EXHIBIT 10.28
CONSULTING AGREEMENT
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This Consulting Agreement ("Agreement"), dated as of November 1, 1996
(the "Effective Date"), is executed by and between Irata, Inc., a Texas
corporation with offices at 0000 Xxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
(the "Company"), and X. X. Xxxxxxx, residing at 000 Xxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxxxx 00000 ("Consultant").
The Company desires to retain Consultant as a senior advisor to the
Company to perform such consulting services for the Company and to serve on its
Board of Directors, and Consultant desires to render such services, on the terms
and conditions hereafter set forth.
1. Term.
(a) Initial Term. The Company agrees to engage Consultant, and
Consultant agrees to render the consulting services described in Section 2
below, on the terms and conditions set forth in this Agreement, for a period of
two (2) years commencing upon the closing of the Company's conduct of a private
placement of approximately $1,500,000.00 of the Company's common stock and
warrants (the "Offering") and ending twenty-four (24) months thereafter (the
"Consulting Period").
2. Duties and Services.
2.1 Nature of Services. During the Consulting Period, Consultant
shall serve as a senior advisor to the Company's President and shall serve as a
member of its Board of Directors (the "Board"). The Board shall nominate
Consultant to serve as a member of the Board at each election of Board members
occurring during the term of this Agreement. The failure of the shareholders of
the Company to elect Consultant shall not result in a termination of this
Agreement. In performance of his duties, Consultant shall be subject to the
direction of the President. Excepting disabilities and illness as provided in
Section 3(e) below, Consultant agrees to devote such time necessary or desirable
to perform his duties under this Agreement and to achieve the Company's plans
and goals as established by the Board and/or the President from time to time
("Company's Business Plan"). In performing his duties to the Company hereunder,
Consultant shall be available for reasonable travel as the needs of the business
require.
2.2 Independent Contractor. It is expressly understood by the
parties that Consultant is acting as an independent contractor and is not
subject to Company's control nor authorized to act as Company's agent or legal
representative. This Agreement shall not act or be construed to create an
employer-employee relationship, partnership, joint venture or any other agency
relationship between the parties. Absent Company's prior approval, Consultant
shall have no authority or power to make any commitments of any nature
whatsoever for the account of or on behalf of Company. Consultant shall have
the right to employ such personnel as Consultant deems necessary to render
services hereunder; however, the retention of such personnel shall be at
Consultant's sole cost, risk and responsibility. Consultant shall be
responsible for all social security, income tax withholding, unemployment
insurance, and such other amounts Company would otherwise be required to deduct
and withhold from amounts payable to its employees.
3. Consulting Fees.
(a) Consulting Fees. As compensation for all of Consultant's services
hereunder, including services as a director, the Company shall pay to
Consultant, during the Consulting Period, monthly consulting fees ("Consulting
Fees") equal to One Thousand Five Hundred Dollars ($1,500.00). Consultant's
Consulting Fees shall be payable by the last day of each calendar month during
the Consulting Period. Consulting Fees for any partial month shall be prorated
based on a thirty (30) day month.
(b) Directors and Officers Liability Insurance. The Company shall
take out and maintain directors and officers liability insurance with coverage
consistent with industry standards for comparable businesses. Proof of such
insurance shall be provided to Consultant prior to the commencement of the
Consulting Period. If such insurance has not been obtained prior to the
commencement of the Consulting Period, Consultant shall have the right to
terminate this Agreement immediately upon written notice to the Company or may
elect to commence the Consulting Period if such insurance is forthcoming within
a reasonable period of time and will relate back to the commencement of the
Consulting Period. If such insurance is not obtained after the Consulting
Period commences, Consultant may at any time given ten (10) days' prior written
notice of his intent to terminate this Agreement. Upon such notice of
termination, this Agreement shall be null and void and neither party shall have
any further rights or obligations hereunder except as otherwise provided in this
Agreement.
(c) Stock Option. Contemporaneously with the commencement of the
Consulting Period and subject to the vesting schedule set forth below, the
Company shall grant to Consultant the option ("Option") to acquire One Hundred
Twenty-Five Thousand (125,000) shares of the Company's common stock, $0.10 par
value ("Company's Stock"), at a purchase price equal to 50 cents per share.
Consultant's Option shall be deemed fully vested as follows:
(i) Upon the Close of the Offering and the commencement of the
Consulting Period, Consultant's Option shall be fully vested as to
Twenty-Five Thousand (25,000) shares;
(ii) Thereafter, Sixteen Thousand Six Hundred Sixty-Seven
(16,667) shares shall be deemed fully vested at the end of each ninety
(90) day period commencing on the closing date of the Offering and
continuing for six (6) consecutive ninety (90) day periods, at which
time all One Hundred Twenty-Five Thousand (125,000) shares shall be
deemed fully vested.
The Company will use best efforts to register Consultant's
Option, at the Company's cost and expense, in conjunction with
Company's registration of its Employee Stock Option Plan.
(d) Change in Control. In the event of a "change of control" (as
defined in Exhibit A hereto): (i) Consultant's Option shall be deemed fully
vested as to all One Hundred Twenty-Five Thousand (125,000) shares of Company's
stock notwithstanding any vesting schedule set forth in Section 3(c) above, and
(ii) Consultant's right to receive any unpaid portion of his Consulting Fees for
the then current term shall survive any termination of his Consulting by reason
of such change in control.
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4. Expenses.
(a) General Business Expenses. Consultant shall be entitled to
reimbursement for all reasonable travel and other out-of-pocket expenses
necessarily incurred in the performance of his duties hereunder, including
attendance at meetings of the Board, upon submission and approval of written
statements and bills in accordance with the then regular procedures of the
Company.
(b) Legal Fees. Upon execution of this Agreement, the Company shall
reimburse Consultant for his legal fees up to the sum of Two Thousand Dollars
($2,000.00) incurred in connection with the negotiation, documentation and
consummation of this Agreement.
5. Representations and Warranties of Consultant. Consultant represents
and warrants to the Company that (a) Consultant is under no contractual or
other restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder and (b) Consultant is under no physical or mental disability
that would hinder his performance of duties under this Agreement.
6. Non-Competition. In view of the unique and valuable services it is
expected Consultant will render to the Company, Consultant's knowledge of the
customers, trade secrets, and other proprietary information relating to the
business of the Company and its customers and suppliers and similar knowledge
regarding the Company it is expected Consultant will obtain, and in
consideration of the compensation to be received hereunder and of the shares of
Company';s stock being sold to Consultant, Consultant agrees that he will not
"Participate in" (hereinafter defined in this Section 6) any other business or
organization, if such business or organization is now or shall then be competing
with or of a nature similar to the business of the Company. The provisions of
this Section 6 will not be deemed breached merely because Consultant owns not
more than five percent (5%) of the outstanding common stock of a competing
corporation if, at the time of its acquisition by Consultant, such stock is
listed on a New York Stock Exchange, American Stock Exchange, or a regional
securities exchange, is reported on NASDAQ or NMS, or is regularly traded in the
over-the-counter market by a member of a national securities exchange. The term
"Participant in" shall mean: "directly or indirectly, for his own benefit or
for, with, or through any other person, firm, or corporation, own, manage,
operates, control, loan money to, or participate in the ownership, management,
operation, or control of, or be connected as a director, officer, employee,
partner, consultant, agent, independent contractor, or otherwise with, or
acquiesce in the use of his name in." Consultant will not directly or
indirectly reveal the name of, solicit or interfere with, or endeavor to entice
away from the Company any of its suppliers, customers, or employees. For a two
(2) year period after the termination of this Agreement, Consultant will not
directly or indirectly employ any person who was an officer of the Company
within a period of one (1) year after such person leaves the employ of the
Company. Since a breach of the provisions of this Section 6 could not
adequately be compensated by money damages, the Company shall be entitled, in
addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith. Consultant agrees
that the provisions of this Section are necessary and reasonable to protect the
Company in the conduct of its business. If any restriction contained in this
Section 6 shall be deemed to be invalid, illegal, or enforceable by reason of
the extent, duration, or geographical scope hereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby.
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7. Patents, etc. Any interest in patents, patent applications,
inventions, technological innovations, copyrights, copyrightable works,
developments, discoveries, designs and processes which Consultant now or
hereafter, during the period he is employed by the Company under this Agreement
or otherwise, and for six (6) months thereafter may own, conceive of, or develop
and either relating to the fields in which the Company may then be engaged or
contemplates (as demonstrated by the records of the Company) being engaged or
conceived of or developed utilizing the time, material, facilities, or
information of the Company ("Such Inventions") shall belong to the Company. As
soon as Consultant owns, conceives of, or develops any Such Inventions, he
agrees immediately to communicate such fact in writing to the Secretary of the
Company, and without further compensation, but at the Company's expense,
forthwith upon request of the Company, Consultant shall execute all such
assignments and other documents (including applications for patents, copyrights,
trademarks, and assignments thereof) and take all such other action as the
Company may reasonably request in order (a) to vest in the Company all
Consultant's right, title and interest in and to Such Inventions, free and clear
of liens, mortgages, security interests, pledges, charges and encumbrances
arising rom the acts of Consultant ("Liens") (Consultant to take such action, at
his expense, as is necessary to remove all such Liens if caused by Consultant's
acts and not operation of law) and (b) if patentable or copyrightable, to obtain
patents or copyrights (including extensions and renewals) therefor in any and
all countries in such name as the Company shall determine.
8. Confidential Information. All confidential information which
Consultant may now possess, may obtain during or after the Consulting Period, or
may create prior to the end of the period he is employed by the Company under
this Agreement or otherwise relating to the business of the Company or of any
customer or supplier of the Company shall not be published, disclosed, or made
accessible by him to any other person, firm, or corporation either during or
after the termination of this Agreement or used by him except during the
Consulting Period in the business and for the benefit of the Company, in each
case without the prior written permission of the Company. Consultant shall
return all physical evidence of such confidential information to the Company
prior to or at the termination of this Agreement. As used in this Section 8,
"confidential information" shall mean any information except that information
available to competitors or which is generally available to the public or which
was in the possession of Consultant prior to the Consulting Period.
9. Termination. Notwithstanding anything herein contained, if, on or
after the Effective Date and prior to the end of the Consulting Period:
(a) Grounds for Termination. Either (i) Consultant shall be
physically or mentally incapacitated or disabled or otherwise unable fully to
discharge his duties hereunder for a period of sixty (60) days, as mutually
determined by the President and Consultant's attending physician(s), (ii)
Consultant shall be convicted of a crime of moral turpitude or a felony, (iii)
Consultant shall breach any fiduciary duty to the Company, or (iv) Consultant
shall breach any material term of this Agreement and fail to correct such breach
within ten (10) days after notice by the Company to Consultant of his commission
of the same, then, and in each such case, the Company shall have the right to
give notice of termination of Consultant's services hereunder as of a date (not
earlier than ten (10) days from such notice) to be specified in such notice, and
this Agreement shall terminate on the date so specified. Nothing contained in
this Section 9(a) shall be deemed to limit any other right the Company may have
to terminate Consultant's Consulting Agreement hereunder upon any ground
permitted by law.
(b) Termination on Death. If Consultant shall die, then this
Agreement shall terminate on the date of Consultant's death, whereupon
Consultant or his estate, as the case may be, shall be entitled to receive his
Consulting Fees, prorated to the date on which termination shall take
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effect. Consultant's Option shall fully vest on Consultant's death.
(c) Effect on Compensation. In the event of termination of Consultant
for all other reasons other than death or "for cause" (as defined herein), (i)
Consultant shall be entitled to receive as severance compensation in one lump
sum payment any unpaid portion of his total Consulting Fees for the unexpired
term of the Consulting Period and (ii) Consultant's Option shall be deemed fully
vested.
(d) Effect on Compensation on Termination for Cause. In the event of
termination "for cause," Consultant shall be entitled to receive his Consulting
Fees, prorated through the effective date of such termination and only that
portion of his Option vested to the termination date. Any portion of
Consultant's Option not fully vested by the termination date shall be deemed
terminated, null and void as to the portion not so vested. For the purposes of
this Agreement, termination "for cause" shall mean termination pursuant to the
grounds specified in Sections 9(a)(ii), (iii) and (iv) above.
10. Survival. The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive Consultant's
termination as provided herein.
11. Entire Agreement; Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
12. Notice. All notices and other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when:
(i) delivered personally and evidenced by a signed receipt for such delivery;
(ii) mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed as set forth below; or (iii) mailed by a
nationally recognized courier service (e.g., Federal Express, DHL, etc.) and
addressed as set forth below. Any address set forth below may be changed by a
party by written notice given in accordance with this Section.
If to Consultant: X. X. Xxxxxxx
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
If to Company: Irata, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, President
13. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing,
signed by both parties.
14. Binding Effect. Consultant's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise. Such rights
shall not be subject to commutation, encumbrance, or the claims of Consultant's
creditors, and any attempt to do any of the foregoing shall
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be void. The provisions of this Agreement shall be binding upon and inure to the
benefit of Consultant and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors and
assigns.
15. No Third-Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
16. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
17. Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of Texas,
without giving effect to the conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
Effective Date.
IRATA, INC.,
A Texas Corporation
By:
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Xxxxx X. Xxxxxx
Title: President
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X. X. Xxxxxxx
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EXHIBIT "A"
CHANGE IN CONTROL
A "Change in Control" shall be deemed to have occurred if at any time
during the Employment Period any of the following events occur:
(a) The Company is merged, consolidated or reorganized into or with
another person or legal entity ("Acquiring Entity") and as a
result of such merger, consolidation or reorganization less than
fifty-one percent (51%) of the combined voting power of the then-
outstanding securities of the Acquiring Entity immediately after
such transaction are held in the aggregate by the holders of the
voting securities of the Company immediately prior to such
transaction; or
(b) The Company sells all or substantially all of its assets or all of
its outstanding securities to an Acquiring Entity in whom less
than fifty-one percent (51%) of the combined voting power of the
then-outstanding voting securities are held in the aggregate by
the holders of the voting securities of the Company immediately
prior to such sale; or
(c) The Company files a report on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"), disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing ten
percent (10%) or more of the outstanding stock of the Company; or
(d) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Item 1 of Form 8-K thereunder or Item 5(f) of Schedule
14A thereunder (or any successor schedule, form or report or item
therein) that a change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-
existing contract or transaction; or
(e) There is a significant adverse change in the nature or scope of
the authorities, powers, functions or duties attached to the
position of Executive; or
(f) The Company files for bankruptcy protection.
