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Exhibit 4(b)
CONSULTING AGREEMENT
CONSULTING AGREEMENT made this 25th day of June 1997 (the
"Agreement"), by and among XXXXXX-FIELD HEALTH PRODUCTS, INC., a Delaware
corporation (the "Company"; the Company and its "affiliates" (as hereinafter
defined) are collectively referred to hereinafter as the "Company"), with
offices at 000 Xxxxx Xxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000, Peek Brothers
Enterprises, Inc., a Colorado corporation with offices at 000 X. Xxxxxxx Xxxx,
Xxxxxx Xxxx, Xxxxxxxx 00000 (the "Consulting Entity"), Xxxxxxx X. Xxxx, an
individual residing at 000 X. Xxxxxxx Xxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, and
Xxxxxxx X. Xxxx, an individual residing at 0000 Xxxxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, the Company has entered into an Agreement and Plan of
Merger dated as of June 25, 1997 (the "Merger Agreement"), by and among the
Company, LaBac Acquisition Corp., a wholly-owned subsidiary of the Company,
LaBac Systems, Inc. ("LaBac"), Xxxxxxx X. Xxxx, and Xxxxxxx X. Xxxx;
WHEREAS, all of the capital stock of the Consulting Entity is
owned by Xxxxxxx X. Xxxx and Xxxxxxx X. Xxxx (the "Principal Stockholders");
WHEREAS, the Merger Agreement provides that, as a condition of
the Closing, the parties hereto enter into this Agreement;
WHEREAS, simultaneously herewith, the Company is entering into
a Non-Competition Agreement with each Principal Stockholder (the
"Non-Competition Agreements"), in the form of Exhibit B hereto; and
WHEREAS, unless otherwise defined herein, all capitalized
terms shall have the meaning ascribed to such terms in the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as
follows:
1. TERM OF CONSULTANCY. The term of the consultancy with the
Consulting Entity (the "Term") shall be for a period of three (3) years
commencing on June 25, 1997 (the "Effective Date"), unless terminated earlier
pursuant to Section 4 of this Agreement.
2. COMPENSATION. For all services rendered by the Consulting
Entity pursuant to Section 3(a), the Consulting Entity shall receive in the
aggregate the following:
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(a) During the Term, the Company shall pay a
consulting fee of $275,000 per annum to the Consulting Entity
for such consulting services rendered to the Company, which
will be paid in equal quarterly installments of Sixty Eight
Thousand Seven Hundred Fifty Dollars ($68,750) on September
30, December 31, March 30 and June 30, during each year of the
Term. The Company shall pay to the Consulting Entity a pro
rata portion of such amount for any partial quarter during
which the Consulting Entity provided such consulting services.
(b) During the Term, the Company shall reimburse the
Consulting Entity against receipts for reasonable business
expenses incurred in connection with the performance of
services set forth in Section 3(a), provided, that the prior
approval of the Company shall be required for any such expense
in excess of $1,000. The Consulting Entity agrees to submit to
the Company such documentation as may be required by the
Company in accordance with its standard practices to
substantiate such expenses.
(c) Notwithstanding paragraph (a) above, the Company
shall have an unlimited right of set-off against all payments
to be made hereunder to the Principal Stockholders in the
event the Company makes any payment relating to indebtedness
described in Section 9.15 of the Merger Agreement.
3. DUTIES; NEW PRODUCTS. (a) During the Term, the Consulting
Entity shall cause each of the Principal Stockholders to use his good faith
reasonable efforts to perform duties and assignments as consultants to the
Company at the request of the Company including: researching, developing,
reviewing and commenting on the Company's products and services; being on call
for, and providing, technical assistance on programs or issues as set forth by
the Company from time to time; assisting the Company with its sales and
marketing efforts; assisting the Company with its customer relations and other
duties and assignments as may be determined by the Company from time to time
which are reasonably necessitated by, and consistent with, the foregoing duties.
The Consulting Entity shall cause the Principal Stockholders, collectively, to
be available for not less than eighty (80) business days (which specific days
shall be agreed to between the Principal Stockholders and the Company upon prior
reasonable notice; the division of the eighty (80) days of duties between the
Principal Stockholders to be decided by the Principal Stockholders, in their
sole discretion) during each twelve (12) month period commencing on January 1,
1998 for the performance of the above-described duties. The Principal
Shareholders shall have the right to decline any duties or assignments which
they believe, in good faith, are foreign to their expertise and experience.
Notwithstanding the foregoing, during the period commencing on the date hereof
through December 31, 1997 (the "Initial Period"), each of the Principal
Stockholders shall continue to perform duties and services for LaBac which are
substantially comparable to those duties and services performed by each of them
for LaBac immediately prior to the date hereof. During the Initial Period, each
of the Principal Stockholders will devote substantially the same number of hours
and days to the performance of their duties, as were provided by each of them
immediately prior to the date hereof.
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(b) In addition to the services provided pursuant to Section
3(a) above, the Consulting Entity and the Principal Stockholders may, during the
Term, develop ideas, original works of authorship and articles of invention
related to durable medical products, wheelchairs and/or wheelchair seating
systems (each, a "Peek Product"). A Peek Product may be (1) a new idea or new
improvement which significantly enhances the products of the Company or (2) an
original, patentable work. Specific provisions relating to Peek Products are set
forth in Exhibit A.
4. TERMINATION; EVENTS UPON TERMINATION/EXPIRATION.
(a) The Consulting Agreement may be terminated
under the following circumstances:
(i) The Consulting Agreement may be
terminated by the Consulting Entity at any time on
not less than thirty (30) days' prior written notice
following the first (1st) anniversary date of the
Closing.
(ii) The Company may terminate the
Consulting Agreement at any time for Cause. For
purposes of this Agreement, the term "Cause" shall
mean: (A) gross negligence of either of the Principal
Stockholders in the performance of their duties
hereunder, (B) willful neglect of the duties of the
Principal Stockholders (all duties of the Principal
Stockholders hereunder being collective, and
performable by either of the Principal Stockholders
as they may determine) which continues after written
notice by the Company, (C) the commission of any
felony involving violence, drugs, dishonesty or a
breach of trust by either of the Principal
Stockholders, (D) any misappropriation of any
property to the Company (whether or not a felony or
misdemeanor), or any embezzlement of the Company's
property by either of the Principal Stockholders, (E)
the material breach of any of the covenants contained
herein which remains uncured twenty (20) days after
written notice of such breach by the Company.
(b) Upon any termination of the Consulting Agreement
under Section 4(a) of this Agreement, the Consulting Entity
shall be entitled to receive solely all amounts and benefits
to be paid or provided by the Company under this Agreement to
the date of such termination and reimbursement of expenses, in
accordance with Section 2(b) above, incurred prior to the date
of such termination, and the Company shall have the right in
accordance with Section 3(b) and Exhibit A to commercialize
any Peek Product which had been previously offered to the
Company and to which the Company has not rejected its final
opportunity to commercialize such product pursuant to Section
4 of Exhibit A.
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(c) At the expiration or earlier termination of the
Agreement, the Consulting Entity and the Principal
Shareholders shall immediately turn over to the Company all
Work Product, including work-in-progress, working papers,
descriptions, reports, notes and data.
5. CONFIDENTIAL INFORMATION. Each of the Principal
Stockholders and the Consulting Entity expressly covenants and agrees that it
will not at any time, during or after the Term of this Agreement, directly or
indirectly, use or permit the use of any trade secrets, confidential
information, or proprietary information (including, without limitation, customer
lists, costing information, technical information, software techniques, business
plans, marketing data, financial information or similar items) of, or relating
to, the Company (collectively, the "Confidential Information"), in connection
with any activity or business, whether for its own account or otherwise (except
solely for the business of the Company), and will not divulge such Confidential
Information to any person, firm, corporation or other entity whatsoever except
as necessary for the performance of duties and assignments as consultants to the
Company under the terms of this Agreement. In the event the Principal
Stockholders or the Consulting Entity is requested pursuant to, or required by,
applicable law or regulation or regulatory authority or by legal process to
disclose any of the Confidential Information, the Principal Stockholders or the
Consulting Entity, as the case may be, hereby agrees to provide the Company with
prompt written notice of such request or requirement in order to enable the
Company to seek an appropriate protective order or other remedy, to consult with
the Company with respect to taking steps to resist or narrow the scope of such
request or legal process, or to waive compliance, in whole or in part, with the
terms of this Agreement. If in the absence of a protective order the Principal
Stockholders or the Consulting Entity is compelled to disclose Confidential
Information, the Principal Stockholders or the Consulting Entity, as the case
may be, may make such disclosure hereunder, provided that the Principal
Stockholders or the Consulting Entity, as the case may be, gives the Company
written notice of the information to be disclosed as far in advance of its
disclosure as is practicable. In any such event, the Principal Stockholders and
the Consulting Entity will each use its reasonable efforts to ensure that all
Confidential Information that is so disclosed will be accorded confidential
treatment. Any information which (i) is or becomes known to the public without
breach by the Principal Stockholders or the Consulting Entity of any of the
terms hereof or of the common law duties of the Principal Stockholders and the
Consulting Entity, (ii) is developed independently by the Principal Stockholders
without reference to any Confidential Information, or (iii) is or becomes
available to the Principal Stockholders, is not bound by a confidentiality
agreement with the Company prohibiting such disclosure, shall not be deemed to
be Confidential Information.
6. OWNERSHIP BY COMPANY. Each of the Principal Stockholders
and the Consulting Entity acknowledge and agree that (1) all work product
created, produced or conceived in response to specific projects assigned to the
Consulting Entity by the Company in writing and (2) all Peek Products, except
those Peek Products to which the Company has not exercised its right to
commercialize pursuant to Section 3(b) and Exhibit A (collectively, "Work
Product") shall be deemed work made for hire and shall be deemed owned
exclusively by the Company. To the extent that title to any such Work Product
may not vest in the Company by
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operation of law, or such Work Product may not be considered a work made for
hire, all right, title and interest therein are hereby irrevocably assigned to
the Company. Without limiting the generality of the foregoing, each of the
Principal Stockholders and the Consulting Entity agree that the Company shall
have and possess all proprietary rights, patent rights, copyright rights and
trade secret rights as may exist in such Work Product or as which are inherent
therein or appurtenant thereto. Each of the Principal Stockholders and the
Consulting Entity agree to execute and deliver all documents and perform all
services required by the Company to document or perfect the Company's
proprietary rights in and to such Work Product.
7. OWNERSHIP OF CONSULTING ENTITY. The Principal Stockholders
hereby covenant and agree that, during the Term they will (i) cause the
Consulting Entity to comply with all of its obligations under this Agreement,
(ii) maintain complete beneficial ownership of all of the outstanding capital
stock of the Consulting Entity between themselves and any Related Party, (iii)
not encumber or permit the encumbrance of any such capital stock and (iv) not
grant any proxies or enter into any voting trust or other agreement or
arrangement with respect to the voting of any such capital stock. "Related
Party" means with respect to a Principal Stockholder (a) the spouse, parent,
children (by blood or adoption), other descendants (by blood or adoption),
stepchildren and in-laws of the Principal Stockholder or a trust for any of
their benefit, (b) each trust, corporation, partnership or other entity of which
the Principal Stockholder or any Related Parties under any clauses of this
definition owns beneficially 80% or more the stock or voting interests, (c) in
the case of a deceased Principal Stockholder or other person that was
immediately prior to his or her death a Related Party under any clause of this
definition, whether by will or intestacy, the heirs, legatees, devisees,
distributees, personal representatives or estate of such deceased Principal
Stockholder or such this definition, whether by will or intestacy, the heirs,
legatees, devisees, distributees, personal representatives or estate of such
deceased Principal Stockholder or such deceased person, (d) in the case of any
stepchildren or in-laws, any person who had that status at the time of receiving
any stock or voting interests, or (e) any former spouse receiving stock or
voting interests in a dissolution of marriage.
8. REMEDIES; INDEMNIFICATION. (a) In the event of the breach
by the Principal Stockholders or the Consulting Entity of any of the terms and
conditions of Section 5 of this Agreement, then the Company shall be entitled,
if it so elects, to institute and prosecute any proceedings in any court of
competent jurisdiction, either in law or equity, for relief, including, without
limiting the generality of the foregoing, any proceedings to obtain provable
damages for any breach of this Agreement, to enforce the specific performance
thereof by the Principal Stockholders and the Consulting Entity, as the case may
be, or to obtain an injunction against the commission, threatened commission or
continuance of any such breach or threatened breach. The prevailing party or
parties in any such action or proceeding shall be entitled to recover from the
other party or parties their reasonable attorneys' fees and expenses in
prosecution or defense of such action or proceeding.
(b) Subject to the provisions of Section 9.4 below, the
Consulting Entity shall, at its own expense, indemnify and hold harmless the
Company, its subsidiaries, affiliates and assignees, and their directors,
officers, employees and agents, and defend any action brought
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against same with respect to any claim, demand, cause of action, debt or
liability, including attorneys' fees, to the extent based upon (i) arising from
the gross negligence or willful misconduct of the Principal Stockholders or the
Consulting Entity, or (ii) personal injury or property damage caused by the
fault or negligence of the Consulting Entity or the Principal Stockholders while
engaged in performing services under this Agreement. However, notwithstanding
the foregoing, it is understood that the Company has the responsibility for
determining whether any Work Product infringes or violates any patents,
copyrights, trade secrets, licenses or other property rights of any third party
and for testing designs and products, unless either of the Principal
Stockholders knew or had reason to know, without any obligation of investigation
or inquiry, of any such infringement or violation.
9. GENERAL.
9.1 APPLICABLE LAW. This Agreement shall, in all respects, be
governed by the laws of the State of New York without giving effect to conflicts
of law principles.
9.2 SURVIVAL. Except as otherwise provided herein, the parties
hereto agree that the covenants contained in Sections 5 and 6 hereof, and the
remedies and indemnification provisions of Section 8, shall survive the
termination of this Agreement. In addition, the parties hereto agree that any
compensation or right which shall have accrued to the Consulting Entity as of
the date of any termination of this Agreement shall survive any such termination
and shall be paid when due to the extent accrued on the date of such
termination.
9.3 INDEPENDENT REPRESENTATION. Each of the Principal
Stockholders and the Consulting Entity acknowledge that it has had the
opportunity to seek independent counsel and tax advice in connection with the
execution of this Agreement, and each of the Principal Stockholders and the
Consulting Entity represent and warrant to the Company (a) that it has sought
such counsel and advice as he or it has deemed appropriate in connection with
the execution hereof and the transactions contemplated hereby; and (b) that it
has not relied on any representation of the Company as to tax matters or as to
the consequences of the execution hereof.
9.4 INDEMNIFICATION. The Company hereby agrees to indemnify
and hold each of the Principal Stockholders and the Consulting Entity, and any
subsidiaries of the Consulting Entity and the affiliates, assignees, directors,
officers, employees and agents of the foregoing, harmless from and against any
and all costs, expenses (including attorneys fees), liabilities, losses,
damages, fines, penalties, judgments and amounts paid in settlement ("Losses"),
that are incurred or suffered by the Principal Stockholders or the Consulting
Entity or any of the other indemnified parties stated above and which arise from
the Principal Stockholders or the Consulting Entity's services to the Company or
services performed at the request of the Company. As part of the foregoing and
without limiting the foregoing, the Company agrees to indemnify and hold each of
the Principal Stockholders, the Consulting Entity and the other indemnified
parties stated above harmless from and against any and all Losses to the extent
based upon (i) a claim that any Work Product infringes or violates any patents,
copyrights, trade secrets, licenses, or other property
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rights of any third party, or (ii) personal injury or property damage caused by
any actual or alleged defect in design, function, material or workmanship of any
Work Product or any product derived therefrom. Notwithstanding the foregoing,
the Company shall not be required to indemnify the Principal Stockholders or the
Consulting Entity in respect of Losses arising from the gross negligence or
willful misconduct of the Principal Stockholders or the Consulting Entity.
9.5 NOTICES. Any and all notices required or desired to be
given hereunder by any party shall be in writing and shall be validly given or
made to another party if delivered either personally, by telex, facsimile
transmission, same day delivery service, overnight expedited delivery service,
or if deposited in the United States Mail, certified or registered, postage
prepaid, return receipt requested. If notice is served personally, notice shall
be deemed effective upon receipt. If notice is served by telex or by facsimile
transmission, notice shall be deemed effective upon transmission, provided that
such notice is confirmed in writing by the sender within one day after
transmission. If notice is served by same day delivery service or overnight
expedited delivery service, notice shall be deemed effective the day after it is
sent, and if notice is given by United States mail, notice shall be deemed
effective on the date of acceptance or rejection as indicated on the return
receipt. In all instances, notice shall be sent to the parties at the following
addresses:
If to the Company:
Xxxxxx-Field Health Products, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxxx
Chairman of the Board and
Chief Executive Officer
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Vice President and General Counsel
Xxxxxx-Field Health Products, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
If to the Principal Stockholders:
Xx. Xxxxxxx X. Xxxx
000 X. Xxxxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
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Xx. Xxxxxxx X. Xxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxx X. Xxxx, Esq.
Holland & Xxxx, LLP
Suite 3200
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
If to the Consulting Entity:
Xx. Xxxxxxx X. Xxxx
000 X. Xxxxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
with a copy to:
Xxxx X. Xxxx, Esq.
Holland & Xxxx, LLP
Suite 3200
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
Any party may change its address for the purpose of receiving
notices by a written notice given to the other party.
9.6 MODIFICATIONS OR AMENDMENTS. No amendment, change or
modification of this document shall be valid unless in writing and signed by all
of the parties hereto.
9.7 WAIVER. No reliance upon or waiver of one or more
provisions of this Agreement shall constitute a waiver of any other provisions
hereof.
9.8 SUCCESSORS AND ASSIGNS. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their successors and assigns. However, no party shall
voluntarily assign any rights hereunder, or delegate any duties hereunder,
except upon the prior written consent of the other; provided, however, that the
Consulting Entity may assign, as collateral or otherwise, its rights to receive
payments hereunder.
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9.9 SEPARATE COUNTERPARTS. This document may be executed in
one or more separate counterparts, each of which, when so executed, shall be
deemed to be an original. Such counterparts shall, together, constitute and
shall be one and the same instrument.
9.10 HEADINGS. The captions appearing at the commencement of
the sections hereof are descriptive only and are for convenience of reference.
Should there be any conflict between any such caption and the section at the
head of which it appears, the substantive provisions of such section and not
such caption shall control and govern in the construction of this document.
9.11 FURTHER ASSURANCES. Each of the parties hereto shall
execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.
9.12 ENTIRE AGREEMENT. This Agreement, together with the
Non-Competition Agreements, constitutes the entire understanding and agreement
of the parties with respect to the subject matter of this Agreement, and any and
all prior agreements, understandings or representations are hereby terminated
and canceled in their entirety.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
XXXXXX-FIELD HEALTH PEEK BROTHERS
PRODUCTS, INC. ENTERPRISES, INC.
By: By:
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Name: Name:
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Title: Title:
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XXXXXXX X. XXXX XXXXXXX X. XXXX
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EXHIBIT A
PEEK PRODUCTS
1. Submission. For each Peek Product, the Consulting Entity
shall provide the Company with a written description (the "Evaluation Material")
that contains sufficient detail to enable the Company to evaluate whether such
Peek Product significantly enhances or complements the Company's existing
products. The Consulting Entity shall not disclose the Evaluation Material to
any other party for any purpose and shall keep Evaluation Material strictly
confidential. The Consulting Entity shall submit to the Company Evaluation
Material only for Peek Products which are original and non-obvious and which, to
the knowledge of the Consulting Entity, do not infringe any patent, trademark,
copyright or other proprietary rights of any other party. Upon the Company's
request, the Consulting Entity shall provide the Company with samples,
specimens, or reasonable facsimiles thereof (each, a "Sample"), of the
applicable Peek Product for the Company's review.
2. Acceptance. The Company shall, within ninety (90) days
after its receipt of the Evaluation Material or its receipt of the applicable
Sample, notify the Consulting Entity of its decision to accept or reject a Peek
Product for commercialization. If the Company accepts a Peek Product, the
Company shall pay the Consulting Entity a royalty for such Peek Product as
provided in Section 3 below, and the Consulting Entity shall assign, transfer
and convey all of its right, title and interest in and to the Peek Product to
the Company. If the Company rejects a Peek Product, then the provisions of
Section 4 below shall apply.
3. Royalties.
(a) In the event the Company accepts a Peek Product, the
parties shall in good faith mutually determine the appropriate royalty payable
by the Company to the Consulting Entity with respect thereto. The amount of the
royalty shall be set forth in an addendum to the Agreement. The royalty shall be
based upon a percentage of the net sales (i.e., gross sales less returns,
discounts and allowances) of each Peek Product, provided, however, in no event
shall the royalty percentage exceed 10% of the net sales of such Peek Product.
Notwithstanding the terms of Section 2 of this Exhibit A, if, following good
faith negotiations, the parties are unable to mutually determine the appropriate
royalty, the Company shall be deemed to have made a decision to reject the Peek
Product.
(b) The Company shall render quarterly statements in
September, December, March and June in each year of the Term following the first
sale or other commercial exploitation of each Peek Product in accordance with
the Company's regular accounting practices, showing (1) the gross sales and net
sales of Peek Product(s) and (2) amounts due the Consulting Entity for the
previous quarterly period. Statements rendered hereunder shall be final and
binding upon the Consulting Entity unless objected to in writing setting forth
the specific objections thereto and the basis for such objections, within two
years after the date the statement was rendered.
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(c) If total royalties due and payable are less than $1,000,
the Company may defer the rendering of payment until such regular payment date
as at least such sum shall be due and payable to the Consulting Entity.
(d) The Company shall make payments of amounts set forth in
this Section until expiration of the Term or earlier termination of the
Agreement.
4. Option for Rejected Products. If the Company rejects a Peek
Product for commercialization, then the Consulting Entity may, directly or
indirectly through agreements with others, manufacture, sell and/or distribute
the rejected Peek Product; provided, however, that the sales volume of that Peek
Product does not exceed a total of twelve (12) units in any twelve-month period,
and provided further that the Company shall be granted a second and final
opportunity to commercialize the rejected Peek Product on an exclusive basis
following the sale of the initial twelve (12) units. If, within ninety (90) days
after its receipt of the Evaluation Materials, the Company has not notified the
Consulting Entity of its decision to accept the Peek Product for
commercialization, then the Principal Stockholders may, directly or indirectly
through agreements with others, manufacture, sell and/or distribute the rejected
Peek Product, but only not in violation of the terms and conditions of the
Non-Competition Agreements.
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EXHIBIT B
NON-COMPETITION AGREEMENT
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