CONSULTING AGREEMENT

 

 

 

4.             Consulting Fee and Benefits.

 

 

For purposes of this Agreement, “Certain Circumstances” shall mean the termination of the Consultant’s engagement (i) by the Company Without Cause (as defined in Section 5.1); or (ii) by the Consultant for Good Reason (as defined in Section 5.2); or (iii) as a result of a Change in Control (as defined in Section 6).

 

 

5.             Termination.

 

6.             Termination Payments.

 

  (a)           Payment to the Consultant of an amount equal to the lesser of (i) 2.99 times (A) the Consulting Fee as of the date of termination plus (B) the value of 250,000 shares of Common Stock (determined based on the closing price of the Common Stock as of the date of termination) or (ii) the amount of Consulting Fee owed to the Consultant for the remainder of the Term plus the value of the Common Stock to be granted to the Consultant over the remainder of the Term (determined based on the closing price of the Common Stock of the Company as of the date of termination), in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date, as determined by the Company;

 

  (b)           Payment to the Consultant of an amount equal to one hundred percent (100%) of the Additional Consulting Fee actually earned for the Fiscal Year prior to the year of termination, if any; this amount shall be paid in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date, as determined by the Company;

 

  (c)           Payment to the Consultant of an amount equal to five (5) times the Consultant’s Consulting Fee plus five (5) times the value of 250,000 shares of Common Stock (determined based on the closing price of the Common Stock of the Company as of the date of termination) less the amount determined pursuant to Section 6.2(a), to be paid in a lump sum within sixty (60) days following termination, as determined by the Company; and

 

  (d)           All outstanding stock options, restricted stock and other awards granted under the Incentive Plan (the "Awards") shall immediately vest upon termination and the Consultant shall be entitled to sell, transfer or otherwise convey all shares of stock received pursuant to the Awards as of the date of termination notwithstanding any provision in any award agreement to the contrary, subject to compliance with the federal securities laws. Consultant shall remain eligible to exercise his stock options through the expiration date of such stock options notwithstanding any provision in any stock option award agreement to the contrary. Notwithstanding this subsection 6.2(e), however, Consultant shall have the option, in his sole discretion, to elect to forgo the accelerated vesting of the Awards.

 

Notwithstanding anything else to the contrary in this Agreement, all termination payments and benefits provided in this Section 6.2 are subject to the Consultant’s signing, returning to the Company and not revoking a Release within 45 days following the date the Consultant actually receives an execution copy of such Release. The Company shall have no more than 15 days following the Consultant's termination of engagement to provide Consultant with such release. In the event the 60 day post-termination period, during which the payments referred to in subsections 6.2(a), 6.2(b) and 6.2(c) above or 6.3(a), 6.3(b) and 6.3(c) below are required to be made, begins in one taxable year of the Consultant and ends in a second taxable year of the Consultant, the payments referred to in subsections 6.2(a), 6.2(b) and 6.2(c) above or 6.3(a), 6.3(b) and 6.3(c) below shall be made in the second taxable year (and within such 60 day period).

 

 

 

  (a)           Payment to the Consultant of an amount equal to the lesser of (i) 2.99 times (A) the Consulting Fee as of the date of termination plus (B) the value of 250,000 shares of Common Stock (determined based on the closing price of the Common Stock as of the date of termination) or (ii) the amount of Consulting Fee owed to the Consultant for the remainder of the Term plus the value of the Common Stock to be granted to the Consultant over the remainder of the Term (determined based on the closing price of the Common Stock of the Company as of the date of termination), in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date, as determined by the Company;

 

  (b)           Payment to the Consultant of an amount equal to one hundred percent (100%) of the Additional Consulting Fee actually earned for the Fiscal Year prior to the year of termination, if any; this amount shall be paid in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date, as determined by the Company;

 

  (c)           Payment to the Consultant of an amount equal to five (5) times the Consultant’s Consulting Fee plus five (5) times the value of 250,000 shares of Common Stock (determined based on the closing price of the Common Stock of the Company as of the date of termination) less the amount determined pursuant to Section 6.2(a), to be paid in a lump sum within sixty (60) days following termination, as determined by the Company; and

 

  (d)           All outstanding Awards shall immediately vest upon termination and the Consultant shall be entitled to sell, transfer or otherwise convey all shares of stock received pursuant to the Awards as of the date of termination notwithstanding any provision in any award agreement to the contrary, subject to compliance with the federal securities laws. Consultant shall remain eligible to exercise his stock options through the expiration date of such stock options notwithstanding any provision in any stock option award agreement to the contrary.

 

  (e)           To the extent that termination payments and benefits are payable under this Section 6.3, no benefits shall be payable under Section 6.2.

 

For purposes of this Agreement, a “Change in Control” shall mean: (i) the direct or indirect acquisition, whether in one or a series of transactions by any person (as such term is used in Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), or related persons (such person or persons, an “Acquirer”) constituting a group (as such term is used in Rule 13d-5 under the Exchange Act), of (A) beneficial ownership (as defined in the Exchange Act) of issued and outstanding shares of stock of the Company, the result of which acquisition is that such person or such group possesses in excess of 50% of the combined voting power of all then-issued and outstanding capital stock of the Company, or (B) the power to elect, appoint, or cause the election or appointment of at least a majority of the members of the Board (or such other governing body in the event the Company or any successor entity is not a corporation); (ii) a merger or consolidation of the Company with a person or a direct or indirect subsidiary of such person, provided that the result of such merger or consolidation, whether in one or a series of related transactions, is that the holders of the outstanding voting stock of the Company immediately prior to the consummation of such transaction do not possess, whether directly or indirectly, immediately after the consummation of such merger or consolidation, in excess of 50% of the combined voting power of all then-issued and outstanding capital stock of the merged or consolidated person, its direct or indirect parent, or the surviving person of such merger or consolidation; or (iii) a sale or disposition, whether in one or a series of transactions, of all or substantially all of the Company’s assets.

 

 

7.             Non-Competition.  Consultant acknowledges that Consultant’s engagement with the Company will enable Consultant to obtain, among other things, knowledge associated with the Company’s business and will also enable Consultant to form certain relationships with individuals and entities with which the Company furnishes its products and/or services. Consultant further acknowledges that the substantial relationships with prospective and existing customers, goodwill and other valuable proprietary interests of the Company will cause the Company to suffer irreparable and continuing damage in the event Consultant competes or assists others in competing with the Company during Consultant’s engagement and within two (2) years subsequent to the Consultant’s notice of voluntary termination (other than for Good Reason) during the Term or a Discretionary Termination Payment Event (if the Board chooses to make the payments described in Section 6.2 above). Therefore, Consultant agrees that during Consultant’s engagement and for a period of two (2) years from the date of notice in the event of voluntary termination (other than for Good Reason) during the Term or a Discretionary Termination Payment Event (if the Board chooses to make the payments described in Section 6.2 above) (“Restrictive Period”), Consultant will not, without the prior written consent of the Company, which consent may be withheld by the Company in its sole and absolute discretion, be employed directly or indirectly by a competitor of the Company, or otherwise engage directly or indirectly in any conduct, activity, or business that substantially competes with the business of the Company’s internet segment, as described in the Company’s registration statement on Form S-1 for its initial public offering, as of the date of effectiveness of such registration statement. The phrase “directly or indirectly” shall include either as an individual or as a partner, joint venturer, employee, agent, executive, independent contractor, consultant, officer, director, stockholder, investor or otherwise. Nothing herein shall preclude Consultant from continuing to engage in the activities authorized by Paragraph 3.3 of this Agreement. Consultant further acknowledges that Consultant’s continued engagement with the Company and the payment of termination payments and benefits pursuant to Section 6 herein constitutes fair and adequate consideration for Consultant’s agreement not to engage in such conduct during the Restrictive Period in the event of Consultant’s voluntary termination (other than for Good Reason) or a Discretionary Termination Payment Event (if the Board chooses to make the payments described in Section 6.2 above). The geographic scope of the non-competition obligations of this paragraph includes anywhere in the world where the Company engage(s) in business or otherwise markets or sells its/their products or services (“Restricted Area”) in the provision of any services which are the same as, substantially similar to or competitive with the business and services which the Company was designing, developing, selling or providing, within the twelve (12) month period prior to the Consultant's termination of engagement. Notwithstanding the foregoing, in the event the Company shall fail to pay Consultant any termination payments to Consultant pursuant to Section 6 of this Agreement when due, Consultant shall have no further obligations under this Section 7. In the event that the Company files for bankruptcy or materially defaults on its secured debt, the Consultant shall have no further obligations under this Section 7.

 

 

8.             Non-Solicitation.  Consultant acknowledges that, because of Consultant’s responsibilities at the Company, Consultant has developed and will help to develop, and has been exposed to, the Company’s business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. For purposes of this Agreement, “Confidential Information” shall mean any and all trade secrets, confidential knowledge, data or any other proprietary information pertaining to any business of the Company or any of its clients, customers or consultants, licensees or affiliates. By way of illustration but not limitation, “Confidential Information” includes (a) inventions, technological innovations, specifications, ideas, improvements, discoveries, trade secrets, processes, data, programs, software, source code, web site designs, web site processes, knowledge, know-how, designs, techniques, formulas, test data, computer code, complaints, complaint processes and analysis, security procedures and processes, passwords, user ids, customer information, affiliate information, customer lists, affiliate lists, other works of authorship and designs whether or not patentable, copyrightable, or otherwise protected by law, and whether or not conceived or prepared by the Consultant, either alone or jointly with others (hereinafter collectively referred to as “Inventions”); (b) information regarding research, development, new products and services, financial information, protocols, proposals, marketing plans and strategies, manuals, procedures and guidelines, merchandising and selling, business plans, strategies, forecasts, projections, profits, investments, operations, financings, records, budgets and financial statements, licenses, prices and costs, suppliers and customers; and (c) identity, requirements, preferences, practices and methods of doing business of specific parties with whom the Company transacts business, and information regarding the skills and compensation of other employees of the Company and independent contractors performing services for the Company. Consultant also acknowledges that the Company’s relationships with its employees, customers, clients, vendors, and other persons are valuable business assets. Therefore, Consultant agrees as follows:

 

 

  (a)           Consultant shall not, for a period of one (1) year following Consultant’s date of notice of voluntary termination (other than for Good Reason) or a Discretionary Termination Payment Event (if the Board chooses to make the payments described in Section 6.2 above), directly or indirectly solicit, induce, recruit, or encourage any officer, director, or employee of the Company to leave the Company or terminate his or her engagement with the Company.

  (b)           Consultant shall not, for a period of one (1) year following the Consultant’s date of notice of voluntary termination (other than for Good Reason) or a Discretionary Termination Payment Event (if the Board chooses to make the payments described in Section 6.2 above), for the purpose of selling products or services competitive with the Company’s, solicit any actual or prospective customer or client of the Company by using the Company’s Proprietary Information or trade secrets, or otherwise solicit such customers or clients by using means that amount to unfair competition.

Notwithstanding the foregoing, in the event the Company shall fail to pay Consultant any termination payments to Consultant pursuant to Section 6 of this Agreement when due, Consultant shall have no further obligations under Section 8(a) and Section 8(b) hereto. In the event that the Company files for bankruptcy or materially defaults on its secured debt, the Consultant shall have no further obligations under this Section 8.

9.             Confidentiality. The Consultant understands and acknowledges that in the course of his former employment with the Company and in the course of this engagement, he has had and will continue to have access to and will learn Confidential Information. Accordingly, the Consultant agrees that during the period that he performed services for the Company (including the time he was an employee of the Company) and continuing in perpetuity thereafter, he has and shall keep confidential and has not and shall not directly or indirectly disclose any such Confidential Information to any third party, except as required to fulfill his duties in connection with his engagement by the Company, and has not and shall not misuse, misappropriate or exploit such Confidential Information in any way. The restrictions contained herein shall not apply to any information which the Consultant can demonstrate (i) was already available to the public at the time of disclosure, or subsequently became available to the public, otherwise than by breach of this Agreement or (ii) was the subject of a court order to disclose.

 

10.           Administration/Other Agreements.  Notwithstanding anything contained in this Agreement to the contrary, the Consultant acknowledges and agrees that the Board, in its sole and absolute discretion, shall administer this Agreement in a manner that complies with Section 409A of the Code. 

 

11.           Section 280G Gross-Up Payments.  If any of the payments under this Agreement ("Payment") will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Consultant in cash additional amounts (the "Gross-Up Payments") such that the net amount retained by the Consultant after deduction from the Payment and the Gross-Up Payments of any Excise Tax imposed upon the Payment and any federal, state and local income tax and Excise Tax and any other tax imposed upon the Gross-Up Payments shall be equal to the original amount of the Payment, prior to deduction of any Excise Tax imposed with respect to the Payment. The Gross-Up Payments are intended to place the Consultant in the same economic position he would have been in if the Excise Tax did not apply. The Gross-Up Payments shall be paid to the Consultant when any Excise Tax relating to said Payment becomes due and payable, provided that such Gross-Up Payments shall not be paid later than the end of the calendar year next following the calendar year in which the Consultant remits (or has remitted on his behalf) the related taxes to the appropriate tax authorities.

 

 

12.           Miscellaneous.

 

12.1           Notices.  All notices under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered with an acknowledgment of receipt or if mailed by first class registered or certified mail, return receipt requested, addressed to Company and to the Consultant at their last known respective addresses, or to such other person or address as may be designated by like notice hereunder. Any such notice shall be deemed to be given on the day delivered, if personally delivered, or on the third day after the mailing if mailed.

 

12.2           Parties in Interest.  The Consultant shall not delegate his consulting obligations under this Agreement to any other person. The Company may not assign any of its obligations hereunder other than to any entity that acquires (by purchase, merger or otherwise) all or substantially all of the voting stock or assets of the Company, provided such acquirer promptly assumes all of the obligations hereunder of the Company in a writing delivered to the Consultant. In the event of a merger or other combination, or the sale or liquidation of business and assets, the Company shall use its reasonable best efforts to cause such assignee or transferee to promptly and expressly assume the liabilities, obligations and duties of the Company hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successor and permitted assigns, but no other person shall acquire or have any rights under or by virtue of this Agreement.

 

12.3           Further Assurances.  From and after the date of this Agreement, each of the parties hereto shall from time to time, at the request of the other party and without further consideration, do, execute and deliver, or cause to be done, executed and delivered, all such further acts, things and instruments as may be reasonably requested or required more effectively to evidence and give effect to the transactions provided for in this Agreement.

 

12.4           Governing Law. This Agreement shall be governed by and construed in accordance with the laws and decisions of the State of Florida applicable to contracts made and to be performed therein without giving effect to the principles of conflict of laws. The parties hereby consent and agree to the exclusive jurisdiction of the state and federal courts in the County of Palm Beach, State of Florida in any lawsuit arising from or relating to this Agreement.

 

 

12.5           Counterparts; Facsimile Signatures.  This Agreement may be executed in counterparts and by facsimile, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile signatures shall be considered originals for all purposes.

 

12.6           Severability.  The provisions of this Agreement are severable, and if any one or more provisions are determined to be judicially unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

12.7           Entire Agreement; Modification; Waiver.  Except as otherwise specifically contemplated herein and in the Indemnification Agreement, this Agreement contains the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior negotiations and understandings, if any. Neither this Agreement nor any of its provisions may be modified, amended, waived, discharged or terminated in whole or in part, except in writing, and signed by the parties. No waiver of any such provision or any breach of or default under this Agreement shall be deemed or shall constitute a waiver of any other provision, breach or default. No amendment of the Agreement may cause any amount payable to the Consultant prior to the amendment to be includible in the Consultant’s taxable income on any earlier date under the provisions of Code Section 409A as determined after the amendment.

 

13.           Section 409A Compliance.  It is intended that all benefits and compensation payable pursuant to this Agreement are exempt from or, alternatively, comply with Code Section 409A (and any legally binding guidance promulgated under Code Section 409A, including, without limitation, the Final Treasury Regulations), and this Agreement will be interpreted, administered and operated accordingly. In the event that any provision of this Agreement is inconsistent with Code Section 409A or such guidance, then the applicable provisions of Code Section 409A shall supersede such inconsistent provision. In accordance with the foregoing, the Consultant shall not have a legally binding right to any distribution made to Consultant in error. Notwithstanding the foregoing, in no event will any of the Company, its parent, or their respective subsidiaries, affiliates, or officers, directors, employees, or agents have any liability for failure of this Agreement to be exempt from or comply with Code Section 409A and none of the foregoing guarantees that the Agreement is exempt from or complies with Code Section 409A. For all purposes under Code Section 409A, the Consultant’s right to receive any payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. A “termination of engagement” (or any other term to that to that effect) under this Agreement shall mean a “separation from service” under Code Section 409A and Final Treasury Regulation 1.409A-1(h) and the default presumptions thereof.

 

Notwithstanding any other provision of this Agreement to the contrary, if the Board (or its delegate) determines in its discretion that termination payments due under this Agreement are “nonqualified deferred compensation” subject to Section 409A of the Code and that the Consultant is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance issued thereunder, then such termination payments, to the extent that they are nonqualified deferred compensation subject to Section 409A of the Code shall be paid on the first payroll date of the seventh month following the month in which the Consultant’s termination occurs. For purposes of this Agreement, whether the Consultant is a “specified employee” will be determined in accordance with written procedures adopted by the Board.

 

 

Notwithstanding any other provision of this Agreement to the contrary, to the extent that any reimbursement of expenses constitutes “deferred compensation” under Code Section 409A, such reimbursement shall be provided no later than December 31 of the year following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year.

 

14.           Attorney Fees.  In the event that either party is required to pursue claims or commence litigation to enforce their rights under this Agreement, or to defend against claims brought against them by the other party that are determined by a court to be without merit, the prevailing party shall be entitled to recover their reasonable attorneys' fees and costs.

 

[ signature page follows ]

 

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.

 

FRIENDFINDER NETWORKS INC.   By:      /s/ Anthony Previte                        Name: Anthony Previte Title:   Chief Executive Officer and President   CONSULTANT: /s/ Daniel C. Staton                                     DANIEL C. STATON

 

 

[Signature Page to Daniel C. Staton Consulting Agreement]

 

 

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