EXHIBIT 10.1
AGREEMENT
This non-exclusive Consultancy and Lock-Up Agreement ("Agreement") is made
and effective this 1st day of october 2001, by and between Mannatech,
Incorporated ("Company"), a Texas corporation with its principal place of
business located at 600 S. Royal Lane, Suite 200, Coppell, Texas 75019 and Stan
Fredrick ("Consultant") whose principal address is 3509 Wingren, Irving, Texas
75062.
WITNESSETH:
WHEREAS, Company is in the business of operating a network marketing
company which sells a proprietary line of dietary supplements, cosmetics and
over-the-counter products ("Products") and which compensates its distributors
("Associates") by a defined compensation plan;
WHEREAS, in connection with the development of its business, Company is
desirous of securing Consultant's unique expertise in the areas of the direct
selling industry and business advice in general ("Consultancy"); and
WHEREAS, Company intends to enter into a confidential relationship with
the Consultant whereby the Consultant will acquire an intimate knowledge and
access to Company's business and will obtain or has obtained specialized skills.
Company will permit the Consultant to have access to and to utilize the business
goodwill, cost and pricing information, Confidential Information (as defined
herein) and various trade secrets of Company, including without limitation,
marketing programs, business relationships, customer lists, business plans,
financial data, privileged legal information and other compilations of
information developed by Company and essential to its business;
WHEREAS, the Consultant will be a key Consultant of Company and Company
will provide or has provided the Consultant with access to such Confidential
Information and trade secrets in reliance upon the Consultant entering into this
Agreement;
WHEREAS, the Consultant or a trust controlled by him will purchase,
simultaneously with the execution of this Agreement, certain shares of Common
Stock of the Company ("Common Stock") and Company desires to restrict sales of
the Common Stock;
WHEREAS, the Consultant has agreed to certain restrictions on the sale of
shares of the Common Stock subject to the terms and conditions of this
Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and upon the terms, conditions and provisions hereinafter set
forth, Company and the Consultant do hereby agree as follows:
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ARTICLE I.
DUTIES AND COMPENSATION
1.1 Term. The term of this Agreement, unless otherwise modified in writing, is
for a two (2) year calendar period, beginning September 30, 2001 and
ending September 30, 2003 (the "Term"). The Term shall be extended
automatically for an additional successive one (1) calendar year period as
of each anniversary of the effective date after the initial term; provided
however, that if either party shall give written notice to the other at
least thirty days prior to such anniversary, then no such automatic
extension shall occur and Consultant's obligations under this Agreement
shall terminate on the day prior to such anniversary. Notwithstanding the
foregoing, the Consultancy will remain in effect as long as Consultant
owns the Common Stock.
1.2 Compensation. Consultant is engaged at an annual payment of $185,000
payable on a monthly basis in equal installments, the first payment being
due upon execution hereof and all payments due in equal monthly
installments thereafter.
1.3 Expenses. Company will reimburse the Consultant for the reasonable cost of
any travel and/or incidental expenses for travel undertaken in pursuit of
the Consultancy. The advance approval for travel, and subsequent
reimbursement of expenses shall be made through the Chief Executive
Officer ("CEO") and reimbursement shall occur in accordance with the
Company Expenditure Procedure, which is attached hereto and incorporated
herein as Exhibit "A" - "Policy".
1.4 Independent Contractor. The Parties agree that this Agreement shall not be
considered an employment agreement nor is it an offer for employment. The
relationship between Consultant and Company is that of independent
contractor under a "work for hire" arrangement and that all work product
developed by Consultant for the Company shall be deemed owned and assigned
to Company in accordance with Article IV hereof. This Agreement is not
authority for Consultant to act for Company as its agent or make
commitments for the Company. Consultant will not be eligible for any
employee benefits, nor will Company make deductions from fees to the
consultant for taxes, insurance, bonds or the like. Consultant retains the
discretion in performing the tasks assigned, within the scope of work
specified.
1.5 Scope of Duties. The Consultant and Company agree that upon reasonable
notice and mutual agreement as to each instance, his undertakings under
the terms of this Agreement shall include, but not necessarily be limited
to the following activities and other tasks as requested (hereinafter
collectively referred to as "Services"):
1.5.1 Avail himself to the CEO and Co-Chairmen or Chairman of the Board of
Directors to provide counsel and business in the areas of corporate
governance, sales and marketing;
1.5.2 Provide business advice and share business expertise with the Board
of Directors;
1.5.3 Work with senior management of Company to promote and extend
Company's business and help develop new business;
1.5.4 Participate in presentations and the start-up phases of new
projects;
1.5.5 Use his best efforts to further public awareness of Company in the
United States and overseas through speeches and/or promotion of
Company and its products in general;
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1.5.6 Appear as a public speaker at Corporate-sponsored events;
1.5.7 Meet with various high ranking Associates to provide various advice
and intervention between Company and the sales force; and
1.5.8 Act as advisor to the CEO and senior management team to provide
industry trends and updates pertaining to direct selling industry.
The Consultant further agrees that:
1.5.9 Under the terms of this Agreement and his Consultancy, he will not
have any authority to act on behalf of Company in the areas of
discussion, negotiation or execution of any contracts or agreements
in an attempt to bind Company (or its subsidiaries) and will not
purport the same to any third party. Any agreements, plans,
proposals, programs, incentives or undertakings of Company must
first be proposed to the Company Board of Directors and/or CEO (as
the case may be) and approved by the same prior to any discussion
with third-parties, including Company Associates. Any contracts,
plans, programs, incentives or undertakings proposed by the
Consultant and approved by the Board or CEO, as the case may be,
will be submitted to the General Counsel in accordance with
Corporate Procedure PLE01002, or any other policy applicable to
this provision as required by the Company in its Policies and
Procedures as added to, modified, or deleted from time-to-time.
1.5.10 During the term of this Agreement, the Consultant agrees that
neither he nor any family member (such to be defined as one
residing in the same household) operate or participate in the
operation of a Company Associate position in any manner whatsoever.
1.5.11 Consultant agrees to perform diligently and to the best of
Consultant's abilities the duties and services appertaining to such
Consultancy, as well as such additional duties and services
appropriate to such Consultancy or as shall be designated by the
Board of Directors upon which the Parties may mutually agree from
time-to-time. The Consultant also agrees that his Consultancy is
subject to the current and future policies and procedures
maintained and established by Company. The Consultant shall devote
his best efforts, ability and attention to the business of Company
and the performance of the Consultant's duties as contemplated
herein.
1.5.12 Consultant acknowledges and understands that from time to time the
Consultant's duties may require the Consultant to work on-site
and/or at a non-company location. In such instance, the Consultant
agrees to comply with all of the policies, procedures and
directives relevant to working at such non-company location.
1.5.13 During the term of this Agreement, the Company may in the event of
a vacancy on the Board of Directors, consider the Consultant for
possible candidacy for such vacancy and may submit the Consultant's
name to the Nominating Committee, pursuant to any guidelines
established by such Nominating Committee of the Board of Directors
for consideration, in filling any such vacant if such seat is
vacant.
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ARTICLE II
LOCK-UP AGREEMENT
2.1 Lock-Up Period. Except as contemplated in this Agreement, Consultant
hereby agrees during the term of this Consultancy Agreement (the "Lock-Up
Period"), he will not offer, sell, assign, pledge, transfer, hypothecate,
contract to sell, grant any option for the sale of or otherwise dispose
of, directly or indirectly, and except to a family member or family
controlled trust, upon prior written notification to the Company, any of
the Common Stock or securities convertible into or exchangeable or
exercisable for any shares of Common Stock, enter into a transaction which
would have the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such
aforementioned transaction is to be settled by delivery of the Common
Stock or such other securities, in cash or otherwise, or publicly disclose
the intention to make any such offer, sale, pledge or disposition, or to
enter into any such transaction, swap, hedge or other arrangement,
without, in each case, the prior written consent of Company. Any
securities received upon exercise of options granted to Consultant will
also be subject to the provisions set forth in this Article II. Consultant
agrees and consents to the entry and stop transfer instructions with
Company's transfer agent against any transfer of shares of Common Stock
held directly or indirectly by Consultant not in compliance with this
Agreement.
2.2. Extended Lock-Up. The restrictions and obligations of Consultant under
Section 2.1 shall be extended without any further action (the "Extended
Lock-Up Period") in the event the Consultancy Agreement is extended
pursuant to the terms of Section 1.1 hereof. The Lock-Up shall be extended
so long as the Company continues to pay the Consultant in accordance with
Section 1.2 hereof or until the Company makes a secondary offering of its
common stock.
ARTICLE III.
NON-COMPETITION and NON-SOLICITATION
3.1 Non-Competition. To the full extent permitted by law, the Consultant will
not for a period of one (1) year following the termination of this
Agreement:
3.1.1 Attempt to cause any person, firm or corporation, which is a
customer of or has a contractual relationship with Company
(including its Associates) at the time of termination of this
Agreement to terminate such relationship with Company. This
provision shall apply regardless of whether such customer has a
valid contractual arrangement with Company;
3.1.2 Attempt to cause any employee of Company to leave such employment;
3.1.3 Engage any person who was an employee of Company at the time of the
termination of this Agreement or cause such person otherwise to
become associated with the Consultant or with any other person,
corporation, partnership or other entity with which the Consultant
may thereafter become associated; or
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3.1.4 Engage in any activity or perform any services competitive with any
business conducted by Company, and in any country in which Company
operates, at the time of execution of this Agreement other than
duties that occur under the course of his current business in which
he participates, of which he has fully disclosed to the Company, as
indicated and attached hereto as Exhibit "B", upon the execution of
this Agreement.
As set forth above, the Consultant acknowledges that the foregoing
non-competition and non-solicitation covenants are ancillary to or a
part of an otherwise enforceable agreement, such being the general
agreement of this Consultancy and its related agreements concerning
confidentiality and non-disclosure of Confidential Information and
non-solicitation. The Consultant acknowledges that at the time that
this non-competition covenant is made, that the limitations as to
time defined herein and that the limitations as to geographic area
are reasonable and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of
Company.
3.2 Consultant agrees that in the highly competitive business in which Company
is engaged, personal contact is of primary importance in securing new and
retaining present Associates and customers. The Consultant also agrees
that Company has a legitimate interest in maintaining its relationships
with its Associates and customers and that it would be unfair for the
Consultant to solicit the business of Company's Associates and customers
in relation to the Company's current business and exploit the personal
relationships that he develops with Company's Associates and customers by
virtue of his access to them as a result of this Consultancy.
3.3 Consultant shall be bound by and abide by all reasonable policies and
procedures of Company that are within the scope of his Consultancy and
that are in effect during the term of his Consultancy.
3.4 Consultant acknowledges and agrees that he owes a fiduciary duty of
loyalty, fidelity, and allegiance to act at all times in the best
interests of Company. In keeping with these duties, Consultant shall make
full disclosure to Company of all business opportunities pertaining to
Company's present business and shall not appropriate for Consultant's own
benefit business opportunities concerning such business.
3.5 The Parties agree that during the term of this Agreement and thereafter,
they will not disparage each other or their respective Affiliates.
3.6 Irrespective of the term of this Agreement, and in consideration of the
promises specified in Article II of this Agreement, Company agrees as
follows:
3.6.1 To provide specialized training as specified herein; and
3.6.2 To provide the Consultant with access to Company's software and
files, records, marketing procedures, processes, computer programs,
compilations of information, records, Associate and client
requirements, pricing techniques, lists, formulae, lists identifying
Associates, partners, potential investors, methods of doing business
and other Confidential Information, as defined in Article III
hereof, which is regularly used in the operation of the business of
Company.
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3.7 Nothing contained herein shall prevent the Consultant from undertaking or
continuing business interests and endeavors that do not directly relate to
the Company's present business, that he has upon execution hereof and/or
making financial investments as he sees fit.
ARTICLE IV.
CONFIDENTIAL INFORMATION
4.1 During the course of the Consultancy the Consultant will be given access
to Company's Confidential Information concerning Products and the business
operations of Company.
4.2 The Consultant acknowledges that in the further course of the Consultancy
with Company, the Consultant will gain a close, personal and special
influence with Company's customers and will be acquainted with all of
Company's business, particularly Company's Confidential Information
concerning the business of Company and its affiliates.
4.3 For purposes of this Agreement "Confidential Information" shall mean and
include information disclosed to the Consultant or known by the Consultant
through the Consultant's consultancy with Company, not generally known in
Company's industry, or otherwise known to Consultant or received from a
source other than the Company about Company's products, processes and
services, including but not limited to information concerning inventions,
trade secrets, research and development, as well as all data or
information concerning customers (including, Associates), customer lists
(including downline reports and similar reports of business activities and
relevant information concerning persons who conduct the same), prospect
lists, mailing lists, sales leads, contracts, financial reports, sales,
purchasing, price lists, product costs, marketing programs, marketing
plans, business relationships, business methods, accounts payable,
accounts receivable, accounting procedures, control procedures and
training materials.
4.4 The Consultant recognizes that his position with Company is one of the
highest trust and confidence by reason of the Consultant's access to the
Confidential Information and the Consultant agrees to use his best efforts
and will exercise utmost diligence to protect and safeguard the
Confidential Information. In this respect, the Consultant agrees that
fulfilling the obligations of this Article IV is part of the Consultant's
responsibilities with Company for which the Consultant has been retained
as a Consultant and for which the Consultant will receive consideration
therefor.
4.5 Except as may be required by Company in connection with and during the
Consultancy with Company, or with the express written permission of
Company, the Consultant shall not, either during his work as a Consultant
with Company or at any time thereafter, directly or indirectly, download,
print out, copy, remove from the premises of Company, use for his own
benefit or for the benefit of another, or disclose to another, any
Confidential Information of Company, its customers, contractors, or any
other person or entity with which Company has a business relationship.
4.6 Consultant agrees that all files, memoranda, data, notes, records,
drawings, charts, graphs, analyses, letters, reports or other documents or
similar items made or compiled by the Consultant, made available to him or
otherwise coming into his possession during the Consultancy concerning any
process, apparatus or products manufactured, sold, used, developed,
investigated or considered by Company concerning the Confidential
Information or concerning any other business or activity of Company shall
remain at all
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times the property of Company and shall be delivered to Company upon
termination of this Agreement or at any other time upon request.
4.7 The Consultant agrees that during the term of this Agreement or upon
termination thereof, and if requested by Company to do so, he will sign an
appropriate list of any and all Confidential Information of Company of
which he has knowledge about or which he has acquired information.
4.8 The Consultant acknowledges that the violation of any of the provisions of
this Section 4 will cause irreparable loss and harm to Company which
cannot be reasonably or adequately compensated by damages in an action at
law, and accordingly, Company will be entitled, without posting bond or
other security, to injunctive and other equitable relief to enforce the
provisions of this Section 4; but no action for any such relief shall be
deemed to waive the right of Company to an action for damages.
ARTICLE V
RESULT OF CONSULTANT'S SERVICES
5.1 Company will be entitled to and will own all the results and proceeds of
the Consultant's services under this Agreement, including without
limitation, all rights throughout the world to any copyright, patent,
trademark or other right and to all ideas, inventions, products, programs,
procedures, formats and other materials of any kind created or developed
or worked on for the Company by the Consultant during his consultancy with
Company; the same shall be the sole and exclusive property of Company; and
the Consultant will not have any right, title, or interest of any nature
or kind therein. Without limiting the foregoing, it will be presumed that
any copyright, patent, trademark or other right and any idea, invention,
product, program, procedure, format or material created, developed or
worked on by the Consultant for the Company at any time during the term of
this Agreement will be a result or proceed of his services under this
Agreement. The Consultant will take such action and execute such documents
as Company may request to warrant and confirm Company's title to and
ownership of all such results and processes and to transfer and assign to
Company any rights which he may have therein. The Consultant's right to
any compensation under this Agreement will not constitute a lien on any
results or proceeds of the Consultant's services under this Agreement.
5.2 During the term of this Agreement and without further remuneration,
Company shall have the right to use the Consultant's name, voice,
likeness, and similar characteristics for the purposes of advertising,
promoting, selling and otherwise merchandising the Company for which
services are retained under this Agreement in the United States and all
other countries in which Company conducts business. During the term of
this Agreement, Company shall be the sole owner and have use and control
of all promotional materials and trade literature ("Promotional
Materials") produced for Company bearing the Consultant's image, likeness,
voice or name. Company shall be free to dispose of and treat in any way
all Promotional Materials as contemplated hereby, including but not
limited to selling, advertising, distributing, and permitting use in other
mediums with prior approval of the Consultant, of which, such approval
shall not be unreasonably withheld.
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ARTICLE VI
TERMINATION
This Agreement shall become null and void, and no further payment obligations
shall become due upon the death of the Consultant.
ARTICLE VII
MISCELLANEOUS
7.1 Future Agreement. Should this Agreement expire in accordance with its
terms, the Parties may choose to renew this Agreement on mutually agreed
upon terms and conditions, such to be governed by a separate agreement.
7.2 Enforcement. It is the express intention of the Parties to this Agreement
to comply with all laws applicable to the covenants and provisions
contained in this Agreement. If any of the covenants contained in this
Agreement are found to exceed in duration or scope permitted by law, it is
expressly agreed that such covenant may be reformed or modified by the
award or decree of an arbitrator, if applicable ("Reformation"). The
Reformation shall be governed by a final judgment of a court of competent
jurisdiction or other lawful constituted authority, as the case may be, to
reflect a lawful and enforceable duration or scope, and such covenant
automatically shall be deemed to be amended and modified so as to comply.
If any one or more of the provisions contained herein shall for any reason
be held invalid, illegal or unenforceable in any respect, even after
formation, such invalidity, illegality or unenforceability shall not
affect the enforceability or validity of any other provision contained in
this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
7.3 Adequacy of Consideration; Separate Agreements. The Consultant agrees that
the agreements, non-competition agreements, nondisclosure agreements, and
non-solicitation agreements set forth herein each constitute separate
agreements, independently supported by good and adequate consideration and
shall be severable from the other provisions of this Agreement and shall
survive the termination thereof.
7.4 Representation and Warranties. Consultant represents and warrants that:
7.4.1 Consultant has no obligations, legal or otherwise, inconsistent with
the terms of this Agreement or with Consultant's undertaking this
relationship with Company;
7.4.2 With respect to Article II hereof, all of the shares of Common Stock
held by Consultant are owned of record and beneficially by
Consultant and that Consultant owns such Common Stock free and clear
of any claims, liens, encumbrances, pledges, security interests or
other arrangements or restriction whatsoever, except for such legend
and related transfer restrictions as required under the Securities
Act of 1933, as amended;
7.4.3 The performance of the Services called for by this Agreement do not
and will not violate any applicable law, rule or regulation or any
proprietary or other right of any third party;
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7.4.4 The Consultant will not use in the performance of his
responsibilities under this Agreement any confidential information
or trade secrets of any other person or entity;
7.4.5 The Consultant has not entered into or will enter into any agreement
(whether oral or written) in conflict with this Agreement except
those enterprises otherwise disclosed in section 3.1.4 hereof.
7.5 Agreement to Perform Necessary Acts. Consultant agrees to perform any
further acts and execute and deliver any documents that may be reasonably
necessary to carry out the provisions of this Agreement.
7.6 Compliance with Law. In connection with his services rendered hereunder,
Consultant agrees to abide by all federal, state, and local laws,
ordinances and regulations.
7.7 Injunctive Relief. The Consultant recognizes and acknowledges that damages
in the event of his breach of certain provisions of this Agreement would
be inadequate, and the Consultant agrees that Company, in addition to all
other remedies it may have, shall have the right to injunctive relief via
arbitration if there is a breach by the Consultant of any one or more of
the provisions contained in Articles III and IV hereof.
7.8 Arbitration. Arbitration, including the right to invoke injunctive relief
and any emergency relief or measures provided for, shall be the exclusive
remedy for any and all disputes, claims or controversies, whether
statutory, contractual or otherwise, between Company and the Consultant
concerning the Consultancy or the termination thereof. In the event either
party provides a Notice of Arbitration of Dispute to the other party,
Company and the Consultant agree to submit such dispute or controversy,
whether statutory or otherwise, to an arbitrator or arbitrators selected
from a panel of arbitrators of the American Arbitration Association
located in Dallas, Texas. The effective rules at the time of the
commencement of the Commercial Arbitration of the American Arbitration
Association shall control the arbitration. In any arbitration proceeding
conducted subject to these provisions, the arbitrator(s) is/are
specifically empowered to decide any question pertaining to limitations,
and may do so by documents or by a hearing, in his or her sole discretion.
In this regard, the arbitrator may authorize the submission of pre-hearing
motions similar to a motion to dismiss or for summary adjudication for the
purposes of consideration in this matter. The arbitrator's decision will
be final and binding upon the Parties. The Parties further agree to abide
by and perform any award rendered by the arbitrator. Each party in such
proceeding shall pay its own attorney's fees. In rendering the award, the
arbitrator shall state the reasons therefor, including any computations of
actual damages or offsets, if applicable.
7.9 Notices. Notices required to be given under this Agreement shall be in
writing and shall be deemed to have been given and received when
personally delivered, or when mailed by registered or certified mail,
postage prepaid, return receipt requested, or when sent by overnight
delivery service to the address as first written above.
7.10 No Agency. This Agreement does not constitute a joint venture or
partnership of any kind between Company and the Consultant.
7.11 Assignment. In the event the Consultant assigns the Common Stock to a
family member or trust ("Assignee") as contemplated in Section 2.1, the
Assignee, its
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successors, representatives and assigns, whether individually and/or
collectively, shall be bound by all of the terms and conditions of this
Agreement.
7.12 Waiver. A waiver by either party of any term or condition of this
Agreement in any instance shall not be deemed or construed to be a waiver
of such term or condition for the future, or any breach of such term or
condition.
7.13 Authority. The Parties represent that they have full capacity and
authority to grant all rights and assume all obligations they have granted
and assumed under this Agreement.
7.14 Captions. The headings of the sections in this Agreement are intended
solely for convenience of reference and are not intended and shall not be
deemed for any purpose whatsoever to modify or explain or place
constriction upon any of the provisions of this Agreement.
7.15 Governing Law. The Parties hereto agree that this Agreement shall be
governed by the laws of the State of Texas without regard to the conflicts
of law principles. The Parties further agree that exclusive jurisdiction
and venue to enforce the arbitration provisions of this agreement shall be
in a state or federal court of appropriate jurisdiction in Dallas County,
Texas. Each party consents to personal jurisdiction in Dallas County,
Texas, for any action to enforce arbitration including any further rules
provided for emergency or extraordinary relief, as to this Agreement.
7.16 Disclosure. Each of the Parties agree to keep confidential the specific
terms of this Agreement, and shall not disclose the terms of this
Agreement to any person except the financial, tax and legal advisors of
the other (and the Board of Directors of Company) unless required to
disclose the same to others by legal process, in which event the Party so
ordered shall first give notice to the other Party and an opportunity to
seek a protective order. This Agreement may be disclosed or appended, as
an exhibit to any securities filing required to be made by Company.
However, after having been so disclosed or appended, the Consultant shall
have no further duty of confidentiality concerning this Agreement, as set
forth in this paragraph.
7.17 Approvals and Consents. This Agreement is subject to the approval of the
Board of Directors and the Compensation Committee of Company.
7.18 Consultant Acknowledgement. The Consultant affirms and attests by signing
this Agreement that he has read this Agreement before signing it and that
he fully understands its purposes, terms, and provisions, which he hereby
expressly acknowledges to be reasonable in all respects. The Consultant
further acknowledges receipt of one (1) copy of this Agreement.
7.19 Counterparts. This Agreement may be executed in multiple counterparts, any
one of which will be deemed an original, but all of which will constitute
one and the same instrument.
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IN WITNESS WHEREOF, this Agreement is executed by the Parties hereto, effective
as of the 30th day of September, 2001.
CONSULTANT:
/s/ J. Stanley Fredrick
- ------------------------------------
Stan Fredrick
COMPANY:
MANNATECH, INCORPORATED
A Texas Corporation
By: /s/ Stephen D. Fenstermacher
-------------------------------
Stephen D. Fenstermacher
Its: Chief Financial Officer
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