CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") by and between English Language
Learning and Instruction System, Inc., a Delaware corporation (the "Company"),
and Dr. Frank Otto (the "Consultant") is made and entered into as of March 18,
2005.
RECITAL
WHEREAS, the Company desires to engage the services of the Consultant,
and the Consultant is willing to render services to the Company, each upon the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual promises set forth herein
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Consulting Services. The Company hereby agrees to retain the
Consultant as a consultant to the Company, and the Consultant hereby agrees to
act as a consultant to the Company, to advise and consult in matters for which
his knowledge and experience qualify him to render valuable services to the
Company, as directed from time to time by the Company. The Consultant shall
report directly to the Chief Executive Officer of the Company.
2. Term. The Consultant began providing the services hereunder on
January 1, 2005 and shall continue to provide the services hereunder (such
time period being hereinafter referred to as the "Term") until the earlier of:
(a) December 31, 2007;
(b) the death of the Consultant; or
(c) the mutual written consent of each of the Company and the
Consultant to terminate this Agreement.
3. Duties. The Consultant shall, and shall be available to, provide
advice, counsel and assistance with respect to such executive, technical and
administrative matters as shall be from time to time mutually agreed upon by
the Company and the Consultant.
4. Compensation. In exchange for the Consultant's agreements and
covenants provided herein (including the Covenant Not to Compete provided in
Section 6 below), the Company shall pay the Consultant as follows:
(a) During the Term, the Company shall pay the Consultant
semi-monthly a consulting fee in the amount equal to Six Thousand Five Hundred
Thirty Seven Dollars and No/100 ($6,537.00).
(b) During the Term, the Company shall pay for long-term care
insurance for the Consultant and his spouse, such insurance to have terms,
conditions and deductibles substantially similar to those that the Company
provided to the Consultant and his spouse during the year ended December 31,
2004.
(c) The Consultant shall be entitled to reimbursement of all
reasonable business expenses incurred by him in the performance of his
services under this Agreement, subject to submitting the appropriate receipts
in accordance with the Company's policy and applicable Internal Revenue
Service Regulations to ensure the deductibility thereof by the Company.
5. Deferred Compensation. The Company acknowledges that as of the date
hereof the Consultant is entitled to certain deferred compensation from the
Company as a result of the Consultant's previous services as an employee of
the Company. Each of the Company and the Consultant hereby agree that in
exchange for the Company entering into and satisfying its obligations pursuant
to the promissory note in the initial aggregate principal amount of
$158,788.95, in the form attached hereto as Exhibit A (the "Promissory Note"),
all of the Consultant's rights or entitlements to any deferred compensation or
similar deferred arrangement otherwise payable from the Company to the
Consultant based on the Consultant's prior services rendered to the Company as
an employee will be automatically and forever discharged. The Consultant
hereby acknowledges and agrees that the Company is entering into the
Promissory Note in exchange for the Consultant relinquishing any and all
rights he has or may have to receive deferred compensation from the Company,
whether or not accrued or vested as of the date hereof.
6. Covenant Not to Compete.
(a) During the period beginning on January 1, 2005 and ending on
the date that is two (2) years after the expiration of the Term, the
Consultant shall not (i) compete, directly or indirectly, with the Company or
(ii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer, client,
supplier, consultant or employee of the Company, including, without
limitation, employing or being an investor (representing more than a 5% equity
interest) in, or officer, director or consultant to, any person or entity that
employs any former key or technical employee whose employment with the Company
was terminated after the date that is one (1) year prior to the expiration of
the Term hereunder. An activity competitive with the Company shall mean the
performance of services (whether as an employee, officer, consultant,
director, partner or sole proprietor), anywhere in the world, for any person
or entity that directly or indirectly competes with the Company or any of its
products or services in any line of business in which the Company engages or
in which the Company's operating plan or budget contemplates as of the
expiration of the Term.
(b) It is the desire and intent of the parties hereto that the
provisions of this Section 6 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular portion of this
Section 6 shall be adjudicated to be invalid or unenforceable, this Section 6
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of this Section 6 in the particular jurisdiction in which such
adjudication is made.
7. Disclosure of Information. The Consultant recognizes and
acknowledges that the Company's trade secrets and proprietary information and
processes, as they may exist from time to time, are valuable, special and
unique assets of the Company's business, access to and knowledge of which are
essential to the performance of the Consultant's duties hereunder. The
Consultant shall not, during or after the Term of this Agreement, disclose, in
whole or in part, such secrets, information or processes to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever,
nor shall the Consultant make use of any such property for his own purposes or
for the benefit of any person, firm, corporation or other entity (except the
Company) under any circumstances during or after the Term of this Agreement;
provided, however, that after the Term of this Agreement these restrictions
shall not apply to such secrets, information and processes that are then in
the public domain (provided that the Consultant was not responsible, directly
or indirectly, for such secrets, information or processes entering the public
domain without the Company's written consent). The Consultant agrees to hold
as the Company's property, all memoranda, books, papers, letters, formulas and
other data, and all copies thereof and therefrom, in any way relating to the
Company's business and affairs or any of its products or services, whether
made by him or otherwise coming into his possession, and automatically upon
the expiration of the Term, or any time upon demand of the Company, to
promptly deliver the same to the Company.
8. Inventions. The Consultant hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company, all of the
entire right, title and interest of the Consultant in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Consultant, solely or
jointly, or in whole or in part, during or before the Term hereof. The
Consultant shall communicate promptly and disclose to the Company, in such
form as the Company requests, all information, details and data pertaining to
the aforementioned inventions, ideas, disclosures and improvements; and,
whether during the Term hereof or thereafter, the Consultant shall execute and
deliver to the Company such formal transfers and assignments and such other
papers and documents as may be required of the Consultant to permit the
Company or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyrights thereon. Any invention by the Consultant within one (1) year
following the expiration of the Term hereof shall be deemed to fall within the
provisions of this Section 8 unless proved by the Consultant to have been
first conceived and made following such expiration.
9. Independent Contractor Status.
(a) The Consultant's relationship with the Company shall be as an
independent contractor and not as an employee, joint venturer, partner or
otherwise. No amounts will be withheld from the payments to be made to the
Consultant for purposes of the Federal Insurance Contributions Act, the Social
Security Act, the Federal Unemployment Tax Act or any other federal, state or
local income tax withholding laws. The Consultant shall be solely responsible
for the payment of all income and self-employment taxes, and any other taxes,
on the amounts paid to the Consultant pursuant to the terms of this Agreement.
(b) Except as expressly provided in Section 4(b) above, the
Consultant shall not be entitled to participate in any employee welfare or
benefit plans of the Company.
(c) Except as expressly provided herein, the Company and the
Consultant shall have no power to obligate or bind the other in any manner
whatsoever.
10. Remedies. If the Consultant breaches the provisions of Sections 6,
7 or 8 of this Agreement, the Company shall be entitled to (i) an injunction
restraining the Consultant from such breach and (ii) immediately cease making
all future payments otherwise required pursuant to Section 4 above. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.
11. Indemnification. The Consultant shall indemnify and hold harmless
the Company and its officers, directors and affiliates from and against any
and all losses, claims, damages, judgments, assessments, costs and other
liabilities, and will reimburse any such person for all fees and expenses,
including, but not limited to, reasonable attorneys' fees, as they are
incurred in investigating, preparing, pursuing or defending any claim, action,
proceeding or investigation, whether or not in connection with pending or
threatened litigation, arising out of or in connection with the breach by the
Consultant of any of the provisions of this Agreement.
12. Miscellaneous.
(a) Governing Law. This Agreement shall be subject to and governed
by the laws of the State of Utah without regard to conflicts of laws
principles.
(b) Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written,
between the parties hereto with respect to the subject matter hereof. This
Agreement may not be amended orally, but only by an agreement in writing
signed by the parties hereto.
(c) Assignment. Neither party shall have the right to assign any
rights or obligations under this Agreement without the prior written approval
of the other party.
(d) Severability. If any provision, paragraph or subparagraph of
this Agreement is adjudged by any court of competent jurisdiction to be void
or unenforceable in whole or in part, this adjudication shall not affect the
validity of the remainder of this Agreement, including any other provision,
paragraph or subparagraph. Each provision, paragraph and subparagraph of this
Agreement is separable from every other provision, paragraph and subparagraph,
and constitutes a separate and distinct covenant.
(e) Experts. The parties to this Agreement have had an opportunity
to consult and engage their own respective independent counsel and experts,
including, without limitation, legal and tax counsel, in negotiating and
drafting the terms of this Agreement. The provisions of this Agreement shall
not be construed against one party because such party was responsible for the
drafting of such provision.
(f) Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and sent by registered or
certified mail to the Consultant at 526 E. Quail Rd., Orem, Utah 84057 or to
the Company at 406 West 10600 South, Suite 610, Salt Lake City, Utah 84095,
Attention: Chief Executive Officer (with a copy, which shall not constitute
notice, to Thomas R. Taylor, Esq., Holme Roberts & Owen LLP, 299 South Main
Street, Suite 1800, Salt Lake City, Utah 84111) .
(g) Waiver of Breach. A waiver by the Company or the Consultant of
a breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach by the other
party.
(h) Counterparts. This Agreement may be executed by facsimile and
may be executed in one or more counterparts, each of which, when taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Consulting Agreement
effective as of the date first written above.
THE COMPANY
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English Language Learning and Instruction
System, Inc., a Delaware corporation
By: /s/ Rohit Patel
Name: Rohit Patel
Title: Chief Executive Officer
THE CONSULTANT
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By: /s/ Frank Otto
Name: Dr. Frank Otto
Exhibit A
Promissory Note