EXHIBIT 99.2
CONSULTING
AGREEMENT
This Consulting Agreement (“
Agreement ”), dated to be effective as of August 9,
2005 (the “ Effective Date ”), is between
Mannatech, Incorporated, a Texas corporation (the “
Company ”), and Dr. Bill H. McAnalley, an individual
resident of the State of Texas (“ Dr. McAnalley
”). The Company and Dr. McAnalley are hereinafter referred to
collectively as the “ Parties .”
WHEREAS, the Company employed Dr.
McAnalley under an Employment Agreement effective August 7, 2003
(the “ Employment Agreement ”), and Dr.
McAnalley’s employment under the Employment Agreement expired
or terminated on August 7, 2005;
WHEREAS, the Parties are also
parties to the Supplemental Royalty Compensation Agreement
effective August 7, 2003 (the “ Royalty Agreement
”), which continues in effect after Dr. McAnalley’s
employment under the Employment Agreement;
WHEREAS, Dr. McAnalley possesses
considerable experience and scientific knowledge in the areas of
nutrition and dietary supplements, and the Company wishes to obtain
Dr. McAnalley’s services as a consultant regarding certain
aspects of the Company’s business with which Dr. McAnalley is
familiar as a result of his previous long-term employment with the
Company;
WHEREAS, the Company wishes to
obtain Dr. McAnalley’s covenants, during the consulting
relationship, not to engage in certain activities that are
competitive with the Company’s business or that interfere
with the Company’s business and relationships; and
WHEREAS, the Parties have entered
into and delivered to each other a Release Agreement dated as of
August 9, 2005 (the “ Release Agreement ”),
which is a condition to the Company’s entering into this
Agreement;
NOW, THEREFORE, in consideration of
the foregoing and the covenants set forth in this Agreement, the
Parties hereby agree as follows:
1. Consulting Services :
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(a)
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Dr. McAnalley
shall, during the term of the consulting relationship set forth in
Section 7(a) below, provide consulting services to or for
the Company and its Subsidiaries (as defined in Section 2
below) that are reasonably requested by the Board of Directors or
the Chief Executive Officer of the Company such as the
following:
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(i)
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Nutritional
research for the purpose of developing new food or dietary
supplement products;
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(ii)
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Research and
development of other products, such as skin care, as requested by
the Company;
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(iii)
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Development of
new technologies, such as assays, for use in the evaluation of
dietary supplements;
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(iv)
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Consultation
regarding patenting new and existing products;
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(v)
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Research and
development of new plant sources for use in new or existing
products;
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(vi)
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Preparation and
delivery of oral and/or written reports to the Company, at least
quarterly, regarding the status of Dr. McAnalley’s research;
and
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(vii)
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Completion of
the projects set forth on Exhibit B attached
hereto.
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Dr. McAnalley shall devote such time
as may be necessary to render the consulting services to or for the
Company hereunder. All services rendered by Dr. McAnalley on behalf
of the Company shall be performed to the best of his ability and in
furtherance of the welfare and development of the Company. The cost
and expense of or relating to any supplies or personnel necessary
to perform the consulting services of Dr. McAnalley hereunder shall
be solely the responsibility of Dr. McAnalley.
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(b)
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Dr. McAnalley
shall disclose promptly to the Company any and all of his
conceptions ideas, inventions, discoveries, improvements, formulas
and formulations, products and other property, and work product
created in connection with the consulting services described in
Section 1(a) , whether or not protectable by patent or
copyright (collectively, “ Discoveries ”). Dr.
McAnalley agrees that all Discoveries shall be the sole property of
the Company or any other entity designated by it. Dr. McAnalley
hereby assigns, and agrees to assign, any and all rights (including
intellectual-property rights) and interest in all Discoveries to
the Company or any other entity designated by it. To that end, Dr.
McAnalley agrees that he will, at the written request of the Chief
Executive Officer or the President, and at the expense, of the
Company, (i) execute any deeds, instruments, or documents necessary
to assign or transfer any of the Discoveries to the Company or any
other entity designated by it and (ii) cooperate with the Company
and its agents and counsel in obtaining, perfecting, and enforcing
all ownership and intellectual-property rights in the Discoveries.
For the avoidance of doubt, this Section 1(b) does not apply
to any of Dr. McAnalley’s conceptions, ideas, inventions,
discoveries, improvements, formulas and formulations, products and
other property, and work product that results from, arises out of,
or relates to any consulting services performed by Dr. McAnalley to
or for any persons or entities other than the Company and its
Subsidiaries.
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(c)
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The Company
will from time to time evaluate all of the Discoveries provided or
submitted to it by Dr. McAnalley. The Company and Dr. McAnalley
shall enter into a Royalty Agreement in the form attached hereto as
Exhibit A for those Discoveries described in Section
1(b) that result in products that are sold or licensed by the
Company.
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2. Trade Secrets : The Parties
acknowledge and agree that, during the consulting relationship
hereunder, the Company will provide and make available to Dr.
McAnalley, and Dr. McAnalley will have access to and become
familiar with, various trade secrets and proprietary and
confidential information of the Company, the Company’s direct
and indirect subsidiaries (“ Subsidiaries ”),
and their affiliates, including manufacturing and other processes,
computer programs, compilations of information, records, sales
procedures, customer requirements, pricing techniques, customer
lists, compensation and other information regarding employees and
agents, formulas and formulations, clinical studies, scientific
studies and analyses, product proposals, products in development,
manufacturing and sales costs, methods of doing business, and other
confidential information (collectively, “ Trade
Secrets ”) which are owned by the Company, the
Subsidiaries, and/or their affiliates and regularly used in the
operation of their business, and as to which the Company, the
Subsidiaries, and/or their affiliates take precautions to prevent
dissemination to persons other than certain directors, officers,
partners, managers, members, and employees. Dr. McAnalley
acknowledges and agrees that the Trade Secrets (a) are secret and
not known in the Company’s industry; (b) give the Company,
the Subsidiaries, and/or their affiliates an advantage over
competitors who do not know or use the Trade Secrets; (c) are of
such value and nature as to make it reasonable and necessary to
protect and preserve the confidentiality and secrecy of the Trade
Secrets; and (d) are valuable and special and unique assets of the
Company, the Subsidiaries, and/or their affiliates, the disclosure
of which could cause substantial injury and loss of profits and
goodwill to the Company, the Subsidiaries and/or their affiliates.
Dr. McAnalley may not, directly or indirectly, use in any way or
disclose any of the Trade Secrets, during the consulting
relationship or at any time thereafter, except (i) as required in
connection with a judicial or administrative proceeding or in
connection with rendering the consulting services described in
Section 1 above, or (ii) if the information becomes public
knowledge other than as a result of an unauthorized disclosure
(directly or indirectly) by Dr. McAnalley. (In this Section
2 , “ indirectly ” is used as defined in
Section 3(a) below.) All files, records, documents,
information, data, and similar items relating to the business of
the Company, whether prepared by Dr. McAnalley or otherwise coming
into his possession, will remain the exclusive property of the
Company, and in any event must be promptly delivered to the Company
upon the expiration or termination of the consulting relationship
under this Agreement. Dr. McAnalley agrees upon his receipt of any
subpoena, process, or other request to produce or divulge, directly
or indirectly, any Trade Secrets to any entity, agency, tribunal,
or person, Dr. McAnalley shall timely notify and promptly hand
deliver a copy of the subpoena, process or other request to the
Company. For this purpose, Dr. McAnalley irrevocably nominates and
appoints the Company (including any attorney retained by the
Company), as his true and lawful attorney-in-fact, to act in Dr.
McAnalley’s name, place and stead to perform any act that Dr.
McAnalley might perform to defend and protect himself or the
Company against any disclosure of any Trade Secret.
3. Noncompetition Covenant :
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(a)
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During the
consulting relationship hereunder (the “ Restricted
Period ”), Dr. McAnalley shall not, anywhere within the
Restricted Territory (as defined below), directly or indirectly
engage in any activity which, or any activity for any enterprise or
entity a material part of the business of which, is a Competing
Business (as defined below). The activity prohibited by the
preceding sentence includes any kind of ownership (other
than
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ownership of less than 1% of a class
of publicly traded securities) in or of, or acting as a director,
officer, agent, employee, or consultant of or for, any enterprise
or entity referred to in the preceding sentence. For the purpose of
this Section 3(a) , the “ Restricted Territory
” means, collectively, each city or county (or equivalent
subdivision) of any state, district, or territory of the United
States of America and each city or county (or equivalent
subdivision) of any state, district, territory, or other political
subdivision of each other country in the world in which the Company
or any of the Subsidiaries does business. Also for the purpose of
this Section 3(a) , “ Competing Business
” means any direct sale, network marketing, multi-level
marketing of food or dietary supplements, or skin care business
operation that engages in the direct-selling business generally or
that competes in the business engaged in by, or whose products
compete with those of, the Company or any of its Subsidiaries or
affiliates during the Restricted Period. . Further, for the purpose
of this Section 3(a) , “ indirectly ”
means by or through (i) any business or entity in which Dr.
McAnalley either owns or possesses any interest in profits, losses,
or capital or is a partner or member, or for which Dr. McAnalley
acts as officer, director, manager, agent, or representative, or to
which Dr. McAnalley provides consulting or advisory services, or
(ii) any family member of Dr. McAnalley or any other person or
entity with whom or which Dr. McAnalley has any professional
association or relationship (including any assistant, employee, or
agent of his). The Company acknowledges Dr. McAnalley’s
ownership of White Gaps, Harding Group, Talking Stick Publishing
Co., and Bill McAnalley and Associates LP, and provided that each
of the foregoing entities is not a Competing Business, Dr.
McAnalley’s mere ownership of such entities shall not
constitute a breach of this Agreement.
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(b)
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Dr. McAnalley
acknowledges and agrees that, in light of the Company’s
covenants herein and other applicable circumstances, the
restrictions imposed in this Section 3 are reasonable, are
prompted by the Company’s desire to protect its legitimate
business interests (including the Trade Secrets), and will not be
unduly burdensome to him.
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4. Nonsolicitation Covenants :
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(a)
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During the
Restricted Period, Dr. McAnalley shall not directly or indirectly
solicit, divert, or appropriate to or for any Competing Business
(as defined in Section 3(a) above) any customer of the
Company, or in any manner solicit or induce any sales associate of
the Company or any customer, franchisee, supplier, or other person
with a business relationship with the Company to cease that
business relationship with the Company or to refuse in the future
to conduct business with the Company. In this Section 4 ,
“ indirectly ” is used as defined in Section
3(a) above.
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(b)
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During the
Restricted Period, Dr. McAnalley shall not directly or indirectly
solicit or hire any employee or regular consultant of the Company
to leave the employ of the Company or cease his or her employment,
consulting or other business relationship with the Company without
obtaining the Company’s chief executive officer’s prior
written consent.
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(c)
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Dr. McAnalley
acknowledges and agrees that, in light of the Company’s
covenants herein and other applicable circumstances, the
restrictions imposed in this Section 4 are reasonable, are
prompted by the Company’s desire to protect its legitimate
business interests (including the Trade Secrets), and will not be
unduly burdensome to him.
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5. Payments to Dr. McAnalley : In
consideration for Dr. McAnalley’s consulting services and his
compliance with or performance of all of his other covenants
herein, the Company shall pay Dr. McAnalley, during each month that
the consulting relationship continues, by check drawn on one or
more accounts of the Company, as follows:
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(a)
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During the
twelve months of the consulting relationship under this Agreement,
the monthly amount of $76,083.33 on or before the 8th day of each
calendar month, commencing on the Effective Date; provided ,
however , that the first of these monthly payments shall be
paid on or before August 15, 2005.
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6. Independent Contractor; Tax Consequences
of Payments and Benefits :
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(a)
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The consulting
services rendered by Dr. McAnalley under this Agreement shall be
provided as an independent contractor to the Company, and nothing
in this Agreement creates or shall be deemed to create the
relationship of partners, joint venturers, employer-employee, or
principal-agent between the Parties. Dr. McAnalley shall have no
authority to (i) create any obligation or responsibility on the
part of the Company, (ii) legally bind or obligate the Company in
any other manner, or (iii) supervise or direct any of the
Company’s employees, without the express written consent of
the Company’s Chief Executive Officer.
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(b)
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The Company
shall not withhold taxes or FICA from any of the payments described
in Section 5 . The payments will be reported as non-wage
income to Dr. McAnalley on Form 1099. Dr. McAnalley shall be
responsible for filing all necessary tax returns and remitting
amounts due to the proper taxing authorities for any federal,
state, and local tax (including social security tax) owed by him
with respect to the payments and benefits made to him by the
Company hereunder. Dr. McAnalley agrees to indemnify the Company
against, and hold the Company harmless from taxes, and any
penalties and interest, assessed against the Company resulting from
the Parties’ tax treatment of the payments described in
Section 5 above.
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7. Term and Termination of Consulting
Relationship :
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(a)
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The term of the
consulting relationship under this Agreement shall commence on the
Effective Date and continue until, and shall expire upon (and
including), the day preceding the first anniversary of the
Effective Date, unless the consulting relationship is sooner
terminated in accordance with Section 7(b) below.
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(b)
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The Company
may, upon seven (7) days written notice to Dr. McAnalley and upon
seven (7) days opportunity to cure, immediately terminate the
consulting relationship upon any of the following:
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(i)
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the
Company’s determination that Dr. McAnalley has neglected,
failed, or refused to render the consulting services or perform any
other of his obligations described in Section 1
above;
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(ii)
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Dr.
McAnalley’s violation of any provision of or obligation under
this Agreement, the Royalty Agreement, or the Release
Agreement;
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(iii)
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the
Company’s determination that Dr. McAnalley is unable to
continue to render consulting services because of any physical or
mental injury, illness, or disability that
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