CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
as of May 16, 2002, to be effective as of August 9, 2000 by and between American
Inflatables, Inc. (the "Company"), a Delaware corporation headquartered in Costa
Mesa, California, and Xxxx Xxxxxxx, a resident of the State of California
("Consultant").
RECITALS
A. The Company hired Consultant to provide services to the Company for
a three month period ending August 9, 2000 pursuant to that certain Independent
Contractor/Consulting Agreement dated May 9, 2000 by and between the Company and
Consultant.
B. Following the expiration of the May 9, 2000 agreement between the
Company and Consultant, Consultant continued to provide the services to the
Company set forth below in this Agreement. These services were provided pursuant
to oral agreements between the Company and Consultant.
C. The Company desires that Consultant continue to provide services to
the Company, and Consultant desires to continue to provide such services. The
Company and Consultant desire to reduce to writing and to amend and restate
their prior oral agreements pertaining to the provision of services by
Consultant to the Company since the expiration of the May 9, 2000 agreement and
after the date hereof as provided below in the Agreement.
D. The Company has entered into a Share Exchange Agreement dated May
16, 2002 (the "Share Exchange Agreement") with Xxxxxxx X. Xxxxxxxxx, Red Oak
Limited Partnership and Xxxxxxx X. Xxxxx (each an "ASDG Shareholder"), the sole
shareholders of American Sports Development Group, Inc., a South Carolina
corporation ("ASDG"), and the ASDG Shareholders were unwilling to enter into the
Share Exchange Agreement unless the Company and Consultant entered into this
Agreement as a condition of closing of the transactions contemplated in the
Share Exchange Agreement. The Company and Consultant both believe that the Share
Exchange Agreement and the transactions contemplated therein are in their
respective best interests.
NOW, THEREFORE, for and in consideration of the mutual promises herein
contained and the benefits that have and will inure to each of the parties
hereto and as an inducement to the ASDG Shareholders to enter into and
consummate the transactions contemplated in the Share Exchange Agreement, the
parties hereto do agree as follows:
1. SERVICES. Subject to the terms and conditions of this Agreement,
Consultant agrees to perform for Company the services listed in the Scope of
Services section in SCHEDULE A, attached hereto and executed by both Company and
Consultant. Such services are hereinafter referred to as "Services." Company
agrees that Consultant shall have ready access to Company's staff and resources
as necessary to perform the Consultant's Services provided for by this
Agreement.
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2. PERIOD OF PERFORMANCE. The Company shall hire Consultant for the "Period
of Performance" as defined in SCHEDULE A, attached hereto and executed by both
Company and Consultant, unless earlier terminated pursuant to the terms of this
Agreement.
3. STANDARD OF PERFORMANCE. Consultant agrees that the Services performed
hereunder will represent his best efforts and will be of the highest
professional standards and quality. If the Company requires Consultant to remedy
any deficiencies in the Services provided, such corrections shall be made at no
additional charge to the Company.
4. COMPLIANCE WITH COMPANY'S POLICIES. Notwithstanding the fact that he is
an independent contractor, while on the Company premises, Consultant shall
observe and obey and cause his employees and subcontractors to observe and obey,
all policies, procedures, rules, and regulations of Company applicable to
Company's own employees.
5. COMPENSATION FOR SERVICES. Company agrees to compensate Consultant for
Services in accordance with the terms and conditions described in SCHEDULE A,
attached hereto and executed by both Company and Consultant. 6. EXPENSE
REIMBURSEMENT: Consultant agrees that he will supply all instrumentalities,
tools, implements, appliances, and other materials needed for the performance of
Services and will bear all routine business and operational expenses incurred to
perform such Services. The Company will reimburse Consultant for the following
out-of-pocket expenses, so long as such expenses are pre-approved and
documented, and incurred in performing the Services:
a. TRAVEL EXPENSES. The Company shall reimburse Consultant for the
following reasonable travel expenses incurred by Consultant directly
in the performance of Services for the Company: (1) transportation
expenses, including coach class airfare, rental cars, gas, and taxi
fare; (2) hotel expenses; (4) meals and (4) dry cleaning expenses for
trips longer than three (3) days.
b. OTHER EXPENSES. The Company shall also reimburse Consultant for other
reasonable expenses incurred by Consultant directly in the performance
of Services for the Company, including expenses for faxes, business
calls, etc.
c. RECEIPT REQUIRED. For the reimbursement of expenses identified in the
above paragraphs 6(a) and 6(b) that exceed ten dollars ($10.00), the
Company requires that the Consultant present an original receipt for
such expenses.
7. INVOICING. Company shall pay the amounts due to Consultant pursuant to
paragraphs 5, 6(a), and 6(b) of this Agreement upon receipt of an invoice, which
shall be sent to Company by Consultant. Company shall pay the amount of such
invoice to Consultant within fifteen (15) days from the date the invoice is
received by Company.
8. RETURN OF COMPANY PROPERTY. When the Services are completed, Consultant
agrees to return to the Company all property of the Company, and all data and
records of Company Data, as defined herein, including all copies thereof. This
includes all of the Company's processes, customer lists, customer requirements,
and information not generally known relating to research, development,
manufacture and sale of Company products.
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9. TERMINATION. For the duration of the Period of Performance, this
Agreement may be terminated only:
a. by mutual agreement of the Company and Consultant;
b. by the Company if the Company reasonably determines based on business
necessity that it no longer requires the Consultant to perform the
Services described in this Agreement;
c. by the Company if Consultant materially breaches this Agreement and
fails to cure any such breach within ten (10) days of receiving
written notice from the Company stating the specific nature of the
breach;
d. by the Company, effective immediately, if Consultant (a) is convicted
or pleads guilty or nolo contendere to a felony or misdemeanor
involving fraud, embezzlement, theft, or dishonesty, or other criminal
conduct; (b) commits any act of fraud or dishonesty with respect to
the Company; or (c) takes other action that is likely, in the
reasonable, good faith judgment of the Company, to have a material
adverse effect upon the Company; or
e. by Consultant if the Company materially breaches this Agreement and
fails to cure any such breach within ten (10) days of receiving
written notice from Consultant stating the specific nature of the
breach.
Effective as of the date of termination (the "Termination Date"), Consultant's
right to receive compensation hereunder shall cease (except to the extent, as of
the Termination Date, that the Company owes the Consultant for Services
previously performed prior to the Termination Date).
10. NONDISCLOSURE OF COMPANY DATA. Whereas the Company has a proprietary
interest in, and its business is one that requires secrecy concerning "Company
Data,"* which is defined as Company or ASDG information that is not generally
known by or readily ascertainable to the public, and includes (i) inventions,
formulas, data, patterns, designs, drawings, discoveries, improvements,
know-how, methods, processes, and methods employed or sold by the Company, ASDG
or relating to their businesses; (ii) client data (whether or not reduced to
writing or capable of being memorized), including but not limited to client
lists, client preferences, the specific services and/or products provided to
specific clients, client contacts, pricing information, concessions and prior
bids; (iii) marketing information, including but not limited to business
strategy, plans and research; (iv) business plans, including but not limited to
capital projects; (v) financial information; and (vi) trade secrets as defined
by California law. Company Data includes documents, records, tapes, files,
media, and any other medium of communicating information.
a. Consultant shall hold in trust for the Company, and not disclose to
any unauthorized person or use for any purpose other than the
performance of this Agreement any Company Data without the prior
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* What may be classified as Company Data, Client Data and/or disclosed or
removed pursuant to the normal course of Consultant's duties, will be determined
in the sole discretion of the Company. If Consultant has questions about what
may be classified as Company Data, Client Data and/or what may be disclosed or
removed pursuant to the normal course of his/her duties with the Company, he/she
should request clarification from Company in writing.
written consent of the Company, unless and only to the extent that
Company Data becomes generally known to and available for use by the
public other than as a result of Consultant's acts or omissions.
b. Consultant hereby acknowledges that during the performance of Services
pursuant to this Agreement, the Consultant may learn of or receive
Company Data concerning the business or affairs of the Company and/or
ASDG that are the property of the Company or ASDG, respectively.
Therefore, Consultant hereby confirms that all such information
relating to the Company's or ASDG's business will be kept confidential
by the Consultant, except to the extent that such information is
required to be divulged to the Consultant's clerical or support staff
or associates in order to enable Consultant to perform Consultant's
obligations under this Agreement. Upon request by the Company or ASDG,
Consultant shall deliver to the requesting party all memoranda, notes,
plans, records, reports, computer tapes, printouts and software and
other documents and data (and copies thereof) relating to Company Data
of the requesting party that Consultant may then possess or have under
his or her control.
11. REMEDIES FOR BREACH OF CONSULTANT'S COVENANTS OF NON-DISCLOSURE. If, at
the time of enforcement of paragraphs 10, 10(a) and 10(b) above, a court shall
hold that the scope of restrictions stated therein are unreasonable under
circumstances then existing, the parties agree that the maximum scope reasonable
under such circumstances shall be substituted for the stated scope and that the
court shall be allowed to revise the restrictions contained herein to cover the
maximum scope permitted by law. Consultant agrees that the restrictions
contained in paragraphs 10, 10(a) and 10(b) are reasonable. In the event of the
breach or a threatened breach by Consultant of any of the provisions of
paragraphs 10, 10(a) and 10(b) the Company, in addition and supplementary to
other rights and remedies existing at law or equity in its favor, may apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the provisions
hereof (without posting a bond or other security).
12. REPRESENTATIONS. Consultant represents and warrants to the Company that
Consultant is subject to no agreement or obligation (including, without
limitation, any non-competition or confidentiality agreement) or bound by any
contract with any person, corporation, or other entity that would in any way
interfere with the performance of Consultant's duties and obligations to the
Company or ASDG under this Agreement. Consultant agrees to hold the Company,
ASDG and their officers, directors, employees, managers, members, shareholders
and agents harmless from any claim (and the expenses associated therewith) by a
third party under a non-competition, confidentiality or similar agreement.
13. SURVIVAL. Paragraphs 5 through 24 shall survive and continue in full
force and effect notwithstanding any termination of this Agreement.
14. NOTICES. All notices, consents, changes of address and other
communications required or permitted to be made under the terms of this
Agreement shall be in writing and shall be (i) personally delivered by an agent
of the relevant party, or (ii) transmitted by postage prepaid, certified or
registered mail:
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To the Company: American Inflatables, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
To Consultant: Xxxx Xxxxxxx
000 X Xxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
15. WAIVER OF BREACH. The waiver by any party of a breach by another party
of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by the breaching party. No waiver shall be valid unless
in writing and signed by the party sought to be bound.
16. ASSIGNMENT. Consultant acknowledges that the services to be rendered by
Consultant are unique and personal. Accordingly, Consultant may not assign any
of Consultant's rights or delegate any of Consultant's duties or obligations
under this Agreement, except to the extent amounts are payable to Consultant
hereunder after Consultant's death, in which case those benefits may be assigned
by will or the law of descent. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and shall be binding upon the
Company and its successors and assigns.
17. SEVERABILITY. In the event that any of these provisions shall be held
to be invalid or unenforceable, the remaining provisions hereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. The parties in no way intend
to include a provision that contravenes public policy. Therefore, if any
provision of this Agreement is unlawful, against public policy, or otherwise
declared void or unenforceable, such provision shall be deemed excluded from
this Agreement, which shall in all other respects remain in effect.
18. ENTIRE AGREEMENT, MODIFICATION OR AMENDMENT. The parties hereby agree
that this Agreement contains the entire agreement and understanding by and
between the parties with respect to the subject matter hereof, and no
representations, promises, agreements, or understandings, written or oral,
relating to the subject matter hereof not contained herein shall be of any force
or effect. Consultant agrees that Consultant has actively participated in
negotiating the provisions contained in this Agreement, that these provisions
have been negotiated in good faith by all parties, and that the terms of this
Agreement should not be construed against either the Company or Consultant. This
Agreement may be amended only by written amendment signed by the parties.
19. SCHEDULES OR ATTACHMENTS: In the event of a conflict in the provisions
of any schedules or attachments hereto and the provisions set forth in this
Agreement, the provisions of such schedules or attachments shall govern.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
Rebuttable proof of execution of this Agreement by any party may be made by
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presentation of a copy of this Agreement bearing a facsimile or photostatic copy
of the signature of the party whose execution is sought to be proved, and such
copies shall be as valid as the originals and as admissible as evidence of proof
of the execution and terms and provisions hereof as the originals.
21. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
22. ARBITRATION. Any and all disputes arising out of or relating to the
interpretation, application, formation, or the termination of this Contract
shall be subject to binding and final arbitration in Orange County, California,
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, the cost of which shall be equally shared between the parties.
23. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
California's rules of conflicts of law, and regardless of the place or places of
its physical execution and performance.
24. INDEPENDENT CONTRACTOR RELATIONSHIP. The parties hereto intend that an
independent contractor-owner relationship will be created by this Agreement.
Company is interested only in the result to be achieved, and the conduct and
control of the Services will lie solely with Consultant. Consultant is not to be
considered an agent or employee of Company for any purpose, and neither
Consultant nor his employees are entitled to any of the benefits that Company
may provide for its own employees. It is understood that Company does not agree
to use Consultant exclusively. It is further understood that Consultant is free
to contract for similar or other services to be performed for other owners while
under this Agreement with Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above-written.
Witnesses: AMERICAN INFLATABLES, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
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Print Name:
----------------------------- Print Name: Xxxxx X. Xxxxxxxxxx
---------------------
Title: President & CEO
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Print Name:
-----------------------------
CONSULTANT
/s/ Xxxx Xxxxxxx
----------------------------------------- --------------------------------
Print Name: Xxxx Xxxxxxx
-----------------------------
-----------------------------------------
Print Name:
-----------------------------
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SCHEDULE A
TERMS AND CONDITIONS OF CONSULTING AGREEMENT
1. PERIOD OF PERFORMANCE: August 9, 2000 until the earlier of (a) August 9,
2002 or (b) the consummation of a business combination, whether by means of
merger, consolidation, share purchase or share exchange, sale or purchase of
assets or otherwise, between the Company and ASDG in which the shareholders of
ASDG become holders of (i) a majority of the voting and distributional rights of
security holders of the Company or (ii) a majority of the assets of the Company
based on the aggregate fair market value of the assets acquired compared to the
aggregate fair market value of the assets not acquired (a "Business
Combination").
2. SCOPE OF SERVICES: Consultant will provide certain of the services to
the Company typically provided by a chief financial officer of a
similarly-situated company including without limitation the following: (a)
direction of the preparation of all financial statements of the Company required
by U.S. Generally Accepted Accounting Principals ("GAAP") in accordance with
GAAP, (b) managing on behalf of the Company the audits of the Company by its
independent auditors, (c) directing the preparation of the Company's annual,
quarterly and current reports and all other reports and filings required by the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended and all other applicable federal and state securities laws and (d)
advising the Company with respect to structuring business combinations with
ASDG. Notwithstanding anything else contained herein to the contrary, Consultant
shall not provide any capital formation and public relations services to the
Company, including but not limited to (i) direct or indirect promotions or sales
of the Company's securities, (ii) assistance in making of a market in the
Company's securities, (iii) assistance in obtaining debt and/or equity financing
for the Company or (iv) advising any parties with respect to an investment in
the Company's securities.
3. COMPENSATION FOR SERVICES:
a. In the Event of a Business Combination with ASDG.
i. In the event that a Business Combination
between the Company and ASDG is closed before May 31, 2002, in addition to all
compensation previously paid to Consultant by the Company, Consultant shall
receive 175,000 shares (the "Shares") of the common stock, par value $0.001
per share (the "Common Stock") as Consultant's sole compensation in addition to
such previously paid compensation for all Services provided to the Company and
ASDG pursuant hereto or otherwise.
ii. The issuance of such Shares shall not
initially be registered under the Securities Act of 1933, as amended (the
"Securities Act") or any State's securities laws. Consultant understands that
the Shares shall thus initially be "restricted securities" within the meaning
of Rule 144 promulgated under the Securities Act. As an inducement to the
Company to issue the Shares as provided herein, Consultant hereby represents and
warrants to the Company as follows:
A. Consultant is acquiring the Shares pursuant to this Agreement for
his own account for investment purposes only and not with a view
to or intention of distribution or resale, and Consultant will
not dispose of any of the Shares in contravention of the
Securities Act or any applicable state securities laws.
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B. Consultant is aware that he is acquiring the Shares from the
Company in a transaction that has not been registered under the
Securities Act or pursuant to the securities laws and regulations
of any State, and that as a consequence, the Shares are
"restricted securities" as defined in Rule 144 promulgated under
the Securities Act and may not be resold except pursuant to a
transaction that is registered under the Securities Act and
applicable state securities laws and regulations or a transaction
that is exempt from such registration.
C. Consultant has had an opportunity to ask questions and receive
answers concerning the Shares and the business and financial
condition of the Company and has had full access to (A) such
information concerning the Company as he has requested and (B)
such other information that Consultant deems necessary or
desirable to make an informed investment decisions regarding the
purchase of the Shares.
D. Consultant is an "accredited investor" as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act. iii. The
Company hereby undertakes to either (i) file a registration
statement with the U.S. Securities and Exchange Commission (the
"SEC") and any state regulatory authorities required by
applicable law appropriate to register the resale of the Shares
by Consultant or (ii) include the Shares in a registration
statement filed with the SEC and any state regulatory authorities
required by applicable law with respect to the issuance of shares
of the Company's Common Stock by the Company and/or the resale of
shares of the Company's Common Stock by other shareholders so as
to permit the resale of the Shares by Consultant, in either case,
as promptly as practical after the closing of the Business
Combination, and the Company shall diligently file such
amendments thereto and respond to such inquiries and comments of
the SEC and applicable state regulatory authorities as is
necessary for such registration statement to become effective.
iv. In the event of any stock dividend, stock
split, reverse stock split, reclassification, reorganization, merger,
consolidation, share exchange or other similar transaction resulting in any
change in the rights of the Common Stock or the conversion of the outstanding
shares of the Common Stock into any other security or a different number of
shares of Common Stock, the number of Shares issuable to Consultant hereunder
shall be adjusted in connection therewith to become the number of shares of
Common Stock and/or other securities with such rights as the Consultant would
be entitled to receive had the Consultant received the Shares prior to such
transaction and had such Shares participated in such transaction in the same
manner as the other outstanding shares of the Common Stock.
b. In the event that no Business Combination between the Company and ASDG
is closed on or before August 9, 2002, Consultant shall be paid at the hourly
rate of $175.00 per hour for hours spent performing the above-described
Services. As of May 13, 2002, the accrued amount of such hourly fees was
$100,000. Such compensation shall be due and payable by the Company on August 9,
2002. Consultant shall not be entitled to receive any compensation for hours not
actually worked, and shall not be entitled to any other compensation of any kind
whatsoever except as provided in this Agreement unless such compensation is
specifically approved in advance in writing by Company.
c. Consultant shall be paid as an independent contractor for the Services,
and shall be solely responsible for the reporting, for purposes of federal,
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state, or local tax and FICA, of any payments made to him by Company. Company
shall not withhold any taxes or make any payments on behalf of Consultant or his
employees and shall report any payments to Consultant to the Internal Revenue
Service on a Form 1099. Neither Consultant nor his employees are entitled to any
of the benefits that Company may provide for its own employees.
IN WITNESS WHEREOF, the parties have executed this SCHEDULE A as of the
date first above-written.
Witnesses: AMERICAN INFLATABLES, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
-------------------------------------- -----------------------------
Print Name:
--------------------------
Print Name: Xxxxx X. Xxxxxxxxxx
---------------------
Title: President
-------------------------------------- --------------------------
Print Name:
--------------------------
CONSULTANT
/s/ Xxxx Xxxxxxx
-------------------------------------- ---------------------------------
Print Name: Xxxx Xxxxxxx
--------------------------
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Print Name:
---------------------------
