Consulting Agreement - Page 1
INDEPENDENT CONSULTING AGREEMENT
This Independent Consulting Agreement ("Agreement"), effective as of November
27, 2002 ("Effective Date") is entered into by and between PATH 1 NETWORK
TECHNOLOGIES INC., a Delaware corporation (herein referred to as the "Company")
and THE DEL MAR CONSULTING GROUP, INC., a California corporation (herein
referred to as the "Consultant").
RECITALS
WHEREAS, the Company is a publicly-held corporation with its common stock traded
on the OTC Bulletin Board; and
WHEREAS, Company desires to engage the services of Consultant to represent the
company in investors' communications and public relations with existing
shareholders, brokers, dealers and other investment professionals as to the
Company's current and proposed activities, and to consult with management
concerning such Company activities;
NOW THEREFORE, in consideration of the promises and the mutual covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. Term of Consultancy. Company hereby agrees to retain the Consultant to act in
a consulting capacity to the Company, and the Consultant hereby agrees to
provide services to the Company commencing immediately and ending on July 30,
2003 unless otherwise mutually agreed to by the parties.
2. Duties of Consultant. The Consultant agrees that it will generally provide
the following specified consulting services through its officers and employees
during the term specified in Section 1, above.
(a) Consult with and assist the Company in developing and implementing
appropriate plans and means for presenting the Company and its
business plans, strategy and personnel to the financial community,
establishing an image for the Company in the financial community, and
creating the foundation for subsequent financial public relations
efforts;
(b) Introduce the Company to the financial community, including, but
not limited to, retail brokers, buy side and sell side institutional
managers, portfolio managers, analysts, and financial public relations
professionals.;
(c) With the cooperation of the Company, maintain an awareness during
the term of this Agreement of the Company's plans, strategy and
personnel, as they may evolve during such period, and consult and
assist the Company in communicating appropriate information regarding
such plans, strategy and personnel to the financial community;
(d) Assist and consult the Company with respect to its (i) relations
with stockholders, (ii) relations with brokers, dealers, analysts and
other investment professionals, and (iii) financial public relations
generally;
(e) Perform the functions generally assigned to stockholder relations
and public relations departments in major corporations, including
responding to telephone and written inquiries (which may be referred
to the Consultant by the Company); preparing press releases for the
Company with the Company's involvement and approval of press releases,
reports and other communications with or to shareholders, the
investment community and the general public; consulting with respect
to the timing, form, distribution and other matters related to such
releases, reports and communications; and, at the Company's request
and subject to the Company's securing its own rights to the use of its
names, marks, and logos, consulting with respect to corporate symbols,
logos, names, the presentation of such symbols, logos and names, and
other matters relating to corporate image;
(f) Upon and with the Company's direction and written approval,
disseminate information regarding the Company to shareholders,
brokers, dealers, other investment community professionals and the
general investing public;
(g) Upon and with the Company's direction, conduct meetings, in person
or by telephone, with brokers, dealers, analysts and other investment
professionals to communicate with them regarding the Company's plans,
goals and activities, and assist the Company in preparing for press
conferences and other forums involving the media, investment
professionals and the general investment public;
(h) At the Company's request, review business plans, strategies,
mission statements budgets, proposed transactions and other plans for
the purpose of advising the Company of the public relations
implications thereof; and,
(i) Otherwise perform as the Company's consultant for public relations
and relations with financial professionals.
3. Allocation of Time and Energies. The Consultant hereby promises to perform
and discharge faithfully the responsibilities which may be assigned to the
Consultant from time to time by the officers and duly authorized representatives
of the Company in connection with the conduct of its financial and public
relations and communications activities, so long as such activities are in
compliance with applicable securities laws and regulations. Consultant and staff
shall diligently and thoroughly provide the consulting services required
hereunder. Although no specific hours-per-day requirement will be required,
Consultant and the Company agree that Consultant will perform the duties set
forth herein above in a diligent and professional manner. The parties
acknowledge and agree that a disproportionately large amount of the effort to be
expended and the costs to be incurred by the Consultant and the benefits to be
received by the Company are expected to occur within or shortly after the first
two months of the effectiveness of this Agreement. It is explicitly understood
that neither the price of the Company's common stock, nor the trading volume of
the Company's common stock hereunder measure Consultant's performance of its
duties. It is also understood that the Company is entering into this Agreement
with Consultant, a corporation and not any individual member or employee
thereof, and, as such, Consultant will not be deemed to have breached this
Agreement if any member, officer or director of the Consultant leaves the firm
or dies or becomes physically unable to perform any meaningful activities during
the term of the Agreement, provided the Consultant otherwise performs its
obligations under this Agreement.
4. Remuneration. As full and complete compensation for services described in
this Agreement, the Company shall compensate Consultant as follows:
For undertaking this engagement, for previous services rendered, and for other
good and valuable consideration, the Company agrees to issue to the Consultant a
"Commencement Bonus" payable in the form of the following:
(1.) Two Hundred Forty Thousand (240,000) shares of the Company's
Common Stock ("Common Stock"); and,
(2.) an Option to purchase 70,000 shares of the Company's Common Stock
at $1.00 per share, which carry a term of four years from the date of this
Agreement, vest ratably over a six month period from the date issued, and have a
"net exercise" provision ("Option"). A copy of the Option is attached hereto and
referenced as "Exhibit "A". This Commencement Bonus shall be issued to the
Consultant immediately following execution of this Agreement and shall, when
issued and delivered to Consultant, be fully paid and non-assessable. The Shares
and the Option hereunder shall be delivered to Consultant as follows:
A total of 150,000 Shares of Common Stock and the Option shall be delivered to
Consultant upon the execution of this Agreement.
A total of 45,000 Shares shall be issued to Consultant upon Consultant
introducing at least 75 investment professionals (such as retail stock brokers,
buy side and sell side analysts, portfolio managers, investment newsletter
writers, investment bankers, etc.) during the first month of this Agreement.
Consultant shall email or fax to Company, on a daily basis, each individual
investment professional that it has introduced. Upon the introduction of the
75th such investment professional, the Company shall deliver the 45,000 Shares
to Consultant.
A total of 45,000 Shares shall be issued to Consultant upon Consultant
introducing at least 150 individual investment professionals during the first
two months of this Agreement. Upon the introduction of the 150th investment
professional, the Company shall deliver the 45,000 Shares to Consultant.
The Company understands and agrees that Consultant has foregone significant
opportunities to accept this engagement and that the Company derives substantial
benefit from the execution of this Agreement and the ability to announce its
relationship with Consultant. The 240,000 shares of Common Stock and the Option
issued as a Commencement Bonus, therefore, constitute payment for Consultant's
agreement to consult to the Company and are a nonrefundable, non-apportionable,
and non-ratable retainer; such shares of common stock are not a prepayment for
future services. If the Company decides to terminate this Agreement prior to
July 30, 2003 for any reason whatsoever, it is agreed and understood that
Consultant will not be requested or demanded by the Company to return any of the
shares of Common Stock or the Option paid to it as Commencement Bonus hereunder,
provided however, that Company shall have no obligation to deliver to Consultant
any of the 90,000 Shares not issued or issuable to Consultant which have yet to
be earned. Further, if and in the event the Company is acquired in whole or in
part, during the term of this Agreement, it is agreed and understood Consultant
will not be requested or demanded by the Company to return any of the issued and
delivered 240,000 shares of Common stock or the Option paid to it hereunder.
4.2 For performance under this agreement on a month-to-month basis,
Company will pay Consultant a cash fee in the amount of $6,000 per month. This
Consultancy Fee shall be issued to the Consultant on a monthly basis, the first
monthly payment due and payable upon the execution of this Agreement and each
following monthly payment payable in full on the first day of the respective
month. The monthly Consultancy Fee shall continue to be paid monthly for the
duration of this Consulting Agreement. The Company shall not be obligated to
Consultant for any monthly cash fee for any month or part thereof remaining from
the date of any cancellation to July 30, 2003.
4.3 The Company or its assigns agrees that it will include, in the next
Registration Statement filed by the Company with the SEC on Forms XX-0, XX-0,
XX-0 or other appropriate form relating to the resale of restricted shares,
both the Common Stock issued to Consultant pursuant to this Agreement, as well
as the shares of the Company's common stock underlying the Option issued to the
Consultant hereunder. The Company agrees to file such a registration statement
no later than November 30, 2003. Consultant agrees that it will not sell or
transfer any of the Common Stock issued to it hereunder prior to the earlier of
July 30, 2003 or the termination of this Agreement by the Company.
4.4 With each transfer of shares of Common Stock and the Option to be
issued pursuant to this Agreement (collectively, the "Shares"), Company shall
cause to be issued a certificate representing the Common Stock and the Option
stating that said shares and Option are validly issued, fully paid and
non-assessable and that the issuance and eventual transfer of them to Consultant
has been duly authorized by the Company. Company warrants that all Shares and
the Option issued to Consultant pursuant to this Agreement shall be or have been
validly issued, fully paid and non-assessable and that the Company's board of
directors shall have duly authorized the issuance and any transfer of them to
Consultant.
4.5 Consultant acknowledges that the shares of Common Stock to be
issued pursuant to this Agreement (collectively, the "Shares") have not been
registered under the Securities Act of 1933, and accordingly are "restricted
securities" within the meaning of Rule 144 of the Act. As such, the Shares may
not be resold or transferred unless the Company has received an opinion of
counsel reasonably satisfactory to the Company that such resale or transfer is
exempt from the registration requirements of that Act.
4.6 In connection with the acquisition of Shares hereunder, the
Consultant represents and warrants to the Company, to the best of its/his
knowledge, as follows:
(a) Consultant acknowledges that the Consultant has been afforded the
opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning
an investment in the Shares, and any additional information that the
Consultant has requested.
(b) Consultant's investment in restricted securities is reasonable in
relation to the Consultant's net worth, which is in excess of ten (10)
times the Consultant's cost basis in the Shares. Consultant has had
experience in investments in restricted and publicly traded
securities, and Consultant has had experience in investments in
speculative securities and other investments that involve the risk of
loss of investment. Consultant acknowledges that an investment in the
Shares is speculative and involves the risk of loss. Consultant has
the requisite knowledge to assess the relative merits and risks of
this investment without the necessity of relying upon other advisors,
and Consultant can afford the risk of loss of his entire investment in
the Shares. Consultant is (i) an accredited investor, as that term is
defined in Regulation D promulgated under the Securities Act of 1933,
and (ii) a purchaser described in Section 25102 (f) (2) of the
California Corporate Securities Law of 1968, as amended.
(c) Consultant is acquiring the Shares for the Consultant's own account
for long-term investment and not with a view toward resale or
distribution thereof except in accordance with applicable securities
laws.
5. Finder's Fee. If in the course of completing its duties as set forth in this
Agreement the Consultant introduces Company, or its nominees, to a party,
including but not limited to a lender or equity purchaser, not already having a
proven preexisting relationship with the Company, with whom Company, or its
nominees, ultimately finances or causes the completion of such financing,
Company agrees to compensate Consultant for such services with a "finder's fee"
in the amount of 5% of total gross funding provided by such lender or equity
purchaser, such fee to be payable in cash.
(a) It is understood that in the event Consultant introduces Company to an
intermediary or broker dealer, not already having a preexisting
relationship with Company, with whom Company, or its nominees,
ultimately finances or causes the completion of such financing,
Company agrees to compensate Consultant for such services with a
"finder's fee" in the amount of 2.5% of total gross funding provided
by such intermediary or broker dealer, such fee to be payable in cash.
This will be in addition to any fees payable by Company to said
intermediary or broker dealer, if any, which shall be per separate
agreements negotiated between Company and such other intermediary or
broker dealer.
(b) It is also understood that in the event Consultant directly introduces
Company, or its nominees, to a merger and/or acquisition candidate,
not already having a preexisting relationship with Company, with whom
Company, or its nominees, ultimately is acquired, or with whom
Company, or its nominees acquires or causes the completion of such
acquisition, Company agrees to compensate Consultant for such services
with a "finder's fee" in the amount of 4% of total gross consideration
provided by such merger and/or acquisition, such fee to be payable in
the same form of consideration received by Company.
(c) It is also understood that in the event Consultant introduces Company,
or its nominees, to a merger and/or acquisition candidate indirectly
through another intermediary, not already having a preexisting
relationship with Company, with whom Company, or its nominees,
ultimately is acquired, or with whom Company, or its nominees acquires
or causes the completion of such acquisition, Company agrees to
compensate Consultant for such services with a "finder's fee" in the
amount of 2% of total gross consideration provided by such merger
and/or acquisition, such fee to be payable in the same form of
consideration received by Company. This will be in addition to any
fees payable by Company to any other intermediary, if any, which shall
be in accordance with separate agreements negotiated between Company
and such other intermediary.
(d) It is understood that in the event Consultant introduces Company to a
strategic or business partner, not already having a preexisting
relationship with Company, with whom Company, or its nominees,
ultimately enters into a business alliance, Company agrees to
compensate Consultant, for such services with a "finder's fee" in the
amount of 3% of total gross revenue provided by such business
alliance, for the life of the business alliance, such fee to be
payable in cash within 10 days of Company's receipt of said revenue.
5.1 It is further understood that Company, and not Consultant, is
responsible to perform any and all due diligence on such intermediary broker
dealer, lender, equity purchaser or acquisition/merger candidate introduced to
it by Consultant under this Agreement, prior to Company receiving funds or
closing on any acquisition/merger. However, Consultant will not introduce any
parties to Company about which Consultant has any prior knowledge of
questionable, unethical or illicit activities.
5.2 Company agrees that said compensation to Consultant shall be paid
in full at the time said financing or acquisition/merger is closed, such
compensation to be transferred by Company to Consultant within five (5) business
days of the closing of a financing, merger or acquisition transaction.
5.3 As further consideration to Consultant, Company, or its nominees
and assigns, agrees to pay with respect to any financing or acquisition/merger
candidate provided directly or indirectly to the Company by any broker/dealer
intermediary, lender or equity purchaser covered by this Section 5 during the
period commencing at the effective date of this Agreement and ending two years
from the termination of this Agreement, a fee to Consultant equal to that
outlined in Section 5 herein.
5.4 Consultant will notify Company, in writing, of introductions it
makes for potential sources of financing or acquisitions/mergers or strategic
partners in a timely manner (within approximately 3 days of introduction) via
confirmed delivery of a facsimile memo or email. If Company has a preexisting
relationship with such nominee and believes such party should be excluded from
this Agreement, then Company will notify Consultant immediately within two (2)
business days of Consultant's facsimile to Company of such circumstance via
facsimile memo or email.
5.5 It is specifically understood that Consultant is not and does not
hold itself out be a Broker/Dealer, but is rather merely a "Finder" in reference
to the Company procuring financing sources and acquisition/merger candidates,
and Consultant does not normally provide such services. The Consultant will only
be introducing the Company to such potential entities and will not be
responsible for the structuring of any transaction. Any obligation to pay a
"Finder's Fee" hereunder shall survive the merging, acquisition, or other change
in the form of entity of the Company and to the extent it remains unfulfilled
shall be assigned and transferred to any successor to the Company. The Company
agrees that no reference to the Consultant will be made in any press release or
advertisement of any transaction without the express approval, in writing, of
such release by Consultant.
5.6 Notwithstanding the foregoing, the maximum finder's fee computed
individually or collectively in Sections 5. through and including 5.5, and
payable by the Company to Consultant hereunder for the term of this Agreement
including any extensions thereof, shall be $500,000, except for the finder's fee
related to a merger or acquisition as provided in Section 5(b) and 5(c), above.
6. Non-Assignability of Services. Consultant's services under this contract are
offered to Company only and may not be assigned by Company to any entity with
which Company merges or which acquires the Company or substantially all of its
assets wherein the Company becomes a minority constituent of the combined
Company. In the event of such merger or acquisition, all compensation to
Consultant herein under the schedules set forth herein shall remain due and
payable, and any compensation received by the Consultant may be retained in the
entirety by Consultant, all without any reduction or pro-rating and shall be
considered and remain fully paid and non-assessable. Notwithstanding the
non-assignability of Consultant's services, Company shall assure that in the
event of any merger, acquisition, or similar change of form of entity, that its
successor entity shall agree to complete all obligations to Consultant,
including the provision and transfer of all compensation herein, and the
preservation of the value thereof consistent with the rights granted to
Consultant by the Company herein, and to Shareholders. Consultant shall not
assign its rights or delegate its duties hereunder without the prior written
consent of Company.
7. Expenses. Consultant agrees to pay for all its expenses (phone, mailing,
labor, etc.), other than extraordinary items (travel required by/or specifically
requested by the Company, luncheons or dinners to large groups of investment
professionals, mass faxing to a sizable percentage of the Company's
constituents, investor conference calls, print advertisements in publications,
etc.) approved by the Company in writing prior to its incurring an obligation
for reimbursement. The Company agrees and understands that Consultant will not
be responsible for preparing or mailing due diligence and/or investor packages
on the Company, and that the Company will have some means to prepare and mail
out investor packages at the Company's expense.
8. Indemnification. The Company warrants and represents that all oral
communications, written documents or materials furnished to Consultant or the
public by the Company with respect to financial affairs, operations,
profitability and strategic planning of the Company are accurate in all material
respects and Consultant may rely upon the accuracy thereof without independent
investigation. The Company will protect, indemnify and hold harmless Consultant
against any claims or litigation including any damages, liability, cost and
reasonable attorney's fees as incurred with respect thereto resulting from
Consultant's communication or dissemination of any said information, documents
or materials excluding any such claims or litigation resulting from Consultant's
communication or dissemination of information not provided or authorized by the
Company.
9. Representations. Consultant represents that it is not required to maintain
any licenses and registrations under federal or any state regulations necessary
to perform the services set forth herein. Consultant acknowledges that, to the
best of its knowledge, the performance of the services set forth under this
Agreement will not violate any rule or provision of any regulatory agency having
jurisdiction over Consultant. Consultant acknowledges that, to the best of its
knowledge, Consultant and its officers and directors are not the subject of any
investigation, claim, decree or judgment involving any violation of the SEC or
securities laws. Consultant further acknowledges that it is not a securities
Broker Dealer or a registered investment advisor. Company acknowledges that, to
the best of its knowledge, that it has not violated any rule or provision of any
regulatory agency having jurisdiction over the Company. Company acknowledges
that, to the best of its knowledge, Company is not the subject of any
investigation, claim, decree or judgment involving any violation of the SEC or
securities laws.
10. Legal Representation. Company and Consultant represents that they have
consulted with independent legal counsel and/or tax, financial and business
advisors, to the extent that they deemed necessary.
11. Status as Independent Contractor. Consultant's engagement pursuant to this
Agreement shall be as independent contractor, and not as an employee, officer or
other agent of the Company. Neither party to this Agreement shall represent or
hold itself out to be the employer or employee of the other. Consultant further
acknowledges the consideration provided hereinabove is a gross amount of
consideration and that the Company will not withhold from such consideration any
amounts as to income taxes, social security payments or any other payroll taxes.
All such income taxes and other such payment shall be made or provided for by
Consultant and the Company shall have no responsibility or duties regarding such
matters. Neither the Company nor the Consultant possesses the authority to bind
each other in any agreements without the express written consent of the entity
to be bound.
12. Attorney's Fee. If any legal action or any arbitration or other proceeding
is brought for the enforcement or interpretation of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
or related to this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs in connection
with that action or proceeding, in addition to any other relief to which it or
they may be entitled.
13. Waiver. The waiver by either party 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 such other party.
14. Notices. All notices, requests, and other communications hereunder shall be
deemed to be duly given if sent by U.S. mail, postage prepaid, addressed to the
other party at the address as set forth herein below:
To the Company:
Path1 Network Technologies, Inc.
Xxxxxxxxx Xxxx, CEO
0000 Xxxxxx Xxxxxx; Xxxxx 000
Xxx Xxxxx, XX 00000
To the Consultant:
The Del Mar Consulting Group, Inc.
Xxxxxx X. Xxxx, President
0000 Xx Xxxxx Xxxx
Xxx Xxx, XX 00000
It is understood that either party may change the address to which notices for
it shall be addressed by providing notice of such change to the other party in
the manner set forth in this paragraph.
15. Choice of Law, Jurisdiction and Venue. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of California.
The parties agree that San Diego County, CA. will be the venue of any dispute
and will have jurisdiction over all parties.
16. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the alleged breach thereof, or relating to Consultant's activities
or remuneration under this Agreement, shall be settled by binding arbitration in
California, in accordance with the applicable rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator(s) shall be
binding on the parties and may be entered in any court having jurisdiction as
provided by Paragraph 14 herein. The provisions of Title 9 of Part 3 of the
California Code of Civil Procedure, including section 1283.05, and successor
statutes, permitting expanded discovery proceedings shall be applicable to all
disputes that are arbitrated under this paragraph.
17. Complete Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof. This Agreement and its terms may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AGREED TO:
COMPANY:
PATH 1 NETWORK TECHNOLOGIES INC.
By: /s/ Xxxxxxxxx Xxxx
----------------------------------------------------------
Name: Xxxxxxxxx Xxxx
Title: CEO and its Duly Authorized Agent
CONSULTANT:
THE DEL MAR CONSULTING GROUP, INC.
By: /s/ Xxxxxx X. Xxxx
----------------------------------------------------------
Name: Xxxxxx X. Xxxx
Title: President and its Duly Authorized Agent
