EXHIBIT 1
CONSULTING AGREEMENT
This Consulting Agreement dated effective as of January 8, 1998 (the
"Agreement"), is made and entered into by and between XR CO., a Florida
corporation (the "Consultant"), and OCEAN OPTIQUE DISTRIBUTORS, INC., a Florida
corporation (the "Company").
WITNESSETH:
WHEREAS, the Company represents that it has been notified that it will
lose its NASDAQ listing in February 1998 for the failure to meet NASDAQ's
minimum net worth and stock price thresholds;
WHEREAS, the Company has represented to the Board of Directors of the
Company (the "Board") that the Company is suffering from severe cash flow
deficits, such that the Company is at risk of failing to meet its obligations as
they ordinarily become due;
WHEREAS, the Company represents that it requires financial relief for
oridinary working capital purposes, including the release of product ready for
delivery to the Company, which the Company critically needs;
WHEREAS, the Consultant has certain knowledge, experience, and
expertise in working through the Company's financial and legal problems and has
access to capital;
WHEREAS, it is the desire of the Company to engage the Consultant as an
independent contractor to perform consulting services and capital enhancement;
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions of the Consultant's engagement with the Company; and
WHEREAS, the foregoing recitals are an integral part of this Agreement;
NOW, THEREFORE, in consideration of the foregoing promises and the
mutual undertakings and covenants herein, and for such other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following terms shall have the respective meanings set forth below
for all purposes of this Agreement:
1.01. SERVICES. The term "Services" shall mean, individually and
collectively, the following:
(i) streamlining the Company's operations;
(ii) negotiating and settling the Revlon Dispute;
(iii) implementing strategies to improve the financial condition of
the Company;
(iv) cooperate with management's negotiations of supply agreements
with the Company's vendors; and
(v) implementing new products and expanding the markets for the
Company's products.
1.02. COMMON STOCK. The term "Common Stock" shall mean the common
stock, no par value per share, of the Company. There are currently 10,000,000
shares of Common Stock authorized, of which all such shares are issued and
outstanding or are reserved for issuance pursuant to options, warrants,
subscription rights, and conversion privileges of any other securities of the
Company.
1.03. SERIES D PREFERRED STOCK. The term "Series D Preferred Stock"
shall mean preferred stock of the Company having the following preferences,
designations, rights, and limitations:
(i) VOTING. The Series D Preferred Stock shall vote with the
Common Stock as one class (and as otherwise permitted under
Florida law) and shall be entitled to 6.5 votes per share of
Common Stock.
(ii) DIVIDENDS. The Series D Preferred Stock shall be entitled to
dividends at the rate of 2.5% of the liquidation value
thereof. Dividends shall begin to accrue on July 1, 1998, and
shall be cumulative.
(iii) LIQUIDATION. The liquidation value of the Series D Preferred
Stock shall be $0.00 until June 30, 1998, and shall thereafter
be $0.35 per share, plus accumulated but unpaid dividends.
(iv) SUBORDINATION; PRIORITY. The Series D Preferred Stock shall be
subordinate in liquidation and the payment of dividends to the
Series A Cumulative Convertible 3% Preferred Stock, the Series
B Cumulative Convertible 2% Preferred Stock, and the Series C
Non-Cumulative Convertible Preferred Stock. No liquidating
distributions shall be paid on any share of Common Stock or
other equity security of the Company not described in this
Clause (iv) until the holder(s) of the Series D Preferred
Stock shall have received
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liquidating distributions totaling the aggregate liquidation
value and accumulated but unpaid dividends on all shares of
Series D Preferred Stock or its earlier conversion. No
dividends shall be declared, set aside, or paid on any share
of Common Stock or other equity security of the Company not
described in this Clause (iv) until the holder(s) of the
Series D Preferred Stock shall have received dividend
distributions totaling the aggregate accumulated but unpaid
dividends, together with the dividends accrued for the period
immediately prior to such declaration, set aside, or payment,
on all shares of Series D Preferred Stock.
(v) CONVERSION. Each share of Series D Preferred Stock shall be
convertible into 6.5 shares of Common Stock, or fraction
thereof, for each $0.35 of liquidation value plus accumulated
but unpaid dividends associated with such share. The Series A
Preferred Stock shall be convertible, in whole or in part,
from time to time, at the election of the holder(s) thereof
at any time.
(vi) ANTI-DILUTION; PRE-EMPTIVE RIGHTS. The Series D Preferred
Stock shall be anti-dilutive with respect to its voting rights
and conversion privilege. In addition, the holder(s) of the
Series D Preferred Stock shall be entitled to pre-emptive
rights with respect to any sale of Common Stock or other
equity securities of the Company on the same terms and
conditions.
1.04. REVLON DISPUTE. The term "Revlon Dispute" shall mean that
certain dispute between the Company and Revlon with respect to certain licensing
and other transactions between the Company and Revlon.
1.05. NET TANGIBLE ASSETS. The term "Net Tangible Assets" shall mean
the total assets, excluding good will, minus total liabilities, of the Company.
ARTICLE II
DUTIES OF THE CONSULTANT
2.01. AVAILABILITY OF CONSULTANT, SERVICES. The Consultant shall be
available during normal business hours to consult, on an as-needed basis, with
the Board, officers, department heads, and/or administrative staff of the
Company, provided, however, that the Consultant shall be accountable only to the
Board. Management of the Company shall not direct nor interfere with the
Consultant's performance of the Services hereunder. The Consultatnt shall use
its best efforts to accomplish each of the Services, although the failure to
accomplish any one or more of the Services shall not be a breach of this
Agreement.
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2.02. INDEPENDENT CONTRACTOR STATUS. The Company and the Consultant
hereby agree that the Consultant is being retained by the Company in the
capacity of an independent contractor and not as an employee or agent of the
Company. The Company and the Consultant further agree that nothing in this
Agreement shall create, or shall be construed as creating, any form of
partnership, joint venture, or other affiliation that would operate to permit
the Consultant to bind the Company with respect to any matter or would cause the
Company to be liable for any action of the Consultant, and the Consultant
hereby agrees that it will not represent to any third party that its engagement
by the Company is in any capacity other than as an independent contractor.
2.03. EMPLOYMENT TAX WITHHOLDINGS. The Consultant hereby acknowledges
and agrees that he shall be solely responsible for all federal, state, and local
income and employment tax withholdings and matching requirements and hereby
convenants and agrees to file all required estimated and other tax statements
and returns required of an independent contractor. The Consultant hereby
acknowledges and agrees that the Company will issue the Consultant an Internal
Revenue Service Form 1099 (or successor form, if any) each year reflecting the
payment of fees (if in excess of $600) to the Consulting during the previous
calendar year.
2.04. ENGAGEMENT OF CONTRACTOR BY THIRD PARTIES. The Consultant shall
devote such time and manpower as shall be necessary or appropriate to perform
the Services, provided, however, that nothing in this Agreement shall preclude
the Consultant from providing similar consulting or other services for third
parties, whether or not such third parties may or may not be competitors of the
Company, so long as the provision of such outside services do not hinder the
timely performance of the Consultant's obligations under this Agreement.
2.05. CONFIDENTIALITY. The Consultant hereby agrees that it will keep
in strictest confidence and will not utilize for its own benefit or disclose to
any person (other than employees, attorneys, accountants, and other persons
retained or employed by the Consultant and whose assistance is reasonably
necessary to provide the Services) any Confidential Information of the Company
that the Consultant acquires or is apprised of, whether directly or indirectly,
or intentionally or unintentionally. "Confidential Information" shall mean trade
secrets, non-public information, and proprietary information of the Company,
including, but not limited to, information concerning its finances, business
plans, marketing plans and techniques, customers, suppliers, representatives,
objectives, analyses, studies, records, results of operations, test results, and
similar information, provided, however, that Confidential Information shall not
include any information in the public domain or generally available to the
public, any information developed by a party on its own and without the
assistance of the other party or its services or activities hereunder, or
information available to a party from a third party unrelated to the activities
of the parties under this Agreement and who is not under any obligation to
refrain from releasing or disclosing such information. The Consultant hereby
agrees to return to the Company all documents or other materials reflecting such
secrets, information, and date (including all copies thereof, whether paper,
magnetic, electronic, or digital, or certifying the destruction thereof) within
30 days following the termination of this Agreement.
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2.06. TERM OF AGREEMENT. This Agreement shall commence on the date
first written above and shall terminate on the date 12 months therefrom. This
Agreement may be terminated prior thereto by the Company only if the Consultant
shall be in material breach of any term or condition of this Agreement and shall
have failed to cure such breach within 30 days following written notice from the
Company specifying the nature of the breach. The Consultant may terminate this
Agreement at any time in its sole discretion, provided, however, that if the
Consultant shall terminate this Agreement prior to July 1, 1998, it shall
forfeit any shares of Series D Preferred Stock that have not been earned as of
such date and shall forfeit the right to receive shares of Common Stock not
previously received that are payable pursuant to Section 3.01 after the date of
termination.
ARTICLE III
FEES
3.01. BASIC PAYMENT. In consideration for the Services to be rendered
by the Consultant pursuant to this Agreement, the Company hereby agrees to pay
to the Consultant, when authorized shares are available, a base payment equal to
400,000 shares of Common Stock payable 33,333 shares on the date of execution of
this Agreement, and 33,333 shares on the first day of each month thereafter,
commencing February 1, 1998, provided, however, that the payment on December 1,
1998, shall be 33,337 shares. The Company shall deliver one or more certificates
respresenting the shares of Common Stock received in each month on or before the
last day of such month.
3.02. REIMBURSEMENT OF EXPENSES. The Consultant shall be reimbursed by
the Company for all reasonable costs and expenses incurred by the Consultant in
negotiating, preparing, and closing this Agreement, in providing the Services;
in effecting the redemption, if any, of any shares of Series D Preferred Stock;
or in futherance of any other provision of this Agreement. The Company shall
provide an automobile and cellular phone for the Consultant's exclusive use
during the term of this Agreement. The Company shall reimburse such costs and
expenses within five days following the presentation of invoices or receipts
therefor.
ARTICLE IV
CAPITAL ENHANCEMENT
4.01. ISSUANCE OF SERIES D PREFERRED STOCK. Upon the execution of this
Agreement, the Company shall issue to the Consultant and/or affiliated or
associated assigns 2,846,154 shares of Series D Preferred Stock and file a
certificate of designation with the Secretary of State of Florida for the Series
D Preferred Stock. In consideration therefor, the Consultant shall increase the
tangible equity capital of the Company by no less than $1,000,000 before July 1,
1998.
4.02. REDEMPTION RIGHT OF THE COMPANY. The shares of Series D Preferred
Stock are not redeemable by the Company, except that the Company shall redeem
shares of Series D Preferred Stock from the Consultant at a redemption price of
$0.001 per share thereof only in accordance with the following schedule:
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(i) If the Consultant has increased the tangible equity capital of
the Company by at least $750,000 but less than $1,000,000
before July 1, 1998, then the Company shall be entitled to
redeem 711,538 shares of Series D Preferred Stock;
(ii) If the Consultant has increased the tangible equity capital of
the Company by at least $500,000 but less than $750,000 before
July 1, 1998, then the Company shall be entitled to redeem
1,423,077 shares of Series D Preferred Stock;
(iii) If the Consultant has increased the tangible equity capital of
the Company by at least $250,000 but less than $500,000 before
July 1, 1998, then the Company shall be entitled to redeem
2,134,615 shares of Series D Preferred Stock;
(iv) If the Consultant has failed to increase the tangible equity
capital of the Company by at least $250,000 before July 1,
1998, than the Company shall be entitled to redeem all of the
shares of Series D Preferred Stock.
The Company's right of redemption pursuant to this Section 4.02 shall
terminate upon the earlier of the termination of this Agreement or the increase
in the Company's Net Tangible Assets by $1,000,000.
4.03. BONUS. If the Consulant is successful in increasing the Net
Tangible Assets of the Company by at least $1,000,000 before the Company's
Common Stock is delisted on the NASDAQ Exchange pursuant to the existing notice
from NASDAQ regarding delisting the Company, the Consultant shall receive an
option to purchase that number of shares of Common Stock, when authorized shares
are available, equal to 1% of the outstanding Common Stock of the Company on a
fully diluted basis. The exercise price per share of Common Stock shall equal
the closing price per share of Common Stock on NASDAQ on the date that the
Consultant completes the increase in the Company's tangible equity capital above
$1,000,000. If shares of Common Stock have not been traded on such date, then
the exercise price shall be the difference between the last quoted bid and ask
prices.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Consultant each of
the following as of the effective date of this Agreement.
5.01. EXISTENCE. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida. The
Company is duly qualified to transact business, and is in good standing, in each
jurisdiction where the nature of its business or properties
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requires such qualification. The Company has all requisite power, authority,
licenses, permits, and approvals material to the ownership and operation of its
properties and to the carrying on of its business.
5.02. CAPACITY. The Company has all requisite power and authority to
execute, deliver, and perform under this Agreement.
5.03. AUTHORIZATION. The execution and delivery of, and performance by
the Company under this Agreement (a) have been duly authorized by all requisite
action; (b) are not in contravention of the terms of its Articles of
Incorporation or Bylaws; and (c) are not in contravention of the terms of any
credit or loan agreement, indenture, lease, franchise, marketing agreement,
license, mortgage or deed of trust, or other material agreement, undertaking, or
arrangement (written or oral) to which the Company is a party or by which it (or
any of its assets) may be bound, except this Agreement may violate that certain
Loan and Security Agreement with Coast Business Credit.
5.04. VALIDITY. This Agreement, when executed and delivered by all
parties thereto, will constitute the valid, legal, and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable liquidation, conservatorship, bankruptcy, insolvency,
reorganization, fraudulent transfer or conveyance, moratorium, or other laws
affecting creditors' rights or the collection of debtors' obligations generally
from time to time in effect.
5.05. COMPLIANCE WITH LAWS. The Company is not, and the execution,
delivery, and performance of, and compliance with, the terms of this Agreement
will not cause the Company to be, in violation of any law, regulation, ruling,
or order or any federal, state, or local government or governmental agency or
any federal or state court in any respect that could have any material adverse
effect whatsoever upon (a) the validity, performance, or enforceability of any
of the terms of this Agreement; or (b) the financial condition or business
operations of the Company.
5.06. NET TANGIBLE ASSETS. The Company's net tangible assets are not
less than $1,200,000 as of 9/30/1997.
ARTICLE VI
MISCELLANEOUS
6.01. FURTHER ASSURANCES. The Company hereby agrees to perform any
further acts and to execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
6.02. SEVERABILITY. In the event that any of the provisions, or
portions thereof, of this Agreement are held to be unenforceable or invalid by
any court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
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6.03. CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular.
6.04. GENDER. Any references herein to the masculine gender, or to the
masculine form of any noun, adjective, or possessive, shall be construed to
include the feminine or neuter gender and form, and vice versa.
6.05. HEADINGS. The headings contained in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
of any of the provisions contained herein.
6.06. MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
6.07. GOVERNING LAW; VENUE. THIS AGREEMENT HAS BEEN EXECUTED IN AND
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA. VENUE FOR ANY ACTION
BROUGHT HEREUNDER SHALL BE PROPER ONLY IN DADE COUNTY.
6.08. COURT COSTS AND ATTORNEYS' FEES. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover costs of court and reasonable attorneys' fees from the other
party or parties to such action, which fees may be set by the court in the trial
of such action or may be enforced in a separate action brought for that purpose,
and which fees shall be in addition to any other relief that may be awarded.
6.09. INUREMENT. Subject to the restrictions against transfer or
assignment as herein contained, the provisions of this Agreement shall inure to
the benefit of, and shall be binding on, the assigns, successors in interest,
personal representatives, estates, heirs, and legatees of each of the parties
hereto.
6.10. WAIVERS. No waiver of any provision or condition of this
Agreement shall be valid unless executed in writing and signed by the party to
be bound thereby, and then only to the extent specified in such waiver. No
waiver of any provision or condition of this Agreement shall be construed as a
waiver of any other provision or condition of this Agreement, and no present
waiver of any provision or condition of this Agreement shall be construed as a
future waiver of such provision or condition.
6.11. AMENDMENT. This Agreement may be amended only by the unanimous
written consent of the parties hereto.
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6.12. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto concerning the subject matter contained
herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties hereto relating to
the subject matter of this Agreement that are not fully expressed herein.
IN WITNESS WHEREOF, the parties to this Agreement have set their hands
hereto as of the date first written above.
THE COMPANY
OCEAN OPTIQUE DISTRIBUTORS, INC.
/s/ XXXXXX X. XXXXXX
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By: Xxxxxx X. Xxxxxx, Chief Executive Officer
THE CONSULTANT
XR CO., INC.
/s/ XXXXXX X. XXXXXXX
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By: Xxxxxx X. Xxxxxxx, Chief Executive Officer
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