Exhibit 10.1
CONFIDENTIAL TREATMENT REQUESTED
INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND
IS IDENTIFIED BY THREE ASTERISKS, AS FOLLOWS "* * *", AN UNREDACTED VERSION OF
THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
[GRAPHIC OMITTED]
November 23, 2005
Xxxxxx Xxxxxxx Enterprises, Inc.
000 X. Xxxxxx-Xxxxx Xxxx., 0xx Xxxxx
Xxxxxx-Xxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx, President "Letter of Agreement"
Ladies and Gentlemen:
This letter agreement (this "Letter") sets forth our mutual understanding
with respect to a transaction (the "Transaction") between Circle Group Holdings,
Inc. ("CXN") and Xxxxxx Xxxxxxx Enterprises, Inc. or any of its affiliates
("GFME"). Based on discussions between CXN and GFME, each of CXN and GFME hereby
agrees to the following:
1. A new limited liability company ("NEWCO") shall be created and shall
be owned 50.1% by GFME and 49.9% by CXN. NEWCO shall be created and
the joint venture between GFME and CXN shall be documented after
GFME's satisfactory completion of its due diligence.
2. GFME shall contribute to NEWCO the rights to use Xxxxxx Xxxxxxx'x
name and likeness in connection with the sale and promotion of
Z-Trim. NEWCO's rights to use Xxxxxx Xxxxxxx'x name and likeness
shall be subject to the limitations and restrictions imposed on
GFME.
3. GFME shall earn the right to convert its interest in NEWCO, in whole
or in part, based upon the agreed performance milestones highlighted
in point 4 hereunder, into an aggregate of up to 50% of the
fully-diluted shares of CXN common stock and up to 50% of any other
class of equity securities, if any, authorized by CXN. As GFME
converts its
interest into CXN common stock, its corresponding interest in NEWCO
shall become owned by CXN.
4. GFME's interest in NEWCO shall, based upon the agreed performance
milestones herein, be convertible into up to 50% of the
fully-diluted shares of CXN common stock and 50% of any other class
of equity securities (in each case after giving effect to the
issuance of stock to GFME) upon GFME satisfying any of the following
milestones which cumulatively add up to 50% based on the percentage
assigned to each milestone. GFME is not required to satisfy
milestones equaling 50% before it is eligible to convert. GFME may,
from time to time, in its sole discretion convert its interest in
NEWCO or any part thereof, into CXN's shares based on the percentage
interest assigned to each earned milestone. By way of example, if
CXN has 50 million shares of common stock outstanding and no other
securities, and GFME satisfies milestones equaling 25% of GFME's
potential 50% interest in CXN, GFME can convert all, or any portion
of that 25% into 12.5 million shares of CXN. Although the total
number of shares assigned to the milestones below, if all achieved,
exceeds 50 million shares, GFME shall only be entitled to convert
its interest into Newco into a total of 50% of the fully diluted
shares of CXN common stock and 50% of any other class of equity
securities. The milestones can be achieved in any order. The
milestones are as follows:
o 10% interest upon creation of NEWCO (including full
documentation of NEWCO's operating agreement and execution
of the definitive agreement contemplated by Section 21
below).
o Up to 25% interest upon the launch of a national public
relations campaign which can be earned as follows: The term
"Z-Trim Story" shall mean an article in which Z-Trim is
prominently mentioned and/or Z-Trim's relationship with
Xxxxxx Xxxxxxx is included in the article.
* * *
o Up to 20% interest upon Xxxxxx Xxxxxxx'x promotion of
Z-Trim on national TV, which can be earned as follows.
* * *
o Up to 17% interest upon Xxxxxx Xxxxxxx'x promotion of
Z-Trim on Radio, which can be earned as follows:
* * *
o [Up to 13.5% interest upon certain additional specified
public activity]. * * *
o 10% interest upon GFME using or promoting Z-Trim in
relation to a launch of Z Trim usage in any restaurant in
which Xxxxxx Xxxxxxx is a spokesperson for the restaurant
chain or Z-Trim or both.
o Up to 50% interest upon Xxxxxx Xxxxxxx making himself
available, at a time and place convenient to Xxxxxx Xxxxxxx
to NEWCO for five (5) days to promote Z-Trim based on the
following timeline:
* * *
Any request by CXN for appearances by Xxxxxx Xxxxxxx is subject to
Xxxxxx Xxxxxxx'x availability. CXN may request that Xxxxxx Xxxxxxx be
available for any or all of the 5 days at anytime after the creation of
NEWCO. CXN must request the appearance days within 365 days after they are
granted, which dates are set forth above. In the event that CXN requests
Xxxxxx Xxxxxxx to be available prior to the dates set forth in the
preceding schedule, GFME shall have the right to convert a 10% interest in
NEWCO into CXN stock for everyday Xxxxxx Xxxxxxx is made available to CXN.
GFME will be credited with achieving milestones listed above whether they
occur before or after execution of a definitive agreement and/or the
creation of NEWCO.
5. Immediately upon GFME's request, but subject to a liquidity and price
formula mutually acceptable to GFME and CXN that is materially
non-detrimental to CXN's market value, CXN shall file with the Securities
Exchange Commission and the American Stock Exchange to register all shares
of CXN common stock and/or any other relevant equity securities that GFME
converts under this Letter.
6. GFME shall receive a bonus in the amount of $100,000 if CXN has Z-Trim
related revenues of $30 million or gross profits of $10 million in any
fiscal year; a bonus of $200,000 if CXN has Z-Trim related revenues of $50
million or gross profits of $15 million in any fiscal year; a bonus of
$300,000 if CXN has Z-Trim related revenues of $70 million or gross
profits of $20 million in any fiscal year; a bonus of $400,000 if CXN has
Z-Trim related revenues of $90 million or gross profits of $25 million in
any fiscal year; a bonus of $500,000 if CXN has Z-Trim related revenues of
$110 million or gross profits of $30 million in any fiscal year.
7. CXN shall contribute $150,000 and a maximum of 5,000,000 shares of common
stock of CXN to NEWCO to be used for promotion and marketing of Z-Trim,
but CXN shall only contribute any such shares if GFME and CXN mutually
agree that the shares will be provided to other third parties pursuant to
a deal that is beneficial to CXN.
8. Utilizing the contributions by GFME and CXN provided for in Points 7 & 9
herein, GFME and CXN shall allocate to NEWCO an agreed-upon amount of
expenses associated with marketing Z-Trim.
9. GFME shall contribute $150,000 to NEWCO and shall use its best efforts to
sign a cross promotional arrangement with Xxxx Xxxxxxx Productions or
another major reality production company. GFME and CXN shall not be
responsible to make additional contributions to NEWCO.
10. GFME shall be given 2 board seats on CXN's Board of Directors upon the
signing of this Letter. CXN agrees that the number of directors on its
Board of Directors shall be limited to 10.
11. CXN and GFME shall mutually agree on the use of any spokesperson being
affiliated with Z-Trim other than Xxxxxx Xxxxxxx. GFME recognizes that CXN
has existing or pending commitments with other celebrity spokespeople, and
will not unreasonably object to CXN retaining the services of the
celebrities referred to in the following sentence. Existing celebrities
who are in various stages of negotiations to develop relationships with
CXN and Z-Trim have been identified confidentially. GFME and CXN shall
agree on the marketing of the three aforementioned existing celebrities.
12. For a period of forty-five (45) days commencing on the date of this
Letter, CXN shall not, and shall cause its directors, officers, employees,
representatives (including, without limitation, attorneys and accountants)
or agents (collectively, "Representatives") not to: (a) directly or
indirectly, solicit, initiate or encourage any inquiries or proposals
from, discuss or negotiate with, provide any non-public information to, or
consider the merits of any unsolicited inquiries or proposals from any
person or entity (other than GFME) relating to (i) any transaction
directly or indirectly involving the subject matter of this Letter,
including without limitation any of the rights to distribute, manufacture
and/or promote Z-Trim (the "Z-Trim Rights") or (ii) any other transaction
involving the sale, transfer or other disposition of any substantial
portion of the stock or assets (including the Z-Trim Rights) of CXN (any
such transaction, an "Alternative Transaction"); (b) provide any
non-public information concerning CXN or Z-Trim to any person or entity
(other than GFME or any Representatives of, or other professional advisors
to, GFME) with respect to any of the Z-Trim Rights or in connection with
an Alternative Transaction; or (c) enter into any discussions or an
agreement with any person or entity (other than GFME) with respect to any
of the Z-Trim Rights or with respect to an Alternative Transaction.
Notwithstanding the foregoing; CXN, its directors, officers, employees,
representatives may provide any relevant information or pursue any
transaction already in place, already being pursued, or being otherwise
contemplated presently as follows (i) any financing transaction already in
process or being contemplated between CXN, its representatives and any
other third party whose relationship to the parties necessitates being
bound by CXN's Non-Disclosure Agreement, (ii) any food companies that CXN
has already contacted or will contact in the future to discuss an
opportunity involving Z-Trim and Xxxxxx Xxxxxxx.
13. GFME and CXN recognize and acknowledge that the final approval of the
total transaction contemplated herein, shall be subject to the appropriate
proxy filing as well as regulatory and shareholder approvals. However,
CXN, Xxxx Xxxxxxx, the CXN directors and the company insiders agree to
vote their shares and use their best efforts to obtain shareholder
approval.
14. Within 60 days from the date of this Letter GFME may, after completing a
food analysis of Z-Trim assisted by an independent third party, terminate
this Letter and have no further obligations or liability to CXN if such
analysis is not consistent with the known benefits and safety of Z-Trim.
Additionally, within 60 days from the date of this Letter GFME may, after
completing its due diligence by meeting with food manufacturers, terminate
this Letter and have no further obligations or liability to CXN; however
GFME may only so terminate in the event that after completing its due
diligence with regard to the various food companies working on projects
that could incorporate Z-Trim, it becomes apparent to GFME that the
parties will be unable to secure sufficient contracts utilizing Z-Trim and
Xxxxxx Xxxxxxx together in a future product campaign.
15. Within 30 days of completion of due diligence by the parties, Xxxxxx
Xxxxxxx will make himself available for one morning or afternoon of his
choice to do a photo shoot with various brand name products that will be
mocked up with the Z-Trim Logo where such photos will be used to pitch the
idea of Xxxxxx Xxxxxxx with Z-Trim on such brands to the major food
companies that manufacture them. The photo shoot will be paid for by CXN
and be arranged at a time and place convenient to Xxxxxx Xxxxxxx. The
photos shall be the property of CXN provided, however, in the event this
Letter is terminated for any reason and/or the final Transaction is not
consummated, CXN shall return all of the photos of Xxxxxx Xxxxxxx to GFME.
16. This Letter contains the entire understanding between the parties hereto
with respect to the Transaction and supersedes and replaces all prior and
contemporaneous agreements and understandings, oral or written, with
regard to such Transaction.
17. This Letter shall be exclusively venued, formed, construed and governed by
the laws of the state of the defendant in any action without regard to
principles of conflicts of laws.
18. This Letter may be amended only in writing executed by both of CXN and
GFME.
19. In the event that any one or more of the provisions contained in this
Letter shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law,
such provision shall survive to the extent it is not so held, and all of
the other provisions of this Letter shall remain in full force and effect.
20. This Letter may be executed by fax and in counterparts, each of which
shall be deemed to be an original and all of which, taken together, shall
constitute the same Letter.
21. Provided GFME does not terminate this Letter as provided in paragraph 14
hereof, GFME and CXN shall, within 90 days from the date of this Letter,
enter into a definitive agreement incorporating the terms of this Letter
and such other provisions customary in transactions of this type. Either
Party may terminate this Agreement in the event of
material breach by the other party, upon giving at least 30 days' written
notice to the other Party, during which 30-day period the Party notified
of breach shall have the opportunity to cure the breach, for any breach
susceptible of cure.
[Remainder of Page Intentionally Left Blank]
If the foregoing correctly sets forth your understanding, please so
indicate by signing an enclosed counterpart of this Letter and returning it to
CXN, whereupon it will constitute a binding agreement between CXN and GFME.
Very truly yours,
CIRCLE GROUP HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: C.E.O.
Accepted and agreed to as of
the date first above written:
XXXXXX XXXXXXX ENTERPRISES, INC.
By: /s/ Xxxxx Xxxxxxxxx
--------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
