AGREEMENT
This agreement ("Agreement") is entered in to as of January 1, 1997,
among Xxxx Xxxxxx ("TF") (or a corporation to be designated by him), on the one
hand, and ILX, Incorporated ("ILX") and Red Rock Collection Incorporated ("Red
Rock"), jointly and severally on the other, and is made with reference to the
following facts:
A. ILX is the owner of the Los Abrigados Resort and Spa in Sedona,
Arizona) the "Hotel"). Red Rock is a wholly-owned subsidiary of ILX and is
engaged in the business of manufacturing and selling personal care products
utilizing natural ingredients indigenous to the Sedona area and which is
marketed utilizing a Sedona theme, including, at the Hotel. Red Rock is seeking
to expand the marketing and sales of its product line through various
distribution channels including sales through its resort properties, sales to
other properties, direct sales, radio advertising, television infomercial
advertising and buying clubs.
B. Red Rock is concurrently herewith entering into an agreement ("DR
Agreement") with Xxxxxx Xxxxxxxx ("DR") to act as a spokesperson for Red Rock's
products.
C. Red Rock is seeking the services of TF to assist in the production
and implementation of its initial advertising and promotional campaign and
materials utilizing DR and Red Rock is also desirous of acquiring the design for
a hairclip owned by TF for use in Red Rock's product line.
It is now agreed among the parties as follows:
1. SERVICES. Red Rock hereby engages TF on an non-exclusive basis to
consult in the creation, development and production of the initial marketing and
promotional campaign for Red Rock's product line, and the use of DR's name,
image and likeness in connection therewith ("Initial Campaign"). It is
anticipated that the Initial Campaign will include radio spots, one or more
television infomercials and print materials.
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All services of TF hereunder shall be rendered at the Hotel, except
that certain production services in connection with campaign materials may be
rendered in Las Vegas or Los Angeles. TF's services hereunder shall at all times
be subject to his availability, including his responsibilities at the Xxxxxx
Xxxxxxxx Hotel & Casino. Red Rock shall be responsible for all costs and
expenses incurred by TF in connection with the rendition of his services
hereunder.
2. TERM. The Term of this Agreement shall commence on the date hereof
and shall expire upon completion of the Initial Campaign materials, but no
longer than one (1) year. The Term may be extended upon material agreement of
the parties.
3. HAIRCLIP. Concurrently with the execution hereof, DR shall quitclaim
to Red Rock of all of his interest in that certain hairclip design which TF has
previously provided to Red Rock for the purpose of including same in Red Rock's
product line.
4. CONSIDERATION. As full consideration for the grant of rights
specified in Paragraph 3 above and for the services of TF in connection with the
Initial Campaign upon execution hereof ILX shall irrevocably transfer ownership
to TF or his designee of ten percent (10%) of the issued and outstanding stock
of Red Rock ("TF Percentage"). ILX and Red Rock warrant that there is only one
class of stock outstanding. Immediately prior to the transfer of said shares,
all existing intercompany debt owed by Red Rock to ILX shall be converted to a
contribution to capital by ILX such that no intercompany debt shall exist at the
time of the transfer. TF's percentage shall be based upon the total number of
Red Rock shares issued and outstanding after taking into account any additional
shares issued or to be issued in respect of such ILX capital contribution.
Within sixty (60) days following the transfer of shares to DR, ILX
shall "spinoff" thirty percent (30%) of the issued and outstanding shares of Red
Rock to the existing ILX shareholders. ILX shall then undertake to promptly
register Red Rock shares with the SEC with a view to listing Red Rock on NASDAQ
as soon as all requirements for listing are met. Either as part of the aforesaid
registration or by separate registration, and upon the advice of Red Rock's
underwriters, Red Rock shall undertake an initial public offering ("IPO") of
$2-5 Million
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Dollars. The TF Percentage shall not be diluted by, or at any time prior to, the
initial IPO (but may be diluted by subsequent public offerings in the same
manner as applicable to the other shareholders). In the event the IPO does not
occur within one (1) year after the date hereof, TF shall have the right to
terminate this Agreement.
The TF shares shall be subject to a Stock Transfer Agreement to be
entered into concurrently herewith which shall contain the foregoing terms and
additional mutually acceptable terms, including a 2 year "lock up" provision and
a "buy-sell" agreement which shall provide, INTER ALIA, that TF shall be given
the opportunity to sell his shares prior to any sale of shares by Xxxxxx Xxxxxxx
(or any individual, trust or other entity related to Xxxxxx Xxxxxxx) and to
participate on an equal basis in all public and private offerings. A copy of the
Stock Transfer Agreement is attached hereto as Exhibit "A" and incorporated
herein by this reference.
Red Rock will pay for the cost of a professional valuation of both Red
Rock and the TF Percentage and TF's approval of such valuation shall be a
condition precedent to the effectiveness of this Agreement. The parties
acknowledge that the Mentor Group of Westlake Village, California has been
engaged to undertake such valuation.
5. ADDITIONAL CONSIDERATION. The parties acknowledge that the
consideration specified in Paragraph 4 hereof compensates TF for his consulting
and production services in connection with the Initial Campaign materials and
that the parties shall negotiate in good faith and agree upon monetary fees for
any additional consulting and production services which Red Rock may desire and
which TF shall desire to undertake.
6. TRAVEL AND EXPENSES. At any time TF's services hereunder are
required at a location other than the city of his residence (currently Las
Vegas), Red Rock shall provide first-class air transportation and hotel
accommodations for two, together with payment of all expenses, including meals,
incidentals and the like. When TF's services are required in Sedona, the
accommodations shall be, when available, the Stonehouse lodging at the Hotel (or
other accommodations acceptable to TF if the Stonehouse is not available), and
TF shall be provided with first-class meals for TF and his guest and free use of
all of the Hotel's facilities and
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services. TF shall be provided with first-class ground transportation (limousine
if requested) to and from all airports, locations where her services may be
rendered and at all other times when desired by TF while at a location.
7. NO ASSIGNMENT. Neither party shall have the right to assign this
Agreement or its rights without the prior written approval of the other, except
that TF may assign his Red Rock stock hereunder subject to the terms of the
Stock Transfer Agreement.
8. BREACH. In the event of a breach hereof by Red Rock, TF shall have
the right to terminate this Agreement unless the breach is cured within fifteen
(15) days after Red Rock's receipt of notice thereof from Lender. Said notice
shall be five (5) business days with respect to payments hereunder.
9. INDEMNIFICATION. Red Rock agrees to defend, indemnify and hold TF
and his representatives from and against any claims, losses, suits, liabilities,
obligations, costs and attorneys' fees which TF or TF's representatives may
suffer as a result of any actions (including, without limitation, consumer
actions) stemming directly or indirectly from TF's participation on behalf of
Red Rock, including, without limitation, any product liability claims, errors
and omissions claims, claims by competitors or governmental authorities.
10. INSURANCE. ILX and Red Rock shall name TF as an additional insured
on each of their product liability insurance policies, general liability
insurance policies and errors and omissions insurance policies. Said policies
shall initially be in an amount not less than One Million Dollars ($1,000,000)
per person and Five Million Dollars ($5,000,000) per occurrence, but shall be
raised to Two Million Dollars ($2,000,000) per person and Ten Million Dollars
($10,000,000) per occurrence on the earlier of the IPO or the commencement of
the second year of the Term. Such policies shall be maintained by Red Rock in
effect during the Term and for two (2) years thereafter. Said policies shall
further provide that TF will receive at least thirty (30) days advance notice of
termination of such insurance. Prior to the dissemination of any commercials or
other productions utilizing TF's name, voice or likeness, TF will be provided
with Certificates of Insurance with respect to such insurance. A breach by Red
Rock of this
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paragraph shall be a material breach of this Agreement giving TF the right to
terminate and to seek injunctive relief, without limitation of any other
remedies.
11. CHANGE OF CONTROL. TF shall have the right to terminate this
Agreement and his further obligations hereunder if Xxxxxx X. Xxxxxxx shall cease
to be the Chairman and Chief Executive Officer of ILX and Red Rock, as well as
the controlling shareholder of ILX and, if and when Red Rock is no longer a
subsidiary of ILX, Red Rock.
12. NOTICES. All notices, payments and statements given hereunder shall
be mailed, postage pre-paid, hand-delivered or, in the case of notices which do
not involve payment or an accounting statement, telefaxed. Notices shall be
effective on the third day after the date of mailing by United States mail or on
the date of telefax or hand delivery. Notices to the parties shall, until
further notice, be sent to the following addresses:
TF: RED ROCK/ILX
Xxxx Xxxxxx Red Rock Incorporated
______________________ 0000 Xxxxx 00xx Xxxxxx
______________________ Xxxxxxx, Xxxxxxx 00000
______________________ Attention: Xxxxxx X. Xxxxxxx
WITH COPY TO:
Xxxxxxxxx, Lopez, Lange, Xxxxxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
13. GENERAL. This Agreement sets forth the entire Agreement between the
parties and supersedes all other written or oral agreements of the parties
relating to the subject matter hereof. This Agreement cannot be modified,
altered or amended except by an agreement in writing signed by each of the
parties. The failure of either party to this Agreement to object or take action
with respect to breach of this Agreement shall not be construed as a waiver said
breach or any future breach hereof. This Agreement shall be construed and
interpreted in accordance with the laws of the State of California, applicable
to agreements to be executed and performed
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therein. If either party initiates legal action to enforce this Agreement, the
prevailing party shall be entitled to recover, in addition to such other relief
as may be granted, all reasonable attorneys' fees and costs incurred in
connection with such litigation. Headings are for the convenience of the parties
and should not be used to construe meaning. This Agreement may be executed in
counterparts with some legal effect as if each party had signed the same copy.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dated first indicated above.
RED ROCK INCORPORATED
/s/ Xxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------- ---------------------------------
XXXX XXXXXX
Its: CHIARMAN
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ILX INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Its: CHAIRMAN
--------------------------------
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