CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is effective as of the 1st
day of January, 1997, by and between ILX Incorporated, an Arizona corporation
(the "Company"), and Investor Resource Services, Inc., a Florida corporation
("Consultant").
WHEREAS, the Company is a publicly held company, and the Consultant is
in the business of assisting public companies in financial, investor, media and
broker relations; and
WHEREAS, the Company and Consultant previously entered into a
Consulting Agreement effective June 2, 1995 (which, along with certain related
agreements, is hereinafter referred to as the "Original Consulting Agreement")
pursuant to which Consultant provided certain services to the Company and
pursuant to which the Company granted to Consultant an option (the "Original
Option") to acquire 250,000 shares of restricted common stock of the Company
(the "Original Option Shares"); and
WHEREAS, in accordance with the Original Consulting Agreement, the
Company filed as to the Original Option Shares a registration statement on Form
S-3 (the "Registration Statement"), which registration became effective on or
about May 17, 1996; and
WHEREAS, following the expiration of the term of the Original
Consulting Agreement, Consultant continued to provide similar services to
Company, the consideration for which was the extension of the term of the
Original Option, which has now expired; and
WHEREAS, prior to the expiration of the term of the Original Option,
Consultant exercised the Original Option to the extent of 100,000 shares,
leaving a balance that remained unexercised of 150,000; and
WHEREAS, the Company desires to continue to retain Consultant to
provide certain services to the Company, in consideration for which the Company
is willing: (1) to reinstate the Original Option as to the 150,000 of Original
Option Shares previously unexercised; and (2) to grant an option for an
additional 350,000 shares of restricted common stock of the Company; all subject
to the various terms and conditions as described hereinafter.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:
1. Duties and Involvement
a. The Company hereby engages Consultant to provide
financial and public relations services. Such
1
EXHIBIT 10
services will generally include advice to and
consulting with the Company's management concerning
marketing surveys, investor profile information,
methods of expanding investor support and increasing
investor awareness of the Company and its products
and/or services, including without limitation the
services set forth on Exhibit "A". Consultant will
also provide additional services to the Company,
including broker relations, assisting in the
preparation and format of due diligence meetings, and
attendance at conventions and trade shows. Consultant
shall be responsible for all expenses incurred in
connection with providing services to the Company.
b. Consultant acknowledges that neither Consultant nor
any of its employees or affiliates is an officer,
director, or agent of the Company, that in rendering
advice or recommendations to the Company it is not
and will not be responsible for any management
decisions on behalf of the Company and that it is not
authorized or empowered to commit the Company to any
recommendation or course of action. The Company
represents that Consultant does not have, through
stock ownership or otherwise, the power to control
the Company nor to exercise any dominating influence
over its management.
c. Notwithstanding anything in this Agreement to the
contrary, Consultant represents and covenants to the
Company that Xxxxxxx X. Xxxxxx ("Xxxxxx") personally
(through a consulting or other arrangement between
Xxxxxx and Consultant) shall have primary
responsibility for all material aspects of the
services provided by Consultant to the Company, and
that the Company's dealings with Consultant will be,
among others, with Xxxxxx personally.
2. Term
This Agreement shall continue until June 30, 1997.
3. Compensation
As total and complete consideration for the services to be
provided by Consultant to the Company hereunder, and subject
to Consultant not having materially breached this Agreement,
the Company hereby agrees as follows:
2
a. Reinstatement of Original Option
The Company hereby reinstates for the benefit of
Consultant the Original Option, such that Consultant
may purchase up to One Hundred Fifty Thousand
(150,000) of the previously unexercised Original
Option Shares, at any time during the Option Term (as
defined below).
x. Xxxxx of Additional Option
The Company hereby grants to Consultant an option
(the "Additional Option") to purchase up to Three
Hundred Fifty Thousand (350,000) additional shares of
the Company's restricted common stock (the
"Additional Option Shares") at any time during the
Option Term (as defined below).
c. Purchase Price
The purchase price for the Original Option Shares and
the Additional Option Shares (collectively referred
to hereinafter as the "Option Shares") shall be $1.25
per share.
d. Term
The term of this Option (the "Option Term") shall
commence on the date hereof and shall terminate on
June 30, 1997.
e. Exercises
Both the Original Option and the Additional Option
(collectively referred to hereinafter as the
"Option") may be exercised in whole or part. The
Option shall be exercised by delivering to the
Company written notice of Consultant's election to so
exercise, and specifying the number of shares to be
purchased (the "Notice"). Any Notice that is given by
Consultant to the Company during the Option Term
shall be valid notwithstanding that the delivery of
the Option shares purchased may take place after the
expiration of the Option Term.
f. Closing
The closing of any purchase of shares pursuant to an
exercise of the Option shall take place at the office
of the Company as soon as practicable following
delivery of the Notice, or at such other time and
place as may be designated by the parties.
3
At the closing, Consultant shall deliver to the
Company a cashiers' check or wire transfer funds in
the amount of the purchase price, together with any
other documents that the Company may require to
effect the transfer of the purchased shares from the
Company to Consultant. The Company shall execute and
deliver documents appropriate to transfer the
purchased shares to Consultant.
g. Anti-dilution
The number and character of the shares to be
purchased upon the exercise of the Option herein
shall be subject to adjustment as provided in this
paragraph. If, after the date hereof, the number of
outstanding shares of common stock of the Company is
increased by a stock dividend payable in shares of
common stock, or by a subdivision or split-up of
shares of common stock, or the number of outstanding
shares of common stock is decreased by a combination
or reclassification of shares of common stock, or the
Company shall pay or make a dividend or other
distribution with respect to common stock (other than
in cash or shares of common stock), or in case of any
capital reorganization or of any reclassification of
the common stock or any change in the outstanding
common stock as a result of the consolidation or
merger of the Company with or into any other
corporation, or the sale of the properties and assets
of the Company to any other corporation, or any other
transaction, similar or dissimilar to the foregoing,
then this Option shall after the effective date of
such stock dividend, subdivision, split-up,
combination, reclassification dividend, other
distribution, capital reorganization, merger, sale or
other transaction entitle Consultant to purchase the
kind and number of shares of stock or other
securities or property to which Consultant would have
been entitled if it had held the shares purchasable
upon the exercise of this Option immediately prior to
such transaction. Nothing herein shall in any way
affect the right of the Company to adjust,
reclassify, reorganize or otherwise make changes in
its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer
all or any part of its business or assets.
4
h. Survival
In the event this Agreement is terminated for any
reason other than a material breach of this Agreement
by Consultant, the Option shall remain in full force
and effect and Consultant shall have the right to
retain Option shares issued or issuable thereunder in
consideration for services performed.
4. Services Not Exclusive
Consultant shall devote such time and effort as necessary to
discharge its duties hereunder. The Company acknowledges that
Consultant is engaged in other business activities and that it
will continue such activities during the term of this
Agreement, subject to the other terms and conditions hereof.
Consultant shall not be restricted from engaging in other
business activities during the term of this Agreement.
5. Confidentiality
Consultant acknowledges that it will have access to
confidential information regarding the Company and its
businesses. Consultant agrees that it will not, during or
subsequent to the term of this Agreement, use, divulge,
furnish, or make accessible to any person (other than with the
written permission of the Company) any knowledge or
information or plans of the Company with respect to the
Company or its businesses, including, but not limited to, the
products, financial information, ideas, and other trade
secrets of the Company, and specifically including but not
limited to the Varsity Clubs of America concept, whether in
the concept or development stage or being marketed by the
Company on the effective date of this Agreement or during the
term hereof, and any other information identified by the
Company as confidential.
6. Covenant Not to Compete
During the term of this Agreement and for a period of three
(3) years after the termination of this Agreement, Consultant
warrants, represents, and agrees that it will not directly or
indirectly participate in or use the information developed for
or by the Company or received by Consultant and will not
compete, or render services for a person, firm or entity
competing, directly or materially indirectly with the Company
in the Company's primary industry or related fields, including
the interval ownership fields or the development of resort or
hotel properties in university locations.
5
7. Investment Representation
a. Access to Information
Consultant represents and warrants that it has been
provided with access to all information relating to
the Company concerning its condition, financial and
otherwise, its management, its business and its
prospects that Consultant has deemed material. The
Company represents that it has provided Consultant
with a copy of the Company's most recent Form 10-K
and any subsequent filing required or filed under the
rules and regulations promulgated under the
Securities Act of 1933 as amended (the "Act") or the
Securities Exchange Act of 1934 as amended (the
"Exchange Act"), if any, (the "Disclosure
Documents"). Consultant acknowledges that it is aware
that because of the Company's financial position and
other factors, the acquisition of the shares to be
paid to Consultant as compensation hereunder involves
a high degree of risk, including the risk that
Consultant may lose its entire investment in such
shares. Consultant further represents that it and its
advisors have been afforded the opportunity to
discuss the Company with the Company's management.
The Company represents that it has and will continue
to provide Consultant with any information or
documentation requested by Consultant to verify the
accuracy of the information contained in the
Disclosure Documents and will promptly upon
Consultant's request provide Consultant with a copy
of any registration statement or other periodic
reporting documents filed pursuant to the rules and
regulations of the Act or the Exchange Act.
Consultant has retained its own legal and business
counsel to the extent Consultant deems necessary, and
is not relying on the Company to explain the
Disclosure Documents.
b. Registration of Securities
Consultant understands and acknowledges that any
shares acquired hereunder are being acquired by
Consultant for its own account and not on behalf of
any other person, and are being acquired for
investment purposes and not for distribution.
Consultant represents that an investment in such
shares is a suitable investment for Consultant,
taking into consideration the restrictions on
transferability affecting the shares.
6
Within sixty (60) days following the execution
hereof, the Company agrees to file an amendment to
the Registration Statement to register the Additional
Option Shares (the "Amendment"). The Company shall
not be in violation of the foregoing covenant by
reason of any delay in the effectiveness of the
Amendment or a requirement by the Securities and
Exchange Commission that an amendment or amendments
to the Amendment be filed prior to, as a condition
of, or following the effective date of the Amendment.
The Company agrees to cause the Amendment to remain
effective for a period of nine (9) months from the
initial effective date thereof.
In addition, the Company will use its best efforts to
provide a list of states in which the Company has
complied with applicable securities laws and
undertakes to comply with the such states securities
laws and regulations. The Company undertakes to make
available for review and comment by Consultant, on a
timely basis and prior to submission with any
regulatory agency, copies of the Amendment.
Consultant agrees that it will not transfer or sell
any of the shares acquired hereunder without
registration under the Act and any applicable state
securities laws unless exemptions from such
registration requirements are available.
7
In connection with a public registration of any
shares acquired hereunder and held by Consultant,
Consultant shall provide to the Company, in a timely
fashion, any and all information required by state
and federal securities laws to be included in the
registration statement or any amendment or any
related documents, including any information
requested by the Company. Furthermore, Consultant
shall review any and all materials transmitted to
Consultant by the Company concerning the registration
of Consultant's shares and Consultant immediately
shall advise the Company in writing of any
misstatement or omission, in such materials.
c. Restrictions on Transfer
Consultant is aware that the Additional Option Shares
have not been registered under the Act and thus
cannot be resold unless they are registered under the
Act or unless an exemption from registration is
available, and is aware of the restrictions imposed
on further distribution of the such shares including
the limitations and applicability of Securities and
Exchange Commission Rule 144 and including the
restrictive legend to be placed thereon and stop
transfer orders to which it will be subject.
Consultant is an "accredited investor" as defined in
Rule 501(a) of Regulation D under the Act, as
amended.
Consultant shall not transfer any shares acquired
hereunder unless and until it has first given written
notice to the Company describing briefly the manner
and nature of the transfer and until:
8
(i) A federal registration statement (or amendment
thereto) filed by the Company with respect to such
shares is declared effective; or
(ii) The Company and Consultant shall have complied
with SEC Rule 144; or
(iii) Consultant presents the Company with a
"noaction" letter, satisfactory to the Company, from
the SEC with respect to the proposed transfer; or
(iv) The Company has received opinions from
Consultant's counsel, in form and substance
satisfactory to the Company that such transfer can be
made without compliance with the registration
provisions of the Act or other securities laws, and
has received such certifications and agreements from
Consultant and any prospective transferee as the
Company deems appropriate under the circumstances.
Consultant further acknowledges that the Original
Option Shares and the Additional Option Shares (the
"Shares") have not been registered under any state
securities laws or regulations and that they may not
be transferred unless Consultant complies with
applicable exemptions from any applicable state
securities laws and regulations and the Company
receives evidence satisfactory to it that such
compliance has occurred before each and any transfer
by Consultant of the Shares takes place. Consultant
represents and warrants that it only shall cause or
allow the transfer of any or all of the Shares upon
complying with the restrictions and conditions set
forth in the preceding sentence.
Consultant also acknowledges that any certificate
representing Shares (the "Certificate") would
otherwise contain a "blue sky" legend setting forth
such restrictions and the conditions under which
Consultant may transfer the Shares (the "Stock
Legend"). However, Consultant has requested that the
Company cause the issuance of the Shares without a
Stock Legend on the Certificate to expedite any legal
transfer of the Shares from the Consultant if and
when the Consultant may do so upon compliance with
the restrictions and conditions that would have been
set forth in the Stock Legend. The Company hereby
agrees to cause the issuance of the Shares without
the Stock Legend on the Certificate only upon the
terms and conditions set forth above. In addition, to
the
9
fullest extent permitted by law, Consultant hereby
indemnifies and holds the Company, its agents,
representatives, officers, directors and employees
harmless from and against claims, damages, losses and
expenses (including but not limited to attorney fees,
court costs, and the cost of appellate proceedings),
relating to, arising out of or resulting, directly or
indirectly, from Consultant's acts or omissions
relating to its transfer of any of the Shares in
violation of the restrictions and conditions cited in
this Agreement or of any applicable state securities
law or regulation.
8. Indemnification
a. The Company agrees to indemnify and hold harmless
Consultant and its agents and employees against any
losses, claims, damages or liabilities, joint or
several, to which Consultant or any such other person
may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or
liabilities (or actions, suits or proceedings in
respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in
the Registration Statement, the Amendment, any
preliminary prospectus, the prospectus, or any
amendment or supplement thereto, or arise out of or
are based upon the omission to state therein a
material fact required to make the statements
contained therein not misleading, and will reimburse
the Consultant or any such other person for any legal
or other expenses reasonably incurred by Consultant
or any such other person in connection with
investigating or defending any such loss, claim,
damage, liability, or action, suit or proceeding;
provided, however, that the Company will not be
liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is
based, in whole or in part, upon an untrue statement,
or omission or alleged omission from the Registration
Statement, the Amendment, any preliminary prospectus,
the prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information
furnished to the Company by the Consultant. This
indemnity agreement will be in addition to any
liability which the Company may otherwise have.
b. Consultant will indemnify and hold harmless the
Company, each of its directors, each of its officers
who has signed the Registration Statement
10
or the Amendment, and each person, if any, who
controls the Company within the meaning of the Act
against any losses, claims, damages or liabilities to
which the Company or any such other person may become
subject, under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions,
suits, or proceedings in respect thereof) arise out
of or are based upon any untrue statement of any
material fact contained in the Registration
Statement, the Amendment, any preliminary prospectus,
the prospectus, or any amendment or supplement
thereto, or arise out of or are based on the omission
to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading to the extent that such untrue
statement or omission is made or omitted in whole or
in part in reliance upon and in conformity with
information furnished to the Company by Consultant.
Consultant will reimburse any legal or other expenses
reasonably incurred by the Company or any such other
person in connection with investigating or defending
any such loss, claim, damage, liability, or action,
suit or proceeding. This indemnity agreement will be
in addition to any liability which the Consultant may
otherwise have.
c. Promptly after receipt by an indemnified party under
this Agreement of notice of the commencement of any
action, suit or proceeding, such indemnified party
will, if a claim in respect thereof is to be made
against an indemnifying party under this Agreement,
notify the indemnifying party of the commencement
thereof; but the omission so to notify the
indemnifying party will not relieve it from any
liability which it may have to any indemnified party
otherwise under this Agreement. In case any such
action, suit or proceeding is brought against any
indemnified party, and it notified an indemnifying
party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and,
to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the
indemnifying party to such indemnified party of its
election so to assume the defense thereof, the
indemnifying party will not be liable to such
indemnified party under this Agreement for any legal
or other expenses subsequently incurred by such
indemnified party in connection with the defense
thereof other than
11
reasonable costs of investigation.
9. Assignment
This Agreement may not be assigned by either party hereto
without the written consent of the other but shall be binding
upon the successors of the parties.
10. Notices
All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
duly given: (i) two (2) hours after delivered personally to
the party to be notified; or (ii) two (2) business days after
deposited in the U.S. mail, postage prepaid via registered or
certified mail, return receipt requested. Notices to the
Company shall be addressed to its chairman at its principal
executive office and to the Consultant at the address set
forth beneath the signature line, or to such other addresses
as either party may designate upon at least ten days' notice
to the other party.
11. Entire Agreement
This Agreement contains the entire understanding and agreement
between the parties. There are no other agreements, conditions
or representations, oral or written, express or implied, with
regard thereto. This Agreement may be amended only by a
written instrument signed by both parties.
12. Non-waiver
A delay or failure by either party to exercise a right under
this Agreement, or a partial or single exercise of that right,
shall not constitute a waiver of that or any other right.
13. Headings
Headings in this Agreement are for convenience only and shall
not be used to interpret or construe its provisions.
14. Attorneys' Fees
In any action or proceeding to enforce this Agreement or any
rights hereunder, the prevailing party shall be entitled to
its court costs and reasonable attorneys' fees in such action
or proceeding.
12
15. Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Arizona.
16. Binding Effect
The provisions of this Agreement shall be binding upon the
parties, their successors and assigns.
17. Severability
If any provision of this Agreement or application thereof to
any person or circumstance shall be deemed or held to be
invalid, illegal, or unenforceable to any extent, the
remainder of this Agreement shall not be affected and the
application of such affected provision shall be enforced to
the greatest extent possible under law.
18. Counterparts
This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall
constitute one and the same agreement.
19. Further Documents
Each party hereby agrees to take such further actions and
execute such further documents as may be reasonably required
and necessary to effectuate the provisions hereof.
20. Restrictions
a. Company states and represents that there are no S-8
registrations in effect or contemplated.
b. Company states and represents that there are no
Regulation-S placements in effect or contemplated.
c. Company agrees that, except for the issuance of
securities in a public offering of securities of the
Company, or the exercise of options or warrants
outstanding or issued in connection with an equity
offering or otherwise issued to employees under a
stock option plan or otherwise, there will be no
additional issuances by the Company of common stock
of the Company during the term of this Agreement in
excess of 5% of the total outstanding shares of the
Company without the knowledge of Consultant.
13
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the day and year first above written.
ILX INCORPORATED,
an Arizona corporation
By: /s/ Xxxxxx X Xxxxxxx
--------------------
Printed Name: Xxxxxx X Xxxxxxx
----------------
Title: Chairman
-----------
Address:
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
INVESTOR RESOURCE SERVICES, INC.
a Florida corporation
By:/s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------
Printed Name: Xxxxxx X. Xxxxxxxxxxx
---------------------
Title: President
------------
Address:
0000 Xxxxx Xxx., Xxxxx 000
Xxxxxx Xxxx, XX 00000
14
EXHIBIT "A"
-----------
Such services as have not yet been provided, or are of an on-going nature, and
described in: (i) Exhibit "A" to the Original Consulting Agreement; and (ii)
Exhibit "A" to the Consulting Agreement dated June 2, 1995 between Company and
Universal Solutions, Inc., a Colorado corporation.
15
