.
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement"), dated and effective as of November
7, 1996 is entered into by and between COTTON VALLEY RESOURCES CORPORATION, an
Ontario, Canada corporation (herein referred to as the "Company") and LIVIAKIS
FINANCIAL COMMUNICATIONS, INC., a California corporation (herein referred to as
the "Consultant").
RECITALS
WHEREAS, Company is a publicly held corporation with its common stock
traded through the Canadian Dealing Network; and
WHEREAS, Consultant has experience in the area of corporate finance,
investor communications and financial and investor public relations; and
WHEREAS, Company desires to engage the services of Consultant to assist
and consult with the Company in matters concerning corporate finance and 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;
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 November 7, 1996 and ending on
January 2, 1998.
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.:
(a) Advise and assist the Company in developing and implementing
appropriate plans and materials 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;
(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 advise and assist the Company in
communicating appropriate information regarding such plans, strategy and
personnel to the financial community;
(d) Assist and advise the Company with respect to its (i) stockholder and
investor relations, (ii) relations with brokers, dealers, analysts and other
investment professionals, and (iii) financial public relations generally;
(e) Perform the functions generally assigned to investor/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 or reviewing press releases, reports and
other communications with or to shareholders, the investment community and the
general public; advising with respect to the timing, form, distribution and
other matters related to such releases, reports and communications; and
consulting with respect to corporate symbols, logos, names, the presentation of
such symbols, logos and names, and other matters relating to corporate image;
(f) Disseminate information regarding the Company to shareholders,
brokers, dealers, other investment community professionals and the general
investing public;
(g) Conduct meetings, in person or by telephone, with brokers, dealers,
analysts and other investment professionals to advise them of the Company's
plans, goals and activities, and assist the Company in preparing for press
conferences and other forums involving the media, investment community
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 investment community implications thereof; and,
(i) Otherwise perform as the Company's financial relations and public
relations consultant.
It is understood that until January 2, 1997, the Consultant will only be
responsible to advise the Company on matters concerning corporate finance and to
assist the Company in creation of its investor relations infastructure. The
Consultant will not be expected to perform any proactive investor relations or
financial public relations activities until January 2, 1997.
3. Allocation of Time and Energies. The Consultant hereby promises to
perform and discharge well and 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 investor public relations and communications activities, so long as such
activities are in compliance with applicable securities laws and regulations.
Consultant 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 hereinabove 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 upon and shortly after, and in any
event, within one month of the effectiveness of this Agreement. It is explicitly
understood that Consultant's performance of its duties hereunder will in no way
be measured by the price of the Company's common stock, nor the trading volume
of the Company's common stock, both of which cannot be guaranteed by the
Consultant. It is also understood that the Company is entering into this
Agreement with Liviakis Financial Communications, Inc. ("LFC"), a corporation
and not any individual member of LFC, and with such, Consultant will not be
deemed to have breached this Agreement if any member, officer or director of LFC
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:
4.1 In connection with Consultant undertaking this engagement, the Company
agrees to sell, and Consultant and Xxxxxx X. Xxxx ("RBP"), an affiliate
of consultant, severally agree to buy, for One Canadian Dollar (C$1.00)
per unit five hundred thousand (500,000) units (the "Units"), each
consisting of one share of the Company's common stock ("Common Stock")
and one stock purchase warrant (a "Warrant") entitling the holder
thereof to purchase a share of Common Stock at an exercise price of One
Dollar and Ten Cents Canadian (C$1.10) through November 7, 2001. The
Warrants shall be evidenced by the form of warrant certificate attached
hereto as Exhibit A. It is understood that the Units, the shares of
Common Stock and Warrants constituting the Units, and the shares of
Common Stock issuable upon exercise of the Warrants have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), and consequently such securities constitute and will constitute
"restricted securities" as defined in Rule 144 promulgated under the
Securities Act, unless registered under the Securities Act.
Consultant shall purchase three hundred seventy-five thousand (375,000)
Units, for which he shall deliver to the Company his promissory note in
the amount of Two Hundred Eighty-One Thousand Two Hundred Fifty United
States Dollars (US$281,250), payable in four monthly installments on the
fifteenth (15th) day of December 1996 and January, February and March
1997 of US$56,250, US$75,000, US$75,000 and US$75,000, respectively. RBP
shall purchase one hundred twenty-five thousand (125,000) Units, for
which he shall deliver to the Company his promissory note in the amount
of Ninety-Three Thousand Seven Hundred Fifty United States Dollars
(US$93,750), payable in four monthly installments on the fifteenth
(15th) day of December 1996 and January, February and March 1997 of
US$18,750, US$25,000, US$25,000, and US$25,000 respectively.
Certificates representing the shares of Common Stock and Warrants
constituting the Units shall be issued in the names of Consultant and
RBP and delivered in trust to Xxxx & Xxxxxx, counsel to the Company,
pursuant to irrevocable instructions under which Xxxx & Xxxxxx is to
deliver the certificates representing such securities to Consultant and
RBP, respectively, pro rata as such promissory notes are paid.
In addition, as consideration for Consultant undertaking this
engagement, the Company shall issue and deliver to Consultant an
aggregate of one million four hundred ninety thousand (1,490,000) shares
(the "Consideration Shares") of Common Stock. The Consideration Shares
shall be issued by the Company and delivered to Consultant in accordance
with the following schedule:
Number of Shares Date
400,000 Upon execution of this agreement
800,000 January 2, 1997
50,000 January 31, 1997
50,000 February 28, 1997
50,000 March 31, 1997
50,000 April 31, 1997
50,000 May 31, 1997
40,000 June 30, 1997
--------
1,490,000
It is understood that the Consideration Shares have not been registered
under the Securities Act and consequently such securities constitute and
will constitute "restricted securities" as defined in Rule 144
promulgated under the Securities Act, unless registered under the
Securities Act.
The Company agrees that, when issued and delivered to Consultant and
RBP, the Consideration Shares, the shares of Common Stock constituting
part of the Units and the shares of Common Stock issuable upon exercise
of the Warrants shall be duly authorized, validly outstanding, fully
paid and non-assessable. The Company also 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 Consideration Shares, therefore, constitute payment
for Consultant's agreement to represent the Company and are a
nonrefundable, non-apportionable and non-ratable retainer. If the
Company elects to terminate this Agreement prior to January 2, 1998 for
any reason whatsoever, it is agreed and understood that Consultant will
not be and may not be required or requested by the company to return any
of the Consideration Shares or any securities constituting the Units or
issued upon exercise of the Warrants.
The Consideration Shares and the shares of Common Stock constituting the
Units shall have the benefit of the same registration rights as the
shares of Common Stock issuable upon exercise of the Warrants receive
pursuant to the terms of the warrant certificates representing the
Warrants. The Company agrees to file by November 30, 1997 and thereafter
to prosecute diligently to effectiveness a registration statement under
the Securities Act covering, among other securities, such Consideration
Shares, shares of common Stock constituting part of the Units, and
shares of Common Stock issuable upon exercise of the Warrants as
Consultant and RBP may request. Consultant and RBP agree that they,
respectively, will not sell shares of Common Stock received hereunder
prior to January 2, 1998.
4.2 Consultant and Prag (hereinafter referred to as "Consultants")
acknowledge that the shares of Common Stock, the Options and the shares
issuable upon the exercise of the Options 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 Options and 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.
4.3 In connection with the acquisition of Shares hereunder, the Consultants
represent and warrant to the Company as follows:
(a) Consultants acknowledge that the Consultants have 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 which the
Consultants have requested. (b) Consultants' investment in restricted
securities is reasonable in relation to the Consultants' net worth,
which is in excess of ten (10) times the Consultants' cost basis in the
Shares. Consultants have had experience in investments in restricted
and publicly traded securities, and Consultants have had experience in
investments in speculative securities and other investments which
involve the risk of loss of investment. Consultants acknowledges that
an investment in the Shares is speculative and involves the risk of
loss. Consultants have the requisite knowledge to assess the relative
merits and risks of this investment without the necessity of relying
upon other advisors, and Consultants can afford the risk of loss of his
entire investment in the Shares. Consultants are (i) accredited
investors, 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) Consultants are acquiring the Shares for the Consultants' own
account for long-term investment and not with a view toward resale or
distribution thereof except in accordance with applicable securities
laws.
(d) In any vote of shareholders for the election of directors or any
related matter (such as increasing or decreasing the authorized number
of directors or creating a classified board of directors) held prior to
January 1, 2001, Consultants shall vote any shares of Common Stock
received by Consultants pursuant to this Agreement, either directly or
through the exercise of warrants, and then held by Consultants (i) in
connection with the election of directors for such nominees as may be
designated by Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxx and (ii) with
respect to related matters in such manner as Messrs. Xxxxxxx and Xxxxx
may designate. Any designation regarding voting by Messrs. Xxxxxxx and
Xxxxx shall be made in a written notice executed by Messrs. Xxxxxxx and
Xxxxx and delivered to Consultants. It is understood that any shares of
Common Stock transferred by Consultants to person or entities not
subject to the control of Consultants shall be transferred free of any
obligation with respect to voting arising under this subparagraph.
5. Financing "Finder's Fee". It is understood that in the event C ONSULTANT
introduces C OMPANY, or its nominees, to a lender or equity purchaser, not
already having a preexisting relationship with the Company, who C OMPANY, or its
nominees, ultimately finances or causes the completion of such financing, C
OMPANY agrees to compensate C ONSULTANT for such services with a "finder's fee"
in the amount of 2.5% of total gross financing provided by C OMPANY payable in
cash. This will be in addition to any fees payable by C OMPANY to any other
intermediary, if any, which shall be per separate agreements negotiated between
C OMPANY and such other intermediary.
5.1 It is further understood that C OMPANY, and not C ONSULTANT, is
responsible to perform any and all due diligence on such lender or
equity purchaser introduced to it by C ONSULTANT under this Agreement,
prior to C OMPANY receiving funds. However, C ONSULTANT will not
introduce any parties to C OMPANY about which C ONSULTANT has any prior
knowledge of questionable, unethical or illicit activities.
5.2 C OMPANY agrees that said compensation to C ONSULTANT shall be paid in
full at the time said financing is closed. Moreover, said compensation,
will be a condition precedent to the closing of such funding or
financing and C OMPANY shall execute any and all documents necessary to
effect said compensation.
5.3 As further consideration to C ONSULTANT, C OMPANY, or its nominees,
agrees not to obtain any other financing from any lender or equity
purchaser supplied or referred to C OMPANY by C ONSULTANT for a period
of five years from the date of this Agreement, either directly or
indirectly through third parties or nominees. In the event of
circumvention by C OMPANY, or its nominees, C ONSULTANT shall receive a
fee equal to that outlined in Section "5" herein.
5.4 Consultant will notify Company of introductions it makes for potential
sources of financing in a timely manner (approximately 3 days within
introduction) via facsimile memo. 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 of such circumstance via facsimile memo.
6. 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 prior to its incurring an obligation for
reimbursement.
7. Indemnification. The Company warrants and represents that all oral
communications, written documents or materials, other than those designated by
the Company to the Consultant as "confidential" or "Company private", furnished
to Consultant by the Company with respect to financial affairs, operations,
profitability and strategic planning of the Company are accurate 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 with respect thereto resulting from Consultant's communication or
dissemination of any said information, documents or materials not designated by
the Company to the Consultant as "confidential" or "Company private", excluding
any such claims or litigation resulting from Consultant's communication or
dissemination of information not provided or authorized by the Company. To the
extent feasible, the Company agrees to make Consultant an additional insured on
any and all commercial liability and directors and officers liability insurance
policies and to provide Consultant with current Certificates of Insurance
reflecting the same.
8. 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, 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.
9. Legal Representation. The Company acknowledges that it has been represented
by independent legal counsel in the preparation of this Agreement. Consultant
represents that they have consulted with independent legal counsel and/or tax,
financial and business advisors, to the extent the Consultant deemed necessary.
10. 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 or the Consultant possess the authority to bind
each other in any agreements without the express written consent of the entity
to be bound.
11. 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.
12. 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.
13. 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: Xx. Xxxxx X. Xxxxx, President
Cotton Valley Resources Corporation
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx X0000
Xxxxxx, XX 00000
To the Consultant: Liviakis Financial Communications, Inc.
Xxxx X. Xxxxxxxx, President
0000 "X" Xxxxxx, Xxxxx 000
Xxxxxxxxxx, 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.
14. 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 Sacramento County, CA. will be the venue of any dispute
and will have jurisdiction over all parties.
15. 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
thereof. 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.
16. Complete Agreement. This Agreement instrument 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.
AGREED TO:
"Company" COTTON VALLEY RESOURCES CORPORATION
Date: ____________ By: _____________________________
Xxxxx Xxxxx, Secretary/Treasurer
& Its Duly Authorized Officer
"Consultant" LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
Date:_____________ By:___________________ ___________________
Xxxx X. Xxxxxxxx Xxxxxx X. Xxxx
President Sr. Vice
President
