XXXXXXXXX GROUP CORPORATE DEVELOPMENT AGREEMENT
This Agreement (the "Agreement") is entered into as of this 5th day of February,
1999, by and between The Xxxxxxxxx Group, Inc., a Nevada corporation
("Michelson"), with its principal place of business at 0000 Xxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx Xxxxx, XX 00000, and Tangible Investments Of America with its
principal place of business at 0000 X. Xxxxxxx Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxx
Xxxxx, XX 00000 (the "Company").
RECITALS
WHEREAS, Company intends to be a public company which is required to file
periodic and other reports under section 13 or 15(d) of the Securities Exchange
Act of 1934 and envisions that it will need the services of corporate
development activities of Xxxxxxxxx; and
WHEREAS, Company desires to engage Xxxxxxxxx to perform corporate
development services on behalf of Company; and
WHEREAS, Xxxxxxxxx has the ability and knowledge necessary for the
performance of such services; and
WHEREAS, Xxxxxxxxx and Company desire, pursuant to the terms of this
Agreement, to set forth the terms and conditions pursuant to which Xxxxxxxxx
will perform corporate development services on behalf of Company.
WHEREAS, as used herein, "Applicable Date" means February 12, 1999 if
Xxxxxxxxx does not terminate this Agreement as provided in Section 1.2.6.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and adequate consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
SCOPE OF SERVICES
1.1 Xxxxxxxxx agrees to perform for the Company the corporate development
services describe as follows:
1.1.1 Referrals; Key Employees. Xxxxxxxxx shall advise the Company on the
selection of professionals. Company will name one designee of Xxxxxxxxx to its
Board of Directors and recommend said designee to its shareholders for election
as a director at future shareholder meetings of the Company. Xxxxxxxxx
recognizes that the shareholders may not cast their votes for such designee and
such failure shall not constitute a breach of this Agreement.
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1.1.2 Stock Option Plan. Xxxxxxxxx recognizes that having management own a
significant ownership position in the Company is a valuable tool for focusing
their attention on increasing shareholder value. Accordingly, Xxxxxxxxx
recommends that the Board of Directors put into effect a stock option plan to be
used for acquiring additional management as well as incentivizing current
management.
1.1.3 Capitalization. Xxxxxxxxx shall make all reasonable efforts to help
Company reach the business objectives to be mutually agreed upon at a later
date.
1.1.4 The Support System. Xxxxxxxxx will develop, implement and maintain
an ongoing stock market support system with the general objective of expanding
stockbroker awareness of the Company's activities, and hence to generate
commensurate interest in the Company's stock.
1.2 Company acknowledges as follows:
1.2.1 No Guarantees. Xxxxxxxxx makes no guarantees, representations or
warranties as to the particular results from Xxxxxxxxx corporate development
services, the response and timeliness of action by the stockholder and brokerage
community, including but not limited to guarantees, representations or
warranties as to future stock price of Company.
1.2.2 Review Responsibility. Company understands that the accuracy and
completeness of any document prepared by Xxxxxxxxx or its advisers is dependent
upon Company's alertness to assure that such document contains all material
facts which might be important and that all such documents must not contain any
misrepresentation of a material fact nor omit information necessary to make the
statements therein not misleading. To that end, Company agrees to review, and
confirm to Xxxxxxxxx in writing that you have reviewed, all materials for their
accuracy, and completeness prior to any use thereof. Company also acknowledges
that this responsibility continues in the event that the materials become
deficient in this regard.
1.2.3 Representations and Warranties. The Company represents and warrants
to Xxxxxxxxx that all information provided prior to the execution of this
Agreement, in writing or otherwise, is true and complete. In the event that
such information is determined to be inaccurate, incomplete or otherwise
misleading, this Agreement may be immediately terminated, at the sole discretion
of Xxxxxxxxx.
1.2.4 Issuance of Additional Securities/Indebtedness. Commencing with the
execution of this Agreement and ending two years from the date of the Agreement,
the Company and its principal shareholders will not issue any additional
securities (except Securities issued in connection with the currently proposed
private securities offerings and Securities issuable upon the exercise or
conversion of existing warrants, options or other convertible securities, or
those issuable upon presently existing employee stock option plans) without the
prior written consent of Xxxxxxxxx.
1.2.5 The contract is subject to Xxxxxxxxx completing its due diligence by
February 12, 1999. If Xxxxxxxxx is not satisfied for any reason, Xxxxxxxxx may
terminate this contract with no obligation to Xxxxxxxxx by February 12, 1999.
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ARTICLE II
COMPENSATION FOR SERVICES
2.1 In consideration for entering into this Agreement and performing the
services described immediately above, Company agrees to compensate Xxxxxxxxx as
follows:
2.1.1 Cash Compensation. Company agrees to pay to Xxxxxxxxx a monthly fee
of $6,500.00, to be paid on the 15th of each month, in advance, beginning upon
execution of this agreement. Xxxxxxxxx agrees to accrue its fees until Company
breaks escrow on a $1,000,000.00 bridge financing. Company agrees to bring
current all Xxxxxxxxx fees upon breaking of escrow and to pre-pay three months
forward fees when Company bridge financing reaches $750,000 in gross proceeds.
When Company completes its bridge financing, Company will escrow $50,000.00 with
Xxxxxxxxx to be spent on Investor Relations. Company will approve all expenses
per Section 2.1.5.
2.1.2 Stock Compensation. Commencing on the Applicable Date, Company agrees
to issue to Xxxxxxxxx warrants to purchase that number of shares of common stock
of the Company (the "Warrants") which would, upon exercise, result in Xxxxxxxxx
holding of 4.9% of the outstanding shares of the Company upon completion of the
proposed bridge financing and reverse merger. Such Warrants shall be
exercisable for a period of five years from the Applicable Date at an initial
price of $.01 per share. The Company shall execute and deliver a customary
Warrant Agreement evidencing the Warrants. Xxxxxxxxx acknowledges that the
Warrants and the shares issuable upon exercise of the Warrants (the "Shares")
will initially be "restricted securities" (as such term is define in Rule 144
promulgated under the Securities Act of 1933, as amended ("Rule 144"), that the
Warrants and Shares will include a restrictive legend, and that the Warrants and
Shares cannot be sold unless registered with the United States Securities and
Exchange Commission ("SEC") and qualified by appropriate state securities
regulators, or unless Xxxxxxxxx complies with an exemption from such
registration and qualification (including without limitation, compliance with
Rule 144).
2.1.3 In order to facilitate Company's growth plan, Xxxxxxxxx agrees to
exercise the warrants due Xxxxxxxxx under this contract in the following
schedule: one half of the warrants can be exercised by Xxxxxxxxx immediately,
an additional one fourth can be exercised when the Company breaks escrow on its
bridge financing; the remainder under this contract, including those listed
under paragraph 2.1.4, are due Xxxxxxxxx upon Company breaking escrow on a debt
or equity financing of $3 million or over for the Company.
Company shall issue the stock certificate for the Shares within five (5)
days after the exercise of any Warrants.
2.1.4 Antidilution. It is the intention of the parties hereto that upon
completion of the reverse merger and bridge financing, the number of warrants to
be held by Xxxxxxxxx shall equal 4.9% of the then issued and outstanding shares
of stock. This 4.9% is to be calculated on a fully diluted basis assuming that
the entire bridge financing is completed. The Company agrees that it shall
issue additional warrants to Xxxxxxxxx, if necessary, in order to assure that
Xxxxxxxxx receives this 4.9%. Xxxxxxxxx shall be diluted in the same manner
that all other shareholders of the Company are diluted, in all offerings
occurring subsequent to the completion proposed bridge financing.
2.1.5 Expenses. Company agrees to pay all incidental costs and expenses
associated with services provided by Xxxxxxxxx. Such expenses are separate from
cash compensation as set out above, and include but not limited to such
incidental costs and expenses as travel and lodging, copying charges, printing
charges, long distance telephone charges, facsimile charges, postage, special
mailings and other reasonable expenses. Such expense shall in every instance be
reasonable and verifiable with appropriate back-up documentation. All expenses
over $1,000.00 a month will be pre-approved by Company.
ARTICLE III
TERM OF THE AGREEMENT
3.1 This Agreement shall commence upon execution of this Agreement and
continue during the two-year period of time following the date of this
Agreement. Renewal shall be determined by a vote of the Board of Directors of
the Company. Notwithstanding the foregoing, the Company or Xxxxxxxxx, as the
case may be, may terminate this Agreement immediately upon written notice to
such party upon the occurrence of any of the following: (a) the other party
shall become insolvent or make an assignment for the benefit of Creditors; and
(b) the other party shall breach any of the material terms of this Agreement.
If this Agreement is terminated on or before the termination date of this
Agreement (as set forth above) for any reason other than a default by Xxxxxxxxx,
the entire cash fee shall immediately become due and payable, shall be deemed to
be earned as of such date, and no offset, refund or reduction of payments shall
be attributable to such termination. The provisions of Article II shall survive
the termination of this Agreement.
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ARTICLE IV
STATUS OF PARTIES
4.1 Nothing contained in this Agreement shall be construed to imply that
either Xxxxxxxxx, the Company, or any employee, agent or other authorized
representative of any such party, is a partner, joint venturer, agent officer or
employee of the other. Neither party hereto shall have any authority to bind
the other in any respect vis a vis any third party, it being intended that each
shall remain an independent contractor and responsible only for its own actions.
The Company and Xxxxxxxxx are independent contractors, each responsible for its
own actions, costs and expenses. Neither Xxxxxxxxx nor the Company shall have
any right to, and shall not, commit the other party to any agreement, contract,
or undertaking or waive or compromise any of such other party's rights against
customers or other parties. All compensation paid to Xxxxxxxxx shall constitute
earnings from self-employment income and the Company shall not withhold any
amounts therefrom as federal or state income tax withholding from wages or as
employee contributions under the Federal Insurance Contribution Act (Social
Security) or any similar federal or state law applicable to employers and
employees.
ARTICLE V
INDEMNIFICATION
5.1 Company acknowledges that Xxxxxxxxx must at all times rely upon the
accuracy and completeness of information and documents supplied to Xxxxxxxxx by
the Company's officers, directors, agents and employees. Consequently, Company
and the entities affiliated with Company agree to indemnify and hold harmless
Xxxxxxxxx, its officers, directors, employees and agents (collectively, the
"Indemnitees") against and from any and all losses, claims, damages or
liabilities, joint or several, which Indemnitees or any of them may become
subject, and to reimburse Indemnitees or any of them for any legal or other
expenses (including the cost of any investigation and preparation) incurred by
Indemnitees or any of them, arising out of or in connection with any inquiry,
litigation or other proceeding, whether or not resulting in any liability,
insofar as such losses, claims, damages, liabilities or expenses arise out of,
or are based upon, (i) any act taken or omitted to be taken by Indemnitee's
services hereunder, or (ii) any untrue statement or alleged untrue statement of
a material fact contained in any information (written or oral) furnished by you
to Indemnitees or the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading.
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ARTICLE VI
CONFIDENTIALITY
6.1 Xxxxxxxxx agrees not at any time (during or after the term of this
Agreement) to disclose or use, except in pursuit of the business of the Company
(for purposes of this Article, "the Company" shall include the Company and any
affiliate of the Company), and Proprietary Information of the Company acquired
during the term of this Agreement. For Purposes of this Agreement the phrase
"Proprietary Information" means all information which is known or intended to be
known only to Xxxxxxxxx or employees of the Company any document, record or
other information of the Company or others in a confidential relationship with
the Company and relates to specific business matters such as patents, patent
applications, trade secrets, secret processes, proprietary know-how, information
of the Company's business, and identity of suppliers or customers or accounting
procedures of the Company or relates to other business of the Company.
Xxxxxxxxx agrees not to remove from the premises of the Company except in the
pursuit of business of the Company any document, record or other information of
the Company. Xxxxxxxxx recognizes that all such documents, records or other
information, whether developed by Xxxxxxxxx or by someone else for the Company
are the exclusive property of the Company, as the case may be.
ARTICLE VII
MISCELLANEOUS
7.1 WAIVER. No waiver of any breach of default of this Agreement by
Xxxxxxxxx shall be considered to be a waiver of any other breach or default of
this Agreement.
7.2 SEVERABILITY. If any portion of this Agreement is found by a court of
competent jurisdiction to be void or unenforceable, that portion hereof shall be
deemed to be reformed to the extent necessary to cause such portion to be
enforceable and the same shall not affect the remainder of this Agreement, which
shall be given full force and effect without regard to the invalid or
unenforceable portions.
7.3 ENTIRE AGREEMENT. This Agreement, which may be signed in duplicate or
counterparts, replaces and supersedes all previous Agreements between Xxxxxxxxx
and the Company, contains the entire understanding between the parties, and may
not be changed, altered, amended, or modified, except in writing, duly executed
by each of the parties.
7.4 ASSIGNMENT. This Agreement may not be assigned or transferred by either
party hereto without the prior written consent of the other.
7.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California.
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7.6 ATTORNEY'S FEES. Should any action be commenced between the parties to
this Agreement concerning the matters set forth in this Agreement or the right
and duties of either in relation thereto, the prevailing party in such action
shall be entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
7.7 ARBITRATION AND VENUE. Any controversy arising out of or relating to
this Agreement or any modification or extension thereof, including any claim for
damages and/or recision, shall be settled by arbitration in Orange County,
California in accordance with the Commercial Arbitration Rules of the American
Arbitration Association before one arbitrator. The arbitrator sitting in any
such controversy shall have no power to alter or modify any express provisions
of this Agreement or to render any award which by its terms effects any such
alteration, or modification. The parties consent to the jurisdiction of the
Superior Court of California, and of the United States District Court for the
Central District of California for all purposes in connection with such
arbitration including the entry of judgment on any award. The parties consent
that any process or notice of motion or other application to either of said
courts, and any paper in connection with arbitration, may be served by certified
mail or the equivalent, return receipt requested, or by personal service or in
such manner as may be permissible under the rules of the applicable court or
arbitration tribunal, provided a reasonable time for appearance is allowed. The
parties further agree that arbitration proceedings must be instituted within one
year after the claimed breach occurred, and that such failure to institute
arbitration proceedings within such period shall constitute an absolute bar or
the institution of any proceedings and a waiver of all claims. This section
shall survive the termination of this Agreement.
7.8 FACSIMILE SIGNATURE. Any signature on a facsimile copy of the Agreement
shall be binding and valid as if made on the original copy of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
XXXXXXXXX GROUP, INC.
By: /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, President
"COMPANY"
/s/ Xxxxxxx XxXxxxxx
By: Xxxxxxx XxXxxxxx
Its: President
