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EXHIBIT 10.40
▇▇▇▇ MANAGEMENT GROUP, INC.
ENGAGEMENT AGREEMENT
AGREEMENT NUMBER M004-001
▇▇▇▇ Management Group, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇, (MMG), is entering into this Agreement with the following
organization or individual ("Customer") for performance of the
work described below:
CUSTOMER: XXsys Technologies, Inc. CUSTOMER ID NO.: M004
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Purchase Order No.:
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Purchase Order Date:
Services:
Deliverables: PROVIDE MANAGEMENT CONSULTING SERVICES TO ASSIST XXsys IN
IMPROVING THE BOTTOM LINE PROFITABILITY. SEE ATTACHED PROPOSAL DATED 5/8/98 and
7/20/98.
Performance Schedule: EFFORT TO COMMENCE ON OR ABOUT JULY 6, 1998 AND CONTINUE
UNTIL XXsys DETERMINES THAT MMG SERVICES ARE NO LONGER REQUIRED. XXsys WILL
PROVIDE MMG WITH A 30 DAY NOTICE OF TERMINATION.
▇▇▇▇ Management Fees: SEE "PROJECTED COSTS" SECTION IN ATTACHED PROPOSAL DATED
July 20, 1998
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Representatives:
▇▇▇▇ Management Group Administrator:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: Dr. GLORIA MA
Address: ▇▇▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇ Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Customer Technical Contact: SPECIAL NOTES:
Name:
Address:
Customer Billing Contact:
Location of Work: VARIOUS
Additional Customer Obligations:
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For ▇▇▇▇ Management Group: For Customer:
Signature: [SIG] Signature: [SIG]
Name: Name:
Title: Title:
Date: July 6, 1998 Date: July 6, 1998
EXECUTION PROCEDURE: Customer signs both copies and returns them to ▇▇▇▇
Management Group. ▇▇▇▇ Management Group signs both copies and returns one fully
signed copy to Customer. This Agreement becomes effective upon execution by
Customer and acceptance and execution by ▇▇▇▇ Management Group at ▇▇▇▇
Management Group's home offices. BY SIGNING THIS AGREEMENT, CUSTOMER AGREES TO
ALL OF THE TERMS AND CONDITIONS SET FORTH HEREIN, INCLUDING THE WARRANTY
EXCLUSIONS AND LIMITATIONS ON LIABILITY CONTAINED ON THE REVERSE SIDE HEREOF.
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▇▇▇▇ MANAGEMENT GROUP, INC.
TERMS AND CONDITIONS
1. MMG FEES. Customer shall pay MMG the fee identified ("MMG Fees") within
thirty (30) days of invoicing. Customer also agrees to pay the reasonable travel
expenses of MMG's personnel in the course of MMG's performance hereunder. MMG,
in incurring any such expenses, shall conform to XXsys's then-current standard
travel policies for employee travel expenses. Payments due and unpaid shall,
upon written notice to Customer by MMG, bear interest from the date payment is
due at the lesser of the maximum rate permitted by law or one and one-half
percent (1-1/2%) per month.
2. CUSTOMER OBLIGATIONS. It is understood that MMG may be required to perform
Services based, in part, on materials, information, equipment, facilities and/or
services furnished by Customer, agents of Customer or other contractors for
Customer, and MMG shall be entitled to rely on the accuracy and completeness of
such information and materials and to assume that all equipment and facilities
shall be in good working order and that all services provided by Customer shall
be provided in a timely and professional manner. Additional duties of Customer
shall be set forth in the Additional Obligations of Customer Section on the
reverse side hereof. When MMG performs any services at Customer's facility,
Customer shall supply sufficient work space, terminals, materials and related
resources which may be needed by MMG for timely performance of the Project.
3. PERFORMANCE OF MMG. The Deliverables of MMG shall be upon delivery in
substantial conformance with any applicable specifications set forth or
referenced on the reverse side hereof. CUSTOMER UNDERSTANDS AND ACKNOWLEDGES
THAT MMG DOES NOT AND CANNOT WARRANT THAT THE DELIVERABLES ARE FREE OF ALL
DEFECTS OR ERRORS. Customer shall have ten (10) days after delivery of the
Deliverables, or portion thereof, to review the Deliverables and determine
whether or not such are in substantial conformance with any specifications set
forth or referenced on the reverse side hereof. Failure to notify MMG in writing
within the ten (10) day period shall be deemed to be acceptance hereunder.
Customer agrees that MMG shall have satisfied its warranty obligation upon
Customer acceptance of the Deliverables. If any portion of the Deliverables
supplied by MMG hereunder fails to comply with the foregoing warranty and MMG is
so notified in writing within the ten (10) day acceptance period, MMG shall
correctly perform such portion of the Deliverables at MMG's own expense. Should
MMG fail to so cure the performance within a reasonable period of time or should
MMG determine that the Deliverables cannot be corrected with a commercially
reasonable effort, MMG shall refund the amount of the MMG Fees as relate to such
portion of the Deliverables not satisfactorily completed.
4. INFRINGEMENT. MMG warrants, except as to material or information
incorporated into the Deliverables that Customer, its agents or other
contractors have supplied to MMG, that the Deliverables will not infringe on the
copyright, patent or trade secret of any third party. If any portion of the
Deliverables supplied hereunder fails to comply with the warranty against
infringement, MMG hereby agrees to indemnify, protect, defend, and hold Customer
harmless from all claims, suits, actions, and judgments which may be sustained
by Customer as a result of such failure; provided, however, that (i) Customer
gives prompt written notice to any suit to MMG, and (ii) MMG shall have sole
control of the defense of any action or claim and all negotiations for
settlement or compromise thereof. Customer may elect to participate in any such
action with an attorney of its own choice and at its own expense. In the event
Customer is precluded by a court of competent jurisdiction from using any
Deliverables as a result of such an infringement, MMG may, in its sole and
absolute discretion, (i) obtain the right to use the Deliverables for the
Customer, or (ii) replace or modify the Deliverables so that they no longer
infringe or (ii) if neither (i) nor (ii) above is commercially reasonable, in
MMG's sole and absolute discretion, then MMG may terminate this Agreement with a
pro-rata refund of the MMG Fees paid by Customer based on a useful life of five
(5) years for the Deliverables. If Customer does not notify MMG, as required
herein, Customer's rights under this Section shall terminate.
5. LIMITATIONS. THE FOREGOING REMEDIES AND WARRANTIES ARE EXCLUSIVE AND IN
LIEU OF ALL OTHER REMEDIES AND WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED OR OTHER WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. MMG SHALL NOT BE LIABLE TO CUSTOMER OR ANY OTHER PERSON, FIRM OR
CORPORATION FOR ANY LOSS OR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS, LOSS OF TIME, MONEY, DATA OR
GOODWILL, OR ANY OTHER CLAIM OR DEMAND BY OR AGAINST CUSTOMER WHICH MAY ARISE
OUT OF THE FURNISHING, PERFORMANCE OR USE OF ANY ITEM OF SERVICE PROVIDED FOR
UNDER THIS AGREEMENT.
6. CONFIDENTIAL INFORMATION. "Confidential Information" shall mean information
or material proprietary to either MMG or Customer and provided by one party
hereunder to the other, provided that such is designated in writing as
confidential or proprietary. Any information relating directly or indirectly to
any software product of MMG and any Deliverables delivered hereunder shall be
confidential and proprietary to MMG and written notice of its confidential
nature shall not be required. "Owner" means the party delivering Confidential
Information to the other. "Recipient" means the party receiving Confidential
Information. Recipient shall use reasonable efforts not to disclose or otherwise
make available any part of the Confidential Information to any other person or
entity. Recipient agrees to use all Confidential Information solely for the
purpose of performing its obligations contemplated hereunder, or as otherwise
expressly permitted under this Agreement. Unless otherwise expressly
contemplated under this Agreement, Recipient shall not incorporate any portion
of the Confidential Information into any other work or product, and shall not
have any proprietary interest in any of the Confidential Information as a result
of Recipient's access to such by virtue of this Agreement. Recipient's
obligation to maintain the confidentially or Confidential Information shall not
apply where such: (i) was already in Recipient's possession prior to disclosure
by Owner, and such was received by Recipient without obligation of confidence;
(ii) is independently developed by Recipient; (iii) is or becomes publicly
available without breach of this Agreement; (iv) is rightfully received by
Recipient from a third party without obligation of confidence; or (v) is
released in accordance with a valid order of a court or governmental agency.
7. CHANGES. Customer and MMG may, at any time, upon mutual agreement, execute
a written document ("Change Order") providing for changes in the Scope of Work,
in any one or more of the following: (i) tasks or sub-tasks to be performed;
(ii) time or place of deliver, and (iii) period of performance. If any such
change causes an increase in the cost of, or the time required for, the
performance of Services, such Change Order shall include an equitable adjustment
in the MMG Fees or Schedule of Performance, or both. In no event shall MMG be
responsible or obligated to perform any change unless the parties have agreed
upon an increase in the Project Fees and revision in the Performance Schedule in
the event MMG determines such is necessary.
8. DELAYS AND EXTENSIONS OF TIME. If MMG is delayed at any time in the
progress of the Services by any act or neglect of Customer, or by any employee
of Customer, or by any separate contractor or agent employed by Customer, or
changes ordered in the Scope of Work, or by labor disputes, fire, unusual delay
in transportation, adverse weather conditions not reasonably anticipated,
unavoidable casualties, or any causes beyond MMG's control, or by any other
cause which justifies the delay, then the performance Schedule, upon request by
MMG, shall be extended by Change Order for such reasonable time as MMG and
customer mutually may determine to be necessary. MMG shall provide an estimate
of the probable effect of such delay on the progress of the Services. If no
agreement is made stating the reasonable effects of the delay, then MMG shall
unilaterally determine the effect of the delay upon MMG's Performance Schedule
and the MMG Fees, which unilateral determination shall be binding upon Customer,
provided that such is supported by proper documentation. There shall be no
adjustment to the Project Fees unless the delay is caused by Customer, an
employee of Customer or an agent or other contractor of Customer. In the case of
a continuing Customer delay in excess of thirty (30) days after written notice
from MMG, or in the case of persistent Customer delays which continue to persist
after written notice from MMG, MMG may terminate its Services and shall be
entitled to all MMG Fees for Services performed prior to termination and all
extra expenses caused by the delay(s), as well as MMG's anticipated profit for
Services not performed.
9. MISCELLANEOUS. The parties are independent contractors with respect to the
services contemplated hereunder. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of Customer and MMG.
However, neither Customer nor MMG shall have the right to assign this Agrement
or any obligations or responsibilities hereunder without the prior written
consent of the other party. The terms, conditions, representation, and
warranties contained in this Agreement shall survive the termination or
expiration of the time for completion of Services, delivery of any Deliverables
and the time for meeting any final payment of Project Fees. No amendment or
modification of any provision of this Agreement shall be effective unless in
writing and signed by both parties hereto. The failure of either party at any
time to demand strict performance by the other party of any of the terms,
covenants or conditions set forth herein shall not be construed as a continuing
waiver or relinquishment of any such term, covenant or condition, and either
party may at any time subsequent demand strict and complete performance by the
other party of said term, covenant or condition. If any provision of this
Agreement is held by a court of competent jurisdiction to be contrary to law,
the remaining provisions of this Agreement will remain in full force and effect
to the extent that such does not operate to create an absurdity. This Agreement
constitutes the entire agreement between Customer and MMG concerning the subject
matter governed by this Agreement. This Agreement shall be construed in
accordance with the plain meaning of the language employed herein, and it shall
not be construed either for or against the drafting party. The headings used
herein are for the sole sake of convenience and shall not be used to interpret,
limit or add to the language of any section contained herein. Any notice, to be
effective hereunder, shall be made in writing and sent to the address of the
appropriate party first appearing herein, unless such party shall have notified
the other party, in accordance with the provisions of this Section, of a new
mailing address. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia.
▇▇▇▇ Management Group, Inc. Proprietary
Form TS0696
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TO: XXsys Board of Directors
FROM: ▇▇▇▇ Management Group
DATE: September 16, 1998
SUBJECT: Addendum to ▇▇▇▇ Agreement
This addendum memorializes the ratified actions for ▇▇▇▇ Management Group
made by the XXsys Board of Directors at the Board meeting held on Monday
September 14, 1998.
The following actions were agreed to:
1. ▇▇▇▇ (▇▇▇ and ▇▇▇) will take full time responsibility for the finance,
administration and operational aspects of the company as ▇▇▇ -- COO and
▇▇▇ -- CFO. Both of these positions will be on an interim basis until the
Company is back on its feet and can attract replacements for both
positions. They will report to the Board of Directors. Both ▇▇▇ ▇▇▇▇ and
▇▇▇ ▇▇▇▇▇▇▇ will be covered by D&O Insurance that will be paid in advance
to ensure coverage.
2. All XXsys personnel with the exception of Dr. Ma and her administrative
assistant will report to ▇▇▇▇.
3. ▇▇▇▇ will continue fulfilling its existing agreement and tasks (over &
above this new responsibility) with some overlap in performance.
4. ▇▇▇▇ will make personnel adjustments as necessary in the XXsys team. Any
action taken regarding the employment of the current management team will
require board concurrence.
5. ▇▇▇▇ will adjust XXsys personnel functional responsibilities as necessary.
6. ▇▇▇▇ ▇▇▇▇▇▇▇ will report to ▇▇▇▇.
7. ▇▇▇▇ will keep the Board appraised at least monthly through a written
progress report.
8. ▇▇▇ & ▇▇▇ will be granted signature authority consistent with current
XXsys guidelines and will be responsible for authorizing all external
agreements and alliances.
9. ▇▇▇▇ will take whatever other actions are required to ensure XXsys operates
as a cost conscious, focused business operation.
10. The existing agreement remains in force. A separate addendum to that
agreement will be executed to add these additional responsibilities.
11. ▇▇▇▇ will provide one full time equivalent (FTE) in either ▇▇▇ or Joe's
time, as needed, to fulfill the new responsibilities for 818,000 monthly
paid bi-monthly with the same priority and at the same time as XXsys
internal salaries. ▇▇▇▇ will be responsible for its own taxes, benefits,
etc.
12. Additionally, ▇▇▇▇ will be granted 50,000 shares of XXsys free trading
stock in lieu of a cash bonus for accepting this additional assignment.
13. Expenses associated with the new assignment are paid in the same manner as
those under the existing agreement.
[SIG]
▇▇▇▇ Management Group, Inc.
COMPANY CONFIDENTIAL
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14. Activities above the FTE are compensated according to the original
agreement.
15. The Board of Directors has granted ▇▇▇▇▇ ▇▇▇▇ with the authority to review
and approve this addendum to the ▇▇▇▇ Agreement.
Therefore in addition to the supporting items shown above, the addendum to the
existing ▇▇▇▇ Management Agreement, M004-001 will be as follows:
▇▇▇▇ will provide one full time equivalent (FTE) in either ▇▇▇ or Joe's time,
as needed, to fulfill the new responsibilities for the sum of $18,000 monthly
paid bi-monthly with the same priority and at the same time as XXsys internal
salaries. ▇▇▇▇ will be responsible for its own taxes, benefit, etc.
Additionally, ▇▇▇▇ will be granted 50,000 shares of XXsys free trading stock in
lieu of a cash bonus for accepting the additional assignment.
XXsys agrees to cover the members of the XXsys Board of Directors and both ▇▇▇
▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ by prepaid D&O insurance payable in advance to ensure
sufficient coverage.
XXsys Technologies, Inc. ▇▇▇▇ Management Group, Inc.
/s/ ▇▇▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇ ▇. ▇▇▇▇
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XXsys Board of Director ▇▇▇▇ Management Group
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇
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Name Name
Director Managing Partner
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September 15, 1998 9/15/98
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Date Date
▇▇▇▇ Management Group, Inc.
COMPANY CONFIDENTIAL
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