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EXHIBIT "1"
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
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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 infrastructure.
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
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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 ▇▇▇▇▇▇ ▇. ▇▇▇▇ ("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
"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
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▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇ & ▇▇▇▇▇▇,
counsel to the Company, pursuant to irrevocable instructions under
which ▇▇▇▇ & ▇▇▇▇▇▇ 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
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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
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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
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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 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' investments 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
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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 requiring the Shares for the Consultants' own
account for long-term investment and not with a view toward resale of
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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇
and (ii) with respect to related matters in such manner as Messrs.
▇▇▇▇▇▇▇ and ▇▇▇▇▇ may designate. Any designation regarding voting by
Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall be made in a written notice executed
by Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ 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
Consultant introduces Company, or its nominees, to a lender or equity
purchaser, not already having a preexisting relationship with the Company, who
Company, or its nominees, ultimately finances or causes the completion of such
financing, Company agrees to compensate Consultant for such services with a
"finder's fee" in the amount of 2.5% of total gross financing provided by
Company payable in cash. This will be in addition to any fees payable by
Company to any other intermediary, if any, which shall be per separate
agreements negotiated between Company and such other intermediary.
5.1 It is further understood that Company, and not Consultant, is
responsible to perform any and all due diligence on such lender or
equity purchaser introduced to it by Consultant under this Agreement,
prior to Company receiving funds. However, Consultant will not
introduce any parties to Company about which Consultant has any prior
knowledge of questionable, unethical or illicit activities.
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5.2 Company agrees that said compensation to Consultant 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 Company shall execute any and all documents
necessary to effect said compensation.
5.3 As further consideration to Consultant, Company, or its nominees,
agrees not to obtain any other financing from any lender or equity
purchaser supplied or referred to Company by Consultant 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 Company, or its nominees, Consultant 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
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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.
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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: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Cotton Valley Resources Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Consultant: Liviakis Financial Communications, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇;
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
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
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enforcement of any waiver, change, modification, extension or discharge is
sought.
AGREED TO:
"Company" COTTON VALLEY RESOURCES CORPORATION
Date: 12/13/96 By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇/President
& Its Duly Authorized Officer
"Consultant" LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
Date: 11/7/96 By:/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇
President Sr. Vice President
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