MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement ("Agreement"), made and effective this 7th
day of May, 1999, by and between Xxxxxxxx Coach, Inc., a Delaware corporation
at 00 Xxx Xxxxx 000, Xxxxxxxxxx, XX 00000 ("Xxxxxxxx") and DRK, Inc., a
Minnesota corporation at 000000 Xxxxxxx Xxxx Xxxxxxxxx, Xxxxx, XX 00000
("Manager").
WHEREAS, Xxxxxxxx is a manufacturer and distributor of a certain unique type
of motor home camper vehicle, as more complete described in Exhibit A, attached
hereto ("Xxxxxxxx'x Product"), and
WHEREAS, Xxxxxxxx needs experienced personnel to manage its operations,
particularly the production and marketing areas of its operations, and
WHEREAS, Manager is very familiar with Xxxxxxxx'x operations, having been
intricately involved with the design of Xxxxxxxx'x Product and having managed
Xxxxxxxx'x operations since Xxxxxxxx'x inception, and
WHEREAS, Manager is very experienced in all aspects of vehicle manufacturing
and vehicle re-manufacturing as well as all aspects of vehicle design and
development, and
WHEREAS, Xxxxxxxx desires to take advantage of Manager's expertise and to
appoint Manager as the exclusive executive manager of Xxxxxxxx'x operations
within the United States for a defined period as set forth herein, and
WHEREAS, Manager desires to accept such appointment to provide the management
services as set forth herein.
NOW THEREFORE, in consideration of the mutual agreements and promises set
forth herein, the parties agree as follows:
1. Management Services
Manager shall provide all executive management services for Xxxxxxxx, to
consist of not less than all executive management duties as described in the
bylaws of Xxxxxxxx, including the performance of all of the duties typical of
the following offices:
Chief Executive Officer
Chief Operating Officer
Chief Marketing Officer
Chief Production Officer
Additionally, Manager shall perform those other Executive management duties
and projects as may be assigned, from time to time, by the board of directors
of Xxxxxxxx. Manager shall provide to Xxxxxxxx, in writing, the names of all
persons whom shall be either employees of or independent consultants hire by
Manager the Manager shall intend to use to perform these duties, and the use
of such persons in this regard shall be subject to the written approval of
Xxxxxxxx, which approval shall not be unreasonably withheld, but which
approval shall be received in writing before any such person is used by
Manager to perform the duties specified herein. It is hereby understood that
each such person shall devote his or her entire productive time, ability and
attention to the business of Xxxxxxxx and shall perform all assigned duties in
a professional, ethical and businesslike manner, the assurance of which is
Manager's responsibility.
Manager shall be responsible for providing the overall executive management
required to operate Xxxxxxxx production, and shall be responsible for
maintaining efficient and quality production of Xxxxxxxx'x Product, using
qualified personnel and subject to service policies and procedures
satisfactory to Xxxxxxxx and as specified by the board of directors of
Xxxxxxxx. Manager shall further be in charge of managing the promotion,
marketing and sales of Xxxxxxxx'x Product in the United States, insuring that
personnel and/or representatives utilized in this endeavor shall be adequately
trained by Manager, and that the marketing plan employed permits sales of
Xxxxxxxx'x Product that are no less that sales goals outlined herein.
Neither Manager, nor its officers and directors nor it's employees assigned to
perform the executive management duties set forth herein, shall, during the
term of this Agreement, directly or indirectly engage in any other business,
either as an employee, employer, consultant, principal, officer, director,
advisor or in any other capacity, either with or without compensation, without
the prior written consent of Xxxxxxxx. In addition to the duties described
herein, Manager is also authorized, responsible for and directed to manage the
daily operational affairs of Xxxxxxxx accordingly sot that Xxxxxxxx'x
operational results shall not fall short of the affairs of Xxxxxxxx listed
herein at Section 4C, and Xxxxxxxx agrees that it shall be supportive of
Manager as deemed necessary in the attainment of these goals, as long as such
required support of Xxxxxxxx is considered reasonable and diligent by the
board of directors of Xxxxxxxx.
2. Term
The term of this Agreement shall commence on May 10, 1999 and shall continue
until December 31, 2004. Thereafter, the Agreement shall only be renewed upon
the mutual agreement of Xxxxxxxx and Manager. This Agreement may only be
terminated by Manager, at Manager's sole discretion, in the event of a default
by Xxxxxxxx in the payments due to Manager as provided herein at Section 4,
and only if such default of payment, after written notice by Manager to
Xxxxxxxx, has not been cured within thirty (30) days of such Notice. Further,
this Agreement may only be terminated by Xxxxxxxx under certain terms and
conditions as set forth herein at this Section and only provided that Xxxxxxxx
shall xxx to Manager an amount equal to the Termination Payment so specified
herein. In the event of such Early Termination and the payment in good funds,
of the requisite Termination Payment, Manager shall be thereby relieved of any
further obligation to perform the duties as set forth in this Agreement, and
Xxxxxxxx shall no longer be obligated to pay Manager any further consideration
whatsoever.
Then this Agreement may bet terminated by Xxxxxxxx, at its sole discretion, at
any time during the term set forth herein, providing at least thirty (30) days
prior written notice to Manager, in accordance with the terms and conditions
as set forth below:
A. If Xxxxxxxx'x operations do not reach the sales and profit
goals set forth herein at Section 4C, both on a fiscal year basis and on an
aggregate basis, determined as of the most recent December 31 of any
year during the Term, Xxxxxxxx may terminate the services of Manager, in its
sole discretion, so long as Xxxxxxxx pays to Manager a Termination Payment
which amount shall be the greater of 1) Three Million Dollars ($3,000,000.00);
or 2) any amount equal to the value of all Xxxxxxxx common stock held by
manager at such date of Early termination calculated using the average closing
price of Xxxxxxxx'x common stock for the sixty (60) day period preceding such
date of Early unpaid at such date. However, upon payment of such Termination
Payment, Manger must surrender to Xxxxxxxx any and all stock of Xxxxxxxx,
common or preferred, which manager owns or to which it has beneficial rights,
to include not less than the common stock and common stock issuance rights to
which Manager is granted in accordance with this Agreement; or
B. If Xxxxxxxx'x operations exceed the sales and profit goals
set forth herein at Section 4C, either on a fiscal year basis or on an
aggregate basis, or both, determined as of the most recent December 31 of any
year during the Term, Xxxxxxxx may still terminate the services of Manager, in
its sole discretion, so long as Xxxxxxxx pays to Manager a Termination Payment
which amount shall be the greater of: 1) Five Million Dollars ($5,000,000.00);
or 2) an amount equal to the value of all Xxxxxxxx common stock held by
Manager at such date of Early Termination calculated using the average closing
price of Xxxxxxxx'x common stock for the sixty (60) day period preceding such
date of Early Termination plus any other amounts owed by Xxxxxxxx to Manger
for executive management services rendered as of the date of such Early
Termination but remaining unpaid at such date. However, upon payment of such
Termination Payment, Manager must surrender to Xxxxxxxx any and all stock of
Xxxxxxxx, common or preferred, which Manager owns or to which it has
beneficial rights to include not less than the common stock and common stock
issuance rights to which Manager is granted in accordance with this Agreement.
3. Default
In the event that either party breaches its duties pursuant to this Agreement,
that is, if and only if Xxxxxxxx fails to fulfill its payment obligations to
manager as provided herein or if, and only if, Manager willfully, wantonly and
habitually neglects its duties to be performed under this Agreement or if
Manager, or any of its employees or representatives, engages in any conduct
which is dishonest or criminal and thereby damages the reputation or standing
of Xxxxxxxx, then and only in such circumstances, the wronged party may xxx
the other for real and liquidated damages, without further limitations other
than those imposed by law, except that the parties hereto may not, in any
manner, xxx to terminate this Agreement other than as provided herein at
Section 2. Further, the parties hereto agree that before any litigatory
action is taken action is taken pursuant to a court filing, the parties will
initially, albeit reasonably, exhaust all other remedies at hand, to include
arbitration and any other third party mediated settlement conference
alternatives.
4. Payment for Services
In return for services to be provided pursuant to this Agreement, Xxxxxxxx
shall be responsible to pay Manager specific consideration as outlined below:
A. Fixed Base Payment equal to Manager's actual cost to provide
the executive management services as contemplated herein, such amount to be
invoiced monthly. Such monthly invoice shall include an attachment which
summarizes and documents each item of Manager's cost, and this attachment
shall be subject to review and verification procedures for propriety and
reasonableness at the sole discretion of the board of directors of Xxxxxxxx.
However, such Fixed Base Payment shall not for any reason exceed, on a
quarterly basis, the amount of the Activity Base Payment, as defined herein at
Section 4B. This Fixed Base Payment shall be due and payable to Manager no
later than the 25th day of the month following that month to which each
invoice relates, and, under no circumstances, may the payment of this amount
be deferred or otherwise withheld by Xxxxxxxx without the written consent of
Manager.
B. Activity Based Payment equal to Ten Percent (10%) of
Xxxxxxxx'x quarterly net income as reported on Xxxxxxxx'x 10QSB reports and
related financial statements. However, any amounts due pursuant to such
calculation, shall be reduced by the total amount of the Fixed Base Payment
billed by manager for the three months in the respective quarter, and only the
excess shall represent an amount additionally due to Manager, which excess
amount shall be payable to Manager no later than April 25th, July 25th,
October 25th and January 25th of each year of the Term for the respective
preceding three-month periods, but which payment may be deferred at the sole
discretion of the board of directors of Xxxxxxxx if it is determined that
Xxxxxxxx'x cash balance at the end of the preceding quarter does not exceed an
amount equal to Twenty-Five Percent (25%) of the total Operating Expenses of
same preceding quarter. However, if such deferment of the payment of this
excess amount is permitted by such cash balance calculation and is duly
elected by the board of directors of Xxxxxxxx, than this deferred and unpaid
amount shall bear no interest, but such deferred and unpaid amount(s) must be
paid to Manager, without further delay, to whatever extent is thereafter
permitted per such aforesaid cash balance calculation for future quarters,
and, under no circumstances, shall any such amounts remain unpaid at the end
of the Term of this Agreement.
C. Incentive Payment in the form of a Restricted Stock Grant,
shall be made to Manager upon execution of this Agreement. This Restricted
Stock Grant shall be for Two Million (2,000,000) shares of the common stock of
Xxxxxxxx and such stock shall be issued pursuant to an executed Restricted
Stock Grant Agreement, attached hereto as Exhibit B. The Restricted Stock
Grant shall provide for the immediate issuance of such shares which shall bear
voting rights upon issuance, but which shall bear certain ownership and
transfer restrictions as indicated below:
1) Transfer Restrictions: All shares shall
be fully restricted regarding owner transfer rights until May 1, 2005, such
shares not permitted in any manner to be sold, assigned, pledged, encumbered,
nor otherwise transferred in any manner, and such shares shall clearly bear a
legend upon the face of such shares that indicate such transfer restrictions.
2) Ownership Restrictions: At May 1, 2001 and
May 1 of each succeeding year through May 1, 2005, Manager shall surrender to
Xxxxxxxx Two Hundred Thousand (200,000) shares of such common stock issued
pursuant to this Restricted Stock Grant for each year that the following
outlined goals for Net Sales are not achieved by Xxxxxxxx in respect to the
preceding fiscal year, attainment of such goals to be ascertained in
comparison with the audited financial statements of Xxxxxxxx for the
respective year. Also, at May 1, 2001 and at May 1, of each succeeding year
through May 1, 2005, Manager shall surrender to Xxxxxxxx Two Hundred Thousand
(200,000) shares of such common stock issued pursuant to this Restricted Stock
Grant for each year that the following outlined goal for Net Income are not
achieved by Xxxxxxxx in respect to the preceding fiscal year, attainment of
such goals to be ascertained in comparison with the audited
financial statements of Xxxxxxxx for the respective year. These Net
Income and Net Sales goals are considered, for purposes of this Restricted
Stock Grant, to be mutually exclusive; therefore, if, in any particular year,
the Net Income goals is reached but the Net Sales goals is not, or vice versa,
Manager shall forfeit and surrender only Two Hundred Thousand (200,000) shares
of common stock. These Net Income and Net Sales goals for each year are as
shown below:
Year Net Income Net Sales
2000 $ 100,000 $ 5,000,000
2001 $ 200,000 $ 7,000,000
2002 $ 300,000 $10,000,000
2003 $ 400,000 $12,500,000
2004 $ 500,000 $15,000,000
For the purpose of this Section, Net Income (all
revenues less all expenses) and Net Sales (gross sales less returns and
discounts) shall be defined in accordance with Generally Accepted Accounting
Principals consistent with that used to prepare the audited financial
statements of Xxxxxxxx.
5. Intellectual Property
Upon execution of this Agreement, Manager shall hereby transfer to Xxxxxxxx
all of Manger's patent rights, title and benefits of ownership in regards to a
Design Patent Application for a Semi Truck/Tractor Sleeper Unit, a copy of
which is attached hereto as exhibit C, in exchange for One Million (1,000,000)
shares of the common stock of Xxxxxxxx, which share shall be restricted
pursuant to Rule 144, which consideration is considered appropriate and
adequate by each of the parties hereto. In regards to the patent rights being
transferred hereby, Manger shall duly issue to Xxxxxxxx a Xxxx of Sale, a copy
of which is attached hereto as Exhibit D. Manager further agrees that so long
as Manager is performing executive management services pursuant to this
Agreement, any and all intellectual property designed or otherwise developed
by manager during the Term of this Agreement shall be the rightful property of
Xxxxxxxx.
6. Covenant Not to Compete
During the term of this Agreement and for a period of two years thereafter,
Manager, or any officer, director or shareholder of Manager, shall not
anywhere within the United States, directly or indirectly either for its own
account or as a partner, shareholder, officer, director, employee agent or
otherwise own, manage, operate, control, be employed by, participate in,
consult with, perform services for, or otherwise be connected with any
business the same as or similar to the business conducted by Xxxxxxxx. In the
event any of the provisions of this Section 6 are determined to be invalid by
reason of their scope or duration, this Section 6 shall be deemed modified to
the extent required to cure the invalidity. In the event of a breach, or a
threatened breach, of this Section 6, Xxxxxxxx shall be entitled to obtain an
injunction restraining the commitments or continuance of the breach, as well
as any other legal or equitable remedies permitted by law.
7. Confidentiality
During the term of this Agreement, and for a period of two years thereafter,
Manager shall not, without the prior written consent of Xxxxxxxx, disclose to
anyone any Confidential Information. "Confidential Information" for the
purposes of this Agreement shall include Xxxxxxxx'x proprietary and
confidential information such as, but not limited to, customer lists, business
plans, marketing plans, financial information, designs, drawing,
specifications, models, software, source codes and object codes. Confidential
Information shall not include any information that is either disclosed by
Xxxxxxxx without restriction or becomes publicly available through no act of
Merger.
8. Indemnification
Xxxxxxxx agrees to protect Manager and hold Manager harmless from any loss or
claim arising out of inherent defects in any Xxxxxxxx'x Product in so far as
such defect existing at the time such product is sold is determined not to
have been caused or otherwise created during the production work of which
Manager is specifically in charge and for which Manager is responsible
pursuant to Manager's duties as described herein. Specifically, Manager shall
be indemnified by Xxxxxxxx in respect to any defect of any component
manufactured by outside vendors. However, Manager agrees to protect Xxxxxxxx
and hold Xxxxxxxx harmless from any loss or claim arising directly out of the
wanton negligence of Manager, or Manager's employees or representatives, in
the installation production or servicing of Xxxxxxxx'x Product of which
Manager is in charge pursuant to Manager's duties as described herein.
Further Manager agrees to protect Xxxxxxxx and hold Xxxxxxxx harmless from any
loss or claim arising out of any representation or warranty made by Manager,
or Manager's employees or representatives, with respect to Xxxxxxxx'x Product
that substantially exceeds Xxxxxxxx'x warranty.
9. Financial Policies
Manager acknowledges the importance to Xxxxxxxx of Manager's sound financial
operation and Manager expressly agrees that it will, within the scope of
Manager's duties as specified herein:
A. Manage and maintain Xxxxxxxx'x working capital in a manner
as may be required to enable Manager to properly and fully carry out and
perform all of manager's duties, obligations and responsibilities under this
Agreement, within Xxxxxxxx'x working capital constraints and as Xxxxxxxx'x
cash position reasonably permits, manager shall pay, in accordance with
negotiated terms consistent with industry standards and guidelines issued
from the board of directors of Xxxxxxxx, all amounts due Xxxxxxxx'x vendors.
B. Maintain all necessary records to permit financial
statements for Xxxxxxxx to be prepared in such form as Xxxxxxxx'x board of
directors may reasonably require from time to time and which, at a minimum, perm
it Xxxxxxxx to properly and timely file all reports required by the
Securities and Exchange Commission or other governmental entities and to
properly and timely file all required federal, state and local tax returns.
C. Employ its best efforts to insure that Xxxxxxxx'x orders
are properly processed and recorded in accordance with terms and conditions of
acceptance set by Xxxxxxxx'x board of directors, that such orders are
promptly and accurately fulfilled and that all cash payments due per such
orders are promptly received and properly recorded.
10. Relationship of the Parties
Manager is, and throughout this Agreement shall be, an independent contractor
and not an employee or partner of Xxxxxxxx. Manager, nor any persons
appointed by Manager is the fulfillment of its executive management services,
shall not be entitled to nor receive any benefit from Xxxxxxxx which are
normally provided to Xxxxxxxx'x employees such as, but not limited to,
vacation payment, retirement, healthcare or sick pay. Xxxxxxxx shall not be
responsible for withholding income or other taxes from the payments made to
Manager. Manager shall be solely responsible for filing all of its tax
returns and paying any income, social security or other tax levied upon or
determined to be due with respect to the payments made to Manager pursuant to
this Agreement.
11. Acknowledgments
Each party acknowledges that no representation or statement, and no
understanding or agreement, has been made or exists and that in entering into
this Agreement, each party has not relied on anything done or said or on any
presumption in fact or in law, 1) with respect to this Agreement, or to the
duration, termination or renewal of this Agreement, or with respect to the
relationship between the parties, other than as expressly set forth in this
Agreement; or 2) that in any way tends to change or modify the terms, or any
of them, of this Agreement or to prevent this Agreement becoming effective; or
3) that in any way affects or relates to the subject matter hereof. Manager
and Xxxxxxxx also acknowledges that the terms and conditions of this
Agreement, and each of them, are reasonable and fair and equitable.
12. Final Agreement
This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether
written or oral. This Agreement may be amended, supplemented or changed only
by an agreement in writing signed by both parties.
13. Assignment
Neither this Agreement nor any interest in this Agreement may be assigned be
Manager without the prior expressed written approval of Xxxxxxxx, which may be
withheld by Xxxxxxxx at Xxxxxxxx'x absolute discretion.
14. No Implied Waivers
Except as expressly provided in this Agreement, waiver by either party, or
failure by either party to claim a default, of any provision of this Agreement
shall not be a waiver of any default or subsequent default.
15. Notices
Any Notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
by certified mail, postage prepaid, or recognized overnight delivery services,
to the respective address of each party as listed at the beginning of this
Agreement. Either party may change its respective address by giving written
Notice to the other party of such change.
16. Governing Law
This Agreement shall be governed by, construed and enforced in accordance with
the laws of the state of Pennsylvania. And each party to this Agreement
accepts that any action filed, one party against another, for any cause
whatsoever, may only be filed in the state of Pennsylvania.
17. Severability
If any term of this Agreement is held by a court of competent jurisdiction to
be invalid or unenforceable, then this Agreement, including all of the
remaining terms, will remain in full force and effect as if such invalid or
unenforceable term had never been included.
18. Headings
Headings used in this Agreement are provided for convenience only and shall
not be used to construe meanings or intent.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
For Xxxxxxxx Coach, Inc.
By:
/s/ Xxxxxxx Xxxxxx /s/ Xxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxx, Secretary Xxxxx Xxxxxxxxx
/s/ Xxxxx X Xxxxxxxxx /s/ Xxxxx Xxxxxxxxx
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Xxxxx X Xxxxxxxxx Xxxxx Xxxxxxxxx, President
For DRK, Inc.
By:
/s/ Xxxxxxxxx X Xxxxxxxxx-Xxxxx
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Xxxxxxxxx X Xxxxxxxxx-Xxxxx, President
