Exhibit 10.1
CIRCLE GROUP
HOLDINGS, INC.
1011 Campus Drive
Mundelein,
Illinois 60060
847.549.6002
fax 847.549.6028
www.crga.com
AMEX: CXN
November 23, 2005
George Foreman Enterprises, Inc.
100 N. Wilkes-Barre Blvd., 4th Floor
Wilkes-Barre, Pennsylvania 18702
Attn: Efrem Gerszberg, President "Letter of Agreement"
Ladies and Gentlemen:
This letter agreement (this "Letter") sets forth our mutual understanding
with respect to a transaction (the "Transaction") between Circle Group Holdings,
Inc. ("CXN") and George Foreman Enterprises, Inc. or any of its affiliates
("GFME"). Based on discussions between CXN and GFME, each of CXN and GFME hereby
agrees to the following:
1. A new limited liability company ("NEWCO") shall be created and shall be
owned 50.1% by GFME and 49.9% by CXN. NEWCO shall be created and the joint
venture between GFME and CXN shall be documented after GFME's satisfactory
completion of its due diligence.
2. GFME shall contribute to NEWCO the rights to use George Foreman's name and
likeness in connection with the sale and promotion of Z-Trim. NEWCO's
rights to use George Foreman's name and likeness shall be subject to the
limitations and restrictions imposed on GFME.
3. GFME shall earn the right to convert its interest in NEWCO, in whole or in
part, based upon the agreed performance milestones highlighted in point 4
hereunder, into an aggregate of up to 50% of the fully-diluted shares of
CXN common stock and up to 50% of any other class of equity securities, if
any, authorized by CXN. As GFME converts its interest into CXN common
stock, its corresponding interest in NEWCO shall become owned by CXN.
4. GFME's interest in NEWCO shall, based upon the agreed performance
milestones herein, be convertible into up to 50% of the fully-diluted
shares of CXN common stock and 50% of any other class of equity securities
(in each case after giving effect to the issuance of stock to GFME) upon
GFME satisfying any of the following milestones which cumulatively add up
to 50% based on the percentage assigned to each milestone. GFME is not
required to satisfy milestones equaling 50% before it is eligible to
convert. GFME may, from time to time, in its sole discretion convert its
interest in NEWCO or any part thereof, into CXN's shares based on the
percentage interest assigned to each earned milestone. By way of example,
if CXN has 50 million shares of common stock outstanding and no other
securities, and GFME satisfies milestones equaling 25% of GFME's potential
50% interest in CXN, GFME can convert all, or any portion of that 25% into
12.5 million shares of CXN. Although the total number of shares assigned to
the milestones below, if all achieved, exceeds 50 million shares, GFME
shall only be entitled to convert its interest into Newco into a total of
50% of the fully diluted shares of CXN common stock and 50% of any other
class of equity securities. The milestones can be achieved in any order.
The milestones are as follows:
o 10% interest upon creation of NEWCO (including full documentation
of NEWCO's operating agreement and execution of the definitive
agreement contemplated by Section 21 below).
o Up to 25% interest upon the launch of a national public relations
campaign which can be earned as follows: The term "Z-Trim Story"
shall mean an article in which Z-Trim is prominently mentioned
and/or Z-Trim's relationship with George Foreman is included in
the article.
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o Up to 20% interest upon George Foreman's promotion of Z-Trim on
national TV, which can be earned as follows.
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[**] Material has been omitted from this Exhibit 10.1 pursuant to a request
for confidential treatment and that material has been filed separately with
the Securities and Exchange Commission.
o Up to 17% interest upon George Foreman's promotion of Z-Trim on
Radio, which can be earned as follows:
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o [Up to 13.5% interest upon certain additional specified
public activity].[**]
o 10% interest upon GFME using or promoting Z-Trim in relation to a
launch of Z Trim usage in any restaurant in which George Foreman
is a spokesperson for the restaurant chain or Z-Trim or both.
o Up to 50% interest upon George Foreman making himself available,
at a time and place convenient to George Foreman to NEWCO for
five (5) days to promote Z-Trim based on the following timeline:
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Any request by CXN for appearances by George Foreman is subject to George
Foreman's availability. CXN may request that George Foreman be available
for any or all of the 5 days at anytime after the creation of NEWCO. CXN
must request the appearance days within 365 days after they are granted,
which dates are set forth above. In the event that CXN requests George
Foreman to be available prior to the dates set forth in the preceding
schedule, GFME shall have the right to convert a 10% interest in NEWCO into
CXN stock for everyday George Foreman is made available to CXN. GFME will
be credited with achieving milestones listed above whether they occur
before or after execution of a definitive agreement and/or the creation of
NEWCO.
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[**] Material has been omitted from this Exhibit 10.1 pursuant to a request
for confidential treatment and that material has been filed separately with
the Securities and Exchange Commission.
5. Immediately upon GFME's request, but subject to a liquidity and price
formula mutually acceptable to GFME and CXN that is materially
non-detrimental to CXN's market value, CXN shall file with the
Securities Exchange Commission and the American Stock Exchange to
register all shares of CXN common stock and/or any other relevant
equity securities that GFME converts under this Letter.
6. GFME shall receive a bonus in the amount of $100,000 if CXN has Z-Trim
related revenues of $30 million or gross profits of $10 million in any
fiscal year; a bonus of $200,000 if CXN has Z-Trim related revenues of
$50 million or gross profits of $15 million in any fiscal year; a
bonus of $300,000 if CXN has Z-Trim related revenues of $70 million or
gross profits of $20 million in any fiscal year; a bonus of $400,000
if CXN has Z-Trim related revenues of $90 million or gross profits of
$25 million in any fiscal year; a bonus of $500,000 if CXN has Z-Trim
related revenues of $110 million or gross profits of $30 million in
any fiscal year.
7. CXN shall contribute $150,000 and a maximum of 5,000,000 shares of
common stock of CXN to NEWCO to be used for promotion and marketing of
Z-Trim, but CXN shall only contribute any such shares if GFME and CXN
mutually agree that the shares will be provided to other third parties
pursuant to a deal that is beneficial to CXN.
8. Utilizing the contributions by GFME and CXN provided for in Points 7 &
9 herein, GFME and CXN shall allocate to NEWCO an agreed-upon amount
of expenses associated with marketing Z-Trim.
9. GFME shall contribute $150,000 to NEWCO and shall use its best efforts
to sign a cross promotional arrangement with Mark Burnett Productions
or another major reality production company. GFME and CXN shall not be
responsible to make additional contributions to NEWCO.
10. GFME shall be given 2 board seats on CXN's Board of Directors upon the
signing of this Letter. CXN agrees that the number of directors on its
Board of Directors shall be limited to 10.
11. CXN and GFME shall mutually agree on the use of any spokesperson being
affiliated with Z-Trim other than George Foreman. GFME recognizes that
CXN has existing or pending commitments with other celebrity
spokespeople, and will not unreasonably object to CXN retaining the
services of the celebrities referred to in the following sentence.
Existing celebrities who are in various stages of negotiations to
develop relationships with CXN and Z-Trim have been identified
confidentially. GFME and CXN shall agree on the marketing of the three
aforementioned existing celebrities.
12. For a period of forty-five (45) days commencing on the date of this
Letter, CXN shall not, and shall cause its directors, officers,
employees, representatives (including, without limitation, attorneys
and accountants) or agents (collectively, "Representatives") not to:
(a) directly or indirectly, solicit, initiate or encourage any
inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited
inquiries or proposals from any person or entity (other than GFME)
relating to (i) any transaction directly or indirectly involving the
subject matter of this Letter, including without limitation any of the
rights to distribute, manufacture and/or promote Z-Trim (the "Z-Trim
Rights") or (ii) any other transaction involving the sale, transfer or
other disposition of any substantial portion of the stock or assets
(including the Z-Trim Rights) of CXN (any such transaction, an
"Alternative Transaction"); (b) provide any non-public information
concerning CXN or Z-Trim to any person or entity (other than GFME or
any Representatives of, or other professional advisors to, GFME) with
respect to any of the Z-Trim Rights or in connection with an
Alternative Transaction; or (c) enter into any discussions or an
agreement with any person or entity (other than GFME) with respect to
any of the Z-Trim Rights or with respect to an Alternative
Transaction. Notwithstanding the foregoing; CXN, its directors,
officers, employees, representatives may provide any relevant
information or pursue any transaction already in place, already being
pursued, or being otherwise contemplated presently as follows (i) any
financing transaction already in process or being contemplated between
CXN, its representatives and any other third party whose relationship
to the parties necessitates being bound by CXN's Non-Disclosure
Agreement, (ii) any food companies that CXN has already contacted or
will contact in the future to discuss an opportunity involving Z-Trim
and George Foreman.
13. GFME and CXN recognize and acknowledge that the final approval of the
total transaction contemplated herein, shall be subject to the
appropriate proxy filing as well as regulatory and shareholder
approvals. However, CXN, Greg Halpern, the CXN directors and the
company insiders agree to vote their shares and use their best efforts
to obtain shareholder approval.
14. Within 60 days from the date of this Letter GFME may, after completing
a food analysis of Z-Trim assisted by an independent third party,
terminate this Letter and have no further obligations or liability to
CXN if such analysis is not consistent with the known benefits and
safety of Z-Trim. Additionally, within 60 days from the date of this
Letter GFME may, after completing its due diligence by meeting with
food manufacturers, terminate this Letter and have no further
obligations or liability to CXN; however GFME may only so terminate in
the event that after completing its due diligence with regard to the
various food companies working on projects that could incorporate
Z-Trim, it becomes apparent to GFME that the parties will be unable to
secure sufficient contracts utilizing Z-Trim and George Foreman
together in a future product campaign.
15. Within 30 days of completion of due diligence by the parties, George
Foreman will make himself available for one morning or afternoon of
his choice to do a photo shoot with various brand name products that
will be mocked up with the Z-Trim Logo where such photos will be used
to pitch the idea of George Foreman with Z-Trim on such brands to the
major food companies that manufacture them. The photo shoot will be
paid for by CXN and be arranged at a time and place convenient to
George Foreman. The photos shall be the property of CXN provided,
however, in the event this Letter is terminated for any reason and/or
the final Transaction is not consummated, CXN shall return all of the
photos of George Foreman to GFME.
16. This Letter contains the entire understanding between the parties
hereto with respect to the Transaction and supersedes and replaces all
prior and contemporaneous agreements and understandings, oral or
written, with regard to such Transaction.
17. This Letter shall be exclusively venued, formed, construed and
governed by the laws of the state of the defendant in any action
without regard to principles of conflicts of laws.
18. This Letter may be amended only in writing executed by both of CXN and
GFME.
19. In the event that any one or more of the provisions contained in this
Letter shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by
law, such provision shall survive to the extent it is not so held, and
all of the other provisions of this Letter shall remain in full force
and effect.
20. This Letter may be executed by fax and in counterparts, each of which
shall be deemed to be an original and all of which, taken together,
shall constitute the same Letter.
21. Provided GFME does not terminate this Letter as provided in paragraph
14 hereof, GFME and CXN shall, within 90 days from the date of this
Letter, enter into a definitive agreement incorporating the terms of
this Letter and such other provisions customary in transactions of
this type. Either Party may terminate this Agreement in the event of
material breach by the other party, upon giving at least 30 days'
written notice to the other Party, during which 30-day period the
Party notified of breach shall have the opportunity to cure the
breach, for any breach susceptible of cure.
[Remainder of Page Intentionally Left Blank]
If the foregoing correctly sets forth your understanding, please so
indicate by signing an enclosed counterpart of this Letter and returning it to
CXN, whereupon it will constitute a binding agreement between CXN and GFME.
Very truly yours,
CIRCLE GROUP HOLDINGS, INC.
Name: Gregory J. Halpern
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Title: C.E.O.
Accepted and agreed to as of
the date first above written:
GEORGE FOREMAN ENTERPRISES, INC.
By: /s/ Efrem Gerszberg
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Name: Efrem Gerszberg
Title: President