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                              [IRVING HUGHES LOGO]


                  ENGAGEMENT LETTER AND COMPENSATION AGREEMENT

        This Agreement is entered into May 6, 2002 (the "Effective Date") by and
        between AME TORREY VIEW, LLC ("Principal"), and IRVING HUGHES
        ("Broker"). In consideration of the mutual covenants contained herein,
        it is agreed as follows:

I.      ENGAGEMENT OF AGENT

        Broker shall cause Shaun Burnett to at all times be the principal agent
        for Broker working on Principal's behalf. Principal does hereby engage
        Broker to negotiate the purchase and development of real property
        ("Property") for a new facility ("Project") in San Diego and to perform
        the services in Section II. Broker shall have no authority to obligate
        Principal in any way.

II.     ACCEPTANCE OF ENGAGEMENT

        Broker does hereby accept the foregoing engagement and agrees to use its
        good faith efforts on behalf of Principal to perform the following
        services:

        -    Programming/needs assessment

        -    Market evaluations/surveys

        -    Locate and present sites

        -    Management of Architect, General Contractor and other Third Party
             Contractors and Vendors

        -    Assistance with City and County permitting process

        -    Assistance with establishing and maintaining a Project Budget and
             Construction Schedule

        -    Assistance with business terms, negotiations and structuring

        -    Financial analysis and comparisons

        -    Lease contract review

        -    Facilities planning

        -    Project management for the duration of the Project as Co-Project
             manager with Principal's Associate Director of Facilities and Jim
             Purvis of San Diego Realty Advisors

III.    COMPENSATION

        Principal shall pay to Broker the amount of $1,500,000 per the following
schedule:

<TABLE>
        <S>                                             <C>
        -    Close of Property:                         1st payment of $250,000 due and payable

        -    Issuance of a Certificate of Occupancy     2nd  payment of $1,250,000 due and
             for the Project authorizing use of the     payable
             Project for Principal's intended use:
</TABLE>


IV.     TERM AND TERMINATION RIGHTS

        A. TERM. The term of this agreement (this "Agreement") shall commence on
        the Effective Date and continue until the later of (i) twenty four (24)
        months after the Effective Date, or (ii) the issuance of the Certificate
        of Occupancy for the Project authorizing use of the Project for
        Principal's intended use.

        B. BROKER'S TERMINATION FOR CAUSE. If Principal believes that Broker has
        breached any of the representations and covenants made in this Agreement
        through fraud, gross negligence or willful misconduct, Principal shall
        provide Broker with written notice setting forth the nature of the
        alleged breach and evidence in support. Broker shall then have ten (10)
        days in which to correct the



<PAGE>

        problem to the satisfaction of Principal, or to provide a written
        explanation of the status of Broker's compliance. If, after Broker's
        response to such notice, the parties continue to disagree regarding
        Broker's compliance, the parties shall submit the issue for resolution
        to a jointly selected, neutral third party. If the jointly selected,
        neutral third party determines Broker has breached this Agreement or any
        of the representations or covenants made herein through fraud, gross
        negligence or willful misconduct, Principal shall compensate Broker only
        for those Phases that have been completed and satisfied as of the date
        of the termination of this Agreement, as more particularly set forth in
        the pro-rated compensation schedule below:

<TABLE>
        <S>                <C>                                                          <C>
        -    Phase One:    Close of Property                                            $375,000

        -    Phase Two:    Recordation Of Loan And Commencement Of Any Construction     $375,000

        -    Phase Three:  Completion of Shell Construction                             $375,000

        -    Phase Four:   Certificate of Occupancy for the Project by
                           the City of San Diego Authorizing Use of the
                           Project for Principal's Intended Purpose                     $375,000
</TABLE>


        In no event shall Broker be entitled to receive from Principal any
        compensation allocable to Phases that have not been completed and
        satisfied as of the date of the termination of this Agreement.

V.      ETHICS CLAUSE

        Broker does not accept any referral fees or compensation from any vendor
        including contractors, architects, moving companies, furniture vendors
        and other consultants.

VI.     INDEMNIFICATION

        Each party hereto ("Indemnitor") shall and hereby does agree to
        indemnify, defend and hold harmless the other party ("Indemnitee") and
        Indemnitee's partners, officers, employees, agents, successors and
        assigns from and against all demands, liabilities, causes of action,
        judgments, costs, claims, losses, and expenses, or any combination
        thereof, including attorneys' fees, of any nature, kind or description
        (collectively, "Liabilities") arising out of, or caused by, or resulting
        from the negligent or wrongful acts or omissions or failure to comply
        with the terms of this Agreement by Indemnitor or Indemnitor's officers,
        partners, agents, employees, successors or assigns. If any Liabilities
        arise or are made, asserted or threatened against Broker or Broker's
        officers, partners, agents, employees, successors or assigns, Principal
        shall have the right to withhold from any commission due an amount
        sufficient in Principal's judgment to protect against and satisfy such
        Liabilities.

VII.    DISPUTES

        In the event a claim or controversy arises concerning any provision of
        this Agreement, the parties hereby agree that such claim or controversy
        shall be settled by final, binding arbitration in accordance with the
        Commercial Arbitration Rules of the American Arbitration Association.
        Judgment upon the award rendered by the arbitrator may be entered in any
        court having jurisdiction thereof. In the event any legal action to
        enforce an arbitration award is commenced, or if other litigation is
        commenced regarding this Agreement, the prevailing party shall be
        entitled to recover its expenses and reasonable attorneys' fees incurred
        therein from the unsuccessful party.


<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
indicated above.

IRVING HUGHES                           AME TORREY VIEW, LLC
("BROKER")                              A CALIFORNIA LIMITED LIABILITY COMPANY
                                        ("PRINCIPAL")

By:  /s/ Craig Irving                   By:  APPLIED MOLECULAR
   --------------------------                EVOLUTION, INC.
Name:   Craig Irving                         a Delaware corporation
Title:  Principal                       Its: Manager

                                             By:  /s/ Lawrence E. Bloch M.D.
                                                -------------------------------
                                             Name:  Lawrence E. Bloch, M.D.
                                             Title: Chief Financial Officer


Date:   April 29, 2002                   Date:    May 6, 2002
      -----------------------                 --------------------


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