EXHIBIT 10.1
K-2 FINANCIAL CORP.
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000 XXXXX 0XX XXXXXX, XXXXX 000
XXXXXXXXXXX XX 00000
TELEPHONE (000) 000-0000 - FAX (000) 000-0000
CONSULTING AGREEMENT
THIS AGREEMENT is made as of January 28, 2000
By and Between
HORIZON PHARMACIES, INC. (THE "COMPANY")
And
K-2 FINANCIAL CORP. (THE "CONSULTANT")
RECITALS
A. The Company desires to promote its business plans to the investment
community and to build the value of the Company for the benefit of its
respective Shareholders;
B. The Consultant is involved in investment banking;
C. The Company recognizes the experience and knowledge of the Consultant
in matters relating to investment banking;
D. The Company has determined that it is in the best interest of the
Company to engage the services of the Consultant; and
E. The Company desires to retain the services and counsel of the
Consultant, and the Consultant desires to render such services to the Company
upon the terms set forth in this Consulting Agreement (this "Agreement").
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby agree as follows:
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1. ENGAGEMENT: The Company hereby engages the Consultant, and the
Consultant accepts engagement by the Company, upon the terms and conditions set
forth in this Agreement.
2. TERM: The term of this Agreement shall begin on the date hereof and
shall continue for a period of twenty-four (24) months.
3. DUTIES: During the term of this Agreement, the Consultant shall
provide financial consulting services to the Company as requested. The services
shall be directed toward achieving the Company's business and financial goals as
established by the Company's board of directors, which may include the
consummation of mergers or acquisitions, changes in the internal capital
structure of the Company, the placement of new debt or equity issues, or any
combination thereof (any such transaction proposed by the Company, a "Proposed
Transaction"). The Consultant's duties shall include, but not be limited to,
assisting the Company (i) to develop strategies and structure proposals related
to the Company's business and financial goals, and to analyze the financial
implications thereof; (ii) to prepare and make presentations to the Company's
board of directors regarding any such strategies or proposals; (iii) to
formulate negotiation strategies and conduct any negotiations necessary to
implementing such strategies and proposals; (iv) to prepare agreements in
principle and definitive agreements necessary to implementing any Proposed
Transaction; and (v) to assist in such other matters as may be agreed upon from
time to time by the Company and the Consultant. The terms of any Proposed
Transaction will be subject in all respects to the Company's approval, and
Consultant is not authorized to make any agreement or commitment on behalf of
the Company under any circumstances. When the Consultant presents a Proposed
Transaction to the Company, the Company in a reasonable time will either approve
or disapprove such Transaction in writing by an authorized officer of the
Company.
4. GRANT AND VESTING OF WARRANTS; CONSULTING FEES:
A. WARRANTS
(1) In exchange for the payment of $50, the receipt and
sufficiency of which are hereby acknowledged, the Company
hereby issues to the Consultant warrants to purchase 200,000
shares of the Company's Common Stock, par value $.01 per
share ("Common Stock"), for a purchase price per share equal
to $2.75 per share (the closing price of the Company's
Common Stock on the American Stock Exchange on January 27,
2000 -- the business day immediately preceding the grant of
such warrants (the "Warrants"); provided, however, that the
rights to exercise
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such Warrants shall vest immediately if the Company
terminates this Agreement other than pursuant to
PARAGRAPH7(b) hereof prior to the second anniversary of the
date hereof or as set forth below in this PARAGRAPH 4(a).
The Warrants shall be in substantially in the form of
EXHIBIT A attached hereto and shall contain such other terms
and conditions as are to be mutually agreed upon by the
parties.
(i) STRATEGIC ALLIANCES. If through the efforts of
the Consultant the Company enters into one or more strategic
alliances, whether by way of merger, consolidation, joint
venture, joint marketing agreement or similar agreements of
strategic nature, but specifically not including agreements
for investment banking, financial consulting or similar
services (each, an "Alliance"), with one or more entities,
then the Consultant shall be entitled to exercise a portion
of the Warrant for the purchase of One Hundred Thousand
(100,000) shares of Common Stock upon the consummation of
each such Alliance; or
(ii) ADVERTISING REVENUES.
(A) If through the efforts of the
Consultant the Company's monthly advertising revenues (the
"Advertising Revenues") (i) increase by Ten Thousand
dollars ($10,000) but less than Twenty Thousand dollars
($20,000) over the trailing three month period and (ii)
remain at such level for four consecutive months, then the
Consultant shall be entitled to exercise a portion of the
Warrant for the purchase of Forty Thousand (40,000) shares
of Common stock; or
(B) If through the efforts of the
Consultant the Company's monthly Advertising Revenues (i)
increase by Twenty Thousand dollars ($20,000) but less than
Thirty Thousand dollars ($30,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then Consultant shall be entitled to
exercise a portion of the Warrant for the purchase of
Eighty Thousand (80,000) shares of Common stock; or
(C) If through the efforts of the
Consultant the Company's monthly Advertising Revenues (i)
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increase by Thirty Thousand dollars ($30,000) but less than
Forty Thousand dollars ($40,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled
to exercise a portion of the Warrant for the purchase of
One Hundred Twenty Thousand (120,000) shares of Common
stock; or
(D) If through the efforts of the
Consultant the Company's monthly Advertising Revenues (i)
increase by Forty Thousand dollars ($40,000) but less than
Fifty Thousand dollars ($50,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled to
exercise a portion of the Warrant for the purchase of One
Hundred Sixty Thousand (160,000) shares of Common stock; or
(E) If through the efforts of the
Consultant the Company's monthly Advertising Revenues (i)
increase by Fifty Thousand dollars ($50,000) or more over
the trailing three month period and (ii) remain at such
level for four consecutive months, then the Consultant
shall be entitled to exercise a portion of the Warrant for
the purchase of Two Hundred Thousand (200,000) shares of
Common stock;
(iii) DISPLAY ALLOWANCES.
(A) If through the efforts of the
Consultant the Company's monthly display allowances (the
"Display Allowances") (i) increase by Ten Thousand dollars
($10,000) but less than Twenty Thousand dollars ($20,000)
over the trailing three month period and (ii) remain at
such level for four consecutive months, then the Consultant
shall be entitled to exercise a portion of the Warrant for
the purchase of Forty Thousand (40,000) shares of Common
stock; or
(B) If through the efforts of the
Consultant the Company's monthly Display Allowances (i)
increase by Twenty Thousand dollars ($20,000) but less than
Thirty Thousand dollars ($30,000) over the trailing
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three month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled
to exercise a portion of the Warrant for the purchase of
Eighty Thousand (80,000) shares of Common stock; or
(C) If through the efforts of the
Consultant the Company's monthly Display Allowances (i)
increase by Thirty Thousand dollars ($30,000) but less than
Forty Thousand dollars ($40,000) over the trailing three
month period (ii) remain at such level for four consecutive
months, then the Consultant shall be entitled to exercise a
portion of the Warrant for the purchase of One Hundred
Twenty Thousand (120,000) shares of Common stock; or
(D) If through the efforts of the
Consultant the Company's monthly Display Allowances (i)
increase by Forty Thousand dollars ($40,000) but less than
Fifty Thousand dollars ($50,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled
to exercise a portion of the Warrant for the purchase of
One Hundred Sixty Thousand (160,000) shares of Common
stock; or
(E) If through the efforts of the
Consultant the Company's monthly Display Allowances (i)
increase by Fifty Thousand dollars ($50,000) or more over
the trailing three month period and (ii) remain at such
level for four consecutive months, then the Consultant
shall be entitled to exercise a portion of the Warrant for
the purchase of Two Hundred Thousand (200,000) shares of
Common stock;
(iv) MERCHANT REBATES.
(A) If through the efforts of the
Consultant the Company's monthly merchant rebates (the
"Merchant Rebates") (i) increase by Ten Thousand dollars
($10,000) but less than Twenty Thousand dollars ($20,000)
over the average amount of merchant rebates the Company
received in the trailing three month period and (ii) remain
at such level for four consecutive months, then the
Consultant shall be entitled to exercise a portion of the
Warrant for the
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purchase of Forty Thousand (40,000) shares of Common
stock; or
(B) If through the efforts of the
Consultant the Company's monthly Merchant Rebates (i)
increase by Twenty Thousand dollars ($20,000) but less than
Thirty Thousand dollars ($30,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled
to exercise a portion of the Warrant for the purchase of
Eighty Thousand (80,000) shares of Common stock; or
(C) If through the efforts of the
Consultant the Company's monthly Merchant Rebates (i)
increase by Thirty Thousand dollars ($30,000) but less than
Forty Thousand dollars ($40,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled
to exercise a portion of the Warrant for the purchase of
One Hundred Twenty Thousand (120,000) shares of Common
stock; or
(D) If through the efforts of the
Consultant the Company's monthly Merchant Rebates (i)
increase by Forty Thousand dollars ($40,000) but less than
Fifty Thousand dollars ($50,000) over the trailing three
month period and (ii) remain at such level for four
consecutive months, then the Consultant shall be entitled
to exercise a portion of the Warrant for the purchase of
One Hundred Sixty Thousand (160,000) shares of Common
stock; or
(E) If through the efforts of the
Consultant the Company's monthly Merchant Rebates (i)
increase by Fifty Thousand dollars ($50,000) or more over
the trailing three month period and (ii) remain at such
level for four consecutive months, then the Consultant
shall be entitled to exercise a portion of the Warrant for
the purchase of Two Hundred Thousand (200,000) shares of
Common stock;
Pursuant to each of PARAGRAPH 4(a)(1)(ii), (iii) and (iv),
only one vesting event may occur during any consecutive
three-
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month period. The vesting of Warrants under this PARAGRAPH
4(a)(i), (ii), (iii) AND (iv) can be combined and occur
simultaneously upon satisfaction of the requirements set
forth herein.
(2) The Warrants shall be immediately forfeited by the
Consultant if at any time (A) the Company terminates this Agreement by
reason of a breach by the Consultant or (B) if the Consultant terminates
this Agreement for any reason.
(3) The Consultant hereby represents to the Company that it
qualifies as an "accredited investor" under Rule 501 promulgated by the
Securities and Exchange Commission under the Securities Act of 1933
("Rule 501").
(4) The Warrants shall be immediately forfeited upon any
transfer or assignment by the Consultant, or any transferee or assignee
of the Consultant, to any person or entity not qualifying as an
"accredited investor" under Rule 501.
b. CONSULTING FEE: The Company shall pay a monthly consulting fee for one
(1) year of Ten Thousand dollars ($10,000) per month, payable no later than the
10th of each month, effective as of February, 2000.
5. NATURE OF ENGAGEMENT: The Consultant is being engaged by the Company
as an independent contractor and shall be responsible for payment of its own
taxes. Nothing in this Agreement shall be construed so as to create an
employer-employee relationship between the parties.
6. EXPENSES: Upon receipt of requests from the Consultant for
reimbursement, the Company shall reimburse the Consultant for all reasonable and
necessary expenses the Consultant incurs prior to and after the date of this
Agreement in performing its duties in connection with this Agreement; provided,
however, that the Company shall not be liable or obligated to reimburse the
Consultant for more than $10,000 of expenses hereunder (not including, for the
purpose of this limitation, any expenses that are incurred with the prior
approval of the Chief Executive Officer ("CEO") or the Chief Financial Officer
("CFO") of the Company).
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7. TERMINATION.
a. This Agreement may be terminated by either party immediately upon
written notice beginning twelve (12) months from the date of this Agreement.
Such notice shall be effective upon receipt by the non-terminating party.
b. Notwithstanding anything in this Agreement to the contrary, the
Company shall have the right to terminate this Agreement at any time upon any
breach by the Consultant of the provisions of this Agreement. If the Company
elects to exercise such right, it shall provide the Consultant with written
notice, and the termination shall be effective immediately upon receipt of such
notice to the Consultant.
8. NOTICES: All notices, requests consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, sent by telecopier,
telex or delivered by Federal Express, United Parcel Service or another similar
company, addressed as follows:
a. if to the Company, at 000 X. Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000, Attention: Xxxxx X. XxXxxx, with a copy to Xxxxxx & Xxxxxx L.L.P.,
3700 Xxxxxxxx Xxxx Center, 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, Attention: Xxx
X. Xxxxxx; and
b. if to the Consultant, at 000 Xxxxx 0xx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxx X. Xxxxxxxxxx, with a copy to Xxxx
des Hotels.
c. Any notice or communication hereunder shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
calendar days after mailing if sent by registered or certified mail (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee). If a notice or communication is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.
9. MISCELLANEOUS PROVISIONS:
a. GOVERNING LAW: This Agreement shall be governed by, interpreted
and enforced in accordance with the laws of the State of Minnesota.
b. WAIVER: The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as a waiver of any other breach of
any provision of this Agreement by any party.
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c. ENTIRE AGREEMENT:This instrument contains the entire Agreement of
the parties concerning engagement and may not be changed or modified except by
written agreement duly executed by the parties hereto.
d. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.
e. ADDITIONAL DOCUMENTS: The Company agrees to execute such other
documents and agreements to effectuate the purposes of this Agreement, as the
Consultant may request from time to time.
f. ASSIGNMENTS: The obligation of the parties under this Agreement
shall not be assigned without the written consent of the parties which shall not
be unreasonably withheld.
g. COUNTERPARTS: This Agreement may be executed in counterparts, and
all counterparts will be considered as part of one agreement binding on all
parties to this Agreement.
h. FACSIMILE SIGNATURES: The parties may execute this Agreement by
facsimile, which signature[s] shall be deemed as an original and shall be
binding upon such party.
i. SEVERABILITY: If any term, condition or provision of this
Agreement or the application thereof to any party of circumstance shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such term, condition or provision to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, condition and provision of their
Agreement shall be valid and enforceable to the fullest extent permitted by the
Law.
j. DISPUTE PROCEDURE: Any dispute, claim or controversy arising out
of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association at a location mutually acceptable to both parties. The
parties further agree that they will abide by and perform any award rendered by
the Arbitrator[s]. Judgment upon any such award may be in any court, State or
Federal, having any arbitration demand, service or process, notice of motion or
other application the court or any Judge thereof may require. Service may be by
registered or certified mail, or by personal service, provided a reasonable time
for appearance or answer is allowed.
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k. AUTHORITY: The Company hereby represents and warrants that the
person executing this Agreement on its behalf is duly authorized to do so, that
the execution of the Agreement has been duly approved by the Board of Directors
of the Company, and that this Agreement is binding upon the Company.
l. INDEMNITY:
(i) In addition to the amounts which the Company has herein agreed to
pay to the Consultant, the Company shall indemnify and hold the
Consultant and its officers, directors, agents and controlling
persons harmless against any losses, claims, damages or
liabilities to which the Consultant or any of them may become
subject insofar as the same arises from an action which alleges
or is based upon the alleged untrue statement of a material fact,
or omission of a material fact, or any other violation of
applicable securities or other laws, by the Company or its
officers, directors, agents and controlling persons and to
reimburse the Consultant for any legal or other expenses
reasonably incurred by it in connection with investigating,
settling or defending any action or claim in connection
therewith; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim,
damage or liability: (A) is found in a final judgment of a court
of competent jurisdiction to have resulted from a breach of the
Consultant's obligations to the Company in connection with the
performance by the Consultant of the services pursuant hereto or
from the Consultant's gross negligence or misfeasance in
performing such services or (B) arises out of, or is based upon,
any untrue statement of a material fact or omission of a material
fact made in any written communication or any amendment or
supplement thereto in reliance upon, and in conformity with,
information furnished to the Company by the Consultant expressly
for use therein.
(ii) The Consultant shall indemnify and hold the Company and its
officers, directors, agents and controlling persons harmless
against any losses, claims, damages or liabilities to which the
Company may become subject in connection with the transactions
contemplated herein, insofar as such losses, claims, damages or
liabilities arise out of, or are based upon (i) any untrue
statement or misleading omissions made by the Consultant in
writing expressly for use in connection with a Financing (other
than untrue statements of a material fact or omission of a
material fact made by the Consultant in reliance on information
supplied to the Consultant by the
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Company) or (ii) the Consultant's gross negligence,
misfeasance or breach of the Consultant's obligation hereunder to
the Company. The Consultant shall reimburse the Company for any
legal or other reasonable expenses incurred by it in connection
with investigating, settling or defending any such action or
claim.
(iii) Upon receipt by the Consultant or its officers, directors,
agents or controlling persons (for purposes of PARAGRAPH
8(l)(i)), or the Company or its officers, directors, agents
or controlling persons (for purposes of PARAGRAPH 8(l)(ii))
(in each case the "Indemnified Party"), of notice of any
action, suit, proceeding, claim, demand or assessment
against the Indemnified Party that might give rise to a
claim pursuant to this section, the Indemnified Party shall
give written notice thereof within ten days (the "Notice of
Claim") to the Company, for purposes of PARAGRAPH 8(l)(i),
or the Consultant, for purposes of PARAGRAPH 8(l)(ii) (in
each case the "Indemnifying Party"), indicating the nature
of such claim and the basis therefor. The Notice of Claim
shall specify all facts known to the Indemnified Party
giving rise to such claim and the amount of estimate of the
amount of liability arising therefrom. Any delay or failure
to notify the Indemnifying Party shall relive the
Indemnifying Party of its obligations hereunder only to the
extent, if at all, that it is prejudiced by reason of such
delay or failure.
(iv) Promptly after a claim is made for which the Indemnified
Party seeks indemnity, the Indemnified Party, at its option
and expense, to assume the defense of such action, suit,
proceeding, claim, demand or assessment with full authority
to conduct such defense and the Indemnified Party will
cooperate fully with such defense. The Indemnified Party
shall have the right to employ separate counsel in any of
the foregoing actions, claims or proceedings and to
participate in the defense thereof, and the Indemnifying
Party shall pay the reasonable fees and expenses of such
counsel in advance at the request of the Indemnified Party.
Anything in this section to the contrary notwithstanding,
the Indemnified Party shall not, without the Indemnifying
Party's prior written consent, settle or compromise any
action or claim or proceeding or consent to entry of any
judgment with respect to any such action or claim that
requires the payment of money damages by the Indemnified
Party or in any way is binding upon or affects the
Indemnifying Party.
(v) The respective reimbursement and indemnity obligation of the
Consultant and the Company pursuant to subparagraphs (i) and
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(ii) of this PARAGRAPH 8(l) shall be in addition to any
liability which the Consultant or the Company may otherwise
have and shall be binding upon, and inure to the benefit of,
their respective successors, assigns, heirs, and personal
representatives.
(vi) The respective indemnity agreements of the Consultant and
the Company contained in subparagraphs (i) and (ii) of this
PARAGRAPH 8(l) shall remain operative and in full force and
effect regardless of any termination of this Agreement or of
any investigation made by or on behalf of this Company or
the Consultant.
M. CONSULTANT AUTHORITY: Consultant shall have no authority under this
Agreement to bind the Company to any transaction or contract. The Company has
the right in its sole and absolute discretion to reject any transaction or
contract regardless of the terms proposed.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
K-2 FINANCIAL CORP. HORIZON PHARMACIES, INC.
By /s/ Xxxxxxx X. Xxxxxxxxx By /s/ Xxxxx X. XxXxxx
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Xxxxxxx X. Xxxxxxxxx, President Xxxxx X. XxXxxx, President & CEO
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EXHIBIT A
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FORM OF WARRANT
