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Exhibit 10-Q
March 15, 2001
Xx. Xxxx Xxxxx
Chief Executive Officer
Xxxxxxx, Xxxxxx & Xxxxx, LLC
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Dear Xxxx,
In follow up to our recent meeting and subsequent conversations, this engagement
letter ("Agreement") shall define the terms of our agreement under which
Xxxxxxx, Xxxxxx & Xxxxx, LLC ("DCA") will provide Business Development and
certain other related services for Zila, Inc. and subsidiaries thereof ("Zila"),
subject to the approval of the Zila Board of Directors on March 14, 2001.
DCA shall, effective March 15, 2001, take on the role as non-exclusive business
development representative for Zila, pursuing strategic partnerships,
acquisitions, divestitures, etc. on behalf of the Company, in accordance with
directions from Xxx Xxxxx and/or Xxxx Xxxxxxxx. It is understood that this is an
independent contractor relationship and will be for approximately 600 hours per
year, with certain periods of time requiring a heavier concentration of effort
than others. DCA shall primarily focus its efforts on the Professional Dental
market, but shall also be available to assist Xxxx on other strategic
initiatives as may be requested by Xxxx.
In this capacity, DCA will, among other things, perform the following functions,
as requested:
[ ] Consult with Xxx Xxxxx and division heads to understand the
strategic plan for the Professional Products Group, and to
identify potential partner / acquisition opportunities which may
be consistent with such strategic plan(s)
[ ] Prospect (through direct mail, e-mail, telephone, and personal
meetings) potential acquisitions or strategic partners within the
professional dental market
[ ] Attend industry trade shows or other events as Zila may reasonably
request
[ ] Assist in the disposition of any assets or business units, as
appropriate
[ ] Sell Zila within the professional dental industry as a company
that others would like to be a part of
[ ] Help to negotiate transaction terms
[ ] Help to coordinate (but not conduct) the due-diligence process
[ ] Develop financial analyses related to potential transactions,
including ROI, XXX and dilution analysis
[ ] Develop Board level presentations for deals on which we have
successfully negotiated terms
[ ] Assist with the documentation process of all transactions
[ ] Assist in developing a post-closing integration strategy
[ ] Assist Zila pursue corporate transactions in other areas of its
business, as requested
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In exchange for the provision of these services, DCA will receive a monthly
retainer of $5000 per month, paid in advance on the first of each month. In
addition, DCA will be reimbursed for any reasonable out-of-pocket expenses
incurred in performing its services for Zila within 10 days of the submission of
such expenses for reimbursement. Notwithstanding the foregoing, any such
expenses over $500 shall require pre-approval by Xxx Xxxxx or another authorized
Zila representative.
In addition to the retainer described above, DCA shall also earn a Success Fee
equal to 1% of each Transaction Value paid in cash at the time of the closing of
such Transaction. For the purposes of this Agreement, a Transaction shall be
defined as any acquisition, divestiture, merger, change of control, sale of
substantial assets, consolidation, reorganization, or recapitalization where (i)
Zila has requested the assistance of DCA to find, solicit, or negotiate such
Transaction, or (ii) DCA has first introduced such proposed Transaction to Zila.
For purposes of this agreement, the term Transaction Value shall mean (a) the
total amount of cash paid; plus (b) the fair market value of any assets,
securities or other property or rights transferred (including, without
limitation, payments to be made under non-competition, employment, or similar
arrangements), except debt instruments which are issued, assumed or forgiven,
which shall be valued at the face amount thereof. For purposes of calculating
the Success Fee, the fair market value of securities for which there is an
established trading market shall be the closing sale price of the securities on
the trading day preceding the closing of the transaction. The fair market value
of any assets, securities, property or rights (other than as provided above)
will be mutually agreed upon by Xxxx and DCA. If the parties can not agree on
the fair market value of such assets, securities, property or rights, then they
will choose a qualified appraiser of national standing to conclusively determine
such fair market value. DCA and Xxxx will share equally the expense of any such
qualified appraiser.
The term of this agreement shall be for a period of one year, after which time
it shall automatically renew for subsequent one-year terms. This agreement may
be terminated at any time following the end of the first year, with or without
cause, by DCA or Zila upon receipt of written notice to the other party to that
effect. However, following termination, DCA shall be entitled to receive the
Success Fee outlined above for any Transaction initiated during the term of this
Agreement which closes within one year following such termination.
Xxxx agrees to indemnify and hold harmless DCA and its affiliates, and their
respective members, officers, directors, shareholders, employees, agents, and
all other parties affiliated with DCA ("Indemnified Person") from and against
any losses, claims, damages or liabilities relating to, arising out of, or in
connection with the engagement hereunder and the performance of the services
contemplated hereunder. Accordingly, Xxxx will reimburse each Indemnified Person
for all expenses (including fees and expenses of counsel) as they are incurred
in connection with investigating, preparing, pursuing, or defending any action,
claim, suit, investigation, or proceeding relating to the engagement hereunder,
whether pending or threatened, and whether or not any Indemnified Party is a
party. HOWEVER, in no event shall Zila be responsible for any such
indemnification where it is judicially determined that any such losses, claims,
damages, or liabilities resulted from the bad faith, gross negligence, or fraud
of any Indemnified Person; provided, however, that if it is judicially
determined that Xxxx's losses, claims, damages or liabilities resulted from the
bad faith, gross negligence or fraud of DCA, DCA shall promptly reimburse Zila
for any expenses incurred (including fees and expenses of counsel) to obtain the
judicial determination.
Xx. Xxxxx, the Chief Executive Officer of DCA, also serves as a director of
Zila, Inc. Xx. Xxxxx agrees to comply with any conflict of interest procedures
instituted by Xxxx's Board of Directors.
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DCA shall perform the Services as an independent contractor to the Company, and
DCA shall serve as an advisor to, and not an agent of, Zila. Liability of DCA
under this Agreement shall be limited to the greater of $200,000 or the amount
of fees paid hereunder, and further limited pursuant to the terms of
indemnification contained herein. DCA will exercise diligence in rendering its
advice and performing the Services, however the final decision and sole
responsibility for all decisions and actions shall remain with Xxxx. This
Agreement shall be construed, interpreted and applied in accordance with the
laws of the State of Arizona, without regard to principles of conflicts of law.
Any dispute arising as a result of this Agreement shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
("AAA"), Maricopa County, Arizona.
Sincerely,
/s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
President/CEO
ACCEPTED:
/s/Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx III for Xxxxxxx, Xxxxxx & Xxxxx, LLC Date: March 15, 2001
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