Exhibit 10.7
ADVISORY SERVICES AGREEMENT
ADVISORY SERVICES AGREEMENT ("Agreement"), dated as of May 25, 2004 ("Agreement
Date"), by and between JMK Associates (hereinafter referred to as Consultant).
and Nesco Industries Inc, (hereinafter referred to as the 'Company").
W I T N E S S E T H:
WHEREAS, the Company wishes to retain Consultant and Consultant wishes to be
retained by the Company, to perform certain business advisory and introduction
services on the terms and conditions set forth herein
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants herein contained, the parties hereto hereby agree as follows:
1. Services
During the Term of this Agreement, Consultant shall provide introductions,
advice, and other appropriate assistance to the Company. This may also include
the identification of opportunities, arranging meetings, preparation of
documents and literature, and overall coordination (hereinafter the "Services").
2. Term
The Term of this Agreement shall be twenty~four (24) months commencing on the
Agreement Date provided that:
(a) The Company shall have the right to terminate this Agreement
immediately upon giving Consultant written notice if Consultant shall have
engaged in gross misconduct in the performance of his duties hereunder.
(b) Consultant shall have the right to terminate this Agreement immediately
if the Company fails to timely pay or reimburse Consultant any amounts owing to
Consultant hereunder, if such failure persists for fourteen (14) days after
Consultant gives the Company written notice of such failure. Consultant shall
also have the right to terminate this Agreement without cause by providing
thirty (30) days written notice to the Company.
3. Definitions
(a) As used herein, the term "Affiliate" shall mean any successor entity to
the Company, any entity that acquires more than 50% of the equity of the
Company, or any other entity in which 50% or more of its equity is owned or
controlled by any individual or entity which owns more than 50% of the equity of
the Company as of the date of the relevant Strategic Alliance, Transaction, or
Financing (as defined below).
(b) As used herein, the term "Strategic Alliance" shall mean, without
limitation, one or more transactions pursuant to which the Company obtains or
transfers the rights to sell one or more products, but not the ownership of the
material intellectual property associated with these products, or a relationship
which results in revenues to the Company.
(c) As used herein, the term "Transaction" shall mean any
merger/acquisition or other form of business combination involving the Company,
such as the sale of the Company or product line(s) or an acquisition of a
company or product line(s), which the Company decides to proceed with at its
discretion.
(d) The following shall be considered part of the "Gross Transaction Value"
whether paid directly or indirectly to or by the Company, or an Affiliate, or to
any of its stockholders, directors, officers or other management personnel, or
to any third party at the direction of the Company, so long as such items or
amounts are paid in connection with a Transaction or to secure distribution
rights and/or a license to intellectual property pursuant to a Strategic
Alliance:
(i) All cash, securities or other property
(ii) The aggregate principal amount of any indebtedness assumed in
connection with the transaction
(iii)All contingent future payments (based upon future profits or
otherwise)
(iv) Any payments for non-compete covenants or consulting agreements,
the net value of any assumed liabilities
(v) The net value of any excess benefits which are realized by any
party or any stockholder, director, officer, employee or agent
thereof as a result of contractual arrangements providing for
benefits to it which are greater than those which would be
available to it on an arm's length basis
If the Gross Transaction Value is paid in whole or in part in the form of
securities, the value of such securities, for purposes of calculating
Consultant's fee, shall be deemed to be the fair market value thereof on the day
prior to the consummation of such transaction as the Company and Consultant
shall mutually agree; provided, however, that if such securities consist of
freely trading securities for which there is an existing public trading market,
the fair market value thereof shall be deemed to be the average of the last
sales prices for such securities on the ten trading days ending five days prior
to the consummation of the transaction.
(e) As used herein, the term "Net Sales" shall mean the sales of products
to any third party less any related returns and allowances, but without any
deductions for commissions paid to sales representatives, agents, or other
individuals or entities.
(f) As used herein, the term "Financing" shall mean a transaction pursuant
to which the Company or an Affiliate raises funds in any form such as, but not
limited to, the sale of debt and equity. The total amount of funds raised
pursuant a Financing shall be referred to herein as "Capital Raise".
4. Fees
(a) As partial consideration fo/the rendering of the Services, Consultant
will receive (a) a monthly advance of $7,500 such advance to be credited against
any other cash fees earned under the terms of this Agreement, such advance will
not be payable until the Company closes on a round of financing in excess of
$300,000 (three hundred thousand), (b) 2,000,000 shares of the Company's common
stock, on a pre-reverse split basis as contemplated by that certain share
exchange agreement dated February 2004 between the Company and Hydrogel Design
Systems, Inc., such shares shall have "piggyback" registration rights.
(b) In the event of a Strategic Alliance introduced by Consultant to the
Company during the Term of this Agreement or within twelve (12) months
thereafter (such introduction to he acknowledged in writing by the Company and
Consultant prior to any Services. If not acknowledged in writing then Consultant
shall not have any entitlement to any additional Strategic Alliance Fee),
Consultant will be compensated by the payment of a portion of its Strategic
Alliance Fee based on the Gross Transaction Value calculated as the sum of the
following:
(i) For amount of Gross Transaction Value Consultant's fee shall be
two percent (2%) of that amount.
(ii) Consultant will also be compensated by the payment of an
additional portion of Consultant's Strategic Alliance Fee equal
to 2.0% of Net Sales for the first three years.
In the event of a Strategic Alliance not introduced to the Company by
Consultant, but in the case that the Company asks Consultant to provide advice
and assistance relating to a transaction, Consultant would not receive any fee.
(c) In the event of a Transaction introduced by Consultant to the Company
during the Term of this Agreement or within twelve (12) months thereafter (such
introduction to be acknowledged in writing by the Company and Consultant prior
to any Services, If not acknowledged in writing then Consultant shall not have
any entitlement to any Transaction Fee), Consultant will be compensated by the
payment of a Transaction Fee based on the Gross Transaction Value calculated as
the sum of the following:
(i) For amount of Gross Transaction Value between $1,00 and
$1,000,000, Consultant's fee shall be five percent (5%) of that
amount.
(ii) For the amount of Gross Transaction Value between $1,000,001 and
$2,000,000, Consultant's fee shall be three percent (4%) of that
amount.
(iii)For the amount of Gross Transaction Value between $2,000,001 and
$3,000,000, Consultant's fee shall be three percent (3%) of that
amount.
(iv) For the amount of Gross Transaction Value between $3,000,001 and
$4,000,000, Consultant's fee shall be three percent (2%) of that
amount.
(v) For the amount of Gross Transaction Value in excess of
$5,000,001, Consultant's fee shall be two percent (1%) of that
amount.
If not acknowledged in writing then Consultant shall not have any entitlement to
any Transaction Fee.
(d) In the event of a Financing utilizing the Services of Consultant during
the Term of this Agreement, as requested in writing by the Company and
Consultant prior to any Services, or within twelve (12) months of such written
acknowledgement, Consultant will be compensated by the payment of a Financing
Fee equal to five percent (5%) of the Capital Raise, payable in cash at the
closing of the Financing. If not acknowledged in writing then Consultant shall
not have any entitlement to any Transaction Fee.
(e) Fees shall be paid without deduction for taxes of any kind. Any taxes
payable as a result of Consultant's fees hereunder shall be entirely
Consultant's responsibility.
(f) The Company and Affiliate shall maintain true and accurate records of
the Gross Transaction Value and Net Sales. The Company and Affiliate shall
provide a copy of these records, in reasonable detail, to Consultant at the
Company and Affiliate's sole expense when requested by Consultant, which shall
not be more than four (4) times in any fiscal year. Consultant shall also have
the right to cause a certified public accountant of Consultant's choice to audit
the records of the Company and Affiliate in reasonable detail not more
frequently than one (1) time during any fiscal year for the purpose of verifying
that accurate records of the Gross Transaction Value have been maintained and
provided to Consultant in accordance with this Section 4(f) of this Agreement
and that the Company and Affiliate has paid to Consultant the correct fees in
accordance with Sections 4(b) and 4(c) of this Agreement. This audit shall be at
the sole expense of Consultant, unless the certified public accountant discovers
that total fees paid were less than eighty-five percent (85%) of the total fees
that should have been paid. In such case, the Company and Affiliate shall
reimburse Consultant for all reasonable costs of the audit and also pay to
Consultant the fees provided for in this Agreement. The Company and Affiliate
shall pay any additional fees due to Consultant within fourteen (14) days after
receipt of notice. The Company's obligations and the Affiliate's obligations
pursuant to this Section 4 shall survive the termination of this Agreement.
5. Expenses
(a) The Company shall reimburse Consultant for reasonable out-of-pocket
expenses incurred by Consultant in connection with the rendering of Consultant's
Services hereunder including, without limitation, all expenses relating to
travel, lodging, due diligence efforts, legal fees, mailing costs, printing
fees, and any additional expenses incurred for or on behalf of the Company. When
the Company requests Consultant to render Services for which Consultant will be
traveling by air, the Company shall provide Consultant, at Consultant's request,
with prepaid tickets for this air travel. Consultant shall obtain the Company's
prior approval before incurring any individual expenses in excess of $500.00.
(b) Consultant shall submit an invoice to the Company delineating these
expenses in reasonable detail. Consultant shall provide appropriate
documentation for all individual expense items in excess of $100.00. Expenses
incurred in a foreign currency shall be converted by Consultant to U.S. dollars
when submitting the invoice using a reasonable and appropriate exchange rate.
The Company shall reimburse these expenses within fourteen (14) days after
receipt of an invoice.
(c) The Company's and Affiliate's obligations pursuant to this Section 5
shall survive the termination of this Agreement.
6. Indemnification
The Company shall defend, indemnify and hold harmless Consultant and its,
members, principals, managers, employees, affiliates, sub-contractors, and
agents from and against any and all liability, demands, loss, expense,
reasonable attorneys' fees and/or claims for injury or damages resulting from,
arising out of or relating to Consultant's retention by the Company and/or
Consultant's performance of its obligations under this Agreement. This Section 6
shall survive the termination of this Agreement.
The Consultant shall defend, indenmify and hold harmless Company and its,
members, principals, managers, employees, affiliates, sub-contractors, and
agents from and against any and all liability, demands, loss, expense,
reasonable attorneys' fees and/or claims for injury or damages resulting from,
arising out of or relating to any gross negligence, willful misconduct or
material breach of this agreement by Consultant. This Section 6 shall survive
the termination of this Agreement.
7. Conflicts of Interest:
The Company hereby expressly acknowledges and waives any claims or conflicts of
interests relating to the following:
Consultant has been and will attempt to continue to be retained by other
companies in the information technology/software field in various capacities,
including, without limitation, general business consulting, capital raising,
mergers, acquisitions, joint ventures, distribution agreements, product line
acquisitions, produce line divestitures, and strategic planning.
Consultant has existing relationships with many companies in the above-described
industry, including some that may be contacted for the purpose of forming a
relationship with the Company or entering into a transaction with the Company.
Consultant may receive other compensation from these companies for services
Consultant provides during the course of Consultant's relationship with the
Company.
8. Confidentiality:
(a) Consultant acknowledges that in the performance of work hereunder
Consultant may obtain access to Confidential Information (as defined below) of
the Company. Consultant agrees as to such Confidential Information during and
after the term of this Agreement, unless specifically permitted in writing by
the Company, to (a) retain it in confidence and (b) not disclose it to any third
party except for the purpose of carrying out Consultant's work and services
hereunder.
(b) Consultant shall not disclose such Confidential Information to any
third party, or use such Confidential Information without first obtaining the
prior approval of the Company including the terms, if any, under which this
Confidential Information may be disclosed.
(c) As used herein Confidential Information means any technical or
non-technical information or data in written, oral or tangible form (including
samples and models) relating to the Company's business or potential business
operations or with respect to its research and development activities not
generally available to or known to the public, that is disclosed to Consultant
by or on behalf of the Company, or learned by Consultant pursuant to
Consultant's work hereunder. Any technical or non-technical information or data
not generally available to or known to the public developed or generated in
whole or in part by Consultant pursuant to Consultant's work hereunder
(including without limitation any reports prepared by Consultant) shall be
deemed Confidential Information.
(d) Upon completion of Consultant's work hereunder or other termination of
this Agreement, Consultant will return to the Company Confidential Information
and copies thereof disclosed to Consultant in connection with this Agreement
except for one copy which may be retained by Consultant for its legal records.
(e) The Company hereby agrees not to disclose the existence of this
Agreement or the specific terms set forth herein or in any manner use this
Agreement in negotiations or communications with third parties. The Company
acknowledges that in the event of a breach of the foregoing sentence, Consultant
will suffer immediate and irreparable harm and that money damages will be
inadequate to compensate Consultant. In the event the Company breaches the
foregoing confidentiality obligation, the Company shall immediately notify
Consultant of such breach and shall take all steps necessary to remedy the same.
Each party's obligations under this paragraph shall survive the termination of
this Agreement for a period of thirty-six (36) months.
9. Not a Broker-Dealer
The Company acknowledges that Consultant proposes to initially act solely as a
finder and advisor. In the event that Consultant successfully introduces the
Company to a third party and the Company enters into a transaction with that
third party, then Consultant may be entitled to a fee pursuant to Section 4 of
this Agreement. In all events, Consultant is not a broker-dealer, shall not
operate as a broker or dealer, is not holding itself out as a broker or dealer
and is not engaged in the business of buying or selling securities or otherwise
required to register with the National Association of Securities Dealers.
10. Entire Agreement
This Agreement contains the entire understanding of the parties and supersedes
all prior agreements, understandings, negotiations and discussions between the
parties, whether oral or written. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, AND TO THE FULLEST EXTENT PERMITTED BY LAW, CONSULTANT MAKES NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES
AND HEREBY DISCLAIMS ALL IMPLIED WARRANTIES. No amendments to this Agreement
shall be binding unless executed in writing by the parties hereto.
11. Severability
This Agreement shall be deemed to be severable in nature. If for any reason any
paragraph, term or provision of this Agreement is held to be invalid or
unenforceable by any court of competent jurisdiction, all other valid provisions
of this Agreement shall remain in full force and effect. If for any reason any
portion of the paragraphs, terms or provisions of this Agreement is held to be
too broad or to any extent invalid as written, then the parties agree that such
provisions shall be enforced to the fullest extent to which they may be found
enforceable under applicable law.
12. Binding
This Agreement shall inure to the benefit of and be binding on the respective
parties hereto and their respective executors, administrators, successors, and
assigns. This Agreement shall not be assignable by either party without the
consent of the other that shall not be unreasonably withheld except as provided
herein. Any sale of all or substantially all of the assets or capital stock of
the Company or any 'merger, combination or consolidation of the Company or any
change in control of the Company shall be deemed an assignment for purposes of
this section,
This Agreement is personal and assignable by Consultant only with the Company's
prior written consent, which consent will jot be unreasonably withheld,
conditioned or delayed.
13. Notices and Payments
Any notices required or given hereunder shall be sent in writing by certified or
registered mail, postage prepaid and return receipt requested, or by overnight
express delivery service to the parties' respective addresses first mentioned
above, or to such other address as such party shall from time to time designate
by like notice to the other. All notices shall be deemed to be effective on the
date of receipt. Any statements or payments required by this Agreement shall be
delivered in person, mailed postage prepaid, or sent by overnight express
delivery service to the parties at the addresses set forth below (unless
delivery is in person) or to such substituted address or designee as either
party may hereafter state in a notice to the other.
If to the Company:
Chief Financial Officer
Nesco Industries, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
If to Consultant:
JMK Associates
x/x Xxxx Xxxxxx Consulting
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
14. Miscellaneous
(a) The parties agree that the Consultant is an independent contractor and
that he is not an agent or representative of the Company and that he has no
authority to make representations on behalf of or otherwise bind the Company in
any respect.
(b) The validity, interpretation and performance of this Agreement shall be
governed by and construed under the laws of the State of New York without regard
to the conflict of law provisions thereof,
(c) Except as provided below, the Company and Consultant agree that any
dispute or controversy arising out of or relating to any interpretation,
construction, performance or breach of this Agreement shall be settled by
arbitration in accordance with the rules then in effect of the American
Arbitration Association The arbitration shall be held in New York, NY. The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator shall be final, conclusive, and binding on the
parties to the arbitration.
(d) This Agreement shall be deemed drafted by both parties so as to avoid
any negative inferences that may be drawn against the drafter by a court of law.
The instant Agreement is the result of extensive negotiations between the
parties and reflects the terms requested by both parties after said
negotiations.
(e) This Agreement may be executed in counterparts and all counterparts
containing original signatures may together be considered as the original of
this Agreement. An executed facsimile shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date set forth above.
COMPANY Nesco Industries, Inc.
Name: Xxxxxxx Xxxxxxxx
Title: CEO
Consultant: JMK Associates
Name: Xxxxxx Xxxxx
Title: Partner
Acknowledged Introductions
Cardiotech Corporation
Medafor
Noble Fiber
NGN Fund
Verticle Ventures
TICC Fund
Provident Healthcare Partners
Xxxx Xxxxxxxx and Xxxxxxxx related companies
