CONSULTING AGREEMENT
EXHIBIT 10.2
This Consulting Agreement (this "Agreement") is made and effective as of the 12th day of July, 2012, by and between MusclePharm Corporation, a Nevada corporation (the "Company"), and Melechdavid, Inc. ("Consultant").
WHEREAS, the Company desires to have Consultant provide certain consulting services, as described in Section 1 of this Agreement, pursuant to the terms and conditions of this Agreement; and
WHEREAS, Consultant desires to provide the Services to the Company pursuant to the terms and conditions of this Agreement in exchange for the Compensation Shares (defined in Section 2) and expense reimbursement provided for in Section 2.
NOW, THEREFORE. in consideration of the foregoing promises and the mutual covenants herein contained, the parties hereto, intending to be legally bound, agree as follows:
1. CONSULTING SERVICES. During the term of this Agreement, Consultant, in the capacity as an independent contractor, shall provide the services to the Company set forth on Schedule 1 (the "Services"). The Company acknowledges that Consultant will limit its role under this Agreement to that of a Consultant, and the Company acknowledges that Consultant is not, and will not become, engaged in the business of (i) effecting securities transactions for or on the account of the Company, (ii) providing investment advisory services as defined in the Investment Advisors Act of 1940, or (iii) providing any tax, legal or other services. The Company acknowledges and hereby agrees that Consultant is not engaged on a full-time basis and Consultant may pursue any other activities and engagements it desires during the term of this Agreement. Consultant shall perform the Services in accordance with all local, state and federal rules and regulations. Notwithstanding the foregoing, the Services shall not (unless the Consultant is appropriately licensed, registered or there is an exemption available from such licensing or registration) include, directly or indirectly any activities which require the Consultant to register as a broker-dealer under the Securities Exchange Act of 1934
2. COMPENSATION TO CONSULTANT.
(a) In consideration for the Services, the Company shall issue to the Consultant shares of the Company’s common stock (the “Compensation Shares”) in an amount equal to 4.2% of the Company on a fully diluted (as-converted) basis and after giving effect to the Company’s contemplated reverse equity split and the Financing (as defined below). The Company shall issue the Consultant the Compensation Shares within five (5) business days after the Company shall receive at least $1.0 million in proceeds in the aggregate in one or more debt and/or equity financings (the “Financing”) and affect the reverse stock split (the “Reverse Stock Split”) contemplated in Section 8(q) of that certain securities purchase agreement dated July 11, 2012 (the “Securities Purchase Agreement”) by and among the Company and the investors named therein. Notwithstanding the foregoing, in the event that the Company shall fail to consummate the Reverse Stock Split within forty five (45) days from the date hereof, the Company shall take all requisite action to increase the number of its authorized common stock outstanding and issue the Compensation Shares no later than sixty (60) days from the date hereof. The failure of the Company to deliver the Compensation Shares on or prior to that date that is sixty (60) days from the date hereof shall constitute a “Compensation Share Default” hereunder. Until the Company has issued and outstanding 3.5 billion shares of Common Stock, the Company shall ensure that the Consultant shall maintain its 4.2% fully diluted equity position. In connection therewith, the Consultant shall be promptly issued additional shares of Common Stock of the Company so that Consultant shall continue to own 4.2% of the Company on a fully diluted (as converted) basis after giving effect to issuance of Common Stock or securities exercisable for or convertible into Common Stock (the “Equity Anti-Dilution Adjustment”). In addition, the Company shall not affect any Change of Control transaction (as defined in the Securities Purchase Agreement) unless Consultant shall have received all of the Compensation Shares it is entitled to receive hereunder prior to affecting such Change of Control transaction. Notwithstanding the foregoing, in the event that there is a Compensation Share Default that remains uncured for a fifteen (15) days, then in addition to the right to Equity Anti-Dilution Adjustments, Consultant shall also be entitled to similar Equity Anti-Dilution Adjustments for a period of two (2) years from the date hereof so that Consultant shall be issued additional shares of Common Stock of the Company so that Consultant shall own 4.2% of the Company on a fully diluted (as converted basis).
(b) Consultant represents and warrants to the Company that:
(i) Consultant has the requisite power and authority to enter into this Agreement. No consent, approval or agreement of any individual or entity is required to be obtained by the Consultant in connection with the execution and performance by the Consultant of this Agreement or the execution and performance by the Consultant of any agreements, instruments or other obligations entered into in connection with this Agreement.
(ii) The Consultant is an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended, and the Consultant is able to bear the economic risk of acquiring the Compensation Shares in consideration of providing the Services.
(c) The Company represents and warrants to Consultant that:
.(i) No consent, approval or agreement of any individual or entity is required to be obtained by the Company in connection with the execution and performance by the Company of this Agreement or the execution and performance by the Company of any agreements, instruments or other obligations entered into in connection with this Agreement.
| (ii) | The Compensation Shares. The Compensation Shares upon issuance: |
(A) are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject only to restrictions upon transfer under the Securities Act of 1933, as amended (the “Securities Act”) and any applicable state securities laws;
(B) have been, or will be, duly and validly authorized and on the dates of issuance of the Compensation Shares as contemplated in Section 2(a) of this Agreement, such Compensation Shares will be duly and validly issued, fully paid and non-assessable and if registered pursuant to the Securities Act and resold pursuant to an effective registration statement or exempt from registration will be free trading, unrestricted and unlegended;
(C) will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company or rights to acquire securities of the Company;
(D) will not subject the holders thereof to personal liability by reason of being such holders; and
(E) assuming the representations warranties of Consultant as set forth in Section 2(b) hereof are true and correct, will not result in a violation of Section 5 under the Securities Act.
(d) Any commercially reasonable out-of-pocket expenses incurred by Consultant in connection with the performance of the Services (the "Consultant Expenses") shall be reimbursed by the Company within thirty (30) days of Consultant submitting to the Company an invoice that details the amount of the Consultant Expenses and includes written documentation of each expense. Consultant shall not charge a markup, surcharge, handling or administrative fee on the Consultant Expenses. The Company acknowledges that Consultant may incur certain expenses during the term of this Agreement, but not receive a xxxx or receipt for such expenses until after the term of this Agreement. In such case, Consultant shall provide the Company with an invoice and documentation of the expense and the Company shall reimburse Consultant for such expenses within five (5) days after receiving such invoice.
(e) The Company agrees that Consultant shall be entitled to (i) identical registration rights with respect to the Compensation Shares in connection with the registration of any regsitrable securities pursuant to that certain registration rights agreement dated July 11, 2012 among the Company and the investors that are signatories thereto, and (ii) identical piggyback registration rights with respect to the Compensation Shares in connection with the registration of any regsitrable securities pursuant to that certain securities purchase agreement dated July 11, 2012 among the Company and the subscribers that are signatories thereto.
(f) The Company shall take all requisite and necessary action to appoint Xxxx Xxxxxxxxx to it board of directors.
3. TERM. The term of this Agreement shall be for twelve (12) months and commence as of the date of this Agreement, subject to Section 4 of this Agreement (the "Tern").
4. EFFECT OF TERMINATION. This Agreement may be terminated during the Term by The Company upon thirty (30) days’ written notice and by Consultant in the event that the Company materially breaches any of its obligations hereunder or under the Securities Purchase Agreement or under any of the Transaction Documents (as defined in the Securities Purchase Agreement); provided, however, notwithstanding such termination, Consultant shall still be entitled to the Compensation Shares as contemplated pursuant to Section 2(a) of this Agreement and to the reimbursement of any Consultant Expenses as contemplated pursuant to Section 2(d) of this Agreement..
5. ACCURACY OF INFORMATION PROVIDED TO CONSULTANT. The Company represents and warrants to Consultant that other than as disclosed on a Current Report on Form 8-K that the Company filed with the Securities and Exchange Commission (“SEC”) with respect to non-reliance on certain of its financial statements, the publicly available financial information concerning the Company subsequent to December 31, 2012, is, to the knowledge of the Company, true and correct in all material respects. As of the date hereof, the Company has restated the financial statements referenced above and filed such restated financial statements with the SEC.
6. INDEPENDENT CONTRACTOR. Consultant shall act at all times hereunder as an independent contractor as that term is defined in the Internal Revenue Code of 1986, as amended, with respect to the Company, and not as an employee, partner, agent or co-venturer of or with the Company. Except as set forth herein, the Company shall neither have nor exercise control or direction whatsoever over the operations of Consultant, and Consultant shall neither have nor exercise any control or direction whatsoever over the employees, agents or subcontractors hired by the Company.
7. NO AGENCY CREATED. No agency, employment, partnership or joint venture shall be created by this Agreement, as Consultant is an independent contractor. Consultant shall have no authority as an agent of the Company or to otherwise bind the Company to any agreement, commitment, obligation, contract, instrument, undertaking, arrangement, certificate or other matter. Each party hereto shall refrain from making any representation intended to create an apparent agency, employment, partnership or joint venture relationship between the parties.
8. INDEMNIFICATION.
(a) Indemnity by the Company. The Company hereby agrees to indemnify and hold harmless Consultant and each person and affiliate associated with Consultant against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal counsel fees), and in addition to any liability the Company may otherwise have, arising out of, related to or based upon any violation of law, rule or regulation by the Company or the Company's agents, employees, representatives or affiliates.
(b) Indemnity by Consultant. Consultant hereby agrees to indemnify and hold harmless the Company and each person and affiliate associated with the Company against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal counsel fees), and in addition to any liability the Company may otherwise have, arising out of, related to or based upon:
| (i) | Any breach by Consultant of any representation, warranty or covenant contained in or made pursuant to this Agreement; or | |
| (ii) | Any violation of law, rule or regulation by Consultant or Consultant's agents, employees, representatives or affiliates. |
(c) Actions Relating to Indemnity. If any action or claim shall be brought or asserted against a party entitled to indemnification under this Agreement (the "Indemnified Party") or any person controlling such party and in respect of which indemnity may be sought from the party obligated to indemnify the Indemnified Party pursuant to this Section 8 (the "Indemnifying Party"), the Indemnified Party shall promptly notify the Indemnifying Party in writing and, the Indemnifying Party shall assume the defense thereof, including the employment of legal counsel and the payment of all expenses related to the claim against the Indemnified Party or such other controlling party. If the Indemnifying fails to assume the defense of such claims, the Indemnified Party or any such controlling party shall have the right to employ a single legal counsel, reasonably acceptable to the Indemnifying Party, in any such action and participate in the defense thereof and to be indemnified for the reasonable legal fees and expenses of the Indemnified Party's own legal counsel.
(d) This Section 8 shall survive any termination of this Agreement for a period of three (3) years from the date of termination of this Agreement. Notwithstanding anything herein to the contrary, no Indemnifying Party will be responsible for any indemnification obligation for the gross negligence or willful misconduct of the Indemnified Party.
9. NOTICES. Any notice required or permitted to be given pursuant to this Agreement shall be in writing (unless otherwise specified herein) and shall he deemed effectively given upon personal delivery or upon receipt by the addressee by courier or by telefacsimile addressed to each of the other Parties thereunto entitled at the respective address listed below, with a copy by email, or at such other addresses as a party may designate by ten (10) days prior written notice:
If to the Company:
MusclePharm Corporation
Attn: Xxxx X. Xxxxx, CEO
0000 Xxxxxxx Xxxxxx, Xxxxxxxx X
Xxxxxx, XX 00000
If to Consultant:
Melechdavid, Inc.
Attn: Xxxx Xxxxxxxxx
0000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxx, Xxxxxxx 00000
10. ASSIGNMENT. This Agreement shall not be assigned, pledged or transferred in any way by either party hereto without the prior written consent of the other party; provided, however, this Agreement and/or the right to receive Compensation Shares may be assigned, in whole or in part, to any of Consultant’s affiliated entities or to any Subscriber or their affiliated entities without the Company’s prior consent. Any attempted assignment, pledge, transfer or other disposition of this Agreement or any rights, interests or benefits herein contrary to the foregoing provisions shall be null and void.
11. CONFIDENTIAL INFORMATION. Consultant agrees that, at no time during the Term or a period of five (5) years immediately after the Term, will Consultant (a) use Confidential Information (as defined below) for any purpose other than in connection with the Services or (b) disclose Confidential Information to any person or entity other than to the Company or persons or entities to whom disclosure has been authorized by the Company. As used herein, "Confidential Information" means all information of a technical or business nature relating to the Company or its affiliates, including, without limitation, trade secrets, inventions, drawings, file data, documentation, diagrams, specifications, know-how, processes, formulae, models, test results, marketing techniques and materials, marketing and development plans, price lists, pricing policies, business plans, information relating to customer or supplier identities, characteristics and agreements, financial information and projections, flow charts, software in various stages of development, source codes, object codes, research and development procedures and employee files and information; provided, however, that "Confidential Information" shall not include any information that (i) has entered the public domain through no action or failure to act of Consultant; (ii) prior to disclosure hereunder was already lawfully in Consultant's possession without any obligation of confidentiality; (iii) subsequent to disclosure hereunder is obtained by Consultant on a non-confidential basis from a third party who has the right to disclose such information to Consultant; or (iv) is ordered to be or otherwise required to be disclosed by Consultant by a court of law or other governmental body; provided, however, that the Company is notified of such order or requirement and given a reasonable opportunity to intervene.
12. RETURN OF MATERIALS AT TERMINATION. Consultant agrees that all documents, reports and other data or materials provided to Consultant shall remain the property of the Company, including, but not limited to, any work in progress. Upon termination of this Agreement for any reason, Consultant shall promptly deliver to the Company all such documents, including, without limitation, all Confidential Information, belonging to the Company, including all copies thereof.
13. CONFLICTING AGREEMENTS; REQUISITE APPROVAL. CONSULTANT and the Company represent and warrant to each other that the entry into this Agreement and the obligations and duties undertaken hereunder will not conflict with, constitute a breach of or otherwise violate the terms of any agreement or court order to which either party is a party, and each of the Company and Consultant represent and warrant that it has all requisite corporate authority and approval to enter into this Agreement and it is not required to obtain the consent of any person, firm, corporation or other entity in order to enter into this Agreement.
14. NO WAIVER. No terms or conditions of this Agreement shall be deemed to have been waived, nor shall any party hereto be stopped from enforcing any provisions of the Agreement, except by written instrument of the party charged with such waiver or estoppel. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived, and shall not constitute a waiver of such term or condition for the future or as to any act other than specifically waived.
15. GOVERNING LAW. This Agreement shall be governed by, construed in accordance with and enforced under the internal laws of the State of New York. The venue for any legal proceedings in connection with this Agreement shall be in the federal or state courts located in the City of New York, State of New York.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties hereto in regard to the subject matter hereof and may only be changed by written documentation signed by the party against whom enforcement of the waiver, change, modification, extension or discharge is sought. This Agreement supersedes all prior written or oral agreements by and among the Company or any of its subsidiaries or affiliates and Consultant or any of its affiliates.
17. SECTION HEADINGS. Headings contained herein are for convenient reference only. They are not a part of this Agreement and are not to affect in any way the substance or interpretation of this Agreement.
18. SURVIVAL OF PROVISIONS. In case any one or more of the provisions or any portion of any provision set forth in this Agreement should be found to be invalid, illegal or unenforceable in any respect, such provision(s) or portion(s) thereof shall be modified or deleted in such manner as to afford the parties the fullest protection commensurate with making this Agreement, as modified, legal and enforceable under applicable laws. The validity, legality and enforceability of any such provisions shall not in any way be affected or impaired thereby and such remaining provisions in this Agreement shall be construed as severable and independent thereof.
19. BINDING EFFECT. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns, subject to the restriction on assignment contained in Section 10 of this Agreement.
20. ATTORNEY'S FEES. The prevailing party in any legal proceeding arising out of or resulting from this Agreement shall be entitled to recover its costs and fees, including, but not limited to, reasonable attorneys' fees and post judgment costs, from the other party.
21. AUTHORIZATION. The persons executing this Agreement on behalf of the Company and Consultant hereby represent and warrant to each other that they are the duly authorized representatives of their respective entities and that each has taken all necessary corporate or partnership action to ratify and approve the execution of this Agreement in accordance with its terms.
22. ADDITIONAL DOCUMENTS. Each of the parties to this Agreement agrees to provide such additional duly executed (in recordable form, where appropriate) agreements, documents and instruments as may be reasonably requested by the other party in order to carry out the purposes and intent of this Agreement.
23. COUNTERPARTS & TELEFACSIMILE. This agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which shall constitute one agreement. A telefacsimile of this Agreement may be relied upon as full and sufficient evidence as an original.
24. COMPLIANCE WITH LAW. Consultant will comply with all laws, rules and regulations related to its activities on behalf of the Company pursuant to this Agreement. Consultant shall provide a prominent notice on all newsletters and websites/webcasts/interview materials and other communications with investors or prospective investors in which Consultant may be reasonably deemed to be giving advice or making a recommendation that Consultant has been compensated for its services and owns common stock of the Company. Consultant acknowledges that it is aware that the federal securities laws restrict trading in the Company's securities while in possession of material non-public information concerning the Company. Consultant acknowledges that with respect to any Company securities now or at any time hereafter beneficially owned by Consultant or any of its affiliates, that he will refrain from trading in the Company's securities while he or any such affiliate is in possession of material non-public information concerning the Company, its financial condition, or its business and affairs or prospects.
25. SPECIFIC PERFORMANCE. The Company and Consultant acknowledge and agree that irreparable damage would occur in the event that the Company’s obligations under Section 2(a) of this Agreement were not performed in accordance with the specific terms set forth therein or were otherwise breached. It is accordingly agreed that Consultant shall be entitled to seek an injunction or injunctions to prevent or cure breaches of Section 2(a) of this Agreement and to enforce specifically the terms and provisions thereof, this being in addition to any other remedy to which Consultant may be entitled by law or equity in connection with the Company’s breach of this Agreement. Subject to Section 15 hereof, the Company hereby irrevocably waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.
[Signatures on Following Page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.
| Company: | ||
| MusclePharm Corporation | ||
| By: | /s/ Xxxx Xxxxx | |
| Name: | Xxxx Xxxxx | |
| Title: | Chief Executive Officer | |
| Consultant: | ||
| Melechdavid Inc. | ||
| By: | /s/ Xxxx X. Xxxxxxxxx | |
| Name: | Xxxx X. Xxxxxxxxx | |
| Title: | President | |
Schedule 1
Services
The following are the Services that Consultant shall provide to the Company:
· Introduction to banking relationships
· Consulting on strategic acquisitions to enhance Company value
· Capital restructuring
· Service as a member of the Board of Directors of the Company
