Exhibit 10.11
CONSULTING AGREEMENT
This agreement (the "Agreement") is entered into as of July 7, 2003
between Health Sciences Group, Inc., a Colorado corporation (the "Company") and
Xxxxxxx Xxxxx Ventures, Inc., a Delaware corporation ("Consultant").
RECITALS
WHEREAS, Consultant represents that it will endeavor to introduce the
Company to one or more Targets (as defined in Section 2 below) who may be
interested in engaging in a business combination or financing arrangement with
the Company which may include a merger or purchase of some or all of the stock
or assets of the Company by a Target or a Target by the Company, or a licensing
agreement, joint venture, distribution agreement or product purchase arrangement
involving the Company and a Target (an "M&A Transaction"); or an investment in
the securities of the Company by a Target (a "Financing Transaction");
WHEREAS, the Company desires to engage the services of Consultant to
provide an introduction to such Targets in accordance with the terms and
conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, and for other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Company engages Consultant as one of the Company's non-exclusive
consultants, to find Targets interested in effecting an M&A or Financing
Transaction. Consultant will endeavor to introduce the Company to such Targets.
2. For the purposes of this Agreement, "Targets" shall mean individuals
or entities introduced to the Company by Consultant.
3. In the event of a consummated M&A Transaction, the Company shall pay
to Consultant a cash fee as follows:
(a) 7% of the first $1,000,000 or portion thereof of the
consideration paid in such transaction; plus
(b) 6% of the next $1,000,000 or portion thereof
of the consideration paid in such transaction; plus
(c) 5% of the next $5,000,000 or portion thereof of the
consideration paid in such transaction; plus
(d) 4% of the next $1,000,000 or portion thereof of the
consideration paid in such transaction; plus
(e) 3% of the next $1,000,000 or portion thereof of the
consideration paid in such transaction; plus
(f) 2.5% of any consideration paid in such transaction in
excess of $9,000,000.
"Consideration paid in such transaction" for purposes of this Agreement
shall mean the value of (i) all consideration paid to the Company or a Target
and/or the stockholders of the Company or a Target in connection with an M&A
Transaction, including cash, securities or other consideration exchanged or paid
at closing; assumption of debt; and any deferred payments including without
limitation notes, contingent payments, license fees or royalty payments; (ii)
amounts paid or payable under consulting, employment, supply, service,
distribution, licensing, lease or agreements not to compete or similar
arrangements (including such payments to management) and (iii) the aggregate
amount of any investment made by the Company and a Target in a joint venture.
Payment of the applicable fee set forth above will be made at the closing of the
related M&A Transaction. The fee shall be payable in cash and any consideration
other than cash which is paid in the consummated M&A Transaction shall be valued
at its fair market value.
1
In the event that "Consideration paid in such transaction" in
connection with a an M&A Transaction or other business arrangement between the
Company and a Target includes (i) licensing of the Company's or a Target's
intellectual property or technology and agreement by the Company or a Target to
make future royalty payments which are variable in amount depending on sales, or
(ii) purchase of the Company's products by a Target or a Target's products by
the Company, the Company shall pay to Consultant, promptly upon receipt of all
such royalty or product purchase payments, a cash fee of 5% of said payments for
a period of five (5) years provided such payment does not result in double
payment.
4. (a) In the event of a consummated Financing Transaction, including
the financing contemplated by the term sheet annexed hereto as Exhibit A (the
"Term Sheet"), the Company shall (i) pay to Consultant a cash fee of 10% (ten
percent) of the gross amount invested in the Company, (ii) issue to Consultant
five-year warrants with cashless exercise and weighted average anti-dilution
protection provisions to purchase the same type of securities as issued to
investors at the price paid by investors in such Financing Transaction, which
warrants will have an aggregate exercise price equal to 20% (twenty percent) of
the gross amount invested in the Company; provided, however, that if a Target
functions solely as an intermediary in arranging a Financing Transaction,
including but not limited to serving as an underwriter of a public offering of
securities or placement agent for a private offering of securities, the
applicable fee to Consultant will be 2% of the gross amount invested in the
Company in such Financing Transaction. In connection with the Financing
Transaction contemplated by the Term Sheet, the Company will not accept an
investment from any prospective investor that was not introduced to the Company
by the Consultant, without the Consultant's prior written consent. Payment of
the applicable cash fee and issuance of the applicable warrants as described
will be made at the closing of the related Financing Transaction and (iii) pay
to the Consultant a nonaccountable expense allowance relating to expenses
incurred by the Consultant in connection with the Financing Transaction
(including, without limitation, travel and related expenses and fees and
expenses of legal, accounting and other advisers to the Consultant) equal to
three percent of the gross amount invested. A good faith advance of $ 10,000 to
cover up front expenses to be incurred by the Consultant has been paid by the
Company. Such amount shall be credited at the first closing of the Financing
Transaction against the 3% nonaccountable expense allowance.
(b) In addition to any fees payable by the Company to
Consultant hereunder, the Company shall, whether or not an M&A Transaction or
Financing Transaction is consummated, reimburse Consultant, in cash and on a
monthly basis, for its travel and other reasonable out-of-pocket expenses up to
an aggregate of $5,000 over the term of the Agreement (including all fees and
disbursements of counsel, consultants or other advisors to be retained by
Consultant with the Company's consent, plus any sales, use or similar taxes,
including additions to such taxes, if any), incurred in connection with, or
arising out of Consultant's activities under or contemplated by, this Agreement.
Such reimbursements shall be made promptly upon submission by Consultant of
statements therefor. Any expenses in excess of $5,000, in the aggregate over the
term of the Agreement, must be approved in advance by the Company.
5. In the event that any fees or warrants due Consultant are not paid
or issued when due, the Company shall also be liable to Consultant for interest
on the value of the compensation due at the annual rate of three percent over
the prime rate, accruing on a daily basis from the date of closing, plus all of
Consultant's reasonable legal fees and expenses in connection with collection of
said compensation.
6. This Agreement shall remain in full force and effect for a period of
twelve (12) months after the date hereof; provided, however, that (a) Consultant
shall be entitled to receive the full fee and expenses set forth in paragraphs 3
or 4 hereof in the event discussions are held with a Target during the term of
this Agreement and an M&A Transaction or Financing Transaction is consummated
with or involving such Target within two years from the expiration of this
Agreement and (b) the provisions of paragraphs 3, 4, 5, 8, 9 and 10 of this
Agreement shall remain in full force and effect.
7. Except as provided herein, the Company shall not be liable for any
retainers, costs, expenses or other charges incurred by Consultant or third
parties at the request of Consultant unless the Company has authorized such
costs or expenses in writing.
8. (a)Consultant is an independent contractor and financial advisor and
is not an employee or agent of the Company and it shall have no authority to
bind the Company in any manner whatsoever. Nothing herein shall be construed to
appoint the Consultant as placement agent or underwriter in connection with any
of the Company's activities, including, without limitation, the transaction
contemplated by the Term Sheet.
2
(b)The Company acknowledges that Consultant has not done any
due diligence with respect to any Target and that Consultant makes no
representations whatsoever with respect to any Target (including without
limitation its financial condition or its ability to perform any obligations to
which it is or may become bound), and the Company expressly agrees that
Consultant shall have no liability whatsoever in connection with any transaction
it may enter into with a Target.
9. The Company agrees to indemnify and hold the Consultant, its
affiliates, control persons, officers, employees and agents (collectively, the
"Indemnified Persons") harmless from and against all losses, claims, damages,
liabilities, costs or expenses (including reasonable attorneys' and accountants'
fees) joint and several, arising out of the performance of this Agreement,
whether or not the Consultant is a party to such dispute. This indemnity shall
not apply, however, where a court of competent jurisdiction has made a final
determination that the Consultant engaged in gross recklessness or willful
misconduct in the performance of its services hereunder which directly gave rise
to the loss, claim, damage, liability, cost or expense sought to be recovered
hereunder (but pending any such final determination, the indemnification and
reimbursement provision of this Agreement shall apply and the Company shall
perform its obligations hereunder to reimburse the Consultant for its expenses).
If for any reason the foregoing indemnification is unavailable to the
Consultant or such other Indemnified Person or insufficient to hold it harmless,
then the Company shall contribute to the amount paid or payable by the
Consultant or such other Indemnified Person as a result of such loss, claim,
damage, or liability in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its shareholders on the one
hand and the Consultant or such other Indemnified Person on the other hand, as
well as any relevant equitable considerations; provided that in no event will
the aggregate contribution by the Consultant and any other Indemnified Person
hereunder exceed the amount of fees actually received by the Consultant pursuant
to this Agreement. The reimbursement, indemnity and contribution obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Company, the
Consultant and any other Indemnified Person.
The provisions of this paragraph (9) shall survive the termination and
expiration of this Agreement.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to its conflict of
law principles.
11. This Agreement constitutes the entire agreement between the parties
and supersedes any prior agreements, whether written or oral, between the
parties. No modification, extension or change in this Agreement shall be
effective unless it is in writing and signed by both Consultant and the Company.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
The provisions of this Agreement shall be deemed severable, so that if any
provision hereof shall be declared unlawful or unenforceable, the remaining
provisions hereof shall not be affected thereby and shall remain in full force
and effect. A facsimile signature on this Agreement shall be considered the same
as an original.
12. The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their heirs, legal representatives,
successors and assigns. This Agreement may not be assigned except upon the prior
written consent of the other party to this Agreement.
13. Any notice hereunder shall be in writing and delivery thereof shall
be complete if delivered in person, by facsimile or mailed by overnight mail, or
registered or certified mail, postage prepaid to the following addresses (unless
changed by written notice):
3
Consultant: Xxxxxxx Xxxxx Ventures, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, President
With a copy to: Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Company: Health Sciences Group, Inc.
0000 Xxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, President
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
HEALTH SCIENCES GROUP, INC. XXXXXXX XXXXX VENTURES, INC
By: _________________________________ By:________________________________
4
