Exhibit 10.10
[XXXXXXXX PARTNERS LETTERHEAD]
August 6, 2004
Xxxxx Xxxxxxxxxx
President and Chief Executive Officer
Applied DNA Sciences, Inc.
0000 X. Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Dear Xx. Xxxxxxxxxx:
Engagement Agreement
1. Engagement
(a) This letter (this "Letter Agreement") confirms our agreement pursuant
to which you retained Xxxxxxxx Partner, LLC (together with its affiliates,
employees and agents, "GP") to provide certain professional services described
below (the "Engagement") to, and to enter into a strategic relationship with
Applied DNA Sciences, Inc. ("ADNAS").
(b) Pursuant to the Engagement, GP shall make itself reasonably available
to provide advise and assistance to ADNAS regarding issues associated with
ADNAS's proprietary DNA-embedded security solutions business (the "ADNAS
Business") in the following ways: (i) assisting ADNAS with strategic positioning
and enhancement of the ADNAS Business and (ii) assisting ADNAS in the
development domestic and international marketing strategies for the products and
services of the ADNAS Business.
(c) GP initially shall assign Xxxx Xxxxxxxxxx (the "Team Leader") to
coordinate GP's obligations hereunder and shall make reasonably available
personnel resources to perform the Engagement and to assist the Team Leader. GP
shall reasonably accommodate ADNAS's requests for the services described herein
consistent with GP's other commitments and obligations; provided, however, that
in no event shall GP be required to perform any services that might reasonably
be deemed to constitute "lobbying" (or any analogous regulated activity) under
applicable law or regulations.
2. Term of the Engagement; Due Diligence; Termination
(a) Term of Engagement. The Engagement shall commence on September 1, 2004
(the "Effective Date") and end of the first anniversary of the Effective Date,
or such earlier date, if terminated by GP pursuant to Section 2(c) hereunder
(the "Term"); provided, however, that the Term will be automatically extended
without further action of either party for additional one-year periods (the
"Renewal Term"), unless written notice of either party's intention not to extend
has been given at least 60 days prior to expiration of the effective term.
Except as expressly provided herein, the agreements, terms and understandings
set forth in this Letter Agreement shall survive the termination of any and all
work performed pursuant to the Engagement.
(b) Due Diligence. ADNAS acknowledges that, as of the Effective Date, GP
has not had the opportunity to conduct a complete due diligence review (the
"Diligence Review") of ADNAS and Biowell Technology, Inc. ("Biowell"), a
Taiwanese company that ADNAS has agreed to acquire the assets of in a pending
transaction (the "Transaction"). Accordingly, XXXXX agrees to make available to
GP on or immediately after the Effective Date, but in no event later than 5
business days thereafter, at a location and in matter as mutually agreed to by
the parties, certain information concerning the business and affairs of ADNAS
and, in connection with the Transaction, Biowell (the "Diligence Information")
in order for GP to conduct the Diligence Review.
(c) Termination. (i) ADNAS agrees that, for the 30-day period following the
Effective Date (the "Option Period"), GP shall have the option, which it may
exercise in its sole discretion, to terminate this Engagement as a result of
GP's findings in connection with the Diligence Review; provided, however, that
in the event that ADNAS does not make available to GP the Diligence Information
within the time period specified in Section 2(b), the Option Period shall
automatically be extended by the number of days that the Diligence Information
was delinquent.
(ii) In the event that GP exercises its option to terminate this Engagement
pursuant to Section 2(c)(i), (A) GP shall return to ADNAS the full amount of any
payments heretofore received by GP pursuant to this Letter Agreement and (B)
following the payment of such aforementioned amount by GP, this Letter Agreement
and the Warrant (as hereinafter defined) shall be null and void and shall have
no force and effect.
3. Fees and Warrants
As compensation for GP's performance of its obligations pursuant to Section
1 hereof:
(a) Advisory Fee Payments. During the Term and the Renewal Term, if
applicable, ADNAS agrees to pay GP an aggregate advisory fee of Two Million
Dollars ($2,000,000) payable as follows: (i) for the Term, (A) a lump sum cash
fee of Five Hundred Thousand Dollars ($500,000) on September 1, 2004, and (B) a
monthly cash fee in the amount of One Hundred Twenty Five Thousand Dollars
($125,000) beginning on September 15, 2004 and continuing thereafter on the
fifteenth day of each month occurring during the Term and (ii) for the Renewal
Term, a monthly cash fee in the amount of One Hundred Sixty Six Thousand Six
Hundred and Sixty-Six Dollars ($166,666) on the fifteenth day of each month
occurring during the Renewal Term.
(b) Issuance of Warrant. As additional consideration to GP, ADNAS shall
issue, upon execution of, and as a condition to, signing this Letter Agreement,
a net-exercisable warrant relating to 21,430,000 shares of common stock of
ADNAS, par value, $0.50 per share (the "Common Stock"), at an exercise price of
$0.15 per share (the "Warrant"). The Warrant shall be immediately exercisable
with respect to all shares of the Common Stock subject thereto as of the date
hereof. The form of Warrant is attached hereto as Exhibit A. If and to the
extent that ADNAS issues any other person warrants, stock options or shares of
capital stock with demand registration rights or any other liquidity rights, GP
shall be entitled, with respect to the shares issued or issuable pursuant to the
Warrant to such registration or other rights that are at least as favorable as
those ADNAS grants to any other holders of warrants, stock options, or shares of
capital stock ADNAS.
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4. Expenses
XXXXX agrees to promptly reimburse GP for all out-of-pocket expenses
reasonably incurred by GP and its representatives in connections with the
Engagement.
5. Confidentiality: Use of Xx. Xxxxxxxx'x Name
(a) GP shall (i) treat and maintain as confidential and/or privileged all
information, documents, materials and work product, including, without
limitation, the Diligence Information, that are, have been or shall be generated
or created by or communicated or provided to GP by ADNAS relating to any
activity undertaken as part of this Letter Agreement and shall not reveal any
such information, document, material or work product to any person or utilize
any affiliates, officers, directors and shareholders to maintain confidentiality
of such information; provided, however, that GP may reveal such information,
documents, materials or work product if required by law pursuant to subpoena or
other government process after prior notice to ADNAS when possible and to the
extent permitted under the circumstances to afford ADNAS an opportunity to
challenge such process at ADNAS's sole discretion and expense. In the
alternative, should ADNAS so direct, GP shall undertake to challenge such
process at ADNAS's sole expense, provided, that such challenge is permitted by
law under the circumstances.
(b) The parties shall keep the terms of this Letter Agreement strictly
confidential at all times and neither party shall make any statement regarding
the Engagement or this Letter Agreement without the advance consent of the
other.
(c) The trade names and trademarks "Xxxxxxx Xxxxxxxx," "Xxxxxxxx Partners
LLC," or any similar mark on variations or derivations thereof (collectively,
the "Xxxxxxxx Marks"), shall not be used by ADNAS without GP's prior written
consent, and upon any termination of the Engagement, ADNAS shall have no further
right to use or exploit the Xxxxxxxx Xxxxx in any fashion. ADNAS shall not by
act or omission use the Xxxxxxxx Xxxxx or perform any services hereunder in any
manner that tarnishes, degrades, disparages or reflects adversely on the
Xxxxxxxx Xxxxx, XX, its affiliates, or their business or reputation. Except as
expressly provided herein, nothing in this Letter Agreement shall be deemed to
give ADNAS any right, title or interest in or to any of GP's trade names,
trademarks or service marks.
6. Promotional Materials
XXXXX agrees that it shall submit to GP for its review, all advertising,
written sales promotion, press releases, news clippings and other publicity
matters relating to the Engagement and the strategic relationship created hereby
or containing language from which the Engagement or such relationship may be
inferred or implied ("Promotional Materials") and not publish, disseminate or
use any such GP Promotional Materials without GP's prior written consent, which
consent shall not be unreasonably withheld or delayed.
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7. Indemnification and Related Matters
(a) ADNAS agrees to indemnify GP, any controlling person of GP and each of
their respective partners, shareholders, directors, officers, employees, agents,
affiliates and representatives (each, an "Indemnified Party") and hold each of
them harmless against any actions, judgments, claims, losses, damages, expenses,
liabilities, joint or several, to which any Indemnified Party may become liable,
directly or indirectly, arising out of, or relating to, this Letter Agreement or
the Engagement, including but not limited to reimbursement for all GP fees,
costs, attorney's fees and disbursements and defense or other costs associated
with any such actions, judgments or claims, unless and until it were to be
finally adjudicated that such liabilities resulted from the gross negligence or
willful misconduct of any Indemnified Party. XXXXX further agrees to reimburse
each Indemnified Party immediately upon request for all expenses (including
reasonable attorneys' fees and expenses) as they are incurred in connection with
the investigation of, preparation for, defense of, or providing evidence in, any
action, claim, suit proceeding or investigation, directly or indirectly, arising
out of, or relating to, this Letter Agreement or GP's services hereunder,
whether or not pending or threatened and whether or not any Indemnified Party is
a party to such proceeding. XXXXX also agrees that no Indemnified Party shall
have any liability (whether direct or indirect, in contract or tort or
otherwise) to ADNAS or any person asserting claims on behalf of or in right of
ADNAS, directly or indirectly, arising out of, or relating to, this Letter
Agreement or GP's services thereunder, unless it is finally judicially
determined that such liability resulted from the gross negligence or willful
misconduct of such Indemnified Party. Moreover, in no event, regardless of the
legal theory advanced, shall any Indemnified Party be liable for any
consequential, indirect, incidental or special damages of any nature. In no
event shall the Indemnified Parties' liability (whether direct, indirect,
contract or otherwise) directly or indirectly relating to or in connection with
this Letter Agreement exceed the advisory fees received by GP during the months
that any such liability of the Indemnified Parties arose. In the event that an
indemnified Party is requested or required to appear as a witness in any action
brought by or on behalf of or against ADNAS or any affiliate of ADNAS in which
such Indemnified Party is not named as a defendant. XXXXX agrees to reimburse GP
for all expenses incurred by it in connection with such Indemnified Party's
appearing and preparing to appear as such a witness, including, without
limitation, the reasonable fees and disbursements of its legal counsel.
(b) ADNAS agrees that, without GP's prior written consent, it will not
settle, compromise or consent to the entry of any judgment in or otherwise seek
to terminate any claim, action, suit, proceeding or investigation in respect of
which indemnification could be sought hereunder (whether or not GP or any other
Indemnified Party is an actual or potential party to such claim, action, suite,
proceeding or investigation), unless (i) such settlement, compromise, consent or
termination includes an unconditional release of each Indemnified Party from any
liabilities arising out of such claim action, suite, proceeding or investigation
and (ii) the parties agree that the terms of such settlement shall remain
confidential.
(c) The rights of the Indemnified Parties referred to above shall be in
addition to any rights that any Indemnified Party may otherwise have.
(d) ADNAS shall be solely responsible for the performance and safety of any
of the products and services of the ADNAS Business. Any representation or
covenant, whether express or implied, given by ADNAS to any customer or third
party regarding the products and services of the ADNAS Business shall be the
sole responsibility of ADNAS, and GP shall not be liable for, and shall be
indemnified against in accordance with Section 7(a), (i) any failure to comply
with such representation or covenant and (ii) any product liability, tort or
other claims relating to the ADNAS Business.
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(e) Each of the parties hereto represents and warrants that its execution
of, and performance of its obligations under, this Letter Agreement shall not
constitute or result in a breach or event of default under any agreement to
which it is a party, or contravene any applicable law, regulation or fiduciary
obligation.
8. Non-Exclusivity
Nothing in this Letter Agreement shall prevent GP from entering into
consulting agreements or arrangements with other parties for any purpose;
provided that GP shall not enter into such consulting agreements or arrangements
with any other party in which the majority of such party's business is related
to DNA-embedded technologies.
9. Modification of Agreement; Non-Assignability; Entire Agreement
(a) This Letter Agreement may not be changed or altered except in a writing
duly executed by an authorized agent of both parties hereto.
(b) Neither party may assign any of its rights or obligations under this
Letter Agreement without the prior written consent of the other party.
(c) There have been no representations, inducements, promises or agreements
of any kind that have been made by either party, or by any person acting on
behalf of wither party, which are not embodied within this Letter Agreement.
This letter Agreement constitutes the entire understanding and agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof.
10. Independent Contractor Status; Governing Law
In connection with the Engagement, GP is acting as an independent
contractor and not in any other capacity, and does not have any authority to act
as an agent for, or otherwise bind ADNAS. All aspects of the relationship
created by this Letter Agreement shall be governed by and construed in
accordance with the laws of the State of New York, United States of America,
applicable to contracts made and to be performed therein.
11. Arbitration
(a) Any dispute, controversy or claim arising out of or relating to this
Letter Agreement or the breach, termination, enforceability or validity hereof
shall be heard and determined by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"). The
number of arbitrators shall be three. Each party shall select an arbitrator from
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the list of names submitted to the parties by the AAA, and such two arbitrators
shall be appoint the third arbitrator. The place of arbitration shall be the
City of New York. (b) No provision of or the exercise of any rights under this
Section 11 shall limit the right of any party to request and obtain from a court
of competent jurisdiction in the City of New York (which shall have exclusive
jurisdiction for purposes of this Section 11
(b)) provisional remedies and relief. Each of the parties hereby submits
unconditionally to the exclusive jurisdiction of the state and federal courts
located in the City of New York for purposes of this provision, waives and
agrees not to assert objection to the venue of any proceeding in any such court
or that any such court provides an inconvenient forum and consents to the
service of the process upon it in connection with any proceeding instituted
under this Section 11 (b) in the same manner as provided for the giving of
notice hereunder.
12. Execution of the Letter Agreement and Signatures
Your signature below on the indicated enclosed copy of this Letter
Agreement is your representation that you are authorized to enter into the
Engagement and to agree to the terms of this Letter Agreement on behalf of
ADNAS. This Letter Agreement shall be binding on all parties and their
respective heirs, successors and permitted assigns. Please execute and return
the indicated copy of this Letter Agreement to GP.
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* * * *
If the foregoing correctly reflects our mutual understanding and agreement
with respect to the terms of the Engagement set forth herein, please so confirm
by executing and delivering the enclosed copy of this Letter Agreement to the
undersigned, and upon the Effective Date, this Letter Agreement shall become a
binding agreement upon ADNAS and GP in accordance with its terms.
Very truly yours,
XXXXXXXX PARTNERS LLC
By:/s/ XXXX XXXXXXXXXX
----------------------
Xxxx Xxxxxxxxxx
Managing Director
The above sets forth the terms of the Engagement and is agreed to on behalf
of ADNAS, as indicated below:
APPLIED DNA SCIENCES, INC.
Dated: August 6, 2004 By:/s/ XXXXX XXXXXXXXXX
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Xxxxx Xxxxxxxxxx
President
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