Exhibit 10.5
XXXXXX & CO., LLC
00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
November 16, 1998
Xxxxxxxxxxx.xxx Inc.
The Xxxxxxxxxxx.xxx Trust
Xxxxxxx Xxxxx, 0xx Xxxxx
00 Xxxx Xxxxxx, Xxxxxxxx
XX XX, Xxxxxxx
Xxxx: Xxxxxx Xxxxxxxx, Chief Executive Officer
Re: Strategic Consulting Interim Agreement
Dear Xx. Xxxxxxxx:
This letter will set forth the binding agreement among Xxxxxx & Co., LLC
("Xxxxxx"), Xxxxxxxxxxx.xxx, Inc. (the"Company") and The Xxxxxxxxxxx.xxx Trust
(the "Trust") with respect to certain services Xxxxxx has furnished to the
Company, options to be granted by the Company and the Trust to Xxxxxx as
consideration for such services, and certain other understandings among the
parties.
1. Description of Services. The Company and the Trust hereby acknowledge
and agree that Xxxxxx has provided valuable consulting services to the Company,
has assisted the Company in securing significant contracts, and has provided
other services which are of material benefit to the Company and to the Trust, as
a principal shareholder of the Company. The Company and the Trust acknowledge
that as of October 21, 1998 such services were complete, and that Xxxxxx shall
have no further obligation to provide any services to the Company; provided,
however, that the Company may, in the future, decide to engage Xxxxxx to provide
additional services.
2. Compensation for Services. As consideration for services rendered by
Xxxxxx, each of the Company and the Trust agrees to grant to Xxxxxx options to
acquire shares of capital stock of the Company as follows:
(a) The Company hereby grants Xxxxxx an option to acquire Two
Million (2,000,000) shares of common stock of the Company without par value (the
"Common Stock") (such option referred to herein as the "Company Option"). The
Company Option may be exercisable in whole or in part at any time from and after
the date hereof and on or before the fifth anniversary of the date hereof. The
Company Option will have an exercise
price of $.003 per share of Common Stock.
(b) The Trust hereby grants to Xxxxxx an option (the "Trust
Option") to purchase up to Six Hundred Thousand (600,000) shares of Common
Stock which the Trust now owns, or may hereafter acquire upon conversion of
preferred stock, par value $.001 per share, of the Company ("Preferred
Stock"). The Trust Option may be exercised in whole or in part at any time,
and from time to time, from and after the date hereof and prior to October 1,
1999. The exercise price per share under the Trust Option shall be the price
per share at which the Preferred Stock owned by the Trust is converted into
Common Stock. If the Trust acquires Common Stock upon conversion of Preferred
Stock on more than one occasion, the Trust Option will be exercisable with
respect to each share of Common Stock at the price at which such share was
received upon conversion from Preferred Stock. If at any time Xxxxxx wishes
to exercise the Trust Option, it shall give notice (the "Option Notice") to
the Trust to such effect, specifying the number of shares as to which it
intends to exercise the Trust Option. If the Trust does not have sufficient
shares of Common Stock with which to fulfill such proposed option exercise it
shall, within five (5) days after receipt of such Option Notice, convert the
Preferred Stock to the extent necessary to obtain the requisite number of
shares of Common Stock.
(c) Each of the Company and the Trust shall enter into such
documents as Xxxxxx may reasonably request evidencing the Company Option and
the Trust Option. Each of the Company Option and the Trust Option may be
assigned in whole or in part by Xxxxxx.
3. Confidentiality. Xxxxxx will hold in confidence and will not use,
other than for the benefit of the Company, any of the Company's proprietary
and confidential information that it obtains by or through the Company
("Information"). Xxxxxx will be permitted to disclose such Information to its
employees, agents and consultants to the extent necessary to perform the
Services and enforce its rights hereunder. At the end of the Term, Xxxxxx
will return all Information. Information will not include information
independently developed by Xxxxxx, information obtained from third parties
without confidentiality restriction and information already possessed by
Xxxxxx.
4. Matters Pertaining to Common Stock.
(a) In the event that the Company completes an offering and sale
of its equity securities (or a debt financing with an equity component),
either public or private, where the primary purpose of the financing is fund
raising, then the Company will offer Xxxxxx the opportunity to purchase a
portion of such securities (on the same terms and conditions including price)
such that Xxxxxx will maintain up to its percentage ownership of the
Company's Common Stock. For purposes hereof, Xxxxxx'x percentage ownership
will be calculated on a fully converted and diluted basis (assuming exercise
in full of the Company Option and the Trust Option). The offer to Xxxxxx will
remain open until the completion of
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such offering, and Xxxxxx will not be obligated to complete that purchase of
securities unless the third party financing is completed. The right granted in
this Section 4(a) will survive termination of this Agreement for a period of six
months.
(b) The Company will not grant any options or warrants with respect
to Company equity to a Founder (defined below) and will not sell or issue any
stock, rights to acquire stock or other equity security to a Founder unless an
identical option, warrant, sale, issuance or right is offered to Xxxxxx (based
on the fully diluted number of shares held). For purposes hereof, the term
"Founder"means The Xxxxxxxxxxx.xxx Trust, Sutcliffe or Xxxxxxx.
(c) For all purposes of this Agreement, the term "Shares" means all
shares of Common Stock issued to Xxxxxx under or pursuant to this Agreement (and
includes all shares issued in respect thereof by means of dividend, split or
other distribution). Xxxxxx will: (x) provide the Company with at least seven
(7) days' prior written notice of its intent to sell, transfer, dispose of or
otherwise hypothecate ("Sell") any Share; and (y) Sell, on any one day no more
than the lesser of 10% of the 30 day average trading volume of the Common Stock
and 50,000 Shares. This restriction shall survive termination of this Agreement
but in all cases will end as to any Share two years after its original issuance.
Xxxxxx agrees that it will deposit certificates representing the Shares in
escrow with counsel for the Company, Xx. Xxx Xxxxxx, until such time as the
restriction contained herein lapses provided that the escrow agreement is
acceptable to Xxxxxx, and the Company pays all fees and costs associated with
the escrow. That Escrow agreement will continue for as long as any Shares remain
unsold.
(d) The Xxxxxxxxxxx.xxx Trust, Xxx Xxxxxxxxx and Xxxxxxx Xxxxxxx
(and their respective affiliates) will enter into similar Escrow agreements to
that noted in (d) whereby each will , (x) provide Xxxxxx with at least seven (7)
days' prior written notice of their intents to sell, transfer, dispose of or
otherwise hypothecate ("Sell") any Share; and (y) Sell on any one day no more
than the lesser of 10% of the 30 day average trading volume of the Common Stock
and 50,000 Shares. That Escrow agreement will continue for as long as any Shares
remain unsold.
5. Registration Rights.
(a) If at any time or times after the date hereof the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders exercising their registration rights,
other than a registration relating solely to employee benefit plans, the Company
will:
(i) Promptly give to Xxxxxx written notice thereof (which
shall include the number of shares the Company or other security holder
proposes to register and, if known, the name of the proposed underwriter);
and
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(ii) Use its best efforts to include in such registration all
the Shares specified in a written request or requests, made by Xxxxxx
within twenty (20) days after the date of delivery of the written notice
from the Company described in clause (i) above. If the underwriter advises
the Company that marketing considerations require a limitation on the
number of shares offered pursuant to any registration statement, then the
Company may offer all of the securities it proposes to register for its
own account or the maximum amount that the underwriter considers salable
and such limitation on any remaining securities that may, in the opinion
of the underwriter, be sold will be imposed, only to the extent necessary,
on Xxxxxx pro rata among Xxxxxx and other stockholders, who request to
include shares in such registration statement according to the number of
securities each such shareholder requested to be included in such
registration statement. In all cases, Shares will be registered for sale
only after all slimes of preferred by The Xxxxxxxxxxx.xxx Trust have been
redeemed by the Company.
(b) All expenses incurred in connection with any registration,
qualification or compliance (including legal fees and expenses of the Company
and Xxxxxx) pursuant to this Section 5, other than underwriting discounts and
commissions, shall be borne by the Company.
(c) If the Company ever registers shares of stock held by The
Xxxxxxxxxxx.xxx. Trust, Ian, Sutcliffe and/or Xxxxxxx Xxxxxxx, the Company
agrees to register a proportionate number of shares on behalf of Xxxxxx.
(d) With a view to making available the benefits of certain rules
and regulations of the Securities and Exchange Commission ("Commission") which
may permit the sale of restricted securities (as that term is used in Rule 144
under the Act) to the public without registration, the Company agrees to:
(i) make and keep public information available (as those terms
are understood and defined in Rule 144 under the Act) at all times;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Act and the Exchange Act; and
(iii) so long as Xxxxxx owns any restricted securities,
furnished to Xxxxxx , forthwith upon request a written statement by the
Company as to its compliance with the Act and Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other
reports and documents so filed as Xxxxxx may reasonably request in
availing itself of any rule or regulation of the Commission allowing
Xxxxxx to sell any such securities without registration.
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6. Representations. The Company makes the following representations and
warranties which, shall be true, correct and complete in all respects on the
date hereof and shall be true, correct and complete in all respects as of the
date that any Share is issued. All representations and warranties continue and
survive this Agreement.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own its properties and to
carry on its business as presently conducted.
(b) The Company has all necessary corporate power and has taken all
necessary corporate action required for the due authorization, execution,
delivery and performance by the Company of this Agreement, and any other
agreements or instruments executed by the Company in connection herewith or
therewith (collectively, the, "Related Agreements"), and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Shares. The issuance of the Shares does not and
will not, require any further corporate action and is not and will not be
subject to any preemptive right, right of first refusal or the like. This
Agreement, the Related Agreements and the other agreements and instruments
executed by the Company in connection herewith or therewith will each be a valid
and binding obligation of the Company enforceable in accordance with its terms.
(c) No consent, approval, license or authorization of, or
designation, declaration or filing with, any court or governmental authority is
or will be required on the part of the Company in connection with the execution,
delivery and performance by the Company of this Agreement, any of the Related
Agreements and any other agreements or instruments executed by the Company in
connection herewith or therewith, or in connection with the issuance of the
Shares, except for those which have already been made or granted and filings
required by state securities laws, all of which have been made.
(i) The authorized capital stock of the Company on the date
hereof consists of 700,000,000 shares of Common Stock and (ii) 400,000
shares of $10 Preferred Stock and (iii) 9,750,000 shares of $.001 par
value Preferred Stock. There has been delivered to Xxxxxx a true, complete
and correct copy of the Charter and by-laws of the Company.
(ii) The issued and outstanding capital stock of the Company
on the date hereof consists of (i) 18,031,400 shares of Common Stock and
(ii) 430,000 shares of $10 Preferred Stock. In addition (i) 410,000 shares
of Common Stock have been granted and are unexercised under the Company's
Stock Option Plan- All of the issued and outstanding shares of Common
Stock are, and when issued in accordance with the terms hereof, the Shares
will be duly authorized and validly
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issued and fully paid and nonassessable, with no personal liability
attaching to the ownership thereof and will be free and clear of all
liens, claims, charges, encumbrances, or transfer restrictions imposed by
or through the Company, except for those imposed pursuant to this
Agreement.
(iii) Except as set forth in Clause (ii) above, (i) no
subscription, warrant. option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (H) there is not
outstanding any commitment of the Company to issue any subscription,
warrant, option, convertible security or other such right or to issue or
distribute to holders of any shares of its capital stock any evidences of
indebtedness or assets of the Company, (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof; and (iv) there are no
agreements, written or oral, between the Company and any holder of its
capital stock or among any holders of its capital stock, relating to the
acquisition, disposition or voting of the capital stock of the Company.
Except as provided in this Agreement., no person or entity is entitled to
any preemptive right, right of first refusal or similar rights granted by
the Company with respect to the issuance of any capital stock of the
Company. All of the issued and outstanding shares of the Company's capital
stock (including the Shares) have been offered, issued and sold by the
Company in compliance with applicable Federal and state securities laws.
7. Representations by Xxxxxx. Xxxxxx hereby represents and warrants to the
Company as follows:
(a) Xxxxxx has duly authorized, executed and delivered this
Agreement and the Related Agreements. No consent or approval of any other person
is required in connection with the execution, delivery and performance of this
Agreement and the Related Agreements by Xxxxxx, Assuming due execution and
delivery by the Company of the Agreement and the Related Agreements, this
Agreement and the Related Agreements to which Xxxxxx is a party constitute
legal, valid and binding obligations of Xxxxxx, enforceable against it in
accordance with their respective terms.
(b) Xxxxxx has been advised and understands that the Shares have not
been registered under the Act, on the grounds that no distribution or public
offering of tire Shares is to be effected.
(c) Xxxxxx has experience and expertise in investing in businesses
that are in the developmental stage and, by reason of its business or financial
experience, Xxxxxx has the capacity to protect its own interest and evaluate the
merits of the investment in the Shares in connection with the transactions
contemplated hereunder.
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(d) Notwithstanding any restriction herein contained the Company
agrees that it will permit (i) a distribution of Shares to one or more of
Xxxxxx'x members or investors or a limited liability Company and its members,
where no consideration is exchanged therefor by such members, partners or to a
retired or withdrawn member who retires or withdraws after the date hereof in
full or partial distribution of his interest in such partnership, or to the
estate of any Such partner or the transfer by gift, will or intestate succession
of any partner to his spouse or to the siblings, lineal descendants or ancestors
of such partner or his spouse, or to a trust created for the benefit of one or
more of the foregoing, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if it were an original purchaser hereunder
and (ii) a sale or other transfer of any of the Shares upon obtaining assurance
satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Act and applicable state securities or "blue-sky" laws,
including, without limitation, receipt of an unqualified opinion to such effect
of counsel reasonably satisfactory to the Company. The certificates representing
the Shares shall bear a legend evidencing such restriction on transfer
substantially in the following form:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933,
as amended (the "Act") or the securities laws of any state. The shares may
not be transferred by sale, assignment, pledge or otherwise unless (i) a
registration statement for the shares under the Act is in effect or (ii)
the corporation has received an opinion of counsel, which opinion is
reasonably satisfactory to the corporation, to the effect that such
registration is not required under the Act."
8. Liability. In addition to our agreements and obligations included in
this Agreement, the Company agrees to indemnify and hold harmless Xxxxxx and its
affiliates (including its managing directors, partners, employees and agents)
(each an "Indemnified Person") from and against all claims, liabilities,
expenses, costs, losses and damages in any way related to or arising out of the
performance by Xxxxxx under this Agreement or its relationship with the Company,
and to reimburse the Indemnified Person for any legal and other expenses
incurred by it in connection with or relating to investigating, preparing to
defend, or defending any actions, claims or other proceedings arising in any
manner out of or in connection with Xxxxxx'x or the Indemnified Person's
performance under this Agreement (whether or not such Indemnified Person is a
named part in such proceeding). Xxxxxx shall not be responsible for any claims,
liabilities, losses, damages or expenses to the extent that it is finally
judicially determined that they directly result from Xxxxxx'x (or such other
Indemnified Person's) gross negligence or willful misconduct. The Indemnified
Persons shall have no liability to the Company for or in connection with this
Agreement except for such loss, claims, damages and expenses that are finally
determined by a court of competent jurisdiction to have resulted primarily from
that Indemnified Person's bad faith
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or gross negligence.
9. Miscellaneous.
(a) Except as otherwise set forth herein, all covenants, agreements,
representations, warranties and undertakings contained in this Agreement shall
be binding on and shall inure to the benefit of the respective successors and
assigns of the parties hereto.
(b) Amendments or additions to this Agreement may be made and
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived upon the written consent of the Company and
Xxxxxx.
(c) All notices. requests, consents, reports and demands shall be in
writing shall be hand delivered, sent by facsimile or other electronic medium,
or mailed, postage prepaid, to the Company or the Xxxxxx at the address set
forth below or to such other address as may be furnished in writing to the other
parties hereto:
Company: The address set forth on page 1 hereto.
A copy to: Xx. Xxx Xxxxxx
Xxxx Xxxxx Xxxxxxxx
Xxxxx 0000, Xxxxx Xxxxx
000 00xx Xxxxxx
Xxxxxx Xxxxxxxx 00000
Xxxxxx: The address set forth on page 1 hereto.
A copy to: Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
(000) 000-0000
(000) 000-0000 (fax)
(d) Each party hereto will pay its own expenses in connection with
the transactions contemplated hereby.
(e) This Agreement and any exhibit hereto may be executed in
multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof
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(f) The section headings herein are for convenience only and shall
not affect the construction or interpretation hereof. The parties agree to
execute any and all documents and instruments reasonably necessary to carry out
the intent of this Agreement.
(g) This Agreement shall be deemed a contract made under the laws of
Massachusetts and together with the rights and obligations of the parties
hereunder, shall be construed under and governed by the laws of such state
(h) The parties agree that they intend to review the structure of
this Agreement as it pertains to the issuance of the Shares so as to arrive at
mutually acceptable amendments that will result in a more efficient structure
for tax and accounting purposes. The parties will negotiate such amendments in
good faith.
Very truly yours,
XXXXXX & CO., LLC
By: /s/ Xxxxxxx X. Xxxxxx
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Title:
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Accepted and agreed to
XXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxxxx
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Title:
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THE MEDICONSULT.COMTRUST
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Title:
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Trustee
AMENDMENT NO. 1 TO LETTER AGREEMENT
-----------------------------------
AMENDMENT AGREEMENT, dated as of February 25, 1999, between Xxxxxx &
Co., LLC ("Xxxxxx") and Xxxxxxxxxxx.xxx, Inc. (the "Company").
WHEREAS, Xxxxxx and the Company are parties to that certain Letter
Agreement dated November 16, 1998 (the "Letter Agreement"); and
WHEREAS, the parties desire to amend the Letter Agreement and obtain
Xxxxxx'x consent to certain other matters.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Paragraph 2(b) to the Letter Agreement is hereby amended to change
the number "600,000" to "358,333" shares of Common Stock, such
number being consistent with the basic understanding of the parties
that the Trust Option shall be for ten percent (10%) of the number
of shares of Common Stock issuable to the majority stockholder in
respect of certain cash advances to the Company.
2. Paragraph 4(a) and 4(b) to the Letter Agreement are hereby deleted
in their entirety and of no further force or effect. Xxxxxx hereby
waives any rights with respect to the issuance of any securities
in the proposed $3,200,000 senior preferred stock financing and also
disclosed in the registration statement for the proposed public
offering referred to below. Further, Xxxxxx hereby waives any rights
under Paragraph 4(d) with respect to such public offering.
3. The last sentence of Paragraph 5(a) is amended to provide that the
Shares will be registered for sale only after all of the preferred
shares owned by The Xxxxxxxxxxx.xxx Trust have been redeemed or
converted by the Company.
4. Xxxxxx hereby acknowledges and consents to the proposed firm
commitment underwritten public offering of the Company's Common
Stock by ING Barings Xxxxxx Xxxx LLC and Xxxxx Xxxxx Xxxxxx &
Company, and hereby waives its registration rights contained in
paragraph 5(a) of the Letter Agreement with respect thereto.
Further, Xxxxxx hereby agrees to enter into the form of lock-up
agreement related to such public offering, as may be entered into
by the majority stockholder of the Company.
IN WITNESS WHEREOF, the undersigned have executed this Amendment Agreement
as of the date first above written.
XXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx, CEO
XXXXXX & CO., LLC
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
Accepted and agreed to:
THE MEDICONSULT TRUST
By: /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx, Trustee
