Consulting Services Agreement - CytoTherapeutics Inc. and John Schwartz
CONSULTING SERVICES AGREEMENT BETWEEN
CYTOTHERAPEUTICS, INC.
AND
JOHN SCHWARTZ
THIS CONSULTING SERVICES AGREEMENT (hereinafter referred to as the "Agreement")
effective as of the 27th day of July, 1998 (the "Effective Date"), as amended
and restated as of this 19th day of December, 1998, by and between
CytoTherapeutics, Inc., a corporation organized under the laws of the state of
Delaware with a place of business at 701 George Washington Highway, Lincoln,
Rhode Island 02865 (hereinafter referred to as "Company"), and John Schwartz, an
individual, with a place of business at 110 Atherton Avenue, Atherton,
California 94207 (hereinafter referred to as "Consultant").
In consideration of the promises and mutual covenants contained herein and on
the terms and conditions hereinafter set forth, it is agreed as follows:
1. PROVISION OF SERVICES - Consultant shall provide to Company, at the
direction of the Company's Chief Executive Officer and in cooperation with
the Officers, employees and Directors of the Company, up to twenty (20)
hours per month of strategic business advice and counsel ("Services"). In
addition, when requested in writing by the Company's Chief Executive
Officer, Consultant shall use his business judgment and experience to
materially participate in the negotiation and consummation of a strategic
collaboration transaction with third parties designated by the Company's
Chief Executive Officer ("Additional Services"). Such Additional Services
are not subject to the twenty (20) hours per month limit established for
the Services.
2. COMPENSATION - (a) Company agrees and shall compensate Consultant in
consideration of his performance of the Services and the Additional
Services as follows:
(1) Within ten (10) business days of the execution of this Agreement,
and as compensation for Services rendered during the period of
September 27, 1997 through July 26, 1998, the sum of Fifty Thousand
Dollars ($50,000) in cash, plus a fully vested option, exercisable
for a period of 10 years from the Effective Date, to purchase 20,000
shares
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of Company's common stock with an exercise price equal to the
closing bid price for the shares of the Company's common stock as
quoted by the Nasdaq stock market for the Effective Date of this
Agreement ($1.281 per share);
(2) For Services to be rendered during the Term of this Agreement,
Consultant shall be paid the sum of Five Thousand Dollars ($5,000)
in cash per month on each of the monthly anniversaries of the
Effective Date, for a total cash compensation of One Hundred Twenty
Thousand Dollars ($120,000) during the Term of this Agreement. In
addition, Consultant shall receive upon execution of this Agreement
an option to purchase 76,000 shares of the Company's common stock
with an exercise price equal to the closing bid price for the shares
of the Company's common stock as quoted by the Nasdaq stock market
for the Effective Date of this Agreement (the "Initial Option"), and
on July 27, 1999, the first anniversary of the Effective Date, an
option to purchase 48,000 shares of the Company's common stock with
an exercise price equal to the closing bid price for the shares of
the Company's common stock as quoted by the Nasdaq stock market for
the date of such grant (the "Supplemental Option"). The Initial
Option shall vest at the rate of 3,167 shares per month for the
first 23 months, with a final vesting of 3,159 shares in the 24th
month. The Supplemental Option, when granted, will vest at the rate
of 2,000 shares per month for 24 months. Both the Initial Option and
the Supplemental Option shall be exercisable for a period of 10
years from the date of the initial grant.
(3) For the Additional Services, upon the consummation of a strategic
collaboration transaction with such third party designated by the
Company's Chief Executive Officer in accordance with Section 1
hereof (the "Collaboration Agreement"), Consultant shall be paid a
fee equal to three percent (3%) of the Transaction Consideration, as
defined below (the "Additional Fee"), in accordance with the
following terms:
(i) Payment of the Additional Fee shall be made within thirty (30)
days of the end of each calendar year and each such Additional
Fee payment shall be calculated on the basis of the
Transaction Consideration actually received by the Company in
the immediately preceding calendar year.
(ii) The Additional Fee shall be paid fifty percent (50%) in cash
and fifty percent (50%) in the form of an option or warrant,
at the election of the Company (the "Option"), to purchase
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registered shares of the Company's common stock, each such
Option being based on the following terms:
(A) The number of shares included in each such Option shall be
calculated by dividing the sum equal to one and a half percent
(1.5%) of the Transaction Consideration actually received in
the immediately preceding calendar year by the average closing
bid price for the common stock of the Company as quoted by the
Nasdaq stock market for the ten (10) trading days beginning
thirty (30) days immediately preceding the first public
announcement by the Company to occur (the "Closing Bid Price")
concerning (x) the consummation of the Collaboration
Agreement, or (y) the execution of a Letter of Intent with
respect to the Collaboration Agreement, or (z) the
confirmation of the existence of any discussions concerning
the Collaboration Agreement;
(B) Each such Option shall be fully vested upon their issuance,
shall bear an exercise price of twenty cents ($ 0.20) per
share and shall be exercisable for a period of ten years from
the date of their respective issuance.
(iii) The Additional Fee shall be due and payable to Consultant for
each calendar year, or portion thereof, of the original term
of the Collaboration Agreement, as envisaged and specified
under the terms thereof, provided the Company receives
Transaction Consideration within such calendar year or portion
thereof. No Additional Fee shall be due and payable to
Consultant for any renewal period or extension of the original
term of the Collaboration Agreement.
(iv) In the event of (a) the sale and transfer of all or
substantially all of the assets of the Company, or (b) any
transaction as a result of which any one individual or entity
owns thirty percent (30%) or more of the common stock of the
Company (hereinafter "Change of Control"), then any Additional
Fee which would be due to Consultant during the remaining
portion of the original term of the Collaboration Agreement,
as envisaged and specified under the terms of thereof, shall
be accelerated and become due and payable within thirty (30)
days of such Change of Control. Solely for the purposes of
this Section 2(a)(3)(iv), the accelerated Additional Fee shall
be calculated on all Transaction Consideration due during the
remaining portion of the original term of the Collaboration
Agreement, but shall exclude any contingent payments which
would only be due upon the occurrence of a milestone event.
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For purposes of this Agreement, "Transaction Consideration"
means the total proceeds and other consideration paid and to
be paid or contributed and to be contributed to the Company
pursuant to a Collaboration Agreement and any amendment,
modification, novation, accord and satisfaction thereof,
including: (i) cash; (ii) notes, loans, and letters of credit
at the face value thereof, (iii) securities, and other
tangible and intangible property at the fair market value
thereof; and (iv) payments to be made to Company in
installments, such as annual sponsored research payments and
milestone payments for the achievement of established
criteria, but excluding royalties.
(b) In addition to the compensation set forth in paragraph 2(a) above,
the Company agrees to reimburse Consultant for reasonable
out-of-pocket expenses actually incurred by Consultant in the
performance of the Services and the Additional Services, including,
but not limited to telephone and facsimile charges and calls, car
rental, lodging, travel expenses, meals and associated expenses.
3. TERM - This Agreement shall enter into force and effect as of the
Effective Date and shall remain in force and effect for a period of
twenty-four (24) months (the "Term"). In the event this Agreement shall
not be renewed beyond such Term, any provisions which by their nature
and/or provisions extend beyond the Term of this Agreement shall survive
the expiration of this Agreement and be binding on the parties hereto with
full force and effect.
4. CONFIDENTIALITY OF INFORMATION AND DOCUMENTS - In the event that Company
shall submit information and/or documents to Consultant in order to permit
him to perform the Services required under this Agreement, Consultant
shall keep such information and/or documents in the strictest confidence
using the same degree of care that Consultant uses in safeguarding his own
confidential information both during and after the completion of the
services under this Agreement and for a period of ten (10) years after
completion of the Services, unless it shall receive from Company the
consent of Company in writing to disclose it. However, nothing herein
shall be interpreted as preventing Consultant from disclosing and/or using
said information or documents which (i) are already rightfully in the
possession of Consultant without obligation of confidence, but were not
obtained directly or indirectly from Company or its affiliates; or (ii)
are independently developed by Consultant not as part of the Services
rendered or called for under the terms of this Agreement; or (iii) are or
become available to the general public without breach of this Agreement;
or (iv) are rightfully received by Consultant from a third party who is
not under obligation of confidence, but who
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did not obtain them directly or indirectly from Company or its affiliates;
or (v) are required to be disclosed pursuant to law or court order, or as
may be authorized by Company.
5. LIABILITY OF CONSULTANT - In furnishing Company with the Services provided
herein, Consultant shall not be liable to Company or its creditors for
errors of judgment or for any matters, except for willful malfeasance, bad
faith or gross negligence in the performance of the Services or Additional
Services or the reckless disregard of its obligations and duties under the
terms of this Agreement. It is further agreed and understood that
Consultant may rely upon information furnished to it by Company which
Consultant reasonably believes to be accurate and reliable and that,
except as provided herein, Consultant shall not be accountable for any
loss suffered by Company by the reason of Company's action or non-action
on the basis of any advice, recommendation or approval of Consultant,
except as provided above.
6. INDEPENDENT CONTRACTOR - Execution of this Agreement in no way creates,
nor shall this Agreement be interpreted or construed as creating, an
employment, agency, partnership or joint venture relationship between
Company and Consultant and it is understood Consultant will be acting as
an independent contractor
7. MISCELLANEOUS
a. OTHER ACTIVITIES OF CONSULTANT. Company recognizes that Consultant
now renders and may continue to render management and other advisory
services to other companies which may or may not have policies and
conduct activities similar to those of Company. Consultant shall be
free to render such advice and other services and Company hereby
consents thereto. Consultant shall not be required to devote its
full time and attention to the performance of the Services or the
Additional Services hereunder to Company, but shall only devote so
much of its time and attention as Company and Consultant mutually
deem reasonable and necessary for such Services and Additional
Services.
b. CONTROL. Nothing contained herein shall be deemed to require Company
to take any action contrary to its Certificate of Incorporation or
By-Laws, or any applicable statute or regulation, or to deprive its
Officers and Board of Directors of their responsibility for any
control of the conduct or the affairs of Company.
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c. This Agreement, read together with the letters addressed by the
Company to Consultant dated July 27, 1998 and August 11, 1998
(copies of which are attached hereto), shall constitute the entire
agreement between Company and Consultant relating to the Services to
be performed, and no representations, promises, understandings, or
agreements, oral or otherwise, not herein contained shall be of any
force or effect. No modification or waiver of any provision of this
Agreement shall be valid unless it is in writing and signed by both
Company and Consultant. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the
parties hereto.
d. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
e. In the event of any litigation between the parties to declare or
enforce any provision of this Agreement, the prevailing party shall
be entitle to recover from the losing party, in addition to any
other recovery and costs, reasonable attorney's fees and costs
incurred in such litigation, in both the trial and in the appellate
courts.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have signed this Agreement as of the date first above written.
JOHN SCHWARTZ CYTOTHERAPEUTICS, INC.
By: By:
---------------------------- Richard M. Rose, M.D.
John Schwartz President &
Chief Executive Officer