EXHIBIT 10.5
[BLACKWATER CAPITAL GROUP
LETTERHEAD]
April 10, 2007
Belinda Tsao-Nivaggioli
Avicena Group, Inc.
228 Hamilton Avenue
3
rd
Floor
Palo Alto, CA 94301
Re: Investment Banking and Financial
Advisory Agreement (the “Agreement”)
Dear Belinda:
You have advised us that Avicena
Group, Inc. (the “Company” or “Business” or
“Avicena”) is committed to maximizing the value of the
Business through listing on the American Stock Exchange, capital
equity deployment, merger and acquisition strategy, strategic
alliances, licensing agreements or increasing sales. This letter is
to confirm our understanding that Blackwater Capital Group, Inc.,
and its affiliates and associates (“Blackwater”), has
been engaged as an Investment Banker/Financial Advisor to the
Company on a non-exclusive basis with respect to financial advisory
services for capital market activities.
During the term of this agreement,
Blackwater in conjunction with its affiliates and associates shall
provide the Company with such regular and customary investment
banking and financial advisory services as are reasonably requested
by the Company, provided that Blackwater shall not be required to
undertake duties not reasonably within the scope of the services in
which it is generally engaged.
In performance of its duties,
Blackwater shall provide the Company with the benefits of its best
judgment and efforts. It is understood and acknowledged by the
parties that the value of Blackwater’s advice is not
measurable in a quantitative manner and Blackwater shall be
obligated to render advice, upon the request of the Company, in
good faith, as shall be determined by Blackwater.
The Company acknowledges that
Blackwater is in the business of providing financial advisory
services (of all types contemplated by this Agreement) to others.
Nothing herein contained shall be construed to limit or restrict
Blackwater or its affiliates and associates in conducting such
business with respect to others or in rendering such advice to
others.
This Agreement may be terminated by
either the Company or Blackwater upon giving thirty (30) days
prior written notice to that effect to the other party. No such
termination will affect (i) Blackwater’s rights to
receive fees accrued prior to such termination or to receive its
reimbursement for expenses as set forth in subparagraph C below; or
(ii) the rights of Blackwater or any other Indemnified Person
(as defined in Schedule A hereto) to indemnification and
contribution.
A. Company
Responsibilities
In connection with
Blackwater’s activities on the Company’s behalf, the
Company agrees to cooperate with Blackwater and will furnish to, or
cause to be furnished to, Blackwater, all information
Blackwater Avicena Engagement
April 10, 2007
Page 2 of 7
and data concerning the Company, any possible
transaction and any possible participant which Blackwater deems
appropriate and will provide Blackwater with access to
Company’s officers, directors, employees and
advisors.
B. Compensation
In consideration of such financial
advisory services, the Company agrees to pay Blackwater (i) an
initial engagement fee of $40,000.00 in cash; and (ii) an
incentive plan consisting of up to 250,000 warrants to purchase
Common Stock at $7.00 per share. The warrants will have a three
year term. The warrants will be held in an escrow account and paid
to Blackwater by the Company based on the Company’s view of
Blackwater’s performance. The term of this escrow will be
fifteen months, and the Company will issue a warrant to Blackwater
to purchase up to a maximum of 16,667 shares each month (16,662 for
the final month). The actual amount of warrant shares will be based
upon the Company’s evaluation of Blackwater’s
performance for the month. To the extent a monthly warrant does not
contain the full 16,667 shares (16,662 for the final month), the
difference between 16,667 (16,662 for the final month) and the
actual number will be forfeited and extinguished and will not be
available for inclusion in any of the other monthly
warrants.
Cash fees are payable as earned via
wire transfer to:
[REDACTED]
C. Indemnity
The Company agrees to indemnify
Blackwater and related persons in accordance with the
indemnification provisions annexed hereto as Schedule A, the
provisions of which are incorporated herein in their
entirety.
Blackwater Avicena Engagement
April 10, 2007
Page 3 of 7
D. Capital Commitment
Blackwater shall sign definitive
documents for the purchase of 1,600,000 shares of Series B
Convertible Preferred Stock and warrants to purchase 800,000 shares
of Common Stock for an aggregate price of eight million dollars
($8,000,000 USD). The Company at its sole discretion may reduce the
amount purchased by Blackwater to no less than 400,000 shares of
Series B Convertible Preferred Stock and warrants to purchase
200,000 shares of Common Stock by the settlement date. Settlement
of the purchase will take place May 21, 2007, or such earlier
time as Blackwater may elect. Blackwater’s initial engagement
fee in Paragraph B (i) will be paid at the time of the signing
of the definite documentation. It is agreed that, at the time of
funding, Blackwater can have Blackwater Capital Partners III, L.P.
(the “Fund”) purchase the shares of Series B
Convertible Preferred Stock as long as the Fund: (i) is
structured as represented in previous e-mails from Blackwater to
the Company, (ii) executes documentation deemed necessary or
advisable by the Company in connection with such purchase and
(iii) is able to give the Company the representations and
warranties contained in the Securities Purchase Agreement as of the
date of the purchase.
E. General
Blackwater represents, warrants and
agrees it will comply with all securities laws, including
Regulation D and applicable state securities laws. The services to
be provided by Blackwater hereunder do not include the giving of
tax, legal, regulatory, valuation, actuarial or other specialist
advice or the provision of any other services unless Blackwater
specifically agrees in writing to provide such services. Blackwater
will have no liability in respect of any services or advice
provided to the Company by persons other than Blackwater (including
accountants, legal advisers and other specialist advisers) other
than Blackwater and persons employed by Blackwater and the degree
to which Blackwater may rely on the work of such other persons
shall not be affected by any limitation of liability for such work
agreed between them and the Company.
Blackwater will not have any
responsibility for due diligence which would normally be carried
out by outside specialist advisers (such as accountancy, tax, legal
or valuation advisers) notwithstanding that any information or
advice from these advisers may be passed on to Blackwater or passed
on by Blackwater to the Company. It is solely the Company’s
responsibility to ensure that the information and advice relating
to such due diligence is received and considered by the Company and
is adequate for the purposes of the transaction.
Notwithstanding that Blackwater is
not held responsible or liable for due diligence, Blackwater
reserves the ri
