1
EXHIBIT 10.2
MANAGEMENT AND CONSULTING AGREEMENT
-----------------------------------
Executed after but dated with effect as of and from the 16th
day of November, 1995.
B E T W E E N:
PHARMA PATCH PLC. incorporated under the laws of the
Republic of Ireland
(hereinafter referred to as "PP")
OF THE FIRST PART;
- and -
PINNACLE FINANCIAL CORPORATION, (formerly known as
1141238 Ontario Limited)
(hereinafter referred to as "Pinnacle")
OF THE SECOND PART;
WHEREAS:
1. PP has recently completed the sale of substantially all of its
operating assets and business operations and will either
continue as a going concern with new business activities or
will be dissolved upon the approval of the shareholders of PP,
and PP is desirous of retaining the expertise and services of
Pinnacle on the terms and conditions all as hereinafter
described and set forth; and
2. Pinnacle, represented by Kenneth G. Howling, has developed
expertise in the fields of financial management and the
operation of businesses and their affairs generally.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
covenants and agreements hereinafter contained and exchanged as well as for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto covenant and agree as follows:
1. ENGAGEMENT
----------
1.1 PP hereby engages to provide financial consulting services, all with
respect to the world-wide business and affairs of PP, and its subsidiary and
associated corporations now in existence and hereinafter established
(collectively hereinafter sometimes called the "Business") from the offices of
PP in Dublin, Ireland and elsewhere around the world upon the terms and
conditions hereinafter set forth, all of which are hereby agreed to and
accepted by Pinnacle.
1.2 Without limiting any of the foregoing, Pinnacle shall be responsible
for the management and direction of the financial controls and reporting
systems of PP and the Business and shall provide advice thereto to the best of
its ability in accordance with reasonable business standards.
1.3 Pinnacle agrees to serve PP and the Business and provide the services
herein described and contemplated and to exercise the powers and duties in
connection therewith as well as to
2
2
perform such other services and exercise such other powers and duties as may be
determined from time to time by the board of directors of PP or of the relevant
subsidiary or associated corporation forming part of the Business, as the case
may be, consistent with the provisions hereof.
1.4
a) In implementation of the discharge of its responsibilities
hereunder, Pinnacle shall and does hereby designate Kenneth G.
Howling to serve PP as its Vice President, Finance and Chief
Financial Officer and of each of the subsidiaries and
associated corporations of the Business. PP agrees to appoint
Kenneth G. Howling to occupy the office of Vice President,
Finance and Chief Financial Officer of PP and to cause him to
be so appointed for each of the subsidiaries and associated
corporations of the Business during the term of this
agreement.
b) It is agreed that the powers and duties of the Vice President,
Finance and Chief Financial Officer of PP shall include
presiding over all matters of a financial, and accounting
nature involving PP and of the relevant subsidiaries and
associated corporations and shall be indemnified and saved
harmless by PP for any and all proper and lawful acts in the
discharge of such powers and duties. It is agreed by PP that
all relevant articles, charter or other constating documents
or the by-laws or resolutions of PP and the relevant
subsidiaries and corporations shall be consistent with the
foregoing powers and duties, as the case may be.
1.5 Pinnacle shall also be entitled in the exercise of its powers and the
performance of its duties hereunder to enter into directly or to cause its
designated nominee management consultant to enter into separate and independent
management and consulting contracts with any subsidiary or associated
corporation of PP for such purposes and on such terms and provisions as are
considered by the contracting parties appropriate but nevertheless consistent
with the terms and provisions hereof.
1.6 Pinnacle shall report to the Chairman of the Board and Chief Executive
Officer and shall report fully on the financial management, operations and
business and affairs of PP and the Business.
1.7 Pinnacle agrees to use its best efforts to promote the world-wide
interests and goodwill of PP and the Business and in so doing accepts the
responsibility for world-wide travel as may be required.
2. REMUNERATION
------------
2.1 PP shall pay Pinnacle for services rendered hereunder a gross annual
base remuneration commencing with the first year of the term hereof of One
Hundred and Twenty Five Thousand Dollars ($125,000) U.S., payable monthly at
the rate of Ten Thousand Four Hundred and Seventeen Dollars ($10,417.00) U.S.
on the first day of each month during the first year, exclusive of bonuses,
stock options, benefits and other compensation and exclusive of reimbursement
of all disbursements and costs.
2.2 It is agreed that the gross annual base remuneration payable to
Pinnacle hereunder after the first year of the term hereof shall be increased
annually thereafter by a minimum of ten percent (10%) of the amount paid
therefor during the immediately preceding year of the term hereof, payable
monthly at the increased rate on the first day of each month during each
succeeding year of the term hereof.
3
3
2.3 It is further agreed that the gross annual base remuneration otherwise
payable hereunder to Pinnacle by PP shall be reduced by an equivalent amount
paid with respect to or for and on behalf of PP by any subsidiary or associated
corporation of PP to Pinnacle or to its designated nominee management
consultant which enters into a separate and independent management and
consulting contract with any such subsidiary or associated corporation of PP.
2.4 Each of Pinnacle and the Vice President, Finance and Chief Financial
Officer shall be entitled to be promptly reimbursed by PP for or to have paid
directly by PP out-of-pocket costs, charges, expenses and disbursements
including without limiting the foregoing travel, entertainment and
accommodation actually and property incurred from time to time in carrying out
their respective duties hereunder against production of invoices or statements.
2.5 In addition to the annual base remuneration, bonuses, stock options and
benefits payable hereunder to Pinnacle and the Vice President, Finance and
Chief Financial, Pinnacle shall be entitled to receive an annual performance
bonus payable in cash or, by mutual agreement, by equivalent equity:
(i) with respect to the first year of the term hereof, an amount
equal to one hundred percent (100%) of the gross annual base
remuneration payable for the first year of the term hereof under
Section 2.1 above, to be paid only in the event that the closing price
of PP's American Depositary Shares, or equivalent, in any 21 trading
day period (whether or not consecutive) immediately preceding February
28, 1997 equals or exceeds US$2.00, to be paid on or before March 31,
1997 provided that in the event there occurs at any time during
the term hereof a change of control of PP as described in subsection
(iii) below, the foregoing performance bonus amount shall become due
and payable in full;
(ii) with respect to each other year of the term hereof thereafter,
an amount to be agreed upon with the compensation committee of the
board of directors of PP before the end of the year of the term hereof
in respect of which the annual performance bonus relates, payable
immediately upon the occurrence of a change of control, or payable
otherwise within thirty (30) days of the end of the year of the term
hereof, as the case may be; and
(iii) a change of control of PP shall mean the acquisition of the
ownership of securities, whether convertible into, exchangeable for or
respecting the right to acquire shares of PP and/or shares of PP which
results in a new person or group of persons or persons acting alone or
jointly or in concert or with others which are associated or
affiliated for such purposes therewith and which or who are not at the
effective date holders of such securities or shares in PP,
beneficially acquiring and owning such securities or shares which
would entitle the holders thereof to cast more than fifty per cent
(50%) of the votes attaching to all such securities and shares in the
capital of PP that may be cast to elect directors of PP.
2.6 In addition to the foregoing, Pinnacle shall be entitled to receive
such number of stock options and upon such terms as determined by the Board of
Directors from time to time, provided that all unexercised options granted
shall not terminate or expire but shall immediately become exercisable in the
event there occurs at any time during the initial term hereof a change of
control of PP, as such term is defined in paragraph 2.5(iii) above.
4
4
2.7 PP agrees to provide to and to allow either Pinnacle or Vice President
Finance and Chief Financial Officer of PP and of each subsidiary or associated
corporation, as the case may be, to participate in all additional benefits
determined by the compensation committee thereof to be provided by such
corporation from time to time to senior executives or consultants or advisors.
In particular, PP shall provide, or shall be required to pay Pinnacle's costs
of providing reasonable life, health, dental and long-term disability insurance
to Mr. Howling.
3. TERM
----
3.1 The term of engagement hereunder shall be for an original term of
three (3) years determined from the effective date hereof unless earlier
terminated as hereinafter provided. Upon the expiry of the original term
hereof, and on each second anniversary of such date following thereafter,
subject to mutual agreement being reached in writing within three (3) months of
the relevant expiry date, the term of this agreement may be extended for
successive renewals each for a further term of two (2) additional years on the
same terms and conditions except as to gross base annual remuneration which
shall be mutually agreed upon at the time.
4. TERMINATION
-----------
4.1 PP may terminate this agreement with Pinnacle without notice or
further compensation, subject to a full and complete accounting for all
obligations and commitments due and payable hereunder to the effective date of
termination, for the following causes:
a) If Pinnacle or the Vice President, Finance and Chief Financial
Officer is convicted of a criminal offence involving fraud or
dishonesty;
b) if the Vice President, Finance and Chief Financial Officer
dies;
c) if the Vice President, Finance and Chief Financial Officer
becomes permanently disabled and prevented from performing his
duties as an officer for six (6) continuous months;
d) if Pinnacle fails to substantially remedy the failure within a
reasonable period of time after receiving written notice from
PP with reasonable particularity, provided the same is capable
of being remedied within a reasonable period, that Pinnacle
fundamentally and repeatedly has demonstrated its failure to
perform its material duties hereunder in a reasonably
competent manner; or
e) if Pinnacle fails to make Kenneth G. Howling available as Vice
President, Finance and Chief Financial Officer.
4.2 During the original term hereof, PP may terminate this agreement on no
less than six (6) months' prior written notice without cause upon payment to
each of Pinnacle and the Vice President, Finance and Chief Financial Officer,
as the case may be, of an amount on account of all payments provided for
hereunder, and whether paid or payable by PP directly or otherwise, equal in
the aggregate to the worth of such payments calculated from the effective date
of termination at the then applicable rate or amounts for the greater period
of: a) the number of years or part thereof remaining for the balance of the
Original term hereof; and b) 12 months.
4.3 During any renewal term, PP may terminate this agreement on no less
than six (6) months'
5
5
prior written notice without cause upon payment to each of Pinnacle and the
Vice President, Finance and Chief Financial Officer of an amount on account of
all payments provided for hereunder, and whether paid or payable by PP directly
or otherwise, equal to the worth of such payments calculated from the effective
date of termination at the then applicable rate or amounts for twelve (12)
months.
4.4 It is agreed that in no event shall the amounts payable to each of
Pinnacle and the Vice President Finance, and Chief Financial Officer under
Sections 4.2 and 4.3 above exceed the amounts otherwise payable had Pinnacle
performed its obligations hereunder for the balance of the original term or the
renewed term whichever is applicable.
4.5 It is agreed that instead of giving no less than twelve (12) months'
notice of termination hereof as contemplated in Sections 4.2 and 4.3 above and
making the payments during such notice period, PP may make payment by lump sum
to each of Pinnacle and the Vice President Finance, and Chief Financial Officer
of all amounts otherwise provided for hereunder during the applicable notice
period at the then applicable rate or amounts.
4.6 Pinnacle shall be entitled to terminate this agreement on six (6)
months' prior written notice for any reason, with or without cause, in which
event PP shall be excused from all further liability from and after the
effective date of such termination with respect to further payments thereafter
otherwise due and payable hereunder but for such termination, to or for the
benefit of Pinnacle and the Vice President Finance, and Chief Financial
Officer, subject to an accounting and payment of all amounts due and owing
therefor to the effective date of such termination.
4.7 Upon termination hereof in accordance with its terms, Pinnacle shall
cause the Vice President Finance, and Chief Financial Officer of PP and of any
subsidiary or associated corporation if nominated by or at the instance of PP
in exercise of its rights hereunder, to resign from office effective the same
date failing which PP shall be entitled to remove him or cause him to be
removed from each such office held, provided all payments and reimbursements to
be made hereunder have been made and accounted for in full to the satisfaction
of Pinnacle.
5. PP Covenants
------------
5.1 PP shall provide or cause to be provided at its sole cost and expense
to Pinnacle and any designated nominee management consultant to the Business
and to the Chairman of the Board and Chief Executive Officer thereof suitable
offices together with all necessary administrative assistance and support staff
and equipment at its place of business in the City of Dublin, in the Republic
of Ireland, and elsewhere in the world where PP permanently or temporarily
carries on business or the Business is carried on as are suitable to enable
Pinnacle, its designated nominee management consultant and Vice President
Finance, and Chief Financial Officer to fulfil their respective duties and
obligations hereunder.
5.2 PP covenants and agrees to take and diligently prosecute all such
steps, actions and proceedings to qualify the shares of PP which may be subject
to options granted hereunder to Pinnacle to be registered for public trading in
the United States of America.
5.3 Whether PP is successful in obtaining all necessary approvals with
respect to qualifying the shares of PP to trade publicly as contemplated
hereunder, nonetheless PP agrees to issue and deliver to Pinnacle or its
designated nominee certificates for all such shares of PP as fully paid and
non-assessable which are subject to the stock options granted hereunder to
Pinnacle or its designated nominee once exercised in accordance with the terms
hereof and to authorize and direct
6
6
the registration of such certificate(s) to be properly recorded in the books
and records of PP.
5.4 PP covenants and agrees to use its best efforts to obtain all
necessary covenants and approvals as may be required or necessary and whether
from third parties or its shareholders or board of directors or those of the
Business or otherwise to give full effect and carry out all of the terms and
provisions hereof.
6. Pinnacle Covenants
------------------
6.1 Pinnacle acknowledges and agrees that
(a) in the course of performing its duties and obligations
hereunder, Pinnacle will have access to and will be entrusted with
detailed confidential information, data and business or trade secrets
and intellectual property covering the present and future products,
services, operations, marketing and sales techniques and procedures of
PP and the Business, including information pertaining to existing or
potential customers and suppliers and participants with PP or the
Business in strategic alliances (collectively "Trade Secrets"), the
disclosure of any of which to competitors of PP or the Business would
be detrimental to PP and the Business;
(b) in the course of performing its duties and obligations
hereunder, Pinnacle will be a representative of PP and the Business to
customers, suppliers and strategic alliance parties and as such will
have responsibility for maintaining and enhancing the goodwill of PP
and the Business;
(c) Pinnacle will have fiduciary duties to PP and the Business
including the duty to act in the best interests thereof; and
(d) the right to maintain the confidentiality of the Trade
Secrets, the right to preserve the goodwill of PP and the Business and
the right to the benefit of relationships developed with customers,
suppliers and strategic alliance parties relating to PP and the
Business by virtue of contractual relationships established hereby,
constitute proprietary rights of PP which PP is entitled to protect.
In acknowledgement of the matters described immediately above, and in
consideration of the payments to be received by Pinnacle hereunder, Pinnacle
agrees that neither Pinnacle nor any of its designated nominees will during
the period commencing on the effective date hereof and ending two (2) years
following the expiration of the term hereof, whether original or as the same
may be renewed and whether earlier terminated, disclose to any person or in
any way make use of the Trade Secrets inconsistent with the purposes herein
set forth in any manner, any of the Trade Secrets save and except for such
information otherwise forming part of the Trade Secrets that is or becomes
generally available to the public other than as a result of disclosure by
Pinnacle.
7. General
-------
7.1 This agreement shall not be construed to be in any respect an
employment arrangement or a partnership between PP or the Business and Pinnacle
or its designated nominees the agent of PP or of the Business, as the case may
be, and Pinnacle and its designated nominees shall each be conclusively deemed
for all purposes, whether in law or equity, to be an independent contractor.
7
7
7.2 Each of the parties hereto covenants and agrees to be bound by,
observe and perform, and to take all actions, steps, proceedings and execute
such further and other assurances, documents and agreements, whether under
corporate seal or otherwise, as are reasonably necessary or required to fully
implement and give effect to all of the terms and provisions hereof.
7.3 Any notice, demand, request, declaration or other communication
required or permitted to be given or made hereunder shall be in writing,
addressed to the recipient and either delivered by hand or mailed by prepaid
registered mail at the address indicated below. At any time other than due to
a disruption in the service of the mail which has or is likely to delay the
mailing and receipt of such a notice, a notice so mailed shall be deemed to
have been received fourteen (14) business days after its postmarked date
thereof or, if delivered by hand, shall be deemed to have been received at the
time of physical delivery. In lieu thereof, notice may be sent by telex or
facsimile or like message as indicated below, in which case it shall be deemed
to have been received on the next business day immediately following the day of
being sent subject to confirmation of sending and receipt thereof being
obtained. Either party hereto may in the manner above provided from time to
time give notice of a change of address or number to which a notice is
thereafter to be sent. Any notice given as aforesaid shall be considered
sufficient notice hereunder.
Pharma Patch plc.
15-16 Fitzwilliam Place
Dublin 2, Ireland
Fax No. 353-1-668-7144
Pinnacle Financial Corporation
43 Parkhurst Blvd.
Toronto, Ontario
M4G 2C8
7.4 In the event of a translation of this agreement into any language
other than English, the English version shall govern.
7.5 In the event any clause, paragraph,term or provision of this agreement,
in whole or in part, including the breadth or scope thereof, shall be held by
any court of competent jurisdiction to be invalid or unenforceable for any
reason whatsoever, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder thereof or of the rest of this
agreement, all of which shall remain valid and enforceable.
7.6 This agreement contains the whole of the agreement between the parties
hereto relating to the subject matter hereof and there are no collateral or
precedent representations, agreements or conditions not specifically set forth
herein, and no modification, amendment, variation or further agreement with
respect hereto shall be effective or binding upon the parties hereto unless
agreed to in writing beforehand.
7.7 The parties hereto hereby covenant and agree that this agreement shall
be binding upon and enure to the benefit of the parties hereto, their
successors, nominees and permitted assigns.
7.8 The parties hereto hereby covenant and agree that this agreement may
not be assigned in whole or in part by either of the parties hereto except
in the case of PP, upon the completion of a corporate re-structuring, and in
the case of Pinnacle, to a related or affiliated corporation provided
8
8
such related or affiliated corporation can demonstrate to the reasonable
satisfaction of PP that Kenneth G. Howling is under contract to such related
or affiliated party to provide consulting and management services thereto.
7.9 Notwithstanding anything else contained herein, all communications,
documents, data and information, whether written or oral, regarding the
business or affairs of either party hereto (collectively, "Information"),
obtained or received in any capacity by the other party hereto and whether done
formally or informally or directly or indirectly and for whatever purpose or
reason including the performance or administration or enforcement of the terms
and provisions hereof, and whether pursuant to the provisions hereof or
otherwise, shall be kept private and confidential and in strict confidence and,
except as may be required by a court, governmental or regulatory authority of
competent jurisdiction, or otherwise by law, shall not be released to any other
party without the express prior written approval of the parties hereto. In the
event of any release, filing or disclosure of information required as
aforesaid, the party hereto so compelled hereby covenants and agrees
notwithstanding to promptly take all such actions, steps and proceedings in the
circumstances to assert and maintain a claim for privacy and confidentiality to
the maximum extent permissible at law or equity, it being acknowledged and
agreed by the parties hereto that this agreement is a contract of uberrimae
fides and imposes an obligation on each of the most abundant and uttermost good
faith.
7.10 The parties hereto hereby each confirm and agree that the covenants
and restrictions contained herein regarding non-disclosure and confidentiality
are reasonable, valid and are given for valuable consideration and each party
hereto covenants and agrees to be bound hereby and that the terms and
provisions hereof may be pleaded as an estoppel in actions or proceedings to
contest the validity of the foregoing and that all defences to the strict
enforcement hereof are hereby waived. Each party hereto further acknowledges
and agrees that the other would suffer irreparable injury in the event of any
breach of any such covenant or restriction and accordingly, that damages
therefor would be inadequate as a complete remedy at law and as a result that
each party hereto which has suffered the injury shall be entitled to temporary
and injunctive relief enjoining the defaulting party from any such breach.
7.11 The parties hereto hereby agree to arbitrate any dispute or
disagreement arising out of or relating to this agreement, whether during the
term hereof or after, which touches upon the validity, construction, meaning,
performance or effect hereof or the rights and liabilities of the parties
hereto or any other matter arising out of or connected herewith shall be
referred to final and binding arbitration to a panel of two (2) arbitrators,
one (1) selected by each of the parties hereto, whose decision shall be final
and binding as between the parties hereto and shall not be subject to review or
appeal by any process or law. The arbitrators may determine all questions of
law and procedure and after hearing any evidence and representations of the
parties, shall make an award and reduce the same to writing together with
reasons therefor in reasonable particularity. It is agreed that the
arbitrators shall not be bound by any formal rules of evidence. The cost of
the arbitration shall be borne by the parties hereto as may be specified in
such determination.
7.12 It is further agreed that the terms and provisions of Sections 6.1,
7.9, 7.10, 7.11 and this Section 7.12 shall survive the termination of this
agreement.
7.13 The parties hereto hereby confirm and acknowledge the truth in
substance and fact of the recitals contained herein.
7.14 This agreement may be executed simultaneously in counterparts, and
evidenced by
9
9
facsimile, each of which shall be an original but both of which when taken
together, shall constitute one and the same instrument.
7.15 IN WITNESS WHEREOF the parties hereto have hereunto signed this
agreement with effect as of the date first above written.
PHARMA PATCH PLC
[SIG]
Per:--------------------------
PINNACLE FINANCIAL CORPORATION
/s/ KENNETH G. HOWLING
Per:--------------------------