Exhibit 10.1

November 7, 2007

Ms. Belinda Tsao Nivaggioli, Ph.D.

Chief Executive Officer

The Avicena Group, Inc

228 Hamilton Avenue

3rd Floor

Palo Alto, CA 94301

Dear Belinda:

We are pleased that The Avicena Group, Inc (the “Company”) has selected CRT
Capital Group LLC (“CRT”) to act as its financial advisor in connection with
reviewing the Company’s strategic and capital market alternatives, including
exploration of financing or other capital market transactions (each, a
“Transaction”) that the Company may choose to pursue. This letter (this
“Engagement Letter”) sets forth the terms of CRT’s financial advisory
engagement.

 

1. Engagement. The Company hereby engages CRT to act as its financial advisor
with respect to the advisory and other services set forth in paragraphs 2 and 5
below. The parties acknowledge that (i) there can be no assurance that a
Transaction will be completed and (ii) this letter is solely for the use of the
parties hereto and may not be relied on by any third party.

 

2. Advisory Services. CRT shall provide such financial advice and assistance as
the Company may reasonably request in connection with a review of, and, if
applicable, and subject to future further engagement of CRT by the Company to
effect a specific Transaction affecting the implementation of, its strategic and
capital markets alternatives. Such services may include, among other things, the
following:

 

  (a) investigating the business, properties, operations and prospects of the
Company;

 

  (b) assisting the Company in defining and analyzing strategic and financial
objectives;

 

  (c) reviewing the Company’s strategic and capital market plans and identifying
and evaluating potential Transactions to give effect thereto;

 

  (d) creating such financial models, valuation analyses and other analytical
tools, as well as such written summaries or presentation materials, as may be
necessary in connection with any of the foregoing;

 

  (e) assisting the Company in analyzing, planning and, on a preliminary basis,
structuring any proposed Transaction;

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The Avicena Group, Inc

November 7, 2007

Page 2

 

  (f) identifying potential counterparties in any Transaction (“Identified
Counterparties”);

 

  (g) assist the Company in conducting a “non-deal road show” not related to any
specific or proposed Transaction;

 

  (h) consideration of research coverage of the Company (in the independent
discretion of CRT’s research department);

 

  (i) the market-making services described in paragraph 5, below; and

 

  (j) Identifying potential investors in any Transaction (“Identified
Investors”).

 

3. Retainer. As compensation for services to be rendered hereunder by CRT, the
Company agrees to pay to CRT a retainer fee (the “Retainer Fee”) comprised of a
fully due cash payment and stock purchase warrants, as described hereinafter.
The cash payment shall be in an amount equal to $150,000, payable for
convenience in four equal installments of $37,500. The initial installment is
payable upon execution of this Engagement Letter, the second installment on
January 29, 2007, the third installment on April 29, 2008 and the final
installment on July 29, 2008; provided that if the Company completes any
Transaction as to which CRT has been retained as provided paragraph 4 below,
then the entire unpaid amount of the Retainer Fee shall become immediately
payable upon the closing of the Transaction. In addition, the Company shall
issue to CRT, upon execution of this Engagement Letter, fully vested five-year
stock purchase warrants to purchase 800,000 shares of the Company’s common stock
at an exercise price equal to $3.35. (The stock purchase warrants shall be
subject to a separate warrant agreement substantially identical, other than as
to Exercise Price, to the C-1 Warrants issued in September 2007, and a
registration rights agreement.)

 

4. Engagement for Future Transactions. During the term of this Engagement Letter
and for a period of 12 months following termination,

 

  (a) if the Company proposes to enter into any private placement of debt,
equity or equity-linked securities issued by the Company or by any subsidiary,
the Company shall give CRT notice of its intention to engage in such Transaction
and an irrevocable, preferential right of first refusal to act as the Company’s
lead managing underwriter or lead placement agent, as the case may be, or,

 

  (b)

if the Company proposes to enter into any public offering of debt, equity or
equity-linked securities issued by the Company or any subsidiary, the Company
shall give CRT notice of its intention to engage in such Transaction and an
irrevocable, preferential right of first refusal to act as no less than a senior
co-managing underwriter, or co-lead placement agent, with economics no less than
any other non-sole book-running

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The Avicena Group, Inc

November 7, 2007

Page 3

 

 

managing underwriter or co-lead placement agent, as the case may be, in
connection with such Transaction(s) on terms and conditions customary and
standard for similar transactions.

 

5. Market Making. CRT will commence making a market in the Company’s common
stock upon execution of this Engagement Letter, and thereafter until termination
of this Engagement Letter by either party. It is CRT’s intention to provide
active market making services for the Company during the term of this Engagement
Letter, subject, at all times, to the discretion of CRT’s trading desk.

 

6. Finders’ Fee. The Company represents that there are no third party claims for
services in the nature of a finder’s fee with respect to a Transaction.

 

7. Expenses. The Company will bear all of its expenses in connection with the
services to be provided under this Engagement Letter, including without
limitation all filing fees, printing costs, postage and mailing expenses with
respect to the transmission of prospectuses, registrar and transfer agent fees,
counsel and accounting fees, issue and transfer taxes, if any, blue sky fees and
expenses (including counsel fees and disbursements with respect to blue sky
qualifications) and road show expenses, if any. Likewise, the Company will
reimburse CRT for its reasonable, documented out-of-pocket expenses in
connection with this engagement hereunder, including without limitation travel,
lodging, meals, mailing, telephone, due diligence and all other reasonable,
documented out-of-pocket expenses incurred by CRT; provided that reimbursement
of expenses incurred in connection with a Transaction will be governed by the
expense provision paragraph in a subsequent separate agreement between the
parties governing CRT’s services with respect to such Transaction.

 

8. Due Diligence. The Company will make available to CRT and its counsel all
material information regarding the Company and its officers, directors and
stockholders.

 

9. Termination. Each of the Company and CRT may terminate this Engagement Letter
at any time upon written notice to the other party; provided that on or before
the effectiveness of any termination, the Company shall pay to CRT any unpaid
portion of the Retainer Fee and shall reimburse CRT for any expenses entitled to
reimbursement pursuant to Section 7 and not previously paid.

 

10. Indemnification. The Company shall indemnify CRT pursuant to the terms and
conditions set forth in Addendum I, which is hereby incorporated by reference.

 

11.

Governing Law; Jurisdiction; Amendment; Headings. This letter shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be fully performed therein, without regard

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The Avicena Group, Inc

November 7, 2007

Page 4

 

 

to conflicts of law principles. Each party hereby consents to submit to the
jurisdiction of the courts of the United States of America located in the
Southern District of New York. This letter may not be modified or amended except
in a writing duly executed by the parties hereto. The section headings in this
letter have been inserted as a matter of convenience of reference and are not
part of this letter.

 

12. Counterparts. For the convenience of the parties, this letter may be
executed in any number of counterparts, each of which shall be, and shall be
deemed to be, an original instrument, but all of which taken together shall
constitute one and the same letter.

If the foregoing correctly sets forth our understanding, please sign this
Engagement Letter and return it to CRT.

 

Very truly yours, CRT CAPITAL GROUP LLC By:  

 

Name:   OLIVIER SAIDI Title:   Advisory Director

Accepted and agreed as of the first date written above:

 

THE AVICENA GROUP, INC. By:  

 

Name:   BELINDA TSAO NIVAGGIOLI Title:   Chief Executive Officer

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ADDENDUM I

This Addendum I is attached to and incorporated by reference into the foregoing
engagement letter (the “Engagement Letter”). Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Engagement Letter.

The Company hereby agrees to indemnify and hold harmless CRT and its affiliates,
and the respective directors, officers, partners, members, controlling persons
(within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended), agents, counsel
and employees of CRT or any of its affiliates (CRT and each such other person or
entity being referred to individually as an “Indemnified Person” and,
collectively, as “Indemnified Persons”), to the full extent lawful, from and
against any and all claims, liabilities, losses, damages, penalties, judgments,
awards and expenses incurred by any Indemnified Person (including reasonable
fees and documented disbursements of counsel) which (A) relate to or arise out
of (i) actions taken or omitted to be taken (including any untrue statements
made or alleged to have been made or any statements omitted or alleged to have
been omitted, whether in connection with any information or materials prepared
by or for the Company or CRT or any other oral or written statements) by the
Company, its affiliates, directors, employees or agents, or (ii) actions taken
or omitted to be taken by an Indemnified Person with the Company’s consent or in
conformity with its express, written instructions or its actions or omissions,
or (B) otherwise relate to or arise out of CRT’s activities on the Company’s
behalf in connection with the Engagement Letter (collectively, “Damages”). In
addition, the Company will reimburse CRT and any other Indemnified Person for
all costs and expenses, including reasonable counsel fees and documented
disbursements, as they are incurred, in connection with investigating, preparing
and defending any action, formal or informal claim, investigation, inquiry or
other proceeding (collectively, “Action”), whether or not in connection with
pending or threatened litigation, caused by or arising out of or in connection
with CRT acting pursuant to the Engagement Letter, whether or not CRT or any
Indemnified Person is named as a party thereto and whether or not any liability
results therefrom; provided the Company shall have the right to review and
comment upon such Indemnified Person’s selection and retention of counsel. The
Company will not, however, be responsible for any Damages pursuant to clause
(B) of the first sentence of this paragraph which are finally judicially
determined by a court of competent jurisdiction (not subject to further review)
to have resulted primarily from CRT’s willful misconduct or gross negligence.
The Company also agrees that neither CRT nor any other Indemnified Person shall
have any liability to the Company for or in connection with such engagement
except for any such liability for Damages incurred by the Company which are
finally judicially determined by a court of competent jurisdiction (not subject
to further review) to have resulted primarily from CRT’s willful misconduct or
gross negligence.

The Company will not, without CRT’s prior written consent, settle, compromise,
consent to the entry of any judgment in or otherwise seek to terminate any
Action in respect of which indemnification may be sought hereunder (whether or
not any Indemnified Person is a party thereto) unless such settlement,
compromise, consent or termination includes an unconditional release of each
Indemnified Person from all Damages arising out of such Action.

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In order to provide for just and equitable contribution, if a claim for
indemnification is made pursuant to these provisions, but it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification is not available for any reason even though the
express provisions hereof provide for indemnification in such case, then the
Company, on the one hand, and CRT on the other hand, shall contribute to such
Damages for which such indemnification or reimbursement is held unavailable in
such proportion as is appropriate to reflect the relative benefits to the
Company and its shareholders and creditors, on the one hand, and CRT on the
other hand, in connection with the actions contemplated by the engagement,
subject to the limitation that in any event the aggregate contribution of CRT
and all Indemnified Persons to all Damages to which contribution is available
hereunder shall not exceed the amount of fees actually received by CRT pursuant
to the Engagement Letter. For the purposes of this agreement, the relative
benefits to the Company and its shareholders and creditors, on the one hand, and
CRT, on the other hand, of the Engagement shall be deemed to be in the same
proportion as (a) the total value paid or contemplated to be paid or received or
retained or contemplated to be received or retained by the Company and its
shareholders and creditors in the transaction or transactions that are the
subject of the Engagement, whether or not any such transaction is consummated,
bears to (b) the fees paid or contemplated to be paid to CRT under the
Engagement Letter.

The foregoing right to indemnity and contribution shall be in addition to any
rights that CRT or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of CRT’s engagement and shall be binding on and inure to the
benefit of the successors, assigns, heirs and personal representatives of the
Company and CRT and any other Indemnified Party.