EXHIBIT
10.38

    
 

    CONSULTING
AGREEMENT

     

    THIS CONSULTING AGREEMENT (this “Agreement”) is made and entered into as of
August 17, 2010 (the “Effective Date”),
by and between MEDGENICS, INC., a
Delaware corporation (the “Company”), and
EQUITY SOURCE PARTNERS, LLC (“ESP”).

     

    RECITALS

     

    WHEREAS, the Company desires the expertise that ESP can
provide in
organizing efforts to secure financing and coordinate all of those
potential funding sources who have
been contacted
by the Company or its
representatives; and

     

    WHEREAS, ESP has agreed to
provide services to the Company on the terms and conditions hereinafter set
forth;

     

    NOW, THEREFORE, the Company
and ESP hereby agree as follows:

     

    AGREEMENTS

     

    1.           Engagement,
Period of Engagement. The Company offers to engage ESP, and ESP hereby
accepts such engagement, to provide services to the Company as a consultant for
a period commencing as of the Effective Date and ending December 31, 2010 (the
“Term”). The parties agree and
acknowledge that the previous Consulting Agreement dated as of May 1, 2009 among
the parties (the “2009 Consulting Agreement”) has expired.

     

    2.           Services.
During the Term, ESP shall assist and advise the Company’s management in
connection with the Company’s efforts to secure financing and will work with the
Company specifically with respect to its current list of potential investors and
will represent the Company in the United States and to the extent helpful in
Europe and Israel. ESP will contact each of the broker dealers or funds on the
Company's list, monitor their interest and report back to the Company. ESP shall
also make itself available to advise the Chief Executive Officer (the “CEO”) as to other matters relating to the
Company.

     

    3.           Compensation.
In consideration for the services to be provided under Section 2 as well as
services provided by ESP to the Company in 2010 prior to the commencement of the
Term, the Company agrees to issue to ESP (and its permitted assigns) promptly
after the full execution of this Agreement, subject to compliance with all
applicable securities and other laws, an aggregate 975,000 unregistered
restricted shares of the Company’s common stock (the “Shares”). In addition, the parties agree and
acknowledge that the 2009 Consulting Agreement stated that the total
compensation to ESP under the 2009 Consulting Agreement was 1,275,000 Shares;
however, the Company issued only 1,125,000 Shares to ESP (or its assigns) in
connection therewith. Accordingly, the Company shall promptly issue to ESP
150,000 Shares representing the difference between the number of Shares provided
for in the 2009 Consulting Agreement and the number of Shares actually issued.
In connection with the issuance of all of the Shares provided hereunder, ESP
(and its permitted assigns) hereby makes the representations and warranties set
forth on Exhibit
A attached hereto.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    4.           Confidential
Information. ESP shall maintain Confidential Information (as defined
below) in strict confidence and secrecy and shall not at any time, directly or
indirectly, use, publish, make lists of, communicate, divulge or disclose to any
person or business entity or use for any purpose any Confidential Information or
assist any third parties in doing so, except on behalf of and for the benefit of
the Company. ESP agrees, upon demand by the Company, to promptly return all
Confidential Information (including any copies, extracts thereof or materials
reflecting any such information) which is in ESP’s possession.

     

    For
purposes of this Agreement, “Confidential
Information” shall include, but not be limited to, materials, records,
data or trade secrets regarding the assets, condition, business, financial
information, business affairs, business matters or other matters related to the
Company and to its direct and indirect subsidiaries and affiliates which ESP has
knowledge of as a result of ESP’s services for the Company. Confidential
Information shall not include information that becomes generally available to
the public other than as a result of disclosure by ESP. Nothing in this
Agreement modifies or reduces ESP’S obligations to comply with applicable laws
related to trade secrets, confidential information or unfair
competition.

     

    5.           Successors
and Assigns. This Agreement will inure to the
benefit of and be binding upon ESP and the Company, and their respective
successors and assigns, including, any successor by merger or consolidation or a
statutory receiver or any other person or firm or corporation to which all or
substantially all of the respective assets and business of such party may be
sold or otherwise transferred. ESP may not assign any of its rights under this
Agreement without the prior written consent of the Company, except that, by
written notice to the Company, ESP may direct the issuance of all or a portion
of the Shares to its employees, members or other representatives provided such
assignee makes the representations set forth on Exhibit
A for the benefit of the
Company. Except as expressly provided herein, nothing in this Agreement shall be
construed to give any person other than the parties to this Agreement any legal
or equitable right, remedy or claim under or with respect to this Agreement or
any provision of this Agreement.

     

    6.           Waiver. The rights and remedies of
the parties to this Agreement are cumulative and not alternative. Neither the
failure nor any delay by any party in exercising any right, power or privilege
under this Agreement or the documents referred to in this Agreement will operate
as a waiver of such right, power or privilege, and no single or partial exercise
of any such right, power or privilege will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege.

     

    7.           Modification. This Agreement may only be
amended by a written agreement executed by both parties.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    8.           Notices. All notices and other
communications under this Agreement must be in writing and will be deemed to
have been duly given if delivered by hand or by nationally
recognized overnight delivery service (receipt requested) or mailed by certified
mail (return receipt requested) with first class postage prepaid:

     

    
      	
                
      

            	
              (a)

            	
              if
      to the Company, to:

               

              
                Medgenics,
      Inc.

                8000
      Towers Crescent Drive, Suite 1300

                Vienna,
      Virginia 22182

                Attention:
      Andrew Pearlman, CEO

              

            


    

     

    
      	
                
      

            	
              (b)

            	
              if
      to ESP, to:

              
                 

                Equity
      Source Partners, LLC

                7
      East Carver Road

                Huntington,
      New York 11743

              

            


    

    
    

     


    or to
such other person or place as either party shall furnish to the other in
writing. Except as otherwise provided herein, all such notices and other
communications shall be effective: (x) if delivered by hand, when delivered; (y)
if mailed in the manner provided in this Section, five (5) business days after
deposit with the United States Postal Service; or (z) if delivered by overnight
express delivery service, on the next business day after deposit with such
service.

     

    9.           Entire
Agreement. This
Agreement and any documents executed by the parties pursuant to this Agreement
and referred to herein constitute a complete and exclusive statement of the
entire understanding and agreement of the parties hereto with respect to their
subject matter and supersede all other prior agreements and understandings,
written or oral, relating to such subject matter between the parties. Without
limiting the foregoing, the parties agree that this Agreement supersedes in its
entirety that certain letter Agreement dated January 28, 2009 and that certain
consulting agreement dated May 1, 2009 by and between ESP and the Company and
that neither party shall have any rights or obligations under said
Agreements.

     

    10.        Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. Without limiting the generality of the foregoing, if the scope of any
provision contained in this Agreement is too broad to permit enforcement to its
full extent, but may be made enforceable by limitations thereon, such provision
shall be enforced to the maximum extent permitted by law, and the Consultant
hereby agrees that such scope may be judicially modified
accordingly.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    11.        Counterparts. This Agreement and any
amendments hereto may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same agreement.

    


    IN WITNESS WHEREOF, the
Company has caused this Agreement to be executed and the
Consultant has hereunto set his hand, all as of the day and year first above
written.

    


    
      
        	
                MEDGENICS,
      lNC.

              	 
      	
                EQUITY
      SOURCE PARTNERS, LLC

              
	 
      	 
      	 
      	 
      	 
      
	
                By:

              	
                /s/
      Andrew Pearlman

              	 
      	
                By:

              	
                /s/
      Cary Sucoff

              
	 
      	
                Andrew
      Pearlman, CEO

              	 
      	 
      	
                Cary
      Sucoff

              


      

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Exhibit
A

      

    Investment
Representations

     

    
      	 	
              
                ·

              

            	
              Investment
      Experience; Acknowledgment of Risk. The recipient acknowledges that
      the recipient can bear the economic risk and complete loss of its
      investment in the Shares and has such knowledge and experience in
      financial or business matters that the recipient is capable of evaluating
      the merits and risks of the investment contemplated hereby. The recipient understands that
      investment in the Shares involves a significant degree of
      risk.

            


    

     

    
      	 	
              
                ·

              

            	
              Disclosure
      of Information. The recipient has conducted the recipient’s own due
      diligence examination of the Company’s business, financial condition,
      results of operations, and prospects, and has had an opportunity to
      receive all information related to the Company and the Shares requested by
      the recipient and to ask questions of and receive answers from the Company
      regarding the Company, its business, finances and operations and the terms
      and conditions of the
Shares.

            


    

     

    
      	 	
              
                ·

              

            	
              Restricted
      Securities. The recipient understands that the Shares are
      characterized as "restricted securities" under the U.S. federal securities
      laws inasmuch as they are being acquired from the Company in a transaction
      not involving a public offering and that under such laws and applicable
      regulations such securities may be resold without registration under the
      1933 Act. The recipient understands that the Shares are being offered and
      sold to it in reliance upon specific exemptions from the registration
      requirements of United States and state securities laws and that the
      Company is relying upon the truth and accuracy of, and the recipient's
      compliance with, the representations, warranties, agreements,
      acknowledgments and understandings of the recipient set forth herein in
      order to determine the availability of such exemption and the eligibility
      of the recipient to acquire the
  Shares.

            


    

     

    
      	 	
              
                ·

              

            	
              Legends.
      It is understood that, except as provided below, certificates evidencing
      the Shares may bear the following or any similar
      legend:

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (a)           “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY
STATE AND HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS AFFORDED UNDER APPLICABLE
LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
HYPOTHECATED, TRANSFERRED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR AN APPLICABLE EXEMPTION (AS TO WHICH THE ISSUER SHALL BE
REASONABLY SATISFIED, INCLUDING RECEIPT OF AN ACCEPTABLE LEGAL OPINION) FROM THE
REGISTRATION REQUIREMENTS OF SUCH LAWS.”

     

    (b)         If
required by the authorities of any state in connection with the issuance of sale
of the Shares, the legend required by such state authority.

     

    
      	
                

            	
              
                ·

              

            	
              Accredited
      Investor. The recipient is an accredited investor as defined in
      Rule 501(a) of Regulation D, as amended, under the 1933 Act, including any
      amendments, modifications or interpretations (whether retroactive or not)
      made to Regulation D, including, without limitation, pursuant to the
      Dodd-Frank Wall Street Reform and Consumer Protection Act. The recipient
      understands that no United States federal or state agency or any other
      government or governmental agency has passed upon or made any
      recommendation or endorsement of the
  Shares.

            


    

     

    
      	
                
      

            	
              
                ·

              

            	
              No
      General Solicitation. The recipient did not learn of the investment
      in the Shares as a result of any public advertising or general
      solicitation.