EXHIBIT 10.4
[ECA LETTERHEAD]
August 19, 2002
Xx. Xxx Xxxxxx CFO and COO
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Dear Xxx:
We are writing this letter to confirm our understanding that Europlay
Capital Advisors, LLC ("ECA") has been retained for a period of 12 months from
the date this letter (the "LETTER AGREEMENT") is accepted by you, by Brilliant
Digital Entertainment, Inc. and its subsidiaries, and affiliates (collectively,
"BDE" or the "COMPANY") to provide non-exclusive consulting services to the
Company which may include (a) advising the BDE business development team,
providing strategic financial, marketing and managerial advice, introducing
corporate alliance partners, for the primary purpose of promoting, marketing,
and exploiting the Company's private peer-to-peer network currently known as
"Altnet"; and (b) advising the BDE business development team in connection with
the Company's (1) Brilliant Banner ad strategy, and (2) b3d software authoring
tools known as b3d Studio and Studio Pro.
A. CONSULTING SERVICES. In connection with its non-exclusive consulting
services, ECA shall:
(a) develop business relationships and achieve strategic sales
relationships for Altnet services primarily focused on leveraging
Altnet technologies to generate money saving enterprise and
entertainment based retail solutions for distributed network,
processing and storage services;
(b) work directly with senior management of the Company. Such work shall
include the development of business plans, strategic directions,
documentation, and promotional and support materials for presentations
to and follow-up communications with potential customers relating to
commercial applications of Altnet technologies;
(c) advise the Company in connection with its relationships with
advertising sales organizations ("ASOs") to promote the acceptance of
Brilliant Banner ad serving technology and achieve sales of Brilliant
Banner Campaigns. By way of example only, and not of limitation, some
of the ASOs currently identified by the Company include: DoubleClick;
Xxxxxxxxxxx.xxx; 24/7 Real Media; Interep Interactive; 411 Web; and
Premium Networks; and
(d) identify third party developers which are potential licensees of b3d
Studio and b3d Studio Pro and help actively market and negotiate
licensing transactions of these software tools to such potential
licensees.
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Europlay Capital Advisors, LLC
Xx. Xxx Xxxxxx
August 19, 2002
Page 2
All business and legal decisions regarding any transaction with third
parties shall be made by the Company, in its sole discretion, and all
transactional documents shall be executed by the Company, and the Company shall
not be bound by ECA or any of its agents, members or employees, or otherwise,
except by a writing signed by the Company or such member. The Company shall be
free to reject any proposed transaction for any reason or no reason without
liability (except for reimbursement of actual out-of-pocket expenses and other
fees payable pursuant to this Letter Agreement as set forth below and for the
indemnification provisions contained in Schedule 1 of this Letter Agreement) to
ECA.
B. COMPENSATION. As compensation for services to be provided by ECA hereunder,
the Company shall pay to ECA the following fees (the "ECA FEES"):
(a) RETAINER FEES: $10,000 per month, payable to ECA at the beginning of
each month, with the first payment for the month of August 2002 (pro
rated for the number of days then remaining) due on signing.
Notwithstanding the foregoing, all Retainer Fees earned by ECA shall
not be paid, but rather shall accrue until such time as the Company
has recognized at least Two Hundred Fifty Thousand Dollars ($250,000)
in revenues (determined in accordance with GAAP) in two consecutive
calendar months (the "RETAINER TRIGGER"). Following the Retainer
Trigger, the Company shall promptly pay ECA all accrued amounts, and
shall thereafter pay ECA the monthly retainer in accordance with the
first sentence of this clause (a).
(b) REVENUE SHARING FEES: With respect to any revenue generating activity,
in connection with which ECA has provided services to the Company
hereunder, the Company shall pay or cause to be paid to ECA a
commission equal to its Applicable Percentage of Net Receipts (the
"Commission"). For purposes of this Agreement, "APPLICABLE PERCENTAGE"
shall mean the following percent of Net Receipts calculated on a
cumulative basis:
NET RECEIPTS APPLICABLE PERCENTAGE
------------ ---------------------
Up to 12.5% of Net Receipts
$20,000,000
Over $20,000000 15% of Net Receipts
C. DEFINITIONS. For purposes of this Agreement, "NET RECEIPTS" means the
fair market value of all consideration (whether in the form of cash,
advances, securities, benefits, lines of credit, debt, other property
or otherwise) actually received by the Company or its subsidiaries or
equity holders, and not refundable pursuant to any written agreement
with a third party, at any time from and after the date hereof
(including after expiration of the Term) to the extent received
pursuant to a written or oral agreement entered into during the Term,
with
Europlay Capital Advisors, LLC
Xx. Xxx Xxxxxx
August 19, 2002
Page 3
any deferred or contingent consideration calculated and paid when
received by the Company or its subsidiaries or equity holders.
D. EXPENSE REIMBURSEMENT: Upon receipt of periodic invoices from ECA, the
Company shall reimburse ECA for all reasonable out-of-pocket expenses
incurred by ECA in connection with this Agreement, including but not
limited to printing, delivery, research, accounting, meals and travel
(first class or equivalent), provided that ECA receives prior approval
for any single expense exceeding $500. Additionally, the Company shall
be responsible for all other expenses associated with this Agreement,
including, but not limited to, its own accounting and legal fees. The
Company shall promptly remit reimbursement of out-of-pocket expenses
to ECA whether or not a transaction is consummated, or this Letter
Agreement is terminated, and hereby agrees that remittance of payment
for such expenses shall be payable upon receipt of an invoice by ECA.
E. ADDITIONAL PROVISIONS.
The Company shall notify ECA in advance of any closing of a
transaction so that ECA may attend any and all such closings. ECA
shall have reasonable access to all closing documents and any other
materials necessary to ascertain and collect its fee hereunder and
shall be furnished at the time of closing with copies of such
agreements, opinions, certificates and other documents delivered as
ECA may reasonably request.
As ECA will be acting on behalf of the Company, it is ECA's
practice to receive indemnification for certain liabilities which may
arise in connection with its work for the Company as set forth in
Schedule I hereto, which is incorporated herein by this reference. In
no event, regardless of the legal theory advanced and except for any
exceptions set forth in Schedule I, shall ECA's aggregate liability to
all parties in connection with its services hereunder exceed the fees
actually received by ECA hereunder. Assuming that any aggregate
liability is not found in a final judgment by a court of competent
jurisdiction to have resulted primarily from ECA's gross negligence or
willful misconduct, in no event shall the expense reimbursement
described in the preceding paragraph offset or otherwise be applied to
the Company's agreement to indemnify ECA as described in the attached
indemnification agreement.
The Company shall make available to ECA in writing all
information concerning the Company and its operations (whether in
original or summary form as determined by the Company) which ECA
reasonably requests, as well as any other information relating to
transactions for which ECA is providing services hereunder, prepared
by the Company or any of its other advisors. ECA shall be entitled to
rely upon all such information supplied to it by the Company, or its
advisors, and shall not in any respect be responsible for the accuracy
or completeness of, or have any obligation to verify, the same or to
conduct any appraisal. All information given to ECA by the Company
will be held by ECA in confidence and will
Europlay Capital Advisors, LLC
Xx. Xxx Xxxxxx
August 19, 2002
Page 4
not be disclosed to anyone without the Company's prior written
approval or used for any purpose other than those referred to in this
Letter Agreement.
Either party may terminate this engagement at any time upon
written advice to that effect. In the event of a termination by the
Company or upon the expiration of this Letter Agreement, ECA shall be
entitled to (i) prompt payment of all Retainer Fees payable through
the termination date, pro rated based on the number of days that have
elapsed during the month of termination, provided, however, that if
the Retainer Trigger has not occurred, such payment shall be made
promptly following the Retainer Trigger, and (ii) all out-of-pocket
expenses for which ECA is entitled to reimbursement in accordance with
this Agreement.
This Letter Agreement shall be binding upon and inure to the
benefit of the Company, ECA and its respective successors and assigns.
This Letter Agreement represents the entire and final understanding
between the parties with no other formal agreement contemplated. This
Letter Agreement may not be modified except by a written agreement by
all of the parties, and represents the entire agreement between the
parties.
The Company acknowledges that its engagement of ECA is not
intended to confer rights upon any person not a party hereto
(including, but not limited to shareholders, employees or creditors of
the Company) as against ECA, ECA's subsidiaries and affiliates or its
respective directors, officers, agents and employees.
The Company represents and warrants to ECA that (i) this Letter
Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms, and (ii) any
offering materials will not, when delivered for distribution in
connection with a transaction and at the closing of a transaction,
contain any untrue statements of a material fact or omit to state any
material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
The Company shall advise ECA promptly of the occurrence of any event
or any other change that results in the information or offering
materials containing any untrue statement of a material fact or
omitting to state any material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading.
ECA and the members associated with ECA represent and warrant to
the Company that (i) ECA is a valid and existing limited liability
company, and (ii) this Letter Agreement has been duly authorized,
executed and delivered by ECA and constitutes a legal, valid and
binding agreement of ECA enforceable in accordance with its terms. In
addition, ECA and each member, agent or related party associated with
ECA in connection with this Letter Agreement has full authority and is
free from any restrictions to enter into this Letter Agreement and
render the services contemplated herein without any restriction or
breach of any obligation or contractual and/or fiduciary duty to any
third party.
Europlay Capital Advisors, LLC
Xx. Xxx Xxxxxx
August 19, 2002
Page 5
Following the closing of any transaction for which ECA is
compensated hereunder, ECA or its designees may, at its own expense,
place an announcement in such newspapers and periodicals it may choose
stating it has acted as consultant or advisor in the transaction.
This Agreement, and the rights and obligations of the parties
hereto, shall be governed by and construed in accordance with
California law (without regard to any rule or principles of conflicts
of law that might look to any jurisdiction outside of California).
In the event of any dispute arising out of or in connection with
this Letter Agreement, any party may submit such dispute to
arbitration under, and in accordance with the rules then in effect of,
the American Arbitration Association, or any successors thereto
("AAA"), in Los Angeles County, California. The parties shall, in
connection with such arbitration, in addition to any discovery
permitted under AAA rules, be permitted to conduct discovery in
accordance with Section 1283.05 of the California Code of Civil
Procedure, the provisions of which are incorporated herein by this
reference. The parties shall jointly select an arbitrator. In the
event the parties fail to agree upon an arbitrator within ten (10)
days, then each party shall select an arbitrator and such arbitrators
shall then select a third arbitrator to serve as the sole arbitrator;
provided, that if either party, in such event, fails to select an
arbitrator within seven (7) days, such arbitrator shall be selected by
the AAA upon application of either party. If the dispute qualifies,
all arbitrators shall be selected from the Large, Complex Case Panel
of the American Arbitration Association. Judgment upon the award of
the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and may be entered in any court of
competent jurisdiction. The losing party in any litigation or
arbitration related to or arising out of this Agreement, including
actions in tort, shall pay the costs and expenses (including
reasonable attorneys' fees) of the prevailing party as determined by a
court of competent jurisdiction.
ECA agrees that the Company may assign all or any portion of this
Letter Agreement to a Company subsidiary, provided that any such
assignment shall not relieve the Company of its obligations hereunder.
Europlay Capital Advisors, LLC
Xx. Xxx Xxxxxx
August 19, 2002
Page 6
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to us the duplicate of this letter enclosed.
Very truly yours,
Europlay Capital Advisors, LLC
By: /S/ XXXXXX XXXXXXX
------------------------
Xxxxxx Xxxxxxx
Its: Managing Director
Accepted and agreed to
this 19th day of August, 2002
Brilliant Digital Entertainment, Inc.
By: /S/ XXXXXX XXXXXX
---------------------------
Xxx Xxxxxx
Its: Chief Financial Officer and
Chief Operating Officer
Europlay Capital Advisors, LLC
00000 Xxxxxxx Xxxx. STE 000
Xxxxxxxx Xxxxx, XX 00000
Gentlemen:
In addition to the fees and expenses which the Company has agreed to pay
for the services to be performed pursuant to the letter agreement of even date
herewith (the "AGREEMENT"), the Company agrees: (i) to indemnify and hold
Europlay Capital Advisors, LLC (which term for purposes of this letter includes
its subsidiaries, affiliates, directors, controlling persons (as such term is
defined under the Securities Act of 1933), officers, employees and agents)
(herein after, "ECA") harmless against and from all losses, claims, damages or
liabilities, joint or several (and all actions, claims, proceedings and
investigations in respect thereof), to which ECA may become subject in
connection with its performance of services in accordance with the Agreement
under any of the Federal securities laws, under any other statute, at common law
or otherwise; (ii) that ECA will not be culpable for and will have no liability
to the Company for or with respect to any and all losses, claims, damages or
liabilities, of the Company incurred in connection with ECA's performance of
services in accordance with the Agreement; and (iii) in each case to reimburse
ECA for all reasonable legal and other out-of-pocket expenses (including the
cost of investigation and preparation) as and when incurred by ECA arising out
of or in connection with any action, claim, proceeding or investigation (whether
initiated or conducted by one or more members of the Company or any other party)
in connection therewith, whether or not resulting in any liability (and whether
or not ECA is a defendant in, or target of, any such action, claim, proceeding
or investigation); provided, however, that the Company shall not be liable to
ECA pursuant to clauses (i) and (iii) above and the Company's exculpation of ECA
pursuant to clause (ii) above shall not apply in any such case to the extent
that any such loss, claim, damage or liability is found in binding arbitration
or in a final judgment by a court of competent jurisdiction to have resulted
primarily from ECA's gross negligence or willful misconduct in performing the
services which are the subject of the Agreement. If for any reason the foregoing
indemnification (including reimbursement pursuant to clause (iii) above) or
exculpation is unavailable to ECA or insufficient to hold it harmless (except to
the extent it is unavailable or insufficient because the Company is not liable
pursuant to the preceding sentence), then the Company shall contribute to the
amount paid or payable by ECA as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and ECA on the other hand, but
also the relative fault of the Company and ECA as well as any relevant equitable
considerations; provided that, assuming that any such loss, claim, damage or
liability is not found in binding arbitration or in a final judgment by a court
of competent jurisdiction to have resulted primarily from ECA' gross negligence
or willful misconduct, ECA's aggregate contribution hereunder will not exceed
the amount of fees actually received by ECA pursuant to the Agreement. The
indemnity, exculpation, reimbursement and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall survive any termination of the Agreement and
shall be binding upon and extend to the benefit of any successors, assigns,
heirs and personal representatives of the Company and ECA.
If any action, claim, proceeding or investigation is instituted or
threatened against ECA in respect of which indemnity may be sought against the
Company hereunder, ECA shall promptly
notify the Company thereof in writing, but the omission so to notify the Company
shall not relieve the Company from any other obligation or liability that the
Company may have to ECA under this letter or otherwise unless the Company is
materially and incurably prejudiced as a result of such omission. ECA will have
the right to retain counsel of its choice to represent ECA in connection with
any such action, claim, proceeding or investigation, provided that such counsel
shall be reasonably satisfactory to the Company. The Company will not be liable
hereunder for any settlement thereof by ECA without the Company's written
consent, which will not be unreasonably withheld.
Capitalized terms used herein and not defined shall have the meanings set
forth in the Agreement.
Very truly yours,
Brilliant Digital Entertainment, Inc.
By: /S/ XXXXXX XXXXXX
----------------------------
Xxx Xxxxxx
Its: Chief Financial Officer and
Chief Operating Officer
Accepted and agreed to
this 19th day of August, 2002
Europlay Capital Advisors, LLC
By: /S/ XXXXXX XXXXXXX
-------------------------
Xxxxxx Xxxxxxx
Its: Managing Director
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