EXHIBIT 10.4
September 10, 2001
Xxxxxxx X. Xxxxxx
President & Chief Operating Officer
Global Sports & Entertainment, Inc.
0000 Xxxxx Xxxxx Xxxxxxxxx
Xxx Xxxxx, XX 00000
Dear Xx. Xxxxxx:
This letter agreement (the "Letter Agreement") confirms our understanding that
Global Sports & Entertainment, Inc. (the "Company") has engaged Xxxxxxx
Investments, LLC ("Xxxxxxx") to provide certain financial advisory and
investment banking services.
1. ENGAGEMENT. Xxxxxxx will perform such of the following financial
advisory services on the Company's behalf as the Company may reasonably request:
(a) Xxxxxxx will familiarize itself to the extent it deems appropriate
and feasible with the business, historic, current and prospective operations,
properties and financial condition of the Company, it being understood that
Xxxxxxx shall, in the course of such familiarization, rely entirely upon
publicly available information and such other information as may be supplied by
the Company without assuming any responsibility for independent investigation or
verification thereof;
(b) Xxxxxxx will undertake a financial due diligence examination of the
Company to determine expected cash flow and current and potential enterprise
value;
(c) Xxxxxxx will advise and assist the Company in identifying and/or
evaluating various financial alternatives that may be available to the Company,
including without limitation, a public or private sale of equity or debt
securities of the Company, or such other form of financial transaction that
Xxxxxxx believes may be of possible interest to the Company;
(d) If the Company determines to consider or undertake one or more
financing transactions, Xxxxxxx will advise and assist the Company in
considering the desirability of undertaking such transaction and, if the Company
believes such transaction to be desirable, in structuring and preparing a
negotiation strategy for such financial transaction;
(e) Xxxxxxx will advise and assist the Company as follows:
(i) Xxxxxxx will advise and assist the Company with
respect to its capital/corporate structure as it
relates to the public markets, including a fair and
equitable valuation/capitalization when issuing
additional securities;
(ii) Xxxxxxx will assist the Company to determine the
short and medium term funding necessary to support
the Company's business and strategic plans for the
next two years; and
(iii) Xxxxxxx will identify and evaluate, at the Company's
request, potential future funding sources.
(f) If the Company determines to consider or undertake one or more
transactions with respect to the sale, merger, consolidation or any other
business combination, in one or a series of transactions, involving all or part
of the business, securities or assets of the Company, any recapitalization of
the Company or any spin-off, split-off or other extraordinary dividend of cash,
securities or other assets to stockholders of the Company (each, a
"Transaction"), Xxxxxxx will advise and assist the Company in considering the
desirability of undertaking such Transactions and, if the Company believes such
Transaction to be desirable, in structuring such transaction.
(g) Xxxxxxx will render such other financial advisory and investment
banking services as may from time to time be agreed upon by Xxxxxxx and the
Company.
2. INFORMATION PROVIDED BY THE COMPANY.
(a) The Company shall make available to Xxxxxxx all information
concerning the business, operations, properties, prospects and financial
condition of the Company, as applicable, that Xxxxxxx requests in connection
with the rendering of services hereunder, and shall provide Xxxxxxx with
reasonable access to the Company's officers, directors, employees, independent
accountants and other advisors and agents as Xxxxxxx shall xxxx appropriate.
(b) The Company recognizes and confirms that Xxxxxxx will use and rely
upon the information provided by or on behalf of the Company and its advisors
and agents and on publicly available information in performing the services
contemplated hereby. It is understood that in performing under this engagement
Xxxxxxx may assume and rely upon the accuracy and completeness of, and is not
assuming any responsibility for independent investigation or verification of,
such publicly available information and the information so furnished.
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3. FEES. Upon signing of this Letter Agreement, the Company will issue
to Xxxxxxx a warrant to purchase 600,000 shares of common stock of the Company
at a purchase price of $0.10 per share. The warrant will be exercisable
immediately and will remain exercisable for a period of five (5) years. The
Company shall provide piggyback registration rights to Xxxxxxx on customary
terms. Payment for further services provided hereunder shall be as mutually
agreed between the Company and Xxxxxxx.
4. EXPENSES. Without in any way reducing or affecting the provisions of
EXHIBIT A hereto, on a monthly basis, the Company shall reimburse Xxxxxxx for
its out-of-pocket expenses incurred in connection with the provision of services
hereunder, including, without limitation, fees, disbursements and other charges
of Xxxxxxx'x counsel. Out-of-pocket expenses also shall include, without
limitation, travel and lodging, data processing and communication charges,
research and courier services. Notwithstanding the foregoing, the Company's
reimbursement obligations under this Section 4 will apply only to expenses not
exceeding an aggregate of $500 per month or such greater amount as may be
specifically designated and pre-approved in writing by the Company.
5. INDEMNITY. The Company agrees to the provisions of EXHIBIT A hereto
which provide for certain indemnification by the Company of Xxxxxxx and certain
related persons. Such indemnification is an integral part of this Letter
Agreement and the terms thereof are incorporated by reference herein. Such
indemnification shall survive any termination, expiration or completion of
Xxxxxxx'x engagement hereunder.
6. TERM. This Letter Agreement and Xxxxxxx'x engagement hereunder may
be terminated by either the Company or Xxxxxxx upon thirty days' prior written
notice thereof to the other party; PROVIDED, HOWEVER, that termination of this
Letter Agreement shall not affect (a) the Company's continuing obligation to
indemnify Xxxxxxx and certain related persons as provided in EXHIBIT A and its
continuing obligations under Section 9 hereof or (b) the Company's obligation to
reimburse the expenses accruing prior to such termination to the extent provided
for in Section 4.
7. MATTERS RELATING TO ENGAGEMENT.
(a) The Company acknowledges that Xxxxxxx has been retained solely to
provide the services set forth in this Letter Agreement. In rendering such
services, Xxxxxxx shall act as an independent contractor, and any duties of
Xxxxxxx arising out of its engagement hereunder shall be owed solely to the
Company. The advice (oral or written) rendered by Xxxxxxx pursuant to this
Letter Agreement is intended solely for the benefit and use of the Board of
Directors of the Company in considering the matters to which this Letter
Agreement relates, and the Company agrees that such advice may not be relied
upon by any other person, used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor shall any public references to Xxxxxxx be made by the Company,
without the prior written consent of Xxxxxxx. The Company further acknowledges
that Xxxxxxx may perform certain of the services described herein through one or
more of its respective affiliates.
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(b) The Company acknowledges that Xxxxxxx works in a variety of
capacities for various entities and that such entities may be direct or indirect
competitors of the Company. The Company's engagement of Xxxxxxx pursuant to this
Letter Agreement shall in no way preclude Xxxxxxx from working in any capacity
for other parties, or on behalf of itself, or its affiliates, including in
matters in which the Company is or may become involved. Xxxxxxx will promptly
disclose to the Company information concerning any proposed representation that
may impinge upon Xxxxxxx'x ability faithfully to execute its obligations under
this Letter Agreement, and in such case Xxxxxxx will not accept the proposed
representation without the prior written consent of the Company . The Company
also acknowledges that Xxxxxxx and its affiliates have no obligation to use in
connection with the transactions contemplated by this Letter Agreement, or to
furnish to the Company, confidential information obtained from other companies.
(c) Except to the extent authorized by the Company or required by any
federal or state law, rule or regulation or any decision or order of any court
or regulatory agency, Xxxxxxx agrees that it will not disclose to any person,
other than to any officer, director, employee, agent or attorney of Xxxxxxx who
needs to know the information in connection with the performance of Xxxxxxx'x
services under this Agreement, any confidential information received by Xxxxxxx
from the Company, its agents or employees in connection with the performance of
Xxxxxxx'x services under this Agreement, provided that information will not be
deemed confidential if such information (i) is or becomes generally available to
the public, other than as a result of a breach of this Agreement by Xxxxxxx,
(ii) is lawfully obtained by Xxxxxxx from a third party, provided that the third
party is not bound by a nondisclosure agreement or fiduciary obligation with
respect to the information, or (iii) is subsequently developed by Xxxxxxx from
independent sources.
(d) Xxxxxxx acknowledges and agrees to comply with the prohibitions
against trading in the Company's securities while in possession of material
non-public information concerning the Company in violation of the xxxxxxx
xxxxxxx rules set forth Section 10 of the Securities Exchange Act of 1934, as
amended, and Rule 10b-5 thereunder.
(e) Xxxxxxx is not authorized to act as agent of the Company in any
connection or transaction, and Xxxxxxx agrees not to act as such agent and not
to purport to do so without the prior written approval of the Company.
(f) If Xxxxxxx identifies or introduces potential investors to the
Company in connection with any financing, Xxxxxxx will use all reasonable
efforts to select investors who Xxxxxxx reasonably believes to be "accredited
investors" as defined in Rule 501(a) of Regulation D of the Securities Act of
1933, as amended, or who otherwise meet the investor suitability requirements
and such additional individual state requirements as may be specified by the
Company.
8. GOVERNING LAW AND SUBMISSION TO JURISDICTION.
(a) This Letter Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the conflicts of laws principles thereof. The Company and Xxxxxxx irrevocably
agree to waive trial by jury in any action, proceeding, claim or counterclaim
brought by or on behalf of either party related to or arising out of this Letter
Agreement or the performance of services hereunder.
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(b) Each of the parties hereto irrevocably agrees that, except as
otherwise set forth in this paragraph, any state or federal court sitting in the
State of California shall have exclusive jurisdiction to hear and determine any
suit, action or proceeding and to settle any dispute arising out of or relating
to this Letter Agreement and, for such purposes, irrevocably submits to the
jurisdiction of such courts. The Company hereby agrees that service of any
process, summons, notice or document by hand delivery or registered mail
addressed to the Company shall be effective service of process for any suit,
action or proceeding brought in any such court. The Company irrevocably and
unconditionally waives any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit,
action or proceeding has been brought in an inconvenient forum. The Company
agrees that a final judgment in any such suit, action or proceeding brought in
any such court shall be conclusive and binding upon the Company and may be
enforced in any other court to whose jurisdiction the Company is or may in the
future be subject, by suit upon judgment. The Company further agrees that
nothing herein shall affect Xxxxxxx'x right to effect service of process in any
other manner permitted by law or to bring a suit, action or proceeding
(including a proceeding for enforcement of a judgment) in any other court or
jurisdiction in accordance with applicable law.
9. MISCELLANEOUS.
(a) If any term, provision, covenant or restriction contained in this
Letter Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. The
Company and Xxxxxxx shall endeavor in good faith negotiations to replace the
invalid, void, or unenforceable provisions with valid provision the economic
effect of which comes as close as possible to that of the invalid, void or
unenforceable provisions.
(b) This Letter Agreement contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all oral statements
and prior writings with respect thereto. This Letter Agreement may not be
amended or modified except by a writing executed by each of the parties. The
provisions of this Letter Agreement, including, without limitation, the
obligations set forth in Sections 3 and 4 above and EXHIBIT A hereto, shall be
binding on the Company and its successors and assigns.
(c) Section headings herein are for convenience only and are not a part
of this Letter Agreement. This Letter Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which taken together will
constitute one and the same instrument.
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If the foregoing correctly sets forth the understanding and agreement
between Xxxxxxx and the Company, please so indicate by signing the enclosed copy
of this letter, whereupon it shall become a binding agreement between the
parties hereto as of the date first above written.
Very truly yours,
XXXXXXX INVESTMENTS, LLC
By: /S/ XXXXXXX X. XXXXXXX
------------------------------
Xxxxxxx X. Xxxxxxx
President
Accepted and agreed to as of the day first written above:
GLOBAL SPORTS & ENTERTAINMENT, INC.
By: /S/ XXXXXXX X. XXXXXX
------------------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Operating Officer
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EXHIBIT A
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Global Sports & Entertainment, Inc. (the "Company") shall
indemnify, defend and hold harmless Xxxxxxx Investments, LLC ("Xxxxxxx") and its
affiliates, counsel and other professional advisors, and the respective
directors, officers, controlling persons, agents and employees of each of the
foregoing (Xxxxxxx, and all of such other persons collectively, the "Indemnified
Parties"), from and against any losses, claims or proceedings including
stockholder actions, damages, judgments, assessments, investigation costs,
settlement costs, fines, penalties, arbitration awards, other liabilities,
costs, fees and expenses (collectively, "Losses") related to or arising out of
(A) oral or written information provided by the Company, the Company's employees
or other agents, which either the Company or Xxxxxxx provides to any persons for
the purposes of making an investment decision with respect to the Company, or
(B) other action or failure to act by the Company, the Company's employees or
other agents, PROVIDED that this paragraph shall not apply to the extent that
such Losses arose out of the willful misconduct, gross negligence, bad faith or
violation of law of such Indemnified Party. If multiple claims are brought
against an Indemnified Party in an arbitration, with respect to at least one of
which indemnification is permitted under applicable law and provided for under
this Letter Agreement, the Company agrees that any arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the arbitration award expressly
states that the award, or any portion thereof, is based solely on a claim as to
which indemnification is not available.
The Company shall assume the defense of any such Action
including the engagement of counsel reasonably satisfactory to Xxxxxxx and will
not settle, compromise, consent or otherwise resolve or seek to terminate any
pending or threatened Action (whether or not any Indemnified Party is a party
thereto) unless it obtains the prior written consent of Xxxxxxx or an express,
unconditional release of each Indemnified Party from all liability relating to
such Action and the engagement of Xxxxxxx under this Letter Agreement. Any
Indemnified Party shall be entitled to retain separate counsel of its choice and
participate in the defense of any Action in connection with any of the matters
to which this EXHIBIT A relates, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party unless: (i) the Company has failed
promptly to assume the defense and employ counsel or (ii) the named parties to
any such Action (including any impleaded parties) include such Indemnified Party
and the Company, and such Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which are different
from or in addition to those available to the Company; PROVIDED that the Company
shall not in such event be responsible under this EXHIBIT A for the fees and
expenses of more than one firm of separate counsel (in addition to local
counsel) in connection with any such Action in the same jurisdiction.
The Company agrees that if any right of any Indemnified Party
set forth in the preceding paragraphs is finally judicially determined to be
unavailable (except by reason of the gross negligence or bad faith of such
Indemnified Party), or is insufficient to hold such Indemnified Party harmless
against such Losses as contemplated herein, then the Company shall contribute to
such Losses (i) in such proportion as is appropriate to reflect the relative
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benefits received by the Company and its stockholders, on the one hand, and such
Indemnified Party, on the other hand, in connection with the transactions
contemplated hereby, and (ii) if (and only if) the allocation provided in clause
(i) is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) but also the
relative fault of the Company and such Indemnified Party; PROVIDED, HOWEVER,
that in no event shall the amount, if any, to be contributed by all Indemnified
Parties exceed the amount of the fees actually received by Xxxxxxx hereunder.
Benefits received (or anticipated to be received) by the Company and its
stockholders shall be deemed to be equal to the aggregate cash consideration and
value of securities or any other property payable, exchangeable or transferable
in any proposed or potential transactions within the scope of this Letter
Agreement, and benefits received by Xxxxxxx shall be deemed to be equal to the
compensation payable by the Company to Xxxxxxx in connection with this Letter
Agreement. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission or any other alleged
conduct relates to information provided by the Company or other conduct by the
Company (or the Company's employees or other agents) on the one hand or by
Xxxxxxx on the other hand. The parties hereto agree that it would not be just
and equitable if contribution were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above.
The Company also agrees that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to
the Company for or in connection with advice or services rendered or to be
rendered by any Indemnified Party pursuant to this Letter Agreement, the
transactions contemplated hereby or any Indemnified Party's actions or inactions
in connection with any such advice, services or transactions except for Losses
of the Company that are finally judicially determined by a court of competent
jurisdiction to have arisen solely out of the willful misconduct, gross
negligence or bad faith of such Indemnified Party in connection with any such
advice, actions, inactions or services.
The rights of the Indemnified Parties hereunder shall be in
addition to any other rights that any Indemnified Party may have at common law,
by statute or otherwise. Except as otherwise expressly provided for in this
EXHIBIT A, if any term, provision, covenant or restriction contained in this
EXHIBIT A is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions contained in this Letter
Agreement all remain in full force and effect and shall in no way be affected,
impaired or invalidated. The reimbursement, indemnity and contribution
obligations of the Company set forth herein shall apply to any modification of
this Letter Agreement and shall remain in full force and effect regardless of
any termination of, or the completion of any Indemnified Person's services under
or in connection with, this Letter Agreement.
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