H.D. Xxxxx & Co., Inc.
00 Xxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000
September 1, 1997
Xxxxxxx Xxxxxx
Chairman of the Board, President
and Chief Executive Officer
Netter Digital Entertainment, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Re: Financial Advisory Agreement
Dear Xxxx:
This will confirm the understanding and agreement (the "Agreement") between
H.D. Xxxxx & Co., Inc. ("Xxxxx") and Xxxxxx Digital Entertainment, Inc. (the
"Company") as follows:
1. Purpose. Company hereby engages Xxxxx and Xxxxx hereby accepts such
engagement, as the Company's exclusive financial advisor and consultant (and not
as an agent) during the term specified hereinafter upon the terms and conditions
as set forth herein.
2. Term. This Agreement shall be effective for a period of six (6)
months (the "Term"), commencing September 1, 1997.
3. Duties of Xxxxx.
(a) During the Term, Xxxxx will provide Company with such
consulting advice with respect to financial planning, capital structure issues,
advice with respect to the development or refinement of a business plan and the
evaluation of financing alternatives as is reasonably requested by Company. In
performance of these duties, Xxxxx shall provide Company with the benefits of
his reasonable judgment and efforts. Xxxxx'x duties shall include, but will not
necessarily be limited to, the following:
(i) Advice regarding the formulation of business and financing
goals and plans;
(ii) Advice concerning strategic issues, alliance partnerships
and joint ventures and concerning market makers for the Company's securities;
(iii) Advice concerning short and long range financial planning;
(iv) Advice regarding business opportunities, acquisitions and
potential institutional and other investors;
(v) Advice regarding the existing and possible alternative
share and financial structure for the Company;
(vi) Advice regarding the implementation of the Company's goals
and plans;
(vii) Arranging for the Company to obtain at least one
additional market maker for its common stock and, with the Company's assistance,
arranging for a research report to be issued by Xxxxx, or an investment bank or
broker of equivalent stature, with respect to the Company;
(viii) Utilizing reasonable diligence and care to comply with
all reasonable requests of the Company and to perform, in a reasonable and
cooperative manner, the duties of Xxxxx hereunder.
(b) In connection with rendering his advice hereunder, Xxxxx and
his employees and agents shall be given reasonable access to Company's officers,
premises, and records.
(c) Company acknowledges that Xxxxx'x advice pursuant hereto does
not and will not constitute any guarantee or other assurance as to the ability
of the Company to obtain financing, to complete an acquisition or to accomplish
any other goals or plans of Company. This Agreement contains the entire
compensation payable by Company to Xxxxx for any and all services.
(d) Company acknowledges that Xxxxx retains the right to provide
financial advisors and consulting advice to other parties. Nothing herein
contained shall be construed to limit or restrict Xxxxx in conducting such
business with respect to others, or in rendering advice to others or conducting
any other business, except as otherwise herein provided. During the Term
however, Xxxxx will not provide consulting advice in favor of any other parties
engaged in (or who may use the advice or pass on their advice in favor of any
other persons engaged in) the same business without Company's prior written
consent.
4. Compensation. The Company shall pay Xxxxx the sum of $5,000 upon
execution of this Agreement and thereafter shall pay $5,000 to Xxxxx on the same
day (or if such date is not a business day, the next business day thereafter) of
each of the next five successive months.
5. Expenses. Company shall advance or, upon billing, promptly reimburse
Xxxxx for reasonable and actual out-of-pocket expenses for travel, lodging,
meals and incidentals reasonably related to travel, long-distance telephone
charges, express mail services, and such other items as the parties may from
time to time agree, incurred by Xxxxx in connection with the services rendered
by Xxxxx pursuant to this Agreement, provided, however, that any travel, lodging
or other significant expense which is to be reimbursed hereunder shall be
submitted to the Company for preapproval before being incurred.
6. Proprietary Information. Xxxxx acknowledges and agrees that he is in
a fiduciary relationship with Company and agrees that he will not sell or use in
any manner not authorized in writing by Company, or disclose any information
provided to Xxxxx by the Company or its employees, agents, or representatives,
including without limitation any of the Company's trade secrets, technical
information, agreements, or other proprietary information or information
concerning the Company's current and any future proposed operations, services,
or products, regardless of whether such information was obtained prior to,
during or after the engagement of Xxxxx by the Company pursuant to this
Agreement, unless Xxxxx is authorized to do so in writing by the Company and/or
Company releases such information to the public via public announcements or
announcements on recognized stock exchanges.
7. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
(a) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby (i) are within the
corporate power and authority of the Company, (ii) do not require the approval
or consent of any stockholders of the Company, and (iii) have been duly
authorized by all necessary corporate action on the part of the Company.
(b) The consummation of the transactions contemplated by this
Agreement will not result in (i) the breach of, or constitute a default under,
any agreement, indenture, mortgage, note agreement or other financing agreement
to which the Company is a party or to which it or its properties or rights are
subject and (ii) will not be in violation of the rights of any other party, nor
result in the creation of any lien, charge or encumbrance upon the assets or
properties of the Company as it relates to the business of Company or the
pending business of the Company (iii) violate any judgment, order, injunction,
decree or award of any court, arbitrator, administrative agency or governmental
body against, or binding upon, either party (or its affiliates) or upon the
property, assets or business of either party (or its affiliates) or (iv)
constitute a violation by either party of any law or regulation of any
jurisdiction, particularly as such law or regulation relates to the Company or
to the property, assets or business of Company.
(c) This Agreement is valid and enforceable against the Company in
accordance with its terms by the other, except as enforcement may be limited by
applicable bankruptcy, insolvency or other laws affecting the rights of
creditors generally. The execution, delivery and performance of this Agreement
by either Xxxxx or the Company does not violate any law or rule or regulation or
give rise to a cause of action in favor of any person which will result in any
liability to either of the parties.
8. Arbitration. Any and all controversies or claims arising out of or
relating to this Agreement shall be settled by binding arbitration in Los
Angeles County, California, in accordance with the rules of the American
Arbitration Association, and judgment on the award rendered by the arbitrator(s)
may be entered by any court having jurisdiction thereof. The parties shall be
entitled to discovery in accordance with the provisions of the California Rules
of Civil Procedure.
9. Options. The Company hereby sells to Xxxxx and Xxxxx hereby
purchases from the Company for an aggregate condiseration of $100 the options to
purchase the securities set forth below:
(a) Options to purchase 50,000 shares of the Company's Common Stock
at an exercise price of $3.50 per share;
(b) Options to purchase 75,000 shares of the Company's Common Stock
at an exercise price of $5.50 per share; and
(c) Options to purchase 100,000 shares of the Company's Common
Stock at an exercise price of $7.50 per share.
The Options shall contain usual and customary antidilution provisions
relating to stock splits, stock or other dividends and distributions, mergers or
divisions of the Company into seperate entities and the like. All options (the
"Options") may be exercisable commencing immediately and shall have a term which
is the later of December 31, 1999 and one hundred eighty (180) days (the
"Options Period") after the shares of Common Stock underlying the Options (the
"Option Shares") have been registered under an appropriate registration
statement which has become effective after filing with the Securities and
Exchange Commission (the "SEC"). If the Company is eligible to register the
Option Shares under a registration statement on Form S-3, then the Company shall
file with and diligently cause such registration statement to be declared
effective by the SEC as soon as may be pracitcable after executing this letter.
The Company has advised Xxxxx that the Company will not be eligible to utilize
Form S-3 until February 1998. If the Company has not caused the Option Shares
to be registered prior to December 31, 1998, then the Company shall as soon as
may be practicable but in any event within six (6) months thereafter file such
registration statement and distribution, and diligently endevor in good faith to
cause such registration statement on Form S-3 to be declared effective by the
SEC and to maintain such effectiveness through the Options Period. All costs
relating to such registration shall be borne and paid by the Company. If the
Option Shares have not been registered prior to the close of business on
December 31, 1999, then the exercise price per share, as set forth above, for
each of the respective Options shall automatically be lowered by 50%.
10. Other Contingent Compensation. Should the Company at any time
during the Term, and for a period of twelve (12) months thereafter, seek to
acquire any corporation, enterprise, or business which Xxxxx has directly or
indirectly introduced to the Company, then, in the absence of any agreement
executed by the parties subsequent to the date of this letter, the Company
shall, upon consummation of such transaction, pay to Xxxxx a fee in cash
determined according to the so-called "Xxxxxx Formula" which is: 5% of the
first $1,000,000 of Consideration, as defined below, and 4% of the next
$1,000,000 of Consideration, and 3% of the next $1,000,000 of Consideration, and
2% of the next $1,000,000 of Consideration, and 1% of all Consideration which is
in excess of $4,000,000. For the purposes set forth herein, "Consideration"
shall mean the total value of all cash, securities, the repurchase or buy-out of
any options or warrants, any agreements or other property and any other
consideration, including, without limitation, any contingent, earned or other
consideration, paid or payable, directly or indirectly, in connection with the
foregoing acquisition.
11. Indemnification by the Company. Because Xxxxx will be acting on
behalf of the Company in connection with his engagement hereunder, Company
hereby agrees to indemnify and save Xxxxx and hold Xxxxx harmless in respect of
all causes of actions, liabilities, costs, charges and expenses, loss and damage
(including consequential loss) suffered or incurred by Xxxxx (including legal
fees) arising from any act or alleged act or omission or alleged omission of the
Company or its employees, servants, and agents.
12. Advertisements. Xxxxx shall have the right to place advertisements
in financial and other newspapers and journals at his own expense describing his
services to the Company hereunder.
13. Bridge and Other Financings. In the event that the Company during
the Term seeks to obtain any bridge or other financing, equity or debt, in
connection with any aspect of its business plan, other than bank or other
similar debt incurred in the ordinary course of business, Xxxxx and its
affiliates shall have the first right of negotiation to provide all or a portion
of such financing on terms mutually acceptable to the Company and Xxxxx. If the
Company determines to raise funds during the Term by means of a public offering
or a private placement, Xxxxx shall have the right of first negotiation to act
as lead underwriter or placement agent for such financing or financings. Any
decision by Xxxxx or its affiliates to provide such financing or act in such
capacity would be contained in a separate letter or other agreement which would
include, among other things, customary fees, indemnifications, the terms of such
financing or financings, conditions precedent, including due diligence, current
conditions and approval by the requisite committees, as well as customary
representations and warranties.
14. Severability. Any portion of the indemnification and/or
confidentiality provisions herein which may be prohibited or unenforceable in
any applicable jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability, but shall not invalidate the
remaining portions of such provisions or the other provisions hereof or affect
any such provisions or portion thereof in any other jurisdiction.
15. Successor and Assigns. The benefits of this Agreement shall inure
to the respective successors and assigns of the parties hereto and of the
indemnified parties hereunder and their successors, assigns and representatives,
and the obligations and liabilities assumed in this Agreement by the parties
shall be binding upon their respective successors and assigns.
16. Assignment. This Agreement and the rights hereunder may not be
assigned by either party (except by operation of law) without prior written
consent of the other party, but, subject to the foregoing limitation, this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, and legal representatives of the parties.
17. Notice. Any notice or other communications between the parties
hereto shall be sufficiently given if sent by certified registered mail, postage
prepaid, or by telecopy, if to Company addressed to it at 0000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxx 00000 or if to Xxxxx, addressed to it at
00 Xxxxxxxxxx Xxxx, Xxxxx Xxxx, Xxx Xxxx 00000, or to such other address as
hereafter by designated in writing by one party to the other. Such notice or
other communications shall, if sent by telecopy, be deemed to be given upon
receipt of the confirmation of its proper transmission and if outside the hours
of 9:00 a.m. to 5:00 p.m. on any business day in the jurisdiction of the
addressee, shall be deemed to be given at 9:00 a.m. on the next business day.
Notices sent by certified or registered mail or prepaid postage shall be deemed
to be received three business days after the date of forwarding the same. For
the purposes of this Agreement, "business day" shall refer to a day in which
trading banks are open for business.
18. Captions. The headings of the sections of this Agreement are
intended solely for convenience of reference and are not intended and shall not
be deemed for any purpose whatsoever to modify or explain or place any
constriction upon any of the provisions of this Agreement.
19. Attorneys' Fees. In the event any party hereto shall institute an
action, including arbitration pursuant to Section 8 of this Agreement, to
enforce any rights hereunder, the prevailing party in such action shall be
entitled, in addition to any other relief granted, to reasonable attorneys' fees
and costs.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties, and there are no representations, warranties, or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein. No supplement, modification, amendment, waiver
or termination of this Agreement shall be binding unless executed in writing by
the parties hereto. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any provisions hereof (whether or not
similar) nor shall waiver constitute a continuing waiver.
21. Governing Law. The parties hereto hereby agree that this Agreement
shall be governed by the laws of the State of New York.
Xxxxx is delighted to accept this engagement and looks forward to working
with you on this assignment. Please confirm that the foregoing correctly sets
forth our agreement by signing the enclosed duplicate of this letter in the
space provided and returning it, whereupon this letter shall constitute a
binding agreement as of the date first above written.
Very truly yours,
H.D. Xxxxx & Co., Inc.
By:/s/Xxxxxxx Xxxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxxx, an authorized agent
Agreed:
NETTER DIGITAL ENTERTAINMENT, INC.
By:/s/Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
