EXHIBIT 10.23
February 24, 1999
CONFIDENTIAL
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Xxxx Xxxxxxxxx
c/o Palisades Capital, Inc.
000 Xxxxx Xx Xxxxxxx
Xxxxxxx Xxxxx, XX 00000
Entertainment Universe, Inc
000 Xxxxx Xx Xxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
Gentlemen:
This letter shall confirm the engagement of Xxxxxx Xxxxxx Xxxxxxxx &
Co., Inc. ("GKM") by Entertainment Universe, Inc. and Xxxx Xxxxxxxxx
(collectively, "Palisades") as their exclusive placement agent to arrange
and negotiate a private placement the "Private Placement") of securities
(the "Securities") to finance the proposed acquisition (the "CD
Acquisition) of CD Universe (including its successors and assigns, the
"Company"). It is anticipated that the CD Acquisition will be made
through a reverse merger (the "Reverse Merger') of the Company into a
public "shell" corporation and that the Company, as the surviving
corporation in such merger, will become a party to this agreement and
issue the Securities simultaneously with the closing of the CD Acquisition
(the "CD Closing"). The Private Placement shall be made pursuant to one
or more exemptions from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and any applicable securities laws of any
state or other jurisdiction (the "Blue Sky Laws"). The Private Placement
will have estimated aggregate gross proceeds of between $2.0 and $8.0
million and will be subject to the following terms and conditions:
I . Retention. Subject to the terms and conditions of this Agreement,
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Palisades hereby appoints (and, at the time of the. CD Closing, the
Company shall appoint) GKM to act on a best efforts basis as its exclusive
agent during the Authorization Period (as hereinafter defined) (i) to
privately place the Securities in an amount and on terms and conditions
satisfactory to Palisades and the Company, and (ii) to render financial
advisory services to Palisades and, effective as of the CD Closing, the
Company regarding any Transaction (as hereinafter defined) involving the
Company. GKM hereby accepts such agency and
Entertainment Universe, Inc.
February 24, 1999
Page 2
agrees, subject to the terms and conditions of this Agreement, to use its best
efforts during the Authorization Period to arrange the sale of the Securities
through the Private Placement.
For purposes of this Agreement, a Transaction shall mean (x) the CD Acquisition
and the Reverse Merger, (y) any transaction or series or combination of
transactions, whereby, directly or indirectly, control of or a material interest
in a company or other entity (an "Acquisition Candidate") or any of its
businesses, product lines or assets is transferred to the Company or any of its
affiliates, including, without limitation, (i) a sale or exchange of capital
stock or assets, (ii) a merger, consolidation or reorganization or other
business combination pursuant to which the Acquisition Candidate or the business
of the Acquisition Candidate or a subsidiary of the Acquisition Candidate is
acquired or combined with the Company, (iii) the acquisition, directly or
indirectly, by the Company of more than 50% of the capital stock outstanding or
a portion of the assets of an Acquisition Candidate by way of tender or exchange
offer, negotiated purchase or otherwise, (iv) the acquisition, directly or
indirectly, by the Company of control of an Acquisition Candidate or the ability
to effect such control, through proxy contest or otherwise, or (v) the formation
of a joint venture, minority investment or partnership, or any similar
transaction with an Acquisition Candidate, or (z) any transaction or series or
combination of transactions, whereby, directly or indirectly, control of or a
material interest in the Company or any of its businesses, product lines or
assets is transferred to another party (a "Purchaser"), including, without
limitation, (i) a sale or exchange of capital stock or assets, (ii) a merger,
consolidation or reorganization or other business combination pursuant to which
the Company or its business or a subsidiary of the Company is acquired or
combined with a Purchaser, (iii) the acquisition, directly or indirectly, by a
Purchaser of more than 50% of the capital stock outstanding or a portion of the
assets of a Company by way of tender or exchange offer, negotiated purchase or
otherwise, (iv) the acquisition, directly or indirectly, by a Purchaser of
control of the Company or the ability to effect such control, through proxy
contest or otherwise, or (v) the formation of a joint venture, minority
investment or partnership, or any similar transaction between the Company and a
Purchaser.
GKM will assist in analyzing, structuring, negotiating and effecting the
Transaction, as more fully described below, after it has met with management of
the Company and its outside counsel and accountants and analyzed, among other
things, the Company's business, operations and prospects, the trading market
for the Company's
Entertainment Universe, Inc.
February 24, 1999
Page 3
common stock and the other securities of the Company. As appropriate, Xxxxxx
Xxxxxx will:
A. assist in the development of appropriate acquisition criteria and
identify Acquisition Candidates and prospective Purchasers;
B. provide advisory services, including company screening and general
business and financial analysis, transaction feasibility analysis and
valuation of prospective acquisitions;
C. advise the Company with respect to the structure, terms and timing of a
Transaction;
D. at the Company's request, assist in negotiations and related strategy;
E. assist the Company in preparing the required Transaction documents
(including a letter of intent and definitive agreement) to the extent
such documents relate to the terms of the Transaction or the terms of
securities being offered in the Transaction;
F. act as dealer/manager in a tender offer, subject to entering into a
dealer/manager agreement in customary form, which includes additional
compensation to be paid to GKM;
G. provide brokerage services on customary terms to the Company in
connection with its accumulation, if any, of the stock of an
Acquisition Candidate;
H. assist in corporate capital planning, including the identification of
available financing; and
I. render such other financial advisory services as may from time to time
be agreed upon by the Company and GKM.
If requested by the Company, Xxxxxx Xxxxxx will render an opinion (the
"Opinion") as to whether or not the consideration to be paid in the
Transaction is fair, from a financial point of view, to the Company. It is
understood that the Opinion, if rendered, will be prepared solely for the
confidential use of the Board of Directors of the Company and will
Entertainment Universe, Inc.
February 24, 1999
Page 4
not be reproduced, summarized, described or referred to or given to any other
person or otherwise made public without Xxxxxx Xxxxxx'x prior written consent
unless subpoenaed to be disclosed in a legal proceeding, provided Xxxxxx Xxxxxx
is given prior written notice in advance of such disclosure. If the Opinion is
included in a proxy statement, the Opinion letter will be reproduced in full,
and any description of or reference to Xxxxxx Xxxxxx or summary of the Opinion
will be in a form acceptable to Xxxxxx Xxxxxx and its counsel.
Each of Palisades and the Company understand and agree that, in soliciting
offers to purchase Securities pursuant to this Agreement and in assuming its
other obligations hereunder, GKM is acting solely as agent and not as principal,
and that, except as otherwise expressly agreed in writing, GKM's responsibility
in respect of its engagement hereunder is limited to a "best efforts" basis in
placing the Securities, with no understanding, expressed or implied, on GKM's
part of a commitment to underwrite, purchase or place the Securities or any
other securities of the Company.
GKM agrees that it may not bind or obligate the Company to sell the
Securities. The Company is not obligated or required to accept any offer to
purchase Securities by any prospective investor identified by GKM, and the
Company may refuse in its sole discretion to sell any Securities to such
prospective investor without any liability to GKM. If the Company should fail
to deliver Securities to a purchaser whose offer the Company has accepted by
execution of a subscription agreement in respect thereof, the Company (i) shall
hold GKM harmless against loss, claim or damage arising from or as a result of
such failure by the Company and (ii) shall pay to GKM any fee to which GKM would
be entitled hereunder in connection with such sale as if such sale had been
consummated.
During the Authorization Period, Palisades and the Company shall be
prohibited from (i) directly or indirectly offering any of the Securities (or
securities substantially similar to the Securities) for sale to, or soliciting
any offer to purchase any of the Securities from, or otherwise contacting,
approaching or negotiating with respect thereto with, any person, (ii)
authorizing anyone other than GKM to act on its behalf to place the Securities
(or securities substantially similar to the Securities), or (iii) having any
discussions or negotiations with any person other than representatives from GKM
with respect to engaging such person (or entity represented by such person) as a
finder, broker, dealer or financial advisor in connection with the sale by the
Company of any securities. The Company shall promptly refer to GKM all offers,
inquiries and proposals relating to any placement of the Securities made to the
Company at any time during the Authorization Period.
Entertainment Universe, Inc.
February 24, 1999
Page 5
It is understood that GKM is being engaged hereunder solely to provide the
services described in this Agreement and that GKM is not acting as an agent or
fiduciary of, and shall have no duties or liabilities to, the equity holders of
Palisades or Company or any third party in connection with its engagement
hereunder.
2. Authorization Period. GKM's engagement hereunder shall become
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effective on the date hereof and, unless extended in writing by
Palisades or the Company and GKM, shall expire on the earlier of (i) the final
closing date of the Private Placement, and (ii) September 30, 1999 (in either
case, the "Termination Date"; the period from the date hereof through the
Termination Date being hereinafter referred to as the "Authorization Period").
3. Offering Documents. GKM shall prepare a Confidential Offering
------------------
Memorandum, and such amendments or supplements to each as GKM may reasonably
deem to be necessary, to effectuate the sale of the Securities (the Confidential
Offering Memorandum, and any such amendments or supplements, are collectively
referred to herein as the "Offering Materials"). The Company shall cooperate
with, and assist, GKM in the preparation of the Offering Materials, and prior to
any distribution thereof by GKM, the Offering Materials shall be subject to the
Company's review and approval, which approval shall not be unreasonably withheld
or delayed. The Company authorizes GKM to transmit the Offering Materials to
potential purchasers of the Securities, and shall furnish to GKM copies of the
Offering Materials in such quantities as GKM may from time to time request. The
Company shall prepare forms of purchase agreements or subscription agreements
containing terms and conditions customary for private placement transactions, to
be entered into by the Company and each purchaser of Securities, which forms
shall be provided to offerees only upon the review and approval of both the
Company and GKM.
4. Compensation.
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(a) As cash compensation for GKM's services hereunder, the Company
shall pay GKM the fees set forth in Annex A hereto.
(b) On the date of the CD Closing, the Company shall issue (and
Palisades shall cause the Company to issue) to GKM warrants to purchase 300,000
shares of common stock at an exercise price of $3.00 per share (the "Retention
Warrants"), assuming that the pre-money valuation of the Company is not less
than $37.5 million. In
Entertainment Universe, Inc.
February 24, 1999
Page 6
the event the Securities are issued at a pre-money valuation less than $37.5
million, the exercise price shall be proportionately and equitably adjusted.
The Retention Warrants shall be immediately exercisable and shall expire five
years after issuance. The Company shall file a registration statement with
respect to the common stock underlying the Retention Warrants within six months
following the CD closing. On each closing date of the sale of Securities, the
Company shall issue to GKM warrants (the "Financing Warrants") to purchase
shares of common stock of the Company in an amount equal to 10% of the amount of
common stock (assuming full conversion or exchange of all Securities convertible
or exchangeable into or for common stock) issued by the Company on such closing
date, at an exercise price equal to the average of ( i) the lowest price at
which any shares of common stock are sold in the Private Placement (or in the
event no shares are sold, the lowest price at which Securities are convertible
into or exchangeable for common stock) and (ii) the lowest price at which any
shares of common stock are sold in the anticipated Rule 504 offering pursuant to
Regulation D promulgated under the Securities Act of 1933, as amended; provided
that the number of Financing Warrants to be issued shall be reduced by one-half
in respect of any Securities sold to any person listed in Amex A on or prior to
March 31, 1999. The Financing Warrants shall not be exercisable until one year
after the date of issuance and shall expire five years after issuance. The
Retention Warrants and the Financing Warrants shall include customary anti-
dilution protection. The Retention Warrants and the Financing Warrants shall
also include provisions for tag-along rights with respect to the underlying
common stock, one demand registration right exercisable following the first
anniversary of the CD Closing, and unlimited piggyback registration rights
customary in transactions of this type.
(c) Regardless of whether the sale of any Securities is consummated,
Palisades will pay or cause the Company to pay the following expenses in
connection herewith: (i) the fees and disbursements of the Company's counsel
and other representatives and advisers; (ii) the expenses in connection with the
preparation and printing of the Offering Materials and amendments and
supplements thereto and the mailing and delivering of copies thereof, (iii) the
cost of printing the purchase agreements or subscription agreements, if any, and
any other documents in connection with the offering, purchase, sale and delivery
of the Securities; (iv) the expenses in connection with the qualification of the
Securities for offering and sale under state securities laws, if any, including
any and all filing fees and the fees and disbursements of counsel for GKM in
connection with reviewing applicable state securities laws and preparing any
filings thereunder; (v) the costs of preparing certificates representing the
Securities; (vi) the costs and charges of any transfer agent or registrar; and
(vii) all other costs and expenses incident
Entertainment Universe, Inc.
February 24, 1999
Page 7
to the performance of the Company's obligations hereunder and under the purchase
agreements or subscription agreements (including, without limitation, any taxes
payable in connection with the issuance, sale and delivery of the Securities).
(d) In addition to the compensation payable to GKM hereunder and
regardless of whether the sale of any of the Securities is consummated,
Palisades shall reimburse (or cause the Company to reimburse) GKM, upon request
made from time to time, for all of its reasonable out-of-pocket expenses
incurred in connection with its engagement hereunder, including the fees,
disbursements and other charges of its legal counsel, provided, however, that
any individual expenses in excess of $1,000 (or $3,000 in the case of travel
expenses) must be approved by the Company in advance, and reimbursement of
expenses shall not exceed a total of $40,000.
(e) In addition, Palisades shall pay or cause the Company to pay to GKM
all compensation described in this Section 4 of this Agreement with respect to
any Securities (or securities substantially similar to the Securities) sold to
any party at any time prior to the expiration of 24 months after the Termination
Date if such party (i) is one identified to the Company by GKM during the
Authorization Period, or (ii) is one with whom the Company, during the
Authorization Period, had material discussions regarding the sale of Securities
or securities substantially similar to the Securities.
(f) In addition, Palisades shall pay GKM additional compensation in the
form of I 00,000 shares of the Company's common stock if the Private Placement
closes on or before March 15, 1999.
5. Representations, Warranties and Covenants of Palisades and the Company.
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Palisades and the Company represent and warrant to, and covenant with, GKM as
follows:
(a) During the Authorization Period, neither Palisades nor the Company
shall not use, disseminate, publish, distribute or refer to any materials in
connection with any offering of Securities, including without limitation, any
Offering Materials, without GKM's prior consent except for internal use among
the Company's personnel and representatives.
(b) Neither Palisades nor the Company has taken, or will take, any
action, directly or indirectly, so as to cause any of the transactions
contemplated by this Agreement to fail to be entitled to exemption from
registration under all applicable
Entertainment Universe, Inc.
February 24, 1999
Page 8
securities laws. Palisades and the Company shall ensure that neither they, nor
any of their affiliates, nor any person (other than GKM) acting on behalf of
Palisades or Company or any such affiliates, has engaged or will engage in any
general advertising or general solicitation (as those terms are used in
Regulation D under the Securities Act) with respect to the Securities.
(c) Palisades and the Company shall, from time to time, take such
action as GKM may reasonably request to qualify the Securities for offering and
sale as a private placement under the securities laws of such states or other
jurisdictions as GKM may reasonably request and to comply with such laws so as
to permit such offers and sales.
(d) Palisades and the Company shall make available to GKM and/or shall
agree to have professionally prepared at their expense, all financial
statements, projections, appraisals, surveys and other information which in
GKM's reasonable judgment shall be necessary or appropriate for the proper
marketing of the Securities. Palisades and the Company shall, upon reasonable
request, cause their respective directors, officers, personnel, counsel,
accountants, and other representatives to meet with GKM or its representatives
to discuss all information relevant for disclosure in any Offering Materials.
Palisades and the Company shall cooperate in any reasonable investigation
requested by GKM or its representatives (including the production of
information at their offices or copies of such information at the offices of
GKM) for the purpose of confirming the accuracy and completeness of the
statements contained in the Offering Materials.
(e) The Offering Materials as of the date thereof and as of the
closing date of each sale of Securities, will be true, complete and correct in
all material respects and do not, and will not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. Palisades and the
Company shall advise GKM immediately of the occurrence of any event or other
change which results in the Offering Materials containing an untrue statement
of a material fact or omitting to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, and shall furnish to
GKM copies of amended or supplemented Offering Materials that correct such
statement or omission in such quantities as GKM may from time to time request
upon being so advised. With respect to any financial or other projections
included or to be included in the Offering Materials, the Company represents
and warrants that they have been, or will be, prepared in good faith on the
basis of
Entertainment Universe, Inc.
February 24, 1999
Page 9
reasonable assumptions. Palisades and the Company recognize and confirm that
GKM (i) will be using and relying primarily on the information in the Offering
Materials and information available from generally recognized public sources in
performing the services contemplated hereunder without having independently
verified the same, (ii) does not assume responsibility for the accuracy or
completeness of such information or of the Offering Materials and (iii) will not
make any appraisal of any assets of the Company.
(f) (i) At the time of the CD Closing, the Company will have full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and all consents, authorizations, approvals
and orders required in connection with the execution, delivery and performance
hereof have been obtained; (ii) this Agreement will be valid and binding
obligation of the Company, enforceable in accordance with its terms, except to
the extent that the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors
generally and general principles of equity; and (iii) the execution, delivery
and performance of this Agreement will not conflict with, result in a breach of
any of the terms or provisions of, or constitute a violation or a default under,
any material agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound.
(g) For a period of five years after the final closing date or until
GKM no longer owns common stock or warrants in the Company, the Company shall
furnish to GKM or shall cause to be furnished to GKM (i) copies of the Company's
annual reports and other financial reports at the earliest time that such
reports are made available to others, (ii) notice of any material development
affecting the Company, (iii) any filings made with the Securities and Exchange
Commission or any exchange on which any class of the Company's securities may be
or become listed or quoted and (iv) such other information concerning the
business and financial condition of the Company as GKM may from time to time
reasonably request or which is sent to the holders of the Securities.
(h) The Company shall cause its counsel to deliver, at each closing of
the sale of Securities, an opinion addressed to GKM and to each of the
purchasers, covering such matters as are typically covered in opinions delivered
in connection with private placements (including, without limitation, an opinion
to the effect that the placement of the Securities is exempt from registration
under the Securities Act), in form and substance reasonably acceptable to both
GKM and its counsel. The Company shall also cause to be furnished to GKM, at
each closing of the sale of the Securities, (i) copies
Entertainment Universe, Inc.
February 24, 1999
Page 10
of other legal opinions, "comfort" letters, certificates, agreements, and other
documents furnished to the purchasers of the Securities on such closing date and
(ii) copies of all filings made by the Company with the Securities and Exchange
Commission or state securities commissions, in each case, in form and substance
reasonably satisfactory to GKM.
6. Indemnification. Palisades agrees (and at the time of the CD Closing
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the Company shall agree) to the indemnification and other agreements set forth
in the Indemnification Agreement attached hereto, the provisions of which are
incorporated herein by reference.
7. Right of First Refusal. In the event the Company raises $2.0 million or
----------------------
more in the Private Placement, the Company agrees that GKM shall have the right,
for a period of twelve months following the termination of GKM's engagement
pursuant to this Agreement, to act as the exclusive underwriter, placement agent
and financial advisor to the Company in connection with any equity or debt
financing, any merger or acquisition activity or any other investment banking
services for the Company, to the extent that the Company decides to engage an
investment bank or other financial advisor for such services; provided however,
that GKM shall agree to become a co-managing underwriter or co-placement agent
if the Company elects to retain and does retain a nationally recognized "bulge
bracket" investment banking firm to act as lead underwriter or agent, so long as
(i) GKM's percentage of the gross underwriters' spread or placement fee shall
not be less than that of any other co-manager or co-placement agent (other than
the lead underwriter or agent), and (ii) if there are no other co-managers or
co-placement agents (other than the lead underwriter or agent), GKM shall not
receive less than 40% of such gross spread or placement fees. Except as
otherwise provided herein, the Company agrees to compensate GKM for such
services in amounts that reflect GKM's normal an customary compensation for such
services, negotiated by the Company and GKM in good faith.
8. Survival of Certain Provisions. The expense, indemnification,
------------------------------
reimbursement and contribution obligations of Palisades and the Company provided
herein and their obligation to pay GKM any compensation earned pursuant hereto
shall remain operative and in full force and effect regardless of (i) any
withdrawal, termination or consummation of or failure to initiate or consummate
any transaction referred to in this Agreement, (ii) any investigation made by or
on behalf of GKM and (iii) any termination or the completion or expiration of
this Agreement or GKM's engagement hereunder.
Entertainment Universe, Inc.
February 24, 1999
Page 11
9. Notices. Notice given pursuant to any of the provisions of this
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Agreement shall be in writing and shall be mailed or delivered (a) if to
Palisades, at its principal office at 000 Xxxxx Xx Xxxxxxx, Xxxxx 000, Xxxxxxx
Xxxxx, XX 9021 1, Attn: Xxxx Xxxxxxxxx, (b) if to the Company, at its principal
office at 000 Xxxxx Xxxxxx Xxxxxxxxxx Xxxx, Xxxxxxxxxxx, XX 00000 and (c) if to
GKM, at the office of Xxxxxx Xxxxxx Xxxxxxxx & Co., Inc., 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 100 1 7, Attention: Xxxxxxx X. Xxxxxx.
10. Future Advertisements. The parties hereto acknowledge and agree that
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GKM has the right, subject to the Company's approval, to place advertisements
describing its services to the Company under this Agreement in financial and
other newspapers and journals at its own expense following the date upon which
the Private Placement closes.
11. Miscellaneous.
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(a) This Agreement (including the attached Indemnification Agreement)
sets forth the entire agreement between the parties, supersedes and merges all
prior written or oral agreements with respect to the subject matter hereof, may
only be amended in writing and shall be governed by the laws of the State of
New York applicable to agreements made and to be performed entirely within such
State. Any controversy arising between the parties hereto, or any person
claiming under either of them, relating to this Agreement or the performance or
breach thereof, shall be settled and determined by arbitration in New York, New
York, before a single arbitrator in accordance with the commercial arbitration
rules of the American Arbitration Association and the provisions of the New
York Code of Civil Procedure governing such arbitrations, and judgement upon
the reward rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
(b) Each of Palisades and the Company (for itself, anyone claiming
through it or in its name, and on behalf of its equity holders) and GKM
hereby irrevocably waives any right they may have to a trial by jury in
respect of any claim based upon or arising out of this Agreement or the
transactions contemplated hereby.
(c) This Agreement may not be assigned by either party without the
prior written consent of the other parties hereto.
Entertainment Universe, Inc.
February 24, 1999
Page 12
(d) If any provision of this Agreement is determined to be invalid or
unenforceable in any respect, such determination will not effect such provision
in any other respect or any other provision of this Agreement, which will remain
in full force and effect.
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to GKM the enclosed duplicate copy of this Agreement.
Very truly yours,
XXXXXX XXXXXX XXXXXXXX & CO., INC.
By:
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Name: Xxxxxxx X. Xxxxxx
Title: Senior Managing Director
Accepted and Agreed to as of
the date first written above
ENTERTAINMENT UNIVERSE, INC.
By:
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Name: Xxxx Xxxxxxxxx
Title: President
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Entertainment Universe, Inc.
February 24, 1999
Page 13
ANNEX A
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This Annex A is part of and incorporated into the letter agreement (the
"Agreement"), dated February [221, 1999, between Entertainment Universe, Inc.
and Xxxx Xxxxxxxxx (collectively, "Palisades") and Xxxxxx Xxxxxx Xxxxxxxx & Co.,
Inc. ("GKM"). Defined terms not defined herein have the meanings ascribed
thereto in the Agreement.
1. Fees with respect to Private Placement
6.0% of the Aggregate Consideration (as defined below) received or receivable by
the Company in connection with the Private Placement, payable in cash promptly
on the closing date on which such Aggregate Consideration is paid or becomes
payable; provided that such feel shall be reduced by one-half if the Securities
sold to any of the following persons on
or before March 31, 1999:
Xxxxxx Brothers
ABS Capital Partners
West End Capital
SouthRidge Capital
Xxxxxxxxx Partners
Isosceles Fund
SBC Xxxxxx Read
Xxxx Xxxx Fund
Pioneer Ventures
RoseGlen Capital
Victory Ventures
Xxxxx Xxxx Xx.
Pacific Capital Group
Gulfstream Capital Group
Apollo Capital
Xxxxx Xxxxx
Dancing Bear Investments
Brand Equity Ventures
MSD Capital (Xxxxxxx Xxxx)
Promethean Inv. Group
Palladin Group
Castle Creek Partners
GE Pension Trust
Xxxxxx London
Xxxxx Fund Management
Special Situations Fund
Retail & Restaurant Capital
Nightangle Capital
HBK Capital
Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxx Xxxxx
The Aggregate Consideration, for purposes of calculating GKM's fee
above, shall include the total value of Securities sold by the Company to
Entertainment Universe, Inc.
February 24, 1999
Page 14
purchasers including any amounts paid in escrow, any amounts payable
in the future, whether or not subject to any contingency in
connection therewith, and any amounts payable upon conversion or
exchange of any Securities sold in the Private Placement. If the
Aggregate Consideration is paid in whole or in part in the form of
securities or other noncash consideration, the value thereof, for
purposes of calculating GKM's fee, shall be the fair market value
thereof on the day prior to the closing date for such investment, as
determined in good faith by the Company and GKM; provided, however,
that to the extent that it consists of securities with an existing
public trading market, the value thereof shall be determined by the
average of the last sales price for such securities on the five
trading days prior to the closing date for such investment.
2. Financial Advisory Fees
If during the term of GKM's engagement hereunder, or within a period of
twenty-four (24) months following the effective date of termination of
GKM's engagement hereunder, the Company enters into one or more definitive
agreements which subsequently result in one or more Transactions and (x)
the party or parties to the Transactions were identified by GKM, or (y)
GKM rendered advice concerning the Transactions, then GKM shall be paid a
cash fee at the closing of each such Transaction as determined by
multiplying the appropriate percentage by the Aggregate Consideration (as
defined below) of the Transaction set forth below:
(i) For Transactions up to $50 million
Purchase Price Percentage
Up to the first $5 million 5.00%
Plus on the next $1 0 million 3.00%
Plus on the amount over $15 million 1.50%
Entertainment Universe, Inc.
February 24, 1999
Page 15
(ii) For Transactions Above $50 million
Purchase Price Percentage
Up to the first $50 million 2.00%
Plus on the next $200 million 1.00%
Plus on the amount over $250 million 0.50%
The term "Purchase Price" means the sum of the aggregate amount of cash and
the fair market value of any securities or assets received by the target company
or its shareholders in connection with a Transaction including, without
limitation, (i) the aggregate principal amount of any indebtedness of the target
company assumed, satisfied or otherwise discharged by the acquiring company at
the time of closing of the Transaction, (ii) amounts paid by the acquiring
company to holders of any warrants, stock purchase rights, convertible
securities or similar rights of the target company and to holders of any options
or stock appreciation rights issued by the target company, whether or not
vested, and (iii) if the Transaction involves the acquisition of all or a
substantial part of the operating assets of the target company, the excess, if
any, of (x) the value of any current assets not sold, minus the (y) the value of
any current liabilities not assumed by the acquiring company. If the Purchase
Price is paid in whole or in part in the form of securities or other noncash
consideration, the value thereof, for purposes of calculating GKM's fee, shall
be the fair market value thereof on the day prior to the closing date for such
investment, as determined in good faith by the Company and GKM; provided,
however, that to the extent that it consists of securities with an existing
public trading market, the value thereof shall be determined by the average of
the last sales price for such securities on the five trading days prior to the
closing date for such investment.
In connection with a Transaction involving a tender offer or other purchase or
sale of stock, the transaction fee will be payable and calculated based on the
Purchase Price as through I 00% of the outstanding stock on a fully diluted
basis had been acquired for the same per share amount paid in the transaction
Entertainment Universe, Inc.
February 24, 1999
Page 16
or series of transactions in which 50% or more of the target company's
outstanding stock is acquired by the Company. Nevertheless, GKM's
services pursuant to this Agreement will continue after such first step
is accomplished to assist the Company with a second step merger or
similar transaction.
2. Fee for Opinion
As compensation for Xxxxxx Xxxxxx'x services in rendering an Opinion, the
Company agrees to pay Xxxxxx Xxxxxx a separate fee to be mutually agreed
upon at the time an opinion is requested, said fee to be payable in cash on
the date Xxxxxx Xxxxxx delivers the Opinion. The obligations of the
Company to pay Xxxxxx Xxxxxx'x compensation and fees and expenses as set
forth in this Annex A shall be irrespective of the conclusions set forth in
the Opinion.
