EXHIBIT 1 (b)
FORM OF FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of this __ day of ______, 1998,
by and between Digital Lava Inc., a Delaware corporation (the "Company"), and
Xxxxx & Company, Inc. (the "Financial Advisor").
In consideration of and for the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Purpose. The Company hereby retains the Financial Advisor to furnish advice
to the Company in connection with the acquisition of and/or merger with other
companies, joint ventures with any third parties, license and royalty agreements
and any other financing, including, but not limited to, the sale of the Company
itself (or any significant percentage, subsidiaries or affiliates thereof).
In the event that any such transactions are directly or indirectly
originated by the Financial Advisor for a period of five (5) years from the date
hereof, the Company shall pay fees to the Financial Advisor as follows:
Legal Consideration Fee
1. $ -0- - $3,000,000 5% of legal consideration
2. $ 3,000,001 - $6,000,000 Amount calculated pursuant to
line 1 of this computation,
plus 4% of excess over
$3,000,000
3. $ 6,000,001 - 8,000,000 Amount calculated pursuant to
lines 1 and 2 of this
computation, plus 3% of excess
over $6,000,000
4. $ 8,000,001-$10,000,000 Amount calculated pursuant to
lines 1, 2 and 3 of this
computation, plus 2% of excess
over $8,000,000.
5. above $ 10,000,000 Amount calculated pursuant to
lines 1, 2, 3 and 4 of this
computation, plus 1% of excess
over $10,000,000.
Legal consideration is defined, for purposes of this Agreement, as the
total of stock (valued at market on the day of closing, or if there is no public
market, valued as set forth herein for other property), cash and assets and
property or other benefits exchanged by the Company or received by the Company
or its shareholders (all valued at fair market value as agreed or, if not, by
any independent appraiser), irrespective of period of payment or terms.
2. Sales or Distributions of Securities. If the Financial Advisor assists
the Company in the sale or distribution of securities to the public or in a
private transaction, the Financial Advisor shall receive fees in the amount and
form to be arranged separately at the time of such transaction.
3. Form of Payment. All fees due to the Financial Advisor pursuant to
Section 1 hereof are due and payable to the Financial Advisor, in cash or by
certified check, at the closing or closings of a transaction specified in such
Section 1 or as otherwise agreed between the parties hereto; provided, however,
that in the case of license and royalty agreements specified in Section 1hereof,
the fees due the Financial Advisor in receipt of such license and royalty
agreements shall be paid as and when license and/or royalty payments are
received by the Company. In the event that this Agreement shall not be renewed
for a period of at least twelve (12) months at the end of the five (5) year
period referred to in Section 1 hereof or if terminated for any reason prior to
the end of such five (5) year period then, notwithstanding any such non-renewal
or termination, the Financial Advisor shall be entitled to the full fee for any
transaction contemplated under Section 1 hereof which closes within twelve (12)
months after such non-renewal or termination.
4. Indemnification. Since the Financial Advisor will be acting on behalf of
the Company in connection with its engagement hereunder, the Company and
Financial Advisor have entered into a separate indemnification agreement
substantially in the form attached hereto as Exhibit A and dated the date
hereof, providing for the indemnification of Financial Advisor by the Company.
The Financial Advisor has entered into this Agreement in reliance on the
indemnities set forth in such indemnification agreement.
5. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for any
reason whatsoever, such unlawfulness or invalidity shall not affect the validity
of the remainder of this Agreement.
6. Miscellaneous.
A. Any notice or other communication between the parties hereto shall be
sent by certified or registered mail, postage prepaid, if to the Company,
addressed to it at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx
00000, Attention: Xxxxxx Xxxxxxxx, Chief Executive Officer with a copy to
Xxxxxxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx LLP, Attention: Xxxxxxx Xxxxx, Esq. or, if
to the Financial Advisor, addressed to it at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx, Attention: Xxxxxx Xxxxx, with a copy to Xxxxxx, Xxxxxxxxxx &
Xxxxxxxxx, 000 0xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx Xxxxxx,
Esq., or to such address as may hereafter be designated in writing by one party
to the other. Such notice or other communication shall be deemed to be given on
the date of receipt.
B. If, during the term hereof, the Financial Advisor shall cease to do
business, the provisions hereof relating to the duties of the Financial Advisor
and compensation by the Company as it applies to the Financial Advisor shall
thereupon cease to be in effect, except for
the Company's obligation of payment for services rendered prior thereto. This
Agreement shall survive any merger of, acquisition of, or acquisition by the
Financial Advisor and, after any such merger or acquisition, shall be binding
upon the Company and the corporation surviving such merger or acquisition.
C. This Agreement embodies the entire agreement and understanding between
the Company and the Financial Advisor and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the central subject matter hereof.
D. This Agreement has been duly authorized, executed and delivered by and
on behalf of the Company and the Financial Advisor.
E. This Agreement shall be construed and interpreted in accordance with
laws of the State of New York, without giving effect to conflicts of laws.
F. This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law) and shall be binding upon and inure to
the benefit of the parties and their respective successors, assigns and legal
representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereof.
DIGITAL LAVA INC.
By:
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Name: Xxxxxx X.X. Xxxxxxxx
Title: Chief Executive Officer
XXXXX & COMPANY, INC.
By:
---------------------------------
Name:
Title:
EXHIBIT A
__________, 1998
XXXXX & COMPANY, INC.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with our engagement of XXXXX & COMPANY, INC. (the "Financial
Advisor") as our financial advisor and investment banker, we hereby agree to
indemnify and hold the Financial Advisor and its affiliates, and the directors,
officers, partners, shareholders, agents and employees of the Financial Advisor
(collectively the "Indemnified Persons"), harmless from and against any and all
claims, actions, suits, proceedings (including those of shareholders), damages,
liabilities and expenses incurred by any of them (including, but not limited to,
fees and expenses of counsel) which are (A) related to or arise out of (i) any
actions taken or omitted to be taken (including any untrue statements made or
any statements omitted to be made) by us, or (ii) any actions taken or omitted
to be taken by any Indemnified Person in connection with our engagement of the
Financial Advisor pursuant to the Financial Advisory Agreement, of even date
herewith, between the Financial Advisor and us (the "Financial Advisory
Agreement"), or (B) otherwise related to or arising out of the Financial
Advisor's activities on our behalf pursuant to the Financial Advisor's
engagement under the Financial Advisory Agreement, and we shall reimburse any
Indemnified Person for all expenses (including, but not limited to, fees and
expenses of counsel) incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or proceeding
(collectively a "Claim"), whether or not in connection with pending or
threatened litigation in which any Indemnified Person is a party. We will not,
however, be responsible for any Claim which is finally judicially determined to
have resulted exclusively from the gross negligence or willful misconduct of any
person seeking indemnification hereunder. We further agree that no Indemnified
Person shall have any liability to us for or in connection with the Financial
Advisor's engagement under the Financial Advisory Agreement except for any Claim
incurred by us solely as a direct result of any Indemnified Person's gross
negligence or willful misconduct.
We further agree that we will not, without the prior written consent of the
Financial Advisor, settle, compromise or consent to the entry of any judgment in
any pending or threatened Claim in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such Claim), unless such settlement,
compromise or consent includes a legally binding, unconditional, and irrevocable
release of each Indemnified Person hereunder from any and all liability arising
out of such Claim.
Promptly upon receipt by an Indemnified Person of notice of any complaint
or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution, but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
unless, and only to the extent that, such failure results in the forfeiture by
us of substantial rights and defenses, and such failure to so notify us will not
in any event relieve us from any other obligation or liability we may have to
any Indemnified Person otherwise than under this Agreement. If we so elect or
are requested by such Indemnified Person, we will assume the defense of such
Claim, including the employment of counsel reasonably satisfactory to such
Indemnified Person and the payment of the fees and expenses of such counsel. In
the event, however, that such Indemnified Person reasonably determines in its
sole judgment that having common counsel would present such counsel with a
conflict of interest or such Indemnified Person concludes that there may be
legal defenses available to it or other Indemnified Persons different from or in
addition to those available to us, then such Indemnified Person may employ its
own separate counsel to represent or defend it in any such Claim and we shall
pay the reasonable fees and expenses of one other such counsel. Notwithstanding
anything herein to the contrary, if we fail timely or diligently to defend,
contest, or otherwise protect against any Claim, the relevant Indemnified Party
shall have the right, but not the obligation, to defend, contest, compromise,
settle, assert crossclaims or counterclaims, or otherwise protect against the
same, and shall be fully indemnified by us therefor, including, but not limited
to, for the fees and expenses of its counsel and all amounts paid as a result of
such Claim or the compromise or settlement thereof. In any Claim in which we
assume the defense, the Indemnified Person shall have the right to participate
in such defense and to retain its own counsel therefor at its own expense.
We agree that if any indemnity sought by an Indemnified Person hereunder is
held by a court to be unavailable for any reason, then (whether or not the
Financial Advisor is the Indemnified Person) we and the Financial Advisor shall
contribute to the Claim for which such indemnity is held unavailable in such
proportion as is appropriate to reflect the relative benefits to us, on the one
hand, and the Financial Advisor, on the other, in connection with the Financial
Advisor's engagement by us under the Financial Advisory Agreement, subject to
the limitation that in no event shall the amount of the Financial Advisor's
contribution to such Claim exceed the amount of fees actually received by the
Financial Advisor from us pursuant to the Financial Advisor's engagement under
the Financial Advisory Agreement. We hereby agree that the relative benefits to
us, on the one hand, and the Financial Advisor, on the other hand, with respect
to the Financial Advisor's engagement under the Financial Advisory Agreement
shall be deemed to be in the same proportion as (a) the total value paid or
proposed to be paid or received by us or our stockholders as the case may be,
pursuant to the transaction (whether or not consummated) for which the Financial
Advisor is engaged to render services bears to (b) the fee paid or proposed to
be paid to the Financial Advisor in connection with such engagement.
Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that an Indemnified Party may have at law or at
equity.
Should the Financial Advisor, or any of its directors, officers, partners,
shareholders, agents or employees, be required or be requested by us to provide
documentary evidence or testimony in connection with any proceeding arising from
or relating to the Financial Advisor's engagement under the Financial Advisory
Agreement, we agree to pay all reasonable expenses (including but not limited to
fees and expenses of counsel) in complying therewith and one thousand dollars
($1,000) per day for any sworn testimony or preparation therefor, payable in
advance.
We hereby consent to personal jurisdiction and service of process and venue
in any court in which any claim for indemnity is brought by any Indemnified
Person.
It is understood that, in connection with the Financial Advisor's
engagement under the Financial Advisory Agreement, the Financial Advisor may be
engaged to act in one or more additional capacities and that the terms of the
original engagement or any such additional engagement may be embodied in one or
more separate written agreements. The provisions of this Agreement shall apply
to the original engagement and any such additional engagement and shall remain
in full force and effect following the completion or termination of the
Financial Advisor's engagement(s).
Very truly yours,
DIGITAL LAVA INC.
By:
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Name: Xxxxxx X.X. Xxxxxxxx
Title: CEO
CONFIRMED AND AGREED TO:
XXXXX & COMPANY, INC.
By:
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Name:
Title:
