EXHIBIT 12
L&R Holdings Consulting Agreement
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L & R Holdings, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
January 12, 1999
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
President & CEO
SMD Group, Inc.
Bedford Towers
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇:
This letter will confirm the agreement ("Agreement") between SMD Group, Inc.
(the "Company") and L & R Holdings, Inc. ("L & R"). The Company hereby retains L
& R as its management consultant with respect to strategic advice relating to
the music, entertainment, computer/Internet and advertising industries, joint
ventures, merger and acquisition opportunities and other similar matters (the
"Project"). The Company authorizes L & R and its agents to approach various
domestic and international institutions, individuals and prospective strategic
partners (the "Partner") on its behalf.
L & R will assist the Company in the preparation of a business plan and
proposals for submission to Partners, provide advice concerning the structure of
the Company and will assist the Company in negotiations and strategy with
Partners and others.
The Company reserves the right to accept or reject, in the Company's sole
discretion, any transaction or business proposal offered by the Partner. The
proposal/commitment that the Partner offers shall not be binding on the Company
unless accepted by the Company in writing.
Upon the successful completion of a strategic alliance, joint venture,
licensing/royalty agreement or other business transaction with a party
introduced to the Company directly or indirectly by L & R, the Company agrees to
pay L & R a success fee(s) and other forms of compensation as are customarily
received by consultants in similar transactions. L & R's role and specific
compensation with respect to any completed transactions or other agreements
shall be subject to an additional engagement letter to be negotiated in good
faith and executed by the parties hereto at such time as is appropriate.
The success fee(s) shall be due and payable to L & R should the Company or any
of its directors, officers, agents, employees and or affiliates or each person,
if any, controlling such affiliates enter into and close a transaction pursuant
to the Project or for any other project with the individuals or entities
introduced, furnished or referred directly or indirectly, by L & R during the
Term of this Agreement or within two years after the termination of this
Agreement.
In consideration for services rendered in connection with the Project, the
Company also agrees to pay L & R a non-refundable retainer as follows: $25,000
due and payable upon the execution of this Agreement, $25,000 due and payable on
February 1, 1999 and $25,000 due and payable on March 1, 1999. Until such time
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as the Company secures additional financing or improves its financial condition,
the February and March monthly retainer payments may be reduced to an amount
less than $25,000 with the balance accruing on account. Thereafter, subject to
the Company's financial condition, future monthly retainer payments will be
determined by mutual agreement of L & R and the Company. The Company and L & R
hereby agree that 20 percent of the first three retainer payments shall be paid
by the Company directly to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇, (the "Finders") or
assigns, subject to a maximum payment of $15,000.
In addition to the compensation as set forth above, the Company agrees to issue
to L & R and/or its designees, based on the Company's current capitalization, a
common stock purchase warrant (the "Warrant") to purchase 303,000 shares of the
Common Stock of the Company at an exercise price of $2.50 per share, such
Warrant to be exercisable at any time and from time to time, in whole or in
part, subject to the conditions herein. In addition, the Company will issue to L
& R and/or its designees, based on the Company's current capitalization,
preferred shares which are convertible into 303,000 shares of the Company's
Common Stock at any time, and form time to time, in whole, or in part. The
Company will reserve and at all times have available a sufficient number of
shares of its Common Stock to be issued upon the exercise of the Warrant and the
conversion of the preferred shares. The Warrant will be exercisable for a period
of five years, contain unlimited incidental or piggyback registration rights
(but subject to any reasonable underwriter lock-up), conventional anti-dilution
provisions and customary terms and provisions provided to investors. All fees
and expenses associated with the registration shall be borne entirely by the
Company.
The Warrant shall be due and issued to L & R upon the execution of this
Agreement or as soon as practicable thereafter. The Warrant issued to L & R or
its designees may not be exercised until the Company enters into an agreement or
agreements to raise at least $5,000,000 in equity capital.
The Company shall reimburse L & R monthly for all of its reasonable
out-of-pocket expenses incurred in connection with this engagement, including
travel. Upon request, all expenses will be fully accountable to the Company by L
& R.
Notwithstanding anything contained herein or other representations to the
contrary, L & R makes no representations or guarantees regarding the services
provided to the Company.
L & R and the Company do hereby acknowledge and agree that L & R will rely on
the adequacy, correctness and accuracy of all materials received by L & R from
the Company as well as all information made public by the Company. L & R shall
not be liable for any errors, omissions, or misrepresentations contained in any
information furnished by the Company to L & R and in turn conveyed by L & R to a
third party, including without limitation, any financial information.
The Company agrees to indemnify and hold harmless L & R (including the
respective officers, directors, employees and agents of L & R from and against
any and all claims, liabilities, losses and damages (or actions in respect
thereof) in any way related to or arising out of this engagement or L & R's
connection therewith and to reimburse L & R and any other such indemnified
person for any legal and other expenses incurred by it in connection with or
relating to investigating, preparing to defend or defending any actions, claims
or other proceedings (including any investigation or inquiry) arising in any
manner out of or in connection with this engagement or L & R's connection
therewith (whether or not such indemnified person is named a party in such
proceeding), provided, however, that the Company shall not be responsible for
any claims or losses to the extent that a final and non-appealable decision by a
court of competent jurisdiction finds that they result solely from L & R's gross
negligence.
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It is understood that in connection with the indemnification described herein,
that L & R may also be engaged to act for the Company or related parties in one
or more additional capacities, and that the terms of this engagement or any such
additional engagement may be embodied in one or more separate engagements. This
indemnification shall apply to any such engagements and any modifications of
this engagement or such additional engagements, and shall remain in full force
and effect following completion or termination of L & R engagement(s).
This Agreement sets forth the entire understanding of the parties relating to
the subject matter hereof, and supersedes and cancels any prior communications,
understanding and agreements between the parties. This Agreement cannot be
modified or changed, nor can any of its provisions be waived, except by written
agreement signed by all parties.
The term of this Agreement shall extend from the date of this letter until
January 12, 2000 and may thereafter be extended by mutual consent of L & R and
the Company (the "Term"); provided, however, that L & R's services hereunder may
be terminated upon thirty (30) days written notice at any time by the Company if
the Company determines not to proceed with the Project. Notwithstanding the
expiration of the Term, (i) L & R shall be entitled to any fees earned by it
hereunder and reimbursement for any out-of-pocket expenses incurred by it as a
result of services rendered prior to the expiration of the Term and (ii) the
indemnity, contribution and expense reimbursement provisions contained herein
shall remain operative an in full force and effect. L & R and the Company agree
to keep the terms of this Agreement confidential except for (i) disclosure at
the request of any regulatory or administrative authority; (ii) pursuant to
subpoena or other court process; or (iii) as required by law.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York without regard to principles of conflicts of laws and
each party agrees and consents to the exclusive jurisdiction of the courts of
the State of New York in any action(s) or proceeding(s) arising out of or
connected with this Agreement. L & R may assign its rights under this Agreement,
including the right to receive any payment hereunder and all Warrants and shares
of Common Stock of the Company issued hereunder in whole or in part without the
consent of the Company.
This Agreement shall be binding upon the parties hereto and their respective
heirs, administrators, successors and assigns.
We are delighted to be working with you. Please indicate that the foregoing is
in accordance with your understanding by signing below and returning to us the
enclosed duplicate of this Agreement.
Very truly yours,
L & R Holdings, Inc. Accepted and
agreed to as of January 12, 1999
SMD Group, Inc.
By:_____________________ By:_________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
Date:3/12/99
Date:_______________
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