Services Agreement - eDiets.com Inc. and Laurel Advisors LLC
[GRAPHIC OMITTED]
November 3, 2000
PERSONAL AND CONFIDENTIAL
Mr. David R. Humble
Chairman
eDiets.com
3467 W. Hillsboro Blvd, Suite 2
Deerfield Beach, FL 33442
Dear David:
We are pleased to confirm the arrangements under which Laurel Advisors LLC
("Laurel") has been engaged by eDiets.com (the "Company") to provide general
financial advisory services in connection with the Company's proposed
transaction (the "Transaction"), including, but not limited to the proposed
equity financing (the "Financing") of up to $15 million. This agreement will
confirm the engagement of Laurel by the Company on the following terms and
conditions.
1. During the term of its engagement, Laurel will, at the Company's
request, provide general financial advice and assistance to the Company
in its evaluation of the financial aspects of the Transaction which may
be under consideration from time to time, which may include advising
and assisting the Company in soliciting, evaluating, structuring and
negotiating any Transaction and assisting the Company in the
administration of the closing of any Transaction.
2. As consideration for Laurel's services, the Company shall pay Laurel a
non-refundable monthly retainer of $8,000, payable in advance the first
of each month, to be credited against any future Financing Fee or Sale
Transaction Fee, as defined below. All payments of the monthly retainer
for calendar year 2000 will accrue and be payable in equal installments
by March 1, 2001. Upon the completion of any Financing the Company
agrees to pay Laurel a cash fee totaling 8.0% of the gross proceeds of
the Financing, subject to a minimum of $500,000 (the "Financing Fee").
Laurel shall have the option of receiving as consideration, up to 25%
of the total Financing Fee in warrants to acquire Company stock to be
issued in the Financing, such that the "in-the-money" value of each
warrant (defined as the difference between the strike price and the
price per share of the Financing) times the number of warrants totals
the value equal to the percent of the Financing Fee Laurel opts to
receive as warrants. The strike price of the warrants shall equal one
cent ($0.01) per share. The warrants shall include mutually acceptable
provisions customary in private equity transactions and shall expire on
the fifth anniversary of their issuance.
One Maritime Plaza Suite 1750 - San Francisco, CA 94111
p. 415.217.6400 - f. 415.217.6409
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eDiets.com
November 3, 2000
Page 2
3. During the course of Laurel's service there may also be potential
merger or acquisition transactions to be evaluated that involve the
Company or any of its subsidiaries or business units (each of the
foregoing being hereinafter referred to as a "Sale Transaction"). The
Company and Laurel agree that, in the event the Company determines to
proceed with a Sale Transaction of this sort during the term of this
engagement, then Laurel shall serve as the Company's financial advisor
in connection with the Sale Transaction. As consideration for Laurel's
services, upon the completion of the Sale Transaction, the Company
shall pay Laurel a fee (the "Sale Transaction Fee") of 1% of total
Transaction Value (defined below) up to $30 million, plus 2.5% of total
Transaction Value in excess of $30 million, subject to a minimum of
$700,000.
4. For purposes of this agreement, the term "Transaction Value" means (i)
the total amount of cash paid, directly or indirectly, for the assets,
business or capital stock of the Company; (ii) the fair market value of
any assets, securities or other property or rights transferred,
directly or indirectly, in payment for the assets, business or stock of
the Company (including, without limitation, payments to be made under
non-competition or similar arrangements - other than payments to be
made under bona fide employment or consulting arrangements- and any
deferred or contingent payments, when, as and if such payments are
received by the Company or its stockholders), except that debt
instruments will be valued at the face amount thereof as of such date;
(iii) the principal amount of any indebtedness for borrowed money
appearing on the most recent balance sheet of the Company prior to the
consummation of the Transaction assumed directly or indirectly by any
acquiring entity or remaining outstanding immediately after closing;
and (iv) the aggregate amount of any dividends or other distributions
declared by the Company with respect to its stock after the date
hereof, other than normal recurring cash dividends in amounts not
materially greater than currently paid or distributions of amounts
included in Transaction Value pursuant to clauses (i), (ii) or (iii).
If any shareholder directly or indirectly retains an ownership interest
in Company or directly or indirectly acquires an ownership interest in
the corporation or other entity surviving or resulting from the
Transaction, the Transaction Value shall be calculated by assuming that
such shareholder had sold its entire ownership interest in the Company
and received in exchange therefor an amount per share equal to that
received by the Company or the other shareholders of the Company, as
the case may be, in the Transaction.
5. For purposes of calculating the Sale Transaction Fee, the fair market
value of securities for which there is an established trading market
will be the closing sale price of the securities on the trading day
preceding the date of the closing of the Sale Transaction. The fair
market value of any assets, securities, property or rights (other than
as provided above) will be mutually agreed by Laurel and the Company.
If the parties cannot agree upon the fair market value of such assets,
securities, property or rights, they will choose a qualified appraiser
of national standing to conclusively determine such fair market value.
The expenses of such appraiser shall be split equally between Laurel
and the Company. Upon request, the Company will make available to
Laurel any information available to it for purposes of calculating the
amount of any component of the Transaction Value.
6. The Sale Transaction Fee will become payable by the Company upon
consummation of (a) any merger, consolidation, reorganization,
recapitalization or other transaction or series of related transactions
pursuant to which the Company is acquired by or combined with another
person or entity in which more than fifty percent (50%) of the shares
of the Company after such merger or consolidation are owned by persons
other than the persons who were the stockholders of the Company prior
to such a merger or consolidation or (b) the acquisition, directly or
indirectly, by another person or entity, in a single transaction or
series of related transactions, of (i) all or a substantial portion of
the assets or business of Company or (ii) securities
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eDiets.com
November 3, 2000
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representing 50% or more of the total voting power of the Company in
the election of directors (a "Transaction").
7. The Company agrees to reimburse Laurel for all reasonable out-of-pocket
expenses incurred in connection with the performance of its duties
under this agreement upon presentation of supporting documentation,
including but not limited to, reasonable fees and expenses of legal
counsel retained by it.
8. The Company agrees to the provisions with respect to Laurel's indemnity
and other matters set forth in Appendix A, which is incorporated by
reference into this letter.
9. This agreement may be terminated with or without cause by Laurel or the
Company at any time upon receipt of written notice by the other party
to that effect. Upon termination of the agreement, neither party will
have any liability or continuing obligation to the other, except that:
(i) the provisions of Appendix A to this agreement will survive any
such termination; (ii) the Company will remain liable for any
out-of-pocket expenses incurred up to the time of termination, and
(iii) if a Financing or a Sale Transaction is consummated within six
months of the termination of Laurel's engagement by the Company for any
reason other than following a breach by Laurel of its obligations
hereunder, the Company shall remain obligated to pay Laurel the
Financing Fee (or the Sale Transaction Fee) in accordance with this
agreement.
10. In order to coordinate our efforts to effect a transaction satisfactory
to the Company, the Company agrees that it and its directors and
executive officers will promptly inform Laurel of any inquiry they may
receive concerning a Financing or a Sale Transaction.
11. The Company will provide Laurel with all information concerning the
Company which Laurel reasonably deems appropriate in connection with
its engagement and will provide Laurel with access to the Company's
officers, directors and advisors. All such information will be true and
accurate in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in light of the
circumstances under which such statements are made. The Company
acknowledges that Laurel will be using and relying upon the accuracy
and completeness of public available information and the information
supplied by the Company and its officers in connection with its
engagement without independent verification.
12. The Company acknowledges that Laurel is operating as an independent
business consultant and is not a registered investment advisor nor a
broker dealer.
13. The Company represents that it is a sophisticated business enterprise
that has retained Laurel for the limited purposes set forth in this
agreement, and the parties acknowledge and agree that their respective
rights and obligations are contractual in nature. Each party disclaims
any intention to impose fiduciary obligations on the other by virtue of
the engagement contemplated by this agreement. This agreement is solely
for the benefit of Laurel, the Company and each of their respective
officers, directors, employees and agents, and any person controlling
them within the meaning of the Securities Act of 1933, as amended, and
the respective legal representatives, successors and assigns of Laurel
and the Company, and no other person shall acquire or have any right
under or by virtue of this agreement.
14. No fee payable to any other financial advisor by the Company or any
other company in connection with the subject matter of this engagement
shall reduce or otherwise affect any fee payable hereunder to Laurel.
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eDiets.com
November 3, 2000
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15. Except to the extent described in the last sentence of this paragraph,
any controversy or claim arising out of or relating to this engagement
agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association under its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Any
arbitration proceedings will be conducted in California. The arbitrator
shall have no authority to award punitive damages or any other damages
not measured by the prevailing party's actual damages, and may not make
any ruling, finding or award that does not conform to the terms and
conditions of this engagement agreement. Notwithstanding the foregoing,
nothing contained in this engagement agreement shall be construed to
restrict in any way the right of any party hereto to seek injunctive or
similar equitable relief in any court of competent jurisdiction with
respect to any threatened breach of the provisions of this agreement or
any of the respective parties' obligations hereunder.
16. This agreement may not be amended or modified except in writing and
shall be governed by and construed in accordance with the laws of the
State of California, without regard to principles of conflicts of laws.
If this letter accurately sets forth the understanding between us, please sign
the enclosed copy of this letter below and return it to Laurel, at which time
this letter will become a mutually binding obligation.
Very truly yours,
Laurel Advisors LLC
By: /s/ Samantha S. Lincoln
-------------------------------
Its: Managing Partner
------------------------------
Agreed to as of the above date:
eDiets.com
By: /s/ Christine Brown
---------------------------------
Its: Vice President, Operations
--------------------------------
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eDiets.com
November 3, 2000
Page 5
APPENDIX A
In the event that Laurel Advisors LLC ("Laurel") becomes involved in any
capacity, other than as a plaintiff, in any action, proceeding or investigation
brought by or against any person, including stockholders of eDiets.com (the
"Company"), in connection with any matter related to the assignment described in
this letter, the Company periodically will reimburse Laurel for its legal and
other expenses (including the cost of any investigation and preparation)
reasonably incurred in connection therewith; provided, however, that if it is
found in any such action, proceeding or investigation that any loss, claim,
damage or liability of Laurel has resulted from the gross negligence, bad faith,
or willful misconduct of Laurel in performing the services which are the subject
of this letter, Laurel shall repay such portion of the reimbursed amounts that
is attributable to expenses incurred in relation to the act or omission of
Laurel which is the subject of such finding. The Company also will indemnify and
hold Laurel harmless against any losses, claims, damages or liabilities to any
such person in connection with any matter related to the assignment described in
this letter, except to the extent that any such loss, claim, damage or liability
results from the gross negligence, bad faith, or willful misconduct of Laurel in
performing the services that are the subject of this letter. If for any reason
the foregoing indemnification is unavailable to Laurel or insufficient to hold
it harmless, then the Company shall contribute to the amount paid or payable by
Laurel as a result of such loss, claim, damage or liability in such proportion
as is appropriate to reflect the relative economic interests of the Company and
its stockholders on the one hand and Laurel on the other hand in the matters
contemplated by this letter as well as the relative fault of the Company and
Laurel with respect to such loss, claim, damage or liability and any other
relevant equitable considerations; provided, however, that in no event shall
Laurel be required to contribute any amounts in excess of the cash fees received
by it hereunder. The Company shall be liable for any settlement of any claim
against Laurel made with the Company's written consent, which consent shall not
unreasonably be withheld, and the Company shall not, without the prior written
consent of Laurel, settle or compromise any claim or permit a default or consent
to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to Laurel of an unconditional release from any and all liability in
respect of such claim. Laurel shall have the right to retain counsel of its own
choice to represent it in connection with any matter as to which the indemnity,
expense reimbursement and contribution provisions apply. The reimbursement,
indemnity and contribution obligations of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliate of Laurel and the
directors, agents, employees and controlling persons (if any), as the case may
be, of Laurel and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, Laurel, any such affiliate and any such person. The indemnity
obligations of the Company hereunder shall not extend to any affiliate of Laurel
or to the directors, agents, employees, or controlling persons (if any), as the
case may be, of Laurel or any such affiliate to the extent that any loss, claim,
damage or liability results from the gross negligence bad faith, or willful
misconduct of Laurel or any such other person in performing the services which
are the subject of the letter. The Company also agrees that neither Laurel nor
any of such affiliates, directors, agents, employees or controlling persons
shall have any liability to the Company and its stockholders for or in
connection with any matter referred to in this letter except to the extent that
any losses, claims, damages, liabilities or expenses incurred by the Company
result from the gross negligence, bad faith, or willful misconduct of Laurel in
performing the services that are the subject of this letter. The provisions of
this Appendix A shall survive any termination or completion of the engagement
provided by this letter agreement and this letter agreement shall be governed by
and construed in accordance with the laws of the State of California without
regard to principles of conflicts of laws.