Advisory Agreement - Patriarch Partners Management Group LLC, Xinhua Finance Ltd. and Xinhua Finance Media Ltd.
PATRIARCH PARTNERS MANAGEMENT GROUP, LLC
227 WEST TRADE STREET, SUITE 1400
CHARLOTTE, NORTH CAROLINA 28202
April 18, 2006
STRICTLY PRIVATE AND CONFIDENTIAL
Mr. Gordon Lau
Chief Financial Officer
Xinhua Finance Limited
Unit 3905-3909
1 Grand Gateway
Shanghai PRC 200030
RE: ADVISORY AGREEMENT
Dear Gordon:
We are pleased to confirm the arrangements under which Patriarch Partners
Management Group, LLC ("Patriarch") is engaged by Xinhua Finance Limited ("XFL"
and Xinhua Finance Media Limited ("XFM", and together with XFL, the "Company")
to act as its advisor in connection with the potential acquisition(s) of such
companies as previously identified by the Company or its advisors or which
become known to XFL over the course of Patriarch's engagement (the "Acquisition
Targets"). An "Acquisition Transaction" shall be defined as the direct or
indirect acquisition of a majority of the stock or assets of an Acquisition
Target, acquisition of securities or assets, exchange of assets, or acquisition
of control of the Board of Directors of an Acquisition Target. The terms of this
relationship are as follows:
1. ADVISORY SERVICES. During the term of its engagement hereunder, Patriarch
will consult with the Company and provide the Company with strategic and
financial advice and assistance in connection with the proposed Acquisition
Transaction(s), such services to commence on the date hereof and end on the
first anniversary of the date hereof, unless earlier terminated as provided
herein (the "Advisory Period"). The Advisory Period may be renewed for
additional periods of one year with the mutual consent of Patriarch and the
Company. Patriarch and the Company agree that Patriarch has previously
provided strategic and financial advice and assistance to the Company in
proposed Acquisition Transactions that are currently being considered and
are likely to be completed by the Company within the next three months, and
that the Company desires Patriarch to continue to provide such advice and
assistance as the Company completes such proposed Acquisition Transactions.
In connection with the proposed Acquisition Transaction(s), Patriarch will,
and will continue to, provide the Company with strategic and financial
advice and assistance as reasonably requested, including: (i) assisting in
formulating a strategy; (ii) performing valuation analyses; (iii) assisting
in structuring, planning, and negotiating the Acquisition Transaction(s);
and (iv) providing strategic and tactical advice throughout the execution
of the merger/acquisition process. As compensation for these services,
Patriarch shall be paid such fees as described below.
<PAGE>
2. COMPENSATION. As compensation for the services provided hereunder
(including, without limitation, services provided to the Company by
Patriarch prior to the date hereof in connection with the proposed
Acquisition Transactions), the Company agrees to pay Patriarch a success
fee for each completed Acquisition Transaction in an amount to be mutually
agreed upon by Patriarch and the Company, provided that the maximum amount
to be paid pursuant to this Agreement shall be $5,000,000. The Company
shall, upon execution of this Agreement, pay an amount of $1,500,000 as a
prepayment which shall be credited against any success fees payable
pursuant to this Agreement.
3. OTHER MATTERS. In connection with Patriarch's activities on the Company's
behalf pursuant to this Agreement, the Company will cooperate with
Patriarch and will furnish Patriarch with all information and data
concerning the Company which Patriarch deems appropriate and will provide
Patriarch with reasonable access to the Company's officers, directors,
employees, independent accountants and legal counsel. The Company
represents and warrants to Patriarch that any information heretofore and
hereafter furnished to Patriarch will be true and correct in all material
respects and does not and will not omit any material fact required to make
such information provided to Patriarch not misleading. The Company further
represents and warrants that any projections or other information provided
by it to Patriarch will have been prepared in good faith and will be based
upon assumptions which, in light of the circumstances under which they are
made, are reasonable. The Company agrees to notify Patriarch promptly of
any material change in the business or the financial condition of the
Company during the course of Patriarch's engagement that may require an
amendment or supplement to any of the information provided to Patriarch so
that such information will not be misleading in any material respect or
omit to state any material fact that is required to be stated or that is
necessary in order to make any such information not misleading given the
occurrence of any such change.
The Company recognizes and confirms that in advising the Company and in
completing its engagement hereunder, Patriarch will be using and relying on
data, material and other information furnished to Patriarch by the Company
and other parties. It is understood that in performing under this letter
Patriarch may rely upon any information so supplied without independent
verification and that Patriarch shall not have any responsibility for such
independent verification and Patriarch shall not assume any responsibility
for the accuracy or completeness of such information. Patriarch agrees that
it will keep confidential and not disclose or permit its employees or
representatives to disclose information received from the Company (other
than to Patriarch employees or representatives involved in the performance
of services hereunder or otherwise on a need-to-know basis) except as
contemplated in this Agreement, as may be specifically authorized by the
Company in connection with Patriarch's performance of services hereunder,
or as such disclosure may be required by law. If Patriarch is requested or
required by law to disclose any such information, Patriarch shall promptly
notify the Company and use commercially reasonable efforts to cooperate
with the Company so that the Company may seek a protective order or other
appropriate remedy. In the event that any such protective order or other
remedy is not obtained, Patriarch will furnish only that portion of such
information that it is advised by counsel that is legally required and will
use commercially reasonable efforts to cooperate with efforts by the
Company to obtain reasonable assurance that confidential treatment will be
accorded such information.
<PAGE>
The Company acknowledges that all advice given by Patriarch in connection
with its engagement hereunder is intended solely for the benefit and use of
the Board of Directors and senior management of XFL. Except as may be
required by applicable law, the Company agrees that no such advice shall be
used for any other purpose or be reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose, nor shall any
public references to Patriarch be made by or on behalf of the Company, in
each case without Patriarch's prior written consent. Patriarch will
cooperate with the Company in connection with any disclosure of such
matters as may be required by federal securities laws.
The Company recognizes that Patriarch has been retained only by the Company
and that its engagement is not deemed to be on behalf of, and is not
intended to confer any rights or bestow the status of third-party
beneficiary upon, any shareholder or employee of the Company, or any other
person not a party hereto as against Patriarch or any of its affiliates,
their respective limited and general partners, directors, officers, agents
and employees or each other person, if any, controlling Patriarch or any of
its affiliates. Unless otherwise expressly stated in writing by Patriarch,
no advice or opinions rendered to the Board of Directors or management of
the Company during the course of the engagement hereunder shall constitute
a recommendation to any other party and no one other than the Company, its
directors and its senior management, is authorized to rely upon the
engagement of Patriarch or any statements or conduct by Patriarch.
Moreover, it is acknowledged that the relationship of Patriarch to the
Company is that of an independent contractor, that the obligations and
responsibilities of Patriarch to the Company are limited to those
specifically set forth herein, and that Patriarch, by entering into this
Agreement and satisfying its obligations hereunder, does not assume any
fiduciary duties with respect to the Company, its Board of Directors, its
management, its employees or its shareholders. All decisions made with
respect to the subject matter herein described, whether or not consistent
with advice rendered by Patriarch, shall be those of the Board of Directors
or management of the Company, as the case may be. Further, it is understood
that Patriarch is not undertaking to provide any legal, accounting, or tax
advice in connection to its engagement hereunder and the Company shall rely
on its own experts therefore.
The Company shall reimburse, indemnify, defend and hold harmless Patriarch
from any and all expenses, losses, damages, liabilities, demands, charges
and claims (including, but not limited to, claims from any potential
investor in any proposed Acquisition Transaction) of any nature whatsoever
(including reasonable attorneys' fees and expenses), arising out of or in
connection with any acts or omissions of Patriarch made in good faith and
in the performance of the duties of Patriarch under this Agreement, except
to the extent resulting from Patriarch's acts or omissions constituting
fraud, bad faith, willful misconduct, gross negligence or breach of
fiduciary duty in the performance, or reckless disregard, of its duties
under this Agreement.
The services of Patriarch to the Company are not to be deemed exclusive and
Patriarch shall be free to render consulting, advisory or other services of
any kind to others (including without limitation affiliates, investment
companies and clients having objectives substantially identical to those of
the Company). It is understood and agreed that the members, directors,
stockholders, partners, employees, officers and managers of Patriarch may
engage in any other business activity or render services to any other
person or entity or serve as partners, owners, officers, directors,
consultants and advisers or managers of any other firm or company.
The Company acknowledges that potential and actual conflicts of interest
may arise from the overall advisory, investment and other activities of
Patriarch and its affiliates,
<PAGE>
managers, directors, officers, stockholders, members, agents, advisors,
partners and employees (collectively, "Related Parties") and their
respective clients. In particular, certain Related Parties own an interest
in the Company, and certain other Related Parties own an interest in a
subsidiary of the Company. Patriarch and its Related Parties may invest for
their own accounts or on behalf of other clients (including clients with
business objectives and structures and loans identical to the Company) in
securities, obligations, loans or other assets that would be appropriate as
investments for the Company. Patriarch and its Related Parties may have, or
advise clients with, ongoing relationships the Company or its affiliates.
Patriarch and its Related Parties may at certain times be simultaneously
seeking to purchase and/or sell investments in the Company. Notwithstanding
any other provision herein to the contrary, Patriarch and its Affiliates
may act as a consultant or collateral manager or an agent for lenders under
any loan facility (or hold any other similar role) in connection with any
debt or equity instruments issued by the Company.
If Patriarch determines that it or any of its Affiliates have a material
conflict of interest between any account or portfolio for which Patriarch
or any of its Affiliates is serving as investment advisor that relates to
any action to be taken with respect to any proposed Acquisition
Transaction, then Patriarch will perform its obligations with respect to
any such conflict in accordance with the care, skill, prudence and
diligence that a prudent person acting in a like capacity and familiar with
such matters would use in the resolution of such conflict.
This Agreement shall be governed by the laws of the State of New York,
without regard to such state's rules concerning conflicts of laws. All
controversies arising from or related to performance under this Agreement
shall be adjudicated in State or Federal court within the State of New
York.
Each of the parties hereto represents that it has all requisite power and
authority to enter into this Agreement and that this Agreement has been
duly and validly authorized by all necessary action on its part, has been
duly executed and delivered by such party and constitutes a legal, valid
and binding agreement of such party, enforceable in accordance with its
terms.
If any term, provision, covenant or restriction contained in this Agreement
is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions contained in
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which shall constitute one instrument.
* * *
<PAGE>
If the terms of our relationship as set forth in this Agreement are
satisfactory, kindly sign the enclosed copy of this Agreement and return them to
Patriarch. We look forward to working with XFL.
Very truly yours,
PATRIARCH PARTNERS
MANAGEMENT GROUP, LLC
/s/
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Name:
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Title:
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Accepted and Agreed to:
XINHUA FINANCE LIMITED
By: /s/ Gordon Lau
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Gordon Lau
Chief Financial Officer
XINHUA FINANCE MEDIA LIMITED
By: /s/ Fredy Bush
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