Exhibit 10.38
August 4, 2003
Xx. Xxxxxxx Xxxxx
Chairman and Chief Executive Officer
Wire One Technologies, Inc.
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Dear Xx. Xxxxx:
This letter Agreement (the "Agreement") confirms the engagement of Xxxxxxx Xxxx
Partners, LLC ("BHP") by Wire One Technologies, Inc. (the "Company") to act 1)
on an exclusive basis as its financial advisor in connection with a potential
strategic transaction for the Company's Glowpoint operations which may include
an acquisition, partnership, strategic alliance, merger, or sale (each a
"Strategic Transaction") and 2) as its placement agent in connection with a
potential private placement of equity or debt securities (a "Financing") which
may occur in combination with or in lieu of a Strategic Transaction.
As part of our engagement, we will:
(a) assist you in analyzing and evaluating the business, operations and
financial position of each suitable prospect for a Strategic
Transaction;
(b) assist the Company with its due diligence efforts related to each
potential Strategic Transaction;
(c) assist the Company in structuring and negotiating each Strategic
Transaction; and,
(d) be available at your request to meet with your Board of Directors to
discuss any proposed Strategic Transaction and its financial
implications.
Upon execution of this Agreement, the Company shall issue to BHP and/or its
assigns a warrant or warrants to purchase an aggregate of 100,000 shares of the
Company's common stock and shall pay BHP a cash retainer fee of $50,000 (which
amount shall be due upon the closing of the sale of the Company's equipment
business to Gores Technology. The warrants issued upon execution of this
Agreement shall have an exercise price of $2.50 per share, shall have a cashless
exercise provision, shall have standard piggyback registration rights with
respect to the underlying shares and shall expire five (5) years from the
issuance date.
As compensation for a completed transaction under this Agreement, 1) in
connection with a Strategic Transaction, the Company agrees to pay BHP a cash
fee equal to 1.25% of the aggregate consideration and 2) in connection with a
Financing, the Company agrees to a) pay BHP a cash fee equal to 6% of the gross
proceeds received by the Company from the sale of its securities (WHICH AMOUNT
SHALL BE INCREASED TO 10% WHERE BHP IS REQUIRED TO COMPENSATE SUB-PLACEMENT
AGENTS, BUT IN NO EVENT MAY THE AGGREGATE CASH FEE EXCEED 8%)) and 4% of the
gross proceeds received by the Company from the exercise of previously
outstanding warrants and b) issue warrants to BHP and/or its assigns ("the
Placement Agent Warrants") to purchase an amount representing 2% of the number
of shares of common stock (or underlying shares of common stock in connection
with convertible securities, excluding any warrants issued to investors) sold in
the Financing. The Placement Agent Warrants shall be exercisable at $.001 per
share and shall expire twelve months from the issuance date. The shares
underlying the Placement Agent Warrants shall have standard piggyback
registration rights. In connection with any Financing in excess of $25 million,
the Company reserves the right to designate BHP and another entity chosen by the
Company, in consultation with BHP, as co-lead placement agents and, in such
event, the compensation payable in connection with such Financing pursuant to
this paragraph shall be allocated based on good faith negotiations between BHP
and such other co-lead placement agent.
The Company shall provide to BHP periodic reimbursement of all reasonable
out-of-pocket expenses upon the submission of
invoices therefor, which amount shall not exceed $10,000 without the prior
written approval of the Company.
Notice given pursuant to any of the provisions of this Agreement shall be given
in writing and shall be sent by recognized overnight courier or personally
delivered (a) if to the Company, to WONE's office at 000 Xxxx Xxxxxx, Xxxxxxxx,
XX 00000. Attention: Xxxxxxx Xxxxx, Chief Executive Officer; and (b) if to BHP,
to its office at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000. Attention: Xxxxx
Xxxxxxx, Managing Director.
No advice or opinion rendered by BHP, whether formal or informal, may be
disclosed, in whole or in part, or summarized, excerpted from or otherwise
referred to without our prior written consent. In addition, BHP may not be
otherwise referred to without its prior written consent, which will not be
unreasonably withheld. Since BHP will be acting on behalf of the Company in
connection with its engagement hereunder, the Company has entered into a
separate letter Agreement, dated the date hereof, providing for the
indemnification by the Company of BHP and certain related persons and entities.
BHP's engagement hereunder shall be for a term (the "Term") of six months from
the date hereof; provided, however, that BHP will continue to be entitled to its
full fees provided for herein in the event that at any time prior to the
expiration of six (6) months after the expiration of the Term, a Strategic
Transaction or Financing involving the Company occurs which involves a party
contacted by BHP on behalf of the Company.
BHP is a division of Pali Capital Inc., a European American Investment Group
Company. In connection with this engagement, BHP is acting as an independent
contractor with duties owing solely to the Company. Our engagement by the
Company is for the limited purposes set forth in this letter, and the rights and
obligations of each of BHP and the Company are defined by this Agreement. Each
of BHP and the Company agrees that the other party has no fiduciary duty to it
or its stockholders, officers and directors as a result of the engagement
described in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
conflicts of law principles thereof. This Agreement may not be amended or
modified except in writing signed by each of the parties hereto.
This letter and the indemnification Agreement contain the entire Agreement of
the parties with respect to the subject matter hereof and supersede and take
precedence over all prior Agreements or understandings, whether oral or written,
between BHP and the Company. The invalidity or unenforceability of any provision
of this letter Agreement shall not affect the validity or enforceability of any
other provisions of this Agreement or the indemnification Agreement, which shall
remain in full force and effect.
We are delighted to accept this engagement and look forward to working with you
on this assignment. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
Agreement.
Very truly yours,
Xxxxxxx Xxxx Partners, LLC
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Name:
Accepted and Agreed to as of the date first written above:
WIRE ONE TECHNOLOGIES
By: /s/ Xxxxxxx Xxxxx
-----------------------------------
Name: Xx. Xxxxxxx Xxxxx
Title: Chairman and CEO
TO: Xxxxxxx Xxxx Partners, LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
In connection with your engagement pursuant to our letter Agreement of
even date herewith (the "Engagement"), we agree to indemnify and hold harmless
Xxxxxxx Hill Partners, LLC ("BHP" ) and its affiliates, the respective
directors, officers, partners, agents and employees of BHP and its affiliates,
and each other person, if any, controlling BHP or any of its affiliates
(collectively, "Indemnified Persons"), from and against, and we agree that no
Indemnified Person shall have any liability to us or our owners, parents,
affiliates, security holders or creditors for, any losses, claims, damages or
liabilities (including actions or proceedings in respect thereof) (collectively
"Losses") (A) related to or arising out of (i) our actions or failures to act
(including statements or omissions made, or information provided, by us or our
agents) or (ii) actions or failures to act by an Indemnified Person with our
consent or in reliance on our actions or failures to act, or (B) otherwise
related to or arising out of the Engagement or your performance thereof, except
that this clause (B) shall not apply to any Losses that are finally judicially
determined to have resulted primarily from your bad faith or gross negligence or
breach of the letter Agreement (it being understood, however, that we retain our
right to assert, as a defense to any claim by BHP for compensation under this
letter agreement, any violation by BHP of its contractual obligations under the
Engagement). If such indemnification is for any reason not available or
insufficient to hold you harmless, we agree to contribute to the Losses involved
in such proportion as is appropriate to reflect the relative benefits received
(or anticipated to be received) by us and by you with respect to the Engagement
or, if such allocation is judicially determined unavailable, in such proportion
as is appropriate to reflect other equitable considerations such as the relative
fault of us on the one hand and of you on the other hand; provided, however,
that, to the extent permitted by applicable law, the Indemnified Persons shall
not be responsible for amounts which in the aggregate are in excess of the
amount of all fees actually received by you from us in connection with the
Engagement. Relative benefits to us, on the one hand, and you, on the other
hand, with respect to the Engagement shall be deemed to be in the same
proportion as (i) the total value paid or proposed to be paid or received or
proposed to be received by us or our security holders, as the case may be,
pursuant to the transaction(s), whether or not consummated, contemplated by the
Engagement bears to (ii) all fees paid or proposed to be paid to you by us in
connection with the Engagement.
We will reimburse each Indemnified Person for all expenses (including
reasonable fees and disbursements of counsel) as they are incurred by such
Indemnified Person in connection with investigating, preparing for or defending
any action, claim, investigation, inquiry, arbitration or other proceeding
("Action") referred to above (or enforcing this Agreement or any related
engagement Agreement), whether or not in connection with pending or threatened
litigation in which any Indemnified Person is a party, and whether or not such
Action is initiated or brought by you . We further agree that we will not settle
or compromise or consent to the entry of any judgment in any pending or
threatened Action in respect of which indemnification may be sought hereunder
(whether or not an Indemnified Person is a party therein) unless we have given
you reasonable prior written notice thereof and used all reasonable efforts,
after consultation with you, to obtain an unconditional release of each
Indemnified Person from all liability arising therefrom. In the event we are
considering entering into one or a series of transactions involving a merger or
other business combination or a dissolution or liquidation of all or a
significant portion of our assets, we shall promptly notify you in writing. If
requested by BHP, we shall then establish alternative means of providing for our
obligations set forth herein on terms and conditions reasonably satisfactory to
BHP.
In the event that we are called or subpoenaed to give testimony in a
court of law, you agree to pay our expenses related thereto and $5,000 per
person per day for every day or part thereof that we are required to be there or
in preparation thereof. Our obligations hereunder shall be in addition to any
rights that any Indemnified Person may have at common law or otherwise. Solely
for the purpose of enforcing this Agreement, we hereby consent to personal
jurisdiction and to service and venue in any court in which any claim which is
subject to this Agreement is brought by or against any Indemnified Person. We
acknowledge that in connection with the Engagement you are acting as an
independent contractor with duties owing solely to us.
The provisions of this Agreement shall apply to the Engagement
(including related activities prior to the date hereof) and any modification
thereof and shall remain in full force and effect regardless of the completion
or termination of the Engagement. This Agreement and any other Agreements
relating to the Engagement shall be governed by and construed in accordance with
the laws of the state of New York, without regard to conflicts of law principles
thereof.
Very truly yours,
Accepted and Agreed:
Xxxxxxx Xxxx Partners, LLC Client: WIRE ONE TECHNOLOGIES
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxx
------------------------------------ ------------------------------------
Name: Name: Xxxxxxx Xxxxx
Title: Title: Chairman and CEO
AMENDMENT
Amendment dated as of January 29, 2004 to the Engagement Letter between
Xxxxxxx Xxxx Partners ("BHP") and Glowpoint, Inc. (formerly known as Wire One
Technologies, Inc.) (the "Company").
WHEREAS, BHP and the Company entered into the Engagement Letter on
August 4, 2003; and
WHEREAS, the parties have agreed to the changes to the terms of the
Engagement Letter as are contained in this Amendment.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Engagement Letter.
1. The first two sentences of the last paragraph on the first page of the
Engagement Letter are hereby amended and restated in their entirety to read as
follows:
"As compensation for a completed transaction under this Agreement, 1)
in connection with a Strategic Transaction, the Company agrees to pay BHP a cash
fee equal to 1.25% of the aggregate consideration and 2) in connection with a
Financing, the Company agrees to a) pay BHP a cash fee equal to 7% of the gross
proceeds received by the Company from the sale of its securities (which amount
shall be increased to 10% where BHP is required to compensate sub-placement
agents, but in no event may the aggregate cash fee exceed 8%) and 4% of the
gross proceeds received by the Company from the exercise of previously
outstanding warrants and warrants issued in the Financing and b) issue warrants
to BHP and/or its assigns (the "Placement Agent Warrants") to purchase an amount
representing seven (7%) percent of the number of shares of common stock (or
underlying shares of common stock in connection with convertible securities,
excluding any warrants issued to investors) sold in the Financing. The Placement
Agent Warrants shall have an exercise price equal to $.01 above the average
closing price of the Company's common stock for the five trading days prior to
the closing of the Financing, shall have a term of five years, shall have a
cashless exercise provision, shall be non-redeemable and shall become
exercisable six months and one day after the closing of the Financing."
2. The fourth paragraph on page 2 of the Engagement Letter is hereby modified to
change the Term from six months to nine months. In addition, the following
sentence is hereby added to the end of such paragraph: "The Term will
automatically be extended for 30 day periods until the Company shall have given
BHP 30 days' written notice that the Company elects to terminate the Agreement."
3. Except as herein expressly amended, all terms, covenants and provisions of
the Engagement Letter are and shall remain in full force and effect and all
references therein to the Engagement Letter shall hereafter refer to the
Engagement Letter as amended by this Amendment.
IN WITNESS WHEREOF, the Parties have executed this Amendment as of
the date first above written.
Glowpoint, Inc. Xxxxxxx Xxxx Partners
a division of Pali Capital Inc.
By: /s/ Xxxxx X. Xxxxxxxxxxxx By: /s/ Xxxxx Xxxxxxx
----------------------------------- --------------------------------------
Name: Xxxxx X. Xxxxxxxxxxxx Name: Xxxxx Xxxxxxx
Title: President and CEO Title: Managing Director
