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EXHIBIT 10.11
August 14, 1997
Xx. Xxxxxxxx Xxxx
President
BrightStar Information Technology Group, Inc.
00000 Xxxxxx Xxxx
Xxxxxxx, Xxxxx 00000-0000
Dear Xx. Xxxx:
The purpose of this letter ("the Agreement"), and the attached Addendum A, is to
set forth the agreement between XxXxxxxxx, Xxxxxxxx & Company, Inc. ("MGCO") and
BrightStar Information Technology Group, Inc. ("the Company") regarding
investment banking services to be provided in connection with the proposed
acquisition of a group of businesses in the information technology services
industry ("the Acquisitions") and financing related thereto.
A. SCOPE OF THE ENGAGEMENT
This Agreement will continue for a period of six months from its effective date
unless extended or terminated early by mutual consent; except the Company
acknowledges that the provisions of Sections B.2. through B.7. and Addendum A
shall survive any termination of the Agreement. During the term hereof, MGCO
will use its best efforts to provide the following services to the Company:
1. MGCO will first provide financial advisory services in connection with
planning and executing the Acquisitions.
2. If needed for presentations to investors and/or lenders, MGCO will
prepare a comprehensive information memorandum and business plan and/or
detailed projections.
3. MGCO will prepare any presentation materials deemed necessary for
meetings with investors and/or lenders.
4. If requested, MGCO will introduce the Company to institutional
investors interested in a Private Placement (as herein defined), assist
in negotiating the terms of the transaction, and facilitating the
closing.
5. MGCO will introduce the Company to lenders interested in providing a
senior credit facility and will assist in negotiating and facilitating
the closing.
6. MGCO will provide such other financial advisory services as deemed
necessary which are related to transaction structure and timing, and
other corporate finance matters.
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B. TERMS AND CONDITIONS
1. Financial Advisory Fee
Upon accepting this Agreement, the Company will pay MGCO a financial
advisory fee of $15,500. Thereafter, the Company will pay MGCO a
monthly financial advisory fee at the beginning of each monthly period
as follows: (1) month 2: $15,500, and (2) months 3-6: $11,000.
In addition to the compensation set forth above, MGCO or its designees
will be sold for 100, a warrant(s) granting the holder(s) thereof the
right to acquire 50,000 shares of common stock of the Company (the
"Newco Stock") at a price per share equal to $6.00 per share. However,
if the Company completes an initial public offering (the "IPO") within
eighteen months after issuance of the warrant(s), the exercise price
will be adjusted to the lesser of $6.00 per share or 60% of the price
per share of the Newco Stock that is sold in the Company's IPO. Such
warrant(s) will be exercisable in whole or in part beginning six months
after its issuance. The Newco Stock into which the warrant(s) is
exercisable (the "Underlying Stock") will be registered, if the Company
completes an IPO, (i) in the Company's first registration statement on
Form S-8 (or comparable form), which will be filed no later than six
months after the Company completes an IPO; or (ii) pursuant to
"piggy-back" registration rights in post-IPO offerings of Newco Stock.
The warrant(s) will be issued in a form which is mutually acceptable,
as soon as practicable after this letter is accepted by the Company and
the Underlying Stock will be subject to adjustment (upward or downward)
so that if the Company completes an IPO, at the time of the IPO, the
Underlying Stock will equal 50,000 shares of the Newco Stock.
2. Private Placement. In the event that one or more transaction(s)
involving a Private Placement (as defined below) of capital in the
Company (or an affiliate in which the Company or its shareholders are
equity owners) is consummated during the term of this Agreement with
any capital source (other than retail private placement conducted and
completed by the founding shareholders of up to $2 million), or within
two (2) years following the termination of this Agreement between the
Company and any capital source(s) introduced by MGCO during the term of
this Agreement, it is understood that MGCO shall earn and be paid
Placement Agent fees as follows:
6% of the amount of the Private Placement. For the purpose of
this Agreement, the Private Placement shall include capital
received as equity and debt that is either (i) advanced by a
person(s) who is also an equity investor, (ii) is subordinated
to loans made by non equity investors, (iii) or is either
convertible into equity, provides the lender
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with warrants to acquire equity, or participates in the
earnings of the Company. Placement Agent fee payments will be
made in full and in cash at the time of the closing.
MGCO will also be issued a warrant to purchase an amount equal
to 10% of the securities issued in the Private Placement (in
the case of convertible securities or warrants, 10% of the
underlying securities). Said warrant shall be in a form
acceptable to MGCO and the Company and shall (i) be
exercisable for a period of 5 years at 120% of the purchase
price as the securities placed as a result of this
transaction, (ii) contain customary anti-dilution provisions,
(iii) exercisable in whole or in part, and/or on a "cashless
exercise basis, and (iv) shall be subject to a customary
piggy-back registration rights agreement.
5. Senior Debt Placement. MGCO will be the exclusive agent for any senior
secured credit agreements for the Company if negotiations or
discussions with the lender is initiated during the term of the
Agreement. MGCO will be paid a placement agent fee equal to 2% of the
amount of the credit facility payable in cash at the time of the
closing if negotiations with the lender extending the facility were
conducted during the term of this Agreement and it is closed during or
within one year of the termination of this Agreement.
6. The Acquisitions. In consideration for financial advisory services
rendered in connection with the Acquisitions, the transaction value of
which is estimated to be $40 million, the Company will pay MGCO a
success fee in cash at the closing of the acquisition of all, or a
material part of the business included in the Acquisitions. The fee
will be the greater of $400,000 or the sum of 5% of the transaction
value up to $1 million, 4% of the transaction value in excess of $1
million up to $2 million, plus 3% of the transaction value in excess
of $2 million up to $3 million, plus 2% of the transaction value in
excess of $3 million. For purposes of this Agreement the transaction
value will include cash, securities, non-compete agreements,
promissory notes, and all other consideration exchanged in the
transaction and upon which the value was established.
7. Reimbursement of Expenses. The Company will reimburse MGCO for all
out-of-pocket travel expenses, printing expenses, delivery fees, and
third party information service fees incurred in connection with this
Agreement. Out-of-pocket expenses will be billed on the 1st and 15th of
the month, for the previous fifteen day period. Invoices are payable
upon receipt.
8. Advertisements. In the event of consummation of a transaction, MGCO
shall have the right to disclose its participation in such transaction,
including, without limitation, the placement of a "tombstone"
advertisement in financial and other newspaper and journals, provided
that
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MGCO will submit a copy of any such advertisements to the Company for
its approval, which approval shall not be unreasonable withhold or
delayed.
9. Documentation. In the event that any of the transactions contemplated
herein are consummated, MGCO will be provided with a bound volume of
the documents evidencing such transactions substantially similar in
form and content as any bound volume that is prepared for the Company.
We look forward to the opportunity to continue our relationship with you If this
proposal is acceptable, please acknowledge with your signature, return one copy
for our records, and retain the other copy.
Very Truly Yours,
XxXxxxxxx, Xxxxxxxx & Company, Inc.
/s/ XXXX XXXXXXXX
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Xxxx Xxxxxxxx
Chief Executive Officer
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AGREED AND ACCEPTED:
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
/s/ Xxxxxxxx X. Xxxx
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Signature
Xxxxxxxx X. Xxxx, President
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Print Name and Title
09-02-97
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Date
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Addendum A
Indemnification
In connection with our engagement described in the foregoing letter dated August
14, 1997 ("Letter"), to which this Addendum A is attached, the Company (as
defined in the Letter) agrees to indemnify and hold harmless XxXxxxxxx, Xxxxxxxx
& Company, Inc. ("MGCO") and each of its directors, officers, agents, employees
and controlling persons (within the meaning of the Securities Act of 1933, as
amended) against any losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) ("Claims") relating to or arising out
of our engagement, and will reimburse MGCO and such other person indemnified
hereunder, from time to time upon written request, for all reasonable legal and
other expenses incurred in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding whether or not in
connection with pending or threatened litigation in which MGCO or any of its
directors, officers, agents, employees and controlling persons is a party
including without limitation any such claims arising from the negligence of MGCO
or the person seeking indemnification or for punitive damages; provided however,
the Company will not be liable in any such case for Claims (except arising out
of the use of information provided by the Company) that a court of competent
jurisdiction shall have found in a final judgement to have arisen primarily from
the gross negligence or willful misconduct of MGCO or the party claiming a right
to indemnification. In case any proceeding shall be instituted involving any
person in respect to whom indemnity may be sought, such person (the "Indemnified
Party") shall promptly notify the Company and the Company, upon request of the
Indemnified Party, shall retain the Company's current legal counsel or such
other counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Company may designate in such proceeding
and shall pay the fees and expenses of such counsel related to such proceeding
from time to time upon written request provided, however, that in such event the
Company shall not be responsible hereunder for the fees and expenses of more
than one firm of such counsel in addition to any local counsel. In any such
proceeding, any Indemnified Party shall have the right to retain its own counsel
at its own expense, except that the Company shall pay, from time to time upon
written request the reasonable fees and expenses of counsel retained by the
Indemnified Party in the event that (i) the Company and the Indemnified Party
shall have mutually agreed to the retention of such counsel or, (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the Company and the Indemnified Party and representation of both parties by the
same counsel would be inappropriate, in the reasonable opinion of counsel to the
Indemnified Party, due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the Company agrees to indemnify the
Indemnified Party to the extent set forth in this Addendum A. In addition, the
Company will not, without the prior written consent of MGCO, settle or
compromise or consent to the entry of any judgement in any pending or threatened
claim, action, suit or proceeding in respect
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of which indemnification may be sought hereunder (whether or not MGCO or any
Indemnified Party is any actual or potential party to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of MGCO and each other Indemnified Party hereunder from
all liability arising out of such claim, action, suit or proceeding.
In the event a claim for indemnification under this Addendum A is determined to
be unenforceable by a final judgement of a court of competent jurisdiction, then
the Company shall contribute to the aggregate losses, claims, damages or
liabilities to which MGCO or its officers, directors, agents, employees or
controlling persons may be subject in such amount as is appropriate to reflect
the relative benefits received by each of the Company and the party seeking
contribution on the one hand and the relative faults of the Company and the
party seeking contribution on the other, as well as any other relevant equitable
considerations.
This indemnification shall apply to the original engagement as set forth in the
Letter and any modification of the original engagement and the indemnification
provided herein shall survive termination of our engagement and shall be binding
upon any successors or assigns of the Company.
Acknowledges and Agreed:
AGREED AND ACCEPTED:
BrightStar Information Technology Group, Inc.
/s/ Xxxxxxxx X. Xxxx
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Signature
Xxxxxxxx X. Xxxx - President
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Print Name and Title
09-02-97
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Date
