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ENGAGEMENT LETTER

Engagement Agreement

ENGAGEMENT LETTER | Document Parties: MPOWER HOLDING CORP You are currently viewing:
This Engagement Agreement involves

MPOWER HOLDING CORP

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Title: ENGAGEMENT LETTER
Governing Law: New York     Date: 3/29/2004
Industry: Communications Services     Sector: Services

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                                                                   Exhibit 10.38

 

February 20, 2003

 

Mpower Communications Holding Corporation

175 Sully's Trail, Suite 300

Pittsford, NY 14534

 

Attention: Rolla Huff, Chairman and CEO

 

Ladies and Gentlemen:

 

         We are pleased to set forth the terms of the retention of Pacific

Alliance Limited, LLC ("Pacific Alliance") by Mpower Holding Corporation

(collectively with its affiliates, the "Company").

 

         1.        Pacific Alliance will assist the Company as its financial

advisor and agent in connection with any Financing (as such term is defined

below). We have been advised that the Company will require an aggregate of up to

$10 to $15 million to finance the Company's working capital requirements as the

Company concludes an operational reorganization intended to result in

self-funding business operations (the "Transaction"). We are further advised

that such amount is expected to be obtained from one or more issuances of

publicly or privately placed debt or equity securities of the Company (the

"Financing"). Pacific Alliance will assist the Company in analyzing,

structuring, negotiating and effecting the proposed Financing. The term

"Financing" as used in this Agreement expressly includes the negotiation of and

entering into letters of credit, standby letters of credit and other types of

third party guarantees used to secure indebtedness or otherwise (regardless of

whether any underlying indebtedness is repaid as part of the Transaction).

 

          2.        In connection with Pacific Alliance's activities on the

Company's behalf, the Company will cooperate with Pacific Alliance and will

furnish Pacific Alliance with all information and data concerning the Company,

the Financing and the Transaction (the "Information") which Pacific Alliance

deems appropriate and will provide Pacific Alliance and any prospective

Financing sources with access to the Company's officers, directors, employees,

independent accountants and legal counsel. The Company represents and warrants

that all Information (a) made available to Pacific Alliance by the Company or

(b) contained in any private placement memorandum prepared by the Company with

respect to the Financing (the "Memorandum") will be complete and accurate in all

material respects at the time it is furnished and the Company agrees to keep

Pacific Alliance advised of all material developments affecting the Company or

its financial position. The Company further represents and warrants that any

projections provided by it to Pacific Alliance or contained in the Memorandum

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 acknowledges and agrees that in

 

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rendering its services hereunder, Pacific Alliance will be using and relying on

the Information (and information available from public sources and other sources

deemed reliable by Pacific Alliance) without independent verification thereof by

Pacific Alliance or independent appraisal by Pacific Alliance of any of the

Company's assets. Pacific Alliance does not assume responsibility for the

accuracy or completeness of the Information or any other information regarding

the Company, the Financing or any Transaction. Except in compliance with

applicable law, any advice or written materials rendered by Pacific Alliance

pursuant to this Agreement may not be disclosed publicly without Pacific

Alliance' prior written consent.

 

         3.        In consideration of our services pursuant to this Agreement,

Pacific Alliance shall be entitled to receive, and the Company agrees to pay,

Pacific Alliance the following compensation:

 

         (a)       A monthly cash retainer (the "Retainer") of $15,000, earned

monthly in advance on the 20th day of each calendar month during the term of

this Agreement; provided, however, that prior May 19, 2003, the Retainer shall

not be paid in cash but shall accrue and be paid only in accordance with

paragraph 3(c) below. From and after May 19, 2003, and provided that this

Agreement shall not have been terminated in accordance with the terms hereof,

the Company shall pay in cash any Retainer accruing on or after such date.

 

         (b)       Upon the consummation of each Financing, other than a

Financing led by Columbia Capital or MC Partners (a "Pending Transaction"), the

Company shall pay to Pacific Alliance an additional cash fee (the "Advisory

Fee") equal to 5% of the gross equity or debt proceeds raised for or made

available to the Company, less any Retainer paid or to be paid, regardless

whether such proceeds are in the form of cash or other valuable consideration;

provided, that:

 

                  (i)       To the extent that a fee is payable to another

                           placement agent in respect of such placement agent or

                           financial advisor introducing the source of any

                           Financing, the cash fee due to Pacific Alliance shall

                            be reduced pro rata, subject to the limitation that

                           the Advisory Fee shall in no event be less than 2.5%;

                           and

 

                  (ii)      To the extent that a Financing is consummated with

                           any of the potential Financing sources that are

                           currently in preliminary discussions with the Company

                           and that are identified on Schedule I, then the

                            Advisory Fee shall be 2.5% with respect to such

                           portion of the Financing; and

 

                  (iii)     Each payment to be made pursuant to this paragraph

                           shall be made at the time of the closing of each

                           portion of the Financing.

 

         (c)       Any accrued but unpaid portion of the Retainer shall become

immediately due and payable on the earlier to occur of (i) the consummation of

any Pending Transaction or another change of control of the Company and (ii) the

later to occur of (x) May 19, 2003 and (y) Pacific Alliance obtaining a bona

fide term sheet, subject only to customary conditions, providing for an

investment in the Company of not less than $5 million.

 

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         (d)       Pacific Alliance shall be entitled to the fees enumerated in

any proceeding subparagraph of this paragraph 3 upon the occurrence during the

term, or within 12 months after the date of termination, of this Agreement, of

any event specified in any such subparagraph so long as such event resulted,

directly or indirectly, from negotiations or contact initiated during the term

of this Agreement. Notwithstanding anything herein to the contrary, Pacific

Alliance shall not be entitled to any fee in connection with any transaction not

specifically referenced in a subparagraph of this paragraph 3.

 

         4.        The fees set forth in paragraph 3 above shall be in addition

to any other fees that the Company may be required to pay to any Financing

source to secure its financing commitment (e.g. commitment fees, etc.). This

Agreement does not constitute a commitment or undertaking on the part of Pacific

Alliance to provide any part of the Financing and does not ensure the successful

arrangement or


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