Exhibit 10.90

 

Path 1 Network Technologies Inc.

July 15, 2005

 

MERRIMAN CURHAN FORD & CO.

 

July 15, 2005

 

PERSONAL & CONFIDENTIAL

 

John R. Zavoli

President and CEO

Path 1 Network Technologies Inc.

6215 Ferris Square, Suite 140

San Diego, CA 92121

 

Dear John:

 

Merriman Curhan Ford & Co. (“MCF”) is pleased to act as financial advisor to
Path 1 Network Technologies Inc. (the “Company”). We will provide investment
banking services to the Company which includes (i) assisting the Company in
identifying acquirers (the “Acquirer”) and evaluating, prioritizing, and
negotiating proposals to purchase the Company, in whole or part (a “Sale
Transaction”), and (ii) if requested by the Board, rendering a Fairness Opinion
in conjunction with a proposed Sale Transaction. The purpose of this letter is
to memorialize the terms of our engagement by the Company.

 

1. Services. In connection with this engagement, MCF will perform the following
services:

 

a. Merger and Acquisition Advisory Services. MCF will work with the Company on
an exclusive basis to evaluate potential Sale Transactions. We will assess the
proposed structures for the Sale Transaction and will offer the Company guidance
in negotiating the terms of the Sale Transaction. MCF will assist the Company in
identifying and, if so instructed, in contacting potential acquirers, and
managing the process and closing the Sale Transaction, including formulating and
presenting responses and counteroffers, conducting due diligence, and
documenting the Sale Transaction. MCF will not provide to any potential acquirer
any information about the Company, other than the information provided by the
Company under Section 2 hereof, and will not provide any nonpublic information
about the Company to a potential acquirer except pursuant to a nondisclosure /
nonuse agreement approved by the Company.

 

PAGE 1 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

b. Fairness Opinion. At the written request of the Company, MCF will render a
Fairness Opinion (our “Opinion”) to the Company’s Board of Directors in
conjunction with the Sale Transaction upon the request of the Company’s Board of
Directors. If requested by the Board, upon reasonable notice, we will make a
detailed presentation of the facts and analyses supporting the conclusions
reached in our Opinion to the Board.

 

2. Information Provided to MCF. In connection with our engagement, the Company
has agreed to furnish to MCF, on a timely basis, all relevant information needed
by MCF to perform under the terms of this agreement. During our engagement, it
may be necessary for us: to interview the management of, the auditors for, and
the consultants and advisors to, the Company; to rely (without independent
verification) upon data furnished to us by them; and to review any financial and
other reports relating to the business and financial condition of the Company as
we may determine to be relevant under the circumstances. In this connection, the
Company will make available to us such information as we may request, including
information with respect to the assets, liabilities, earnings, earning power,
financial condition, historical performance, future prospects and financial
projections and the assumptions used in the development of such projections of
the Company. We agree that all nonpublic information obtained by us in
connection with our engagement will be held by us in strict confidence and will
be used by us solely for the purpose of performing our obligations relating to
our engagement.

 

We do not assume any responsibility for, or with respect to, the accuracy,
completeness or fairness of the information and data supplied to us by the
Company or its representatives. In addition, the Company acknowledges that we
will assume, without independent verification, that all information supplied to
us with respect to the Company will be true, correct and complete in all
material respects and will not contain any untrue statements of material fact or
omit to state a material fact necessary to make the information supplied to us
not misleading. If at any time during the course of our engagement the Company
becomes aware of any material change in any of the information previously
furnished to us, it will promptly advise us of the change.

 

3. Scope of Engagement. The Company acknowledges that we will not make, or
arrange for others to make, an appraisal of any physical assets of the acquirer
candidates or the Company. Nonetheless, if we determine after review of the
information furnished to us that any such appraisal or appraisals are necessary
or desirable, we will so advise the Company and, if approved by the Company in
writing, the costs incurred in connection with such appraisal(s) will be borne
by the Company.

 

MCF has been engaged by the Company only in connection with the matters
described in this letter agreement and for no other purpose. We have not made,
and will assume no responsibility to make any representation in connection with
our engagement as to any legal matter. Except as specifically provided in this
letter agreement, MCF shall not be required to render any advice or reports in
writing or to perform any other services.

 

PAGE 2 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

4. Term of Engagement. Our representation on an exclusive basis will continue
for a period of twelve (12) months from the date this letter agreement is
executed with MCF; however either party may terminate the relationship at any
time upon written notice to the other party. Notwithstanding the foregoing, in
the event of termination or expiration of this agreement, MCF’s retainer and
expenses incurred will be payable in full and the Company’s obligation under
paragraph 5 to pay any applicable M&A Completion Fee will continue for the six
(6) month period commencing with such termination or expiration, but no M&A
Completion Fee will be payable if the Acquirer was referred to the Company
directly or indirectly by MCF and is engaged in discussions regarding the Sale
Transaction with the Company or MCF during the period that MCF acted as the
Company’s exclusive financial advisor under this agreement (Tail Period).

 

5. Fees and Expenses. MCF will invoice the Company on a monthly basis for actual
and reasonable out-of-pocket expenses. The Company also agrees to pay for
reasonable attorney fees for MCF in conjunction with the Sale Transaction. Any
expenses exceeding $30,000, excluding the MCF attorney fees, must be approved in
advance in writing by the Company.

 

Performance-based compensation for our services will be as follows:

 

a. Merger and Acquisition Advisory Services.

 

  (i) If a Sale Transaction is consummated, the Company will pay MCF a cash M&A
Completion Fee at the closing of the Sale Transaction equal to $500,000 at a
sale value of less than $20 million, $750,000 at a sale value between $20
million to $25 million and $750,000 plus 10% of the excess sale value beyond $25
million at a sale value of greater than $25 million.

 

  (ii) If a Sale Transaction is consummated whereby, directly or indirectly,
less than a 50% interest in the Company is acquired; the formation of a joint
venture, partnership or other business entity, a fee shall be payable in cash
upon the occurrence of such event equal to 7.0% of the Transaction Value.

 

PAGE 3 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

  (iii) If a Transaction is not consummated and the Company is entitled to
receive a “termination fee,” “break-up fee,” “topping fee,” or other form of
compensation payable in cash or other assets, including, but not limited to, an
option to purchase securities from another company (such cash, securities,
including in the case of options, the right to exercise such options or other
assets hereinafter referred to as the “Break-up Fee”) then the Company shall pay
to MCF in cash, promptly upon the Company’s receipt of such Break-up Fee, an
amount equal to twenty percent (20%) of such Break-up Fee received. But in no
event shall such 20% payment be greater than the fee calculated pursuant to
Paragraph 5.a.(i) above. In the event that the Break-up Fee is paid to the
Company in whole or in part in the form of securities or other assets, the value
of such securities or other assets, for purposes of calculating our fee, shall
be the fair market value thereof, as the parties hereto shall mutually agree on
the day such Break-up Fee is paid to the Company; provided that, if such
Break-up Fee includes securities with an existing public trading market, the
value thereof shall be determined by the last sales price for such securities on
the last trading day thereof prior to such payment.

 

  (iv) It is understood that any of the following transactions shall be deemed
not to constitute a Sale Transaction: a going-private transaction in which the
Company is not acquired; a management buyout; or an acquisition of the Company
by a private equity group or other financial buyer (as opposed to a strategic
buyer which is already operating in the telecommunications equipment business).

 

b. Fairness Opinion. In the event that the Board deems it necessary or
appropriate for a fairness opinion to be rendered in connection with a Sale
Transaction, MCF will receive a Fairness Opinion Fee of $150,000 for rendering
its Opinion payable upon delivery of the Fairness Opinion and will be credited
against the fee entitled to MCF under sections 5(a) (i), (ii), or (iii). This
fee is for our investment banking services related to the Fairness Opinion and
is in no way conditioned upon the results of our evaluation and analysis or upon
the conclusions reached in the fairness opinion.

 

PAGE 4 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

6. Indemnity and Contribution. The parties agree to the terms of the
indemnification agreement, which is attached hereto as Appendix A and
incorporated herein by reference. The provisions of this paragraph 6 shall
survive any termination of this Agreement.

 

7. Other Business. If the Company is considering a public offering of its
securities, the Company agrees to offer MCF the opportunity to compete for the
position of lead underwriter at an economic participation level of no less than
60%. If the Company is considering a private offering of its securities, the
Company agrees to offer MCF the opportunity to compete for the position of sole
advisor, with customary fees to be mutually agreed upon at the appropriate time.
The terms of any such additional engagements will be set forth in separate
letter agreements containing terms and conditions to be mutually agreed upon,
including without limitation appropriate indemnification provisions.

 

The Company further understands that if MCF is asked to act for the Company in
any other formal additional capacity relating to this engagement but not
specifically addressed in this letter, such as acting as an underwriter in
connection with the issuance of securities by the Company, then such activities
shall constitute separate engagements and the terms and conditions of any such
additional engagements will be embodied in one or more separate written
agreements, containing provisions and terms to be mutually agreed upon,
including without limitation appropriate indemnification provisions. The
indemnity provisions in Appendix A shall apply to any such additional
engagements, unless superseded by an indemnity provision set forth in a separate
agreement applicable to any such additional engagements, and shall remain in
full force and effect regardless of any completion, modification or termination
of MCF’s engagement(s).

 

8. Other MCF Activities. MCF is a full service securities firm engaged in
securities trading and brokerage activities as well as investment banking and
financial advisory services. In the ordinary course of our trading and brokerage
activities, MCF or its affiliates may hold positions, for its own account or the
accounts of customers, in equity, debt or other securities of the Company or any
other company that may be involved in a Sale Transaction.

 

9. Compliance with Applicable Law. In connection with this engagement, the
Company and MCF will comply with all applicable federal, provincial, state and
foreign securities laws and other applicable laws.

 

PAGE 5 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

10. Independent Contractor. MCF is and at all times during the term hereof will
remain an independent contractor, and nothing contained in this letter agreement
will create the relationship of employer and employee or principal and agent as
between the Company and MCF or any of its employees. Without limiting the
generality of the foregoing, all final decisions with respect to matters about
which MCF has provided services hereunder shall be solely those of the Company,
and MCF shall have no liability relating thereto or arising therefrom. MCF shall
have no authority to bind or act for the Company in any respect, and agrees not
to purport to do so. It is understood that MCF responsibility to the Company is
solely contractual in nature and that MCF does not owe the Company, or any other
party, any fiduciary duty as a result of its engagement.

 

11. Successors and Assigns. This letter agreement and all obligations and
benefits of the parties hereto shall bind and shall inure to their benefit and
that of their respective successors and assigns. The indemnity and contribution
provisions incorporated into this letter agreement are for the express benefit
of the officers, directors, employees, consultants, agents and controlling
persons of MCF and their respective successors and assigns.

 

12. Announcements. The Company grants to MCF the right to place customary
announcement(s) of this engagement in certain newspapers and to mail
announcement(s) to persons and firms selected by MCF, the whole subject to the
Company’s prior approval and all costs of such announcement(s) will be borne by
MCF.

 

13. Arbitration. Any dispute between the parties concerning the interpretation,
validity or performance of this letter agreement or any of its terms and
provisions shall be submitted to binding arbitration in the State of California
before an arbitrator selected by the parties hereto, and the prevailing party in
such arbitration shall have the right to have any award made by the arbitrators
confirmed by a court of competent jurisdiction.

 

14. General Provisions. No purported waiver or modification of any of the terms
of this letter agreement will be valid unless made in writing and signed by the
parties hereto. Section headings used in this letter agreement are for
convenience only, are not a part of this letter agreement and will not be used
in construing any of the terms hereof. This letter agreement constitutes and
embodies the entire understanding and agreement of the parties hereto relating
to the subject matter hereof, and there are no other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof. No representation, promise, inducement or statement of
intention has been made by either of the parties hereto which is to be embodied
in this letter agreement, and none of the parties hereto shall be bound by or
liable for any alleged representation, promise, inducement or statement of
intention, not so set forth herein. No provision of this letter agreement shall
be construed in favor of or against either of the parties hereto by reason of
the extent to which either of the parties or its counsel participated in the
drafting hereof. If any provision of this letter agreement is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, the remaining
provisions hereof shall in no way be affected and shall remain in full force and
effect. In case of any litigation or arbitration between the parties hereto, the
prevailing party shall be entitled to its reasonable legal fees. This letter
agreement is made and

 

PAGE 6 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

entered in the State of California, and the laws of that state relating to
contracts made in, and to be performed entirely in, the state shall govern the
validity and the interpretation hereof. This letter agreement may be executed in
any number of counterparts and by facsimile signature.

 

If the foregoing correctly sets forth your understanding of our agreement,
please sign the enclosed copy of this letter and return it to MCF, whereupon it
shall constitute a binding agreement between us.

 

Very truly yours,

MERRIMAN CURHAN FORD & CO.

By:

 

/s/ Chet White

   

Chet White

Managing Director

 

The undersigned hereby accepts, agrees to and becomes party to the foregoing
letter agreement, effective as of the date first written above.

 

PATH 1 NETWORK TECHNOLOGIES INC.

By:

 

/s/ John R. Zavoli

   

John R. Zavoli

President and CEO

 

PAGE 7 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

APPENDIX A – INDEMNIFICATION AGREEMENT

 

The Company agrees to indemnify and hold harmless MCF and its officers,
directors, employees, consultants, attorneys, agents and controlling persons
(within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended) (MCF and each
such other persons are collectively and individually referred to below as an
“Indemnified Party”) from and against any and all loss, claim, damage, liability
and expense whatsoever, as incurred, including, without limitation, reasonable
costs of any investigation, legal and other fees and expenses incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted, to which the Indemnified Party may become
subject under any applicable federal or state law (whether in tort, contract or
on any other basis) or otherwise, and related to the performance by the
Indemnified Party of the services contemplated by this letter agreement and will
reimburse the Indemnified Party for all expenses (including legal fees and
expenses) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not the Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
the Company. The Company will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability or expense is
found in a final judgment by a court or arbitrator, not subject to appeal or
further appeal, to have resulted from the Indemnified Party’s bad faith, willful
misconduct or gross negligence, and the indemnified party must agree that in
such a situation the indemnified party must repay the Company for any costs of
the indemnified party’s defense borne by the Company. The Company also agrees
that the Indemnified Party shall have no liability (whether direct or indirect,
in contract, tort or otherwise) to the Company related to, or arising out of,
the engagement of the Indemnified Party pursuant to, or the performance by the
Indemnified Party of the services contemplated by, this letter agreement except
to the extent that any loss, claim, damage, liability or expense is found in a
final judgment by a court or arbitrator, not subject to appeal or further
appeal, to have resulted from the Indemnified party’s bad faith, willful
misconduct or gross negligence.

 

If the indemnity provided above shall be unenforceable or unavailable for any
reason whatsoever, the Company, its successors and assigns, and the Indemnified
Party shall contribute to all such losses, claims, damages, liabilities and
expenses (including, without limitation, all costs of any investigation, legal
or other fees and expenses incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted) (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and MCF under the terms of this letter agreement or (ii) if the
allocation provided for by clause (i) of this sentence is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i), but also the relative fault of the
Company and MCF in connection with the matter(s) as to which contribution is to
be made. The relative benefits received by the Company and MCF shall be deemed
to be in the same proportion as the fee the Company actually pays to MCF bears
to the total value of the consideration paid or to be paid to the Company and/or
the Company’s shareholders in the Sale Transaction. The relative fault of the
Company and MCF shall be determined by reference to, among other things, whether
any untrue or alleged untrue statement of material fact or omission or alleged
omission to state a material fact relates to

 

PAGE 8 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX

--------------------------------------------------------------------------------

Path 1 Network Technologies Inc.

July 15, 2005

 

information supplied by the Company or by MCF and the Company’s and MCF’s
relative intent, knowledge, access to information and opportunity to correct.
The Company and MCF agree that it would not be just or equitable if contribution
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take into account these equitable
considerations. Notwithstanding the foregoing, to the extent permitted by law,
in no event shall the Indemnified Party’s share of such losses, claims, damages,
liabilities and expenses exceed, in the aggregate, the fee actually paid to the
Indemnified Party by the Company.

 

The Indemnified Party will give prompt written notice to the Company of any
claim for which it seeks indemnification hereunder, but the omission to so
notify the Company will not relieve the Company from any liability which it may
otherwise have hereunder except to the extent that the Company is damaged or
prejudiced by such omission or from any liability it may have other than under
this Appendix A. The Company shall have the right to assume the defense of any
claim, lawsuit or action (collectively an “action”) for which the Indemnified
Party seeks indemnification hereunder, subject to the provisions stated herein
with counsel reasonably satisfactory to the Indemnified Party. After notice from
the Company to the Indemnified Party of its election so to assume the defense
thereof, and so long as the Company performs its obligations pursuant to such
election, the Company will not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at its own expense; provided,
however, that the reasonable fees and expenses of such counsel shall be at the
expense of the Company if the named parties to any such action (including any
impleaded parties) include both the Indemnified Party and the Company and the
Indemnified Party shall have reasonably concluded, based on advice of counsel,
that there may be legal defenses available to the Indemnified Party which are
different from, or in conflict with, any legal defenses which may be available
to the Company (in which event the Company shall not have the right to assume
the defense of such action on behalf of the Indemnified Party, it being
understood, however, that the Company shall not be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for all
Indemnified Parties in each jurisdiction in which counsel is needed). Despite
the foregoing, the Indemnified Party shall not settle any claim without the
prior written approval of the Company, which approval shall not be unreasonably
withheld, so long as the Company is not in material breach of this Appendix A.
Also, each Indemnified Party shall make reasonable efforts to mitigate its
losses and liabilities. In addition to the Company’s other obligations hereunder
and without limitation, the Company agrees to pay monthly, upon receipt of
itemized statements thereof, all reasonable fees and expenses of counsel
incurred by an Indemnified Party in defending any claim of the type set forth in
the preceding paragraphs or in producing documents, assisting in answering any
interrogatories, giving any deposition testimony or otherwise becoming involved
in any action or response to any claim relating to the engagement referred to
herein, or any of the matters enumerated in the preceding paragraphs, whether or
not any claim is made against an Indemnified Party or an Indemnified Party is
named as a party to any such action.

 

PAGE 9 of 9

 

600 CALIFORNIA STREET, 9TH FLOOR n SAN FRANCISCO, CA 94108

(415) 248-5600 MAIN n (415) 248-5692 FAX