EXHIBIT 10.34

 

 

January 18, 2002

 

 

Mr. James R. Schmidt

Chief Executive Officer

HearMe

6200 Stoneridge Mall Road, Suite 3010

Pleasanton, CA 94588

 

Dear Jim:

 

Thank you for retaining Burr, Pilger & Mayer LLP (BPM) to assist you with the
liquidation of HearMe and its wholly owned subsidiaries including but not
limited to Catapult, Resounding, and AudioTalk.  This letter is to confirm our
understanding of the terms and objectives of our engagement and the nature and
limitations of the services we will provide.

 

BPM agrees to sign HearMe’s standard form of Confidential Information and
Invention Assignment Agreement for consultants and that its employees performing
services for HearMe thereunder shall be bound thereunder.

 

BPM agrees that it shall not resign from or terminate the engagement hereunder
without engaging a successor on behalf of HearMe.  In addition, BPM’s
representative serving on the Board of Directors of HearMe shall not resign
without appointing an additional director (to ensure that HearMe has at least
one director at all times).

 

BENEFITS OF WORKING WITH BPM

 

Although we have discussed many of these benefits, I thought it would be
beneficial to put them in writing so that if you need to pass this engagement
letter onto other members of your board, they too will have some of the
background information.

 

1.

 

BPM has extensive experience with regard to the liquidation of companies and the
final wrap-up by holding them in a “trust” position.  Attached, as Exhibit A, is
a listing of some of the engagements we have performed with similar types of
work.

 

 

 

2.

 

BPM has experience with SEC reporting companies.  Currently we audit five
reporting companies.  All of these are smaller companies that call upon us to
assist them with various issues regarding their 10Q and 10K filings.  We are
familiar with the requirements and, as in this case, we would be able to prepare
these documents and correspond with the SEC for as long as the company is
required to do so.

 

 

 

3.

 

BPM is a large enough company that, through its various departments, it is able
to handle the many aspects of this engagement.  As we discussed, the primary
components of the engagement are IT, accounting, bookkeeping, possibly HR, and
CEO/CFO, Chairman of the Board requirements.  BPM, through its 150-person
workforce, has a fully capable IT department, an HR consulting group, a separate
bookkeeping and write-up department where we provide liquidation accounting
services, and have the needed people to handle the SEC reporting and financial
statements.  Thus, you can be assured we can provide all aspects of this
engagement and will not be “farming” out portions to other consultants.

 

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Mr. James R. Schmidt

January 18, 2002

Page 2

 

4.

 

Assurance that we will be in business.  BPM was formed 15 years ago and all of
its founding partners are still quite young.  One of the important things in the
wrap-up of a company is to make sure the key people will be around for the
foreseeable future to ensure the job is handled in a consistent, professional
and accurate manner.  You can be assured the members of our team and our firm
will be around long after HearMe is liquidated.

 

 

SCOPE OF WORK

 

1.

 

Act as the single Board member, CEO, CFO, and Secretary to assure all compliance
matters are handled and the company meets its reporting requirements.

 

 

 

2.

 

Prepare monthly financial statements for the company and for as long as required
and coordinate with the outside auditors for 10Q and annual audits.

 

 

 

3.

 

Prepare the annual tax returns for the next three years.

 

 

 

4.

 

Prepare or cause to be prepared all of the payroll filings for 2001.

 

 

 

5.

 

Establish a system to archive financial, personnel, and legal records of the
company so they are accessible in the event of a dispute, tax inquiry, or former
employee requiring historical data.

 

 

 

6.

 

Create an historical backup of existing computer files.  These files should be
accessible for the next several years to retrieve information.

 

 

 

7.

 

Collect remaining accounts receivable and coordinate payables.

 

 

 

8.

 

Maintain the company’s accounting systems, monthly accounts receivable and
accounts payable ledgers, and other financial responsibilities as necessary
during the final wrap up phase after resignation of the company’s chief
financial officer.

 

 

 

9.

 

Implement a file destruction system so that information no longer needed or
required is disposed of properly.

 

 

 

10.

 

Make final distributions to shareholders.

 

 

 

11.

 

Assist and handle special projects as necessary.

 

 

STAFF ASSIGNED

 

The orderly liquidation of a company, such as HearMe, involves a team effort of
accountants, human resources, technology, and administrative personnel.  BPM has
developed an integrated team approach to coordinate the many issues, problems,
and situations that arise in liquidation. Below are some of the key personnel
who will be assigned to this project.

 

Stephen D. Mayer, Managing Partner, has extensive experience in the liquidation
and wind down of many companies and will coordinate the overall effort from BPM.

 

Venita Baldwin, Partner in charge of Human Resources Consulting group, will
oversee and coordinate the HR aspects of this engagement.

 

 

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Mr. James R. Schmidt

January 18, 2002

Page 3

 

 

Ken Nangle, Senior Director, Computer Consulting Services group, will coordinate
the IT aspects of this engagement.  He has over 25 years of computer consulting
experience.

 

Grace Kosakura, Senior Accountant in our Outsource Accounting Group (OAS) will
oversee the day-to-day activities in the accounting areas including financial
statements, accounts payable, cash management, tax returns, and coordination
with the outside accounts.

 

Rebecca Simon, a Manager in our Accounting Department, who will oversee the
accounting and tax aspects of this engagement.

 

Other staff, at the appropriate level, will be assigned once the job is fully
scoped and we begin work.

 

 

FEES

 

Our fees for professional services are based on the hourly rate of the
individual performing the work times the number of hours incurred.  Our rates
are adjusted on a periodic basis when we adjust the compensation levels of our
personnel.  These adjustments are made in July and January based on market
conditions.  At this time our rates range from $75 per hour at the beginning
staff level to $375 at the senior partner level.  In addition, direct
out-of-pocket expenses such as travel, tax-processing fees, outside consultants,
lodging, and other similar expenses are billed at our cost.  Indirect expenses
such as telephone, fax, postage, photocopy, and technology services are billed
at 3% of our fees.

 

It is always difficult to estimate the exact fees of a project such as this;
however, based on our previous experience, below is a general overview for the
three phases of this project.

 

Phase I

Consists of the initial project and involves an intensive effort of coordination
between our staff and your remaining employees.  This phase usually lasts about
60 days and results in “passing the baton” from your company to ours.

 

Phase II

This is the wind down phase.  During this time, the company completes the
liquidation of its assets and pays its liabilities.  This phase includes the
wind down of the employee benefit plans, destruction of some records, the
quarterly filings, and vacating the premises.  This phase usually lasts six to
12 months.

 

Phase III

This is the hibernation phase.  During this phase, which usually lasts two to
three years, the company has little activity and our tasks would be tax filings,
occasional requests for information, collecting the last few assets and/or
paying the last few liabilities, reporting to shareholders, and other tasks
related to the final dissolution of the company, including any future
distributions to the shareholders.

 

This type of engagement requires a different approach to fees.  We suggest the
following:

 

 

A.

 

A transition fee totaling $35,000 to cover our services for December 2001,
January 2002, and February 2002.  This will encompass all transition services
comprised of accounting, bookkeeping, HR, IT, and Board role.  This will include
the hand off to our firm from you, your employees, and Board members.

 

 

 

 

 

B.

 

A monthly fee of $12,500 for the months of March 2002 through March 2003.

 

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Mr. James R. Schmidt

January 18, 2002

Page 4

 

 

 

C.

 

A monthly fee of $6,000 for the months of April 2003 through March 2005.  The
assumption here is that the project will end March 2005.

 

 

 

 

 

D.

 

Our normal hourly rates for projects such as:

 

 

 

1.

SEC reporting past September 2002.

 

 

 

2.

Special audits for tax authorities or governmental agencies.

 

 

 

3.

Special research of IT related issues including retrieving back-ups.

 

 

 

4.

Assisting with litigation related projects.

 

 

 

5.

Cash distributions to shareholders.

 

 

 

6.

Other projects beyond the scope outlined in A, B, and C above.

 

 

If the foregoing is in accordance with your understanding, please sign the copy
of this letter in the space provided and return it to us along with a retainer
check in the amount of $35,000.  This retainer will be applied to fees through
February 2002, as outlined above in item A.  Please contact Steve Mayer if you
have questions.

 

Thank you for the opportunity to assist in this effort.  BPM looks forward to
working with you and your company.

 

Very truly yours,

 

 

 

Burr, Pilger & Mayer LLP

 

 

 

 

 

BPM:abj

F:\02\145030\engage

 

 

 

ACKNOWLEDGED:

 

HearMe

 

 

 

 

 

 

 

James R. Schmidt, CEO

 

Date

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EXHIBIT A

 

 

 

 

        Arnelle, Hastie, McGee, Willis & Greene

BPM is currently wrapping up the liquidation of this medium-sized law firm
located in San Francisco and Los Angeles. BPM was called upon to provide an
orderly liquidation which included selling all of the assets, collecting all of
the receivables and negotiating with creditors and banking relations for the
orderly payment of the firm’s obligations.

 

        Dinkelspiel, Donovan & Reder

This was a medium-sized law firm located in San Francisco.  BPM was called upon
to provide an orderly liquidation that included selling all assets, collecting
all receivables, and disposing of more than 10,000 boxes of records in storage.

 

        Landsing Pacific Fund, Inc.

This was a REIT that sold its assets and began liquidation proceedings in late
1995 by creation of a liquidating trust.  BPM was engaged to perform outsource
accounting services to assist with the initial liquidation, close down of its
company offices, including file retention, fixed asset sale/disposition,
preparation of all accounting data, tax returns for the liquidating trust, and
ensuring the timely periodic distribution of dividends to the 12,000
shareholders of the original REIT.

 

        US Lend Lease Investments, Inc.

USLI and its sister company USL were wholly owned subsidiaries of one of the
largest real estate companies in Australia.  The USL subsidiaries had assets in
excess of $200 million.  We helped grow the company’s domestic presence and then
after the company decided to close their operations we assisted in the
liquidation and wrap up.

 

During a five-year period of time, BPM acted as the outsource financial and
administrative department for these companies, providing all services including
interaction with the auditors (meeting both US and Australian standards),
preparation of annual tax returns, preparation of monthly financial statements,
and all cash management.  In addition, BPM served on their boards reporting to
the Australian parent company.

 

        Flintkote Corporation

This was the wholly owned subsidiary of a large Canadian corporation.  While in
the process of being liquidated, it was determined they had significant exposure
to asbestos claims.  BPM became the outsource accounting department and managed
a $100 million fund of liquid assets that was reinvested on a periodic basis to
provide cash flow, pay the costs of the asbestos litigation, and settle claims. 
BPM was required to maintain a database, perform daily accounting functions,
prepare monthly financials, and coordinate the annual audit with Coopers &
Lybrand, LLP.

 

        PURUS, Inc.

PURUS was a publicly traded manufacturer who sold their product line in
anticipation of purchasing a new venture.  During this interim period between
product lines, BPM was engaged to out-source all accounting and administrative
functions.  This included preparation of income tax returns, coordination with
auditors, assistance with 10K and 10Q filings, and employee benefit issues.

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