Opinion ID: 782841
Heading Depth: 2
Heading Rank: 1

Heading: The Engagement Letter

Text: 6 The Engagement Letter provided that Hollander was hiring OGSI on an exclusive basis to render financial advisory services in connection with Hollander's attempt to acquire more shares of 4D. The letter included OGSI's obligations: (1) to provide advisory services, general business and financial analysis, transaction feasibility analysis and pricing; (2) to assist in negotiations and related strategy; (3) to act as dealer/manager in any tender offer; (4) to assist in corporate capital planning; (5) to provide a fairness opinion; and (6) to use its best efforts to raise between $20 and $25 million to reacquire 4D stock. 7 OGSI had initially asked for a $100,000 retainer, but Hollander balked at so large an initial cash outlay. The Engagement Letter thus provided that Hollander would pay OGSI a retainer of only $50,000 in cash but would give OGSI warrants, which shall vest immediately upon signing this Agreement, to acquire 25,000 shares of 4D common stock held by Hollander. OGSI could not exercise the warrants before January 1, 1998, but could exercise them at a price of $4.30 per share any time thereafter. 8 Hollander would retain the right to buy back the warrants any time during the four-year period commencing February 5, 1995 whenever the market price of 4D stock exceeded twice the exercise price for the warrants (i.e., reached $8.60 per share). The cost to Hollander to buy back the warrants would be the current market price for 4D common stock minus the $4.30 exercise price. On January 2, 1997, 4D's common stock closed above $8.60. 9 In 1995 and 1996 OGSI conveyed most of its interest (88.47%) in the warrants to six (6) present and former employees of OGSI. Significantly, OGSI retained an 11.53% interest in the warrants. 10 The Engagement Letter also provided that OGSI was entitled to reimbursement from Hollander for OGSI's reasonable expenses in connection with its services — up to a maximum of $10,000. In 1995, OGSI billed Hollander $5,454.04 for expenses, but was never paid. 11 The district court found that OGSI performed its obligation under the Engagement Letter. Specifically, OGSI had introduced Hollander to potential investors and sources of financing, had created and distributed an investor memorandum to potential investors, and had met with Einav and Prashker-Katzman.