for the district of delaware in re: ) chapter 11 ... · for the district of delaware in re: )...

IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE

In re: ) Chapter 11

HIPCRICKET, INC., ) Case No. 15-10104 (LSS)

Debtor. 1 Related Docket No. 10

Hearing Date: February 11, 2015 at 2:00 p.m. prevailing Eastern timeObjection Deadline: February 4, 2015 at 4:00 p.m. prevailing Eastern time

NOTICE OF HEARING ON DEBTOR'S APPLICATION FOR ENTRY OFAN ORDER UNDER 11 U.S.C. SECTIONS 327(A) AND 328(A) AUTHORIZINGTHE EMPLOYMENT AND RETENTION OF CANACCORD GENUITY INC.

AS INVESTMENT BANKER NUNC PRO TUNC TO THE PETITION

TO: (a) the United States Trustee fox the District of Delaware; (b) counsel for the Debtor'sproposed purchaser and post-petition lender SITO Mobile, Ltd.; (c) counsel for Fast PayPartners LLC, the Debtor's secured lender; (d) the Debtor's twenty (20) largest unsecuredcreditors; and (e) any party that has requested notice pursuant to Bankruptcy Rule 2002.

PLEASE TAKE NOTICE that on January 21, 2015, the above-captioned debtor

and debtor in possession (the "Debtor") filed the Debtor's Application for Entry of an Order

under 11 U.S.C. Sections 327(a) and 328(a) Authorizing the Employment and Retention of

Canaccord tenuity Inc. as Investfnent Banker Nunc Pro Tunc to the Petition Date (the

"A~ lip cation") [Docket No. 10], with the United States Bankruptcy Court for the District of

Delaware, 824 Market Street, Wilmington, Delaware 19801 (the "Bankruptcy Court"). A copy

of the Application is attached hereto as Exhibit A.

PLEASE TAKE FURTHER NOTICE that any response or objection to the

entry of an order with respect to the relief sought in the Application must be filed with the

Bankruptcy Court on or before February 4, 2015 at 4:00 p.m. prevailing Eastern time.

The last four digits of the Debtor's tax identification number are 2076. The location of the Debtor's

headquarters and the service address for the Debtor is 110 110th Avenue NE. Suite 410, Bellevue,

WA 98004.

Case 15-10104-LSS Doc 40 Filed 01/23/15 of 3

PLEASE TAKE FURTHER NOTICE that at the same time, you must also

serve a copy of the response or objection upon: (i) [proposed] counsel to the Debtor,

Pachulski Stang Ziehl &Jones LLP, 919 North Market Street, 17th Floor, Wilmington, DE

19899, Attn: James E. O'Neill, Esq., (ii) counsel to SITO Mobile, Ltd., Greenberg Traurig, LLP,

200 Park Avenue, New York, NY 10166, Attn: Nancy Mitchell, Esq.; (iii) counsel to Fast Pay

Partners, The Lamm Group, 160$ Walnut Street, Suite 703, Philadelphia, PA 19103, Attn:

Deirdre M. Richards, Esq.; (iv) counsel to any Committee of Unsecured Creditors; and (v) the

Office of the United States Trustee, J. Caleb Boggs Federal Building, 844 N. King Street, Suite

2207, Lock Box 35, Wilmington, DE 19801, Attn: Jane M. Leamy, Esq.

PLEASE TAKE FURTHER NOTICE THAT IF YOU FAIL TO RESPOND IN

ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF

REQUESTED 1N THE APPLICATION WITHOUT FURTHER NOTICE OR HEARING.

PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER

THE RELIEF SOUGHT IN THE APPLICATION WILL BE HELD ON FEBRUARY 11, 2015,

AT 2:00 P.M. PREVAILING EASTERN TIME BEFORE-THE HONORABLE LAURIE

SELBER SILVERSTEIN AT THE UNITED STATES BANKRUPTCY COURT, 824

MARKET STREET, 6TH FLOOR, COURTROOM NO. 2, WILMINGTON, DELAWARE

19801.

2


Dated: January ~, 2015PACHULSKI STANG ZIEHL &JONES LLP

a D. Kharasch (CA Bar No. 109084)inda F. Cantor (CA Bar No. 153672)

James E. O'Neill (Bar No. 4042)919 North Market Street, 17th FloorP.O. Box 8705Wilmington, DE 19899-8705 (Courier 19801)

Telephone: (302) 652-4100Facsimile: (302) 652-4400E-mail: [email protected]

[email protected]@pszjlaw.com

[Proposed] Counsel for Debtors and Debtors inPossession

p~; 196333 - 02980.001

3


EXHIBIT A

42125-001\DOGS DE:6375,1 DOCS_D6:6375.142125/001

Case 15-10104-LSS Doc 40-1 Filed 01/23/15 Page 1 of 51

iN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re: ) Chapter 11

HIPCRICKET, INC.,1 ) Case No. 15-10104 ~5

Debtor

DEBTOR'S APPLICATION FOR ENTRY OF AN ORDER UNDER 11 U.S.C. §§ 327(A)

AND 328(A) AUTHORIZING THE EMPLOYMENT AND RETENTIpN OF

CANACC4RD GENUITY INC. AS INVESTMENT BANKER

NUNC PRO TUNC TO T~-iE PETITION DATE

The debtor and debtor in possession Hipericket, Inc. (the "Debtor") files this

application (the "Application") for entry of an order, substantially in the form attached hereto as

Exhibit A (the "Order"), authorizing the employment and retention of Canaccord Genuity Inc.

("Canaccord") as investment banker to the Debtor nunc pro tunc to the Petition Date (defined

below), in accordance with the terms and conditions set forth in that certain engagement letter,

dated as of January 20, 2014 and Amendment No. 1 to Agreement dated December 14, 2014

(collectively, the "Engagement Letter"), a copy of each of which is annexed to the Order as Exhibit

1. In support of this Application, the Debtor submits the Declaration of Geoffrey Richards (the

"Richards Declaration"), attached hereto as Exhibit B. In further support of this Application, the

Debtor respectfully states as follows.

I The last four digits of the Debtor's tax identification number are 2076. The location of the Debtor's headquarters and the service address for the

Debtor is 110 110' Avenue NE. Suite 410, Bellevue, WA 98004.

DOCS LA:2851253 36480/001 p~~'K~~ # 6


_Tnrierlirtinn

1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157

and 1334 and the Amended Standing D~der of Reference from the United States District Court

for the District of Delaware, dated February 29, 2012. This matter is a core proceeding within

the meaning of 28 U.S.C. § 157(b)(2), and the Court may enter a final order consistent with

Article III of the United States Constitution.

2. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

3. The statutory bases for the relief requested herein are sections 327(a) and

328(a) of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the "Bankru~tcv Code"),

and Rule 2014(a) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules").

Relief Requested

4. The Debtor seeks entry of the Order authorizing the employment and

retention of Canaccord as its investment banker in accordance with the terms and conditions of

the Engagement Letter, effective nunc pNo tunc to the Petition Date.

Background

5. On January 20, 2015 (the "Petition Date"), the Debtor commenced this

chapter 11 case (the "Chapter 11 Case") by filing a voluntary petition for relief under chapter 11

of the Bankruptcy Code.

6. The Debtor has continued in the possession of its property and has

continued to operate and manage its business as a debtor in possession pursuant to sections

1107(a) and 1108 of the Bankruptcy Code.

DOGS LA:285125.3 36480/001 2


7. No official committee has been appointed by the Office of the United

States Trustee.

8. The Debtor provides end-to-end data driven mobile advertising and

marketing solutions through its proprietary AD LIFEOO software-as-a service platform

(the "AD

LIFE Platform" or "Platform") — a proprietary, mobile engagement platform for bus

inesses to

communicate with customers through cellphones, tablets and other mobile devices.

Additional

factual background relating to the Debtor's commencement of this Chapter 11 Case is

set forth

in detail in the DeclaNation of Todd Wilson in Support of'FiNst Day Motions (the

"Wilson

Declaration") and incorporated herein by reference.

Services to Be Provided

9. Canaccord commenced its engagement as investment banker to the

Debtor in January 2014 and the terms of its engagement were amended in De

cember 2014.

10. Pursuant to the Engagement Letter, Canaccord serves as the Debtor's

investment banker and financial advisor with respect to the review of the Debto

r's strategic and

financial alternatives, through purchase, sale, merger, or joint venture whether acco

mplished

pursuant to a Plan of Reorganization (a "Plan"), or other transactions) with anoth

er party

through which assets of the Debtor are, directly or indirectly, combined with or

transferred to

another party outside the ordinary course of business (the "Transaction").2

2 Capitalized terms not otherwise defined herein shall have their meaning as

cribed to them in the Engagement Letter.

DOCS LA:2851253 36480/001 3


11. As outlined in the Engagement Letter, the Debtor proposes to continue to

retain Canaccord to render, among other things, the following investment banking services to

the Debtor:

a. advise the Debtor in analyzing and evaluating the business, operations

and financial position of the Debtor and its strategic alternatives;

b. assist the Debtor in preparing descriptive materials regarding the

Debtor's company for distribution and presentation to potential

buyers, strategic partners ancUar investors ("Potential Buyers");

c. assist the Debtor in the preparation and implementation of a plan to

have discussions with Potential Buyers;

d. assist the Debtor in identifying and screening interested Potential

Buyers;

e. assist the Debtor in coordinating Potential Buyers' due diligence

investigations;

f. assist the Debtor in evaluating proposals received from Potential

Buyers;

g. assist the Debtor in structuring and negotiating the financial aspects

of any Transaction;

h. to be available at the Debtor's request to meet with the Debtor's

Board of Directors to discuss any proposed Transaction and its

financial implications; and

i. if requested, participate in hearings before the Bankruptcy Court in

connection with a Transaction and provide relevant testimony with

respect to the matters arising in connection with any Transaction or

any proposed Plan.

Canaccord's Qualifications

12. Canaccord is an independent and full-service global investment banking

firm offering investment banking, equity research, wealth management, institutional and private

brokerage, and private capital solutions to individual and institutional clients. Canaccord

employs over 2,000 individuals and has 20 locations in 11 countries worldwide, including in

DOCS LA285125.3 36480/001 ~


cities such as Chicago, New York, Boston, San Francisco, London, Toronto, Vancouver, Paris,

Sydney, Hong Kong, and Singapore. In fiscal year 2014, Canaccord participated in 365

transactions, raising approximately $36.5 billion. Of these transactions, Canaccord led or co-led

over 79 transactions, raising over $4.0 billion for clients.

13. The Debtor selected Canaccord because Canaccord's professionals have

considerable expertise and experience in providing investment banking services to financially-

distressed companies and to creditors, purchasers, bondholders, and other constituencies in

chapter 11 as well as in out-of-court proceedings. Representative clients which investment

bankers at Canaccord have advised in prior chapter 11 engagements include American

IronHorse Motorcycles, Inc., BI-LO, LLC, Diamond Glass Companies, Inc., Gateway Ethanol,

LLC, Giordano's Enterprises, Inc., Gulf Fleet Holdings, Inc., HMX Acquisition Corp.,

International Garden Products, Inc., KeyLime Cove Waterpark, Inc., Loehmann's Holdings,

Inc., Max & Erma's, Inc., National Envelope Corporation, Osyka Corporation, Renew Energy,

Inc., Robbins Bros. Corporation, Waterworks, Inc., and Zultys Technologies, Inc.

14. As set forth in the Richards Declaration, Canaccord was engaged prior to

the Petition Date to provide investment banking services to the Debtor pursuant to the

Engagement Letter.

15. As a result of rendering prepetition services to the Debtor, Canaccord is

intimately familiar with the Debtor's corporate and capital structure, management, operations,

and various other aspects of its business: Canaccord has awell-developed knowledge of the

DOCS LA:2851253 36480/001


Debtor's financial history and business operations and is well-suited to provide the Debtor with

the investment banking services contemplated by the Engagement Letter.

No Duplication of Services

16. The Debtor believes that the services provided by Canaccord will not

duplicate the services that other professionals will be providing to the Debtor in this Chapter 11

Case. Specifically, Canaccord will carry out unique functions directly related to the sale

transaction and will use reasonable efforts to coordinate with the Debtor and its professionals

retained in this Chapter 11 Case to avoid the unnecessary duplication of services.

Professional Compensation

17. Canaccord will seek the Court's approval of its compensation for

professional services rendered and reimbursement of expenses incurred in connection with the

Debtor's Chapter 11 Case in compliance with applicable provisions of the Bankruptcy Code, the

Bankruptcy Rules, the Local Rules of the United States Bankruptcy Cozut for the District of

Delaware (the "Local Rules"), the guidelines established by the Office of the United States

Trustee for the District of Delaware (the "U.S. Trustee Guidelines"), and any other applicable

procedures and orders of the Court, and consistent with the proposed compensation set forth in

the Engagement Letter.

18. Investment bankers such as Canaccord do not typically charge for its

services on an hourly basis. Instead, they customarily charge fees that are contingent upon the

occurrence of a specified type of transaction. The Engagement Letter sets forth the transaction-

based fees that are to be payable to Canaccord.

DOCS LA:285125.3 36480/001 6


19. As set forth more fully in the Engagement Letter, and subject thereto,

Canaccord will be compensated as follows (the "Fee Structure"):

a. Monthly Fees. In addition to the other fees described below and as

further provided for in the Engagement Letter, the Debtor shall pay

Canaccord a fee due, earned and fully payable in the amount of

$35,000 on February 2, 2015 and on the first business day of each

month thereafter, a fee in the amount of $35,000 shall be paid and

earned upon Canaccord's receipt thereof in consideration of

Canaccord accepting the engagement ("Monthly Fees"). The

Monthly Fees will continue to be paid promptly following entry of

the prder of the Bankruptcy Court having jurisdiction over the

Debtor's Chapter 11 case authorizing the employment of Canaccord

pursuant to the terms of the Engagement Letter;

b. M&A Fee. Upon the cloying of a Transaction other than a Financing

Transaction (as defined below), a fee (the "M&A Fee") equal to the

greater of (i) $500,000 and (ii) 5% of the Aggregate Consideration (as

defined below) up to and including $15 million, plus 4% of the

Aggregate Consideration over $15 million up to and including $20

million, plus 3% of the Aggregate Consideration over $20 million;

c. Success Fee. Upon the closing of a financing transaction consisting

of a financing for any portion of the Debtor, whether in the form of

secured, unsecured, subordinated or senior debt or equity equivalents

("Financial Transaction"), the Debtor shall pay Canaccord a success

fee equal to 3% (the "Success Fee") of the gross proceeds received by

the Debtor in such Financing Transaction; provided that if a proposed

buyer provides debtor in possession financing as part of a

contemplated sale transaction, and such sale transaction is

consummated with that proposed buyer, then Canaccord shall earn

only the M&A Fee and not any Success Fee on account of a

Financing Transaction;

d. Ag~reg_ate Consideration. For purposes of this agreement the

aggregate consideration ("Aggregate Consideration") received by the

Debtor in any Transaction shall mean the cumulative value of the

Transaction, representing the total value of the Debtor implied by the

sum of all cash paid or payable and the fair market value of all

property or securities transferred or transferable directly or indirectly,

in connection with a Transaction, as more fully defined in section 4.b

of the Engagement Letter; and

DOCS LA:285125.3 36480/001 ~


e. Expenses. In addition to all of the other fees and expenses describedin the engagement Letter, and regardless of whether any Transactionis consummated, the Debtor shall, upon Canaccord's request,reimburse Canaccord for its reasonable out-of-pocket expensesincurred from time to time in connection with its services hereunder,provided however, that unless the Company otherwise consents inwriting in advance, such expenses shall not exceed $50,000 in the

aggregate. Canaccord shall notify the Debtor once expenses exceed$25,000.

20. Indeed, Canaccord's industry and restructuring experience, its capital

markets knowledge, financing skills, and mergers and acquisitions capabilities, some or all of

which may be required by the Debtor during the term of Canaccord's engagement, were

important factors in determining the Fee Structure. The ultimate benefit to the Debtor of

Canaccord's services could not be measured merely by reference to the number of hours to be

expended by Canaccord's professionals in the performance of such services. Moreover, the Fee

Structure takes into consideration Canaccord's anticipation that it will need to provide a

substantial commitment of professional time and effort in order to perform its duties under the

Engagement Letter, and in light of the fact that such commitment may foreclose other

opportunities for Canaccord. Further, the actual time and commitment required of Canaccord

and its professionals to render services to the Debtor may vary substantially from week to week

or month to month, creating "peak load" issues for the firm.

21. Thus, because of Canaccord's expertise, commitment of resources to this

engagement to the exclusion of other possible employment, and the time that Canaccord has

devoted and will continue to devote to this engagement, the Debtor requests that the Court

approve the Fee Structure for Canaccord pursuant to section 328(a) of the Bankruptcy Code and

that the Court evaluate the final compensation and reimbursement of expenses in the Chapter 11

Case for Canaccord under the standards of section 328(a) of the Bankruptcy Code, rather than

DOCS LA2851253 36480/001


under those of section 330 of the Bankruptcy Code, subject to Canaccord filing a final fee

application seeking approval of the payment of its fees and expenses.

Canaccord's Disinterestedness

22. To the best of the Debtor's knowledge, information, and belief, and

except to the extent disclosed herein and in the Richards Declaration, Canaccord: (a) is a

"disinterested person" within the meaning of section 101(14) of the Bankruptcy Code, as

modified by section 11p7(b) of the Bankruptcy Code; (b) does not hold or represent an

interest materially adverse to the Debtor, its creditors, and shareholders for the matters for

which Canaccord is to be employed; and (c) has no connection to the Debtor, its creditors,

shareholders, or related parties herein except as disclosed in the Richards Declaration.

23. As of the Petition Date, Canaccord does not hold a prepetition claim

against the Debtor for services rendered.

24. To the extent that any new relevant facts or relationships bearing on the

matters described herein during the period of Canaccord's retention are discovered or arise,

Canaccord will use reasonable efforts to promptly file a supplemental declaration, as required

by Bankruptcy Rule 2014(a).

Recordkeepin~

25. It is not the general practice of investment banking firms; including

Canaccord, to keep detailed time records similar to those customarily kept by attorneys.

Because Canaccord does not maintain contemporaneous time records in one-tenth hour

increments or provide or conform to a schedule of hourly rates for its professionals, Canaccord

DOCS LA:285125.3 36480/001


respectfully requests, pursuant to Local Rule 2016-2(h), that it be excused from compliance

with such requirements. Instead, Canaccord requests that it be required only to maintain time

records in half-hour (0.50) increments setting forth, in a summary format, a description of the

services rendered by each professional and the amount of time spent on each date by each such

individual in rendering services on behalf of the Debtor.

26. Canaccord will also maintain detailed records of any actual and necessary

costs and expenses incurred in connection with the aforementioned services. Canaccord's

application for compensation and expenses will be paid by the Debtor pursuant to the terms of

the Engagement Letter, in accordance with Local Rule 2016-2(e) asid any procedures

established by the Court.

Indemnification and Contribution Provisions

27. The Debtor has agreed, among other things, to indemnify, and provide

contribution and reimbursement to, Canaccord and certain related parties in accordance

with the indemnification provisions attached as Annex A to the Engagement Letter (the

"Indemnification Provisions")

28. The Debtor believes such provisions are customary and reasonable for

Canaccord's engagement. Unlike the market for other professionals that the Debtor may

retain, such provisions are standard terms of the market for investment bankers. Canaccord

and the Debtor believe that such provisions are comparable to those generally obtained by

investment banking and financial advisory firms of similar stature to Canaccord and for

comparable engagements, both in and out of court.

DOCS LA2851253 36480/001 1


29. Accordingly, as part of this Application, the Debtor requests that the

Court approve the Indemnification Provisions subject to the modifications set forth in the

propgsed Order.

Basis for Relief

30. Section 327(a) of the Bankruptcy Code provides that a debtor is

authorized to employ professional persons "that do not hold or represent an interest adverse to

the estate, and that are disinterested persons, to represent or assist the [Debtors] in carrying out

their duties under this title." 11 U.S.C. § 327(a). Additionally, section 328(a) of the

Bankruptcy Code, which provides, in relevant part, that the Debtor "with the court's approval,

may employ or authorize the employment of a professional person under section 327 ... on any

reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on

a fixed or percentage fee basis, or on a contingent fee basis ...." 11 U.S.C. § 328(a).

Accordingly, section 328(a) of the Bankruptcy Code permits the compensation of investment

bankers on more flexible terms that reflect the nature of their services and market conditions.

31. The Debtor submits that the Court's approval of the Debtor's retention of

Canaccord in accordance with the terms and conditions of the Engagement Letter is warranted.

First, the requirements of section 327 of the Bankruptcy Code are satisfied. Canaccord is

needed postpetition to assist with negotiations, as necessary, to provide expert advice and

testimony regarding financial matters related to transactions contemplated by the Engagement

Letter, and to enable the Debtor to discharge its duties as a debtor and debtor in possession.

Canaccord has extensive experience and an excellent reputation in providing high-quality

DOGS LA:285125.3 36480/001 1 1


investment banking and financial advisory services. The Debtor submits that Canaccord is well

qualified to provide its services to the Debtor in acost-effective, efficient, and timely manner.

32. Second, the Debtor believes that the Fee Structure is market-based, fair,

and reasonable under the standards set forth in section 328(a} of the Bankruptcy Code. The Fee

Structure reflects Canaccord's commitment to the variable level of time and effort necessary to

perform the services to be provided, its particular expertise, and the market prices for its

services for engagements of this nature both out of court and in the chapter 11 context.

33. Courts in this and other jurisdictions have approved similar arrangements

to the Fee Structure under section 328 of the Bankruptcy Code. See, e.g., In re Vertis Holdings,

Inc., Case No. 12-12821 (CSS) (Bankr. D. Del. Nov. 20, 2012) (approving a flexible fee

structure and engagement letter under section 328 on the grounds that both were reasonable); In

re Neb. Book Co., Case No. 11-12005 (PJW); (Bankr. D. Del. Aug. 10, 2011); In re Appleseed's

Intermediate Holdings LLC, Case No. 1I-10160 (KG) (Banlcr. D. Del. Feb. 23, 2011); In re

Local Inszght Media Holdings, Inc., Case No. 10-13677 (KG) (Bankr. D. Del. Dec. 20, 2010);

In re LandsouNce Communities Dev. LLC, Case No. 08-11111 (KJC) (Bankr. D. Del. Aug. 27,

200$).

34. Third, the Indemnification Provisions are reasonable under the

circumstances and reflect market conditions, and accordingly should be approved under

section 328 of the Bankruptcy Code. See, e.g., In ~e United ANtists TheatNe Co. v. Walton,

No. O1-1351, 315 F.3d 217 (3rd Cir. 2003) (approving indemnification for investment banker

and financial advisor where the indemnity clause, including a carve out for gross negligence,

DOCS LA:285125.3 36480/001 12


was "reasonable" and therefore, permissible under the Bankruptcy Code). Courts in this

jurisdiction have approved similar provisions to the Indemnification Provisions in other

chapter 11 cases. See, e.g., In ~e VeNtis Holdings, Inc., No. 12-12821 (CSS) (Bankr. D. Del.

Nov. 20, 2012) (approving an indemnification provision the court deemed reasonable and

reflective of market conditions); In Ne Neb. Book Co., No. 11-12005 (PJW); (Bankr. D. Del.

Aug. 10, 2011) (same); In Ne Appleseed's Intermediate Holdings LLC, No. 11-10160 (KG)

(Bankr. D. Del. Feb. 23, 2011) (same); In ~e Local Insight Media Holdings, Inc., No. 10-13677

(KG) (Bankr. D. Del. Dec. 20, 2010) (same); In re Aventine Renewable Energy Holdings, Inc.,

No. 09-11214 (KG) (Bankr. D. Del. June 24, 2009) (same).

Notice

35. The Debtor has provided notice to the following parties or, in lieu

thereof, to their counsel: (i) the Office of the United States Trustee; (ii) the Debtor's secured

lender, Fast Pay, LLC; (iii) Debtor's proposed purchaser and post-petition lender STTO Mobile,

Ltd.; (iv) the 201argest unsecured creditors of the Debtor; and (v) any party that has requested

notice pursuant to Bankruptcy Rule 2002. The Debtor submits that, in light of the nature of the

relief requested, no other or further notice need be given.

No Prior Request

36. No prior application for the relief requested herein has been made to this

or any other court. Pursuant to Local Bankruptcy Rule 9013-1(~, the Debtor consents to the

entry of a final judgment or order with respect to the Motion if it is determined that this Court

ROCS LA285125.3 36480/001 13


would lack A~~ticle III jurisdiction to enter such final order or judgment absent the consent of the

parties.

'WHEREFORE, for the reasons set Earth herein, the Debtar respectfully requests that the

Cocut enter the Order, substantially in tk~ farm attached hereto as Exhibit A, granting the relief

requested herein and such other and fui~Gher relief as the Count deems appropriate.

Dated: ranuary2~ 2015 HIPCRICKET, INC,, {

L, ~•By; Tadd WilsonIts; Chief Executive Officer

DOCS LA:285125.3 3G480/001 ~


Exhibit A

Proposed Order


IN THE UNITED STATES BANKRUPTCY COURT


In re: ) Chapter 11

HIPCRICKET, INC.,1 ) Case No: 15-10104 (_)

Debtor. )

ORDER ITNDER 11 U.S.C. §§ 327(A) AND 328(A) AUTHORIZING

THE EMPLOYMENT AND RETENTION OF

CANACCORD GENUITY INC. AS INVESTMENT BANI~R

TO DEBTOR NUNC PRp TUNC TO THE PETITION DATE

Upon the application (the "A~plication") of the debtor and debtor in possession

Hipericket, Inc. (the "Debtor") for entry of this Orderz under 11 U.S.C. §§ 327(a) and 328(a)

authorizing the Debtor to employ and retain Canaccord Genuity Inc. ("Canaccord") as investment

banker, effective nunc pro tunc to the Petition Date, all as more fully set forth in the Application;

and upon the Declaration of Geoffrey Richards ("Richards Declaration") in support of the

Application; and this Court having jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and

1334 and the Amended Standing OrdeN of Reference from the United States District Court for the

District of Delaware, dated February 29, 2012; and this Court having found that this is a core

proceeding pursuant to 28 U.S.C. § 157(b)(2); and that this Court may enter a final order consistent

with Article III of the United States Constitution; and this Court having found that venue of this

proceeding and the Application in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409;

and this Court being satisfied based on the representations made in the Application and in the

I The last four di~its of the Debtor's tax identification numUer are 2076. The location of the Debtor's headquarters and the servi

ce address for the

Debtor is 110 110 Avenue NE. Suite 410, Bellevue, WA 98004.

zCapitalized terms used but not otherwise defined herein have

the meanings ascribed to them in the Application.

DOCS LA:285125.3 36480/001



In re:

HIPCRICKET, INC.,I


Chapter 11

Debtor. )

Case No. 15- (~

ORI?ER UNDER 11 U.S.C. §§ 327(A) AND 328(A) AUTHORIZING

THE EiVIPLOYMENT AND RETENTION OF

CANACCOR.D GENUITY INC. AS INVESTI'VIENT BANKER

TO DEBTOR NUNC PRO TUNC TO THE PETITION DATE

Upon the application (the "Application") of the debtor and debtor in possession

Hipericket, Inc. (the "Debtor") for entry of this Order2 under 11 U.S.C. §§ 327(a) and 328(a)

authorizing the Debtor to employ and retain Canaccord Genuity Inc. ("Canaccord") as investment

banker, effective nunc pro tune to the Petition Date, all as more fully set forth in the Application;

and upon the Declaration of Geoffrey Richards ("Richards Declaration") in support of the

Application; and this Court having jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and

1334 and the Amended Standing Order of Reference from the United States District Court for the

District of Delaware, dated February 29, 2012; and this Court having found that this is a core

proceeding pursuant to 28 U.S.C. § 157(b)(2); and that this Court may enter a final order consistent

with Article III of the United States Constitution; and this Court having found that venue of this

proceeding and the Application in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409;

and this Court being satisfied based on the representations made in the Application and in the

1 The last -four digits of the Debtor's tax identification number are 2076. The location of the Debtor's headquarters and the

service address for the

Debtor is 110 110'~ Avenue NE. Suite 410, Bellevue, WA 98004.

2Capitalized terms used but not otherwise defined herein

have the meanings ascribed to them in the Application.

DOCS LA:285125.3 36480/001


Richards Declaration that the terms and conditions of Canaccord's employment, including, but not

limited to, the Fee Structure set forth in the Engagement Letter and summarized in the Application

and Richards Declaration, are reasonable as required by section 328(a) of the Bankruptcy Code; and

Canaccord not holding or representing interests adverse to the Debtor's estate; Canaccord being a

"disinterested person" as such term is defined under section 101(14) of the Bankruptcy Code; and

this Court having found that the relief requested in the Application is in the best interests of the

Debtor's estate, its creditors, and other parties in interest; and this Court having found that the

Debtor's notice of the Application and opportunity for a hearing on the Application were

appropriate and no other notice need be provided; and this Court having reviewed the Application

and having heard the statements in support of the relief requested therein at a hearing before this

Court (the "Hearing"); and this Court having determined that the legal and factual bases set forth in

the Application and at the Hearing establish just cause for the relief granted herein; and upon all of

the proceedings had before this Court; and after due deliberation and sufficient cause appearing

therefor, it is HERBY ORIJERED THAT:

1. The Application is GRANTED.

2. The Debtor is authorized, pursuant to section 327(a) and 328(a) of the

Bankruptcy Code, effective Hunt pNo tunc to the Petition Date, to employ and retain Canaccord as

its investment banker in accordance with the terms and conditions set forth in the Application and

the Engagement Letter attached hereto as Exhibit 1, subject to the terms of this Order.

3. The terms of the Engagement Letter are approved and Canaccord shall be

compensated and reimbursed pursuant to section 328(a) of the Bankruptcy Code in accordance with

DOCS LA:285125.3 36480/001 2


the terms of the Engagement Letter, subject to Canaccord filing a final fee application seeking

approval of the payment of its fees and expenses, the procedures set forth in the Bankruptcy Code,

the Bankruptcy Rules, the Local Rules, the U.S. Trustee Guidelines, and any other applicable orders

of this Court.

4. Notwithstanding the preceding paragraph of this Order and any provision to

the contrary in the Application or the Engagement Letter, the U.S. Trustee shall have the right to

object to Canaccord's request for compensation and reimbursement based on the reasonableness

standard provided in section 330 of the Bankruptcy Code, not section 328(a) of the Bankruptcy

Code; provided, however, that "reasonableness" shall be evaluated by comparing (among other

things) the fees payable in this case to fees paid to comparable investment banking firms with

similar experience and reputation offering comparable services in other chapter 11 cases and shall

not be evaluated primarily on an hourly or length-of-case based criteria.

5. Canaccord is granted a waiver of the information requirements relating to the

compensation requests set forth in Local Rule 2016-2(h) to the extent requested in the Application.

6. Canaccord and any Indemnified Party shall not be entitled to any

indemnification pursuant to the terms of the Engagement Letter for any claims, liabilities, losses,

expenses, and damages incurred by the Indemnified Party resulting from the bad faith, willful

misconduct or gross negligence of an Indemnified Party.

7. The Indemnification Provisions set forth in the Engagement Letter are

approved, subject during the pendency of this proceeding to the following:

a. Canaccord shall not be entitled to indemnification, contribution or

reimbursement pursuant to the Engagement Letter for services, unless

DOCS LA:285125.3 36480/001 3


such services and the indemnification, contribution or reimbursement

therefor are approved by the Court;

b. The Debtor shall have no obligation to indemnify Canaccord, or

provide contribution or reimbursement to Canaccord, for any claim or

expense that is either: (i) judicially determined (the determination

having become final) to have arisen from Canaccord's gross

negligence, fraud, willful misconduct, breach of fiduciary duty, if

any, bad faith or self-dealing; (ii) for a contractual dispute in which

the Debtor alleges the breach of Canaccord's contractual obligations,

unless the Court determines that indemnification, contribution or

reimbursement would be permissible pursuant to In Ne United Artists

Theatre Co., 315 F.3d 217 (3d Cir. 2003); or (iii) settled prior to a

judicial determination as to the exclusions set forth in clauses (i) and

(ii) above, but determined by this Court, after notice and a hearing, to

be a claim or expense for which Canaccord should not receive

indemnity, contribution or reimbursement under the terms of the

Engagement Letter as modified by this Order; and

c. If, before the earlier of (i) the entry of an order confirming a chapter

11 plan in this Chapter 11 Case (that order having become a final

order no longer subject to appeal) and (ii) the entry of an order

closing this Chapter 11 Case, Canaccord believes that it is entitled to

the payment of any amounts by the Debtor on account of the Debtor's

indemnification, contribution and/or reimbursement obligations under

the Engagement Letter (as modified by this Order), including, without

limitation, the advancement of defense costs, Canaccord must file an

application therefor in this Court, and the Debtor may not pay any

such amounts to Canaccord before the entry of an order by this Court

approving the payment. This subparagraph (c) is intended only to

specify the period of time under which the Court shall have

jurisdiction over any request for fees and expenses by Canaccord for

indemnification, contribution or reimbursement, and not a provision

limiting the duration of the Debtor's obligation to indemnify

Canaccord. All parties in interest shall retain the right to object to

any demand by Canaccord for indemnification, contribution or

reimbursement.

d. Any limitation on liability or any amounts to be contributed by the

parties to the Engagement Letter under the terms of the Engagement

Letter shall be eliminated.

Notwithstanding any provision in the Engagement Letter to the contrary, the

contribution obligations of the Indemnified Parties (as such term is defined in the Engagement

DOCS LA:285125.3 36480/001 4'


Letter) shall not be limited to the aggregate amount in excess of the amount of fees actually

received by Canaccord from the Debtor pursuant to the Engagement Letter, this Order, or

subsequent orders of this Court.

9. Notwithstanding anything to the contrary contained hereon, any payment to

be made, or authorization contained hereunder, shall be subject to the requirements imposed on the

Debtor pursuant to any DIP Facility as approved by the DIP Order and as set forth in the DIP

Budget.

10. To the extent requested in the Application, Canaccord is granted a waiver of

the information requirements relating to compensation requests set forth in Local Rule 2016-2(d).

11. The terms and conditions of this Order are immediately effective and

enforceable upon its entry.

12. The Debtor is authorized to take all actions necessary to effectuate the relief

granted in this Order in accordance with the Application.

Dated:United States Bankruptcy Judge

DOCS LA285125.3 36480/001


EXHIBIT 1

Engagement Letter

DOGS LA:285125.3 36480/001


! :6! .. ...;7:;S

CONFIDLNTIA.L

.tanuaiy Z0, 2(}14

Hiperickct, Inc.

1.10 11 Otli Avenue NE

F3ellevue, WA 980Q4

Attention: Mr. Todd Wilson

Chairman

Ladies & Gentteinen:

This leceer agreement (the "Agreement") w.ill confirm our' understanding of the terms

and conditions wider

which Canaccord tenuity Jnc. (together with its affiliates, conhol persons, dire

ctors, officers, employees, and

agents, "Canaccord Genuiry") is engaged by IIipericket, Inc. (together with its s

ubsidiaries and affiliates, the

"Company") as its exclusive financial advisor ui connection with the Company's

review of its strategic and

financial alternatives, incfiding one or several possible business combinations, t

hrough purchase, sale, merger,

joint venture or otherwise acid whether in one or more transactions chrau~;h the

purchase of air organization's

equity, debt securities or assets, or by means of a merger, consolidarion, reorgan

ization, spin-off, tender offer,

exchtuige offer or any other transaction of a like nature involving all or at least

40% of the assets or equity

interests of the Company, regardless of form (a "Transaction") with any other

person (individually, and

toge[her with each such person's respective subsidiaries and affiliates, the "Strateg

ic Paruter"); provided,

hotuever, that a TransacCion shall not include the licensing of products or a co

llaUoration agreement to develop

products or other similar commercial contracts entered into in the ordinary

course of business. A Transaction

in which tt~e Company issues capital stock of the Company representin6less Chan 5

0% of die Company's

equity interests, or in which the Company issues debt securities (convertible into

equity or otheiwisc), for.cash,

to one or more investors (individually, and together with their respective subsi

diaries and affiliates, the

"Investors") shall be referred to as n "Financing Transaction."

Services. As financial advisor, Canaecord tenuity will if appropriate and i.f req

uested:

(a) assist you in analyzing and evaluating the business, operations and financial p

osition of

the Company and its strategic alternati~vcs;

(b) assist you in preparing descriptive materials regarding lire Company for distri

bution and

presentation to potential Strategic Partners and/or Investors;

(c) assist you in the preparation dnd implementation of a plan to have discussions

with

prospective Strategic Partners and/or Investors;

(d) assist you in identityiug and screening interested prospective Strategic Partners

and/or

Investors;

(e) assist you iG1 coordinating potential Strategic Partners' and/or investors' cite dilig

ence

investigations;

99999•G7 t S/LrGAL290G78H42


CONFIDENTIAL

I-iipericket, Inc.January 20, 2014Page 2 of 9

(t) assist you in evaluating- proposals received from potential Strategic Parhiers and/or

Investors;

(g) assisT you in stnicturing rind negotiating the financial aspects of cony Transaction;

(h) be available at your request to meet with your Board of Directors to discuss airy proposed

Transaction and its financial implications; and

(i) render an opinion as to the fairness from a financial point of view to Company ~~r its

stocl~halders, as appropriate, of the considerztion to be received in a Transaction (ihe

.̀Opinion").

If Canaccord tenuity is requested ro render an opinion, the nature anc~ scope of our analysis and the form

and substance of the Opinion will be such as Canaccord tenuity considers appropriate and will not

address the underlying business decision to effect a Transaction. 1'he Opinion may be included in any

disclosure document required to be filed by the Company with the Sec~u~ities and Exchange Commission

with respect to a proposed Transactio~i, provided that it is reproduced in fizll, and that any description of or

reference to Canaccord tenuity, and any summary of the Opinion in the disclosure document, is in a form

reasonably acceptable to Canaccord Gcimiry. It is understood and agreed that the Opinion will be

addressed to, and be prepared solely for the use and benefit of the Fiau-d, or a committee tEicreof, if

applicable, and, except as set forth above or as required by law, may not be disclosed to any third party

(other thou the Company's legal counsel and other advisors with whom the Company works on the

potential Transaction) or circulated or referred to pub(icfy without the prior written consent of Canaccord

tenuity.

The Company wi11 furnish and will request potential Strategic Partners and/or Investors to furnish

Canaccord tenuity such inforcrration as Canaccord Genuiry reasonably requests in connection with the

performance of its services hereunder (all such information so furnished is referred to herein as the

"Information"). The Company agrees that Canaccord Gcnuity, in performing its services hereunder, wilt

use and rely upon the Informfltion without assuming any responsibility for independent investigation or

verification thereof. Accordingly, Canaceord tenuity shall be entitled to assume and rely upon the

accuracy and completeness of all such Information. Cunaccord tenuity will assume that any forecasts and

projections have been reasonably prepared and reflect tl~e best currently avaiilable estimltes andjudgments

of the management of the Company or the potential Strategic Partner ar Investor, as the case may be, as to

the matters covered thereby.

Cans~ccard tenuity agrees that any non-public information relating to the Company or any potential

Strategic Partner and/or .(nvestoi• received by Ganaccord tenuity from or at the direction or request of tl~e

Company will be used by Canaccord tenuity solely for the purpose of'per~bnning its services hereunder

and that Clnaccord Gc;nuity will maintain the confidentiality thereof except to the extent (a) such

inf'ormution is o.r becomes otherwise publicly available without breads of this Agreement; (h) disclosure

tticreof is required by law or requested by any governmental agency or Uody (including through a

subpoena or other valid legal process); ar (e) Canaccord tenuity discloses such information tc~ a party that

is bound by a contidenriality agreement acceptable to the Company. These con6dcntiality provisions will

survive the termination and/or expiration of this Agreement.

2. Fees. Tn consideration for its services hereunder, the Company shall pziy Canaccord Ganutty, by wire

transfer of immediately available fiords at the time due, the following fees:

99) I9-6718~LEGA L290b788d. Z


CONFIDENTIAL

Hipericket, inc.

January 20, ZOl4Page 3 of 9

(a) $75,0O0, payaUle upon signing of this Agreement (ihe "Retainer");

(U) $4UO,OOQ payable upon delivery to the F3oard of the Opinion (the "Opinion E'ee");

(c) upon the closing of a Transaction other than a Financing 'Cransactian, a "Success Fee" equal to

2.125% of Aggrebate Consideration up to and including X75 million, plus 3.125% of Ag~~regate

Considercirion over $75 million;

(d) upon the closing of a Financing Transaction, a Success Fee equal to 6.0% of the gross proce

eds

received by the Cam~~any in such Financing Transaction, but not inchlding proceeds from the exercise

of a~~y warrants issued in the Financing Transaction. Notwithstanding the above for up to $S million

of proceeds received by the Company fi~om Investors listed in Annex $ to this Agreement that does

not close within 60 days of the closing of a subsequent Financing Transaction on suUstuntially the

same price and t4rtns, the Success Pee will equal 3.0% of the dross proceeds received by die

Company from such Investors listed in Annex B;

provided, that under no circumstances will the Success Fee from a Transaction other than a Fi

nancing

Transaction be less clean $1,250,000 (the "Minimum Fee"); and Provided, further, drat the Retai

ner and

Opinion Fee paid pursuant to subsection 2(a) and (b) shall be credited against any Success Fec.

For purposes of this Agreement, "Aggregate Consideration" shalt mean the cumulative value of the

Transaction, representing the total value of the Company implied by tha sum of all cash paid or paya

ble

and the fair market value of all property or securities transferred or transferable directly or indirectl

y, in

connection with a Transaction, including (i) cash amounts paid or securities issued (or otherwise

exchanged or transferred) to holders of shares of capital stock or of any warrants, options or

stock

appreciation rights, whether or not vested, or other securities convertible or exchangeable for any sh

ares of

capital stock; (ii) the total amount of indebtedness for banowed money ar similar non-trade li

abilities or

obligations (including pension liabilities, guarantees, Capit~tized teases, deferred compensation

and the

like) repaid, retired, extinguished or asstuned in connection with a Transaction; (iu) the value

of any

dividends or other distributions to stockholders or affiliates, declared or paid after the date of

this

Agreement, other than normal recurring cash dividends in amounts not materially greater th

an currently

paid; and (iv) amounts paid by the Compiny to repurchase any of its securities outstaadi

nb on the date

hereof. In the case of an acquisition of substantially all o.f the Company's assets, Aggregate Cons

ideration

Tall include the net v~luc of any current assets not sold by the Company. Aggregate Considerat

ion also'

shall include, iii the case of a joint venture or similar collaborative undertaking, the total amount

of cash

and fair market value (on the date of clasin~) of alt property contriUuted by third parties to the

joint

venture.

Por purposes of calcuLatui~ Aggregate Consideration: (i) iu a Transaction involving the sale o

r transfer,

directly or indireetiy, of 50% or more of the outstanding common stock or other equity interest

in, or

assets of, the Company, Aggregate Consideration shall be caicutated as if 100% of the outstan

ding

common stock or other equity interest in, or assets of, the Company were sold or transferred for t

he same

amount paid (and ~the~wise on the same terms) in such Transaction; (ii) the value of any securit

y (as that

term is defined in the Securities Act of 1933, as amended) issuable in connection with a Transact

ion will

be detern~ined, if a pablicly-traded security, an the Uasis of the average af'thc closing prices for

the 20

trading days prior to Che closing, or, if the security is not freely tradable (or having n.o establishe

d public

market) on the basis of.~the .fair market value of such security at closing as mutuagy determined in goo

d

faith Uy Canaccord Genaity and [he Company; and (iii) the value of any property h•ansferred in

connection

with a Transaction will be mutually determined on the basis of the fair market v11ue of such prop

erty at

closing ac dctcrniined in good faith by Canaccord Crenuity and the Company.

9y9)9-6'1 l 8lLEGA 1.290(7 84.2


CONFIDENTIAL.

Hipericket, Tnc.January 20, 2014Pale 4 of 9

Amounts paid into escrow in connection wide a Transaction shall be inclt~dcd as part of Aggregate

Consicieratian. Subject to Uie Miniizium Fee which shalt be due and payable at the closing of a

Transaction other than a Financing TY•ansaction in the event the consideration to be paid in a Transaction

may be increased by payments related to fixture events (including, without limitation, eiirnout payments),

tt~e portion of the Success Fee relating to such contingent payments will be calculated end paid if:uid

~~hen such continbcnt payments are made.

The Campany is not obligated or required to accept any offer to enter into a "transaction by any

prospective State~ic Partner and/or Investor, and the Company may refuse, in its sole discretion, to enter

into any Transaction and/or accept financing from tmy potential Investor without any liability to

Canaccord Geituity.

I~, in connection with a Transaction that is not completed, the Company receives abreak-up ice, tof~ping

fee, liquidated damages or other termination fee or payment (including, without limitation, any judgment

for daniages or amount in setttemeat of any dispute as a result of the failure ot'sueta'I'ransaction)

(eoltectivety, a "Terr~~ivation Fee"), the Company will pay Canaccord Genuity a fee equal to the lesser of

(i) 10% of such Termination Fee at the time such Termination Fee is received by the Company and (ii) the

Minimum Fee.

Expenses. In addition to any fees that may be payable to Canaccord tenuity hereunder and regardless of

whether sny TransAction is proposed or closed, the Company hereby agrees, from time to time upon

request, to reimburse Cnnlccord tenuity for all of its seasonable, documented out-of-pocket expenses

arising out of the engagement hereunder (including travel and related capenses, the costs of document

~reparatian, production and distribution (such as printing and binding, and photocopies), and third party

research and database services, and the reasonable fees and disbursements of independent counsel retained

by Canaccord tenuity); provided, however, that w~less the Company othecwisc consents in writing in

advance, such consent not to he unreasonably withheld, and subject to the provisions of Annex A, sash

expenses shall not exceed $50,000 in the aggregate (the "Expense Cap"}. Canaceord tenuity agrees to

notify die Company once expenses exceed $25,000. The Expense Cap wild not apply [v the rcasonab(c

fees and disbursements of independent counsel retained by Canaccord tenuity. Canaccord tenuity

expects to bill such expenses periodically with plyment due within 30 days after a statement therefor.

~S. Indemnification. In consideeation of and as a condition precedent to Canaccord tenuity undertaking tl~e

engagement enntemp.lated by dlis letter, the Company agrees to the indemnification provisions and other

matters set forth in Annex A, which is incorporated by reference into dais Agreement.

5. Ter~iina,~ion of E~a~ement. This Agreement shall have a term of 12 monfl~s from the date of this

Agreement set forth about, unless earlier terminated under this Section S. Canlecord Genuity's

engagement hereunder, and this Agreement, n ay be terminated by either party at any time for any reason,

upon 10 day's prior v~~•itten notice to the other party, and may be terminated by the Company immediately

for cause. For purposes of this Agreement, cause is defined as the willftil misconduct or gross negligence

of Canaccord tenuity in tt~e provision of the services hereuncicr. Upon tcrmi.nation Uy tl~e Company for

cause, Cannecord tenuity Evil( only be entitled to previously incurred expenses, subject to the provisions

of Section 3, above. IIE~on termination of dte Agreement by die Cainpany other than for tunas, or upon

ex~ir~tion ~f the engagement, Canaccord tenuity will be entitled to its full fee under Section 2 hereof in

the event that (i) at airy time prior to the expiration of 12 months after such termination or expiration a

Transaction is consumm~ited with a Strategic Partner or Im~estor; or (ii) the; Comp~my enters into an

agreement during the term cif ltiis A~;reemcnt or during such subsequent 12 month period contemplaUing a

9y999-G71 SiLF.,GAt.7,906783d.2


CONFlnF,NT7,~17,

Hipericket; Iuc.January 20, 2014Page 5 of 9

Transaction with a SU•ategic Partner or Investor ~uzd sucU Transaction is ultimately consummated;

prtivided, however, once the Company consummltes one or more Financing Transactions with aggregate

gross proceeds received by the Company of at le~~st ~ I O,000,U00, ehen with respecC to a Financing

Transaction, the l2 month }~~riod refe;rreci to above shall be deemd to Ue six months for all purposes.

H. .Reliance on Others. Canaccord Genuity does not provide accounting, tax or Iega1 advice. The Company

confirms that it will rely an its awn independent counsel. and independent accountlnts for such advice.

No Rights in Shareholders. etc. Canaccord tenuity has been engaged only by the Company, ana this

engagement of Canaccord tenuity is not intended to confer rights upon any shareholder, partner or other

owner of the Company or any other person not a psuty hereto. Unless otherwise expressly agreed, no one

other than the CompKny is authorized to rely on any statements, advice, opinions or conduct by Canaccord

tenuity. Any opinions or advice rendered by Cauaccord tenuity to clue F3oard or the Catnpany's

m~u~tigement in the course of this engagement are for the ptitrpose of assisting the Board or the Company's

mans~gement, is the case may be, in evlluating the Txaiisaction coGitemplated hereby and such opinions or

advice do not constitute a rc:commend~tion to any sh.ireholder of tl~e Company concerning action lhet such

shareholder mibht or should take in connection with a Transaction. Canaccord Genuity's role herein is

Qlat af'an independent contractor and nathin~; contained herein is intended ro create or shall be constnied

as creating a fiduciary rclalionship between Canaccord tenuity anel the Company or its security holders,

employees or creditors.

4. Other Activities. Canaccord fiienuity is a tul[ service securities firm engaged, either directly or t}v-ough its

affiliates, in various activities, including securities trading, invesunei~t management, financing and

brokerage activities. Canaccord tenuity may agree ar anan~;e to prcrvide any prospective Strate{;ic

Partner with, or otherwise assist them in'retaining all or a portion of the tinancins they may require in

connection with a proposed Transaction. In the ordinary course of its business, Cai~uccord tenuity and its

a~flates may actively trade dte seculities (or related derivative securities) of the Company and other

companies which may be the subject of the engagement contemplated by this letter for their own account

and for the accounts of their customers and may at any time hold tong and short positions in such

securities. In addition, Canaccord tenuity has adopted policies and procedures designed to preserve the

independence of its research analysts, whose views n ay differ from those of Canaccord Genuity's

investment banking department.

9. Ivtiscellaneous. Nothing in this A~eernent is intended to obligaie or commit Canaccord tenuity to

provide any services other than as set forth above. This Agreement maybe executed in counterparts, each

of which shall be deemed as original, but which together shall. be considered a si.nglc instrument. This

Agreement (including Annex A and Annex B) constitutes the entire agreement bet~vecn the parties hereto,

and supersedes all prior abreements and understandings (both written and oral) of the parties hereto with

respect to the subject matter hereof, and cannot be amended or otherwise modified except in writing

executed by the parties hereto. The provisions hereof shall inure to the benefit of and be binding upon the

successors and assigns of the Company and Canaccord tenuity. Ganaccord tenuity may refer to the

Transaction, after it is public knowledge, in traditional "tombstone" announcements or any of its other

professional promotional materials. In connection therewith Canaccord tenuity may use the Company's

corporate logo in such advertising or promotional materials (including electronic versions thereo fl.

Clnaccord tenuity shall provide the Company with a drat:[ of any announcement that it proposes to place

and shall mike such revisions to the announcement as the Company may reasonably request.

99999-6718!LF.•.G A L.29UG783~.2


CONFIDENTIftL

Hipericket, Tnc.3anuary 20, ZU 14Page G of 9

If you are in 1~;reement with die foregoing, please sign ~vheee indicated below avd return to the undersigned,

whereupon the Agreement shall become effective as of the date hereof.

Sincerc[y,

C~NACCORD C'~NUITY INC.f 9 ~ _.

Ry: ~ ,tom.

A~ac~s~w-~c~3ani.. t~c~ f.~~{ '~' S 7`z::_~(Manabing Director

ACCEPTED AND AGREED:

HIPCRTCKET', TNC.

Todd E. WilsonChairman

94999-(i7l ~ ̀LEGAI.29067 F+84.2


CONFIDENTrAL

Hipericke[, InaJanuary 20, 2014Page 7 of 9

ANNEX A

In the event that Canaccord Geimity Inc. or any of its affiliates ("Canaccord tenuity"), die respective

shareholders, directors, officers, agents or employees of Canaccord tenuity, or any other person controlling

Canaccord tenuity (collectively, together with Canaccord tenuity, "Indemnified Persons") becomes involved

in any capacity in any action, claim, suii, investigation ar proceeding, actual or thre;atcned, brought by or

against any person, including stockholders of Hiperieket, Inc. (the "Company"), in connection with or as a

result of the engngain.ent contemplated by the letter agreement to which this Annex A is attached (the

"englgement"), the Company will reimburse such Tndcmniticd Person for its legal and other expenses

(i~tcluding without limitation the reasonable out-of-pocket costs and expenses incurred in cocmection with

investigating, preparing for and responding to third party subpoenas) incurred in connection therewith as such

expenses are incurred; provided, however, that if it is finally determined by a court or arbitcal tribunal in any

such.actioii, clztim, suit, inirestigativn ur proceeding dial any toss, claim damage ar liability ofi Canaccord

tenuity or any other Indemnified Person has resulted from the gross negligence or willful misconduct of

Canaccord tenuity iia perfornting the services that are the subject of the engagement, then Canaccard tenuity

will repay such portion of reimbursed amounts that is attriUutable to expenses incurred in relation to the actor

omission of Canaccord tenuity or any other indemnified Person which is the subject of such determination.

The Company wilt also indemnify and hold harmless each Indemnified Person from and against any losses,

claims, damages or liabilities (including actions or proceedings in respect thcreo.~ (collectively, "Losses")

related to or arising out of the engagement, except to the extent any such Losses are finally determined by a

court or nrbitral tribunal to have resulted from the willful misconduct or gross negligence of Canaccord

tenuity in perforn~iug the services that are the subject of the engagement.

if such indemnification is for any reason not available or iaisufficient to hold an Indemnified Person harmless

(except by reason of the p;ross negligence or lvillful misconduct of Canaccord Genuiry), the Company and

Canaccord tenuity shall contribute to Che Losses involved in such proportion as is appropriaee to reflect the

relative benefits received (or anticipated to be received) by the Company, on the one hand, and by Canaccord

tenuity, on the other hand, with respect to the engagement or, if such allocation is determined by a court or

urbitra[ h7bunai to be unavailable, in such proportion as is appropriate to reflect other equitable considerations

such as the relative fault of the Company on the one hand and of Canaccord tenuity on the other hand;

pt~ovided, hvwei~er, that in no event shall fhe amounts to be contributed by Canaccord tenuity exceed the fees

actually received by Canaccord Genuiry in the engagement. Relative benefits to the Company, on the one

hind, and Canaccord tenuity, on. the other hand, stroll be deemed to be in the same proportion. as (r) the total

value Paid or proposed to be paid or received or proposed to be receivc;d by the Company or its security

h.otders, as the cash may bc, pursuant to the transaction(s), whether or not consummated, contemplated by the

engagement, bears to (ii) all fees ach~ally received by Canaccord Genuily in the engagcnient.

The Company also agrees that neither Canaccord Uenuity nor any other Indemnified Person shall have any

liability to the Company or auy person asserting claims on Uehalf or in right of the Company en connection

with or as a result of the cngabement or any mltter referred to in the engagement, except to the extent that any

Losses incurred Uy t(le Company are f7nally determined by a court or arbitrat tribunal to leave resulted from the

willful misconduct or gross negligence of Canaccord tenuity in perfartning the services that are the subject of

die engagement. I:n no event shall Canaccord tenuity or any other indemnified Person be responsible for any

indirect, special or consequential damages, even if advised of the possibility thereof.

In the event that an indc;mnificd Party is requested or required to appear as a witness in any lction brought by

or on Uehaif of or against the Company relating to the engagement in which such Indemnified Party is not

named as a defendant, the Cainpany agrees to promptly reimburse Caziaccord on a monthly basis for all

reasonable nut-of-pocke[ expenses incurred by it in. connection with such Indemnified Party's appearing and

99999.1713/[,EG AL29067S8d2


CONFIDENTIAL

Hiperick.et, iuc.January 20, 2014Pale 8 of g

preparing to appear as such a witness, including, without limi~acion, il~e reasonable fees and disbursement; of

its legal counsel.

Prior to enCuring info any a~recment or airangemcnt with respect to, or efifecting, any merger, statutory

exchange or other business combinutiou or proposed sale or exchange, dividend ar other distribution or

liquidation of all or a signifccant portion of its assets in onu or a series of transactions or any significant

recapitalization ar reclassification of its outsUsnding securities that does not directly or indirectly provide for

the assumption oP the obligativns t>f the Company set forth herein, the Company will notify Canaccord tenuity

in writing thereof (if not previously so notified) and, iti requested by Canaccord tenuity, shall arrange in

connection therewith alternative means of providing for the obiibations of the Company set forth herein upon

terms and conditions reasonably satisfactory to Canaccord tenuity.

The Company's obli~;auons hereunder shall be in addition to any rights that any Indemnified Person may have

at common luw or othenvisc. The letter to which this Annex A is attached, including this Annex A, and any

other agreements relating to the engagement shall be governed by and construed in accordance witU tke laws of

die Commonwealth af'Massachusects, applicable to conU-acts made and to be performed therein and, in

cotuiectian therewith, the parties hereto consent to the exclusive jurisdiction of the state and federal counts of

chz Comrnonwea(th oi' Massachusetts. Not~vithstunding the faregaing, solely for purposes of enfarcinb the

Company's obligltions hereunder, the Company consents to personal jurisdiction, service and venue in any

court proceeding in which any claim subject to this Annex A is brought by or agFiinst any Indemnified Person.

C:ANACCORD GEI~IUITY EIEREBY AGREES, AND THE COMPANY HEREBY AGREES ON IT5 OWN

B~HALP AND, TO THE L'XTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF TT5

SECURITY T-IOLDERS, TO WAIVE ANY R.iGHT TO TRIAL BY JURY WITH RESPF,CT TO ANY

CLAIM, COUNTER-CLAIM OR ACTION ARISING OUT OF T.ETE ENGAC'r~MENT OR CANACCORD

GENUITY'S PERFORMANCE OF S~.RVICES THAT ARE THE SUB3ECT THEREOF.

The provisions of this Annex A shalt apply to the engagement (inciudan~; related activities prior to the date

hereof and any modification thereof and shall remain in full force and efTect regardless of the completion or

ternunation of the engagement. If any term, provision, covenant or restriction herein is held by a court of

competent.jurisdiclion tv be invalid, void or unenforceable or against public policy, the remainder of the tc;rms,

provisions and restrictions contained herein shall remain in full force and effect and shall in uo way be

}ffected, impaired or invalidated.

99999-G71 SrLF:GAl.290G78A4.2


CONFIDENTIAL

Hiperickct, Inc.January 20, ?014Page 9 of 9

ANNEX R

List of Investors:

Aspire

Diker

Lincoln Park.New FrontierKedCombTwin Oaks

99999-671 S.!LEGAL2y0678$4.2


101 Montgomery StreetSuite 2000

San Frandsco, CA 94100.

T :415-229-7171

F :415-229-7194

www.ca naccord~enuitv.com

CONFIDENTIAL

Amendmenf No. 7 to Agreement

December 11, 2014

Hipericket, Inc.110 110~h Avenue NEBellevue, WA 98004

Attn: Mr. Todd E. WilsonChairman and Chief Executive Officer

Ladies &Gentlemen:

Reference is made to that certain letter agreement dated January 20, 2014 (the "Agreement")

between Canaccord tenuity Inc. ("Canaccord tenuity") and Hipericket, Inc. (the

"Company") pursuant to which the Company engpged Canaccord tenuity as its exclusive

financial advisor in connection with the Company's review of its strategic and financial

alternatives. Capitalized terms used in this Amendment No. 1 to Agreement' (this "Amendment")

and not defined in this Amendment shall have the meanings ascribed to them in the

Agreement.

The Company and Canaccord tenuity hereby acknowledge that the Agreement fs hereby

amended by this Amendmenfi as follows.

1. Definition of Transaction. The term "Transaction" as it is defined in the Agreement shall be

replaced by the following definition: "any transaction or series of transactions, whether

accomplished pursuant to a Plan (as defined below) or otherwise, involving (a) an

acquisition, merger, consolidation or other transact(on with another party through which

assets of the Company are, directly or indirectly, combined with or transferred to another

party outside of the ordinary course of business; (b) the acquisition, directly or indirectly,

by a buyer or buyers of equity interests or options, or any combination thereof

constituting a majority or controlling portion of the stpcic of the Company or possessing a

majority or controlling portion of the opting power of the Company; (c) any other

purchase or acquisition, directly or indirectly, by a buyer or buyers of a majority ar

controlling portion of the securities or other interests (through tender offer, merger, sale,

exchange or otherwise) or any portion of the assets of the Company outside of the

ordinary course of business; (d) the formation of a joint venture or partnership with the

Company or direct investment in the Company for the purposes of affecting a transfer of

a majority or controlling interest in the Company to a third party; (e) the conversion to

common or other equity, or any other security or instrument, of any portion of the

Company's indebtedness; or(f) any combination of the foregoing."

2. Definition of Financin~Transaction, The term "Financing Transaction" as it is defined in the

Agreement shall be replaced by the following definition: "a financing for any portion of

the Company, whether in the form of secured, unsecured, subordinated or senior debt,

equity or equity equivalents,"


Hipericket, Inc.December 11, 2014Page 2

3. Services to Be Rendered. In addition to the services to be rendered under the

Agreement, Canaccord tenuity will perform the following Additional service if recdvested

and if appropriate:

a. In the event the Company determines to commence one or more cases under

chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in order

to pursue a Transaction or otherwise, and if requested by the Company,

participate in hearings before the Bankruptcy Court in which such cases are

commenced (the "bankruptcy Court") and provide relevant testimony with

respect to the matters described herein and arising in connection with any

Transaction or any proposed Plan

b. Section 1(i) of the Agreement shall be deleted.

c. The fol{owing language in Section 1 of the Agreement shall be deleted: "If

Canaccord tenuity is requested to render an Opinion, the nature and scope of

our analysis and the form and substance of the Opinion will be such as

Canaccord tenuity considers appropriate and wild not address the underlying

business decision to effect p Transaction. The Opinion may be included in qny

disclosure document required to be filed by the Company with the Securities and

Exchange Commission with respect to a proposed Transaction, provided that it is

reproduced in full, and that any description of or reference to Canaccord

'tenuity, and any summary of the Opinion in the disclosure document, is in a form

reasonably acceptable to Canaccord tenuity. It is understood and agreed that

the Opinion will be addressed to, and be prepared solely for the use and benefit

of the Board, or a committee thereof, if applicable, and, except as set forth

above or as required by law, may not be disclosed to any third party (other than

the Company's legal counsel and other advisors with whom the Company works

on the potential Transaction) or circulated or referred to publicly without the prior

written consent of Canaccord tenuity.

4. Fees.

a. In addition to the fees set forth in the Agreement, the Company shall pay

Canaccord tenuity, by wire trpnsfer of immediately available funds at the times

due the following -fees:

i. Monthly Fees. Upon the execution of this Amendment, a fee due, earned

And fully payable in advance in the amount of $35,000 and, on the first

business day of each month thereafter, a fee in the amount of $35,000

(collectively, the "Monthly Fees") .

b. Section 2(c) of the Agreement shall be replaced with "upon the closing of a

Transaction other than a Financing Transaction, a fee (the "M8~A Fee") equal to

the greater of (i) $500,000 and (ii) 5% of the Aggregate Consideration (as defined

below) up fo and including $15 million, plus 4% of the Aggregate Consideration

over $15 million up to and including $20 million, plus 3% of the Aggregate

Consideration over $20 million (so, for instance, if Aggregate Consideration

equals $18 million, the fee would be $870,000 (($15 million * 5%) + ($3 million

4%) ~; ~~


Hipericket, Inc,pecember 11, 2014

Page 3

c. Section 2(b) of the Agreement shall be deleted.

d. Sectign 2(d) of the Agreement shall be amended by deleting "6.0%" and

replacing it with "3.p%".

e. The following language in sectipn 2 of the Agreement shall be deleted "provided,

That under no circumstances will the Success Fee from a Transaction other than a

Financing Transpction be less than $1,250,000 (the "Minimum Fee"); and

provided, further, that the Retainer and Opinion Fee paid pursuant to subsection

2(p) and (b) shall be credited against any Success Fee" and replaced with

" rovi d, that if a proposed buyer provides debtor in possession financing as

part of a contemplated sale transaction, and such sale transaction is

consummated with that proposed buyer, then Canaccord tenuity shall earn

only the M&A Fee and not any Success Fee on account pf a Finpncing

Transaction."

f. The following language shakl be included for purposes of calculating "Aggregate

Consideration:"

i. Aggregate Consideratign shall also mean the vplue of any performance

payments, equity incentives, cash bonus plans or other similar

arrangemenfis established in connection with, and payable after the

consummation of, a Transaction (other than ordinary course base salgry

and bonuses consistent with past practice).

ii. Aggregate Consideration also shall include, in the case of a joint venture

or similar collaborative undertaking, the total amount of cash and fair

market value (on the date of closing) of all property contribufied by third

parties to the joint venture.

iii. The phrase "capitalized leases" shall be deleted from section (ii) within the

definition of Aggregate Consideration.

5. Application for Retention of Canaccord Genuity. In the event the Company determines

to commence chapter 11 proceedings in order to pursue a Transaction or otherwise, the

Company shall apply promptly fio the Bankruptcy Court pursuant to sections 327(a~ and

328(a) of the Bankruptcy Code, Rule 2014 of the Federal Rules of Bankruptcy Procedure,

gpplicabie local rules and procedural orders of the Bankruptcy Court and procedural

guidelines established by the Office of the United States Trustee, far approval of (a) this

Agreement and (b) Cgnaccord Genuity's retention by the Company under the terms of

this Agreement, nunc pro tunc to the date the Company commences its chapter 11

case, and shall use its best efforts to obtain Bankruptcy Court authorization thereof. The

Company shall use its best efforts to obtain such Bankruptcy Court approval and

aufihorization subject only to the subsequent review by the Bankruptcy Court under the

standard of review provided in section 328~a) of the Bankruptcy Code, and not subject

to the standard of review set forth in section 330 of the Bankruptcy Code, The Company

shall supply Canaccord tenuity and its Counsel with a draft of such application and any

proposed order authorizing Canaccord Genuity's retention sufficiently in advance of the

filing of such application and proposed order to enable Canaccord tenuity and its

counsel to review and comment thereon, Canaccord tenuity shall have no obligation

to provide any services under this Agreement unless and until Canaccord Genuity's


Hipericket, Inc.pecember 11, 2014Page 4

retention under the terms of this Agreement is approved under section 328(a) of the

Bankruptcy Code by a final - order of the Bankruptcy Court in form and substance

acceptable to Canaccord tenuity. Subject to being so retained, Canaccord tenuity

agrees that during the pendency of any such proceedings, it shall continue its

obligations under this Agreement pursuant to the provisions of this Agreement so long as

the Company is using its best efforts to seek Canaccord Genuity's retention under

section 328(x) of the Bankruptcy Code,

Canaccord tenuity acknowledges that in the event that the Bankruptcy Court

approves its retention by the Company pursuant to the application process described in

this Section, payment of Canaccord Genuity's fees and expenses shall be subject to (i)

the jurisdiction and approval of the Bankruptcy Court under section 328(a) of the

Bankruptcy Code and any order approving Canaccord Genuity's retention, (ii) any

applicable fee and expense guidelines and/or orders and (iii) any requ(rements

governing interim and final fee Applications; provided, however, that Canaccord

tenuity shall not be required to maintain time records. In the event that Canaccord

Genuity's engagement hereunder is approved by the Bankruptcy Court, the Company

shall pay ali fees and expenses of Canaccord tenuity hereunder as promptly as

practicable in accordance with the terms hereof and the orders governing Canaccord

Genuity's interim and final fee applications, and after pbtaining all necessary further

Approvals from the Bpnkruptcy Court, if any.

With respect to Canaccord Genuity's retention under section 328(a) of the Bankruptcy

Code, the Company acknowledges and agrees that Canaccord Genuity's industry and

restructuring expertise as well as its capital markets knowledge, financing skills and

mergers and acquisitions capabilities, some or all of which may be required by the

Company during the term of Canaccord Genuity's engagement hereunder, were

important factors in defiermining the amount of the various fees set forth herein, and that

the ultimate benefit to the Company of Canaccord Genuity's services hereunder could

not be measured merely by reference to the number of hours to be expended by

Canaccard Genuity`s professionals in the performance of such services. The Company

also acknowledges And agrees that the various fees set forth herein have been agreed

upon by the parties hereto in anticipation that a substantial commitment of professional

time and effort will be required of Canaccord tenuity and its professionals hereunder

over the life of the engagement, and in light of the fact that such commitment may

foreclose other ppportunities for Canaccord tenuity and that the Actual time and

commitment required of Canaccord tenuity and its professionals to perform its services

hereunder may vary substantially from week to week or month to month, creating "peak

load" issues for the firm, In addition, the Company believes that given the numerous

issues which Canaccord tenuity may be required to address in the performance of its

services hereunder, Canaccord Genuity's commitment to the variable level of time and

effort necessary to address all such issues as they arise, and the market prices for

Canaccord Genuity's services for engagements of this nature in an out-of-court context,

the Company agrees that the fee Arrangements hereunder are reasonable under the

standards set forth in section 328(a) of the Bankruptcy Code,

[SIGNATURE PAGE FOLLOWS]


Hipericket, Inc.Qecember 11, 2014

Page 5

Please indicate your acceptance of this Amendment by signing in the space provided below

and returning the same to Canaccord tenuity along with the $35,000 payment via wire transfer.

Sincerely,

CANACCORD GENUITY INC.

~y. i

ACG~PTED &AGREED:

HIPPCRICKET, INC,

David lstockManaging Director

Name: Todd E. Wilson

Title: Chairman and Chief Executive Officer


~xxIBIT B

Richards Declaration

DOCS LA285125.3 36480/001




In re: ) Chapter 11

HIPCRICKET, INC.,1 ) Case No. 15-10104 (_)

Debtor

DECLARATION OF GEOFFREY ItICHARDS IN SUPPORT OF

DEBTOR'S APPLICATION FOR ENTRY OF AN ORDER UNDER 11 U.S.C. ~~ 327(A)

AND 328(A) AUTHpRIZING THE EMPLOYMENT AND RETENTION OF CANACCORD

GENUITY INC., AS INVESTMENT BANKER NUNC PRO TUNC TO THE PETITION

DATE

I, Geoffrey Richards being duly sworn, state the following under penalty of

perjury.

I am a Managing Director and Head of U.S. Special Situations and

Restructuring of Canaccord Genuity, Inc. ("Canaccord") and am duly authorized to make this

declaration (the "Declaration") on behalf of Canaccord.

2. I submit this Declaration in accordance with sections 327(a) and 328(a) of

title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the "Bankruptcy Code") and Rules

2014(a) and 5002 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") in

connection with the application (the "A~plication")2 of the debtor and debtor in possession

Hipericket, Inc. (the "Debtor"), seeking an order approving the retention of Canaccord as an

investment banker pursuant to sections 327(a) and 328(a) of the Bankruptcy Code and effective

1 The last four digits of the Debtor's tax identification number are 2076. The location of the Debtor's headquarte

rs and the service address for

the Debtor is 110 110 h̀ Avenue NE. Suite 410, Bellevue, WA 98004.

2 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Applica

tion.

DOGS LA:285125.3 36480/001


as of the Petition Date. Unless otherwise stated in this Declaration, I have personal knowledge

of the facts set forth herein and, if called as a witness, I would testify thereto. To the extent that

any information disclosed herein requires subsequent amendment or modification upon

Canaccord's completion of fizrther analysis or as additional creditor information becomes

available to it, one or more supplemental declarations will be submitted to the court reflecting the

same.

Services to Be Provided

Canaccord commenced its engagement as investment banker to the Debtor

in January 2014 pursuant to that certain engagement letter, dated as of January 20, 2014 and

Amendment No. 1 to Agreement dated December 14, 2014 (collectively, the "Enema e~ ment

Letter"). A true copy of the Engagement Letter is annexed to the Order as Exhibit 1.

4. Pursuant to the Engagement Letter; Canaccord will continue to serve as

the Debtor's investment banker and financial advisor with respect to the review of Debtor's

strategic and financial alternatives, through purchase, sale or merger, joint venture whether

accomplished pursuant to a Plan of Reorganization (a "Plan"), or other transactions) with

another party through which assets of the Debtor are, directly or indirectly, combined with or

transferred to another party outside the ordinary course of business (the "Transaction"}3

5. As outlined in the Engagement Letter, the Debtor proposes to continue to

retain Canaccord to render, among other things, the following investment banking services to the

Debtor:

3 Capitalized terms not otherwise defined herein shall have their meaning ascribed to them in the Engagement

Letter.

DOCS LA285125.3 36480/001


a. advise the Debtor in analyzing and evaluating the business,

operations and financial position of the Debtor and its strategic

alternatives;

b. assist the Debtor in preparing descriptive materials regarding the

Debtor's company for distribution and presentation to potential

buyers, strategic partners or investors ("Potential Buyers");

assist the Debtor in the preparation and implementation of a plan to

have discussions with Potential Buyers;

d. assist the Debtor in identifying and screening interested Potential

Buyers;

assist the Debtor in coordinating Potential Buyers' due diligence

investigations;

f. assist the Debtor in evaluating proposals received from Potential

Buyers;

g. assist the Debtor in structuring and negotiating the financial

aspects of any Transaction;

h. to be available at the Debtor's request to meet with the Debtor's

Board of Directors to discuss any proposed Transaction and its

financial implications;

i, if requested, participate in hearings before the Bankruptcy Court in

connection with a Transaction and provide relevant testimony with

respect to the matters arising in connection with any Transaction or

any proposed Plan.

Canaccord's Qualifications

6. I believe that Canaccord and the professionals it employs are uniquely

qualified to advise the Debtor in the matters for which Canaccord is proposed to be employed.

7. Canaccord is an independent and full-service global investment banking

firm offering investment banking, equity research, wealth management, institutional and private

brokerage, and private capital solutions to individual and institutional clients. Canaccord

employs over 2,000 individuals and has 201ocations in 11 countries worldwide, including in

DOCS LA:285125.3 36480/001


cities such as Chicago, New York, Boston, San Francisco, London, Toronto, Vancouver, Paris,

Sydney, Hong Kong, and Singapore. In fiscal year 2014, Canaccord participated in 365

transactions, raising approximately $36.5 billion. Of these transactions, Canaccord led or co-led

over 79 transactions, raising over $4.0 billion for clients.

8. The Debtor selected Canaccord because Canaccord's professionals have

considerable expertise and experience in providing investment banking services to financially-

distressed companies and to creditors, purchasers, bondholders, and other constituencies in

chapter 11 as well as in out-of court proceedings. Representative clients which investment

bankers at Canaccord have advised in prior chapter 11 engagements include American IronHorse

Motorcycles, Inc., BI-LO, LLC, Diamond Glass Companies, Inc., Gateway Ethanol, LLC,

Giordano's Enterprises, Inc., Gulf Fleet Holdings, Inc., HMX Acquisition Corp., International

Garden Products, Inc., KeyLime Cove Waterpark, Inc., Loehmann's Holdings, Inc., Max &

Erma's, Inc., National Envelope Corporation, Osyka Corporation, Renew Energy, Inc., Robbins

Bros. Corporation, Waterworks, Inc., and Zultys Technologies, Inc.

9. Canaccord was engaged prior to the Petition Date to provide investment

banking services to the Debtor pursuant to the Engagement Letter.

10. As a result of rendering prepetition services to the Debtor, Canaccord is

intimately familiar with the Debtor's corporate and capital structure, management, operations,

and various other aspects of their business. Canaccord has awell-developed knowledge of the

Debtor's financial history and business operations and is well-suited to provide the Debtor with

the investment banking services contemplated by the Engagement Letter.

DOCS LA285125.3 36480/001


11. Due to Canaccord's industry experience and prepetition involvement with

the Debtor, I believe that Canaccord is well qualified to serve as the Debtor's investment banker.

Therefore, I believe that the retention of Canaccord will benefit the estate and its creditors.

No Duplication of Services

12. I believe that Canaccord's services will not duplicate the services that

other professionals will be providing tp the Debtor in this chapter 11 case. Specifically,

Canaccord will carry out unique functions and will use reasonable efforts to coordinate with the

Debtor and its professionals retained in this Chapter 11 Case to avoid the unnecessary

duplication of services.

Professional Compensation

13. Canaccord will seek the Court's approval of its compensation for

professional services rendered and reimbursement of expenses incurred in connection with the

Debtor's Chapter 11 Case in compliance with applicable provisions of the Bankruptcy Code, the

Bankruptcy Rules, the Local Rules of the United States Bankruptcy Court for the District of

Delaware (the "Local Rules"), the guidelines established by the Office of the United States

Trustee for the District of Delaware (the "U.S. Trustee Guidelines"), and any other applicable

procedures and orders of the Court, and consistent with the proposed compensation set forth in

the Engagement Letter.

14. Investment bankers such as Canaccord do not typically charge for its

services on an hourly basis. Instead, they customarily charge fees that are contingent upon the

DOCS LA:285125.3 36480/001


occurrence of a specified type of transaction. The Engagement Letter sets forth the transaction-

based fees that are to be payable to Canaccord.

15. As set forth more fully in the Engagement Letter, and subject thereto,

Canaccord will be compensated as follows (the "Fee Structure"):

a. Monthly Fees. In addition to the other fees described below and as

further provided for in the Engagement Letter, the Debtor shall pay

Canaccord a fee due, earned and fu11y payable in the amount of

$35,000 on February 2, 2015 and on the first business day of each

month thereafter, a fee in the amount of $35,000 shall be paid and

earned upon Canaccord's receipt thereof in consideration of

Canaccord accepting the engagement ("Monthly Fees"). The_

Monthly Fees will continue to be paid promptly following entry of

the Order of the Bankruptcy Court having jurisdiction over the

Debtor's Chapter 11 case authorizing the employment of

Canaccord pursuant to the terms of the Engagement Letter;

b. M&A Fee. Upon the closing of a Transaction other than a

Financing Transaction (as defined below), a fee (the "M&A Fee")

equal to the greater of (i) $500,000 and (ii) 5% of the Aggregate

Consideration (as defined below) up to and including $15 million,

plus 4% of the Aggregate Consideration over $15 million up to and

including $20 million, plus 3% of the Aggregate Consideration

over $20 million;

Success Fee. Upon the closing of a financing transaction

consisting of a financing for any portion of the Debtor, whether in

the form of secuxed, unsecured, subordinated or senior debt or

equity equivalents ("Financial Transaction"), the Debtor shall pay

Canaccord a success fee equal to 3% (the "'Success Fee") of the

gross proceeds received by the Debtor in such Financing

Transaction; provided that if a proposed buyer provides debtor in

possession financing as part of a contemplated sale transaction, and

such sale transaction is consummated with that proposed buyer,

then Canaccord shall earn only the M&A Fee and not any Success

Fee on account of a Financing Transaction;

d. Aggregate Consideration. For purposes of this agreement the

aggregate consideration ("A~~re~;ate Consideration") received by

the Debtor in any Transaction shall mean the cumulative value of

the Transaction, representing the total value of the Debtor implied

by the sum of all cash paid or payable and the fair market value of

DOCS LA:285125.3 36480/001


all property or securities transferred or transferable directly or

indirectly, in connection with a Transaction, as more fully defined

in section 4.b of the Engagement Letter; and

e. Expenses. In addition to all of the other fees and expenses

described in the Engagement Letter, and regardless of whether any

Transaction is consummated, the Debtor shall, upon Canaccord's

request, reimburse Canaccord for its reasonable out-of-pocket

expenses incurred from time to time in connection with its services

hereunder, provided however, that unless the Company otherwise

consents in writing in advance, such expenses shall not exceed

$50,000 in the aggregate. Canaccord shall notify the Debtor once

expenses exceed $25,000.

16. Indeed, Canaccord's industry and restructuring experience, its capital

markets knowledge, financing skills, and mergers and acquisitions capabilities, some or all of

which may be required by the Debtor during the term of Canaccord's engagement, were

important factors in determining the Fee Structure. The ultimate benefit to the Debtor of

Canaccord's services could not be measured merely by reference to the number of hours to be

expended by Canaccord's professionals in the performance of such services. Moreover, the Fee

Structure takes into consideration Canaccord's anticipation that it will need to provide a

substantial commitment of professional time and effort in order to perform its duties under the

Engagement Letter, and in light of the fact that such commitment may foreclose other

opportunities for Canaccord. Further, the actual time and commitment required of Canaccord

and its professionals to render services to the Debtor may vary substantially from week to week

or month to month, creating "peak load" issues for the firm.

17. Thus, because of Canaccord's expertise, commitment of resources to this

engagement to the exclusion of other possible employment, and the time that Canaccord has

devoted and will continue to devote to this engagement, the Debtor request that the Court

DOCS LA:2851253 36480/001


approve the Fee Structure for Canaccord pursuant to section 328(a) of the Banitruptcy Code and

that the Court evaluate the final compensation and reimbursement of expenses in the Chapter 11

Case for Canaccord under the standards of section 328(a) of the Bankruptcy Code, rather than

under those of section 330 of the Bankruptcy Code, subject to Canaccord filing a final fee

application seeking approval of the payment of its fees and expenses.

Recordkeepin~

18. It is not the general practice of investment banking firms, including

Canaccord, to keep detailed time records similar to those customarily kept by attorneys. Because

Canaccord does not ordinarily maintain contemporaneous time records in one-tenth hour

increments or provide or conform to a schedule of hourly rates for its professionals, Canaccord

respectfully requests, pursuant to Local Rule 2016-2(h), that it be excused from compliance with

such requirements. Instead, Canaccord requests, that it be required only to maintain time records

in half-hour (0:50) increments setting forth, in a summary format, a description of the services

rendered by each professional and the amount of time spent on each date by each such individual

in rendering services on behalf of the Debtor.

19. Canaccord will also maintain detailed records of any actual and necessary

costs and expenses incurred in connection with the aforementioned services. Canaccord's

application for compensation and expenses will be paid by the Debtor pursuant to the terms of

the Engagement Letter, in accordance with Local Rule 2016-2(e) and any procedures established

by the Court.

DOCS LA:2851253 36430/001


Indemnification and Contribution Provisions

20. The Debtor has agreed, among other things, to indemnify, and provide

contribution and reimbursement to, Canaccord and certain related parties in accordance with the

indemnification provisions (the "Indemnification Provisions") attached as Annex A to the

Engagement Letter.

21. I believe the Indemnification Provisions reflected in the Engagement

Letter are customary and reasonable terms of consideration for investment banking firms

such as Canaccord for engagements both out of court and in chapter 11. The terms of the

Engagement Letter were fully negotiated between the Debtor and Canaccord at arm's length.

Canaccord's Disinterestedness

22. In connection with the preparation of this Declaration and its retention by

the Debtor, Canaccord conducted a review of its conflicts check systems of the list of potential

parties in interest that Canaccord received from the Debtor's master conflicts list ("Conflicts

Search")

23. Canaccord reviewed the relationships between Canaccord and the list of

individuals and entities that Canaccord has been informed may have an interest in this Chapter

11 Case (collectively, the "Parties in Interest"). Based on the results of the Conflicts Search

conducted to date, to the best of my knowledge, neither myself, Canaccord, nor any of its

principals, partners, members, or professionals (collectively, the "Professionals"), insofar as I

have been able to ascertain based on the Conflicts Search (a) has any connection with the Debtor,

any of the Parties in Interest, the U.S. Trustee, or any person employed in the Office of the U.S.

DOCS LA2851253 36480/001


Trustee or (b) represents an interest that is materially adverse to the interest of tha Debtor's estate

or any class of creditors or equity security holders, by reason of any direct or indirect

relationship to, connection with or interest in, the Debtor or for any other reason of which I know

or about which I have been informed, with respect to the services to be performed pursuant to the

Engagement Letter, except as disclosed or otherwise described herein.

24. To the best of my knowledge, and based on the results of the Conflicts

Search, Canaccord is a "disinterested person" within the meaning of section 101(14) of the

Bankruptcy Code, in that, except as otherwise set forth herein, its Professionals:

a. are not creditors, equity security holders or insiders of the Debtor;

b. are not and were not, within two years before the date of the filing

of the Debtor's chapter 11 petition, a director, officer or employee

of the Debtor; and

c. do not have an interest materially adverse to the interest of the

estates or of any class of creditors or equity security holders, by

reason of any direct or indirect relationship to, connection with or

interest in the Debtor, or for any other reason.

25. Some of the Professionals, in connection with their employment before

joining Canaccord, may have appeared or were engaged in cases, proceedings, or transactions

involving attorneys, accountants, investment bankers, and financial consultants, some of whom

may represent claimants and Parties in Interest.

26. As part of Canaccord's diverse business, Canaccord appears or may

appear as a financial advisor or an investment bank in cases, proceedings, or transactions

involving attorneys, accountants, investment bankers, and financial consultants, some of whom

may represent claimants and Parties in Interest. Further, Canaccord (including its Professionals

DOCS LA:2851253 36480/001 10


through their prior employment) has in the past, and may in the future, be represented by several

attorneys and law firms in the legal community, some of whom may be involved in this chapter

11 case. In addition, Canaccord (including its Professionals through their prior employment) has

in the past and will likely in the future be working with or against other professionals involved in

this Chapter 11 Case in matters unrelated to this Chapter 11 Case. To the best of my knowledge,

none of these business relations constitute interests materially adverse to the Debtor in matters

upon which Canaccord is to be engaged in this Chapter 11 Case.

27. Canaccord (including its Professionals through their prior employment)

may have in the past represented, may currently represent, and likely in the future will represent,

Parties in Interest of the Debtor in connection with matters unrelated to the Debtor and this

Chapter 11 Case (except as described below). Ganaccord regularly calls on private and public

companies in the sector related to M&A and capital raising opportunities. This leads our team to

have regular contact with various sources of potential new business in the sector, including

investors (whether financial and strategic) who are active with private companies in the sector.

28. Except as disclosed herein, Canaccord has not been retained to assist any

entity or person other than the Debtor on matters relating tp, or in connection with, this Chapter

11 Case. If the Court approves the proposed employment of Canaccord by the Debtor,

Canaccord will not accept any engagement or perform any services in relation to this Chapter 11

Case for any entity or person other than the Debtor. Canaccord will, however, continue to

provide professional services to entities or persons that may be creditors of the Debtor or Parties

DOGS LA:285125.3 36480/001 I1


in Interest in this Chapter 11 Case; provided, however, that such services do not directly relate

to, or have any direct connection with, this Chapter 11 Case.

29. To the best of my knowledge, information, and belief after reasonable

inquiry, other than as disclosed in this Declaration, neither I, Canaccord, nor any of our

professionals or employees participating in or connected with Canaccord's engagement with the

Debtor: (i) is related to the Debtor or any other party in interest herein, the U.S. Trustee for the

District of Delaware or anyone employed in the Office of the U.S. Trustee's for; (ii) has any

connection with or holds or represents any interest adverse to the Debtor, its estate, its creditors,

or any other Interested Party or their respective attorneys in the matters on which Canaccord is

proposed to be retained; or (iii) has advised any Interested Party in connection with this

Chapter 11 Case. Additionally, Canaccord does not believe that any relationship that Canaccord

or any of our professionals or employees participating in or connected with Canaccord's

engagement with the Debtor may have with any Interested Party in connection with any

unrelated matter will interfere with or impair Canaccord's representation of the Debtor in this

Chapter 11 Case.

30. In light of the extensive number of the Debtor's creditors, Parties in

Interest, and potential additional parties in interest, neither I nor Canaccord are able conclusively

to identify all potential relationships at this time, and we reserve the right to supplement this

disclosure as additional relationships come to our attention. In particular, among other things,

Canaccord may have relationships with persons who are beneficial owners of Parties in Interest

and persons whose beneficial owners include Parties in Interest or persons who otherwise have

DOCS LA285125.3 36480/001 12


relationships with Parties in Interest. Moreover, Canaccord employees may have relationships

with Parties in Interest, persons that may become parties in interest in this case, and/or persons

that have business relationships with the Debtor, are competitors of the Debtor, or that are

customers of the Debtor. If any new relevant facts or relationships are discovered or arise,

Canaccord will use reasonable efforts to identify such further developments and will file

promptly a supplemental declaration, as required by Bankruptcy Rule 2014(a).

Affirmative Statement of Disinterestedness

31. Based on the Conflicts Search conducted to date and described herein, to

the best of my knowledge and insofar as I have been able to ascertain, (a} Canaccord is a

"disinterested person" within the meaning of section 101(14) of the Bankruptcy Code, as

required by section 327(a) of the Bankruptcy Code, and does not hold or represent an interest

adverse to the Debtor's estate and (b) Canaccord has no connection to the Debtor, its creditors, or

their related parties, except as is disclosed herein.

32. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the

foregoing is true and correct.

Executed on thi~U day of 3anuary, 2015 at/~er,~yr`c. , ~~_,

~,

`~.!

Geoffrey h ds

13

DOCS LA:285125.3 36480/001


for the district of delaware in re: ) chapter 11 ... · for the district of delaware in re: )...

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