1
[XXXX XXXXXXXX LETTERHEAD]
EXHIBIT 99.1
CORPORATE FINANCE DEPARTMENT
September 20, 1996
PRIVILEGED AND CONFIDENTIAL
Digital Systems International, Inc.
0000 000xx Xxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Chairman of the Board and CEO
Dear Xx. Xxxxxx:
By this letter agreement (the "Agreement") Digital Systems
International, Inc. (the "Company") retains Xxxx Xxxxxxxx Incorporated ("Dain")
as its exclusive financial advisor, on the terms and subject to the conditions
set forth herein, in connection with a transaction (the "Transaction") generally
described as the purchase of all or substantially all of the assets, business,
or equity securities of Viewstar Corp. (the "Target"), by the Company or any of
its subsidiaries or affiliates. In addition, Xxxx is retained to provide an
opinion with respect to the fairness to the shareholders of the Company from a
financial perspective of the consideration to be paid by the Company in
connection with the Transaction (the "Fairness Opinion"). This Agreement
confirms the understanding between the Company and Dain with respect to the
services Dain will provide and confirms the parties' understanding concerning
fees and expenses, indemnification obligations and other matters. The
appointment of Dain is exclusive and is for a period of twelve months commencing
on the date of acceptance of this Agreement by the Company (the "Appointment
Period"), subject to extension by written agreement of the Company and Dain and
subject to termination pursuant to Section 8 hereof.
1. SERVICES PROVIDED
Financial Advisory Services. As the Company's financial advisor in
connection with the Transaction, Xxxx will assist the Company in such
activities, analysis, negotiation and planning as the Company reasonably may
require or request, including:
i) valuing the Target;
2
ii) developing strategies for consummating a Transaction
successfully;
iii) structuring Transaction proposals;
iv) analyzing the economic effects of various Transaction
structures on the Company;
v) preparing and presenting a Transaction proposal, and
negotiating changes to such proposal;
vi) performing due diligence on the Target;
vii) preparing and negotiating documents related to a
Transaction; and
viii) completing other matters related to closing a
Transaction.
For purposes of this Agreement, a Transaction, whether effected in one
transaction or in a series of transactions, means (i) any merger, consolidation,
reorganization or other business combination pursuant to which the Company
directly or indirectly acquires the business of the Target, or (ii) the
acquisition by the Company directly or indirectly of all of the capital stock or
equity interests in the Target or all or substantially all of the assets of the
Target, in each case whether by way of tender offer, exchange offer, negotiated
purchase, or otherwise.
Fairness Opinion. Dain will render the Fairness Opinion after
undertaking such reasonable due diligence investigation and financial analysis
as it deems appropriate consistent with the generally accepted standards of
practice in the investment banking industry for such opinions. In connection
with its financial analysis, it is expressly understood that Xxxx will not
independently verify the accuracy of financial statements and projections
furnished to it. The Fairness Opinion will be delivered when given orally or in
writing to the Board of Directors of the Company (the "Board"), and the Fairness
Opinion and any related supporting reports provided by Xxxx may be relied upon
solely by the Board. If the Board determines that the Fairness Opinion must be
reproduced in a proxy statement or similar document to be distributed to its
shareholders, Dain must approve of any reference to or description of Dain, the
Fairness Opinion or the related supporting reports in the proxy statement or
similar document. The Fairness Opinion, related supporting reports and related
written or oral advice provided to the Board by Dain may not be otherwise used,
circulated, quoted or otherwise referred to for any purpose without the prior
written approval of Dain.
-2-
3
2. OTHER SERVICES; INVESTMENT BANKING SERVICES
In the event the Company requests services by Dain which are outside
the scope of this Agreement, the services to be performed and the fees to be
charged will be described in a separate agreement between the Company and Dain.
Any such additional engagement will be described in a separate agreement between
the Company and Dain specifying terms and conditions which are reasonable and
customary for Dain and mutually acceptable.
3. COMPENSATION
In consideration for the services provided under the terms of this
Agreement, the Company agrees to pay Xxxx the following non-refundable
compensation and expense reimbursement:
(a) Engagement Fee. The Company shall pay Dain a nonrefundable
cash engagement fee of $25,000, payable upon the execution of this Agreement.
(b) Transaction Fee. If, but only if, a Transaction is
consummated prior to the later of (i) the expiration of the Appointment Period
or (ii) six months after termination of this Agreement in accordance with
paragraph 8, the Company will pay or cause to be paid in cash to Dain a
transaction fee in the amount of $350,000.
(c) Expense Reimbursement. The Company shall reimburse Dain,
promptly upon request, for all reasonable out-of-pocket costs and expenses
incurred by Dain and its affiliates in connection with this engagement, whether
or not a Transaction is closed or a Fairness Opinion is delivered, including
travel expenses and fees and expenses of Xxxx's counsel and accountants;
provided that the Company shall not be responsible for such costs and expenses
in excess of $25,000 without its prior written consent.
(d) Fairness Opinion Fee. The Company shall pay Dain a
fairness opinion fee with respect to each Fairness Opinion of $125,000, payable
upon delivery of the Fairness Opinion to the Company's Board. In addition, the
Company will pay Dain an additional fee of $35,000 for each separate
confirmation or reaffirmation of a Fairness Opinion.
4. INDEMNIFICATION
The Company agrees to indemnify and hold Dain harmless in accordance
with the terms and conditions of Exhibit A attached hereto and made a part
hereof as though fully set forth in this Agreement.
-3-
4
5. COOPERATION
The Company agrees to furnish or cause to be furnished to Dain such
information and data relating to the Company, the Target, and the Transaction as
Dain determines is reasonably appropriate, and agrees to provide Xxxx with
access to the Company's officers, directors, employees, consultants, counsel,
and independent accountants. The Company agrees to inform Xxxx promptly of any
developments which concern or could affect the Company, the Target, or the
Transaction. The Company warrants and represents the accuracy and completeness
of all information furnished to Dain by or on behalf of the Company, including
any various corporate reports or filings and any other materials or documents
used in connection with consummating the Transaction (collectively, the
"Documents") and any other information provided by the Company's officers,
directors, employees, consultants, counsel, and independent accountants. The
Company acknowledges that Xxxx will rely on the completeness and accuracy of the
information furnished to it pursuant to this Section 5 without undertaking
independent verification and that Dain does not assume responsibility for the
completeness or accuracy of such information. Dain does not intend to provide an
independent appraisal of the assets of the Company or the Target. The Company
agrees to retain its own legal counsel and accountants for any necessary legal,
tax, and accounting advice.
At the request of Xxxx, the Company shall cause any entity which it may
form or in which it may invest in connection with a Transaction to execute this
Agreement and to agree not to use or retain any financial advisor other than
Dain in respect of its consideration of a Transaction.
6. CONFIDENTIALITY
Except to the extent authorized by the Company or required by any
Federal or state law, rule or regulation or any decision or order of any court
or regulatory authority, Xxxx agrees that it will use its best efforts not to
disclose to any person, other than to any officer, director, employee, agent,
attorney, accountant or employee of Dain who needs to know the information in
connection with the performance of Xxxx's services under this Agreement, any
confidential information received by Xxxx from the Company or its officers,
directors, employees, consultants, counsel, and independent accountants in
connection with the performance of Xxxx's services under this Agreement,
provided that information shall not be deemed to be confidential if such
information (i) is or becomes generally available to the public, other than as a
result of a breach of this Agreement by Xxxx, (ii) is lawfully obtained by Xxxx
from a third party, provided that the third party is not, to Xxxx's knowledge,
bound by a
-4-
5
nondisclosure agreement with respect to the information, or (iii) is
subsequently developed by Xxxx from independent sources.
Any advice provided to the Company by Dain pursuant to this Agreement
is solely for the information and assistance of the Board. Such advice shall be
treated as confidential information, shall not be disclosed publicly in any
manner without Xxxx's prior written approval and shall not be relied upon by the
Company's shareholders or any third party. Any reference to Dain or to any
affiliate of Dain in any release or communication to any party outside the
Company is subject to Xxxx's prior written approval. If this Agreement is
terminated prior to any release or communication, no reference shall be made to
Dain without Dain's prior written approval. To the extent that the Company seeks
to disclose our opinion in any proxy or registration statement to be filed under
the federal securities laws, we will not unreasonably withhold our consent
thereto so long as the full text of the opinion is disclosed and we have had a
reasonable opportunity to comment on the text of any accompanying disclosure.
7. ADVERTISEMENTS
Dain shall have the right to place advertisements in financial and
other newspapers and journals at its own expense describing its services to the
Company under this Agreement, provided that Dain shall have submitted a copy of
any such proposed advertisements to the Company for its prior approval, which
approval shall not be unreasonably withheld or delayed.
8. TERMINATION
Either the Company or Dain may terminate this Agreement at any time by
fifteen days' written notice to the other. Notwithstanding such termination by
the Company, the provisions of Sections 3, 4, 6, 11 and Exhibit A shall survive
termination.
9. OTHER ACTIVITIES OF DAIN
In the ordinary course of its business and at any time, Dain and its
affiliates may hold long or short positions and may trade or otherwise effect
transactions as principal or for the account of customers in debt or equity
securities or options on securities of the Company or any other party that is or
may be involved in the Transaction. Dain may provide published research on, and
represent in transactions, other entities which may be in the same general
business as the Company and may compete with the Company.
-5-
6
10. THIRD PARTY BENEFICIARY
This Agreement is solely for the benefit of the Company, Dain and the
other Indemnified Person(s) described in Exhibit A and their respective
permitted successors and assigns. This Agreement is not intended to confer
rights upon any other persons, including shareholders, employees or creditors of
the Company or its affiliates. Xxxx is acting as an independent contractor under
this Agreement.
11. GOVERNING LAW
This Agreement is governed by the laws of the State of Minnesota,
without regard to principles of conflicts of laws.
12. SURVIVAL; BINDING EFFECT; ASSIGNMENT
The provisions of this Agreement relating to the payment of all fees,
reimbursement of expenses, indemnification and contribution shall survive the
expiration of the Appointment Period (including any extension thereof) or the
termination of this Agreement pursuant to Section 8 or completion of the
Transaction, as the case may be. This Agreement shall be binding upon and inure
to the benefit of the Company, Dain, the Indemnified Person(s) and their
respective permitted successors and assigns. This Agreement may not be assigned
without the prior written consent of the other party to this Agreement.
13. ENTIRE AGREEMENT; AMENDMENTS; PRIOR AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and, except as otherwise
explicitly provided, supersedes all prior understandings, written or oral, with
respect to the subject matter hereof. This Agreement may be amended by an
agreement in writing signed by Xxxx and the Company.
14. NOTICES
Notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be mailed or delivered to the Company at 0000 000xx
Xxxxxx Xxxxx Xxxx, Xxxxxxx, XX 00000, Attention Mr. Xxx Xxxxxx, and to Dain at
00 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxxx, XX 00000, Attention Xxxxxx X.
Xxxxxx.
15. MISCELLANEOUS
Any determination that any provision of this Agreement may be or is
unenforceable shall not affect the enforceability of the remaining provisions of
this
-6-
7
Agreement. The section headings in this Agreement are for convenience of
reference and are not to be deemed to be a part of this Agreement. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed to be an original but all of which shall constitute one
and the same instrument. The obligations of the Company under this Agreement
shall be joint and several obligations of the entities comprising the Company.
If the terms set forth in this Agreement are acceptable to you, please
sign and date the enclosed copy of this letter and return it to Dain.
XXXX XXXXXXXX INCORPORATED
By: [Illegible]
__________________________________
Title: Vice President
_______________________________
Xxxxxx and accepted as of
September 25 , 1996
____________________
DIGITAL SYSTEMS INTERNATIONAL, INC.
By: Xxxx X. Xxxxxx
_______________________________
Its: Sr. V-P
______________________________
-7-
8
EXHIBIT A
This Exhibit A is a part of and is incorporated into that certain
letter agreement dated September 20, 1996, between Digital Systems
International, Inc. (the "Company") and Xxxx Xxxxxxxx Incorporated ("Dain") (the
letter agreement and this Exhibit A are referred to herein as the "Agreement").
Capitalized terms used herein without definition shall have the meanings
ascribed to them in such letter agreement.
The Company agrees to indemnify and hold harmless Dain, any affiliates
and the respective officers, directors, partners, representatives and agents and
any other persons controlling Dain or any affiliates within the meaning of
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended (Dain and each such other person or
entity each being referred to as an "Indemnified Person"), to the fullest extent
lawful, from and against all claims, liabilities, losses, damages, and expenses,
(including without limitation and as incurred, reimbursement of all costs of
investigating, preparing, pursuing, or defending any such claim or action,
including fees and expenses of counsel to, whether or not arising out of pending
litigation, governmental investigation, arbitration or other alternative dispute
resolution, or other action or proceeding or threatened litigation, governmental
investigation, arbitration or other alternative dispute resolution, or other
action or proceeding) directly or indirectly related to or arising out of, or in
connection with (i) actions taken or omitted to be taken by the Company, its
affiliates, employees, directors, partners, representatives or agents in
connection with any Transaction or activities contemplated by, this Agreement;
(ii) actions taken or omitted to be taken by any Indemnified Person pursuant to,
the terms of, or in connection with services rendered pursuant to this
Agreement, provided that in the case of this subsection (ii), the Company shall
not be responsible for any claim, liability, loss, damage or expense arising
primarily out of or based primarily upon the willful misconduct or gross
negligence (as determined by the judgment of a court of competent jurisdiction,
no longer subject to appeal or further review) of or by such Indemnified Person;
and (iii) any untrue statement or alleged untrue statement of a material fact
contained in any Document or any omission or alleged omission to state a
material fact necessary to make the statements therein not misleading (other
than untrue statements or alleged untrue statements in, or omissions or alleged
omissions from, information relating to an Indemnified Person furnished in
writing by or on behalf of such Indemnified Person expressly for use in such
Document). If multiple claims are brought against an Indemnified Person in an
arbitration with respect to at least one of which indemnification is permitted
under applicable law and provided for under this Agreement, the Company agrees
that any
9
arbitration award shall be conclusively deemed to be based on claims as to which
indemnification is permitted and provided for, except to the extent that the
arbitration award expressly states that the award, or any portion thereof, is
based solely on a claim as to which indemnification is not available.
If the indemnification provided for herein is unavailable to an
Indemnified Person in respect of any claims, liabilities, losses, damages or
expenses, then the Company, in lieu of indemnifying such Indemnified Person,
shall contribute to the amount paid or payable by such Indemnified Person as a
result of such claims, liabilities, losses, damages or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by Dain on the other, from the services rendered
under this Agreement, or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above, but also the
relative fault of the Company on the one hand and the Indemnified Person on the
other, as well as any other relevant equitable considerations. It is further
agreed that the relative benefits to the Company on the one hand and Dain on the
other hand with respect to the services rendered under this Agreement shall be
deemed to be in the same proportion as (i) the aggregate Transaction Value bears
to (ii) the fees actually paid to Dain with respect to the services provided
pursuant to this Agreement in connection with the Transaction. The Company also
agrees that no Indemnified Person shall have any liability to the Company for or
in connection with this Agreement and the engagement of Dain hereunder, except
for such claims, liabilities, losses, damages, or expenses incurred by the
Company to the extent they are appropriately judicially determined (without
possibility of appeal or review) to have resulted primarily from such
Indemnified Person's willful misconduct or gross negligence, and the Company
agrees that in no event shall the Indemnified Persons be required to contribute
an amount in the aggregate greater than the fees actually received by Dain for
its services performed under this Agreement.
Promptly after receipt by any Indemnified Persons of notice of any
pending or threatened litigation, such Indemnified Persons will promptly notify
the Company in writing of such matter, provided, however, that the failure to
provide such prompt notice to the Company shall not relieve the Company of any
liability it may have to such Indemnified Persons unless such failure to provide
such prompt notice to the Company has prejudiced the defense of the litigation.
In the event any such action is brought against any Indemnified Person, the
Company shall be allowed to participate therein and assume the defense thereof,
with counsel reasonably satisfactory to the Indemnified Person, provided,
however, that if the defendants in such action include both the Company and the
Indemnified Persons and the Indemnified Persons shall have reasonably concluded
that there may be legal defenses available to them which
-2-
10
are different from or additional to those available to the Company, the
Indemnified Persons shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action
on behalf of such Indemnified Persons, it being understood that the Company
shall not be liable for the expenses of more than one separate counsel (together
with the appropriate local counsel) approved by the Company representing all of
the Indemnified Persons. The Company shall be liable as provided herein for any
settlement of any claim against Dain or any Indemnified Person made with the
Company's written consent, which consent shall not be unreasonably withheld. The
Company agrees that it will not, without the prior written consent of Xxxx,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters contemplated by
Xxxx's engagement (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise or consent includes an unconditional release
of Dain and each other Indemnified Person from all liability arising or that may
arise out of such claim, action, or proceeding.
The indemnity and contribution obligations of the Company set forth
herein shall be in addition to any liability or obligation the Company may
otherwise have to any Indemnified Person. The Company hereby consents to
personal jurisdiction, service and venue in any court in which any claim which
is subject to this Agreement is brought against Dain or any other Indemnified
Person.
It is understood that, in addition to Xxxx's engagement pursuant to
this Agreement, Xxxx may also be engaged to act for the Company in one or more
additional capacities, and that the terms of such additional engagements may be
embodied in one or more separate written agreements. The provisions of this
Exhibit A shall apply to any such separate agreements, any modifications of this
Agreement, and any modifications of such separate agreements, and the provisions
of this Exhibit A shall remain in full force and effect following the
completion, expiration or termination of this Agreement or such additional
agreements or modifications of any of the foregoing.
-3-
