May 1, 2001
Board of Directors
Digital Recorders, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Dear Gentlemen:
This letter agreement (this "Agreement") will confirm the understanding
and agreement between Investec Ernst & Company ("Investec Ernst") and Digital
Recorders, Inc. (the "Company") as follows:
1. The Company hereby engages Investec Xxxxx to deliver a fairness
opinion in connection with the Company's contemplated acquisition
of Mobitec Holding AB (the "Transaction").
2. Investec Xxxxx hereby accepts the engagement described in paragraph
1 and, in that connection, agrees to render an opinion (the
"Opinion") to the Board of Directors with respect to the fairness or
inadequacy, from a financial point of view, to the Company's
stockholders of the consideration to be paid pursuant to the
Transaction. The Opinion shall be in such a form as Investec Xxxxx
shall determine, including statements therein that Investec Xxxxx has
relied upon the information furnished to it by the Company and the
Board of Directors and has assumed the accuracy and completeness of
all information used by it without assuming any responsibility for
independent verification of such information. In any event, the
Opinion shall be limited to the fairness or inadequacy, from a
financial point of view, of the aggregate consideration to be
offered pursuant to the Transaction and shall not address the
Board of Director's or the Company's underlying business decision
as to whether to accept the Transaction.
3. The Company and the Board of Directors shall make available to
Investec Xxxxx all information concerning the business, assets,
operations, financial condition and prospects of the Company which
Investec Ernst reasonably requests in connection with the
performance of its obligations hereunder. All such information
provided by or on behalf of the Company shall contain no untrue
statement of material fact and shall not omit to state any material
fact required or necessary to make the statements therein, in light
of the circumstances under which they were made or under which such
information will be used, not misleading. All such information
provided by the Company or the Board of Directors shall, to the
best knowledge of the Company and its Board of Directors after due
inquiry, contain no untrue statement of material fact and shall not
omit to state any material fact required or necessary to make the
statements therein, in light of the circumstances under which they
were made or under which such information will be
used, not misleading. Investec Xxxxx xxx assume and rely upon the
accuracy and completeness of all such information without
independent verification.
4. As compensation for the services rendered by Investec Xxxxx
xxxxxxxxx, the Company shall pay Investec Xxxxx as follows:
(a) Upon delivery of the Opinion by Investec Xxxxx to the Board of
Directors, a fee of $120,000, payable in cash in three
installments consisting of $50,000 upon delivery of the Opinion
by the Company and two subsequent equal installments each of
$37,500 due thirty days and sixty days from the date of the
acceptance of the Opinion by the Company.
(b) If Investec Xxxxx provides any additional financial advisory or
investment banking services to the Company or the Board of
Directors which are not set forth in paragraph 2, then the
Company shall pay to Investec Xxxxx additional fees to be
mutually agreed upon based on Investec Xxxxx'x customary fees
for the services rendered.
5. The Company shall:
(a) indemnify Investec Xxxxx and hold it harmless against any and
all losses, claims, damages or liabilities to which Investec
Xxxxx xxx become subject arising in any manner out of or in
connection with the rendering of services by Investec Xxxxx
xxxxxxxxx (including any services rendered prior to the date
hereof) or the rendering of additional services by Investec
Xxxxx as requested by the Board of Directors that are related
to the services rendered hereunder, unless it is finally
judicially determined that such losses, claims, damages or
liabilities resulted from the gross negligence or willful
misconduct of Investec Xxxxx; and
(b) reimburse Investec Xxxxx promptly for any legal or other
expenses reasonably incurred by it in connection with
investigating, preparing to defend or defending, or providing
evidence in or preparing to serve or serving as a witness with
respect to, or otherwise relating to, any lawsuits,
investigations, claims or other proceedings arising in any
manner out of or in connection with the rendering of services
by Investec Xxxxx xxxxxxxxx or the rendering of additional
services by Investec Xxxxx as requested by the Board of
Directors that are related to the services rendered hereunder
(including, without limitation, in connection with the
enforcement of this Agreement and the indemnification
obligations set forth herein); provided, however, that in the
event a final judicial determination is made to the effect
specified in subparagraph 5(a) above, Investec Xxxxx will remit
to the Company any amounts reimbursed under this subparagraph
5(b).
The Company agrees that the indemnification and reimbursement commitments
set forth in this paragraph 5 shall apply if either the Company or Investec
Xxxxx is a formal party to any
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such lawsuits, investigations, claims or other proceedings and that such
commitments shall extend upon the terms set forth in this paragraph to any
controlling person, affiliate, director, officer, employee or consultant of
Investec Xxxxx (each, with Investec Xxxxx, an "Indemnified Person"). The
Company further agrees that, without Investec Xxxxx'x prior written consent,
it will not enter into any settlement of a lawsuit, claim or other proceeding
arising out of the transactions contemplated by this Agreement (i) if Investec
Xxxxx or any other Indemnified Person is an actual or, in the reasonable
judgment of the Company, potential, party to such lawsuit, claim or
proceeding, unless such settlement includes an explicit and unconditional
release from the party bringing such lawsuit, claim or other proceeding of all
Indemnified Persons, or (ii) if Investec Xxxxx or any other Indemnified Person
is not an actual or, in the reasonable judgment of the Company, potential
party to such lawsuit, claim or proceeding, unless the Company uses
commercially reasonable efforts to ensure that such settlement includes an
explicit and unconditional release from the party bringing such lawsuit, claim
or other proceeding of all Indemnified Persons.
The Company further agrees that the Indemnified Persons are entitled to
retain separate counsel of their choice in connection with any of the matters
in respect of which indemnification, reimbursement or contribution may be
sought under this Agreement; provided that the Company may reasonably object
to the Indemnified Persons' choice of counsel if, in the reasonable opinion of
counsel to the Company, such counsel is insufficiently qualified or
inexperienced in such matters.
6. The Company and Investec Xxxxx agree that if any indemnification or
reimbursement sought pursuant to the preceding paragraph 5 is
judicially determined to be unavailable for a reason other than the
gross negligence or willful misconduct of Investec Xxxxx, then,
whether or not Investec Xxxxx is the Indemnified Person, the
Company and Investec Xxxxx shall contribute to the losses, claims,
damages, liabilities and expenses for which such indemnification or
reimbursement is held unavailable (i) in such proportion as is
appropriate to reflect the relative benefits to the Company and the
Board of Directors on the one hand, and Investec Xxxxx on the other
hand, in connection with the transactions to which such
indemnification or reimbursement relates, or (ii) if the allocation
provided by clause (i) above is judicially determined not to be
permitted, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) but also the
relative faults of the Company and the Board of Directors on the
one hand, and Investec Xxxxx on the other hand, as well as any
other equitable considerations; provided, however, that in no event
shall the amount to be contributed by Investec Xxxxx pursuant to
this paragraph exceed the amount of the fees actually received by
Investec Xxxxx xxxxxxxxx.
7. Except as contemplated by the terms hereof or as required by
applicable law or pursuant to an order entered or subpoena issued
by a court of competent jurisdiction, Investec Xxxxx shall keep
confidential all material non-public information provided to it by
the
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Company or the Board of Directors, and shall not disclose such
information to any third party, other than such of its employees
and advisors as Investec Xxxxx determines to have a need to know.
8. Except as required by applicable law, any advice (including,
without limitation, the Opinion) to be provided by Investec Xxxxx
under this Agreement shall not be disclosed publicly or made
available to third parties without the prior approval of Investec
Xxxxx, and accordingly such advice shall not be relied upon by any
person or entity other than the Board of Directors. Notwithstanding
the foregoing, Investec Xxxxx approves of a description and
inclusion of the Opinion in documents required to be filed with the
Securities and Exchange Commission and distributed to the Company's
stockholders in connection with the Transaction and to references
to Investec Xxxxx in such documents, provided that any such
description and references are approved in advance by Investec
Xxxxx, which approval shall not be unreasonably withheld.
9. The Company agrees that Investec Xxxxx has the right to place
advertisements in financial and other newspapers and journals at
its own expense describing its services to the Board of Directors
hereunder, provided that Investec Xxxxx will submit a copy of any
such advertisements to the Board of Directors for its approval,
which approval shall not be unreasonably withheld.
10. Subject to the provisions of paragraphs 4 through 9 and paragraphs
11 through 14, which shall survive any termination or expiration of
this Agreement (including by operation of the preceding sentence),
either party may terminate Investec Xxxxx'x engagement hereunder at
any time by giving the other party at least 10 days' prior written
notice.
11. The Board of Directors and Investec Xxxxx each represent that there
is no other person or entity that is entitled to a finder's fee or
any type of brokerage commission in connection with the
transactions contemplated by this Agreement as a result of any
agreement or understanding with it.
12. Nothing in this Agreement, expressed or implied, is intended to
confer or does confer on any person or entity other than the
parties hereto or their respective successors and assigns, and to
the extent expressly set forth herein, the Indemnified Persons,
any rights or remedies under or by reason of this Agreement or as a
result of the services to be rendered by Investec Xxxxx xxxxxxxxx.
The parties acknowledge that Investec Xxxxx is not acting as an
agent of the Company or the Board of Directors or in a fiduciary
capacity with respect to the Company or the Board of Directors and
that Investec Xxxxx is not assuming any duties or obligations other
than those expressly set forth in this Agreement. Each of the
Company and the Board of Directors further agree that neither
Investec Xxxxx nor any of its controlling persons, affiliates,
directors, officers, employees or consultants shall have any
liability to the Company or the Board of Directors or any person
asserting claims on behalf of or in right of the Company or the
Board of Directors for any losses, claims, damages, liabilities or
expenses arising out of or relating to this Agreement or the
services to be rendered by Investec Ernst hereunder, unless it is
finally judicially
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determined that such losses, claims, damages, liabilities or
expenses resulted from the gross negligence or willful misconduct
of Investec Xxxxx.
13. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provisions of this Agreement, which shall remain in full
force and effect.
14. This Agreement may not be amended or modified except in writing
signed by each of the parties and shall be governed by and
construed and enforced in accordance with the laws of the State of
New York. Any right to trial by jury with respect to any lawsuit,
claim or other proceeding arising out of or relating to this
Agreement or the services to be rendered by Investec Xxxxx
xxxxxxxxx is expressly and irrevocably waived.
If the foregoing correctly sets forth the understanding and agreement
between Investec Ernst, the Company and the Board of Directors, please so
indicate in the space provided for that purpose below, whereupon this letter
shall constitute a binding agreement as of the date hereof.
INVESTEC ERNST & COMPANY
By:__________________________
AGREED:
DIGITAL RECORDERS, INC.
By:__________________________
Name:
Title:
BOARD OF DIRECTORS OF DIGITAL RECORDERS, INC.
By:__________________________
Name:
Title:
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