EXHIBIT 5
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
OR, IF AN EXEMPTION FROM REGISTRATION SHALL BE AVAILABLE, THE HOLDER SHALL HAVE
DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Void after 5:00 p.m. New York Time, on October 12, 1996.
Warrant to Purchase 1,500,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
DIGITAL PRODUCTS CORPORATION
This is to certify that, in consideration for the execution by
Strategic Technologies, Inc. (the "Holder") of an Agreement and Plan of Merger
dated October 13, 1995 ("Merger Agreement") relating to a proposed merger
transaction between the Holder, Strategic Florida Inc. ("Merger Sub") and
Digital Products Corporation (the "Company"), the Holder is entitled to
purchase, subject to the provisions of this Warrant, from the "Company", up to
1,500,000 fully paid, validly issued and nonassessable shares of Common Stock,
$.025 par value, of the Company ("Common Stock") at a price of $.25 per share on
or before October 12, 1996 (the "Expiration Date") only if one of the conditions
set forth in paragraph 1 below is met. The number of shares of Common Stock to
be received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock are subject to the provisions of Section 1(b) hereof and
may be adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
(a) The Warrant may be exercised as to the number of Warrant Shares
set forth in Section 1(b) hereof only if, before the Expiration Date, the Holder
has paid the expenses of the Company incurred to date (the "Paid Expenses") and
the Merger Agreement has been terminated without consummation of the Merger as a
result of any of the following events in (i) to (vi): (i) the Board of Directors
of the Company withdraws or modifies its approval or recommendation of the
Merger Agreement or the Merger, approves or recommends another takeover
proposal, enters into an agreement with respect to another takeover proposal or
terminates the Merger Agreement (other than as a result of a willful and
material breach of the Merger Agreement by the Holder or Merger Sub (which
breach shall not have been cured
within five business days following the Holder's receipt of written notice of
such breach from the Company, (ii) the requisite approval of the Company's
stockholders for the Merger is not obtained at the Company Stockholders'
Meeting; (iii) more than 2 1/2% of shares of the Company become subject to
dissent; (iv) the Company Stockholders' Meeting does not occur prior to the
termination of the Merger Agreement pursuant to Section 7.1(b)(ii) of the Merger
Agreement; or (v) there is a material breach of any representation, warranty or
covenant thereof by the Company which is not remedied prior to the Effective
Time (as defined in the Merger Agreement) and/or (vi) the Merger is terminated
by virtue of failure to meet the conditions precedent to closing set forth in
Section 6.2(d), Section 6.3(e), and/or Section 6.1(d) of the Merger Agreement.
(b) In the event the Merger terminates for any reason other than
those set forth in subsection 5.9(b) (i), (ii), (iv) or Section 6.3(e) of the
Merger Agreement, this Warrant may only be exercisable to the extent of the Paid
Expenses. In the event the Merger terminates as a result of an event set forth
in subsection 5.9(b) (i), (ii), (iv) or Section 6.3(e) of the Merger Agreement,
this Warrant may be exercisable in full.
(c) This Warrant may be exercised by presentation and surrender hereof
to the Company at its principal office, with the Purchase Form annexed hereto
duly executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form or through a credit against the Paid
Expenses as set forth in Section 1(b) above. As soon as practicable after each
such exercise of the Warrants, but no later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder a certificate
or certificates for the Warrant Shares issuable upon such exercise, registered
in the name of the Holder. Upon receipt by the Company of this Warrant at its
office in proper form for exercise, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
(d) Compliance with the Securities Act. (1) The Holder may exercise
----------------------------------
its Warrants if it is an "accredited investor" or a "qualified institutional
buyer", as defined in Regulation D and Rule 144A under the Securities Act,
respectively, provided each of the following conditions is satisfied:
(a) The Holder establishes to the reasonable satisfaction of the
Company that it is an "accredited investor" or "qualified
institutional buyer"; and
(b) The Holder represents that it is acquiring the underlying
common stock for its own account and that it is not acquiring
such underlying common stock with a view to, or for offer or sale
in connection with, any distribution thereof (within the meaning
of the Securities Act) that would be in violation of the
securities laws of the United States or any state thereof, but
subject, nevertheless, to the disposition of its property being
at all times within its control.
(2) In the event of a proposed exercise that does not qualify
under Section (d)(1), the Holder may exercise its Warrants only if:
(i) the Holder gives written notice to the Company of its
intention to exercise, which notice (A) shall describe the manner and
circumstances of the proposed transaction in reasonable detail and (B)
shall designate the counsel for the Holder, which counsel shall be
satisfactory to the Company;
(ii) counsel for the Holder shall render an opinion, in form
and substance satisfactory to the Company, to the effect that such
proposed exercise may be effected without registration under the
Securities Act or under applicable Blue Sky laws; and
(iii) the Holder complies with Sections (d)(1)(b) above.
(e) This Warrant may not be assigned in whole or in part without the
prior written consent of the Company.
(3) All stock certificates issued pursuant to the exercise of
the Warrants shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. SUCH SHARES
MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IN COMPLIANCE WITH THE
REQUIREMENTS OF SUCH ACT AND OF ANY APPLICABLE STATE SECURITIES
LAWS.
2. RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. The
Company shall issue to the Holder the largest number of whole shares purchasable
upon exercise of the Warrant. The Company shall not be required to make any
cash or other adjustment in respect of such fraction of a share to which the
Holder would otherwise be entitled.
4. LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (ii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect at
the time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock immediately prior to such
action. Such adjustment shall be made each time any event listed above shall
occur.
(b) If the Company shall issue rights, options or warrants
exercisable into Common Stock to all holders of its Common Stock entitling them
to subscribe for, purchase or receive shares of Common Stock, the Exercise Price
shall be subject to adjustment as follows. If the price at which Common Stock
is issuable pursuant to such rights, options or warrants (the "Subscription
Price") is less than the current market price of the Common Stock (as defined in
Subsection (h) below) on the record date for such distribution, the Exercise
Price in effect immediately prior to such issuance shall be multiplied by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock which the aggregate Subscription Price of the total
number of shares of Common Stock issuable upon exercise of such rights, options
or warrants would purchase at the then current market price of the Common Stock,
and the denominator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock
issuable upon exercise of such rights, options or warrants. If the Subscription
Price is greater than or equal to the current market price (as defined in
Subsection (h) below) of the Common Stock on the record date for such
distribution, but less than the then effective Exercise Price, the Exercise
Price in effect immediately prior to such issuance shall be multiplied by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock which the aggregate Subscription Price of the total
number of shares of Common Stock issuable upon exercise of such rights or
options would purchase at the Exercise Price in effect immediately prior to such
issuance and the denominator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
issuable upon exercise of such rights, options or warrants. If the Subscription
Price is greater than or equal to the current market price of the Common Stock
on the record date for such distribution, and greater than or equal to the then
effective Exercise Price, then there shall be no adjustment under this
Subsection. Such adjustment shall be made each time
such rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of Shareholders entitled
to receive such rights, warrants or options; and to the extent that any such
rights, warrants or options expire or are redeemed without the exercise or
conversion thereof, the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the basis of the
issuance of only the number of shares of Common Stock actually issued.
(c) If the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding multiplied by the current
market price per share of Common Stock (as defined in Subsection (h) below),
less the fair market value (as determined by the Company's Board of Directors)
of said assets or evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of shares of
Common Stock outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made each time such a record date is
fixed. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such distribution.
(d) If the Company shall issue shares of its Common Stock,
(excluding shares issued (i) in any transactions described in Subsection (a)
above, (ii) upon exercise of existing stock options granted to the Company's
employees, (iii) upon exercise of this Warrant, and (iv) to the shareholders of
any corporation which merges into the Company in proportion to their
stockholdings of such corporation immediately prior to such merger, or (v) in a
bona fide public offering pursuant to a firm commitment underwriting) and if no
adjustment is required under any other subjection of this Section 6 (without
regard to the Subsection (j) below), the Exercise Price shall be subject to
adjustment as follows. If the price at which Common Stock is issued (the
"Offering Price") is less than the current market price of the Common Stock (as
defined in Subsection (h) below) on the record date for such distribution, the
Exercise Price in effect immediately prior to such issuance shall be multiplied
by a fraction, the numerator of which shall be the sum of the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock which the aggregate Offering Price of the total number of
shares of Common Stock so issued would purchase at the then current market price
of the Common Stock, and the denominator of which shall be the number of shares
of Common Stock outstanding on such record date plus the number of shares of
Common Stock so issued. If the Subscription Price is greater than or equal to
the current market price (as defined in Subsection (h) below) of the Common
Stock on the date of such issuance, but less than the then effective Exercise
Price, the Exercise Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate Offering Price of the
total number of shares of Common Stock so issued would purchase at the Exercise
Price in effect immediately prior to such issuance and the denominator of which
shall be the number of shares outstanding on such record date plus the
number of shares of Common Stock so issued. If the Offering Price is greater
than or equal to the current market price of the Common Stock on the record date
for such distribution, and greater than or equal to the then effective Exercise
Price, then there shall be no adjustment under this Subsection. Such adjustment
shall be made each time such an issuance is made.
(e) If the Company shall issue any securities convertible into
or exchangeable into Common Stock (excluding securities issued in transactions,
described in Subsections (b) and (d) above) the Exercise Price shall be subject
to adjustment as follows. If the price at which Common Stock is issuable
pursuant to such convertible securities (the "Conversion Price") is less than
the current market price on the record date for such distribution, the Exercise
Price in effect immediately prior to such issuance shall be multiplied by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock which the aggregate Conversion Price of the total number
of shares of Common Stock issuable upon conversion of the convertible securities
would purchase at the then current market price of the Common Stock, and the
denominator of which shall be the number of shares of Common Stock outstanding
on such record date plus the number of shares of Common Stock issuable upon
conversion of such convertible securities. If the Conversion Price is greater
than or equal to the current market price (as defined in Subsection (h) below)
of the Common Stock on the record date for such distribution, but less than the
then effective Exercise Price, the Conversion Price in effect immediately prior
to such issuance shall be multiplied by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock which the aggregate
Conversion Price of the total number of shares of Common Stock issuable upon
conversion of the securities at the Exercise Price in effect immediately prior
to such issuance and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of Common
Stock issuable upon conversion of such convertible securities. If the
Conversion Price is greater than or equal to the current market price of the
Common Stock on the record date for such distribution, and greater than or equal
to the then effective Exercise Price, then there shall be no adjustment under
this Subsection. Such adjustment shall be made each time such convertible
securities are issued and shall become effective immediately after the record
date for the determination of holders entitled to receive such convertible
securities; and to the extent that any such convertible securities expire or are
redeemed without the conversion thereof, the Exercise Price shall be readjusted
to the Exercise Price which would then be in effect had the adjustments made
upon the basis of the issuance of only the number of shares of Common Stock
actually issued.
(f) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e) above,
the number of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(g) For purposes of any computation respecting consideration
received pursuant to Subsections (d) and (e) above, the following shall apply:
(1) in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company
for any underwriting of the issue or otherwise in connection
therewith;
(2) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the accounting
treatment thereof), whose determination shall be conclusive; and
(3) in the case of the issuance of securities convertible
into or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Company upon the conversion or exchange
thereof the consideration in each case to be determined in the
same manner as provided in clauses (1) and (2) of this Subsection
(g).
(h) For the purpose of any computation under Subsections (b),
(c), (d) and (e) above, the current market price per share of Common Stock at
any date shall be deemed to be the lower of (i) the average of the mean of the
high and low bid prices for 30 consecutive business days before such date or
(ii) the mean of the high and low bid price on the business day immediately
preceding such date as reported by the National Association of Securities
Dealers, Inc., or other similar organization if the National Association of
Securities Dealers, Inc., is no longer reporting such information, or if not so
available, the fair market price as determined by the Board of Directors in good
faith in the exercise of their best business judgment taking into account all
relevant information known to them.
(j) All calculations under this Section 6 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 6 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the Exercise Price
in addition to those required by this Section 6, as it shall determine, in its
sole discretion, to be advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any Federal
Income tax liability to the holders of the Common Stock or securities
convertible into Common Stock (including warrants).
(k) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly cause a notice setting forth the adjusted Exercise
Price and adjusted number of Shares issuable upon exercise of each Warrant to be
mailed to the Holder, at its last address appearing in the Warrant Register.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 6, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(m) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (a) to (j), inclusive above.
(n) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office, an officer's certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail the
facts requiring such adjustment, including a statement of the number of
additional shares of Common Stock, if any, and such other facts as shall be
necessary to show the reason for and the manner of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the holder or any holder of a Warrant executed and delivered
pursuant to Section 1 and the Company shall, forthwith after each such
adjustment, mail a copy by certified mail of such certificate to the Holder or
any such holder.
8. NOTICES TO WARRANT HOLDER. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior to the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than the merger contemplated by
the Merger Agreement or a merger with a subsidiary in which merger the Company
is the continuing corporation and which does not result in any reclassification,
capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant, at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which said holder would have received if he had exercised this Warrant
immediately prior to such transaction. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 9 shall similarly apply to successive
reclassification, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of
Subsection (a) of Section 6 hereof.
10. TERMINATION. This Warrant shall terminate and become void on the
Expiration Date.
IN WITNESS WHEREOF, Digital has duly executed this Warrant as of the
date first above written.
Attest: DIGITAL PRODUCTS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
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Secretary Xxxxxxx X. Xxxxxx, President
and Chief Executive Officer
[SEAL]
