EXHIBIT 1
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT between Digi International Inc., a Delaware
corporation (the "Company"), and Norwest Bank Minnesota, National Association
(the "Rights Agent"), dated as of January 26, 1999 (this "Amendment"), to
Rights Agreement dated as of June 10, 1998 (the "Original Agreement") between
the Company and the Rights Agent.
WHEREAS, the Company and the Rights Agent have entered into the
Original Agreement; and
WHEREAS, the Board of Directors of the Company has determined to
amend the Original Agreement in accordance with Section 27 thereof.
ACCORDINGLY, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Section 1(a) of the Original Agreement is hereby amended in
its entirety to read as follows:
(a) "Acquiring Person" shall mean any Person (as such term is
defined in this Agreement) who or which, together with all Affiliates and
Associates (as such terms are defined in this Agreement) of such Person,
shall be the Beneficial Owner (as such term is defined in this Agreement)
of 20% or more of the Common Shares of the Company then outstanding, but
shall not include (i) the Company, (ii) any Subsidiary (as such term is
defined in this Agreement) of the Company, (iii) any employee benefit plan
of the Company or of any Subsidiary of the Company, or (iv) any entity
holding Common Shares for or pursuant to the terms of any such plan
described in clause (iii) of this sentence. Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number
of Common Shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 20% or more of the Common Shares of
the Company then outstanding; PROVIDED, HOWEVER, that if a Person shall,
together with all Affiliates or Associates of such Person, become the
Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding by reason of share acquisitions by the Company and if such
Person or such Person's Affiliates or Associates shall, after such share
acquisitions by the Company, become the Beneficial Owner of any additional
Common Shares of the Company, and, immediately after becoming the
Beneficial Owner of such additional Common Shares, such Person shall,
together with all Affiliates and Associates of such Person, be the
Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding, then such Person (unless such Person shall be (1) the Company,
(2) any Subsidiary of the
Company, (3) any employee benefit plan of the Company or of any
Subsidiary of the Company, or (4) any entity holding Common Shares for
or pursuant to the terms of any such plan described in clause (3) of
this sentence) shall be deemed an "Acquiring Person." An entity other
than the Company or any Subsidiary of the Company holding Common Shares
for or pursuant to the terms of an employee benefit plan of the Company
or of any Subsidiary of the Company and in addition being the Beneficial
Owner of Common Shares that are not held for or pursuant to the terms of
any such plan shall be deemed to constitute an Acquiring Person,
notwithstanding anything herein stated, if, but only if, it, together
with its Affiliates and Associates, shall be the Beneficial Owner of 20%
or more, exclusive of those Common Shares held by it for or pursuant to
the terms of any such plan, of the Common Shares then outstanding.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), has become such inadvertently (including, without
limitation, because (A) such Person was unaware that it beneficially
owned a percentage of the Common Shares that would otherwise cause such
Person to be an "Acquiring Person" or (B) such Person was aware of the
extent of its Beneficial Ownership but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement), and
without any intention of changing or influencing control of the Company,
and such Person divests as promptly as practicable a sufficient number
of Common Shares so that such Person would no longer be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this
paragraph (a), for any purposes of this Agreement.
2. Section 1(g) of the Original Agreement is hereby deleted in its
entirety. Sections 1(h) through (p) shall not relabeled.
3. Section 3(a) of the Original Agreement is hereby amended in its
entirety to read as follows:
Section 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the Close of Business on the 15th
day after the Shares Acquisition Date or (ii) the Close of Business on the
15th day (or such later date as may be determined by action of the Board of
Directors of the Company prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary of the Company or any entity holding
Common Shares
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for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding Common
Shares for or pursuant to the terms of any such plan) to commence (which
intention shall not have been withdrawn within five business days (as
defined in Rule 14d-1 of the General Rules and Regulations under the
Exchange Act) after such public announcement), a tender or exchange
offer the consummation of which would result in beneficial ownership by
a Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company
or any entity holding Common Shares for or pursuant to the terms of any
such plan) of 20% or more of the then outstanding Common Shares
(including any such date that is after the date of this Agreement and
prior to the issuance of the Rights, the earlier of such dates being
herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right
Certificates where the context so requires) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As
soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or
more Right Certificates, in substantially the form of EXHIBIT B hereto
(the "Right Certificates"), evidencing one Right for each Common Share
so held, subject to adjustment pursuant to Section 11(i). In the event
that an adjustment in the number of Rights per Common Share has been
made pursuant to Section 11(i), at the time Right Certificates are
distributed, the Company may, to the extent provided in Section 14(a),
make the necessary and appropriate adjustments (as set forth in Section
14(a)) so that Right Certificates are distributed representing only
whole numbers of Rights and pay cash in lieu of fractional Rights
pursuant to Section 14(a). As of and after the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
4. Section 11(a)(ii) of the Original Agreement is hereby
amended in its entirety to read as follows:
(ii) Subject to Section 24 of this Agreement, in the event
any Person shall become an Acquiring Person (other than pursuant to any
Section 13 Event occurring after the Distribution Date or within 15 days
prior thereto), proper provision shall be made so that each holder of a
Right, subject to Section 11(a)(iii), shall thereafter have a right to
receive, upon exercise thereof by payment of the amount equal to the
product of the number of one one-hundredths of a Preferred Share which
would otherwise be issuable upon exercise of a Right and the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of
Preferred Shares, such number of Common Shares of the Company as shall
equal the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-hundredths of a Preferred
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Share for which a Right is exercisable immediately prior to the
occurrence of the Section 11(a)(ii) Event and (y) dividing that product
by 50% of the then current per share market price of the Company's
Common Shares (determined pursuant to Section 11(d)) on the date of such
occurrence.
From and after the first occurrence of a Section 11(a)(ii)
Event or a Section 13 Event, any Rights that are beneficially owned by any
Acquiring Person (or any Associate or Affiliate thereof) or were
beneficially owned by any Acquiring Person (or any Associate or Affiliate
thereof) after the Acquiring Person became an Acquiring Person shall become
null and void without any further action and no holder of such Rights shall
thereafter have any rights to exercise such Rights or any other rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights that would be void pursuant to the
preceding sentence; no Right Certificate shall be issued at any time upon
the transfer of any Rights to an Acquiring Person whose Rights would be
void pursuant to the preceding sentence or any Associate or Affiliate of
such an Acquiring Person or to any nominee of such Acquiring Person,
Associate or Affiliate; and any Right Certificate delivered to the Rights
Agent for transfer to an Acquiring Person or any Associate or Affiliate of
such Acquiring Person whose Rights would be void pursuant to the preceding
sentence shall be canceled. The Company shall use all reasonable efforts
to insure that the provisions of this Section 11(a)(ii) are complied with,
but shall have no liability to any holder of a Right Certificate or other
Person as a result of its failure in good faith to make any determinations
with respect to an Acquiring Person or its Affiliates or Associates.
5. Section 13(a) of the Original Agreement is hereby amended in its
entirety to read as follows:
Section 13. CONSOLIDATION, MERGER, SALE OR TRANSFER OF ASSETS
OR EARNING POWER.
(a) In the event, after the Distribution Date or within 15 days
prior thereto, directly or indirectly,
(x) the Company shall consolidate with, or merge with and
into, any other Person, and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,
(y) any Person shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection
with such consolidation or merger, all or part of the outstanding Common
Shares of the Company held by existing stockholders of the Company shall be
changed into or exchanged for stock or
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other securities of any other Person (or the Company) or money or any
other property (except as a result of the exercise of statutory
dissenters' rights), or
(z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or a
series of related transactions, assets or earning power aggregating 50% or
more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company
or one or more of its wholly owned Subsidiaries),
then, and in each such case, proper provision shall be made so that
(i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof by payment
of the amount equal to the product of the number of one one-hundredths of a
Preferred Share which would otherwise be issuable upon exercise of a Right
and the then current Purchase Price in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable
Common Shares of the Principal Party (as hereinafter defined), not subject
to any liens, encumbrances, rights of first refusal or adverse claims, as
shall be equal to the result obtained by (x) multiplying the then current
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right is, immediately prior to the occurrence of the Section 13
Event, exercisable and (y) dividing that product by 50% of the then current
per share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d)) on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such merger, consolidation, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
its Common Shares to permit the exercise of all outstanding Rights) in
connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common
Shares thereafter deliverable upon the exercise of the Rights.
6. Section 13(e) of the Original Agreement is hereby deleted in its
entirety.
7. Section 23(a) of the Original Agreement is hereby amended in its
entirety to read as follows:
Section 23. REDEMPTION.
(a) Subject to the provisions of Section 27, the Board of
Directors of the Company may, at its option, at any time prior to the
earlier of (x) such time as a Person becomes an Acquiring Person or (y) the
Close of Business on the Final Expiration Date, redeem all but not less
than all of the then outstanding Rights at a
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redemption price of $.001 per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after
the date of this Agreement (such redemption price being hereinafter
referred to as the "Redemption Price"). The Redemption Price shall be
payable in cash by the Company. The redemption of the Rights by the
Board of Directors of the Company may be made effective at such time and
on such basis and with such conditions as the Board of Directors of the
Company in its sole discretion may establish. Except for the obligation
to pay the Redemption Price, the Board of Directors and the Company
shall not have any liability to any Person as a result of the redemption
of Rights pursuant to the terms of this Section 23.
8. Section 27 of the Original Agreement is hereby amended in its
entirety to read as follows:
Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may and
the Rights Agent shall, if so directed by the Company, from time to time
supplement or amend this Agreement without the approval of any holders of
Common Shares or Right Certificates in order (i) to extend the Final
Expiration Date or, provided that at the time of such amendment no Person
has become an Acquiring Person, the period during which the Rights may be
redeemed, (ii) to cure any ambiguity, or to correct or supplement any
provision contained in this Agreement which may be defective or
inconsistent with any other provisions in this Agreement, (iii) prior to
the Distribution Date, to otherwise change or supplement any provision in
this Agreement in any manner which the Company may deem necessary or
desirable, or (iv) following the Distribution Date, to otherwise change or
supplement any provision in this Agreement in any manner which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than Right
Certificates evidencing Rights that shall have become null and void
pursuant to Section 11(a)(ii)). Without limiting the foregoing, the
Company may at any time prior to such time as any Person becomes an
Acquiring Person amend this Agreement to lower the thresholds set forth in
Sections 1(a) and 3(a) hereof from 20% to not less than the greater of
(i) the sum of .001% and the largest percentage of the outstanding Common
Shares then known by the Company to be beneficially owned by any Person
(other than (1) the Company, (2) any Subsidiary of the Company, (3) any
employee benefit plan of the Company or any Subsidiary of the Company, or
(4) any entity holding Common Shares for or pursuant to the terms of any
plan described in clause (3) of this sentence) or (ii) 10%.
9. Section 30 of the Original Agreement is hereby amended in its
entirety to read as follows:
Section 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of
the terms, provisions,
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covenants and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
10. Exhibit C of the Original Agreement is hereby deleted in its
entirety and Exhibit C as attached hereto is substituted therefore.
The Original Agreement shall remain in full force and effect without
amendment except this Amendment and any other amendment made in accordance with
Section 27 of the Agreement. All references in the Original Agreement to "this
Agreement" or the "Agreement" or "hereof" and all references in this Amendment
to the Agreement shall hereafter be deemed to be references to the Original
Agreement as amended by this Amendment and any other amendment made in
accordance with Section 27 of the Agreement. All terms used in this Amendment
that are defined in the Original Agreement but are not defined herein shall have
the meanings ascribed to them in the Original Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
DIGI INTERNATIONAL INC.
By /s/ Xxxxx X. Xxxx
--------------------------------
Its President
---------------------------
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Xxxxxxx X. Xxxxx
--------------------------------
Its Vice President
---------------------------
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EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
OF
DIGI INTERNATIONAL INC.
On June 10, 1998, the Board of Directors of Digi International Inc.
(the "Company"), declared a dividend of one preferred share purchase right (a
"Right") for each outstanding Common Share of the par value of $.01 per share
(the "Common Shares") of the Company. The dividend was payable on June 30,
1998 (the "Record Date") to stockholders of record on that date. On January
26, 1999, the Board of Directors amended the Rights plan in certain respects.
Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a Series A Junior Participating Preferred Share,
$.01 par value per share (the "Preferred Shares") of the Company at a price
of $115 per one one-hundredth of a Preferred Share (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement (the "Rights Agreement"), dated as of June 10, 1998,
between the Company and Norwest Bank Minnesota, National Association, as
Rights Agent (the "Rights Agent"), as amended on January 26, 1999.
Initially, the Rights will attach to all certificates representing
Common Shares then outstanding and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares and a
Distribution Date for the Rights will occur, subject to certain exceptions,
upon the earlier of:
(i) the close of business on the fifteenth day following a
public announcement that a person or group of affiliated or associated
persons has become an "Acquiring Person" (i.e., has become, subject to
certain exceptions, the beneficial owner of 20% or more of the outstanding
Common Shares), or
(ii) the close of business on the fifteenth day following the
commencement or public announcement of a tender offer or exchange offer the
consummation of which would result in a person or group of affiliated or
associated persons becoming, subject to certain exceptions, the beneficial
owner of 20% or more of the outstanding Common Shares (or such later date as
may be determined by the Board of Directors of the Company prior to a person
or group of affiliated or associated persons becoming an Acquiring Person).
Until the Distribution Date,
(i) the Rights will be evidenced by the Common Share
certificates and will be transferred with and only with the Common Shares,
C-1
(ii) new Common Share certificates issued after the Record
Date upon transfer or new issuance of the Common Shares will contain a
notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any Common Share
certificate, even without such notation or a copy of this Summary of Rights
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.
As promptly as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on June 30, 2008, unless extended or earlier redeemed or
exchanged by the Company as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution:
(i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Shares,
(ii) upon the grant to holders of the Preferred Shares of
certain rights, options or warrants to subscribe for or purchase Preferred
Shares or convertible securities at less than the then current market price
of the Preferred Shares, or
(iii) upon the distribution to holders of the Preferred Shares
of evidences of indebtedness or assets (excluding regular periodic cash
dividends or dividends payable in Preferred Shares) or of subscription rights
or warrants (other than those described in clause (ii) hereof).
The number of Preferred Shares issuable upon the exercise of a Right is also
subject to adjustment in the event of a dividend on Common Shares payable in
Common Shares, or a subdivision, combination or consolidation of the Common
Shares.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional Preferred Shares will be issued (other than
fractional shares which are integral multiples of one one-hundredth (subject to
adjustment) of a Preferred Share, which may, at the election of the Company, be
evidenced by depositary receipts) if in lieu thereof a payment in
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cash is made based on the closing price (pro-rated for the fraction) of the
Preferred Shares on the last trading date prior to the date of exercise.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights that are or were beneficially owned
by the Acquiring Person (which will thereafter be void), will thereafter have
the right to receive upon exercise thereof at the then current exercise price
of the Right that number of Common Shares having a market value of two times
the exercise price of the Right, subject to certain possible adjustments.
In the event that, after the Distribution Date or within 15 days
prior thereto, the Company is acquired in certain mergers or other business
combination transactions or 50% or more of the assets or earning power of the
Company and its subsidiaries (taken as a whole) are sold after the
Distribution Date or within 15 days prior thereto in one or a series of
related transactions, each holder of a Right (other than Rights which have
become void under the terms of the Rights Agreement) will thereafter have the
right to receive, upon exercise thereof at the then current exercise price of
the Right, that number of common shares of the acquiring company (or, in
certain cases, one of its affiliates) having a market value of two times the
exercise price of the Right.
In certain events specified in the Rights Agreement, the Company is
permitted to temporarily suspend the exercisability of the Rights.
At any time after a person or group of affiliated or associated
persons becomes an Acquiring Person (subject to certain exceptions) and prior
to the acquisition by a person or group of affiliated or associated persons
of 50% or more of the outstanding Common Shares, the Board of Directors of
the Company may exchange all or part of the Rights (other than Rights which
have become void under the terms of the Rights Agreement) for Common Shares
or equivalent securities at an exchange ratio per Right equal to the result
obtained by dividing the exercise price of a Right by the current per share
market price of the Common Shares, subject to adjustment.
At any time prior to a person or group of affiliated or associated
persons becoming an Acquiring Person, the Board of Directors of the Company
may redeem the Rights in whole, but not in part, at a price of $.001 per
Right, subject to adjustment (the "Redemption Price"), payable in cash. The
period of time during which the Rights may be redeemed may be extended by the
Board of Directors of the Company if no person has become an Acquiring
Person. The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The Board of Directors and the Company shall not
have any liability to any person as a result of the redemption or exchange of
the Rights pursuant to the provisions of the Rights Agreement.
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The terms of the Rights may be amended by the Board of Directors of
the Company, subject to certain limitations after the Distribution Date,
without the consent of the holders of the Rights, including an amendment
prior to the date a person or group of affiliated or associated persons
becomes an Acquiring Person to lower the 20% threshold for exercisability of
the Rights to not less than the greater of (i) the sum of .001% and the
largest percentage of the outstanding Common Shares then known by the Company
to be beneficially owned by any person or group of affiliated or associated
persons (subject to certain exceptions) or (ii) 10%.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated June 24, 1998, as amended on Form 8-A/A-1 dated February 5, 1999. A
copy of the Rights Agreement, as amended, is available free of charge from
the Company by contacting the Chief Financial Officer at Digi International
Inc., 00000 Xxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxx 00000. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, as amended, which is
hereby incorporated herein by reference.
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