EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
DIGI INTERNATIONAL INC.,
CD ACQUISITION INC.
AND
CENTRAL DATA CORPORATION
DATED AS OF JULY 1, 1998
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I The Merger; Effective Time; Closing. . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II Charter and By-Laws of the Surviving Corporation. . . . . . . . . . 2
2.1 The Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 The By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III Directors and Officers of the Surviving Corporation. . . . . . . . 2
3.1 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV Merger Consideration; Conversion of CDC Shares in the Merger;
Substitution of Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Merger Consideration; Conversion of CDC Shares in Merger . . . . . 3
4.2 Substitution of Stock Options. . . . . . . . . . . . . . . . . . . 4
4.3 Payment for CDC Shares in the Merger . . . . . . . . . . . . . . . 5
4.4 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 No Transfer of CDC Shares. . . . . . . . . . . . . . . . . . . . . 5
4.6 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V Representations and Warranties of CDC. . . . . . . . . . . . . . . . 6
5.1 Organization and Qualification, Subsidiaries . . . . . . . . . . . 6
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . 8
5.4 No Conflict, Required Filings and Consents . . . . . . . . . . . . 8
5.5 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . 9
5.8 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . .10
5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . .11
5.10 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.11 Real Property and Leases . . . . . . . . . . . . . . . . . . . . .13
5.12 Proprietary Information of Third Parties . . . . . . . . . . . . .14
5.13 Trademarks, Patents and Copyright. . . . . . . . . . . . . . . . .14
5.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
5.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . .16
5.16 Certain Interests. . . . . . . . . . . . . . . . . . . . . . . . .16
5.17 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . .17
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5.18 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.19 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.20 Customer Inventories . . . . . . . . . . . . . . . . . . . . . . .19
5.21 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.22 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE VI Representations and Warranties of Digi and Merger Sub . . . . . . .19
6.1 Organization and Qualification . . . . . . . . . . . . . . . . . .19
6.2 Authority Relative to this Agreement . . . . . . . . . . . . . . .19
6.3 No Conflict; Required Filings and Consents . . . . . . . . . . . .20
6.4 Ownership of Merger Sub; No Prior Activities; Assets of Merger
Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
6.5 SEC Reports; Financial Statements; Capitalization. . . . . . . . .21
6.6 Stock Option Plan Registration . . . . . . . . . . . . . . . . . .22
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . .22
6.8 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE VII Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . . .22
7.1 Conduct of CDC's Business Pending the Merger . . . . . . . . . . .22
7.2 Books and Records; Access and Information. . . . . . . . . . . . .23
7.3 Notification of Certain Matters. . . . . . . . . . . . . . . . . .23
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .24
7.5 NASDAQ Listing . . . . . . . . . . . . . . . . . . . . . . . . . .24
7.6 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . .24
7.7 Severance; Bonuses . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE VIII Conditions to Closing . . . . . . . . . . . . . . . . . . . . . .25
8.1 Conditions to Obligation of Digi and Merger Sub to Close . . . . .25
8.2 Conditions to Obligation of CDC to Close . . . . . . . . . . . . .26
ARTICLE IX Registration Rights . . . . . . . . . . . . . . . . . . . . . . . .27
9.1 Required Registration. . . . . . . . . . . . . . . . . . . . . . .27
9.2 Registration Procedures. . . . . . . . . . . . . . . . . . . . . .28
9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
9.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE X Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .32
ARTICLE XI Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . .32
11.1 Survival of Representations and Warranties . . . . . . . . . . . .32
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
11.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
11.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
11.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
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11.6 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . .34
11.7 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
11.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
11.9 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . .36
11.10 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . .36
11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .36
11.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.14 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.15 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .37
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SCHEDULES
CDC DISCLOSURE SCHEDULES:
5.1--Organization and Qualification, Subsidiaries
5.2--Capitalization
5.3--Authority Relative to This Agreement
5.4--No Conflict, Required Filings and Consents
5.6--Financial Statements
5.7--Absence of Certain Changes or Events
5.8--Absence of Litigation
5.9--Employee Benefit Plans
5.10--Labor Matters
5.11(b)(i) --Owned Real Property
5.11(b)(ii) --Leased Real Property
5.13--Trademarks, Patents and Copyright
5.14--Taxes
5.16--Certain Interests
5.17--Material Contracts
5.18--Officers
5.19--Employees
DIGI DISCLOSURE SCHEDULE
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EXHIBITS
Certificate of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
Legal Opinion of Xxxxxx & Xxxxxxx LLP. . . . . . . . . . . . . . . . . . . . . B
Indemnification Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . C
Legal Opinion of Faegre & Xxxxxx LLP . . . . . . . . . . . . . . . . . . . . . D
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AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of July 1, 1998,
among Digi International Inc., a Delaware corporation ("Digi"), CD Acquisition
Inc., a Delaware corporation and a direct wholly owned subsidiary of Digi
("MERGER SUB"), and Central Data Corporation, a Delaware corporation ("CDC").
RECITALS
WHEREAS, the Board of Directors of Digi, Merger Sub and CDC each have
determined that it is in the best interests of their respective stockholders for
Merger Sub to merge with and into CDC upon the terms and subject to the
conditions of this Agreement;
WHEREAS, holders of a majority of the outstanding CDC Shares (as
hereinafter defined) have concurrently consented in writing in favor of this
Agreement and the transactions contemplated hereby in lieu of a special meeting
of stockholders of CDC; and
WHEREAS, Digi, Merger Sub and CDC desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, Digi, Merger Sub and CDC hereby agree
as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereinafter defined), CDC and Merger Sub shall
consummate a merger (the "MERGER") in which (i) Merger Sub shall be merged with
and into CDC and the separate corporate existence of Merger Sub shall thereupon
cease, (ii) CDC shall be the successor or surviving corporation in the Merger
and shall continue to be governed by the laws of the State of Delaware, and
(iii) the separate corporate existence of CDC with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
corporation surviving the Merger is sometimes hereinafter referred to as the
"SURVIVING CORPORATION." The Merger shall have the effects specified in the
General Corporation Law of the State of Delaware (the "DGCL").
1.2 EFFECTIVE TIME. Digi, Merger Sub and CDC will cause counterparts
of a Certificate of Merger, substantially in the form attached hereto as
EXHIBIT A (the "CERTIFICATE OF MERGER"), to be executed and filed on the date of
the Closing (as hereinafter defined) (or on such later date as Digi and CDC may
agree) with the Secretary of State of the State of Delaware and recorded in the
office of the Recorder of New Castle County of the State of Delaware as provided
in Section 251(c) of the DGCL. The Merger shall become effective at the opening
of business on the day immediately following the date of Closing (or, if later,
at
the time the Certificate of Merger shall have been accepted for record by the
Secretary of State of the State of Delaware) or such other time as Digi and CDC
may agree and specify in the Certificate of Merger in accordance with
Section 103(d) of the DGCL, and such time of effectiveness is hereinafter
referred to as the "EFFECTIVE TIME."
1.3 CLOSING. The closing of the Merger (the "CLOSING") shall take
place (i) at the offices of Faegre & Xxxxxx LLP, 0000 Xxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx, at 10:00 a.m. on July 8, 1998 or (ii) at such other
place and/or time and/or on such other date as Digi and CDC may agree.
ARTICLE II
CHARTER AND BY-LAWS OF THE SURVIVING CORPORATION
2.1 THE CHARTER. The Charter of Merger Sub as in effect immediately
prior to the Effective Time shall be the Charter of the Surviving Corporation,
until duly amended in accordance with the terms thereof and of the DGCL, except
that from and after the Effective Time, Article First of the Charter of Merger
Sub shall be amended to be and read as follows:
First: The name of the Corporation shall
be Central Data Corporation
2.2 THE BY-LAWS. The By-Laws of Merger Sub in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation, until
duly amended in accordance with the terms thereof, of the Charter of the
Surviving Corporation and of the DGCL.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation, such directors to serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Charter and By-Laws.
3.2 OFFICERS. From and after the Effective Time, the officers of the
Surviving Corporation shall be as set forth below:
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Xxxxx X. Xxxx President
Xxxxxxxx X. Xxxxxxx Vice President and Treasurer
Xxxx X. Xxxxxxxx Secretary
Each such officer shall serve until his successor has been duly elected or
appointed and qualified or until his earlier death, resignation or removal in
accordance with the Surviving Corporation's Charter and By-Laws.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OF CDC SHARES
IN THE MERGER; SUBSTITUTION OF STOCK OPTIONS
4.1 MERGER CONSIDERATION; CONVERSION OF CDC SHARES IN MERGER. The
manner of converting shares of CDC and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, all of the shares of common stock, par value
$.01 per share, of CDC ("CDC SHARES") issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive in the aggregate (i) that number of shares of common stock, par
value $.01 per share, of Digi ("DIGI COMMON SHARES," which term shall
include any Preferred Share Purchase Rights attaching to the outstanding
common stock of Digi) which could be purchased for US $4,500,000 (Four
Million Five Hundred Thousand United States Dollars), with Digi Common
Shares valued for such purpose at a per-share price equal to the closing
sale price quoted on the NASDAQ National Market System for the trading day
immediately prior to the date of this Agreement (i.e. US $20.25); provided,
however, that the number of Digi Common Shares so determined shall be
rounded to the nearest whole number in the event that a fractional share or
scrip would otherwise be issuable on such basis (the "SHARE
CONSIDERATION"), plus (ii) US $13,500,000 (Thirteen Million Five Hundred
Thousand United States Dollars) (the "CASH CONSIDERATION" and, together
with the Share Consideration, the "MERGER CONSIDERATION"). If prior to the
Effective Time, Digi should split or combine the Digi Common Shares, or pay
a stock dividend or other distribution in respect of Digi Common Shares
(other than a distribution of Preferred Share Purchase Rights), then such
exchange ratio will be appropriately adjusted to reflect such split,
combination, dividend or other distribution.
(b) At the Effective Time, (i) all issued and outstanding CDC Shares to
be converted pursuant to this Section 4.1 shall, by virtue of the Merger
and without any action on the part of the holders thereof, cease to be
outstanding, be canceled and retired and cease to exist, and each holder of
a certificate representing any such CDC Shares shall thereafter cease to
have any rights with respect to such CDC Shares, except the right to
receive for each of the CDC Shares, upon the surrender of such
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certificate in accordance with Section 4.3(a), Share Consideration and Cash
Consideration as contemplated by Sections 4.3(a) and 4.3(b), and cash paid
in lieu of fractional Digi Common Shares as contemplated by Section 4.4;
and (ii) each share of Common Stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the same number of shares of Common Stock of the
Surviving Corporation.
(c) Notwithstanding anything in this Agreement to the contrary, any CDC
stockholder who fails to provide reasonable confirmation of such
stockholder's status as an "accredited investor" within the meaning of Rule
501(a) under the Securities Act (an "Unaccredited Stockholder") promptly
following the Effective Time after due inquiry by Digi or CDC shall not
receive any Share Consideration and, in lieu thereof, shall receive
additional Cash Consideration in an amount equal to one-third of the Cash
Consideration payable in respect of such Unaccredited Stockholder's CDC
Shares (i.e., an aggregate of four thirds the Cash Consideration per CDC
Share payable to CDC stockholders who are not Unaccredited Stockholders).
4.2 SUBSTITUTION OF STOCK OPTIONS. Immediately following the Effective
Time, each outstanding option to purchase CDC Shares (a "CDC STOCK OPTION"),
whether vested or unvested, shall be exchanged for an option to acquire Digi
Common Shares (a "DIGI STOCK OPTION") on substantially the same terms and
conditions as under the CDC Stock Option such that such substituted Digi Stock
Option satisfies the "spread ratio" test and other conditions of Section 424(a)
of the Code and such that no benefit to such optionee is reduced under the terms
of such Digi Stock Option solely as a result of such substitution. The number
of Digi Common Shares subject to such Digi Stock Option shall equal the product
(rounded down to the nearest whole share) obtained by multiplying (i) the number
of CDC Shares issuable upon exercise of the CDC Stock Option immediately prior
to the Effective Time by (ii) the Option Exchange Ratio (as hereinafter
defined), and the price per Digi Common Share at which such Digi Stock Option is
exercisable shall be the quotient (rounded up to the nearest whole cent)
obtained by dividing (x) the exercise price per CDC Share under the CDC Stock
Option immediately prior to the Effective Time by (y) the Option Exchange Ratio.
The "OPTION EXCHANGE RATIO" shall equal the product of (i) the number of Digi
Common Shares into which each CDC Share issued and outstanding immediately prior
to the Effective Time (other than CDC shares held by Unaccredited Stockholders)
is converted at the Effective Time pursuant to this Article IV, times (ii) four.
4.3 PAYMENT FOR CDC SHARES IN THE MERGER. At the Effective Time:
(a) Norwest Bank Minnesota, N.A., transfer agent for the Digi Common
Shares (the "TRANSFER AGREEMENT") shall cancel all certificates which
immediately prior to the Effective Time represented outstanding CDC Shares
(the "CERTIFICATES"), and the holder of such Certificates, other than
Unaccredited Stockholders, shall forthwith receive certificates
representing that number of Digi Common Shares to be issued as
4
Share Consideration which bears the same ratio to the total Share
Consideration as the number of CDC Shares represented by such Certificates
bears to the total number of CDC Shares issued and outstanding immediately
prior to the Effective Time, excluding CDC Shares held by Unaccredited
Stockholders;
(b) Digi shall deliver to each holder of Certificates a check payable
to such holder in that amount which bears the same ratio to the total Cash
Consideration as the number of CDC Shares represented by the Certificates
surrendered by such holder pursuant to the preceding paragraph bears to the
total number of CDC Shares issued and outstanding immediately prior to the
Effective Time, except that Unaccredited Stockholders shall also receive
additional Cash Consideration and no Share Consideration as provided in
Section 4.1(c).
4.4 FRACTIONAL SHARES. No fractional Digi Common Shares shall be
issued in the Merger. In lieu of any such fractional securities, each CDC
stockholder who would otherwise have been entitled to a fraction of a Digi
Common Share will be paid an amount in cash (without interest) equal to the
product of such fraction times the value of a Digi Common Share determined
pursuant to Section 4.1(a).
4.5 NO TRANSFER OF CDC SHARES. No transfer of CDC Shares shall be made
on the stock transfer books of CDC after the date hereof.
4.6 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, CDC Shares that are issued and outstanding immediately prior to
the Effective Time and are held by stockholders who have the right (to the
extent such right is available by law) to demand and receive payment of the fair
value of their CDC Shares in the manner provided in Section 262 of the DGCL and
have not failed to perfect or effectively withdrawn or lost such right under the
DGCL, as the case may be, prior to the time provided therefor under the DGCL
("DISSENTING SHARES") will not be converted into the right to receive the Merger
Consideration; provided, however, that if any holder of Dissenting Shares shall
fail to perfect or shall have effectively withdrawn or lost such right, such CDC
Shares shall thereupon be deemed to have been converted into and to have become
exchangeable for the right to receive the Merger Consideration, without
interest. Digi shall cause the Surviving Corporation to honor its obligations
under the DGCL to holders of Dissenting Shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CDC
CDC hereby represents and warrants to Digi and Merger Sub that:
5.1 ORGANIZATION AND QUALIFICATION, SUBSIDIARIES.
(a) Each of CDC and each subsidiary of CDC (each a "CDC SUBSIDIARY") is
a corporation duly organized, validly existing and in good standing under
the laws of
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the jurisdiction of its incorporation. Each of CDC and the CDC
Subsidiaries has the requisite power and authority and all necessary
permits, licenses and approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to have such power, authority, permits, licenses and approvals
would not, individually or in the aggregate, have a Material Adverse Effect
on CDC. CDC and each CDC Subsidiary is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or
licensed and in good standing that would not, individually or in the
aggregate, have a Material Adverse Effect on CDC.
(b) CDC DISCLOSURE SCHEDULE 5.1 contains a list of all the CDC
Subsidiaries. Except for such subsidiaries or as set forth in CDC
DISCLOSURE SCHEDULE 5.1, CDC does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock, options, warrants
or other rights to purchase capital stock or securities convertible into
capital stock of any other corporation or (B) any participating interest in
any partnership, joint venture or other non-corporate business enterprise
or (ii) control, directly or indirectly, any other entity. Except as set
forth in CDC DISCLOSURE SCHEDULE 5.1, all of the outstanding shares of
capital stock of each of the CDC Subsidiaries are owned beneficially and of
record by CDC, one of its other subsidiaries, or any combination of CDC and
one or more of its other subsidiaries, in each case free and clear of any
liens, charges, restrictions, claims or encumbrances of any nature
whatsoever; and there are no outstanding subscriptions, warrants, options,
convertible securities, or other rights (contingent or otherwise) pursuant
to which any of the CDC Subsidiaries is or may become obligated to issue
any shares of its capital stock to any person other than CDC or one of the
other CDC Subsidiaries.
5.2 CAPITALIZATION.
(a) The authorized capital stock of CDC consists of 1,000,000 CDC
Shares. As of the date hereof, 419,900 CDC Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable.
The stockholders, and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to purchase
or otherwise acquire equity securities, of CDC and each CDC Subsidiary, and
the number of shares of capital stock of CDC and each CDC Subsidiary, and
the number of such subscriptions, warrants, options, convertible
securities, and other such rights, held by each, and their respective
addresses as set forth on the books of CDC, are as set forth in CDC
DISCLOSURE SCHEDULE 5.2. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and
series of authorized capital stock of CDC and each CDC Subsidiary are as
set forth in the organizational documents of each, copies of which have
been provided to Digi, and all such designations, powers, preferences,
rights,
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qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. Except as set
forth in CDC DISCLOSURE SCHEDULE 5.2, (i) no person is known to CDC to own
any share of capital stock of CDC or any CDC Subsidiary, (ii) no
subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or otherwise acquire equity securities of
CDC or any CDC Subsidiary is authorized or outstanding and (iii) there is
no commitment by CDC or any CDC Subsidiary to issue shares, subscription,
warrants, options, convertible securities, or other such rights or to
distribute to holders of any of its equity securities any evidence of
indebtedness or asset.
(b) There are no outstanding contractual obligations of CDC or any CDC
Subsidiary to repurchase, redeem or otherwise acquire any CDC Shares or any
capital stock of any CDC Subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in,
any CDC Subsidiary or any other person.
(c) Except as set forth in CDC DISCLOSURE SCHEDULE 5.2, there are no
voting trusts or agreements, stockholders' agreements, pledge agreements,
registration rights agreements, buy-sell agreements, rights of first
refusal, co-sale rights, preemptive rights or proxies relating to any
securities of CDC or any CDC Subsidiary (whether or not CDC or any CDC
Subsidiary is a party thereto).
(d) All of the outstanding securities of CDC were issued in compliance
with all applicable securities laws.
(e) Each outstanding share of capital stock of each CDC Subsidiary is
duly authorized, validly issued, fully paid and nonassessable.
5.3 AUTHORITY RELATIVE TO THIS AGREEMENT. CDC has all necessary power
and authority to execute and deliver this Agreement, to perform its obligations
under this Agreement, and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation by
CDC of the transactions contemplated by this Agreement have been duly and
validly authorized by all necessary corporate action of CDC, and no other
corporate proceedings on the part of CDC are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement.
Concurrently with the execution and delivery of this Agreement, holders of a
majority of the CDC Shares have duly consented in writing to approve this
Agreement and the transactions contemplated by this Agreement in lieu of a
special meeting of stockholders of CDC. True and correct copies of such
consents are set forth in CDC DISCLOSURE SCHEDULE 5.3. This Agreement has been
duly and validly executed and delivered by CDC. Assuming the due authorization
by Digi and Merger Sub, and the due execution and delivery by Digi and Merger
Sub, this Agreement constitutes a legal, valid and binding obligation of CDC,
enforceable in accordance with its terms.
7
5.4 NO CONFLICT, REQUIRED FILINGS AND CONSENTS
(a) The execution and delivery of this Agreement by CDC does not, and
the performance of this Agreement by CDC will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws of CDC, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree
applicable to CDC or any CDC Subsidiary or by which any property or asset
of CDC or any CDC Subsidiary is bound or affected, or (iii) except as set
forth in CDC DISCLOSURE SCHEDULE 5.4, result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of CDC or any CDC
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation of CDC or any CDC Subsidiary, except, in the case of (ii) and
(iii), for such conflicts, violations, breaches, defaults, rights, liens or
encumbrances which would not prevent or delay consummation of the Merger,
or otherwise prevent CDC from performing its obligations under this
Agreement, and which would not, individually or in the aggregate, have a
Material Adverse Effect on CDC.
(b) The execution and delivery of this Agreement by CDC does not, and
the performance of this Agreement by CDC will not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, domestic or foreign, except
(i) for filing and applicable requirements under United States securities
laws and state securities or "blue sky" laws and the DGCL and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent CDC from performing its
obligations under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect on CDC.
5.5 COMPLIANCE. Neither CDC nor any CDC Subsidiary is in conflict
with, or in default or violation of, (i) any law, rule, regulation, order,
judgment or decree applicable to CDC or any CDC Subsidiary or by which any
property or asset of CDC or any CDC Subsidiary is bound or affected, or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which CDC or any CDC Subsidiary
is a party or by which CDC or any CDC Subsidiary or any property or asset of CDC
or any CDC Subsidiary is bound or affected, in each case except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect on CDC. To the knowledge of CDC, no
proposed law, rule, regulation or order exists which, if enacted, would have a
Material Adverse Effect on CDC.
5.6 FINANCIAL STATEMENTS. True and complete copies of (i) the audited
consolidated balance sheets of CDC as of December 28, 1996 and January 3, 1998,
and the related audited
8
consolidated statements of income, stockholders' equity and cash flows of CDC,
together with all related notes and schedules thereto (collectively referred to
herein as the "CDC FINANCIAL STATEMENTS") and (ii) the unaudited consolidated
balance sheet of CDC as of May 2, 1998 and the related consolidated statements
of income and cash flows of CDC, together with all related notes and schedules
thereto (collectively referred to herein as the "CDC INTERIM FINANCIAL
STATEMENTS") have been delivered by CDC to Digi and have been attached hereto as
CDC DISCLOSURE SCHEDULE 5.6. The CDC Financial Statements and the CDC Interim
Financial Statements (i) were prepared in accordance with the books of account
and other financial records of CDC, (ii) present fairly the consolidated
financial condition, results of operations and cash flows of CDC and its
subsidiaries as of the dates thereof or for the periods covered thereby,
(iii) have been prepared in accordance with applicable law and United States
generally accepted accounting principles ("US GAAP") applied on a basis
consistent with the past practices of CDC and (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the consolidated financial condition of CDC and its subsidiaries
and the results of the operations of CDC and its subsidiaries as of the dates
thereof or for the periods covered thereby.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since May 2, 1998, except as
contemplated by this Agreement or as set forth in CDC DISCLOSURE SCHEDULE 5.7,
CDC and the CDC Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since May 2,
1998, there has not been (i) any Material Adverse Change with regard to CDC,
(ii) any change by CDC or any CDC Subsidiary in its accounting methods,
principles or practices, other than changes required by US GAAP, (iii) any
revaluation by CDC or any CDC Subsidiary of any asset (including, without
limitation, any writing down of the value of inventory or writing off of notes
or accounts receivable), other than in the ordinary course of business
consistent with past practice and in accordance with US GAAP, (iv) any issuance
by CDC or any CDC Subsidiary of any stock, bonds or other corporate securities,
(v) borrowing of any amount or incurrence of any material obligation or material
liability (absolute, accrued or contingent) by CDC or any CDC Subsidiary, except
current liabilities incurred and liabilities under contracts entered into in the
ordinary course of business, (vi) discharge or satisfaction of any material lien
or material encumbrance or payment of any material obligation or material
liability (absolute, accrued or contingent) by CDC or any CDC Subsidiary, other
than current liabilities shown on the CDC Interim Financial Statements and
current liabilities incurred since the date of the CDC Interim Financial
Statements in the ordinary course of business, (vii) mortgage, pledge,
encumbrance or lien on any of the material assets of CDC or any of the CDC
Subsidiaries, tangible or intangible, other than liens for current real property
taxes not yet due and payable, (viii) sale, assignment or transfer of any of the
material tangible assets of CDC or any of the CDC Subsidiaries except in the
ordinary course of business, or cancellation by CDC or any CDC Subsidiary of any
material debt or material claim except in the ordinary course of business,
(ix) sale, assignment, transfer or grant of any exclusive license with respect
to any patent, trademark, trade name, service xxxx, copyright, trade secret or
other intangible asset or CDC or any of the CDC Subsidiaries, (x) any loss of
9
property or waiver of any right of substantial value, whether or not in the
ordinary course of business, (xi) any action by a customer or supplier, the loss
of which would have a Material Adverse Effect on CDC, to terminate, materially
reduce or threaten to terminate its purchases from or provision of products or
services to CDC or any CDC Subsidiary, as the case may be, (xii) any entry by
CDC or any CDC Subsidiary into any commitment or transaction material to CDC and
the CDC Subsidiaries, taken as a whole, (xiii) any declaration, setting aside or
payment of any dividend or distribution in respect of any capital stock of CDC
or any CDC Subsidiary or any redemption, purchase or other acquisition of any of
its securities, (xiv) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
CDC or any CDC Subsidiary, except in the ordinary course of business consistent
with past practice, or (xv) any commitment to do any of the foregoing.
5.8 ABSENCE OF LITIGATION. Except as set forth in CDC DISCLOSURE
SCHEDULE 5.8, there is no claim, action, proceeding or investigation pending or,
to the knowledge of CDC, threatened against CDC or any CDC Subsidiary, or any
property or asset of CDC or any CDC Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which (i) individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on CDC, or (ii) seeks to delay or prevent the
consummation of any transaction contemplated by this Agreement. As of the date
hereof, neither CDC nor any CDC Subsidiary nor any property or asset of CDC or
any CDC Subsidiary is subject to any order, writ, judgment, injunction, decree,
determination or award having, individually or in the aggregate, a Material
Adverse Effect on CDC.
5.9 EMPLOYEE BENEFIT PLANS.
(a) CDC DISCLOSURE SCHEDULE 5.9 lists each Employee Plan that covers
any employee of CDC or any CDC Subsidiary, copies or descriptions of all of
which have previously been made available or furnished to Digi. With
respect to each Employee Plan, CDC has provided the most recently filed
Form 5500 and an accurate summary description of such plan.
(b) CDC DISCLOSURE SCHEDULE 5.9 also includes a list of each Benefit
Arrangement of CDC or any CDC Subsidiary, copies or descriptions of which
have been made available or furnished previously to Digi.
(c) Except as set forth on CDC DISCLOSURE SCHEDULE 5.9, none of the
Employee Plans or other arrangements listed on CDC DISCLOSURE SCHEDULE 5.9
cover any non-United States employee or former employee of CDC or any CDC
Subsidiary.
10
(d) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any Employee Plan of
CDC.
(e) No Employee Plan of CDC is a Multiemployer Plan and no Employee
Plan of CDC is subject to Title IV of ERISA. CDC, the CDC Subsidiaries and
their ERISA Affiliates have not incurred nor reasonably expect to incur any
material liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA
or arising in connection with any complete or partial withdrawal from a
Multiemployer Plan.
(f) Each Employee Plan of CDC which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to date, and each trust forming a part thereof
is exempt from tax pursuant to Section 501(a) of the Code. CDC has
furnished to Digi copies of the most recent Internal Revenue Service
determination letters with respect to each such plan. Each Employee Plan
of CDC has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such plan, except for noncompliance which individually or in
the aggregate is not reasonably likely to have a Material Adverse Effect on
CDC.
(g) Each Benefit Arrangement of CDC has been maintained in material
compliance with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations which are applicable to such
Benefit Arrangement of CDC.
(h) With respect to the employees, former employees and beneficiaries
of employees or former employees of CDC and any CDC Subsidiary, there are
no post-retirement medical, health or life insurance plans in effect,
except as required by Section 4980B of the Code. No tax under
Section 4980B of the Code has been incurred in respect of any Employee Plan
that is a group health plan, as defined in Section 5000(b)(1) of the Code.
(i) All contributions and payments accrued under each Employee Plan and
Benefit Arrangement, in each case of CDC, determined in accordance with
prior funding and accrual practices, as adjusted to include proportional
accruals for the period ending on the Closing Date, will be accrued in
accordance with normal accounting practices on or prior to the Closing
Date. Except as disclosed in writing to Digi prior to the date hereof,
there has been no amendment to, written interpretation of or announcement
(whether or not written) by CDC, any CDC Subsidiary or any of their ERISA
Affiliates relating to, or change in employee participation or coverage
under, any Employee Plan or Benefit Arrangement, in each case of CDC, that
individually or collectively would increase materially the expense of
maintaining such
11
Employee Plan or Benefit Arrangement above the level of the expense
incurred in respect thereof for the fiscal year ended prior to the date
hereof.
(j) There is no contract, agreement, plan or arrangement covering any
employee or former employee of CDC or any CDC Subsidiary that, individually
or collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code.
(k) Except as disclosed on CDC DISCLOSURE SCHEDULE 5.9, no employee of
CDC or any CDC Subsidiary will become entitled to any bonus, retirement,
severance or similar benefit or enhanced benefit solely as a result of the
transactions contemplated hereby.
(l) With respect to each Foreign Benefit Plan of CDC: (i) all employer
and employee contributions to each Foreign Benefit Plan required by law or
by the terms of such Foreign Benefit Plan have been made or, if applicable,
accrued in accordance with normal accounting practices; (ii) the fair
market value of the assets of each funded Foreign Benefit Plan, the
liability of each insurer for any Foreign Benefit Plan funded through
insurance or the book reserve established for any Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or
provide for the accrued benefit obligations, as of the Closing, with
respect to all current and former participants in such plan according to
the actuarial assumptions and valuations most recently used to determine
employer contributions to such Foreign Benefit Plan and no transaction
contemplated by this Agreement shall cause such assets or insurance
obligations to be less than such benefit obligations; and (iii) each
Foreign Benefit Plan required to be registered has been registered and has
been maintained in good standing with the appropriate regulatory
authorities.
5.10 LABOR MATTERS. Except as set forth in CDC DISCLOSURE
SCHEDULE 5.10, (i) there are no controversies pending or, to the knowledge of
CDC, threatened between CDC or any CDC Subsidiary and any of their respective
employees, which controversies have or could have a Material Adverse Effect on
CDC, (ii) neither CDC nor any CDC Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by CDC or any CDC Subsidiary, nor, to the knowledge of CDC, are there
any activities or proceedings of any labor union to organize any such employees,
(iii) neither CDC nor any CDC Subsidiary has breached or otherwise failed to
comply with any provision of any such agreement or contract and there are no
grievances outstanding against CDC or any CDC Subsidiary under any such
agreement or contract, (iv) there are no unfair labor practice complaints
pending against CDC or any CDC Subsidiary before the National Labor Relations
Board or any current union representation questions involving employees of CDC
or any CDC Subsidiary, and (v) there is no strike, slowdown, work stoppage or
lockout, or, to the knowledge of CDC, threat thereof, by or with respect to any
employees of CDC or any CDC Subsidiary.
12
5.11 REAL PROPERTY AND LEASES.
(a) CDC and the CDC Subsidiaries have sufficient title to all their
properties and assets to conduct their respective businesses as currently
conducted, with only such exceptions as, individually or in the aggregate,
would not have a Material Adverse Effect on CDC.
(b) CDC DISCLOSURE SCHEDULE 5.11(B)(I) contains a list of all real
property owned by CDC or any CDC Subsidiary. CDC DISCLOSURE
SCHEDULE 5.11(B)(II) contains a list of real property leased by CDC or any
CDC Subsidiary, the applicable lease agreements, the name of the lessor,
the date of the lease agreement and each amendment thereto and the
aggregate annual rental or other fee payable under any such lease. Except
as set forth on CDC DISCLOSURE SCHEDULE 5.17, each parcel of real property
owned or leased by CDC or any CDC Subsidiary (i) is owned or leased free
and clear of all mortgages, pledges, liens, security interests, conditional
and installment sale agreements, encumbrances, charges or other claims of
third parties of any kind (collectively, "LIENS"), other than (A) Liens for
current taxes and assessments not yet past due, (B) inchoate mechanics' and
materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary
course of business of CDC or such CDC Subsidiary consistent with past
practice, and (D) all matters of record, Liens and other imperfections of
title and encumbrances which, individually or in the aggregate, would not
have a Material Adverse Effect on CDC, and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefor, nor, to the knowledge of CDC, has any
such condemnation, expropriation or taking been proposed.
5.12 PROPRIETARY INFORMATION OF THIRD PARTIES. To the knowledge of CDC,
no third party has claimed or has reason to claim that any person employed by or
affiliated with CDC or any CDC Subsidiary has (i) violated or may be violating
any of the terms or conditions of his employment, non-competition or
non-disclosure agreement with such third party, (ii) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (iii) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. To the knowledge of CDC, no third party has
requested information from CDC or any CDC Subsidiary which suggests that such a
claim might be contemplated. To the knowledge of CDC, no person employed by or
affiliated with CDC or any CDC Subsidiary has employed or proposes to employ any
trade secret or any information or documentation proprietary to any former
employer, and to the knowledge of CDC, no person employed by or affiliated with
CDC or any CDC Subsidiary has violated any confidential relationship which such
person may have had with any third party, in connection with the development,
manufacture or sale of any product or proposed product or the development or
13
sale of any service or proposed service of CDC or any CDC Subsidiary, and CDC
has no reason to believe there will be any such employment or violation. To the
knowledge of CDC, none of the execution or delivery of this Agreement, or the
carrying on of the business of CDC or any CDC Subsidiary as officers, employees
or agents by any officer, director or key employee of CDC or any CDC Subsidiary,
or the conduct or proposed conduct of the business of CDC or any CDC Subsidiary,
will conflict with or result in a breach of the terms, conditions or provisions
of or constitute a default under any material noncompetition contract, covenant
or instrument under which any such person is obligated.
5.13 TRADEMARKS, PATENTS AND COPYRIGHT. Set forth in CDC DISCLOSURE
SCHEDULE 5.13 is a list and brief description of all domestic and foreign
patents, patent rights, patent applications, trademarks, trademark applications,
service marks, service xxxx applications, trade names and copyrights material to
the business of CDC and the CDC Subsidiaries as currently conducted, and all
applications for such which are in the process of being prepared, owned by or
registered in the name of CDC or any CDC Subsidiary, or of which CDC or any CDC
Subsidiary is a licensor or licensee or in which CDC or any CDC Subsidiary has
any right (and, if applicable, a brief description of the nature of such right).
CDC and the CDC Subsidiaries own or possess adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets, applications
for patents, trademarks and service marks, know-how, manufacturing processes,
formulae, trade secrets, customer lists and other proprietary rights and
information ("INTELLECTUAL PROPERTY") necessary to the business of CDC and the
CDC Subsidiaries as currently conducted. To the knowledge of CDC, all technical
information developed by and belonging to CDC or any CDC Subsidiary which has
not been patented has been kept confidential. Neither CDC nor any CDC
Subsidiary has granted or assigned to any other person or entity any right to
manufacture or assemble any products of CDC or such CDC Subsidiary, except as
set forth in CDC DISCLOSURE SCHEDULE 5.13. The conduct of the business of CDC
and the CDC Subsidiaries as currently conducted does not and will not conflict
in any way with any Intellectual Property of any third party that, individually
or in the aggregate, could have a Material Adverse Effect on CDC. To the
knowledge of CDC, there are no infringements of any propriety rights owned by or
licensed by or to CDC or any CDC Subsidiary which, individually or in the
aggregate, could have a Material Adverse Effect on CDC. To the knowledge of
CDC, neither CDC nor any CDC Subsidiary has licensed or otherwise permitted the
use by any third party of any proprietary information on terms or in a manner
which, individually or in the aggregate, could have a Material Adverse Effect on
CDC. No claim is pending or, to the knowledge of CDC, threatened, to the effect
that the operations of CDC or any CDC Subsidiary infringe upon or conflict with
the asserted rights of any other person under any Intellectual Property, and, to
the knowledge of CDC, there is no basis for any such claim (whether or not
pending or threatened). No claim is pending or, to the knowledge of CDC,
threatened, to the effect that any such Intellectual Property owned or licensed
by CDC or any CDC Subsidiary, or which CDC or any CDC Subsidiary otherwise has
the right to use, is invalid or unenforceable by
14
CDC, and, to the knowledge of CDC, there is no basis for any such claim (whether
or not pending or threatened).
5.14 TAXES. Except as set forth in CDC DISCLOSURE SCHEDULE 5.14:
(a) Each of CDC and the CDC Subsidiaries has timely filed all Returns
required to be filed and paid all Taxes shown as due on such Returns. All
such Returns were complete and correct in all material respects. All Taxes
with respect to which any of CDC or any CDC Subsidiary has become obligated
have been paid and adequate reserves have been established for all Taxes
accrued but not yet payable (including any Taxes arising out of, or in
connection with, the transactions contemplated by this Agreement). None of
CDC or any CDC Subsidiary is currently the beneficiary of any extension of
time within which to file any Return. None of CDC or any CDC Subsidiary
has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency. None
of CDC or any CDC Subsidiary is a party to any Tax sharing or similar
agreement with any person.
(b) No issues have been raised (and are currently pending) by any
taxing authority in connection with any of the Returns filed or required to
be filed by any of CDC or any CDC Subsidiary. All deficiencies asserted or
assessments made as a result of any examinations of such Returns have been
fully paid, or are fully reflected as a liability in the respective
financial statements of CDC or any CDC Subsidiary, or are being contested
and an adequate reserve therefor has been established and is fully
reflected in the respective financial statements of CDC or any CDC
Subsidiary. There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of any of CDC or any CDC Subsidiary.
All material elections with respect to taxes affecting CDC or any CDC
Subsidiary, as of the date hereof, are set forth in the respective
financial statements of such entities.
5.15 ENVIRONMENTAL MATTERS.
(a) CDC and each CDC Subsidiary has complied with all applicable
foreign, federal, state and/or local laws (including without limitation
case law, rules, regulations, orders, judgments, decrees, permits, licenses
and governmental approvals) that are intended to protect the environment
and/or human health or safety (collectively, "ENVIRONMENTAL LAWS"), except
where the failure to so comply would not, individually or in the aggregate,
have a Material Adverse Effect on CDC.
(b) Neither CDC nor any CDC Subsidiary has handled, generated, used,
stored, transported or disposed of any substance or waste which is
regulated by Environmental Laws, except for reasonable amounts of ordinary
office supplies, manufacturing supplies and/or office cleaning supplies
which have been used in compliance with Environmental Laws.
15
(c) To the knowledge of CDC, there are no "ENVIRONMENTAL LIABILITIES."
For purposes of this Section, "Environmental Liabilities" are liabilities
which (i) arise out of or in any way relate to CDC or any CDC Subsidiary or
any real estate at any time owned, used or leased by CDC or any CDC
Subsidiary, or CDC's or CDC Subsidiary's use or ownership thereof, whether
vested or unvested, contingent or fixed, actual or potential, and
(ii) arise from or relate to actions occurring (including any failure to
act) or conditions existing on or before the Closing Date.
5.16 CERTAIN INTERESTS.
(a) Except as set forth on CDC DISCLOSURE SCHEDULE 5.16, none of CDC or
any affiliate of CDC, any officer or director of CDC or any CDC Subsidiary
or any relative or spouse (or relative of such spouse) who resides with, or
is a dependent of, any such officer or director:
(i) has any ownership or financial interest in any competitor,
supplier, or customer of CDC or any CDC Subsidiary (other than
rights of ownership of securities of a publicly-held corporation
amounting to less than one percent of any class of outstanding
securities);
(ii) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which CDC
or any CDC Subsidiary uses in the conduct of its business or
otherwise; or
(iii) has outstanding any indebtedness to CDC or any CDC
Subsidiary.
(b) Except as set forth in CDC DISCLOSURE SCHEDULE 5.16, CDC and the
CDC Subsidiaries do not have any liability or any obligation of any nature
whatsoever to any officer, director or stockholder of CDC or any CDC
Subsidiary, or to any relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such officer, director or
stockholder.
5.17 MATERIAL CONTRACTS.
(a) CDC DISCLOSURE SCHEDULE 5.17 lists all agreements relating to
Intellectual Property set forth in CDC DISCLOSURE SCHEDULE 5.13 and each of
the following contracts and agreements of CDC and the CDC Subsidiaries
(such contracts and agreements, together with all contracts or other
agreements listed on CDC DISCLOSURE SCHEDULES 5.2, 5.9, 5.10, 5.11(B)(II)
and 5.19 to which CDC or any CDC Subsidiary is a party, being the "CDC
MATERIAL CONTRACTS"):
(i) each distributor, dealer, manufacturer's representative or
sales agency agreement which is (A) exclusive as to territory or
product line, (B) material to the business of CDC and the CDC
Subsidiaries, taken as a whole, or (C) not
16
terminable on less than 90 days' notice without material cost or
other material liability to CDC or any CDC Subsidiary;
(ii) each sales agreement with a customer of CDC or any CDC
Subsidiary under the terms of which CDC or any CDC Subsidiary is
likely to receive more than $100,000 in the aggregate during the
calendar year ending December 31, 1998 and which entitles such
customer to a rebate or right of set-off, to return any product to
CDC or any CDC Subsidiary after acceptance thereof, or which varies
in any material respect from CDC's or any CDC Subsidiary's standard
form agreements;
(iii) each agreement with any supplier under the terms of which
CDC or any CDC Subsidiary is likely to pay or otherwise give
consideration of more than $100,000 in the aggregate during the
calendar year ending December 31, 1998 and containing any provision
permitting any party other than CDC or any CDC Subsidiary to
renegotiate the price or other material terms upon the failure of
CDC or any CDC Subsidiary to meet its obligations thereunder or
containing any payback or similar provisions;
(iv) each agreement for the future purchase of fixed assets or
for the future purchase of materials, supplies or equipment,
outside the ordinary course of business consistent with past
practice;
(v) each agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security
interest on, any material asset of CDC or any CDC Subsidiary;
(vi) each guaranty of any material obligation for borrowed money;
(vii) each agreement under which CDC or any CDC Subsidiary has
limited or restricted its right to compete in any geographical area
or with any person in any respect;
(viii) each agreement or group of related agreements with the same
party under the terms of which CDC or any CDC Subsidiary is likely
to pay consideration of more than $100,000 in the aggregate during
the calendar year ending December 31, 1998, and which is not
terminable by CDC or any CDC Subsidiary without penalty upon notice
of 30 days or less; and
(ix) all contracts and agreements the absence of which would have
a Material Adverse Effect on CDC.
(b) To the knowledge of CDC, each CDC Material Contract (i) is valid
and binding on the respective parties thereto and is in full force and
effect; and (ii) upon
17
consummation of the transactions contemplated by this Agreement, shall
continue in full force and effect without penalty or other adverse
consequence.
(c) Neither CDC nor any CDC Subsidiary has received any notice of
default under, or is in default under or in material breach of, any CDC
Material Contract. Neither CDC nor any CDC Subsidiary has any present
expectation or intention of not performing any material obligation under
any CDC Material Contract and, to the knowledge of CDC, no party to any CDC
Material Contract other than CDC or any CDC Subsidiary has breached or
intends to breach any CDC Material Contract.
(d) True and correct copies of all Material Contracts have been
heretofore delivered to Digi.
5.18 OFFICERS. CDC DISCLOSURE SCHEDULE 5.18 sets forth a list of the
names of the officers of CDC and the CDC Subsidiaries, together with the title
or job classification of each such person and the total compensation anticipated
to be paid to each such person by CDC and the CDC Subsidiaries in the calendar
year ending December 31, 1998.
5.19 EMPLOYEES. No officer or key employee of CDC or any CDC Subsidiary
has advised CDC or any CDC Subsidiary (orally or in writing) that he intends to
terminate employment with CDC or any CDC Subsidiary. Except as set forth in CDC
DISCLOSURE SCHEDULE 5.19, no person has an employment or consulting agreement or
understanding, whether oral or written, with CDC or any CDC Subsidiary, which is
not terminable on notice by CDC or such subsidiary without cost or other
liability to CDC or such subsidiary.
5.20 CUSTOMER INVENTORIES. Each of the largest customers of CDC which
comprise in the aggregate at least 80% of CDC's net sales for the current
calendar year to date has in such customer's inventory CDC products not
exceeding four weeks' average net sales to such customer, based upon CDC's net
sales volume to such customer for the quarter ended June 30, 1998.
5.21 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of CDC or any CDC Subsidiary.
5.22 FULL DISCLOSURE. Neither CDC nor any of its officers has knowingly
withheld from Digi any material facts relating to CDC.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF DIGI AND MERGER SUB
6.1 ORGANIZATION AND QUALIFICATION. Each of Digi and each subsidiary
of Digi (each a "DIGI SUBSIDIARY") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Digi and the Digi
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Subsidiaries has the requisite power and authority and all necessary permits,
licenses and approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to have such
power, authority, permits, licenses and approvals would not, individually or in
the aggregate, have a Material Adverse Effect on Digi. Each of Digi and the
Digi Subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on Digi.
6.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Digi and Merger Sub
has all necessary power and authority to execute and deliver this Agreement, to
perform its obligations under this Agreement, and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
and the consummation by Digi and Merger Sub of the transactions contemplated by
this Agreement have been duly and validly authorized by all necessary corporate
action of Digi and Merger Sub, and no other corporate proceedings on the part of
Digi or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated by this Agreement. This Agreement has been duly
and validly executed and delivered by Digi and Merger Sub. Assuming the due
authorization by CDC, and the due execution and delivery by CDC, this Agreement
constitutes a legal, valid and binding obligation of each of Digi and Merger
Sub, enforceable in accordance with its terms.
6.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Digi and Merger Sub
does not, and the performance of this Agreement by Digi and Merger Sub will
not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of Digi or Merger Sub, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Digi or any Digi
Subsidiary or by which any property or asset of Digi or any Digi Subsidiary
is bound or affected, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of Digi or any Digi
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation of Digi or any Digi Subsidiary, except, in the case of (ii) and
(iii), for such conflicts, violations, breaches, defaults, rights, liens
and encumbrances which would not prevent or delay consummation of the
Merger, or otherwise prevent Digi or Merger Sub from performing its
obligations under this Agreement, and which would not, individually or in
the aggregate, have a Material Adverse Effect on Digi.
19
(b) The execution and delivery of this Agreement by Digi and Merger Sub
does not, and the performance of this Agreement by Digi and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic
or foreign, except (i) for filing and applicable requirements under United
States securities laws and state securities or "blue sky" laws and the DGCL
and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or
delay consummation of the Merger, or otherwise prevent Digi or Merger Sub
from performing its obligations under this Agreement, and would not,
individually or in the aggregate, have a Material Adverse Effect on Digi.
6.4 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES; ASSETS OF MERGER SUB.
(a) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock of
Merger Sub is and will be owned 100% by Digi directly. Further, there are
not as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or
any other agreements of any character which Merger Sub is a party to, or
may be bound by, requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for or
acquire, any shares of capital stock of Merger Sub.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated hereby, Merger Sub has not
and will not have incurred, directly or indirectly through any subsidiary
or affiliate, any obligations or liabilities or engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
(d) Digi will take all action necessary to ensure that Merger Sub at no
time prior to the Effective Time owns any asset other than an amount of
cash necessary to incorporate Merger Sub and to pay the expenses of the
Merger attributable to Merger Sub in connection with the Merger.
6.5 SEC REPORTS; FINANCIAL STATEMENTS; CAPITALIZATION.
(a) Since October 1, 1997, Digi has filed with the SEC all reports
(Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K), definitive proxy statements and portions of the
Annual Report to Stockholders to the extent filed under the Securities
Exchange Act, in each case required to be filed by it pursuant to the
Securities Exchange Act, all of which complied as to form in all
20
material respects with all applicable requirements of the Securities
Exchange Act (collectively, the "DIGI SEC REPORTS"). True and correct
copies of the Digi SEC Reports have been furnished to CDC. None of the
Digi SEC Reports, including without limitation any financial statements or
schedules included therein, at the time filed contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(b) The consolidated statements of financial position and the related
consolidated statements of income, stockholders' equity and cash flows
(including the related notes thereto) of Digi included in the Digi SEC
Reports (the "DIGI FINANCIAL STATEMENTS") complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, are in accordance
with the books and records of Digi, have been prepared in accordance with
US GAAP applied on a basis consistent with prior periods (except as
otherwise noted therein), and present fairly the consolidated financial
position of Digi and its consolidated subsidiaries as of their respective
dates, and the consolidated results of their operations and their cash
flows for the periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
(c) The authorized capital stock of Digi is as set forth in the Digi
Financial Statements.
6.6 STOCK OPTION PLAN REGISTRATION. Digi has filed and caused to
become effective registration statements on Form S-8 promulgated by the SEC,
covering Digi Common Shares issued pursuant to the Digi International Inc. Stock
Option Plan and the Digi International Inc. Non-Officer Stock Option Plan.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Digi SEC Reports or the DIGI DISCLOSURE SCHEDULE or as contemplated by the Digi
Financial Statements and except for the transactions contemplated hereby, since
March 31, 1998, the business of Digi has been carried on only in the ordinary
and usual course, and there has been no Material Adverse Change with regard to
Digi since March 31, 1998.
6.8 BROKERS. No broker, finder or investment banker other than Bear,
Xxxxxxx & Co., Inc. is entitled to any brokerage, finder's or other fee or
commission in connection with the transaction's contemplated by this Agreement
based upon arrangements made by or on behalf of Digi or any Digi Subsidiary.
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ARTICLE VII
CERTAIN COVENANTS
7.1 CONDUCT OF CDC'S BUSINESS PENDING THE MERGER. CDC agrees that,
from the date hereof to the Effective Time, except (i) for entering into this
Agreement and consummating the transactions expressly contemplated hereby,
(ii) to the extent that Digi shall otherwise consent in writing:
(a) CDC shall, and shall cause each CDC Subsidiary to, operate its
business substantially as presently planned or operated and only in the
ordinary, usual and customary manner, and, consistent with such operation,
use its reasonable efforts to preserve intact its present business
organization and its relationships with persons having business
relationships with it.
(b) No amendment shall be made to the Certificate of Incorporation or
the By-Laws of CDC.
(c) There shall be no changes in the number of shares, par value or
class of authorized or issued capital stock of CDC, except as a result of
the exercise of presently exercisable options to purchase CDC Shares. In
addition, CDC shall not grant any option, warrant, convertible security, or
other right to acquire any shares of capital stock of CDC.
(d) There shall not be any declaration or payment of any dividend or
other distribution in respect to the capital stock of CDC.
(e) CDC shall not, and shall not permit any CDC Subsidiary to,
(i) except pursuant to outstanding offers of employment, enter into any
employment contract or consulting agreement or make any new offer of
employment to any person or offer to engage any person as a consultant, or
(ii) increase the wages, salary, fees or other compensation of any
person(s) presently employed or rendering any service(s) to CDC or any CDC
Subsidiary.
(f) Except in the ordinary course of business, CDC shall not, and shall
not permit any CDC Subsidiary to, enter into, materially amend or renew, or
waive or release any rights of material value under, or default on, any CDC
Material Contract.
7.2 BOOKS AND RECORDS; ACCESS AND INFORMATION. From the date of this
Agreement until the Effective Time, CDC shall give, and cause each of the CDC
Subsidiaries to give, to Digi and Digi's officers and representatives reasonable
access to its premises, books and records, and provide Digi with such financial
and operating data and other information with respect to its business and
properties as Digi shall from time to time reasonably request, including,
without limitation, all interim financial data as soon as it becomes available;
22
provided, however, that any such investigation shall be conducted in such manner
as not to interfere unreasonably with the operation of the business of CDC and
the CDC Subsidiaries.
7.3 NOTIFICATION OF CERTAIN MATTERS. Subsequent to the date of this
Agreement and on or prior to the Effective Time, CDC and Digi shall each
promptly notify the other of:
(a) the receipt of any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become
a default, under any material agreement to which it is a party or to which
it or any of its respective material properties or assets may be subject or
bound;
(b) the receipt of any notice or other communication from any third
party whose consent or approval is or may be required in connection with
the transactions contemplated by this Agreement, denying such consent or
approval;
(c) the receipt of any notice or other communication from any
governmental regulatory agency or authority in connection with the
transactions contemplated hereby;
(d) any material adverse change in its consolidated business, financial
condition, operating results, assets, business prospects, management,
employee relations or customer relations, or the occurrence of an event or
development which, so far as reasonably can be foreseen at the time of its
occurrence, could result in any such change; or
(e) any condition or fact which would not permit it to satisfy a
condition to the other's obligation to effect the transactions contemplated
hereby, including the Merger.
7.4 CONFIDENTIALITY. Each of the parties hereto agrees that it shall
remain bound by the Non-Disclosure Agreement dated April 22, 1998 through the
Effective Time, at which time such agreement shall expire.
7.5 NASDAQ LISTING. Digi will cause the Digi Common Shares issuable in
the Merger to be listed on the Nasdaq Stock Market.
7.6 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its reasonable efforts to satisfy as promptly as
practicable all conditions to Closing set forth in this Agreement that are
within such party's control.
7.7 SEVERANCE; BONUSES. Digi agrees that each employee of CDC at the
Effective Time whose employment is terminated by CDC (other than for cause) on
or after the Effective Time and prior to January 1, 1999, shall be entitled to
receive a severance payment equal to three weeks of base salary for each year or
portion thereof that the employee had been employed by CDC as of June 30, 1998
(but not less than 17 weeks). Digi agrees to
23
make, or cause to be made, such payment to each employee in bi-weekly
installments during the period for which he or she is entitled to severance.
Digi agrees that any employee bonuses to be accrued at the Effective Time shall
be calculated prior to expenses related to the Merger, and Digi agrees to cause
CDC to pay such bonuses on the later of September 30, 1998 or the applicable
employee's last day of employment.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATION OF DIGI AND MERGER SUB TO CLOSE. The
obligation of Digi and Merger Sub to effect the closing of the transactions
contemplated by this Agreement is subject to the satisfaction prior to or at the
Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of CDC under this Agreement shall be true and correct in all material
respects as of the Closing Date with the same effect as though made on and
as of the Closing Date other than such representations and warranties as
are made as of another date, which shall be true and correct as of such
date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 8.1(a) has been satisfied with respect to such portion
of such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects).
(b) OBSERVANCE AND PERFORMANCE. CDC shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed and complied with by it prior to or as of the
Closing Date.
(c) NO ADVERSE CHANGE. Except as otherwise disclosed or contemplated
in this Agreement (including the CDC Disclosure Schedules), there shall
have occurred no Material Adverse Change with regard to CDC since May 2,
1998.
(d) OFFICERS' CERTIFICATE. CDC shall have delivered to Digi a
certificate, dated the Closing Date, executed by the Chief Executive
Officer and President/Chief Operating Officer of CDC and certifying to the
satisfaction of the conditions specified in Sections 8.1(a), (b) and (c)
hereof.
(e) CONSENTS OF THIRD PARTIES. Digi shall have received duly executed
copies of all consents and approvals of third parties to the transactions
contemplated hereby referred to in CDC DISCLOSURE SCHEDULE 5.4.
(f) LEGAL OPINION. Digi shall have received an opinion, dated the
Closing Date, from Xxxxxx & Xxxxxxx LLP, counsel to CDC, substantially in
the form attached hereto as EXHIBIT B.
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(g) SURRENDER OF CERTIFICATES. The CDC stockholders who consented in
writing to approve this Agreement and the transactions contemplated hereby
in lieu of a special meeting of stockholders of CDC shall have surrendered
Certificates representing all of their CDC Shares to the Transfer Agent for
cancellation after the Effective Time.
(h) CLOSING DOCUMENTS. Digi shall have received such further
instruments and documents as may be reasonably required for CDC to
consummate the transactions contemplated hereby.
(i) EMPLOYMENT AGREEMENTS. Digi shall have entered into an employment
agreement with each of Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxxxx, in a form
mutually acceptable to Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxxxx,
respectively, and Digi.
(j) INDEMNIFICATION AGREEMENT. Digi and Xxxxxxx X. Xxxxxx shall have
entered into an Indemnification Agreement in the form attached as Exhibit
C.
(k) NO LEGAL ACTIONS. No court or governmental authority of competent
jurisdiction shall have issued an order, not subsequently vacated,
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and no person shall have
instituted an action or proceeding which shall not have been previously
dismissed seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement or seeking damages with respect
thereto.
(l) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be reasonably satisfactory
in form and substance to Digi and its counsel.
8.2 CONDITIONS TO OBLIGATION OF CDC TO CLOSE. The obligation of CDC to
effect closing of the transactions contemplated by this Agreement is subject to
the satisfaction prior to or at the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Digi and Merger Sub under this Agreement shall be true and correct as of
the Closing Date with the same effect as though made on and as of the
Closing Date other than such representations and warranties as are made as
of another date, which shall be true and correct as of such date (provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this
Section 8.2(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects).
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(b) OBSERVANCE AND PERFORMANCE. Digi and Merger Sub shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed and complied with by
them prior to or as of the Closing Date.
(c) NO ADVERSE CHANGE. Except as otherwise disclosed or contemplated
in this Agreement (including the Digi Disclosure Schedule) there shall have
occurred no Material Adverse Change with regard to Digi since March 31,
1998.
(d) OFFICERS' CERTIFICATE. Digi shall have delivered to CDC a
certificate, dated the Closing Date, executed by the Chairman of the Board
or President and the Chief Financial Officer of Digi and certifying to the
satisfaction of the conditions specified in Sections 8.2(a), (b) and (c)
hereof.
(e) LEGAL OPINION. CDC shall have received an opinion, dated the
Closing Date, from Faegre & Xxxxxx LLP, counsel to Digi and Merger Sub,
substantially in the form attached hereto as EXHIBIT D.
(f) NO LEGAL ACTIONS. No court or governmental authority of competent
jurisdiction shall have issued an order, not subsequently vacated,
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and no person shall have
instituted an action or proceeding which shall not have been previously
dismissed seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement or seeking damages with respect
thereto.
(g) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be reasonably satisfactory
in form and substance to CDC and its counsel.
ARTICLE IX
REGISTRATION RIGHTS
9.1 REQUIRED REGISTRATION. Digi shall promptly prepare and file (in
any event no later than 45 days of the Closing) a registration statement under
the Securities Act covering the Digi Common Shares issued in the Merger and
shall use its best efforts to cause such registration statement to become
effective. Digi shall be obligated to prepare, file and cause to become
effective only one registration statement (on Form S-3 or any successor form
promulgated by the SEC ("FORM S-3")) pursuant to this Section 9.1, and to pay
the expenses associated with such registration statement. In the event that
Digi shall not be eligible to use Form S-3, Digi shall be obligated to prepare,
file and cause to become effective one
26
registration statement on Form X-0, X-0 or other applicable form or any other
successor form promulgated by the SEC at Digi's election, in which case
references herein to "Form S-3" shall be deemed to refer to such other form. In
Digi's sole discretion, such registration statement may include Digi Common
Shares held by other Digi stockholders having registration rights.
9.2 REGISTRATION PROCEDURES. Digi will:
(a) prepare and file with the SEC a registration statement with respect
to the Digi Common Shares issued in the Merger, and use its best efforts to
cause such registration statement to become and remain effective until the
earlier of one year from the Effective Time or the date that all Digi
Common Shares registered on such registration statement have been sold;
(b) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for such period as
may be reasonably necessary to effect the sale of such securities, not to
exceed one year from the Effective Time;
(c) furnish to the security holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus,
final prospectus and such other documents as such security holders or
underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or qualify the securities covered
by such registration statement under such state securities or blue sky laws
of such jurisdictions as such participating holders may reasonably request
in writing, except that Digi shall not for any purpose be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by SEC for the amending
or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of any
such holders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for such holders (and
concurred in by counsel for Digi), is
27
required under the Securities Act in connection with the distribution of
the Digi Common Shares by such holder;
(h) prepare and promptly file with the SEC and promptly notify such
holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading;
(i) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued;
(j) not file any amendment or supplement to such registration statement
or prospectus to which a majority in interest of such holders shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Securities
Act, after having been furnished with a copy thereof at least five business
days prior to the filing thereof, unless in the opinion of counsel for Digi
the filing of such amendment or supplement is reasonably necessary to
protect Digi from any liabilities under any applicable federal or state law
and such filing will not violate applicable law; and
(k) at the request of any such holder, furnish: (i) an opinion, dated
as of the date of closing, of the counsel representing Digi for the
purposes of such registration, addressed to the underwriters, if any, and
to the holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request; and (ii) letters
dated as of the effective date of the registration statement and as of the
date of closing, from the independent certified public accountants of Digi,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request.
9.3 EXPENSES. With respect to such registration, Digi shall bear the
following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for Digi,
all internal Digi expenses, and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified. Fees and disbursements of counsel and accountants for the selling
security holders, underwriting discounts and commissions and transfer taxes and
any other expenses incurred
28
by the selling security holders not expressly included above, shall be borne by
the selling security holders.
9.4 INDEMNIFICATION. With respect to such registration:
(a) Digi will indemnify and hold harmless each holder of Digi Common
Shares which are included in a registration statement pursuant to the
provisions of this Article IX, its directors and officers, and any
underwriter (as defined in the Securities Act) for such holder and each
person, if any, who controls such holder or such underwriter within the
meaning of the Securities Act, from and against, and will reimburse such
holder and each such underwriter and controlling person with respect to,
any and all loss, damage, liability, cost and expense to which such holder
or any such underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities,
costs or expenses are caused by any untrue statement or alleged untrue
statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that Digi will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by such holder, such underwriter or such controlling
person in writing specifically for use in the preparation thereof.
(b) Each holder of Digi Common Shares which are included in a
registration pursuant to the provisions of this Article IX will indemnify
and hold harmless Digi, its directors and officers, any controlling person
and any underwriter from and against, and will reimburse Digi, its
directors and officers, any controlling person and any underwriter with
respect to, any and all loss, damage, liability, cost or expense to which
Digi or any controlling person and/or any underwriter may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity
with written information furnished by such holder specifically for use in
the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 9.4 of notice of the
commencement of any action
29
involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said paragraph (a) or (b),
promptly notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party pursuant to the provisions of said paragraph (a) or
(b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the proviso of the preceding
sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time notwithstanding approval of
the Merger by the stockholders of CDC:
(a) by mutual consent of the Boards of Directors of Digi and CDC;
(b) by either Digi or CDC if (i) any of the conditions to their
respective obligations specified in Article VIII hereof have not been
satisfied or waived prior to July 31, 1998, or (ii) the Merger shall not
have been consummated on or before July 31, 1998; provided, however, that
the right to terminate this Agreement pursuant
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to this Section 10.1(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement shall have been the cause
of, or resulted in, the failure to satisfy any of the conditions specified
in Article VIII that are required to have been satisfied prior to the
Merger or the failure to consummate the Merger.
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement by either Digi or CDC, as provided above, this Agreement shall
thereafter become void and there shall be no liability on the part of any party
hereto or their respective directors, officers, stockholders or agents, except
as provided in Sections 7.4 and 11.2 hereof and except that any such termination
shall be without prejudice to the rights of any party hereto arising out of the
willful breach by any other party of any covenant or agreement contained in this
Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Digi and CDC in this Agreement shall terminate immediately
upon the Effective Time.
11.2 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses (including without limitation the fees and expenses of investment
bankers, attorneys and accountants) incurred in connection with this Agreement
and the transactions contemplated hereby shall be born by the party incurring
such costs and expenses.
11.3 NOTICES. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, by registered or certified mail (postage prepaid,
return receipt requested) or by overnight delivery by a nationally recognized
courier service to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 11.3):
(a) If to Digi or Merger Sub to:
Digi International Inc.
00000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telecopy: (000) 000-0000
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with copy to:
Digi International Inc.
00000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
and to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
(b) If to CDC to:
Central Data Corporation
0000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
All notices and other communications shall be conclusively deemed to be received
and shall be effective, (a) if sent by hand delivery, upon receipt, (b) if sent
by registered or certified mail, on the tenth day after the day on which such
notice is mailed, (c) if sent for overnight delivery by a nationally recognized
courier service (such as Federal Express), on the third business day after the
day on which notice is sent, or (d) if sent by telecopy, on the first business
day following the successful transmission of such notice or communication to the
telecopier of the intended recipient (the number of which has been set forth
herein).
11.4 AMENDMENTS. This Agreement may be amended by all the parties
hereto by action taken by their respective Boards of Directors without any
further approval of the stockholders of CDC, except as otherwise required by
law. This Agreement may not be amended, modified or supplemented except by
written agreement of the parties hereto.
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11.5 WAIVER. At any time prior to the Effective Time, Digi or CDC may
(i) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the obligations of the
other party or any of the conditions to its own obligations contained herein to
the extent permitted by law. Any agreement on the part of Digi and CDC to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the parties to be bound thereby.
11.6 CERTAIN DEFINITIONS. For purpose of this Agreement, the term:
(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "BENEFIT ARRANGEMENT" means, with respect to any person, each
employment, severance or other similar contract, arrangement or policy
(written or oral) and each plan or arrangement (written or oral) providing
for severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation
rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an Employee Plan, and
(ii) covers any employee, former employee (or beneficiary of any employee
or former employee) of such person or any subsidiary of such person;
(c) "CODE" means the United States Internal Revenue Code of 1986, as
amended;
(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly as trustee or
executor, of the power to direct or cause the direction of the management
and policies of a person, whether through ownership of voting securities,
as trustee or executor, by contract or credit arrangement or otherwise;
(e) "DIGI DISCLOSURE SCHEDULE" means the disclosure schedule of Digi
attached hereto, dated as of the date hereof, and forming a part of this
Agreement;
(f) "EMPLOYEE PLAN" means, with respect to any person, each "employee
benefit plan," as such term is defined in Section 3(3) of ERISA, that
(i) is subject to any provision of ERISA and (ii) is maintained or
contributed to by such person, any subsidiary of such person or any of
their ERISA Affiliates;
(g) "ERISA" means the United States Employee Retirement Income Security
Act of 1974, as amended;
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(h) "ERISA AFFILIATES" of any entity means any other entity that,
together with such entity, would be treated as a single employer under
Section 414 of the Code;
(i) "FOREIGN BENEFIT PLAN" means, with respect to any such person, any
Benefit Arrangement of such person or any subsidiary of such person that is
not subject to the laws of the United States;
(j) "CDC DISCLOSURE SCHEDULES" or "CDC DISCLOSURE SCHEDULE" means the
disclosure schedules, or any one of such disclosure schedules, of CDC,
attached hereto, dated as of the date hereof, and forming a part of this
Agreement;
(k) "KNOWLEDGE" means the actual knowledge of the executive officers of
the respective party and its subsidiaries;
(1) "MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" mean, with
respect to any person, any change or effect that is or is reasonably likely
to be materially adverse to the business, operation, properties, condition
(financial or otherwise), assets or liabilities (including, without
limitation, contingent liabilities) or prospects of such person and its
subsidiaries (if any) taken as a whole;
(m) "MULTIEMPLOYER PLAN" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA;
(n) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d) of the Securities Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government;
(o) "RETURNS" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes, and "Return"
means any one of the foregoing;
(p) "SEC" means the United States Securities and Exchange Commission.
(q) "SECURITIES ACT" means the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(r) "SECURITIES EXCHANGE ACT" means the United States Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(s) "SUBSIDIARY" or "SUBSIDIARIES" of any person means an Affiliate
controlled by such person, directly or indirectly, through one or more
intermediaries; and
(t) "TAXES" means all United States federal, state, local, foreign and
other net income, gross income, gross receipts, sales, use ad valorem,
transfer, franchise,
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profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs duties, value added, business enterprise, capital
or other taxes, fees, assessments or other charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts with respect thereto.
11.7 PUBLICITY. No party other than Digi shall make any public
announcement or issue any press release concerning the transactions contemplated
by this Agreement, and any public announcement or press release by Digi shall
require the prior approval of CDC both as to the making of such announcement or
release and as to the form and content thereof, except to the extent that Digi
is advised by counsel, in good faith, that such announcement or release is
required as a matter of law or under the rules of The Nasdaq Stock Market and
full opportunity for prior consultation is afforded to CDC to the extent
practicable.
11.8 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.9 NONASSIGNABILITY. This Agreement shall not be assigned by
operation of law or otherwise.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto, and nothing in this
Agreement, expressed or implied, is intended to confer upon any other person any
rights or remedies of any nature under or by reason of this Agreement (which is
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons); provided, however, that subject to and upon
consummation of the Merger, the provisions of Article IX shall benefit and may
be enforced by former stockholders of CDC and their heirs, representatives,
successors and permitted assigns, and provided further that subject to and upon
consummation of the Merger, the provisions of Section 7.7 hereof shall benefit
and may be enforced by employees and former employees of CDC and their heirs,
representatives, successors and permitted assigns.
11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto.
11.12 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without regard
to its conflicts of law rules. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any state or federal
court sitting in the City of Wilmington, State of Delaware.
11.13 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other
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conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the Merger is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
11.14 REMEDIES. Nothing contained herein is intended to or shall be
construed so as to limit the remedies which either party may have against the
other in the event of a breach of any representation, warranty, covenant or
agreement made under or pursuant to this Agreement, it being intended that any
remedies shall be cumulative and not exclusive.
11.15 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and, other than the Non-Disclosure Agreement referred
to in Section 7.4 hereof, which shall continue until the Effective Time,
supersedes all prior agreements and understandings, oral or written, among the
parties hereto with respect to the subject matter hereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of Digi, Merger Sub and CDC on the date first above
written.
DIGI INTERNATIONAL INC. CENTRAL DATA CORPORATION
By: /s/ Xxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------------- -------------------------------
Xxxxx X. Xxxx Xxxxxxx X. Xxxxxx
President and Chief Executive Chairman and Chief Executive
Officer Officer
CD ACQUISITION INC.
By: /s/ Xxxxx X. Xxxx
-------------------------------
Xxxxx X. Xxxx
President and Chief Executive Officer
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