EXHIBIT 1
---------
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED OCTOBER 13, 1995
AMONG
STRATEGIC TECHNOLOGIES INC.,
AND
STRATEGIC FLORIDA INC.
AND
DIGITAL PRODUCTS CORPORATION
================================================================================
T A B L E O F C O N T E N T S
--------------------------------------------------------------------------------
Page
ARTICLE 1
THE MERGER
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 2
Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . 3
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 3
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 5
Effect of Merger on Digital Options . . . . . . . . . . . . . . . . . 7
Effect of Merger on Digital Warrants . . . . . . . . . . . . . . . . . 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of Digital . . . . . . . . . . . . . . 8
Representations and Warranties of Strategic . . . . . . . . . . . . . 18
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 27
No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 5
ADDITIONAL AGREEMENTS
Preparation of Form F-4 and the Joint Proxy Statement; Stockholders'
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Letter of Digital's Accountants . . . . . . . . . . . . . . . . . . . 34
Letter of Strategic's Accountants . . . . . . . . . . . . . . . . . . 34
Access to Information; Confidentiality . . . . . . . . . . . . . . . . 34
Best Efforts; Notification . . . . . . . . . . . . . . . . . . . . . . 35
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . 37
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 39
Affiliates and Certain Stockholders . . . . . . . . . . . . . . . . . 39
Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . 39
Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 6
CONDITIONS PRECEDENT
Conditions to Each Party's Obligation to Effect the Merger . . . . . . 40
Conditions to Obligations of Strategic and Merger Sub . . . . . . . . 40
Conditions to Obligations of Digital . . . . . . . . . . . . . . . . . 42
Frustration of Closing Condition . . . . . . . . . . . . . . . . . . . 43
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . 45
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Procedure for Termination, Amendment, Extension or Waiver . . . . . . 45
ARTICLE 8
GENERAL PROVISIONS
Nonsurvival of Representations and Warranties . . . . . . . . . . . . 46
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . 48
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Execution and Attestation . . . . . . . . . . . . . . . . . . . . . . 49
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") made as of October 13, 1995
AMONG:
STRATEGIC TECHNOLOGIES INC., a British Columbia, Canada
corporation
("Strategic")
AND:
STRATEGIC FLORIDA INC., a Florida corporation wholly owned
by Strategic
("Merger Sub")
AND:
DIGITAL PRODUCTS CORPORATION, a Florida corporation
("Digital")
WHEREAS:
(A) The boards of directors of each of Strategic and Digital have
determined that a business combination between them is in the best interests of
their respective companies and shareholders and presents an opportunity for
their respective companies to achieve long term strategic and financial benefits
and accordingly have agreed to effect the merger provided for herein upon the
terms and subject to the conditions set forth herein;
(B) Strategic and Digital executed a letter agreement dated August 1, 1995
as amended or extended on August 31, 1995, September 15, 1995, September 22,
1995 and October 6, 1995, respecting the business combination which this
Agreement is to supersede;
NOW THEREFORE, in consideration of the foregoing and of the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE (1)
THE MERGER
The Merger
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Florida Business Corporations Act (the
"Florida Code"), Merger Sub shall be merged with and into Digital at the
Effective Time of the Merger (as defined in Section 1.3). Following the
Effective Time of the Merger, the separate corporate existence of Merger Sub
shall cease and Digital shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with the Florida Code.
Closing
1.2 The closing of the Merger (the "Closing") will take place at 10:00 a.m. on
a date to be specified by the parties (the "Closing Date"), which (subject to
satisfaction or waiver of the conditions set forth in Section 6.2 and Section
6.3) shall be no earlier than December 20th, 1995, and no later than the second
business day after satisfaction of the conditions set forth in Section 6.1, at
the offices of Lang Xxxxxxxx Xxxxxxxx & Xxxx at the address set forth in Section
8.2, unless another date or place is agreed to in writing by the parties hereto.
Effective Time
1.3 Subject to the provisions of this Agreement, as soon as practicable
following the satisfaction or waiver of the conditions set forth in Article 6,
the parties shall file a certificate of merger, articles of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the Florida Code and shall make
all other filings or recordings required under the Florida Code. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Florida, or at such other time as
Merger Sub and Digital shall agree should be specified in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time of the Merger").
Effects of the Merger
1.4 The Merger shall have the effects set forth in Section 607.1106 of the
Florida Code.
Articles of Incorporation and By-Laws
1.5 (a) The articles of incorporation of Digital, as in effect immediately
prior to the Effective Time of the Merger, shall not be amended as of the
Effective Time of the Merger and such articles of incorporation shall be
the articles of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The by-laws of Digital as in effect at the Effective Time of the
Merger shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
Directors
1.6 The directors of Digital at the Effective Time of the Merger shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Officers
1.7 The officers of Digital at the Effective Time of the Merger shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Effect on Capital Stock
2.1 As of the Effective Time of the Merger, by virtue of the Merger and
without any action on the part of the holder of any shares of Digital Common
Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each of the issued and outstanding 100
shares of capital stock of Merger Sub shall be converted into and become
one fully paid and non-assessable share of Common Stock, par value $0.025
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Digital Common Stock
that is owned by Digital or by any subsidiary (as defined in Section 8.3)
of Digital shall automatically be cancelled and retired and shall cease to
exist, and no Strategic Common Stock or other consideration shall be
delivered in exchange therefor.
(c) Conversion of Digital Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of Digital Common Stock (other than shares to
be cancelled in accordance with Section 2.1(b)) shall be converted into the
right to receive .379291 of a fully paid and non-assessable share of
Strategic Common Stock (the "Exchange Ratio"). As of the Effective Time of
the Merger, all such shares of Digital Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Digital Common Stock shall cease to have any rights with respect
thereto, except the right to receive the shares of Strategic Common Stock
to be issued or in consideration therefor upon surrender of such
certificate in accordance with Section 2.2.
(d) Adjustment of Exchange Ratio. If, prior to the Effective Time,
Strategic recapitalizes through a subdivision of its outstanding shares
into a greater number of shares, or a combination of its outstanding shares
into a lesser number of shares, or reorganizes, reclassifies or otherwise
changes its outstanding shares into the same or a different number of
shares or other classes, or declares a dividend on its outstanding shares
payable in shares of its capital stock or securities convertible into
shares of its capital stock, then the Exchange Ratio will be adjusted
appropriately so as to maintain the relative proportionate interests of the
holders of Strategic Common Stock and Digital Common Stock as of the date
of this Agreement.
(e) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Digital Common Stock outstanding immediately prior to
the Effective Time of the Merger held by a holder (if any) who is entitled
to demand, and who properly demands, appraisal for such shares in
accordance with Section 607.1302 to 607.1320 of the Florida Code
("Dissenting Shares") shall not be converted into a right to receive Common
Stock of Strategic Common Stock unless such holder fails to perfect or
otherwise loses such holder's right to appraisal, if any. If, after the
Effective time of the Merger, such holder fails to perfect or loses any
such right to appraisal, such shares shall be treated as if they had been
converted as of the Effective Time of the Merger into the right to receive
Strategic Common Stock pursuant to Section 2.1(c). Digital shall give
prompt notice to Strategic of any demands received by Digital for appraisal
of shares of Digital Common Stock, and Strategic shall have the right to
participate in and direct all negotiations and proceedings with respect to
such demands. Digital shall not, except with the prior written consent of
Strategic, make any payment with respect to, or settle or offer to settle,
any such demands.
Exchange of Certificates
2.2 (a) Exchange Agent. As of the Effective Time of the Merger, Strategic
shall deposit with The Montreal Trust Company of Canada or such other bank
or trust company as may be designated by Strategic and reasonably
acceptable to Digital (the "Exchange Agent"), for the benefit of the
holders of shares of Digital Common Stock, for exchange in accordance with
this Article 2, through the Exchange Agent, certificates representing the
shares of Strategic Common Stock (such shares of Strategic Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Digital Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time of the Merger represented outstanding shares of Digital
Common Stock (the "Certificates") whose shares were converted into the
right to receive shares of Strategic Common Stock pursuant to Section 2.1,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Strategic may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Strategic
Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Strategic, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of
Strategic Common Stock which such holder has the right to receive pursuant
to the provisions of this Article 2, and the Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of record of
Digital Shares, a certificate representing the proper number of shares of
Strategic Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or
other taxes required by reason of the issuance of shares of Strategic
Common Stock to a person other than the registered holder of such
Certificate or establish to the satisfaction of Strategic that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive upon
such surrender the certificate representing shares of Strategic Common
Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Strategic Common Stock with a record
date after the Effective Time of the Merger shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Strategic
Common Stock represented thereby until the surrender of such Certificate in
accordance with this Article 2. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of Strategic Common
Stock issued in exchange therefor, without interest, (i) the amount of
dividends or other distributions with a record date after the Effective
Time of the Merger theretofore paid with respect to such whole shares of
Strategic Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time of the Merger but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole shares
of Strategic Common Stock.
(d) No Further Ownership Rights in Digital Common Stock. All shares of
Strategic Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article 2 (including any
cash paid pursuant to Section 2.2(c)) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Digital Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
of the Merger which may
have been declared or made by Digital on such shares of Digital Common
Stock in accordance with the terms of this Agreement or prior to the date
of this Agreement and which remain unpaid at the Effective Time of the
Merger, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Digital
Common Stock which were outstanding immediately prior to the Effective Time
of the Merger. If, after the Effective Time of the Merger, Certificates
are presented to the Surviving Corporation or the Exchange Agent for any
reason, they shall be cancelled and exchanged as provided in this Article
2, except as otherwise provided by law.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Strategic Common Stock shall be issued upon the
surrender for exchange of Certificates. Any holder of Digital Common Stock
who would otherwise receive a fractional share shall, upon surrender of
such shareholder's certificate or certificates representing Strategic
Common Stock, receive a share certificate adjusted to the next higher whole
number of Strategic Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months
after the Effective Time of the Merger shall be delivered to Strategic,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Article 2 shall thereafter look only to Strategic for
payment of their claim for Strategic Common Stock and any dividends or
distributions with respect to Strategic Common Stock.
(g) No Liability. None of Strategic, Merger Sub, Digital or the Exchange
Agent shall be liable to any person in respect of any shares of Strategic
Common Stock (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered prior to seven years after the Effective
Time of the Merger (or immediately prior to such earlier date on which any
shares of Strategic Common Stock, any dividends or distributions with
respect to Strategic Common Stock in respect of such Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.1(d)), any such shares, cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted
by applicable law, become the property of the Surviving Corporation, free
and clear of all claims or interest of any person previously entitled
thereto.
Effect of Merger on Digital Options
2.3 Digital shall cause all options to purchase shares of Digital Common
Stock (each, a "Digital Stock Option") to terminate as of the Effective Time (if
not exercised prior to such time) and the holder of any such Digital Stock
Option shall have no further rights except as otherwise provided in the
applicable Digital Stock Option agreement. Each stock option plan of Digital
shall automatically terminate at the Effective Time, and participants in such
plans shall have no further rights thereunder. Digital shall deliver to holders
of Digital Stock Options appropriate notices describing the treatment of the
options held by such holder.
Effect of Merger on Digital Warrants
2.4 As of the date of this Agreement, Digital has outstanding 750,000
warrants to purchase Digital Common Stock with the exercise price of $2.00 and
the termination date of November 22, 1996 (the "Acorn Warrants") and 1,955,000
warrants to purchase Digital Common Stock with the exercise price of $25.00 and
the termination date of February 7, 1997 (the "Class B Warrants"). As of the
Effective Time of the Merger, each of the Acorn Warrants and the Class B
Warrants shall be assumed by Strategic by written agreement in accordance with
the terms and conditions of such warrants. At least fifteen days prior to the
Effective Date, Digital shall send to each of the holders of the Acorn Warrants
and the Class B Warrants a notice containing a brief description of the Merger
and the effect of the Merger on such warrants, as well as a copy of the written
agreement of Strategic pursuant to which Strategic will assume such warrants as
of the Effective Time of the Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of Digital
3.1 Except as set forth on the Disclosure Schedule delivered by Digital to
Strategic prior to the execution of this Agreement and attached hereto (the
"Digital Disclosure Schedule") or except as disclosed in a document delivered to
Strategic and set forth on the Document Delivery index dated the date hereof,
Digital represents and warrants to Strategic and Merger Sub as follows:
(a) Organization, Standing and Corporate Power. Each of Digital and each
of its subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry
on its business as now being conducted. Each of Digital and each of its
subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so qualified or licensed individually or in the aggregate would not have
a material adverse effect on Digital. Digital has delivered to Strategic
complete and correct copies of its articles of incorporation and by-laws
and the certificates of incorporation and by-laws of its subsidiaries, in
each case as amended to the date hereof.
(b) Subsidiaries. Digital's Form 10-K for the fiscal year ended March 31,
1995 lists each subsidiary of Digital. All the outstanding shares of
capital stock of each such subsidiary have been validly issued and are
fully paid and non-assessable and are owned by Digital, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"). Except for the
capital stock of its subsidiaries, Digital does not own, directly or
indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of Digital consists
of 50,000,000 shares of Digital Common Stock, par value $.025 per share.
At the close of business on October 6, 1995, (i) 11,589,267 shares of
Digital Common Stock were issued and outstanding, (ii) 40,061 shares of
Digital Common Stock were held by Digital in its treasury, (iii) 1,818,980
shares of Digital Common Stock were reserved for issuance pursuant to the
Stock Plans (as defined in Section 5.6) and (iv) 2,705,000 shares of
Digital Common Stock were reserved for issuance upon exercise of Digital's
outstanding share purchase warrants ("Digital Warrants"). Except as set
forth above, at the close of business on October 6, 1995, no shares of
capital stock or other voting securities of Digital were issued, reserved
for issuance or outstanding. All outstanding shares of capital stock of
Digital are, and all shares which may be issued pursuant to the Stock Plans
will be, when issued, duly authorized, validly issued, fully paid and non-
assessable and not subject to pre-emptive rights. There are no bonds,
debentures, notes or other indebtedness of Digital having the right to vote
(or, except for the Digital Warrants, convertible into, or exchangeable
for, securities having the right to vote) on any matters on which
stockholders of Digital may vote. Except as set forth above, as of the
date hereof, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which Digital or any of its subsidiaries is a party or by which any of
them is bound obligating Digital or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Digital or of any of
its subsidiaries or obligating Digital or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. As of the date
of this Agreement, there are not any outstanding contractual obligations of
Digital or any of its subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of Digital or any of its subsidiaries.
There are not any outstanding contractual obligations of Digital to vote or
to dispose of any shares of the capital stock of any of its subsidiaries.
(d) Authority; Noncontravention. Digital has the requisite corporate
power and authority to enter into this Agreement and, subject to Digital
Stockholder Approval with respect to the Merger, to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement by Digital and the consummation by Digital of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Digital, subject, in the case
of the Merger, to Digital Stockholder Approval. This Agreement has been
duly executed and delivered by Digital and constitutes a valid and binding
obligation of Digital, enforceable against Digital in accordance with its
terms. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Digital or any of its subsidiaries under, (i) the
articles of incorporation or by-laws of Digital or the comparable charter
or organizational documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to Digital or any of its subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Digital or any of
its subsidiaries or their respective properties or assets, other than, in
the case of clause (ii), any such conflicts, violations, defaults, rights
or Liens that individually or in the aggregate would not (x) have a
material adverse effect on Digital, (y) impair the ability of Digital to
perform its obligations under this Agreement or (z) prevent the
consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any Federal, state, local or foreign government or any
court, administrative agency or commission or other governmental authority
or agency, domestic or foreign (a "Government Entity"), is required by or
with respect to Digital or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Digital or the consummation by
Digital of the transactions contemplated by this Agreement, except for (1)
the filing with the Securities and Exchange Commission (the "SEC") of (A) a
proxy statement relating to Digital Stockholder Approval (such proxy
statement, together with the proxy statement relating to Strategic
Stockholder Approval, in each case as amended or supplemented from time to
time, the "Joint Proxy Statement"), and (B) such reports under Section
13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (2) the filing of the
Certificate of Merger with the Secretary of State of the State of Florida
and appropriate documents with the relevant authorities of other states in
which Digital is qualified to do business, (3) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the laws of any foreign country in which Digital, Strategic
or any of their respective subsidiaries conducts any business or owns any
property or assets or (4) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as would not
individually or in the aggregate (A) have a material adverse effect on
Digital, (B) impair the ability of Digital to perform its obligations under
this Agreement or (C) prevent the consummation of any of the transactions
contemplated by this Agreement.
(e) SEC Documents; Undisclosed Liabilities. Digital has filed all
required reports, schedules, forms, statements and other documents with the
SEC since March 31, 1990 (the "SEC Documents"). As of their respective
dates, to the knowledge of Digital the SEC Documents filed with the SEC
between March 31, 1990 and September 30, 1993 complied in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
SEC Documents. To the knowledge of Digital, none of the SEC Documents
filed with the SEC between March 31, 1990 and September 30, 1993 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, except to the extent that information contained in any SEC
Document has been revised or superseded by a later Filed SEC Document (as
defined in Section 3.1(g)). As of their respective dates, the SEC
Documents filed with the SEC after September 30, 1993 complied in all
material respects with the requirement of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC documents. None of the SEC
documents filed with the SEC after September 30, 1993 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,
except to the extent that information containing any SEC Document has been
revised or superseded by a later filed SEC Document. The financial
statements of Digital included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Digital and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows (or changes in financial position prior to the
approval of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 95) for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Other
than with respect to ERISA (as defined in Section 3.1(j) below) and tax
matters, which are addressed by Section 3.1(j) and Section 3.1(k),
respectively, except as set forth in the Filed SEC Documents, neither
Digital nor any of its subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise and whether
or not required by generally accepted accounting principles to be
recognized or disclosed on a consolidated balance sheet of Digital and its
consolidated subsidiaries or in the notes thereto) which individually or in
the aggregate could reasonably be expected to have a material adverse
effect on Digital.
(f) Information Supplied. None of the information supplied or to be
supplied by Digital specifically for inclusion or incorporation by
reference in (i) the registration statement on Form F-4 to be filed with
the SEC by Strategic in connection with the issuance of Strategic Common
Stock in the Merger (the "Form F-4") or the Schedule 13E-3 will, at the
time the Form F-4 or Schedule 13E-3 is filed with the SEC, at any time it
is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) the Joint Proxy Statement
will, at the date it is first mailed to Digital's stockholders or at the
time of the Digital Stockholders Meeting (as defined in Section 5.1(b)),
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Joint Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no representation or warranty
is made by Digital with respect to statements made or incorporated by
reference therein based on information supplied by Strategic or Merger Sub
specifically for inclusion or incorporation by reference in the Joint Proxy
Statement.
(g) Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents filed and publicly available prior to the date of this Agreement
(the "Filed SEC Documents"), since the date of the most recent audited
financial statements included in the Filed SEC Documents, Digital has
conducted its business only in the ordinary course, and there has not been
(i) any material adverse change in Digital, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of Digital's capital stock, (iii)
any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, (iv) (x) any granting by Digital or any of its subsidiaries to any
executive officer or other employee of Digital or any of its subsidiaries
of any increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents, (y) any
granting by Digital or any of its subsidiaries to any such executive
officer of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements in
effect as of the date of the most recent audited financial statements
included in the Filed SEC Documents or (z) any entry by Digital or any of
its subsidiaries into any employment, severance or termination agreement
with any such executive officer, (v) any damage, destruction or loss,
whether or not covered by insurance, that has or could reasonably be
expected to have a material adverse effect on Digital or (vi) any change in
accounting methods, principles or practices by Digital materially affecting
its assets, liabilities or business, except insofar as may have been
required by a change in generally accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed SEC Documents, there is
no suit, action or proceeding pending or, to the knowledge of Digital,
threatened against or affecting Digital or any of its subsidiaries (and
Digital is not aware of any basis for any such suit, action or proceeding)
that individually or in the aggregate could reasonably be expected to (i)
have a material adverse effect on Digital, (ii) impair the ability of
Digital to perform its obligations under this Agreement or (iii) prevent
the consummation of any of the transactions contemplated by this Agreement,
nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Digital or any of its
subsidiaries having, or which is reasonably likely to have, any effect
referred to in clause (i), (ii) or (iii) above.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the Filed
SEC Documents, since the date of the most recent audited financial
statements included in the Filed SEC Documents, there has not been any
adoption or amendment in any material respect by Digital or any of its
subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee, officer or director
of Digital or any of its subsidiaries. Except as disclosed in the Filed
SEC Documents, there exist no employment, consulting, severance,
termination or indemnification agreements, arrangements or understandings
between Digital or any of its subsidiaries and any current or former
employee, officer or director of Digital or any of its subsidiaries.
(j) ERISA Compliance. Digital has no employee benefit plans as
contemplated by the Employee Retirement Income Security Act of 1974 or
other liability or obligation under such legislation which has not been
fulfilled.
(k) Taxes.
(i) Each of Digital and its subsidiaries has filed all tax returns
and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have
not expired, except to the extent that such failures to file or to
have extensions granted that remain in effect individually and in the
aggregate would not have a material adverse effect on Digital. All
returns filed by Digital and each of its subsidiaries are complete and
accurate in all material respects to the knowledge of Digital.
Digital and each of its subsidiaries has paid (or Digital has paid on
its behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the Filed SEC Documents
reflect an adequate reserve for all taxes payable by Digital and its
subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Digital or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or
in the aggregate would not have a material adverse effect on Digital,
and no requests for waivers of the time to assess any such taxes have
been granted or are pending.
None of the Federal income tax returns of Digital and each of its
subsidiaries consolidated in such returns have been examined by and
settled with the United States Internal Revenue Service. The statute
of limitations on assessment or collection of any taxes due from
Digital or any of its subsidiaries has expired for all taxable years
of Digital or any of its subsidiaries through March 31, 1990.
(l) No Excess Parachute Payments; Section 162(m) of the Code.
(iii) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer
or director of Digital or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation
Section 1.280G-1) under any arrangement or Benefit Plan currently in
effect would not be characterized as an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Code).
(iv) The disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid or payable
by Digital or any subsidiary of Digital under any contract, plan,
program, arrangement or understanding.
(m) Voting Requirements. The affirmative vote of a majority of the votes
cast by the holders of the shares of Digital Common Stock entitled to vote
thereon at the Digital Stockholders Meeting with respect to the approval of
the Merger is the only vote of the holders of any class or series of
Digital's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
(n) State Takeover Statutes. The Board of Directors of Digital has
approved the execution and delivery of this Agreement and the consummation
of the Merger and the other transactions contemplated by this Agreement,
and such approval is sufficient to render inapplicable to this Agreement,
the Merger and the other transactions contemplated by this Agreement the
provisions of take-over legislation in the Florida Code. To the best of
Digital's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement or
any of the transactions contemplated by this Agreement and no provision of
the articles of incorporation, by-laws or other governing instruments of
Digital or any of its subsidiaries would, directly or indirectly, restrict
or impair the ability of Strategic to vote, or otherwise to exercise the
rights of a stockholder with respect to, shares of Digital and its
subsidiaries that may be acquired or controlled by Strategic.
(o) Labour Matters. There are no collective bargaining or other labour
union agreements to which Digital or any of its subsidiaries is a party or
by which any of them is bound. To the best knowledge of Digital, since
December 1, 1992, neither Digital nor any of its subsidiaries has
encountered any labour union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
(p) Brokers; Schedule of Fees and Expenses. No broker, investment banker,
financial advisor or other person, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Digital.
(q) No Undisclosed Prior Valuations. Digital has not received any
valuations of the business of Digital in the 24 months before this
Agreement which have not been disclosed to Strategic.
(r) Accounting Matters. Neither Digital nor, to its best knowledge, any
of its affiliates has taken or agreed to take any action that (without
giving effect to any action taken or agreed to be taken by Strategic or any
of its affiliates) would prevent Strategic from accounting for the business
combination to be effected by the Merger as a purchase.
(s) Compliance with Applicable Laws.
(i) Each of Digital and its subsidiaries has in effect all Federal,
state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and
rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted,
and there has occurred no default under any such Permit, except for
the lack of Permits and for defaults under Permits which lack or
default individually or in the aggregate would not have a material
adverse effect on Digital. Except as disclosed in the Filed SEC
Documents, to the knowledge of Digital, Digital and its subsidiaries
are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, except for
possible noncompliance which individually or in the aggregate would
not have a material adverse effect on Digital.
(ii) To the best of Digital's knowledge, each of Digital and its
subsidiaries is, and has been, and each of Digital's former
subsidiaries, while subsidiaries of Digital, was in compliance with
all applicable Environmental Laws, except for possible noncompliance
which individually or in the aggregate would not have a material
adverse effect on Digital. The term "Environmental Laws" means any
Federal, state, local or foreign statute, code, ordinance, rule,
regulation, policy, guideline, permit, consent, approval, license,
judgment, order, writ, decree, directive, injunction or other
authorization, including the requirement to register underground
storage tanks, relating to: (1) emissions, discharges, Releases (as
defined below) or threatened Releases of Hazardous Material (as
defined below), into the environment, including ambient air, soil,
sediments, land surface or subsurface, buildings or facilities,
surface water, groundwater, publicly-owned treatment works, septic
systems or land; (2) the generation, treatment, storage, disposal,
use, handling, manufacturing, transportation or shipment of Hazardous
Material; or (3) pollution of the environment or the protection of
human health or safety.
(iii) During the period of ownership or operation by Digital and
its subsidiaries of any of their respective current or previously-
owned properties, there have been no Releases of Hazardous Material
in, on, under or affecting such properties or, to the knowledge of
Digital, any surrounding site, except in each case for those which
individually or in the aggregate would not have a material adverse
effect on Digital. Prior to the period of ownership or operation by
Digital and its subsidiaries of any of their respective current or
previously-owned properties, to the knowledge of Digital, no Hazardous
Material was generated, treated, stored, disposed of, used, handled or
manufactured at, or transported, shipped or disposed of from, such
current or previously-owned properties, and there were no Releases of
Hazardous Material in, on, under or affecting any such property or any
surrounding site, except in each case for those which individually or
in the aggregate would not have a material adverse effect on Digital.
The term "Release" has the meaning set forth in 42 U.S.C. (S)
9601(22). The term "Hazardous Material" means (1) hazardous
materials, pollutants, contaminants, constituents, medical wastes,
hazardous or infectious wastes and hazardous substances as those terms
are defined in the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C.
(S) 1801 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. (S) 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the Occupational
Safety and Health Act, 29 U.S.C. (S) 651 et seq., the Clean Water Act,
33 U.S.C. (S) 1251 et seq., the Toxic Substances Control Act, 15
U.S.C. (S) 2601 et seq., and the Clean Air Act, 42 U.S.C. (S) 7401 et
seq.; (2) petroleum, including crude oil and any fractions thereof;
(3) natural gas, synthetic gas and any mixtures thereof; (4) asbestos
and/or asbestos-containing material; and (5) PCBs, or materials or
fluids containing PCBs.
(t) Contracts; Debt Instruments.
(i) Except as disclosed in the Filed SEC Documents, there are no
contracts or agreements that are material to the business, properties,
assets, condition (financial or otherwise), results of operations or
prospects of Digital and its subsidiaries taken as a whole.
Neither Digital or any of its subsidiaries is in violation of or in
default under (nor does there exist any condition upon which the
passage of time or the giving of notice would cause such a violation
of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or
any other contract, agreement, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that individually or in the
aggregate would not have a material adverse effect on Digital.
(ii) Set forth on the Digital Disclosure Schedule is (x) a list of all
loan or credit agreements, notes, bonds, mortgages, indentures and
other agreements and instruments pursuant to which any indebtedness of
Digital or any of its subsidiaries in an aggregate principal amount in
excess of $25,000 is outstanding or may be incurred and (y) the
respective principal amounts currently outstanding thereunder. For
purposes of this Agreement, "indebtedness" shall mean, with respect to
any person, without duplication, (4) all obligations of such person
for borrowed money, or with respect to deposits or advances of any
kind to such person; (5) all obligations of such person evidenced by
bonds, debentures, note or similar instruments; (6) all obligations
of such person upon which interest charges are customarily paid;
(7) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such
person; (8) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations
of supplies incurred in the ordinary course of such person's
business); (9) all capitalized lease obligations of such person;
(10) all obligations of others secured by any lien on property or
assets owned or acquired by such person, whether or not the
obligations secured thereby have been assumed; (11) all obligations
of such person under interest rate or currency hedging transactions
(valued at the termination value thereof); (12) all letters of credit
issued for the account of such person; and (13) all guarantees and
arrangements having the economic effect of a guarantee of such person
of any indebtedness of any other person.
(u) Title to Properties.
(i) Each of Digital and each of its subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances or
impediments that individually or in the aggregate would not materially
interfere with its ability to conduct its business as currently
conducted. All such material assets and properties, other than assets
and properties in which Digital or any of its subsidiaries has
leasehold interests, are free and clear of all Liens, except for Liens
that individually or in the aggregate would not materially interfere
with the ability of Digital and its subsidiaries to conduct business
as currently conducted.
(ii) Each of Digital and each of its subsidiaries is in compliance in
all material respects with the terms of all material leases to which
it is a party and under which it is in the occupancy, and all such
leases are in full force and effect. Each of Digital and each of its
subsidiaries enjoys peaceful and undisturbed possession under all such
material leases.
(v) Intellectual Property. To the best of Digital's knowledge, Digital
and its subsidiaries own, or are validly licensed or otherwise have
the right to use, all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service xxxx
rights, copyrights and other proprietary intellectual property rights
and computer programs (collectively, "Intellectual Property Rights")
which are material to the conduct of the business of Digital and its
subsidiaries taken as a whole. The Digital Disclosure Schedule sets
forth a description of all Intellectual Property Rights which are
material to the conduct of the business of Digital and its
subsidiaries taken as a whole. Except as set forth on the Digital
Disclosure Schedule, no claims are pending or, to the knowledge of
Digital, threatened that Digital or any of its subsidiaries is
infringing or otherwise adversely affecting the rights of any person
with regard to any Intellectual Property Right. To the knowledge of
Digital, except as set forth on the Digital Disclosure Schedule, no
person is infringing the rights of Digital or any of its subsidiaries
with respect to any Intellectual Property Right.
(w) Insurance. Digital maintains in good standing the insurance policies
more particularly described on the Disclosure Schedule. Digital has
not been refused insurance by any carrier. Digital has not received
any notice of any claim or suit against it which exceeds or is outside
of the coverage of its insurance policies and Digital is not aware of
any facts which could lead to a claim or suit against it which could
reasonably be expected to exceed or fall outside the coverage of its
insurance policies.
Representations and Warranties of Strategic
3.2 Except as set forth on the Disclosure Schedule delivered by Strategic
to Digital prior to the execution of this Agreement and attached hereto (the
"Strategic Disclosure Schedule"), Strategic represents and warrants to Digital
as follows:
(a) Organization, Standing and Corporate Power. Each of Strategic, the
Material Subsidiaries and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of
Strategic, the Material Subsidiaries and Merger Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate would not have a material adverse effect
on Strategic. Strategic has delivered to Digital complete and correct
copies of its articles of incorporation and by-laws and the certificates of
incorporation and by-laws of its subsidiaries, in each case as amended to
the date hereof. All of the outstanding shares of capital stock of the
Merger Sub and the Material Subsidiaries have been validly issued and are
fully paid and non-assessable and are owned by Strategic, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of
every kind or nature whatsoever. The material subsidiaries of Strategic
are Tactical Technologies Inc., a British Columbia company, and Strategic
Monitoring Services, Inc., a Delaware company and Merger Sub (together, the
"Material Subsidiaries").
(b) Capital Structure. The authorized capital stock of Strategic consists
of 25,000,000 shares of Strategic Common Stock. At the close of business
on October 13, 1995, 6,054,451 shares of Strategic Common Stock were issued
and outstanding. Except as set forth above, at the close of business on
October 13, 1995, no shares of capital stock or other voting securities of
Strategic were issued, reserved for issuance or outstanding, except for
325,000 shares issuable pursuant to outstanding share purchase warrants
exercisable at $2.25 (Cdn.) per Strategic share (the "Strategic Warrants").
All outstanding shares of capital stock of Strategic are, and all shares
which may be issued pursuant to this Agreement, when issued, duly
authorized, validly issued, fully paid and non-assessable and not subject
to pre-emptive rights. There are no bonds, debentures, notes or other
indebtedness of Strategic having the right to vote (or, except for the
Strategic Warrants, convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of Strategic
may vote. Except as set forth above, as of the date hereof, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Strategic or
any Material Subsidiary is a party or by which any of them is bound
obligating Strategic or any Material Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of Strategic or any Material Subsidiary or
obligating Strategic or Merger Sub to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are
not any outstanding contractual obligations of Strategic or any Material
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital
stock of Strategic or any Material Subsidiary. There are not any
outstanding contractual obligations of Strategic to vote or to dispose of
any shares of the capital stock of any Material Subsidiary. As of the date
of this Agreement, the authorized capital of Merger Sub consists of 1,000
shares of common stock, without par value, 100 of which have been validly
issued for $0.025 each, are fully paid and non-assessable and are owned by
Strategic free and clear of any lien.
(c) Authority; Noncontravention. Strategic and Merger Sub have the
requisite corporate power and authority to enter into this Agreement and,
subject to Strategic Stockholder Approval with respect to the issuance of
Strategic Common Stock and the Merger, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by Strategic and the consummation by Strategic of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Strategic, subject, in the
case of with respect to the issuance of Strategic Common Stock and the
Merger, to Strategic Stockholder Approval. This Agreement has been duly
executed and delivered by Strategic and constitutes a valid and binding
obligation of Strategic, enforceable against Strategic in accordance with
its terms. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Strategic or any of its subsidiaries under, (i) the
articles of incorporation or by-laws of Strategic or the comparable charter
or organizational documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to Strategic or any of its subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Strategic or any
of its subsidiaries or their respective properties or assets, other than,
in the case of clause (ii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
material adverse effect on Strategic, (y) impair the ability of Strategic
to perform its obligations under this Agreement or (z) prevent the
consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any Federal, state, local or foreign government or any
court, administrative agency or commission or other governmental authority
or agency, domestic or foreign (a "Government Entity"), is required by or
with respect to Strategic or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Strategic or the consummation
by Strategic of the transactions contemplated by this Agreement, except for
(1) the filing with the Vancouver Stock Exchange and Securities and
Exchange Commission (the "SEC") of (A) a proxy statement relating to
Strategic Stockholder Approval (such proxy statement, together with the
proxy statement relating to Digital Stockholder Approval, in each case as
amended or supplemented from time to time, the "Joint Proxy Statement"),
and (B) such reports under the British Columbia Securities Act (the "BC
Act") and Section 13(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (2) the filing of the
Certificate of Merger with the Secretary of State of the State of Florida
and appropriate documents with the relevant authorities of other states and
Provinces in which Strategic is qualified to do business, (3) such
consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign country in
which Strategic, Digital or any
of their respective subsidiaries conducts any business or owns any property
or assets or (4) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as would not individually or in the
aggregate (A) have a material adverse effect on Strategic, (B) impair the
ability of Strategic to perform its obligations under this Agreement or (C)
prevent the consummation of any of the transactions contemplated by this
Agreement.
(d) BCSC and SEC Documents; Undisclosed Liabilities. Strategic has filed
all required reports, schedules, forms, statements and other documents with
the British Columbia Securities Commission ("BCSC") and the SEC (under
s.12(g) 3-2(b) of the 1934 Securities Exchange Act) since September 30,
1993 (the "Strategic SEC Documents"). As of their respective dates, the
Strategic SEC Documents complied in all material respects with the
requirements of the BC Act, the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such
Strategic SEC Documents, and none of the Strategic SEC Documents 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. Except to the extent that information contained in any
Strategic SEC Document has been revised or superseded by a later filed
Strategic SEC Document none of the Strategic SEC Documents contains any
untrue statement of a material fact or omits to state any 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. The financial statements of Strategic included in the
Strategic SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the BCSC with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of
Strategic as of the dates thereof and the consolidated results of their
operations and cash flows (or changes in financial position for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments). Except as set forth in the Filed Strategic SEC
Documents, neither Strategic nor Merger Sub has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise and whether or not required by generally accepted accounting
principles to be recognized or disclosed on a consolidated balance sheet of
Strategic and Merger Sub or in the notes thereto) which individually or in
the aggregate could reasonably be expected to have a material adverse
effect on Strategic.
(e) Information Supplied. None of the information supplied or to be
supplied by Strategic specifically for inclusion or incorporation by
reference in (i) the registration statement on Form F-4 to be filed with
the SEC by Strategic in connection with the issuance of Strategic Common
Stock in the Merger (the "Form F-4") or the Schedule 13E-3 (the "Schedule
13E-3") will, at the time the Form F-4 or Schedule 13E-3 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Joint Proxy Statement will, at the date it is first mailed to
Strategic's stockholders or at the time of the Strategic Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Joint Proxy Statement will comply as to form
in all material respects with the requirements of the B.C. Act and the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Strategic with respect to statements
made or incorporated by reference therein based on information supplied by
Digital specifically for inclusion or incorporation by reference in the
Joint Proxy Statement.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Strategic SEC Documents filed and publicly available prior to the date of
this Agreement (the "Filed Strategic SEC Documents"), since the date of the
most recent audited financial statements included in the Filed Strategic
SEC Documents, Strategic has conducted its business only in the ordinary
course, and there has not been (i) any material adverse change in
Strategic, (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to
any of Strategic's capital stock, (iii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (iv) (x) any
granting by Strategic or any Material Subsidiary to any executive officer
or other employee of Strategic or any Material Subsidiary of any increase
in compensation, except in the ordinary course of business consistent with
prior practice or as was required under employment agreements in effect as
of the date of the most recent audited financial statements included in the
Filed Strategic SEC Documents, (y) any granting by Strategic or any
Material Subsidiary to any such executive officer of any increase in
severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of the date of the most
recent audited financial statements included in the Filed Strategic SEC
Documents or (z) any entry by Strategic or any Material Subsidiary into any
employment, severance or termination agreement with any such executive
officer, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or could reasonably be expected to have a material
adverse effect on Strategic or (vi) any change in accounting methods,
principles or practices by Strategic materially affecting its assets,
liabilities or business, except insofar as may have been required by a
change in generally accepted accounting principles.
(g) Litigation. Except as disclosed in the Filed Strategic SEC Documents,
there is no suit, action or proceeding pending or, to the knowledge of
Strategic, threatened against or affecting Strategic or any Material
Subsidiary (and Strategic is not aware of any basis for any such suit,
action or proceeding) that individually or in the aggregate could
reasonably be expected to (i) have a material adverse effect on Strategic,
(ii) impair the ability of Strategic to perform its obligations under this
Agreement or (iii) prevent the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Strategic or any Material Subsidiary having, or which
is reasonably likely to have, any effect referred to in clause (i), (ii) or
(iii) above.
(h) Voting Requirements. The affirmative vote of a majority of the votes
cast by the holders of the shares of Strategic Common Stock entitled to
vote thereon at the Stockholders Meeting with respect to the approval of
the Merger is the only vote of the holders of any class or series of
Strategic's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
(i) Labour Matters. There are no collective bargaining or other labour
union agreements to which Strategic or any Material Subsidiary is a party
or by which any of them is bound. To the best knowledge of Strategic,
since incorporation, neither Strategic nor any Material Subsidiary has
encountered any labour union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
(j) Brokers; Schedule of Fees and Expenses. No broker, investment banker,
financial advisor or other person is entitled to any broker's. finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Strategic.
(k) No Undisclosed Prior Valuations. Strategic has not received any
valuations of the business of Strategic in the 24 months before this
Agreement which have not been disclosed to Digital.
(l) Accounting Matters. Neither Strategic nor, to its best knowledge, any
of its affiliates has taken or agreed to take any action that (without
giving effect to any action taken or agreed to be taken by Digital or any
of its affiliates) would prevent Digital from accounting for the business
combination to be effected by the Merger as a purchase.
(m) Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
(n) Benefit Plans. Neither Strategic nor any Material Subsidiary have any
employee benefit plans subject to ERISA.
(o) Taxes.
(i) Strategic and each Material Subsidiary has filed all tax returns
and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have
not expired, except to the extent that such failures to file or to
have extensions granted that remain in effect individually and in the
aggregate would not have a material adverse effect on Strategic. All
returns filed by Strategic and each Material Subsidiary are complete
and accurate in all material respects to the knowledge of Strategic.
Strategic and each Material Subsidiary has paid (or Strategic has paid
on its behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the Filed Strategic SEC
Documents reflect an adequate reserve for all taxes payable by
Strategic and each Material Subsidiary for all taxable periods and
portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Strategic or each Material Subsidiary that are not
adequately reserved for, except for deficiencies that individually or
in the aggregate would not have a material adverse effect on
Strategic, and no requests for waivers of the time to assess any such
taxes have been granted or are pending. None of the Canadian or
Federal U.S. income tax returns of Strategic and each Material
Subsidiary consolidated in such returns have been examined by and
settled with the United States Internal Revenue Service or applicable
Canadian taxation authority. The statute of limitations on assessment
or collection of any taxes due from Strategic or each Material
Subsidiary has expired for all taxable years of Strategic or each
Material Subsidiary through September 30, 1991.
(p) Compliance with Applicable Laws.
(i) Strategic and each Material Subsidiary has in effect all Federal,
Canadian Provincial, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or
operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit,
except for the lack of Permits and for defaults under Permits which
lack or default individually or in the aggregate would not have a
material adverse effect on Strategic. Except as disclosed in the
Filed Strategic SEC Documents, to the knowledge of Strategic,
Strategic and the Material Subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations
of any Governmental Entity, except for possible noncompliance which
individually or in the aggregate would not have a material adverse
effect on Strategic.
(ii) To the best of Strategic's knowledge, Strategic and each
Material Subsidiary is, and has been, in compliance with all
applicable Environmental Laws, except for possible noncompliance which
individually or in the aggregate would not have a material adverse
effect on Strategic. The term "Environmental Laws" means any U.S.
Federal, state, local or foreign statute, code, ordinance, rule,
regulation, policy, guideline, permit, consent, approval, license,
judgment, order, writ, decree, directive, injunction or other
authorization, including the requirement to register underground
storage tanks, relating to: (14) emissions, discharges, Releases (as
defined below) or threatened Releases of Hazardous Material (as
defined below), into the environment, including ambient air, soil,
sediments, land surface or subsurface, buildings or facilities,
surface water, groundwater, publicly-owned treatment works, septic
systems or land; (15) the generation, treatment, storage, disposal,
use, handling, manufacturing, transportation or shipment of Hazardous
Material; or (16) pollution of the environment or the protection of
human health or safety.
(iii) During the period of ownership or operation by Strategic and
each Material Subsidiary of any of their respective current or
previously-owned properties, there have been no Releases of Hazardous
Material in, on, under or affecting such properties or, to the
knowledge of Strategic, any surrounding site, except in each case for
those which individually or in the aggregate would not have a material
adverse effect on Strategic. Prior to the period of ownership or
operation by Strategic and each Material Subsidiary of any of their
respective current or previously-owned properties, to the knowledge of
Strategic, no Hazardous Material was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped
or disposed of from, such current or previously-owned properties, and
there were no Releases of Hazardous Material in, on, under or
affecting any such property or any surrounding site, except in each
case for those which individually or in the aggregate would not have a
material adverse effect on Strategic. The term "Release" has the
meaning set forth in 42 U.S.C. (S) 9601(22). The term "Hazardous
Material" means (1) hazardous materials, pollutants, contaminants,
constituents, medical wastes, hazardous or infectious wastes and
hazardous substances as those terms are defined in the following
statutes and their implementing regulations: the Hazardous Materials
Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act,
as amended by the Superfund Amendments and Reauthorization Act, 42
U.S.C. (S) 9601 et seq., the Occupational Safety and Health Act, 29
U.S.C. (S) 651 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et
seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.,
and the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; (2) petroleum,
including crude oil and any fractions thereof; (3) natural gas,
synthetic gas and any mixtures thereof; (4) asbestos and/or asbestos-
containing material; and (5) PCBs, or materials or fluids containing
PCBs.
(q) Contracts; Debt Instruments.
(i) Except as disclosed in the Filed Strategic SEC Documents,
there are no contracts or agreements that are material to the
business, properties, assets, condition (financial or otherwise),
results of operations or prospects of Strategic and the Material
Subsidiaries taken as a whole.
Neither Strategic or any Material Subsidiary is in violation of or in
default under (nor does there exist any condition upon which the
passage of time or the giving of notice would cause such a violation
of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or
any other contract, agreement, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that individually or in the
aggregate would not have a material adverse effect on Strategic.
(ii) Set forth on Strategic Disclosure Schedule is (x) a list of
all loan or credit agreements, notes, bonds, mortgages, indentures and
other agreements and instruments pursuant to which any indebtedness of
Strategic or any Material Subsidiary in an aggregate principal amount
in excess of $25,000 is outstanding or may be incurred and (y) the
respective principal amounts currently outstanding thereunder. For
purposes of this Agreement, "indebtedness" shall mean, with respect to
any person, without duplication, (17) all obligations of such person
for borrowed money, or with respect to deposits or advances of any
kind to such person; (18) all obligations of such person evidenced by
bonds, debentures, note or similar instruments; (19) all obligations
of such person upon which interest charges are customarily paid;
(20) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such
person; (21) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations
of supplies incurred in the ordinary course of such person's
business); (22) all capitalized lease obligations of such person;
(23) all obligations of others secured by any lien on property or
assets owned or acquired by such person, whether or not the
obligations secured thereby have been assumed; (24) all obligations
of such person under interest rate or currency hedging transactions
(valued at the termination value thereof); (25) all letters of credit
issued for the account of such person; and (26) all guarantees and
arrangements having the economic effect of a guarantee of such person
of any indebtedness of any other person.
(r) Title to Properties.
(i) Strategic and each Material Subsidiary has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances or
impediments that individually or in the aggregate would not materially
interfere with its ability to conduct its business as currently
conducted. All such material assets and properties, other than assets
and properties in which Strategic or any Material Subsidiary has
leasehold interests, are free and clear of all Liens, except for Liens
that individually or in the aggregate would not materially interfere
with the ability of Strategic and any Material Subsidiary to conduct
business as currently conducted.
(ii) Strategic and each Material Subsidiary has complied in all
material respects with the terms of all material leases to which it is
a party and under which it is in the occupancy, and all such leases
are in full force and effect. Each of Strategic and each Material
Subsidiary enjoys peaceful and undisturbed possession under all such
material leases.
(s) Intellectual Property. To the best of Strategic's knowledge,
Strategic and each Material Subsidiary own, or are validly licensed or
otherwise have the right to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service
marks, service xxxx rights, copyrights and other proprietary
intellectual property rights and computer programs (collectively,
"Intellectual Property Rights") which are material to the conduct of
the business of Strategic and each Material Subsidiary taken as a
whole. Strategic Disclosure Schedule sets forth a description of all
Intellectual Property Rights which are material to the conduct of the
business of Strategic and each Material Subsidiary taken as a whole.
Except as set forth on Strategic Disclosure Schedule, no claims are
pending or, to the knowledge of Strategic, threatened that Strategic
or any Material Subsidiary is infringing or otherwise adversely
affecting the rights of any person with regard to any Intellectual
Property Right. To the knowledge of Strategic, except as set forth on
Strategic Disclosure Schedule, no person is infringing the rights of
Strategic or any Material Subsidiary with respect to any Intellectual
Property Right.
(t) Insurance. Strategic maintains in good standing the insurance policies
more particularly described on the Disclosure Schedule. Strategic has
not been refused insurance by any carrier. Strategic has not received
any notice of any claim or suit against it which exceeds or is outside
of the coverage of its insurance policies and Strategic is not aware
of any facts which could lead to a claim or suit against it which
could reasonably be expected to exceed or fall outside the coverage of
its insurance policies.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
Conduct of Business
4.1 (a) Conduct of Business by Digital. Subject to the Interim
Procedures Agreement of even date, during the period from the date of
this Agreement to the Effective Time of the Merger, Digital shall, and
shall cause its subsidiaries to, carry on their respective businesses
in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current
officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others
having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Time of the
Merger. Notwithstanding the foregoing, Strategic acknowledges that
the operations of DPC/International Business Solutions, Inc. have been
substantially discontinued and that the operations of BGIS Systems,
Co. may be sold or otherwise disposed of by Digital. Without limiting
the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time of the Merger, Digital shall not,
and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other
than dividends and distributions by a direct or indirect wholly owned
subsidiary of Digital to its parent, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise
acquire any shares of capital stock of Digital or any of its
subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities for other
than nominal consideration;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than (x) the issuance of Digital Common Stock upon the exercise
of Employee Stock Options (as defined in Section 5.6) outstanding on
the date of this Agreement and in accordance with their present terms
and (y) the issuance of Digital Common Stock upon exercise of any
warrants by the holders thereof in accordance with their present
terms);
(iii) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division
thereof or (y) any assets that individually or in the aggregate are
material to Digital and its subsidiaries taken
as a whole, except purchases of inventory in the ordinary course of
business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, except sales in the ordinary course of business consistent
with past practice of inventory or of furniture, fixtures and
equipment that are no longer used by or useful to Digital or its
subsidiaries;
(vi) (x) incur any indebtedness, except for short-term borrowings
incurred in the ordinary course of business consistent with past
practice and except for intercompany indebtedness between Digital and
any of its subsidiaries or between such subsidiaries, or (y) make any
loans, advances or capital contributions to, or investments in, any
other person, other than to Digital or any direct or indirect wholly
owned subsidiary of Digital;
(vii) make or agree to make any new capital expenditure or capital
expenditures which individually is in excess of $10,000 or in the
aggregate are in excess of $50,000;
(viii) make any tax election that could reasonably be expected to
have a material adverse effect on Digital or settle or compromise any
income tax liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of Digital included in the Filed SEC
Documents or incurred since the date of such financial statements in
the ordinary course of business consistent with past practice;
(x) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which Digital or any
subsidiary is a party of waive, release or assign any material rights
or claims thereunder;
(xi) take any action that (without giving effect to any action
taken or agreed to be taken by Strategic or any of its affiliates)
would prevent Strategic from accounting for the business combination
to be effected by the Merger as a purchase;
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by Strategic. Subject to the Interim Procedures
Agreement of even date, during the period from the date of this Agreement
to the Effective Time of the Merger, Strategic shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to the end that
their goodwill and ongoing businesses shall be unimpaired at the Effective
Time of the Merger. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time of
the Merger, Strategic shall not and shall not permit any of its
subsidiaries to:
(i) (x) declare, set aside or pay and dividends on, or make any
other distributions in respect of, any capital stock of Strategic or
(y) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Strategic's capital stock (other
than exchanges in the ordinary course respecting Strategic's Warrant);
(ii) take any action that (without giving effect to any action
taken or agreed to be taken by Digital or any of its affiliates) would
prevent Strategic from accounting for the business combination to be
effected by the Merger as a purchase;
(iii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
without the consent of Digital except for Strategic's right hereby
granted to issue up to 500,000 shares for gross proceeds of not less
than (Cdn.)$750,000 and a per share price of not less than 80% of the
then current market price of Strategic's common stock, which shall be
the average of the daily closing prices for the 30 consecutive
business days ending on the day before the closing of such stock
issuance (the "Strategic Interim Financing");
(iv) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents;
(v) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division
thereof of (y) any assets that individually or in the aggregate are
material to Strategic and its subsidiaries taken as a whole, except
purchases of inventory in the ordinary course of business consistent
with past practice, in each case if any such action could reasonably
be expected to (A) delay materially the date of mailing of the Joint
Proxy Statement or, (B) if it were to occur after such date of
mailing, require an amendment of the Joint Proxy Statement; or
(vi) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, except sales in the ordinary course of business consistent
with past practice of inventory or of furniture, fixtures and
equipment that are no longer used by or useful to Strategic or its
subsidiaries;
(vii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Other Actions. Digital and Strategic shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the
representations and warranties that are not so qualified becoming untrue in
any material respect or (iii) except as otherwise permitted by Section 4.2,
any of the any conditions to the Merger set forth in Article 6 not being
satisfied.
(d) Advice of Changes. Digital and Strategic shall promptly advise the
other party orally and in writing of any change or event having, or which,
insofar as can reasonable be foreseen, would have, a material adverse
effect on such party or on the truth of their respective representations
and warranties.
No Solicitation
4.2 (a) Digital shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any officer, director or employee of
or any investment banker, attorney or other advisor or representative of,
Digital or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage the submission of, any takeover proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any takeover proposal; provided,
however, that prior to the Digital Stockholders Meeting to the extent
required by the fiduciary obligations of the Board of Directors of Digital,
as determined in good faith by the Board of Directors based on the advice
of outside counsel, Digital may, (A) in response to an unsolicited request
therefor, furnish information with respect to Digital to any person
pursuant to a
customary confidentiality agreement (as determined by Digital's outside
counsel) and discuss such information (but not the terms of any possible
takeover proposal) with such person and (B) upon receipt by Digital of a
takeover proposal, following delivery to Strategic of the notice required
pursuant to Section 4.2(c), participate in negotiations regarding such
takeover proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding sentence by
any officer, director or employee of Digital or any of its subsidiaries or
any investment banker, attorney or other advisor or representative of
Digital or any of its subsidiaries, whether or not such person is
purporting to act on behalf of Digital or any of its subsidiaries or
otherwise, shall be deemed to be a breach of this Section 4.2(a) by
Digital. For purposes of this Agreement, "takeover proposal" means any
proposal for a merger or other business combination involving Digital or
any of its subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, an equity interest in, any voting securities of, or
a substantial portion of the assets of Digital or any of its subsidiaries,
other than the transactions contemplated by this Agreement.
(b) Neither the Board of Directors of Digital nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to Strategic or Merger Sub, the approval or recommendation
of such Board of Directors or any such committee of this Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
takeover proposal or (iii) enter into any agreement with respect to any
takeover proposal. Notwithstanding the foregoing, in the event the Board
of Directors of Digital receives a takeover proposal that, in the exercise
of its fiduciary obligations (as determined in good faith by the Board of
Directors based on the advice of outside counsel), it determines to be a
superior proposal, the Board of Directors may (subject to the following
sentences) withdraw or modify its approval or recommendation of this
Agreement and the Merger, approve or recommend any such superior proposal,
enter into an agreement with respect to such superior proposal or terminate
this Agreement, in each case at any time after the second business day
following Strategic's receipt of written notice (a "Notice of Superior
Proposal") advising Strategic that the Board of Directors has received a
superior proposal, specifying the material terms and conditions of such
superior proposal and identifying the person making such superior proposal.
In the event the Board of Directors of Digital takes any of the foregoing
actions with respect to such superior proposal, Digital shall, concurrently
with the taking of any such action, permit the exercise by Strategic of the
Termination Warrant pursuant to Section 5.9(b). For purposes of this
Agreement, "superior proposal" means a bona fide takeover proposal to
acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the shares of Digital Common Stock then
outstanding or all or substantially all the assets of Digital, and
otherwise on terms which the Board of Directors of Digital determines in
its good faith reasonable judgment to be more favourable to Digital's
stockholders than the Merger (based on the written opinion, with only
customary qualifications, of Digital's independent financial advisor that
the value of the consideration provided for in such proposal is superior to
the value of the consideration provided for in the Merger) and for which
financing, to the extent required, is then committed or which, in the good
faith reasonable judgment of the Board of Directors, is reasonably capable
of being financed by such third party.
(c) In addition to the obligations of Digital set forth in paragraph
(b) above, Digital promptly shall advise Strategic orally and in writing of
any request for information or of any takeover proposal or any inquiry with
respect to or which could lead to any takeover proposal, the identity of
the person making any such takeover proposal or inquiry and the material
terms and conditions thereof. Digital will keep Strategic generally
informed of the status and details of any such request, takeover proposal
or inquiry.
ARTICLE 4
---------
ADDITIONAL AGREEMENTS
Preparation of Form F-4 and the Joint Proxy Statement; Stockholders' Meetings
5.1 (a) The Strategic Common Stock to be issued in the Merger shall be
registered under the Securities Act. As soon as practicable following the
date of this Agreement, Digital and Strategic shall prepare and file with
the SEC and any necessary Canadian regulatory authorities the Joint Proxy
Statement and Strategic shall prepare and file with the SEC the Form F-4,
in which the Joint Proxy Statement will be included as a prospectus, and
Digital shall prepare and file with the SEC the Schedule 13E-3. Each of
Digital and Strategic shall use its best efforts to have the Form F-4
declared effective under the Securities Act and any applicable state
securities or blue sky laws as promptly as practicable after such filing.
Digital will use its best efforts to cause the Joint Proxy Statement to be
mailed to Digital's stockholders, and Strategic will use its best efforts
to cause the Joint Proxy Statement to be mailed to Strategic's
stockholders, in each case as promptly as practicable after the Form F-4 is
declared effective under the Securities Act. Strategic shall also take any
action (other than qualifying to do business in any jurisdiction in which
it is not now so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of Strategic Common Stock
in the Merger and under the Stock Plans and Digital shall furnish all
information concerning Digital and the holders of Digital Common Stock and
rights to acquire Digital Common Stock pursuant to the Stock Plans as may
be reasonably requested in connection with any such action.
(b) Digital will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Digital Stockholders' Meeting") for the purpose of
approving the Merger. Strategic will, as promptly as practicable following
the date of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Strategic Stockholders' Meeting") for the
purpose of approving (i) the issuance of the Strategic Common Stock in the
Merger, and (ii) the creation of a Strategic Stock Plan to issue 600,000
options exercisable for 5 years at $1.55 Cdn. per Strategic share to such
persons as are mutually agreed by Digital and Strategic (the "Strategic
Stock Plan"). Digital and Strategic will, through their respective Boards
of Directors, recommend to their respective stockholders approval of the
foregoing matters, except to the extent that the Board of Directors of
Digital shall have withdrawn or modified its approval or recommendation of
this Agreement or the Merger as permitted by Section 4.2(b). Strategic and
Digital will use reasonable efforts to hold the Digital Stockholders'
Meeting and the Strategic Stockholders' Meeting on the same day and use
their best efforts to hold such Meetings as soon as practicable after the
date hereof.
(c) Digital shall use its best efforts to obtain the opinion of
Xxxxxxxx & Xxxxxxx Incorporated, dated on or about the date that is 10
business days prior to the mailing of the Joint Proxy Statement, to the
effect that, as of such date, the Exchange Ratio is fair to Digital's
stockholders from a financial point of view, and shall cause a signed copy
of such opinion to be delivered to Strategic.
(d) Strategic shall use its best efforts to obtain the opinion of CWC
Capital L.P., dated on or about the date that is 10 business days prior to
the mailing of the Joint Proxy Statement, to the effect that, as of such
date, the Exchange Ratio is fair to Strategic's stockholders from a
financial point of view, and shall cause a signed copy of such opinion to
be delivered to Digital.
Letter of Digital's Accountants
5.2 Digital shall use its best efforts to cause to be delivered to
Strategic a letter of Xxxxxxx Xxxxxx & Co., LLP, Digital's independent public
accountants, dated a date within two business days before the date on which the
Form F-4 shall become effective and a letter of Xxxxxxx Xxxxxx & Co., LLP, dated
a date within two business days before the Closing Date, each addressed to
Strategic, in form and substance reasonably satisfactory to Strategic and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form F-4.
Letter of Strategic's Accountants
5.3 Strategic shall use its best efforts to cause to be delivered to
Digital a letter of Deloitte & Touche, Chartered Accountants, Strategic's
independent public accountants, or such other public accountants as are
acceptable to Digital, dated a date within two business days before the date on
which the Form F-4 shall become effective and a letter of such accountants,
dated a date within two business days before the Closing Date, each addressed to
Digital, in form and substance reasonably satisfactory to Digital and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Form F-4.
Access to Information; Confidentiality
5.4 (a) Each of Digital and Strategic shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other
representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time of the Merger
to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, each of Digital and
Strategic shall, and shall cause each of its respective subsidiaries to,
furnish promptly to the other party (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal, state or Canadian securities laws
and (ii) all other information concerning its business, properties and
personnel as such other party may reasonably request. Except as required
by law, each of Digital and Strategic will hold and will cause its
respective officers, employees, accountants, counsel, financial advisors
and other representatives and affiliates to hold, any non-public
information in confidence until such time as such information becomes
publicly available (otherwise than through the wrongful act of any such
person) and shall use its best efforts to ensure that such persons do not
disclose such information to others without the prior written consent of
Digital or Strategic, as the case may be. In the event of the termination
of this Agreement for any reason, Digital and Strategic shall promptly
return or destroy all documents containing non-public information so
obtained from the other party or any of its subsidiaries and any copies
made of such documents. In addition, Strategic and Digital shall not, and
shall cause their respective advisors and agents not to, use any such non-
public information for any purpose except in furtherance of the
transactions contemplated by this Agreement.
(b) Neither Strategic nor any of its subsidiaries will solicit or
employ any employees of Digital or any of its subsidiaries as long as they
are employed by Digital or such subsidiary during the period prior to the
Effective Time of the Merger (except as contemplated by this Agreement)
and, in the event of termination of this Agreement for any reason, for a
period of two years after the date of termination.
Best Efforts; Notification
5.5 (a) Upon the terms and subject to the conditions set forth in this
Agreement, unless, to the extent permitted by Section 4.2(b), the Board of
Directors of Digital approves or recommends a superior proposal, each of
the parties agrees to use its best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
to consummate and make effective, in the most expeditious manner
practicable, the
Merger and the other transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or non-actions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties including those holding
Digital options or warrants and (iii) the execution and delivery of any
additional instruments necessary to consummate transactions contemplated
by, and to fully carry out the purposes of, this Agreement. In connection
with and without limiting the foregoing, Digital and its Board of Directors
shall (A) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the
Merger, this Agreement or any of the other transactions contemplated by
this Agreement and (B) if any state takeover or similar statute or
regulation becomes applicable to the Merger, this Agreement or any other
transaction contemplated by this Agreement, take all action necessary to
ensure that the Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger and the other transactions contemplated
by this Agreement. Notwithstanding the foregoing, the Board of Directors
of Digital shall not be prohibited from taking any action permitted by
Section 4.2.
(b) Digital shall give prompt notice to Strategic, and Strategic or
Merger Sub shall give prompt notice to Digital, of (i) any representation
or warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with
or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
Stock Options
5.6 (a) As soon as practicable following the date of this Agreement, the
Board of Directors of Digital (or, if appropriate, any committee
administering the Stock Plans) shall adopt such resolutions or take such
other actions as may be required to effect the following:
(i) terminate all options to purchase shares of Digital Common
Stock (each, a "Digital Stock Option") at the Effective Time; and
(ii) terminate each stock option plan of Digital at the Effective
Time.
(b) As soon as practicable after the Effective Time of the Merger,
Strategic shall deliver to those persons who will be holders of Strategic
Stock Options appropriate notices setting forth such holders' rights
pursuant to Section 5.1(b) and the agreements evidencing the grants of such
Strategic Stock Options.
(c) Strategic agrees to use reasonable efforts to take such actions as are
necessary for the establishment of the Strategic Stock Plan, including the
reservation, issuance and listing of Common Stock of Strategic.
(d) A holder of a Strategic Option may exercise such Strategic Option in
whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to Strategic, together with the consideration
therefor and the Federal or Canadian withholding tax information, if any,
required in accordance with the Strategic Stock Plan.
(e) As promptly as practicable but in no event later than 180 days after
the Effective Date of the Merger, Strategic shall file a registration
statement on Form S-8 with the SEC covering all of the Strategic Stock
Options, and shall keep such registration statement effective until all of
the shares of common stock underlying such options have been sold or such
options have terminated.
Benefit Plans
5.7 (a) Except as provided in Section 5.6 and subject to the provisions of
ERISA and the Code, Strategic agrees to cause the Surviving Corporation to
maintain for a period of at least six months after the Effective Time of
the Merger the Benefit Plans of Digital and its subsidiaries in effect on
the date of this Agreement or to provide benefits to employees of Digital
and its subsidiaries that are comparable in the aggregate to those in
effect on the date of this Agreement, and thereafter Strategic will cause
the employees of the Surviving Corporation to have benefit plans that are
at least comparable to those provided to the employees of Strategic.
Strategic will cause each employee benefit plan of the Surviving
Corporation or Strategic covering such employees of Digital and its
subsidiaries to recognize the service of such employees with Digital and
its subsidiaries prior to the Closing Date, but only for purposes of
eligibility to participate and vesting under any such plan.
(b) After the Effective Time of the Merger, Strategic intends to grant to
key employees of Strategic options to purchase Strategic Common Stock under
the Strategic Stock Plan.
Indemnification and Insurance
5.8 (a) Strategic and Merger Sub agree that all rights to indemnification for
acts or omissions occurring at or prior to the Effective Time of the Merger
now existing in favour of the current or former directors or officers of
Digital and its subsidiaries as provided in Digital's certificate of
incorporation or by-laws shall survive the Merger and shall continue in
full force and effect in accordance with their terms for a period of not
less than five years from the Effective Time of the Merger.
(b) In the event the Surviving Corporation or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then and in each such case, proper provisions shall
be made so that the successors and assigns of Strategic or the Surviving
Corporation, as the case may be, shall assume the obligations set forth in
this Section 5.8.
(c) This Section 5.8 shall survive the consummation of the Merger at the
Effective Time of the Merger, is intended to benefit the persons
indemnified pursuant to Section 5.8(a), and shall be binding on all
successors and assigns of Strategic and the Surviving Corporation.
Fees and Expenses
5.9 (a) All fees and expenses incurred after August 1, 1995 in connection with
the Merger, this Agreement and the transactions contemplated by this
Agreement ("Expenses") shall be shared equally by Strategic and Digital if
the Merger is not consummated. Notwithstanding the foregoing, Strategic
hereby covenants to advance and fund up to $275,000 U.S. of Digital's
Expenses hereunder, inclusive of the first $60,000 U.S. funded to the date
hereof and with the balance to be funded commencing 45 days from the date
of execution hereof. Digital's Expenses shall be paid promptly (within 15
days) on receipt by Strategic of the invoices received by Digital in regard
to Expenses subject always to Strategic's right to dispute the
reasonableness of such Expenses but only after making payment of same to
Digital. For purposes of this paragraph, "Expenses" shall mean all out-of-
pocket fees and expenses incurred or paid by or on behalf of Strategic or
Digital in connection with the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants to Strategic or Digital.
(b) Pursuant to a letter agreement dated August 1, 1995, Digital has
issued to Strategic a warrant to purchase 500,000 shares of Digital Common
Stock exercisable at a price of $0.25 (the "Initial Warrant") in
consideration of the partial funding of Digital's Expenses to the extent of
$60,000 U.S. by Strategic. Digital shall allot and issue to Strategic on
execution hereof a second warrant (the "Second Warrant") to purchase
1,500,000 shares of Digital Common Stock exercisable at a price of $0.25.
Subject to paragraph 5.9(c), the Initial Warrant and the Second Warrant
(together, the "Termination Warrants") are exercisable if this Agreement
terminates without consummation of the Merger as a result of any of the
following events in (i) to (vi): (i) the Board of Directors of Digital
withdraws or modifies its approval or recommendation of this Agreement or
the Merger, approves or recommends another takeover proposal, enters into
an agreement with respect to another takeover proposal or terminates this
Agreement (other than as a result of a willful and material breach of this
Agreement by Strategic or Merger Sub (which breach shall not have been
cured within five business days following Strategic's receipt of written
notice of such breach from Digital)), (ii) the requisite approval of
Digital's stockholders for the Merger is not obtained at the Digital
Stockholders' Meeting; (iii) more than 2 1/2% of shares of Digital become
subject to dissent; (iv) the Digital Stockholders' Meeting does not occur
prior to the termination of this Agreement pursuant to Section 7.1(b)(ii);
or (v) there is a material breach of any representation, warranty or
covenant hereof by Digital which is not remedied prior to the Effective
Time; and/or (vi) the Merger is terminated by virtue of failure to meet the
conditions precedent to closing set forth in Section 6.2(d), Section
6.3(e), and/or Section 6.1(d). In the event of the termination of this
Merger Agreement pursuant to one of the foregoing events, Strategic may
recover any of Digital's Expenses funded by Strategic from Digital solely
through the exercise of the Termination Warrants and the application of
such funded Expenses to the exercise price which would otherwise be payable
by Strategic to Digital upon the exercise of the Termination Warrants. Any
Expenses incurred by Strategic in excess of such exercise price (i.e., any
Expenses in excess of $500,000) shall not be recovered by Strategic from
Digital. Subject to paragraph 5.9(c), any portion of the Termination
Warrants desired to be exercised by Strategic in excess of the funded
portion of Digital's Expenses shall be paid by Strategic in cash.
(c) The Second Warrant shall only be exercisable by Strategic to the
extent of the incurred and paid Expenses of Digital (i.e. the balance of
the Second Warrant shall not be exercisable for a cash payment by
Strategic) in the event the Merger terminates for any reason other than
those set forth in subsections 5.9(b)(i), (ii), (iv) or section 6.3(e).
(d) In the event the Merger terminates as a result of an event set forth
in subsection 5.9(b)(i), (ii), (iv) or Section 6.3(e), the Second Warrant
may be exercisable to the extent of the incurred and paid expenses of
Digital and the balance of the Second Warrant may be exercisable for a cash
payment by Strategic.
Public Announcements
5.10 Strategic and Merger Sub, on the one hand, and Digital on the other
hand, will consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by agreement with any stock exchange or by law.
Affiliates and Certain Stockholders
5.11 (a) Prior to the Closing Date, Digital shall deliver to Strategic a letter
identifying all persons who are, at the time the Merger is submitted for
approval to the stockholders of Digital, "affiliates" of Digital for
purposes of Rule 145 under the Securities Act.
(b) Digital shall deliver to Strategic on the date of the Joint Proxy
Statement and on the Closing Date letters, in each case dated as of such
respective dates and identifying all persons who are, as of such respective
dates, beneficial owners of five percent or more of Digital Common Stock.
Stockholder Litigation
5.12 Digital shall give Strategic the opportunity to participate in the
defense or settlement of any stockholder litigation against Digital and its
directors relating to the transactions contemplated by this Agreement; provided,
however, that no such settlement shall be agreed to without Strategic's consent,
which consent shall not be unreasonably withheld.
Directorships
5.13 As of the Effective Time of the Merger, Strategic's Board of Directors
shall be expanded to nine directors and Col. Xxxxxxx Xxxxxx (Xxx.), Xxxxxxx
Xxxxxx, Xxxxxxx Xxxxxx and Xxxxxx X. Xxxxxxxxx shall be elected as directors of
Strategic.
ARTICLE 6
CONDITIONS PRECEDENT
Conditions to Each Party's Obligation to Effect the Merger
6.1 The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. Each of Digital Stockholder Approval and
Strategic Stockholder Approval (with respect to both the issuance of
Strategic Common Stock in the Merger and the Strategic Stock Plan) shall
have been obtained.
(b) TSE. The shares of Strategic Stock issuable to Digital's stockholders
pursuant to this Agreement and under the Stock Plans shall have been
approved for trading on The Toronto Stock Exchange subject to official
notice of issuance.
(c) No Injunctions or Restraints. No statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued
by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition preventing the consummation of the
Merger shall be in effect.
(d) Form F-4. The Form F-4 and Schedule 13e-3 shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order. Strategic shall have received all state
securities authorizations necessary to issue the Strategic Stock pursuant
to this Agreement and under the Stock Plans.
Conditions to Obligations of Strategic and Merger Sub
6.2 The obligations of Strategic and Merger Sub to effect the Merger are
further subject to satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Digital set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of
Digital set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent such
representations and warranties speak as of an earlier date, and Strategic
shall have received a certificate signed on behalf of Digital by the chief
executive officer and the chief financial officer of Digital to such
effect.
(b) Performance of Obligations of Digital. Digital shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Strategic shall
have received a certificate signed on behalf of Digital by the chief
executive officer and the chief financial officer of Digital to such
effect.
(c) Certificates; Letters from Digital Affiliates. Digital shall have
delivered to Strategic certified copies of resolutions duly adopted by
Digital's Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Strategic and its
counsel shall reasonably request prior to the date of the Stockholders
Meeting.
(d) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding and there shall not be
pending or if pending, have been adversely amended from the date hereof by
any other person, any suit, action or proceeding which has a reasonable
likelihood of success, in such case (i) challenging the acquisition by
Strategic or Merger Sub of any shares of Digital Common Stock, seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from
Digital, Strategic or Merger Sub any damages that are material in relation
to Digital and its subsidiaries taken as a whole or Strategic and its
subsidiaries taken as a whole, as applicable, (ii) seeking to prohibit or
limit the ownership or operation by Digital, Strategic or any of their
respective subsidiaries of any material portion of the business or assets
of Digital, Strategic or any of their respective subsidiaries, or to compel
Digital, Strategic or any of their respective subsidiaries to dispose of or
hold separate any material portion of the business or assets of Digital,
Strategic or any of their respective subsidiaries, as a result of the
Merger or any of the other transactions contemplated by this Agreement,
(iii) seeking to impose limitations on the ability of Strategic to acquire
or hold, or exercise full rights of ownership of, any shares of Digital
Common Stock or common stock of the Surviving Corporation, including the
right to vote Digital's Common Stock, or Common Stock of the Surviving
Corporation, on all matters properly presented to the stockholders of
Digital or the Surviving Corporation, respectively, (iv) seeking to
prohibit Strategic or any of its subsidiaries from effectively controlling
in any material respect the business or operations of Digital or its
subsidiaries or (v) which otherwise could reasonably be expected to have a
material adverse effect on Digital or Strategic. In addition, there shall
not be any statute, rule, regulation, judgment or order enacted, entered,
enforced or promulgated that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (ii) through
(iv) above.
(e) Approval of Digital Board of Directors. The Board of Directors of
Digital or any committee thereof shall not have withdrawn or modified in a
manner adverse to Strategic or Merger Sub its approval or recommendation of
the Merger or this Agreement, or approved or recommended any takeover
proposal, (ii) Digital shall not have entered into any agreement with
respect to any superior proposal in accordance with Section 4.2(b) of this
Agreement, (iii) Strategic shall not have received a Notice of Superior
Proposal from Digital or two business days shall not have elapsed from the
date of such receipt or (iv) the Board of Directors of Digital or any
committee thereof shall not have resolved to take any of the foregoing
actions referred to in clause (i) or (ii) above.
(f) Fairness Opinion. Strategic shall have received the opinion of CWC
Capital L.P., dated on or about the date that is 10 business days prior to
the mailing of the Joint Proxy Statement, to the effect that, as of such
date, the Exchange Ratio is fair to Strategic's Stockholders from a
financial point of view, a signed copy of which opinion shall have been
delivered to Digital.
(g) Digital Dissenters. No more than 2 1/2% of the outstanding shares of
Digital Common Stock immediately prior to the Merger shall constitute
Dissenting Shares in accordance with Section 2.1(d).
Conditions to Obligations of Digital
6.3 The obligation of Digital to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Strategic and the Material Subsidiaries set forth in this Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of Strategic and the Material Subsidiaries
set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations speak as of an
earlier date, and Digital shall have received a certificate signed on
behalf of Strategic by the chief executive officer of Strategic to such
effect.
(b) Performance of Obligations of Strategic and Merger Sub. Strategic and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date, and Digital shall have received a certificate signed on
behalf of Strategic by the chief executive officer of Strategic to such
effect.
(c) Certificates. Strategic shall have delivered to Digital certified
copies of resolutions duly adopted by Strategic's and Merger Sub's
respective Board of Directors and stockholders of Strategic evidencing the
taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as Digital
and its counsel shall reasonably request prior to the date of Strategic's
Stockholders Meeting.
(d) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding and there shall not be
pending by any other person any suit, action or proceeding which has
reasonable likelihood of success, in each case (i) challenging the
acquisition by Strategic or Merger Sub of any shares of Digital Common
Stock, seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement or seeking to
obtain from Digital, Strategic or Merger Sub any damages that are material
in relation to Digital and its subsidiaries taken as a whole or Strategic
and Merger Sub taken as a whole, as applicable, (ii) seeking to prohibit or
limit the ownership or operation by Digital, Strategic or any of their
respective subsidiaries of any material portion of the business or assets
of Digital, Strategic or any of their respective subsidiaries to compel
Digital, Strategic or any of their respective subsidiaries to dispose of or
hold separate any material portion of the business or assets of Digital,
Strategic or any of their respective subsidiaries, as a result of the
Merger or any of the other transactions contemplated by this Agreement,
(iii) seeking to impose limitations on the ability of Strategic to acquire
or hold, or exercise full rights of ownership of, any shares Digital Common
Stock or common stock of the Surviving Corporation including the right to
vote the Digital Common Stock, or Common Stock of the Surviving
Corporation, on all matters properly presented to the stockholders of
Digital or the Surviving Corporation, respectively, (iv) seeking to
prohibit Strategic or Merger Sub from effectively controlling in any
material respect the business or operations of Digital or its subsidiaries
or (v) which otherwise could reasonably be expected to have a material
adverse effect on Digital or Strategic. In addition, there shall not be
any statute, rule, regulation, judgment or order enacted, entered, enforced
or promulgated that is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (ii) through (iv) above.
(e) Fairness Opinion. Digital shall have received the opinion of Xxxxxxxx
& Xxxxxxx Incorporated dated on or about the date that is 10 business days
prior to that mailing of the Joint Proxy Statement, to the effect that, as
of such date, the Exchange Ratio is fair to Digital, a signed copy of which
opinion shall have been delivered to Strategic.
(f) Strategic Interim Financing. Strategic shall have received the
proceeds of the Strategic Interim Financing.
(g) Tax Opinion. Strategic shall have caused to be delivered to Digital
an opinion of U.S. counsel confirming that the Merger can be effected on a
tax-deferred basis to Digital shareholders as outlined in the memorandum of
Deloitte & Touche dated October 5, 1995.
Frustration of Closing Condition
6.4 None of Digital, Strategic and Merger Sub may rely on the failure of
any condition set forth in Sections 6.1, 6.2 or 6.3, as the case may be, to be
satisfied if such failure was caused by such party's failure to act in good
faith or to use its best efforts to consummate the Merger and the other
transactions contemplated by this Agreement, as required by Section 5.5.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Termination
7.1 This Agreement may be terminated at any time prior to the Effective
Time of the Merger, whether before of after approval of matters presented in
connection with the Merger by the stockholders of Digital
(a) by mutual written consent of Strategic, Merger Sub and Digital;
(b) by either Strategic or Digital:
(i) if, upon a vote at a duly held Digital Stockholders Meeting or
Strategic Stockholders Meeting or any adjournment thereof, any
required approval of the stockholders of Digital or Strategic, as the
case may be, shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before April
30, 1996, unless the failure to consummate the Merger is the result of
a willful and material breach of this Agreement by the party seeking
to terminate this Agreement; provided, however, that the passage of
such period shall be tolled for any part thereof (but not exceeding 60
calendar days in the aggregate) during which any party shall be
subject to a non-final order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or
the calling or holding of the Stockholders Meeting or the Strategic
Stockholders Meeting;
(iii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and
nonappealable; or
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in
this Agreement which (A) would give rise to the failure of a condition
set forth in Section 6.2(a) or (b) or Section 6.3(a) or (b), as
applicable, and (B) cannot be or has not been cured within 30 day
after the giving of written notice to the breaching party of such
breach (a "Material Breach") (provided that the terminating party is
not then in Material Breach of any representation, warranty, covenant
or other agreement contained in this Agreement); or
(v) by Digital in accordance with the provisions of Section 4.2(b).
Effect of Termination
7.2 In the event of termination of this Agreement by either Digital or
Strategic as provided in Section 7.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of
Strategic, Sub or Digital, other than the provisions of Section 3.1(p), Section
3.2(j), the last two sentences of Section 5.4, Section 5.9, this Section 7.2 and
Article 8 and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
Amendment
7.3 This Agreement may be amended by the parties at any time before or
after any required approval of matters presented in connection with the Merger
by the stockholders of Digital and at any time before or after any required
approval of matters presented in connection with the issuance of shares of
Strategic Common Stock in the Merger and the Strategic Stock Plan by the
stockholders of Strategic; provided, however, that after any such approval,
there shall be made no amendment that by law requires further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
Extension; Waiver
7.4 At any time prior to the Effective Time of the Merger, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance by the other parties with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
Procedure for Termination, Amendment, Extension or Waiver
7.5 A termination of this Agreement pursuant to Section 7.1, an amendment
of this Agreement pursuant to Section 7.3 or an extension or waiver pursuant to
Section 7.4 shall, in order to be effective, require in the case of Strategic,
Merger Sub or Digital, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
ARTICLE 8
GENERAL PROVISIONS
Nonsurvival of Representations and Warranties
8.1 None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
of the Merger. This Section 8.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective Time
of the Merger.
Notices
8.2 All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Strategic, to
Building A, Xxxx 000 00000 00xx Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxxx
with a copy to:
Lang Xxxxxxxx Xxxxxxxx & Xxxx, to
0000 Xxxxx Xxxxxxx Xxxxxx, X.X. Xxx 00000
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxx Zinkhofer, Esq.
(b) if to Digital, to
000 X.X. 00xx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxx
XXX 00000
Telecopy: (000) 000-0000
Attention: Mr. Xxxxxxx Xxxxxx
with a copy to Mason, Briody, Xxxxxxxxx & Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx
00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Definitions
8.3 For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "indebtedness" has the meaning assigned thereto in Section 3.1(t)(ii);
(c) "material adverse change" or "material adverse effect" means, when
used in connection with Digital or Strategic, any change or effect that is
materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of
such party and its subsidiaries taken as a whole;
(d) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity;
(e) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
(f) "superior proposal" has the meaning assigned thereto in Section 4.2;
(g) "takeover proposal" has the meaning assigned thereto in Section 4.2;
and
(h) "taxes" has the meaning assigned thereto in Section 3.1(k).
Interpretation
8.4 When a reference is made in this Agreement to an Article, Section,
Exhibit or Schedule, such reference shall be to an Article or Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined herein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
Counterparts
8.5 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
Entire Agreement; No Third-Party Beneficiaries
8.6 This Agreement (including the documents and instruments referred to
herein)
(a) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect
to the subject matter of this Agreement, and
(b) except for the provisions of Article 2, Section 5.6, Section 5.7 and
Section 5.8, are not intended to confer upon any person other than the
parties any rights or remedies.
Governing Law
8.7 This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Florida, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
Assignment
8.8 Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise by any of the parties without the prior written consent of the
other parties, except that Merger Sub may assign, in its sole discretion, any of
or all its rights, interests and obligations under this Agreement to Strategic
or to any direct or indirect wholly owned subsidiary or Strategic, but no such
assignment shall relieve Merger Sub of any of its obligations under this
Agreement. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and permitted assigns.
Enforcement
8.9 The parties agree that irreparable damage would occur in the event
that any of the provisions of Section 5.4 of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of Section 5.4 of this Agreement in any court of
the United States located in the State of Florida state Court. In addition,
each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any Federal
court located in the State of Florida or any Florida state court in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and
(c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other
than a Federal court sitting in the State of Florida.
Execution and Attestation
IN WITNESS WHEREOF, Strategic, Merger Sub and Digital have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date below written.
STRATEGIC TECHNOLOGIES INC.
by:
Attest: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxx,
Chairman and Chief Executive
Officer
/s/ Xxxxxxxx Xxxxxxxxx Execution Date: October 18,
----------------------
Xxxxxxxx Xxxxxxxxx, 1995
Secretary
STRATEGIC FLORIDA INC.
by:
Attest: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxxx,
President and Chief Executive
Officer
/s/ Berhnard Zinkhofer Execution Date: October 18,
----------------------
Xxxxxxxx Xxxxxxxxx, 1995
Secretary
DIGITAL PRODUCTS CORPORATION
by:
Attest: /s/ Xxxxxxx Xxxxxx
------------------
Xxxxxxx Xxxxxx,
President and Chief Executive
Officer
/s/ Xxxxxx X. Xxxxxxxxx Execution Date: October 20,
-----------------------
Xxxxxx X. Xxxxxxxxx 1995
Secretary
Digital Products Corporation Disclosure Schedule
(Schedules omitted)
Section 3.1(d) NONCONTRAVENTION
Section 3.1(g) CERTAIN CHANGES OR EVENTS
Section 3.1(h) LITIGATION
Section 3.1(i) ABSENCE OF CHANGE IN BENEFIT PLANS
Section 3.1(k) TAXES
Section 3.1(t)(i) MATERIAL CONTACTS
Section 3.1(t)(ii) INDEBTEDNESS
Section 3.1(v) INTELLECTUAL PROPERTY
Section 3.1(w) INSURANCE
Strategic Technologies Inc Disclosure Schedule
(Schedules Omitted)
1. LITIGATION
2. INSURANCE
3. CONTRACTS, INDEBTEDNESS
