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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
DIGI INTERNATIONAL INC.,
ION ACQUISITION INC.,
INSIDE OUT NETWORKS, INC.
AND
OTHERS
DATED AS OF SEPTEMBER 26, 2000
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TABLE OF CONTENTS
RECITALS.....................................................................................1
ARTICLE I The Merger; Effective Time; Closing...............................................1
1.1 The Merger...........................................................................1
1.2 Effective Time.......................................................................2
1.3 Closing..............................................................................2
ARTICLE II Articles and By-Laws of the Surviving Corporation................................2
2.1 The Articles.........................................................................2
2.2 The By-Laws..........................................................................2
ARTICLE III..................................................................................3
Directors and Officers of the Surviving Corporation..........................................3
3.1 Directors............................................................................3
3.2 Officers.............................................................................3
ARTICLE IV Merger Consideration; Conversion of ION Shares in the Merger; Stock Options.......3
4.1 Merger Consideration.................................................................3
4.2 Subordinated Debentures..............................................................4
4.3 Payment..............................................................................4
4.4 Contingent Payment...................................................................5
4.5 Reports and Disputes................................................................12
4.6 Dissenting Shares...................................................................15
4.7 Adjustment of Purchase Price........................................................15
ARTICLE V Representations and Warranties of ION.............................................16
5.1 Organization and Qualification......................................................16
5.2 Capitalization......................................................................17
5.3 Authority Relative to this Agreement................................................18
5.4 No Conflict, Required Filings and Consents..........................................18
5.5 Compliance..........................................................................19
5.6 Financial Statements................................................................19
5.7 Absence of Certain Changes or Events................................................19
5.8 Absence of Litigation...............................................................20
5.9 Employee Benefit Plans..............................................................21
5.10 Labor Matters.......................................................................22
5.11 Real Property and Leases............................................................23
5.12 Proprietary Information of Third Parties............................................23
5.13 Trademarks, Patents and Copyright...................................................24
5.14 Taxes...............................................................................24
5.15 Environmental Matters...............................................................25
5.16 Certain Interests...................................................................25
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5.17 Material Contracts..................................................................26
5.18 Officers............................................................................27
5.19 Employees...........................................................................27
5.20 Customer Inventories................................................................28
5.21 Brokers.............................................................................28
5.22 Survival of Representations and Warranties and Indemnity............................28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF DIGI AND MERGER SUB............................28
6.1 Organization and Qualification......................................................28
6.2 Authority Relative to this Agreement................................................29
6.3 No Conflict; Required Filings and Consents..........................................29
6.4 Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub..................30
6.5 Financial Resources.................................................................30
6.6 Brokers.............................................................................30
ARTICLE VII CERTAIN COVENANTS...............................................................31
7.1 Confidentiality.....................................................................31
7.2 Shareholders Meeting................................................................31
7.3 Reasonable Efforts..................................................................31
7.4 Certificates........................................................................31
ARTICLE VIII CONDITIONS TO CLOSING..........................................................31
8.1 Conditions to Obligation of Digi and Merger Sub to Close............................31
(a) Representations and Warranties......................................................31
(b) Observance and Performance..........................................................31
(c) No Adverse Change...................................................................32
(d) Consents of Third Parties...........................................................32
(e) Legal Opinion.......................................................................32
(f) Employment Agreements...............................................................32
(g) Indemnification Agreement...........................................................32
(h) Cancellation Agreements.............................................................32
(i) No Legal Actions....................................................................32
(j) Proceedings and Documents...........................................................32
(k) Closing Documents...................................................................33
8.2 Conditions to Obligation of ION to Close............................................33
(a) Representations and Warranties......................................................33
(b) Observance and Performance..........................................................33
(c) No Adverse Change...................................................................33
(d) Employment Agreements...............................................................33
(e) Legal Opinion.......................................................................33
(f) Cancellation Agreements.............................................................33
(g) No Legal Actions....................................................................33
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(h) Proceedings and Documents...........................................................34
(i) Closing Documents...................................................................34
ARTICLE IX MISCELLANEOUS....................................................................34
9.1 Expenses............................................................................34
9.2 Notices.............................................................................34
9.4 Amendments..........................................................................35
9.5 Waiver..............................................................................35
9.6 Certain Definitions.................................................................36
9.7 Publicity...........................................................................40
9.8 Headings............................................................................41
9.9 Nonassignability....................................................................41
9.10 Parties in Interest.................................................................41
9.11 Counterparts........................................................................41
9.12 Governing Law.......................................................................41
9.13 Severability........................................................................41
9.14 Remedies............................................................................41
9.15 Entire Agreement....................................................................41
9.16 Force Majeure.......................................................................42
9.17 Arbitration.........................................................................42
9.18 Schedules/Exhibits..................................................................42
9.19 Interpretations and Definitions.....................................................43
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SCHEDULES
ION DISCLOSURE SCHEDULES:
4.3--Payments
4.4--Contingent Payments
4.4(c)--Individual Contingent Payments
5.1--Organization and Qualification
5.2--Capitalization
5.4--Consents and Approvals
5.6--Financial Statements
5.7--Absence of Certain Changes or Events
5.8--Absence of Litigation
5.9--Employee Benefit Plans
5.10--Labor Matters
5.11(b)(ii) --Leased Real Property
5.13--Trademarks, Patents and Copyright
5.14--Taxes
5.16--Certain Interests
5.17--Material Contracts
5.17(a)(ii)--Customer Sales Agreements
5.18--Officers
5.19--Employees
EXHIBITS
Certificate of Merger........................................................A
Legal Opinion of Xxxxx Xxxx LLP..............................................B
Indemnification Agreement....................................................C
Cancellation Agreement.......................................................D
Legal Opinion of Faegre & Xxxxxx LLP.........................................E
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is entered into as
of September 26, 2000 to be effective as of 12:01 a.m. on October 2, 2000, by
and among Digi International Inc., a Delaware corporation ("Digi"), ION
Acquisition Inc., a Texas corporation and a direct wholly owned subsidiary of
Digi ("Merger Sub"), and Inside Out Networks, Inc., a Texas corporation ("ION")
together with all of the holders of the capital stock, options and warrants
issued by ION (collectively the "ION Stakeholders").
RECITALS
WHEREAS, the Board of Directors of Digi, Merger Sub and ION each have
determined that it is in the best interests of their respective stockholders for
Merger Sub to merge with and into ION upon the terms and subject to the
conditions of this Agreement;
WHEREAS, the ION Stakeholders have concurrently consented in writing in
favor of this Agreement and the transactions contemplated hereby in lieu of a
special meeting of stockholders of ION;
WHEREAS, Digi, Merger Sub and ION desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition thereof, Digi and certain key employees of ION shall enter into
employment agreements regarding the terms of employment of each key employee
with Surviving Corporation; and
WHEREAS, concurrently with the execution of this Agreement, and as a
condition thereof, the stockholders of Merger Sub and ION have unanimously
approved and consented to this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, Digi, Merger Sub and ION
hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined), ION and Merger Sub
shall consummate a merger (the "Merger") in which (i) Merger Sub shall be merged
with and into ION and the separate corporate existence of Merger Sub shall
thereupon cease, (ii) ION shall be the successor or surviving corporation in the
Merger and shall continue to be governed by the laws of the State of Texas, and
(iii) the separate corporate existence of ION with all its rights, privileges,
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immunities, powers and franchises shall continue unaffected by the Merger. The
corporation surviving the Merger is sometimes hereinafter referred to as the
"Surviving Corporation." The Merger shall have the effects specified in the
Texas Business Corporation Act (the "TBCA").
1.2 Effective Time. Digi, Merger Sub and ION will cause
counterparts of a Certificate of Merger, substantially in the form attached
hereto as Exhibit A (the "Certificate of Merger"), to be executed and filed on
the date of the Closing (as hereinafter defined) (or on such later date as Digi
and ION may agree) with the Secretary of State of the State of Texas. The Merger
shall become effective October 2, 2000 (or, if later, at the time the
Certificate of Merger shall have been accepted for record by the Secretary of
State of the State of Texas) or such other time as Digi and ION may agree and
specify in the Certificate of Merger in accordance with Section 10.03 of the
TBCA, and such time of effectiveness is hereinafter referred to as the
"Effective Time."
1.3 Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Faegre & Xxxxxx LLP, 2200 Xxxxx Fargo Center,
Minneapolis, Minnesota, at 10:00 a.m. on September 26, 2000 or (ii) at such
other place and/or time and/or on such other date as Digi and ION may agree and
the same shall be deemed effective at the Effective Time.
ARTICLE II
ARTICLES AND BY-LAWS OF THE SURVIVING CORPORATION
2.1 The Articles. The Articles of Incorporation of Merger Sub as
in effect immediately prior to the Effective Time shall be the Articles of the
Surviving Corporation, until duly amended in accordance with the terms thereof
and of the TBCA, except that from and after the Effective Time, Article One of
the Articles of Merger Sub shall be amended to be and read as follows:
The name of the Corporation shall be Inside Out
Networks, Inc.
2.2 The By-Laws. The By-Laws of Merger Sub in effect immediately
prior to the Effective Time shall be the By-Laws of the Surviving Corporation,
until duly amended in accordance with the terms thereof, of the Articles of the
Surviving Corporation and of the TBCA.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 Directors. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation, such directors to
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serve until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Articles and By-Laws.
3.2 Officers. From and after the Effective Time, the officers of
the Surviving Corporation shall be as set forth below:
Xxxxxx X. Xxxxxxxx President
Xxxxxxx X. Xxxxxxxx Chief Operating Officer
Xxxxxxxxxxx Xxxxxxxx Vice President and Treasurer
Xxxxx X. Xxxxxxxxx Secretary
Each such officer shall serve until his successor has been duly elected or
appointed and qualified or until his earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles and By-Laws.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OF ION SHARES
IN THE MERGER; STOCK OPTIONS AND WARRANTS
4.1 Merger Consideration. At the Effective Time, as a result of
the Merger and without any action on the part of the holder of any capital stock
of ION or warrant holder or option holder of ION, other than to consent to this
Agreement:
(a) Each issued and outstanding share of common stock, no par
value, of ION ("ION Shares") (other than Dissenting Shares (as defined
in Section 4.6)) shall be converted into the right to receive:
(i) Initial cash consideration equal to the sum of (the
"Per Share Initial Consideration") (A) $6,410,000 as may be
adjusted pursuant to Section 4.9 divided by the sum of (1) the
number of ION Shares at the Effective Time (2,978,753); plus
(2) the number of shares of Series A Preferred (as defined in
Section 5.2) issued and outstanding at the Effective Time
(1,000,000); plus (3) the number of shares of common stock of
ION issuable at the Effective Time upon the exercise or
conversion of all warrants to purchase shares of common stock
(278,000); plus (4) the number of shares of common stock of
ION issuable at the Effective Time upon the exercise or
conversion of all stock options, rights, or other securities
of ION (307,100), including, in all cases, Dissenting Shares
(collectively, the "Fully Diluted Shares") (approximately
$1.4045 per share) plus (B) the Aggregate Exercise Amount
divided by the Fully Diluted Shares (approximately $0.1044 per
share);
(ii) a pro rata portion of the purchase price
adjustment, if any, pursuant to Section 4.7(b); and
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(iii) the contingent right to receive a pro rata portion
or none of $8,500,000 in cash pursuant to Section 4.4 hereof
(the "Contingent Consideration"), as may be adjusted pursuant
to Section 4.7(b).
All ION Shares issued and outstanding at the Effective Time shall
thereafter no longer be outstanding and shall be canceled and retired
and shall cease to exist, and each certificate formerly representing
any of such ION Shares (other than Dissenting Shares) shall thereafter
represent only the right to the Per Share Initial Consideration, a pro
rata portion of the purchase price adjustment, if any, pursuant to
Section 4.7(b), and a pro rata portion of the Contingent Consideration,
if any, pursuant to Section 4.4.
(b) Each issued and outstanding share of Series A Preferred
(other than Dissenting Shares) shall be automatically converted into
and become the right to receive an amount in cash equal to the Per
Share Initial Consideration, plus a pro rata portion of the purchase
price adjustment, if any, pursuant to Section 4.7(b) plus a pro rata
portion of the Contingent Consideration, if any, pursuant to Section
4.4.
(c) Each ION share underlying an outstanding option (an
"Option") to purchase ION Shares granted under an option agreement with
ION and each ION share underlying an outstanding warrant (a "Warrant")
to purchase ION Shares shall be automatically converted into and become
the right to receive, (i) an amount in cash equal to (A) the difference
between the Per Share Initial Consideration and the per share exercise
price of such Option or Warrant, as applicable, less (B) the amount of
any applicable withholding tax obligations with respect to the payment
of the amount of such difference; plus (ii) a pro rata portion of the
purchase price adjustment, if any, pursuant to Section 4.7(b), less the
amount of any applicable withholding tax obligations; and plus (iii) a
pro rata portion of the Contingent Consideration, if any, pursuant to
Section 4.4, less the amount of any applicable withholding tax
obligations.
(d) Each share of common stock, $0.01 par value, of Merger
Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the Surviving
Corporation.
4.2 Subordinated Debentures. At or before the Effective Time, the
holder of each then-outstanding subordinated debenture shall be entitled, to
receive, upon execution of a cancellation agreement, a cash payment from ION in
an amount equal to the principal amount thereof and all accrued and unpaid
interest.
4.3 Payment.
(a) Prior to the Effective Time, Digi shall deposit in
immediately available funds with CitiBank, N.A., or any disbursing
agent that is selected by the Securityholder
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Agent (as defined in Section 4.5(h) and reasonably satisfactory to ION
(the "Disbursing Agent"), the amount (such amount being hereinafter
referred to as the "Cash Fund") of $6,410,000. Except for the sum of
$203,000 due Xxxxxxx X. Xxxxxxxx pursuant to Section 4.3(b), on the
Closing Date the Disbursing Agent shall make the payments identified on
Schedule 4.3 by wire transfer or bank cashiers check, as designated
thereon, to the applicable persons identified thereon (the "Payment
Recipients"), subject to the requirements of paragraph (b) of this
Section 4.3. Any amount remaining in the Cash Fund six months after the
Effective Time may be refunded to the Surviving Corporation at its
option; provided, however, that the Surviving Corporation and Digi
shall be liable for any cash payments required to be made thereafter
pursuant to this Section 4.3(a) and Sections 4.1, 4.4 and 4.7 hereof.
(b) Digi shall withhold the sum of $203,000 from the amount
otherwise due Xxxxxxx X. Xxxxxxxx pursuant to Section 4.1(a) and one
third of that amount ($67,666.67) shall be paid to him by Digi upon
each of September 30, 2001, September 30, 2002 and September 30, 2003;
provided that, with respect to each such date, he has not voluntarily
resigned from the employ of ION or his employment with ION has not been
terminated for Good Cause prior to said anniversary date.
4.4 Contingent Payment.
(a) Digi and Surviving Corporation shall pay to each Payment
Recipient such person's pro rata portion set forth on Schedule 4.3
("Contingent Payment Percentage") of the Contingent Consideration over
a three year period commencing October 1, 2000, fifty percent of which
is attributable to achievement of certain Cumulative Revenue targets
for the Earn-Out Period and fifty percent of which is attributable to
the achievement of certain Cumulative Operating Income targets for the
Earn-Out Period, all in accordance with this Section 4.4 and the
Contingent Consideration Matrix contained in Schedule 4.4 (the
"Contingent Consideration Matrix").
(b) Payment of the Contingent Consideration, to the extent
earned, shall be made 30 days after completion of the audited financial
statements of Digi for each of the first three fiscal years of Digi
commencing with the fiscal year ending on September 30, 2001 (each a
"Payment Date"), but in any event not later than January 15th of the
following year. Except as provided in Section 4.4(c) below, on a
Payment Date each Payment Recipient shall receive his or her Contingent
Payment Percentage of the sum of (i) the amount set forth under the
heading "Revenue Payout Amount" that corresponds to the amount of
Cumulative Revenue recognized by the Surviving Corporation since
October 1, 2000 (as may be adjusted as provided herein) set forth in
the column entitled "Cumulative Revenue Amount," less the aggregate
amount of the Revenue Payout Amounts, if any, received on all previous
Payment Dates and (ii) the amount set forth under the heading
"Operating Income Payout Amount" that
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corresponds to the Cumulative Operating Income earned by the Surviving
Corporation since October 1, 2000 (as may be adjusted as provided
herein) set forth in the column entitled "Cumulative Operating Income
Amount," less the aggregate amount of the Operating Income Payout
Amounts, if any, received on all previous Payment Dates. The Revenue
Payout Amount and Operating Income Payout Amount shall be prorated for
Cumulative Revenue achieved and Cumulative Operating Income earned that
fall between the dollar amounts set forth on the Contingent Payment
Matrix, as adjusted as provided in the notes to the Contingent Payment
Matrix. Notwithstanding the foregoing, no portion of Contingent
Consideration shall be paid unless the Cumulative Revenue of the
Surviving Corporation since October 1, 2000 is at least $10,000,000 and
the Cumulative Operating Income of the Surviving Corporation since
October 1, 2000 is at least $2,000,000.
(c) Each individual set forth on Schedule 4.4(c) shall
receive the amounts set forth following his name on the dates set forth
on Schedule 4.4(c) so long as before such date such individual has not
voluntarily resigned his employment with the Surviving Corporation or
his employment with the Surviving Corporation has not been terminated
for Good Cause. Any amount paid to such individuals pursuant to this
Section 4.4(c) shall reduce the amount otherwise payable to such
individuals pursuant to Section 4.4(b).
(d) "Revenue" is all revenue recognized by the Surviving
Corporation, as determined in accordance with GAAP on a basis
consistently applied by Digi for all of its business units, except that
revenue actually received in transactions in which SAB 101 would
require deferred recognition shall be deemed to be recognized in the
period in which it is actually received. Revenue from the Surviving
Corporation's sales of its products for resale into the distribution
channels will be recognized as similar sales income is recognized by
Digi on a corporate wide normalized basis. Further, with respect to
products or services sold from Surviving Corporation to Digi, or an
affiliate of Digi, there shall be added to Revenue the difference
between the price Surviving Corporation sells to Digi or an affiliate
of Digi and the selling price to third parties by Digi or its
affiliates with respect to such goods and services.
(e) "Cumulative Revenue" is all Revenue recognized during the
Earn-Out Period.
(f) "Operating Income" is calculated as Revenue less cost of
goods sold and operating expenses of the Surviving Corporation, all as
determined in accordance with GAAP on a basis consistently applied by
Digi for all of its business units; and
(i) shall be reduced by Digi corporate allocations for
actual direct services provided by Digi to the Surviving
Corporation, pursuant to Digi's standard allocation method for
its divisions;
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(ii) shall be reduced by Digi corporate allocations at
Digi's then current labor fringe rate for costs incurred by
Digi on behalf of the Surviving Corporation for insurance,
including unemployment and workers compensation insurance, and
contributions by Digi to employee benefit plans for the
employees of Surviving Corporation;
(iii) assumes operating expenses will include total lease
costs during the applicable period if leases do not meet the
GAAP criteria for a capital lease or will include appropriate
depreciation and interest expenses related to lease equipment
if such leases meet the criteria for a capital lease under
GAAP;
(iv) assumes that United States federal and state income
taxes shall not be taken into account for purposes of
determining Cumulative Operating Income; and
(v) shall be reduced by the amount of any unrecorded
liabilities of ION not included in the Final Report (as
defined in Section 4.7).
(g) "Cumulative Operating Income" is all Operating Income
recognized during the Earn-Out Period.
(h) Digi and ION agree that Surviving Corporation shall be
operated during the Earn-Out Period as a separate legal entity as
follows:
(i) Xxxxxxx X. Xxxxxxxx shall be the chief operating
officer of Surviving Corporation with the usual and customary
authority of a chief operating officer of a corporation, which
authority shall include, at a minimum and not exclusively (and
without the further need for the consent or approval from the
management of Digi or the ION Board of Directors), the
following rights:
(A) to conduct day-to-day operations of with
respect to Surviving Corporation;
(B) to hire and fire employees of Surviving
Corporation;
(C) to purchase goods and services from third
parties independently from Digi;
(D) to determine the sales channels to be used in
selling the products of the Surviving Corporation and to
incur sales and marketing expenses consistent with the
limitations contained herein;
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(E) to make capital purchases for Surviving
Corporation in the amount of fifty thousand dollars
($50,000) for individual expenditures but not to exceed
three hundred thousand dollars ($300,000) in the
aggregate annually;
(F) to have full control of the manufacturing and
customer support activities of Surviving Corporation; and
(G) to determine the product development direction
and effort as well as the product mix to be sold by
Surviving Corporation and to incur research and
development expenses up to the level provided for herein;
(ii) Digi shall transfer all of its existing USB
products and product development activities to Surviving
Corporation and Digi shall not conduct any future product
development or sales of USB products, except through Surviving
Corporation, provided in all cases, in the event that such
existing USB products and product development activities are
discontinued, no costs or expenses related thereto shall be
borne or allocated to Surviving Corporation for purposes of
computing Operating Income (e.g., inventory write-downs or
write-offs, employee termination costs, capitalized product or
development costs, future support costs, etc.).
(iii) All debt for capital expenditures of the Surviving
Corporation shall be approved by Digi, through its normal
budget approval process.
(iv) Surviving Corporation shall have the right to
purchase inventory components at levels consistent with three
(3) to four (4) turn ratios annually or as otherwise agreed by
the parties and any Non-saleable Product will be considered
obsolete inventory.
(v) During a fiscal quarter the percentage obtained by
dividing Surviving Corporation's marketing and sales expenses
by Surviving Corporation's sales revenue for such quarter
shall not exceed the percentage obtained by dividing the
amount of Digi's total marketing and sales expenses for such
quarter by Digi's total sales revenue during such quarter.
(vi) The terms of any marketing services provided for
the benefit of the Surviving Corporation by employees of Digi
who do not customarily provide services to the Surviving
Corporation will be agreed upon at the beginning of each
fiscal year.
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(vii) Licenses for technology may be granted to third
parities; provided that such third parties are not competitors
or potential competitors of Digi or Surviving Corporation and
provided further that Digi approves any such licenses to
competitors or potential competitors prior to the commencement
of discussions with such third parties.
(viii) Not less than twenty percent (20%) of the revenues
of the Surviving Corporation shall be allocated to, and may be
used by, Surviving Corporation for research and development
activities of the Business to support and enhance existing
products and develop new products.
(ix) If the Surviving Corporation requires engineering
services by employees of Digi who do not customarily provide
services to the Surviving Corporation, then Digi shall
allocate to the expenses of the Surviving Corporation Digi's
then year-to-date fully loaded cost per hour of each employee.
(x) If Digi requires engineering services of employees
who customarily provide services to Surviving Corporation and
Surviving Corporation agrees to provide such services, then
Digi shall determine the fully loaded average cost per hour of
each employee and credit the Cumulative Revenue of Surviving
Corporation an amount equal to five times such cost (the
"Engineering Credit") and credit Cumulative Operating Income
of Surviving Corporation an amount equal to 20% of the
Engineering Credit.
(xi) Without the consent of Digi, Surviving Corporation
shall not enter into agreements with third parties, including
development agreements or licenses to acquire technology, (A)
which agreements will result in annual payments of fifty
thousand dollars ($50,000) for an individual agreement or
three hundred thousand dollars ($300,000) in the aggregate or
(B) which agreements have a term that exceeds the term of the
Earn-Out Period and the post Earn-Out Period cost of such
agreements is expected to exceed $25,000 in the aggregate.
(xii) Surviving Corporation may elect to distribute its
products through Digi's two tier distribution system into the
channel or through Digi's OEM structure for a monthly fee
equal to Surviving Corporation' sales revenue times a
fraction, the numerator of which is the amount of Digi's North
American and OEM sales expenses for the previous quarter and
the denominator of which is the total amount of Digi's North
American and OEM sales revenue for the previous quarter.
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(i) In the event of a Change of Control of Digi prior to the
earlier of September 30, 2003 or the date that the Contingent
Consideration has been paid in full, the Securityholder Agent, at his
option, either (x) shall continue the provisions of this Agreement with
respect to the terms of this Section 4.4 and, in the case of a Change
of Control as a result of a sale of all or substantially all of the
assets of Digi, the Payment Recipients shall, jointly and severally,
release Digi from any obligation to make future payments of the
Contingent Consideration pursuant to the terms of this Section 4.4 or
(y) shall require that Digi and the Surviving Corporation pay the
Contingent Consideration Value as calculated pursuant to Section
4.4(i)(ii) on the date of the Change in Control.
(i) A "Change in Control" shall be deemed to have
occurred upon (X) the occurrence of any person, as defined in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934 (the "Exchange Act"), becoming the "beneficial owner"
(as defined in Rule 13d-3 promulgated pursuant to the Exchange
Act), directly or indirectly, of securities of Digi having 50%
or more of the voting power in the election of directors of
Digi except that any merger of the Surviving Corporation with
Digi shall not be deemed to be a Change in Control and (Y) a
merger or consolidation of Digi with or into any other entity,
regardless of whether Digi is the surviving corporation,
unless more than 60% of, respectively, the then outstanding
shares of common stock of the corporation surviving any such
merger or consolidation or, if appropriate, the parent
corporation of Digi or such surviving corporation, and the
combined voting power of the then outstanding securities of
such surviving corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
outstanding common shares and the outstanding securities of
Digi entitled to vote generally in the election of the board
of directors (the "Voting Securities"), immediately prior to
such merger or consolidation in substantially the same
proportions as was their ownership, immediately prior to such
merger or consolidation, of the outstanding common shares and
outstanding Voting Securities, as the case may be, except that
any merger of the Surviving Corporation with Digi shall not be
deemed to be a Change in Control.
(ii) "Contingent Consideration Value" shall mean the
amount of Contingent Consideration that would be due assuming
the same rate of growth of Cumulative Revenue and Cumulative
Operating Income of Surviving Corporation from the date of the
Change in Control to September 30, 2003, as the rate of growth
of Surviving Corporation from the Effective Time to the date
of the closing of the Change of Control.
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(j) The Payment Recipients shall be deemed to have earned
the remaining unpaid portion of the Contingent Consideration if at any
time during Earn-Out Period:
(i) The Surviving Corporation is not continued as a
separate corporate entity which is responsible for all of the
activities of Digi and its affiliates relating to the
Business; or
(ii) The ability of Xxxxxxx X. Xxxxxxxx to act as the
Chief Operating Officer of the Surviving Corporation (pursuant
to the terms of Section 4.4(h)(i) herein) is materially
impaired other than by reason of his voluntary resignation,
death, disability or termination by Digi for Good Cause; or
(iii) Xxxxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxxx
Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx, and Xxx Xxxxxxx, or any of
them, are terminated by Digi or Surviving Corporation for
reasons other than for Good Cause or without the consent of
Xxxxxxx X. Xxxxxxxx or;
(iv) Digi requires the transfer of any of the Key
Employees more than ten (10) miles from the current place of
business of Surviving Corporation in California; or
(v) The current chief executive officer of Digi is no
longer employed by Digi and Digi requires the transfer of
Xxxxxxx X. Xxxxxxxx more than ten (10) miles from the current
place of business of Surviving Corporation in Texas, unless
Xxxxxxx X. Xxxxxxxx initiates such transfer.
In the event that the Contingent Consideration is deemed earned under
this section, the same shall paid by Digi within ten days thereof to
the persons entitled thereto.
(k) The Contingent Payment is personal to each of the
Payment Recipients and may not be transferred without the prior written
consent of Digi, which consent shall not be unreasonably withheld, for
any reason other than by operation of law or by reason of death,
incapacity, divorce, or to a trust for the benefit of the initial
person entitled thereto or to a member of his or her family. Any
attempted transfer of the Contingent Payment right by any holder
thereof (other than as set forth in the preceding sentence) shall be
null and void.
(l) The Contingent Payment shall represent only a right to
receive cash from Digi subject to the terms set forth herein. The
Contingent Payment shall not possess any attributes of common stock and
shall not entitle the Payment Recipients to any right of any kind other
than as specifically set forth herein.
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4.5 Reports and Disputes
(a) Not later than fifteen (15) days following the end of each
calendar month, Digi shall deliver to Securityholder Agent (as defined
in Section 4.5(h)) monthly income statements setting forth the results
of operations for Surviving Corporation for the applicable monthly
period and for the cumulative period from the beginning of the fiscal
year through the end of such month, all prepared in accordance with
GAAP on a basis consistently applied by Digi for all of its business
units (the "Monthly Statements"). The Monthly Statements shall contain
such detailed information as can be generated by Digi's accounting
software and as may be reasonably requested by the Securityholder Agent
from time to time and shall set forth, at a minimum, the Revenue to be
recognized for the applicable periods by SKU and by customer and the
cost of goods and operating expenses together with any adjustments to
such income statement in accordance with Sections 4.4(f)(i) - (v),
inclusive.
(b) In connection with the making of each payment by Digi to
the Payment Recipients under Section 4.3, Digi shall deliver to the
Securityholder Agent, at the time of such payment, a Statement of
Revenue and Operating Income, based upon Digi's audited financial
statements and certified as true and accurate by the Chief Financial
Officer of Digi, which shall set forth the Revenue and the Operating
Income for the applicable fiscal year ended September 30 together with
the requisite detailed information necessary to understand the basis
for the computation of Revenue, Operating Income and the Contingent
Consideration together with a copy of the relevant financial
information used in making such computation and such other information
as can be generated by Digi's accounting software and as the
Securityholder Agent may reasonably request to verify the accuracy of
Digi's Statement of Revenue and Operating Income.
(c) Digi's Statement of Revenue and Operating Income shall be
conclusive and binding upon the parties hereto unless, within ninety
(90) days following payment of all or any portion of the Contingent
Consideration due to the Payment Recipients (the "Payment Amount"), if
any, and the delivery of Digi's Statement of Revenue and Operating
Income and other information described in Section 4.5(b), the
Securityholder Agent notifies Digi in writing (the "Agent's Notice")
that it disagrees with Digi's Statement of Revenue and Operating Income
and the Payment due. The Agent's Notice shall include a schedule
setting forth the Securityholder Agent's computation of the Payout
Amount, together with a copy of any financial information, other than
that previously supplied by Digi to the Securityholder Agent, used in
making the Securityholder Agent's computation.
(d) The Securityholder Agent's computation of the Contingent
Consideration under Section 4.5(c) shall be conclusive and binding upon
the parties
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hereto unless, within 20 business days following Digi's receipt of the
Agent's Notice, Digi notifies the Securityholder Agent in writing that
it disagrees with the Securityholder Agent's computation of the Payout
Amount. If Digi disagrees with the Securityholder Agent's computation
of the Payout Amount and the parties are unable to agree upon the
Payout Amount within fifteen (15) days thereafter, Digi and the
Securityholder Agent shall request a national firm of independent
certified public accountants mutually agreeable to Digi and the
Securityholder Agent to compute the amount of the Payout Amount due as
promptly as possible, which computation shall be conclusive and binding
upon Digi and all of the Payment Recipients. In the event that Digi and
the Securityholder Agent cannot agree on such a national firm of
independent certified public accountants, then the names of national
accounting firms, exclusive of any such firm which is rendering or has
within the past three years rendered services to Digi, the
Securityholder Agent or ION or any of their Affiliates, shall be
selected by lottery until one such firm is willing to compute the
disputed payment for purposes of this Agreement. In the event that such
national accounting firm determines that the amount of the additional
payment exceeds the cost of the fees of such national accounting firm
incurred in making its determination, then Digi shall pay the fees of
the such national accounting firm; otherwise, the Payment Recipients
bear the cost of such national accounting firm. The obligation of the
Payment Recipients to pay any such fees shall be satisfied by reducing
the next Payout Amount by the amount of such fees, except that in the
event that the Earn-Out Period has terminated or no additional Payout
Amounts are earned to offset such fees, then the Payment Recipients
shall be joint and severally liable for such fees.
(e) In the event that additional Contingent Consideration is
to be paid by Digi as a result of any deficiency in the payment when
due, the additional amount of Payout Amount shall be paid by Digi to
the Payment Recipients within ten business days following the date the
amount is finally determined plus interest at a rate equal to ten
percent (10%) per annum from the original due date until paid.
(f) If Digi fails to perform any of its obligations hereunder
or violates the terms of this Agreement, the Securityholder Agent shall
give Digi a notice of default specifically setting forth the nature of
default, violation or interference ("Default") and stating that Digi
shall have a period of thirty (30) days to cure such Default as
specified in the notice of default except for a default for the payment
of money which must be cured in ten (10) days. If Digi does not cure
the specified default within such thirty (30) day period or ten (10)
day period, as applicable, or, if such Defaults (other than the payment
of money) are curable but are not capable of being cured within such
period and Digi has not commenced in good faith to cure such Defaults
within such thirty (30) day period and does not thereafter proceed as
promptly as is reasonably practicable and continue to promptly take all
reasonable steps to cure said default, then the Securityholder Agent
may, at his sole discretion, exercise his respective rights to enforce
any provision of this Agreement for Default by Digi.
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Furthermore, if such Default is not cured as provided herein (and time
is of the essence), then the Securityholder Agent may, at his sole
discretion, in addition to any other rights available at law or equity,
demand in writing that Digi pay the Payment Recipients the maximum
remaining Contingent Consideration contemplated by this Agreement,
regardless of the actual Cumulative Revenue or Cumulative Operating
Income of the Surviving Corporation and Digi shall pay the same within
ten (10) days following such written demand.
(g) Digi and ION shall maintain complete and accurate books
and records of account relating to the determination of Revenue and
Operating Income and all adjustments thereto. Upon reasonable notice,
the Shareholders' Agent and his representatives shall have the right to
examine and copy the relevant books and records of Digi and ION which
are applicable to the determination of Revenue and Operating Income and
the working papers of Digi, ION and their accountants and to perform
such audit and other procedures as the Shareholders' Agent deems
necessary or desirable during normal business hours to verify that
appropriate accounting and payments have been made by Digi under this
Agreement. Digi will cause its accountants to provide to the
Shareholders' Agent and his representatives access to its accountants'
working papers. Any fees and expenses incurred by Shareholders' Agent
in connection with such inspection, copying, audit or other procedures
shall be paid by the Surviving Corporation and shall be a reduction in
Operating Income applicable to the period in which the expenses are
incurred.
(h) In the event that the Merger is approved, effective upon
such vote, and without further act of any holder of ION capital stock,
Xxxxxxx X. Xxxxxxxx shall be appointed as agent and attorney-in-fact
("Securityholder Agent"), for each Payment Recipient, for and on behalf
of the Payment Recipients, to give and receive notices and
communications, to object to payments of the Contingent Consideration,
to agree to, negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions
necessary to appropriate in the judgment of Securityholder Agent for
the accomplishment of the foregoing. Such agency may be changed by the
Payment Recipients from time to time upon prior written notice to Digi;
provided that the Securityholder Agent may not be removed unless
holders of two-thirds interest in the Contingent Consideration agree to
such removal and to the identity of the substituted agent. Any vacancy
in the position of Securityholder Agent may be filled by approval of
the holders of a majority in interest in the Contingent Consideration.
No bond shall be required of the Securityholder Agent, and the
Securityholder Agent shall not receive compensation for his or her
services. Notices or communications to or from the Securityholder Agent
shall constitute notice to or from each of the Payment Recipients.
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(i) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent
while acting in good faith and in the exercise of reasonable
judgment. The Payment Recipients shall jointly and severally
indemnify the Securityholder Agent and hold the Securityholder
Agent harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the
Securityholder Agent and arising out of or in connection with
the acceptance or administration of the Securityholder Agent's
duties hereunder, including the reasonable fees and expenses
of any legal counsel or other advisors retained by the
Securityholder Agent.
(ii) A decision, act, consent or instruction of the
Securityholder Agent shall constitute a decision of all
Payment Recipients and shall be final, binding and conclusive
upon each of such Payment Recipients, and Digi and the
Surviving Corporation may rely upon any such decision, act,
consent or instruction of the Securityholder Agent as being
the decision, act, consent or instruction of each every such
Payment Recipients. Digi and the Surviving Corporation are
hereby relieved from any liability to any person for any acts
done by them in accordance with such decision, act, consent or
instruction of the Securityholder Agent.
4.6 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of capital stock of ION issued and outstanding
immediately prior to the Effective Time that are held by stockholders who have
the right (to the extent such right is available by law) to demand and receive
payment of the fair value of their shares in the manner provided in Section 5.12
of the TBCA and have not failed to perfect or effectively withdrawn or lost such
right under the TBCA, as the case may be, prior to the time provided therefor
under the TBCA ("Dissenting Shares") will not be converted into the right to
receive the Cash Consideration or the Contingent Consideration; provided,
however, that if any holder of Dissenting Shares shall fail to perfect or shall
have effectively withdrawn or lost such right, such share of capital stock shall
thereupon be deemed to have been converted into and to have become exchangeable
for the right to receive the Cash Consideration and the Contingent
Consideration, without interest. Digi shall cause the Surviving Corporation to
honor its obligations under the TBCA to holders of Dissenting Shares.
4.7 Adjustment of Purchase Price.
(a) Within 30 days after the Closing Date, Securityholder
Agent will furnish to Digi an actual balance sheet of ION as of the
Effective Time (the "Preliminary Report"). Unless Digi gives written
notice to the Securityholder Agent of a good faith objection to any
aspect of the Preliminary Report before the close of business on the
20th day after Digi's receipt thereof, the Preliminary Report shall
then become binding upon Digi and Surviving Corporation and shall be
the "Final Report" and such 20th day shall be the "Final Report Date."
If Digi (by written notice before the close of business
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on such 20th day) objects in good faith to any aspect of the
Preliminary Report, Digi and Securityholder Agent shall discuss the
objections and, if they reach written agreement amending the
Preliminary Report, then the Preliminary Report, as amended by such
written agreement, shall become binding and shall become the Final
Report and the date of such written agreement shall be the Final Report
Date. If Digi and Securityholder Agent do not reach written agreement
within 30 days after Digi gives such notice of objection, then the
balance sheet of ION as of the Closing shall be submitted to a
nationally known independent accounting firm, exclusive of any such
firm which is rendering or has within the past three years rendered
services to Digi, the Securityholder Agent or ION or any of their
Affiliates (the "Neutral CPAs"), who shall determine the balance sheet
of ION as of the Closing Date and submit a written statement of such
resolution, which statement, when delivered to Digi and Securityholder
Agent, shall become binding on Digi, Surviving Corporation and
Securityholder Agent. Such statement and the balance sheet of ION as of
the Closing Date, as determined, shall be deemed the Final Report and
the date on which the Neutral CPAs submit such statement to Digi and
Securityholder Agent shall be the Final Report Date.
(b) If the liabilities of ION set forth on the Final Report
are greater than the net worth of ION calculated based on information
contained in the Final Report ("Net Worth"), then the amount of the
Contingent Consideration shall be reduced by the amount that such
liabilities on the Final Report exceed the Net Worth. If the
liabilities of ION set forth on the Final Report are less than the Net
Worth, then within five business days of the date of the Final Report,
Digi shall pay to the Securityholder Agent, on behalf of the Payment
Recipients, the amount by which the Net Worth exceeds the liabilities
of ION in the Final Report. If Digi does not pay such amount within 20
days of the delivery of the Preliminary Report, then Digi shall pay
interest thereon at a rate equal to Digi's normal borrowing rate
computed from the 20th day after delivery of the Preliminary Report to
Digi until such amount is paid in full.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ION
ION hereby represents and warrants to Digi and Merger Sub that as of
the Effective Time:
5.1 Organization and Qualification.
(a) ION is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation. ION has the requisite power and authority and all
necessary permits, licenses and approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted.
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ION is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary.
Set forth in ION Disclosure Schedule 5.1 is a list of each jurisdiction
in which ION is qualified to do business as a foreign corporation.
(b) ION does not (i) own of record or beneficially, directly
or indirectly, (A) any shares of capital stock, options, warrants or
other rights to purchase capital stock or securities convertible into
capital stock of any other corporation or (B) any participating
interest in any partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other
entity.
5.2 Capitalization.
(a) The authorized capital stock of ION consists of 5,000,000
ION Shares, no par value and 5,000,000 shares of preferred stock, no
par value, of which 1,000,000 shares have been designated Series A
Convertible Preferred Stock, no par value ("Series A Preferred"). As of
the date hereof, 2,978,753 ION Shares and 1,000,000 shares of Series A
Preferred are issued and outstanding, all of which are duly authorized
validly issued, fully paid and nonassessable and have not been issued
in violation of any preemptive or similar rights. The stockholders, and
holders of subscriptions, warrants, options, convertible securities,
and other rights (contingent or other) to purchase or otherwise acquire
equity securities, of ION, and the number of shares of capital stock of
ION, and the number of such subscriptions, warrants, options,
convertible securities, and other such rights, held by each, and their
respective addresses as set forth on the books of ION, are as set forth
in ION Disclosure Schedule 5.2. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of each
class and series of authorized capital stock of ION is as set forth in
the organizational documents of each, copies of which have been
provided to Digi, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding
and enforceable and in accordance with all applicable laws. Except as
set forth in ION Disclosure Schedule 5.2, (i) no person is known to ION
to own any share of capital stock of ION, (ii) no subscription,
warrant, option, convertible security, or other right (contingent or
other) to purchase or otherwise acquire any equity securities or other
securities of ION is authorized or outstanding and (iii) there is no
commitment by ION to issue shares, subscription, warrants, options,
convertible securities, or other such rights or to distribute to
holders of any of its equity securities, any evidence of indebtedness
or asset.
(b) There are no outstanding contractual obligations of ION to
repurchase, redeem or otherwise acquire any of its capital stock or to
provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any person.
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(c) Except as set forth in ION Disclosure Schedule 5.2, there
are no voting trusts or agreements, stockholders' agreements, pledge
agreements, registration rights agreements, buy-sell agreements, rights
of first refusal, co-sale rights, preemptive rights or proxies relating
to any securities of ION (whether or not ION is a party thereto).
(d) All of the outstanding securities of ION were issued in
compliance with all applicable securities laws.
5.3 Authority Relative to this Agreement. ION has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement, and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation by ION of the transactions contemplated by this Agreement have
been duly and validly authorized by all necessary corporate action of ION, and
no other corporate proceedings on the part of ION are necessary to authorize
this Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered by ION. Assuming
the due authorization by Digi and Merger Sub, and the due execution and delivery
by Digi and Merger Sub, this Agreement constitutes a legal, valid and binding
obligation of ION, enforceable in accordance with its terms, subject only to the
approval of shareholders of ION, which approval has been obtained.
5.4 No Conflict, Required Filings and Consents
(a) The execution and delivery of this Agreement by ION does
not, and the performance of this Agreement by ION will not, (i)
conflict with or violate the Articles of Incorporation or By-Laws of
ION, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to ION or by which any property or asset
of ION is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of
ION pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation of ION.
(b) The execution and delivery of this Agreement by ION does
not, and the performance of this Agreement by ION will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or
foreign, except for filing and applicable requirements under federal
securities laws and state securities or "blue sky" laws and the TBCA.
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5.5 Compliance. Except as to the extent that there is no Material
Adverse Effect on ION:
(a) ION is not in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable
to ION or by which any property or asset of ION is bound or affected,
or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which ION is a party or by which ION or any property or asset of ION is
bound or affected.
(b) ION has obtained and is now in possession of all
governmental permits, licenses, orders, approvals, concessions,
registrations, qualifications, authorizations, permissions and similar
filings including, without limitation, those relating to Environmental
Laws, occupational safety and health and equal employment practices
(the "Permits") that are required for the operation of the business of
ION.
(c) No notice, citation, summons or order has been issued, no
complaint has been filed and no penalty has been assessed which is
outstanding or has been resolved by ION during the two years preceding
the Closing Date and no investigation or review is pending or
threatened by any governmental or other entity with respect to the
Permits. The Permits are in full force and effect. To the knowledge of
ION, no proposed law, rule, regulation or order exists.
5.6 Financial Statements. True and complete copies of (i) the
audited balance sheets of ION as of September 30, 1998 and 1999, and the related
audited statements of income, stockholders' equity and cash flows of ION,
together with all related notes and schedules thereto (collectively referred to
herein as the "ION Financial Statements") and (ii) the unaudited balance sheet
of ION as of June 30, 2000 and the related statements of income (collectively
referred to herein as the "ION Interim Financial Statements") have been
delivered by ION to Digi and have been attached hereto as ION Disclosure
Schedule 5.6. The ION Financial Statements and the ION Interim Financial
Statements and notes, thereto, fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of ION as
at the respective dates of, and for the periods referred to, in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, have Material Adverse Effect)
and the absence of notes (that, if presented, would not differ materially from
those included with ION Financial Statements for September 30, 1999). The ION
Financial Statements and ION Interim Financial Statements reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements.
5.7 Absence of Certain Changes or Events. Since June 30, 2000,
except as contemplated by this Agreement or as set forth in ION Disclosure
Schedule 5.7, ION conducted its business only in the ordinary course and in a
manner consistent with past
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practice and, since June 30, 2000, there has not been (i) any Material Adverse
Change with regard to ION, (ii) any change by ION in its accounting methods,
principles or practices, other than changes required by GAAP, (iii) any
revaluation by ION of any asset (including, without limitation, any writing down
of the value of inventory or writing off of notes or accounts receivable), other
than in the ordinary course of business consistent with past practice and in
accordance with GAAP, (iv) any issuance by ION of any stock, bonds or other
corporate securities, (v) borrowing of any amount or incurrence of any material
obligation or material liability (absolute, accrued or contingent) by ION,
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (vi) discharge or satisfaction of any
material lien or material encumbrance or payment of any material obligation or
material liability (absolute, accrued or contingent) by ION (other than payment
of the debenture), other than current liabilities shown on the ION Interim
Financial Statements and current liabilities incurred since the date of the ION
Interim Financial Statements in the ordinary course of business, (vii) mortgage,
pledge, encumbrance or lien on any of the material assets of ION, tangible or
intangible, other than liens for current real property taxes not yet due and
payable, (viii) sale, assignment or transfer of any of the material tangible
assets of ION except in the ordinary course of business, or cancellation by ION
of any material debt or material claim except in the ordinary course of
business, (ix) sale, assignment, transfer or grant of any exclusive license with
respect to any patent, trademark, trade name, service xxxx, copyright, trade
secret or other intangible asset of ION, (x) any loss of property or waiver of
any right of substantial value, whether or not in the ordinary course of
business, (xi) any action by a customer or supplier, the loss of which would
have a Material Adverse Effect on ION, to terminate, materially reduce or
threaten to terminate its purchases from or provision of products or services to
ION, as the case may be, (xii) any entry by ION into any commitment or
transaction material to ION, (xiii) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of ION or any
redemption, purchase or other acquisition of any of its securities, (xiv) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of ION, except in the ordinary
course of business consistent with past practice, or (xv) any commitment to do
any of the foregoing.
5.8 Absence of Litigation. Except as set forth in ION Disclosure
Schedule 5.8, there is no claim, action, proceeding or investigation pending or,
to the knowledge of ION, threatened against ION, or any property or asset of
ION, before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign. Neither ION nor any property or asset of
ION is subject to any order, writ, judgment, injunction, decree, determination
or award.
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5.9 Employee Benefit Plans.
(a) ION Disclosure Schedule 5.9 lists each Employee Plan that
covers any employee of ION, copies or descriptions of all of which have
previously been made available or furnished to Digi. With respect to
each Employee Plan, ION has provided the most recently filed Form 5500
and an accurate summary description of such plan.
(b) ION Disclosure Schedule 5.9 also includes a list of each
Benefit Arrangement of ION, copies or descriptions of which have been
made available or furnished previously to Digi.
(c) Except as set forth on ION Disclosure Schedule 5.9, none
of the Employee Plans or other arrangements listed on ION Disclosure
Schedule 5.9 cover any non-United States employee or former employee of
ION.
(d) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any
Employee Plan of ION.
(e) No Employee Plan of ION is a Multiemployer Plan and no
Employee Plan of ION is subject to Title IV of ERISA. ION and its ERISA
Affiliates have not incurred nor reasonably expect to incur any
material liability under Title IV of ERISA arising in connection with
the termination of any plan covered or previously covered by Title IV
of ERISA or arising in connection with any complete or partial
withdrawal from a Multiemployer Plan.
(f) Each Employee Plan of ION which is intended to be
qualified under Section 401(a) of the Code is so qualified and has been
so qualified during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant to Section
501(a) of the Code. ION has furnished to Digi copies of the most recent
Internal Revenue Service determination letters with respect to each
such plan. Each Employee Plan of ION has been maintained in compliance
with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, which are applicable to such plan, except for
noncompliance which individually or in the aggregate is not reasonably
likely to have a Material Adverse Effect on ION.
(g) Each Benefit Arrangement of ION has been maintained in
material compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations which are
applicable to such Benefit Arrangement of ION, except for noncompliance
which individually or in the aggregate is not reasonably likely to have
a Material Adverse Effect on ION.
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(h) With respect to the employees, former employees and
beneficiaries of employees or former employees of ION, there are no
post-retirement medical, health or life insurance plans in effect,
except as required by Section 4980B of the Code. No tax under Section
4980B of the Code has been incurred in respect of any Employee Plan
that is a group health plan, as defined in Section 5000(b)(1) of the
Code.
(i) Except as set forth on ION Disclosure Schedule 5.9, all
contributions and payments accrued under each Employee Plan and Benefit
Arrangement, in each case of ION, determined in accordance with prior
funding and accrual practices, as adjusted to include proportional
accruals for the period ending on the Closing Date, will be discharged
and paid on or prior to the Closing Date. Except as disclosed in
writing to Digi prior to the date hereof, there has been no amendment
to, written interpretation of or announcement (whether or not written)
by ION or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement that individually or collectively would increase materially
the expense of maintaining such Employee Plan or Benefit Arrangement
above the level of the expense incurred in respect thereof for the
fiscal year ended prior to the date hereof.
(j) There is no contract, agreement, plan or arrangement
covering any employee or former employee of ION that, individually or
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code.
(k) Except as disclosed on ION Disclosure Schedule 5.9 or
options which become accelerated by reason of the transactions
contemplated hereby, no employee of ION will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit
solely as a result of the transactions contemplated hereby.
5.10 Labor Matters. Except as set forth in ION Disclosure Schedule
5.10, (i) there are no controversies pending or, to the knowledge of ION,
threatened between ION and any of its respective employees, which controversies
have or could have a Material Adverse Effect on ION, (ii) ION is not a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by ION, nor, to the knowledge of ION, are there any activities
or proceedings of any labor union to organize any such employees, (iii) ION has
not breached or otherwise failed to comply with any provision of any such
agreement or contract and there are no grievances outstanding against ION under
any such agreement or contract, (iv) there are no unfair labor practice
complaints pending against ION before the National Labor Relations Board or any
current union representation questions involving employees of ION, and (v) there
is no strike, slowdown, work stoppage or lockout, or, to the knowledge of ION,
threat thereof, by or with respect to any employees of ION.
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5.11 Real Property and Leases.
(a) ION has good and marketable title to all its properties
and assets to conduct its business as currently conducted, with only
such exceptions as, individually or in the aggregate, would not have a
Material Adverse Effect on ION.
(b) ION does not own any real property. ION Disclosure
Schedule 5.11(b)(ii) contains a list of real property leased by ION,
the applicable lease agreements, the name of the lessor, the date of
the lease agreement and each amendment thereto and the aggregate annual
rental or other fee payable under any such lease. Each lease for any
parcel of real property leased by ION (i) is free and clear of all
mortgages, pledges, liens, security interests, conditional and
installment sale agreements, encumbrances, charges or other claims of
third parties of any kind (collectively, "Liens"), other than (A) Liens
for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C)
workmen's, repairmen's, warehousemen's and carriers' Liens arising in
the ordinary course of business of ION consistent with past practice,
and (D) all matters of record, Liens and other imperfections of title
and encumbrances which, individually or in the aggregate, would not
have a Material Adverse Effect on ION, and (ii) is neither subject to
any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefor, nor, to the knowledge of ION, has any
such condemnation, expropriation or taking been proposed.
5.12 Proprietary Information of Third Parties. To the knowledge of
ION, no third party has claimed or has reason to claim that any person employed
by or affiliated with ION has (i) violated or may be violating any of the terms
or conditions of his employment, non-competition or non-disclosure agreement
with such third party, (ii) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
third party, or (iii) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. To the knowledge of ION: (a) no third party has requested information
from ION which suggests that such a claim might be contemplated; (b) no person
employed by or affiliated with ION has employed or proposes to employ any trade
secret or any information or documentation proprietary to any former employer,
and (c) no person employed by or affiliated with ION has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of ION, and ION has no reason to believe there will be any such employment or
violation. To the knowledge of ION, none of the execution or delivery of this
Agreement, or the carrying on of the business of ION as officers, employees or
agents by any officer, director or key employee of ION, or the conduct or
proposed conduct of the business of ION, will conflict with or result in a
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breach of the terms, conditions or provisions of or constitute a default under
any material noncompetition contract, covenant or instrument under which any
such person is obligated.
5.13 Trademarks, Patents and Copyright. Set forth in ION Disclosure
Schedule 5.13 is a list and brief description of all domestic and foreign
patents, patent rights, patent applications, trademarks, trademark applications,
service marks, service xxxx applications, trade names, domain names and
copyrights material to the business of ION as currently conducted, and all
applications for such which are in the process of being prepared, owned by or
registered in the name of ION, or of which ION is a licensor or licensee or in
which ION has any right (and, if applicable, a brief description of the nature
of such right). ION owns or possesses adequate licenses or other valid rights to
use all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, copyrights, service marks, trade secrets, domain names,
applications for patents, trademarks and service marks, know-how, manufacturing
processes, formulae, trade secrets, customer lists and other proprietary rights
and information ("Intellectual Property") necessary to the business of ION as
currently conducted. To the knowledge of ION, all proprietary technical
information developed by and belonging to ION which has not been patented has
been kept confidential. Except as disclosed on ION Disclosure Schedule 5.13, ION
has not granted or assigned to any other person or entity any right to
manufacture or assemble any products of ION. To the knowledge of ION, the
conduct of the business of ION as currently conducted does not and will not
conflict in any way with any Intellectual Property of any third party that,
individually or in the aggregate, could have a Material Adverse Effect on ION.
To the knowledge of ION, there are no infringements of any propriety rights
owned by or licensed by or to ION which, individually or in the aggregate, could
have a Material Adverse Effect on ION. ION has not licensed or otherwise
permitted the use by any third party of any proprietary information on terms or
in a manner which, individually or in the aggregate, could have a Material
Adverse Effect on ION. No claim is pending or, to the knowledge of ION,
threatened, to the effect that the operations of ION infringe upon or conflict
with the asserted rights of any other person under any Intellectual Property,
and, to the knowledge of ION, there is no basis for any such claim (whether or
not pending or threatened). No claim is pending or, to the knowledge of ION,
threatened, to the effect that any such Intellectual Property owned or licensed
by ION, or which ION otherwise has the right to use, is invalid or unenforceable
by ION, and, to the knowledge of ION, there is no basis for any such claim
(whether or not pending or threatened).
5.14 Taxes. Except as set forth in ION Disclosure Schedule 5.14:
(a) ION has timely filed all Returns required to be filed and
paid all Taxes shown as due on such Returns. All such Returns were
complete and correct in all material respects. All Taxes with respect
to which ION has become obligated have been paid and adequate reserves
have been established for all Taxes accrued but not yet payable
(including any Taxes arising out of, or in connection with, the
transactions contemplated by this Agreement). ION is not currently the
beneficiary of
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any extension of time within which to file any Return. ION has not
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency. ION
is not a party to any Tax sharing or similar agreement with any person.
(b) No issues have been raised (and are currently pending) by
any taxing authority in connection with any of the Returns filed or
required to be filed by ION. All deficiencies asserted or assessments
made as a result of any examinations of such Returns have been fully
paid, or are fully reflected as a liability in the respective financial
statements of ION, or are being contested and an adequate reserve
therefor has been established and is fully reflected in the respective
financial statements of ION. There are no liens for Taxes (other than
for current Taxes not yet due and payable) upon the assets of ION. All
material elections with respect to taxes affecting ION, as of the date
hereof, are set forth in the ION Financial Statements.
5.15 Environmental Matters.
(a) ION has complied in all material respects with all
applicable foreign, federal, state and/or local laws (including without
limitation case law, rules, regulations, orders, judgments, decrees,
permits, licenses and governmental approvals) that are intended to
protect the environment and/or human health or safety (collectively,
"Environmental Laws").
(b) ION has not handled, generated, used, stored, transported
or disposed of any substance or waste which is regulated by
Environmental Laws, except for reasonable amounts of ordinary office
supplies, manufacturing supplies and/or office cleaning supplies which
have been used in compliance with Environmental Laws.
(c) To the knowledge of ION, there are no "Environmental
Liabilities." For purposes of this Section, "Environmental Liabilities"
are liabilities which (i) arise out of or in any way relate to ION or
any real estate at any time owned, used or leased by ION, or ION's use
or ownership thereof, whether vested or unvested, contingent or fixed,
actual or potential, and (ii) arise from or relate to actions occurring
(including any failure to act) or conditions existing on or before the
Effective Time.
5.16 Certain Interests.
(a) Except as set forth on ION Disclosure Schedule 5.16, none
of ION or any affiliate of ION, any officer or director of ION or any
relative or spouse (or relative of such spouse) who resides with, or is
a dependent of, any such officer or director:
(i) has any ownership or financial interest in any
competitor, supplier, or customer of ION (other than rights of
ownership of securities of a
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publicly-held corporation amounting to less than one percent
of any class of outstanding securities);
(ii) owns, directly or indirectly, in whole or in part, or
has any other interest in any tangible or intangible property
which ION uses in the conduct of its business or otherwise; or
(iii) has outstanding any indebtedness to ION.
(b) Except as set forth in ION Disclosure Schedule 5.16, ION
does not have any liability or any obligation of any nature whatsoever
to any officer, director or stockholder of ION, or to any relative or
spouse (or relative of such spouse) who resides with, or is a dependent
of, any such officer, director or stockholder.
5.17 Material Contracts.
(a) Except for those agreements set forth on ION Disclosure
Schedules 5.2, 5.9, 5.10, 5.11(b)(ii), 5.13 and 5.19, ION Disclosure
Schedule 5.17 lists all other agreements relating to Intellectual
Property and each of the following contracts and agreements of ION
(such contracts and agreements, together with all contracts or other
agreements listed on ION Disclosure Schedules 5.2, 5.9, 5.10,
5.11(b)(ii) and 5.19 to which ION is a party or by which ION or any of
its assets are bound, being the "ION Material Contracts"):
(i) each distributor, dealer, manufacturer's
representative or sales agency agreement which is (A)
exclusive as to territory or product line, (B) material to the
business of ION, or (C) not terminable on less than 90 days'
notice without material cost or other material liability to
ION;
(ii) each sales agreement with a customer of ION under the
terms of which ION is likely to receive more than $50,000 in
the aggregate during the calendar year ended December 31, 2000
and which entitles such customer to a rebate or right of
set-off, to return any product to ION after acceptance thereof
(other than standard warranty returns, the terms of which have
been disclosed on ION Disclosure Schedule 5.17(a)(ii)), or
which varies in any material respect from ION's standard form
agreements;
(iii) each agreement with any supplier under the terms of
which ION is likely to pay or otherwise give consideration of
more than $50,000 in the aggregate during the calendar year
ended December 31, 2000 and containing any provision
permitting any party other than ION to renegotiate the price
or other material terms upon the failure of ION to meet its
obligations thereunder or containing any payback or similar
provisions;
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(iv) each agreement for the future purchase of fixed
assets or for the future purchase of materials, supplies or
equipment, outside the ordinary course of business consistent
with past practice and which exceeds $50,000 in the aggregate;
(v) each agreement relating to the borrowing of money
or to the mortgaging or pledging of, or otherwise placing a
lien or security interest on, any material asset of ION;
(vi) each guaranty of any material obligation for
borrowed money;
(vii) each agreement under which ION has limited or
restricted its right to compete in any geographical area or
with any person in any respect;
(viii) each agreement or group of related agreements with
the same party under the terms of which ION is likely to pay
consideration of more than $50,000 in the aggregate during the
calendar year ended December 31, 2000, and which is not
terminable by ION without penalty upon notice of 30 days or
less; and
(ix) all contracts and agreements the absence of which
would have a Material Adverse Effect on ION.
(b) To the knowledge of ION, each ION Material Contract (i) is
valid and binding on the respective parties thereto and is in full
force and effect; and (ii) upon consummation of the transactions
contemplated by this Agreement, shall continue in full force and effect
without penalty or other adverse consequence.
(c) ION has not received any notice of default under, or is in
default under or in material breach of, any ION Material Contract and
ION does not have any present expectation or intention of not
performing any material obligation under any ION Material Contract and,
to the knowledge of ION, no party to any ION Material Contract other
than ION has breached or intends to breach any ION Material Contract.
(d) True and correct copies of all Material Contracts have
been heretofore delivered to Digi.
5.18 Officers. ION Disclosure Schedule 5.18 sets forth a list of
the names of the officers of ION, together with the title or job classification
of each such person and the total compensation anticipated to be paid to each
such person by ION in the calendar year ending December 31, 2000.
5.19 Employees. No officer or key employee of ION has advised ION
(orally or in writing) that he intends to terminate employment with ION. Except
as set forth in ION
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Disclosure Schedule 5.19 or employment agreements to be entered into as part of
the transactions contemplated hereby, no person has an employment or consulting
agreement or understanding, whether oral or written, with ION, which is not
terminable on notice by ION without cost or other liability to ION.
5.20 Customer Inventories. No stocking resellers or distributors of
ION have inventory greater than four weeks of ION's average net sales to such
reseller or distributor for the most recent fiscal quarter.
5.21 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of ION.
5.22 Survival of Representations and Warranties and Indemnity
(a) Each of the representations and warranties set forth in
Articles 5 and 6 herein shall survive the Merger until September 30,
2002 and shall thereafter expire and be terminated, except that the
representations and warranties set forth in Section 5.2 shall survive
indefinitely and the representations and warranties set forth in
Sections 5.9, 5.14 and 5.15 shall survive until the later of the
expiration of the applicable statutes of limitations (without any waiver
of any statutes of limitations or extensions not consented to by the
Shareholder Agent).
(b) Digi shall first set off against the unpaid Contingent
Consideration any damages it has actually suffered as a result of any
loss, injury, damage or deficiency resulting from any misrepresentation,
breach of warranty or breach of covenant on the part of ION hereunder
including all judgments, costs, fees (including reasonable attorneys'
fees), and other out-of-pocket expenses incident to the foregoing to the
extent such damages exceed fifty thousand dollars ($50,000). If the
unpaid Contingent Consideration is insufficient, then Digi shall have
the right to exercise its rights under the Indemnification Agreement by
and between Digi and Xxxxxxx X. Xxxxxxxx.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF DIGI AND MERGER SUB
Digi and Merger Sub hereby represent and warrant to the holders of the
Fully Diluted Shares that:
6.1 Organization and Qualification. Each of Digi and each subsidiary of
Digi (each a "Digi Subsidiary") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Digi and the Digi Subsidiaries has the requisite power
and authority and all necessary permits, licenses and approvals to own, lease
and operate its properties and to carry on its business as it is now
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being conducted, except where the failure to have such power, authority,
permits, licenses and approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Digi. Each of Digi and the Digi Subsidiaries
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on Digi.
6.2 Authority Relative to this Agreement. Each of Digi and Merger Sub
has all necessary power and authority to execute and deliver this Agreement, to
perform its obligations under this Agreement, and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation by Digi and Merger Sub of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action of Digi and Merger Sub, and no other corporate proceedings on the part of
Digi or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated by this Agreement. This Agreement has been duly
and validly executed and delivered by Digi and Merger Sub. Assuming the due
authorization by ION, and the due execution and delivery by ION, this Agreement
constitutes a legal, valid and binding obligation of each of Digi and Merger
Sub, enforceable in accordance with its terms.
6.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Digi and
Merger Sub does not, and the performance of this Agreement by Digi and
Merger Sub will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of Digi or Merger Sub, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree
applicable to Digi or any Digi Subsidiary or by which any property or
asset of Digi or any Digi Subsidiary is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Digi or any Digi Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation of
Digi or any Digi Subsidiary, except, in the case of (ii) and (iii),
for such conflicts, violations, breaches, defaults, rights, liens and
encumbrances which would not prevent or delay consummation of the
Merger, or otherwise prevent Digi or Merger Sub from performing its
obligations under this Agreement, and which would not, individually or
in the aggregate, have a Material Adverse Effect on Digi.
(b) The execution and delivery of this Agreement by Digi and
Merger Sub does not, and the performance of this Agreement by Digi and
Merger Sub will not, require any consent, approval, authorization or
permit of, or filing with or notification
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to, any governmental or regulatory authority, domestic or foreign,
except (i) for filing and applicable requirements under federal
securities laws and state securities or "blue sky" laws and the TBCA
and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger, or otherwise
prevent Digi or Merger Sub from performing its obligations under this
Agreement, and would not, individually or in the aggregate, have a
Material Adverse Effect on Digi.
6.4 Ownership of Merger Sub; No Prior Activities; Assets of Merger
Sub.
(a) Merger Sub was formed solely for the purpose of engaging in
the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital
stock of Merger Sub is and will be owned 100% by Digi directly.
Further, there are not as of the date hereof and there will not be at
the Effective Time any outstanding or authorized options, warrants,
calls, rights, commitments or any other agreements of any character
which Merger Sub is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of
capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire,
any shares of capital stock of Merger Sub.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated
hereby, Merger Sub has not and will not have incurred, directly or
indirectly through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with
any person or entity.
(d) Digi will take all action necessary to ensure that Merger
Sub at no time prior to the Effective Time owns any asset other than
an amount of cash necessary to incorporate Merger Sub and to pay the
expenses of the Merger attributable to Merger Sub in connection with
the Merger.
6.5 Financial Resources. Digi presently has sufficient cash and cash
equivalents and lines of credit to pay the Cash Consideration and the Contingent
Consideration.
6.6 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transaction's contemplated by this Agreement based upon arrangements made by or
on behalf of Digi or any Digi Subsidiary.
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ARTICLE VII
CERTAIN COVENANTS
7.1 Confidentiality. Each of the parties hereto agrees that it shall
remain bound by the terms of the Bilateral Non-Disclosure Agreement dated May 8,
2000 relating to "Proprietary Information" (as defined therein) through the
Effective Time, at which time such agreement shall expire.
7.2 Shareholders Meeting. ION shall have taken, in accordance with
applicable law and its articles of incorporation and by-laws, all action
necessary to convene a meeting of holders of ION Shares.
7.3 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each party will use its reasonable efforts to satisfy as promptly as
practicable all conditions to Closing set forth in this Agreement that are
within such party's control.
7.4 Certificates. Each ION Stakeholder releases ION from any and all
claims as a shareholder that the ION Stakeholder may have against ION and/or its
officers and directors, except for any claims arising out of or related to ION's
duties or obligations set forth in this Agreement.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Obligation of Digi and Merger Sub to Close. The
obligation of Digi and Merger Sub to effect the closing of the transactions
contemplated by this Agreement is subject to the satisfaction prior to or at the
Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of ION under this Agreement shall be true and correct as of
the Effective Time with the same effect as though made on and as of
the Effective Time other than such representations and warranties as
are made as of another date, which shall be true and correct as of
such date (provided, however, that if any portion of any
representation or warranty is already qualified by materiality, for
purposes of determining whether this Section 8.1(a) has been satisfied
with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be
true and correct in all respects).
(b) Observance and Performance. ION shall have performed and
complied with all covenants and agreements required by this Agreement
to be performed and complied with by it prior to or as of the
Effective Time.
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(c) No Adverse Change. Except as otherwise disclosed or
contemplated in this Agreement (including the ION Disclosure
Schedules), there shall have occurred no Material Adverse Change with
regard to ION since June 30, 2000.
(d) Consents of Third Parties. Digi shall have received duly
executed copies of all consents and approvals of third parties to the
transactions contemplated hereby referred to in ION Disclosure Schedule
5.4 and the consents required from the spouses of those holders of ION
Shares residing in California.
(e) Legal Opinion. Digi shall have received an opinion, dated
the Closing Date, from Xxxxx Xxxx LLP, counsel to ION, relying upon the
opinion of Graves, Dougherty, Xxxxxx & Xxxxx as to Texas law,
substantially in the form attached hereto as Exhibit B.
(f) Employment Agreements. Each of Xxxxxxx X. Xxxxxxxx, Xxxxx
Xxxxxxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx, Xxx Xxxxxxx and Xxxxxx Xxxxx,
shall have entered into an employment agreement with Digi or Surviving
Corporation in a form mutually acceptable to the respective parties.
(g) Indemnification Agreement. Digi and Xxxxxxx X. Xxxxxxxx
shall have entered into an Indemnification Agreement in the form
attached as Exhibit C.
(h) Cancellation Agreements ION and each holder of an Option or
Warrant shall have executed a cancellation agreement in the form
attached as Exhibit D.
(i) No Legal Actions. No court or governmental authority of
competent jurisdiction shall have issued an order, not subsequently
vacated, restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement, and no
person shall have instituted an action or proceeding which shall not
have been previously dismissed seeking to restrain, enjoin or prohibit
the consummation of the transactions contemplated by this Agreement or
seeking damages with respect thereto.
(j) Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions
contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such
transaction shall be reasonably satisfactory in form and substance to
Digi and its counsel.
(k) Closing Documents. Digi shall have received such further
instruments and documents as may be reasonably required for ION to
consummate the transactions contemplated hereby.
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8.2 Conditions to Obligation of ION to Close. The obligation of ION
to effect closing of the transactions contemplated by this Agreement is subject
to the satisfaction prior to or at the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Digi and Merger Sub under this Agreement shall be true
and correct as of the Effective Time with the same effect as though
made on and as of the Effective Time other than such representations
and warranties as are made as of another date, which shall be true and
correct as of such date (provided, however, that if any portion of any
representation or warranty is already qualified by materiality, for
purposes of determining whether this Section 8.2(a) has been satisfied
with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true
and correct in all respects).
(b) Observance and Performance. Digi and Merger Sub shall have
performed and complied with all covenants and agreements required by
this Agreement to be performed and complied with by them prior to or as
of the Effective Time.
(c) No Adverse Change. Except as otherwise disclosed or
contemplated in this Agreement (including the Digi Disclosure Schedule)
there shall have occurred no Material Adverse Change with regard to
Digi since March 31, 2000.
(d) Employment Agreements. Digi or Surviving Corporation shall
have entered into an employment agreement with each of Xxxxxxx X.
Xxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxx Xxxxx and
Xxxxxx Xxxxx in a form mutually acceptable to the respective parties
(e) Legal Opinion. ION shall have received an opinion, dated
the Effective Time, from Faegre & Xxxxxx LLP, counsel to Digi and
Merger Sub, substantially in the form attached hereto as Exhibit E.
(f) Cancellation Agreements ION and each holder of an Option or
Warrant shall have executed a cancellation agreement in the form
attached as Exhibit D.
(g) No Legal Actions. No court or governmental authority of
competent jurisdiction shall have issued an order, not subsequently
vacated, restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement, and no
person shall have instituted an action or proceeding which shall not
have been previously dismissed seeking to restrain, enjoin or prohibit
the consummation of the transactions contemplated by this Agreement or
seeking damages with respect thereto.
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(h) Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions
contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such
transaction shall be reasonably satisfactory in form and substance to
ION and its counsel.
(i) Closing Documents. ION shall have received such further
instruments and documents as may be reasonably required for Digi to
consummate the transactions contemplated hereby.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Whether or not the Merger is consummated, all costs
and expenses (including without limitation the fees and expenses of investment
bankers, attorneys and accountants) incurred in connection with this Agreement
and the transactions contemplated hereby shall be born by the party incurring
such costs and expenses.
9.2 Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, by registered or certified mail (postage prepaid,
return receipt requested) or by overnight delivery by a nationally recognized
courier service to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 9.3):
(a) If to Digi or Merger Sub to:
Digi International Inc.
00000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
with copy to:
Digi International Inc.
00000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx Xxxxxxxx,
Chief Financial Officer
Telecopy: (000) 000-0000
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and to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
(b) If to ION to:
Inside Out Networks, Inc.
000 Xxxxx Xxx
Xxxxx X-000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: M. Xxxx XxXxxxxx
Telecopy: (000) 000-0000
All notices and other communications shall be conclusively deemed to be received
and shall be effective upon the earlier of, (a) if sent by hand delivery, upon
receipt, (b) if sent by registered or certified mail, on the fifth day after the
day on which such notice is mailed, (c) if sent for overnight delivery by a
nationally recognized courier service (such as Federal Express), on the first
business day after the day on which notice is sent, or (d) if sent by telecopy,
on the first business day following the successful transmission of such notice
or communication to the telecopier of the intended recipient (the number of
which has been set forth herein).
9.4 Amendments. This Agreement may be amended by all the parties hereto
by action taken by their respective Boards of Directors without any further
approval of the stockholders of ION, except as otherwise required by law. This
Agreement may not be amended, modified or supplemented except by written
agreement of the parties hereto.
9.5 Waiver. At any time prior to the Effective Time, Digi or ION may
(i) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of
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the obligations of the other party or any of the conditions to its own
obligations contained herein to the extent permitted by law. Any agreement on
the part of Digi and ION to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the parties to be bound thereby.
9.6 Certain Definitions. For purpose of this Agreement, the term:
(a) "Affiliate" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "Agent's Notice" has the meaning set forth in Section
4.5(c);
(c) "Beneficial Owner" has the meaning set forth in Section
4.4(i)(i);
(d) "Benefit Arrangement" means, with respect to any person,
each employment, severance or other similar contract, arrangement or
policy (written or oral) and each plan or arrangement (written or oral)
providing for severance benefits, insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits
which (i) is not an Employee Plan, and (ii) covers any employee, former
employee (or beneficiary of any employee or former employee) of such
person or any subsidiary of such person;
(e) "Business" means the business of the development,
manufacture and distribution of products which interconnect by way of a
USB port, including products developed by Digi that plug into or
interconnect using a variety of other interfaces (i.e. serial, 802.11b,
Bluetooth, Ethernet) and provide host/bridge functionality for serial,
USB and aforementioned wireless interfaces
(f) "Cash Fund" has the meaning set forth in Section 4.3(a);
(g) "Certificate of Merger" has the meaning set forth in
Section 1.2;
(h) "Change in Control" has the meaning set forth in Section
4.4(i)(i);
(i) "Closing" has the meaning set forth in Section 1.3;
(j) "Code" means the United States Internal Revenue Code of
1986, as amended;
(k) "Contingent Consideration" has the meaning set forth in
Section 4.1(a)(iii);
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42
(l) "Contingent Consideration Matrix" has the meaning set forth
in Section 4.4(a);
(m) "Contingent Consideration Value" has the meaning set forth
in Section 4.4(i)(ii);
(n) "Contingent Payment Percentage" has the meaning set forth
in Section 4.4 (a);
(o) "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly as
trustee or executor, of the power to direct or cause the direction of
the management and policies of a person, whether through ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(p) "Cumulative Operating Income" has the meaning set forth in
Section 4.4(g);
(q) "Cumulative Operating Income Amount" has the meaning set
forth in Section 4.4(b);
(r) "Cumulative Revenue" has the meaning set forth in Section
4.4(d);
(s) "Cumulative Revenue Amount" has the meaning set forth in
Section 4.4(b);
(t) "Default" has the meaning set forth in Section 4.5(f);
(u) "Digi Disclosure Schedule" means the disclosure schedule of
Digi attached hereto, dated as of the date hereof, and forming a part
of this Agreement;
(v) "Digi Subsidiary" has the meaning set forth in Section 6.1;
(w) "Disbursing Agent" has the meaning set forth in Section
4.3(a);
(x) "Dissenting Shares" has the meaning set forth in Section
4.6;
(y) "Earn-Out Period" means the period commencing October 1,
2000 and continuing through the earlier of September 30, 2003 or the
date the entire Contingent Consideration has been earned and paid to
the Payment Recipients.
(z) "Effective Time" has the meaning set forth in Section 1.2;
(bb) "Employee Plan" means, with respect to any person, each
"employee benefit plan," as such term is defined in Section 3(3) of
ERISA, that (i) is subject to
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any provision of ERISA and (ii) is maintained or contributed to by such
person, any subsidiary of such person or any of their ERISA Affiliates;
(cc) "ERISA" means the United States Employee Retirement Income
Security Act of 1974, as amended;
(dd) "ERISA Affiliates" of any entity means any other entity
that, together with such entity, would be treated as a single employer
under Section 414 of the Code;
(ee) "Environmental Laws" has the meaning set forth in Section
5.15.(a);
(ff) "Environmental Liabilities" has the meaning set forth in
Section 5.15 (c);
(gg) "Exchange Act" has the meaning set forth in Section
4.4(i)(i);
(hh) "Final Report" has the meaning set forth in Section
4.7(a);
(ii) "Fully Diluted Shares" has the meaning set forth in
Section 4.1(a)(i);
(jj) "GAAP" means generally accepted accounting principles;
(kk) "Good Cause" means acts of an individual which constitute
moral turpitude, legally actionable improprieties (e.g., sexual
harassment, racial discrimination, etc.), or the refusal to perform the
responsibilities set forth in an employment agreement with Digi or
Surviving Corporation.
(ll) "Intellectual Property" has the meaning set forth in
Section 5.13;
(mm) "ION Disclosure Schedules" or "ION Disclosure Schedule"
means the disclosure schedules, or any one of such disclosure
schedules, of ION, attached hereto, dated as of the date hereof, and
forming a part of this Agreement;
(nn) "ION Financial Statements" has the meaning set forth in
Section 5.6;
(oo) "ION Interim Financial Statements" has the meaning set
forth in Section 5.6;
(pp) "ION Material Contracts" has the meaning set forth in
Section 5.17(a);
(qq) "ION Shares" has the meaning set forth in Section 4.1(a);
(rr) "ION Stakeholders" has the meaning set forth in the
introductory paragraph of this Agreement;
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44
(ss) "Key Employee" means any of Xxxxx Xxxxxxxxx, Xxxxxx
Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx, or Xxx Xxxxxxx;
(tt) "Knowledge" means the actual knowledge of the executive
officers of the respective party and its subsidiaries (if any);
(vv) "Liens" has the meaning set forth in Section 5.11(b);
(ww) "Material Adverse Change" and "Material Adverse Effect"
mean, with respect to any person, any change or effect that is or is
reasonably likely to be materially adverse to the business, operation,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) or prospects of
such person and its subsidiaries (if any) taken as a whole;
(xx) "Merger Agreement" has the meaning set forth in the
introductory paragraph of this Agreement;
(yy) "Monthly Statements" has the meaning set forth in Section
4.5(a);
(zz) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA;
(aaa) "Neutral CPAs" has the meaning set forth in Section
4.7(a);
(bbb) "Non-Saleable Product" means at September 30th of each
year during the Earn-Out Period any product type with a unique SKU
number that has not been sold within the preceding six (6) months;
(ccc) "Operating Income" has the meaning set forth in Section
4.4(f);
(ddd) "Operating Income Payout Amount" is a portion of the
Contingent Consideration as set forth in the Contingent Consideration
Matrix;
(eee) "Option" has the meaning set forth in Section 4.1(c);
(fff) "Payment Date" has the meaning set forth in Section
4.4(b);
(ggg) "Payment Recipients" has the meaning set forth in Section
4.3(a);
(hhh) "Permits" has the meaning set forth in Section 5.5(b);
(iii) "Person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation,
a "person" as defined in Section 13(d) of the Securities Exchange Act),
trust, association or entity or government, political subdivision,
agency or instrumentality of a government;
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45
(jjj) "Preliminary Report" has the meaning set forth in Section
4.7(a);
(lll) "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of
Taxes, and "Return" means any one of the foregoing;
(mmm)"Revenue" has the meaning set forth in Section 4.4(d);
(nnn) "Revenue Payout Amount" is a portion of the Contingent
Consideration as set forth in the Contingent Consideration Matrix;
(ooo) "Securities Exchange Act" means the United States
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder;
(ppp) "Securityholder Agent" has the meaning set forth in
Section 4.5(h);
(qqq) "Series A Preferred" has the meaning set forth in Section
5.2(a);
(sss) "Subsidiary" or "subsidiaries" of any person means an
Affiliate controlled by such person, directly or indirectly, through
one or more intermediaries;
(ttt) "Surviving Corporation" has the meaning set forth in
Section 1.1;
(uuu) "Taxes" means all United States federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use
ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs duties,
value added, business enterprise, capital or other taxes, fees,
assessments or other charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts with
respect thereto;
(vvv) "TBCA" has the meaning set forth in Section 1.1;
(www) "Warrant" has the meaning set forth in Section 4.1(c);
(yyy) "Voting Securities" has the meaning set forth in Section
4.4(i)(i)
9.7 Publicity. No party other than Digi shall make any public
announcement or issue any press release concerning the transactions contemplated
by this Agreement, and any public announcement or press release by Digi shall
require the prior approval of ION both as to the making of such announcement or
release and as to the form and content thereof, except to the extent that Digi
is advised by counsel, in good faith, that such announcement or release is
required as a matter of law or under the rules of The Nasdaq Stock Market and
full opportunity for prior consultation is afforded to ION to the extent
practicable.
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9.8 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 Nonassignability. This Agreement shall not be assigned by operation
of law or otherwise.
9.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto, and nothing in this
Agreement, expressed or implied, is intended to confer upon any other person any
rights or remedies of any nature under or by reason of this Agreement (which is
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons); provided, however, that subject to and upon
consummation of the Merger, the provisions of this Agreement shall be for the
benefit of, and may be enforced by, the ION stakeholders and their heirs,
representatives, successors and permitted assigns.
9.11 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto.
9.12 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Minnesota without
regard to its conflicts of law rules.
9.13 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
9.14 Remedies. Nothing contained herein is intended to or shall be
construed so as to limit the remedies which either party may have against the
other in the event of a breach of any representation, warranty, covenant or
agreement made under or pursuant to this Agreement, it being intended that any
remedies shall be cumulative and not exclusive.
9.15 Entire Agreement. Before signing this Agreement, the parties had
numerous conversations, including preliminary discussions, formal negotiations
and informal conversations, and generated correspondence and other writings, in
which the parties discussed the transaction which is the subject of this
Agreement and their aspirations for its success. In such conversations and
writings, individuals representing the parties may have expressed their
judgments and beliefs concerning the intentions, capabilities, and practices of
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the parties, and may have forecasted future events. The parties recognize that
such conversations and writings often involve an effort by both sides to be
positive and optimistic about the prospects for the transaction. It is also
recognized, however, that all business transactions contain an element of risk,
and that it is normal business practice to limit the legal obligations of
contracting parties to only those promises and representations which are
essential to their transaction so as to provide certainty as to their respective
future rights and remedies. Accordingly, this Agreement is intended to define
the full extent of the legally enforceable undertakings of the parties hereto,
and no related promise or representation, written or oral, which is not set
forth explicitly in this Agreement is intended by either party to be legally
binding. The parties acknowledge that in deciding to enter into this transaction
they have relied on no representations, written or oral, other than those
explicitly set forth in this Agreement. Without limiting the generality of the
foregoing, neither Digi nor its affiliates shall have any duty to the Payment
Recipients to act or fail to act in a manner which maximizes or otherwise
positively affects the Contingent Consideration other than to perform its duties
and obligations as set forth herein. It is hereby acknowledged that Digi, as the
sole shareholder of the Surviving Corporation with the power to elect all of the
directors who will elect the officers of Surviving Corporation, will have the
indirect power to control the activities of Surviving Corporation subject only
to the duties and limitations imposed hereunder and the fiduciary duties of the
officers and directors of Digi to its shareholders.
9.16 Force Majeure. No party shall be liable for any failure or delay
in performing its obligations hereunder due to any external cause beyond its
reasonable control, including without limitation, fire, accident, acts of the
public enemy, war, rebellion, labor dispute or unrest, insurrection, sabotage,
transportation delays, shortage of raw materials, energy or machinery, acts of
God, government or the judiciary, or other matters beyond the reasonable control
of a party.
9.17 Arbitration. Any unresolved dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three (3) arbitrators in Minneapolis,
Minnesota in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgement may be entered on the arbitrator's award in any court
having jurisdiction. Except as otherwise specifically provided in this
Agreement, the direct expense of any arbitration proceeding shall be borne
equally by the Payment Recipients on the one hand, and Digi and the Surviving
Corporation, on the other hand.
9.18 Schedules/Exhibits. All schedules and exhibits, attached hereto
and referred to herein, are an integral part of this Agreement and are
incorporated herein by reference hereby.
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9.19 Interpretations and Definitions. In this Agreement whenever the
context so requires, the gender includes the neuter, feminine and masculine and
the number includes the singular and the plural and the words "person" and
"party" include individuals, corporations, partnerships, firms, trusts,
associations, other legal entities and any group of persons acting in concert.
Any references to parties, Sections, Subsections, Exhibits or Schedules shall be
to the parties hereto and the relevant parties, Sections, Subsections, Exhibits
or Schedules of this Agreement as appropriate which are deemed incorporated
herein by this reference. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular articles, section or other subdivision. The words "includes" and
"including" shall mean by way of example and not by way of limitation.
References in this Agreement to "provisions" of this Agreement refer to the
terms, conditions and promises contained in this Agreement taken as a whole. All
references to days, months, quarters or years are references to days, calendar
months, calendar quarters or calendar years.
[Remainder of page is deliberately left blank.]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of Digi, Merger Sub and ION on the date first above
written.
DIGI INTERNATIONAL INC. INSIDE OUT NETWORKS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------- ------------------------------
Xxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer President and Chief Executive
Officer
ION ACQUISITION INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxx
President
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/s/ Xxxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx X. Xxxxx
------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxx
------------------------------------
Xxxxxx X. Xxx
/s/ Xxxxx Xxx
------------------------------------
Xxxxx Xxx
/s/ Xxxxxxxxx X. Xxxxxxxxx
------------------------------------
Xxxxxxxxx X. Xxxxxxxxx
/s/ Xxxxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxxx
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/s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx
THE XXXXXXX FAMILY REVOCABLE TRUST
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx, Trustee
By: /s/ Xxxx Xxxxxxx
------------------------------------
Xxxx Xxxxxxx, Trustee
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
XXXXXX FAMILY TRUST
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, Trustee
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx, Trustee
/s/ Xxxx XxXxxxxx
------------------------------------
Xxxx XxXxxxxx
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N LYNX SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------------------
Print Name: Xxxx X. Xxxxxxxx
------------------------------------------
Title: President
-----------------------------------------------
/s/ Xxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx
/s/ Seine Xxxxxxxx
--------------------------------------------
Seine Xxxxxxxx
/s/ Xxxxxx Xxxxx
--------------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxx
--------------------------------------------
Xxxxxx Xxxxxxxx
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/s/ Xxx Xxxxxxxxx
--------------------------------------------
Xxx Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
SILVERTON FAMILY TRUST
By: /s/ LE Silverton
--------------------------------------------------
Print Name: LE Silverton
------------------------------------------
Print Title: Trustee
------------------------------------------
OXCAL VENTURE FUND LP
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------------------------
Oxcal Venture Fund LP
Print Name: By Oxcal Venture Corp.
------------------------------------------
Its GP By Its Pres.
Print Title: Xxxxxx Xxxxxxxx
------------------------------------------
/s/ Xxxx Xxxxxxxxx
-----------------------------------------
Xxxx Xxxxxxxxx
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/s/ Xxxxxx Ring
--------------------------------------------
Xxxxxx Ring
/s/ Xxx Xxxxxxx
--------------------------------------------
Xxx Xxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxxx
49