EXHIBIT 10(d)
RESTATED AND AMENDED NOTE PURCHASE AGREEMENT
BETWEEN THE COMPANY AND
AETHERWORKS CORPORATION
DATED JUNE 19, 1996
AETHERWORKS CORPORATION
RESTATED AND AMENDED
NOTE PURCHASE AGREEMENT
THIS RESTATED AND AMENDED AGREEMENT is made and entered into as of June
19, 1996, by and between AetherWorks Corporation, a Minnesota corporation
(the "Company"), and Digi International Inc., a Delaware corporation
("Digi"), sometimes referred to individually as a "Party" and collectively as
the "Parties."
R E C I T A L S
As of October 10, 1995, the Company and Digi executed a Note Purchase
Agreement (the "1995 Note Purchase Agreement"), pursuant to which Digi
purchased, and the Company issued, a convertible secured promissory note,
dated October 10, 1995, in the original principal amount of $3,353,235 (the
"1995 Convertible Note"). Digi also committed in the 1995 Note Purchase
Agreement to purchase an additional convertible secured promissory note in
the original principal amount of $1,433,290.
Digi has held two seats on the Company's Board of Directors (the "Board
of Directors" or the "Board") since October 10, 1995, and has participated in
the decisions of the Board, including the election of the fifth member of the
Board, the appointment of senior management of the Company, and Board-level
decisions regarding the development of the ARMs and Jeeves, and the decision
to acquire and develop V.Mach Technology (as hereinafter defined), which was
not contemplated at the time of execution of the 1995 Note Purchase Agreement.
Digi has expressed interest in purchasing, and the Company desires to
have Digi purchase, in part for the development and commercial exploitation
of V.Mach Technology, convertible promissory notes of the Company, in the
aggregate principal amount of $9,000,000, in addition to one for $1,433,290
originally to be issued pursuant to the 1995 Note Purchase Agreement and the
1995 Convertible Note previously issued pursuant to the 1995 Note Purchase
Agreement.
In light of the mutual commercial opportunity presented by the V.Mach
Technology, in recognition of the greater familiarity and closer relationship
of the Parties and in order to provide for the additional development
contemplated by the Parties, the Parties desire to amend and restate in its
entirety the 1995 Note Purchase Agreement, most particularly to eliminate
milestones set forth in the 1995 Note Purchase Agreement and the rights and
obligations of the Parties in connection with such milestones, and to
delineate the Parties' respective rights and obligations with respect to the
V.Mach Technology.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises and the
Parties' respective rights and obligations set forth in this Agreement, the
Company and Digi hereby agree as follows:
1. AMENDMENT TO 1995 NOTE PURCHASE AGREEMENT AND COROLLARY DOCUMENTS.
The 1995 Note Purchase Agreement shall be, and hereby is, amended and
restated in its entirety by this Agreement. The 1995 Convertible Note shall
be restated and amended in the form attached to this Agreement as Exhibit 1
upon execution of such form (and, as restated and amended, shall for purposes
of this Agreement hereinafter be referred to as the "Amended 1995 Note").
Each of the Security Agreement, Manufacturing Agreement and Shareholder
Voting Agreement issued pursuant to the 1995 Note Purchase Agreement shall
be amended and restated in its entirety in the forms attached to this
Agreement as Exhibits 3, 4 and 5, respectively, upon execution of such forms
(and, as restated and amended in their entirety, shall, for purposes of this
Agreement, hereinafter be referred to as the "Security Agreement,"
"Manufacturing Agreement" and "Shareholder Voting Agreement," respectively).
Each of this Agreement, the Amended 1995 Note, the Notes to be issued under
this Agreement, the Security Agreement, the Manufacturing Agreement, the
Technology Transfer Agreement and the Shareholder Voting Agreement may be
referred to individually a "Transaction Document" and collectively, as the
"Transaction Documents". The Parties expressly intend that the
representations, warranties and agreements of the Principal Shareholder
(Jonathan A. Henrikssen Sachs, Ph.D.) set forth in the Note Purchase
Agreement dated October 9, 1995 shall expire upon execution of this
Agreement.
2. SALE AND PURCHASE OF CONVERTIBLE NOTES. Subject to the terms and
conditions hereof, the Company agrees to issue and to sell to Digi, and Digi
agrees to purchase from the Company, the convertible notes described in this
Section 2 (each a "Note" and together, the "Notes"). The term "Notes" as used
herein shall mean the (a) convertible notes issued pursuant to this
Agreement, (b) where such term is used to refer to an issued Note, the
Amended 1995 Note and (c) all notes of the Company issued in exchange or
substitution for the foregoing.
2.1 PRINCIPAL AMOUNT OF NOTES AND TIMING OF PURCHASES. The Notes
to be purchased by Digi subsequent to the date of this Agreement shall be in
the amounts set forth below and shall, subject to satisfaction of the
conditions set forth in Section 3 and elsewhere in this Agreement, be
purchased according to the following schedule:
(a) Upon the execution of this Agreement, a Note of the Company,
dated June 19, 1996, in the principal amount of $1,433,290; and
(b) Within ten business days of the Company's written request, in one
or more additional Notes as and when requested by the Company, whose
principal amounts shall be in lawful money of the United States and in
integral increments of $1,000,000, provided that the aggregate principal
amount of such Notes to the exclusion of the 1995 Convertible Note and the
Note in 2.1(a) above, shall not exceed $9,000,000.
2.2 TERMS OF EACH NOTE. Each Note shall be in substantially the
form set forth in Exhibit 2 to this Agreement (the "Form of Note"). The
Notes shall be convertible into shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), in accordance with the terms set
forth in the Form of Note, provided that conversion of any of the Notes
issued pursuant to this Agreement shall not release Digi from its obligation
to purchase additional Notes pursuant to this Section 2. The shares of
Common Stock into which the Notes are convertible and all shares of Common
Stock of the Company issued in exchange or substitution therefor are
hereinafter sometimes referred to as the "Conversion Stock." Each Note shall
be secured by a lien on those assets identified in, and in accordance with
the terms of the Security Agreement. Each Note shall be due and payable on
December 31, 1998. Interest on each Note shall accrue at the rate set forth
in the Form of Note and shall be due and payable on the earlier of December
31, 1998 or from the proceeds of the Company's Initial Public Offering (as
defined below) as provided in the Form of Note. AetherWorks shall have the
option, upon written notice sixty (60) days prior to such date as interest
becomes due and payable, to convert interest accrued on the Notes into either
(a) Common Stock of the Company at the same rate and upon the same terms as
the principal amount of the Notes issued on a Subsequent Closing as that term
is defined in Section 3 or issued according to Section 2.1(b), or (b)
principal evidenced by a new note bearing interest at the same rate, with
principal and interest payable on mutually acceptable terms.
For all purposes under this Agreement, the term "Initial Public
Offering" shall mean the
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closing of the first public offering of the Company of shares of Common Stock
of the Company registered under the Securities Act in which (1) the aggregate
public offering price of the securities sold for cash by the Company in the
offering is at least $20,000,000, and (2) the offering is underwritten on a
firm commitment basis by an underwriter, or a group of underwriters presented
by an underwriter or underwriters, which is a member of the New York Stock
Exchange. For this purpose, the term "closing" shall mean the delivery by
the Company to the underwriters of certificates representing the shares of
Common Stock offered to the public against delivery to the Company by the
underwriters of payment therefor, and the term "firm commitment basis" with
respect to the underwriting of such public offering shall mean a commitment
pursuant to a written underwriting agreement under which the nature of the
underwriters' commitment is such that all securities will be purchased by
such underwriters if any securities are purchased by such underwriters.
3. CLOSING. The closing of the sale to, and purchase by Digi, of the
Notes to be purchased pursuant to Section 2.1(a) of this Agreement (the
"Initial Closing") shall occur at the offices of Digi International at 1:00
p.m. on June 19, 1996, or on such other day or at such other time or place as
Digi and the Company shall agree upon (the "Initial Closing Date"). The
closing of the sale of each Note to be purchased pursuant to the provisions
of Section 2.1(b) subsequently by Digi (each a "Subsequent Closing") shall
occur within ten business days of the Company's request therefor at such time
and place as Digi and the Company shall agree upon (each a "Subsequent
Closing Date"). The term "Closing" as used herein shall mean, as applicable,
the Initial Closing or any Subsequent Closing. The term "Closing Date" as
used herein shall mean, as applicable, the Initial Closing Date or any
Subsequent Closing Date. At the Initial Closing, the Company will deliver to
Digi the Note to be purchased at such closing in the original principal
amount of $1,433,290, dated June 19, 1996, and Digi shall deliver Digi's
certified or bank cashier's check drawn on Norwest Bank Minnesota, National
Association, in the principal amount of $1,433,290. At each Subsequent
Closing, the Company will deliver to Digi the Note to be purchased by Digi at
such Closing against delivery to the Company of Digi's certified or bank
cashier's check drawn on Norwest Bank Minnesota, National Association, in the
principal amount of such Note, in payment of the total purchase price of such
Note.
4. CONDITIONS TO THE PURCHASE OF EACH NOTE. The obligation to
purchase and pay for each Note which Digi has agreed to purchase on the
Initial Closing Date is subject to the fulfillment prior to or on such
Initial Closing Date of the conditions set forth in Section 4.1 through 4.11,
inclusive. The obligation to purchase and pay for each Note which Digi has
agreed to purchase on a Subsequent Closing Date is subject to the fulfillment
prior to or on such Subsequent Closing Date of the conditions set forth in
Sections 4.1 through 4.4, inclusive, and Sections 4.6 and 4.11.
4.1 NO ERRORS, ETC. The representations and warranties of Section
6 of this Agreement shall be true in all material respects as of each Closing
Date.
4.2 COMPLIANCE WITH AGREEMENT. The Company shall have performed
and complied with all material agreements or conditions required by this
Agreement to be performed and complied with by it prior to or as of each
Closing Date, the nonperformance or noncompliance with which would have a
material adverse effect on the operation of the Company's business.
4.3 NO EVENT OF DEFAULT. There shall exist at the time of each
Closing, no condition or event which would constitute an Event of Default of
the Company (as defined in Section 11) or which, after notice or lapse of
time or both, would constitute an Event of Default of the Company.
4.4 CERTIFICATE OF OFFICERS. The Company shall have delivered to
Digi a certificate, dated the Initial Closing Date or the Subsequent Closing
Date, as the case may be, executed by the Chief Executive Officer and the
senior financial officer of the Company and certifying to the satisfaction of
the
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conditions specified in Sections 4.1, 4.2 and 4.3 hereof.
4.5 OPINION OF COUNSEL. The Company shall have delivered to Digi
an opinion or opinions of Briggs and Morgan, P.A., counsel for the Company in
form acceptable to counsel for Digi, dated June 20, 1996.
4.6 QUALIFICATION UNDER STATE SECURITIES LAWS. All registrations,
qualifications, permits and approvals required under applicable state
securities laws for the lawful execution and delivery of this Agreement and
the offer, sale, issuance and delivery of the Notes and the offer of the
Conversion Stock shall have been obtained.
4.7 SECURITY AGREEMENT. Digi and the Company shall have executed
the Security Agreement covering all of the Company's inventory, equipment,
accounts arising from licenses and other transfers of V.Mach Wireline
Technology (as defined in the Technology Transfer Agreement), and general
intangibles arising from such technology, in substantially the form of
Exhibit 3 hereto.
4.8 MANUFACTURING AGREEMENT. Digi and the Company shall have
executed the Manufacturing Agreement, in substantially the form of Exhibit 4
hereto.
4.9 SHAREHOLDER VOTING AGREEMENT. Digi, and each of William H.
Costigan, Robert C. Lind, Ph.D., Jonathan A. Henrikssen Sachs, Ph.D., each a
shareholder of the Company, shall have entered into the Shareholder Voting
Agreement in substantially the form of Exhibit 5 hereto.
4.10 V.MACH TECHNOLOGY TRANSFER AGREEMENT. Digi and the Company
shall have entered into a Technology Transfer Agreement (the "Technology
Transfer Agreement") governing the technology known to the Parties as V.Mach,
which agreement shall be in substantially the form of Exhibit 6 hereto.
4.11 BUSINESS PLAN. Prior to the Initial Closing Date, management
of the Company shall have caused to be prepared product development schedules
for each of the Company's Arm, Jeeves, and V.Mach products and services.
Prior to the next Subsequent Closing Date, management of the Company shall
have caused to be prepared and the Company's Board of Directors shall have
approved, the business plan contemplated by Section 7.4 of this Agreement.
5. REPRESENTATIONS AND WARRANTIES BY COMPANY. Except as
disclosed in the disclosure schedule attached as Schedule A (the "Disclosure
Schedule"), and subject to the provisions of Section 13 hereof, the Company
represents and warrants to Digi that:
5.1 ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Minnesota, and has the requisite corporate power and authority to own its
properties and to carry on its business in all material respects as it is now
being conducted. The Company has the requisite corporate power and authority
to issue the Notes and the Conversion Stock, and to otherwise perform its
obligations under this Agreement and the Notes. The copies of the Articles
of Incorporation and Bylaws of the Company delivered to Digi or their agents
prior to the execution of this Agreement are true and complete copies of the
duly and legally adopted Articles of Incorporation and Bylaws of the Company
in effect as of the date of this Agreement. As of the date of this
Agreement, the Company does not have any direct or indirect equity interest
in any other firm, corporation, partnership, joint venture association or
other business organization.
5.2 QUALIFICATION. To the best of its knowledge, the Company is
duly qualified or licensed as a foreign corporation in good standing in each
jurisdiction wherein the nature of its activities or
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of its properties owned or leased makes such qualification or licensing
necessary and failure to be so qualified or licensed would have a material
adverse impact on its business.
5.3 FINANCIAL STATEMENTS. Attached hereto as Schedule B is an
unaudited balance sheet dated April 30, 1996 (the "Balance Sheet Date"),
together with the related unaudited statements of operations, shareholders'
equity and cash flow for the fiscal period then ended (such financial
statements hereinafter referred to as the "Financial Statements"). Such
Financial Statements (i) are in accordance with the books and records of the
Company, (ii) present fairly the financial condition of the Company at the
Balance Sheet Date and the results of its operations for the period therein
specified, and (iii) have, in all material respects, been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods; provided, however, that the
unaudited financial statements omit the footnotes required under generally
accepted accounting principles, including the description of business,
summary of accounting policies, notes payable, income taxes, employment
agreements, stock options and warrants, proposed issuance of convertible
notes, and other necessary disclosures arising from this Agreement and the
Notes, and do not reflect the leases, the payments on which might be
capitalized under generally accepted accounting principles. Specifically, but
not by way of limitation, to the Company's best knowledge and belief, the
unaudited financial statements disclose all of the debts, liabilities and
obligations of any nature (whether absolute or accrued) of the Company at the
Balance Sheet Date which, individually or in the aggregate, are material and
which in accordance with generally accepted accounting principles would be
required to be disclosed in such unaudited financial statements, and the
omission of which would, in the aggregate, have a material adverse impact on
the Company. The unaudited balance sheet includes appropriate reserves for
all taxes incurred through such Balance Sheet date.
5.4 TAX RETURNS AND AUDITS. To the best of the Company's
knowledge, all required federal, state and local tax returns or appropriate
extension requests of the Company have been filed, and all federal, state and
local taxes required to be paid with respect to such returns have been paid
or due provision for the payment thereof has been made. To the best of the
Company's knowledge, the Company is not delinquent in the payment of any such
tax or in the payment of any assessment or governmental charge. The Company
has not received notice of any tax deficiency proposed or assessed against
it, and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax. None of the Company's tax returns has
been audited by governmental authorities in a manner to bring such audits to
the Company's attention. To the best of the Company's knowledge, the Company
does not have any tax liabilities except those reflected in the Financial
Statements hereto and those incurred in the ordinary course of business since
the Balance Sheet Date.
5.5 CHANGES, DIVIDENDS, ETC. Except for the transactions
contemplated by this Agreement or transactions disclosed to the Company's
Board of Directors prior to the date of this Agreement, since the Balance
Sheet Date, the Company has not: (a) incurred any debts, obligations or
liabilities, absolute, accrued or contingent, except current liabilities
incurred in the ordinary course of business, which (individually or in the
aggregate) will not materially and adversely affect the business, properties
or prospects of the Company; (b) paid any obligation or liability other than,
or discharged or satisfied any liens or encumbrances other than those
securing current liabilities, in each case in the ordinary course of
business; (c) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible,
except in the ordinary course of business; (d) sold, transferred or leased
any of its assets except in the ordinary course of business; (e) canceled or
compromised any debt or claim, or waived or released any right of material
value; (f) suffered any physical damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting the properties,
business or prospects of the Company; (g) entered into any transaction other
than in the ordinary course of business; (h) encountered any labor
difficulties or labor union organizing activities; (i) increased the
compensation payable, or to become payable, to any of its directors or
employees, or made
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any bonus payment or similar arrangement with any directors or employees or
increased the scope or nature of any fringe benefits provided for its
employees or directors; or (j) agreed to do any of the foregoing other than
pursuant hereto. Except as disclosed to the Company's Board of Directors
there has been no material adverse change in the financial condition,
operations, results of operations or business of the Company since the
Balance Sheet Date. For all purposes under this Agreement, "disclosed to the
Company's Board of Directors" shall mean discussed in a duly convened Board
meeting or reflected in written actions of the Board in lieu thereof.
5.6 TITLE TO PROPERTIES AND ENCUMBRANCES. To the best of its
knowledge and belief, the Company has good and marketable title to all its
owned properties and assets, including without limitation the properties and
assets reflected in the Financial Statements and the properties and assets
used in the conduct of its business, except for property leased by or
disposed of in the ordinary course of business since the Balance Sheet Date,
which properties and assets are not subject to any mortgage, pledge, lease,
lien, charge, security interest, encumbrance or restriction, except (a) those
incurred in the ordinary course of the Company's business, (b) which are
shown and described in the Financial Statements or the notes thereto, or (c)
Permitted Liens (as hereinafter defined). The offices and equipment owned
and leased by the Company have been kept in good condition and repair in the
ordinary course of business, and the Company has not been threatened with any
action or proceeding under any building or zoning ordinance, law or
regulation. For the purposes of this Agreement, "Permitted Liens" shall mean
(a) liens for taxes and assessments or governmental charges or levies not at
the time due or in respect of which the validity thereof shall currently be
contested in good faith by appropriate proceedings; (b) liens in respect of
pledges or deposits under worker's compensation laws or similar legislation,
carriers', warehousepersons', mechanics', laborers' and materialpersons',
landlords' and statutory and similar liens, if the obligations secured by
such liens are not then delinquent or are being contested in good faith; (c)
liens and encumbrances incidental to the conduct of the business of the
Company which were not incurred in connection with the borrowing of money or
the obtaining of advances or credits and which do not in the aggregate
materially detract from the value of its property or materially impair the
use thereof in the operation of its business; and (d) Permitted Encumbrances
(as defined in the Security Agreement).
5.7 LITIGATION; GOVERNMENTAL PROCEEDINGS. There are no legal
actions, suits, arbitration or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, its properties, assets or business, and
except as previously disclosed to Digi, the Company is not aware of any facts
which are likely to result in or form the basis for any such action, suit or
other proceeding. The Company is not in default with respect to any
judgment, order or decree of any court or any governmental agency or
instrumentality. The Company has not been threatened with any action or
proceeding under any business or zoning ordinance, law or regulation.
5.8 COMPLIANCE WITH APPLICABLE LAWS AND OTHER INSTRUMENTS. To the
best of the Company's knowledge: The business and operations of the Company
have been and are being conducted in accordance with all applicable laws,
rules and regulations of all governmental authorities; neither the execution
nor delivery of, nor the performance of or compliance with the Transaction
Documents nor the consummation of the transactions contemplated hereby or
thereby will conflict with, or, with or without the giving of notice or
passage of time, result in any breach of, or constitute a default under, or
result in the imposition of any lien or encumbrance upon any asset or
property of the Company pursuant to, any applicable law, administrative
regulation or judgment, order or decree of any court or governmental body,
any agreement or other instrument to which the Company is a party or by which
it or any of its properties, assets or rights is bound or affected, and will
not violate the Articles of Incorporation or Bylaws of the Company; the
Company is not in violation of its Articles of Incorporation or its Bylaws
nor in violation of, or in default under, any lien, indenture, mortgage,
lease, agreement, instrument, commitment or arrangement in any material
respect other than as otherwise disclosed herein.
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5.9 CONVERSION STOCK. The Conversion Stock has been reserved for
issuance, and when issued upon conversion will be duly authorized, validly
issued and outstanding, fully paid, nonassessable and free and clear of all
pledges, liens, encumbrances and restrictions. The certificates representing
the Conversion Stock to be delivered upon the conversion of the Notes will be
genuine, and the Company has no knowledge of any fact which would impair the
validity thereof.
5.10 SECURITIES LAWS. Based in part upon the representations and
warranties contained in Section 6 hereof and the advice of the Company's
counsel, no consent, authorization, approval, permit or order of or filing
with any governmental or regulatory authority is required under current laws
and regulations in connection with the execution and delivery of the
Transaction Documents or the offer, issuance, sale or delivery of the Notes
or the offer of the Conversion Stock other than the qualification thereof, if
required, under applicable state securities laws, which qualification has
been or will be effected as a condition of these sales. The Company has not,
directly or through an agent, offered the Notes or the Conversion Stock, or
any similar securities for sale to, or solicited any offers to acquire such
securities from, persons other than Digi. Based on the advice of the
Company's counsel, under the circumstances contemplated hereby, the offer,
issuance, sale and delivery of the Notes and the offer of the Conversion
Stock will not under current laws and regulations require compliance with the
prospectus delivery or registration requirements of the Securities Act.
5.11 PATENTS AND OTHER INTANGIBLE RIGHTS. To the best of the
Company's knowledge, the Company (a) owns or has the right to use, free and
clear of all material liens, claims and restrictions, except in favor of
Digi, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect to the foregoing, used in the conduct of its
business as now conducted or proposed to be conducted, (b) is not obligated
or under any liability requiring but not having received the approval of the
Company's Board of Directors to make any payments of a material nature by way
of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trademark, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the current
conduct of its business or otherwise, (c) owns or has sufficient rights to
use all trade secrets, including know-how, inventions, designs, processes,
computer programs and technical data necessary to the development, operation
and sale of all products and services sold or proposed to be sold by it and
(d) the Company is not, to the best of its knowledge, nor has it received
notice with respect to, infringing upon or otherwise acting adversely to any
known right or claimed right of any person under or with respect to any
patents, trademarks, service marks, trade names, copyrights, licenses or
rights with respect to the foregoing.
5.12 CAPITAL STOCK. The authorized capital stock of the Company
consists of 10,000,000 common shares, of which 1,126,700 shares are issued
and outstanding; all of these shares were duly authorized, validly issued and
are fully paid and nonassessable. In addition, there are outstanding
warrants to purchase 39,166 common shares, additional options and warrants
may be issued to purchase up to 10,000 common shares pursuant to a Private
Placement Memorandum previously authorized by the Company's Board of
Directors, and options have been and will be granted to one of the members of
the Company's Board of Directors. Other than the foregoing and the Amended
1995 Note, there are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, or other securities which are at any time
directly or indirectly convertible or exchangeable for shares of common stock
of the Company (collectively, "Convertible Securities") or other agreements
or arrangements of any character or nature whatever, except as otherwise
disclosed in the Disclosure Schedule or as contemplated by this Agreement,
under which the Company is or may be obligated to issue capital stock or
other securities of any kind representing an ownership interest or contingent
ownership interest in the Company. Except for the foregoing, neither the
offer nor the issuance or sale of the Notes or the Conversion Stock
constitutes an event, under any anti-dilution provisions of any securities
issued or issuable by the Company or any agreements with respect to the
issuance of securities by the Company, which will either increase the
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number of shares issuable pursuant to such provisions or decrease the
consideration per share to be received by the Company pursuant to such
provisions. No holder of any security of the Company is entitled to any
preemptive or similar rights to purchase securities from the Company except
as otherwise contemplated by this Agreement, provided, however, that nothing
in this Section 5.12 shall affect, alter or diminish any right granted to
Digi in this Agreement. To the best of the Company's knowledge, all
outstanding securities of the Company have been issued in full compliance
with an exemption or exemptions from the registration and prospectus delivery
requirements of the Securities Act and from the registration and
qualification requirements of all applicable state securities laws.
5.13 OUTSTANDING DEBT. The Company has no indebtedness for
borrowed money except as otherwise set forth in Schedule B. Except as
otherwise disclosed in the Disclosure Schedules, the Company is not in
default in the payment of the principal of or interest or premium on any such
indebtedness for borrowed money, and no event has occurred or is continuing
under the provisions of any instrument, document or agreement evidencing or
relating to any such indebtedness for borrowed money which with the lapse of
time or the giving of notice, or both, would constitute an event of default
thereunder. As used herein, the phrase "indebtedness for borrowed money"
shall include only indebtedness of the Company incurred as the result of a
direct borrowing of money and shall not include any other indebtedness,
including indebtedness with respect to trade accounts.
5.14 MATERIAL CONTRACTS. The Company has disclosed to its Board of
Directors prior to the date of this Agreement each material contract, lease,
commitment or other arrangements required to be disclosed to its Board of
Directors to which it is a party or by which it is otherwise bound. Except
as previously disclosed to its Board of Directors or in the Disclosure
Schedules, the Company has in all material respects substantially performed
all obligations required to be performed by it to date under such agreements.
All of the foregoing agreements are in effect and enforceable according to
their respective terms (except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies), and there is not under any of such agreements
any existing material default or event of default or event which, with notice
or lapse of time or both, would constitute an event of default thereunder.
All parties having material contractual arrangements with the Company are in
substantial compliance therewith and none are in material default in any
respect thereunder.
5.15 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of the Company, and
has been duly executed and delivered by authorized officers of the Company.
All corporate action necessary to the authorization, creation, issuance and
delivery of the Notes, the Conversion Stock and the Security Agreement has
been taken on the part of the Company, or will be taken by the Company on or
prior to the Closing Date. This Agreement is, and each of the Notes when
issued pursuant to the terms of this Agreement will be, and the Security
Agreement and the Manufacturing Agreement when executed and delivered
pursuant to the terms of this Agreement will be, a valid and binding
agreement of the Company enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of
creditors' rights generally, and except for judicial limitations on the
enforcement of the remedy of specific enforcement and other equitable
remedies.
5.16 ACCOUNTS RECEIVABLE. To the extent that they exceed the
reserves for doubtful accounts set forth in the Financial Statements, the
accounts receivable of the Company which are reflected in the Financial
Statements and all of its accounts receivable which have arisen since the
Balance Sheet Date (except such accounts receivable as have been collected
since the Balance Sheet Date) are valid and enforceable claims, and the goods
and services sold and delivered which gave rise to such accounts were sold
and delivered in conformity with the applicable purchase orders, agreements
and specifications. Such
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accounts receivable are subject to no valid defense or offsets except routine
customer complaints or warranty demands of an immaterial nature. The reserve
for doubtful accounts that is included in the Financial Statements is
adequate.
5.17 INVENTORIES. The inventories of the Company which are
reflected in the Financial Statements and all inventory items which have been
acquired since the Balance Sheet Date consist of raw materials, supplies,
work-in-process and finished goods of such quality and in such quantities as
are currently useable or saleable in the ordinary course of its business.
5.18 INSURANCE COVERAGE. There are in full force policies of
insurance issued by insurers of recognized responsibility insuring the
Company, its properties and business against such losses and risks, and in
such amounts, as in the Company's best judgment, after advice from its
insurance broker, are acceptable for the nature and extent of its business
and the Company's resources.
5.19 NO BROKERS OR FINDERS. Other than the International Business
Group, which is owed $130,299.09 pursuant to the agreement with the Company
dated 24 July 1995, the fees and reimbursable expenses of which shall be the
sole obligation of the Company, no person, firm or corporation has or will
have, as a result of any act or omission of the Company, any right, interest
or valid claim against or upon the Company or Digi for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
The Company will indemnify and hold Digi harmless against any and
all liability with respect to any such commission, fee or other compensation
which may be payable or determined to be payable as a result of the actions
of the Company in connection with the transactions contemplated by this
Agreement.
5.20 LICENSES. To the best of the Company's knowledge, the Company
possesses from the appropriate agency, commission, board and government body
and authority, whether state, local or federal, all licenses, permits,
authorizations, approvals, franchises and rights which (a) are necessary for
it to engage in the business currently conducted by it, and (b) if not
possessed by the Company, would have an adverse impact on the Company's
business. The Company has no knowledge that would lead it to believe that it
will not be able to obtain all licenses, permits, authorizations, approvals,
franchises and rights that may be required for any business the Company
proposes to conduct.
5.21 REGISTRATION RIGHTS. Other than under this Agreement, the
Company has not agreed to register any of its authorized or outstanding
securities under the Securities Act.
5.22 EMPLOYEE PLANS. Each plan in which any of the Company's
employees participate that is subject to any provisions of the employee
Retirement Income Security act of 1974 and the regulations adopted pursuant
thereto ("ERISA") is operated in accordance with applicable law, including
ERISA and the Internal Revenue Code and regulations promulgated thereunder
(the "Code"), and each such plan intended to be tax qualified is so
qualified. Each plan which is a "group health plan" as defined in the Code
has not failed to comply in any material respect with the continuation
coverage requirements imposed by the Code.
5.23 ENVIRONMENTAL AND SAFETY LAWS. To the best of the Company's
knowledge: The Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
no material expenditures are or will be required in order to comply with any
such existing statute, law or regulation; the operations of the Company do
not involve any hazardous substances or materials including, but not limited
to, hazardous substances or materials under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund
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Amendments and Reauthorization Act, the Resource Conservation and Recovery
Act, the Minnesota Environmental Response and Liability Act, or any other
federal, state or local statute, regulation, code or ordinance.
5.24 EMPLOYEES. To the best of the Company's knowledge: No
officer of the Company or employee of the Company whose annual compensation
is in excess of $20,000 has any plans to terminate his or her employment with
the Company; the Company has complied in all material respects with all laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and payment of Social
Security and other taxes, and the Company has not encountered any material
labor difficulties; the Company does not have any worker's compensation
liabilities, except those reflected in the Financial Statements.
5.25 ABSENCE OF RESTRICTIVE AGREEMENTS. To the best of the
Company's knowledge: No employee of the Company is subject to any secrecy or
non-competition agreement or any agreement or restriction of any kind that
would impede in any way the ability of such employee to carry out fully all
activities of such employee in furtherance of the business of the Company; no
employer or former employer of any employee of the Company has any claim of
any kind whatsoever in respect of any of the rights described in Section 5.10
hereof.
5.26 DISCLOSURE. The Company has not knowingly withheld from Digi
any material facts relating to the assets, business, operations, financial
condition or prospects of the Company. No representation or warranty in this
Agreement or in any certificate, schedule, written statement or other
document furnished to Digi pursuant hereto or in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state any material fact required to be stated herein or
therein or necessary to make the statements herein or therein not misleading.
6. REPRESENTATIONS AND WARRANTIES OF DIGI. Digi represents and
warrants that:
6.1 INVESTMENT INTENT. The Notes being acquired and to be
acquired by Digi hereunder are being purchased or will be purchased, and the
Conversion Stock acquired by Digi upon conversion of such Notes will be
acquired, for Digi's own account and not with the view to, or for resale in
connection with, any distribution or public offering thereof within the
meaning of the Securities Act. Digi understands that the Notes and the
Conversion Stock have not been registered under the Securities Act or any
applicable state laws by reason of their issuance or contemplated issuance in
a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and such laws, and that the reliance of
the Company upon this exemption is predicated in part upon this
representation and warranty. Digi further understands that the Notes and
Conversion Stock may not be transferred or resold without (a) registration
under the Securities Act and any applicable state securities laws, or (b) an
exemption from the requirements of the Securities Act and applicable state
securities laws.
Digi understands that an exemption from such registration is not
presently available pursuant to Rule 144 promulgated under the Securities Act
by the Securities and Exchange Commission (the "Commission") and that in any
event Digi may not sell any securities pursuant to Rule 144 prior to the
expiration of a two-year period after Digi has acquired the securities. Digi
understands that any sales pursuant to Rule 144 may only be made in full
compliance with the provisions of Rule 144.
6.2 LOCATION OF PRINCIPAL OFFICE AND QUALIFICATION AS ACCREDITED
INVESTOR. Digi's principal office is located in Minnetonka, Minnesota. Digi
qualifies as an accredited investor within the meaning of Rule 501 under the
Securities Act. Digi has such knowledge and experience in financial and
business matters that Digi is capable of evaluating the merits and risks of
the investment to be made hereunder by Digi. Digi has and has had access to
all of the Company's material books and records and
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access to the Company's executive officers has been provided to Digi or to
Digi's agents.
6.3 ACTS AND PROCEEDINGS. The Transaction Documents have been
duly authorized by all necessary action on the part of Digi, have been duly
executed and delivered by Digi, and are valid and binding agreements upon the
part of Digi.
6.4 NO BROKERS OR FINDERS. No person, firm or corporation has or
will have, as a result of any act or omission by Digi, any right, interest or
valid claim against the Company for any commission, fee or other compensation
as a finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement. Digi will indemnify and hold
the Company harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to
be payable as a result of the actions of Digi in connection with the
transactions contemplated by this Agreement.
7. AFFIRMATIVE COVENANTS. Subject to the provisions of Section 13
hereof, the Company covenants and agrees that:
7.1 CORPORATE EXISTENCE. The Company will maintain its corporate
existence in good standing and comply with all applicable laws and
regulations of the United States or of any state or states thereof or of any
political subdivision thereof and of any governmental authority where failure
to so comply would have a material adverse impact on the Company or its
business or operations.
7.2 BOOKS OF ACCOUNT AND RESERVES. The Company will keep books of
record and account in which full, true and correct entries are made of all of
its and their respective dealings, business and affairs, in accordance with
generally accepted accounting principles. The Company will employ certified
public accountants selected by the Board of Directors of the Company who are
"independent" within the meaning of the accounting regulations of the
Securities and Exchange Commission ("Commission") and who are one of the
so-called "Big Six" accounting firms, and have annual audits made by such
independent public accountants in the course of which such accountants shall
make such examinations, in accordance with generally accepted auditing
standards, as will enable them to give such reports or opinions with respect
to the financial statements of the Company as will satisfy the requirements
of the Commission in effect at such time with respect to certificates and
opinions of accountants.
7.3 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The
Company will deliver to Digi:
(a) as soon as practicable, but in any event within 30 days after the
close of each month, unaudited consolidated balance sheets of the Company
as of the end of such month, together with the related consolidated
statements of operations and cash flow for such month, all in reasonable
detail and certified by the principal accounting officer of the Company;
and
(b) as soon as practicable, but in any event within 90 days after the
end of each fiscal year, a consolidated balance sheet of the Company as of
the end of such fiscal year, together with the related consolidated
statements of operations, shareholders' equity and cash flow for such
fiscal year, all in reasonable detail and duly certified by the Company's
independent public accountants, which accountants shall have given the
Company an opinion, unqualified as to the scope of the audit, regarding
such statements, provided that the audit may contain a qualification
regarding the Company's ability to continue as a going concern or any other
generally accepted qualifications for a similar ongoing concern; and
(c) concurrently with the delivery in each year of the financial
statements referred
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to in paragraph (b) of this Section 7.3, a statement and report signed by
the independent public accountants who certified such financial statements
to the effect that they have read this Agreement and that in the course of
the audit upon which their certificate was based they became aware of no
condition or event which constituted an Event of Default of the Company (as
hereinafter defined) or which, after notice or lapse of time or both, would
constitute an Event of Default of the Company or if such accountants did
become aware of any such condition or event, specifying the nature and
period of existence thereof.
(d) with reasonable promptness, such other financial data relating to
the business, affairs and financial condition of the Company as is
available to the Company and as Digi from time to time may reasonably
request.
7.4 PREPARATION AND APPROVAL OF BUSINESS PLAN AND BUDGETS. On or
before the next scheduled meeting of the Company's Board of Directors
following execution of this Agreement, the Company shall prepare a business
plan to be presented for approval by its Board of Directors at such meeting.
In addition, prior to the beginning of the fiscal year ending September 30,
1996, and thereafter of each fiscal year of the Company, the Company shall
prepare and submit to the Board of Directors of the Company, for its review
and approval, an annual plan for such year, which shall include capital and
operating expense budgets, cash flow statements and profit and loss
projections itemized in such detail as the Board of Directors of the Company
may reasonably request. The business and annual plans shall be modified as
often as is necessary in the judgment of the Board of Directors of the
Company and the Company's executive officers to reflect changes required as a
result of operating results and other events that occur, or may be reasonably
expected to occur, during the year covered by the annual plan.
7.5 PAYMENT OF TAXES AND MAINTENANCE OF PROPERTIES. The Company
will:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly when due and payable, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or upon any of its
properties, as well as all material claims of any kind (including claims
for labor, material and supplies) which, if unpaid, might by law become a
lien or charge upon its property; provided, however, that the Company shall
not be required to pay any such tax, assessment, charge, levy or claim if
the amount, applicability or validity thereof shall currently be contested
in good faith by appropriate proceedings and if the Company shall have set
aside on its books reserves (segregated to the extent required by generally
accepted accounting principles) deemed adequate by it with respect thereto;
and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to
time make, or cause to be made, all repairs and renewals and replacements
which in the opinion of the Company are necessary and proper so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; the Company will maintain or cause
to be maintained back-up copies of all valuable papers and software.
7.6 INSURANCE. The Company will obtain and maintain in force such
property damage, public liability, business interruption, worker's compensation,
indemnity bonds and other types of insurance as the Company's executive
officers, after consultation with an accredited insurance broker, shall
determine to be necessary or appropriate to protect the Company from the
insurable hazards or risks associated with the conduct of the Company's
business. The Company's executive officers shall periodically report to the
Board of Directors on the status of such insurance coverage. All insurance
shall be maintained in at least such amounts and to such extent as shall be
determined to be reasonable by the Board of Directors; and all such insurance
shall be effected and maintained in force under a policy or
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policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance
fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws.
7.7 PAYMENT OF INDEBTEDNESS AND DISCHARGE OF OBLIGATIONS. The
Company will pay or cause to be paid the principal of and interest and
premium, if any, on all indebtedness for borrowed money heretofore or
hereafter incurred or assumed by it when and as the same shall become due and
payable, unless such indebtedness for borrowed money is renewed or extended,
except in the case of the existing notes the holders of which will be offered
the right to convert the indebtedness evidenced thereby to Common Stock
pursuant to the terms of the Private Placement Memorandum previously approved
by the Company's Board of Directors. The Company will faithfully observe,
perform and discharge all of the material covenants, conditions and
obligations which are imposed on it by any and all indentures and other
agreements securing or evidencing such indebtedness for borrowed money or
pursuant to which such indebtedness for borrowed money is issued, and will
not permit the continuance of any act or omission which is or under the
provisions thereof may be declared to be a material default thereunder,
unless such default is waived pursuant to the provisions thereof. The
Company shall not be required to make any payment or to take any other action
by reason of this Section 7.7 at any time while it shall be currently
contesting in good faith by appropriate proceedings its obligations to make
such payment or to take such action provided that the Company shall have set
aside on its books reserves (segregated to the extent required by generally
accepted accounting principles) deemed adequate by it with respect thereto.
For purposes of this Section 7.7, the phrase "indebtedness for borrowed
money" shall have the meaning ascribed to it pursuant to Section 5.13 of this
Agreement.
7.8 DIRECTORS' AND SHAREHOLDERS' MEETINGS. Until the earliest to
occur of (i) repayment in full of the Notes if the Notes are not converted,
or (ii) the date of the Company's Initial Public Offering, the Company shall
have a Board of Directors the composition of which shall be determined as
follows: (a) so long as it is the holder of any Notes or Conversion Stock,
Digi shall be entitled to designate two fifths (2/5) of the directors of the
Company and to exercise any right of removal or replacement of any such
director, (b) the holders of a majority of the outstanding Common Stock
exclusive of Digi shall be entitled to designate two fifths (2/5) of the
directors of the Company and to exercise any right of removal or replacement
of any such director, (c) the remaining director or directors must be
approved by both Digi and by the holders of a majority of the outstanding
Common Stock exclusive of Digi and shall be a person (or persons) who is
(are) not otherwise affiliated with the Company or Digi or any officer or
other director of the Company or Digi, and (e) Digi and the Company agree
that in submitting to the Company's shareholders or Board of Directors the
names of nominees for election as directors or in filling interim vacancies,
each will use its best efforts to cause any person designated pursuant to
this Section 7.8 to be elected as a director. Failure of any of the persons
so designated by the Company or Digi to be so elected shall be an Event of
Default of the Company or an Event of Default of Digi respectively within the
meaning of Section 11 hereof.
The Company shall reimburse all directors elected for the reasonable
out-of-pocket expenses incurred by them pursuant to this Section 7.8 in
connection with the attending of meetings by their director designee or
carrying out any other duties by such director designee that may be specified
by the Board of Directors; shall maintain at all times, director and officer
liability insurance in an amount of not less than $1 million from a carrier
reasonably acceptable to the Board of Directors of the Company; and shall
maintain as part of its Articles of Incorporation or Bylaws a provision for
the indemnification of its directors to the full extent permitted by law.
7.9 RESERVATION OF SHARES; REPLACEMENT OF NOTES OR CERTIFICATES
REPRESENTING CONVERSION STOCK. The Company shall at all times have authorized
and reserved a sufficient number of
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shares of its Common Stock for the purpose of issue upon the conversion of
the Notes. Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any Notes or certificates
representing Conversion Stock, and, in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and
cancellation of the Notes or certificates representing Conversion Stock, as
the case may be, the Company will issue new Notes or certificates
representing Conversion Stock of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Notes or certificates representing Conversion Stock.
7.10 APPLICATION OF PROCEEDS. Unless otherwise approved by the
Company's Board of Directors, the net proceeds received by the Company from
the sale of the Notes shall be used to pay the existing payables and
indebtedness, for general operating purposes, and for the development of the
ARMs, Jeeves and V.Mach. Pending such use of the proceeds, they shall be
deposited in a bank or banks having deposits of $150,000,000 or more,
invested in money market mutual funds having assets of $500,000,000 or more,
or invested in securities issued or guaranteed by the United States
Government or the agencies or instrumentalities thereof.
7.11 RETIREMENT PLANS. The Company will cause each retirement plan
of the Company in which any employees of the Company participate that is
subject to the provisions of ERISA and the documents and instruments
governing each such plan to be conformed to when necessary, and to be
administered in a manner consistent with, those provisions of ERISA which
may, from time to time, become effective and operative with respect to such
plans; and at such time as such insurance shall be available at rates deemed
commercially reasonable by the Company, maintain insurance against the
contingent liability against the net worth of the Company imposed in respect
of each such plan by the provisions of ERISA.
7.12 FILING OF REPORTS. The Company will, from and after such time
as it has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or has securities registered pursuant to
the Securities Act, make timely filing of such reports as are required to be
filed by it with the Commission so that Rule 144 under the Securities Act or
any successor provision thereto will be available to the security holders of
the Company who are otherwise able to take advantage of the provisions of
such Rule.
7.13 PATENTS AND OTHER INTANGIBLE RIGHTS. The Company will apply
for, or obtain assignments of, or licenses to use, all patents, trademarks,
trademark rights, trade names, trade name rights and copyrights which in the
opinion of a prudent and experienced businessperson operating in the industry
in which the Company is operating are desirable or necessary for the conduct
and protection of the business of the Company.
7.14 RULE 144A. The Company agrees that, upon Digi's request, the
Company shall promptly provide (but in any case within 15 days of a request)
to Digi the following information: (a) a brief statement of the nature of
the business of the Company and the products and services it offers; (b) the
Company's most recent consolidated balance sheets and profit and loss and
retained earnings statements, and similar financial statements for such part
of the two preceding fiscal years prior to such request as the Company has
been in operation (such financial information shall be audited, to the extent
reasonably available); and (c) such other information about the Company and
its business, financial condition and results of operations as the requesting
person shall specify in order to comply with Rule 144A promulgated under the
Securities Act and the anti-fraud provisions of the federal and state
securities laws.
The Company hereby represents and warrants to any such requesting person
that the information provided by the Company pursuant to this Section 7.14
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
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circumstances under which they were made, not misleading.
8. NEGATIVE COVENANTS. Subject to the provisions of Section 13
hereof, the Company will be limited and restricted as follows:
8.1 CONSOLIDATION, MERGER, ACQUISITION, ETC. Without the prior
approval of Digi, (a) the Company will not sell, lease, license or otherwise
dispose of all or substantially all of its assets or any asset or assets in a
manner which would require shareholder approval, and (b) the Company will not
consolidate with or merge into any other corporation or entity, or permit any
other corporation or entity to consolidate or merge into the Company, or
enter into a plan of exchange with any other corporation or entity, or
otherwise acquire any other corporation or entity; provided that the
foregoing shall not apply to any transaction between the Company and a
wholly-owned subsidiary.
8.2 DIVIDENDS ON OR REDEMPTION OF CAPITAL STOCK. Without the
prior approval of Digi, which approval shall not be unreasonably withheld,
the Company will not declare or pay any dividend or make any other
distribution on any shares of capital stock or purchase, redeem or otherwise
acquire for any consideration, or set aside a sinking fund or other fund for
the redemption or repurchase of any shares of capital stock or any warrants,
rights or options to purchase shares of capital stock.
8.3 ISSUANCE OF SECURITIES. Except as provided in the Disclosure
Schedules, as disclosed to the Company's Board of Directors prior to the date
of this Agreement or pursuant to a stock option plan approved by the
Company's Board of Directors, the Company will not, without the prior
approval of Digi, issue (i) any additional capital stock of the Company of
any class, or securities convertible into any such class, or (ii) any
options, warrants or other rights to purchase capital stock of the Company of
any class, or securities convertible into shares of any such class.
8.4 CHANGE IN THE NATURE OF THE COMPANY'S BUSINESS. The Company
will not, without the prior approval of Digi, which approval shall not be
unreasonably withheld, make any material change in the nature of its business
as carried on or as proposed to be carried out as of the date of this
Agreement.
8.5 FUTURE REGISTRATION RIGHTS. Except for any registration
expressly permitted by Section 10 hereof, the Company will not, without the
prior approval of the Company's Board of Directors, agree with the holders of
any securities issued or to be issued by the Company to register such
securities under the Securities Act nor will it grant any incidental
registration rights.
8.6 OTHER RESTRICTIONS. The Company will not without the prior
approval of the Company's Board of Directors:
(a) guarantee, endorse or otherwise be or become contingently liable
in connection with the obligations, securities or dividends of any person,
firm, association or corporation, other than endorse negotiable instruments
for collection in the ordinary course of business; or
(b) make loans or advances to any person (including without
limitation to any officer, director or shareholder of the Company), firm,
association or corporation, except loans and advances to the Company and
advances to suppliers and employees made in the ordinary course of
business; or
(c) purchase or invest in the stock or obligations of any other
person, firm or corporation; or
(d) pay compensation, whether by way of salaries, bonuses,
participations in
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pension or profit sharing plans, fees under management contracts or for
professional services or fringe benefits to any officer in excess of
amounts fixed by the Board of Directors of the Company prior to any payment
to such officer.
9. RESTRICTION ON TRANSFER OF SECURITIES.
9.1 RESTRICTIONS. The Notes and the Conversion Stock are
transferable only pursuant to (a) a public offering registered under the
Securities Act, (b) Rule 144 (or any similar rule then in effect) adopted
under the Securities Act, if such rule is available, and (c) subject to the
conditions elsewhere specified in this Section 9, any other legally available
means of transfer.
9.2 LEGEND. Each Note shall be endorsed with the following legend:
"The securities evidenced hereby may not be transferred without
(i) the opinion of counsel satisfactory to the Company that such
transfer may be lawfully made without registration under the Federal
Securities Act of 1933 and all applicable state securities laws or
(ii) such registration."
Upon the conversion of any Notes, unless the Company receives an opinion of
counsel from Digi satisfactory to the Company to the effect that a sale,
transfer, assignment, pledge or distribution of the Conversion Stock issuable
upon such conversion may be made without registration, or unless such
Conversion Stock is being disposed of pursuant to registration under the
Securities Act and any applicable state act, the same legend shall be
endorsed on the certificate evidencing such Conversion Stock.
9.3 STOP TRANSFER ORDER. A stop transfer order shall be placed
with the Company's transfer agent preventing transfer of any of the
securities subject to the legend referred to in Section 9.2 above pending
compliance with the conditions set forth in any such legend.
9.4 REMOVAL OF LEGEND. Any legend endorsed on a certificate or
instrument evidencing a security pursuant to Section 9.2 hereof shall be
removed, and the Company shall issue a certificate or instrument without such
legend to Digi, if such security is being disposed of pursuant to
registration under the Securities Act and any applicable state acts or
pursuant to Rule 144 or any similar rule then in effect, or if Digi provides
the Company with an opinion of counsel satisfactory to the Company to the
effect that a sale, transfer, assignment, offer, pledge or distribution for
value of such security may be made without registration and that such legend
is not required to satisfy the applicable exemption from registration.
10. REGISTRATION OF SECURITIES.
10.1 DIGI DEMAND FOR REGISTRATION. If the Company shall receive a
written request therefor from Digi, the Company shall prepare and file a
registration statement under the Securities Act covering the Conversion Stock
which is the subject of such request and shall use its best efforts to cause
such registration statement to become effective; provided, however, Digi may
not make such a request prior to the expiration of six (6) months from the
date of this Agreement. In addition, if the registration requested by Digi
would result in the Company's first registration of securities under the
Securities Act, the Company shall have the right to defer filing such
registration for a period of not more than twelve (12) months after the
Company's receipt of Digi's request. The Company shall be obligated to
prepare, file and cause to become effective only one registration statement
(other than on Form S-3 or any successor form promulgated by the Commission
("Form S-3")) pursuant to this Section 10.1, and to pay the expenses
associated with such registration statements; notwithstanding the foregoing,
Digi may require, pursuant to this Section 10.1, the Company to file, and to
pay the expenses associated with, any number of registration
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statements on Form S-3, if such form is then available for use by the Company
and such record holder or holders. In the event that Digi determines for any
reason not to proceed with a registration at any time before a registration
statement has been declared effective by the Commission, and such
registration statement, if theretofore filed with the Commission, is
withdrawn with respect to the Conversion Stock covered thereby, and Digi
agrees to bear its own expenses incurred in connection therewith and to
reimburse the Company for the expenses incurred by it attributable to the
registration of such Conversion Stock, then Digi shall not be deemed to have
exercised its right to require the Company to register Conversion Stock
pursuant to this Section 10.1, provided, however, that in such event Digi may
not exercise its deferral rights under Section 10.2 should the Company
determine to continue with such a registration.
If, at the time any written request for registration is received by the
Company pursuant to this Section 10.1, the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any
of its securities by it or any of its security holders, such written request
shall be deemed to have been given pursuant to Section 10.2 hereof rather
than this Section 10.1, and the rights of Digi covered by such written
request shall be governed by Section 10.2 hereof.
10.2 INCIDENTAL REGISTRATION. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders
(other than a registration statement on a form that does not permit the
inclusion of shares by its security holders), the Company will give written
notice of its determination to Digi. If the registration which is the
subject of the notice to Digi by the Company would result in the Company's
first registration of securities under the Securities Act, Digi shall have
the right to defer filing such registration for a period of not more than
twelve (12) months after Digi's receipt of the Company's notice. Upon the
written request of Digi given within 30 days after receipt of any such notice
from the Company, the Company will, except as herein provided, cause all
Conversion Stock for which Digi has requested registration to be included in
such registration statement, all to the extent requisite to permit the sale
or other disposition by Digi of such Conversion Stock; provided, however,
that nothing herein shall prevent the Company from, at any time, abandoning
or delaying any such registration initiated by it; provided further, however,
that if the Company determines not to proceed with a registration after the
registration statement has been filed with the Commission and the Company's
decision not to proceed is primarily based upon the anticipated public
offering price of the securities to be sold by the Company, and if Digi so
requests the Company shall promptly complete the registration for Digi's
benefit and Digi shall bear all expenses in excess of $25,000 incurred by the
Company as the result of such registration after the Company has decided not
to proceed. If any registration pursuant to this Section 10.2 shall be
underwritten in whole or in part, the Company may require that the Conversion
Stock requested for inclusion pursuant to this Section 10.2 be included in
the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. In the event that the Conversion Stock
requested for inclusion pursuant to this Section 10.2 would constitute more
than 25% of the total number of shares to be included in a proposed
underwritten public offering, and if in the good faith judgment of the
managing underwriter of such public offering the inclusion of all of the
Conversion Stock originally covered by a request for registration would
reduce the number of shares to be offered by the Company or interfere with
the successful marketing of the shares of stock offered by the Company, the
number of Conversion Stock otherwise to be included in the underwritten
public offering may be reduced. Conversion Stock which is thus excluded from
the underwritten public offering shall be withheld from the market by Digi
for a period not to exceed 90 days, which the managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering.
10.3 REGISTRATION PROCEDURES. If and whenever the Company is
required by the
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provisions of Section 10.1 or 10.2 hereof to effect the registration of
Conversion Stock under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective for such period as
may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(c) furnish to Digi and to the underwriters of the securities being
registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as Digi may reasonably request in writing
within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify Digi, promptly after it shall receive notice thereof, of
the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement
has been filed;
(f) notify Digi promptly of any request by the Commission for the
amending or supplementing of such registration statement or prospectus or
for additional information;
(g) prepare and file with the Commission, promptly upon the request
of Digi, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for Digi (and concurred in by
counsel for the Company), is required under the Securities Act or the rules
and regulations thereunder in connection with the distribution of the
Conversion Stock by Digi;
(h) prepare and promptly file with the Commission and promptly notify
Digi of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading;
(i) advise Digi, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued;
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(j) not file any amendment or supplement to such registration
statement or prospectus to which Digi shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy thereof at
least five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate applicable
law; and
(k) at the request of Digi, furnish: (i) an opinion, dated as of the
closing date, of the counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and to Digi,
covering such matters as such underwriters and Digi may reasonably request;
and (ii) letters dated as of the effective date of the registration
statement and as of the closing date, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and to
Digi, covering such matters as such underwriters and Digi may reasonably
request.
10.4 EXPENSES. With respect to each registration, including
registrations pursuant to Form S-3, requested pursuant to Section 10.1 hereof
(except as otherwise provided in such Section with respect to registrations
voluntarily terminated at the request of Digi) and with respect to each
inclusion of Conversion Stock in a registration statement pursuant to Section
10.2 hereof (except as otherwise provided in Section 10.2 with respect to
registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees,
costs and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
fees and disbursements of counsel for the underwriter or underwriters of such
securities (if the Company and/or Digi are required to bear such fees and
disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue
sky laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering.
Fees and disbursements of counsel and accountants for Digi, underwriting
discounts and commissions and transfer taxes relating to the shares included
in the offering by Digi, and any other expenses incurred by Digi not
expressly included above, shall be borne by Digi.
10.5 INDEMNIFICATION. In the event that any Conversion Stock is
included in a registration statement under Section 10.1 or 10.2 hereof:
(a) The Company will indemnify and hold harmless Digi pursuant to the
provisions of this Section 10, its directors and officers, and any
underwriter (as defined in the Securities Act) for Digi and each person, if
any, who controls Digi or such underwriter within the meaning of the
Securities Act, from and against, and will reimburse Digi and each such
underwriter and controlling person with respect to, any and all loss,
damage, liability, cost and expense to which Digi or any such underwriter
or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so
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made in conformity with information furnished by Digi, such underwriter or
such controlling person in writing specifically for use in the preparation
thereof.
(b) Digi will indemnify and hold harmless the Company, its directors
and officers, any controlling person and any underwriter from and against,
and will reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling person
and/or any underwriter may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished
by Digi specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 10.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party pursuant to the provisions of said paragraph (a) or
(b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the proviso of the preceding
sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
11. DEFAULT.
11.1 EVENTS OF DEFAULT BY THE COMPANY. Each of the following events
shall be an event of default by the Company for purposes of this Agreement (an
"Event of Default of the Company"):
(a) if default shall be made in the punctual payment of interest on
the Notes, and
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such default shall have continued for a period of 15 days after written
notice thereof to the Company by Digi;
(b) if default shall be made in the punctual payment of the principal
of the Notes;
(c) if any judgment, writ or warrant of attachment or of any similar
process in an amount in excess of $250,000 shall be entered or filed
against the Company or against any of its property or assets and either
remains unpaid, unvacated, unbonded or unstayed for a period of 30 days or
adequate reserves are not established on the Company's books;
(d) if an order for relief shall be entered in any Federal bankruptcy
proceeding in which the Company is the debtor; or if bankruptcy,
reorganization, arrangement, insolvency, or liquidation proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws
for the relief of debtors, are instituted by or against the Company and, if
instituted against the Company, are consented to or, if contested by the
Company, are not dismissed by the adverse parties or by an order, decree or
judgment within 60 days after such institution;
(e) if the Company shall default in any material respect in the due
and punctual performance of any covenant or agreement in any note
(including without limitation any of the Notes), bond, indenture, loan
agreement, note agreement, mortgage, security agreement including without
limitation the Security Agreement) or other instrument evidencing or
related to indebtedness for borrowed money, other than the outstanding
notes described in Section 7.7 hereof, and such default shall continue for
more than the period of notice and/or grace, if any, therein specified and
shall not have been waived;
(f) (i) if any representation or warranty made by or on behalf of the
Company in this Agreement or in any certificate, report or other instrument
delivered under or pursuant to any term hereof or thereof shall prove to
have been untrue or incorrect in any material respect as of the date of
this Agreement or as of any Closing Date, or (ii) if any report,
certificate, financial statement or financial schedule or other instrument
prepared or purported to be prepared by the Company or any officer of the
Company furnished or delivered under or pursuant to this Agreement after
any such Closing Date shall prove to be untrue or incorrect in any material
respect as of the date it was made, furnished or delivered;
(g) if any of Digi's designees to the Company's Board of Directors
shall fail to be elected to the Board of Directors in the manner and under
the terms and conditions set forth in Section 7.8 hereof; or
(h) if default shall be made by the Company in the due and punctual
performance or observance of any other term contained in this Agreement or
in any other Transaction Document, and such default shall not have been
remedied, or the Company shall have not taken steps to remedy such default
to Digi's reasonable satisfaction, within 15 days after written notice
thereof to the Company by Digi.
11.2 EVENTS OF DEFAULT BY DIGI. Each of the following events shall be
an event of default by Digi for purposes of this Agreement (an "Event of Default
of Digi"):
(a) Digi does not purchase a Note when required by the terms and
conditions contained in this Agreement;
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(b) if default shall be made by Digi in any material respect in the
performance or observance of any other term contained in this Agreement or
in any other Transaction Document, and such default shall not have been
remedied, or Digi shall have not taken steps to remedy such default to the
Company's reasonable satisfaction, within 15 days after written notice
thereof to Digi by the Company;
(c) (i) if any representation or warranty made by or on behalf of
Digi in this Agreement or in any certificate, report or other instrument
delivered under or pursuant to any term hereof or thereof shall prove to
have been untrue or incorrect in any material respect as of the date of
this Agreement or (ii) if any report, certificate, financial statement or
financial schedule or other instrument prepared or purported to be prepared
by Digi or any officer of Digi furnished or delivered under or pursuant to
this Agreement after any such Closing Date shall prove to be untrue or
incorrect in any material respect as of the date it was made, furnished or
delivered.
11.3 REMEDIES UPON EVENTS OF DEFAULT OF THE COMPANY. Upon the
occurrence of an Event of Default of the Company as herein defined, then, unless
such Event of Default shall have been waived by Digi, Digi shall be entitled so
long as such Event of Default of the Company continues unremedied, by notice to
the Company (a) to declare the principal of and any accrued interest on the
Notes, to be immediately due and payable, and thereupon the Notes, including
both principal and interest shall become immediately due and payable (provided,
however, that when any Event of Default of the Company described in
Section 11.1(d) hereof has occurred, the Notes shall immediately become due and
payable without presentment, demand or notice of any kind), and (b) to designate
a majority of the Board of Directors of the Company, as provided in Section 11.4
below.
11.4 DESIGNATION OF MAJORITY OF BOARD OF DIRECTORS. In the event Digi
is entitled to designate a majority of the Board of Directors of the Company
pursuant to Section 11.3 hereof, the Company shall, immediately upon receiving
written notice from Digi, call a special shareholders' meeting to be held as
soon as possible, but in any event within fifteen days of the date of the notice
of such meeting. At such special shareholders' meeting a majority of the
directors of the Company shall be elected from designees nominated by Digi. Any
right of Digi to continue to designate a majority of the Board of Directors of
the Company shall expire, and a shareholders' meeting to elect new directors
shall be called, six months after the later of (a) the curing of the Event of
Default upon which the right was exercised, or (b) the curing of any Event of
Default occurring after the Event of Default upon which such right was
exercised.
11.5 NOTICE OF DEFAULTS. When, to its knowledge, any Event of Default
of the Company has occurred or exists, the Company agrees to give prompt written
notice of such Event of Default of the Company, to Digi, but in any event within
ten business days. When, to its knowledge, any Event of Default of Digi has
occurred or exists, Digi agrees to give prompt written notice of such Event of
Default of Digi, to the Company, but in any event within ten business days.
11.6 SUITS FOR ENFORCEMENT; REMEDIES CUMULATIVE AND NOT WAIVED. In
case an Event of Default of the Company shall have occurred and be continuing,
unless such Event of Default of the Company shall have been waived in the manner
provided in Section 13 hereof, Digi may proceed to protect and enforce its
rights under this Section 11 by suit in equity or action at law. In case an
Event of Default of Digi shall have occurred and be continuing, unless such
Event of Default of Digi shall have been waived in the manner provided in
Section 13 hereof, the Company may proceed to protect and enforce its rights
under this Agreement by suit in equity or action at law. No right, power or
remedy conferred upon either Party hereto shall be exclusive, and each such
right, power or remedy shall be cumulative and in addition to every other right,
power or remedy, whether conferred hereby or by any such security or now or
hereafter available at law or in equity or by statute or otherwise. No course
of dealing between the
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Company and Digi and no delay in exercising any right, power or remedy
conferred hereby or by any such security or now or hereafter existing at law
or in equity or by statute or otherwise, shall operate as a waiver of or
otherwise prejudice any such right, power or remedy; provided, however, that
this sentence shall not be construed or applied so as to negate the
provisions and intent of any statute which is otherwise applicable.
12. TERMINATION OF CERTAIN COVENANTS. The obligations of the Company
under Sections 7 (other than its obligations under Sections 7.8, 7.9 and 7.14
hereof), 8 and 11.1 of this Agreement and the obligations of Digi under section
11.2 shall notwithstanding any provisions hereof apparently to the contrary,
terminate and be of no further force or effect from and after the earlier of the
repayment in full of the Notes or the Initial Public Offering of the Company.
The obligation of Digi to purchase Notes of the Company shall terminate upon the
earlier of December 31, 1988 or the Initial Public Offering of the Company.
13. CONSENTS; WAIVERS AND AMENDMENTS. With the written consent of either
Party hereto, any obligation of the other Party to this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), and by mutual written consent the Parties may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of any
supplemental agreement or modifying in any manner the rights and obligations of
either Party.
14. CHANGES, WAIVERS, ETC. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the Party against which enforcement of the
change, waiver, discharge or termination is sought.
15. PAYMENT OF FEES AND EXPENSES. Each Party will bear the out-of-pocket
expenses incurred by it in connection with the transactions herein contemplated,
including without limitation the fees and out-of-pocket expenses of agents,
finders (if any) and counsel.
16. NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail,
(a) if to Digi, addressed to it at 11001 Bren Road East, Minnetonka
MN 55343, Attn: Chief Financial Officer, or at such other address as Digi
may specify by written notice to the Company, or
(b) if to the Company, addressed to it at 10000 West 76th Street,
Eden Prairie, MN 55344-3767, Attn: Dr. Jonathan A. Henrikssen Sachs, with
a copy to William T. Dolan, Esq., Briggs and Morgan P.A., 2400 IDS Center,
Minneapolis, Minnesota 55402 or to such other addresses as the Company may
specify by written notice to Digi,
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by certified mail, when received.
17. PARTIES IN INTEREST. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the Parties hereto.
18. HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
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19. CHOICE OF LAW. It is the intention of the Parties that the laws of
Minnesota shall govern the validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the Parties.
20. COUNTERPARTS. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
DIGI INTERNATIONAL INC.
By /s/ ERVIN F. KAMM, JR.
-----------------------------------------
Name: Ervin F. Kamm, Jr.
Its: President & C.E.O.
AETHERWORKS CORPORATION
By /s/ JONATHAN A. HENRIKSSEN SACHS, Ph.D.
-----------------------------------------
Name: Jonathan A. Henrikssen Sachs, Ph.D.
Its: President & C.E.O.
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