-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GS1i9KBymg2HEamdZ5ORtG9P6HMsW+RQLbuddFwUKlDvBdyPcIOEi4lJpuEHcJ+S DIWJTqFhg4/ai7VfKXUAnA== 0000950112-95-002834.txt : 19951027 0000950112-95-002834.hdr.sgml : 19951027 ACCESSION NUMBER: 0000950112-95-002834 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951023 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951026 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL PRODUCTS CORP CENTRAL INDEX KEY: 0000028895 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 591141879 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09503 FILM NUMBER: 95584452 BUSINESS ADDRESS: STREET 1: 800 NW 33RD ST CITY: POMPANO BEACH STATE: FL ZIP: 33064 BUSINESS PHONE: 3057839600 MAIL ADDRESS: STREET 1: 800 N W 33 STREET CITY: POMANO BEACH STATE: FL ZIP: 33064 8-K 1 DIGITAL PRODUCTS CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 23, 1995 Digital Products Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in character) Florida 0-9503 59-1141879 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 800 N.W. 33rd Street, Pompano Beach, Florida 33064 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (305) 783-9600 - -------------------------------------------------------------------------------- Item 5. Other Events On October 23, 1995, Digital Products Corporation (the "Company") and Strategic Technologies Inc. ("Strategic"), announced the execution of a definitive Agreement and Plan of Merger dated as of October 13, 1995 (the "Merger Agreement") providing for the merger (the "Merger") of a wholly owned subsidiary of Strategic with and into the Company pursuant to which the Company will become a wholly-owned subsidiary of Strategic. Pursuant to the transaction, each outstanding share of Digital common stock will be converted into .379291 of a share of Strategic common stock. Upon completion of the merger and a proposed private placement of 500,000 shares of Strategic common stock, Strategic will have approximately 10.9 million shares outstanding (11.9 million fully diluted), of which 4.4 million shares and 600,000 options will be held by former Digital shareholders. It is anticipated that the merger will be consummated in or about March of 1996. The transaction is conditioned on obtaining the approval of the shareholders of both Strategic and the Company, the approval of the United States and Canadian securities regulators and the listing of the Strategic common shares on the Toronto Stock Exchange, as well as other conditions. The Merger Agreement is attached hereto as Exhibit 1 and incorporated herein by reference. In reaching its determination to approve the Merger Agreement, the Board of Directors considered, among other things, the opinion of Marshall & Stevens Incorporated, the Company's advisor as to the fairness, from a financial point of view, of the consideration to be received by the shareholders of the Company pursuant to the Merger. The opinion of Marshall & Stevens Incorporated is attached hereto as Exhibit 2 and incorporated herein by reference. In conjunction with the execution of the Merger Agreement certain principal shareholders of both companies, including members of the Boards of the companies, have executed a related Shareholders' Agreement whereby the signatories have confirmed their intention to vote for and support the Merger and to provide for certain post-closing governance matters relating to Strategic. Strategic and Digital have also agreed to immediately begin joint marketing of their respective product lines and integration of certain other business operations. The Shareholders' Agreement is attached hereto as Exhibit 3 and incorporated herein by reference. Strategic has been issued a one year warrant to acquire 500,000 shares of Digital at $0.25 per share plus a conditional warrant to acquire an additional 1,500,000 Digital shares in consideration of agreeing to bear certain transaction costs which warrants are exercisable in the event the transaction is not consummated under certain circumstances. The Warrant Agreements are attached hereto as Exhibits 4 and 5 and incorporated herein by reference. In conjuction with the execution of the Merger Agreement, Strategic, the Company and Richard A. Angulo, the President and Chief Executive Officer of the Company, entered into a Conditional Employment Agreement dated as of October 13, 1995 which agreement will become effective as of the closing of the Merger. The Conditional Employment Agreement is attached hereto as Exhibit 6 and incorporated herein by reference. Attached hereto as Exhibit 7 is a press release issued on October 23, 1995 with respect to the signing of the Merger Agreement. Item 7. Financial Statement and Exhibits. (c) Exhibits. (1) Agreement and Plan of Merger dated as of October 13, 1995 among the Company, Strategic, and Strategic Florida Inc.(with list of omitted Schedules thereto). (2) Opinion of Marshall & Stevens Incorporated dated October 13, 1995. (3) Shareholders' Agreement dated as of October 13, 1995 among Strategic, certain shareholders of Strategic, the Company and certain shareholders of the Company. (4) Warrant Agreement dated as of October 13, 1995 between the Company and Strategic with respect to 500,000 shares of Common Stock of the Company. (5) Warrant Agreement dated as of October 13, 1995 between the Company and Strategic with respect to 1,500,000 shares of Common Stock of the Company. (6) Conditional Employment Agreement dated as of October 13, 1995 among Strategic, the Company and Richard A. Angulo. (7) Joint press release, dated October 23, 1995, of the Company and Strategic. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized, DIGITAL PRODUCTS CORPORATION /s/ Richard A. Angulo -------------------------------------- Date: October 26, 1995 Richard A. Angulo President and Chief Executive Officer EX-99.1 2 EXHIBIT 1 --------- ================================================================================ AGREEMENT AND PLAN OF MERGER DATED OCTOBER 13, 1995 AMONG STRATEGIC TECHNOLOGIES INC., AND STRATEGIC FLORIDA INC. AND DIGITAL PRODUCTS CORPORATION ================================================================================ T A B L E O F C O N T E N T S - -------------------------------------------------------------------------------- Page ARTICLE 1 THE MERGER The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 2 Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . 3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 3 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 5 Effect of Merger on Digital Options . . . . . . . . . . . . . . . . . 7 Effect of Merger on Digital Warrants . . . . . . . . . . . . . . . . . 7 ARTICLE 3 REPRESENTATIONS AND WARRANTIES Representations and Warranties of Digital . . . . . . . . . . . . . . 8 Representations and Warranties of Strategic . . . . . . . . . . . . . 18 ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 27 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 5 ADDITIONAL AGREEMENTS Preparation of Form F-4 and the Joint Proxy Statement; Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Letter of Digital's Accountants . . . . . . . . . . . . . . . . . . . 34 Letter of Strategic's Accountants . . . . . . . . . . . . . . . . . . 34 Access to Information; Confidentiality . . . . . . . . . . . . . . . . 34 Best Efforts; Notification . . . . . . . . . . . . . . . . . . . . . . 35 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . 37 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 39 Affiliates and Certain Stockholders . . . . . . . . . . . . . . . . . 39 Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . 39 Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE 6 CONDITIONS PRECEDENT Conditions to Each Party's Obligation to Effect the Merger . . . . . . 40 Conditions to Obligations of Strategic and Merger Sub . . . . . . . . 40 Conditions to Obligations of Digital . . . . . . . . . . . . . . . . . 42 Frustration of Closing Condition . . . . . . . . . . . . . . . . . . . 43 ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . 45 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Procedure for Termination, Amendment, Extension or Waiver . . . . . . 45 ARTICLE 8 GENERAL PROVISIONS Nonsurvival of Representations and Warranties . . . . . . . . . . . . 46 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . 48 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Execution and Attestation . . . . . . . . . . . . . . . . . . . . . . 49 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "Agreement") made as of October 13, 1995 AMONG: STRATEGIC TECHNOLOGIES INC., a British Columbia, Canada corporation ("Strategic") AND: STRATEGIC FLORIDA INC., a Florida corporation wholly owned by Strategic ("Merger Sub") AND: DIGITAL PRODUCTS CORPORATION, a Florida corporation ("Digital") WHEREAS: (A) The boards of directors of each of Strategic and Digital have determined that a business combination between them is in the best interests of their respective companies and shareholders and presents an opportunity for their respective companies to achieve long term strategic and financial benefits and accordingly have agreed to effect the merger provided for herein upon the terms and subject to the conditions set forth herein; (B) Strategic and Digital executed a letter agreement dated August 1, 1995 as amended or extended on August 31, 1995, September 15, 1995, September 22, 1995 and October 6, 1995, respecting the business combination which this Agreement is to supersede; NOW THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE (1) THE MERGER The Merger 1.1 Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Florida Business Corporations Act (the "Florida Code"), Merger Sub shall be merged with and into Digital at the Effective Time of the Merger (as defined in Section 1.3). Following the Effective Time of the Merger, the separate corporate existence of Merger Sub shall cease and Digital shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the Florida Code. Closing 1.2 The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified by the parties (the "Closing Date"), which (subject to satisfaction or waiver of the conditions set forth in Section 6.2 and Section 6.3) shall be no earlier than December 20th, 1995, and no later than the second business day after satisfaction of the conditions set forth in Section 6.1, at the offices of Lang Michener Lawrence & Shaw at the address set forth in Section 8.2, unless another date or place is agreed to in writing by the parties hereto. Effective Time 1.3 Subject to the provisions of this Agreement, as soon as practicable following the satisfaction or waiver of the conditions set forth in Article 6, the parties shall file a certificate of merger, articles of merger or other appropriate documents (in any such case, the "Certificate of Merger") executed in accordance with the relevant provisions of the Florida Code and shall make all other filings or recordings required under the Florida Code. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Florida, or at such other time as Merger Sub and Digital shall agree should be specified in the Certificate of Merger (the time the Merger becomes effective being hereinafter referred to as the "Effective Time of the Merger"). Effects of the Merger 1.4 The Merger shall have the effects set forth in Section 607.1106 of the Florida Code. Articles of Incorporation and By-Laws 1.5 (a) The articles of incorporation of Digital, as in effect immediately prior to the Effective Time of the Merger, shall not be amended as of the Effective Time of the Merger and such articles of incorporation shall be the articles of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The by-laws of Digital as in effect at the Effective Time of the Merger shall be the by-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. Directors 1.6 The directors of Digital at the Effective Time of the Merger shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Officers 1.7 The officers of Digital at the Effective Time of the Merger shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES Effect on Capital Stock 2.1 As of the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder of any shares of Digital Common Stock or any shares of capital stock of Merger Sub: (a) Capital Stock of Merger Sub. Each of the issued and outstanding 100 shares of capital stock of Merger Sub shall be converted into and become one fully paid and non-assessable share of Common Stock, par value $0.025 per share, of the Surviving Corporation. (b) Cancellation of Treasury Stock. Each share of Digital Common Stock that is owned by Digital or by any subsidiary (as defined in Section 8.3) of Digital shall automatically be cancelled and retired and shall cease to exist, and no Strategic Common Stock or other consideration shall be delivered in exchange therefor. (c) Conversion of Digital Common Stock. Subject to Section 2.2(e), each issued and outstanding share of Digital Common Stock (other than shares to be cancelled in accordance with Section 2.1(b)) shall be converted into the right to receive .379291 of a fully paid and non-assessable share of Strategic Common Stock (the "Exchange Ratio"). As of the Effective Time of the Merger, all such shares of Digital Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Digital Common Stock shall cease to have any rights with respect thereto, except the right to receive the shares of Strategic Common Stock to be issued or in consideration therefor upon surrender of such certificate in accordance with Section 2.2. (d) Adjustment of Exchange Ratio. If, prior to the Effective Time, Strategic recapitalizes through a subdivision of its outstanding shares into a greater number of shares, or a combination of its outstanding shares into a lesser number of shares, or reorganizes, reclassifies or otherwise changes its outstanding shares into the same or a different number of shares or other classes, or declares a dividend on its outstanding shares payable in shares of its capital stock or securities convertible into shares of its capital stock, then the Exchange Ratio will be adjusted appropriately so as to maintain the relative proportionate interests of the holders of Strategic Common Stock and Digital Common Stock as of the date of this Agreement. (e) Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Digital Common Stock outstanding immediately prior to the Effective Time of the Merger held by a holder (if any) who is entitled to demand, and who properly demands, appraisal for such shares in accordance with Section 607.1302 to 607.1320 of the Florida Code ("Dissenting Shares") shall not be converted into a right to receive Common Stock of Strategic Common Stock unless such holder fails to perfect or otherwise loses such holder's right to appraisal, if any. If, after the Effective time of the Merger, such holder fails to perfect or loses any such right to appraisal, such shares shall be treated as if they had been converted as of the Effective Time of the Merger into the right to receive Strategic Common Stock pursuant to Section 2.1(c). Digital shall give prompt notice to Strategic of any demands received by Digital for appraisal of shares of Digital Common Stock, and Strategic shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Digital shall not, except with the prior written consent of Strategic, make any payment with respect to, or settle or offer to settle, any such demands. Exchange of Certificates 2.2 (a) Exchange Agent. As of the Effective Time of the Merger, Strategic shall deposit with The Montreal Trust Company of Canada or such other bank or trust company as may be designated by Strategic and reasonably acceptable to Digital (the "Exchange Agent"), for the benefit of the holders of shares of Digital Common Stock, for exchange in accordance with this Article 2, through the Exchange Agent, certificates representing the shares of Strategic Common Stock (such shares of Strategic Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") issuable pursuant to Section 2.1 in exchange for outstanding shares of Digital Common Stock. (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time of the Merger, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time of the Merger represented outstanding shares of Digital Common Stock (the "Certificates") whose shares were converted into the right to receive shares of Strategic Common Stock pursuant to Section 2.1, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Strategic may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of Strategic Common Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Strategic, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Strategic Common Stock which such holder has the right to receive pursuant to the provisions of this Article 2, and the Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of record of Digital Shares, a certificate representing the proper number of shares of Strategic Common Stock may be issued to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the issuance of shares of Strategic Common Stock to a person other than the registered holder of such Certificate or establish to the satisfaction of Strategic that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time of the Merger to represent only the right to receive upon such surrender the certificate representing shares of Strategic Common Stock as contemplated by this Section 2.2. (c) Distributions with Respect to Unexchanged Shares. No dividends or other distributions with respect to Strategic Common Stock with a record date after the Effective Time of the Merger shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Strategic Common Stock represented thereby until the surrender of such Certificate in accordance with this Article 2. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the holder of the certificate representing whole shares of Strategic Common Stock issued in exchange therefor, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time of the Merger theretofore paid with respect to such whole shares of Strategic Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time of the Merger but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such whole shares of Strategic Common Stock. (d) No Further Ownership Rights in Digital Common Stock. All shares of Strategic Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms of this Article 2 (including any cash paid pursuant to Section 2.2(c)) shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the shares of Digital Common Stock theretofore represented by such Certificates, subject, however, to the Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time of the Merger which may have been declared or made by Digital on such shares of Digital Common Stock in accordance with the terms of this Agreement or prior to the date of this Agreement and which remain unpaid at the Effective Time of the Merger, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Digital Common Stock which were outstanding immediately prior to the Effective Time of the Merger. If, after the Effective Time of the Merger, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article 2, except as otherwise provided by law. (e) No Fractional Shares. No certificates or scrip representing fractional shares of Strategic Common Stock shall be issued upon the surrender for exchange of Certificates. Any holder of Digital Common Stock who would otherwise receive a fractional share shall, upon surrender of such shareholder's certificate or certificates representing Strategic Common Stock, receive a share certificate adjusted to the next higher whole number of Strategic Common Stock. (f) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the holders of the Certificates for six months after the Effective Time of the Merger shall be delivered to Strategic, upon demand, and any holders of the Certificates who have not theretofore complied with this Article 2 shall thereafter look only to Strategic for payment of their claim for Strategic Common Stock and any dividends or distributions with respect to Strategic Common Stock. (g) No Liability. None of Strategic, Merger Sub, Digital or the Exchange Agent shall be liable to any person in respect of any shares of Strategic Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to seven years after the Effective Time of the Merger (or immediately prior to such earlier date on which any shares of Strategic Common Stock, any dividends or distributions with respect to Strategic Common Stock in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 3.1(d)), any such shares, cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Effect of Merger on Digital Options 2.3 Digital shall cause all options to purchase shares of Digital Common Stock (each, a "Digital Stock Option") to terminate as of the Effective Time (if not exercised prior to such time) and the holder of any such Digital Stock Option shall have no further rights except as otherwise provided in the applicable Digital Stock Option agreement. Each stock option plan of Digital shall automatically terminate at the Effective Time, and participants in such plans shall have no further rights thereunder. Digital shall deliver to holders of Digital Stock Options appropriate notices describing the treatment of the options held by such holder. Effect of Merger on Digital Warrants 2.4 As of the date of this Agreement, Digital has outstanding 750,000 warrants to purchase Digital Common Stock with the exercise price of $2.00 and the termination date of November 22, 1996 (the "Acorn Warrants") and 1,955,000 warrants to purchase Digital Common Stock with the exercise price of $25.00 and the termination date of February 7, 1997 (the "Class B Warrants"). As of the Effective Time of the Merger, each of the Acorn Warrants and the Class B Warrants shall be assumed by Strategic by written agreement in accordance with the terms and conditions of such warrants. At least fifteen days prior to the Effective Date, Digital shall send to each of the holders of the Acorn Warrants and the Class B Warrants a notice containing a brief description of the Merger and the effect of the Merger on such warrants, as well as a copy of the written agreement of Strategic pursuant to which Strategic will assume such warrants as of the Effective Time of the Merger. ARTICLE 3 REPRESENTATIONS AND WARRANTIES Representations and Warranties of Digital 3.1 Except as set forth on the Disclosure Schedule delivered by Digital to Strategic prior to the execution of this Agreement and attached hereto (the "Digital Disclosure Schedule") or except as disclosed in a document delivered to Strategic and set forth on the Document Delivery index dated the date hereof, Digital represents and warrants to Strategic and Merger Sub as follows: (a) Organization, Standing and Corporate Power. Each of Digital and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to carry on its business as now being conducted. Each of Digital and each of its subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate would not have a material adverse effect on Digital. Digital has delivered to Strategic complete and correct copies of its articles of incorporation and by-laws and the certificates of incorporation and by-laws of its subsidiaries, in each case as amended to the date hereof. (b) Subsidiaries. Digital's Form 10-K for the fiscal year ended March 31, 1995 lists each subsidiary of Digital. All the outstanding shares of capital stock of each such subsidiary have been validly issued and are fully paid and non-assessable and are owned by Digital, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens"). Except for the capital stock of its subsidiaries, Digital does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, joint venture or other entity. (c) Capital Structure. The authorized capital stock of Digital consists of 50,000,000 shares of Digital Common Stock, par value $.025 per share. At the close of business on October 6, 1995, (i) 11,589,267 shares of Digital Common Stock were issued and outstanding, (ii) 40,061 shares of Digital Common Stock were held by Digital in its treasury, (iii) 1,818,980 shares of Digital Common Stock were reserved for issuance pursuant to the Stock Plans (as defined in Section 5.6) and (iv) 2,705,000 shares of Digital Common Stock were reserved for issuance upon exercise of Digital's outstanding share purchase warrants ("Digital Warrants"). Except as set forth above, at the close of business on October 6, 1995, no shares of capital stock or other voting securities of Digital were issued, reserved for issuance or outstanding. All outstanding shares of capital stock of Digital are, and all shares which may be issued pursuant to the Stock Plans will be, when issued, duly authorized, validly issued, fully paid and non- assessable and not subject to pre-emptive rights. There are no bonds, debentures, notes or other indebtedness of Digital having the right to vote (or, except for the Digital Warrants, convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Digital may vote. Except as set forth above, as of the date hereof, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Digital or any of its subsidiaries is a party or by which any of them is bound obligating Digital or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of Digital or of any of its subsidiaries or obligating Digital or any of its subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are not any outstanding contractual obligations of Digital or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Digital or any of its subsidiaries. There are not any outstanding contractual obligations of Digital to vote or to dispose of any shares of the capital stock of any of its subsidiaries. (d) Authority; Noncontravention. Digital has the requisite corporate power and authority to enter into this Agreement and, subject to Digital Stockholder Approval with respect to the Merger, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Digital and the consummation by Digital of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Digital, subject, in the case of the Merger, to Digital Stockholder Approval. This Agreement has been duly executed and delivered by Digital and constitutes a valid and binding obligation of Digital, enforceable against Digital in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Digital or any of its subsidiaries under, (i) the articles of incorporation or by-laws of Digital or the comparable charter or organizational documents of any of its subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Digital or any of its subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Digital or any of its subsidiaries or their respective properties or assets, other than, in the case of clause (ii), any such conflicts, violations, defaults, rights or Liens that individually or in the aggregate would not (x) have a material adverse effect on Digital, (y) impair the ability of Digital to perform its obligations under this Agreement or (z) prevent the consummation of any of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, any Federal, state, local or foreign government or any court, administrative agency or commission or other governmental authority or agency, domestic or foreign (a "Government Entity"), is required by or with respect to Digital or any of its subsidiaries in connection with the execution and delivery of this Agreement by Digital or the consummation by Digital of the transactions contemplated by this Agreement, except for (1) the filing with the Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating to Digital Stockholder Approval (such proxy statement, together with the proxy statement relating to Strategic Stockholder Approval, in each case as amended or supplemented from time to time, the "Joint Proxy Statement"), and (B) such reports under Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (2) the filing of the Certificate of Merger with the Secretary of State of the State of Florida and appropriate documents with the relevant authorities of other states in which Digital is qualified to do business, (3) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under the laws of any foreign country in which Digital, Strategic or any of their respective subsidiaries conducts any business or owns any property or assets or (4) such other consents, approvals, orders, authorizations, registrations, declarations and filings as would not individually or in the aggregate (A) have a material adverse effect on Digital, (B) impair the ability of Digital to perform its obligations under this Agreement or (C) prevent the consummation of any of the transactions contemplated by this Agreement. (e) SEC Documents; Undisclosed Liabilities. Digital has filed all required reports, schedules, forms, statements and other documents with the SEC since March 31, 1990 (the "SEC Documents"). As of their respective dates, to the knowledge of Digital the SEC Documents filed with the SEC between March 31, 1990 and September 30, 1993 complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents. To the knowledge of Digital, none of the SEC Documents filed with the SEC between March 31, 1990 and September 30, 1993 contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that information contained in any SEC Document has been revised or superseded by a later Filed SEC Document (as defined in Section 3.1(g)). As of their respective dates, the SEC Documents filed with the SEC after September 30, 1993 complied in all material respects with the requirement of the Securities Act, or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC documents. None of the SEC documents filed with the SEC after September 30, 1993 contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that information containing any SEC Document has been revised or superseded by a later filed SEC Document. The financial statements of Digital included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Digital and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows (or changes in financial position prior to the approval of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 95) for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Other than with respect to ERISA (as defined in Section 3.1(j) below) and tax matters, which are addressed by Section 3.1(j) and Section 3.1(k), respectively, except as set forth in the Filed SEC Documents, neither Digital nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise and whether or not required by generally accepted accounting principles to be recognized or disclosed on a consolidated balance sheet of Digital and its consolidated subsidiaries or in the notes thereto) which individually or in the aggregate could reasonably be expected to have a material adverse effect on Digital. (f) Information Supplied. None of the information supplied or to be supplied by Digital specifically for inclusion or incorporation by reference in (i) the registration statement on Form F-4 to be filed with the SEC by Strategic in connection with the issuance of Strategic Common Stock in the Merger (the "Form F-4") or the Schedule 13E-3 will, at the time the Form F-4 or Schedule 13E-3 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Joint Proxy Statement will, at the date it is first mailed to Digital's stockholders or at the time of the Digital Stockholders Meeting (as defined in Section 5.1(b)), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Digital with respect to statements made or incorporated by reference therein based on information supplied by Strategic or Merger Sub specifically for inclusion or incorporation by reference in the Joint Proxy Statement. (g) Absence of Certain Changes or Events. Except as disclosed in the SEC Documents filed and publicly available prior to the date of this Agreement (the "Filed SEC Documents"), since the date of the most recent audited financial statements included in the Filed SEC Documents, Digital has conducted its business only in the ordinary course, and there has not been (i) any material adverse change in Digital, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of Digital's capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) (x) any granting by Digital or any of its subsidiaries to any executive officer or other employee of Digital or any of its subsidiaries of any increase in compensation, except in the ordinary course of business consistent with prior practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Filed SEC Documents, (y) any granting by Digital or any of its subsidiaries to any such executive officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Filed SEC Documents or (z) any entry by Digital or any of its subsidiaries into any employment, severance or termination agreement with any such executive officer, (v) any damage, destruction or loss, whether or not covered by insurance, that has or could reasonably be expected to have a material adverse effect on Digital or (vi) any change in accounting methods, principles or practices by Digital materially affecting its assets, liabilities or business, except insofar as may have been required by a change in generally accepted accounting principles. (h) Litigation. Except as disclosed in the Filed SEC Documents, there is no suit, action or proceeding pending or, to the knowledge of Digital, threatened against or affecting Digital or any of its subsidiaries (and Digital is not aware of any basis for any such suit, action or proceeding) that individually or in the aggregate could reasonably be expected to (i) have a material adverse effect on Digital, (ii) impair the ability of Digital to perform its obligations under this Agreement or (iii) prevent the consummation of any of the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Digital or any of its subsidiaries having, or which is reasonably likely to have, any effect referred to in clause (i), (ii) or (iii) above. (i) Absence of Changes in Benefit Plans. Except as disclosed in the Filed SEC Documents, since the date of the most recent audited financial statements included in the Filed SEC Documents, there has not been any adoption or amendment in any material respect by Digital or any of its subsidiaries of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of Digital or any of its subsidiaries. Except as disclosed in the Filed SEC Documents, there exist no employment, consulting, severance, termination or indemnification agreements, arrangements or understandings between Digital or any of its subsidiaries and any current or former employee, officer or director of Digital or any of its subsidiaries. (j) ERISA Compliance. Digital has no employee benefit plans as contemplated by the Employee Retirement Income Security Act of 1974 or other liability or obligation under such legislation which has not been fulfilled. (k) Taxes. (i) Each of Digital and its subsidiaries has filed all tax returns and reports required to be filed by it or requests for extensions to file such returns or reports have been timely filed, granted and have not expired, except to the extent that such failures to file or to have extensions granted that remain in effect individually and in the aggregate would not have a material adverse effect on Digital. All returns filed by Digital and each of its subsidiaries are complete and accurate in all material respects to the knowledge of Digital. Digital and each of its subsidiaries has paid (or Digital has paid on its behalf) all taxes shown as due on such returns, and the most recent financial statements contained in the Filed SEC Documents reflect an adequate reserve for all taxes payable by Digital and its subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements. (ii) No deficiencies for any taxes have been proposed, asserted or assessed against Digital or any of its subsidiaries that are not adequately reserved for, except for deficiencies that individually or in the aggregate would not have a material adverse effect on Digital, and no requests for waivers of the time to assess any such taxes have been granted or are pending. None of the Federal income tax returns of Digital and each of its subsidiaries consolidated in such returns have been examined by and settled with the United States Internal Revenue Service. The statute of limitations on assessment or collection of any taxes due from Digital or any of its subsidiaries has expired for all taxable years of Digital or any of its subsidiaries through March 31, 1990. (l) No Excess Parachute Payments; Section 162(m) of the Code. (iii) Any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of Digital or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any arrangement or Benefit Plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (iv) The disallowance of a deduction under Section 162(m) of the Code for employee remuneration will not apply to any amount paid or payable by Digital or any subsidiary of Digital under any contract, plan, program, arrangement or understanding. (m) Voting Requirements. The affirmative vote of a majority of the votes cast by the holders of the shares of Digital Common Stock entitled to vote thereon at the Digital Stockholders Meeting with respect to the approval of the Merger is the only vote of the holders of any class or series of Digital's capital stock necessary to approve this Agreement and the transactions contemplated by this Agreement. (n) State Takeover Statutes. The Board of Directors of Digital has approved the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement, and such approval is sufficient to render inapplicable to this Agreement, the Merger and the other transactions contemplated by this Agreement the provisions of take-over legislation in the Florida Code. To the best of Digital's knowledge, no other state takeover statute or similar statute or regulation applies or purports to apply to the Merger, this Agreement or any of the transactions contemplated by this Agreement and no provision of the articles of incorporation, by-laws or other governing instruments of Digital or any of its subsidiaries would, directly or indirectly, restrict or impair the ability of Strategic to vote, or otherwise to exercise the rights of a stockholder with respect to, shares of Digital and its subsidiaries that may be acquired or controlled by Strategic. (o) Labour Matters. There are no collective bargaining or other labour union agreements to which Digital or any of its subsidiaries is a party or by which any of them is bound. To the best knowledge of Digital, since December 1, 1992, neither Digital nor any of its subsidiaries has encountered any labour union organizing activity, or had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts. (p) Brokers; Schedule of Fees and Expenses. No broker, investment banker, financial advisor or other person, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Digital. (q) No Undisclosed Prior Valuations. Digital has not received any valuations of the business of Digital in the 24 months before this Agreement which have not been disclosed to Strategic. (r) Accounting Matters. Neither Digital nor, to its best knowledge, any of its affiliates has taken or agreed to take any action that (without giving effect to any action taken or agreed to be taken by Strategic or any of its affiliates) would prevent Strategic from accounting for the business combination to be effected by the Merger as a purchase. (s) Compliance with Applicable Laws. (i) Each of Digital and its subsidiaries has in effect all Federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, and there has occurred no default under any such Permit, except for the lack of Permits and for defaults under Permits which lack or default individually or in the aggregate would not have a material adverse effect on Digital. Except as disclosed in the Filed SEC Documents, to the knowledge of Digital, Digital and its subsidiaries are in compliance with all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity, except for possible noncompliance which individually or in the aggregate would not have a material adverse effect on Digital. (ii) To the best of Digital's knowledge, each of Digital and its subsidiaries is, and has been, and each of Digital's former subsidiaries, while subsidiaries of Digital, was in compliance with all applicable Environmental Laws, except for possible noncompliance which individually or in the aggregate would not have a material adverse effect on Digital. The term "Environmental Laws" means any Federal, state, local or foreign statute, code, ordinance, rule, regulation, policy, guideline, permit, consent, approval, license, judgment, order, writ, decree, directive, injunction or other authorization, including the requirement to register underground storage tanks, relating to: (1) emissions, discharges, Releases (as defined below) or threatened Releases of Hazardous Material (as defined below), into the environment, including ambient air, soil, sediments, land surface or subsurface, buildings or facilities, surface water, groundwater, publicly-owned treatment works, septic systems or land; (2) the generation, treatment, storage, disposal, use, handling, manufacturing, transportation or shipment of Hazardous Material; or (3) pollution of the environment or the protection of human health or safety. (iii) During the period of ownership or operation by Digital and its subsidiaries of any of their respective current or previously- owned properties, there have been no Releases of Hazardous Material in, on, under or affecting such properties or, to the knowledge of Digital, any surrounding site, except in each case for those which individually or in the aggregate would not have a material adverse effect on Digital. Prior to the period of ownership or operation by Digital and its subsidiaries of any of their respective current or previously-owned properties, to the knowledge of Digital, no Hazardous Material was generated, treated, stored, disposed of, used, handled or manufactured at, or transported, shipped or disposed of from, such current or previously-owned properties, and there were no Releases of Hazardous Material in, on, under or affecting any such property or any surrounding site, except in each case for those which individually or in the aggregate would not have a material adverse effect on Digital. The term "Release" has the meaning set forth in 42 U.S.C. (S) 9601(22). The term "Hazardous Material" means (1) hazardous materials, pollutants, contaminants, constituents, medical wastes, hazardous or infectious wastes and hazardous substances as those terms are defined in the following statutes and their implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., and the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; (2) petroleum, including crude oil and any fractions thereof; (3) natural gas, synthetic gas and any mixtures thereof; (4) asbestos and/or asbestos-containing material; and (5) PCBs, or materials or fluids containing PCBs. (t) Contracts; Debt Instruments. (i) Except as disclosed in the Filed SEC Documents, there are no contracts or agreements that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of Digital and its subsidiaries taken as a whole. Neither Digital or any of its subsidiaries is in violation of or in default under (nor does there exist any condition upon which the passage of time or the giving of notice would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that individually or in the aggregate would not have a material adverse effect on Digital. (ii) Set forth on the Digital Disclosure Schedule is (x) a list of all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any indebtedness of Digital or any of its subsidiaries in an aggregate principal amount in excess of $25,000 is outstanding or may be incurred and (y) the respective principal amounts currently outstanding thereunder. For purposes of this Agreement, "indebtedness" shall mean, with respect to any person, without duplication, (4) all obligations of such person for borrowed money, or with respect to deposits or advances of any kind to such person; (5) all obligations of such person evidenced by bonds, debentures, note or similar instruments; (6) all obligations of such person upon which interest charges are customarily paid; (7) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (8) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding obligations of supplies incurred in the ordinary course of such person's business); (9) all capitalized lease obligations of such person; (10) all obligations of others secured by any lien on property or assets owned or acquired by such person, whether or not the obligations secured thereby have been assumed; (11) all obligations of such person under interest rate or currency hedging transactions (valued at the termination value thereof); (12) all letters of credit issued for the account of such person; and (13) all guarantees and arrangements having the economic effect of a guarantee of such person of any indebtedness of any other person. (u) Title to Properties. (i) Each of Digital and each of its subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and assets except for such as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that individually or in the aggregate would not materially interfere with its ability to conduct its business as currently conducted. All such material assets and properties, other than assets and properties in which Digital or any of its subsidiaries has leasehold interests, are free and clear of all Liens, except for Liens that individually or in the aggregate would not materially interfere with the ability of Digital and its subsidiaries to conduct business as currently conducted. (ii) Each of Digital and each of its subsidiaries is in compliance in all material respects with the terms of all material leases to which it is a party and under which it is in the occupancy, and all such leases are in full force and effect. Each of Digital and each of its subsidiaries enjoys peaceful and undisturbed possession under all such material leases. (v) Intellectual Property. To the best of Digital's knowledge, Digital and its subsidiaries own, or are validly licensed or otherwise have the right to use, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (collectively, "Intellectual Property Rights") which are material to the conduct of the business of Digital and its subsidiaries taken as a whole. The Digital Disclosure Schedule sets forth a description of all Intellectual Property Rights which are material to the conduct of the business of Digital and its subsidiaries taken as a whole. Except as set forth on the Digital Disclosure Schedule, no claims are pending or, to the knowledge of Digital, threatened that Digital or any of its subsidiaries is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right. To the knowledge of Digital, except as set forth on the Digital Disclosure Schedule, no person is infringing the rights of Digital or any of its subsidiaries with respect to any Intellectual Property Right. (w) Insurance. Digital maintains in good standing the insurance policies more particularly described on the Disclosure Schedule. Digital has not been refused insurance by any carrier. Digital has not received any notice of any claim or suit against it which exceeds or is outside of the coverage of its insurance policies and Digital is not aware of any facts which could lead to a claim or suit against it which could reasonably be expected to exceed or fall outside the coverage of its insurance policies. Representations and Warranties of Strategic 3.2 Except as set forth on the Disclosure Schedule delivered by Strategic to Digital prior to the execution of this Agreement and attached hereto (the "Strategic Disclosure Schedule"), Strategic represents and warrants to Digital as follows: (a) Organization, Standing and Corporate Power. Each of Strategic, the Material Subsidiaries and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to carry on its business as now being conducted. Each of Strategic, the Material Subsidiaries and Merger Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate would not have a material adverse effect on Strategic. Strategic has delivered to Digital complete and correct copies of its articles of incorporation and by-laws and the certificates of incorporation and by-laws of its subsidiaries, in each case as amended to the date hereof. All of the outstanding shares of capital stock of the Merger Sub and the Material Subsidiaries have been validly issued and are fully paid and non-assessable and are owned by Strategic, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of every kind or nature whatsoever. The material subsidiaries of Strategic are Tactical Technologies Inc., a British Columbia company, and Strategic Monitoring Services, Inc., a Delaware company and Merger Sub (together, the "Material Subsidiaries"). (b) Capital Structure. The authorized capital stock of Strategic consists of 25,000,000 shares of Strategic Common Stock. At the close of business on October 13, 1995, 6,054,451 shares of Strategic Common Stock were issued and outstanding. Except as set forth above, at the close of business on October 13, 1995, no shares of capital stock or other voting securities of Strategic were issued, reserved for issuance or outstanding, except for 325,000 shares issuable pursuant to outstanding share purchase warrants exercisable at $2.25 (Cdn.) per Strategic share (the "Strategic Warrants"). All outstanding shares of capital stock of Strategic are, and all shares which may be issued pursuant to this Agreement, when issued, duly authorized, validly issued, fully paid and non-assessable and not subject to pre-emptive rights. There are no bonds, debentures, notes or other indebtedness of Strategic having the right to vote (or, except for the Strategic Warrants, convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Strategic may vote. Except as set forth above, as of the date hereof, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Strategic or any Material Subsidiary is a party or by which any of them is bound obligating Strategic or any Material Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of Strategic or any Material Subsidiary or obligating Strategic or Merger Sub to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are not any outstanding contractual obligations of Strategic or any Material Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of Strategic or any Material Subsidiary. There are not any outstanding contractual obligations of Strategic to vote or to dispose of any shares of the capital stock of any Material Subsidiary. As of the date of this Agreement, the authorized capital of Merger Sub consists of 1,000 shares of common stock, without par value, 100 of which have been validly issued for $0.025 each, are fully paid and non-assessable and are owned by Strategic free and clear of any lien. (c) Authority; Noncontravention. Strategic and Merger Sub have the requisite corporate power and authority to enter into this Agreement and, subject to Strategic Stockholder Approval with respect to the issuance of Strategic Common Stock and the Merger, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Strategic and the consummation by Strategic of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Strategic, subject, in the case of with respect to the issuance of Strategic Common Stock and the Merger, to Strategic Stockholder Approval. This Agreement has been duly executed and delivered by Strategic and constitutes a valid and binding obligation of Strategic, enforceable against Strategic in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Strategic or any of its subsidiaries under, (i) the articles of incorporation or by-laws of Strategic or the comparable charter or organizational documents of any of its subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Strategic or any of its subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Strategic or any of its subsidiaries or their respective properties or assets, other than, in the case of clause (ii), any such conflicts, violations, defaults, rights or Liens that individually or in the aggregate would not (x) have a material adverse effect on Strategic, (y) impair the ability of Strategic to perform its obligations under this Agreement or (z) prevent the consummation of any of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, any Federal, state, local or foreign government or any court, administrative agency or commission or other governmental authority or agency, domestic or foreign (a "Government Entity"), is required by or with respect to Strategic or any of its subsidiaries in connection with the execution and delivery of this Agreement by Strategic or the consummation by Strategic of the transactions contemplated by this Agreement, except for (1) the filing with the Vancouver Stock Exchange and Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating to Strategic Stockholder Approval (such proxy statement, together with the proxy statement relating to Digital Stockholder Approval, in each case as amended or supplemented from time to time, the "Joint Proxy Statement"), and (B) such reports under the British Columbia Securities Act (the "BC Act") and Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (2) the filing of the Certificate of Merger with the Secretary of State of the State of Florida and appropriate documents with the relevant authorities of other states and Provinces in which Strategic is qualified to do business, (3) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under the laws of any foreign country in which Strategic, Digital or any of their respective subsidiaries conducts any business or owns any property or assets or (4) such other consents, approvals, orders, authorizations, registrations, declarations and filings as would not individually or in the aggregate (A) have a material adverse effect on Strategic, (B) impair the ability of Strategic to perform its obligations under this Agreement or (C) prevent the consummation of any of the transactions contemplated by this Agreement. (d) BCSC and SEC Documents; Undisclosed Liabilities. Strategic has filed all required reports, schedules, forms, statements and other documents with the British Columbia Securities Commission ("BCSC") and the SEC (under s.12(g) 3-2(b) of the 1934 Securities Exchange Act) since September 30, 1993 (the "Strategic SEC Documents"). As of their respective dates, the Strategic SEC Documents complied in all material respects with the requirements of the BC Act, the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Strategic SEC Documents, and none of the Strategic SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Strategic SEC Document has been revised or superseded by a later filed Strategic SEC Document none of the Strategic SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Strategic included in the Strategic SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the BCSC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Strategic as of the dates thereof and the consolidated results of their operations and cash flows (or changes in financial position for the periods then ended (subject, in the case of unaudited statements, to normal year- end audit adjustments). Except as set forth in the Filed Strategic SEC Documents, neither Strategic nor Merger Sub has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise and whether or not required by generally accepted accounting principles to be recognized or disclosed on a consolidated balance sheet of Strategic and Merger Sub or in the notes thereto) which individually or in the aggregate could reasonably be expected to have a material adverse effect on Strategic. (e) Information Supplied. None of the information supplied or to be supplied by Strategic specifically for inclusion or incorporation by reference in (i) the registration statement on Form F-4 to be filed with the SEC by Strategic in connection with the issuance of Strategic Common Stock in the Merger (the "Form F-4") or the Schedule 13E-3 (the "Schedule 13E-3") will, at the time the Form F-4 or Schedule 13E-3 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Joint Proxy Statement will, at the date it is first mailed to Strategic's stockholders or at the time of the Strategic Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint Proxy Statement will comply as to form in all material respects with the requirements of the B.C. Act and the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Strategic with respect to statements made or incorporated by reference therein based on information supplied by Digital specifically for inclusion or incorporation by reference in the Joint Proxy Statement. (f) Absence of Certain Changes or Events. Except as disclosed in the Strategic SEC Documents filed and publicly available prior to the date of this Agreement (the "Filed Strategic SEC Documents"), since the date of the most recent audited financial statements included in the Filed Strategic SEC Documents, Strategic has conducted its business only in the ordinary course, and there has not been (i) any material adverse change in Strategic, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of Strategic's capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) (x) any granting by Strategic or any Material Subsidiary to any executive officer or other employee of Strategic or any Material Subsidiary of any increase in compensation, except in the ordinary course of business consistent with prior practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Filed Strategic SEC Documents, (y) any granting by Strategic or any Material Subsidiary to any such executive officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Filed Strategic SEC Documents or (z) any entry by Strategic or any Material Subsidiary into any employment, severance or termination agreement with any such executive officer, (v) any damage, destruction or loss, whether or not covered by insurance, that has or could reasonably be expected to have a material adverse effect on Strategic or (vi) any change in accounting methods, principles or practices by Strategic materially affecting its assets, liabilities or business, except insofar as may have been required by a change in generally accepted accounting principles. (g) Litigation. Except as disclosed in the Filed Strategic SEC Documents, there is no suit, action or proceeding pending or, to the knowledge of Strategic, threatened against or affecting Strategic or any Material Subsidiary (and Strategic is not aware of any basis for any such suit, action or proceeding) that individually or in the aggregate could reasonably be expected to (i) have a material adverse effect on Strategic, (ii) impair the ability of Strategic to perform its obligations under this Agreement or (iii) prevent the consummation of any of the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Strategic or any Material Subsidiary having, or which is reasonably likely to have, any effect referred to in clause (i), (ii) or (iii) above. (h) Voting Requirements. The affirmative vote of a majority of the votes cast by the holders of the shares of Strategic Common Stock entitled to vote thereon at the Stockholders Meeting with respect to the approval of the Merger is the only vote of the holders of any class or series of Strategic's capital stock necessary to approve this Agreement and the transactions contemplated by this Agreement. (i) Labour Matters. There are no collective bargaining or other labour union agreements to which Strategic or any Material Subsidiary is a party or by which any of them is bound. To the best knowledge of Strategic, since incorporation, neither Strategic nor any Material Subsidiary has encountered any labour union organizing activity, or had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts. (j) Brokers; Schedule of Fees and Expenses. No broker, investment banker, financial advisor or other person is entitled to any broker's. finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Strategic. (k) No Undisclosed Prior Valuations. Strategic has not received any valuations of the business of Strategic in the 24 months before this Agreement which have not been disclosed to Digital. (l) Accounting Matters. Neither Strategic nor, to its best knowledge, any of its affiliates has taken or agreed to take any action that (without giving effect to any action taken or agreed to be taken by Digital or any of its affiliates) would prevent Digital from accounting for the business combination to be effected by the Merger as a purchase. (m) Interim Operations of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. (n) Benefit Plans. Neither Strategic nor any Material Subsidiary have any employee benefit plans subject to ERISA. (o) Taxes. (i) Strategic and each Material Subsidiary has filed all tax returns and reports required to be filed by it or requests for extensions to file such returns or reports have been timely filed, granted and have not expired, except to the extent that such failures to file or to have extensions granted that remain in effect individually and in the aggregate would not have a material adverse effect on Strategic. All returns filed by Strategic and each Material Subsidiary are complete and accurate in all material respects to the knowledge of Strategic. Strategic and each Material Subsidiary has paid (or Strategic has paid on its behalf) all taxes shown as due on such returns, and the most recent financial statements contained in the Filed Strategic SEC Documents reflect an adequate reserve for all taxes payable by Strategic and each Material Subsidiary for all taxable periods and portions thereof accrued through the date of such financial statements. (ii) No deficiencies for any taxes have been proposed, asserted or assessed against Strategic or each Material Subsidiary that are not adequately reserved for, except for deficiencies that individually or in the aggregate would not have a material adverse effect on Strategic, and no requests for waivers of the time to assess any such taxes have been granted or are pending. None of the Canadian or Federal U.S. income tax returns of Strategic and each Material Subsidiary consolidated in such returns have been examined by and settled with the United States Internal Revenue Service or applicable Canadian taxation authority. The statute of limitations on assessment or collection of any taxes due from Strategic or each Material Subsidiary has expired for all taxable years of Strategic or each Material Subsidiary through September 30, 1991. (p) Compliance with Applicable Laws. (i) Strategic and each Material Subsidiary has in effect all Federal, Canadian Provincial, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, and there has occurred no default under any such Permit, except for the lack of Permits and for defaults under Permits which lack or default individually or in the aggregate would not have a material adverse effect on Strategic. Except as disclosed in the Filed Strategic SEC Documents, to the knowledge of Strategic, Strategic and the Material Subsidiaries are in compliance with all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity, except for possible noncompliance which individually or in the aggregate would not have a material adverse effect on Strategic. (ii) To the best of Strategic's knowledge, Strategic and each Material Subsidiary is, and has been, in compliance with all applicable Environmental Laws, except for possible noncompliance which individually or in the aggregate would not have a material adverse effect on Strategic. The term "Environmental Laws" means any U.S. Federal, state, local or foreign statute, code, ordinance, rule, regulation, policy, guideline, permit, consent, approval, license, judgment, order, writ, decree, directive, injunction or other authorization, including the requirement to register underground storage tanks, relating to: (14) emissions, discharges, Releases (as defined below) or threatened Releases of Hazardous Material (as defined below), into the environment, including ambient air, soil, sediments, land surface or subsurface, buildings or facilities, surface water, groundwater, publicly-owned treatment works, septic systems or land; (15) the generation, treatment, storage, disposal, use, handling, manufacturing, transportation or shipment of Hazardous Material; or (16) pollution of the environment or the protection of human health or safety. (iii) During the period of ownership or operation by Strategic and each Material Subsidiary of any of their respective current or previously-owned properties, there have been no Releases of Hazardous Material in, on, under or affecting such properties or, to the knowledge of Strategic, any surrounding site, except in each case for those which individually or in the aggregate would not have a material adverse effect on Strategic. Prior to the period of ownership or operation by Strategic and each Material Subsidiary of any of their respective current or previously-owned properties, to the knowledge of Strategic, no Hazardous Material was generated, treated, stored, disposed of, used, handled or manufactured at, or transported, shipped or disposed of from, such current or previously-owned properties, and there were no Releases of Hazardous Material in, on, under or affecting any such property or any surrounding site, except in each case for those which individually or in the aggregate would not have a material adverse effect on Strategic. The term "Release" has the meaning set forth in 42 U.S.C. (S) 9601(22). The term "Hazardous Material" means (1) hazardous materials, pollutants, contaminants, constituents, medical wastes, hazardous or infectious wastes and hazardous substances as those terms are defined in the following statutes and their implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., and the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; (2) petroleum, including crude oil and any fractions thereof; (3) natural gas, synthetic gas and any mixtures thereof; (4) asbestos and/or asbestos- containing material; and (5) PCBs, or materials or fluids containing PCBs. (q) Contracts; Debt Instruments. (i) Except as disclosed in the Filed Strategic SEC Documents, there are no contracts or agreements that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of Strategic and the Material Subsidiaries taken as a whole. Neither Strategic or any Material Subsidiary is in violation of or in default under (nor does there exist any condition upon which the passage of time or the giving of notice would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that individually or in the aggregate would not have a material adverse effect on Strategic. (ii) Set forth on Strategic Disclosure Schedule is (x) a list of all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any indebtedness of Strategic or any Material Subsidiary in an aggregate principal amount in excess of $25,000 is outstanding or may be incurred and (y) the respective principal amounts currently outstanding thereunder. For purposes of this Agreement, "indebtedness" shall mean, with respect to any person, without duplication, (17) all obligations of such person for borrowed money, or with respect to deposits or advances of any kind to such person; (18) all obligations of such person evidenced by bonds, debentures, note or similar instruments; (19) all obligations of such person upon which interest charges are customarily paid; (20) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (21) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding obligations of supplies incurred in the ordinary course of such person's business); (22) all capitalized lease obligations of such person; (23) all obligations of others secured by any lien on property or assets owned or acquired by such person, whether or not the obligations secured thereby have been assumed; (24) all obligations of such person under interest rate or currency hedging transactions (valued at the termination value thereof); (25) all letters of credit issued for the account of such person; and (26) all guarantees and arrangements having the economic effect of a guarantee of such person of any indebtedness of any other person. (r) Title to Properties. (i) Strategic and each Material Subsidiary has good and marketable title to, or valid leasehold interests in, all its material properties and assets except for such as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that individually or in the aggregate would not materially interfere with its ability to conduct its business as currently conducted. All such material assets and properties, other than assets and properties in which Strategic or any Material Subsidiary has leasehold interests, are free and clear of all Liens, except for Liens that individually or in the aggregate would not materially interfere with the ability of Strategic and any Material Subsidiary to conduct business as currently conducted. (ii) Strategic and each Material Subsidiary has complied in all material respects with the terms of all material leases to which it is a party and under which it is in the occupancy, and all such leases are in full force and effect. Each of Strategic and each Material Subsidiary enjoys peaceful and undisturbed possession under all such material leases. (s) Intellectual Property. To the best of Strategic's knowledge, Strategic and each Material Subsidiary own, or are validly licensed or otherwise have the right to use, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (collectively, "Intellectual Property Rights") which are material to the conduct of the business of Strategic and each Material Subsidiary taken as a whole. Strategic Disclosure Schedule sets forth a description of all Intellectual Property Rights which are material to the conduct of the business of Strategic and each Material Subsidiary taken as a whole. Except as set forth on Strategic Disclosure Schedule, no claims are pending or, to the knowledge of Strategic, threatened that Strategic or any Material Subsidiary is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right. To the knowledge of Strategic, except as set forth on Strategic Disclosure Schedule, no person is infringing the rights of Strategic or any Material Subsidiary with respect to any Intellectual Property Right. (t) Insurance. Strategic maintains in good standing the insurance policies more particularly described on the Disclosure Schedule. Strategic has not been refused insurance by any carrier. Strategic has not received any notice of any claim or suit against it which exceeds or is outside of the coverage of its insurance policies and Strategic is not aware of any facts which could lead to a claim or suit against it which could reasonably be expected to exceed or fall outside the coverage of its insurance policies. ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS Conduct of Business 4.1 (a) Conduct of Business by Digital. Subject to the Interim Procedures Agreement of even date, during the period from the date of this Agreement to the Effective Time of the Merger, Digital shall, and shall cause its subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired at the Effective Time of the Merger. Notwithstanding the foregoing, Strategic acknowledges that the operations of DPC/International Business Solutions, Inc. have been substantially discontinued and that the operations of BGIS Systems, Co. may be sold or otherwise disposed of by Digital. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time of the Merger, Digital shall not, and shall not permit any of its subsidiaries to: (i) (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by a direct or indirect wholly owned subsidiary of Digital to its parent, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (z) purchase, redeem or otherwise acquire any shares of capital stock of Digital or any of its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities for other than nominal consideration; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than (x) the issuance of Digital Common Stock upon the exercise of Employee Stock Options (as defined in Section 5.6) outstanding on the date of this Agreement and in accordance with their present terms and (y) the issuance of Digital Common Stock upon exercise of any warrants by the holders thereof in accordance with their present terms); (iii) amend its articles of incorporation, by-laws or other comparable charter or organizational documents; (iv) acquire or agree to acquire (x) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (y) any assets that individually or in the aggregate are material to Digital and its subsidiaries taken as a whole, except purchases of inventory in the ordinary course of business consistent with past practice; (v) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, except sales in the ordinary course of business consistent with past practice of inventory or of furniture, fixtures and equipment that are no longer used by or useful to Digital or its subsidiaries; (vi) (x) incur any indebtedness, except for short-term borrowings incurred in the ordinary course of business consistent with past practice and except for intercompany indebtedness between Digital and any of its subsidiaries or between such subsidiaries, or (y) make any loans, advances or capital contributions to, or investments in, any other person, other than to Digital or any direct or indirect wholly owned subsidiary of Digital; (vii) make or agree to make any new capital expenditure or capital expenditures which individually is in excess of $10,000 or in the aggregate are in excess of $50,000; (viii) make any tax election that could reasonably be expected to have a material adverse effect on Digital or settle or compromise any income tax liability; (ix) pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of Digital included in the Filed SEC Documents or incurred since the date of such financial statements in the ordinary course of business consistent with past practice; (x) except in the ordinary course of business, modify, amend or terminate any material contract or agreement to which Digital or any subsidiary is a party of waive, release or assign any material rights or claims thereunder; (xi) take any action that (without giving effect to any action taken or agreed to be taken by Strategic or any of its affiliates) would prevent Strategic from accounting for the business combination to be effected by the Merger as a purchase; (xii) authorize any of, or commit or agree to take any of, the foregoing actions. (b) Conduct of Business by Strategic. Subject to the Interim Procedures Agreement of even date, during the period from the date of this Agreement to the Effective Time of the Merger, Strategic shall, and shall cause its subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired at the Effective Time of the Merger. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time of the Merger, Strategic shall not and shall not permit any of its subsidiaries to: (i) (x) declare, set aside or pay and dividends on, or make any other distributions in respect of, any capital stock of Strategic or (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of Strategic's capital stock (other than exchanges in the ordinary course respecting Strategic's Warrant); (ii) take any action that (without giving effect to any action taken or agreed to be taken by Digital or any of its affiliates) would prevent Strategic from accounting for the business combination to be effected by the Merger as a purchase; (iii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, without the consent of Digital except for Strategic's right hereby granted to issue up to 500,000 shares for gross proceeds of not less than (Cdn.)$750,000 and a per share price of not less than 80% of the then current market price of Strategic's common stock, which shall be the average of the daily closing prices for the 30 consecutive business days ending on the day before the closing of such stock issuance (the "Strategic Interim Financing"); (iv) amend its articles of incorporation, by-laws or other comparable charter or organizational documents; (v) acquire or agree to acquire (x) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof of (y) any assets that individually or in the aggregate are material to Strategic and its subsidiaries taken as a whole, except purchases of inventory in the ordinary course of business consistent with past practice, in each case if any such action could reasonably be expected to (A) delay materially the date of mailing of the Joint Proxy Statement or, (B) if it were to occur after such date of mailing, require an amendment of the Joint Proxy Statement; or (vi) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, except sales in the ordinary course of business consistent with past practice of inventory or of furniture, fixtures and equipment that are no longer used by or useful to Strategic or its subsidiaries; (vii) authorize any of, or commit or agree to take any of, the foregoing actions. (c) Other Actions. Digital and Strategic shall not, and shall not permit any of their respective subsidiaries to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties that are not so qualified becoming untrue in any material respect or (iii) except as otherwise permitted by Section 4.2, any of the any conditions to the Merger set forth in Article 6 not being satisfied. (d) Advice of Changes. Digital and Strategic shall promptly advise the other party orally and in writing of any change or event having, or which, insofar as can reasonable be foreseen, would have, a material adverse effect on such party or on the truth of their respective representations and warranties. No Solicitation 4.2 (a) Digital shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any officer, director or employee of or any investment banker, attorney or other advisor or representative of, Digital or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage the submission of, any takeover proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any takeover proposal; provided, however, that prior to the Digital Stockholders Meeting to the extent required by the fiduciary obligations of the Board of Directors of Digital, as determined in good faith by the Board of Directors based on the advice of outside counsel, Digital may, (A) in response to an unsolicited request therefor, furnish information with respect to Digital to any person pursuant to a customary confidentiality agreement (as determined by Digital's outside counsel) and discuss such information (but not the terms of any possible takeover proposal) with such person and (B) upon receipt by Digital of a takeover proposal, following delivery to Strategic of the notice required pursuant to Section 4.2(c), participate in negotiations regarding such takeover proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any officer, director or employee of Digital or any of its subsidiaries or any investment banker, attorney or other advisor or representative of Digital or any of its subsidiaries, whether or not such person is purporting to act on behalf of Digital or any of its subsidiaries or otherwise, shall be deemed to be a breach of this Section 4.2(a) by Digital. For purposes of this Agreement, "takeover proposal" means any proposal for a merger or other business combination involving Digital or any of its subsidiaries or any proposal or offer to acquire in any manner, directly or indirectly, an equity interest in, any voting securities of, or a substantial portion of the assets of Digital or any of its subsidiaries, other than the transactions contemplated by this Agreement. (b) Neither the Board of Directors of Digital nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Strategic or Merger Sub, the approval or recommendation of such Board of Directors or any such committee of this Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any takeover proposal or (iii) enter into any agreement with respect to any takeover proposal. Notwithstanding the foregoing, in the event the Board of Directors of Digital receives a takeover proposal that, in the exercise of its fiduciary obligations (as determined in good faith by the Board of Directors based on the advice of outside counsel), it determines to be a superior proposal, the Board of Directors may (subject to the following sentences) withdraw or modify its approval or recommendation of this Agreement and the Merger, approve or recommend any such superior proposal, enter into an agreement with respect to such superior proposal or terminate this Agreement, in each case at any time after the second business day following Strategic's receipt of written notice (a "Notice of Superior Proposal") advising Strategic that the Board of Directors has received a superior proposal, specifying the material terms and conditions of such superior proposal and identifying the person making such superior proposal. In the event the Board of Directors of Digital takes any of the foregoing actions with respect to such superior proposal, Digital shall, concurrently with the taking of any such action, permit the exercise by Strategic of the Termination Warrant pursuant to Section 5.9(b). For purposes of this Agreement, "superior proposal" means a bona fide takeover proposal to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the shares of Digital Common Stock then outstanding or all or substantially all the assets of Digital, and otherwise on terms which the Board of Directors of Digital determines in its good faith reasonable judgment to be more favourable to Digital's stockholders than the Merger (based on the written opinion, with only customary qualifications, of Digital's independent financial advisor that the value of the consideration provided for in such proposal is superior to the value of the consideration provided for in the Merger) and for which financing, to the extent required, is then committed or which, in the good faith reasonable judgment of the Board of Directors, is reasonably capable of being financed by such third party. (c) In addition to the obligations of Digital set forth in paragraph (b) above, Digital promptly shall advise Strategic orally and in writing of any request for information or of any takeover proposal or any inquiry with respect to or which could lead to any takeover proposal, the identity of the person making any such takeover proposal or inquiry and the material terms and conditions thereof. Digital will keep Strategic generally informed of the status and details of any such request, takeover proposal or inquiry. ARTICLE 4 --------- ADDITIONAL AGREEMENTS Preparation of Form F-4 and the Joint Proxy Statement; Stockholders' Meetings 5.1 (a) The Strategic Common Stock to be issued in the Merger shall be registered under the Securities Act. As soon as practicable following the date of this Agreement, Digital and Strategic shall prepare and file with the SEC and any necessary Canadian regulatory authorities the Joint Proxy Statement and Strategic shall prepare and file with the SEC the Form F-4, in which the Joint Proxy Statement will be included as a prospectus, and Digital shall prepare and file with the SEC the Schedule 13E-3. Each of Digital and Strategic shall use its best efforts to have the Form F-4 declared effective under the Securities Act and any applicable state securities or blue sky laws as promptly as practicable after such filing. Digital will use its best efforts to cause the Joint Proxy Statement to be mailed to Digital's stockholders, and Strategic will use its best efforts to cause the Joint Proxy Statement to be mailed to Strategic's stockholders, in each case as promptly as practicable after the Form F-4 is declared effective under the Securities Act. Strategic shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under any applicable state securities laws in connection with the issuance of Strategic Common Stock in the Merger and under the Stock Plans and Digital shall furnish all information concerning Digital and the holders of Digital Common Stock and rights to acquire Digital Common Stock pursuant to the Stock Plans as may be reasonably requested in connection with any such action. (b) Digital will, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its stockholders (the "Digital Stockholders' Meeting") for the purpose of approving the Merger. Strategic will, as promptly as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its stockholders (the "Strategic Stockholders' Meeting") for the purpose of approving (i) the issuance of the Strategic Common Stock in the Merger, and (ii) the creation of a Strategic Stock Plan to issue 600,000 options exercisable for 5 years at $1.55 Cdn. per Strategic share to such persons as are mutually agreed by Digital and Strategic (the "Strategic Stock Plan"). Digital and Strategic will, through their respective Boards of Directors, recommend to their respective stockholders approval of the foregoing matters, except to the extent that the Board of Directors of Digital shall have withdrawn or modified its approval or recommendation of this Agreement or the Merger as permitted by Section 4.2(b). Strategic and Digital will use reasonable efforts to hold the Digital Stockholders' Meeting and the Strategic Stockholders' Meeting on the same day and use their best efforts to hold such Meetings as soon as practicable after the date hereof. (c) Digital shall use its best efforts to obtain the opinion of Marshall & Stevens Incorporated, dated on or about the date that is 10 business days prior to the mailing of the Joint Proxy Statement, to the effect that, as of such date, the Exchange Ratio is fair to Digital's stockholders from a financial point of view, and shall cause a signed copy of such opinion to be delivered to Strategic. (d) Strategic shall use its best efforts to obtain the opinion of CWC Capital L.P., dated on or about the date that is 10 business days prior to the mailing of the Joint Proxy Statement, to the effect that, as of such date, the Exchange Ratio is fair to Strategic's stockholders from a financial point of view, and shall cause a signed copy of such opinion to be delivered to Digital. Letter of Digital's Accountants 5.2 Digital shall use its best efforts to cause to be delivered to Strategic a letter of Richard Eisner & Co., LLP, Digital's independent public accountants, dated a date within two business days before the date on which the Form F-4 shall become effective and a letter of Richard Eisner & Co., LLP, dated a date within two business days before the Closing Date, each addressed to Strategic, in form and substance reasonably satisfactory to Strategic and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Form F-4. Letter of Strategic's Accountants 5.3 Strategic shall use its best efforts to cause to be delivered to Digital a letter of Deloitte & Touche, Chartered Accountants, Strategic's independent public accountants, or such other public accountants as are acceptable to Digital, dated a date within two business days before the date on which the Form F-4 shall become effective and a letter of such accountants, dated a date within two business days before the Closing Date, each addressed to Digital, in form and substance reasonably satisfactory to Digital and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Form F-4. Access to Information; Confidentiality 5.4 (a) Each of Digital and Strategic shall, and shall cause each of its respective subsidiaries to, afford to the other party and to the officers, employees, accountants, counsel, financial advisors and other representatives of such other party, reasonable access during normal business hours during the period prior to the Effective Time of the Merger to all their respective properties, books, contracts, commitments, personnel and records and, during such period, each of Digital and Strategic shall, and shall cause each of its respective subsidiaries to, furnish promptly to the other party (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal, state or Canadian securities laws and (ii) all other information concerning its business, properties and personnel as such other party may reasonably request. Except as required by law, each of Digital and Strategic will hold and will cause its respective officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any non-public information in confidence until such time as such information becomes publicly available (otherwise than through the wrongful act of any such person) and shall use its best efforts to ensure that such persons do not disclose such information to others without the prior written consent of Digital or Strategic, as the case may be. In the event of the termination of this Agreement for any reason, Digital and Strategic shall promptly return or destroy all documents containing non-public information so obtained from the other party or any of its subsidiaries and any copies made of such documents. In addition, Strategic and Digital shall not, and shall cause their respective advisors and agents not to, use any such non- public information for any purpose except in furtherance of the transactions contemplated by this Agreement. (b) Neither Strategic nor any of its subsidiaries will solicit or employ any employees of Digital or any of its subsidiaries as long as they are employed by Digital or such subsidiary during the period prior to the Effective Time of the Merger (except as contemplated by this Agreement) and, in the event of termination of this Agreement for any reason, for a period of two years after the date of termination. Best Efforts; Notification 5.5 (a) Upon the terms and subject to the conditions set forth in this Agreement, unless, to the extent permitted by Section 4.2(b), the Board of Directors of Digital approves or recommends a superior proposal, each of the parties agrees to use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement, including (i) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties including those holding Digital options or warrants and (iii) the execution and delivery of any additional instruments necessary to consummate transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and without limiting the foregoing, Digital and its Board of Directors shall (A) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Merger, this Agreement or any of the other transactions contemplated by this Agreement and (B) if any state takeover or similar statute or regulation becomes applicable to the Merger, this Agreement or any other transaction contemplated by this Agreement, take all action necessary to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on the Merger and the other transactions contemplated by this Agreement. Notwithstanding the foregoing, the Board of Directors of Digital shall not be prohibited from taking any action permitted by Section 4.2. (b) Digital shall give prompt notice to Strategic, and Strategic or Merger Sub shall give prompt notice to Digital, of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. Stock Options 5.6 (a) As soon as practicable following the date of this Agreement, the Board of Directors of Digital (or, if appropriate, any committee administering the Stock Plans) shall adopt such resolutions or take such other actions as may be required to effect the following: (i) terminate all options to purchase shares of Digital Common Stock (each, a "Digital Stock Option") at the Effective Time; and (ii) terminate each stock option plan of Digital at the Effective Time. (b) As soon as practicable after the Effective Time of the Merger, Strategic shall deliver to those persons who will be holders of Strategic Stock Options appropriate notices setting forth such holders' rights pursuant to Section 5.1(b) and the agreements evidencing the grants of such Strategic Stock Options. (c) Strategic agrees to use reasonable efforts to take such actions as are necessary for the establishment of the Strategic Stock Plan, including the reservation, issuance and listing of Common Stock of Strategic. (d) A holder of a Strategic Option may exercise such Strategic Option in whole or in part in accordance with its terms by delivering a properly executed notice of exercise to Strategic, together with the consideration therefor and the Federal or Canadian withholding tax information, if any, required in accordance with the Strategic Stock Plan. (e) As promptly as practicable but in no event later than 180 days after the Effective Date of the Merger, Strategic shall file a registration statement on Form S-8 with the SEC covering all of the Strategic Stock Options, and shall keep such registration statement effective until all of the shares of common stock underlying such options have been sold or such options have terminated. Benefit Plans 5.7 (a) Except as provided in Section 5.6 and subject to the provisions of ERISA and the Code, Strategic agrees to cause the Surviving Corporation to maintain for a period of at least six months after the Effective Time of the Merger the Benefit Plans of Digital and its subsidiaries in effect on the date of this Agreement or to provide benefits to employees of Digital and its subsidiaries that are comparable in the aggregate to those in effect on the date of this Agreement, and thereafter Strategic will cause the employees of the Surviving Corporation to have benefit plans that are at least comparable to those provided to the employees of Strategic. Strategic will cause each employee benefit plan of the Surviving Corporation or Strategic covering such employees of Digital and its subsidiaries to recognize the service of such employees with Digital and its subsidiaries prior to the Closing Date, but only for purposes of eligibility to participate and vesting under any such plan. (b) After the Effective Time of the Merger, Strategic intends to grant to key employees of Strategic options to purchase Strategic Common Stock under the Strategic Stock Plan. Indemnification and Insurance 5.8 (a) Strategic and Merger Sub agree that all rights to indemnification for acts or omissions occurring at or prior to the Effective Time of the Merger now existing in favour of the current or former directors or officers of Digital and its subsidiaries as provided in Digital's certificate of incorporation or by-laws shall survive the Merger and shall continue in full force and effect in accordance with their terms for a period of not less than five years from the Effective Time of the Merger. (b) In the event the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then and in each such case, proper provisions shall be made so that the successors and assigns of Strategic or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 5.8. (c) This Section 5.8 shall survive the consummation of the Merger at the Effective Time of the Merger, is intended to benefit the persons indemnified pursuant to Section 5.8(a), and shall be binding on all successors and assigns of Strategic and the Surviving Corporation. Fees and Expenses 5.9 (a) All fees and expenses incurred after August 1, 1995 in connection with the Merger, this Agreement and the transactions contemplated by this Agreement ("Expenses") shall be shared equally by Strategic and Digital if the Merger is not consummated. Notwithstanding the foregoing, Strategic hereby covenants to advance and fund up to $275,000 U.S. of Digital's Expenses hereunder, inclusive of the first $60,000 U.S. funded to the date hereof and with the balance to be funded commencing 45 days from the date of execution hereof. Digital's Expenses shall be paid promptly (within 15 days) on receipt by Strategic of the invoices received by Digital in regard to Expenses subject always to Strategic's right to dispute the reasonableness of such Expenses but only after making payment of same to Digital. For purposes of this paragraph, "Expenses" shall mean all out-of- pocket fees and expenses incurred or paid by or on behalf of Strategic or Digital in connection with the Merger or the consummation of any of the transactions contemplated by this Agreement, including all fees and expenses of counsel, investment banking firms, accountants, experts and consultants to Strategic or Digital. (b) Pursuant to a letter agreement dated August 1, 1995, Digital has issued to Strategic a warrant to purchase 500,000 shares of Digital Common Stock exercisable at a price of $0.25 (the "Initial Warrant") in consideration of the partial funding of Digital's Expenses to the extent of $60,000 U.S. by Strategic. Digital shall allot and issue to Strategic on execution hereof a second warrant (the "Second Warrant") to purchase 1,500,000 shares of Digital Common Stock exercisable at a price of $0.25. Subject to paragraph 5.9(c), the Initial Warrant and the Second Warrant (together, the "Termination Warrants") are exercisable if this Agreement terminates without consummation of the Merger as a result of any of the following events in (i) to (vi): (i) the Board of Directors of Digital withdraws or modifies its approval or recommendation of this Agreement or the Merger, approves or recommends another takeover proposal, enters into an agreement with respect to another takeover proposal or terminates this Agreement (other than as a result of a willful and material breach of this Agreement by Strategic or Merger Sub (which breach shall not have been cured within five business days following Strategic's receipt of written notice of such breach from Digital)), (ii) the requisite approval of Digital's stockholders for the Merger is not obtained at the Digital Stockholders' Meeting; (iii) more than 2 1/2% of shares of Digital become subject to dissent; (iv) the Digital Stockholders' Meeting does not occur prior to the termination of this Agreement pursuant to Section 7.1(b)(ii); or (v) there is a material breach of any representation, warranty or covenant hereof by Digital which is not remedied prior to the Effective Time; and/or (vi) the Merger is terminated by virtue of failure to meet the conditions precedent to closing set forth in Section 6.2(d), Section 6.3(e), and/or Section 6.1(d). In the event of the termination of this Merger Agreement pursuant to one of the foregoing events, Strategic may recover any of Digital's Expenses funded by Strategic from Digital solely through the exercise of the Termination Warrants and the application of such funded Expenses to the exercise price which would otherwise be payable by Strategic to Digital upon the exercise of the Termination Warrants. Any Expenses incurred by Strategic in excess of such exercise price (i.e., any Expenses in excess of $500,000) shall not be recovered by Strategic from Digital. Subject to paragraph 5.9(c), any portion of the Termination Warrants desired to be exercised by Strategic in excess of the funded portion of Digital's Expenses shall be paid by Strategic in cash. (c) The Second Warrant shall only be exercisable by Strategic to the extent of the incurred and paid Expenses of Digital (i.e. the balance of the Second Warrant shall not be exercisable for a cash payment by Strategic) in the event the Merger terminates for any reason other than those set forth in subsections 5.9(b)(i), (ii), (iv) or section 6.3(e). (d) In the event the Merger terminates as a result of an event set forth in subsection 5.9(b)(i), (ii), (iv) or Section 6.3(e), the Second Warrant may be exercisable to the extent of the incurred and paid expenses of Digital and the balance of the Second Warrant may be exercisable for a cash payment by Strategic. Public Announcements 5.10 Strategic and Merger Sub, on the one hand, and Digital on the other hand, will consult with each other before issuing, and provide each other the opportunity to review, comment upon and concur with, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by agreement with any stock exchange or by law. Affiliates and Certain Stockholders 5.11 (a) Prior to the Closing Date, Digital shall deliver to Strategic a letter identifying all persons who are, at the time the Merger is submitted for approval to the stockholders of Digital, "affiliates" of Digital for purposes of Rule 145 under the Securities Act. (b) Digital shall deliver to Strategic on the date of the Joint Proxy Statement and on the Closing Date letters, in each case dated as of such respective dates and identifying all persons who are, as of such respective dates, beneficial owners of five percent or more of Digital Common Stock. Stockholder Litigation 5.12 Digital shall give Strategic the opportunity to participate in the defense or settlement of any stockholder litigation against Digital and its directors relating to the transactions contemplated by this Agreement; provided, however, that no such settlement shall be agreed to without Strategic's consent, which consent shall not be unreasonably withheld. Directorships 5.13 As of the Effective Time of the Merger, Strategic's Board of Directors shall be expanded to nine directors and Col. Clinton Pagano (Ret.), Michael Marino, Richard Angulo and Thomas P. Gallagher shall be elected as directors of Strategic. ARTICLE 6 CONDITIONS PRECEDENT Conditions to Each Party's Obligation to Effect the Merger 6.1 The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) Stockholder Approval. Each of Digital Stockholder Approval and Strategic Stockholder Approval (with respect to both the issuance of Strategic Common Stock in the Merger and the Strategic Stock Plan) shall have been obtained. (b) TSE. The shares of Strategic Stock issuable to Digital's stockholders pursuant to this Agreement and under the Stock Plans shall have been approved for trading on The Toronto Stock Exchange subject to official notice of issuance. (c) No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect. (d) Form F-4. The Form F-4 and Schedule 13e-3 shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order. Strategic shall have received all state securities authorizations necessary to issue the Strategic Stock pursuant to this Agreement and under the Stock Plans. Conditions to Obligations of Strategic and Merger Sub 6.2 The obligations of Strategic and Merger Sub to effect the Merger are further subject to satisfaction or waiver of the following conditions: (a) Representations and Warranties. The representations and warranties of Digital set forth in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of Digital set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except to the extent such representations and warranties speak as of an earlier date, and Strategic shall have received a certificate signed on behalf of Digital by the chief executive officer and the chief financial officer of Digital to such effect. (b) Performance of Obligations of Digital. Digital shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Strategic shall have received a certificate signed on behalf of Digital by the chief executive officer and the chief financial officer of Digital to such effect. (c) Certificates; Letters from Digital Affiliates. Digital shall have delivered to Strategic certified copies of resolutions duly adopted by Digital's Board of Directors and stockholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Strategic and its counsel shall reasonably request prior to the date of the Stockholders Meeting. (d) No Litigation. There shall not be pending or threatened by any Governmental Entity any suit, action or proceeding and there shall not be pending or if pending, have been adversely amended from the date hereof by any other person, any suit, action or proceeding which has a reasonable likelihood of success, in such case (i) challenging the acquisition by Strategic or Merger Sub of any shares of Digital Common Stock, seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by this Agreement or seeking to obtain from Digital, Strategic or Merger Sub any damages that are material in relation to Digital and its subsidiaries taken as a whole or Strategic and its subsidiaries taken as a whole, as applicable, (ii) seeking to prohibit or limit the ownership or operation by Digital, Strategic or any of their respective subsidiaries of any material portion of the business or assets of Digital, Strategic or any of their respective subsidiaries, or to compel Digital, Strategic or any of their respective subsidiaries to dispose of or hold separate any material portion of the business or assets of Digital, Strategic or any of their respective subsidiaries, as a result of the Merger or any of the other transactions contemplated by this Agreement, (iii) seeking to impose limitations on the ability of Strategic to acquire or hold, or exercise full rights of ownership of, any shares of Digital Common Stock or common stock of the Surviving Corporation, including the right to vote Digital's Common Stock, or Common Stock of the Surviving Corporation, on all matters properly presented to the stockholders of Digital or the Surviving Corporation, respectively, (iv) seeking to prohibit Strategic or any of its subsidiaries from effectively controlling in any material respect the business or operations of Digital or its subsidiaries or (v) which otherwise could reasonably be expected to have a material adverse effect on Digital or Strategic. In addition, there shall not be any statute, rule, regulation, judgment or order enacted, entered, enforced or promulgated that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (ii) through (iv) above. (e) Approval of Digital Board of Directors. The Board of Directors of Digital or any committee thereof shall not have withdrawn or modified in a manner adverse to Strategic or Merger Sub its approval or recommendation of the Merger or this Agreement, or approved or recommended any takeover proposal, (ii) Digital shall not have entered into any agreement with respect to any superior proposal in accordance with Section 4.2(b) of this Agreement, (iii) Strategic shall not have received a Notice of Superior Proposal from Digital or two business days shall not have elapsed from the date of such receipt or (iv) the Board of Directors of Digital or any committee thereof shall not have resolved to take any of the foregoing actions referred to in clause (i) or (ii) above. (f) Fairness Opinion. Strategic shall have received the opinion of CWC Capital L.P., dated on or about the date that is 10 business days prior to the mailing of the Joint Proxy Statement, to the effect that, as of such date, the Exchange Ratio is fair to Strategic's Stockholders from a financial point of view, a signed copy of which opinion shall have been delivered to Digital. (g) Digital Dissenters. No more than 2 1/2% of the outstanding shares of Digital Common Stock immediately prior to the Merger shall constitute Dissenting Shares in accordance with Section 2.1(d). Conditions to Obligations of Digital 6.3 The obligation of Digital to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) Representations and Warranties. The representations and warranties of Strategic and the Material Subsidiaries set forth in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of Strategic and the Material Subsidiaries set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except to the extent such representations speak as of an earlier date, and Digital shall have received a certificate signed on behalf of Strategic by the chief executive officer of Strategic to such effect. (b) Performance of Obligations of Strategic and Merger Sub. Strategic and Merger Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and Digital shall have received a certificate signed on behalf of Strategic by the chief executive officer of Strategic to such effect. (c) Certificates. Strategic shall have delivered to Digital certified copies of resolutions duly adopted by Strategic's and Merger Sub's respective Board of Directors and stockholders of Strategic evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Digital and its counsel shall reasonably request prior to the date of Strategic's Stockholders Meeting. (d) No Litigation. There shall not be pending or threatened by any Governmental Entity any suit, action or proceeding and there shall not be pending by any other person any suit, action or proceeding which has reasonable likelihood of success, in each case (i) challenging the acquisition by Strategic or Merger Sub of any shares of Digital Common Stock, seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by this Agreement or seeking to obtain from Digital, Strategic or Merger Sub any damages that are material in relation to Digital and its subsidiaries taken as a whole or Strategic and Merger Sub taken as a whole, as applicable, (ii) seeking to prohibit or limit the ownership or operation by Digital, Strategic or any of their respective subsidiaries of any material portion of the business or assets of Digital, Strategic or any of their respective subsidiaries to compel Digital, Strategic or any of their respective subsidiaries to dispose of or hold separate any material portion of the business or assets of Digital, Strategic or any of their respective subsidiaries, as a result of the Merger or any of the other transactions contemplated by this Agreement, (iii) seeking to impose limitations on the ability of Strategic to acquire or hold, or exercise full rights of ownership of, any shares Digital Common Stock or common stock of the Surviving Corporation including the right to vote the Digital Common Stock, or Common Stock of the Surviving Corporation, on all matters properly presented to the stockholders of Digital or the Surviving Corporation, respectively, (iv) seeking to prohibit Strategic or Merger Sub from effectively controlling in any material respect the business or operations of Digital or its subsidiaries or (v) which otherwise could reasonably be expected to have a material adverse effect on Digital or Strategic. In addition, there shall not be any statute, rule, regulation, judgment or order enacted, entered, enforced or promulgated that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (ii) through (iv) above. (e) Fairness Opinion. Digital shall have received the opinion of Marshall & Stevens Incorporated dated on or about the date that is 10 business days prior to that mailing of the Joint Proxy Statement, to the effect that, as of such date, the Exchange Ratio is fair to Digital, a signed copy of which opinion shall have been delivered to Strategic. (f) Strategic Interim Financing. Strategic shall have received the proceeds of the Strategic Interim Financing. (g) Tax Opinion. Strategic shall have caused to be delivered to Digital an opinion of U.S. counsel confirming that the Merger can be effected on a tax-deferred basis to Digital shareholders as outlined in the memorandum of Deloitte & Touche dated October 5, 1995. Frustration of Closing Condition 6.4 None of Digital, Strategic and Merger Sub may rely on the failure of any condition set forth in Sections 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was caused by such party's failure to act in good faith or to use its best efforts to consummate the Merger and the other transactions contemplated by this Agreement, as required by Section 5.5. ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER Termination 7.1 This Agreement may be terminated at any time prior to the Effective Time of the Merger, whether before of after approval of matters presented in connection with the Merger by the stockholders of Digital (a) by mutual written consent of Strategic, Merger Sub and Digital; (b) by either Strategic or Digital: (i) if, upon a vote at a duly held Digital Stockholders Meeting or Strategic Stockholders Meeting or any adjournment thereof, any required approval of the stockholders of Digital or Strategic, as the case may be, shall not have been obtained; (ii) if the Merger shall not have been consummated on or before April 30, 1996, unless the failure to consummate the Merger is the result of a willful and material breach of this Agreement by the party seeking to terminate this Agreement; provided, however, that the passage of such period shall be tolled for any part thereof (but not exceeding 60 calendar days in the aggregate) during which any party shall be subject to a non-final order, decree, ruling or action restraining, enjoining or otherwise prohibiting the consummation of the Merger or the calling or holding of the Stockholders Meeting or the Strategic Stockholders Meeting; (iii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (iv) in the event of a breach by the other party of any representation, warranty, covenant or other agreement contained in this Agreement which (A) would give rise to the failure of a condition set forth in Section 6.2(a) or (b) or Section 6.3(a) or (b), as applicable, and (B) cannot be or has not been cured within 30 day after the giving of written notice to the breaching party of such breach (a "Material Breach") (provided that the terminating party is not then in Material Breach of any representation, warranty, covenant or other agreement contained in this Agreement); or (v) by Digital in accordance with the provisions of Section 4.2(b). Effect of Termination 7.2 In the event of termination of this Agreement by either Digital or Strategic as provided in Section 7.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Strategic, Sub or Digital, other than the provisions of Section 3.1(p), Section 3.2(j), the last two sentences of Section 5.4, Section 5.9, this Section 7.2 and Article 8 and except to the extent that such termination results from the willful and material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement. Amendment 7.3 This Agreement may be amended by the parties at any time before or after any required approval of matters presented in connection with the Merger by the stockholders of Digital and at any time before or after any required approval of matters presented in connection with the issuance of shares of Strategic Common Stock in the Merger and the Strategic Stock Plan by the stockholders of Strategic; provided, however, that after any such approval, there shall be made no amendment that by law requires further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. Extension; Waiver 7.4 At any time prior to the Effective Time of the Merger, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 7.3, waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. Procedure for Termination, Amendment, Extension or Waiver 7.5 A termination of this Agreement pursuant to Section 7.1, an amendment of this Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section 7.4 shall, in order to be effective, require in the case of Strategic, Merger Sub or Digital, action by its Board of Directors or the duly authorized designee of its Board of Directors. ARTICLE 8 GENERAL PROVISIONS Nonsurvival of Representations and Warranties 8.1 None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time of the Merger. This Section 8.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time of the Merger. Notices 8.2 All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Strategic, to Building A, Unit 102 17802 66th Avenue Surrey, British Columbia V3S 7X1 Telecopy: (604) 576-0436 Attention: Mr. Douglas H. Blakeway with a copy to: Lang Michener Lawrence & Shaw, to 2500 Three Bentall Centre, P.O. Box 49200 595 Burrard Street Vancouver, British Columbia V7X 1L1 Telecopy: (604) 685-7084 Attention: Mr. Bernhard Zinkhofer, Esq. (b) if to Digital, to 800 N.W. 33rd Street Pompano Beach, Florida USA 33064 Telecopy: (305) 783-9609 Attention: Mr. Richard Angulo with a copy to Mason, Briody, Gallagher & Taylor 104 Carnegie Centre Suite 201 Princeton, New Jersey 08540 Attention: Thomas P. Gallagher, Esq. Definitions 8.3 For purposes of this Agreement: (a) an "affiliate" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person; (b) "indebtedness" has the meaning assigned thereto in Section 3.1(t)(ii); (c) "material adverse change" or "material adverse effect" means, when used in connection with Digital or Strategic, any change or effect that is materially adverse to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of such party and its subsidiaries taken as a whole; (d) "person" means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity; (e) a "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person; (f) "superior proposal" has the meaning assigned thereto in Section 4.2; (g) "takeover proposal" has the meaning assigned thereto in Section 4.2; and (h) "taxes" has the meaning assigned thereto in Section 3.1(k). Interpretation 8.4 When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined herein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Counterparts 8.5 This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Entire Agreement; No Third-Party Beneficiaries 8.6 This Agreement (including the documents and instruments referred to herein) (a) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement, and (b) except for the provisions of Article 2, Section 5.6, Section 5.7 and Section 5.8, are not intended to confer upon any person other than the parties any rights or remedies. Governing Law 8.7 This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Assignment 8.8 Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, except that Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Strategic or to any direct or indirect wholly owned subsidiary or Strategic, but no such assignment shall relieve Merger Sub of any of its obligations under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns. Enforcement 8.9 The parties agree that irreparable damage would occur in the event that any of the provisions of Section 5.4 of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of Section 5.4 of this Agreement in any court of the United States located in the State of Florida state Court. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Florida or any Florida state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal court sitting in the State of Florida. Execution and Attestation IN WITNESS WHEREOF, Strategic, Merger Sub and Digital have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date below written. STRATEGIC TECHNOLOGIES INC. by: Attest: /s/ Douglas H. Blakeway ----------------------------- Douglas H. Blakeway, Chairman and Chief Executive Officer /s/ Bernhard Zinkhofer Execution Date: October 18, ---------------------- Bernhard Zinkhofer, 1995 Secretary STRATEGIC FLORIDA INC. by: Attest: /s/ Douglas H. Blakeway ------------------------------ Douglas H. Blakeway, President and Chief Executive Officer /s/ Berhnard Zinkhofer Execution Date: October 18, ---------------------- Bernhard Zinkhofer, 1995 Secretary DIGITAL PRODUCTS CORPORATION by: Attest: /s/ Richard Angulo ------------------ Richard Angulo, President and Chief Executive Officer /s/ Thomas P. Gallagher Execution Date: October 20, ----------------------- Thomas P. Gallagher 1995 Secretary Digital Products Corporation Disclosure Schedule (Schedules omitted) Section 3.1(d) NONCONTRAVENTION Section 3.1(g) CERTAIN CHANGES OR EVENTS Section 3.1(h) LITIGATION Section 3.1(i) ABSENCE OF CHANGE IN BENEFIT PLANS Section 3.1(k) TAXES Section 3.1(t)(i) MATERIAL CONTACTS Section 3.1(t)(ii) INDEBTEDNESS Section 3.1(v) INTELLECTUAL PROPERTY Section 3.1(w) INSURANCE Strategic Technologies Inc Disclosure Schedule (Schedules Omitted) 1. LITIGATION 2. INSURANCE 3. CONTRACTS, INDEBTEDNESS EX-99.2 3 EXHIBIT 2 --------- October 13, 1995 File Reference: 11-11120 The Board of Directors Digital Products Corporation 800 N.W. 33rd Street Pompano Beach, Florida 33064 Attention: Mr. Richard Angulo President Gentlemen: Marshall & Stevens, Inc. was retained by the Board of Directors of Digital Products Corporation, ("Digital") for the purpose of expressing an opinion as to the fairness, from a financial point of view, to the shareholders of Digital of a proposed merger between Strategic Technologies, Inc. (Strategic), Strategic Florida Inc. (Merger Sub) and Digital. Description of the Transactions It is our understanding that the opinion contained in this letter will be used pursuant to the proposed transaction as described in the Agreement and Plan of Merger, dated October 13, 1995, (the Agreement) among Strategic, Merger Sub and Digital. Important financial characteristics of the merger and the Agreement include the following: - Strategic is a British Columbia, Canada Corporation, publicly held and traded on the Vancouver Stock Exchange. Merger Sub is a Florida Corporation wholly owned by Strategic. Digital is a Florida Corporation, publicly held and traded on the OTC Bulletin Board. - The closing of the merger shall be no earlier than December 20, 1995 and no later than the second business day after satisfaction of conditions precedent as contained in sections 6.1, 6.2 and 6.3 of the Agreement. - The outstanding common stock of Digital shall be converted into the right to receive .379291 shares of Strategic Common Stock. All Digital treasury stock will be cancelled, all Digital options to purchase Digital shares will be terminated and all Digital warrants to purchase Digital shares will be assumed by Strategic. - The authorized, issued and outstanding capital stock of Digital, as of August 31, 1995, consists of 11,589,267 shares of common stock. The authorized, issued and outstanding capital stock of Strategic, as of August 1, 1995 consists of 6,054,451 shares of common stock. The total number of Strategic's authorized, issued and outstanding capital stock upon completion of the merger and a proposed private placement of 500,000 shares of Strategic common stock is estimated at 10,950,156 shares. - Conditions precedent to the merger include that the shares issued to Digital's stockholders shall be approved for trading on the Toronto Stock Exchange. - The Canadian to United States dollar monetary exchange rate, for the purpose of this study is 1.3713. Scope For the purposes of this Opinion we have made such reviews, studies, and analysis as we deemed necessary and pertinent including, but not limited to, the following: - Discussions with the management of Strategic and Digital; - Strategic's historical financial statements for the fiscal years ending September 30, 1990 through September 30, 1994 as audited by Doane Raymond; - Strategic's internally prepared pro forma financial statements reflecting the merger of Digital and Strategic for the year ending September 30, 1994 and the interim three months ending period as of and for the interim period ending June 30, 1995; - Digital's form 10-K and 10-Q filed with the Securities and Exchange Commission for the years ending March 31, 1992 through 1995 and the 10Q for the first quarter ending June 30, 1995. - The letter of intent dated July 31, 1995 between Strategic and Digital; - The Agreement and Plan of Merger, dated September 15, 1995 among Strategic, Strategic Florida and Digital; - Publicly held actively traded companies with business operations similar to Strategic and Digital; - Acquisition data of companies with business operations similar to Strategic and Digital; - The economic environment of the industry and markets in which Strategic and Digital operate; - Historical trading activity in the common stock of Digital and Strategic; - Such other financial studies, analysis and investigation as we deem relevant for purposes of this Opinion. In rendering this Opinion we have relied, without independent verification, on the accuracy and completeness of all financial and other information which was publicly available or provided by Digital and Strategic. Conclusion Based upon the investigation and analysis described in this letter, it is our opinion that the proposed merger, as of the date of this letter, is fair, from a financial point of view, to the shareholders of Digital. The opinions expressed in this letter are contingent upon the assumptions contained in this letter, the statement of Assumptions and Limiting Conditions attached to this letter and upon business and market conditions as they exist at the date of this letter, and involves assumptions and uncertainties, not all of which can be qualified or ascertained prior to any actual or proposed transaction. Yours very truly, MARSHALL & STEVENS INCORPORATED ASSUMPTIONS AND LIMITING CONDITIONS Title No investigation of legal title was made, and we render no opinion as to ownership of Digital or the underlying assets. Date of Value The date of this analysis is October 13, 1995. The dollar amount of any value reported is based on the purchasing power of the U.S. dollar as of that date. The financial analysts assumes no responsibility for economic or physical factors occurring subsequent to the date of value which may affect the opinions reported. Visitation Digital was visited in the course of this appraisal assignment. When the date of the analysis differs from the transaction or effective date, the financial analyst has assumed no material change in the operations of Strategic and/or Digital or the underlying assets, unless otherwise noted in the report. The scope of this study did not include a visit to the headquarters of Strategic. Non Financial Expertise No opinion is intended to be expressed for matters which require legal or specialized expertise, investigation or knowledge, beyond that customarily employed by financial analysts. Information and Data Information supplied by others that was considered in this valuation is from sources believed to be reliable, and no further responsibility is assumed for its accuracy. We reserve the right to make such adjustments to the valuation and analysis herein reported based upon consideration of additional or more reliable data subsequent to the issuance of this letter. In rendering this Opinion we have relied, without independent verification, on the accuracy and completeness of all financial and other information which was publicly available or furnished to us by Digital and/or Strategic. Further, we have assumed that: - The acquisition and the financing will be consummated on the terms and conditions substantially as described in the Agreement. - That the projections, as provided by management, and shown in Exhibit B attached to this letter, were reasonably prepared on a basis reflecting the best available estimates and judgment of Strategic and Digital's management at the time of preparation as to Digital's future performance. - As advised by the management of Digital, that there has been no material adverse change in the business, prospects, or financial condition of Digital subsequent to the date of the latest financial statements made available to us or to the time the information was provided to us. Confidentiality/Advertising It is understood that this letter is for the information of the Board of Directors of Digital only and may be published in its entirety in the registration statement/proxy statement to be distributed to shareholders of Digital in connection with the merger so long as we give our prior written consent to any summary of, excerpt from or reference to such opinion. This letter is not to be quoted or referred to, in whole or in part, in any other document, nor shall this letter be used for any other purposes without the prior written consent of Marshall & Stevens Incorporated. Litigation Support Depositions, expert testimony, attendance in court, and all preparations/support for same, arising from this analysis and opinion shall be provided by Marshall & Stevens Incorporated subject to arrangements for such services having been agreed to by the parties. Management The opinion of value expressed herein assumes the continuation of prudent management policies of both Digital and Strategic over whatever period of time that is deemed reasonable and necessary to maintain the character and integrity of Digital and/or Strategic. Purpose All opinions are presented as Marshall & Stevens Incorporated's considered opinion based on the facts and data obtained during the course of the investigation. The opinion letter has been prepared for the sole purpose stated herein and shall not be used for any other purpose. Unexpected Conditions We assume there are no hidden or unexpected conditions associated with Digital and Strategic that might adversely affect value. Further, we assume no responsibility for changes in market condition which may require an adjustment in the analysis. Hazardous Substance Hazardous substances, if present within a business, can introduce an actual or potential liability that may adversely affect the marketability and value of the subject companies or the underlying assets. In this analysis, no consideration has been given to such liability or its impact on value. EX-99.3 4 EXHIBIT 3 --------- SHAREHOLDERS' AGREEMENT AMONG Strategic TECHNOLOGIES INC. and Certain Shareholders of Strategic TECHNOLOGIES INC. and DIGITAL PRODUCTS CORP. and Certain Shareholders of DIGITAL PRODUCTS CORP. DATED FOR REFERENCE THE 13th DAY OF OCTOBER, 1995 TABLE OF CONTENTS 1 SHAREHOLDERS' REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 2 1.1 Ownership and control of shares . . . . . . . . . . . . . . 2 1.2 No Knowledge of Objection . . . . . . . . . . . . . . . . . 2 1.3 No Current Intention to Sell Shares . . . . . . . . . . . . 2 2 VOTING OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1 Support of Merger . . . . . . . . . . . . . . . . . . . . . 3 2.2 Additional Merger Covenants of Strategic . . . . . . . . . . 4 2.3 Additional Covenants of Shareholders . . . . . . . . . . . . 4 3 GENERAL AND INTERPRETATION PROVISIONS . . . . . . . . . . . . . . . . 5 3.1 Applicable Laws and Attornment . . . . . . . . . . . . . . . 5 3.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . 5 3.3 No Partnership . . . . . . . . . . . . . . . . . . . . . . . 6 3.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.5 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.6 Enurement . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . 8 3.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 8 3.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . 8 3.10 Execution . . . . . . . . . . . . . . . . . . . . . . . . . 8 Schedule "A" Particulars of Shareholders of Strategic and Digital SHAREHOLDERS' AGREEMENT ----------------------- THIS AGREEMENT dated for reference the 13th day of October, 1995. AMONG: Strategic TECHNOLOGIES INC., Building A, Unit 102 17802 66th Avenue, Surrey, British Columbia V3S 7X1 Telephone: (604) 576-8658; Telecopier: (604) 576-0436 ("Strategic") OF THE FIRST PART AND: THOSE SHAREHOLDERS OF Strategic more particularly described on Schedule "A" hereto, all c/o the facsimile numbers set opposite their names (herein collectively the "Strategic Shareholders") OF THE SECOND PART AND: DIGITAL PRODUCTS CORPORATION, 800 N.W. 33rd St., Pompano Beach, Florida USA 33064 Telephone (305) 783-9600; Telecopier (305) 784-3109 ("Digital") OF THE THIRD PART AND: THOSE SHAREHOLDERS OF DIGITAL PRODUCTS CORPORATION more particularly described on Schedule "A" hereto, all c/o the facsimile numbers set opposite their names (herein collectively the "Digital Shareholders") OF THE FOURTH PART WHEREAS: (A) Strategic and Digital are parties to a merger letter agreement dated August 1, 1995, as amended or extended August 31, 1995, September 15, 1995, September 22, 1995 and October 6, 1995 to be superseded by an Agreement and Plan of Merger of even date (the "Merger Agreement") between the companies which proposes a merger whereby Digital will, on closing of the Merger (the "Effective Time") become a wholly-owned subsidiary of Strategic and Digital shareholders will receive Strategic shares in exchange for their Digital stock; (B) each of the Digital Shareholders and the Strategic Shareholders (herein collectively, the "Shareholders" or individually a "Shareholder") wish to support the Merger and further to provide for certain matters of management pertaining thereto; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties hereto agree each with the other as follows: ARTICLE 1 SHAREHOLDERS' REPRESENTATIONS 1.1 Ownership and control of shares Each of the Strategic Shareholders represents to and covenants with each of the other Strategic Shareholders and all the Digital Shareholder that he beneficially owns or controls and exercises voting control over or has the right to acquire the number of shares of Strategic set forth opposite his name on Schedule "A" and each Digital Shareholder hereby makes a reciprocal representation to the other Digital Shareholders and the Strategic Shareholders respecting the number of Digital shares owned, controlled or which such person has the right to acquire. 1.2 No Knowledge of Objection Each Shareholder represents to all the other Shareholders that such Shareholder is not aware of any other shareholders of Digital or Strategic who object to or intend to actively oppose the Merger. 1.3 No Current Intention to Sell Shares Each Shareholder represents to the other Shareholders that such Shareholder does not have any current intention to sell any Digital or Strategic Shares owned or controlled by such Shareholder. ARTICLE 2 VOTING OF SHARES 2.1 Support of Merger Each of the Shareholders agrees and covenants with each of the other Shareholders that: (a) he will vote all his shares in the capital of each of Strategic and Digital (together, the "Merger Companies") in favour of the Merger at any meeting of the shareholders of Digital or Strategic or any adjournment thereof convened to consider the Merger; (b) in the event he acquires, directly or indirectly, beneficial ownership of or voting control over any additional shares of any of the Merger Companies, he will vote such additional shares in favour of the Merger; (c) he will not exercise any statutory right of dissent nor encourage any other person to exercise any statutory right of dissent with respect to the Merger; (d) he will not prior to the Effective Time sell, transfer or otherwise dispose of any more than 2% of the number of Digital Shares or Strategic Shares owned by him including any Digital Shares or Strategic Shares acquired after the date of this Agreement and before the Effective Date, unless: (i) this Agreement is earlier terminated in accordance with Sec.3.2; or (ii) such Digital Shares or Strategic Shares are sold to another Shareholder; or (iii) the transferee shall have executed an agreement to become a Shareholder party to this Agreement; (e) he will not do or perform any act or conduct himself in a manner inconsistent with the terms of this Agreement and will use his best efforts to encourage other Shareholders of each of the Merger Companies to vote their Share in favour of the Merger; and (f) he will execute any proxies, powers of attorney, and all other written assurances, without further consideration, as may be necessary to effect the intent of this Agreement and will permit the representatives of Digital or Strategic to contact third parties including brokerages to verify and ensure compliance with the terms hereof. 2.2 Additional Merger Covenants of Strategic (a) Strategic hereby covenants and agrees with the Shareholders and Digital that for a period of two years from the Effective Time it will only effect the following special business or corporate matters of Strategic with the approval of at least two of the four Digital appointees to Strategic's Board of Directors as contemplated by the Merger Agreement: (i) the appointment of auditors of Strategic and Digital other than Deloitte & Touche; (ii) any relocation of Digital's Pompano Beach offices; (iii) any equity financing of Strategic in excess of $2,000,000 (Cdn.); (iv) any expansion of the size of the Board of Directors beyond nine; and (v) any significant corporate acquisition or divestiture ($2,000,000 (Cdn.) threshold) or any corporate reorganization or alteration of authorized share capital or similar fundamental corporate change. Strategic shall nominate and keep nominated as directors at all general shareholders meetings of Strategic for two years from the Effective Time the nine directors of Strategic holding office at the Effective Time or their replacements as contemplated by Sec.2.3. (b) Strategic further agrees to: (i) adopt a Board Policy Statement to implement the foregoing covenants, which statement may not be amended or terminated without the consent of 75% of the directors of Strategic; (ii) indemnify and save harmless any of the Shareholders who act as directors of Strategic after the Effective Time for any good faith actions as directors, subject to the provisions of the British Columbia Company Act requiring prior judicial approval for such indemnification, and further agrees to pay the actual legal fees and expenses of any of the Shareholders who seek and obtain any injunctive or other relief from a court of competent jurisdiction requiring that Strategic modify, abandon or reverse any action or proposed action which is determined to be a breach of this Agreement; (iii) establish an Executive Compensation Committee of the Board of Directors of Strategic comprised of two of the former Digital Directors and two current Directors of Strategic who shall review the compensation of the four highest paid senior officers of the Company annually and make recommendation to the Board respecting modification to such compensation arrangements. 2.3 Additional Covenants of Shareholders (a) Each of the Shareholders agrees to vote any Strategic shares owned or controlled by them for a two-year period after the Effective Time to elect and keep elected the nine directors of Strategic who will hold office as of the Effective Time being the five existing Strategic directors, plus the four Digital appointees contemplated by the Merger Agreement. In the event of the death, incapacity, resignation, or unwillingness to serve as a director of any of the nine aforesaid individuals or the written request of seven of the nine directors not to elect one of the nine aforesaid individuals, Strategic shall nominate as a replacement a person nominated in the case of a Strategic appointee, by the remaining Strategic appointees, or if a Digital appointee is unable to act, then by the remaining Digital appointees and such replacement appointees shall be nominated for election by Strategic in its annual proxy materials and voted in favour of by the Shareholders and each of the Shareholders agrees to vote any Strategic shares owned or controlled by them for the two-year period after the Effective Time in favour of such persons. (b) Each of the Shareholders who are intended under the Merger Agreement to become or remain directors of Strategic after the Effective Time hereby acknowledge their consent and preparedness to act as directors of Strategic and confirm the reasonableness of Strategic's post- closing covenants contemplated by Sec.2.2 hereof and confirm their intention to use their best efforts to cause Strategic to comply with the provisions thereof. ARTICLE 3 GENERAL AND INTERPRETATION PROVISIONS 3.1 Applicable Laws and Attornment This Agreement will in all respects be governed by and be construed in accordance with the laws of the State of Florida and the laws of the United States applicable in the State of Florida. 3.2 Termination This Agreement will terminate on the earliest of: (a) with respect to any Shareholder, at the time he disposes all of or substantially all of his Shares of both Strategic and Digital, providing he does so after the Effective Time; (b) two years after the Effective Time; (c) on March 15, 1996 or such later date as agreed to by Digital and Strategic under the terms of the Merger Agreement, if the Effective Time has not occurred on or before that date; (d) on the termination of the Merger Agreement if that date is prior to the Effective Time; or (e) on that date mutually consented to in writing by all the parties. 3.3 No Partnership Nothing in this Agreement shall be deemed in any way or for any purpose to constitute any party a partner of any other party to this Agreement in the conduct of any business or otherwise as a member of a joint venture or joint enterprise with any other party to this Agreement or to deem any party acting in concert with another as contemplated by securities legislation. 3.4 Notices Unless otherwise specified herein, any notice required to be given hereunder by any party will be deemed to have been well and sufficiently given if delivered personally or if sent by prepaid registered mail, telex, telecopy to, or delivered at, the address of the other party hereinafter set forth: (a) If to Digital: DIGITAL PRODUCTS CORPORATION 800 N.W. 33rd St. Pompano Beach, Florida USA 33064 Telephone (305) 783-9600; Telecopier (305) 784-3109 with a copy to: Mason, Briody, Gallagher & Taylor 104 Carnegie Center, Suite 201 Princeton, New Jersey 08540 Attention: Thomas P. Gallagher/Barbara J. Comly ------------------------------------------------ (b) If to STRATEGIC: STRATEGIC TECHNOLOGIES INC. Building A, Unit 102 17802 66th Avenue, Surrey, British Columbia V3S 7X1 Telephone: (604) 576-8658; Telecopier: (604) 576-0436 with a copy to: Lang Michener Lawrence & Shaw Barristers and Solicitors Suite 2500, 595 Burrard Street Vancouver, British Columbia, V7X 1L1 Attention: Bernhard Zinkhofer Fax: (604) 685 - 7084 (c) If to any Shareholder, at the facsimile number set forth on Schedule "A" hereto. If a Shareholder does not have a facsimile number, delivery shall be made by ordinary mail at the Shareholder's address listed in Schedule "A", or at such other address as the other party may from time to time direct in writing. Any such notice will be deemed to have been received, if mailed, telexed or telecopied, 72 hours after the time of mailing, telexing or telecopying, and if delivered, upon the date of delivery, provided that if such day is not a business day, then the notice will be deemed to have been given and received on the first business day following such day. If normal mail service, telex service or telegraph service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by the impaired means of communication will not be deemed to be received until actually received, and the party sending the notice shall utilize any other such services which have not been so interrupted or will deliver such notice in order to ensure prompt receipt thereof. 3.5 Time Time will be of the essence hereof. 3.6 Enurement This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors, heirs and personal representatives, as the case may be. The obligations of the parties under this Agreement are non-assignable. 3.7 Severability If any one or more of the provisions contained in this Agreement is invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality, and enforceability of such provision or provisions will not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby. 3.8 Counterparts This Agreement may be executed by the parties in separate counterparts each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. A faxed signature shall be deemed an original copy for purposes hereof. 3.9 Further Assurances The parties hereto shall with reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate any transaction contemplated hereby, and each party shall execute and deliver such further documents or instruments required by any other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions. 3.10 Execution This Agreement is binding on each of the parties at the time this Agreement (or a counterpart hereof) is executed. THE PARTIES HAVE EXECUTED this agreement and Schedule "A" hereto effective the day and year first above written. STRATEGIC TECHNOLOGIES INC. by: /s/ Douglas H. Blakeway ----------------------- Douglas H. Blakeway, Chairman and Chief Executive Officer Attest: /s/ Bernie Zinkhofer -------------------- Bernhard Zinkhofer, Secretary Execution Date: October 18, 1995 DIGITAL PRODUCTS CORPORATION by: /s/ Richard Angulo ------------------ Richard Angulo, President and Chief Executive Officer Attest: /s/ Thomas P. Gallagher Execution Date: October 20, ----------------------- Thomas P. Gallagher 1995 Secretary SCHEDULE "A" This is Schedule "A" to the Shareholders' Agreement among Strategic Technologies Inc., certain Strategic Shareholders, Digital Products Corp. and certain Digital Shareholders.
Name, Address and Fax Number of Strategic Number of Shareholder Securities Signature Date Doug Blakeway and 670,877 shares /s/ Doug Blakeway October 18, 1995 Geni D Ventures Inc. 274,350 warrants Bernie Zinkhofer 54,870 shares /s/ Bernie Zinkhofer October 18, 1995 3,750 warrants Jack Stott 11,427 shares /s/ Jack Stott October 18, 1995 Ken Tolmie 64,857 shares /s/ Ken Tolmie October 18, 1995 2,500 warrants Bud Boyer 267,540 shares /s/ Bud Boyer October 18, 1995 37,810 warrants
Name, Address and Fax Number of Digital Number of Shareholder Securities Signature Date Richard Angulo 850,000 shares /s/ Richard Angulo October 20, 1995 486,140 options Clinton Pagano 150,000 shares /s/ Clinton Pagano October 20, 1995 132,340 options John E. Dell 629,127 shares /s/ John E. Dell October 20, 1995 396,500 options Mike Marino 50,000 shares /s/ Mike Marino October 20, 1995 120,250 options Mason, Briody, 120,000 shares /s/ Thomas P. Gallagher October 20, 1995 Gallagher & Taylor 0 options
EX-99.4 5 EXHIBIT 4 --------- NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR, IF AN EXEMPTION FROM REGISTRATION SHALL BE AVAILABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. New York Time, on October 12, 1996 Warrant to Purchase 500,000 Shares of Common Stock. WARRANT TO PURCHASE COMMON STOCK OF DIGITAL PRODUCTS CORPORATION This is to certify that, in consideration for the execution by Strategic Technologies, Inc. (the "Holder") of a letter agreement dated August 1, 1995 as amended on August 31, 1995, September 15, 1995, September 22, 1995 and October 6, 1995 ("Letter of Intent") relating to a proposed merger transaction between the Holder and Digital Products Corporation (the "Company") pursuant to the terms of a Merger Agreement dated October 13, 1995 between the Holder, Strategic Florida Inc. ("Merger Sub") and the Company (the "Merger Agreement), the Holder is entitled to purchase, subject to the provisions of this Warrant, from the Company, 500,000 fully paid, validly issued and nonassessable shares of Common Stock, $.025 par value, of the Company ("Common Stock") at a price of $.25 per share on or before October 12, 1996 (the "Expiration Date") only if one of the conditions set forth in paragraph 1 below is met. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". 1. EXERCISE OF WARRANT. (a) The Warrant may be exercised as to the Warrant Shares if, before the Expiration Date, the Merger Agreement has been terminated without consummation of the Merger as a result of any of the following events in (i) to (vi): (i) the Board of Directors of the Company withdraws or modifies its approval or recommendation of the Merger Agreement or the Merger, approves or recommends another takeover proposal, enters into an agreement with respect to another takeover proposal or terminates the Merger Agreement (other than as a result of a willful and material breach of the Merger Agreement by the Holder or Merger Sub (which breach shall not have been cured within five business days following the Holder's receipt of written notice of such breach from the Company, (ii) the requisite approval of the Company's stockholders for the Merger is not obtained at the Company Stockholders' Meeting; (iii) more than 2 1/2% of shares of the Company become subject to dissent; (iv) the Company Stockholders' Meeting does not occur prior to the termination of the Merger Agreement pursuant to Section 7.1(b)(ii) of the Merger Agreement; or (v) there is a material breach of any representation, warranty or covenant thereof by the Company which is not remedied prior to the Effective Time (as defined in the Merger Agreement) and/or (vi) the Merger is terminated by virtue of failure to meet the conditions precedent to closing set forth in Section 6.2(d), Section 6.3(e), and/or Section 6.1(d) of the Merger Agreement. (b) This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form, provided however, in lieu of all or a portion of such cash payment, the Holder may receive a credit against such purchase price in an amount equal to the PaidExpenses. As soon as practicable after each such exercise of the Warrants, but no later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder. Upon receipt by the Company of this Warrant at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (c) Compliance with the Securities Act. (1) The Holder may exercise ---------------------------------- its Warrants if it is an "accredited investor" or a "qualified institutional buyer", as defined in Regulation D and Rule 144A under the Securities Act, respectively, provided each of the following conditions is satisfied: (a) The Holder establishes to the reasonable satisfaction of the Company that it is an "accredited investor" or "qualified institutional buyer"; and (b) The Holder represents that it is acquiring the underlying common stock for its own account and that it is not acquiring such underlying common stock with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States or any state thereof, but subject, nevertheless, to the disposition of its property being at all times within its control. (2) In the event of a proposed exercise that does not qualify under Section (c)(1), the Holder may exercise its Warrants only if: (i) the Holder gives written notice to the Company of its intention to exercise, which notice (A) shall describe the manner and circumstances of the proposed transaction in reasonable detail and (B) shall designate the counsel for the Holder, which counsel shall be satisfactory to the Company; (ii) counsel for the Holder shall render an opinion, in form and substance satisfactory to the Company, to the effect that such proposed exercise may be effected without registration under the Securities Act or under applicable Blue Sky laws; and (iii) the Holder complies with Section (c)(1)(b) above. (d) This Warrant may not be assigned in whole or in part without the prior written consent of the Company. (3) All stock certificates issued pursuant to the exercise of the Warrants shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS. 2. RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. 3. FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. The Company shall issue to the Holder the largest of whole shares purchasable upon exercise of this Warrant. The Company shall not be required to make any cash or other adjustment in respect of such fraction of a share to which the Holder would otherwise be entitled. 4. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. 6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (ii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock immediately prior to such action. Such adjustment shall be made each time any event listed above shall occur. (b) If the Company shall issue rights, options or warrants exercisable into Common Stock to all holders of its Common Stock entitling them to subscribe for, purchase or receive shares of Common Stock, the Exercise Price shall be subject to adjustment as follows. If the price at which Common Stock is issuable pursuant to such rights, options or warrants (the "Subscription Price") is less than the current market price of the Common Stock (as defined in Subsection (h) below) on the record date for such distribution, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Subscription Price of the total number of shares of Common Stock issuable upon exercise of such rights, options or warrants would purchase at the then current market price of the Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon exercise of such rights, options or warrants. If the Subscription Price is greater than or equal to the current market price (as defined in Subsection (h) below) of the Common Stock on the record date for such distribution, but less than the then effective Exercise Price, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Subscription Price of the total number of shares of Common Stock issuable upon exercise of such rights or options would purchase at the Exercise Price in effect immediately prior to such issuance and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon exercise of such rights, options or warrants. If the Subscription Price is greater than or equal to the current market price of the Common Stock on the record date for such distribution, and greater than or equal to the then effective Exercise Price, then there shall be no adjustment under this Subsection. Such adjustment shall be made each time such rights, warrants or options are issued and shall become effective immediately after the record date for the determination of Shareholders entitled to receive such rights, warrants or options; and to the extent that any such rights, warrants or options expire or are redeemed without the exercise or conversion thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the basis of the issuance of only the number of shares of Common Stock actually issued. (c) If the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (a) above) or subscription rights or warrants (excluding those referred to in Subsection (b) above),then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Subsection (h) below), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made each time such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (d) If the Company shall issue shares of its Common Stock, (excluding shares issued (i) in any transactions described in Subsection (a) above, (ii) upon exercise of existing stock options granted to the Company's employees, (iii) upon exercise of this Warrant, and (iv) to the shareholders of any corporation which merges into the Company in proportion to their stockholdings of such corporation immediately prior to such merger, or (v) in a bona fide public offering pursuant to a firm commitment underwriting) and if no adjustment is required under any other subjection of this Section 6 (without regard to the Subsection (j) below), the Exercise Price shall be subject to adjustment as follows. If the price at which Common Stock is issued (the "Offering Price") is less than the current market price of the Common Stock (as defined in Subsection (h) below) on the record date for such distribution, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Offering Price of the total number of shares of Common Stock so issued would purchase at the then current market price of the Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock so issued. If the Subscription Price is greater than or equal to the current market price (as defined in Subsection (h) below) of the Common Stock on the date of such issuance, but less than the then effective Exercise Price, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Offering Price of the total number of shares of Common Stock so issued would purchase at the Exercise Price in effect immediately prior to such issuance and the denominator of which shall be the number of shares outstanding on such record date plus the number of shares of Common Stock so issued. If the Offering Price is greater than or equal to the current market price of the Common Stock on the record date for such distribution, and greater than or equal to the then effective Exercise Price, then there shall be no adjustment under this Subsection. Such adjustment shall be made each time such an issuance is made. (e) If the Company shall issue any securities convertible into or exchangeable into Common Stock (excluding securities issued in transactions, described in Subsections (b) and (d) above) the Exercise Price shall be subject to adjustment as follows. If the price at which Common Stock is issuable pursuant to such convertible securities (the "Conversion Price") is less than the current market price on the record date for such distribution, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Conversion Price of the total number of shares of Common Stock issuable upon conversion of the convertible securities would purchase at the then current market price of the Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon conversion of such convertible securities. If the Conversion Price is greater than or equal to the current market price (as defined in Subsection (h) below) of the Common Stock on the record date for such distribution, but less than the then effective Exercise Price, the Conversion Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Conversion Price of the total number of shares of Common Stock issuable upon conversion of the securities at the Exercise Price in effect immediately prior to such issuance and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon conversion of such convertible securities. If the Conversion Price is greater than or equal to the current market price of the Common Stock on the record date for such distribution, and greater than or equal to the then effective Exercise Price, then there shall be no adjustment under this Subsection. Such adjustment shall be made each time such convertible securities are issued and shall become effective immediately after the record date for the determination of holders entitled to receive such convertible securities; and to the extent that any such convertible securities expire or are redeemed without the conversion thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the basis of the issuance of only the number of shares of Common Stock actually issued. (f) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (g) For purposes of any computation respecting consideration received pursuant to Subsections (d) and (e) above, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (3) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this Subsection (g). (h) For the purpose of any computation under Subsections (b), (c), (d) and (e) above, the current market price per share of Common Stock at any date shall be deemed to be the lower of (i) the average of the mean of the high and low bid prices for 30 consecutive business days before such date or (ii) the mean of the high and low bid price on the business day immediately preceding such date, as reported by the National Association of Securities Dealers, Inc. or other similar organization if the National Association of Securities Dealers, Inc. is no longer reporting such information, or if not so available, the fair market price as determined by the Board of Directors in good faith in the exercise of their best business judgment taking into account all relevant information known to them. (j) All calculations under this Section 6 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section 6 to the contrary notwithstanding, the Company shall be entitled , but shall not be required, to make such changes in the Exercise Price in addition to those required by this Section 6, as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal Income tax liability to the holders of the Common Stock or securities convertible into Common Stock (including warrants). (k) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly cause a notice setting forth the adjusted Exercise Price and adjusted number of Shares issuable upon exercise of each Warrant to be mailed to the Holder, at its last address appearing in the Warrant Register. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section 6, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (m) In the event that at any time, as a result of an adjustment made pursuant to Subsection (a) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (a) to (j), inclusive above. (n) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. 7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the holder or any holder of a Warrant executed and delivered pursuant to Section 1 and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. 8. NOTICES TO WARRANT HOLDER. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least fifteen days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. 9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than the merger with the Holder or a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant, at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which said holder would have received if he had exercised this Warrant immediately prior to such transaction. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 9 shall similarly apply to successive reclassification, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (a) of Section 6 hereof. 10. TERMINATION. This Warrant shall terminate and become void on the Expiration Date. IN WITNESS WHEREOF, Digital has duly executed this Warrant as of the date first above written. Attest: DIGITAL PRODUCTS CORPORATION By: /s/ Thomas P. Gallagher By: /s/ Richard A. Angulo ----------------------- ------------------------------ Secretary Richard A. Angulo, President and Chief Executive Officer [SEAL] EX-99.5 6 EXHIBIT 5 --------- NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR, IF AN EXEMPTION FROM REGISTRATION SHALL BE AVAILABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. New York Time, on October 12, 1996. Warrant to Purchase 1,500,000 Shares of Common Stock. WARRANT TO PURCHASE COMMON STOCK OF DIGITAL PRODUCTS CORPORATION This is to certify that, in consideration for the execution by Strategic Technologies, Inc. (the "Holder") of an Agreement and Plan of Merger dated October 13, 1995 ("Merger Agreement") relating to a proposed merger transaction between the Holder, Strategic Florida Inc. ("Merger Sub") and Digital Products Corporation (the "Company"), the Holder is entitled to purchase, subject to the provisions of this Warrant, from the "Company", up to 1,500,000 fully paid, validly issued and nonassessable shares of Common Stock, $.025 par value, of the Company ("Common Stock") at a price of $.25 per share on or before October 12, 1996 (the "Expiration Date") only if one of the conditions set forth in paragraph 1 below is met. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock are subject to the provisions of Section 1(b) hereof and may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". 1. EXERCISE OF WARRANT. (a) The Warrant may be exercised as to the number of Warrant Shares set forth in Section 1(b) hereof only if, before the Expiration Date, the Holder has paid the expenses of the Company incurred to date (the "Paid Expenses") and the Merger Agreement has been terminated without consummation of the Merger as a result of any of the following events in (i) to (vi): (i) the Board of Directors of the Company withdraws or modifies its approval or recommendation of the Merger Agreement or the Merger, approves or recommends another takeover proposal, enters into an agreement with respect to another takeover proposal or terminates the Merger Agreement (other than as a result of a willful and material breach of the Merger Agreement by the Holder or Merger Sub (which breach shall not have been cured within five business days following the Holder's receipt of written notice of such breach from the Company, (ii) the requisite approval of the Company's stockholders for the Merger is not obtained at the Company Stockholders' Meeting; (iii) more than 2 1/2% of shares of the Company become subject to dissent; (iv) the Company Stockholders' Meeting does not occur prior to the termination of the Merger Agreement pursuant to Section 7.1(b)(ii) of the Merger Agreement; or (v) there is a material breach of any representation, warranty or covenant thereof by the Company which is not remedied prior to the Effective Time (as defined in the Merger Agreement) and/or (vi) the Merger is terminated by virtue of failure to meet the conditions precedent to closing set forth in Section 6.2(d), Section 6.3(e), and/or Section 6.1(d) of the Merger Agreement. (b) In the event the Merger terminates for any reason other than those set forth in subsection 5.9(b) (i), (ii), (iv) or Section 6.3(e) of the Merger Agreement, this Warrant may only be exercisable to the extent of the Paid Expenses. In the event the Merger terminates as a result of an event set forth in subsection 5.9(b) (i), (ii), (iv) or Section 6.3(e) of the Merger Agreement, this Warrant may be exercisable in full. (c) This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form or through a credit against the Paid Expenses as set forth in Section 1(b) above. As soon as practicable after each such exercise of the Warrants, but no later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder. Upon receipt by the Company of this Warrant at its office in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (d) Compliance with the Securities Act. (1) The Holder may exercise ---------------------------------- its Warrants if it is an "accredited investor" or a "qualified institutional buyer", as defined in Regulation D and Rule 144A under the Securities Act, respectively, provided each of the following conditions is satisfied: (a) The Holder establishes to the reasonable satisfaction of the Company that it is an "accredited investor" or "qualified institutional buyer"; and (b) The Holder represents that it is acquiring the underlying common stock for its own account and that it is not acquiring such underlying common stock with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States or any state thereof, but subject, nevertheless, to the disposition of its property being at all times within its control. (2) In the event of a proposed exercise that does not qualify under Section (d)(1), the Holder may exercise its Warrants only if: (i) the Holder gives written notice to the Company of its intention to exercise, which notice (A) shall describe the manner and circumstances of the proposed transaction in reasonable detail and (B) shall designate the counsel for the Holder, which counsel shall be satisfactory to the Company; (ii) counsel for the Holder shall render an opinion, in form and substance satisfactory to the Company, to the effect that such proposed exercise may be effected without registration under the Securities Act or under applicable Blue Sky laws; and (iii) the Holder complies with Sections (d)(1)(b) above. (e) This Warrant may not be assigned in whole or in part without the prior written consent of the Company. (3) All stock certificates issued pursuant to the exercise of the Warrants shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS. 2. RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. 3. FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. The Company shall issue to the Holder the largest number of whole shares purchasable upon exercise of the Warrant. The Company shall not be required to make any cash or other adjustment in respect of such fraction of a share to which the Holder would otherwise be entitled. 4. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. 6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (ii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock immediately prior to such action. Such adjustment shall be made each time any event listed above shall occur. (b) If the Company shall issue rights, options or warrants exercisable into Common Stock to all holders of its Common Stock entitling them to subscribe for, purchase or receive shares of Common Stock, the Exercise Price shall be subject to adjustment as follows. If the price at which Common Stock is issuable pursuant to such rights, options or warrants (the "Subscription Price") is less than the current market price of the Common Stock (as defined in Subsection (h) below) on the record date for such distribution, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Subscription Price of the total number of shares of Common Stock issuable upon exercise of such rights, options or warrants would purchase at the then current market price of the Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon exercise of such rights, options or warrants. If the Subscription Price is greater than or equal to the current market price (as defined in Subsection (h) below) of the Common Stock on the record date for such distribution, but less than the then effective Exercise Price, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Subscription Price of the total number of shares of Common Stock issuable upon exercise of such rights or options would purchase at the Exercise Price in effect immediately prior to such issuance and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon exercise of such rights, options or warrants. If the Subscription Price is greater than or equal to the current market price of the Common Stock on the record date for such distribution, and greater than or equal to the then effective Exercise Price, then there shall be no adjustment under this Subsection. Such adjustment shall be made each time such rights, warrants or options are issued and shall become effective immediately after the record date for the determination of Shareholders entitled to receive such rights, warrants or options; and to the extent that any such rights, warrants or options expire or are redeemed without the exercise or conversion thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the basis of the issuance of only the number of shares of Common Stock actually issued. (c) If the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (a) above) or subscription rights or warrants (excluding those referred to in Subsection (b) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Subsection (h) below), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made each time such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (d) If the Company shall issue shares of its Common Stock, (excluding shares issued (i) in any transactions described in Subsection (a) above, (ii) upon exercise of existing stock options granted to the Company's employees, (iii) upon exercise of this Warrant, and (iv) to the shareholders of any corporation which merges into the Company in proportion to their stockholdings of such corporation immediately prior to such merger, or (v) in a bona fide public offering pursuant to a firm commitment underwriting) and if no adjustment is required under any other subjection of this Section 6 (without regard to the Subsection (j) below), the Exercise Price shall be subject to adjustment as follows. If the price at which Common Stock is issued (the "Offering Price") is less than the current market price of the Common Stock (as defined in Subsection (h) below) on the record date for such distribution, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Offering Price of the total number of shares of Common Stock so issued would purchase at the then current market price of the Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock so issued. If the Subscription Price is greater than or equal to the current market price (as defined in Subsection (h) below) of the Common Stock on the date of such issuance, but less than the then effective Exercise Price, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Offering Price of the total number of shares of Common Stock so issued would purchase at the Exercise Price in effect immediately prior to such issuance and the denominator of which shall be the number of shares outstanding on such record date plus the number of shares of Common Stock so issued. If the Offering Price is greater than or equal to the current market price of the Common Stock on the record date for such distribution, and greater than or equal to the then effective Exercise Price, then there shall be no adjustment under this Subsection. Such adjustment shall be made each time such an issuance is made. (e) If the Company shall issue any securities convertible into or exchangeable into Common Stock (excluding securities issued in transactions, described in Subsections (b) and (d) above) the Exercise Price shall be subject to adjustment as follows. If the price at which Common Stock is issuable pursuant to such convertible securities (the "Conversion Price") is less than the current market price on the record date for such distribution, the Exercise Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Conversion Price of the total number of shares of Common Stock issuable upon conversion of the convertible securities would purchase at the then current market price of the Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon conversion of such convertible securities. If the Conversion Price is greater than or equal to the current market price (as defined in Subsection (h) below) of the Common Stock on the record date for such distribution, but less than the then effective Exercise Price, the Conversion Price in effect immediately prior to such issuance shall be multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock which the aggregate Conversion Price of the total number of shares of Common Stock issuable upon conversion of the securities at the Exercise Price in effect immediately prior to such issuance and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock issuable upon conversion of such convertible securities. If the Conversion Price is greater than or equal to the current market price of the Common Stock on the record date for such distribution, and greater than or equal to the then effective Exercise Price, then there shall be no adjustment under this Subsection. Such adjustment shall be made each time such convertible securities are issued and shall become effective immediately after the record date for the determination of holders entitled to receive such convertible securities; and to the extent that any such convertible securities expire or are redeemed without the conversion thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the basis of the issuance of only the number of shares of Common Stock actually issued. (f) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (g) For purposes of any computation respecting consideration received pursuant to Subsections (d) and (e) above, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (3) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this Subsection (g). (h) For the purpose of any computation under Subsections (b), (c), (d) and (e) above, the current market price per share of Common Stock at any date shall be deemed to be the lower of (i) the average of the mean of the high and low bid prices for 30 consecutive business days before such date or (ii) the mean of the high and low bid price on the business day immediately preceding such date as reported by the National Association of Securities Dealers, Inc., or other similar organization if the National Association of Securities Dealers, Inc., is no longer reporting such information, or if not so available, the fair market price as determined by the Board of Directors in good faith in the exercise of their best business judgment taking into account all relevant information known to them. (j) All calculations under this Section 6 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section 6 to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price in addition to those required by this Section 6, as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal Income tax liability to the holders of the Common Stock or securities convertible into Common Stock (including warrants). (k) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly cause a notice setting forth the adjusted Exercise Price and adjusted number of Shares issuable upon exercise of each Warrant to be mailed to the Holder, at its last address appearing in the Warrant Register. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section 6, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (m) In the event that at any time, as a result of an adjustment made pursuant to Subsection (a) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (a) to (j), inclusive above. (n) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. 7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the holder or any holder of a Warrant executed and delivered pursuant to Section 1 and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. 8. NOTICES TO WARRANT HOLDER. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least fifteen days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. 9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than the merger contemplated by the Merger Agreement or a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant, at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which said holder would have received if he had exercised this Warrant immediately prior to such transaction. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 9 shall similarly apply to successive reclassification, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (a) of Section 6 hereof. 10. TERMINATION. This Warrant shall terminate and become void on the Expiration Date. IN WITNESS WHEREOF, Digital has duly executed this Warrant as of the date first above written. Attest: DIGITAL PRODUCTS CORPORATION By: /s/ Thomas P. Gallagher By: /s/ Richard A. Angulo ----------------------- ------------------------------------ Secretary Richard A. Angulo, President and Chief Executive Officer [SEAL] EX-99.6 7 EXHIBIT 6 --------- CONDITIONAL EMPLOYMENT AGREEMENT THIS AGREEMENT is made the 13th day of October, 1995 BETWEEN: Strategic TECHNOLOGIES INC. ("Strategic") AND: DIGITAL PRODUCTS CORPORATION ("Digital") AND: RICHARD A. ANGULO (the "Executive") WHEREAS Digital and Strategic have agreed to merge pursuant to an Agreement and Plan of Merger dated October 13, 1995 (the "Merger Agreement"); AND WHEREAS the Executive is currently the Chief Executive of Digital and the parties have agreed that conditional upon completion of the merger that the Executive will serve as the Chief Operating Officer of Strategic and Chief Executive Officer of Digital. NOW THEREFORE THIS AGREEMENT WITNESSETH: 1. Engagement: ----------- At the Effective Time as defined in the Merger Agreement the Executive shall be appointed a Director of and Vice-President and Chief Operating Officer of Strategic and will also continue to serve as the Chief Executive Officer of Digital. The Executive hereby agrees to serve Digital and Strategic in the foregoing offices subject to the terms hereof. 2. Terms of Employment and Strategic Guarantee: -------------------------------------------- The Executive shall be remunerated and the parties shall be governed by the terms of the Executive Employment Agreement dated July 3, 1995 except as hereinafter amended. The parties acknowledge that the engagement of the Executive by Strategic shall be for nominal consideration and the Executive shall continue to be remunerated by Digital. Strategic does hereby guarantee the due performance by Digital of all of its covenants pursuant to the Employment Agreement as hereby amended. 3. Amendment to Employment Agreement Terms: --------------------------------------- (a) Paragraph 5 (b) of the Employment Agreement is deleted on the Effective Date, as defined in the Merger Agreement, and the following new paragraph 5 (b) is substituted in its place instead: (b) Executive will receive an annual bonus in an amount up to Two Hundred and Fifty Thousand Dollars ($250,000.00 US) based on the annual net income of Strategic on a consolidated basis calculated from the Effective Date as follows: (i) Five per cent (5%) of the first One Million Dollars ($1,000,000.00 US) of Strategic net income before taxes on a consolidated basis; (ii) Four per cent (4%) of the next One Million Dollars ($1,000,000.00 US) of Strategic net income before taxes on a consolidated basis; (iii) Three per cent (3%) of the next One Million Dollars ($1,000,000.00 US) of Strategic net income before taxes on a consolidated basis; and (iv) Two per cent (2%) on any amount in excess of Three Million Dollars ($3,000,000.00 US) of Strategic net income before taxes on a consolidated basis to the maximum bonus of $250,000 US. (b) Strategic and Digital hereby agreed to indemnify the Executive with respect to any good faith actions taken by the Executive in connection with the services provided hereunder and particularly with respect to the negotiation, execution and consummation of the merger transaction between Strategic and Digital. (c) Digital and Strategic acknowledge that the Executive shall have the right to elect to terminate this Agreement and thereby cease his engagement to render services to Digital and Strategic by notice in writing to Strategic and Digital if any of the following events occur during the term of the Employment Agreement: (a) The Executive ceases to have the duties and authority of the offices herein provided or such duties are modified so that they are not commensurate with the usual duties generally applicable to such offices; (b) The Executive is required to relocate his place of employment outside of Pompano Beach, Florida (although this right shall not affect Strategic's or Digital's right to relocate the Pompano Beach facilities, in which event arrangements will be negotiated to provide home office or similar facilities for the Executive to continue to render services in the Pompano Beach area); or (c) There is any reduction in the Executive's base salary, benefits or bonus hereunder. In the event of a termination pursuant to one of the foregoing sub-paragraphs the Executive shall be entitled to receive a lump sum payment equal to the aggregate annual salary for the balance of the Term discounted to a present value at an assumed interest rate of eight per cent (8%) p.a. provided, however, that notwithstanding the foregoing, in the event that any payment or benefit received, or to be received, by the Executive (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with Digital) would not be deductible as a result of Section 280G of the Internal Revenue Code of 1986, as amended, by Digital, an affiliate or other person making such payment or providing such benefit, then the total payments shall be reduced to the extent necessary to make the payment fully deductible. 4. General Provisions: ------------------ (a) This Agreement shall be construed and enforced under the laws of the State of Florida. (b) Notices shall be deliverable hereunder: if to Strategic: Building A, Unit 102 or to Digital 17802 - 66th Avenue Surrey, BC V3S 7X1 Fax: 604-576-0436 Attention: Doug Blakeway ------------------------- with a copy to: Lang Michener Lawrence and Shaw 2500-595 Burrard Street Vancouver, BC V7X 1L1 Fax: 604-685-7084 Attention: Bernhard Zinkhofer ------------------------------ if to Executive: 511 N.W. 85 Way Pembroke Pines, Florida U.S.A. 33024 All notices shall be deemed to have been properly given when delivered personally to the foregoing addresses. IN WITNESS WHEREOF the parties have caused this Agreement to be executed effective the date first above written. STRATEGIC TECHNOLOGIES INC. Per:/s/ Douglas Blakeway -------------------- Execution Date: October 18, 1995 ---------------- DIGITAL PRODUCTS CORPORATION Per: /s/ Thomas P. Gallagher ----------------------- Execution Date: October 20, 1995 ---------------- /s/ Richard A. Angulo - --------------------- RICHARD A. ANGULO Execution Date: October 20, 1995 ---------------- EX-99.7 8 EXHIBIT 7 --------- STRATEGIC TECHNOLOGIES INC. DIGITAL PRODUCTS CORPORATION ("STRATEGIC") ("Digital") Building A, Unit 102 17802 66th Avenue 800 N.W. 33rd St. Surrey, British Columbia V3S 7X1 Pompano Beach, Florida Telephone: (604) 576-8658 USA 33064 Telecopier: (604) 576-0436 Telephone: (305) 783-9600 Contact: Doug H. Blakeway Telecopier: (305) 783-9609 VSE Trading Symbol: STI Contact: Richard A. Angulo OTC Electronic Bulletin Board: SGTKF OTC Electronic Bulletin Board: DIPC NEWS RELEASE October 23, 1995 STRATEGIC TECHNOLOGIES INC. AND DIGITAL PRODUCTS CORP. SIGN FORMAL MERGER AGREEMENT Vancouver, British Columbia: Douglas H. Blakeway, President and CEO of Strategic, and Richard A. Angulo, President and CEO of Digital, announce that further to the August 1, 1995 agreement in principle to merge the two Companies a Definitive Agreement and Plan of Merger has been executed between the Companies whereby Digital will become a wholly owned subsidiary of STRATEGIC. Pursuant to the transaction, each outstanding share of Digital common stock will be converted into .379291 of a share of Strategic common stock. Upon completion of the merger and a proposed private placement of 500,000 shares of Strategic common stock, Strategic will have approximately 10.9 million shares outstanding (11.9 million fully diluted), of which 4.4 million shares and 600,000 options will be held by former Digital shareholders. Digital and Strategic have the number two and three market share positions in the North American Electronic Supervision and Offender Monitoring business. The combined companies are expected to have gross revenues in the $14 million US per annum range. In conjunction with the Definitive Agreement and Plan of Merger certain principal shareholders of both Companies, including members of the Boards of the Companies, have executed a related Shareholders' Agreement whereby the signatories have confirmed their intention to vote for and support the merger and to provide for certain post-closing governance matters relating to Strategic. Strategic and Digital have also agreed to immediately begin joint marketing of their respective product lines and integration of certain other business operations. Strategic has been issued a one year warrant to acquire 500,000 shares of Digital at $0.25 per share plus a conditional warrant to acquire an additional 1,500,000 Digital shares in consideration of agreeing to bear certain transaction costs (exercisable in the event of non-consummation). It is anticipated that the merger will be consummated early 1996. The transaction is conditioned on obtaining the approval of the shareholders of both Strategic and Digital, the approval of United States and Canadian securities regulators and the listing of the Strategic common shares on the Toronto Stock Exchange, as well as other conditions. Upon consummation of the merger the Board of Directors will consist of nine persons, including Strategic's five existing directors and four Digital directors. Douglas H. Blakeway will become Chairman of the Board of Directors and CEO, and Richard A. Angulo will become the Vice-President and COO upon the effective date of the merger. Douglas Blakeway stated "We are pleased that the Companies were able to expeditiously reach a Definitive Merger Agreement and that significant shareholders of both Companies have agreed to support the merger." Richard A. Angulo stated "The formal Merger Agreement represents a significant milestone for Digital. We look forward to working with Strategic as both parties are of the view that the expanded product line now available to customers of both Companies will enhance the competitive position of both Companies in the marketplace." In-residence monitoring of offenders is fast becoming a preferable alternative to the serious problem of prison overcrowding in Canada and the United States. Strategic is the only Canadian manufacturer of electronic supervision equipment for use in court ordered home curfew programs. Strategic markets its leading edge technology under the name SureTrac and SureTalk in Canada, the United States and Australia. Digital is a major provider of global information management solutions to the criminal justice and corrections industry, the construction trade. Further information will be released as the transaction progresses. ON BEHALF OF THE BOARD ON BEHALF OF THE BOARD STRATEGIC Technologies, Inc. Digital Products Corporation Per: Per: Douglas H. Blakeway Richard A. Angulo President & Chief Executive Officer President & Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----