FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Date of Report (Date of earliest event reported) May 31, 2000.
DCI Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 2-96976-D 84-1155041
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
611 Access Road, Stratford, CT 06615
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(Address of principal executive offices)
Registrant's telephone number, including area code:(203) 380-0910
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(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
DCI Telecommuncations, Inc. on May 31, 2000 sold its Fone.com
subsidiary in an arms length negotiation to Tanner's Restaurant
Group (OTCBB:ROTI) which has entered the telecommunications field.
It was a stock for stock exchange. DCI common stock holders will
receive common shares in Tanner's in the future. A record date will
be established after the Tanner's stock is registered and ready for
a stock dividend. Fone.com represented less than 2% of the total
assets and less than 1% of the total sales of DCI. Thus, it
did not meet the substantially all rule and shareholders approval
was not required. There is no relationship between the parties.
Item 7. Financial Statements and Exhibits
a) Exhibits
2.1 Stock Purchase Agreement by and between Tanner's Restaurant
Group, Inc. and DCI Telecommunications regarding all of the
shares of Fone.com, Ltd. Dated May 31, 2000.
23.1 Opinion of Counsel
SIGNATURES
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 hereunto duly authorized.
DCI TELECOMMUNICATIONS, Inc.
By: /s/ John J. Adams
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Name: John J. Adams
Title: President
Date: June 19, 2000
Exhibit Index
Exhibit No. Description
2.0 Stock Purchase Agreement by and between Tanner's Restaurant
Group, Inc. and DCI Telecommunications regarding all of the
shares of Fone.com, Ltd. Dated May 31, 2000.
23.1 Opinion of Counsel
STOCK PURCHASE AGREEMENT
May 31, 2000
By and Between
TANNER'S RESTAURANT GROUP, INC.
(a Texas corporation)
and
DCI TELECOMMUNICATIONS, INC.
(a Colorado corporation)
regarding all of the shares of
FONE.COM, LIMITED
(a corporation organized under the laws of England and Wales)
TABLE OF CONTENTS
THE PURCHASE 4
PURCHASE AND SALE OF SHARES 4
TIME AND PLACE OF CLOSING 4
OFFICERS AND DIRECTORS OF THE COMPANY 5
PURCHASE PRICE AND PAYMENT OF PURCHASE PRICE 5
PURCHASE PRICE 5
PAYMENT OF PURCHASE PRICE 5
SURRENDER AND EXCHANGE OF CERTIFICATES 5
LEGENDING OF SECURITIES 6
TRANSFER TAXES 7
RULES OF CONSTRUCTION 7
REPRESENTATIONS AND WARRANTIES OF DCI 8
ORGANIZATION 9
CAPITALIZATION 9
AUTHORITY; NO VIOLATION 10
FINANCIAL STATEMENTS 11
BROKER'S AND OTHER FEES 11
ABSENCE OF CERTAIN CHANGES OR EVENTS 12
LEGAL PROCEEDINGS 12
TAXES AND TAX RETURNS 12
EMPLOYEE BENEFIT PLANS AND RELATIONS 13
COMPLIANCE WITH APPLICABLE LAWS 15
CERTAIN CONTRACTS 15
PROPERTIES AND INSURANCE 17
ENVIRONMENTAL MATTERS 18
INTELLECTUAL PROPERTY 18
[INTENTIONALLY OMITTED] 19
THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN SOFTWARE 20
NO PARACHUTE PAYMENTS 20
ABSENCE OF CERTAIN AGREEMENTS AND PRACTICES 20
MAJOR VENDORS AND CUSTOMERS 21
ACCOUNTS RECEIVABLE 21
BANK ACCOUNTS 21
CORPORATE RECORDS 21
COMBINATIONS INVOLVING THE COMPANY 21
LABOR RELATIONS 21
YEAR 2000 MATTERS. 22
CHANGE IN CONTROL PROVISIONS. 22
DISCLOSURE. 22
SECURITIES ACT COMPLIANCE 23
NO PRIOR CONVICTIONS 23
TAX ADVICE 23
REPRESENTATIONS AND WARRANTIES OF PURCHASER. 23
CORPORATE ORGANIZATION 23
CAPITALIZATION 24
AUTHORITY; NO VIOLATION. 24
FINANCIAL STATEMENTS 25
BROKER'S AND OTHER FEES 25
LEGAL PROCEEDINGS 25
TAXES AND TAX RETURNS 26
BUYER COMMON STOCK 26
COVENANTS AND AGREEMENTS OF THE PARTIES 27
NO SOLICITATION 27
CURRENT INFORMATION 28
ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY 28
REGULATORY MATTERS; CONSENTS; COOPERATION, ETC. 30
PARTIES' EFFORTS; FURTHER ASSURANCES; COOPERATION 30
PUBLIC ANNOUNCEMENTS 30
FAILURE TO FULFILL CONDITIONS 31
DISCLOSURE SUPPLEMENTS 31
RELEASE; COVENANT NOT TO SUE 31
INTENTIONALLY OMITTED 32
NO TRANSFERS 32
SPECIAL PROVISIONS WITH RESPECT TO SELLER 32
COOPERATION AND EXCHANGE OF INFORMATION 32
CUSTOMER CONTACTS 32
REGISTRATION 32
NON-COMPETITION 32
CLOSING CONDITIONS 34
CONDITIONS OF EACH PARTY'S OBLIGATIONS UNDER
THIS AGREEMENT 34
APPROVALS AND REGULATORY FILINGS 34
CONDITIONS TO THE OBLIGATIONS OF PURCHASER UNDER THIS
AGREEMENT 34
CONDITIONS TO THE OBLIGATIONS OF DCI UNDER
THIS AGREEMENT 36
TERMINATION, AMENDMENT AND WAIVER 37
TERMINATION 37
EFFECT OF TERMINATION 37
AMENDMENT 38
EXTENSION; WAIVER 38
INDEMNIFICATION 38
INDEMNIFICATION BY THE DCI 38
INDEMNIFICATION BY BUYER 38
CLAIMS FOR INDEMNIFICATION 39
DEFENSE OF CLAIM BY THIRD PARTIES 39
THIRD PARTY CLAIM ASSISTANCE 40
SETTLEMENT OF INDEMNIFICATION CLAIMS 40
[INTENTIONALLY OMITTED]
CERTAIN LIMITATIONS 40
MISCELLANEOUS 41
EXPENSES 41
NOTICES 41
PARTIES IN INTEREST 42
ENTIRE AGREEMENT. 42
COUNTERPARTS; FACSIMILES 43
GOVERNING LAW 43
ARBITRATION 43
INVALIDITY OF ANY PART 43
TIME OF THE ESSENCE; COMPUTATION OF TIME 44
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the Agreement) is made as of May
31, 2000, by and between TANNER'S RESTAURANT GROUP, INC., a Texas
corporation (Purchaser), and DCI TELECOMMUNICATIONS, INC., a Colorado
corporation (DCI). Purchaser and DCI are hereinafter collectively
called the Parties.
W I T N E S S E T H :
WHEREAS, DCI owns two shares of the common stock of FONE.COM,
LIMITED, a corporation organized under the laws of England and Wales
(the Company), constituting one hundred percent (100%) of the issued
and outstanding shares of the Company's common stock (the Company
Common Stock);
WHEREAS, the Parties have agreed that it is in their best
interests for Purchaser to purchase and for DCI to sell all of the
Company Common Stock; and
WHEREAS, the Board of Directors of Purchaser has approved the
purchase of the Company Common Stock and the Board of Directors of
DCI has approved the sale of the Company Common Stock upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set
forth herein, the Parties agree as follows:
ARTICLE 1
THE PURCHASE
1.1 Purchase and Sale of Shares. Upon the terms and subject to the
conditions of this Agreement, DCI shall sell to Purchaser, and
Purchaser shall purchase from DCI, all of the Company Common Stock.
1.2 Time and Place of Closing. The consummation of the transactions
contemplated by this Agreement (the Closing) shall take place at the
offices of Nelson Mullins Riley & Scarborough, L.L.P., 999 Peachtree
Street, N.E., Suite 1400, Atlanta, Georgia 30309 at 10:00 a.m. on the
first business day after all conditions set forth in Article 8 (other
than the delivery of certificates, opinions and other instruments and
documents to be delivered at the Closing) have been satisfied or
waived in writing, or at such other place and time as Purchaser and
DCI may agree (the Closing Date). At the Closing, the parties shall
execute and deliver the certificates, opinions and other instruments
and documents referred to in Article 8.
ARTICLE 2
OFFICERS AND DIRECTORS
Effective as soon as possible following the Closing, upon
receipt of the approval of the shareholders of Purchaser in
accordance with applicable federal and state law, certain officers and
directors of Purchaser shall resign as directors and officers of
Purchaser, and the following officers and directors of the Company
shall be appointed as officers and directors of Purchaser:
(a) Larry Shatsoff, President and Director; and
(b) Clifford Postelnik, Director.
The officers and directors of the Company shall remain the
officers and directors of the Company following the closing.
ARTICLE 3
PURCHASE PRICE AND PAYMENT OF PURCHASE PRICE
3.1 Purchase Price. Subject to the terms of this Agreement and the
related agreements and documents, the purchase price (Purchase Price)
for all of the Company Common Stock shall be 40,000,000 shares of
common stock, par value $.01 per share, of Purchaser (Purchaser
Common Stock) and the assumption by Purchaser of those liabilities
of DCI set forth on Exhibit 3.1 hereto.
3.2 Payment of Purchase Price. At the Closing, Purchaser shall
deliver (or cause to be delivered) the Purchase Price as follows:
(a) to DCI, certificates representing 40,000,000 shares of
Purchaser Common Stock issued in the name of DCI.
(b) Purchaser and DCI shall execute and deliver those
certain Assumption Agreements of which copies are attached hereto as
Exhibits 3.2(c)(i), 3.2(c)(ii) and 3.2(c)(iii).
3.3 Surrender and Exchange of Certificates.
(a) Surrender of Certificates. At the Closing, Purchaser
shall deliver certificates for the number of shares of Purchaser
Common Stock provided for in Section 3.1 in a manner as provided in
Section 3.2 and DCI shall deliver certificates representing one
hundred percent (100%) of the issued and outstanding shares of the
Company Common Stock (properly issued, executed and countersigned, as
appropriate) (the Certificates). All payments in respect of Company
Common Stock that are made in accordance with the terms hereof shall
be deemed to have been made in full satisfaction of all rights
pertaining to such securities.
(b) [Intentionally Omitted]
(c) Dividends on Purchaser Common Stock. No holder of a
Certificate shall be entitled to delivery of any dividend or other
distribution from Purchaser having a record date after the Closing
Date until surrender of such holder's Certificate pursuant to this
Section 3.4. Upon such surrender, there shall be paid to the holder
the amount of any dividends or other distributions (without interest)
that theretofore became payable by Purchaser, but were not paid by
reason of the foregoing with respect to the number of whole shares of
Purchaser Common Stock represented by the Certificate(s) issued upon
such surrender. From and after the Closing Date, Purchaser shall,
however, be entitled to treat any such Certificate that has not yet
been surrendered pursuant to Section 3.4(a) as evidencing the
ownership of the aggregate Purchase Price represented by such
Certificate, notwithstanding any failure to surrender such
Certificate.
3.4 Legending of Securities.
(a) The shares of Purchaser Common Stock to be delivered in
connection with this Agreement will be issued in a transaction exempt
from registration under the Securities Act of 1933, as amended (the
Securities Act) by reason of Section 4(2) thereof or Regulation D
promulgated thereunder, and Purchaser is relying on the
representations of DCI with respect to such exemption. DCI
understands and agrees that stop transfer instructions with respect
to the shares of Purchaser Common Stock issued pursuant to this
Agreement will be given to Purchaser's transfer agent and that there
will be placed on the certificates for such shares a legend stating
in substance as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES ACT AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
PURCHASER, THE TRANSFER OF SUCH SECURITIES ARE NOT REQUIRED
TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE
PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED MAY 31,
2000, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED,
EXCEPT IN ACCORDANCE THEREWITH. COPIES OF SUCH
AGREEMENTS MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE COMPANY.
(b) The foregoing legends will also be placed on any
certificate representing securities issued subsequent to the original
issuance of the Purchaser Common Stock pursuant to this Agreement as
a result of any transfer of such shares or any stock dividend, stock
split or other recapitalization as long as the Purchaser Common Stock
issued pursuant to this Agreement has not been transferred in such a
manner as to justify the removal of the legend therefrom.
3.5 Transfer Taxes. DCI shall pay all taxes and fees incurred by
DCI, the Company, and Purchaser as a result of the transfer of the
Company Common Stock from DCI to Purchaser.
ARTICLE 4
RULES OF CONSTRUCTION
In the interpretation of this Agreement, unless otherwise
provided or the context otherwise requires:
(a) The singular includes the plural and vice versa and,
in particular (but without limiting the generality of the foregoing),
any word or expression defined in the singular has the corresponding
meaning used in the plural and vice versa;
(b) Any reference to any gender includes the other gender;
(c) Any reference to an Article, Section, Exhibit, clause,
subclause, paragraph, subparagraph, Schedule or recital is a
reference to an Article, Section, Exhibit, clause, subclause,
paragraph, subparagraph, Schedule or recital of this Agreement;
(d) Any reference to any agreement, instrument or other
document (i) shall include all appendices, exhibits and schedules
thereto and all agreements, documents or other writings incorporated
by reference therein, and (ii) shall be a reference to such
agreement, instrument or other document as amended, supplemented,
modified, suspended, restated or novated from time to time;
(e) Any reference to any statute shall be construed as
including all statutory provisions consolidating, amending or
replacing such statute and all governmental regulations and rules
promulgated thereunder;
(f) Any reference to writing includes printing, typing,
lithography and other means of reproducing words in a visible form;
(g) Any reference to a time or date or to a local time or
date is a reference to the time and date in Stratford, Connecticut;
(h) The headings and Article, Section and paragraph
numbering contained in this Agreement are used solely for convenience
and do not constitute a part of this Agreement, nor shall such
headings and numbering be used in any manner to aid in the
construction of this Agreement;
(i) References herein to the Company Disclosure Schedules
mean the disclosure schedules, dated as of the date hereof, which
have been delivered by the Company and/or DCI to Purchaser and all
other documents, agreements, and other items disclosed by the Company
and/or DCI in writing to the Purchaser and attached to such schedules
in connection with this Agreement, and references to a numbered
Company Disclosure Schedule shall mean that portion of the Company
Disclosure Schedules that refers to the specific section or
subsection of Article 5 of this Agreement;
(j) The term including means including, without
limitation;
(k) The term Governmental Authority means any United
States federal, state or local, or any foreign, governmental,
regulatory or administrative authority, agency, department, board,
investigative body or commission or any court, tribunal, or judicial
or arbitral body;
(l) The term Knowledge as used with respect to DCI and/or
the Company (including any references to DCI and/or the Company being
aware of a particular matter) means the actual knowledge of DCI
and/or the Company, their officers, directors or employees, and
information which DCI and/or the Company, their officers, directors
or employees reasonably should have known, given the nature of the
disclosure;
(m) The term Material Adverse Effect with respect to a
person or entity means any circumstance, change in, or effect on the
business and affairs of such person or entity or any Subsidiary
thereof that, individually or in the aggregate with any other
circumstances, changes in, or effects on, the business and affairs of
such person or entity and its Subsidiaries: (i) is, or would
reasonably be expected to be, materially adverse to the business,
operations, assets or liabilities, prospects, results of operations
or financial condition of such person or entity and its Subsidiaries,
taken as a whole, or (ii) would reasonably be expected to materially
adversely affect the ability of such person or entity and its
Subsidiaries to operate or conduct its or their business and affairs
in the manner in which it is currently operated or conducted or
contemplated by such person or entity to be operated or conducted;
(n) The term person means any individual, partnership,
limited liability company, firm, corporation, association, trust,
joint venture, unincorporated organization or other entity, as well
as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act (as defined herein);
(o) The term Subsidiary means any corporation,
partnership, joint venture or other legal entity in which a specified
person or entity, directly or indirectly, owns or controls the voting
of at least a 50% share or other equity interest or for which such
person or entity, directly or indirectly, acts as a general partner
or managing member;
(p) Each of the Parties acknowledges that it has had the
opportunity to negotiate the terms and provisions of this Agreement,
with the assistance and review of its counsel. This Agreement,
therefore, shall be construed without regard to any presumption or
other rule requiring construction against the party causing the
Agreement to be drafted.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF DCI
To induce Purchaser to enter into this Agreement and the other
Purchase Agreements, DCI hereby represents and warrants to Purchaser
as follows:
5.1 Organization.
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of England and
Wales. The Company has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business
as it is now being conducted, and, except as disclosed on Company
Disclosure Schedule 5.1(a), is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such
licensing or qualification necessary. The failure of the Company to
be licensed, qualified or in good standing in the jurisdictions
listed on Company Disclosure 5.1(a) does not have and is not
reasonably likely to have a Material Adverse Effect on the Company.
The Company has no subsidiaries.
(b) Company Disclosure Schedule 5.1(b) sets forth true and
correct copies of the Articles of Incorporation and Bylaws and
amendments thereto of the Company.
(c) Except as disclosed on Company Disclosure Schedule
5.1(c), the Company does not own or control, directly or indirectly,
any equity interest in any corporation, company, association,
partnership, joint venture or other entity.
5.2 Capitalization. DCI owns, of record and beneficially, good and
valid title to the Company Common Stock, and the Company Common Stock
is validly issued and are free and clear of any mortgage, charge
(whether fixed or floating), security interest, claim, right of first
refusal, or any other lien, encumbrance or restriction as to
transfer, use or possession, with no defects of title whatsoever, and
DCI has full and exclusive power, right and authority to vote the
Company Common Stock. Upon consummation of the Closing, Purchaser
shall obtain good and valid title to the Company Common Stock, free
and clear of all any mortgages, charges (whether fixed or floating),
security interests, claims, rights of first refusal, and any other
liens, encumbrances and restrictions as to transfer, use or
possession, with no defects of title whatsoever, and shall have full
and exclusive power, right and authority to vote the Company Common
Stock. The authorized capital stock of the Company consists of one
hundred (100) shares of Company Common Stock and no (0) shares of
preferred stock. As of the date hereof, there are two (2) shares of
Company Common Stock issued and outstanding, owned by DCI. There are
no options, warrants, or other rights to acquire Company Common Stock
or any other equity securities of the Company (collectively, Company
Stock). Neither the Company nor DCI has granted or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, purchase,
subscription or issuance of any shares of capital stock of the
Company or any securities representing the right to purchase,
subscribe or otherwise receive any shares of such capital stock or
any securities convertible into any such shares, and there are no
agreements or understandings with respect to voting any such shares.
5.3 Authority; No Violation.
(a) Except as disclosed on Company Disclosure Schedule
5.3(a) (collectively, the Company Approvals), no consents, approvals,
authorizations, clearances or orders of, filings or registrations
with or notices to (collectively Authorizations) any third party or
any Governmental Authority are necessary on behalf of the Company or
DCI in connection with (i) the execution and delivery by the Company
and DCI of this Agreement and (ii) the consummation by the Company
and DCI of the transactions contemplated hereby. Clifford Postelnik
is the sole director of the Company and he has taken fully approved
the transfer of the Company Common Stock to Purchaser. The Company
and DCI have the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The
execution and delivery of this Agreement and the other Purchase
Agreements (as defined herein) and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly approved by the Board of Directors of DCI in accordance with
the Articles of Incorporation and Bylaws of DCI and with applicable
Laws (as defined below). Except for the Company Approvals, no other
corporate proceedings on the part of the Company are necessary for
the Company and DCI to execute and deliver this Agreement and the
other Purchase Agreements to which they are a party and for the
Company and DCI to be bound by the terms hereof and thereof. This
Agreement and the other Purchase Agreements to which they are a party
have been duly and validly executed and delivered by the Company and
DCI and constitute the valid and binding obligation of the Company
and DCI enforceable against the Company and DCI in accordance with
its and their terms.
(b) Neither the execution and delivery by the Company and
DCI of this Agreement and the other Purchase Agreements to which they
are a party, nor the consummation by the Company and DCI of the
transactions contemplated hereby and thereby in accordance with the
terms hereof and thereof, nor compliance by the Company and DCI with
any of the terms or provisions hereof, will: (i) violate any
provision of the Company's Articles of Incorporation or Bylaws; (ii)
assuming that the Company Approvals are duly obtained, violate any
federal, state or local or foreign statute, code, ordinance, rule,
regulation, judgment, order, writ, ruling, decree or injunction of
any Governmental Authority (collectively, Laws) applicable to the
Company, DCI or any of its or their respective properties or assets;
or (iii) assuming that the Company Approvals are duly obtained,
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in
the creation of any lien, mortgage, security interest, pledge,
charge, other right of third parties or other encumbrance
(collectively, Liens) upon any of the respective properties or assets
of the Company or DCI under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
the Company or DCI is a party, or by which they or any of their
respective properties or assets may be bound or affected, except,
with respect to (ii) and (iii) above, such as individually or in the
aggregate will not have a Material Adverse Effect on the Company, and
which will not prevent or delay the consummation of the transactions
contemplated hereby.
5.4 Financial Statements.
(a) Company Disclosure Schedule 5.4(a) sets forth copies
of: (i) the balance sheet of the Company as of December 31, 1999, and
(ii) the statement of income for the period ended December 31, 1999
(together with the related notes, collectively, the Company Financial
Statements). The Company and DCI represent and warrant that the
business of the Company commenced in June 1999 and that there is no
predecessor entity of the Company for which financial statements are
required under the accounting and securities laws, rules and
regulations of the United States or England and Wales.
(b) The Company Financial Statements present fairly, in
all material respects, the financial position of the Company as of
the respective dates set forth therein, and the results of the
Company's operations and its cash flows for the respective periods
set forth therein.
(c) The books and records of the Company have been
maintained in material compliance with applicable legal and
accounting requirements.
(d) Except as and to the extent reflected, disclosed or
reserved against in the Company Financial Statements, or as disclosed
in Company Disclosure Schedule 5.4(d), since December 31, 1999, the
Company has not incurred any liabilities or obligations of any kind,
whether absolute, accrued, contingent or otherwise (Liabilities),
except in the ordinary course of business and consistent with past
practice (which, in the aggregate, are not material).
(e) Since December 31, 1999 there has not been any change,
occurrence or circumstance affecting the business, results of
operations or financial condition of the Company that has had,
individually or in the aggregate, a Material Adverse Effect, other
than changes, occurrences and circumstances disclosed by the Company
on the Company Disclosure Schedules.
(f) At the Closing, the Company shall not be indebted to
DCI.
5.5 Broker's and Other Fees. Except as disclosed in Company
Disclosure Schedule 5.5, neither the Company nor DCI has employed any
broker or finder or incurred any liability for any broker's or
finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement and the other Purchase
Agreements.
5.6 Absence of Certain Changes or Events.
(a) Except as disclosed in Company Disclosure Schedule
5.6(a), to the Knowledge of DCI or the Company, no facts or
conditions exist which will cause a Material Adverse Effect on the
Company in the future.
(b) Except for execution of this Agreement and the other
Purchase Agreements, the Company has conducted its business only in
the ordinary course, consistent with past practice since December 31,
1999.
5.7 Legal Proceedings. Except as disclosed in Company Disclosure
Schedule 5.7, neither the Company nor DCI is a party to any, and
there are no pending or, to the Knowledge of DCI or the Company,
threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against
the Company or DCI that involve the Company. Except as disclosed in
Company Disclosure Schedule 5.7, the Company is not a party to any
order, judgment or decree entered in any lawsuit or proceeding and
DCI is not a party to any order, judgment or decree entered in any
lawsuit or proceeding that involves the Company. Without limiting
the foregoing, except as disclosed in Company Disclosure Schedule
5.7, no actions, suits, demands, notices, claims, investigations or
proceedings are pending or, to the Knowledge of DCI or the Company,
threatened against or otherwise involving, directly or indirectly,
any officer, director, employee or agent of the Company (in
connection with such officer's, director's, employee's or agent's
activities on behalf of the Company or that otherwise relate,
directly or indirectly to the Company or its properties or
securities) including without limitation any notices, demand letters
or requests from any Governmental Authority relating to such
potential Liabilities, nor, to the Knowledge of DCI or the Company,
are there any circumstances which could lead to such actions, suits,
demands, notices, claims, investigations or proceedings. The matters
referenced on Company Disclosure Schedule 5.7, if resolved against
the Company or DCI, would not have a Material Adverse Effect on the
Company. DCI agrees to cooperate fully with the Company and Purchaser
in the defense of any claim or action referenced on Company
Disclosure Schedule 5.7 or otherwise brought against the Company
after the date of Closing.
5.8 Taxes and Tax Returns. Except as disclosed in Company
Disclosure Schedule 5.8:
(a) The Company has duly filed (and until the Closing Date will
so file) all returns, declarations, reports, information returns and
statements (Returns) required to be filed by it in respect of any
United States federal, state or local, or any foreign, Taxes and has
duly paid (and until the Closing Date will so pay) all such Taxes due
and payable. As used herein, Tax or Taxes means and includes any and
all taxes, fees, levies, assessments, duties, tariffs, imposts, and
other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including,
without limitation: foreign, domestic, central, local, state or other
jurisdictional taxes or other charges on or with respect to income,
estimated income, franchises, business, occupation, windfall or other
profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; license, registration and documentation fees;
and customs duties, tariffs, and similar charges. The Company has
established (and until the Closing Date will establish) on its books
and records reserves that are adequate for the payment of all Taxes
not yet due and payable, but are incurred in respect of the Company
through such date.
(b) None of the Returns of the Company have been examined by the
Internal Revenue Service (the IRS), or any other federal, state or
local or any foreign Governmental Authority within the past six
years. To the Knowledge of DCI and the Company, there are no audits
or other Governmental Authority proceedings presently pending nor any
other disputes pending with respect to, or claims asserted for, Taxes
upon the Company, nor has the Company given any currently outstanding
waivers or comparable consents regarding the application of any
statute of limitations with respect to any Taxes or Returns. There
are no Liens for Taxes upon the assets of the Company, except Liens
for Taxes not yet due. The Company and DCI have complied (and until
the Closing Date will comply) in all respects with all applicable
Laws relating to the payment and withholding of Taxes.
(c) The Company (i) has not requested any extension of time within
which to file any Return which Return has not since been filed; (ii)
is not a party to any agreement providing for the indemnification,
allocation or sharing of Taxes; (iii) is not required to include in
income any adjustment by reason of a voluntary change in accounting
method initiated by the Company (nor to the Knowledge of DCI and the
Company has any Governmental Authority proposed any such adjustment
or change of accounting method); (iv) has not filed a consent with
any Governmental Authority pursuant to which the Company has agreed
to recognize gain (in any manner) relating to or as a result of this
Agreement or the transactions contemplated hereby; or (v) has not
been a member of an affiliated group other than one of which the
Company was the common Purchaser.
5.9 Employee Benefit Plans and Relations. Except as disclosed in
Company Disclosure Schedule 5.9:
(a) The Company does not maintain or contribute to any employee
pension benefit plan (the Company Pension Plans), as such term is
defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended (ERISA), including any pension, profit-sharing,
retirement, thrift or stock bonus plan, employee welfare benefit plan
(the Company Welfare Plans), as such term is defined in Section 3 of
ERISA, or any other stock option plan, stock purchase plan,
restricted stock plan, deferred compensation plan, severance plan,
phantom stock plan, bonus plan or other similar plan, program or
arrangement (collectively the Employee Plans). The Company has not
contributed to, or been required to contribute to, any Multiemployer
Plan, as such term is defined in Section 3(37) of ERISA.
(b) Each of the Company Pension Plans is intended to be a qualified
plan within the meaning of Section 401(a) of the Internal Revenue
Code of 1986, as amended (the Code), and DCI and the Company are not
aware of any fact or circumstance that would adversely affect the
qualified status of any such plan.
(c) Each of the Company Pension Plans, Company Welfare Plans and
other Employee Plans has been operated in compliance in all material
respects with the provisions of ERISA, the Code, and all other
applicable Laws.
(d) Neither the Company nor, to the Knowledge of DCI or the Company,
any trustee, fiduciary or administrator of any Company Pension Plan
or Company Welfare Plan or any trust created thereunder, has engaged
in a prohibited transaction as such term is defined in Section 4975
of the Code, which could subject the Company or any such trustee,
fiduciary or administrator thereof, to the tax or penalty on
prohibited transactions imposed by said Section 4975.
(e) No Company Pension Plan or any trust created thereunder has been
terminated, nor have there been any reportable events for which the
30 day notice has not been waived with respect to any Company Pension
Plan, as that term is defined in Section 4043(b) of ERISA.
(f) There are no pending or, to the Knowledge of DCI or the Company,
threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Company Pension
Plans or the Company Welfare Plans or any trusts related thereto.
(g) Accruals; Funding.
(i) Pension Plans. None of the Employee Plans is a Pension Plan
subject to ERISA Title IV (including those for retired, terminated or
other former employees and agents).
(ii) Other Plans. Company Disclosure Schedule 5.9(g) fully and
accurately sets forth any funding liability under each Employee Plan
not subject to ERISA Title IV, whether insured or otherwise,
specifically setting forth any liabilities under any retiree medical
arrangement and specifically designating any insured plan which
provides for retroactive premium or other adjustments. To the
Knowledge of DCI or the Company, the levels of insurance reserves and
accrued liabilities with regard to each such Employee Plan are
reasonable and are sufficient to provide for all incurred but
unreported claims and any retroactive premium adjustments.
(iii) Contributions. Except as set forth on Company Disclosure
Schedule 5.9(g): (A) the Company and each trade or business (whether
or not incorporated), which together with the Company is treated as a
single employer pursuant to Code Section 414(b),(c),(m) or (o) (an
ERISA Affiliate), has made full and timely payment of all amounts
required to be contributed under the terms of each Employee Plan and
applicable Law, or required to be paid as expense under such Employee
Plan, including the Pension Benefit Guaranty Corporation (PBGC)
premiums and amounts required to be contributed under Code Section
412; (B) where applicable, all contributions have been made in
accordance with the actuarial recommendations; and (C) no excise
taxes are assessable as a result of any nondeductible or other
contributions made or not made to an Employee Plan.
(h) To the Knowledge of DCI and the Company, summary plan
descriptions and all other returns, reports, registration statements,
prospectuses, documents, statements and communications required to
have been filed, published or disseminated under ERISA or other Laws
and the rules and regulations promulgated by the Department of Labor
under ERISA and the Treasury Department or by the Securities and
Exchange Commission (SEC) with respect to the Employee Plans have
been so filed, published or disseminated.
5.10 Compliance with Applicable Laws. Except as set forth in Company
Disclosure Schedule 5.10, the Company holds all licenses, franchises,
permits, consents and authorizations (Licenses) necessary for the
lawful conduct of its business, except to the extent a failure to
hold such Licenses would not have a Material Adverse Effect. No
proceeding is pending or threatened seeking the revocation or
suspension of any License. Except as set forth on Company Disclosure
Schedule 5.10, the Company is and has been in compliance in all
material respects with all applicable Laws, and neither the Company
nor any Shareholder has received any notices of any allegation of any
violation by the Company of any Laws or Licenses.
5.11 Certain Contracts.
(a) Company Disclosure Schedule 5.11(a) lists the following
agreements (collectively, the Material Contracts), including, without
limitation, leases, purchase contracts and commitments, to which the
Company is a party or by which the Company or any of its properties
or assets is bound:
(i) all agreements involving an annual commitment or
payment by any party thereto of more than $5,000 individually or
which have a fixed term extending more than 12 months from the date
hereof;
(ii) all joint venture, sales agency, sales
representative or distributorship, broker, franchise, license or
similar agreements;
(iii) all leases of real property and all leases
of personal property that is material to the Company's business;
(iv) all notes, bonds, mortgages, security agreements,
guarantees and other agreements and instruments for or relating to
any lending or borrowing by the Company in any amount (exclusive of
advances to employees for expenses in the ordinary course of
business);
(v) all powers of attorney, guarantees, suretyships
or similar agreements; and
(vi) all other written agreements the breach of or
default under which could have a Material Adverse Effect on the
Company.
(b) Except as set forth on Company Disclosure Schedule
5.11(b), each of the Material Contracts is in full force and effect,
has not been modified, rescinded, cancelled, or amended and is valid,
binding and enforceable on the parties thereto in accordance with its
terms. The Company has provided a copy of each Material Contract to
Purchaser.
(c) Except as disclosed in Company Disclosure Schedule
5.11(c), (i) the Company is not a party to or bound by any agreement
or understanding (whether written or oral) with respect to the
employment of any officers, employees, directors or consultants, and
(ii) the consummation of the transactions contemplated by this
Agreement and the other Purchase Agreements will not (either alone or
upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from the
Company to any officer, employee, director, shareholder or consultant
thereof. Company Disclosure Schedule 5.11(c) sets forth true and
correct copies of all severance or employment agreements with
officers, directors, employees, agents or consultants to which the
Company is a party.
(d) Except as disclosed in Company Disclosure Schedule
5.11(d), no agreement or understanding to which the Company or DCI is
a party or by which any of them is bound limits the freedom of the
Company to compete in any line of business or with any person.
(e) Except as disclosed in Company Disclosure Schedule
5.11(e), neither the Company nor, to the Knowledge of DCI or the
Company, any other party thereto, is in default under any of the
Material Contracts or any other agreement to which the Company or DCI
is a party or to which its or their properties is bound; to the
Knowledge of DCI or the Company, no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence
of any other event) would constitute a default thereunder entitling
any party to terminate a Material Contract or other such agreement;
and the continuation, validity and effectiveness of all such Material
Contracts and agreements under the current terms thereof and the
current rights and obligations of the Company and DCI thereunder will
in no way be affected, altered or impaired by the consummation of the
transactions contemplated hereby. Except as disclosed in Company
Disclosure Schedule 5.11(e), upon consummation of the transactions
contemplated by this Agreement and the other Purchase Agreements, the
Company will be entitled to continue to enjoy the advantages and
benefits of the business arrangements, agreements, opportunities and
relationships of the Company as it enjoyed on the Closing Date
without interference or interruption.
5.12 Properties and Insurance.
(a) Except as disclosed in Company Disclosure Schedule
5.12(a), the Company has good and marketable title to all assets and
properties, whether real or personal, tangible or intangible,
reflected in the Company Financial Statements or owned or acquired
subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary
course of business since such date), subject to no Liens except (i)
statutory liens for amounts not yet delinquent or which are being
contested in good faith (and for which adequate reserves have been
made) and (ii) such Liens and title imperfections that do not in the
aggregate have a Material Adverse Effect on the Company. The Company
as lessee has the right under valid and subsisting leases to occupy,
use, possess and control all real property leased by the Company as
presently occupied, used, possessed and controlled by the Company or
necessary in the operation of its businesses as currently conducted.
(b) The business operations and all insurable properties
and assets of the Company are insured for their benefit against all
risks which, in the reasonable judgment of DCI, should be insured
against, in each case under policies or bonds issued by insurers of
recognized responsibility, in such amounts with such deductibles and
against such risks and losses as are in the opinion of DCI adequate
for the business engaged in by the Company. Copies of all such
policies as in effect on the date hereof are attached hereto as
Company Disclosure Schedule 5.12(b). Neither the Company nor any of
DCI has received any notice of cancellation or notice of a material
amendment of any such insurance policy or bond and the Company is not
in default under any such policy or bond, no coverage thereunder is
being disputed and all material claims thereunder have been filed in
a timely fashion.
(c) No person other than the Company is currently entitled
to possession of any of the properties of the Company, whether owned
or leased by the Company. To the Knowledge of DCI and the Company,
the real property, buildings, structures and improvements owned or
leased by the Company conform to all applicable Laws, including
zoning regulations, none of which would upon consummation of the
transactions contemplated hereby adversely interfere with the use of
such properties, buildings, structures or improvements for the
purposes for which they are now utilized. The Company has not
received notice of, and to the Knowledge of DCI and the Company,
there does not exist (i) any pending or contemplated condemnation or
eminent domain proceeding affecting the properties owned or leased by
the Company, (ii) any proposal for increasing the assessed value of
any such properties for state, county, local or other ad valorem
Taxes or (iii) any pending or contemplated proceedings or public
improvements that would result in the levy of any special Tax or
assessment against any such properties; and there are no outstanding
requirements or recommendations by the Company's insurance providers
requiring or recommending any repairs or work to be done with
reference to any such properties or any basis for such. The
properties and assets owned or leased by the Company constitute all
of the property and assets that the Company uses or may reasonably
need in connection with the operation of its business as conducted on
the Closing Date, and all such property and assets are in good repair
and operating condition, normal wear and tear excepted. The
consummation of the transactions contemplated by this Agreement and
the other Purchase Agreements will not impair the ability of the
Company to continue to use such properties and assets.
5.13 Environmental Matters.
(a) The operations of the Company comply, and have complied, in all
material respects with all applicable Laws relating to pollution or
protection of the environment (Environmental Laws).
(b) The Company has obtained all environmental, health and safety
Licenses and other authorizations necessary for the operation of the
Company's business, all of which are valid and in good standing and
are not subject to any modification or revocation proceeding, and the
Company is in compliance in all material respects with all terms and
conditions thereof.
(c) Neither the Company nor DCI has received any notice of any
pending or threatened investigation, proceeding or claim to the
effect that the Company is or may be liable to any person or entity,
or responsible or potentially responsible for the costs of any
remedial or removal action or other cleanup costs, as a result of
noncompliance with any Environmental Laws or arising out of the
presence, generation, storage or disposal of hazardous waste,
including liability under the United States Comprehensive
Environmental Response, Compensation and Liability Act, as amended,
any state superfund law or any Environmental Law, and there is no
past or present action, or to the Knowledge of DCI and the Company,
activity, condition or circumstance that could be expected to give
rise to any such liability on the part of the Company to any person
or entity or for any such cleanup costs.
5.14 Intellectual Property.
(a) Ownership. Except as set forth in Company Disclosure Schedule
5.14(a), the Company owns all patents, trademarks, service marks,
trade names and copyrights (including registrations, licenses and
applications pertaining thereto) and all other proprietary
information used by the Company in the conduct of its business.
Company Disclosure Schedule 5.14(a) sets forth all domestic and
foreign patents, trademarks, service marks, trade names and
copyrights owned or used by the Company and all applications therefor
and registrations thereof.
(b) Procedures for Copyright Protection. Company Disclosure
Schedule 5.14(b) sets forth the form and placement of the proprietary
legends and copyright notices displayed in or on the Company's and in
or on documents related to the Company's products or services. To
the Knowledge of DCI and the Company, the eligibility of the
Company's products, services, documentation and other assets for
protection under copyright law has not been forfeited to the public
domain.
(c) Procedures for Trade Secret Protection. Neither the Company nor
DCI has ever disclosed proprietary information to a third party other
than the persons identified in Company Disclosure Schedule 5.14(c).
The Company discloses its proprietary information to employees only
on a need-to-know basis in connection with the performance of their
duties to the Company. The Company has at all times maintained its
proprietary information in confidence and the Company has not taken
(nor has it failed to take) any action which would result in such
proprietary information not being protectable as a trade secret under
applicable Laws.
(d) Ownership of Proprietary Information. Except as disclosed on
Company Disclosure Schedule 5.14(d), all persons who have contributed
to or participated in the conception and development of the Company's
proprietary information on behalf of the Company have been full-time
employees of the Company hired to prepare such works within the scope
of employment. As a consequence, the Company has all ownership
interests in its proprietary information.
(e) Absence of Claims. Except as set forth in Company Disclosure
Schedule 5.14(e), no claims have been asserted by any person to
rights in the Company's proprietary information, and no valid basis
for any such claim exists. To the Knowledge of DCI and the Company,
the use of the proprietary information by the Company and its
licensees does not infringe on the rights of any person (whether
arising under copyright, trade secret, patent, unfair competition or
other Laws which protect intellectual property rights). To the
Knowledge of DCI and the Company, the use by the Company of the
patents, trademarks, service marks, trade names and copyrights
identified in Company Disclosure Schedule 5.14(a) does not infringe
the rights of any person, and no claim has been asserted that the use
by the Company of any of the foregoing infringes the rights of any
person. No claim has been asserted by any person to the effect that
any current or former employee of the Company has violated the
provisions of any noncompete or nondisclosure agreement with such
person, or has disclosed any proprietary information of such person
to the Company or any third party.
5.15 [Intentionally omitted.]
5.16 Third-Party Components. The Company has validly obtained the
right and license to use, copy, modify and distribute any third-party
products, services and materials used in the conduct of its business
pursuant to the contracts identified in Company Disclosure Schedule
5.16, subject to no further license fee, royalty or other payment
obligations not identified in Company Disclosure Schedule 5.16.
5.17 Third-Party Interests or Marketing Rights in Software. The
Company has not granted, transferred or assigned any right or
interest in its proprietary information to any person except pursuant
to the contracts identified on Company Disclosure Schedule 5.17(i).
There are no contracts, agreements, licenses, commitments or
arrangements in effect with respect to the marketing, distribution,
licensing or promotion of the proprietary information by any
independent salesperson, distributor, sublicensor or other remarketer
or sales organization except as set forth on Company Disclosure
Schedule 5.17(ii).
5.18 No Parachute Payments. Except as disclosed on Company
Disclosure Schedule 5.18, no officer, director, employee, shareholder
or agent (or former officer, director, employee, shareholder or
agent) of the Company is entitled now, or will or may be entitled to
as a consequence of this Agreement and the other Purchase Agreements,
to any payment or benefit from the Company or Purchaser which if paid
or provided would constitute an excess parachute payment as defined
in Section 280G of the Code.
5.19 Absence of Certain Agreements and Practices.
(a) Except as set forth in Company Disclosure Schedule 5.19(a) or in
connection with customary transactions in the ordinary course of
business, no present or former officer, director or shareholder of
the Company:
(i) owes money to the Company;
(ii) has any claim (as defined in Section 101 of the United States
Bankruptcy Code) against the Company;
(iii) has any interest in any property or assets used by the
Company in its business;
(iv) has any benefits that are contingent on the transactions
contemplated by this Agreement, other than as stated herein;
(v) has any agreement with the Company that is not terminable by the
Company without penalty or notice;
(vi) has any agreement providing severance benefits or other benefits
after the termination of employment of such employee (before or after
a change in control) regardless of the reason for such termination of
employment; or
(vii) has any agreement or plan, any of the benefits of which
will be increased, vested or accelerated by the occurrence of any of
the transactions contemplated by this Agreement.
(b) Neither the Company nor any of its directors, officers, agents,
affiliates or employees, nor any other person acting on behalf of the
Company or DCI has (i) given or agreed to give any gift or similar
benefit having a value of $1,000 or more to any customer, supplier or
governmental employee or official or any other person, for the
purpose of directly or indirectly furthering the business of the
Company, (ii) used any corporate funds for contributions, payments,
gifts or entertainment, or made any expenditures relating to
political activities to government officials or others in violation
of any applicable Laws or (iii) received any unlawful contributions,
payments, gifts or expenditures in connection with the business of
the Company.
5.20 Major Vendors and Customers. Company Disclosure Schedule 5.20
sets forth a list of each licensor, developer, remarketer,
distributor and supplier of property or services to, and each
licensee, end-user or customer of, the Company, to whom the Company
paid or billed in the aggregate in excess of $5,000 during calendar
year 1999 and through April 30, 2000.
5.21 Accounts Receivable. Company Disclosure Schedule 5.21 sets
forth the accounts receivable of the Company as of April 30, 2000,
together with an aging of these accounts. These accounts receivable,
and all accounts receivable of the Company created after April 30,
2000, arose from valid transactions in the ordinary course of
business and will be good and collectible at the recorded amounts
thereof, except to the extent adequate reserves therefor have been
made on the Company Financial Statements. No portion of the accounts
receivable is subject to counterclaim or setoff.
5.22 Bank Accounts. Company Disclosure Schedule 5.22 lists all bank,
money market, savings and similar accounts and safe deposit boxes of
the Company, specifying the account numbers and the authorized
signatories or persons having access to them.
5.23 Corporate Records. The corporate record books (including the
share records) of the Company are complete, accurate and up to date
with all necessary signatures and set forth all meetings and actions
taken by the shareholders and directors of the Company and all
transactions involving the shares of the Company (and contain all
canceled share certificates).
5.24 Combinations Involving the Company. All mergers, consolidations
or other business combinations involving the Company and all
liquidations, purchases or other transactions by which the Company or
any of its Subsidiaries acquired or disposed of any of their business
and property were conducted in accordance with applicable
certificates of incorporation, bylaws, any other applicable
agreements, instruments and documents and applicable Laws.
5.25 Labor Relations. Except as disclosed on Company Disclosure
Schedule 5.25, the Company is in compliance with all federal, state
and foreign Laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, and is not
engaged in any unfair labor or unlawful employment practice except
where a failure to so comply would not have a Material Adverse Effect
on the Company. There is no unlawful employment practice or
discrimination charge pending before the United States Equal
Employment Opportunity Commission (EEOC), any EEOC recognized state
referral agency or any foreign governing body. There is no unfair
labor practice charge or complaint against the Company pending before
the National Labor Relations Board (NLRB) or any similar foreign
governing body. There is no labor strike, dispute, slowdown or
stoppage actually pending or, to the Knowledge of DCI and the
Company, threatened against or involving or affecting the Company and
no NLRB representation question exists respecting any of its
employees. No grievance or arbitration proceeding is pending and no
written claim therefor exists. There is no collective bargaining
agreement that is binding on the Company. Except for any Material
Contract disclosed pursuant to Section 5.11, the Company is not a
party to or bound by any agreement, arrangement or understanding with
any employee or consultant that cannot be terminated on notice of
ninety (90) or fewer days without liability to the Company or that
entitles the employee or consultant to receive any salary
continuation or severance payment or retain any specified position
with the Company.
5.26 Year 2000 Matters. Except as provided on Company Disclosure
Schedule 5.26, the Company's products and services are designed to be
used after January 1, 2000 and will operate during each such time
period without error relating to date data, specifically including
any error relating to, or the product of, date data which represents
or references different centuries or more than one century or any
leap year. The Company's internal systems and software and the
network connections it maintains are adequately programmed to address
the Year 2000 issue.
5.27 Change in Control Provisions. Company Disclosure Schedule 5.27
contains a true and complete copy of all agreements in effect to
which the Company is a party and which contain any provisions which
become effective upon a change in control, merger, consolidation,
sale of assets or other business combination involving the Company or
otherwise require any payment or performance by the Company or any
officer, director or shareholder thereof, now or in the future, in
connection with or as a result of any of the transactions
contemplated by this Agreement.
5.28 Disclosure. No representation, warranty or statement made by
the Company and/or DCI in this Agreement, the other Purchase
Agreements or in any document or certificate furnished or to be
furnished to Purchaser pursuant to this Agreement or the other
Purchase Agreements contains or will contain any untrue or incomplete
statement or omits or will omit to state any fact necessary to make
the statements contained herein or therein not misleading in any
material respect. The Company and DCI have completely and accurately
responded to all diligence inquiries made by Purchaser or its
officers, directors, attorneys, accountants and other representatives
in connection with this Agreement and the other Purchase Agreements.
All facts known or reasonably available to the Company or DCI that
are material to the financial condition, operation, or prospects of
the business and assets of the Company have been disclosed by the
Company and DCI to Purchaser.
5.29 Securities Act Compliance. DCI acknowledges that the issuance
of the shares of the Purchaser Common Stock pursuant to this
Agreement will not be registered under the securities laws of any
state or federal authority (the Securities Laws). DCI represents and
warrants that it is acquiring the Purchaser Common Stock for its own
account for investment purposes and not with a view toward, or for
resale in connection with, a distribution or public offering of the
Purchaser Common Stock. DCI acknowledges that at reasonable times
prior to DCI's execution of this Agreement it has had the opportunity
to ask questions and receive answers concerning the terms and
conditions of this Agreement, the financial condition of Purchaser,
and the Purchaser Common Stock and to obtain any additional
information that is necessary to verify the accuracy of the
information furnished to DCI. DCI understands and agrees that DCI
may not sell or otherwise transfer any of the Purchaser Common Stock
except pursuant to a registered offering or in one or more private
transactions which, in the opinion of counsel reasonably satisfactory
to Purchaser, are not required to be registered under the Securities
Act of 1933 and applicable state securities laws.
5.30 No Prior Convictions. No officer or director of DCI or the
Company has been convicted of, arrested for, or has any action
pending for, a crime involving fraud, embezzlement or theft or any
similar crime.
5.31 Tax Advice. DCI is responsible for the federal, state, local
and foreign tax consequences (to DCI) of an investment in the
Purchaser Common Stock and the transactions contemplated by this
Agreement and the other Purchase Agreements. DCI is not relying on
any statements or representations of Purchaser or any of their
agents, and DCI (and not Purchaser or any other person or entity)
shall be responsible for its own tax liability that may arise as a
result of this investment or the transactions contemplated by this
Agreement and the other Purchase Agreements.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce DCI to enter into this Agreement and the other
Purchase Agreements, Purchaser hereby represents and warrants to DCI
as follows:
6.1 Corporate Organization.
(a) Purchaser is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Texas. Purchaser
has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed,
qualified or in good standing would not have a Material Adverse
Effect on Purchaser.
6.2 Capitalization.
(a) The authorized capital stock of Purchaser consists of
200,000,000 shares of Purchaser Common Stock and 5,000,000 shares of
preferred stock, par value $1.00 per share (Purchaser Preferred
Stock). As of May 24, 2000, there were 23,823,328 shares of
Purchaser Common Stock issued and outstanding, and 1,212,295.5 shares
of Purchaser Preferred Stock issued and outstanding. Exhibit 6.2(a)
sets forth the number of shares of common stock issuable pursuant to
outstanding stock options and warrants and the number of shares of
common stock issuable upon conversion of outstanding convertible
securities (Stock Options). All issued and outstanding shares of
Purchaser Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
(b) Exhibit 6.2(b) sets forth true and correct copies of
the Articles of Incorporation and Bylaws and amendments thereto of
Purchaser.
(c) Except as disclosed on Exhibit 6.2(c), Purchaser does
not own or control, directly or indirectly, any equity interest in
any corporation, company, association, partnership, joint venture or
other entity.
6.3 Authority.
(a) Except as disclosed on Exhibit 6.3(a) (collectively, the
Purchaser Approvals), no consents, approvals, authorizations,
clearances or orders of, filings or registrations with or notices to
(collectively Purchaser Authorizations) any third party or any
Governmental Authority are necessary on behalf of Purchaser in
connection with (i) the execution and delivery by Purchaser of this
Agreement and (ii) the consummation by Purchaser of the transactions
contemplated hereby. Assuming that the Purchaser Approvals are duly
obtained, Purchaser has the full corporate power and authority to
execute and deliver this Agreement and the other Purchase Agreements
to which it is a Party and to consummate the transactions
contemplated hereby in accordance with the terms hereof and thereof;
the execution and delivery of this Agreement and the other Purchase
Agreements to which it is a Party and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly approved by the Board of Directors of Purchaser in accordance
with the Articles of Incorporation and Bylaws of Purchaser and with
applicable Laws; no other corporate proceedings on the part of
Purchaser are necessary for Purchaser to execute and deliver this
Agreement and for Purchaser to be bound by the terms hereof; and to
the knowledge of Purchaser, this Agreement and the other Purchase
Agreements to which it is a Party have been duly and validly executed
and delivered by Purchaser and constitute the valid and binding
obligation of Purchaser enforceable against Purchaser in accordance
with its and their terms.
(b) Assuming that the Purchaser Approvals are duly obtained, to the
best of the knowledge of Purchaser, neither the execution and
delivery by Purchaser this Agreement and the other Purchase
Agreements to which they are a party, nor the consummation by
Purchaser of the transactions contemplated hereby and thereby in
accordance with the terms hereof and thereof, nor compliance by
Purchaser with any of the terms or provisions hereof, will: (i)
violate any provision of Purchaser's Articles of Incorporation or
Bylaws; (ii) violate any Laws applicable to Purchaser or any of its
respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute
a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any Liens upon
any of the respective properties or assets of Purchaser under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Purchaser is a party, or by which
they or any of their respective properties or assets may be bound or
affected, except, with respect to (ii) and (iii) above, such as
individually or in the aggregate will not have a Material Adverse
Effect on Purchaser, and which will not prevent or delay the
consummation of the transactions contemplated hereby.
6.4 Financial Statements.
(a) Exhibit 6.4(a) sets forth copies of: (i) the balance
sheet of Purchaser as of December 31, 1999, and (ii) the statement of
income of Purchaser for the period ended December 31, 1999 (together
with the related notes, collectively, the Purchaser Financial
Statements).
(b) The Purchaser Financial Statements present fairly, in
all material respects, the financial position of Purchaser as of the
respective dates set forth therein, and the results of Purchaser's
operations and its cash flows for the respective periods set forth
therein.
(c) The books and records of Purchaser have been
maintained in material compliance with applicable legal and
accounting requirements.
6.5 Broker's and Other Fees. Except as disclosed in Exhibit 6.5,
Purchaser has not employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in
connection with any of the transactions contemplated by this
Agreement and the other Purchase Agreements.
6.6 Legal Proceedings. To the knowledge of Purchaser, and except as
disclosed in Exhibit 6.6, Purchaser is not a party to any, and there
are no pending or threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental investigations of
any nature against Purchaser. Except as disclosed in Exhibit 6.6, to
the knowledge of Purchaser, Purchaser is not a party to any order,
judgment or decree entered in any lawsuit or proceeding. Without
limiting the foregoing, except as disclosed in Exhibit 6.6, to the
knowledge of Purchaser no actions, suits, demands, notices, claims,
investigations or proceedings are pending or threatened against or
otherwise involving, directly or indirectly, any officer, director,
employee or agent of the Company (in connection with such officer's,
director's, employee's or agent's activities on behalf of Purchaser
or that otherwise relate, directly or indirectly to Purchaser or its
properties or securities) including without limitation any notices,
demand letters or requests from any Governmental Authority relating
to such potential Liabilities, nor, to the knowledge of Purchaser,
are there any circumstances which could lead to such actions, suits,
demands, notices, claims, investigations or proceedings.
6.7 Taxes and Tax Returns. Except as disclosed in Exhibit 6.7:
(a) The Purchaser has duly filed (and until the Closing Date will so
file) all returns, declarations, reports, information returns and
statements (Returns) required to be filed by it in respect of any
United States federal, state or local, or any foreign, Taxes and has
duly paid (and until the Closing Date will so pay) all such Taxes due
and payable. As used herein, Tax or Taxes means and includes any and
all taxes, fees, levies, assessments, duties, tariffs, imposts, and
other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including,
without limitation: foreign, domestic, central, local, state or other
jurisdictional taxes or other charges on or with respect to income,
estimated income, franchises, business, occupation, windfall or other
profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; license, registration and documentation fees;
and customs duties, tariffs, and similar charges. Purchaser has not
established on its books and records reserves that are adequate for
the payment of all Taxes not yet due and payable, but are incurred in
respect of Purchaser through such date.
(b) To the knowledge of Purchaser, there are no audits or other
Governmental Authority proceedings presently pending nor any other
disputes pending with respect to, or claims asserted for, Taxes upon
Purchaser, nor has Purchaser given any currently outstanding waivers
or comparable consents regarding the application of any statute of
limitations with respect to any Taxes or Returns. To the knowledge
of Purchaser, there are no Liens for Taxes upon the assets of
Purchaser, except Liens for Taxes not yet due.
6.8 Purchaser Common Stock. Assuming the Purchaser Approvals are
duly obtained, at the Closing Date, the Purchaser Common Stock to be
delivered to DCI will be duly authorized and validly issued, fully
paid and nonassessable, free of preemptive rights and free and clear
of all Liens created by or through Purchaser (except as set forth in
this Agreement and the documents and agreements executed in
connection herewith).
ARTICLE 7
COVENANTS AND AGREEMENTS OF THE PARTIES
7.1 No Solicitation. Except as indicated on Company Disclosure
Schedule 7.3, from the date hereof to the Closing Date or the earlier
termination of this Agreement in accordance with its terms, DCI:
(a) agrees that neither the Company nor any of its present or future
subsidiaries or other affiliates, nor any of its or their directors,
officers, shareholders, employees, representatives or other agents
(collectively, the Company Affiliates) shall, directly or indirectly,
(i) enter into any agreement (or agree to do so), or solicit,
initiate or knowingly encourage the invitation of inquiries or
proposals or offers from any person or entity (other than Purchaser
or its directors, officers, employees, representatives and agents)
concerning: (A) any sale of assets or transfer or liabilities of the
Company or any of its present or future subsidiaries, divisions or
other affiliates (other than any such sale or transfer in the
ordinary course of business); (B) any issuance, purchase or sale of
capital stock or debt or other securities of the Company or any of
its present or future subsidiaries, divisions or other affiliates
(other than the incurrence of liabilities in the ordinary course of
its business); or (C) any merger, consolidation, restructuring,
recapitalization or other significant transaction involving the
Company or any of its present or future subsidiaries, divisions or
other affiliates; or (ii) provide any confidential information to,
participate in discussions or negotiations relating to any such
transaction with, or otherwise cooperate with or assist or
participate in any effort to take such action by any person or entity
(other than Purchaser or its directors, officers, shareholders,
employees, representatives and agents). The Company shall
immediately advise Purchaser if any such inquiry, offer or proposal
is made or received by the Company or any of the Company Affiliates;
(b) will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and the Company and
DCI will take the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this
Section 7.1; and (c) will notify Purchaser immediately of the identity of any
potential acquiror and the terms of any proposal or offer (including,
without limitation, any proposal or offer to any of DCI) with respect
to a proposed or potential merger, acquisition, consolidation,
business combination, transfer or similar transaction involving, or
any purchase of all or any significant portion of the assets, equity
securities of or rights with respect to any assets or securities of,
the Company whether or not permitted by this Section 7.1.
7.2 Current Information.
(a) During the period from the date of this Agreement to the Closing
Date or the earlier termination of this Agreement in accordance with
its terms, on a frequent basis:
(b) DCI will cause one or more of the Company's representatives to
confer with representatives of Purchaser regarding its business,
operations, properties, assets and financial condition; each of the
Parties will cause one or more of its representatives to confer with
representatives of the other Parties regarding matters relating to
the completion of the transactions contemplated herein; and
(c) Each of the Parties will notify the other Parties as soon as
practicable after any determination or discovery by it of any fact or
circumstance relating to any Party which it has discovered through
the course of investigation and which represents, or is reasonably
likely to represent, a material breach of any representation,
warranty, covenant or agreement of any Party or which has or is
reasonably likely to have a Material Adverse Effect on any Party.
7.3 Access to Properties and Records; Confidentiality.
(a) DCI shall permit, and shall cause the Company to permit,
Purchaser and its representatives reasonable access to its properties
and shall disclose and make available to Purchaser and its
representatives all books, papers and records and information
relating to it, its assets, stock ownership, properties, operations,
obligations and liabilities, including, but not limited to, all books
of account (including the general ledger), tax records, minute books
of directors' and shareholders' meetings, organizational documents,
agreements, filings with any Governmental Authority, accountants'
work papers, litigation files, plans affecting employees, and any
other records and information in which Purchaser and its
representatives may have a reasonable interest; provided that such
investigation shall be reasonably related to the transactions
contemplated by this Agreement and shall not interfere unnecessarily
with the normal business operations of the Company.
(b) DCI shall hold in trust and confidence all Confidential
Information (as defined below) and shall not make any copies of,
distribute, or use any Confidential Information except as necessary
to prepare for the completion of the transactions contemplated under
this Agreement. DCI shall not make any unauthorized disclosure of
Confidential Information. Upon the first request in writing from
Purchaser, DCI shall return to Purchaser all Confidential Information
in its possession, without retaining any copies thereof; provided,
however, that DCI may retain Confidential Information (but not use or
disclose such Confidential Information except to enforce its rights
under this Agreement, and any such Confidential Information so
retained shall remain subject to the restrictions contained in this
Agreement) which is necessary to enforce its rights under this
Agreement.
(c) DCI shall hold in trust and confidence all Trade Secrets (as
defined below) and shall not make any copies of, distribute, or use
any Trade Secrets except as necessary to prepare for the completion
of the transactions contemplated under this Agreement. DCI shall not
make any unauthorized disclosure of any Trade Secrets. Upon the
first request in writing from Purchaser, DCI shall return to
Purchaser all manifestations of any Trade Secrets in their
possession, without retaining any copies thereof; provided, however,
that the DCI may retain Trade Secrets (but not use or disclose such
Trade Secrets except to enforce its rights under this Agreement, and
any Trade Secrets so retained shall remain subject to the
restrictions contained in this Agreement) which is necessary to
enforce their rights under this Agreement.
(d) As used in this Section 7.3(b):
(i) Confidential Information means all information relating to the
Company's business (current or future), or any person or entity with
which the foregoing deals, and whether such information is oral,
written, recorded or stored by electronic, magnetic, electromagnetic
or other form or process or otherwise in a machine readable form,
translated from the original form, recompiled, made into a
compilation, wholly or partially copied, modified, updated or
otherwise altered, or originated or obtained by, or coming into the
possession, custody, control or knowledge of the Company either alone
or jointly; provided, that Confidential Information expressly
excludes Trade Secrets and information in the public domain on the
date hereof or that enters the public domain after the date hereof
through no fault of any DCI.
(ii) By way of example and not in limitation of the foregoing,
Confidential Information includes the terms of this Agreement and the
transactions contemplated hereunder, all Inventions; technical data;
research and development information; business records, information
and notes; products; know-how; engineering or other data; designs,
specifications, processes and formulae; manufacturing or planning
procedures, techniques or information; marketing plans, strategies
and forecasts; business and product development plans, strategies and
forecasts; financial statements, budgets, prices, costs and financial
projections; accounting procedures or financial information; names
and details of consumers, customers, suppliers and agents; employee
details; and secret information.
(iii) Invention means any invention, drawing,
design, model, contrivance, structure, specification,
improvement, discovery, creation, idea, concept, formula,
process and other work or contribution however developed,
created, made discovered or conceived, and whether or not
patented or patentable (whether by renewal or otherwise),
protected by copyright, or otherwise protected or capable of
protection by law anywhere.
(iv) Trade Secrets means any information of the
(including but not limited to technical or non-technical data, a
formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, financial data,
financial plans, product plans, or a list of actual or potential
customers or suppliers) which (i) derives economic value, actual
or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is
the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
7.4 Regulatory Matters; Consents; Cooperation, etc.
(a) Each of the Parties will promptly furnish each other with copies
of written communications received by them or any of their respective
Subsidiaries from, or delivered by any of the foregoing to, any
Governmental Authorities in respect of the transactions contemplated
hereby.
(b) As soon as practicable following the date hereof, each of the
Parties will use its commercially reasonable efforts to obtain all
material consents, waivers and other Approvals under any of its or
its Subsidiaries' agreements, contracts, licenses or leases required
to be obtained by such Party in connection with the consummation of
the transactions contemplated hereby.
7.5 Parties' Efforts; Further Assurances; Cooperation. Subject to
the other provisions in this Agreement, the Parties shall in good
faith perform their obligations under this Agreement before, at and
after the Closing Date, and shall each use all commercially
reasonable efforts to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to obtain all
Authorizations and satisfy all conditions to the obligations of the
Parties under this Agreement and to cause the transactions
contemplated by this Agreement to be carried out promptly in
accordance with the terms hereof and shall cooperate fully with each
other and their respective officers, directors, employees, agents,
counsel, accountants and other designees in connection with any steps
required to be taken as part of their respective obligations under
this Agreement. Upon the execution of this Agreement and thereafter,
each party shall take such actions and execute and deliver such
documents as may be reasonably requested by the other Parties in
order to consummate the transactions contemplated by this Agreement.
7.6 Public Announcements. Prior to the Closing Date or the earlier
termination of this Agreement in accordance with its terms, the
Parties shall consult and cooperate with each other as to the timing,
content and form of any press release or other public disclosure
related to this Agreement or the transactions contemplated herein,
and will not issue a press release or make any such public disclosure
without the prior consent of the other party, which shall not be
unreasonably withheld, conditioned or delayed. After the Closing
Date, DCI shall not make any public announcement regarding any aspect
of this Agreement without Purchaser's prior written consent. Nothing
in this Section 7.6 shall be deemed to prohibit any Party from making
any disclosure which its counsel deems necessary in order to satisfy
such Party's disclosure obligations imposed by Law or Governmental
Authority.
7.7 Failure to Fulfill Conditions. In the event that any Party
determines that a material condition to its or the other's obligation
to consummate the transactions contemplated hereby cannot be
fulfilled on or prior to June 15, 2000 (the Deadline Date), it will
promptly notify the other Party. Each Party will promptly inform the
other Parties of any facts applicable to it that would be likely to
prevent or materially delay consummation of the transactions
contemplated by this Agreement.
7.8 Disclosure Supplements. From time to time prior to the Closing
Date, each Party hereto will promptly notify the other Party of any
inaccuracy in its respective Disclosure Schedules delivered pursuant
hereto including, without limitation, any matter which, if existing,
occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Schedule or which is
necessary to correct any information in such Schedule that has been
rendered inaccurate. Notwithstanding the foregoing, for the purpose
of determining satisfaction of the conditions set forth in Article 8,
no such notification shall be deemed to amend such Disclosure
Schedules or shall be deemed to be part hereof unless agreed to by
the other Parties.
7.9 Release; Covenant Not to Sue.
(a) If the Closing occurs, then DCI hereby releases Purchaser and
the Company, and their agents, representatives, successors and
assigns (collectively, the Released Parties) from any and all Claims
(as defined herein) that any of DCI may have or may have had against
any or all of the Released Parties arising out of or in connection
with any transactions between DCI and any or all of the Released
Parties prior to, or arising from or with respect to any fact,
circumstance, act or omissions occurring prior to or on the Closing
Date.
(b) If the Closing occurs, DCI covenants not to sue or otherwise
institute, cause to be instituted or in any way participate in, any
legal or administrative proceeding against any of the Released
Parties with respect to any claims (as defined by Section 101 of the
United States Bankruptcy Code, as amended), debts, demands, actions,
causes of action, suits, accounts, damages and liabilities of every
name and nature, both at law and in equity, whether known or unknown
(collectively, the Claims), that DCI or the Company now has, ever had
or may, at any time, claim to have had against any of the Released
Parties. This covenant shall not apply to Claims based upon acts or
omissions by a Released Party first occurring after the Closing Date.
DCI represents and warrants that it has not voluntarily or
involuntarily assigned or suffered any transfer of any of the Claims
to any other person or entity, and DCI agrees to indemnify and hold
harmless the Released Parties from and against any loss, damage,
liability, cost and expense (including, but not limited to,
attorneys' fees incurred in connection therewith or in connection
with enforcing this indemnity) asserted against, imposed on or
incurred by any Released Parties by reason of any such Claims which
were effectively or purportedly assigned or transferred by the
Company or DCI.
7.10 [Intentionally omitted.]
7.11 No Transfers. Except pursuant to this Agreement or with the
prior written consent of Purchaser, DCI shall not transfer, assign,
convey or otherwise dispose of any of the Company Common Stock or any
rights with respect to such Company Common Stock (including voting
and conversion or option rights) after the date of this Agreement.
7.12 Special Provisions with Respect to the Company. If the Closing
occurs as provided herein, then at that time all representations,
warranties, covenants and agreements to the extent made or adopted by
the Company (and only to such extent) shall expire and be of no
further force and effect, and the Company's having made
representations, warranties, covenants and agreements shall in no way
limit the liability of DCI for those representations, warranties,
covenants and agreements pursuant to this Agreement.
7.13 Cooperation and Exchange of Information. The Parties agree to
furnish, or to cause to be furnished in good faith to each other,
such cooperation and assistance as is reasonably necessary to file
any future returns, to respond to audits, to negotiate settlements
with Tax authorities and to prosecute and defend against Tax claims.
7.14 Customer Contacts. The Company shall permit Purchaser to
conduct a survey or otherwise inquire of certain or all of the
Company's key customers, as selected by Purchaser, regarding the
relationship between such customer and the Company and the impact of
a change in control on such relationship. The Company shall assist
Purchaser in making such survey or inquiries and shall have the right
to have a representative of its choice participate therein.
7.15 Registration. Parent hereby agrees to use its best efforts to
file a registration statement with the Securities and Exchange
Commission for the purpose of registering the resale of the
40,000,000 shares of Parent Common Stock to be issued to DCI pursuant
to the terms of this Agreement. Parent shall us its best efforts to
file such registration statement by the later to occur of:
(i) the 60th day after the Closing Date; or
(ii) the 45th day after DCI delivers to Parent audited financial
statements for the Company that satisfy the requirements of U.S.
Generally Accepted Accounting Principles and the United States
Securities laws and regulations applicable to financial statements to
be included in the registration statement.
7.16 Non-Competition. DCI shall not at any time after the date of
this Agreement and for five (5) years after the Closing: (i) engage
directly or indirectly in any Competitive Business anywhere in the
Restricted Territory, whether such engagement be as an employer,
officer, director, owner, investor, employee, partner, consultant or
other participant in any Competitive Business; (ii) solicit or accept
business, for a business which is wholly or partly similar to the
Company's Business from anyone who is an active or prospective
customer of Purchaser, the Company, or any of their Affiliates; or
(iii) attempt to do any of the things (or directly or indirectly
assist anyone else in doing or attempting to do any of the things)
specified in this paragraph. For the purposes of this section,
Competitive Business means any business, individual, corporation or
other entity which is primarily engaged wholly or partly in any
business similar to the Company's Business; the Company's Business
means the business of the Company and Restricted Territory means
Europe, Asia, Africa and South America.
7.17 English Company Legal Matters. DCI shall cooperate with
Purchaser after the Closing to effect all actions necessary or
desirable to vest Purchaser with ownership and enjoyment of the
Company Common Stock, including but not limited to the following
actions: (i) a meeting of the directors of the Company shall be held
and the transfer of the Company Common Stock to Purchaser shall be
passed for registration and registered, and persons nominated by the
Purchaser shall be appointed to be directors or secretaries of the
Company; (ii) at the request of Purchaser, DCI shall procure and
deliver the written resignations of all of the directors and
secretaries of the Company upon terms acceptable to Purchaser; (iii)
at the request of Purchaser, DCI shall procure and deliver the
written resignations of the auditors of the Company containing the
statements referred to in section 394(1), CA 85 that they consider
there are no such circumstances as are mentioned in that section and
confirming that they have deposited or shall deposit that statement
in accordance with section 394(2), CA 85 at the respective registered
offices of the Company; (iv) DCI shall revoke all existing
instructions and authorities to bankers shall replaced the same with
alternative instructions, mandates and authorities in such form as
the Purchaser may require; (v) DCI shall change the registered office
of the Company to such address as the Purchaser shall direct; (vi)
DCI shall cause the Company to change the accounting reference date
to such date as the Purchaser shall direct; and (vii) DCI shall cause
the Company to hold an Extraordinary General Meeting of the Company
to transact such other business as the Purchaser may require.
ARTICLE 8
CLOSING CONDITIONS
8.1 Conditions of Each Party's Obligations Under this Agreement.
The respective obligations of each party under this Agreement shall
be subject to the satisfaction, or, where permissible under
applicable Law, waiver at or prior to the Closing Date of the
following conditions:
(a) Approvals and Regulatory Filings. All necessary Authorizations
of Governmental Authorities required to consummate the transactions
contemplated hereby shall have been obtained without any term or
condition which would materially impair the value of the Company or
Purchaser. All conditions required to be satisfied prior to the
Closing Date by the terms of such approvals and consents shall have
been satisfied; and all statutory waiting periods in respect thereof
shall have expired.
(b) Suits and Proceedings. The consummation of the transactions
contemplated hereby will not violate the provisions of any
injunction, order, judgment, decree or Law applicable or effective
with respect to Purchaser or the Company or their officers and
directors. No suit or proceeding shall have been instituted by any
person, or, to the knowledge of Purchaser or DCI, shall have been
threatened by any Governmental Authority, and not subsequently
withdrawn, dismissed or otherwise eliminated, which seeks (i) to
prohibit, restrict or delay consummation of the transactions
contemplated hereby or to limit in any material respect the right of
Purchaser to control any material aspect of the business of Purchaser
or the Company after the Closing Date, or (ii) to subject Purchaser
or the Company or their respective directors or officers to material
liability on the ground that it or they have breached any Law or
otherwise acted improperly in relation to the transactions
contemplated by this Agreement.
8.2 Conditions to the Obligations of Purchaser under this Agreement.
The obligations of Purchaser under this Agreement shall be further
subject to the satisfaction or waiver, at or prior to the Closing
Date (and continued until the Closing Date), of the following
conditions:
(a) Representations and Warranties; Covenants and Agreements;
Consents. The representations and warranties of DCI contained in
this Agreement shall be true and correct in all material respects as
of the date hereof and shall also be true and correct in all material
respects on the Closing Date as though made on and as of the Closing
Date, except that those representations and warranties which are
confined to a particular date shall speak only as of such date, and
the Company and DCI shall have performed in all material respects the
agreements, covenants and obligations to be performed by it or them
at or prior to the Closing Date. All Authorizations of or with any
Governmental Authority or other third party that are required for or
in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby by the
Company and DCI shall have been obtained or made.
(b) Opinion of Counsel. Purchaser shall have received an opinion of
counsel to the Company and DCI, dated the Closing Date, in form and
substance reasonably satisfactory to Purchaser, covering the matters
set forth on Exhibit 8.2(b).
(c) Certificates. DCI shall have furnished Purchaser with such
certificates of the Company and its authorized officers, DCI or
others and such other documents to evidence fulfillment of the
conditions set forth in this Article 8 and otherwise to consummate
the transactions contemplated pursuant to this Agreement as Purchaser
may reasonably request, including certificates in the form attached
hereto as Exhibit 8.2(c).
(d) Transfer Tax. DCI shall have paid to Purchaser the amount of
the stock transfer stamp duty required to lawfully transfer the
Company Common Stock, as estimated by Purchaser, such amount not to
exceed U.S. $30,000.
(e) Fone.com, Limited. DCI shall have delivered the following
documents regarding the Company to Purchaser: (i) resolutions of the
sole director of the Company authorizing the transfer of the Company
Stock to Purchaser; (ii) original stock transfer forms endorsed by
Clifford Postelnik surrendering any and all interest of the same to
DCI; (ii) original stock transfer forms endorsed by at least two
members of the board of directors of DCI effecting the transfer of
the Company Stock from DCI to Purchaser; and (iv) original stock
certificates in the name of DCI evidencing all of the Company Stock.
(f) Completion of Due Diligence on the Company. Purchaser shall
have completed its review of the Company, the results of which shall
be acceptable to Purchaser in its absolute discretion.
(g) No Material Adverse Effect on the Company. No event shall have
occurred and no fact or circumstance shall have arisen which, in the
judgment of Purchaser, is reasonably likely to have a Material
Adverse Effect on the Company or materially and adversely affect the
value of this transaction to Purchaser, since the date of the most
recent Company Financial Statements except (i) the announcement of
this Agreement or (ii) conditions effecting global economy or
regional economy in which Purchaser operates any part of its or their
business.
(h) Customer Inquiries. Purchaser shall be reasonably satisfied
with the results of their inquiries of the Company's customers with
respect to the impact of a change in control on their relationship
with the Company.
(i) No Interest in Proprietary Information. Except as set forth in
Company Disclosures Schedule 8.2(i), the Company shall have
eliminated or provided for the elimination of any and all claims to
ownership, access, copies, source code and license and royalty
interests in all products, services, software, systems and
proprietary information associated with the Company.
(j) Spinoff. The Company and DCI shall have executed and delivered
agreements, the terms of which are acceptable to Purchaser, with
respect to which DCI and the Company shall have transferred,
assigned, sold or otherwise conveyed all of the Company's assets and
all of its liabilities, including accounts receivable, customer
agreements, intellectual property rights, software, and any other
support systems necessary to ensure continuity in the business and
operations to be transferred to Purchaser pursuant to this Agreement.
(k) Release of Obligations. All obligations of the Company pursuant
to any loan, lease, guaranty, commitment or other undertaking of the
Company, DCI or any of its or their Subsidiaries and other
Affiliates, whether as maker, guarantor or otherwise, including those
obligations listed on Schedule 8.2(k), shall have been fully and
permanently released or satisfied, or payoff letters shall have been
executed and delivered, pursuant to documents and agreements
satisfactory in all respects to Purchaser.
8.3 Conditions to the Obligations of the Company and DCI under this
Agreement. The obligations of the Company and DCI under this
Agreement shall be further subject to the satisfaction or waiver, at
or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties; Covenants and Agreements;
Consents. The representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects
as of the date hereof and shall also be true and correct in all
material respects on the Closing Date as though made on and as of the
Closing Date, and Purchaser shall have performed in all material
respects the agreements, covenants and obligations to be performed by
it and them at or prior to the Closing Date. All Authorizations of
or with any Governmental Authority or other third party that are
required for or in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby
by Purchaser shall have been obtained or made, except where the
failure to obtain any such Authorizations would not have a Material
Adverse Effect on Purchaser.
(b) Certificates. Purchaser shall have furnished the Company with
such certificates of its officers or others and such other documents
to evidence fulfillment of the conditions set forth in this Article 8
and otherwise to consummate the transactions contemplated pursuant to
this Agreement as the Company may reasonably request.
(c) No Material Adverse Effect on Purchaser. No Material Adverse
Effect with respect to Purchaser shall have occurred since the date
of this Agreement except (i) the announcement of this Agreement, and
(ii) conditions effecting global economy or regional economy in which
Purchaser operates any part of its business.
(d) Approvals. This Agreement and the transactions contemplated
hereby shall have received all Required Government Consents and other
consents or approvals from third parties (including lenders,
licensees and lessors) required to consummate the transactions
contemplated hereby which, either individually or in the aggregate,
if not obtained would have a Material Adverse Effect.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated prior to the
Closing Date, whether before or after approval of this Agreement by
DCI or Purchaser:
(a) by mutual written consent of Purchaser and DCI;
(b) by Purchaser or DCI if the Closing Date shall not have occurred
on or prior to the Deadline Date; provided, however, that the right
to terminate this Agreement under this Section 9.1(b) shall not be
available to any Party whose action or failure to act has been a
principal cause of or resulted in the failure of the transaction
contemplated by this Agreement to occur on or before such date and
such action or failure to act constitutes a willful and material
breach of this Agreement;
(c) by Purchaser, if there has been a material breach of any
representation, warranty, covenant, agreement or obligation of the
Company or DCI hereunder in each case which either is not capable of
being remedied, or, if capable of being remedied, shall not have been
remedied within 10 days after receipt by the Company or DCI, as
appropriate, of notice in writing from Purchaser specifying the
nature of such breach and requesting that it be remedied;
(d) by DCI, if there has been a material breach in any
representation, warranty, covenant, agreement or obligation of
Purchaser hereunder in each case which either is not capable of being
remedied, or, if capable of being remedied, shall not have been
remedied within 10 days after receipt by Purchaser of notice in
writing from DCI specifying the nature of such breach and requesting
that it be remedied;
(e) by Purchaser if any of the conditions set forth in Section 8.1
or 8.2 is not satisfied and is no longer capable of being satisfied
by the Closing Date; or
(f) by DCI if any of the conditions set forth in Section 8.1 or 8.3
is not satisfied and is no longer capable of being satisfied by the
Closing Date;
9.2 Effect of Termination. If either Purchaser or DCI terminates
and abandons this Agreement pursuant to Section 9.1, this Agreement,
other than Section 7.5(b), this Section 9.2, Section 9.3, Article 10
and Section 11.1 (each of which shall survive termination), shall
forthwith become void and have no effect, without any liability on
the part of any Party or its officers, directors or shareholders;
provided, however, that nothing contained in this Section 9.2, shall
relieve any Party from any liability for any material breach of this
Agreement.
9.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the Parties hereto.
9.4 Extension; Waiver. The Parties may, at any time prior to the
Closing Date, (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 contained herein
or in any document delivered pursuant thereto; or (c) waive
compliance with any of the agreements or conditions contained herein.
Any agreement on the part of any Party to any extension or waiver
shall be valid only if it is set forth in an instrument in writing
signed on behalf of the Party against which the waiver is sought to
be enforced and shall apply only to the specific condition,
representation or warranty identified by the writing as being waived,
extended or modified.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification by DCI. Subject to the terms of this Article
10, DCI shall indemnify, defend, save and hold harmless Purchaser,
its subsidiaries and their respective predecessors, successors,
directors, officers, employees, agents, representatives and assigns
(collectively, the Purchaser Indemnified Parties), from and against
any demands, claims (as defined in Section 101 of the U.S. Bankruptcy
Code), actions, losses, damages, deficiencies, liabilities, costs and
expenses (including, without limitation, reasonable attorneys' and
accountants' fees and expenses), together with interest and
penalties, if any, awarded by court order or otherwise agreed to
(collectively, Indemnifiable Damages), suffered by Purchaser
Indemnified Parties that arise out of or result from any of the
following (whether or not a third party initiates the proceeding or
claim giving rise to such Indemnifiable Damages):
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company or DCI in this Agreement and the
other Purchase Agreements; or
(b) any breach of any representation, warranty, covenant or
agreement in a document, certificate or affidavit delivered by the
Company or DCI at the Closing.
10.2 Indemnification by Purchaser. Subject to the terms of this
Article 10, Purchaser shall indemnify, defend, save and hold harmless
the Company and DCI (but after consummation of the transactions
contemplated by this Agreement, solely DCI, and not the Company) and
its predecessors, successors, directors, officers, employees, agents,
representatives and assigns (collectively, the Company Indemnified
Parties), from and against any Indemnifiable Damages suffered by the
Company Indemnified Parties that arise out of or result from any of
the following (whether or not a third party initiates the proceeding
or claim giving rise to such Indemnifiable Damages):
(a) any breach of any of the representations, warranties, covenants
and agreements made by Purchaser in this Agreement and the other
Purchase Agreements; or
(b) any breach of any representation, warranty, covenant or
agreement in a document, certificate or affidavit delivered by
Purchaser at the Closing.
10.3 Claims for Indemnification. The representations, warranties,
covenants and agreements in this Agreement shall survive the Closing
for a period of two years and shall not be affected by any
investigation made by the parties hereto prior to the date hereof or
the Closing Date. The Party seeking indemnification (the Indemnified
Party) shall give the Party from whom indemnification is sought (the
Indemnifying Party) a written notice (Notice of Claim) within sixty
(60) days of the discovery of any loss, liability, claim or expense
in respect of which the right to indemnification contained in this
Article 10 may be claimed; provided, however, that the failure to
give such notice within such sixty (60) day period shall not result
in the waiver or loss of any right to bring such claim hereunder
after such period unless, and only to the extent that, the other
Party is actually prejudiced by such failure. In the event a claim
is pending or threatened or the Indemnified Party has a reasonable
belief as to the validity of the basis for such claim, the
Indemnified Party may give written notice (a Notice of Possible
Claim) of such claim to the Indemnifying Party, regardless of whether
a loss has arisen from such claim. A Party shall have no liability
under this Article 10 for breach of a representation or warranty,
unless a Notice of Claim or Notice of Possible Claim therefor is
delivered by the Indemnified Party; provided, however, that the
limitations set forth in this Section 10.3 shall not apply to
liability under this Article 10 for any intentional breach of a
representation or warranty in this Agreement. Any Notice of Claim or
Notice of Possible Claim shall set forth the representations,
warranties, covenants and agreements with respect to which the claim
is made, the specific facts giving rise to an alleged basis for the
claim and the amount of liability asserted or anticipated to be
asserted by reason of the claim.
10.4 Defense of Claim by Third Parties. If any claim is made by a
third party against a Party to this Agreement that, if sustained,
would give rise to a liability of another Party under this Agreement,
the Party against whom the claim is made shall promptly cause notice
of the claim to be delivered to the other Party and shall afford the
other Party and its counsel, at the other Party's sole expense, the
opportunity to join in the defense and settlement of the claim. The
failure to provide such notice will not relieve the Indemnifying
Party of liability under this Agreement unless, and only to the
extent that, the Indemnifying Party is actually prejudiced by such
failure.
10.5 Third Party Claim Assistance. From time to time after the
Closing, Purchaser, the Company and DCI shall provide or cause their
appropriate employees or representatives to provide the other Parties
with information or data in connection with the handling and defense
of any third party claim or litigation (including counterclaims filed
by the parties) in respect to which a Party may be required to
indemnify another Party under this Agreement. The Party receiving
such information or data shall reimburse the other Parties for all of
their reasonable costs and expenses in providing these services,
including, without limitation, (i) all out of pocket, travel and
similar expenses incurred by their personnel in rendering these
services; and (ii) all fees and expenses for services performed by
third parties engaged by or at the request of such other Parties.
10.6 Settlement of Indemnification Claims. If a recipient of a
Notice of Claim desires to dispute such claim, it shall, within
thirty (30) days after receipt of the Notice of Claim, give
counternotice, setting forth the basis for disputing such claim, to
Purchaser or DCI, as the case may be. If no such counternotice is
given within such thirty (30) day period, or if Purchaser or DCI, as
the case may be, acknowledges liability for indemnification, then the
amount claimed shall be promptly satisfied. If, within thirty (30)
days after the receipt of counternotice by Purchaser or DCI, as the
case may be, DCI and Purchaser shall not have reached agreement as to
the claim in question, then the Party disputing the claim shall
satisfy any undisputed amount and the disputed amount of the claim of
indemnification shall be submitted to and settled by arbitration in
accordance with the then prevailing commercial arbitration rules of
the American Arbitration Association. Such arbitration shall be held
in the Stratford, Connecticut area before a panel of three (3)
arbitrators, one selected by each of the Parties and the third
selected by mutual agreement of the first two, and all of whom shall
be independent and impartial under the rules of the American
Arbitration Association. The decision of the arbitrators shall be
final and binding as to any matter submitted under this Agreement.
To the extent the decision of the arbitrators is that a Party shall
be indemnified hereunder, the amount shall be satisfied. Judgment
upon any award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
10.7 [intentionally omitted].
10.8 Certain Limitations. The foregoing indemnification obligations
are subject to the limitation that no Indemnifying Party shall have
any liability for indemnification for breaches of representations and
warranties pursuant to this Article 10 unless the total Indemnifiable
Damages for which the Indemnifying Party would be liable exceed
$50,000 in the aggregate; provided, however, that the foregoing
limitation shall not apply to any Indemnifiable Damages with respect
to, as a result of or involving any intentional breach of a
representation or warranty in this Agreement. In no event shall the
liability of DCI and Purchaser under this Article 10 exceed the total
Purchase Price paid by Purchaser for the Company Common Stock.
ARTICLE 11
MISCELLANEOUS
11.1 Expenses.
(a) Except as otherwise expressly stated herein, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including legal and accounting fees
and expenses) shall be borne by the Party incurring such costs and
expenses and shall be paid by such Party prior to or on the Closing
Date.
(b) Notwithstanding any provision in this Agreement to the contrary,
if any of the Parties shall willfully default in its obligations
hereunder, the non-defaulting Party may pursue any remedy available
at law or in equity to enforce its rights and shall be paid by the
willfully defaulting Party for all damages, costs and expenses,
including without limitation reasonable legal and accounting expenses
incurred or suffered by the non-defaulting Party in connection
herewith or in the enforcement of its rights hereunder.
11.2 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if
delivered personally or by reputable overnight or express courier,
sent by registered or certified mail, postage prepaid, or by telefax
(with subsequent delivery via one of the two previous methods) as
follows:
(a) If to Purchaser, to:
Tanner's Restaurant Group, Inc.
c/o J.P. Carey Securities, Inc.
Atlanta Financial Center, East Tower
3343 Peachtree Road, Suite 500
Atlanta, Georgia 30326
Attn: Mr. Jose A. Auffant
Telefax: (404) 816-7837
Copy (which shall not constitute notice) to:
Nelson Mullins Riley & Scarborough, LLP
999 Peachtree Street, N.E.
Suite 1400
Atlanta, Georgia 30309
Attn: Wade H. Stribling, Esq.
Telefax: (404) 817-6050
(b) If to the Company (prior to Closing) or DCI, to:
Fone.com, Limited
c/o DCI Telecommunications, Inc.
611 Access Road
Stratford, Connecticut 06615
Telefax: (203) 380-0915
Attn: John Adams
Copy (which shall not constitute notice) to:
Alfano & Baroff, P.A.
814 Elm Street
Manchester, New Hampshire 03101-2019
Attn: Martin J. Baroff, Esq.
Telefax: (603) 647-4664
(c) If to DCI, to:
DCI Telecommunications, Inc.
611 Access Road
Stratford, Connecticut 06615
Telefax: (203) 380-0915
Attn: John Adams
or such other addresses and telefax numbers as shall be furnished in
writing by any Party, and any such notice or communications shall be
deemed to have been given as of three business days after the date
actually sent via overnight or express courier, eight days after
mailed and upon telefax confirmation of receipt to addressee by the
sender.
11.3 Parties in Interest. This Agreement shall be binding on and
shall inure to the benefit of the Parties hereto and their respective
successors, representatives and assigns. This Agreement (and the
rights and interests herein) may not be assigned by any Party without
the written consent of the other Parties; provided, however,
Purchaser may assign its interests herein to (a) an entity
controlling, controlled by or under common control with Purchaser or
(b) a purchaser or transferee of all or substantially all of the
business or assets of Purchaser, whether by sale of stock or assets,
merger or otherwise. Any attempted assignment in contravention of
the foregoing shall be null and void. Nothing in this Agreement is
intended to confer, expressly or by implication, upon any other
person or entity any rights or remedies under or by reason of this
Agreement.
11.4 Entire Agreement. This Agreement, which includes the Disclosure
Schedules, Exhibits and the other documents, agreements, certificates
and instruments executed and delivered pursuant to or in connection
with this Agreement (collectively, the "Purchase Agreements"), sets
forth the agreement among the Parties with respect to the purchase
and sale of the Company Common Stock.
11.5 Counterparts; Facsimiles. This Agreement may be executed in two
or more counterparts, each of which shall be an original, and each of
which shall constitute one and the same agreement. Any Party may
deliver an executed copy of this Agreement and any documents
contemplated hereby by facsimile transmission to another Party, and
such delivery shall have the same force and effect as any other
delivery of a manually signed copy of this Agreement or of such other
documents.
11.6 Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE UNITED STATES OF AMERICA AND THE
STATE OF CONNECTICUT, EXCLUDING CHOICE OF LAW PRINCIPLES.
(b) Purchaser, the Company and DCI consent to the
exclusive jurisdiction and venue of the courts of any county in the
State of Connecticut and the United States Federal District Courts of
Connecticut, in any judicial proceeding brought to enforce this
Agreement. The Parties agree that any forum other than the State of
Connecticut is an inconvenient forum and that a lawsuit (or non-
compulsory counterclaim) brought by one Party against another Party,
in a court of any jurisdiction other than the State of Connecticut
should be forthwith dismissed or transferred to a court located in
the State of Connecticut.
11.7 Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement or any other related documents,
agreements, certificates or other writing, or the breach,
termination, construction, validity or enforceability hereof or
thereof, shall be settled by binding arbitration in accordance with
the rules of the American Arbitration Association (except as
otherwise provided in this Section 11.7).
(b) Termination or limitation of Purchaser's rights in any
of its software, products, or any associated intellectual property
rights or documents may not be awarded under any circumstances. The
right to demand arbitration and to receive damages and obtain other
available remedies as provided hereunder shall be the exclusive
remedy in the event an arbitration demand is made, except that
Purchaser shall be entitled to obtain equitable relief, such as
injunctive relief, from any court of competent jurisdiction to
protect its rights in any of its software products or any associated
intellectual property rights or documents while such proceeding is
pending or in support of any award made pursuant to such arbitration.
11.8 Invalidity of any Part. If any provision or part of this
Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this
Agreement and shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability. Upon any such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties hereto will negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent
possible.
11.9 Time of the Essence; Computation of Time. Time is of the
essence of each and every provision of this Agreement. Whenever the
last day for the exercise of any right or the discharge of any duty
under this Agreement shall fall upon Saturday, Sunday or a federal,
public or legal holiday, the Party having such right or duty shall
have until 5:00 p.m., Eastern Standard Time on the next succeeding
regular business day to exercise such right or to discharge such
duty.
[Signatures begin on following page]
IN WITNESS WHEREOF, Purchaser and DCI have caused this
Agreement to be executed by their duly authorized officers as of the
day and year first above written.
PURCHASER:
Tanner's Restaurant Group, Inc.
By: /s/ Jose A. Affaunt
Name: Jose A. Affaunt
Title: CEO
DCI:
DCI Telecommunications, Inc.
By: /s/ John J. Adams
Name: John J. Adams
Title: President
SCHEDULES
Schedule 5.1(a) - Governmental Authority
Schedule 5.1(b) - Articles of Incorporation and Bylaws of
Company
Schedule 5.1(c) - Equity Interests
Schedule 5.2 - Shareholders and other Holders of Company
Stock
Schedule 5.3(a) - Company Approvals
Schedule 5.4(a) - Company Financial Statements
Schedule 5.4(d) - Certain Company Liabilities and Obligations
Schedule 5.5 - Brokers, Finders, Etc.
Schedule 5.6(a) - Facts or Conditions
Schedule 5.7 - Litigation of Company
Schedule 5.8 - Taxes and Tax Returns
Schedule 5.9 - Employee Benefit Plans
Schedule 5.9(g) - Accruals; Funding - Employee Benefit Plans
Schedule 5.10 - Compliance with Applicable Laws
Schedule 5.11(a) - Material Contracts
Schedule 5.11(b) - Amendments to Material Contracts
Schedule 5.11(c) - Employment/Severance Agreements
Schedule 5.11(d) - Limits on Competition
Schedule 5.11(e) - Defaults on Material Contract
Schedule 5.12(a) - Ownership of Company Assets and Properties
Schedule 5.12(b) - Insurance
Schedule 5.14 - Intellectual Property not owned by the
Company
Schedule 5.14(a) - Ownership of Patents, Trademarks, Service
Marks, Trade Names and Copyrights
Schedule 5.14(b) - Proprietary Legends and Copyright Notices
Schedule 5.14(c) - Trade Secret Protection
Schedule 5.14(d) - Ownership of Software
Schedule 5.14(e) - Absence of Claims
Schedule 5.16 - Third Party Components
Schedule 5.17 - Third Party Interests
Schedule 5.18 - Parachute Payments
Schedule 5.19(a) - Absence of Certain Agreements
Schedule 5.20 - Major Vendors and Customers
Schedule 5.21 - Accounts Receivable
Schedule 5.22 - Bank Accounts
Schedule 5.25 - Labor and Employment Matters
Schedule 5.26 - Year 2000 Matters
Schedule 5.27 - Change in Control Provisions
Schedule 7.3 - No Solicitation
Schedule 8.2(i) - No Interest in Proprietary Information
Schedule 8.2(k) - Release of Obligations
EXHIBITS
Exhibit 3.1 - Liabilities of DCI to be Assumed by
Purchaser
Exhibit 3.2(c)(i) - Form of Assumption Agreement
Exhibit 3.2(c)(ii) - Form of Assumption Agreement
Exhibit 3.2(c)(iii) - Form of Assumption Agreement
Exhibit 6.2(a) - Outstanding Securities of Purchaser
Exhibit 6.2(b) - Articles of Incorporation and Bylaws of
Purchaser
Exhibit 6.2(c) - Subsidiaries
Exhibit 6.3(a) - Purchaser Approvals
Exhibit 6.4(a) - Financial Statements
Exhibit 6.5 - Broker's and Other Fees
Exhibit 6.6 - Legal Proceedings
Exhibit 6.7 - Taxes and Tax Returns
Exhibit 8.2(b) - Form of Opinion of Counsel to the Company
and DCI
Exhibit 8.2(c) - Form of Certificate of the Company
EXHIBIT 20.1 OPINION OF COUNSEL
MARK C. FOSTER
Attorney at Law
Suite 820 Direct Line (303) 321-7997
3033 East First Avenue Receptionist (303) 320-4162
Denver, Colorado 80206 Telecopier (303) 321-321-8106
April 19, 2000
DCI Telecommunication, Inc.
611 Access Road
Stratford, CT 06497
Re: DCI Telecommunications, Inc. Sale of Fone.com
Gentlemen:
You have requested an opinion regarding the application of the
Colorado Corporation Code concerning the `sale of substantially all
of the company's assets' as it may apply to the proposed sale of
Fone.com.
In rendering this opinion I have relied upon the representations
of the Board of Directors of DCI Telecommunications, Inc. (the
Company). I have reviewed originals or copies certified or otherwise
identified to my satisfaction, of the Certificate of Incorporation
and Bylaws of the Company, each as amended, and 1999 Annual Corporate
Report of the Company. I have assumed the truthfulness of all
representations made to me and the authenticity of all documents
submitted to me as originals and the conformity to original documents
of all documents submitted to me as copies, I have not independently
verified such information and assumptions. I am a member of the Bar
of the State of Colorado, and I express no opinion as to the law of
any other jurisdiction. The opinions expressed herein are subject to
rulings of fact and law by a court of competent jurisdiction, the
laws of bankruptcy and such other ruling or laws that may apply.
The Company proposes to sell a wholly owned subsidiary
incorporated as Fone.com. The sale will be a sale of all of the
shares of Fone.com held by the Company in exchange for stock in a
fully reporting, trading shell company, domiciled in Texas. You have
asked if under Colorado law the Company must obtain approval from the
DCI shareholders for the sale Fone.com.
Colorado Revised Statute 7-112-101 provides that a corporation
may, as authorized in its bylaws or by the board of directors, sell,
lease, exchange or otherwise dispose of any or all of its property in
the usual and regular course of business. Section 7-112-102 requires
a corporation to obtain shareholder approval to sell, lease,
exchange, or otherwise dispose of all, or substantially all, of its
property.
In determining whether shareholder approval is required for the
sale of assets, the first question is whether the sale is or is not
in the usual and regular course of business. If the sale is in the
regular course of business, even a sale of substantially all of a
corporation's assets does not always require shareholder approval.
To determine whether a sale is in the usual and regular course
of business, the Courts first examine the stated purpose of the
company set forth in the Articles of Incorporation. The stated
purpose of the Company in the Articles of Incorporation is to conduct
any lawful purpose and business. The Courts then examine the business
actually being conducted by the corporation.
The Company is engaged in the business of providing long
distance telecommunications services and related businesses.
Fone.com, as it has been described by the Board of Directors, is a
subsidiary whose business is consistent with the business of the
Company. Accordingly, the acquisition of companies such as Fone.com
and the disposition of such companies would seem to be within the
usual and regular course. of business of the Company.
The Court will further review the sale of assets based upon a
qualitative and quantitative analysis. Under the qualitative review
the courts have generally found that the critical factor in
determining the character of a sale of assets is not the amount of
the property sold but whether the sale is in fact an unusual
transaction or one made in the regular course of business. The
transaction must strike at the heart of the corporate existence and
purpose to be found to be unusual or not in the ordinary course of
business.
Based upon the current business activity of the Company, the
business of Fone.com may well be considered under the qualitative
analysis as being at the heart of the corporate existence and purpose
and therefore require further review under the quantitative analysis.
If a sale is of assets quantitatively vital to the operation of
the corporation and is out of the ordinary and substantially affects
the existence and purpose of the corporation, then such transaction
is beyond the power of the board of directors. In order to require
shareholder approval, the sale must be more than merely outside the
ordinary course of business. It muse substantially affect the
existence and purpose of the company.
Quantitative analysis examines the asset value of the sale.
Courts generally look at fair market value but will also consider
book value. Sales of assets greater the 60% of the value of a company
generally require shareholder approval. Sales of assets between 30%
and 60% have had varying results, and sales of assets valued at less
than 30% generally do not require shareholder approval. Based upon
the representations made by the Company, the value of Fone.com is
substantially less than 30% of the asset base of the Company.
Based both upon the qualitative and quantitative analysis
applied by the Courts, the sale of Fone.com should not require
shareholder approval.
Further review of the common law basis for the applicable
statute and relevant case laws also supports this conclusion. The
common law basis for the statute rests upon the premise of implied
consent among the shareholders to invest in an enterprise with a
stated business objective. The management cannot unilaterally
determine to sell all or substantially all of the company's assets to
the detriment of the common purpose of the shareholders. The law is
designed to prevent the shareholder's investment from being
fundamentally changed without their consent. The proposed sale of
Fone.com does not appear to be inconsistent with the shareholders
investment purpose.
There is further reason to conclude that the statute will not
apply to the sale of Fone.com. The statute requires shareholder
approval for the sale of assets not in the regular course of
business. If the sale of Fone.com is not in the regular course of
business, then shareholder approval is required. Fone.com is wholly
owned by the Company. The Company is the shareholder who must approve
the sale of the asset. The shareholders of DCI Telecommunications are
beneficiaries of the Fone.com stock which is owned by the Company.
Some courts have interpreted the statute to require the approval in
the sale of a wholly owned subsidiary to mean the approval of the
parent company, not the shareholders of the parent company. This has
been found most often when the sale of the subsidiary is not a sale
of substantially all of the assets of the company. Thus, even if
shareholder approval is required, it may be argued that the Company
is the shareholder who must approve the sale.
Based upon the information provided to me by the Company, the
application of the statute and the governing case law, it is unlikely
that the sale of Fone.com would under judicial review require
shareholder approval from the shareholders of DCI Telecommunications,
Inc.
Very truly yours,
/s/ Mark C. Foster
---------------------
Mark C. Foster, Esq.