SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
June 28, 2001
(Date of Report)
Diversified Technologies Group, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0 41703 51 0356301
(Commission File Number) (IRS Employer Identification Number)
48 S.W. 16th, Dania Beach, Florida 33004
(Address of principal executive offices including zip code)
(954) 927.0034
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
Item 1. Change in Control of Registrant.
Acquisition of X-Change, Inc., as a Wholly Owned Subsidiary of Registrant:
On June 28, 2001, Diversified Technologies Group, Inc., a Nevada corporation
(Company), entered into an agreement (Reorganization Agreement) to acquire all
of the outstanding capital stock of X-Change Corporation, Inc., a privately-held
Nevada corporation (XCI or X Change). Pursuant to the Reorganization Agreement,
the Company agreed to acquire all of the outstanding capital stock of XCI in
exchange for 28,000,000 post split shares of its common stock. The
Reorganization Agreement became effective on July 1, 2001.
Background and Overview of X-Change, Inc.:
XCI is a corporation registered under the laws of the state of Nevada. The
corporation is developing an alternative trading system (ATS) for the orderly
transactional flow of stock transactions primarily for shares normally excluded
from mainstream trading venues. These shares may be American Depository Receipts
or private placement shares, but the major focus is in transactions of shares
trading currently through the National Quotation Bureau "Pink Sheets". A second
prospect is the orderly trading of shares issued under Rule 144. Until the
advent of "The X Change," holders of these shares had no choice but to wait
until the expiration of a specific holding period had been satisfied before
realizing any gains that may have accrued. The X Change will offer a method of
transaction that will serve this poorly addressed market.
As previously mentioned, XCI is in the development stage of a stock trading and
order flow system called an alternative trading system. OM Technology is doing a
design study for XCI and has the software necessary to establish an effective
and efficacious order flow system that can be used by either individual stock
traders or broker dealers or institutions.
Mission Statement:
The aim of X Change is to provide a means by which young, emerging companies can
be introduced to the investing public and conversely provide the individual
investor with a fair and equitable venue through which ownership in these
companies can be made with a high degree of assurance that the investment
decision is based on reliable information and the best price available.
Of equal importance will be the institution of a trading venue for transactions
in shares that have been issued under Rule 144 of the Act. These are shares that
were originally issued as un-registered and must be held for a specific time
before being eligible as free trading. Often times they are sold at injurious
discounts instead of at fair market value. Our system should enable holders to
make transactions at more equitable price levels.
XCI intends to employ state of the art computer software designed specifically
to provide the best order flow possible for quick execution of transactions
taken from the broadest cross section of buyers and sellers. This system will be
available to not only broker dealers and institutions but independent investors
who see the advantages to trading in an arena where the members truly do monitor
and police themselves to insure the efficacy of their own vision.
Business History:
On July 28, 2000, X Change was incorporated under the laws of the State of
Nevada. XCI is developing an alternative trading system (ATS) for the trading of
shares normally excluded from mainstream trading venues. XCI is registered as a
broker-dealer with the SEC. On October 15, 2001, XCI signed an agreement with OM
Technologies to design an electronic trading platform. X Change has filed with
the United States Patent & Trademark office for its trademark.
Alternative Trading System:
An Alternative Trading System is the next generation in transaction processing
and order flow. Software exists that can connect individuals into a network that
provides for proper quotations, order entry and transactional procedures all on
a real time electronic basis.
A Self-Regulating Organization (SRO) operates under auspices of the Securities
and Exchange Commission. The two groups work hand in glove to regulate specific
broker dealers and issues traded on venues organized and monitored by the SRO
itself. At the present time there are but a handful of SROs. The New York Stock
Exchange and various regional exchanges. The Commodities Futures Trading
Commission and some other minor special interest venues. It must be noted
however that nothing precludes the establishment of other SRO's who have
qualified under the rules as promulgated by the SEC.
Market:
X Change has identified a specific market segment that will lend itself easily
to the Alternative Trading System it is developing in conjunction with OM
Technologies. This focus is the Pink Sheets.
By using this new software technology the Company will generate an increase in
liquidity and visibility of these issues by providing traders with an online
trading vehicle through a totally new membership venue.
As has been previously noted, Pink Sheet issues trade exclusively over the
phone. This limits liquidity and restricts the validity of these issues. In
addition, there is no form of Order Book and no electronic access to route
orders.
The NASD has not turned a deaf ear to the needs of these smaller companies but
as presently organized they simply do not have the man power or the necessary
regulations to provide an effective trading venue or monitoring system to give
viability to such issues. In order to keep viability amongst such stocks, they
have encouraged the National Quotation Bureau to create its own electronic
market data competition to NASD's Bulletin Board. The opportunity to become a
leader in trading small capital and limited liquidity stocks by providing an
open, fully automated cost effective, transparent marketplace is rapidly
growing. By incorporating in its place trading software with an intended
registration as an SRO, X Change intends to create a network of institutions and
individuals that will implement trading on the system.
Including private individuals as full members with access to all markets on the
system opens the market to an almost unlimited number of associates. Through the
use of simple PC connections every computer nationwide can be connected as a
terminal not only for order execution but for real time reporting of trades and
market conditions. XCI intends to charge a monthly fee for connection to the
service and for the software. Once the trading structure is in place, the
universe could grow to include other under-served or foreign markets, but a
defined focus in this area will contain scope, minimize risk and provide the
quickest returns. Expansion into foreign markets requires the addition of
multi-market, multi-instrument and multi-currency capabilities to existing base
programs being licensed by XCI from OM Technology, which has scheduled this as
an on going development. Technology also allows access to domestic markets from
overseas investors via the Internet and other order routing methods. In
addition, local points of presence to foreign investors would be available
through currently available technology.
Technology:
XCI has contracted with OM Technology to do a design study for this project and
intends to contract with OM to implement this program with proprietary software,
hardware infrastructure and support services. OM is an internationally
recognized leader in exchange trading systems. Their software suite and
integration expertise is unrivaled. They were the pioneer in "for profit"
exchanges and offer valuable expertise in establishing this venture as a profit
making investment for X Change.
The electronic trading system to be used will provide transparency; quotes based
on a Limit Book, real-time trade reporting, feed to NQB and a standard feed to
vendors such as Reuter's etc. OM will be installing an NQB interface for our
Service Bureau business. The software systems have the capability to perform
full customer accounting and will maintain client position information, receive
securities orders via the Internet or a private network, perform price discovery
and manage orders and route and deliver orders to multiple execution
destinations. In addition, the software can communicate transaction confirmation
information that is received back from the market to the order sending sources.
Trade information will be delivered to clearing firms and updated credit and
position information can be received from those clearing firms.
According X Change research, the electronic system brings with it expertise from
electronic exchanges around the world. The common limit order book can be set to
interact with one or more matching models. For fairly active/liquid models, a
FIFO continuous match could be used while less liquid issues might revert back
to periodic auction. Large blocks or special interest orders may `trigger' a
call auction. The model can be flexible enough to meet the issue and market
requirements.
Participants:
XCI's intent is to provide all market participants or members--from individual
investors to large financial institutions--with the ability to execute
transactions on a level playing field, at an extremely low cost. Membership will
be open to allow the most number of players and by its very nature increase
liquidity.
XCI will have subscribers consisting of any person that has entered into a
contractual agreement XCI to access such alternative trading systems for the
purpose of effecting transactions in thinly traded securities or for submitting,
disseminating or displaying orders on such alternative trading systems,
including a customer, member, user or participant in an alternative trading
system. Anyone who deals with and handles orders for the OTC market can route
those orders to The X Change. XCI estimates that within the first year of
operation it will enroll 700 members making 200,000 transactions per month.
Traders will only be able to access The X Change via broker/dealers, all of
which will have access to over 500 institutional clients connected into the
IXNET hub.
Development Strategy:
XCI anticipates rolling out its development and marketing program in three
phases during the first 12 months of operation.
Phase I . XCI will launch its alternative trading system for stocks which do not
have the liquidity and visibility regarded as a prerequisite for an active
market.
Revenues are anticipated to be generated within the first eighteen months after
the ATS is launched. As previously mentioned, XCI is in negotiations with a
regional stock exchange to use its services for surveillance and compliance.
The infrastructure is in place to connect to the International Stock Exchange,
which is the first electronic stock exchange to trade options. It is the intent
XCI to trade options side by side on a single screen which is something that is
against current regulations to do on an exchange floor but can be accomplished
with electronic access to simultaneous exchange floors with modern technology
available from OM Technology. The benefits include reduced trading risks.
Phase II. XCI will commence offering access to its system to U.S. financial
services companies, broker-dealers and other regional exchanges.
XCI will market access to the system through front-end platforms developed for
it or through the customer's own brokerage platform.
In summary, XCI's objective, commencing immediately and continuing over an
estimated one year period, is to provide an electronic platform that will make
OTC securities markets available to financial institutions and retail investors
in a centralized, fully-automated and efficient manner.
Management:
Cary Grant is the principal founder and president of XCI. Mr. Grant had been a
partner/founder of Third Market Corp. and began his career as an account
executive with Merrill Lynch. Third Market Corp. was an earlier client of OM
Technology allowing The X Change to leverage the relationship into this new
venture, with OM willing to defer licensing fees into the future because of its
confidence in the vision. He also founded Grant Financial Corp., a specialist
firm on the floor of the Chicago Stock Exchange. He subsequently sold Grant
Financial to Rodman & Renshaw. Born and raised in Chicago, Mr. Grant was
educated at Loyola University and the New York Institute of Finance. He is
presently a member of the Security Traders Association (STA), the Security
Traders Association of Chicago and the Securities Industry Association. He was a
member of the Chicago Stock Exchange from 1981 to 1989 and the Chicago Board of
Options Exchange from 1974 to 1981. He was nominated for the 1988 Entrepreneur
of the year by Venture Magazine and Arthur Young and Company.
Mark Fadiman is the founder of Palisade Business Press, a New Jersey based
cooperative publishing firm that has published close to 30 books on business and
finance between 1998 and 2000 and supports top Wall Street firms such as Weiss,
Peck & Greer and RWB Advisory Services with magazines, newsletters and marketing
materials. Palisade Press also supervises advertorial programs for the financial
trade publication Ticker magazine and Individual Investor magazine
(ca.:500,000). Mark was previously publisher and editor-in-chief of the Money
Review magazine and is the author of two well-received books on the financial
industry--Rebuilding Wall Street (Simon & Schuster, 1992) and MarketShock (John
Wiley & Sons, 1994). Fadiman has held numerous reporting positions in the
financial media including Wall Street and banking correspondent for Investor's
Business Daily and retail brokerage and municipal finance editor for Investment
Dealers Digest magazine. He is founding editor of the financial technology
newsletter Investment Management Technology and the retail brokerage magazine On
Wall Street (ca.:100,000 Thomson Corp.)
Location:
The Company's and XCI's offices are located at 150 North Michigan Avenue, Suite
690, Chicago, IL 60601. The telephone number is (312) 332-4400 and facsimile
number is (312) 332-4401.
Regulatory Classification:
On December 8, 1998, the Securities and Exchange Commission issued new rules and
rule amendments regarding the regulation of exchanges and alternative trading
systems (ATS). The new SEC rules and amendments allow an ATS to choose whether
to register as national exchanges or as broker/dealers and comply with
additional requirements under Regulation ATS. The amendments also make changes
to the interpretation of the definition of "exchange" and the rules regarding
the registration as an exchange, and exclude from the rule filing requirements
for self-regulatory organizations (SRO's) certain pilot trading systems operated
by national securities exchanges and national securities associations. These new
rules provide options to The X Change in how best to take advantage of the
opportunity to introduce the next generation of equity trading platforms.
There are exemptions that XCI can take advantage of if it so chooses. Section 36
of the Exchange Act gives the SEC authority to exempt any person, security, or
transaction from provisions of the Exchange Act. Under this authority, the SEC
adopted Exchange Act Rule 3a1-1, which exempts certain entities from the
definition of "exchange" and there for the requirement to register as an
exchange, if they are operated by a national securities association, comply with
new Regulation ATS, or are not required to comply with that regulation.
One such exemption that The X Change can use is a temporary exemption from rule
filing requirements for Pilot Trading Systems. In order to provide an SRO with
the opportunity to better compete with ATS's registered as broker/dealers, the
SEC adopted new Rule 19b-5. Rule 19b-5 allows SROs to operate new pilot trading
systems for up to two years without pre-approval by the SEC. Currently, these
entities are required to submit a rule filing to the SEC for approval before
they are permitted to operate any new trading system. The X Change's
relationship with the regional stock exchange mentioned above could prove to be
invaluable. Taking the swift and easier regulatory route of first establishing a
Pilot program under the oversight of the regional stock exchange, but having a
partner who can provide the knowledge, experience (such as compliance and
surveillance) and operational structure of a regional exchange gives The X
Change instant credibility. Established procedures and well-run facilities
insure a high degree of acceptance and success. Proven connectivity to SIAC (for
trade reporting), to NSCC (for clearing) and to member firms for order routing
shorten the development, testing and certification cycles. When XCI moves to
exchange status, the connectivity to ITS as well as the business expertise with
the regional stock exchange will save the time and headaches during the process.
Ultimately The X Change will choose to take advantage of these new rules by
creating a new National Securities Exchange and Self-Regulatory Organization
(SRO) if it receives approval from the SEC. As an "exchange," XCI will be
defined as such under Section 3(a)(1) of the Securities Exchange Act of 1934
(Exchange Act) which includes a "market place or facilities for bringing
together purchasers and sellers or for otherwise performing with respect to
securities the functions commonly performed by a stock exchange". The Adopting
Release states that ATS's are increasingly performing many of the functions
typically carried out by registered exchanges and are being used by many market
participants as the functional equivalents of exchanges. The SEC therefore
adopted new Rule 3b-16 under the Exchange Act. Rule 3b-16 defines terms used in
the statutory definition of "exchange" in order to include systems, such as The
X Change's ATS, within the definition of "exchange". Specifically, Rule 3b-16
interprets the terms used in the statutory definition of "exchange" to include
any entity that (1) brings together the orders for securities of multiple buyers
and sellers and (2) uses established, non-discretionary methods under which the
orders interact with each other, and the buyers and sellers entering the orders
agree to the terms of a trade.
An ATS registering as a National Securities Exchange must comply with all the
current requirements of registered exchanges. For example, an ATS must perform
all the self-regulatory responsibilities of an exchange, including enforcing
compliance by its members, and persons associated with its members, with the
federal securities laws, and the rules of the exchange. The representation of
their members in the selection of directors and prohibits registered exchanges
from granting new membership to any person not registered as a broker/dealer
with the SEC or associated with a broker/dealer. An ATS registering, as an
exchange also would be required to trade only registered securities and would be
expected to become a participant in the national market system.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, and information relating to us
that are based on the beliefs of our management, as well as assumptions made by
and information currently available to our management. When used in this filing,
the words estimate, project, believe, anticipate, intend, expect and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements reflect our current views with respect to future
events and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in these forward-looking
statements. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on this filing. We
have no obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this filing or
to reflect the occurrence of unanticipated events.
Item 2. Acquisition or Disposition of Assets: See Item 1, above.
Item 3. Bankruptcy or Receivership: Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item. 5. Other Events. Not Applicable.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits:
Pursuant to the terms and conditions of the Reorganization Agreement, the
financial statements required will be filed within the time limitations set
forth in applicable regulations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Diversified Technologies Group, Inc.
(Registrant)
By: /s/ W. Steven Garrett
W. Steven Garrett, Chief Executive Officer
Date: July 10, 2001
EXHIBIT 1
Plan and Agreement of Reorganization
PLAN AND AGREEMENT OF REORGANIZATION
UNDER
SECTION 368(b) OF THE INTERNAL REVENUE CODE
DIVERSIFIED TECHNOLOGIES GROUP, INC.
AND
X-CHANGE CORPORATION, INC.
Boca Raton, Florida
(June 28, 2001)
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement" and "Reorganization,"
either of which may be used in the alternative) has been entered into on June
28, 2001 ("Closing Date"), to be effective July 1, 2001, and is between
Diversified Technologies Group, Inc., a publicly-held and traded Nevada
corporation ("DTGI"), X-Change, Inc., a privately-held Nevada corporation
("XCI"), and the shareholder(s) of XCI, ("Shareholders").
THE FOLLOWING PREMISES ARE AN INTEGRAL PART OF THIS AGREEMENT: 1. DTGI, solely
in exchange for 28,000,000 common shares of DTGI ("DTGI Shares"), desires to
acquire from the Shareholders 100% of the outstanding capitalization of XCI
(collectively, the "XCI Shares"). 2. This acquisition will make XCI a
wholly-owned subsidiary of DTGI. 3. The Shareholders desire to acquire the DTGI
Shares solely in exchange for the XCI Shares, which constitute 100% of the
outstanding capital of XCI. 4. The governing bodies of DTGI and XCI have found
it advisable for the benefit of each corporation, as well as their respective
best interests, that DTGI acquire XCI as a wholly-owned subsidiary and,
therefore, have approved this Agreement and the corresponding Reorganization. 5.
The Shareholders have likewise approved this Agreement.
THE PARTIES ADOPT THIS AGREEMENT AS A TAX-FREE REORGANIZATION UNDER SECTION
368(b) OF THE INTERNAL REVENUE CODE AND AGREE AS FOLLOWS:
ARTICLE I
TRANSFER AND CONVEYANCE OF THE XCI AND DTGI SHARES
1.1. Transfer and Conveyance. Subject to all of the terms, conditions,
representations, warranties and covenants set forth in this Agreement, the
Shareholders have transferred and conveyed (without reservation and free and
clear from all encumbrances) to DTGI the XCI Shares on the Closing Date.
Correspondingly, DTGI has transferred and conveyed (without reservation and free
and clear from all encumbrances) to the Shareholders the DTGI Shares.
1.2. DTGI Directors and Officers. The current members of the board of directors
of DTGI, as well as its sole executive officers, Messrs. W. Steven Garrett and
Richard Gregory, shall, subsequent to the consummation of this Agreement, resign
from the board and as executive officer of DTGI and shall appoint Cary Grant as
their replacement board member, who shall then appoint other directors in
accordance with the bylaws of DTGI. The current board members and executive
officers of XCI shall remain unchanged until such time as additional and/or
replacement board members and/or executive officers are appointed in accordance
with the bylaws of XCI.
ARTICLE II
REPRESENTATIONS, WARRANTIES, COVENANTS
2.1. Representations, Warranties and Covenants of DTGI to XCI and Shareholders.
DTGI represents and warrants to XCI and the Shareholders, jointly and severally,
on the Closing Date as follows: (a) Authority: All necessary action has been
taken to make this Agreement a legal, valid and binding obligation of DTGI
enforceable in accordance with its terms and conditions. (b) No Breach or
Violation: The execution and delivery of this Agreement and the performance by
DTGI of its obligations will not result in any breach or violation of or default
under any agreement, indenture, lease, license, mortgage, instrument, or
understanding, nor result in any violation of any law, rule, regulation,
statute, order or decree of any kind, to which DTGI or any of its affiliates is
a party or by which they or any of their property is or may be or become
subject, nor in the violation of the articles or bylaws governing the conduct of
DTGI. (c) Non-Assessable DTGI Shares: The DTGI Shares have each been validly
issued and are fully paid for and nonassessable. (d) No Liens on DTGI Shares:
The DTGI Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever through any act
of DTGI or its affiliates; further, the DTGI Shares are not the subject of any
agreement other than this Agreement. (e) Outstanding Commitments: There are no
outstanding commitments (direct or indirect) which would cause the issuance or
transfer out of treasury of any additional proprietary interest of DTGI, whether
by common stock, preferred stock, option, warrant, debt or otherwise. (f) SEC
and Tax Reports; Filings: DTGI has delivered to XCI and Shareholders its annual
report on Form 10-KSB for the year ended December 31, 2000, and its quarterly
reports on Form 10-QSB for the fiscal quarter ended March 31, 2001, all of which
were true and correct as of the date of filing and remain true and correct. DTGI
has provided to XCI and the Shareholders full access to any and all information
desired concerning the business and operations of DTGI, and DTGI has made
available to XCI and the Shareholders such personnel as has been requested to
answer any and all questions which XCI and/or the Shareholders may have had
concerning their investment in DTGI. DTGI is current in all of its required
reports under the Securities Exchange Act of 1934. DTGI is current in its
filings with all federal and state taxing agencies, including, without
limitation, the Internal Revenue Service. DTGI has delivered to XCI and the
Shareholders its annual report on Form 1040, which was true and correct as of
the date of filing and remains true and correct. No taxes are due any federal or
state agency. (g) No Undisclosed Liabilities or Obligations. DTGI has no
obligations or liabilities of any nature (absolute, accrued, contingent or
otherwise, and whether due or to become due, herein "liabilities") except
liabilities fully reflected or reserved in the balance sheet filed as a part of
the Form 10-QSB dated March 31, 2001; further, DTGI has no assets. (h)
Litigation. There is no valid legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation pending or threatened
against or involving DTGI, or which questions or challenges the validity of this
Agreement, or any action to be taken by DTGI pursuant to this Agreement or in
connection with the transactions contemplated hereby, and DTGI does not know or
have any reason to know of any valid basis for any such legal, administrative,
arbitration or other proceeding, claim or action of any nature or investigation;
further, DTGI is not subject to any valid judgment, order or decree entered in
any lawsuit or proceeding which has an adverse effect on its business practices
or on its ability to acquire any property or conduct its business in any area.
(i) Compliance with Law. DTGI is in compliance with all laws, regulations and
orders applicable to its business; further, DTGI has not received any
notification that it is in violation of any law, regulation or order and no such
violation exists. (j) Disclosure. No representations or warranties by DTGI in
this Agreement contain any untrue statement of fact or omit to state any fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading; further, there are no
facts known to DTGI which (either individually or in the aggregate) could or
would materially and adversely affect or involve any substantial possibility of
having a material, adverse effect on the condition (financial or otherwise),
results of operations, assets, liabilities or businesses of DTGI which have not
been disclosed in this Agreement.
2.2. Representations, Warranties and Covenants of XCI and Shareholders to DTGI.
XCI and the Shareholders each represents and warrants, jointly and severally, to
DTGI on the Closing Date as follows: (a) Authority: All necessary action has
been taken to make this Agreement a legal, valid and binding obligations of XCI
and the Shareholders enforceable in accordance with its terms and conditions.
(b) No Breach or Violation: The execution and delivery of this Agreement and the
performance by XCI and the Shareholders of their respective obligations will not
result in any breach or violation of or default under any material agreement,
indenture, lease, license, mortgage, instrument, or understanding, nor result in
any violation of any law, rule, regulation, statute, order or decree of any
kind, to which XCI, the Shareholders and/or any of their respective affiliates
is a party or by which they or any of them or any of their property is or may be
or become subject, nor in the violation of any documents governing the conduct
of either XCI or the Shareholders. (c) Non-Assessable XCI Shares: The XCI Shares
have each been validly issued and are fully paid for and nonassessable. (d) No
Liens on XCI Shares: The XCI Shares are not and shall not be or become subject
to any lien, encumbrance, security interest or financing statement whatsoever
through any act of XCI and/or the Shareholders; further, the XCI Shares are not
the subject of any agreement. (e) Capital Percentage; Outstanding Commitments:
The XCI Shares represent 100% of the outstanding proprietary interest of XCI;
further, there are no outstanding commitments (direct or indirect) which would
cause the issuance or transfer out of treasury of any additional proprietary
interest of XCI, whether by common stock, preferred stock, option, warrant, debt
or otherwise. XCI shall remain a wholly-owned subsidiary of DTGI until such time
as those covenants set forth in Section 2.4 are fulfilled. (f) Audited Financial
Statements and Tax Reports: XCI and the Shareholders have delivered or will
forthwith deliver within the time periods set forth in Form 8-KSB to DTGI
audited financial statements of XCI as of and for the yearly periods ended March
31, 2001, which statements shall include an audit opinion, balance sheet as of
March 31, 2001, operating and cash flow statements as of March 31, 2001, a
statement of changes in shareholders' equity from inception through March 31,
2001, and footnotes. The audit opinion is or will be unqualified and states or
will state that these financial statements were audited in accordance with
Generally Accepted Auditing Standards and present such statements in compliance
with Generally Accepted Accounting Principles. XCI has also delivered or will
forthwith deliver within the time periods set forth in Form 8-KSB to DTGI, if
required, unaudited financial statements as of and for any period subsequent to
March 31, 2001, as required under applicable securities statutes. All of the
foregoing financial statements were or will be true and correct as of the date
of preparation, remain or will remain true and correct and comply or will comply
with Regulation S-X under the Securities Exchange Act of 1934. XCI and the
Shareholders have provided to DTGI full access to any and all information which
either of them desired concerning the business and operations of XCI and/or the
Shareholders. XCI and the Shareholders have made available to DTGI such
personnel as has been requested to answer any and all questions which DTGI may
have had concerning its investment in XCI. XCI is current in all of its required
reports with all governmental and local taxing agencies. No taxes are due any
governmental or local agency. XCI and the Shareholders have provided to DTGI
full access to any and all information it desired concerning the business and
operations of XCI. XCI and the Shareholders have made available to DTGI such
personnel as has been requested to answer any and all questions which DTGI may
have had concerning its investment in XCI. (g) No Undisclosed Liabilities or
Obligations. XCI has no obligations or liabilities of any nature (absolute,
accrued, contingent or otherwise, and whether due or to become due, herein
"liabilities") except liabilities fully reflected or reserved in the balance
sheet dated March 31, 2001. (h) Litigation. There is no legal, administrative,
arbitration or other proceeding, claim or action of any nature or investigation
pending or threatened against XCI and/or the Shareholders, or which questions or
challenges the validity of this Agreement or any action to be taken by XCI
and/or the Shareholders pursuant to this Agreement or in connection with the
transactions contemplated hereby, and XCI and the Shareholders do not know or
have any reason to know of any valid basis for any such legal, administrative,
arbitration or other proceeding, claim or action of any nature or investigation.
XCI and the Shareholders are not subject to any judgment, order or decree
entered in any lawsuit or proceeding which has an adverse effect on their
business practices or on their ability to acquire any property or conduct their
business in any area. (i) Compliance with Law. XCI is in compliance with all
laws, regulations and orders applicable to its business and neither XCI nor the
Shareholders have received any notification that they are in violation of any
law, regulation or order and no such violation exists. (j) Disclosure. No
representations or warranties made by XCI and/or the Shareholders contain any
untrue statement of fact or omit to state any fact necessary in order to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading; further, there are no facts known to XCI and/or the
Shareholders which (either individually or in the aggregate) could or would
materially and adversely affect or involve any substantial possibility of having
a material, adverse effect on the condition (financial or otherwise), results of
operations, assets, liabilities or businesses of XCI which have not been
disclosed in this Agreement.
2.3. Understandings of the Shareholders. The Shareholders each individually
acknowledges, understands and agrees that: (a) Certificate. The certificate
representing the DTGI Shares will bear a legend restricting their transfer under
Rule 144 of the Securities Act of 1933 and will be issued solely in his name.
(b) No Securities Act Registration. The DTGI Shares have not been registered
under the Securities Act of 1933 or any applicable state law (collectively, the
"Securities Act"). The DTGI Shares may not be sold, offered for sale,
transferred, pledged, hypothecated or otherwise disposed of except in compliance
with the Securities Act. DTGI has no obligation, and does not intend, to cause
the DTGI Shares to be registered under the Securities Act, or to comply with any
exemption under the Securities Act that would permit a sale or sales of all or
any portion of the DTGI Shares. The legal consequences of the foregoing mean
that the Shareholders must bear the economic risk of his investment in the DTGI
Shares for an indefinite period of time. If any of them desires to sell or
transfer all or any part of the DTGI Shares within the restricted period, DTGI
may require such Shareholder's counsel to provide a legal opinion that the
transfer may be made without registration under the Securities Act. (c) Lack of
Agency Findings. No federal or state agency has made any findings or
determination as to the fairness of an investment in DTGI or any recommendation
or endorsement of this investment. (d) No Market for DTGI Shares. There is
presently only an extremely limited market for the DTGI Shares and no market may
exist in the future for any sale or sales of all or any portion thereof. (e)
Commitments to Investments. Shareholder's commitment to investments that are no
readily marketable is not disproportionate to his net worth and his investment
in the DTGI shares will not cause his commitment to become excessive. (f)
Financial Ability. Shareholders has the financial ability to bear the economic
risks of this investment, has adequate means of providing for his current needs,
and has no need for liquidity in this investment. (g) High Risk of Investment.
The Shareholders has evaluated the high risks of investing in the DTGI Shares
and has such knowledge and experience in financial and business matters in
general and in particular with respect to this type of investment that he is
capable of evaluating the merits and risks of an investment in the DTGI Shares.
(h) Opportunity to Investigate Investment. Shareholders has been given the
opportunity to ask questions of and receive answers from DTGI concerning the
terms and conditions of this investment and to obtain additional information
necessary to verify the accuracy of the information it desired in order to
evaluate his investment. In evaluating the suitability of an investment in the
DTGI Shares, the Shareholders have not relied upon any representations or other
information (whether oral or written) other than that furnished by DTGI or the
representatives of DTGI. (i) Opportunity to Consult Professionals. The
Shareholders have had the opportunity to discuss with their professional, legal,
tax and financial advisers the suitability of an investment in the DTGI Shares
for their particular tax and financial situation and all information that they
have provided to DTGI concerning themselves and their financial position is
correct and complete. (j) Reliance. In making the decision to purchase the DTGI
Shares the Shareholders have relied solely upon independent investigations made
by them or on their behalf. (k)Investment Purpose. The Shareholders are
acquiring the DTGI Shares solely for their own account, for investment purposes
only, and are not purchasing with a view to, or for, the resale, distribution,
subdivision or fractionalization thereof.
2.4. Covenants of XCI and the Shareholders. XCI and the Shareholders each
individually covenant with DTGI that, immediately upon consummation of this
Agreement, they shall forthwith undertake to fully and timely implement the
business plan of XCI and shall further undertake such public relations efforts
as are necessary to provide for the full and fair dissemination of information
pertaining to such implementation to the public. The parties agree that the
criteria for determining the success of the foregoing shall be the purchase in
the market of no less than 1,000,000 DTGI common shares at a price of not less
than $1.00 per share. In the event that XCI and/or the Shareholders are not
successful in this endeavor, this Agreement may be rescinded as provided in
ARTICLE III, Section 3.2 below. XCI and the Shareholders shall not, until the
successful completion of this covenant, either issue additional shares of DTGI
or transfer the DTGI Shares. The DTGI Shares shall be held in escrow pending
completion of this covenant.
ARTICLE III
REMEDY FOR BREACH OF REPRESENTATIONS, WARRANTIES, COVENANTS
3.1. Breach of Representations, Warranties and/or Covenants by DTGI: DTGI agrees
and accepts that, in the event of it being or becoming in material breach of any
or all representations, warranties or covenants given by it pursuant to ARTICLE
II Section 2.1 hereof, whether by purposeful act, negligence, accident on its
part or for no reason or otherwise, it has and will have no means or assets with
which to remedy such breach; therefore, in such circumstances, this Agreement
shall be rescinded forthwith upon such breach being evident and the XCI Shares
shall be returned to the Shareholders without cost or penalty, and XCI and the
Shareholders shall forthwith and forever be relieved of any and all obligations
undertaken by them, either individually or joint and severally, in entering into
and executing this Agreement after returning to DTGI the DTGI Shares.
3.2. Breach of Representations, Warranties and/or Covenants by XCI and/or
Shareholders: XCI and the Shareholders each individually agree and accept that,
in the event of their being or becoming in material breach of any or all
representations, warranties or covenants given by either of them pursuant to
ARTICLE II Sections 2.2, 2.3 and/or 2.4 hereof, whether by purposeful act,
negligence, accident on either of their parts or for no reason or otherwise, the
former management of DTGI may elect to notify XCI and the Shareholders of DTGI's
rescission of this Agreement and this Agreement shall be deemed rescinded
forthwith and the XCI Shares shall be returned to the Shareholders without cost
or penalty, and XCI and the Shareholders shall forthwith and forever be relieved
of any and all obligations undertaken by them, either individually or joint and
severally, in entering into and executing this Agreement after returning to DTGI
the DTGI Shares.
ARTICLE IV
MISCELLANEOUS
4.1. Entire Agreement. This Agreement sets forth the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, understandings, promises, warranties, covenants and representations
made by any party to the other concerning the subject matter and terms.
4.2. Modification. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by duly
authorized representatives of all parties.
4.3. Severability. The invalidity or unenforceabilty of any one or more of the
provisions of this Agreement shall not affect the validity or enforceability of
any one or more of the other provisions, and this Agreement shall be construed
in all respects as if such invalid or unenforceable provisions are omitted.
4.4. Governing Law. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of
Florida.
4.5. Waivers. The failure of any party to insist on the performance of any of
the terms, conditions and/or covenants or to otherwise exercise any right shall
not be construed as a waiver of the future performance of any such term,
condition and/or covenant. Waiver on one occasion is not a waiver on any other
occasion.
4.6. Headings. The headings in the articles, sections and paragraphs are
included for convenience only and are not to be used in construing or
interpreting this Agreement.
4.7. Notice. All notices, demands, or requests shall be in writing and served
either personally, by certified mail, return receipt requested, by Federal
Express or other reputable overnight courier, or by facsimile, as follows:
If to DTGI: Diversified Technologies Group, Inc.
If to XCI and/or Shareholders:: c/o X-Change Corporation, Inc.
4.8. Successor and Assigns. This Agreement shall be binding on and inure to the
benefit of the parties, their respective successors, successors-in-title, heirs
and permitted assigns, if any, and each and every successor-in-interest to any
party, whether such successor acquires such interest by way of gift, purchase,
foreclosure, or by any other legal method, who shall hold such interest subject
to all the terms and conditions of this Agreement.
4.9. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all counterparts shall together
constitute one and the same instrument.
4.10. Attorneys' Fees. In the event of any dispute, the prevailing party shall
be entitled to receive a reimbursement of their reasonable attorneys' fees and
such other costs and expenses as are reasonably incurred in resolving the
dispute.
4.11. Expenses. Each party shall pay the expenses incurred by them under or in
connection with this Agreement, including counsel fees and the expenses of their
respective representatives.
4.12. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants shall survive execution and closing,
and shall be unaffected by any investigation made by any party at any time.
4.13. Further Assurances. At any time and from time to time after the Closing
Date, all parties shall execute such additional instruments and take such other
and further action as may be reasonably requested by any other party to carry
out the intent and purpose of this Agreement.
4.14. Brokers. No party has engaged or is otherwise liable for any amount due or
to become due to any broker or sales agent in regards of the transactions giving
rise to and/or evidenced by this Agreement. In the event that any claim is
asserted by any person claiming a commission and/or finder's fee with respect to
this Agreement arising from any act, representation or promise of a party or
their representative(s), such party shall indemnify, save, defend and hold every
other party harmless from and against any and all such claims, as well as
against all related costs and expenses, including attorneys' fees and costs.
THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AND DELIVERED ON THE DATE
FIRST ABOVE WRITTEN TO BECOME EFFECTIVE, IF AT ALL, AT CLOSING.
DIVERSIFIED TECHNOLOGIES GROUP, INC., a Nevada corporation ("DTGI")
By: /s/ Steven Garrett
W. Steven Garrett, President
X-CHANGE CORPORATION, INC.
By: /s/ Cary Grant
Authorized Representative
SHAREHOLDERS OF XCI:
/s/ Cary Grant