UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-14273
DCX, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0868815
............................... ......................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3002 N. State Highway 83, Franktown, Colorado 80115-0569
....................................................................
(Address of principal executive offices)
(Zip Code)
(303) 688-6070
.............................................
(Registrant's telephone number, including area code)
Not Applicable
.......................................................................
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
4,367,969 Common Shares were outstanding as of June 30, 1996.
Transitional Small Business Format: Yes No X
Number of pages in this report is 10.
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Balance Sheets
June 30 September 30
1996 1995
(Unaudited) (Audited)
- --------------------------------------------------------------------------------
Assets
Current:
Cash and Cash equivalents $ 266,428 $ 125,844
Restricted cash 0 154,985
Accounts receivable 1,351,687 2,061,931
Inventories 1,107,099 810,922
Prepaid expenses 168,534 118,316
Subscriptions receivable 0 25,000
- --------------------------------------------------------------------------------
Total current assets 2,893,748 3,296,998
- --------------------------------------------------------------------------------
Property and equipment:
At cost 2,032,536 2,039,534
Less: accumulated depreciation (731,684) (653,031)
- --------------------------------------------------------------------------------
Net property and equipment 1,300,852 1,386,503
- --------------------------------------------------------------------------------
Other assets 255,947 131,431
- --------------------------------------------------------------------------------
$ 4,450,547 $ 4,814,932
================================================================================
See accompanying summary of accounting policies
and notes to financial statements
2
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Balance Sheets
June 30 September 30
1996 1995
(Unaudited) (Audited)
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Notes payable $ 677,130 $ 1,026,024
Accounts payable 481,284 588,965
Accounts payable - terminated contracts 347,065 373,042
Accrued expenses 65,375 206,150
Accrued litigation settlement 521,000 150,000
- --------------------------------------------------------------------------------
Total current liabilities 2,091,854 2,344,181
Long-term debt, less current maturities 362,897 362,897
- --------------------------------------------------------------------------------
Total liabilities 2,454,751 2,707,078
- --------------------------------------------------------------------------------
Commitments and Contingencies (Note 5)
Stockholders' Equity:
Preferred stock, $.001 par value,
20,000,000 shares authorized,
no shares issued or outstanding
Common stock, no par value,
2,000,000,000 shares authorized;
shares issued and outstanding,
4,367,969 and 4,115,631 at
June 30, 1996 and 1995, respectively. 5,027,661 4,765,540
Additional paid-in capital 329,384 329,384
Subscriptions receivable (179,000) (179,000)
Accumulated deficit (3,182,249) (2,808,070)
- --------------------------------------------------------------------------------
Total stockholders' equity 1,995,796 2,107,854
- --------------------------------------------------------------------------------
$ 4,450,547 $ 4,814,932
================================================================================
See accompanying summary of accounting policies
and notes to financial statements
3
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
DCX, Inc. and Subsidiaries
Condensed and Consolidated Statements of Operations
(Unaudited)
Nine months ended Three months ended
June 30 June 30
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $3,683,117 $1,611,647 $1,234,456 $ 690,634
Cost of sales 2,776,167 956,699 1,046,675 426,633
- -------------------------------------------------------------------------------------------------------
Gross profit on sales 906,950 654,948 187,781 264,001
- -------------------------------------------------------------------------------------------------------
General and administrative expenses 771,053 987,008 282,931 301,959
- -------------------------------------------------------------------------------------------------------
Income (loss) from operations 135,897 (332,060) ( 95,150) ( 37,958)
Other income (expense):
Interest expense ( 89,950) ( 35,251) (19,126) ( 8,333)
Investment and other income 18,046 10,830 3,090 3,679
Other expense ( 4,998) ( 1,913) (872) ( 830)
Forgiveness of debt 87,826 0 0 0
Litigation Settlement Expense (521,000) 0 (521,000) 0
- --------------------------------------------------------------------------------------------------------
Net Income (loss) $ (374,179) $ (358,394) $(633,058) $ ( 43,442)
=======================================================================================================
Net Income (loss) per share $ (.09) $ (.09) $ (.15) $ (.01)
=======================================================================================================
Weighted average number of shares
of common stock outstanding 4,194,885 3,875,615 4,338,019 3,919,712
=======================================================================================================
See accompanying summary of accounting policies and notes to financial statements
4
</TABLE>
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
For the Nine-Month Periods Ended June 30, 1996 1995
- --------------------------------------------------------------------------------
Operating activities:
Net income (loss) $ (374,179) $(358,394)
Adjustment to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 78,653 46,308
(Increase) decrease in accounts
receivable 710,244 ( 38,370)
Increase in inventory (296,177) (220,860)
(Increase) decrease in prepaid
expenses ( 50,218) 100,848
(Increase) decrease in other assets (124,516) (164,069)
(Decrease) increase in accounts payable (133,658) 206,149
(Decrease) increase in other liabilities (140,775) 351,970
Increase in accrued litigation settlement 371,000 0
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities 40,374 (76,418)
- --------------------------------------------------------------------------------
Investing activities:
Disposal of property and equipment 6,998 (84,332)
Restricted Cash 154,985
- --------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 161,983 (84,332)
- --------------------------------------------------------------------------------
Financing activities:
Payments on long-term debt, net (348,894) (98,408)
Stock subscriptions paid/issuance
of common stock 287,121 220,409
- --------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (61,773) 122,001
- --------------------------------------------------------------------------------
Net increase (decrease) in cash 140,584 ( 38,749)
- --------------------------------------------------------------------------------
Cash and cash equivalents,
beginning of period $ 125,844 $ 201,561
- --------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 266,428 $ 162,812
- --------------------------------------------------------------------------------
See accompanying summary of accounting policies
and notes to financial statements
5
<PAGE>
DCX, INC.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed Consolidated Financial Statements
The condensed consolidated financial statements included herein have been
prepared by DCX, INC. without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. DCX, INC. believes that the disclosures
are adequate to make the information presented not misleading. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's consolidated financial position as of June 30,
1996, the consolidated results of its operations for the nine-month periods
ended June 30, 1995, and 1996 and statements of cash flows for the nine-month
periods then ended.
The accounting policies followed by the Company are set forth in the annual
report of September 30, 1995, filed on Form 10-K, and the audited consolidated
financial statements therein with the accompanying notes thereto. While
management believes the procedures followed in preparing these consolidated
financial statements are reasonable, the accuracy of the amounts are in some
respects dependent upon the facts that will exist, and procedures that will be
accomplished by DCX, INC. later in the year.
During April, 1994, the Company formed a subsidiary corporation, GeoStars,
International, Inc. which in turn subsequently formed two subsidiary operating
corporations to provide products and services in the geographic information
services (GIS) arena. Accordingly, these quarterly consolidated financial
statements represent the consolidated results of operations. All intercompany
balances and transactions have been eliminated in the consolidation of the
financial statements.
The consolidated results of operations for the nine-month period ended June 30,
1996, are not necessarily indicative of the results to be expected for the full
year ending September 30, 1996.
(2) Accounts Receivable
Accounts receivable contain amounts computed under the cost-to-cost method to
determine percentage of completion as described in the Form 10-K for September
30, 1995. A portion of the total amount of receivables represents unrecovered
costs and estimated profits subject to future negotiation and represented by
certain portions of a settlement proposal and related claim asserted against the
Department of Defense for contracts terminated by the Government (See Note 10 to
the financial statements accompanying the Form 10-K and Note 4, below). Such
receivables amounted to nil at June 30, 1996 and $1,702,009 at September 30,
1995 as compared to $2,100,838 at June 30, 1995.
(3) Provision for Income Taxes
At the beginning of the fiscal year the Company had net operating loss
carryforwards of $2,053,000 with expirations through 2010. At June 30, 1996, the
amount of the net operating loss carryforward balance is estimated at
$2,427,179. The Company expects to incur a minimal amount of alternative minimum
tax for the fiscal year. Since the Company is unable to determine that deferred
tax assets exceeding tax liabilities are more likely than not to be realized, it
will record a valuation allowance equal to the excess deferred tax assets at
fiscal year end.
6
<PAGE>
(4) Terminated Contracts
As reported in the Form 10-K for September 30, 1995, the Company and the Defense
Logistics Agency (DLA) agreed to a final settlement in November, 1995, on two of
three terminated contracts. The last partial payment, therefor, was received in
January, 1996.
A third contract with DLA required the Company to design, develop test and
manufacture light sets to a specified schedule. Testing of the lights was
subcontracted; scheduling delays resulting from a higher priority Government
contract caused the Company to miss the contractually required date for an
environmental test report by three days. Federal regulations require a delivery
date extension equal to the Government caused delay. The contract was terminated
for default by the Government in July, 1988. The Company asserted in July 1991
hearings the termination for default was erroneous and the termination should be
characterized as for the convenience of the Government. The Company received a
decision from the ASBCA holding for the Government. The Company filed an appeal
before the U.S. Court of Appeals for the Federal Circuit; oral arguments were
presented on February 7, 1996; legal brief to the court en banc was submitted
April 23, 1996. The appeals court also held for the Government. The Company and
its attorney have found that the termination contracting officer failed to
follow published federal regulations as required by the Administrative Procedure
Act which prejudiced the Company and caused harmful error to the Company. The
issue of failure to follow published federal regulations in government
contracting actions has not been directly decided by the U.S. Supreme Court;
accordingly, since it is a case of first impression, the Company has directed
its attorney to file a request for certiorari to address this issue. Were the
Company not to prevail, it could record a loss of approximately $521,000.
Although the ultimate outcome cannot be determined at present, the Company has,
in light of its previous adverse decisions recorded a reserve of $521,000 for
possibility that it may not prevail at bar in the Supreme Court.
See also the more detailed explanation of terminated contracts in Note 10 to the
Consolidated Financial Statements for September 30, 1995, as filed on Form 10-K.
(5) Lease Obligations
The Company leases various equipment under capital leases that expire through
June 2000 as noted in Note 7 to the Financial Statements in Form 10-K, September
30, 1995.
-----------------
PART I, ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition:
Liquidity.
Final negotiations related to two terminated Government contracts were recently
concluded. (See Form 10-K, Item 3, Legal Proceedings, and Item 7, MD & A,
Liquidity) As a result the Company received three payments in final settlement,
the last of which arrived during January, 1996. A third contract was also
appealed; it was heard by the U.S. Court of Appeals which held for the
Government and is now being submitted to the U.S. Supreme Court for certiorari;
the Company recorded a reserve of $521,000 for a possible adverse decision. (See
Note 4, above.)
Cash and marketable securities increased $125,844 to $266,428 from $125,844 at
September 30, 1995, primarily as a result of payments received for the
terminated contracts, cash provided by operations which totaled $60,962 while
cash used for debt reduction payments was $348,894.
The Company presently has working capital of $801,894 as compared to $1,538,834
at June 30, 1995, and to $952,817 at the beginning of the fiscal year. The
primary causes for the decrease from a year ago are payments of terminated
contract creditors and the increase of $379,000 in accrued litigation settlement
liability. The decrease in accounts receivable was used to reduce terminated
contract debt as well as to lay in materials for the Company's increasing
contract backlog. As a result, the Company's current ratio, the ratio of total
current assets to total current liabilities, decreased to 1.38:1 down from
1.61:1 a year ago and from 1.41:1 at September 30, 1995.
7
<PAGE>
Capital Resources.
Until fiscal year 1993 the Company's primary source of liquidity historically
consisted of cash flow from operations. During fiscal years 1993 through 1996
the Company received reimbursements from the two successfully litigated
terminated contracts in the form of a number of partial payments against the
settlement proposals. As a result of final negotiations concluded with Defense
Logistics Agency, the Company has received the remaining amounts of the agreed
settlement for these two contracts.
During the second quarter, the Company completed a refinancing of its real
property mortgage and reduced monthly cash payments by $6,000. This is the first
phase of its refinancing efforts and provides an interim period during which it
expects to secure permanent financing to consolidate its real property mortgage
and the note payable maturing on June 3, 1996 which was extended to June 3, 1997
by the Small Business Administration. See also the "Going Concern Issues"
caption under Item 7, MD & A, Liquidity, of Form 10-K.
Results of Operations:
Nine Months of Fiscal Year 1996.
During the first nine months of fiscal year 1996 net sales increased by
$2,071,470, or 128 percent, over the same period of the prior year. Cost of
sales was $2,776,167, or 75 percent of sales, and resulted in a gross profit of
$906,950, or 27 percent of sales, decreased from 41 percent of sales for the
same period of the prior year. The decrease in gross profit occurred due to
learning curve associated with complex new products in certain new contracts and
the effects of a downward adjustment in the final pricing of a temporary letter
contract. Sales increases during the current fiscal year resulted from the
Company commencing production on its growing backlog which rose because of
restructuring in the defense industry causing prime contractors to outsource
more work.
General and Administrative expenses of $771,053 for the current period decreased
$215,955 from a year ago and reflect the control efforts of management and the
curtailment of nonproductive GIS subsidiaries. After factoring out acquisition
expenses of $118,651, recurring G & A expenses amount to $652,402. Interest
expense increased because of capital lease imputed interest costs this period;
investment income increased as a result of increased money market balances. In
liquidating a $287,826 note balance related to the terminated contracts the
Company recorded a discount of $87,826 as forgiveness of debt.
Restricted cash decreased to nil as a result of the release of a bond (posted by
the Company to indemnify a Director of the Company) to a former employee. The
release resulted from a final decision on the case which was pending before the
Colorado Court of Appeals. The finding was for the plaintiff and the expense had
been recorded in a prior year. The accrued litigation settlement liability
expense increased by $379,000 as the Company recorded a reserve of $521,000 for
a possible adverse decision relative to its litigation on the third terminated
contract being submitted to the U.S. Supreme Court.
The increase of $124,516 in other assets resulted from the Company entering into
a consulting contract.
Nine Months of Fiscal Year 1995.
During the nine months of fiscal 1995 net sales increased by $708,366, or 78
percent, over the same period of the prior year. Cost of sales was $956,699, or
59 percent of sales, and resulted in a gross profit of $654,948 or 41 percent of
sales which compared favorably to gross profit of 24 percent of sales for the
same period of the prior year. The increase in gross profit was attributable to
the increased volume of production during the period. Sales increased as a
result of restructuring in the defense industry causing prime contractors to
outsource more work.
8
<PAGE>
General and administrative expenses of $987,008 for the period reflected the
effects of funding the development stage subsidiaries. While G & A expenses
increased $463,661 over the same period of the prior year, approximately
$480,033 of G & A expenses resulted from financial support attempting to develop
the GIS subsidiaries. After factoring out this amount, G & A expenses related to
manufacturing operations would amount to $506,975, or a decrease of three
percent from the prior year. Although interest expense increased slightly, as
did investment income from the prior year.
While sales increased during the period over the same period of the prior year,
the Company experienced a net loss of $358,394, or nine cents per share. Causing
this was a loss of about $464,881, or 12 cents per share, from activities
related to the GIS subsidiaries; manufacturing activities generated net income
of $100,033, or three cents per share over comparable activities in same period
of the prior year when a loss of 10 cents per share was reported.
Third Quarter of Fiscal Year 1996.
Third quarter sales for fiscal 1996 increased by $543,822 or 79 percent, over
the same quarter of the prior year. Cost of sales was $1,046,675, or 85 percent
of sales, and resulted in a gross profit of $187,781, or 15 percent of sales
versus 38 percent for the same period of the prior year. The decrease was
attributable to the learning curve effect associated with new and more complex
products on which production began during the current quarter and the effects of
a final downward price negotiation of a temporary letter contract.
Reduced general and administrative expenses for the quarter reflected the effect
of no longer funding the development stage subsidiaries. Interest expense has
increased because of imputed interest expense generated by leased equipment.
While sales increased during the quarter as compared to the same period of the
prior year the Company experienced a net loss of $112,058, or $.03 per share,
versus a net loss of $.01 per share for the prior year. The loss is related to
the learning curve, rework of certain new products required as a result of final
test data the final letter contract repricing.
The Company recorded $521,000 of expense as a reserve for a possible adverse
decision on its third terminated contract litigation being submitted to the U.S.
Supreme Court. The increase of $124,516 in other assets resulted from the
Company entering into a consulting agreement during the quarter.
Third Quarter of Fiscal Year 1995
Quarterly sales of $690,634 were 126 percent higher than the same period of the
prior year. Cost of sales amounted to $426,633 which was 62 percent of sales,
down from the prior year's 70 percent. Gross profit of $264,001 was 38 percent
of sales and up from the prior year's 30 percent. The positive changes resulted
from increased manufacturing volume over the prior year.
General and administrative expenses increased $114,693 over the same period of
the prior year primarily as a result of development expenses of the GIS
subsidiaries.
Contract Backlog
The Company's manufacturing operation has active funded contracts and awarded
work amounting to $7.9 million as compared to an approximate $5.4 million
backlog with $4.4 million of uncompleted work a year prior. The current backlog
contains approximately $4.2 million of uncompleted work of which approximately
$.5 million is unfunded. Deliveries on funded orders are scheduled over the next
37 months. The Company is aggressively bidding opportunities with prime
contractors for defense opportunities and sends its technical staff to meet
personally with program managers in order to more competitively meet their
requirements. The Company is confident that during the ensuing year these
projects will result in additional orders as during the past fiscal year. In
addition, the Company continues to be invited to bid on more projects with new
and existing customers.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 7, 1996, at the annual meeting of shareholders of the Company, the
following individuals were reelected to the Board of Directors to serve until
the next annual shareholders' meeting and their successors are elected or until
their earlier death, resignation or removal. The results were:
John G. Anderson, 3,783,446 votes for and 24,861 votes withheld.
Jeanne M. Anderson, 3,782,212 votes for and 26,095 votes withheld.
Stephen Carreker, 3,785,330 votes for and 22,977 votes withheld.
Frederick G. Beisser, 3,785,450 votes for and 22,857 votes withheld.
No other matters were submitted to a vote. Item 5, Other Events, of the Form
8-K, dated June 6, 1996, which reported voting matters is filed as Exhibit 22.1
of this report.
ITEM 5. OTHER INFORMATION.
On July 29, 1996, the Company entered into an Agreement for Exchange of Shares
with Airtech International Corporation of Dallas, Texas. The entire agreement is
filed as Exhibit 2.1 of this report. The agreement provides for Airtech
shareholders to receive 2.0 shares of the Company's common stock for 3.5 Airtech
shares and is subject to completion of an effective registration statement with
the Securities and Exchange Commission, to approval of Airtech shareholders and
to the absence of material changes in the companies prior to closing.
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Sequentially
Number Exhibit Numbered Page
------ ------- -------------
2.1 Agreement for Exchange of Shares between DCX, INC. 12
and Airtech International Corporation, dated
July 29, 1996
22.1 Item 5, Other Events, of Form 8-K, June 11, 1996 27
(b) Reports of Form 8-K. On Form 8-K, dated June 6, 1996, the Company
reported: (1) the termination of a letter of intent dated May 17, 1996,and an
agreement in principle, dated June 5, 1996, with Airtech International
Corporation; (2) the reelection of its Board of Directors consisting of four
directors at the annual shareholders' meeting as well as certain information
made public in that forum; (3) that at the annual directors' meeting the Board
approved an increase of the Board to five and the appointment of a new director,
D. Scott McReynolds who was also appointed Vice President and General Manager.
The entire text of Item 5, Other Events, of that Form 8K is filed as Exhibit
22.1 of this report.
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 thereunto duly authorized.
D C X , I N C .
Dated: August 1, 1996
/S/ FREDERICK G. BEISSER
----------------------------------------
Frederick G. Beisser
Chief Financial Officer, Secretary &
Treasurer
================================================================================
AGREEMENT FOR EXCHANGE OF SHARES
Between
DCX, INC.
And
AIRTECH INTERNATIONAL CORPORATION
================================================================================
Table of Contents
1. Purchase and Sale of Shares........................................... 2
2. Representations and Warranties of Airtech............................. 3
3. Representations and Warranties of DCX................................. 6
4. Representations and Warranties of the Shareholders.................... 7
5. Representations and Warranties of Certain Shareholders................ 8
6. Covenants of Certain Shareholders..................................... 8
7. Covenants............................................................. 9
8. Conditions............................................................ 11
9. Miscellaneous......................................................... 12
-1-
<PAGE>
AGREEMENT FOR EXCHANGE OF SHARES
This Agreement for Exchange of Shares (the "Agreement") is dated July _29_,
1996, and is made by and between DCX, Inc., a Colorado corporation ("DCX"),
Airtech International Corporation, a Texas corporation ("Airtech"), and the
Airtech shareholders ("Shareholders") who sign this Agreement or vote in favor
of this Agreement.
WHEREAS, the Boards of Directors of each of DCX and Airtech believe it is
in the best interests of the respective shareholders to enter into this
Agreement; and
WHEREAS, the respective Boards of Directors anticipate that certain synergy
will result from the acquisition of Airtech as a subsidiary of DCX, that the
business relationships of each company may provide additional marketing
opportunity for DCX and Airtech, and as a larger enterprise it may be easier to
raise capital, to complete business transactions with third parties, or to
acquire assets for stock or other securities.
THEREFORE, in consideration of the premises and the mutual covenants,
representations and warranties in this Agreement, the parties adopt this
Agreement which is intended to meet the requirements of ss.368(a)(1)(B) of the
Internal Revenue Code, and agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 Purchase and Sale. DCX shall purchase the Airtech issued and
outstanding securities from the participating Airtech shareholders
("Shareholders"); provided that the purchased securities must represent at least
81% of Airtech's issued and outstanding voting securities. The Airtech
Shareholders will receive shares at the exchange rate of two shares of DCX
Common Stock, $.0001 par value, ("DCX Common Stock") for three and one-half
shares of Airtech Common Stock par value $.0001 per share ("Airtech Common
Stock"). The voting common stock of DCX will be the sole consideration paid to
Airtech shareholders in exchange for their shares of Airtech.
1.2 Airtech Shareholder Vote. The Board of Directors of Airtech will
present to the Airtech shareholders as soon as possible, and recommend a vote in
favor of, the approval of the stock for stock exchange pursuant to this
Agreement. This Agreement is conditioned upon and subject to the approval of the
required number of Airtech shareholders.
1.3 Power of Attorney. For all purposes, except for the individual
representations made by each Shareholder, after the signing of this Agreement
and the purchase and sale of the shares, no shareholder acting alone has the
power or authority to modify or terminate this Agreement, or to exercise any
other right under this Agreement. Each Airtech shareholder who votes in favor of
this Agreement designates the President of Airtech, or his successors or
assigns, to act as their power of attorney to execute this Agreement and to
exercise any right under this Agreement. The Shareholders shall forever release
DCX and Airtech from any claim or liability for any action taken or not taken
pursuant to such power of attorney.
1.4 Closing Date. The issuance, delivery, and exchange of shares pursuant
to this Agreement shall take place at the closing ("Closing"). The Closing shall
be conducted at the offices of DCX on the time and date established by DCX and
Airtech. The Closing shall be scheduled within ten business days after the later
of: (i) the date the Securities and Exchange Commission declares effective the
registration statement referred to in Section 1.7; and (ii) the date the
required number of Airtech shareholders have approved this Agreement, and the
nature and extent of any dissenter and appraisal rights of Airtech shareholders
has been resolved to the satisfaction of DCX in its judgment.
1.5 Delivery at Closing. At the Closing, the respective parties shall
deliver the following items:
a. The Airtech Shareholders shall deliver to DCX the original Airtech
stock certificates, duly endorsed for transfer.
-2-
<PAGE>
b. DCX shall deliver to the Airtech Shareholders the shares of DCX
Common stock in exchange for their shares of Airtech as determined pursuant to
this Agreement.
c. Airtech shall deliver to DCX: the balance sheet and income
statement of Airtech for the period ending within 30 days of the Closing
(interim financial statement), certified by the President and Chief Financial
Officer of Airtech to be prepared on a basis consistent with the audited
financial statements dated February 29, 1996 and to fairly present the financial
condition and results of operations of Airtech; a certified copy of the actions
of the Airtech Board of Directors specifying all actions taken with respect to
this Agreement; the original Articles of Incorporation, Bylaws, stock transfer
records and blank stock certificates of Airtech; the certificate of the officers
of Airtech required by Section 2 of this Agreement; and such other items as may
be required by DCX.
1.6 Exchange Agent. DCX shall appoint its stock transfer agent to serve as
the exchange agent (the "Exchange Agent"). The Exchange Agent shall deliver to
each holder of shares of Airtech Common Stock converted into DCX Common Stock,
upon surrender by such holder to the Exchange Agent of one or more certificates
representing such Airtech shares properly endorsed for cancellation,
certificates representing the aggregate number of shares of DCX Common Stock
into which such surrendered shares have been converted as soon as practicable on
or after the Closing and after receipt of Airtech certificates by the Exchange
Agent. Unless and until an outstanding certificate is so surrendered, (i) no
dividends or distributions of any kind payable to the holders of record of DCX
Common Stock shall be paid by DCX to the holder of such an outstanding
certificate representing Airtech Common Stock; and (ii) no such holder shall
have a right to receive such dividends or distributions. Upon the surrender and
exchange of such an outstanding certificate, the holder shall be paid, without
interest, the amount of any dividends or distributions which theretofore became
payable after the Closing with respect to the shares of DCX Common Stock
evidenced by such certificate.
1.7 Registration Statement. As soon as practicable after the signing of
this Agreement, DCX shall prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement covering the shares of DCX common
stock issuable pursuant to the share exchange. Airtech and its shareholders
shall cooperate to provide any information required for such registration
statement, and DCX shall use its best efforts to have the registration statement
declared effective by the SEC.
1.8 Articles of Exchange. Upon the Closing and completion of the share
exchange, DCX and Airtech shall file any required Articles of Exchange and other
documents with the respective Secretaries of State of Texas and Colorado.
2. REPRESENTATIONS AND WARRANTIES OF AIRTECH.
Airtech represents and warrants to DCX as follows:
2.1 Corporate Organization. Airtech is a corporation duly organized,
validly existing and in good standing under the laws of Texas, and has all
requisite corporate power and authority to own, operate and lease its property
and to carry on its businesses substantially as they are being conducted.
Airtech is duly qualified to do business as a foreign corporation in good
standing in the states in which it owns a material amount of property of the
nature, or transacts a material amount of business of the type, that would make
such qualification necessary except where the failure to so qualify would not
have a material adverse effect on Airtech. The representations and warranties of
Airtech include its wholly owned subsidiary, McCleskey Sales and Service, Inc. a
Texas corporation.
2.2 Capitalization. The authorized capital stock of Airtech consists of
90,000,000 shares of Common Stock $.0001 par value, 1,750,000 shares of $1.00
par value Series A Preferred Stock, of which no shares are issued or
outstanding, 5,000,000 shares of Series AA Preferred Stock, of which no shares
are issued or outstanding, and 1,000 shares of $1.00 par value Series C
Preferred Stock, of which 1,000 shares are issued and outstanding. On or before
the Closing the holders of the Airtech Series C Preferred will return their
shares to Airtech for no additional consideration. As of the date hereof,
14,994,833 shares of Airtech Common Stock are issued and outstanding, fully paid
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and nonassessable, and on the Closing will have the sole voting power of the
capital stock of Airtech. Airtech has no treasury shares. The Certificate of
Incorporation and By-laws of Airtech, as currently in effect, are included as
Schedule 2.2(a). Airtech has no employee or other stock option plans applicable
to Airtech. Airtech does not have any outstanding preemptive rights, rights of
first refusal or any subscription, option, warrant, call, contract, commitment,
understanding or arrangement by which it or they are bound to purchase, issue,
sell or transfer any shares of their capital stock or other securities.
2.3 Authorization. The execution, delivery and performance of this
Agreement by Airtech have been duly authorized by all necessary corporate action
on the part of Airtech, except that the Airtech shareholders must approve this
Share exchange pursuant to Texas law. The Airtech shareholders who vote in favor
of the share exchange will be listed on Exhibit B to this Agreement.
2.4 No Violation. The execution, delivery, and performance of this
Agreement do not, and will not (i) conflict with any provision of Airtech's
Certificate of Incorporation or By-laws, (ii) violate any law, rule or
regulation, or any judgment, decree or order of any court or governmental agency
or instrumentality, to which Airtech or any of its subsidiaries is subject, or
(iii) conflict with, or result in a breach or violation of, or accelerate the
performance required by, or result in early termination under, or result in any
loss of benefits under, the terms of any agreement, indenture, mortgage or other
instrument to which Airtech is a party or to which any of its property is
subject, or constitute an event which, with the lapse of time or action by a
third party, or both, could result in a default thereunder or the creation of
any lien, charge or encumbrance upon any of the assets or properties of Airtech,
if the effect of any of the foregoing contained in subsections (ii) or (iii)
above, singly or in the aggregate, is material to the business, financial
condition or results of operations of Airtech.
2.5 Litigation. There is no action, suit or other litigation, proceeding or
governmental investigation pending or, to the knowledge of the officers of
Airtech, threatened, against Airtech or its executive officers, which if
adversely determined, would have a material adverse effect upon the business,
financial condition or results of operations of Airtech, or upon the business,
financial condition or results of operations of DCX after the Closing.
2.7 Agreements. Except as is not material to the business, financial
condition or results of operations of Airtech, (i) each agreement and lease to
which Airtech or any subsidiary is a party is valid, in full force and effect
and enforceable by and against Airtech in accordance with its terms; (ii) there
has not occurred any default by Airtech under any material agreement or material
lease, or any event (including the execution, delivery and performance of this
Agreement) which, with the lapse of time or the election of any person other
than Airtech, will become a default; (iii) to Airtech's knowledge, there has not
occurred any default or any event (including the execution, delivery and
performance of this Agreement) which, with the lapse of time or the election of
Airtech, will become such a default under any agreement or lease, nor has
Airtech received notice of claim of any default and Airtech is not, and, to the
knowledge of Airtech, no other party is in arrears in respect of the performance
or satisfaction of any other material terms or conditions on its part to be
performed or satisfied under any agreement or lease and no waiver or indulgence
has been granted by any of the parties thereof. Airtech is not a party to any
agreement or lease that Airtech has reason to believe in the future may have a
materially adverse effect on the business of Airtech.
2.8 Property. Airtech has good and marketable title to its assets,
including trade secrets and proprietary information, free and clear of all
liens, pledges, claims, charges, security interests or other encumbrances
except, (i) as having arisen in the ordinary course of business since such date
in an aggregate amount not exceeding $10,000, (iii) liens for current taxes and
assessments, mechanic's liens and materialman's liens, not yet due or being
contested in good faith by appropriate proceedings (the aggregate amount of such
contested liens not exceeding $10,000), and (iv) such imperfections of title and
non-monetary encumbrances, if any, which do not materially interfere with the
present use of the properties or otherwise materially impair business operations
conducted by Airtech.
2.9 Taxes. Airtech has filed, or caused to be filed, with the appropriate
agencies all tax returns and tax reports required by law to be filed by Airtech,
and has paid and made proper arrangements for payment of all required taxes.
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2.10 Violation of Law. Airtech is not in violation of any law, statute,
rule, governmental regulation, or order, which violation might have a material
adverse effect on the business, financial condition or prospects of Airtech. Any
violation(s) of environmental or similar law, state, rule, governmental
regulation, or order, which could result, singly or in the aggregate, in fines,
penalties, costs of clean-up or compliance costs, in the aggregate, of $10,000
or more is for purposes of this Section deemed materially adverse.
2.11 Employment Agreements. Airtech is not a party to any agreement with
any executive officer providing for his employment or service or other payments
upon termination of his employment. All employment agreements between Airtech
and its employees are terminable by Airtech at will without penalty or cost.
2.12 Accounting Controls. a. The audited Financial Statements of Airtech
dated February 29, 1996, included as Exhibit 2.12, as well as the interim
financial statements delivered to DCX fairly present the financial condition of
Airtech and the results of its operations as of the dates and for the periods
therein specified, and have been prepared in accordance with generally accepted
accounting principles which have been consistently applied through the periods
covered.
b. Airtech maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (1) transactions are executed
in accordance with management's general or specific authorizations, (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (3) access to assets is permitted only in
accordance with management's general or specific authorization, and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2.13 Transactions With Its Officers, Directors or Shareholders. Airtech is
not indebted, either directly or indirectly, to any of its officers, directors
or shareholders or to their respective spouses or children, in any amount
whatsoever, other than for payment of current salary or fees for services
rendered and reasonable expenses. None of the officers, directors or
shareholders or any members of their immediate families is indebted to Airtech.
No officer, director, or shareholder or any member of their immediate families,
is, directly or indirectly, interested in any material contract with Airtech.
Airtech is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.14 Adverse Events. There is no event, factor or condition which, to the
best knowledge and belief of Airtech, materially and adversely effects the
business, assets, financial condition or prospects of Airtech or which could
reasonably be expected to do so. Since February 29, 1996, there has not been any
adverse change in the financial condition, or prospects, or any damage or loss
to the assets (whether or not covered by insurance), of Airtech which is
material.
2.15 No Plan of Disposal. To the best of the knowledge of Airtech there is
no plan or intention by the stockholders of Airtech who own 5 percent or more of
the Airtech Common Stock, and there is no plan or intention on the part of the
remaining stockholders of Airtech to sell, exchange or otherwise dispose of a
number of shares of DCX Common Stock received pursuant to this Agreement that
would reduce the Airtech stockholders' ownership of DCX Common Stock to a number
of shares having a value as of the date of this Agreement, of less than 50
percent of the value of all the formerly outstanding stock of Airtech as of the
same date.
2.16 Update at Closing. Five business days prior to the Closing, and at the
Closing the President and Chief Executive Officers of Airtech will provide DCX
with a certificate signed by them individually and as officers of Airtech, that
the representations and warranties of Airtech remain true and correct, or
stating any change in such representations and warranties.
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3. REPRESENTATIONS AND WARRANTIES OF DCX.
DCX, except as may be set forth in the reports filed by DCX with the
Securities and Exchange Commission, represents and warrants to the Shareholders
and to Airtech as follows:
3.1 Corporate Organization. DCX is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own,
operate and lease its property and to carry on its businesses substantially as
they are being conducted. DCX is duly qualified to do business as a foreign
corporation in good standing in the states in which it owns a material amount of
property of the nature, or transacts a material amount of business of the type,
that would make such qualification necessary except where the failure to so
qualify would not have a material adverse effect on DCX.
3.2 Capitalization. The authorized capital stock of DCX consists of
2,000,000,000 shares of $.0001 par value Common Stock, of which 4,367,969 shares
are issued and outstanding, and twenty million shares of $.001 par value
preferred stock of which none are issued or outstanding. The Articles of
Incorporation and Bylaws of DCX, as currently in effect, are included in the
public reports filed by DCX with the SEC. All shares of DCX Common stock
outstanding as of the date hereof are fully paid and nonassessable, and
represent the sole voting power of the capital stock of DCX. Except as set forth
above or in Schedule 3.2(b), DCX and its subsidiaries do not have any
outstanding preemptive rights, rights of first refusal or any subscription,
option, warrant, call, contract, commitment, understanding or arrangement by
which it or they are bound to issue, sell or transfer any shares of their
capital stock. The issuance and sale of all outstanding shares of DCX Common
have been made in full compliance with applicable federal and state securities
laws in all material respects.
3.3 Authorization. The execution, delivery and performance of this
Agreement by DCX have been duly authorized by all necessary corporate action on
the part of DCX. This Agreement and the transactions contemplated hereby have
been approved by a resolution adopted at a duly constituted meeting of the Board
of Directors of DCX. This Agreement has been duly executed and delivered by DCX,
and constitutes a valid and binding obligation of DCX, enforceable in accordance
with its terms. DCX has all requisite corporate power and authority to enter
into and perform this Agreement.
3.4 No Violation. The execution and delivery of this Agreement do not, (i)
conflict with any provision of DCX's Articles of Incorporation or By-laws, or
(ii) violate any law, rule or regulation, or any judgment, decree or order of
any court or governmental agency or instrumentality, to which DCX is subject, or
(iii) conflict with, or result in a breach or violation of, or accelerate the
performance required by, or result in early termination of, or result in any
loss of benefits under, the terms of any agreement, indenture, mortgage or other
instrument to which DCX is a party or to which any of its property is subject,
or constitute an event which, with the lapse of time or action by a third party,
or both, could result in a default thereunder or the creation of any lien,
charge or encumbrance upon any of the assets or properties of DCX, if the effect
of any of the foregoing contained in subsections (ii) or (iii) above, singly or
in the aggregate, is material to the business, financial condition or results of
operations of DCX.
3.5 Litigation. There is no action, suit or other litigation, proceeding or
governmental investigation pending or, to the knowledge of the officers of DCX,
threatened, against DCX, or any of its subsidiaries, which if adversely
determined, would have a material adverse effect upon the business, financial
condition or results of operations of DCX and its subsidiaries, considered as a
whole.
3.6 Agreements. Except as is not material to the business, financial
condition or results of operations of DCX and its subsidiaries, considered as a
whole, (i) each agreement and lease to which DCX is a party is valid, in full
force and effect and enforceable by and against DCX in accordance with its
terms; (ii) there has not occurred any default by DCX under any material
agreement or material lease, or any event (including the execution, delivery and
performance of this Agreement) which, with the lapse of time or the election of
any person other than DCX will become a default; (iii) to DCX's knowledge, there
has not occurred any default by others or any event (including the execution,
delivery and performance of this Agreement) which, with the lapse of time or the
election of DCX, will become such a default under any agreement or lease, nor
has DCX received notice of claim of any default.
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3.8 Property. DCX has good and marketable title to its assets, including
trade secrets and proprietary information, free and clear of all liens, pledges,
claims, charges, security interests or other encumbrances except, (i) as shown
on DCX's public reports, or having arisen in the ordinary course of business
since such date in an aggregate amount not exceeding $10,000, (ii) liens for
current taxes and assessments, mechanic's liens and materialman's liens, not yet
due or being contested in good faith by appropriate proceedings (the aggregate
amount of such contested liens not exceeding $10,000).
3.9 Taxes. DCX has filed, or caused to be filed, with the appropriate
agencies all tax returns and tax reports required by law to be filed by DCX, and
has paid and made arrangements for payment of all required taxes.
3.10 Violation of Law. DCX is not in violation of any law, statute, rule,
governmental regulation, or order, which violation might have a material adverse
effect on the business, financial condition or prospects of DCX. Any
violation(s) of environmental or similar law, state, rule, governmental
regulation, or order, which could result, singly or in the aggregate, in fines,
penalties, costs of clean-up or compliance costs, in the aggregate, of $10,000
or more is for purposes of this Section 3.11 deemed materially adverse.
3.11 Accounting Controls. a. The financial statements contained in the DCX
public reports fairly present the financial condition of DCX and the results of
its operations as of the dates and for the periods therein specified, and have
been prepared in accordance with generally accepted accounting principles which
have been consistently applied through the periods covered.
b. DCX maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (1) transactions are executed in
accordance with management's general or specific authorizations, (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (3) access to assets is permitted only in
accordance with management's general or specific authorization, and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.12 Transactions With Its Officers, Directors or Shareholders. DCX is not
indebted, either directly or indirectly, to any of its officers, directors or
shareholders or to their respective spouses or children, in any amount
whatsoever, other than for payment of current salary or fees for services
rendered and reasonable expenses. None of the officers, directors or
shareholders or any members of their immediate families is indebted to DCX. No
officer, director, or shareholder or any member of their immediate families, is,
directly or indirectly, interested in any material contract with DCX. DCX is not
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.13 Adverse Events. There is no event, factor or condition which, to the
best knowledge and belief of DCX, materially and adversely effects the business,
assets, financial condition or prospects of DCX or which could reasonably be
expected to do so. Since March 31, 1996, there has not been any adverse change
in the financial condition, or prospects, or any damage or loss to the assets
(whether or not covered by insurance), of DCX which is material.
3.14 Continuation of Airtech. Following the exchange of shares pursuant to
this Agreement, DCX will continue the operations of Airtech as a subsidiary of
DCX. DCX has no present intent to liquidate Airtech.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each of the Airtech Shareholders who exchanges their Airtech shares for DCX
shares represents and warrants to DCX and Airtech as follows:
4.1 Ownership of Shares. The Shareholder covenants the he or she owns, both
legally and beneficially, all right, title, and interest in the Airtech shares
being sold to DCX pursuant to this Agreement, and that he or she has not
mortgaged, pledged, encumbered, hypothecated, assigned or caused to be
transferred to any other person or entity any interest, claims or rights
whatsoever in his or her Airtech shares.
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4.2 Authorization; Power. This Agreement constitutes a valid and binding
obligation of Shareholder, enforceable in accordance with its terms. Each
Shareholder has all requisite power and authority to enter into and perform this
Agreement.
4.3 No Violation. The execution and delivery of this Agreement does not
violate any judgment, decree or order of any court or governmental agency or
instrumentality, to which the Shareholder is subject, or conflict with, or
result in a breach or violation of, the terms of any agreement, indenture,
mortgage or other instrument to which the Shareholder is a party or to which any
of his property is subject, or constitute an event which, with the lapse of time
or action by a third party, or both, could result in the creation of any lien,
charge or encumbrance upon any of the Airtech shares being purchased by DCX.
4.4 No Adverse Claims. The Shareholder has no adverse claims or pending or
threatened litigation or adversary proceeding against DCX or Airtech.
5.REPRESENTATIONS AND WARRANTIES OF CERTAIN SHAREHOLDERS
John Potter, President of Airtech, and C.J. Comu, Chief Executive Officer
of Airtech, each individually, represent and warrant to DCX that, to the best of
their knowledge and belief after reasonable investigation, the representations
and warranties of Airtech in this Agreement are true and do not contain any
material misstatement or omission.
6.COVENANTS OF CERTAIN SHAREHOLDERS
John Potter, President of Airtech, and C.J. Comu, Chief Executive Officer
of Airtech, each individually covenant with DCX as follows:
6.1 Escrow of Shares. a. At the Closing John Potter, President of Airtech,
and C.J. Comu, Chief Executive Officer of Airtech, shall each deposit into an
escrow account seventy percent of the shares of DCX they are entitled to receive
in exchange for their shares of Airtech common stock pursuant to the share
exchange. The escrow agreement shall be prepared by DCX on or before the
Closing, and shall include performance goals as specified below.
b. If Airtech has earned at least $4,135,000 net earnings after taxes
for the fiscal year ended September 30, 1997, then thirty percent of the shares
issued pursuant to the share exchange (equal to three-sevenths of the shares
placed into the escrow account) will be released from the escrow to the
respective shareholders who have met the performance goals. If Airtech has not
earned at least $4,135,000 net earnings after taxes for the fiscal year ended
September 30, 1997, then thirty percent of the shares issued pursuant to the
share exchange (equal to three-sevenths of the shares placed into the escrow
account) will be forfeited and released from escrow back to DCX. If Airtech has
earned at least $4,135,000 net earnings after taxes in the fiscal year ended
September 30, 1997, then Airtech will pay into a bonus account a total of 10% of
the net earnings after taxes for the fiscal year ended September 30, 1997. The
bonus account will be split between Messrs. Potter and Comu as they mutually
advise in writing, otherwise half to each.
c. If Airtech has earned at least $11,873,000 net earnings after taxes
in the fiscal year ended September 30, 1998, then forty percent of the shares
issued pursuant to the share exchange (equal to four-sevenths of the shares
placed into the escrow account) will be released from the escrow to the
respective shareholders who have met the performance goals. If Airtech has not
earned at least $11,873,000 net earnings after taxes for the fiscal year ended
September 30, 1998, then forty percent of the shares issued pursuant to the
share exchange (equal to four-sevenths of the shares placed into the escrow
account) will be forfeited and released from escrow back to DCX. If Airtech has
earned at least $11,873,000 net earnings after taxes in the fiscal year ended
September 30, 1998, then Airtech will pay into a bonus account a total of 10% of
the net earnings after taxes for the fiscal year ended September 30, 1998. The
bonus account will be split between Messrs. Potter and Comu as they mutually
advise in writing, otherwise half to each.
d. Any dividends or other rights payable with respect to the DCX
shares held in escrow shall be deposited into the escrow account and shall
become subject to the escrow terms.
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6.2 Voting Trust. Messrs. Potter and Comu shall each grant to the Board of
Directors of DCX the right to vote their respective shares of DCX held in escrow
during the term of the escrow. DCX may prepare a voting trust or other form of
proxy for the purpose of transfer of the voting rights of the DCX shares in the
escrow account.
6.3 Termination of Other Airtech Securities. At the Closing, the holders of
Airtech common stock shall possess the sole voting power with respect to Airtech
securities. Airtech shall only have its class of common stock issued and
outstanding. In further consideration for DCX entering into this Agreement, the
holders of all other classes of the capital stock of Airtech, including the
holders of the Class C preferred, shall return such securities to Airtech
without further payment or consideration.
6.4 Other Matters. Each will take all actions that may be necessary to
cause Airtech to comply with the covenants given by Airtech in this Agreement.
7. COVENANTS.
7.1 Stockholders' Meeting. Airtech will submit and recommend approval of
this Agreement by its shareholders as soon as practicable.
7.2 Access to Properties and Records. DCX and Airtech will, and will cause
their respective subsidiaries, accountants, counsel and other representatives to
provide to the other and its accountants, counsel and other representatives,
full access at reasonable times and upon reasonable notice, throughout the
period prior to the completion of the share exchange, to all of their respective
properties, books, and business records (including but not limited to accounting
records and tax returns) and commitments. During such period both DCX and
Airtech shall use its best efforts to furnish promptly to the other information
concerning its business, properties and personnel as the other may reasonably
request.
7.3 Conduct of Business. Between the date hereof and the effective time of
the share exchange: (i) each of Airtech and DCX shall carry on their respective
businesses in substantially the same manner as heretofore conducted and (to the
extent consistent with such business) shall use all reasonable efforts to
preserve intact their respective business organizations, to keep available the
services of their officers and employees, and to preserve their relationships
with customers, suppliers and others having business dealings with them, to the
end that their goodwill and continuing business shall not be materially
adversely affected at the effective time of the share exchange; (ii) each of
Airtech and DCX shall not enter into any agreement other than in the ordinary
course of business or amend its Articles of Incorporation or By-laws, (iii) each
of Airtech and DCX shall not purchase or redeem, directly or indirectly, any
securities or declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock, (iv) Airtech shall not enter into any written
employment agreement or increase the compensation of any employee other than in
accordance with customary practice; (v) Airtech shall not issue or sell any
shares of their capital stock or issue or grant any stock appreciation rights,
or any option, warrant, conversion or other right to purchase or acquire any
such shares or any securities convertible into or exchangeable for such shares,
other than shares issuable upon the terms of existing agreements on the date
hereof, except Airtech may issue up to 2 million shares of common stock pursuant
to a private placement, provided that at least 34% of the gross offering
proceeds are promptly transferred without further consideration to DCX, and
provided further that the private placement must comply with federal and state
securities laws; (vi) other than in the ordinary course of business, each of
Airtech and DCX shall not sell or dispose of any of its assets or any assets of
its subsidiaries which is material, singly or in the aggregate, to the business,
financial condition or results of operations of the respective company,
considered as a whole; and (vii) Airtech shall not, prior to the effective time
of the Share exchange, effect any stock split, stock dividend, stock
combination, reorganization, recapitalization or reclassification affecting any
of its authorized or issued and outstanding securities.
7.4 Negotiations with Other Parties. Neither DCX nor Airtech will, and each
will use its best efforts to assure that its directors, officers and other
employees will not, solicit, initiate, encourage or, except as may be consistent
with fiduciary duties to shareholders, engage in formal discussions or
negotiations with, or furnish any information to, or cooperate with, any third
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party relating to, or otherwise approve, any merger or other business
combination involving it or any sale, tender offer or any other disposition of,
any stock or substantial portion of its assets or any of its subsidiaries
assets, or a proposal related thereto.
7.5 Notice. At all times prior to the effective time of the share exchange,
each party shall promptly notify the other in writing of the occurrence of any
event which will or may result in the failure to satisfy the conditions
specified in this Agreement, and of any known breaches of any of the
representations or warranties made by such party herein, and shall further
undertake to periodically update each of the schedules hereto, as necessary.
7.6 Indemnification. a. DCX shall indemnify and hold harmless, and provide
contribution to, the Shareholders and to Airtech and its officers, directors,
controlling persons, employees and agents, and professionals against any and all
liabilities, claims and lawsuits, including any and all awards and/or judgments
to which it may become subject under the Securities Act, Exchange Act or any
other federal or state statute, at common law or otherwise, insofar as said
liabilities, claims and lawsuits (including awards and/or judgments) arise out
of or are in connection with any material misstatement or omission to make a
material statement by DCX; however, DCX shall not be liable in any such case to
the extent any liability arises out of any breach of this Agreement by Airtech
or the Shareholders, or for any untrue statement or omission made in reliance on
information provided by Airtech or the Shareholders. In addition, DCX shall also
indemnify and hold harmless, and provide contribution to, the Shareholders and
to Airtech and its officers, directors, controlling persons and professionals
against any and all costs and expenses, including reasonable counsel fees,
incurred or relating to the foregoing.
b. Airtech shall indemnify and hold harmless, and provide contribution
to, the Shareholders and to DCX and its officers, directors, controlling
persons, employees and agents, and professionals against any and all
liabilities, claims and lawsuits, including any and all awards and/or judgments
to which it may become subject under any federal or state statute, at common law
or otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with any material
misstatement or omission to make a material statement by Airtech or a breach of
this Agreement; however, Airtech shall not be liable in any such case to the
extent any liability arises out of an untrue statement or omission made in
reliance on information provided by DCX. In addition, Airtech shall also
indemnify and hold harmless, and provide contribution to, the Shareholders and
to DCX and its officers, directors, controlling persons and professionals
against any and all costs and expenses, including reasonable counsel fees,
incurred or relating to the foregoing.
c. Each Shareholder shall indemnify and hold harmless, and provide
contribution to, DCX, Airtech and their officers, directors, controlling
persons, employees and agents, and professionals against any and all
liabilities, claims and lawsuits, including any and all awards and/or judgments
to which they may become subject under any federal or state statute, at common
law or otherwise, insofar as said liabilities, claims and lawsuits (including
awards and/or judgments) arise out of or are in connection with any material
misstatement or omission to make a material statement or a breach of this
Agreement; however, the Shareholders shall not be liable in any such case to the
extent any liability arises out of an untrue statement or omission made in
reliance on information provided by DCX. In addition, each Shareholder shall
also indemnify and hold harmless, and provide contribution to, DCX, Airtech and
their officers, directors, controlling persons and professionals against any and
all costs and expenses, including reasonable counsel fees, incurred or relating
to the foregoing.
d. Messrs. Potter and Comu, each individually, shall indemnify and
hold harmless, and provide contribution to, DCX and its officers, directors,
controlling persons, employees and agents, and professionals against any and all
liabilities, claims and lawsuits, including any and all awards and/or judgments
to which it may become subject under any federal or state statute, at common law
or otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with any material
misstatement or omission to make a material statement, or a breach of this
Agreement, by Airtech or by Messrs. Potter or Comu; however, Messrs. Potter or
Comu shall not be liable in any such case to the extent any liability arises out
of an untrue statement or omission made in reliance on information provided by
DCX. In addition, Messrs. Potter or Comu shall also indemnify and hold harmless,
and provide contribution to, DCX and its officers, directors, controlling
persons and professionals against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing.
-10-
<PAGE>
7.7 DCX Board of Directors. Upon the Closing of the Share exchange, the
size of the DCX Board of Directors will be increased to nine members, and
representatives of Airtech shall have the right to nominate four persons to
serve on the DCX Board. Such persons nominated shall be qualified in all
respects to serve on the Board of a publicly traded company.
7.8 Airtech Board of Directors. Upon the Closing of the Share exchange, the
size of the Airtech Board of Directors will be increased to three persons, and
representatives of DCX shall appoint one out of three of the members of the
Airtech Board of Directors to take office at the Closing.
8. CONDITIONS.
8.1 Conditions to Each Party's Performance. Each of DCX and Airtech has the
right to terminate this Agreement, prior to the effective time and date of the
Share exchange, pursuant to written notice, if any of the following conditions
have not been satisfied:
8.1.1 Orders; Litigation. There shall not be in force any order or decree,
or any governmental complaint praying for an order or decree, restraining or
enjoining the closing of this Agreement or the transactions contemplated hereby
and there shall not exist any such order or decree whether or not stayed pending
appeal.
8.1.2 Airtech Stockholder Approval. This Agreement shall have been approved
and adopted by the necessary vote of the holders of the outstanding shares of
Airtech Common Stock, and the nature and extent of any dissenter and appraisal
rights of Airtech shareholders has been resolved to the satisfaction of DCX in
its judgment.
8.1.3 Representations and Warranties. The representations and warranties of
each party set forth in this Agreement shall be true and correct in all material
respects as of the effective date of the Share exchange with the same effect as
though made on and as of the effective date of the Share exchange.
8.1.4 Covenants. Each of the obligations, covenants and agreements of each
party to be performed by it prior to the effective time of the Share exchange
shall have been duly performed in all material respects.
8.1.5 No Material Change. There shall be no material change in the
business, operations, management, or financial condition of either Airtech or
DCX.
8.2. Effect. In the event of termination of this Agreement by either
DCX or Airtech that is not due to a breach of this Agreement, this Agreement
shall forthwith become void and there shall be no liability hereunder on the
part of DCX or Airtech or their respective officers, directors, employees, or
agents. A party that breaches this Agreement or terminates this Agreement in a
manner that is a breach of this Agreement shall remain liable for damages
arising as a result of such breach.
8.3 Survival of Certain Terms. The agreements regarding indemnification
contained in Section 7.6 shall survive the Closing and survive the termination
of this Agreement. The covenants, representations, and warranties in this
Agreement shall survive the Closing or termination of this Agreement. Other
terms of this Agreement to be performed after the Closing shall survive the
Closing.
-11-
<PAGE>
9. MISCELLANEOUS.
9.1 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.2 Waiver. Any term, provision or condition of this Agreement (other than
the requirement for stockholder approval) may be waived in writing by the party
which is entitled to the benefits thereto.
9.3 Expenses. Except as otherwise provided, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense. DCX will not assume the expenses
that Airtech shareholders may incur under this Agreement.
9.4 Notices. Any notice or other communications required or permitted under
this Agreement shall be effective when received only if it is in writing and
delivered personally, by overnight delivery by a nationally recognized carrier
or by registered or certified mail, in all cases postage prepaid, addressed as
follows (or to such other address as the party to whom notice is to be given
furnishes in writing to the other party in the manner set forth):
DCX, Inc. Airtech International Corporation
Attention: President Attention: President
3002 N. State Highway 83 15400 Knoll Trail, Suite 106
Franktown, CO 80116 Dallas, TX 75248
Airtech Shareholders
c/o Airtech International Corporation
Attention: President
15400 Knoll Trail, Suite 106
Dallas, TX 75248
9.5 No Assignment. This Agreement is binding upon and is solely for the
benefit of the parties hereto and their respective successors, legal
representatives and assigns. This Agreement cannot be assigned except by mutual
consent.
9.6 Headings. The headings in this Agreement are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
9.7 Entire Agreement. This Agreement supersedes any and all oral or written
agreements and understandings heretofore made relating to the subject matter
hereof and contains the entire agreement of the parties relating to the subject
matter hereof and documents referred to herein.
9.8 Separability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
9.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado applicable to contracts
entered into or to be performed in that state.
-12-
<PAGE>
9.10 Return of Documents; Confidentiality. If this Agreement is terminated
as provided herein:
(a) Each party will promptly return all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same; and
(b) All non-public proprietary information received by any party
hereto with respect to the business of any other party or its subsidiaries shall
not at any time be used for the advantage of, or disclosed to third persons by,
such party for any reason whatsoever.
9.11 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.12 Share exchange. As used herein, Share exchange shall mean the exchange
of shares of DCX for shares of Airtech, as described in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, sealed and attested by their respective officers thereunto duly
authorized, all as of the date first above written.
DCX, INC.
ATTESTED TO:
By: /S/ FREDERICK G. BEISSER By: /S/ JEANNE M. ANDERSON
---------------------------- ---------------------------
Frederick G. Beisser, Secretary Jeanne M. Anderson, President
AIRTECH INTERNATIONAL, INC.
ATTESTED TO:
By: /S/ C.J. COMU By: /S/ JOHN POTTER
---------------------------- ---------------------------
C.J. Comu, Secretary John Potter, President
By: /S/ C.J. COMU By: /S/ JOHN POTTER
---------------------------- --------------------------
C.J. Comu, Individually John Potter, Individually
SHAREHOLDERS
By: /S/ JOHN POTTER
-----------------------------
President of Airtech, Attorney in Fact
under a power of attorney given by the
shareholders listed on Exhibit A hereto
-13-
<PAGE>
AGREEMENT FOR EXCHANGE OF SHARES
EXHIBITS
A. List of Airtech Shareholders and Number of Shares
SCHEDULES
2.2(a) Airtech Articles of Incorporation and ByLaws
2.12 Airtech Audited Financial Statements dated February 29, 1996
-14-
Exhibit 22.1
Item 5, Other Events.
Termination of Proposed Acquisition of Airtech International Corporation. The
Company reports that on June 6, 1996, it terminated the Letter of Intent dated
May 17, 1996 and an Agreement in Principle dated June 5, 1996, with Airtech
International Corporation of Dallas, Texas. The instruments were terminated as a
result of the Company's continuing due diligence efforts.
Annual Shareholders' Meeting.
The Company also reports that on June 7, 1996, at the annual meeting of
shareholders of DCX, Inc., the following individuals were reelected to the Board
of Directors to serve until the next annual shareholders' meeting and their
successors are elected or until their earlier death, resignation or removal. The
results were:
John G. Anderson, 3,783,446 votes for and 24,861 votes withheld.
Jeanne M. Anderson, 3,782,212 votes for and 26,095 votes withheld.
Stephen Carreker, 3,785,330 votes for and 22,977 votes withheld.
Frederick G. Beisser, 3,785,450 votes for and 22,857 votes withheld.
During the annual meeting of shareholders, it was noted that the Small Business
Administration recently agreed to extend its note with the Company for twelve
months postponing the need for a payoff. Also during the meeting the President
and Chief Executive Officer of the Company reported that the Company has
experienced two fiscal quarters of solid revenue and earnings. The Company has a
contract backlog of $8.0 million with $5.0 million of uncompleted work and
expects the momentum to continue. The President also indicated the Company will
continue with its plan to diversify through product development and the
acquisition of one or more companies.
Annual Board of Directors' Meeting.
The Company further reports that at the Annual Directors' Meeting following the
Annual Shareholders' Meeting, the Board reelected John G. Anderson as Chairman
of the Board.
The Board increased its members to five and appointed a new director, D. Scott
McReynolds who was also designated Vice President - General Manager. Mr.
McReynolds, 32, joined the Company in 1991 as an industrial engineer; he was
subsequently promoted to Quality Assurance Manager and became Acting General
Manager in December, 1995. He holds a Bachelor of Science in Industrial
Engineering from Southern Illinois University.
Other officers of the Company continuing in their present positions are:
Jeanne M. Anderson, President and Chief Executive Officer
Wayne A. Wilson, Vice President - Technical Operations
William A. Walters, Vice President - Manufacturing
Frederick G. Beisser, Chief Financial Officer, Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 266,428
<SECURITIES> 0
<RECEIVABLES> 1,351,687
<ALLOWANCES> 0
<INVENTORY> 1,107,099
<CURRENT-ASSETS> 2,893,748
<PP&E> 2,032,536
<DEPRECIATION> 731,684
<TOTAL-ASSETS> 4,450,547
<CURRENT-LIABILITIES> 2,091,854
<BONDS> 0
0
0
<COMMON> 5,027,661
<OTHER-SE> (3,031,865)
<TOTAL-LIABILITY-AND-EQUITY> 4,450,547
<SALES> 3,683,117
<TOTAL-REVENUES> 3,683,117
<CGS> 2,776,167
<TOTAL-COSTS> 2,776,167
<OTHER-EXPENSES> 525,998<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89,950
<INCOME-PRETAX> (374,179)
<INCOME-TAX> 0
<INCOME-CONTINUING> (374,179)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (374,179)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
<FN>
<F1>Company recorded reserve of $521,000 for possible adverse decision by
U.S. Supreme Court relative to third terminated contract which was held
against the Company in U.S. Court of Appeals.
</FN>
</TABLE>
