SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange of 1934
Date of Report September 22, 1997
DCX, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-14273 84-0868815
- ------------- ----------- -------------------
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
3002 North State Highway 83, Franktown, CO 80116-0569
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 688-6070
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ---------------------------------------------
On September 22, 1997, DCX, Inc. ("the Corporation") acquired all the
outstanding shares of PlanGraphics, Inc. ("PGI"), a Maryland corporation located
in Frankfort, Kentucky, in exchange for a total of 2,631,145 shares of the
Corporation's no par value common stock at a price of $1.52 per share as set in
the acquisition agreement which is filed as Exhibit 2.1a with this Form 8-K. The
purchase price was based upon, among other things, what the Company believes is
purchase price valuations paid for other companies in industries similar to
PlanGraphics. In addition, the Corporation provided working capital to PGI
subsequent to the executing the acquisition agreement.
Effective upon completion of the closing, the Corporation has agreed to increase
the size of its Board of Directors from four to seven members and appoint John
C. Antenucci (President and Chairman of PlanGraphics) and two additional persons
nominated by Mr. Antenucci as three, including Mr. Antenucci, of the seven
directors of the Company. Furthermore, the Corporation has agreed to appoint one
additional person jointly nominated by Mr. Carreker, President and CEO of the
Corporation, and Mr. Antenucci as the seventh of the seven members, with all
appointees serving until the next annual shareholders' meeting. The Company has
also agreed to renominate Mr. Antenucci and these three additional newly
appointed directors of the Corporation to be elected for a full one-year term at
its next annual shareholders' meeting. The additional directors have not yet
been appointed.
The Corporation has agreed to register all of the shares to be issued in
connection with the acquisition. The Corporation agreed to appoint John C.
Antenucci President and Vice Chairman. Mr. Antenucci, 51, is founder, President
and CEO of PlanGraphics, Inc., a company specializing in the design and
implementation of geographic information systems, since 1979. Mr. Antenucci is a
former president of AF/FM International, a professional association for the
mapping industry. He is also a former member of the Academy of Sciences on
National Mapping, an advisor to Ohio State University's Center for Mapping and
editor of the leading textbook on GIS.
Item 5. Press Release
- ---------------------
A copy of the Corporation's press release, dated September 24, 1997, is provided
as an attachment to this Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of business acquired.
PLANGRAPHICS, INC.
AUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEAR ENDED DECEMBER 31, 1995
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
Board of Directors
PlanGraphics, Inc.
Frankfort, Kentucky
We have audited the accompanying balance sheets of PlanGraphics, Inc. as of
September 30, 1996 and December 31, 1995, and the related statements of income,
changes in stockholders' equity, and cash flows for the nine months ended
September 30, 1996 and the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PlanGraphics, Inc. at
September 30, 1996 and December 31, 1995, and the results of its operations and
cash flows for the nine months ended September 30, 1996 and the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
/S/ Eskew & Graham
-------------------------
Lexington, Kentucky
August 26, 1997
3
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<TABLE>
<CAPTION>
PLANGRAPHICS, INC.
BALANCE SHEETS
September 30 December 31
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Cash $ 59,870 $ 437,198
Accounts receivable - billed contract fees 1,363,697 976,294
Accounts receivable - unbilled contract fees 766,321 735,738
Accounts receivable - other 84,588 66,913
Deferred tax asset 36,000 160,000
----------- -----------
Total current assets $ 2,310,476 $ 2,376,143
Premises and equipment (net of accumulated
depreciation of $860,953 and $579,808, respectively) 2,650,728 466,577
Other assets 174,099 138,648
Goodwill 155,416 165,271
----------- -----------
TOTAL ASSETS $ 5,290,719 $ 3,146,639
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Accounts payable $ 560,230 $ 259,645
Bank overdraft 0 385,429
Notes payable - current portion 337,507 954,292
Obligation under capital leases - current portion 115,308 64,429
Accrued expenses 631,482 321,017
Deferred revenue 428,291 744,824
Other liabilities 15,389 11,682
----------- -----------
Total current liabilities $ 2,088,207 $ 2,741,318
Notes payable 1,229,840 691,126
Obligation under capital leases 2,041,154 72,761
----------- -----------
Total liabilities $ 5,359,201 $ 3,505,205
Stockholders' Equity (Deficit):
Common stock, no par value; voting; 100,000
shares authorized; 97,175 shares issued and
outstanding$ 153,928 $ 153,928
Common stock, no par value; non-voting; 110,000
shares authorized; 110,396 and 111,980 issued
and outstanding in 1996 and 1995, respectively 328,035 342,850
Accumulated deficit (550,445) (855,344)
----------- -----------
Total stockholders' equity (deficit) $ (68,482) $ (358,566)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,290,719 $ 3,146,639
See notes to financial statements.
4
</TABLE>
<PAGE>
PLANGRAPHICS, INC.
STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEAR ENDED DECEMBER 31, 1995
1996 1995
----------- -----------
Contract revenues $ 7,985,750 $ 7,838,201
Costs and expenses:
Salaries and employee benefits $ 4,208,219 $ 4,770,217
Direct contract costs 1,582,377 1,355,552
Marketing and proposal expenses 317,659 409,914
Other operating expenses 1,112,216 985,692
----------- -----------
Total cost and expenses $ 7,220,471 $ 7,521,375
Operating income $ 765,279 $ 316,826
Other income and (expenses):
Interest income$ 416 $ 0
Interest expense (297,064) (225,220)
Other income 12,737 8,493
----------- -----------
Total other income and (expenses) $ (283,911) $ (216,727)
Income before income taxes $ 481,368 $ 100,099
Income tax expense 176,469 50,450
----------- -----------
NET INCOME $ 304,899 $ 49,649
See notes to financial statements.
5
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<TABLE>
<CAPTION>
PLANGRAPHICS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEAR ENDED DECEMBER 31, 1995
Total
Stockholders'
Common Stock Accumulated Equity
Voting Non-Voting Deficit (Deficit)
------ ---------- ------- ---------
<S> <C> <C> <C> <C>
Balance January 1, 1995 $ 153,928 $ 353,718 $ (904,993) $ (397,347)
Issuance of 500 shares of common
stock 0 4,000 0 4,000
Retirement of 1,433 shares of
common stock 0 (14,868) 0 (14,868)
Net income 0 0 49,649 49,649
--------- --------- --------- ---------
Balances, December 31, 1995 $ 153,928 $ 342,850 (855,344) $(358,566)
Issuance of 817 shares of common
stock 0 5,765 0 5,765
Retirement of 2,401 shares of
on stock 0 (20,580) 0 (20,580)
Net income 0 0 304,899 304,899
--------- --------- --------- ---------
BALANCES, SEPTEMBER 30, 1996 $ 153,928 $ 328,035 $(550,445) $ (68,482)
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
PLANGRAPHICS, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEAR ENDED DECEMBER 31, 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ----------- -----------
<S> <C> <C>
Net income $ 304,899 $ 49,649
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 290,999 157,761
Deferred taxes 124,000 38,000
Change in assets and liabilities:
Accounts receivable (435,661) (279,816)
Other assets (35,450) 31,790
Accounts payable 300,585 (71,300)
Accrued expenses 310,466 85,711
Deferred revenue (316,533) 604,403
Other current liabilities 3,707 9,799
----------- -----------
Net cash provided by operating activities $ 547,012 $ 625,997
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment $ (365,296) $ (268,398)
----------- -----------
Net cash used in investing activities $ (365,296) $ (268,398)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease (increase) in bank overdraft $ (385,429) $ 245,999
Repayment of notes payable (78,072) (95,022)
Payments on obligations under capital lease (80,728) (65,052)
Issuance of common stock 5,765 4,000
Retirement of common stock (20,580) (14,868)
----------- -----------
Net cash (used in) provided by financing activities $ (559,044) $ 75,057
Net (decrease) increase in cash $ (377,328) $ 432,656
Cash at beginning of period 437,198 4,542
----------- -----------
CASH AT END OF PERIOD $ 59,870 $ 437,198
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest expense $ 292,863 $ 233,457
Income taxes $ 6,455 $ 5,600
NON-CASH TRANSACTIONS:
Acquisition of building under capitalized lease
obligation $ 2,100,000 $ 0
See notes to financial statements.
7
</TABLE>
<PAGE>
.
PLANGRAPHICS, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEAR ENDED DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Operations - The Company is an independent consulting firm
specializing in the design and implementation of Geographic Information Systems
(GIS) as well as advisory services in the United States and foreign markets. The
customer base consists primarily of utilities, government agencies, and land and
resource management organizations.
B. Estimates in the Financial Statements - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
C. Cash - For purposes of reporting cash flows, cash includes cash on hand
and deposits in banks.
D. Revenue and Cost Recognition - Revenues from contracts are recognized on
the percentage-of-completion method, measured by the percentage of costs
incurred to date to estimated total costs for each contract.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as supplies, tools, repairs
and depreciation costs. General and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job performance,
job conditions, and estimated profitability may result in revisions to costs and
income and are recognized in the period in which the revisions are determined.
E. Premises and Equipment - Premises and equipment are recorded at
acquisition cost. Provisions for depreciation are based on annual rates
calculated to amortize the cost of depreciable assets over their estimated
economic lives. Depreciation is computed by both the straight-line and
double-declining-balance methods.
F. Investment in Partnership - The Company holds a minority interest in
a limited partnership. The investment is recorded at cost, adjusted for the
Company's pro rata share of income, loss and cash distributions and is included
in other assets on the balance sheet.
G. Goodwill - Goodwill represents the excess of the cost over the fair
value of its net assets acquired at the date of acquisition and is being
amortized on the straight-line method over fifteen years.
H. Deferred Revenue - Deferred revenue represents amounts received under
certain contracts in excess of revenue recognized.
I. Marketing Expense - The Company charges all marketing expenses to
operations when incurred. No amounts have been established for any future
benefits related to these expenditures.
8
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. Income Taxes - The Company uses the liability method for computing
deferred income taxes. Under the liability method, deferred taxes are based on
the change in the deferred tax liability or asset established for the expected
future tax consequences of differences in the financial reporting and tax bases
of assets and liabilities. The differences relate principally to accrued
vacation and net operating loss carryforwards.
K. Change in Fiscal Year - During 1996, the Company changed its fiscal year
end from December 31 to September 30.
2. CASH DEPOSITS
The Company maintains amounts of cash in related and unrelated bank
deposits which, at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts. The Company believes it is not
exposed to any significant credit risk on cash and cash equivalents.
3. CONTRACT RECEIVABLES
Contract receivables at September 30, 1996 and December 31, 1995 consist of
the following:
1996 1995
Contract receivables:
Billed $ 1,363,697 $ 976,294
Unbilled 703,318 678,066
Retained 63,003 57,672
---------------- ---------------
$ 2,130,018 $ 1,712,032
4. PREMISES AND EQUIPMENT
The Company's premises and equipment at September 30, 1996 and December 31,
1995 are summarized as follows:
1996 1995
Land and building under capital lease $ 2,100,000 $ 0
Equipment under capital lease 310,253 310,253
Furniture, fixtures and equipment 1,101,428 736,132
------------- ------------
$ 3,511,681 $ 1,046,385
Accumulated depreciation (860,953) (579,808)
------------- ------------
$ 2,650,728 $ 466,577
9
<PAGE>
4. PREMISES AND EQUIPMENT (CONTINUED)
Depreciation expense was $281,144 and $144,621 for the nine months ended
September 30, 1996 and year ended December 31, 1995, respectively.
5. NOTES PAYABLE
Notes payable at September 30, 1996 and December 31, 1995, represent the
outstanding balances of notes payable to a commercial bank and to a minority
shareholder.
The notes payable to the commercial bank consist of two fully drawn lines
of credit which aggregate $850,000. The first line originated December 5, 1990,
and was last renewed June 10, 1996 in the amount of $650,000. It bears a demand
feature with interest at the prime rate plus 1% and matured June 10, 1997.
Interest payments are made monthly. Collateral consists of a security agreement
dated December 5, 1990, on all equipment and accounts receivable of the Company,
a stock pledge agreement on 40,000 shares of capital stock held by the majority
shareholder, and an assignment of a $500,000 life insurance policy on the life
of the majority shareholder. The second line originated December 5, 1990, and
was last renewed June 10, 1996 in the amount of $200,000. Interest on this line
is fixed at 9.5% and is due on demand. This line is secured by the December 5,
1990 security agreement and a Guaranty Agreement dated April 2, 1992 from a
minority shareholder. Total amounts outstanding under these notes were $850,000
at September 30, 1996 and December 31, 1995. The loan agreement dated June 10,
1996 includes certain restrictions on liquidation or disposal of assets, capital
expenditures, additional indebtedness, payments to guarantors, capital
transactions, dividend payments and other such agreements, all of which have
been complied with at September 30, 1996.
The $650,000 line was subsequently renegotiated on April 25, 1997 and
includes quarterly interest and principal reduction of $5,000 per month for
eleven months with remaining principal due at maturity, April 24, 1998. The
$200,000 line was renegotiated June 6, 1997 for 60 days with principal and
interest due at maturity. All terms and conditions of the June 10, 1996 loan
agreement remain in effect.
The notes payable to a minority shareholder consist of an installment note
which originated July 26, 1991 in the amount of $330,000, and was renewed
December 21, 1994 in the amount of $284,732 and five demand notes of various
dates and amounts aggregating $550,000 which along with outstanding interest
were combined into one promissory note dated December 21, 1994. The installment
note bears a fixed interest rate of 10% and is secured by a proxy on 32,400
shares of Company stock owned by the majority shareholder. The promissory note
bears interest at the prime rate. Both notes mature December 21, 1998 and are
subject to covenants prohibiting further issuance of voting stock and other such
agreements. Total amounts outstanding under these related party notes were
$717,347 and $795,418 at September 30, 1996 and December 31, 1995, respectively.
10
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5. NOTES PAYABLE (CONTINUED)
Principal payments on all notes payable due subsequent to September 30,
1996 are as follows:
Due September 30, 1997 $ 337,507
1998 747,817
1999 482,023
-------------
$ 1,567,347
6. OBLIGATION UNDER CAPITAL LEASES
The Company leases its main office facility from a related party, Capitol
View Development, LLC, under a triple net commercial lease beginning January
1996. The majority shareholder of PlanGraphics, Inc. owns approximately ten
percent of Capitol View Development. The lease includes an annual base rent
increasing over the term of the lease plus an adjustment based on Capitol View
Development's rate of interest on its loan. The initial lease term is for a
period of fifteen years with five renewal options for a term of one year each.
Annual rental payments approximate $320,000 per year.
The Company also leases certain equipment under capital leases from a
related party. Original lease terms are for five years.
The following is a schedule, by years, of future minimum payments required
under these leases, together with their present value as of September 30, 1996.
<TABLE>
<CAPTION>
Land and
Building Equipment Total
<S> <C> <C> <C>
September 30, 1997 $ 314,255 $ 67,090 $ 381,345
1998 327,261 26,576 353,837
1999 330,218 2,656 332,874
2000 335,635 0 335,635
2001 337,089 0 337,089
Thereafter 2,837,559 0 2,837,559
------------ ------------- ------------
$ 4,482,017 $ 96,322 $ 4,578,339
Less: amount representing interest (2,414,556) (7,321) (2,421,877)
------------ ------------- ------------
Present value of minimum lease
payments $ 2,067,461 $ 89,001 $ 2,156,462
11
</TABLE>
<PAGE>
7. OPERATING LEASE COMMITMENTS
The Company leases certain office facilities and certain furniture and
equipment under various operating leases. Lease terms range from one to five
years.
Minimum annual lease commitments at September 30, 1996 are as follows:
September 30, 1997 $ 125,058
1998 105,387
1999 83,578
2000 5,295
2001 1,094
-------------
$ 320,412
Rental expense for nine months ending September 30, 1996 and year ended
December 31, 1995 totaled $136,078 and $196,907, respectively.
8. MAJOR CUSTOMER
A significant portion of the Company's contract revenue was derived
directly or indirectly from contracts with a major customer, a gas and electric
utility company located in the northeastern United States. Accounts receivable
from this customer aggregated $315,598 and $96,505 at September 30, 1996 and
December 31, 1995, respectively. Gross and deferred revenue from these contracts
were as follows:
1996 1995
Gross revenue $ 2,777,922 $ 2,720,816
Deferred revenue 303,650 554,635
9. BACKLOG
The following schedule shows a reconciliation of approximate backlog
representing signed contracts in existence at September 30, 1996:
Balance, December 31, 1995 $ 8,840,877
Contract adjustments 1,417,932
New contracts, 1996 4,932,291
-------------
$ 15,191,100
Less: contract revenue earned, 1996 (7,985,750)
-------------
Balance, September 30, 1996 $ 7,205,350
The Company's backlog at July 31, 1997 is approximately $4,522,000.
12
<PAGE>
10. PROFIT SHARING PLAN
The Company has a qualified profit sharing plan with a 401(k) deferred
compensation provision covering substantially all employees. The plan allows
employees to defer up to twenty percent of their annual salary with a tiered
matching contribution by the Company up to 1.75%. Additional contributions are
at the Company's discretion. The expense charged to operations for the plan was
$41,113 and $35,219 for the nine months ended September 30, 1996 and the year
ended December 31, 1995, respectively.
11. INCOME TAXES
The provision for income taxes for the nine months ended September 30, 1996
and the year ended December 31, 1995 consists of the following:
1996 1995
Current $ 52,469 $ 12,450
Deferred 124,000 38,000
------------ ------------
$ 176,469 $ 50,450
The provision for income taxes differs from the amount computed by applying
statutory rates principally due to nondeductible meals and entertainment
expenses.
The Company's deferred tax assets and liabilities at September 30, 1996 and
December 31, 1995 are shown below. No valuation allowance for the realization of
deferred tax assets is considered necessary.
1996 1995
Total deferred tax assets $ 36,000 $ 160,000
Total deferred tax liabilities 0 0
----------- -----------
Net deferred tax asset $ 36,000 $ 160,000
12. GOING CONCERN CONTINGENCY
As shown in the accompanying financial statements, the Company had a
stockholders' deficit of $68,482 and $358,566 and an accumulated deficit of
$550,445 and $855,344 as of September 30, 1996 and December 31, 1995,
respectively. Although the Company has been profitable during the nine months
ended September 30, 1996 and the year ended December 31, 1995, its ability to
continue as a going concern is dependent on either their ability to continue to
successfully control their costs or their ability to obtain the necessary
funding to continue its operations.
Management has developed a plan identifying excess costs and has developed
strategies to reduce costs where feasible. Additionally, the Company has
successfully identified an investor with access to capital markets with the
ability and intent to provide the capital necessary for the Company to continue
as a going concern (see Note 16).
13
<PAGE>
13. STOCKHOLDERS' EQUITY
The Company's articles of incorporation authorize the issuance of 110,000
non-voting common stock shares. As shown on the balance sheet, the Company
inadvertently issued more shares than were authorized at September 30, 1996 and
December 31, 1995. At August 26, 1997, the Company has corrected the error by
repurchasing certain non-voting shares.
14. COMMON STOCK REPURCHASE COMMITMENTS
In October 1996, the Company and a shareholder entered into a stock
repurchase agreement whereby the Company agreed to repurchase the shareholder's
18,271 non-voting common shares over a three year period at prices that
approximate the appraised value of the shares as of December 31, 1995, the most
recent valuation date. The Company's total repurchase obligation over the three
years subsequent to September 30, 1996 is as follows:
Year ended September 30, 1997 $ 44,364
1998 40,417
1999 43,638
---------
$ 128,419
In March 1997, a former shareholder of a company acquired by the Company
under a Stock Exchange Agreement (the Agreement) exercised his option under the
Agreement to sell 25% of his 10,154 non-voting common shares received under the
Agreement to the Company at a price of $14.43 per share, the appraised value of
the Company's shares as of September 30, 1996. Under the terms of the Agreement,
the Company has elected to pay the purchase price in twelve equal monthly
installments beginning April 1, 1997. Additionally, the former shareholder has
the option of selling a maximum of 25% of the shares received under the
Agreement annually to the Company at the appraised value of the common shares as
of the end of the previous fiscal year.
Additionally, all Company common shares issued and outstanding are subject
to a right of first refusal held by the Company to repurchase the shares in the
event the shareholder desires to transfer ownership of the shares.
15. SUBSEQUENT EVENTS
On May 7, 1997, the Board of Directors approved a 5-for-1 stock split to be
effected in the form of a dividend to shareholders of record on May 7, 1997. The
stock split will become effective upon approval by the shareholders of an
increase in the number of common shares authorized. References in the
accompanying financial statements to the number of shares issued and outstanding
have not been restated to reflect the pending stock split.
14
<PAGE>
15. SUBSEQUENT EVENTS (CONTINUED)
On May 7, 1997, the Board of Directors approved a non-qualified stock
option plan for outside directors and employees of the Company. The Board
reserved 21,500 pre-split shares (107,500 post-split shares) for issuance under
the plan. On June 26, 1997, the Board granted the option to purchase 3,100
pre-split (15,500 post-split) of non-voting common shares to certain employees
at an exercise price of $7.10 per pre-split share ($1.42 per post-split share).
Such price represents approximately 50% of the most recent appraised value of a
common stock share at the date of grant. Additionally, on June 26, 1997, the
Board granted the option to purchase 8,400 pre-split shares (42,000 post-split
shares) of non-voting common shares to certain employees at an exercise price of
$12.27 per pre-split share ($2.45 per post-split share). Such price represents
approximately 85% of the most recent appraised value of a common stock share at
the date of grant. Approximately 4,025 pre-split shares (20,125 post-split
shares) become exercisable one year from the date of grant and the remainder
become exercisable two years from the date of grant. The options terminate five
years from the date of grant. The reservation of shares for issuance and the
granting of options under the plan are subject to the shareholders' approval of
an increase in the number of common shares authorized.
16. PENDING MERGER
On August 12, 1997, the Company entered into an Acquisition Agreement with
DCX, Inc., a publicly held defense contracting company, whereby the Company
agreed to exchange 100% of the Company's issued and outstanding common stock for
2,631,145 shares of DCX, Inc. common stock. It is anticipated that the agreement
will be consummated on or about September 10, 1997.
Additionally, as of August 26, 1997, DCX, Inc. has advanced the Company
$250,000 under three promissory notes in accordance with the terms of a loan
agreement dated July 30, 1997. The amounts advanced bear interest at 13% per
annum, payable monthly. The principal amount is due at maturity, June 30, 1998.
Collateral for the notes consists of a second lien on substantially all assets
of the Company and a security interest in, and pledge of 15,000 pre-split shares
(75,000 post-split shares) of the Company's voting common stock held by the
majority shareholder.
15
<PAGE>
(b) Pro Forma Financial Information.
DCX, INC. and Subsidiary
Pro Forma Consolidated Financial Statements (Unaudited)
The accompanying unaudited pro forma consolidated financial statements give
effect to the acquisition by DCX, Inc. (the "Company" or "DCX") of 100% of the
outstanding common stock of PlanGraphics, Inc. ("PlanGraphics") pursuant to the
agreement between the parties; to reflect the issuance of 2,631,145 of the
Company's common stock and are based on the estimates and assumptions set forth
herein under the purchase method of accounting. The unaudited pro forma
information has been prepared utilizing the historical financial statements and
notes thereto, which are incorporated by reference herein. The unaudited pro
forma financial data does not purport to be indicative of t he results which
actually would have been obtained had the purchase been effected on the date
indicated or of the results which may be obtained in the future. The unaudited
pro forma financial statements should be read in conjunction with the financial
statements.
The pro forma consolidated balance sheet assumes the acquisition was consummated
at June 30, 1997. The accompanying unaudited pro forma statement of income has
been derived from the statement of income of the Company for the nine month
period ended June 30,1 997 and PlanGraphics for the nine month period ended June
30, 1997, and such information adjusted to give effect to the proposed
acquisition as if the proposed acquisition had occurred as of the beginning of
the period presented.
16
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<TABLE>
<CAPTION>
DCX, INC AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
DCX, Inc. PlanGraphics Pro Forma Consolidated
Actual Actual Adjustments Pro Forma
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 183,447 $ 10,016 $ $ 193,463
Accounts receivable 1,703,845 2,018,353 3,722,198
Inventories 1,213,121 0 1,213,121
Prepaid and other 272,828 125,945 398,773
------------ ------------ ------------ ------------
Total current assets $ 3,373,241 $ 2,154,314 $ $ 5,527,555
Property and equipment 1,206,419 2,802,617 4,009,036
Other assets 46,310 197,715 244,025
Goodwill 0 145,561 4,496,842b,c 4,642,403
------------ ------------ ------------ ------------
TOTAL ASSETS $ 4,625,970 $ 5,300,207 $ 4,496,842 $ 14,423,019
LIABILITIES AND
STOCKHOLDERS' EQUITY
Notes payable $ 907,708 $ 1,109,645 $ $ 2,017,353
Accounts payable 888,445 713,500 1,601,945
Accrued expenses and other liabilities 161,961 869,067 400,000b 1,431,028
Accrued litigation settlement 521,000 0 521,000
Deferred revenues 0 156,044 156,044
------------ ------------ ----------- ------------
Total current liabilities $ 2,479,114 $ 2,848,256 $ 400,000 $ 5,727,370
Notes payable 0 514,400 514,400
Obligations under capital leases 0 2,068,176 2,068,176
----------- ------------ ----------- ------------
Total liabilities $ 2,479,114 $ 5,430,832 $ 400,000 $ 8,309,946
Stockholders' Equity:
Preferred stock $ 0 $ 0 $ 0 $ 0
Common stock 5,545,806 434,454 3,564,886a,d 9,545,146
Additional paid in capital 329,384 0 329,384
Subscriptions receivable (179,000) 0 (179,000)
Accumulated deficit (3,549,334) (565,079) 531,956d,e 3,582,457
------------ ------------- ----------- ------------
Total stockholders' equity $ 2,146,856 $ (130,625) $ 4,096,842 $ 6,113,073
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,625,970 $ 5,300,207 $ 4,496,842 $ 14,423,019
See the accompanying Headnote and Notes to Pro Forma Consolidated Financial Statements
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DCX, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
PlanGraphics,
DCX, Inc. Inc.
Nine Months Nine Months
June 30, 1997 June 30, 1997 Proforma Consolidated
Actual Actual Adjustments Pro Forma
<S> <C> <C> <C> <C>
Revenue $ 3,964,929 $ 6,764,206 $ 0 $ 10,729,135
Cost of revenue 3,530,824 2,175,170 0 5,705,994
------------ ------------ ------------ ------------
Gross profit $ 434,105 $ 4,589,036 $ 0 $ 5,023,141
General and administrative 702,705 4,280,089 224,842 5,207,636
------------ ------------ ------------ ------------
Income (loss)from operations $ (268,600) $ 308,947 $ (224,842) $ (184,495)
Other income (expense):
Interest expense $ (101,622) $ (314,029) $ 0 $ (415,651)
Miscellaneous 415,562 0 0 415,562
------------ ------------ ------------ ------------
Total other $ 313,940 $ (314,029) $ 0 $ (89)
Net income before income taxes
and extraordinary item $ 45,430 $ (5,082) $ (224,842) $ (184,584)
Income taxes 0 10,130 0 10,130
------------ ------------ ------------ ------------
Net income before extraordinary
item $ 45,340 $ (15,212) $ (224,842) $ (194,714)
Extraordinary item: gain on
extinguishment of debt 267,050 0 0 267,050
------------ ------------ ------------ ------------
NET INCOME $ 312,390 $ (15,212) $ (224,842) $ 72,336
See the accompanying Headnote and Notes to Pro forma consolidated Financial Statements
</TABLE>
DCX, Inc. and Subsidiary
Notes to Pro Forma Consolidated Financial Statements
a. To record the issuance of 2,631,145 shares of DCX, Inc. common stock (NPV)
at the agreed upon rate of $1.52 per share.
b. To record the liability for transaction costs.
c. To record the purchase of PlanGraphics and the related goodwill.
d. To eliminate the capital accounts of PlanGraphics upon consolidation with
DCX, Inc.
e. To record the amortization of goodwill over a 15 year period.
18
<PAGE>
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement, liquidation or succession:
2.1a Acquisition Agreement (without schedules) dated August 12, 1997 between
DCX, Inc. (purchaser) and PlanGraphics, Inc. (seller).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DCX, Inc.
(Registrant)
October 7, 1997, 1997 /S/ Fred Beisser
--------------------------------------------
(Signature)
Frederick G. Beisser
Secretary, Treasurer & Vice President -
Finance & Accounting
19
<PAGE>
PRESS RELEASE
DCX, INC. BECOMES GEOGRAPHIC INFORMATION SYSTEMS (GIS) INDUSTRY COMPETITOR
WITH FIRST MAJOR ACQUISITION.
DCX, Inc. Completes Purchase of PlanGraphics, Inc.,
Nation's Leading GIS Provider
FRANKTOWN, Colorado, September 24, 1997 --DCX, Inc., - (NASDAQ: DCXI) today
announced that it has completed its acquisition of PlanGraphics, Inc. of
Frankfort, Ky. The transaction involved the exchange of DCX common stock valued
at slightly more than $4 million plus the injection of nearly $1,000,000 in
working capital in exchange for all the outstanding stock of PlanGraphics, Inc.
Privately held PlanGraphics, is the nation's leading independent advisory
services GIS firm in the $8.2 billion worldwide GIS industry. DCX will have
approximately 9.4 million shares outstanding following the closing of the
PlanGraphics transaction. Mr. John Antenucci, President of PlanGraphics, will be
appointed President and a director. As previously reported, the size of the
board will be increased; additional members have not yet been identified.
This acquisition completes the first step by DCX President and CEO Stephen
Carreker to transform DCX into a fully integrated GIS service provider,
lessening its historic reliance on defense business. GIS combines interactive
computer map displays with database management software to display geographic
information - "PlanGraphics has successfully expanded into GIS systems
integration and is expected to continue achieving high growth rates," said Mr.
Carreker. "The company brings immediate value to DCX in the form of
international reputation and contacts. No other U.S. company possesses the
objectivity, comprehensive experience, and expertise in GIS technologies, user
needs and solutions."
Approximately 30% of PlanGraphics' revenues are derived from state and local
government customers; 45% from utilities, and the balance from private and
industrial sectors. Commercial clients include IBM, Space Imaging Corp.,
Analytical Surveys, Inc., Unisys Corp., Lockheed Martin Corp., Hughes Corp. and
Harris Corp., in addition to a number of international public and private
customers. Formed in 1979, PlanGraphics is headquartered in Frankfort, Ky. and
maintains offices in Denver, Silver Spring, Md., Brisbane, Australia, Muscat,
Oman and Buenos Aires, Argentina. The firm has 100 employees. For the nine
months ended June 30, 1997, PlanGraphics recorded $6.7 million in while DCX
reported $4.0 million and net income of $312,390. DCX currently designs and
manufactures electronic cables for various aerospace/defense applications. DCX
was founded and is currently headquartered in Douglas County, south of Denver.
Some of the statements in this Press Release contain predictions and other
forward-looking statements that involve a number of risks and uncertainties.
While this outlook represents our current judgment on a future direction of the
business, actual results may differ materially from any future action suggested
in this report. The accuracy of these statements cannot be guaranteed as they
are subject to a variety of risks including, but not limited to, future economic
conditions, new developments and other factors.
- End -
POC: Bruce Haun at B. Edward Haun & Co., Financial Communications, 303 595-4667
For Release at 6:30 a.m. Mountain Time, September 24, 1997
20
Exhibit 2.1a
ACQUISITION AGREEMENT
This Acquisition Agreement (the "Agreement") is dated September 22, 1997,
and is made by and among PlanGraphics, Inc., a Maryland corporation ("Company"),
DCX, Inc., a Colorado corporation ("DCX"), IXCD Sub, Inc. ("IXCD Sub"), a
Colorado corporation and wholly owned subsidiary of DCX, and John C. Antenucci
of Frankfort, Kentucky, a shareholder holding controlling shares in the Company
("Shareholder").
RECITALS
WHEREAS, the Boards of Directors of each of the Company and DCX believe it
is in the best interests of the respective companies and their shareholders to
enter into this Agreement; and
WHEREAS, the respective Boards of Directors anticipate that certain synergy
will result from the acquisition of the Company as a subsidiary of DCX, 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; and
WHEREAS, the parties entered into an Acquisition Agreement dated August 12,
1997, and the parties desire to update their agreement as reflected in this
Agreement, which shall supersede the Acquisition Agreement dated August 12,
1997;
THEREFORE, in consideration of the premises and the mutual covenants,
representations and warranties in this Agreement, the parties, intending to be
legally bound, adopt this Agreement which is intended to meet the requirements
of ss.368(a) of the Internal Revenue Code, and agree as follows:
1. MERGER
1.1 Agreement for Merger. Subject to the terms of this Agreement, DCX and
IXCD Sub shall effect a merger of IXCD Sub with and into the Company, and the
Company shall be the surviving corporation. The merger shall be effected in
compliance with the corporate laws of the respective states of incorporation of
the Company and IXCD Sub. The merger between the Company and IXCD Sub (the
"Merger") shall also be in accordance with an agreement and plan of merger
attached hereto as Schedule 1.1 (the "Merger Agreement"). The status of DCX as a
Colorado corporation shall not be affected, and DCX shall not be deemed a party
to the merger.
1.2 DCX Common Stock.. DCX shall make available to IXCD Sub a sufficient
number of shares of DCX no par value voting common stock ("DCX Common Stock") to
effect the merger pursuant to the terms of this Agreement and the Merger
Agreement in a private transaction exempt from registration under applicable
federal and state securities laws. Upon the consummation of the Merger, each
share of the Company's issued and outstanding shares of common stock (voting and
non-voting) will, by virtue of the Merger, be converted into 2.4476 shares of
DCX Common Stock, no par value ("Consideration Shares"). The Company's
shareholders will receive a maximum aggregate of 2,631,145 shares of DCX Common
Stock. The voting common stock of DCX will be the sole consideration paid to the
Company's shareholders in exchange for their shares of the Company. The ratio of
exchange of shares is based upon the price of $1.52 per share for DCX Common
Stock. The parties have determined that the fair market value of DCX Common
Stock received by the Company's shareholders is approximately equal to the fair
market value of the Company's stock surrendered by the shareholders.
1.3 Escrow. A certificate representing 125,000 of the Consideration Shares
issuable to the Shareholder (the "Escrow Shares") shall be delivered to American
Securities Trust and Transfer ("AST"), Denver, Colorado, or other third party
determined by DCX (the "Escrow Agent") on the Closing Date. The Escrow Agent
shall hold the Escrow Shares pursuant to the terms and conditions of an Escrow
Agreement between the Escrow Agent, DCX and the Shareholder in substantially the
form attached hereto as Schedule 1.3 (the "Escrow Agreement"). AST is the
transfer agent for DCX.
21
<PAGE>
1.4 No fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of DCX Common Stock shall be issued to holders of the
Company's stock. For administrative efficiency and simplicity, in the event the
number of shares issuable to a shareholder results in a fractional share, said
number shall be rounded up to the next higher whole number of shares. No cash
shall be paid for any fractional share.
1.5 Issuance and Delivery of DCX Common Stock. The issuance, delivery, and
exchange of shares pursuant to this Agreement and the Merger Agreement between
the Company and IXCD Sub shall take place at the Closing specified in Section 2
of this Agreement. The Company's Shareholders shall deliver the certificates
representing their shares, duly endorsed for transfer, together with a letter of
transmittal containing such representations as are customary for transactions of
this nature.
1.6 Exchange Agent. DCX shall appoint its stock transfer agent, or other
third party, to serve as the exchange agent (the "Exchange Agent"). The Exchange
Agent shall deliver to each holder of shares of the Company's Common Stock
converted into DCX Common Stock, upon surrender by such holder of one or more
certificates representing the Company's shares 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. Unless and until
an outstanding certificate is so surrendered, (i) no dividends or distributions
of any kind shall be payable to the holder of such an outstanding certificate,
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 with respect to the
shares of DCX Common Stock evidenced by such certificate.
1.7 Articles of Merger. The Company and IXCD Sub shall file any required
Articles of Merger, or other documents as may be required, with the Secretary of
State of Colorado and the Department of Assessments and Taxation of Maryland.
The Merger shall become effective upon such filing with the respective State
government departments.
2. CLOSING
Unless this Agreement is terminated as hereinafter provided, consummation
of the Merger (the "Closing") shall take place at the offices of PlanGraphics,
Inc., 112 Main Street, Frankfort, Kentucky 40601, at 10:00 AM, Eastern Daylight
Time, on September 19, 1997, or on such other date as the parties may mutually
agree in writing. The actual date and time of the Closing is herein called the
"Closing Date."
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholder hereby represents and warrants to DCX as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland, has all requisite power to own, lease and operate all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and in good standing in all
jurisdictions in which it owns or leases properties, or conducts any business so
as to require such qualification and in which the failure to be duly qualified
could have a material adverse effect upon the Company subsequent to the
exhaustion of all remedial actions, in excess of $25,000. The copies of the
Articles of Incorporation and the Bylaws of the Company, both as amended to
date, attached as Schedule 3.1, are true, complete and correct. The Company is
not an investment company as defined in Sections 368(a)(2)(F)(iii) and 368
(a)(2)(F)(iv) of the Internal Revenue Code.
22
<PAGE>
3.2 No Conflicts.
(a) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby by the Company, nor
compliance by the Company with any of the provisions hereof, will (i) violate or
conflict with, or result in a breach of any provision of or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any liens upon any of the assets of
the Company under, the Articles of Incorporation or Bylaws of the Company or,
except as provided on Schedules 3.2(a) and 3.12, any Contract (as defined in
Section 3.13(d)) to which the Company is a party or by which the Company or any
of its assets may be bound or affected, or (ii) violate any (A) order, writ,
injunction, decree or judgment of any court or governmental authority
(collectively, "Orders"), or (B) (except as set forth on Schedule 3.2 a" any
federal, state, local or foreign laws, statutes, rules, ordinances or
regulations (collectively, "Laws") applicable to the Company or any of the
properties or assets of the Company. Except as set forth on Schedules 3.2(a) and
3.12 hereto, no consent, approval or authorization of, notice to, registration
or filing with any person, entity or governmental authority is required to be
obtained, given or made by the Company in order to permit the Company to
execute, deliver and perform this Agreement or consummate any of the
transactions contemplated hereby.
(b) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby by the Shareholder, nor
compliance by the Shareholder with any of the provisions hereof, will (i) except
as set forth on Schedule 3.12, violate or conflict with, or result in a breach
of any provision of or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any liens upon any of the assets of the Company or the Shareholder
under any Contract to which the Shareholder is a party or by which the
Shareholder or any of his assets may be bound or affected, or (ii) violate any
Orders or Laws applicable to the Shareholder or any of the properties or assets
of the Shareholder. No consent, approval or authorization of, notice to,
registration or filing with any person, entity or governmental authority is
required to be obtained, given or made by the Shareholder in order to permit the
Shareholder to execute, deliver and perform this Agreement or consummate any of
the transactions contemplated hereby.
3.3 Subsidiaries and Certain Affiliates. Except as set forth on Schedule
3.3, the Company has no subsidiaries and no interest in any other corporation,
partnership, limited joint venture.
3.4 Authorized Capitalization. The authorized capitalization of the Company
is 1,100,000 shares of common stock, no par value (the "Company Common Stock").
A total of 1,075,000 Shares of Company Common Stock are issued, of which
1,014,825 are outstanding and 60,175 shares are held as treasury stock as of
September 19, 1997. All of such issued and outstanding Shares have been duly
authorized and validly issued and are fully paid and nonassessable.
3.5 Options, Warrants, Rights, Etc. Except as set forth on Schedule 3.5:
(a) the Company has no outstanding stock or securities convertible into or
exchangeable for, or any option, warrant or other right to subscribe for or to
purchase, or convert any obligation into, any unissued shares of the Company's
Common Stock, and has not agreed to issue securities so convertible or
exchangeable or any such option, warrant or other right; and (b) neither the
Shareholder nor the Company is a party to any voting trust or voting agreement,
stockholders' agreement, pledge agreement, buy-sell agreement or first refusal
or preemptive rights agreement relative to any securities of the Company.
3.6 Authority.
(a) Except as set forth on Schedule 3.6, the Shareholder hereby represents
and warrants as follows: (i) he is the lawful owner and the holder of record of
his respective Shares, free and clear of all liens; (ii) he has full authority
to execute and deliver this Agreement and to perform his obligations hereunder;
(iii) this Agreement constitutes a valid and binding obligation of such
Shareholder enforceable in accordance with its terms; and (iv) the Shareholder
has no legal obligation, absolute or contingent, to any other person or firm to
sell any of his Shares, to effect any merger, consolidation or other
reorganization of the Company or to enter into any agreement which would affect
the Shareholder's title or right to deliver the Shares owned by the Shareholder
on the Closing Date free and clear of all liens.
23
<PAGE>
(b) (i) The Company has the full corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder; (ii) the
execution, delivery and performance of this Agreement by the Company and the
consummation of transactions contemplated hereby have been duly authorized by
all requisite corporate action of the Company; (iii) this Agreement constitutes
a valid and binding obligation of the Company, enforceable in accordance with
its terms; and (iv) except as set forth on Schedule 3.6, the Company has no
legal obligation, absolute or contingent, to any other person or firm to sell
any of its assets or Company Common Stock, to effect any merger, consolidation
or other reorganization of the Company or to enter into any agreement which
would affect the Shareholders' title or right to deliver the Shares on the
Closing Date free and clear of all liens.
3.7 Financial Statements.
(a) The Company has delivered to DCX the unaudited balance sheets of the
Company as of December 31, 1994 and 1995 and as of September 30, 1996 and the
related unaudited statements of operations and statements of cash flows for the
years then ended and the comparable unaudited financial statements as of June
30, 1997 for the nine (9) months then ended (collectively, the "Financial
Statements"). The Financial Statements are attached as Schedule 3.7(a). The
Financial Statements, together with the notes thereto, were prepared based on
information included in the books and records of the Company and, except for
such matters as have been previously disclosed to DCX in writing which do not
materially adversely affect the financial position or results of operations of
the Company reflected in the Financial Statements, present fairly and truthfully
the financial position of the Company as of the respective dates indicated and
the results of operations and cash flows for the respective periods indicated
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis.
(b) The four (4) year "Financial Forecast," including the Pro Forma Income
Statement, Balance Sheet and Cash Flow Statement for the fiscal years ending
September 30, 1997, 1998, 1999 and 2000, submitted to DCX by the Company on or
before April 22, 1997, were prepared on a basis consistent with the Company's
current accounting principles and practices and with the Unaudited Financial
Statements. The Financial Forecast is attached as Schedule 3.7(b). All
projections of revenues and the related expenses are reasonable based upon past
results and reasonably anticipated growth in the GIS market, availability of
adequate capital, and successful execution of the acquisition strategy as
referenced in Schedule 3.7(b).
3.8 Absence of Undisclosed Liabilities and Obligations. Except as disclosed
in Schedule 3.8 to this Agreement, the Company does not have any debts,
liabilities or obligations (whether accrued, absolute, contingent, unliquidated
or otherwise and whether due or to become due) of a nature that exceed a total
of $25,000 and customarily reflected in a balance sheet prepared in accordance
with generally accepted accounting principles or disclosed in the notes thereto
other than those (a) reflected on the Financial Statements of the Company, (b)
which arose since such date of the Financial Statements in the lawful and
ordinary course of business or (c) fees and expenses of attorneys and
accountants incurred in connection with investigating and negotiating this
Agreement.
3.9 Absence of Certain Changes or Events. Except as set forth on Schedule
3.9 hereto, since April 30, 1997, the Company has conducted business in
compliance with all Laws material to the operation of its business and in the
ordinary course of business as theretofore conducted. Without limiting the
generality of the foregoing, except as disclosed in Schedules 3.9 hereto, since
April 30, 1997 there has not been any:
(a) material adverse change in the condition (financial or otherwise),
assets, liabilities, earnings, prospects or business of the Company;
24
<PAGE>
(b) (i) increase in the compensation payable or to become payable by
the Company to any directors, officers, employees or agents (collectively,
"Corporate Personnel") of the Company whose total compensation for services
rendered to the Company is currently at an annual rate of more than $10,000, or
(ii) bonus, incentive compensation, service award or other like benefit granted,
made or accrued, contingently or otherwise, to or to the credit of any of such
Corporate Personnel, or (iii) employee welfare, pension, retirement, profit
sharing or similar payments or arrangements made or agreed to by the Company for
the benefit of such Corporate Personnel, except pursuant to the existing
Employee Plans (as defined in Section 3.16);
(c) mortgage, pledge or subjection to liens of any of the assets of
the Company, except the lien for current real and personal property taxes
incurred but not yet due and payable;
(d) losses of or damages to the properties or assets of the Company by
fire or other casualty, whether or not covered by insurance, which singly or in
the aggregate materially affect the properties or business of the Company;
(e) waiver of any rights of substantial value of the Company whether
or not in the ordinary course of business;
(f) cancellation or termination by the Company of any Contract of an
annualized aggregate value exceeding $25,000.
(g) capital expenditure or the execution of any lease with respect to
any aspect of the business of the Company or any incurring of liability therefor
involving aggregate payments for any item in excess of $10,000;
(h) significant failure on the part of the Company to operate its
business in the ordinary course so as to preserve the business intact or to
preserve the good will of suppliers, customers and others having business
relations with the Company;
(i) unreasonable discharge of any of the Corporate Personnel;
(j) declaration, setting aside or payment of any dividend or
distribution (whether in cash, capital stock or property) with respect to any
shares of capital stock of the Company;
(k) repurchase of any Company Common Stock in any material amount; or
(1) other existing event or condition of any character which in any
one case or in the aggregate has materially and adversely affected, actually
known to the officers of the Company or which it would be reasonable to expect
will, in any one case or in the aggregate, materially and adversely affect in
the future, the condition (financial or otherwise), assets, liabilities,
earnings, prospects or business of the Company.
3.10 Accounts Receivable. The accounts receivable of the Company, billed
and unbilled, however designated on the Financial Statements, or thereafter
acquired by the Company prior to the Closing Date, reflect, or will reflect, to
the best of the Company's ability to determine, and its current knowledge of
valid and collectible contractual obligations of its customers; except as set
forth in Schedule 3.10.
3.11 Inventories. The inventories and work-in-process of the Company which
are reflected on the Financial Statements or thereafter acquired by it until the
Closing Date, consist of items of a quality and quantity usable by the Company
in the ordinary course of its business within one year after the Closing Date.
The values of obsolete inventory and inventory of below standard quality, if
any, have been written down to realizable market values or have been written
off, or adequate reserves therefor have been established, on the financial
statements. With the exception of goods acquired pursuant to commitments made
prior to June 30, 1997, any increase in the inventories of the Company
subsequent to such date was reasonable and warranted in the ordinary course of
business.
25
<PAGE>
3.12 Title to Properties, Absence of Liens and Encumbrances, Leases. The
Company owns no real property. Except as otherwise disclosed in Schedule 3.12 or
Schedule 3.13(h) the Company has good and marketable title to, or valid
leasehold interests in, all of its properties and assets, real, personal and
mixed, tangible and intangible (including those reflected on the financial
statements or acquired after June 30, 1997, except as since sold or otherwise
disposed of in the ordinary course of business), free and clear of all liens,
except for the lien for taxes not yet due and payable; (b) the Company has valid
and enforceable leases with respect to the premises leased by it in connection
with its operations, has in all material respects performed all obligations
required to be performed by it prior to the date hereof under said leases and
possesses and quietly enjoys said premises under said leases, and such premises
are not subject to any liens, easements, rights of way, building or use
restrictions, exceptions, reservations or limitations as to use which in any
material respect interfere with or impair the present continued use thereof in
the usual and ordinary conduct of the business of the Company; (c) all real or
personal property leases are valid and effective in accordance with their
respective terms and there is not, under any of such leases, any existing
default or event of default; and (d) there is no violation or default under any
such lease by any other person or party.
3.13 Documentation of Properties, Contracts and Personnel Data. The Company
makes reasonable effort to retain documentation and maintain control over assets
and information material to the operation of the Company as set forth below:
(a) all United States and foreign patents, service marks, trademarks, trade
names, copyrights and franchises, unexpired as of the date hereof, all United
States and foreign applications pending for patents, trademarks, service marks,
trade name registrations, copyright registrations or franchises, and all other
trademarks, service marks, trade names, labels and other trade rights, all of
the foregoing being owned in whole or in part as noted thereon by the Company;
(ii) all licenses granted by or to the Company and all other agreements to which
the Company is a party which relate in whole or in part to any items of the
categories mentioned in clause (i) above, or to intellectual property,
inventions, discoveries, improvements, processes, formulae, proprietary rights,
trade secrets, ideas or other know-how, whether owned by the Company or
otherwise (all properties referred to in this subparagraph shall hereinafter be
referred to as the "Intellectual Property");
(b) listing, including serial numbers, of all aircraft, automobiles, trucks
and other vehicles owned or leased by the Company;
(c) all policies of insurance of any kind including, but not limited to,
third party insurance, retention insurance and self-insurance, in force with
respect to the Company, including, without restricting the generality of the
foregoing, those covering properties, buildings, aircraft, machinery, equipment,
vehicles, furniture, fixtures, operations, products sold or services rendered by
the Company, and lives and health of, or performance of their duties by
Corporate Personnel, including the policy numbers, names and addresses of
insurers, expiration dates, descriptions and amounts of coverage and annual
premiums;
(d) all contracts, leases, agreements, covenants, licenses, notes, bonds,
mortgages, indentures, instruments or commitments, written or oral, of the
Company (collectively, "Contracts") calling for the payment of $10,000 or more
or which are otherwise material to the business of the Company, including,
without limiting the generality of the foregoing: (i) executor contracts for the
rendering of services or sale of products; (ii) executory contracts for the
purchase, sale or lease of any raw materials, parts, assemblies, supplies, fixed
assets or real property; (iii) management or consulting contracts; (iv)
contracts with any distributor, dealer or sales representative; (v) note
agreements, loan agreements, indentures and the like; (vi) instruments
evidencing liens or secured transactions; (vii) contracts or agreements
prohibiting the Company from freely engaging in its business as now conducted or
proposed to be conducted or from competing anywhere in the world; and (viii)
contracts not in the ordinary course of business;
Except as set forth on Schedule 3.13, all of the Contracts are in full
force and effect and are valid and enforceable in accordance with their
respective terms for the periods stated therein, and neither the Company nor any
other party thereto is in default in performance of any of their respective
obligations thereunder, and there is no event which with the giving of notice or
lapse of time, or both, would constitute a default or event of default on the
part of a party to any of the Contracts that has occurred and is continuing
unremedied and unwaived.
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(e) the names and current annual rate of compensation of all Corporate
Personnel, together with a summary (containing estimates to the extent
necessary) of existing bonuses, additional compensation (whether current or
deferred) and other fringe or additional benefits, if any, paid to such persons
in the fiscal year ended September 30, 1996 and accrued and payable subsequent
to said date;
(f) the names of all retired employees, if any, of the Company, who are
receiving or are entitled to receive any payments not covered by any pension
plan of the Company, their ages and their current annual funded and unfunded
pension benefits;
(g) the names of all persons holding powers of attorney from the Company to
act on its behalf in connection with the importation of goods and materials or
in connection with any other matters;
(h) all liens on assets of the Company;
(i) the name of each agent, if any, of the Company who has been paid a
commission in connection with the business of the Company since January 1, 1994,
indicating the amount of such commission and the territory or customers,
whichever is appropriate, to which the said commissions relate;
(j) the name of each bank in which the Company has an account or safe
deposit box (with the identifying account number or symbol) and the names of all
persons authorized to draw thereon or to have access thereto;
(k) all Permits (as defined in Section 3.19);
(1) all documents, instruments and oral or written agreements not listed in
any other Schedule hereto or previously delivered by the Shareholder to DCX or
made available to DCX during its due diligence pursuant to this Agreement which
are material to the business operations of the Company.
3.14 Patents, Trademarks, Copyrights. Etc. Except as set forth on Schedule
3.14, the Company owns, free and clear of any liens, all right, title and
interest in and to the Intellectual Property. Other than as disclosed in
Schedule 3.14, no person has a right to receive a royalty with respect to any of
the Intellectual Property. Other than as disclosed in Schedule 3.14, no
intellectual property other than the Intellectual Property listed on Schedule
3.14 is required to permit the conduct of business of the Company as now
conducted (or as proposed to be conducted by DCX) without conflict with the
rights of others. All of the Intellectual Property is valid and in full force
and effect, and the Company is not infringing upon, or otherwise violating the
rights of, any third parties with respect to any of the Intellectual Property.
Except as provided in Schedule 3.14, there is no infringement or other adverse
claim against the rights of the Company with respect to any of the Intellectual
Property.
3.15 Insurance. All policies of insurance (or renewals thereof) are
outstanding and in force on the date hereof. Such policies insure against such
losses and risks and are adequate in accordance with customary industry practice
to protect the properties and business of the Company. There are no outstanding
requirements by any insurance company that issued any such policy or by any
Board of Fire Underwriters or other similar body or governmental authority
exercising similar functions which requires any changes in the conduct of the
Company's business or any repairs or other work to be done on or with respect to
any of the Company's properties or assets. The Company has not received notice
from any insurer or agent of such insurer of cancellation of any insurance
policy, nor has any insurer previously canceled any insurance policy of the
Company. There are no claims, actions, suits or proceedings arising out of or
based upon any of such policies and there exists no basis for any such claim,
action, suit or proceeding.
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3.16 Employee Plans.
(a) Employee Plan. The term "Employee Plan(s)" includes all present and
prior (including terminated and transferred) plans, programs, agreements,
arrangements and methods of contribution or compensation (including all
amendments to and components of the same, such as a trust with respect to a
plan) providing any remuneration or benefits, other than current cash
compensation, to any current or former Corporate Personnel. The term "Employee
Plan" includes but is not limited to, pension, retirement, profit sharing,
bonus, non-qualified deferred compensation, welfare, disability, medical,
hospitalization, dental, workers' compensation, health insurance, life
insurance, severance and incentive plans, vacation benefits and fringe benefits.
(b) Pension Plan. The term "Pension Plan" includes all Employee Plans which
provide for the deferral of the receipt of remuneration or benefits.
(c) Plans Listed. The Company does not maintain, contribute to or
participate in any Employee Plans other than those listed on Schedule 3.16.
There are and have been no funded Employee Plans other than those so designated
on Schedule 3.16.
(d) Operations of Employee Plans in General.
(i) Operations in Accordance With Law and Plan Documents. Except
as set forth in Schedule 3.16, all Employee Plans are now, and have always been
established, maintained and operated in accordance with all applicable Laws
including, but not limited to, the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as amended
(the "Code")) and the applicable plan documents.
(ii) Funded Plans. Except as set forth in Schedule 3.16, each
funded Pension Plan is and always has been qualified under Section 401 of the
Code, and each trust maintained in connection with each such Plan is and always
has been tax exempt under Section 501 of the Code. The Internal Revenue Service
("IRS") has issued one or more determination letters with respect to each funded
Pension Plan stating that, from the inception of each such Plan, such Plan has
been and is qualified under Section 401 of the Code. There are no funded
Employee Plans that are not Pension Plans.
(iii) Taxes and Penalties. Except as may arise from circumstances
described in Schedule 3.16 and except with respect to income taxes on benefits
paid or provided, no income, excise or other tax or penalty (federal or state)
has been waived or excused, has been paid or is owed by any person (including,
but not limited to, any Employee Plan, any plan fiduciary or the Company) with
respect to the operations of, or any transactions with respect to, any Employee
Plan. Except as set forth on Schedule 3.16, no action has been taken, nor has
there been any failure to take any action, nor is any action or failure to take
action contemplated, that would subject any person or entity to any liability
for any tax or penalty in connection with any Employee Plan (including, but not
limited to, any tax or penalty for the failure to withhold income taxes in
connection with fringe benefits). No reserve for any taxes or penalties has been
established with respect to any Employee Plan, nor has any advice been given to
any person with respect to the need to establish such a reserve.
(iv) Government Filings. All reports, forms and other documents
required to be filed, or advisable to be filed, with any government entity with
respect to any Employee Plan have been timely filed and are accurate.
(v) PBGC. There have been no filings with respect to any Employee
Plan with the Pension Benefit Guaranty Corporation ("PBGC"). No liability to the
PBGC has been incurred or is expected with respect to any Employee Plan. There
has been no event or condition, nor is any event or condition expected, other
than the transaction contemplated by this Agreement or described in Schedule
3.16, that would present a risk of termination of any Employee Plan, or which
would constitute a "reportable event" (within the meaning of Section 4043 of
ERISA).
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(vi) Multiple Employer Plan. The Company does not and has not
participated in any Employee Plan maintained by or subscribed to by any employer
that is not an Affiliate of the Company.
(vii) No Liability. Except as described in Schedule 3.16, no
Employee Plan or any other person has or has had any liability to any plan
participant, beneficiary or any other person under any provision of ERISA or any
other applicable law by reason of any action or failure to act in connection
with any Employee Plan.
(e) COBRA Notices The Company has provided the notices required by Section
4980B of the Code, and any predecessor to that Section, to all persons entitled
thereto in a timely manner.
(f) No Retiree Welfare Plan. Other than the Company Pension Plan, the
Company does not have and never has had any Employee Plan, other than a Section
401(K) Plan, that provides benefits to terminated employees or their dependents.
(g) Employee Plan Documents. Copies of all current and prior material
documents, including all amendments thereto, with respect to each Employee Plan
have been given to DCX. These documents include, but are not limited to, the
following: plan documents, trust agreements, insurance contracts, annuity
contracts, fidelity bonds and fiduciary liability policies and applications
therefor, summary plan descriptions, filings with, applications to and
correspondence with any government entity, disputed claims made by or against
any Employee Plan, investment manager and investment advisory contracts,
evaluations of investment performance, administration contracts, actuarial
reports, audit reports, financial statements, agreements concerning plan mergers
or transfers, determination letters and private letter rulings from the IRS,
advisory opinion letters from the Department of Labor or the PBGC, prohibited
transaction exemptions, resolutions of the Board of Directors of the Company,
minutes or other records of the meetings of any plan committee, reports of
trustees and appraisals of assets.
(h) Finances.
(i) Funding. Except as provided on Schedule 3.16, each Employee
Plan is fully accrued and will remain fully accrued as of the Closing Date.
(ii) Current Contributions, Etc. All contributions payable to
each Employee Plan for benefits earned and other liabilities accrued through the
Closing Date will have been completely and timely accrued on or before the
Closing Date. The amount of such contributions has been determined in accordance
with the terms and conditions of each Employee Plan and is sufficient to fully
provide for all benefits earned and other liabilities accrued under each such
Plan through the Closing Date.
(iii) Funding Standard Account. A funding standard account has
been maintained for each Pension Plan if and to the extent required by ERISA and
the Code. There has not been and is not now, nor is there expected to be, any
deficiency in any funding standard account for any such Plan. No waiver from the
minimum funding standard requirements of ERISA or the Code has been obtained or
applied for or is contemplated with respect to any Pension Plan.
(iv) Prohibited Transaction. There has been no prohibited
transaction (within the meanings of Section 406 of ERISA and Section 4975 of the
Code) with respect to any Employee Plan.
3.17 Litigation. (a) there is no (i) litigation, administrative action,
proceeding, claim, action, labor dispute, arbitral action or governmental
investigation (collectively, "Litigation") pending or threatened in writing
against the Company with respect to the business of, or otherwise relating to,
the Company or its assets or the transactions contemplated by this Agreement, or
Corporate Personnel in reference to actions taken by them in their corporate
capacities nor (ii) any facts known to the Company that may give rise to
Litigation which, if adversely determined, could, in any one case or in the
aggregate, have a material adverse effect on the business of the Company or the
assets of the Company; and (b) there are no Orders of any court or governmental
department or agency binding upon or affecting the Company.
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3.18 Tax Matters. Except as set forth on Schedule 3.18: (a) the Company has
properly prepared and filed with the appropriate United States and state
governmental agencies all tax returns for the periods ended on or before
September 30, 1996; (b) the Company has properly prepared and filed with the
appropriate foreign, county and local governmental agencies all tax returns for
the periods ended on or before the date hereof, and at the Closing Date shall
have properly prepared and filed with all such agencies all tax returns for the
periods ended on or before the Closing Date; (c) the Company has paid all taxes
shown to be due on the tax returns referred to in clauses (a) and (b) and on all
assessments received by the Company to the extent that such assessments have
become due, and has withheld and paid to the appropriate governmental agency
when due all taxes it is required to withhold from any amounts owing to any
Corporate Personnel of the Company, creditor or third party; (d) with respect to
periods after April 30, 1997, the Company has properly prepared and timely filed
applications for extensions of the due dates for all federal and state tax
returns which otherwise would have been due, and has fully paid or reserved for
all taxes due for all periods up to and including the date hereof, and at the
Closing Date shall have fully paid or reserved for all taxes due and payable as
of the Closing Date; (e) the Company's tax position has not been materially
prejudiced by the Company's failure to timely file any tax return or application
for extension; (f) the Company has not executed or filed with the IRS or any
other taxing authority any agreement which is now effective, extending the
period for assessment or collection of any taxes; (g) no tax liens have been
asserted, or have been threatened to be asserted, against any of the Company's
assets, except for liens for current taxes not yet due; (h) any potential
assessments of any additional taxes, or other adjustments for periods for which
returns have been filed will not exceed the recorded liability therefor by more
than $25,000; (i) there is no audit of the Company's tax returns currently in
process by any governmental authority, and there are no material unresolved
questions or claims concerning the Company's tax liability; (j) the Company is
not a party to any pending Litigation by any governmental authority for
assessment or collection of taxes, and no claim for assessment or collection of
taxes asserted against the Company is pending; (k) use of the Company's net
operating loss carry forwards reflected in the footnotes to the Unaudited
Financial Statements is not restricted by Section 382 of the Code other than as
a result of the exchange contemplated by this Agreement; and (1) the Company has
not filed a consent under Section 341(f) of the Code.
3.19 Permits. The Company and its Corporate Personnel hold all
certificates, permits, licenses, registrations, consents, authorizations,
approvals, privileges, waivers, exemptions and orders (collectively, "Permits")
including, without limitation, all Permits from any federal, state or local
authority, as well as all environmental, public health or safety Permits,
necessary to permit it to own its properties and to conduct its business
pursuant to all Laws. There is no material violation of any Permit, all of the
Permits are current, valid and in full force and effect, and no action or claim
is pending to suspend, revoke or terminate any Permit or to render any Permit
invalid in any material respect.
3.20 Machinery and Equipment. All of the machinery, equipment and personal
property of the Company, is in good repair and safe operating condition and is
adequate to conduct the business of the Company as presently being conducted.
3.21 Compliance with Laws. (a) there is no material noncompliance by the
Company with any Laws or Orders, and the Company has not received notice from
any enforcement authority of any violation of any Laws or of any investigation
of any alleged violation; and (b) the Company's property, including its
facilities, aircraft, machinery and equipment, conforms with applicable Laws
including, without limitation, zoning laws and building codes. The Company is
not under the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Internal Revenue Code.
3.22 Employees and Labor. Except as disclosed on Schedule 3.22, (a) the
Company is not a party to any employment agreement, collective bargaining
agreement or similar labor agreement, nor has it ever experienced any attempt to
organize any of the Company's employees into any collective bargaining unit; (b)
there are no strikes, work stoppages or other labor disputes pending or
threatened between the Company and any of its employees except for individual,
routine grievances; (c) the Company has not received any notice and has no
reason to believe that any executive or key employee of the Company, or any
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group of employees of the Company, has any plans to terminate his, her or its
employment with the Company; (d) the Company has no reason to believe that any
executive or key employee is subject to any agreement, obligation or other legal
hindrance that. impedes or might impede such executive or key employee from
devoting his or her full business time to the affairs of the Company; (e) the
Company has complied in all material respects with all Laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes; and (f) the Company is not indebted to any of its Corporate
Personnel, whether by loan, advance or otherwise, other than for accrued
salaries and out-of-pocket expenses incurred in the ordinary course of business,
nor is any of such Corporate Personnel indebted to the Company.
3.23 Environmental Matters.
(a) "Environmental Law" shall mean any federal, state or local statute,
ordinance, rule or regulation, any judicial or administrative order, judgment,
request or directive, any common law doctrine or theory and any provision or
condition of any Permit, license or other operating authorization, primarily
relating to (i) protecting the environment, including without limitation
protection of the environment, persons or the public welfare from actual or
potential exposure (or the effects of exposure) to any actual or potential
release, discharge or emission (whether past or present) of, or regarding the
manufacture, processing, importation, use, transportation, generation,
treatment, storage, disposal, transportation or handling of, any chemical, raw
material, pollutant, contaminant or toxic, hazardous or radioactive substance;
(ii) occupational or public health or safety; or (iii) land use.
(b) There is no material noncompliance by the Company with any
Environmental Laws or any necessary Permits, licenses or other authorizations,
and the present condition of the Company or the real property described in
Schedule 3.23 attached hereto which is currently leased by the Company (the
"Company Leased Property"), or the Company's present or past activities or
manner of operating the Company or the Company Leased Property (including
disposing or arranging for the disposal of waste materials), does not give rise
to any liability to any person, contingent or otherwise, under any Environmental
Law.
(c) The Company is not aware of any pending or proposed Environmental Laws
or amendments to Environmental Laws which would require any material change in
any of the Company's facilities, equipment, operation or procedures, or
materially affect the Company's business or its costs of conducting its business
as now conducted.
3.24 No Brokers. Other than Quarterdeck Investment Partners, Inc. ("QIP"),
neither the Company nor the Shareholder has entered into any agreement,
arrangement or understanding with any person or firm which will result in an
obligation of any of the parties to this Agreement to pay any finder's fee,
brokerage commission or similar payment for all such parties in connection with
the transactions contemplated hereby.
3.25 Transactions with Certain Persons. Except as set forth on Schedules
3.22 and 3.25, none of the Corporate officers nor the Shareholder or their
affiliates is a party to any transaction with the Company, including, without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for the rental of real or personal
property from or (iii) otherwise requiring payments to (other than for service
as an officer, director, or employee) any such person or to any corporation,
partnership, trust or other entity in which any such person has, directly or
indirectly, an interest as an officer, director, trustee, shareholder or
partner. There is no property, tangible or intangible, real or personal, valued
in the aggregate in excess of $10,000 which is (A) owned by the Shareholders or
any of their Affiliates, any current or former officer, director or shareholder
of the Company, or persons not dealing with any of them at arm's length, and (B)
which is presently used by the Company in connection with its business.
3.26 Suppliers and Customers. With respect to individual suppliers and
customers who either provided in excess of $10,000 worth of services or supplies
to Company or accounted for more than ten percent (10%) of the Company's net
sales during the three most recent fiscal years, the financial impact of all
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such transactions is reflected in the unaudited company Financial Statements for
the fiscal years ending December 31, 1994; December 31, 1995; September 30,
1996; and the partial fiscal year ending June 30, 1997. The relationships of the
Company with its suppliers and customers are good commercial working
relationships, and, except as noted in Schedule 3.26(b), no supplier or customer
has canceled or otherwise terminated, or threatened to cancel or otherwise
terminate, its relationship with the Company, or threatened to decrease or limit
materially its materials supplied to, or services purchased from the Company
since January 1, 1994.
3.27 Books and Records. All books of account, minute books, stock
certificate books, stock transfer ledgers and other corporate records of, and
records maintained pursuant to the requirements of governmental authorities by,
the Company are complete and correctly and accurately present and reflect in all
material respects all the transactions entered into by the Company or to which
the Company is a party or any other matter which should be set forth in such
books and records.
3.28 Certain Payments. Neither the Company, nor any Corporate Personnel or
other person associated with or acting on behalf of the Company has, directly or
indirectly; (a) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
made any unlawful payments from corporate funds to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns; (c) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; (d) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (e) made any bribe, payoff,
influence payment, kickback or other unlawful payment; (f) used any corporate
funds to give any substantial favor or gift which is not deductible for federal
income tax purposes; or (g) made any bribe, kickback or other payment of a
similar or comparable nature, whether lawful or not, to any person or entity,
private or public, regardless of form, whether in money, property or services,
to obtain special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
3.29 Adequacy of the Company's Assets. The assets owned or leased by the
Company as of the Closing date shall be sufficient for DCX to continue to
operate the Company in the manner heretofore conducted, and the Shareholder has
no knowledge of any facts which can reasonably be expected to give rise to any
impediment to such operation of the Company except for working capital needs and
such other matters as may arise from general economic conditions or conditions
affecting the Company's industry generally.
3.30 Consideration Shares Unregistered.
(a) The Shareholder hereby represents and warrants, and all other
shareholders who exchange their shares in the merger will represent and warrant
to DCX, that the shareholder is acquiring his or her respective Consideration
Shares for his or her own account for the purpose of investment and not with a
view to any distribution or sale of such Consideration Shares except insofar as
such Shares are included in a public offering registered pursuant to the
Securities Act of 1933, as amended (the " 1933 Act"), or the disposition thereof
is exempt from such registration; and the Company represents and warrants that
each shareholder will be specifically notified that his or her Consideration
Shares have not been registered under the 1933 Act or any state securities law
and that such Consideration Shares are being offered and sold to such
shareholder pursuant to exemptions from the registration requirements of such
laws.
(b) The number of shareholders of the Company and the manner of
communication with its shareholders will comply with the requirements of Rule
505 of Regulation D under the 1933 Act. The Company will comply with the
securities laws of the states in which its shareholders reside.
3.31 Disclosure. No representation or warranty made by the Shareholder as
to the Company or the Shareholder in this Agreement, nor any information
contained in the Schedules hereto or in any certificate or instrument delivered
by or on behalf of the Company or the Shareholder at the Closing pursuant to
this Agreement or in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading. All such representations and warranties and information are true,
correct and complete in all material respects.
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3.32. Ownership of Assets. Upon completion of the merger between the
Company and IXCD Sub, the Company will own at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the gross assets
it held immediately before the merger. For purposes of this representation,
amounts paid by the Company to dissenting shareholders and amount used by the
Company to pay merger expenses will be included as assets of the Company
immediately prior to the transaction.
3.33. No Disposal of Shares. To the best of the knowledge of the
Shareholder, there is no plan or intention by the shareholders of the Company
who own one percent or more of the Company's stock, and there is no plan or
intention on the part of the remaining shareholders of the Company, to sell,
exchange, or otherwise dispose of a number of shares of DCX received in the
transaction that would reduce the Company's shareholder's ownership of DCX stock
to a number of shares having a value, as of the date of the transaction, of less
than 50 percent of the value of all of the formerly outstanding Company stock as
of the same date. Shares of the Company's stock surrendered by dissenters will
be treated as outstanding Company stock on the date of the merger. Moreover,
shares of Company stock and shares of DCX stock held by the Company's
shareholders and otherwise sold or disposed of prior or subsequent to the merger
will be considered.
3.34. No Additional Shares. The Company has no plan or intention to issue
additional shares of its stock.
3.35 Continuation of Business. From the date of this Agreement, and after
the merger with IXCD Sub, the Company will continue its historic business or use
a significant portion of its historic business assets in a business.
3.36 No Inter-company Debt. There is no inter-company indebtedness existing
between DCX and the Company or between IXCD Sub and the Company that was issued,
acquired, or will be settled at a discount.
4. REPRESENTATIONS AND WARRANTIES OF DCX.
DCX hereby represents and warrants to the Company as follows:
4.1 Organization, Good Standing and Qualification. DCX is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado, has all requisite power to own, lease and operate all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly qualified to do business and in good standing in all jurisdictions
in which it owns or leases properties, or conducts any business so as to require
such qualification and in which the failure to be duly qualified could have a
material adverse effect upon DCX. The copies of the Certificate of Incorporation
and the Bylaws of DCX which have been delivered to the Company prior to the date
hereof are true, complete and correct. DCX and IXCD Sub are not an investment
company as defined in Sections 368(a)(2)(F)(iii) and 368 (a)(2)(F)(iv) of the
Internal Revenue Code.
4.2 No Conflicts. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby by DCX, nor compliance
by DCX with any of the provisions hereof, will (a) violate or conflict with, or
result in a breach of any provision of or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in the creation of any liens upon any of the assets of DCX under, the
Certificate of Incorporation or Bylaws of DCX or any Contract to which DCX is a
party or by which DCX or any of its assets may be bound or affected, or (b)
violate any Order or any Laws applicable to DCX or any of the properties or
assets of DCX. No consent, approval or authorization of, notice to, registration
or filing with any person, entity or governmental authority is required to be
obtained, given or made by DCX in order to permit DCX to execute, deliver and
perform this Agreement or consummate any of the transactions contemplated
hereby, except as may be required under Federal and State Securities Laws.
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4.3 Subsidiaries and Certain Affiliates. DCX has no subsidiaries and no
interest in any other corporation, partnership, limited partnership or joint
venture except as otherwise publicly disclosed.
4.4 Authorized Capitalization. The authorized capitalization of DCX is
2,000,000,000 shares of DCX Common Stock, of which 4,924,570 shares are issued
and outstanding, and 20,000,000 shares of Preferred Stock, of which 1,650 shares
of Series A preferred stock in the principal amount of $1,650,000 are issued and
outstanding. All of such issued and outstanding shares of DCX Common Stock have
been duly authorized and validly issued and are fully paid and non assessable.
The Consideration Shares, when issued upon conversion of the Shares as
contemplated by this Agreement, will have been duly authorized, validly issued,
fully paid and non assessable.
4.5 Options, Warrants, Rights, Etc. Except as disclosed in Schedule 4.5,
DCX has no outstanding stock or securities convertible into or exchangeable for,
or any option, warrant or other right to subscribe for or to purchase, or
convert any obligation into, any unissued shares of DCX Common Stock, and has
not agreed to issue securities so convertible or exchangeable or any such
option, warrant or other right, and is not a party to any voting trust or voting
agreement, stockholders' agreement, pledge agreement, buy-sell agreement or
first refusal or preemptive rights agreement relative to any securities of DCX
except as described in DCX's Annual Report on Form 10-KSB for the year ended
September 30, 1996 (the " 10-KSB").
4.6 Corporate Authority. (a) DCX has the full corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder;
(b) the execution, delivery and performance of this Agreement by DCX and the
consummation of transactions contemplated hereby have been duly authorized by
all requisite corporate action of DCX; and (c) this Agreement constitutes a
valid and binding obligation of DCX, enforceable in accordance with its terms.
4.7 Financial Statements. The audited financial statements of DCX contained
in the 10-KSB, and the unaudited financial statements contained in its Quarterly
Report on Form 10-QSB for the quarter and nine months ended June 30, 1997 (the
"10-QSB") (collectively, the "DCX Financial Statements"), together with the
notes thereto, were prepared based on information included in the books and
records of DCX and present fairly and truthfully the financial position of DCX
as of the respective dates indicated and the results of operations and cash
flows for the respective periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis.
4.8 Absence of Undisclosed Liabilities and Obligations. DCX does not have
any debts, liabilities or obligations (whether accrued, absolute, contingent,
unliquidated or otherwise and whether due or to become due) of a nature
customarily reflected in a balance sheet prepared in accordance with generally
accepted accounting principles or disclosed in the notes thereto other than
those (a) reflected on the June 30, 1997 balance sheet included in the 10-QSB,
(b) which arose since such date in the lawful and ordinary course of business or
(c) fees and expenses of attorneys, accountants and consultants incurred in
connection with investigating and negotiating the Letter of Intent and this
Agreement.
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
4.9 hereto, and except as necessary to satisfy the requirements of this
Agreement, since June 30, 1997, DCX has conducted its business in compliance
with all Laws material to the operation of its business and in the ordinary
course of business as theretofore conducted. Without limiting the generality of
the foregoing, except as disclosed in Schedule 4.9 or the certificate delivered
pursuant to Section 7.2(c), since June 30, 1997 there has not been any:
(a) material adverse change in the condition (financial or otherwise),
assets, liabilities, prospects or business of DCX;
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(b) (i) increase in the compensation payable or to become payable by DCX to
any Corporate Personnel of DCX whose total compensation for services rendered to
DCX is currently at an annual rate of more than $30,000, except for salary
increases to become effective for all DCX officers following the Closing, or
(ii) bonus, incentive compensation, service award or other like benefit granted,
made or accrued, contingently or otherwise, to or for the credit of any of such
Corporate Personnel, or (iii) employee welfare, pension, retirement, profit
sharing or similar payments or arrangements made or agreed to by DCX for the
benefit of such Corporate Personnel, except pursuant to the plans and other
compensation arrangements described in the 10-KSB;
(c) mortgage, pledge or subjection to liens of any of the assets of DCX,
except the lien for current real and personal property taxes incurred but not
yet due and payable;
(d) losses of or damages to the properties or assets of DCX by fire or
other casualty, whether or not covered by insurance, which singly or in the
aggregate materially affect the properties or business of DCX;
(e) waiver of any rights of substantial value of DCX whether or not in the
ordinary course of business;
(f) cancellation or termination by DCX of any Contract;
(g) capital expenditure or the execution of any lease with respect to any
aspect of the business of DCX or any incurring of liability therefor involving
aggregate payments for any item in excess of $10,000;
(h) significant failure on the part of DCX to operate its business in the
ordinary course so as to preserve the business intact or to preserve the good
will of suppliers, customers and others having business relations with DCX;
(i) unreasonable discharge of any of the Corporate Personnel;
(j) declaration, setting aside or payment of any dividend or distribution
(whether in cash, capital stock or property) with respect to any shares of
capital stock of DCX;
(k) repurchase of any DCX Common Stock; or
(1) other event or condition of any character which in any one case or in
the aggregate has materially and adversely affected, or any event or condition
actually known to the officers of DCX which it would be reasonable to expect
will, in the aggregate, materially and adversely affect in the future, the
condition (financial or otherwise) assets, liabilities, prospects or business of
DCX.
4.10 Title to Properties, Absence of Liens and Encumbrances; Leases. Except
as otherwise disclosed in Schedule 4.10 (a), DCX has good and marketable title
to, or valid leasehold interests in, all of its properties and assets, real,
personal and mixed, tangible and intangible (including those reflected on the
balance sheet included in the 10-QSB or acquired after June 30, 1997, except as
since sold or otherwise disposed of in the ordinary course of business), free
and clear of all liens, except for the lien for taxes not yet due and payable;
(b) DCX has valid and enforceable leases with respect to the premises leased by
it in connection with its operations, has in all material respects performed all
obligations required to be performed by it prior to the date hereof under said
leases and possesses and quietly enjoys said premises under said leases, and
such premises are not subject to any liens, easements, rights of way, building
or use restrictions, exceptions, reservations or limitations as to use which in
any material respect interfere with or impair the present continued use thereof
in the usual and ordinary conduct of the business of DCX; (c) all real or
personal property leases are valid and effective in accordance with their
respective terms and there is not, under any of such leases, any existing
default or event of default or event which, with notice or lapse of time, or
both, would constitute a default which has been noticed to DCX or of which DCX
is aware; and (d) DCX knows of no violation or default under any such lease by
any other person or party.
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4.11 Contracts. Schedule 4.11 contains a true and complete list of all
Contracts calling for payment of $25,000 or more or which are otherwise material
to the business of DCX. Except as set forth on Schedule 4.11, all of such
Contracts are in full force and effect and are valid and enforceable in
accordance with their respective terms for the periods stated therein, and
neither DCX nor any other party thereto is in default in performance of any of
their respective obligations thereunder, and DCX is not aware of any event which
with the giving of notice or lapse of time, or both, would constitute a default
or event of default on the part of a party to any of such Contracts that has
occurred and is continuing unremedied and unwaived.
4.12 Insurance. Schedule 4.12 contains a true, correct and complete list of
all policies of insurance of any kind including, but not limited to, third party
insurance, retention insurance and self-insurance, in force with respect to DCX,
including, without restricting the generality of the foregoing, those covering
properties, buildings, machinery, equipment, vehicles, furniture, fixtures,
operations, products sold or services rendered by DCX, and lives and health of,
or performance of their duties by Corporate Personnel, including the amounts of
coverage. All policies of insurance (or renewals thereof) as set forth in
Schedule 4.12 are outstanding and in force on the date hereof. Such policies are
in the amounts shown in Schedule 4.12 and insure against such losses and risks
as are adequate in accordance with customary industry practice to protect the
properties and business of DCX. There are no outstanding requirements by any
insurance company that issued any such policy or by any Board of Fire
Underwriters or other similar body or governmental authority exercising similar
functions which requires any changes in the conduct of DCX's business or any
repairs or other work to be done on or with respect to any of DCX's properties
or assets. DCX has not received notice from any insurer or agent of such insurer
of cancellation of any insurance policy, nor has any insurer previously canceled
any insurance policy of the Company. There are no claims, actions, suits or
proceedings arising out of or based upon any of such policies and, so far as is
known to DCX, there exists no basis for any such claim, action, suit or
proceeding.
4.13 Employee Plans.
(a) Plans Listed. DCX does not maintain, contribute to or participate in
any Employee Plans other than those listed on Schedule 4.13. DCX has no Pension
Plans or funded Employee Plans.
(b) Operations of Employee Plans. All DCX Employee Plans are established,
maintained and operated in accordance with all applicable Laws (including, but
not limited to, ERISA and the Code) and the applicable plan documents.
4.14 Litigation. Except as disclosed in Schedule 4.14 hereto, (a) there is
no Litigation pending or threatened in writing against DCX with respect to the
business of, or otherwise relating to, DCX or its assets or the transactions
contemplated by this Agreement, or DCX Corporate Personnel in reference to
actions taken by them in their corporate capacities nor (ii) any facts known to
DCX that may give rise to Litigation which, if adversely determined, could, in
any one case or in the aggregate, have a material adverse effect on the business
of DCX or the assets of DCX; and (b) there are no Orders of any court or
governmental department or agency binding upon or affecting DCX.
4.15 Tax Matters. DCX has properly prepared and timely filed with the
appropriate United States, foreign, state, county and local governmental
agencies all tax returns for the periods ended on or before June 30, 1997. DCX
has paid, on or prior to the due date thereof (including extensions of such due
dates), all taxes shown to be due on such tax returns and on all assessments
received by DCX to the extent that such assessments have become due, and has
withheld and paid to the appropriate governmental agency when due all taxes it
is required to withhold from any amounts owing to any Corporate Personnel of
DCX, creditor or third party. With respect to periods after June 30, 1997, DCX
has properly prepared and timely filed applications for extensions of the due
dates for all returns which otherwise would have been due, and has fully paid or
reserved for all taxes due for all periods up to and including the date hereof,
and at the Closing Date shall have fully paid or reserved for all taxes due and
payable as of the Closing Date. DCX has not executed or filed with the IRS or
any other taxing authority any agreement which is now effective extending the
period for assessment or collection of any taxes. No tax liens have been
asserted, or have been threatened to be asserted, against any of DCX's assets,
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except for liens for current taxes not yet due. Any potential assessments of any
additional taxes or other adjustments for periods for which returns have been
filed will not exceed the recorded liability therefor. No audit of DCX's tax
returns is currently in process by any governmental authority, and there are no
material unresolved questions or claims concerning DCX's tax liability. DCX is
not a party to any pending Litigation by any governmental authority for
assessment or collection of taxes, and no claim for assessment or collection of
taxes asserted against DCX is pending.
4.16 Permits. DCX and its Corporate Personnel hold all Permits including,
without limitation, all environmental, public health or safety Permits,
necessary to permit it to own its properties and to conduct its business
pursuant to all Laws. There is no material violation of any Permit, all of the
Permits are current, valid and in full force and effect, and no action or claim
is pending to suspend, revoke or terminate any Permit or to render any Permit
invalid in any material respect.
4.17 Compliance with Laws. There is no material noncompliance by DCX with
any Laws or Orders, and DCX has not received notice from any enforcement
authority of any violation of any Laws. DCX's property, including its
facilities, machinery and equipment, conforms with applicable Laws including,
without limitation, zoning laws and building codes.
4.18 Employees and Labor. DCX is not a party to any employment agreement
collective bargaining agreement or similar labor agreement except as set forth
in Schedule 4.18, nor has it experienced any attempt to organize any of DCX's
employees into any collective bargaining unit. There are no strikes, work
stoppages or other labor disputes pending or, to the knowledge of DCX,
threatened between DCX and any of its employees except for individual, routine
grievances. DCX has not received any notice, and has no reason to believe, that
any executive or key employee of DCX, or any group of employees of DCX, has any
plans to terminate his, her or its employment with DCX. No executive or key
employee is subject to any agreement, obligation or other legal hindrance that
impedes or might impede such executive or key employee from devoting his or her
full business time to the affairs of DCX. DCX has complied in all material
respects with all Laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes. DCX is not indebted to any of
its Corporate Personnel, whether by loan, advance or otherwise, other than for
accrued salaries and out-of-pocket expenses incurred in the ordinary course of
business, nor is any of such Corporate Personnel indebted to DCX. Since March
31, 1997, DCX has not increased the compensation payable to any of its Corporate
Personnel except for reasonable and normal raises in the ordinary course of
business.
4.19 Environmental Matters.
(a) There is no material noncompliance by DCX with any Environmental Laws
or any necessary Permits, licenses or other authorizations, and the present
condition of DCX or its owned facilities at Franktown, Colorado (the "DCX
Property"), or DCX's present or past activities or manner of operating the DCX
Property (including disposing or arranging for the disposal of waste materials),
does not give rise to any liability to any person, contingent or otherwise,
under any Environmental Law. DCX has fully disclosed to the Company all
documents and information in its possession and control regarding activities and
conditions relating to DCX and the Property which could in the future result or
may in the past have resulted in noncompliance with, or liability under,
Environmental Law.
(b) DCX is not aware of any pending or proposed Environmental Laws or
amendments to Environmental Laws which would require any material change in any
of DCX's facilities, equipment, operation or procedures, or materially affect
DCX's business or its costs of conducting its business as now conducted.
4.20 Public Filings. The 10-KSB for the period ended September 30, 1996,
and the 10-QSB for the period ended June 30, 1997, all as filed with the
Securities and Exchange Commission, contained no materially misleading statement
of a material fact nor failed to state any fact necessary to make the statements
made therein not materially misleading as of their respective filing dates.
Furthermore, all required filings by DCX have been made timely to the S.E.C.
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4.21 No Brokers. Other than with Transition Partners, Limited, DCX has not
entered into any agreement, arrangement or understanding with any person or firm
which will result in any obligation of the Shareholders or the Company to pay
any finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
4.22 Books and Records. All books of account, minute books, stock
certificate books, stock transfer ledgers, and other corporate records of, and
records maintained pursuant to the requirements of governmental authorities by
DCX are complete and correctly and accurately present and reflect in all
material respects all the transactions entered into by DCX or to which DCX is a
party or any other matter which should be set forth in such books and records.
4.23 Certain Payments. Neither DCX, nor any Corporate Personnel or other
person associated with or acting on behalf of DCX has, directly or indirectly;
(a) used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; (b) made any unlawful
payments from corporate funds to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns; (c) violated
or is in violation of any provision of the Foreign Corrupt Practices Act of
1977; (d) established or maintained any unlawful or unrecorded fund of corporate
monies or other assets; (e) made any bribe, payoff, influence payment, kickback
or other unlawful payment; (f) used any corporate funds to give any substantial
favor or gift which is not deductible for federal income tax purposes; or (g)
made any bribe, kickback or other payment of a similar or comparable nature,
whether lawful or not, to any person or entity, private or public, regardless of
form, whether in money, property or services, to obtain special concessions, or
to pay for favorable treatment for business secured or for special concessions
already obtained.
4.24 Disclosure. No representation or warranty made by DCX in this
Agreement, nor any information contained in the Schedules hereto or in any
certificate or instrument delivered by or on behalf of DCX at the Closing
pursuant to this Agreement or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading. All such representations and warranties and information are true,
correct and complete in all material respects.
4.25 Regulatory Approvals. As soon as practical after the Closing, DCX
shall prepare and file with the United States Securities and Exchange
Commission, a registration statement filed by DCX in accordance with the
Securities Act of 1933 on an appropriate form, seeking to register the
Consideration Shares deliverable to the Company's shareholders who exchange
their shares in the Merger. DCX shall use its best efforts to have such
registration statement declared effective and keep such registration effective
for a period of one year from the Closing.
4.26 IXCD Sub. DCX has formed IXCD Sub, Inc., a Colorado corporation, as a
wholly owned subsidiary of DCX. Subject to and consistent with the terms of this
Agreement, DCX will cause IXCD Sub, Inc. to enter into a merger with the Company
pursuant to which the Company will be the surviving corporation. Prior to the
Closing, IXCD Sub will have engaged only in the transaction contemplated by this
Agreement, will have no material liabilities, and will have incurred no
obligations except in connection with its performance of the transactions
provided for in this Agreement. Neither DCX nor IXCD Sub will own any shares of
common stock of the Company prior to the merger, and have not owned any shares
of the Company's Common Stock during the past five years. Upon completion of the
merger between the Company and IXCD Sub, the Company will own at least 90% of
the fair market value of the net assets and at least 70% of the fair market
value of the gross assets held by IXCD Sub immediately before the merger.
4.27 No Repurchase. DCX has no plan or intention to reacquire any of its
common stock issued to the Company's shareholders in the merger with IXCD Sub.
4.28 No Intent to Liquidate the Company.DCX has no plan or intention to
liquidate the Company; to merge the Company with or into another corporation; to
sell or otherwise dispose of the stock of the Company except for transfers of
stock to a corporation controlled by DCX; or to cause the Company to sell or
otherwise dispose of any of its assets or any of the assets acquired from IXCD
Sub, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation controlled by DCX.
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4.29 Continuation of Business. After the merger with IXCD Sub, DCX intends
to continue the Company's historic business or use a significant portion of its
historic business assets in a business.
5. REPRESENTATIONS AND WARRANTIES - GENERAL
5.1 Survival of Representations and Warranties. All statements contained in
any certificate or instrument delivered by or on behalf of any party at the
Closing pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties of that
party hereunder. All representations and warranties of any party contained in
this Agreement or in any Schedule hereto (or deemed to have been made hereunder)
shall survive the Closing Date for a period of one (1) year notwithstanding any
investigation at any time made by or on behalf of the other party.
6 COVENANTS
6.1 Pre-Closing Covenants.
(a) Access to and Information Concerning Properties and Records. Each of
the corporate parties shall give to the other and to the other's counsel,
accountants, engineers and other advisors, agents, consultants and
representatives, full access, during normal business hours throughout the period
prior to the Closing Date, to all of the properties, books, Contracts,
commitments, records and responsible employees of such party, and will promptly
furnish to the other party during such period all such information concerning
such party as the other party reasonably may request.
(b) Conduct of Business Pending the Closing Date. Prior to the Closing
Date, except as may be necessary to satisfy the terms of this Agreement, and
except as otherwise consented to or approved by the other corporate party in
writing:
(i) Each of the Company and DCX will use its best efforts to (A)
preserve its present business organization intact, (B) keep available the
services of existing Corporate Personnel other than termination of such
personnel in the ordinary course of business, and (C) maintain its present
relationships with customers, suppliers and other persons having business
dealings with it.
(ii) Each of the Company and DCX will maintain all of its properties
in good repair, order and condition, and will maintain insurance upon all of its
properties and Corporate Personnel and with respect to the conduct of its
business in such amounts and of such kinds comparable to that in effect as of
the date hereof.
(iii) Each of the Company and DCX will maintain its books, accounts
and records in the usual, regular and ordinary manner, on a basis consistent
with prior years, will comply with all Laws applicable to it and to the conduct
of its business, and will perform all of its material obligations without
default other than the defaults or potential defaults disclosed in the Schedules
hereto.
(iv) No amendment will be made in the Articles of Incorporation or
Bylaws of the Company or the Articles of Incorporation of DCX.
(v) Neither the Company nor DCX will declare or pay any dividends or
make any other distributions with respect to, or redeem, any of their respective
capital stock, except as may be required under the terms of issued and
outstanding capital stock. No change will be made in the number of Shares of
Company Common Stock issued and outstanding and no option, warrant or any other
right to purchase or to convert any obligation into Company Common Stock will be
granted or made by the Company, except for those disclosed elsewhere in this
document. No change will be made in the number of shares of DCX Common Stock
issued and outstanding except pursuant to the exercise of rights, options or
warrants granted or issued by DCX prior to the date of this Agreement or
pursuant to the stock issuances, as described on Schedule 4.5. No right, option,
warrant or any other right to purchase or to convert any obligation into DCX
Common Stock will be granted or made by DCX except pursuant to the plans
described in Schedule 4.5 and the 10-KSB.
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(vi) Except as disclosed in this Agreement, including the schedules
hereto, no increase shall be made in the compensation payable or to become
payable by the Company to any Corporate Personnel; no bonus, profit sharing,
pension, retirement or other similar payment or arrangements shall be paid or
made by the Company except in the ordinary course of the administration of the
Employee Plans; and no employment agreement, sales agency or other contract or
arrangement with respect to the performance of personal services shall be
entered into, except as provided in this Agreement or in the ordinary course of
business.
(vii) Except for the settlement of litigation referred to in Section
7.2(b)(ii), no modification in any Contract listed pursuant to Section 3.13 or
Section 4.11, and no sale or other distribution of any right or privilege
accruing to the Company or DCX, respectively, thereunder, shall be made by the
Company or DCX, as the case may be, other than in the ordinary course of
business.
(viii) No short or long-term borrowing or any mortgage or pledge of
any of the properties or assets of the Company or DCX, or any sales or other
disposition of any of the properties of the Company or DCX, otherwise than in
the ordinary course of business, shall be made by the Company or DCX,
respectively.
(ix) No change shall be made in the banking and safe deposit
arrangements reflected in the list set forth in Schedule 3.13(j) without prior
written notice to DCX, giving the details of such change, and no powers of
attorney shall be granted.
(x) The Company and DCX will not enter into any transaction and will
use their respective best efforts not to permit any event to occur which would
result in any of the representations and warranties contained in Sections 3 and
4, respectively, not being materially true and correct at and as of the time
immediately after the occurrence of such transaction or event and at the Closing
Date.
(xi) The Company and DCX will not take any action which will result
in, and will use their respective best efforts to avoid, any material adverse
change in the financial condition, properties or operation of the business of
the Company or DCX, as the case may be, other than as disclosed in this
Agreement or the Schedules hereto. Each corporate party shall give prompt notice
to the other of any notice of default received by such party subsequent to the
date of this Agreement under any material Contract, or any material adverse
change occurring prior to the Closing Date in the operation of such party's
business.
(c) No-Shop Clause. Except as may be necessary to satisfy the terms of this
Agreement, and except as otherwise consented to or approved by the other
corporate party in writing, from the date hereof until the Closing Date or the
termination of this Agreement, whichever occurs sooner: (i) the Company will not
enter into or conduct negotiations with parties other than DCX with respect to
the sale of the Shares or the assets of the Company, or any other form of
business combination transaction involving the Company or the Shares; and (ii)
DCX will not enter into or conduct negotiations with parties other than the
Company and the Shareholder with respect to DCX's acquisition of, or business
combination with, any business other than the Company.
(d) Cancellation of Company's Common Stock Purchase Arrangements. The
arrangements for the purchase of Company Common Stock by employees of the
Company referred to on Schedule 3.5 will be suspended and all funds retained by
the Company for this purpose will be converted into shares of the Company's
common stock prior to the Closing in compliance with applicable laws. At the
time of the merger with IXCD Sub, the Company will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire shares of the Company's common stock.
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(e) Cooperation. The parties to this Agreement will cooperate and use their
best efforts to structure the merger and take such action as may be necessary to
qualify the transaction as a reorganization under Section 368 of the Internal
Revenue Code, and to qualify for treatment as a pooling of interests for
accounting purposes.
6.2 Confidential Information. For a period of three (3) years following the
Closing, the Company, the Shareholder, and the Company's affiliates shall not,
directly or indirectly, use, disseminate, or disclose for any purpose other than
for the purposes in furtherance of DCX's or the Company's business, any of DCX's
or the Company's confidential information or trade secrets unless such
disclosure is compelled in a judicial or governmental proceeding. Following
completion of the Closing, all documents, records, notebooks and similar
repositories of records containing information relating to any trade secrets or
confidential information of the Company then in the Shareholder's possession or
control, whether prepared by him or by others, shall be delivered to the Company
or returned to the Company upon its request.
6.3 Environmental Assessment. DCX may, at its sole expense, conduct an
environmental assessment (the "Assessment") of the Company Leased Property to
assess the extent to which the Company Leased Property is in compliance with, or
may give rise to any liability under, any Environmental Law. DCX shall retain a
qualified engineer to conduct the Assessment. The findings of the Assessment
shall be incorporated into an assessment report (the "Assessment Report"). The
Assessment Report shall be addressed to counsel for DCX and shall otherwise be
disseminated only with the prior consent of both corporate parties. In the event
that this Agreement is terminated by any or all parties, all copies of the
Assessment Report shall be delivered to counsel for the Company.
6.4 Shareholders' Representation in DCX and Company Management.
(a) Effective upon completion of the Closing, DCX shall increase the size
of its Board of Directors from four (4) to seven (7) members and shall appoint
John C. Antenucci and two (2) additional persons nominated by Antenucci as three
(3), including Antenucci, of the Seven (7) DCX directors. Furthermore, DCX shall
appoint one (1) additional person jointly nominated by Carreker and Antenucci as
the seventh of the seven (7) members, with all appointees serving until the next
annual DCX shareholders meeting in September, 1997. Furthermore, DCX will cause
to renominate Antenucci and these three (3) additional newly appointed directors
of DCX to be elected for a full one-year term by the shareholders of DCX at its
next annual shareholders meeting in September, 1997. No nominee appointed by
either party shall affect the NASDAQ listing or shall be subject to any
disqualification specified in ss.230.262 of Regulation A. In addition, upon
completion of the Closing, DCX will appoint the following persons to the
positions in DCX set forth below opposite their respective names:
NAME POSITION
---- --------
Stephen Carreker Chairman and Chief Executive Officer
John C. Antenucci Vice Chairman and President
(b) Effective upon completion of the Closing, the Company shall appoint
Stephen Carreker to serve on the Company's Board of Directors. The Company's
Board of Directors shall serve at the pleasure of the DCX Board of Directors.
6.5 Stock Options for Company Personnel. Effective upon completion of
closing, the Company will cancel all current existing stock options for Company
stock and DCX will cause to issue replacement stock options for DCX shares to
employees of the Company on terms substantially equivalent in terms and value
contained in the stock options previously granted to them by the Company. The
replacement of options shall be on the same conversion ratio and subject to the
same terms and conditions as the shares exchanged in the merger between the
Company and IXCD Sub. As specified within Schedule 3.5, within three (3) months
after the closing date, the committee of DCX's Board of Directors which
administers DCX's Stock Option Plan (the "Committee") shall review the Company
stock option program and revise as appropriate.
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6.6 Matters Requiring Two-Thirds (2/3) Consent of DCX Board of Directors.
For a period of eighteen (18) months following the Closing Date, without the
consent of two-thirds (2/3) of the DCX Board of Directors, neither DCX or the
Company will sell or transfer all or substantially all of the stock or assets of
the Company.
6.7 Location of Operations. DCX will not relocate the corporate
headquarters of the Company from the Company's present facilities in Frankfort,
Kentucky, for the term of the Shareholder's employment agreement referenced in
Section 7.1(g).
6.8 Payment of Expenses. Each of the parties shall pay its own fees and
expenses incident to the negotiation and execution of this Agreement and their
previous Letter of Intent, and the consummation of the transactions contemplated
hereby and thereby including, but not limited to, counsel and accountant's fees.
6.9 Payment of Finder's Fee. In the event that the Closing is successfully
consummated, DCX shall pay a finder's fee to Transition Partners, Limited of
Boulder, Colorado, in an amount of no more than 5% of the transaction, in stock
or cash, as specified by Transition Partners, Limited.
6.10 Continuation of Company's Benefit Plan. The continuation of the
Company's employee benefit package will be determined by the Company's Board of
Directors.
6.11 The Company and QIP have agreed that the Company will issue QIP shares
of the Company's common stock prior to Closing in complete satisfaction and
extinguishment of any obligation to QIP. The shares to be issued to QIP are
included in the total shares issued and will not increase the total shares
issued. The Company will pay QIP from its own treasury shares prior to Closing
without reimbursement from DCX or IXCD Sub.
6.12 The Company and the Shareholder represent and covenant that on the
Closing, the fair market value of the assets of the Company will exceed the sum
of its liabilities, plus the amount of liabilities, if any, to which the assets
are subject.
7. CONDITIONS PRECEDENT TO CLOSING
7.1 Conditions Precedent to DCX's Obligation to Close. The obligations of
DCX under this Agreement to proceed with the Closing on the Closing Date shall
at all times be subject to the following conditions Precedent which must be
completed to the reasonable satisfaction of DCX, any of which may be waived by
DCX in writing:
(a) Accuracy of Representations, Warranties and Covenants. The
representations, warranties, and covenants of the Shareholder contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on and as of such date. All disclosures and
schedules shall be current as of the Closing Date, and any changes shall be
delivered a reasonable time prior to the Closing Date to DCX for its approval.
(b) Performance of Agreements,. The Shareholder and the Company shall have
performed all obligations and agreements and complied with all covenants and
conditions contained in this Agreement to be performed or complied with by each
of them at or prior to the Closing Date.
(c) Shareholder's Certificate. The Shareholder shall have furnished DCX
with a certificate, dated the Closing Date, stating that, subject to the
qualifications contained in the initial paragraph of Section 3, the
representations and warranties contained in Section 3 are true and correct on
the Closing Date in all material respects as if then made, and that the
Shareholder and the Company have fulfilled the conditions specified in Sections
7.l(a) and (b) above.
(d) Absence of Material Damage to Property. Between the date of this
Agreement and the Closing Date, there shall not have occurred any casualty to,
foreclosure upon, or any condemnation by any governmental authority, officer or
instrumentality thereof, of any facility, property, aircraft, equipment or
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inventory owned or leased by the Company as a result of which either: (i) the
monetary amount of damage, destruction, foreclosure or condemnation measured by
the book value of the property so damaged, destroyed, foreclosed upon or
condemned aggregates in excess of the recoverable proceeds payable to the
Company under valid and existing insurance underwritten by a responsible insurer
or the amount of compensation offered to the Company by the condemning
authority, as the case may be; or (ii) the operations of the Company reasonably
may be expected to be materially adversely affected.
(e) Opinion of Counsel for Shareholder and the Company. DCX shall have
received an opinion of counsel for the Shareholder and the Company, dated the
Closing Date, in form and substance reasonably satisfactory to DCX and its
counsel, containing such matters as DCX or its counsel may reasonably request
with respect to the matters set forth in Section 3 on which it is within
counsel's competence to opinion.
(f) No Litigation. No Litigation shall have been instituted before any
court or governmental body, or instituted by any governmental agency, to
restrain or prevent the carrying out of the transactions contemplated by this
Agreement or which might affect DCX's right to own, operate and control the
assets, properties and business of the Company on or after the Closing Date.
(g) Employment Agreements. DCX shall have entered into employment
agreements with the Shareholder and J. Gary Reed in substantially the form
attached hereto as Schedule 7. 1 (g) (1) (the "Employment Agreements").
Furthermore, the Company shall obtain the continuation or establishment of
employment agreements with a minimum of 80% of those key executive managers
listed in Schedule 7.1(g)(2) prior to the Closing. Finally, the Company shall
use its reasonable best efforts to continue or establish employment agreements
similar in form to the agreements effective with respect to these persons listed
in Schedule 7.1(g)(2) with those key technical managers listed in Schedule
7.1(g)(3);
(h) Regulatory Approvals: Other Approvals and Consents. All regulatory
approvals of any governmental agency required for the exchange of the Shares for
Consideration Shares and the other transactions contemplated hereby shall have
been obtained. The Company also shall have obtained all other requisite
approvals and consents pursuant to Contracts or Permits relative to the
transactions contemplated by this Agreement.
(i) No Material Adverse Change. No material adverse change shall have taken
place in the business, operations or property of the Company since April 30,
1997.
(j) Due Diligence. DCX's "due diligence" investigation of the Company shall
not reveal any information not disclosed to DCX on or before the Closing which
materially adversely affects in any manner DCX's willingness to consummate the
Closing.
(k) Audited Financial Statements. The Company shall cause to be delivered
to DCX at least 12 days prior to Closing, audited financial statements covering
its two fiscal years ending December 31, 1995 and September 30, 1996 accompanied
by an unqualified opinion of the Company's auditors (the "Audited Financial
Statements").
(1) Escrow Agreement. DCX shall have entered into the Escrow Agreement with
Shareholder in substantially the form attached hereto as Schedule 1.3.
(m) U.S. Persons. DCX shall have received a certificate from each
shareholder pursuant to Section 1445 of the Code confirming that he or she is a
U.S. person for federal income tax purposes.
(n) Shareholder Approval. A sufficient number of each class of the
Company's issued and outstanding securities shall have voted in favor of the
Merger in order to implement the Merger under Maryland law, and holders of no
more than 10% of the Company's Common Stock shall have exercised their
dissenter's rights. The extent of, and procedure for payment of, dissenter's
rights must be resolved to the reasonable satisfaction of DCX.
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(o) Liabilities. Any items listed on Schedule 3.8 must be quantified, and
the Company must make adequate arrangements for the resolution of such items to
the satisfaction of DCX.
(p) DCX shall not have received any notice that the proposed transaction
may adversely affect its qualification for listing its common stock on the
NASDAQ system.
7.2 Conditions Precedent to the Shareholder's and Company's Obligation to
Close. The obligations of the Shareholder and the Company under this Agreement
to proceed with the Closing on the Closing Date shall at all times be subject to
the following conditions precedent which must be completed to the reasonable
satisfaction of the Company and the Shareholder, any of which may be waived by
the Shareholder and the Company:
(a) Accuracy of Representations, Warranties and Covenants. The
representations, warranties, and covenants of DCX contained herein shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of such date. All disclosures and schedules shall be
current as of the Closing Date, and any changes shall be delivered to the
Company for its approval a reasonable time prior to the Closing Date.
(b) Performance of Agreements. DCX shall have performed all obligations and
agreements and complied with all covenants and conditions contained in this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and DCX shall use its best efforts to complete the following conditions:
(i) Eliminate the default of the SBA Loan.
(ii) Obtain a settlement agreement in a form reasonably satisfactory
to the Company, with the applicable government agency in an amount not to exceed
$350,000 regarding the litigation involving light set contract reprocurement
costs.
(iii) Establish working capital of at least $2.0 million.
(iv) Provide written reconciliation as of June 30, 1997 regarding
DCX's current inventory.
DCX shall satisfy the conditions in section 7.2(b)(i-iv) no later than
seventy-two (72) hours prior to the Closing Date. In the event DCX does not
satisfy such conditions, the Shareholder, the Company, or DCX may terminate this
Agreement without liability for such termination.
(c) DCX's Certificate. DCX shall have furnished the Shareholder and the
Company with two (2) separate certificates each, dated the Closing Date, stating
that the representations and warranties contained in Section 4 are true and
correct on the Closing Date in all material respects as if then made, and that
DCX has fulfilled the conditions specified in Sections 7.2(a) and (b) above.
(d) Absence of Material Damage to Property. Between the date of this
Agreement and the Closing Date, there shall not have occurred any casualty to,
foreclosure upon or any condemnation by any governmental authority, officer or
instrumentality thereof, of any facility, property, equipment or inventory owned
or leased by DCX as a result of which either: (i) the monetary amount of damage,
destruction, foreclosure or condemnation measured by the book value of the
property so damaged, destroyed, foreclosed upon or condemned aggregates more
than $50,000 in excess of the recoverable proceeds payable to DCX under valid
and existing insurance underwritten by a responsible insurer or the amount of
compensation offered to DCX by the condemning authority, as the case may be; or
(ii) the operations of DCX reasonably may be expected to be materially adversely
affected.
(e) Opinion of Counsel for DCX. The Shareholder and the Company shall have
received an opinion of counsel for DCX, dated the Closing Date, in form and
substance reasonably satisfactory to the Shareholder, the Company and their
counsel containing such matters as the Shareholder, the Company or their counsel
may reasonably request with respect to matters set forth in Section 4 on which
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it is within counsel's competence to opine and with respect to certain tax
matters relating to the transactions contemplated by this Agreement. In
addition, DCX shall cause its counsel to render an opinion to the effect that
the Merger qualifies as a tax-free reorganization under Section 368(a) of the
internal Revenue Code. Such opinion shall be in a form customary and usual in
transactions of this nature and shall be addressed to the Company and the
shareholders.
(f) No Litigation. No Litigation shall have been instituted before any
court or governmental body, or instituted by any governmental agency, to
restrain or prevent the carrying out of the transactions contemplated by this
Agreement.
(g) No Material Adverse Change. No material adverse change shall have taken
place in the business, operations or property of DCX since June 30, 1997.
(h) Due Diligence. The Company's and Shareholder's "due diligence"
investigation of DCX shall not reveal any information not disclosed to the
Company and the Shareholder on or before the Closing, which materially adversely
affects in any manner the Company's and the Shareholder's willingness to
consummate the Closing.
(i) Shareholder Approval. A sufficient number of each class of the
Company's issued and outstanding securities shall have voted in favor of the
Merger in order to implement the Merger under Maryland law, and holders of no
more than 10% of the Company's Common Stock shall have exercised their
dissenter's rights. The extent of, and procedure for payment of, dissenter's
rights must be resolved to the reasonable satisfaction of DCX.
8 . INDEMNIFICATION
8.1 Shareholder's Indemnification.
a. The Shareholder shall indemnify and hold harmless DCX, the Company and
their respective Affiliates, directors, officers, employees and agents from and
against any losses, liabilities, claims, fines, penalties, actions, settlements,
expenses (including reasonable attorneys' fees, court costs, costs of
investigation and remediation, and expert witness fees) or damages
(collectively, "Losses") relating to or arising out of the breach by the
Shareholder of any representation or warranty contained herein or in any
certificate required to be furnished by the Shareholder to DCX in connection
with the Closing hereunder, or the breach of any covenant or agreement on the
part of the Shareholder or the Company.
b. The Shareholder's aggregate obligation to indemnify DCX, the Company
their respective Affiliates, directors, officers, employees and agents and hold
them harmless under Section 8.1 shall in no event exceed the market value of the
Escrow Shares held by the Escrow Agent pursuant to Section 1.3 at the time that
the Shareholder's obligation to pay any Losses is established, and such Losses
shall be paid from the Escrow Shares in accordance with the terms of the Escrow
Agreement. At such time, if any, as an aggregate amount equal to the market
value of the Escrow Shares then remaining subject to the Escrow Agreement has
been paid to DCX, the Company and their respective Affiliates, directors,
officers, employees and agents under this Section 8. 1, the Shareholder shall
thereafter have no further liability under this Section 8. 1.
c. DCX hereby acknowledges and agrees for itself, the Company and their
respective Affiliates, directors, officers, employees and agents that their sole
and exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Article 8.
8.2 DCX's Indemnification.
a. DCX shall indemnify and hold harmless the Shareholder from and against
any Losses relating to or arising out of the breach by DCX of any representation
or warranty contained herein or in any certificate required to be furnished by
DCX to the Shareholder in connection with the Closing hereunder, or the breach
of any covenant or agreement on the part of the DCX.
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b. DCX' aggregate obligation to indemnify the Shareholder and hold him
harmless under Section 8.2 shall in no event exceed the number of Escrow Shares
held by the Escrow Agent pursuant to Section 1.3 at the time that DCX'
obligation to pay any Losses is established. Any indemnification by DCX shall be
paid by DCX issuing non-registered shares of common stock to the Shareholder. At
such time, if any, as an aggregate number of shares of non-registered common
stock equal to the number of Escrow Shares then remaining subject to the Escrow
Agreement has been paid to Shareholder under this Section 8.2, DCX shall
thereafter have no further liability under this Section 8.2.
c. The Shareholder hereby acknowledges and agrees for himself, the Company
and their respective Affiliates, directors, officers, employees and agents that
the sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Article 8.
8.3 Procedure for Indemnification.
a. If the Shareholder or DCX shall determine to make a claim asserting the
existence of a Loss as to which such party (the "Indemnitee") is to be
indemnified pursuant to the terms of this Agreement, the Indemnitee shall
promptly Notify the other party (the "Indemnitor") of such claim in writing.
Unless in the Indemnitee's reasonable judgment a conflict of interest between
the Indemnitee and Indemnitor may exist with respect to such claim, the
Indemnitor shall have the right to defend against any such claim with counsel
reasonably satisfactory to the Indemnitee, provided (a) the Indemnitor, within
ten (10) days after the receipt of such notice from the Indemnitee, shall notify
the Indemnitee that the Indemnitor disputes the claim, giving the reasons
therefor, and that the Indemnitor will, at its own expense, defend the same, and
that (b) such defense is instituted promptly and maintained in good faith by the
Indemnitor. In such event, the defense may, if necessary, be maintained in the
Indemnitee's name, and the Indemnitee may, if it so elects, designate its own
counsel to participate at the Indemnitee's sole expense, along with the counsel
selected by the Indemnitor, in the conduct of such defense. The Indemnitee
shall, in any event, be kept fully advised as to the status of such defense. If
such defense is assumed, the Indemnitor will not be subject to any liability for
any settlement made by the Indemnitee without its consent (but such consent will
not be unreasonably withheld). Notwithstanding the foregoing, following the
Closing, DCX shall have the right to direct and control the negotiations,
settlement and litigation if the same have a direct material effect upon the
operations of the Company's business, and the conduct of any necessary
investigatory or remedial activities. If the Indemnitor shall receive notice
from the Indemnitee of a claim, as aforesaid, and shall either fail to notify
the Indemnitee of its election to defend such claim or fail to maintain such
defense in good faith, the Indemnitee shall defend such claim at Indemnitor's
expense. In such event, the Indemnitor shall not be obligated to pay the fees
and expenses of more than one counsel for all Indemnitees with respect to such
claim, unless in the reasonable judgment of any Indemnitee a conflict of
interest may exist between such Indemnitee and any other Indemnitee with respect
to such claim. If the defense of any claim shall, upon final nonappealable
determination, be unsuccessful, then in any such event the Indemnitor shall
fully satisfy and discharge the claim or any judgment within thirty (30) days
after notice from the Indemnitee to the Indemnitor requesting it to do so.
b. It is the intent of all parties to this Agreement that any Losses
subject to indemnification shall be satisfied solely by delivery or issuance of
shares of non-registered common stock of DCX by the Indemnitor to the
Indemnitee, up to a maximum of 125,000 shares.
9. ALTERNATIVE METHODS OF DISPUTE RESOLUTION
In the event of any controversy, claim or matter of difference arising out
of or related to this Agreement, the parties shall discuss in good faith using
methods of dispute resolution other than litigation in order to resolve any such
matter in an expeditious, cost-effective and equitable manner.
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10. MISCELLANEOUS
10.1 Termination of Agreement. This Agreement may be terminated at any time
on or prior to the Closing Date:
(a) by mutual written consent of DCX and the Shareholder and the Company;
(b) by the Shareholder, if independent tax counsel selected by DCX
determines that the Merger contemplated by this Agreement would not be tax-free
to the Shareholders and such transaction cannot be restructured in a manner
which would make the Merger tax-free to the Shareholders without significant
adverse economic consequences to the Shareholders;
(c) by DCX, if there has been a material breach by the Company or the
Shareholder of any of its or his representations, warranties or covenants set
forth herein, or a failure of any condition to which the obligations of DCX are
subject;
(d) by the Shareholder and the Company, if there has been a material breach
by DCX of any of its representations, warranties or covenants set forth herein,
or a failure of any condition to which the obligations of the Shareholder and
the Company are subject; or
(e) At midnight on September 30, 1997 if the Closing shall not have
occurred on or before that date, unless the parties otherwise agree.
(f) by DCX if the Audited Financial Statements of the Company for the
period ended September 30, 1996, show a decrease compared to the September 30,
1996 unaudited Financial Statement of more than 20% in net income, total assets,
or total liabilities of the Company.
(g) In the event of the termination of this Agreement pursuant to Section
10.1(a), (b), or 10(f), this Agreement shall terminate without any liability or
further obligation of any party to the other except pursuant to Section 6.8. Any
termination pursuant to Section 10.1(c), (d) or (e) shall not relieve either
party of any liability for any misrepresentation or breach of a representation,
warranty or covenant.
(h) In the event of the termination of this Agreement, all documents,
records, notebooks and similar repositories of records containing information
relating to any trade secrets or confidential information of any party which are
then in the possession or control of another party, whether prepared by such
other party or by others, shall be returned to the party which owns such trade
secrets or confidential information, and no such information or trade secrets
shall be used, disseminated or disclosed by such other party for any purpose
whatsoever.
10.2 Waivers. Any party may by written notice to the others (a) extend the
time for the performance of any of the obligations or other actions of the
others; (b) waive any inaccuracies in the representations and warranties of the
others contained in this Agreement or in any document delivered pursuant to this
Agreement; (c) waive compliance with any of the covenants of the others
contained in this Agreement; or (d) waive performance of any of the obligations
of the others. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any party hereto of the breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
10.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, the Shareholder and the Company and DCX each shall
pay their own fees and expenses incident to the negotiation, preparation,
execution and consummation of this Agreement, including counsel and accountant's
fees and the expense of any appraisals and audits required to be performed
hereunder.
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10.4 Notices. Any notice, request or other communication required or
allowed under this Agreement shall be in writing and shall be deemed given (a)
upon personal delivery, (b) on report of successful transmission by facsimile
machine that complies with applicable industry standards at the time and that
automatically generates a printed diagnostic report, indicating whether
transmission was completed successfully, at the conclusion of each transmission,
(c) on the first business day after receipted delivery to a courier service
which guarantees next business-day delivery, under circumstances in which such
guaranty is applicable, or (d) on the earlier of delivery or three business days
after mailing by United States certified mail, postage and fees prepaid, to the
appropriate party at the address set forth below or to such other address as the
party so notifies the other in writing.
(a) If to the Company: to PlanGraphics, Inc.; 112 East Main Street;
Frankfort, Kentucky 40601.
(b) If to the Shareholder: John C. Antenucci, 112 E. Main Street,
Frankfort, Kentucky 40601.
(c) If to DCX: DCX, Inc.; 3002 North State Highway 83; Franktown, Colorado
80116.
10.5 Entire Agreement: Modification. This Agreement and the Schedules
hereto constitute the entire agreement among the parties and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof including, but not limited to, the Letter
of Intent. No modification of this Agreement shall be valid unless made in
writing and signed by the parties hereto. The disclosure of information on any
of the Schedules hereto shall constitute a disclosure of such information on
every other schedule on which such information might have been required in order
to render such other schedule materially true, correct or not misleading.
10.6 Non-Assignability: Third Party Beneficiaries. This Agreement shall be
assignable by any party hereto only with the prior written consent of other
parties hereto. This Agreement shall not benefit or create any right or cause of
action in or on behalf of any person other than the parties.
10.7 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors, heirs, legal
representatives and permitted assigns.
10.8 Section Headings. The Section headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
10.9 Governing Law. This Agreement shall be construed and governed by the
laws of the state of Kentucky without giving effect to the principles of
conflicts of laws.
10.10 Further Assurances. Both before and after the Closing, the parties
agree to cooperate with each other in effectuating this Agreement and to execute
and deliver such further documents or instruments and take such further actions
as shall reasonably be requested in connection therewith.
10.11 Severability. If any provision in this Agreement shall for any reason
be determined to be invalid or unenforceable, the remaining provisions of this
Agreement shall nevertheless continue to be valid and enforceable as though the
invalid or unenforceable provision had not been a part hereof.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page of this Agreement shall be deemed to be the
execution of a counterpart of this Agreement.
10.13 Definition of Affiliate. For purposes of this Agreement, an
"Affiliate", of a person or entity shall be a person or entity controlling,
controlled by or under common control with that person or entity.
10.1 4 Publicity. Prior to the Closing, the parties will consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement and the transactions contemplated
hereby, and no party shall issue any such press release nor make any such public
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statement without the prior written consent of the other parties, except as may
be required by law or DCX's listing agreement with the National Association of
Securities Dealers, Inc.
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In Witness whereof, the parties hereto have caused this Acquisition
Agreement to be executed as of the date first above written.
DCX, Inc. PlanGraphics, Inc.
/S/ Stephen Carreker /S/ John Antenucci
- ------------------------------- -------------------------------------
By: Stephen Carreker, President By: John Antenucci, President
/S/ John Antenucci
- -----------------------------------
By: John Antenucci, the Shareholder
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LIST OF SCHEDULES
PlanGraphics Schedules
Schedule Number Description
1.1 Merger Agreement
1.3 Escrow Agreement
3.1 Articles and Bylaws of PlanGraphics
3.2(a) No Conflicts
3.3 Subsidiaries and Certain Affiliates
3.5 Option, Warrants, Rights
3.6 (a&b) Authority
3.7(b) Financial Statements
3.8 Absence of Undisclosed Liabilities
3.9 Absence of Certain Changes
3.10 Accounts Receivable
3.12 Title to Properties, etc.
3.13 Valid Contracts, etc.
3.14 Patents, Trademarks, Copyrights, etc.
3.16 Employee Plans
3.18 Tax Matters
3.22 Employees
3.25 Transactions with Certain Persons
3.26(a) Suppliers and Customers
3.26(b) Suppliers and Customers
7.1(g)(1) Preclosing covenant
7.1(g)(2) Key Executive Manager Employment Contracts
7.1(g)(3) Key Manager Employment Contracts
DCX Schedules
Schedule Number Description
4.5 Option, Warrants, Rights, etc.
4.9 Certain Changes or Events
4.11 Contracts
4.12 Insurance
4.13 Employee Plans
4.14 Litigation
4.18 Employees and labor
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PlanGraphics Schedules
----------------------
Schedule 1.3
Escrow Agreement
See Attachment A
Schedule 3.1
Copy of Articles and By-Laws
Reference Attachment B
Schedule 3.2 (a)
No Conflicts
The Company has taken all reasonable action to be fully informed of federal,
state and local laws and regulations and responds diligently when notified of
additional actions or restrictions required of the Company. Two office leases
(Frankfort and Denver) require the company to give notice when a change of
control or recapitalization occurs. The Company intends to do so after closing.
Each of the leases would allow the lessor to terminate the lease at the time
notice is given; in the case of Capital View Development this is unlikely since
the building was constructed on behalf of PlanGraphics, in the case of Denver,
the lease is assignable by PlanGraphics (to DCX) and such permission cannot be
unreasonably withheld. Should this occur there is comparable office space
available
Schedule 3.3
Subsidiaries and Certain Affiliates
As disclosed in the Company's financial statements, the Company has a minority
(7%) position in Intuitive Solutions L.L.C.
Schedule 3.5
Options, Warrants, Rights, Etc.
As of June 26, 1997 the following stock options were issued and unexercised:
Stock Option Plan A: Outside Directors William Gorton 2,500 voting Ramund
O'Mara 2,500 voting
Stock Option Plan B: Employee Annual Performance-Attachment B
Stock Option Plan C: Sustained Performance-Attachment B
Farmers Bank and Capital Trust Company holds 200,000 non-voting shares of the
Shareholder as part of a security interest for a $600,000 loan. This loan will
be settled by PlanGraphics prior to Closing to the reasonable satisfaction of
DCX.
Schedule 3.6 (a & b)
Authority
Farmers Bank and Capital Trust Company holds 200,000 non-voting shares of the
Shareholder as part of a security interest for a $600,000 loan. This loan will
be settled by PlanGraphics prior to Closing to the reasonable satisfaction of
DCX.
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Schedule 3.7 (b)
Financial Statements
Projections of revenue are forward looking and are stated in the four (4) year
"Financial Forecast" submitted to DCX, dated April 22, 1997 and are based, in
part, on the timely availability of capital, the execution of an acquisition and
internal growth plan, outlined in the Post Infusion Business Plan Addendum to
1997 Business Plan, dated December, 1996
Schedule 3.8
Absence of Undisclosed Liabilities and Obligations
Reference Attachment B
The following liabilities are forward looking and, for a range of reasons, may
or may not materialize.
They include possible commission to sales staff contingent on fully billing
and full receipt of revenues from selected contracts payable to Chuck
Cmeyla, Jim Fox, Charlie Cashion, Larry Raper, Dennis Kunkle, Mark Watt,
Dan Krishock and, over time, others who have sales responsibility.
Moving Expenses which may be incurred consistent with Company relocation
and reimbursement policy and letters of employment to the following
individuals who are currently in the Company's employ and who have not, and
may not, exercise their rights:
Dave Lagasse, Cindy Popollilo, Bill Shinar, Lee Nelson, William Lloyd
Moving expenses associated with the relocation of the San Antonio office to
Denver including the relocation of Bob Finkle and Laura Mizula and the
establishment of a home office for Kathy Spivey in San Antonio to support
existing Texas based clients.
Moving expenses associated with relocation of Larry Raper upon his eventual
return from Oman.
Advance payment to Capital View Development of an amount to be calculated
not to exceed $179,000 on or before March 1, 1999, coincident with a
reduction of lease payments for the remainder of the lease period for
Frankfort headquarters.
Potential extraordinary costs associated with sales of current residential,
including possible reimbursement of sales commission, related closing
costs, and underwriting of loss on sales for R. Finkle and D. Lagasse
Schedule 3.9
Absence of Certain Changes or Events
3.9 (f) The Company was notified in or about April by Oakland County, Michigan
that it would require PlanGraphics to direct certain amounts of work originally
slated for PlanGraphics to a specified subcontractor, though the contract
vehicle would be retained for future assignments to PlanGraphics.
3.9 (g)' As previously disclosed PlanGraphics has entered into a sale lease back
and lease facility for selected capital equipment (office and computer
equipment) necessary for the performance and normal operation of the business.
The credit facility is with Fifth Third Bank of Lexington, KY.
3.9 (k) As disclosed in PlanGraphics financials PlanGraphics is obligated to
repurchase non voting stock held by two former employees, Chuck Howard and Scott
Boocher under conditions established during the acquisition of Infrastructure
Management Systems and terms resulting from those conditions.
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Schedule 3.10.
Accounts Receivable
Reference Attachment B
The attached document lists all receivables due and payable to PlanGraphics per
existing or prior contracts and agreements. Invoices older than 30 days are
typical of PlanGraphics' clientele. While it is expected all amounts shown are
collectible, there is no certainty that payments will be made.
Schedule 3.12
Title to Properties, Absence of Liens and Encumbrances: Leases
Black & Veatch holds a proxy on 32,400 voting shares of the Shareholder pursuant
to the Agreement dated January 3, 1995 as disclosed in Section 2.2 (among
others) in the due diligence documentation.
Farmers Bank and Capital Trust Company holds a security interest in the accounts
receivable and a portion of the operating assets and equipment of the business
to secure a $600,000 loan and $200,000 loan. These loans may be paid at or
coincident with the Closing and the security released.
Equipment leases pursuant to Fifth Third, Overland Lease Co. (Black & Veatch)
and small number of small and miscellaneous equipment leases are encumbered per
standard practice and were disclosed in, among other documents and discussions,
the Company's financial and section 7.5 of the due diligence records.
Schedule 3.13
Valid contracts, Leases, Agreements, Covenants, Licenses, Notes, Bonds,
Mortgages, Indentures, Instruments or Commitments; Payment of $10,000 or More
3.13 (b) 1988 Ford Thunderbird Serial No. IFABP6048JH239699
1991 Chevy Blazer Serial No. I GNDT I 3ZOM2171874
3.13 (d) As identified in Section 3.10 some of the contracts are in a
delinquent state relative to contract terms, though management
has not chosen to find the client in default and has reason to
believe that payments will be made to the Company.
3.13 (f) Maurice F. Foley. Company provides health care for retired
employee and spouse until each reach the age of 65. Spouse
reached age 65 in January, 1997; retired employee will reach age
65 in July, 1997, at which time all PlanGraphics' obligations
will cease.
3.13 (h) Reference 3.12
3.13 (1) The Company maintains an oral agreement with Camp Dresser and
McKee to undertake joint business development activities in
selected accounts.
- -3.13 (1) Attachment B summarizes all open contracts that have in the past, may
now or may in the future be(en) revenue producing
- -3.13 (1) Attachment C-Subcontractors, Associates, Professional Services
- -3.13 (1) Attachment D- Teaming Agreements
- -3.13 (1) Attachment E -Miscellaneous Contracts and Agreements
Schedule 3.14
Patents, Trademarks, Copyrights Etc.
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The Company has used the mark "PlanGraphics" domestically and internationally
since 1979 and 1981, respectively, without contest; The Company has used its
service mark domestically and internationally since 1985 without contest.
The Company has taken action to formally register both its name and service mark
with the US Department of Commerce and the Canadian Intellectual Property
Office, Trademarks, where registration is currently pending.
The Company holds licenses to the commercial software that it uses in the
conduct of its business and typically must pay licensing and annual maintenance
fees for the use of the software.
Schedule 3.16
Employee Plan
125 Cafeteria Plan Reference Attachment B
Reference Employee Handbook, Reference Attachment C - information provided in
the due diligence documentation including but limited to Sections 6.2, 6.3, 6.4,
6.5, and 6.7.
Employee Pension, Health, Life and ADD insurance, reference Attachment C
Employee 401 K Plan, reference Attachment D
Schedule 3.18
Tax Matters
The Company endeavors to maintain compliance with all requests by federal,
state, and local government organizations, both domestic and international, in
regards to rules, regulations, licenses and administrative matters affecting
taxes and tax status.
Schedule 3.22
Employees
Company Debt to Employees -Attachment B
Schedule 3.23
Environmental Matters
PlanGraphics leases facilities at the following locations:
1 12 E. Main Street, Frankfort, Kentucky 40601
1300 Spring Street, Suite 306, Silver Spring, Maryland 20910
8703 Yates Drive, Suite 200, Westminster, Colorado 80030
10100 Reunion Place, Suite 715, San Antonio, Texas 78216
1232 East Broadway Road, Suite 210, Tempe, Arizona 85282
Schedule 3.25
Transactions with Certain Persons
As previously disclosed in the Company's financials and the due diligence
document, the Shareholder has a (paid in) 10% interest in Capital View
Development L.L.C. which leases office space to the Company in Frankfort, KY.
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Schedule 3.26 (b)
Suppliers and Customers (Terminated/Canceled)
As detailed in Attachment B, Accounts Payable, some accounts are past due and
it may be reasonable to assume that selected creditors may elect to restrict
account activity until such time that the account is brought current.
Schedule 7.1(g) (1)
Preclosing Covenant: Employment Agreements
Reference Appendix F and G
Schedule 7.1(g) (2)
Key Executive Manager Employment Contracts
Reference Appendix H
Schedule 7.1(g) (3)
Key Manager Employment Contracts
Reference Appendix I
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