SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 2, 1999
MONSTERDAATA.COM, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 033-01599 22-2732163
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(State or Other (Commission (IRS Employer
Jurisdiction of File No.) Identification No.)
Incorporation)
115 Stevens Avenue, Valhalla, NY 10595
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (914) 747-9100
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D-Vine, Ltd., 712 Fifth Avenue, Fifth Floor, New York, NY 10019
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On March 30, 1999, prior to the exercise of the warrant described in Item 5
below (the "Warrant"), and prior to the acquisition described in Item 2 below
(the "Acquisition"), D-Vine Investment Partners, a partnership between Edward J.
Tobin and Christopher F. Brown, owned 19,500 shares of Registrant's common
stock, representing approximately 79.2% of the total issued and outstanding
shares of Registrant's common stock. Accordingly, D-Vine Investment partners
controlled the Registrant. In connection with the exercise of the Warrant,
Registrant issued an aggregate of 1,000,000 shares of its common stock to the
Warrant holder and its designees. Separately, in connection with the
Acquisition, Registrant issued an aggregate of 6,000,000 shares of its common
stock on April 2, 1999 to former shareholders of Taconic Data Corp., a New York
corporation ("Taconic"), in exchange for the shares of stock such shareholders
then held in Taconic. None of the recipients of Registrant's shares in
connection with the exercise of the Warrant or in connection with the
Acquisition owns 10% or more of the Registrant's total issued and outstanding
shares of common stock, except for Mitchell Deutsch, who owns 3,079,054 shares
of Registrant's common stock (approximately 44.0% of the total outstanding) and
James Garfinkel, who owns 1,315,496 shares of Registrant's common stock
(approximately 18.8% of the total outstanding). As a result of the exercise of
the Warrant and the completion of the Acquisition, D-Vine Investment Partner's
percentage ownership of the Registrant was reduced to less than 1% of the total
issued and outstanding shares of Registrant's common stock, and D-Vine
Investment Partners therefore no longer controls Registrant. See Item 2 below.
In connection with the Acquisition, the following changes occurred in the
directors and officers of Registrant: Edward J. Tobin, Christopher F. Brown and
Thomas Tuttle resigned as directors, Edward J. Tobin resigned as Chief Executive
Officer and President, Steven A. Saide resigned as Secretary, Mitchell Deutsch,
James Garfinkel and Thomas Ingegneri were elected directors, Mr. Deutsch was
elected Chief Executive Officer and President and Mr. Garfinkel was elected
Vice-President, Secretary and Treasurer.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 2, 1999, pursuant to an Acquisition Agreement and Plan of
Reorganization dated as of March 26, 1999, between Taconic, Registrant and
certain shareholders of Taconic and Registrant (the "Acquisition Agreement"),
Registrant acquired 99.2% of the issued and outstanding capital stock of
Taconic, a privately-held corporation, in exchange for the issuance of an
aggregate of 6,000,000 shares of Registrant's common stock.
Taconic, which was formed in 1992, provides database information services
directly to consumers, real estate professionals and other businesses over the
Internet and through member organizations and industry trade groups. Taconic
provides an integrated data service comprising real estate transaction due
diligence, risk assessment and valuation information. In addition to
business-to-business data services, Taconic's products also include consumer
information such as neighborhood profiles containing school, town and community,
crime, culture, affordability,
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demographic and lifestyle characteristic data for every community in the United
States (by zip code).
ITEM 5. OTHER EVENTS
On April 5, 1999, Registrant filed a Certificate of Amendment to its Certificate
of Incorporation, changing its corporate name from "D-Vine, Ltd." to
"MonsterDaata.com, Inc."
On August 1, 1997, Registrant issued to Ocean Strategic Holdings Limited, a
Guernsey corporation ("OSHL"), a warrant to purchase 1,000,000 shares of its
common stock for cash consideration of $50,000. The exercise price of the
Warrant, which was originally $.01 per share, was increased to $1.00 per share
in connection with the issuance of a new warrant to OSHL described below. On
April 2, 1999, OSHL exercised its rights under the Warrant to purchase 1,000,000
shares of Registrant's common stock for $1,000,000. The Warrant and the shares
issued upon exercise thereof were issued pursuant to the provisions of
Regulation S.
On March 31, 1999, in consideration for the modification of the exercise price
of the Warrant (from $0.01 per share to $1.00 per share), Registrant issued to
OSHL a warrant (the "New Warrant") to purchase 500,000 shares of its common
stock at an exercise price of $3.00 per share. The New Warrant expires on March
31, 2004, and is not exercisable until March 31, 2000. The New Warrant was
issued pursuant to the provisions of Regulation S.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS.
It is impracticable to provide the required financial statements
concurrently with the filing of this report. Registrant expects to file
the required financial statements as soon as practicable, but in no event
later than sixty (60) days after the due date of this Current Report on
Form 8-K. In the interim, unaudited financial statements of Taconic as of
December 31, 1997 and December 31, 1996, and for the periods then ended,
are attached as Exhibit (c)(3).
(b) PRO-FORMA FINANCIAL INFORMATION.
It is impracticable to provide the required pro-forma financial
information concurrently with the filing of this report. Registrant
expects to file the required pro-forma financial information as soon as
practicable, but in no event later than sixty (60) days after the due
date of this Current Report on Form 8-K.
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(c) EXHIBITS.
(c)(1) - Acquisition Agreement
(c)(2) - New Warrant
(c)(3) - 1997 Unaudited Financial Statement of Taconic
(c)(4) - Press Release
(c)(5) - Risk Factors
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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.
MONSTERDAATA.COM, INC.
By: /s/ James Garfinkel
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James Garfinkel
Vice-President, Secretary and Treasurer
Date: April 15, 1999
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Exhibit (c)(1)
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION, (hereinafter
referred to as this "Agreement") is made and entered into this 26th day of March
by and between D-VINE, LTD., a Delaware corporation (hereinafter referred to as
"DVL"), the stockholders of DVL listed on the signature page (collectively, the
"Principal Stockholders"), TACONIC DATA CORP., a New York corporation
(hereinafter referred to as "TDC"), and the stockholders of TDC listed on the
signature page (collectively, the "TDC Sellers").
RECITALS
WHEREAS, DVL desires to acquire the majority of all the issued and
outstanding shares of TDL common stock, $.01 par value in exchange solely for
Six Million (6,000,000) shares of the authorized but unissued DVL common stock,
$.01 par value per share (post-split as per Section 1.3 below), pursuant to the
terms and conditions set forth herein (the "Acquisition"), and whereby the
transaction shall qualify as a tax free exchange pursuant to Section 351 of the
Internal Revenue Code ("IRC");
WHEREAS, in furtherance of such Acquisition, the Board of Directors of DVL
approved the Acquisition, upon the terms and subject to the conditions set forth
herein and in accordance with the applicable provisions of the Delaware General
Corporation Law ("DGCL").
WHEREAS, the TDC Sellers desire to exchange all of their share ownership
interest in TDC for shares of DVL common stock, in the respective amounts set
forth in Schedule 1.2 hereto, as a tax free exchange pursuant to Section 351 of
the IRC;
WHEREAS, the parties hereto desire to reorganize, pursuant to Section
368(a)(1)(B) of the IRC, the management and operations of DVL as set forth
herein (in order to more closely conform the management and operations of DVL to
the current management and operations of TDC).
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
THE ACQUISITION
SECTION 1.1 (a) Acquisition and Plan of Reorganization. The parties agree
that DVL shall acquire 99.2% of the issued and outstanding shares of TDC common
stock from the TDC Sellers, in exchange for Six Million (6,000,000) shares of
authorized but previously unissued DVL common stock, par value $.01 per share
(post-split as per Section 1.3 below). It is also agreed to by the parties
hereto that by acquiring the majority of the shares of TDC common
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stock, DVL will acquire all rights, titles and interest to all assets and
property presently owned by TDC. Said assets and property may be subject to
certain interests, liens and/or encumbrances. The parties hereby further agree
that at the Closing, hereinafter defined, TDC shall become a majority-owned
subsidiary of DVL. As soon as practicable after the Closing, DVL"s corporate
name will be changed from "D-Vine, Ltd." to "MonsterDaata.com, Inc." As promptly
as practicable after the Closing, the necessary steps be shall be taken in order
to reflect the relocation of DVL"s principal place of business to TDC's current
principal place of business and the management and operations of DVL will be
organized to become engaged in the current business endeavors of TDC.
SECTION 1.2 Issuance of Shares.
(a) Upon the Closing of the Agreement, DVL shall cause to be issued and
delivered to the TDC Sellers or their designees, stock certificates representing
an aggregate of Six Million (6,000,000) shares (the "Acquisition Shares") of DVL
common Stock (post-split as per Section 1.3 below) in the amounts set forth in
Schedule 1.2 hereto.
(b) The Acquisition Shares to be issued hereunder are deemed "restricted
securities" as defined by Rule 144 promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and the recipients shall represent that they are acquiring
the Acquisition Shares for investment purposes only and without the intent to
make a further distribution of the Acquisition Shares. All Acquisition Shares to
be issued under the terms of this Agreement shall be issued pursuant to
exemptions from the registration requirements of the Securities Act and the
rules and regulations promulgated thereunder. Certificates representing the
restricted Acquisition Shares shall bear the following, or similar legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
PROVISIONS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.
SECTION 1.3 Consent of Shareholders. In anticipation of this Agreement and
as a condition precedent to the consummation of the Acquisition, DVL (i) has,
concurrently with the execution of this Agreement, obtained the written consent
of the majority of its shareholders in accordance with the DGCL and with the
Securities Act and all other applicable federal securities laws and (ii) has
heretofore taken all necessary and requisite action to obtain the consent of its
Directors in order to transact the following business:
(i) To amend the Certificate of Incorporation of DVL to change the name of
DVL to "MonsterDaata.com, Inc.", in order to more accurately describe the new
business of the Company (which amendment will be filed promptly after the
Closing); and
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(ii) To amend the Certificate of Incorporation of DVL to reorganize the
share capital of DVL whereby the then issued and outstanding shares of DVL
common stock will be reverse split on a one (1) share for one thousand shares
(1,000) share basis (which amendment will be filed promptly after the date
hereof and prior to the Closing).
In addition, immediately after the filing referred to in clause (ii)
above, DVL will accept the resignations of Thomas Tuttle and Christopher F.
Brown as directors of DVL, and will report such resignations, and the items
described in clause (ii) above, on a duly filed Form 8-K. As required pursuant
to the DGCL, DVL will also promptly (and prior to the Closing Date) notify all
shareholders of the consent to the items referred to in clauses (i) and (ii)
above given by less than unanimous consent of stockholders.
SECTION 1.4 Closing. Subject to the satisfaction or waiver, if
permissible, of the conditions set forth in Articles VII, VIII and IX, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place (i) at the offices of Kaplan Gottbetter & Levenson, LLP, as promptly
as practicable (and in any event within two business days) after satisfaction or
waiver, if permissible, of the conditions set forth in Articles VII, VIII and IX
or (ii) at such other time, date or place as TDC, the TDC Sellers and DVL may
mutually agree (the date of either (i) or (ii) shall be referred to hereinafter
as the "Closing Date"). At the Closing:
(a) The TDC Sellers shall deliver to DVL all stock certificates
representing 99.2% of the issued and outstanding shares of TDC common stock, so
as to make DVL the majority holder thereof, free and clear of all claims and
encumbrances;
(b) DVL shall deliver to those persons listed in Schedule 1.2 stock
certificates representing an aggregate of 6,000,000 shares of DVL common stock,
which shall all bear the restrictive legend as set forth in Section 1.2(b)
above;
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DVL
As an inducement for TDC and the TDC Sellers to enter into this Agreement,
DVL and each Principal Stockholder hereby makes, jointly and severally as of the
date hereof and as of the Closing Date, the following representations and
warranties:
SECTION 2.1 Organization of DVL. (a) DVL is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified and in good standing as a foreign corporation in every
jurisdiction in which such qualification is necessary, and has the corporate
power and authority to own its properties and assets and to transact the
business in which it is engaged. There are no corporations or other entities
with respect to which (i) DVL owns any of the outstanding stock or other
interests, or (ii) DVL may be deemed to be in control. DVL and the Principal
Stockholders have all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and thereby,
and have taken all corporate or other action necessary to
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consummate the transactions contemplated hereby and thereby and to perform their
obligations hereunder and thereunder. This Agreement upon its execution and
delivery, is the legal, valid and binding obligation of DVL and the Principal
Stockholders, enforceable against DVL and the Principal Stockholders in
accordance with its terms except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
SECTION 2.2 Capitalization of DVL. (a) The authorized capital stock of DVL
on the date hereof consists of Fifty Million (50,000,000) shares of common
stock, par value $.01 per share (the "Common Stock"), of which Twenty-Four
Million Six Hundred Seven Thousand Seven Hundred Thirty-one (24,607,731) shares
of Common Stock are issued and outstanding, and Ten Million (10,000,000) shares
of preferred stock, par value $.01 per share, with such rights, privileges,
preferences and other terms and conditions as shall be approved by DVL's Board
of Directors pursuant to a duly adopted resolution thereof ("Preferred Stock"),
of which no shares of Preferred Stock are issued and outstanding.
(b) All shares of Common Stock currently issued and outstanding have
been duly authorized and validly issued and are fully paid and non-assessable,
and have been issued in compliance with any and all applicable laws, contractual
requirements and other legal requirements (including federal and state
securities laws or pursuant to appropriate exemptions therefrom). There are no
options, warrants, rights, calls, commitments or agreements of any character
obligating DVL to issue any shares of its capital stock or other securities or
any security representing the right to purchase or otherwise receive any such
stock or other securities except (i) the warrant (the "Warrant") for 1,000,000
shares of Common Stock, dated August 1, 1997, issued to Ocean Strategic
Holdings, Limited, a Guernsey corporation (the "Warrant Holder") and (ii) the
warrant (the "Additional Warrant") for 500,000 shares of Common Stock, dated
March 31, 1999, issued to the Warrant Holder. The Acquisition Shares, when
issued, will be duly authorized, validly issued, fully paid and non-assessable.
(c) After giving effect to the amendment to the Certificate of
Incorporation described in Section 1.3(ii), the authorized capital stock of DVL
will consists of Fifty Million (50,000,000) shares of Common Stock and Ten
Million (10,000,000) shares of Preferred Stock, of which Twenty-Four Thousand
Six Hundred Eighty Eight (24,688) shares of Common Stock and no shares of
Preferred Stock will be issued and outstanding.
(d) Prior to the date hereof, or roughly concurrent with the
execution of this Agreement, DVL and the Warrant Holder amended the Warrant to
provide for (i) the purchase thereunder of 1,000,000 common shares of DVL for a
purchase price of $1.00 per share and (ii) the issuance of the Additional
Warrant. DVL has informed TDC that the New Warrant Holders will exercise the
Warrant and, prior to the Closing Date, DVL will receive $1,000,000 in proceeds
pursuant to such exercise (free and clear of any fees, commissions, deductions
or expenses). The exercise of the Warrant and the issuance of 1,000,000 shares
thereunder will each be made in compliance with any and all applicable laws,
contractual requirements and other legal requirements (including federal and
state securities laws or pursuant to appropriate exemptions therefrom). The
amendment and exercise of the Warrant will be duly reported by DVL on Form 8-K
prior to the Closing.
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(e) Other than the transactions contemplated by this Agreement,
there is no outstanding vote, plan, pending proposal or right of any person to
cause any redemption of Common Stock or the merger or consolidation of DVL with
or into any other entity. DVL is not under any obligation under any agreement to
register any of its securities under federal or state securities laws.
(f) There are no agreements among stockholders of DVL, or otherwise,
voting trusts, proxies or other agreements or understanding of any character,
whether written or oral, with respect to or concerning the purchase, sale,
transfer or voting of the Common Stock or any other security of DVL.
(g) None of DVL or any Principal Stockholders have any legal
obligations, absolute or contingent, to any other Person to sell any assets or
to sell any capital stock or any other security of DVL or to effect any merger,
consolidation or other reorganization of DVL or to enter into any agreement with
respect thereto, except pursuant to this Agreement.
SECTION 2.3 Charter Documents. Certified copies of the DVL Articles of
Incorporation and By-Laws, as amended to date, have been or will be delivered to
TDC prior to the Closing and are or will be true, correct and complete copies
thereof.
SECTION 2.4 Corporate Documents. The DVL shareholders' list previously
delivered to TDC and DVL's corporate minute books are complete and accurate as
of the date hereof and such corporate minute books contain the recorded minutes
of all corporate meetings or the written consents of shareholders and directors
through the date hereof.
SECTION 2.5 Financial Statements. (a) DVL's audited financial statements
(the "DVL Financial Statements") for the years ended September 31, 1997 and
1998, copies of which have been delivered to TDC, are true and complete in all
material respects, having been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis for the period
covered by such statements, and fairly present, in accordance with GAAP, the
financial condition of DVL, and results of its operations for the periods
covered thereby. DVL maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
with management"s authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management"s authorizations and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any difference. Neither DVL nor any
of its subsidiaries has engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts or funds
which have been and are reflected in the normally maintained books and records.
Except as otherwise disclosed to TDC in writing and as set forth herein, there
has been no material adverse change in the business operations, assets,
properties, prospects or condition (financial or otherwise) of DVL taken as a
whole from that reflected in the financial statements referred to in this
Section 2.5.
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(b) SEC Documents. DVL has furnished TDC with a true and complete
copy of each report and schedule filed by DVL with the SEC since September 25,
1996 (as such documents have since the time of their filing been amended, the
"DVL SEC Documents"), and since that date DVL has filed with the SEC all
documents required to be filed pursuant to Section 15(d) of the Exchange Act of
1934, as amended (the "Exchange Act"). As of their respective dates, the DVL SEC
Documents complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such DVL SEC Documents, and none
of the DVL SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of DVL included in the DVL SEC
Documents (i) comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, (ii) are accurate, complete and in accordance with the
books and records of DVL, (iii) have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-QSB of the SEC) and (iv) fairly present (subject, in the
case of the unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of DVL as at the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended.
SECTION 2.6 Absence of Certain Changes or Events. Since the date of the
latest DVL financial statement and except as disclosed otherwise herein, DVL has
not (i) issued or sold any promissory note, stock, bond, option or other
security of which it was an issuer or other obligor, (ii) discharged or
satisfied any lien or encumbrance or paid any obligation or liability, absolute
or contingent, direct or indirect, (iii) incurred or suffered to be incurred any
liability or obligation whatsoever, (iv) caused or permitted any lien,
encumbrance or security interest to be created or arise on or in any of its
properties or assets, (v) declared or made any dividend, payment or distribution
to stockholders or purchased or redeemed or agreed to purchase or redeem any
shares of its capital stock, (vi) reclassified its shares of capital stock,
(vii) amended its Certificate of Incorporation or Bylaws, (viii) acquired any
equity interest in any other Person, or (ix) entered into any agreement or
transaction except in connection with the execution and performance of this
Agreement. DVL has not entered into any agreement to do any of the foregoing
actions described in this Section 2.6.
SECTION 2.7 Assets and Liabilities. DVL has good and marketable title to
all of its assets and property, free and clear of any and all liens, claims and
encumbrances. As of the date hereof, DVL does not have any debts, liabilities or
obligations of any nature whatsoever, whether accrued, absolute, contingent, or
otherwise, whether due or to become due.
SECTION 2.8 Tax Returns and Payments. All of DVL's tax returns (federal,
state, city, county or foreign) which are required by law to be filed on or
before the date of this Agreement, have been duly filed and are complete and
accurate in all respects. DVL has paid all taxes due on said returns, any
assessments made against DVL and all other taxes, fees and similar charges
imposed on DVL by any governmental authority (other than those, the amount or
validity of which is being contested in good faith by appropriate proceedings).
No tax liens have
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been filed and no claims are being assessed with respect to any such taxes, fees
or other similar charges. DVL knows of (i) no other tax returns or reports which
are required to be filed which have not been so filed and (ii) no unpaid
assessment for additional taxes for any fiscal period or any basis thereof.
SECTION 2.9 Required Authorizations. There have been or will be timely
filed, given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications waivers or other actions of any kind
required by virtue of execution and delivery of this Agreement by DVL or the
consummation by it of the transactions contemplated hereby. Without limiting the
generality of the foregoing, all necessary director and shareholder actions and
consents have been obtained for the transactions described in Sections 1.3 and
2.2, and all notices to shareholders of consents given by stockholders to such
transactions described in Section 1.3 by less than unanimous consent have been
sent in accordance with the DGCL.
SECTION 2.10 Compliance with Law and Government Regulations. DVL is in
compliance with and is not in violation of applicable federal, state, local or
foreign statutes, laws or regulations (including without limitation, any
applicable building, zoning or other law, ordinance or regulation) affecting
DVL, its properties or the operation of its businesses. DVL is not subject to
any order, decree, judgment or other sanction of any court, administrative
agency or other tribunal.
SECTION 2.11 Litigation. Except as set forth on Schedule 2.11, there is no
litigation, arbitration, proceeding or investigation pending, threatened or
anticipated to which DVL is a party or which may result in any material change
in the business or condition, financial or otherwise, of DVL or in any of its
properties or assets, or which might result in any liability on the part of DVL,
or which questions the validity of this Agreement or of any action taken or to
be taken pursuant to or in connection with the provisions of this Agreement, and
to the best knowledge of DVL, there is no basis for any such litigation,
arbitration, proceeding or investigation. There are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting DVL or any of its assets that is not disclosed
herein. Schedule 2.11 contains a complete and accurate description of all
claims, suits, litigations, proceedings, investigations, disputes, writs,
injunctions, judgments and decrees since December 31, 1996 to which DVL has been
a party.
SECTION 2.12 Governmental Consent. No consent, approval, authorization or
order of, or registration, qualification, designation, declaration or filing
with, any governmental authority on the part of DVL is required in connection
with the execution and delivery of this Agreement or the carrying out of any
transactions contemplated hereby with the exception of the necessary corporate
filings with the State of Delaware relating to the transactions described in
Section 1.3 and the filings with the SEC described elsewhere herein.
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SECTION 2.13 No Disqualifying Orders. Neither DVL, the Principal
Stockholders nor any of its affiliates, directors, officers or principals is
subject to any disqualifying order under the "Bad Boy" provisions of the federal
or any state"s securities law. As used herein, "Bad Boy" provisions include Rule
262 of Regulation A, Rule 507 of Regulation D and other similar disqualifying
provisions of federal and state securities laws.
SECTION 2.14 Business. DVL (i) does not own or lease any real property or
personal property, (ii) is not a party to any contract, (iii) has no employees
or anyone who acts as an employee, (iv) has only the bank accounts listed on
Schedule 2.14 hereto and (v) is not required to have any Permits.
SECTION 2.15 Authority. The Board of Directors of DVL and the general
partner of the Principal Stockholders have approved this Agreement and duly
authorized the execution hereof. DVL and the Principal Stockholders have full
power, authority and legal right to enter into this Agreement and to consummate
the transactions contemplated hereby, and all action necessary to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby has been duly and validly taken. The execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby and compliance by DVL and the Principal Stockholders with
the provisions hereof will not (a) conflict with or result in a breach of any
provisions 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 creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of DVL under, any of the terms, conditions or provisions of the
Certificate of Incorporation of DVL, the partnership agreement of the Principal
Stockholders, or any note, bond, mortgage, indenture, license, agreement or any
instrument or obligation to which DVL and the Principal Stockholders are a party
or by which they are bound; or (b) violate any order, writ, injunction, decree,
law, statute, rule or regulation applicable to DVL or the Principal Stockholders
or any of their properties or assets.
SECTION 2.16 Full Disclosure. None of the representations and warranties
made by DVL herein, or in any exhibit, certificate or memorandum furnished or to
be furnished by DVL on its behalf pursuant hereto, contains or will contain any
untrue statement of material fact, or omits any material fact, the omission of
which would be misleading. The information with respect to DVL and TDC which is
to be included in any notice to be sent to the shareholders of DVL will not
contain any untrue statement of material fact, or omit to state any material
fact necessary to make the statement or fact contained herein not misleading.
SECTION 2.17 Brokerage. No broker, finder or investment banker is entitled
to any brokerage, finder"s or other fee or commission in connection with the
Acquisition based upon arrangements made by or on behalf of DVL.
SECTION 2.18 Transactions with Affiliates. No director or officer of DVL
or any member of his or her immediate family, is a party to any contract or
other business arrangement or relationship of any kind with DVL, has an
ownership interest in any business, corporate or otherwise, which is a party to,
or in any property which is the subject of, business arrangements or
relationships of any kind with DVL.
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ARTICLE III
COVENANTS OF DVL AND THE PRINCIPAL STOCKHOLDERS
SECTION 3.1 Conduct Prior to the Closing. Between the date hereof and the
Closing, other than actions or transactions referred to herein:
(a) DVL will not enter into any material agreement, contract or
commitment, whether written or oral, or engage in any transaction, without the
prior written consent of TDC;
(b) DVL will not pay, incur or declare any dividends or distributions with
respect to its capital stock or amend its Articles of Incorporation or By-Laws,
without the prior written consent of TDC;
(c) DVL will not authorize, issue, sell, purchase or redeem any shares of
its capital stock or any options or other rights to acquire its capital stock,
without the prior written consent of TDC;
(d) DVL will comply with all requirements which federal or state law may
impose on it with respect to this Agreement and the transactions contemplated
hereby, and will promptly cooperate with and furnish written information to TDC
in connection with any such requirements imposed upon the parties hereto in
connection therewith and will provide TDC with the opportunity to review and
approve any mailing or proxy to be delivered to stockholders of DVL;
(e) DVL will not incur any indebtedness for money borrowed, or issue or
sell any debt securities, incur or suffer to be incurred any liability or
obligation of any nature whatsoever, or cause or permit any lien, encumbrance or
security interest to be created or arise on or in any of its properties or
assets, acquire or dispose of fixed assets change employment terms, enter into
any material or long-term contract, guarantee obligations of any third party,
settle or discharge any balance sheet receivable for less than its stated amount
or enter into any other transaction other than in the regular course of
business, except to comply with the terms of this Agreement, without the prior
written consent of TDC.
(f) DVL will not make any investment of capital nature either buy
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person.
(g) DVL will not enter into any contract whatsoever, including any
employment contract or any other compensation arrangement.
(h) DVL will not do any other act which would cause representation or
warranty of DVL in this Agreement to be or become untrue in any material respect
or that is not in the ordinary course of business consistent with past practice.
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(i) Neither DVL nor any Principal Stockholder shall directly or indirectly
(a) solicit any inquiry or proposals or enter into or continue any discussions,
negotiation or agreements relating to (i) the sale or exchange of DVL"s capital
stock or (ii) the merger of DVL with any Person or (b) provide any assistance or
any information to other otherwise cooperate with any Person in connection with
any such inquiry, proposal or transaction.
(j) DVL shall grant to TDC and its counsel, accountants and other
representatives, full access during normal business hours during the period
prior to the Closing to all of its respective properties, books, contracts,
commitments and records and, during such period, furnish promptly to TDC and
such representatives all information relating to DVL as TDC may reasonably
request, and shall extend to TDC the opportunity to meet with DVL's accountants
and attorneys to discuss the financial condition of DVL; and
(k) Except for the transactions contemplated by this Agreement, DVL will
conduct its business in the normal course, and shall not sell, pledge or assign
any of its assets without the prior written consent of TDC.
SECTION 3.2 Affirmative Covenants. Prior to Closing, DVL will do the
following:
(a) Use its best efforts to accomplish all actions necessary to consummate
this Agreement, including satisfaction of all conditions contained in this
Agreement;
(b) Promptly notify TDC in writing of any material adverse change in the
financial condition, business, operations or key personnel of DVL, any
threatened material litigation or investigation, any breach of its
representations or warranties contained herein, and any material contract,
agreement, license or other agreement which, if in effect on the date of this
Agreement, should have been included in this Agreement or in an exhibit annexed
hereto and made a part hereof;
(c) Satisfy all consents of or notices to its shareholders under federal
and state securities laws and state corporate law.
(d) Obtain written resignations and general releases from its existing
officers and directors other than Ed Tobin (who will remain as a director and
the President of DVL for 10 days after the Closing) and, concurrent with the
Closing, nominate (by action of its sole remaining director) the nominees listed
in Section 9.5.
(e) Obtain financing from the exercise of all outstanding warrants as
contemplated by Section 2.2(c).
(f) Reserve, and promptly after the Closing, issue and delivered to TDC or
its designees the number of shares of DVL common stock required hereunder.
(g) Complete the share reorganization of DVL as contemplated by Section
1.3(ii).
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(h) Take all other necessary corporate actions to accomplish those items
in Section 1.3 hereof and the other items herein that are to be completed
promptly or prior to Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TDC
TDC hereby represents, warrants and agrees that:
SECTION 4.1 Organization of TDC. TDC is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
is duly qualified or will become duly qualified and in good standing in every
jurisdiction in which such qualification is necessary. There are no corporations
or other entities with respect to which (i) TDC owns any of the outstanding
stock or other interests, or (ii) TDC may be deemed to be in control except as
otherwise disclosed in Schedule 4.1 annexed hereto and by this reference made a
part hereof.
SECTION 4.2 Shareholders. TDC has nineteen (19) shareholders. The 18 TDC
Sellers own 3,789,981 of the 3,854,218 issued and outstanding shares of common
stock of TDC. All 3,854,218 issued and outstanding shares of common stock were
validly issued, and are fully paid and non-assessable. There are no options,
warrants, rights, calls, commitments or agreements of any character obligating
TDC to issue any additional shares of its common stock except as otherwise
disclosed in Schedule 4.2 annexed hereto and by this reference made a part
hereof.
SECTION 4.3 Charter Documents. Complete and correct copies of the
Certificate of Incorporation of TDC, and all amendments thereto, have been or
will be delivered to DVL prior to the Closing.
SECTION 4.4 Financial Statements, Assets and Liabilities. TDC's audited
financial statements (the "TDC Financial Statements") for the years ended
December 31, 1996 and 1997, copies of which have been delivered to DVL, are true
and complete in all material respects, having been prepared in accordance with
GAAP applied on a consistent basis for the period covered by such statements,
and fairly present, in accordance with GAAP, the financial condition of TDC, and
results of its operations for the periods covered thereby. TDC has good and
marketable title to all of its assets and property to be delivered to DVL
hereunder free and clear of any and all liens, claims and encumbrances, except
as may be otherwise set forth herein and in its financial statements. TDC and
each of its Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorizations and (iv) the recorded accountability
for assets if compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any difference. Neither TDC nor any
of its Subsidiaries has engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts or funds
which have been and are reflected in the normally maintained books and records.
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SECTION 4.5 Absence of Certain Changes or Events. Since December 31, 1998,
except as disclosed otherwise herein, TDC has not (i) issued or sold any
promissory note, unit of ownership, bond, option or other security of which it
was an issuer or other obligor, (ii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability, absolute or contingent, direct
or indirect, except in the ordinary course of its business, (iii) incurred or
suffered to be incurred any liability or obligation whatsoever, except in the
ordinary course of its business, (iv) cause or permitted any lien, encumbrance
or security interest to be created or arise on or in any of its properties or
assets, (v) declared or made any dividend, payment or distribution to
stockholders or purchased or redeemed or agreed to purchase or redeem any
stockholder"s ownership rights, or (vi) reclassified its shares of capital
stock, or (vii) entered into by agreement or transaction not in the ordinary
course of business.
SECTION 4.6 Tax Returns and Payments. All of TDC's tax returns (federal,
state, city, county or foreign) which are required by law to be filed on or
before the date of this Agreement, have been duly filed or extended with the
appropriate governmental authority and are complete and accurate in all
respects. TDC has paid all taxes to be due on said returns, on any assessments
made against TDC and on all other taxes, fees and similar charges imposed on TDC
by any governmental authority (other than those, the amount or validity of which
is being contested in good faith by appropriate proceedings). No tax liens have
been filed and no claims are being assessed with respect to any such taxes, fees
or other similar charges. TDC knows of (i) no other tax returns or reports which
are required to be filed which have not been so filed and (ii) no unpaid
assessment for additional taxes for any fiscal period or any basis thereof.
SECTION 4.7 Required Authorizations. There have been or will be timely
filed, given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications waivers or other actions of any kind
required by virtue of execution and delivery of this Agreement by TDC or the
consummation by it of the transactions contemplated hereby.
SECTION 4.8 Compliance with Law and Government Regulations. TDC is, to the
best of its knowledge, in compliance with all applicable statutes, regulations,
decrees, orders, restrictions, guidelines and standard affecting its properties
and operations, imposed by the United States of America or any state to which
TDC is subject, the failure to comply with which would, either individually or
in the aggregate, have a material adverse effect on the business, finances or
prospects of TDC.
SECTION 4.9 Litigation. There is no litigation, arbitration, proceeding or
investigation pending or threatened to which TDC is a party or which may result
in any material change in the business condition, financial or otherwise, of TDC
or in any of its properties or assets, or which questions the validity of this
Agreement or of any action taken or to be taken pursuant to or in connection
with the provisions of this Agreement, and to the best knowledge of TDC, there
is no basis for any such litigation, arbitration, proceeding or investigation,
except as otherwise set forth in Schedule 4.9. There are presently no
outstanding judgments, decrees or orders of any court or any governmental or
administrative agency against or affecting TDC or any of its assets that is not
disclosed herein.
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SECTION 4.10 Governmental Consent. No consent, approval, authorization or
order of, or registration, qualification, designation, declaration or filing
with, any governmental authority on the part of TDC is required in connection
with the execution and delivery of this Agreement or the carrying out of any
transactions contemplated herein.
SECTION 4.11 Authority. The Board of Directors of TDC has approved this
Agreement and duly authorized the execution hereof. TDC and each of the
corporate TDC Sellers has full power, authority and legal right to enter into
this Agreement and to consummate the transactions contemplated hereby, and all
corporate action necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby has been
duly and validly taken. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by TDC with
the provisions hereof will not (a) conflict with or result in a breach of any
provisions 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 creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of TDC under, any of the terms, conditions or provisions of the
Certificate of Incorporation of TDC, or any note, bond, mortgage, indenture,
license, agreement or any instrument or obligation to which TDC is a party or by
which it is bound; or (b) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to TDC or any of its properties or assets.
SECTION 4.12 Ownership of Shares. TDC has received representations from
the TDC Sellers that the holders of 99.2% of the TDC common stock currently
issued and outstanding (which stock is to be transferred to DVL under this
Agreement) have full power and authority transfer such shares of TDC common
stock to DVL hereunder, and that such shares are free and clear of any liens,
charges, mortgages, pledges or encumbrances and that such shares are not subject
to any claims as to the ownership thereof, or any rights, powers or interest
therein, by any third party.
SECTION 4.13. Investment Purpose. TDC has received or shall receive
representations from its stockholders that the recipients of the restricted DVL
Shares hereunder are acquiring the shares for investment purposes only and
acknowledges that the DVL Shares issued hereunder are "restricted securities"
and may not be sold, traded or otherwise transferred without registration under
the Securities Act or exemption therefrom.
SECTION 4.14 Nonexistence of Disqualifying Orders. Neither TDC nor any of
its affiliates, directors, officers or principals is subject to any
disqualifying order under the "Bad Boy" provisions of the federal or any state"s
securities law as defined in Section 2.15.
SECTION 4.15 Full Disclosure. None of the representations and warranties
made by TDC herein, or in any exhibit, certificate or memorandum furnished or to
be furnished by, on its behalf pursuant hereto, contains or will contain any
untrue statement of material fact, or omits any material fact, the omission of
which would be misleading.
SECTION 4.16 Transactions and Affiliates. No officer or director of TDC or
any member of his or her immediate family, is a party to any material contract
or other business
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arrangement or relationship of any kind with TDC or has an ownership interest in
any material business, corporate or otherwise, which is a party to, or in any
property which is the subject of, business arrangements or relationships of any
kind with TDC.
ARTICLE V
COVENANTS OF TDC
SECTION 5.1 Conduct Prior to the Closing. Between the date hereof and the
Closing:
(a) Except within the regular course of business, TDC will not enter into
any material agreement, contract or commitment, whether written or oral, without
the prior written consent of DVL;
(b) TDC will not pay, incur or declare any dividends or distributions with
respect to its stockholders or amend its Certificate of Incorporation, without
the prior written consent of DVL;
(c) TDC will not authorize, issue, sell, purchase, or redeem any shares of
its common stock or any options or other rights to acquire shares of its common
stock without the prior written consent of DVL.
(d) Except within the regular course of business and in its financing
activities previously disclosed to DVL, TDC will not incur any indebtedness for
money borrowed or issue any debt securities, or incur or suffer to be incurred
any liability or obligation of any nature whatsoever, or cause or permit any
lien, encumbrance or security interest to be created or arise on or in any of
its properties or assets, without the prior written consent of DVL;
(e) TDC will not make any investment of capital nature either buy
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person.
(f) TDC will not do any other act which would cause representation or
warranty of DVL in this Agreement to be or become untrue in any material respect
or that is not in the ordinary course of business consistent with past practice.
(g) TDC shall not directly or indirectly (a) solicit any inquiry or
proposals or enter into or continue any discussions, negotiation or agreements
relating to (i) the sale or exchange of TDC"s capital stock, or (ii) the
Acquisition of TDC with any Person other than DVL; or (b) provide any assistance
or any information to, or other otherwise cooperate with, any Person in
connection with any such inquiry, proposal or transaction.
(h) TDC will comply with all requirements which federal or state law may
impose on
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it with respect to this Agreement and the transactions contemplated hereby, and
will promptly cooperate with and furnish written information to DVL in
connection with any such requirements imposed upon the parties hereto in
connection therewith;
(i) TDC shall grant to DVL and its counsel, accountants and other
representatives, full access during normal business hours during the period
prior to the Closing to all its respective properties, books, contracts,
commitments and records and, during such period, furnish promptly to DVL and
such representatives all information relating to TDC as DVL may reasonably
request, and shall extend to DVL the opportunity to meet with TDC's accountants
and attorneys to discuss the financial condition of TDC.
SECTION 5.2 Affirmative Covenants. Prior to Closing, TDC will do the
following:
(a) Use its best efforts to accomplish all actions necessary to consummate
this Agreement, including satisfaction of all conditions contained in this
Agreement; and
(b) Promptly notify DVL in writing of any material adverse change in the
financial condition, business, operations or key personnel of TDC, any
threatened material litigation or investigation, any breach of its
representations or warranties contained herein, and any material contract,
agreement, license or other agreement which, if in effect on the date of this
Agreement, should have been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense, except as provided for in Section 11.1.
SECTION 6.2. Brokers and Finders. Each of the parties hereto represents,
as to itself, that no agent, broker, investment banker or firm or person is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement.
SECTION 6.3 Necessary Actions. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In the event at any time after the Closing, any further action is necessary or
desirable to carry out the purpose of this Agreement, the proper managers,
officers and/or directors of DVL or TDC, as the case may be, shall take all such
necessary action.
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SECTION 6.4 Indemnification.
(a) General.
(i) Subsequent to the Closing, DVL and the Principal
Stockholders shall, jointly and severally, indemnify TDC, the TDC Sellers, and
the TDC Officers and directors, ("TDC Indemnified Parties") against, and hold
each of the TDC Indemnified Parties harmless from any damage, claim, loss, cost,
fine, liability, obligation or expense, including without limitation, interest,
penalties, reasonable attorneys" fees and expenses of investigation, diminution
of value, response action, removal action or remedial action (collectively
"Damages") incurred by any such TDC Indemnified Party, that are incident to,
arise out of, in connection with, or related to, whether directly or indirectly,
the breach of any warranty, representation, covenant or agreement of DVL or the
Principal Stockholders contained in this Agreement or any schedule hereto or in
any certificate or instrument of conveyance (including, without limitation, any
notice to be delivered to the shareholders of DVL) delivered by or on behalf of
DVL or the Principal Stockholders pursuant to this Agreement or in connection
with the transaction contemplated hereby.
(ii) Subsequent to the Closing, TDC and the TDC Sellers shall
indemnify DVL and the Principal Stockholders ("DVL Indemnified Parties")
against, and hold each of the DVL Indemnified Parties harmless from, any Damages
incurred by such DVL Indemnified Party, that are incident to, arise out of, in
connection with, or related to, whether directly or indirectly, the breach of
any warranty, representation, covenant or agreement of TDC contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of TDC pursuant to this Agreement or in connection
with the transactions contemplated hereby.
The term "Damages" as used in this Section 6.4 is not limited to
matters asserted by third parties against TDC Indemnified Parties or DVL
Indemnified Parties, but includes Damages incurred or sustained by such persons
in the absence of third party claims.
(b) Procedure for Claims. If a claim for Damages (a "Claim") is to
be made by a person entitled to indemnification hereunder, the person claiming
such indemnification (the "Indemnified Party"), subject to clause (ii) below,
shall give written notice (a "Claim Notice") to the indemnifying person (the
"Indemnifying Party") as soon as practicable after the Indemnified Party becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 6.4. The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except and only to the extent that, the Indemnifying
Party demonstrates actual material damage caused by such failure. Failure by the
Indemnifying Party to respond within 30 days of delivery of a Claim Notice shall
constitute acceptance by the Indemnifying Party of responsibility to make
payment pursuant thereto. In the case of a Claim involving the assertion of a
claim by a third party (whether pursuant to a lawsuit or other legal action or
otherwise, a "Third-Party Claim"), if the Indemnifying Party shall acknowledge
in writing to the Indemnified
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Party under the terms of its indemnity hereunder in connection with such
Third-Party Claim, then (A) the Indemnifying party shall be entitled and, if it
so elects, shall be obligated at its own cost, risk and expense, (1) to take
control of the defense and investigation of such Third-Party Claim and (2) to
pursue the defense thereof in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued, including, without
limitation, to employ and engage attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, and (B) the
Indemnifying Party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the prior written consent of the Indemnified Party, such consent not
to be unreasonably withheld. In the event the Indemnifying Party elects to
assume control of the defense and investigation of such lawsuit or other legal
action in accordance with this Section 6.4, the Indemnified Party may, at its
own cost and expense, participate in the investigation, trial and defense of
such Third-Party Claim; provided that, if the named persons to a lawsuit or
other legal action include both the Indemnifying Party and the Indemnified Party
and the Indemnified Party has been advised in writing by counsel that there may
be one or more legal defenses available to such Indemnified Party that are
different from or additional to those available to the Indemnifying Party, the
Indemnified Party shall be entitled, at the Indemnifying Party"s cost, risk and
expense, to separate counsel of its own choosing. If the Indemnifying Party
fails to assume the defense of such Third-Party Claim in accordance with this
Section 6.4 within 10 calendar days after receipt of the Claim Notice, the
Indemnified Party against which such Third-Party Claim has been asserted shall
upon delivering notice to such effect to the Indemnifying Party have the right
to undertake, at the Indemnifying Party"s cost, risk and expense, the defense,
compromise and settlement of such Third-Party Claim on behalf of and for the
account of the Indemnifying Party; provided that such Third-Party Claim shall
not be compromised or settled without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. In the
event the Indemnifying Party assumes the defense of the claim, the Indemnifying
Party shall keep the Indemnified Party reasonably informed of the progress of
any such defense, compromise or settlement, and in the event the Indemnified
Party assumes the defense of the claim, the Indemnified Party shall keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement. The Indemnifying Party shall be liable for any
settlement of any Third-party Claim effected pursuant to and in accordance with
this Section 6.4 and for any final judgment (subject to any right of appeal),
and the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Party from and against any and all Damages by reason of such
settlement or judgment.
(c) No Right of Contribution. After the Closing, no Principal
Stockholder shall have any right of contribution or other recourse against DVL
for any breach of any representation, warranty, covenant or agreement of DVL.
TDC and DVL shall be entitled to specific performance and injunctive relief,
without posting bond or other security, for the purpose of asserting their
respective rights under this Section 6.4. The remedies described in this Section
6.4 shall be in addition to, and not in lieu of, and any other remedies at law
or in equity that the parties may elect to pursue.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Agreement are subject to the
fulfillment and satisfaction of each of the following conditions:
SECTION 7.1 Legal Action. No preliminary or permanent injunction or other
order by any federal or state court which prevents the consummation of this
Agreement or any of the transactions contemplated by this Agreement shall have
been issued and remain in effect.
SECTION 7.2 Absence of Termination. The obligations to consummate the
transactions contemplated hereby shall not have been canceled pursuant to
Article X hereof.
SECTION 7.3 Required Approvals. DVL and TDC shall have received all such
approvals, consents, authorizations or modifications as may be required to
permit the performance by DVL and TDC of their respective obligations under this
Agreement and the consummation of the transactions herein contemplated, whether
from governmental authorities or other persons, and DVL and TDC shall each have
received any and all permits and approvals from any regulatory authority having
jurisdiction required for the lawful consummation of this Agreement.
SECTION 7.4 "Blue Sky" Compliance. There shall have been obtained any and
all permits, approvals and consents of the appropriate state securities
commissions of any jurisdictions, and of any other governmental body or agency,
which counsel for DVL or TDC may reasonably deem necessary or appropriate so
that consummation of the transactions contemplated by this Agreement may be in
compliance with all applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF DVL AND THE PRINCIPAL STOCKHOLDERS
All obligations of DVL under this Agreement are subject to the fulfillment
and satisfaction by TDC prior to or at the time for Closing, of each of the
following conditions, any one or more of which may be waived by DVL.
SECTION 8.1 Representations and Warranties True at Closing. All
representations and warranties of TDC contained in this Agreement will be true
and correct at and as of the time of the Closing, TDC shall have delivered to
DVL an Officer"s Certificate dated the Closing Date, and signed by a duly
authorized officer, in each case to such effect and in form and substance
satisfactory to DVL.
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SECTION 8.2 Performance. The obligations of TDC to be performed on or
before the Closing pursuant to the terms of this Agreement shall be duly
performed at such time.
SECTION 8.3 Absence of Certain Changes or Events. There shall not have
occurred, since the date hereof, any adverse change in the business, condition
(financial or otherwise), assets or liabilities of TDC or any event or condition
of any character adversely affecting TDC.
SECTION 8.4 Closing Documents. TDC shall have delivered to DVL the
documents and other items described in Section 10.2 and such other documents and
items as DVL shall reasonably request.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF TDC
All obligations of TDC and the TDC Sellers under this Agreement are
subject to the fulfillment and satisfaction by DVL and the Principal
Stockholders prior to or at the time of Closing, of each of the following
conditions, any one or more of which may be waived by TDC.
SECTION 9.1 Representations and Warranties True at Closing. All
representations and warranties of DVL and the Principal Stockholders contained
in this Agreement will be true and correct at and as of the time of the Closing,
and DVL and the Principal Stockholders shall have delivered to TDC an Officer"s
Certificate dated the Closing Date, to such effect and in the form and substance
satisfactory to TDC.
SECTION 9.2 Performance. The obligations of DVL and the Principal
Stockholders to be performed on or before the Closing pursuant to the terms of
this Agreement shall have been duly performed at such time.
SECTION 9.3 Absence of Certain Changes or Events. There shall not have
occurred, since the date hereof, any adverse change in the business, condition
(financial or otherwise), assets or liabilities of DVL or any event or condition
of any character adversely affecting DVL.
SECTION 9.4 Resignations and Releases. Prior to the Closing of this
Agreement, the current directors and officers of DVL shall have submitted their
resignations as directors and officers of DVL, and general releases in favor of
DVL, effective as of the time set forth in Section 1.3 (except in the case of Ed
Tobin, whose resignation and release delivered at Closing shall be effective as
of the 10th day following the Closing Date).
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SECTION 9.5 Appointment of New Officers and Directors. At Closing, the
remaining director of DVL will appoint the following TDC designees as officers
and directors of DVL:
Mitchell Deutsch (Director), Vice President
James Garfinkel, (Director), Secretary and Treasurer
SECTION 9.6 Opinion of Counsel. DVL shall deliver to TDC an opinion of
counsel substantially in the form previously provided to DVL's counsel.
SECTION 9.7 Closing Documents. DVL and the Principal Stockholders, as the
case may be, shall have delivered to TDC the documents and other items described
in Section 10.1 and such other documents and items as TDC may reasonably
require.
SECTION 9.8 Exemption Under Federal and State Securities Laws. The
issuance of shares of DVL in the Acquisition shall not violate any federal or
state securities laws.
SECTION 9.9 Charter Amendment. The Amendment to the Certificate of
Incorporation of DVL as described in Section 1.3 shall have occurred and the
notice to shareholders referred to in such Section shall have been duly sent in
accordance with the DGCL.
SECTION 9.10 Exercise of Warrant. The Warrant shall have been exercised
and DVL shall have received proceeds of $1,000,000 as described in Section
2.2(d).
ARTICLE X
CLOSING
On the Closing Date:
SECTION 10.1 Deliveries by DVL. DVL shall deliver (or cause to be
delivered) to TDC:
(a) any Consents required to be obtained by DVL and the Principal
Stockholders;
(b) an Officer's Certificate as described in Section 9.1 hereof,
dated the Closing Date, that confirms the satisfaction of the conditions set
forth in Sections 9.1, 9.2 and 9.3;
(c) all DVL company books and records;
(d) an opinion of legal counsel to DVL dated as of the Closing Date,
in a form reasonably satisfactory to TDC;
20
<PAGE>
(e) the Acquisition Shares to be issued to the TDC shareholders in
accordance with Section 1.2;
(f) evidence that this Agreement and the transactions contemplated
hereby have been approved by the stockholders owning a majority of the issued
and outstanding common stock of DVL;
(g) certificates of good standing from Delaware and any other state
in which DVL is required to be qualified to do business;
(h) a Secretary"s Certificate of DVL, in the form and substance
satisfactory to TDC, attaching thereto the current Certificate of Incorporation
of DVL, bylaws of DVL and meeting minutes from all Board and shareholder
meetings for the last five years as well as verifying that no other director or
stockholder minutes exist and no other director or stockholder meetings took
place;
(i) such other documents and certificates duly executed as may
reasonably be requested by TDC prior to the Closing Date;
SECTION 10.2 Delivered by TDC. TDC shall deliver to DVL:
(a) any Consents required to be obtained by TDC;
(b) TDC shall deliver a Officer"s Certificate as described in
Section 8.1 hereof, dated the Closing Date, that confirms the satisfaction of
the conditions set forth in Sections 8.1, 8.2 and 8.3;
(c) certificates of good standing from New York and any other state
in which TDC is required to be qualified to do business.
(d) such other documents and certificates duly executed as may
reasonably be requested by DVL prior to the Closing Date.
SECTION 10.3 Termination. Notwithstanding anything herein or elsewhere to
the contrary, this Agreement may be terminated:
(a) By mutual agreement of the parties hereto at any time prior to the
Closing;
(b) By DVL at any time prior to the Closing, if:
(i) a condition to performance by DVL under this Agreement or
a covenant of TDC contained herein shall not be fulfilled on or
before the date of the Closing or at such other time and date
specified in this Agreement for the
21
<PAGE>
fulfillment of such covenant or condition; or
(ii) a material default or breach of this Agreement shall be
made by TDC;
(c) By TDC at any time prior to the Closing, if:
(i) a condition to TDC 's performance under this Agreement or
a covenant of DVL contained herein shall not be fulfilled on or
before the date of the Closing or at such other time and date
specified in this Agreement for the fulfillment of such covenant or
condition; or
(ii) a material default or breach of this Agreement shall be
made by DVL or a Principal Stockholder.
SECTION 10.4 Effect of Termination. If this Agreement is terminated, this
Agreement, except as to Section 11.1 and Section 11.2, shall no longer be of any
force or effect and there shall be no liability on the part of any party or its
respective directors, officers or stockholders; provided however, that in the
case of a termination pursuant to Section 10.1 (b)(ii) or 10.1(c)(ii) hereof
because of a prior material default under or a material breach of this Agreement
by another party, the damages which the aggrieved party or parties may recover
from the defaulting party or parties shall in no event exceed the amount of
out-of-pocket costs and expenses incurred by such aggravated party or parties in
connection with this Agreement, and no party to this Agreement shall be entitled
to any injunctive relief.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Cost and Expenses. In the event of any termination of this
Agreement pursuant to Section 10.3, subject to the provisions of Section 10.4,
DVL and TDC will each bear their own respective expenses.
SECTION 11.2 Extension of time: Waivers. At any time prior to the Closing:
(a) DVL may in its sole discretion (i) extend the time for the performance
of any of the obligations or other acts of TDC, (ii) waive any inaccuracies in
the representations and warranties of TDC contained herein or in any documents
delivered pursuant hereto by TDC and (iii) waive compliance with any of the
agreements or conditions contained herein to be performed by TDC. Any agreement
on the part of DVL to any such extension or waiver shall be valid only if set
forth in an instrument, in writing, signed on behalf of DVL and shall only be
effective in the specific instance. No waiver or any condition or provision
shall be deemed to be a subsequent waiver of such condition or provision or a
waiver of any condition or provision other than the one specifically waived.
22
<PAGE>
(b) TDC may in its sole discretion (i) extend the time for the performance
of any of the obligations or other acts of DVL, (ii) waive any inaccuracies in
the representations and warranties of DVL contained herein or in any documents
delivered pursuant hereto by DVL and (iii) waive compliance with any of the
agreements or conditions contained herein to be performed by DVL. Any agreement
on the part of TDC to any such extension or waiver shall be valid only if set
forth in an instrument, in writing, signed on behalf of TDC and shall only be
effective in the specific instance. No waiver or any condition or provision
shall be deemed to be a subsequent waiver of such condition or provision or a
waiver of any condition or provision other than the one specifically waived.
SECTION 11.3 Notices. Any notice to any party hereto pursuant to this
Agreement shall be in writing and given by Certified or Registered Mail, Fedex
or by facsimile, addressed as follows:
TACONIC DATA CORP. D-VINE LTD.
115 Stevens Avenue 712 Fifth Avenue
Valhalla, NY 10595 7th Floor
Attn.: James Garfinkel New York, NY 10019
Fax: (914) 747-9198 Attn.: Ed Tobin
Fax: (212) 265-4035
Any notice to any TDC Seller shall be valid if it is delivered to
TDC at the address set forth above. Each TDC Seller hereby irrevocably appoints
TDC as its agent and attorney-in-fact with respect to notices to be provided
under this Section 11.3 and all other matters and actions to be taken by the TDC
Sellers in or contemplated by this Agreement. Any notice to any Principal
Stockholder shall be valid if it is delivered to DVL at the address set forth
above. Each Principal Stockholder hereby irrevocably appoints DVL as its agent
and attorney-in-fact with respect to notices to be provided under this Section
11.3 and all other matters and actions to be taken by the Principal Stockholders
in or contemplated by this Agreement.
Additional notices are to be given as to each party, at such other address
as should be designated in writing complying as to delivery with the terms of
this Section 11.3. All such notices shall be effective when sent, addressed as
aforesaid.
SECTION 11.4 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and the respective successors
and assigns. Nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by reason of
this Agreement.
SECTION 11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together shall
constitute one document. The delivery by facsimile of an executed counterpart of
this Agreement shall be deemed to be an original and shall have the full force
and effect of an original executed copy.
23
<PAGE>
SECTION 11.6 Severability. The parties hereto agree and affirm that none
of the provisions herein is dependent upon the validity of any other provision,
and if any part of this Agreement is deemed to be unenforceable, the remainder
of the Agreement shall remain in full force and effect.
SECTION 11.7 Headings. The "Article" and "Section" headings are provided
herein for convenience of reference only and do not constitute a part of this
Agreement.
SECTION 11.8 Survival of Representations and Warranties. All terms,
conditions, representations and warranties set forth in this Agreement or in any
instrument, certificate, opinion, or other writing providing for in it, shall
survive the Closing and the delivery of the DVL Shares issued hereunder at the
Closing, for a period of one year from the Closing regardless of any
investigation made by or on behalf of any of the parties hereto.
SECTION 11.9 Assignability. This Agreement shall not be assigned by any of
the parties hereto without the prior written consent of the other parties.
SECTION 11.10 Amendment. This Agreement may be amended with the approval
of the Boards of Directors of DVL and TDC at any time before or after approval
thereof by stockholders of DVL, if required, and TDC; but after such approval by
the DVL shareholders, no amendment shall be made which substantially and
adversely changes the terms hereof. This Agreement may not be amended except by
an instrument, in writing, signed on behalf of each of the parties hereto.
SECTION 11.11 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction
under which the respective entity derives its powers shall govern.
SECTION 11.12 Publicity; Confidentiality. (a) Except as required by law or
on advice of counsel, neither party shall issue any press release or make any
public statement regarding the transactions contemplated hereby without the
prior approval of the other parties, and the parties hereto shall issue a
mutually acceptable press release as soon as practicable after the date hereof
and after the Closing Date.
(b) The parties hereto acknowledge that in the course of doing
their respective due diligence investigations or otherwise that they, or their
agents, attorneys, accountants, or other personnel may become privy to
confidential information, and the parties hereby agree that they shall keep such
information confidential unless the prior, express written consent of the other
party has been obtained.
24
<PAGE>
SECTION 11.13 Definitions.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or order of, or filing with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the business or
ownership of the assets of such person.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
[ SIGNATURE PAGES FOLLOW ]
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in a manner legally binding upon them as of the date first above
written.
D-VINE, LTD.
By: ____________________________
President
PRINCIPAL STOCKHOLDERS OF D-VINE, LTD.
D-VINE INVESTMENT PARTNERS
By: _______________________
Ed Tobin, General Partner
TACONIC DATA CORP.
By: ____________________________
President
________________________________
David Backman
________________________________
Sherrie Christopher
________________________________
Jesse Deutsch
________________________________
Julia Deutsch
26
<PAGE>
________________________________
Mitchell Deutsch
________________________________
Noah Deutsch
________________________________
Barry H. Garfinkel
________________________________
David A. Garfinkel
________________________________
Elior Garfinkel
________________________________
James Garfinkel
________________________________
Barry Hartheimer
________________________________
Sol Kiperman
________________________________
Daniel V. Klein
________________________________
Paul Marsh
27
<PAGE>
GOLDMAN-SONNENFELDT FOUNDATION
By: ____________________________
THOMAS ASSOCIATES
By: ____________________________
TRUSTEES OF HAMILTON COLLEGE
By: ____________________________
WHAT ABOUT ME, INC.
By: ____________________________
28
<PAGE>
SCHEDULE 1.2 ACQUISITION SHARES TO BE DELIVERED
TDC Sellers Amounts
----------- -------
David Backman 2,102
Sherrie Christopher 2,102
Jesse Deutsch 23,040
Julia Deutsch 23,040
Mitchell Deutsch 3,079,054
Noah Deutsch 23,040
Barry H. Garfinkel 352,622
David A. Garfinkel 283,050
Elior Garfinkel 23,040
James Garfinkel 1,315,496
Barry Hartheimer 100,000
Sol Kiperman 160,344
Daniel V. Klein 4,265
Paul Marsh 11,675
Goldman-Sonnenfeld
Foundation 1,557
Thomas Associates 99,764
Trustees Of
Hamilton College 2,880
What About Me, Inc. 492,929
<PAGE>
SCHEDULE 2.11 LEGAL PROCEEDINGS
None
<PAGE>
SCHEDULE 2.14 BANK ACCOUNTS
DVL has an account at the Bank of New York under account #6301833995.
<PAGE>
SCHEDULE 4.1 ENTITIES CONTROLLED BY TDC
None
<PAGE>
SCHEDULE 4.2 WARRANTS, RIGHTS, CALLS, COMMITMENTS, ETC.
None
<PAGE>
SCHEDULE 4.9 TDC LITIGATION, ETC.
TDC is a plaintiff in two separate actions against Realization
Services, Inc. arising out of a consulting arrangement between TDC and
Realization Services, Inc. One such action by TDC is being disputed in
arbitration in Westchester County, New York and seeks approximately $600,000.
The other action by TDC seeks approximately $40,000 from Realization Services,
Inc. in New York State Supreme Court.
Void after 5:00 p.m., New York Time on March 31, 2004
Warrant to Purchase 500,000 Shares of Common Stock
---------------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
D-VINE, LTD.
---------------------------------
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS PURSUANT TO THE
REGISTERED UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVISIONS OF REGULATION S PROMULGATED UNDER THE ACT.
IN ANY EVENT, UNTIL MARCH 31, 2000 THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUED OR TO BE ISSUED UPON EXERCISE THEREOF MAY NOT BE SOLD OR
OFFERED FOR SALE BY THE HOLDER OR DELIVERED TO ANY U.S. PERSON OR FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON.
IN CONSIDERATION OF MODIFICATION OF EXISTING WARRANT IN ACCORDANCE
WITH A CERTAIN AGREEMENT DATED MARCH ___, 1999, D-Vine, Ltd., a Delaware
corporation (the "Company"), grants the following rights to Ocean Strategic
Holdings Limited, a Guernsey corporation ("Holder"):
ARTICLE 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings, unless
the context shall otherwise require:
(a) "Common Stock" shall mean the common stock, par value
$0.01 per share, of the Company.
(b) "Corporate Office" shall mean the office of the Company
(or its successor) at which at any particular time its principal business shall
be administered.
<PAGE>
(c) "Exercise Date" shall mean any date upon which the Holder
shall give the Company a Notice of Exercise.
(d) "Exercise Price" shall mean the price to be paid to the
Company for each share of Common Stock to be purchased upon exercise of this
Warrant in accordance with the terms hereof which shall be $3.00 per share.
(e) "Expiration Date" shall mean 5:00 p.m. (New York time) on
March 31, 2004.
(f) "Regulation S" shall mean Regulation S as promulgated
under the Act.
(g) "SEC" shall mean the United States Securities and Exchange
Commission.
(h) "Transfer Agent" shall mean American Securities Transfer,
as the Company's transfer agent, or its authorized successor, as such.
(i) "Underlying Shares" shall mean the shares of the Common
Stock issuable upon exercise of the Warrant.
ARTICLE 2. EXERCISE AND AGREEMENTS.
2.1 Exercise of Warrant. This Warrant shall entitle Holder to
purchase up to 500,000 shares of Common Stock (the "Shares") at the Exercise
Price. This Warrant shall be exercisable at any time after March 31, 2004 and
from time to time prior to the Expiration Date (the "Exercise Period"). This
Warrant and the right to purchase Shares hereunder shall expire and become void
at the Expiration Date.
2.2 Manner of Exercise.
(a) Holder may exercise this Warrant at any time and from time
to time during the Exercise Period, in whole or in part (but not in
denominations of fewer than 10,000 Shares, except upon an exercise of this
Warrant with respect to the remaining balance of Shares purchasable hereunder at
the time of exercise), by delivering to the Escrow Agent (as defined in an
escrow agreement dated the date of the existing warrant referred to above) (i) a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 hereto and (ii) a bank cashier's or certified check for the aggregate Exercise
Price of the Shares being purchased.
(b) From time to time upon exercise of this Warrant, in whole
or part, in accordance with its terms, the Escrow Agent will deliver stock
certificates to the Holder representing the number of Shares being purchased
pursuant to such exercise, subject to adjustment as described herein.
<PAGE>
(c) Promptly following any exercise of this Warrant, if the Warrant
has not been fully exercised and has not expired, the Company will deliver to
the Holder a new Warrant for the balance of the Shares covered hereby.
2.3 Termination. All rights of the Holder in this Warrant, to the
extent they have not been exercised, shall terminate on the Expiration Date.
2.4 No Rights Prior to Exercise. Prior to its exercise pursuant to
Section 2.2 above, this Warrant shall not entitle the Holder to any voting or
other rights as holder of Shares.
2.5 Adjustments. In case of any reclassification, capital
reorganization, stock dividend or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
capital reorganization, stock dividend or other change of outstanding shares or
Common Stock), or in case of any sale or conveyance to another corporation of
the property of the Company as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the Company shall
cause effective provision to be made so that the Holder shall have the right
thereafter, by exercising this Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization, stock dividend or other change,
consolidation, merger, sale or conveyance as the Holder would have been entitled
to receive had the Holder exercised this Warrant in full immediately before such
reclassification, capital reorganization, stock dividend or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2.5. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations, stock dividends and other changes of outstanding shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
Notwithstanding anything to the contrary contained herein, if the Company shall
complete a "reverse split" of its shares into a smaller number of outstanding
shares, the number of shares issuable upon exercise of this Warrant, and the
Exercise Price, shall remain unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of this Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional Share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional Share interest by paying Holder the amount computed by
multiplying the fractional interest by the closing bid price of a full Share on
the date of the Notice of Exercise.
2.7 Limitation on Exercise. In no event shall Holder be entitled to
exercise any portion of this Warrant such that upon giving effect to such
exercise, the aggregate number of shares of Common Stock beneficially owned by
the Holder and its affiliates would exceed 4.9% of the outstanding shares of the
Common Stock following such exercise. For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the Holder and
its affiliates shall include the number of shares of Common Stock issuable upon
exercise of the Warrant with respect to which the
<PAGE>
determination of such proviso is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (i) exercise of the
remaining Warrant beneficially owned by the holder and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the holder and its affiliates. Except as set forth
in the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. The Holder may waive the foregoing limitations by
written notice to the Company upon not less than 61 days prior notice (with such
waiver taking effect only upon the expiration of such 61 day notice period).
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully-paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws, and not subject to any
pre-emptive rights.
(b) The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware, and has the full power and
authority to issue this Warrant and to comply with the terms hereof. The
execution, delivery and performance by the Company of its obligations under this
Warrant, including, without limitation, the issuance of the Shares upon any
exercise of the Warrant have been duly authorized by all necessary corporate
action. This Warrant has been duly executed and delivered by the Company and is
a valid and binding obligation of the Company, enforceable in accordance with
its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting enforceability of
creditors' rights generally and except as the availability of the remedy of
specific enforcement, injunctive relief or other equitable relief is subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) The Company is not subject to or bound by any provision of
any certificate or articles of incorporation or by-laws, mortgage, deed of
trust, lease, note, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship, other restriction or any applicable provision of
any law, statute, rule, regulation, judgment, order, writ, injunction or decree
of any court, governmental body, administrative agency or arbitrator which could
prevent or be violated by or under which there would be a default (or right of
termination) as a result of the execution, delivery and performance by the
Company of this Warrant.
(d) The Company is eligible to issue securities exempt from
registration pursuant to Regulation S promulgated under the Securities Act.
<PAGE>
ARTICLE 4. REPRESENTATIONS OF THE HOLDER.
4.1 Representations and Warrants. The Holder hereby represents and
warrants to the Holder as follows:
(a) The Holder is not a "U.S. person" within the meaning of
Regulation S. In general, "U.S. person" means (A) any natural person resident in
the United States; (B) any partnership or corporation organized or incorporated
under the laws of the United States; (C) any estate of which any executor or
administrator is a U.S. person; (D) any trust of which any trustee is a U.S.
person; (E) any agency or branch of a foreign entity located in the United
States; (F) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
person; (G) any partnership or corporation if (i) organized or incorporated
under the laws of any foreign jurisdiction, and (ii) formed by a U.S. person
principally for the purpose of investing in securities not registered under the
Act, unless it is organized or incorporated, and owned, by accredited investors
(as defined in Rule 501(a) promulgated under the Act who are not natural
persons, estates or trusts. For purposes of this Agreement, the United States
includes the United States of America, its territories and possessions, any
state of the United States and the district of Columbia.
(b) The Holder is not organized under the laws of any jurisdiction
within the United States, its territories or possessions, and was not formed for
the purpose of investing in Regulation S securities; (ii) at the time this
Warrant was acquired by Holder and the time this Warrant was executed and any
offer to purchase this Warrant or the Underlying Shares hereunder was made, the
Holder was physically outside the United States; (iii) the Holder has acquired
this Warrant and the Underlying Shares (the Warrant and the Underlying Shares
are herein collectively referred to as the "Securities") for its own account and
not on behalf of or for the benefit of any U.S. person and the sale of the
Securities has not been prearranged with any buyer in the United States; (iv)
the Holder hereby agrees that to its knowledge all offers and sales of the
Securities prior to the expiration of a period commencing on the date hereof and
ending forty days thereafter (the "Restricted Period") shall not be made to U.S.
persons or for the account or benefit of U.S. Persons and shall otherwise be
made in compliance with the provisions of Regulation S. The Holder is not a
distributor or dealer.
(c) The Holder is acquiring this Warrant and the Underlying Shares
for its own account for investment and not as a nominee and not with a view to
the distribution thereof. Holder represents and warrants to the Company that it
has no preexisting plan to sell the Warrant or the Underlying Shares in the
United States at any particular time following the expiration of the Restricted
Period. Holder covenants that neither Holder nor its affiliates nor any person
acting on its or their behalf has the intention of entering, or will enter,
during the Restricted Period, into any put option, short position or other
similar instrument or position with respect to the Underlying Shares or
securities of the same class as the Underlying Shares and neither Holder nor any
of its affiliates nor any person acting on its or their behalf will use at any
time Underlying Shares acquired pursuant to this Agreement or upon conversion of
the shares to settle any put option, short position or
<PAGE>
other similar instrument or position that may have been entered into prior to
the execution of this Agreement.
ARTICLE 5. MISCELLANEOUS.
5.1 Transfer. This Warrant may not be transferred or assigned, in
whole or in part, at any time, except in compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of an investment representation letter and a legal
opinion reasonably satisfactory to the Company) and the Company will refuse to
register any transfer of this Warrant or the Underlying Shares not made in
accordance with the provisions of Regulation S. This Warrant may not be
transferred or assigned such that either the Holder or any transferee will,
following such transfer or assignment, hold a Warrant for the right to purchase
fewer than 5,000 Shares.
5.2 Transfer Procedure. Subject to the provisions of Section 5.1,
Holder may transfer or assign this Warrant by giving the Company notice setting
forth the name, address and taxpayer identification number of the transferee or
assignee, if applicable (the "Transferee") and surrendering this Warrant to the
Company for reissuance to the Transferee (and the Holder, in the event of a
transfer or assignment of this Warrant in part). (Each of the persons or
entities in whose name any such new Warrant shall be issued are herein referred
to as a Holder").
5.3 Loss, Theft, Destruction or Mutilation. If this Warrant shall
become mutilated or defaced or be destroyed, lost or stolen, the Company shall
execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or, in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder
filing with the Company evidence satisfactory to it that such Warrant has been
so mutilated, defaced, destroyed, lost or stolen. However, the Company shall be
entitled, as a condition to the execution and delivery of such new Warrant, to
demand indemnity satisfactory to it and payment of the expenses and charges
incurred in connection with the delivery of such new Warrant. Any Warrant so
surrendered to the Company shall be canceled.
5.4 Notices. All notices and other communications from the Company
to the Holder or vice versa shall be deemed delivered and effective when given
personally, by facsimile transmission and confirmed in writing or mailed by
first-class registered or certified mail, postage prepaid at such address and/or
facsimile number as may have been furnished to the Company or the Holder, as the
case may be, in writing by the Company or the Holder from time to time.
5.5 Waiver. This Warrant and any term hereof may be changed, waived,
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
<PAGE>
5.6 Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
its principles regarding conflicts of law.
Dated: March 31, 1999
D-Vine, Ltd.
By: ____________________________________
Name:
Title:
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ______ shares of the
Common Stock of D-Vine, Ltd. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
3. The undersigned (the "Holder") hereby represents that:
(a) The Holder is not a "U.S. person" within the meaning of
Regulation S. In general, "U.S. person" means (A) any natural person
resident in the United States; (B) any partnership or corporation
organized or incorporated under the laws of the United States; (C) any
estate of which any executor or administrator is a U.S. person; (D) any
trust of which any trustee is a U.S. person; (E) any agency or branch of a
foreign entity located in the United States; (F) any non-discretionary or
similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person; (G) any partnership
or corporation if (i) organized or incorporated under the laws of any
foreign jurisdiction, and (ii) formed by a U.S. person principally for the
purpose of investing in securities not registered under the Act, unless it
is organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a) promulgated under the Act who are not natural
persons, estates or trusts. For purposes of this Agreement, the United
States includes the United States of America, its territories and
possessions, any state of the United States and the district of Columbia.
(b) The Holder is not organized under the laws of any jurisdiction
within the United States, its territories or possessions, and was not
formed for the purpose of investing in Regulation S securities; (ii) at
the time this Warrant was acquired by Holder and the time this Warrant was
executed and any offer to purchase this Warrant or the Underlying Shares
hereunder was made, the Holder was physically outside the United States;
(iii) the Holder has acquired this Warrant and the Underlying Shares (the
Warrant and the Underlying Shares are herein collectively referred to as
the "Securities") for its own account and not on behalf of or for the
benefit of any U.S. person and the sale of the Securities has not been
prearranged with any buyer in the United States; (iv) the Holder hereby
agrees that to its knowledge all offers and sales of the Securities prior
to the expiration of a period commencing on the date hereof and ending one
year thereafter (the "Restricted Period") shall not be made to U.S.
persons or for the account or benefit of U.S. Persons and shall otherwise
be made in compliance with the provisions of Regulation S. The Holder is
not a distributor or dealer.
(c) The Holder is acquiring this Warrant and the Underlying Shares
for its own account for investment and not as a nominee and not with a
view to the distribution thereof. Holder represents and warrants to the
Company that it has no preexisting plan to sell the Warrant or the
Underlying Shares in the United States at any particular time following
the expiration of the Restricted Period. Holder covenants that neither
Holder nor its affiliates nor any person acting on its or their behalf has
the intention of entering,
<PAGE>
or will enter, during the Restricted Period, into any put option, short
position or other similar instrument or position with respect to the
Underlying Shares or securities of the same class as the Underlying Shares
and neither Holder nor any of its affiliates nor any person acting on its
or their behalf will use at any time Underlying Shares acquired pursuant
to this Agreement or upon conversion of the shares to settle any put
option, short position or other similar instrument or position that may
have been entered into prior to the execution of this Agreement.
(d) it is acquiring the shares solely for its own account and not as
a nominee for any other party and not with a view toward the resale or
distribution thereof except in compliance with applicable securities laws.
________________________________________
(Signature)
_____________________
(Date)
TACONIC DATA CORP.
FINANCIAL STATEMENTS
For the Years Ended December 31, 1997 and 1996
<PAGE>
TACONIC DATA CORP.
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
-------- --------
CURRENT ASSETS
Cash $ 33,570 $ 4,733
Accounts receivable 317,665 343,901
Investment in Assetrac -0- 14,395
Prepaid expense and other current assets
45 489
-------- --------
Total Current Assets 351,280 363,518
PROPERTY AND EQUIPMENT, Net 168,983 277,978
OTHER ASSETS 8,333 8,333
-------- --------
TOTAL ASSETS $528,596 $649,829
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TACONIC DATA CORP.
BALANCE SHEETS
December 31, 1997 and 1996
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
1997 1996
----------- -----------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 412,856 $ 1,050,555
Deferred revenue 317,506 663,875
Current maturities of capital lease
obligations 105,385 20,176
Note payable, bank -0- 250,000
----------- -----------
Total Current Liabilities 835,747 1,984,606
----------- -----------
OTHER LIABILITIES
Capital lease obligations,
less current maturities 37,842 225,490
Notes payable 234,902 -0-
Notes payable, stockholders
216,958 -0-
Notes payable, related parties 472,459 -0-
----------- -----------
Total Other Liabilities
962,161 225,490
----------- -----------
TOTAL LIABILITIES 1,797,908 2,210,096
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock - no par value;
200 shares authorized, issued
and outstanding 2,000 2,000
Accumulated deficit (1,271,312) (1,562,267)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,269,312) (1,560,267)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 528,596 $ 649,829
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TACONIC DATA CORP.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997 and 1996
1997 1996
----------- -----------
SALES $ 3,099,139 $ 3,813,407
COST OF SALES 1,610,853 2,817,344
----------- -----------
GROSS PROFIT 1,488,286 996,063
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,109,736 1,612,483
----------- -----------
OPERATING INCOME (LOSS) 378,550 (616,420)
----------- -----------
OTHER INCOME (EXPENSE)
Interest expense, net of interest income of
$161 and $2,517, respectively (104,205) (24,272)
Equity in earnings (loss) of Assetrac 4,083 (110,090)
Other income 14,527 41,046
----------- -----------
TOTAL OTHER EXPENSE (85,595) (93,316)
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES 292,955 (709,736)
INCOME TAXES 2,000 -0-
----------- -----------
NET INCOME (LOSS) $ 290,955 $ (709,736)
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TACONIC DATA CORP.
STATEMENTS OF ACCUMULATED DEFICIT
For the Years Ended December 31, 1997 and 1996
1997 1996
----------- -----------
(ACCUMULATED DEFICIT) RETAINED EARNINGS -
Beginning, as originally reported
$(1,562,267) $ 365,618
Prior Period Adjustments -0- (1,218,149)
----------- -----------
ACCUMULATED DEFICIT - Beginning, as restated (1,562,267) (852,531)
Net Income (Loss)
290,955 (709,736)
----------- -----------
ACCUMULATED DEFICIT - Ending
$(1,271,312) $(1,562,267)
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TACONIC DATA CORP.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997 and 1996
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 290,955 $(709,736)
--------- ---------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 127,861 120,352
Equity in (earnings) loss of Assetrac (4,083) 110,090
Decrease (increase) in accounts receivable 26,236 (237,898)
Decrease in prepaid expense and other
current assets 444 4,918
Decrease in other assets -0- 13,946
(Decrease) increase in accounts
payable and accrued expenses
(465,033) 616,205
Decrease in deferred revenue (346,369) (119,704)
--------- ---------
TOTAL ADJUSTMENTS (660,944) 507,909
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (369,989) (201,827)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (18,867) (69,807)
Investment in Assetrac (331,522) (124,485)
Proceeds from sale of Assetrac 350,000 -0-
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (389) (194,292)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayments) proceeds of note payable, bank (250,000) 250,000
Proceeds from notes payable 62,236 -0-
Proceeds from notes payable, related parties 472,459 -0-
Proceeds from notes payable, stockholders 216,958 -0-
Principal repayments of capital lease obligations (102,438) (91,158)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 399,215 158,842
--------- ---------
NET INCREASE (DECREASE) IN CASH 28,837 (237,277)
CASH - Beginning 4,733 242,010
--------- ---------
CASH - Ending $ 33,570 $ 4,733
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TACONIC DATA CORP.
STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 1997 and 1996
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the years for:
1997 1996
---------- ----------
Interest $ 72,267 $ 26,790
Noncash activities:
During 1997, the Company converted certain trade accounts payable to a note
payable in the amount of $172,666.
During 1996, property and equipment value at $120,474 was obtained through
capital lease obligations.
During 1996, a prior period adjustment was made affecting the following
accounts:
Deferred revenue $ 783,579
Property and equipment 145,911
Due from stockholder 288,659
----------
$1,218,149
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
Nature of Business
Taconic Data Corp. (the "Company") is a professional business information
company with a specialty in real estate, public records data and
newspapers. It develops and manages complex real estate and marketing
information data bases under long-term service contracts to multiple
listing services, realtor associations, newspapers, and other information
companies located primarily in the eastern United States.
Revenue Recognition
The Company utilizes long-term contracts and recognizes revenue for
financial statement purposes under the percentage of completion method
and, therefore, takes into account the costs, estimated earnings and
revenue-to-date on contracts not yet completed.
The amount of revenue recognized at the financial statement date is the
portion of the total contract price that the costs expended to date bears
to the anticipated total costs, based on current estimates of costs to
complete. Contract costs include all direct labor and benefits, materials
unique to or installed in the project, subcontract costs and allocated
indirect costs.
Revisions in estimates of costs and earnings during the life of the
contracts are reflected in the accounting period in which such revisions
become known.
At the time a loss on a contract becomes known, the entire amount of the
estimated loss is recognized in the financial statements.
The unearned revenue represents billings in excess of costs and estimated
earnings on uncompleted contracts.
Property and Equipment and Depreciation
Property and equipment is stated at cost and is depreciated using
accelerated methods over the estimated useful lives of the respective
assets. Routine maintenance, repairs and replacement costs are expensed as
incurred and improvements that extend the useful life of the assets are
capitalized. When property and equipment is sold or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is recognized in income.
Income Taxes
The Company with the consent of their stockholders, has elected under the
Internal Revenue Code to be an 'S' corporation. In lieu of corporate
income taxes, the stockholders of an 'S' corporation are taxed on their
proportionate share of the corporation's taxable income. Accordingly, no
provision for federal and state income taxes has been included in the
accompanying financial statements.
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
Advertising Costs
Advertising costs are expensed as incurred.
Use of 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 asset 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.
NOTE 2 - Investment in Assetrac
During 1996 the Company entered into a joint venture with an unrelated
party to form Assetrac Data Corporation (Assetrac) to compile information
regarding the real estate industry into various database products. The
Company accounts for this investment in Assetrac under the equity method
of accounting. On November 11, 1998, the assets and liabilities of
Assetrac were sold to an unrelated third party for a purchase price of
$415,288. As a result of this transaction, the Company has recorded a gain
on investment of $4,083 at December 31, 1997.
NOTE 3 - Property and Equipment
Property and equipment at December 31, 1997 and 1996 consists of the
following:
Estimated
1997 1996 Useful Lives
--------- --------- ------------
Furniture and fixtures $ 73,790 $ 73,790 5-7 years
Computer equipment 552,621 533,755 3-5 years
--------- ---------
626,411 607,545
Less: accumulated depreciation (457,428) (329,567)
--------- ---------
Property and Equipment, Net $ 168,983 $ 277,978
========= =========
Depreciation expense for the years ended December 31, 1997 and 1996 was
$127,861 and $120,352, respectively.
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Capitalized Lease Obligations
The Company is the lessee of equipment under four capital leases expiring
through the year 2000. The assets and liabilities are recorded at
fair-market value. The assets are being depreciated over their estimated
useful lives. Depreciation of assets under capital leases charged to
expense for the years ended December 31, 1997 and 1996 was $80,955 and
$73,768, respectively. The following is a summary of property held under
capital leases included in equipment:
1997 1996
--------- ---------
Equipment $ 355,009 $ 355,009
Less: accumulated depreciation (235,901) (167,495)
--------- ---------
$ 119,108 $ 187,514
========= =========
Minimum future lease payments under capital leases as of December 31, 1997
for each of the next three years, and in the aggregate, are as follows:
For the Year Ending
December 31, Amount
-------------------- --------
1998 $123,041
1999 32,769
2000 5,416
--------
Total minimum lease payments 161,226
Less: amount representing interest 17,999
--------
Present value of net minimum
lease payments $143,227
========
Current portion $105,385
Long-term portion 37,842
--------
Total $143,227
========
Interest rates on capitalized leases vary from 5.43% to 17.43% and are
imputed based on the lessor's implicit rate of return.
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - Notes Payable
Notes payable at December 31, 1997 and 1996 consists of the following:
1997 1996
-------- --------
Note payable - principal due on April 9, 1999
bearing interest at 10% per annum
$105,000 $ -0-
Note payable, with interest at 11% and principal
due on July 24, 1999. (1)
62,236 -0-
Note payable, with interest at 11% and principal
due on October 31, 1999. (1) (2)
67,666 -0-
-------- ----
Total Notes Payable $234,902 $ -0-
======== ====
(1) If the Company offers to repay the outstanding principal and interest
prior to maturity date, the lender has the option to convert any or all of
the outstanding amount into an equity investment in the Company.
If the Repayment Option is chosen by the lender, the Company shall pay the
lender cash for the unconverted portion. In addition, the Company shall
issue warrants to the lender for one-fourth (') of the shares the lender
will receive should the Conversion Option be chosen.
If the Conversion Option is chosen, the Company shall provide an equity
interest in the form of common stock in the Company for the unconverted
portion as defined in the Agreement.
If a majority interest in the Company is purchased prior to maturity date,
the Company shall provide the lender shares equal to a percentage of
ownership as defined in the Agreement.
(2) Subsequent to December 31, 1997, the above note was converted to equity
(see Note 12).
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - Notes Payable, Stockholders
Notes payable, stockholders at December 31, 1997 and 1996 consists of the
following:
1997 1996
-------- --------
Note payable, stockholder (J. Garfinkle),
with interest at 11% and principal due
on August 12, 1999 $ 53,087 $ -0-
Note payable, stockholder (J. Garfinkle),
with interest at 11% and principal due
on September 4, 1999 55,451 -0-
Note payable, stockholder (M. Deutsch),
with interest at 11% and principal due
on August 12, 1999 53,059 -0-
Note payable, stockholder (M. Deutsch),
with interest at 11% and principal due
on September 4, 1999 55,361 -0-
-------- --------
Notes Payable, Stockholders $216,958 $-0-
======== ========
Subsequent to December 31, 1997, the above notes were converted to equity
(see Note 12).
NOTE 7 - Notes Payable, Bank
The Company had a $250,000 line of credit with a bank with interest
payable monthly at 1.5% above prime. The line of credit was secured by
substantially all of the assets of the Company. The line expired in 1997.
NOTE 8 - Notes Payable, Related Parties
Notes payable, related parties at December 31, 1997 and 1996 consists of
the following:
1997 1996
-------- --------
Note payable - David Garfinkle,
with interest at 11% and principal
due on May 20, 1999 (including
accrued interest of $5,844) $ 80,844 $ -0-
Note payable - David Garfinkle,
with interest at 11% and principal
due on June 25, 1999 (including
accrued interest of $7,219) 132,219 -0-
-------- -----
(Forward) $213,063 $ -0-
-------- -----
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - Notes Payable, Related Parties, continued
1997 1996
-------- --------
(Forward) $213,063 $ -0-
Note payable - Barry Garfinkle,
with interest at 11% and principal
due on June 24, 1999 (including
accrued interest of $9,396) 259,396 -0-
-------- -----
Notes Payable, Related Parties $472,459 $ -0-
======== =====
The above note holders are related to one of the stockholders of the
Company and are subject to the same provisions of the notes payable as
described in Note 5.
Subsequent to December 31, 1997, the above notes were converted to equity
(see Note 12).
NOTE 9 - Commitments and Contingencies
Lease Arrangement
The Company leases office space under a five (5) year noncancelable lease
expiring December 31, 2000. The Company pays property taxes, insurance,
and other related expenses to the leased properties. Rent expense was
$68,054 and $67,665 for the years ended December 31, 1997 and 1996,
respectively.
Future minimum rental payments required under the above non-cancelable
operating lease at December 31, 1997 are as follows:
Year Ending
December 31, Amount
------------ --------
1998 $ 76,000
1999 76,500
2000 76,500
--------
Total $229,000
========
License Agreement
The Company is obligated to pay a license fee for the use of software and
the maintenance of the software through October 1998. The future
commitment for the year ending December 31, 1998 is $24,135.
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - Commitments and Contingencies, continued
Litigation
The Company is involved in litigation through the normal course of
business. The Company believes that the resolution of these matters will
not have a material adverse effect on the financial position of the
Company.
NOTE 10 - Major Customers
The Company sells a substantial portion (greater than 10% of sales) of its
product to four major customers. During the years ended December 31, 1997
and 1996, sales to these customers totaled $2,358,982 (76%) and $2,238,155
(59%), respectively. As of December 31, 1997 and 1996, the amounts due
from these customers included in accounts receivable were $245,670 and
$197,453, respectively.
During and subsequent to December 31, 1997, three of the above major
customers terminated their contracts. Each contract was settled subsequent
to December 31, 1997. The Company will be paid approximately $310,000 in
aggregate based upon the respective settlement agreements.
During the years ended December 31, 1997 and 1996, sales to these three
terminated customers amounted to $1,972,510 (64%) and $1,851,683 (49%),
respectively.
NOTE 11 - Prior Period Adjustments
Certain errors resulting in the overstatement of previously reported
assets and the understatement of previously reported liabilities were
corrected in 1996, resulting in the following changes to retained earnings
as of December 31, 1995:
Retained Earnings - as previously reported $ 365,618
Deferred income on contracts $(783,579)
Property, plant and equipment (145,911)
Loans receivable
(288,659)
---------
Total Adjustments (1,218,149)
-----------
Accumulated Deficit - as adjusted $ (852,531)
-----------
<PAGE>
TACONIC DATA CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - Subsequent Events
Employment Agreements
On April 14, 1998 the Company entered into employment agreements with two
stockholders of the Company, expiring on April 15, 2000 (the 'Initial
Period'). After the Initial Period employment will continue for successive
one-year periods if the agreement is not terminated with at least ninety
(90) days notice. Such agreements provide for minimum salary levels,
adjusted annually for cost of living changes, as well as for incentive
bonuses if specific management goals are attained. The agreements also
provide for all benefits generally available to the Company's managerial
employees.
The aggregate commitment for future salaries at December 31, 1997 are as
follows:
Year Ending
December 31, Amount
------------ --------
1998 $137,500
1999 220,000
2000 85,000
--------
Total $442,500
========
Purchase Commitment
During each twenty-four (24) successive months beginning April 1998, the
majority stockholder of the Company has the option to sell back to the
Company up to 3,350 shares of common stock per month at $2.00 per share.
Business Acquisition
On June 3, 1998, the Company entered into a stock purchase agreement, as
amended, with What About Me, Inc. (the 'Seller'), whereby the Company
acquired a 51% interest in Technosoft, Inc. for $123,000 in cash and
162,143 in the Company's common stock. The purchase method of accounting
will be used for this transaction.
Conversion of Debt
On June 8, 1998, the Company converted certain notes payable (see Note 4,
5 and 6) to common stock. The aggregate notes payable including accrued
interest through April 15, 1998 was $790,729. Each $1.3999 of debt was
converted into one (1) share of common stock, par value $.01. The total
shares issued for this conversion was 567,666 shares.
Stock Split
On June 12, 1998, the Board of Directors authorized a 14,018.75 for 1
stock split, thereby increasing the number of issued and outstanding
shares to 2,803,750, and increasing par value to $.01 per share. In
addition, the Board of Directors amended the certificate of incorporation
to increase the number of common shares authorized to 6,000,000, par value
$.01.
FOR IMMEDIATE RELEASE
Contact:
James Garfinkel
Vice President and Corporate Secretary
914-747-9100 Ext.209
D-VINE ANNOUNCES ACQUISITION OF INTERNET COMPANY AND ANNOUNCES NAME
CHANGE TO "MONSTERDAATA.COM"
April 2, 1999 (New York) -- D-Vine Ltd. (OTC:DVNL) announced today
that it has completed the acquisition of 99.2% of the outstanding common stock
of Taconic Data Corp., a New York-based privately-held provider of real estate
due diligence data delivered to consumers over the Internet and to businesses
through industry member organizations and trade groups. Following the completion
of the acquisition, D-Vine changed its name to "MonsterDaata.com, Inc." to
better reflect its business activities. D-Vine issued 6 million shares of its
common stock to former holders of Taconic Data stock to complete the
acquisition.
D-Vine previously announced the completion of a 1,000 to 1 reverse
stock split, with a record date for affected stockholders of March 26, 1999.
Subsequent to the completion of this reverse stock split, an existing warrant
holder was issued 1 million shares of D-Vine common stock, upon exercise of the
warrant, and D-Vine received $1 million in proceeds from the exercise of this
warrant. In connection with the completion of the acquisition of Taconic Data,
directors of Taconic Data assumed control of the Board of Directors of D-Vine.
MonsterDaata.com intends to use the proceeds of the warrant exercise
to enhance sales and marketing, target acquisitions, and further develop the
www.MonsterDaata.com web site. MonsterDaata.com recently hired John Evans as
Senior VP of Corporate Development to develop and oversee the company's
acquisition and internal growth efforts. "This is just the beginning," said
Mitchell Deutsch, the company's co-founder and CEO. "The business to business
and consumer web content sector is fast growing and quickly consolidating. We
intend to take advantage of this situation through additional acquisitions and
our internal expansion initiatives."
Taconic Data was incorporated in 1992, and is the leading provider
of due diligence, transaction valuation, target marketing, and competitive
intelligence data to consumers, realtors, and real estate professionals. "We
like to think of ourselves as a Bloomberg of the real estate due diligence
world" said James Garfinkel, a principal and co-founder. The company's
DaataSuperstore(TM) will be offered to Internet portals throughout the real
estate, mortgage & lending, title, insurance, and other related industries. Its
Neighborhood Place(TM) database of school, demographics, lifestyle
characteristics, crime, and local area information is currently an integral
component of the Realtor.com web site, which is the largest consumer real estate
portal in the country. (MonsterDaata.com is not affiliated with Realtor.com; the
data
<PAGE>
provided by MonsterDaata.com to Realtor.com and other Internet portals is
licensed by MonsterDaata.com to such portals on arms-length terms).
Except for statements that are historical, the statements in this release are
"forward-looking" statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and Section
27A of the securities Act of 1933 and Section 21E of the Securities Exchange act
of 1934. Forward-looking statements involve significant risks and uncertainties,
and in light of the significant uncertainties inherent in such statements, the
inclusion of such information should not be regarded as a representation that
the objectives, assumptions or plans described in such statements will be
achieved; in fact, actual results could differ materially from those
contemplated by such forward looking statements. The Company does not undertake
any obligation to publicly release any revisions to these forward-looking
statements or to reflect the occurrence of unanticipated events.
RISK FACTORS
An investment in MonsterDaata.com involves a high degree of risk. The
achievement of our business objectives is subject to a number of market and
other factors beyond our control, and our future prospects are speculative.
If we make any forward-looking statements or assumptions concerning our future
business activities, revenues, profits or financial condition, or if we make any
forward-looking statements concerning our industry, the economy, technological
changes or our competitors, you should recognize that our predictions and
assumptions are subject to a great deal of uncertainty. Actual results could
differ materially from our predictions and assumptions, particularly given the
highly speculative nature of our business and that of other Internet-related
businesses in our industry. If our predictions prove to be too optimistic, the
value of our business could be adversely impacted and our shareholders will
probably lose money.
Our shareholders could find that there is nobody willing to purchase their
shares when they want to sell, and it is possible that our shareholders could
lose their entire investment in our stock.
Our stock should only be purchased by speculators who understand the high level
of risk that a purchase of our stock entails and who are willing and able if
necessary to hold our stock for an extended period of time, or indefinitely, and
to risk the loss of their entire investment in our stock. If you are a suitable
investor for MonsterDaata.com, you should fully understand the following
material risk factors:
Developing Internet Market
We expect a substantial portion of our revenue to come from the continued
development of products and services to be distributed over Internet. Our
revenue models are based primarily on:
o fees paid for the item-by-item use of our information products
database by consumers and businesses over the Internet;
o bulk licensing fees for the use of our information products
database by Internet portals, such as Realtor.com, or industry
trade groups and member organizations, such as regional real
estate multiple listing services, for redistribution to
consumers and businesses; and
o revenues from advertisers and other third parties that are
generated from the number and type of visitors we attract to
our Web site.
The business use of the Internet is still in its infancy, and it is possible
that the Internet may not prove to be a viable commercial marketplace. Known
issues in this regard include inadequate development of Internet infrastructure
to date, competing technology, delays in the development
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of new standards and protocols required to handle increased Internet activity,
and the possibility of significant government regulation (locally, nationally
and internationally). Moreover, concerns over the security of Internet
transactions and the privacy of users may inhibit the growth of the Internet,
particularly as a means of conducting commercial transactions. To the extent
that our activities involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could expose us to a
risk of loss or litigation and possible liability. We cannot assure you that
contractual provisions attempting to limit our liability in such areas will be
adequately implemented or enforceable, or that other parties will accept such
contractual provisions as part of our agreements.
We have not fully resolved some other critical issues concerning our use of the
Internet, including reliability, cost, ease of deployment, administration and
quality of service. This may affect our ability to maintain our business, expand
product marketing, improve communications and increase business efficiencies.
Rapid Technological Change
Business on the Internet is characterized by:
o rapid technological change;
o frequent changes in user requirements and preferences;
o frequent new product and service introductions embodying new
processes and technologies; and
o evolving industry standards and practices that could render
our information delivery practices obsolete.
Our success will depend partly on our ability to improve our existing services,
develop new product offerings and respond to technological advances, emerging
industry standards and competitive offerings. We cannot assure you that we will
be successful in these endeavors.
Evolving Internet technology and standards increase the risk that system
interruptions will occur. Our Internet operations are also vulnerable to
interruption by fire, power loss, telecommunications failure and other events
beyond our control. System interruptions that result in the unavailability of
our Web site, or slower response times for users, could reduce the number of
advertisements delivered, and our revenues earned from advertisers, as well as
the fees we collect from consumers and businesses using our database information
products over the Internet. We have experienced periodic system interruptions in
the past and expect that such interruptions could continue to occur from time to
time in the future.
Additionally, any substantial increase in traffic on our Web site could require
us to expand and adapt our network infrastructure. We cannot assure you that we
will be able to expand our network infrastructure on a timely basis to meet
increased demand.
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Competition
The market for Internet data services is relatively new, intensely competitive
and rapidly evolving. Our Internet operations compete against a variety of firms
that provide information products through one or more media, including print,
broadcast, television and the Internet. Within our targeted niche of information
products and the Internet, we compete with Experian Corporation, Public Priority
Systems, Inc. (School Match) and Online Data Services (CrimeCheck). Each of
these competitors offers one or more Internet sites with information products
similar to individual items we provide over the Internet; and each of these
competitors, in particular Experian, may have greater financial resources than
we do. These financial resources could be deployed to more aggressively compete
on the Internet or through more traditional media, to our disadvantage, at any
time.
We expect competition to persist and intensify. There are relatively low
barriers to entry into our business, and competitors using other media to
deliver information products could adapt their businesses to include the
Internet as a medium for delivering their products. Competitors could develop or
offer services that provide significant performance, price, creative or other
advantages over those offered by us, and any competitor or group of competitors
could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Government Regulation
Due to the increasing popularity of the Internet, it is likely that a number of
laws and regulations related to the Internet will be adopted at the local,
state, national and international levels. These laws would cover issues such as
user privacy, freedom of expression, pricing of products and services, taxation,
advertising, intellectual property rights, information security and the
convergence of traditional communication services with Internet communications.
Because of the growth in the electronic commerce market, Congress has held
hearings on whether to regulate providers of services and transactions in the
electronic commerce market. These laws could have an adverse impact on client
demand and decrease growth of the Internet, which could in turn decrease the
demand for our services or increase our cost of doing business over the
Internet.
Acquisitions
We intend to acquire businesses complementary to ours in order to expand our
services, diversify our business and lead the consolidation trend among Internet
information products providers. We cannot assure you that we will be able to
make any acquisitions in the future on favorable terms or that such acquisitions
will ultimately prove advantageous to us. We may encounter substantial costs,
delays or other problems as we integrate our acquisitions. Such costs could
include severance payments to employees of acquired companies, systems
integration costs, restructuring charges and other expenses associated with a
change of control, as well as non-recurring acquisition costs including
accounting, legal and investment banking fees and transaction-related
obligations.
Increased competition for acquisition candidates may develop in our targeted
industries, in which case there may be fewer acquisition opportunities available
to us and higher acquisition costs for
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the opportunities that are available. Moreover, it is possible that neither our
management nor management of any of the acquired companies will have the
necessary skills to manage a company with substantial internal growth
opportunities and plans for further growth through acquisitions or strategic
alliances. We may seek to recruit additional managers to supplement the
management of the acquired companies, but we may not have the ability to recruit
additional managers with the skills necessary to enhance the management of the
acquired companies.
Dependence On Key Managers, Employees and Outsource Vendors
Our success depends heavily on the continued service of our executive officers
and our managers. Should one or more of these individuals leave before
acceptable replacements are found, there could be a material adverse effect on
our business and prospects. We do not presently maintain key-man life insurance
on any of our executives or employees.
Competition for employee candidates with the technical skills we require is
intense. We have not experienced any significant difficulties in attracting and
retaining qualified personnel to date, although there can be no assurance that
we will not encounter such problems in the future.
We also use the services of a data entry and data conversion facility in the
Philippines, a CD-ROM software company, and Internet site development and
hosting companies. Should the service of those facilities become unavailable or
unreasonably priced, we may experience an interruption in our business
activities until we identify other suitable outsource vendors.
Dependence on Availability of Information
Our collection of data from primary sources is subject to Federal Freedom of
Information Act laws and regulations and local, county and state interpretations
of that Act. A change in these laws and regulations, or additional such laws and
regulations, could have an adverse effect on our business by limiting our
ability to collect data.
We also collect data from external providers, but we cannot assure you that our
license agreements will continue to allow us to do so, nor can we assure you
that, in cases where providers can no longer serve us, alternative sources of
data will be available.
Concentration of Customers
Although we have relatively diversified customer base, our business could be
materially and adversely affected by the loss of any one or more large multiple
listing service customers. On a pro forma basis, our top ten multiple listing
service customers accounted for approximately 80% of our total sales and the
single largest customer accounted for 10% of our total sales in 1998. The loss
or insolvency of one or more major customers, or a material reduction in the
sales to such customers, would have a material adverse effect on our results of
operations.
Intellectual Property Rights
It is uncertain how intellectual property laws will apply to the Internet, and
we cannot assure you that existing laws will provide adequate protection for our
proprietary database offerings or our Internet domain names. Our success and
ability to compete partly depends on the protection of
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our proprietary database offerings on the Internet and on the goodwill
associated with our trademarks, trade names, and Internet domain names.
We rely on copyright laws to protect the original content that we develop for
the Internet. We rely on trade secret and copyright laws to protect the
proprietary technologies that we have developed to manage and improve our Web
site, but we cannot assure you that these laws will sufficiently protect us,
that others will not develop technologies similar or superior ours, or that
others will not obtain or use our technologies without our authorization.
In addition, we rely on certain technology licensed from others, and we may be
required to license additional technology, for use in managing our Web site and
providing related services to users and advertising customers. Our ability to
generate revenues from Internet commerce may also depend on data encryption and
authentication technologies that we may be required to license from others. We
cannot assure you that these third party technology licenses will be available
to us on acceptable commercial terms, or at all. The inability to enter into and
maintain any of these technology licenses could have a material adverse effect
on our business, prospects, financial condition and operating results.
We also cannot assure you that others will not bring claims of copyright or
trademark infringement against us or claim that our use of certain technologies
violates the intellectual property rights of others. Any claims of infringement
could be time consuming to defend, result in costly litigation, divert
management attention, require us to enter into costly royalty or licensing
arrangements and prevent us from using important technologies. Any of these
could have a material adverse effect on our business, prospects, financial
condition and operating results.
Potential Adverse Effect of Shares Eligible for Future Sale
As of April 5, 1999, 7,024,688 shares of our common stock were issued and
outstanding. Of these shares we believe that 6,000,000 are "restricted
securities" which under certain circumstances may be sold in compliance with
Rule 144 or other exemptions under the Securities Act. Assuming that Rule 144 is
available, we believe that, subject to certain volume limitations and "manner of
sale" requirements, these "restricted securities" would be eligible for resale
in April 2000; however, if we were to file a registration statement with the SEC
covering some or all of these shares, they could become eligible for resale even
sooner. In addition, we have issued warrants for the purchase of an aggregate of
560,000 shares of our common stock for $3.00 per share. These warrants are not
exercisable until March 31, 2000, and will expire on March 31, 2004 if not
exercised after March 31, 2000. The shares that would be issued if the warrants
were exercised would be "restricted securities," as described above.
No prediction can be made regarding the effect that the availability of these
"restricted securities" will have on the market prices of our shares from time
to time. The possibility that substantial amounts of our shares may be sold in
the public market may adversely effect the prevailing market prices for shares
and could impair our ability to raise capital in the future by selling new
shares.
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No "Established Trading Market"; No Dividends
Although our shares are eligible for the OTC Bulletin Board of the NASD, there
is currently no "established trading market" for our shares, and we cannot
assure you that any such market will ever develop or be maintained. The absence
of an active trading market would reduce or eliminate the liquidity of an
investment in our shares.
If and to the extent that brokerage firms act as market makers for our shares on
the OTC Bulletin Board, they may be a dominating influence in any market that
might develop, and the degree of participation by such firms may significantly
affect the price and liquidity of our shares. These firms may discontinue their
market making activities at any time. The prices at which our shares may be
offered in the market will be determined by these firms and by the purchasers
and sellers of our shares, but such prices may not necessarily relate to our
assets, book value, results of operations or other established and quantifiable
criteria of value.
Any market price for our shares is likely to be very volatile, and numerous
factors beyond our control may have a significant adverse effect on prices.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends for the foreseeable future.
Possible Effect of "Penny Stock" Rules On Liquidity
The Exchange Act requires additional disclosure relating to the market for
"penny stocks." A penny stock is generally defined to be any equity security not
listed on NASDAQ or a national securities exchange that has a market price of
less than $5.00 per share, subject to certain exceptions. Among these exceptions
are shares issued by companies that have:
o net tangible assets of at least $2 million, if the issuer has
been in continuous operation for three years;
o net tangible assets of at least $5 million, if the issuer has
been in continuous operation for less than three years; or
o average annual revenue of at least $6 million for each of the
last three years.
We do not currently meet the requirements of these exceptions and, therefore,
our shares would be deemed penny stocks for purposes of the Exchange Act if our
market price falls below $5.00 per share. In such case, trading in our shares
would be regulated pursuant to Rules 15-g-1 through 15-g-6 and 15-g-9 of the
Exchange Act. Under these rules, brokers or dealers recommending our shares to
prospective buyers would be required, unless an exemption is available, to:
o deliver a lengthy disclosure statement in a form designated by
the SEC relating to the penny stock market to any potential
buyers, and obtain a written acknowledgement from each buyer
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that such disclosure statement has been received by the buyer
prior to any transaction involving our shares;
o provide detailed written disclosure to buyers of current price
quotations for our shares, and of any sales commissions or
other compensation payable to any broker or dealer, or any
other related person, involved in the transaction;
o send monthly statements to buyers disclosing updated price
information for any penny stocks held in their accounts, and
these monthly statements must include specified information on
the limited market for penny stocks.
In addition, if we are subject to the penny stock rules, all brokers or dealers
involved in a transaction in which our shares are sold to any buyer, other than
an established customer or "accredited investor," must make a special written
determination that our shares would be a suitable investment for the buyer, and
the brokers or dealers must receive the buyer's written agreement to purchase
our shares, as well as the buyer's written acknowledgement that the suitability
determination made by the broker or dealer accurately reflects the buyer's
financial situation, investment experience and investment objectives, prior to
completing any transaction in our shares.
These Exchange Act rules may limit the ability or willingness of brokers and
other market participants to make a market in our shares and may limit the
ability of our shareholders to sell in the secondary market, through brokers,
dealers or otherwise. We also understand that many brokerage firms will
discourage their customers from trading in shares falling within the "penny
stock" definition due to the added regulatory and disclosure burdens imposed by
these Exchange Act rules.
Our shares also could also be subject to Section 15(b)(6) of the Exchange Act,
which gives the SEC the authority to prohibit any person that engages in
unlawful conduct while participating in a distribution of penny stock from
associating with a broker or dealer, or participating in a distribution of penny
stock, if the SEC finds that such a restriction would be in the public interest.
Such a restriction, if any were imposed, could materially and adversely affect
the market liquidity for our shares.
The SEC from time to time proposes even more stringent regulatory or disclosure
requirements on shares not listed on NASDAQ or on a national securities
exchange. For example, changes are currently proposed to Rule 15c2-11 of the
Exchange Act. The adoption of the proposed changes to Rule 15c2-11, or any other
regulatory changes that may be made in the future, could have an adverse effect
on the trading market for our shares.
Control by Principal Stockholders; Other Antitakeover Provisions
As of April 5, 1999, Mitchell Deutsch, together with his children, owned about
45% of our outstanding common stock, and James Garfinkel, together with his
children, owned about 28% of our outstanding common stock. As a result, Mitchell
Deutsch, James Garfinkel and their families together are able to elect a
majority of the Board of Directors and otherwise continue to
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influence our policies and any other matter requiring shareholder approval
(including mergers, consolidations and the sale of all or substantially all of
our assets). They can also, together with others, prevent or cause a change in
control in our company.
Our Certificate of Incorporation authorizes the issuance of up to 10,000,000
shares of "blank check" preferred stock with such designation, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue a new series of preferred stock with dividend, liquidation, conversion,
voting or other rights which could hamper the voting power or other rights of
our common stockholders. The issuance of a new series of preferred stock could
be used in certain circumstances as a method of discouraging, delaying or
preventing a change in control in our company. Although we do not presently
intend to issue any additional shares of preferred stock, we cannot assure you
that we will not do so in the future.
We are subject to Section 203 of the General Corporation Law of the State of
Delaware. Subject to certain exceptions, Section 203 prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder unless the proposed business combination was
approved by the Board of Directors before the stockholder became an interested
stockholder. In general, Section 203 defines an interested stockholder as any
shareholder directly or indirectly owning 15% or more of the outstanding voting
stock of a Delaware corporation. Section 203 could have the effect of
discouraging others from making tender offers for our shares, and also may have
the effect of preventing changes in our management.
Litigation
We may potentially be liable in the course of our business for defamation,
negligence, copyright, patent or trademark infringement and other claims based
on the materials that we publish or distribute over the Internet. In addition,
we could be exposed to liability with respect to material that is indexed or
offered on our sites. Although we carry general liability insurance, our
insurance may not cover potential claims of this type or may not be adequate to
indemnify us for all possible liability.
The successful assertion of one or more large claims against us that exceeds
available insurance coverage, if any, or results in changes to any insurance
policies we may obtain (including premium increases or the imposition of a large
deductible or co-insurance requirements) could adversely affect our business,
results of operations and financial condition.
Future Capital Needs; Uncertainty of Additional Financing
We anticipate a need to raise additional funds in order to conduct our
operations and take advantage of acquisition and expansion opportunities. Our
liquidity and capital requirements will depend on numerous factors, including
the success of our new product offerings, the growth of our Internet-related
revenues, and competing technological and market developments. We will be
required to raise additional funds through public or private financing,
strategic relationships or other arrangements, particularly as our acquisition
strategy matures. We cannot
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assure you that such additional funding, if needed, will be available on terms
acceptable to us, or at all.
Furthermore, any additional equity financing may dilute existing shareholders.
In addition, any new shares issued may have rights, preferences or privileges
senior to those of the existing shareholders. Debt financing, if available, may
involve restrictive covenants which may limit our operating flexibility.
Strategic arrangements, if necessary, may require us to relinquish our rights to
some of our intellectual property or some business opportunities. Any of these
occurrences could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Effect of the Year 2000
Many computer chips and computer software programs use two digits rather than
four to define the applicable year and, as a result, are incapable of properly
recognizing or processing information with dates beyond December 31, 1999. Upon
arrival of the year 2000, any computer programs that have date sensitive
software may:
o interpret the year as "00" and refuse to accept any date entry
for years past 1999;
o interpret "00" as connoting the year 1900; and/or
o erroneously assume that the year 2000 is not a leap year.
We are checking all of our internal systems to ensure they are year 2000
compliant. We cannot assure you, however, that the year 2000 problem will not
affect us or any entities with whom we conduct business.
