U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) OR 12(g) of The Securities Exchange Act of 1934
TWILIGHT PRODUCTIONS, LTD.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C>
DELAWARE 88-0339012
------------------------------ -----------------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
</TABLE>
1619 Mardon Dr., Dayton, Ohio 45432
---------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (937) 429-4288
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
------------------- -------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------------
(Title of Class)
THIS AMENDMENT IS FILED SOLELY FOR THE PURPOSE OF REFORMATTING
THE ORIGINAL FORM 10-SB
TABLE OF CONTENTS
Forward Looking Statements
PART I
Item 1. Description of Business
Item 2. Management Discussion and Analysis or Plan of Operation
Item 3. Description of Properties
Item 4. Security Ownership of Certain Beneficial Owners and Management
Item 5. Directors and Executive Officers
Item 6. Executive Compensation
Item 7. Certain Relationships and Related Transactions
Item 8. Description of Securities
PART II
Item 1. Market Price of and Dividends on the Common Equity and Related
Stockholder Matters
Item 2. Legal Proceedings
Item 3. Changes In and Disagreements with Accountants
Item 4. Recent Sales of Unregistered Securities
Item 5. Indemnification of Directors and Officers
PART F/S
Item 1. Financial Statements
PART III
Index to Exhibits
SIGNATURES
FORWARD LOOKING STATEMENTS
This Form 10-SB contains forward-looking statements, including statements
regarding the expectations of future operations. For this purpose, any
statements contained in this Form 10-SB that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate," or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, and actual results may differ materially
depending on a variety of factors, many of which are not within the Company's
control. These factors include, but are not limited to, economic conditions
generally and in the industries in which the Company may participate,
competition within chosen industry, including competition from much larger
competitors, technological advances, and the failure to successfully develop
business relationships. In light of these risks and uncertainties, you are
cautioned not to place undue reliance on these forward looking statements.
The Company acknowledges that the safe harbor contained in the Litigation
Reform Act of 1995 is not applicable to the disclosure in this Form 10-SB.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS HISTORY
Twilight Products, LTD., ("Twilight") was incorporated in the State of
Delaware on March 9, 1994. Twilight was engaged in the business of producing
high-quality, low budget, feature-length motion pictures. Since Twilight's
inception, two films have been produced but not sold as of May 1, 2000.
During fiscal year 1999, Twilight wrote down the value of both films to zero.
On April 10, 2000, Twilight acquired all of the issued and outstanding shares
of EDICT Systems, Inc. ("Edict" or the "Company"), a company incorporated in
September of 1994 and organized under the laws of the state of Ohio pursuant
to the terms of an Agreement and Plan of Merger dated April 10, 2000 (the
"Merger Agreement") by and among the Company, Twilight and Twilight
Acquisition Sub, Inc., an Ohio corporation and a wholly-owned subsidiary of
Twilight ("Sub"). In accordance with the terms of the Merger Agreement, Sub
was merged into Edict (the "Merger") and the Shareholders of Edict were issued
4,359,000 shares of Twilight's common stock, par value $.001 per share
("Common Stock"). As a result of the Merger, Edict became a wholly-owned
subsidiary of Twilight. In addition, the directors and officers of Edict
became the directors and officers of Twilight.
Immediately following the Merger, the Shareholders of Edict owned
approximately 81% of the issued and outstanding Common Stock of Twilight.
Immediately thereafter, the two films that were developed by Twilight were
transferred to Chaverim Productions, Ltd., a Delaware corporation, an entity
owned by the former officers and directors of Twilight, in exchange for
Twilight's release from any and all obligations and liabilities arising from
the production of the films, leaving the sole business of Twilight consisting
of the business of Edict.
Also on April 10, 2000, Twilight entered into a stock purchase agreement (the
"Stock Purchase Agreement") with Halter Financial Group, Inc., a Texas
corporation ("HFG") and Art Howard Beroff ("Beroff"), a former director and
officer of Twilight prior to the Merger. This Stock Purchase Agreement was a
requirement made by Edict in order to consummate the Merger. Under the
terms of the Stock Purchase Agreement, HFG and Beroff, or their designees, are
obligated to purchase 141,500 shares of Common Stock each for a purchase price
of $150,000 within 90 days of the effective date of the Merger. The date of
purchase has been delayed by agreement of the parties and shall occur within 5
days after the filing of this Form 10SB. The Stock Purchase Agreement
obligates Twilight to issue 283,000 shares of Common Stock for an aggregate
consideration of $300,000 (approximately $1.06 per share). At the time of
execution of the Stock Purchase Agreement, shares of Common Stock were trading
at approximately $1.06 per share. This offering was made pursuant to Section
4(2) of the Securities Act of 1933.
OVERVIEW/BACKGROUND
The Company is a provider of business-to-business ("B2B") electronic commerce
("e-commerce") products and services, offering comprehensive, standards-based
and proprietary solutions for businesses of all sizes. The Company develops,
markets, and supports B2B e-commerce software products and provides Internet-
based communication and e-commerce data processing services that help
businesses process transactions required in the electronic procurement of
goods and services and other B2B relationships.
The Company's software products enable businesses to engage in e-commerce with
one another by allowing companies to fully integrate e-commerce data into
their business infrastructure and operations as well as allowing smaller
companies the ability to manually process electronic transactions.
As of December 31, 1999, the Company had over 800 companies using its
FORMULA_ONE EDI translation software which allows companies to transmit,
receive, manage, and process Electronic Data Interchange ("EDI") transactions
for integration into legacy systems or for stand-alone processing via printed
output and entry screens for data generation.
In addition, the Company has over 200 companies using its bar code label
modules ("BCLM") to produce shipping container labels. The BCLM modules
integrate with the Company's FORMULA_ONE software and utilize data received
from business partners for the rapid creation of shipping labels.
In 1999, the Company developed its EnterpriseEC service as an alternative to
EDI software and to private network services that are currently provided by
traditional value added networks ("VANs") offering their services primarily
using dedicated telecommunications links.
EnterpriseEC transmits and receives electronic documents, such as purchase
orders, invoices, promotional information, and other documents over the
Internet. EnterpriseEC also allows customers to transmit and receive data
directly using other communications protocols. In addition, EnterpriseEC
communicates with traditional VANs via an interconnect with AT&T Easylink
Services which allows EnterpriseEC to support its customers even if their
trading partner uses a traditional VAN.
EnterpriseEC allows companies to utilize their current EDI software (including
FORMULA_ONE) to process electronic documents, but uses the Internet (via
EnterpriseEC) for communication of the electronic documents to reduce the
costs associated with traditional VANs.
EnterpriseEC also provides value-added services such as conversion of data
from one format to another. This is known as server-side data translation.
EnterpriseEC also allows companies to utilize a web-based, generic portal
("www.EZEC.com" and "www.EasyEC.com") to access documents stored on
EnterpriseEC via commonly available web browsers for processing which
eliminates the need for EDI software in many cases.
In addition to generic access and processing of documents via the EnterpriseEC
generic portal, the Company creates vertical industry portals ("Vortals")
which target specific industries and allows for the addition of value added
services to these vertical communities.
In October, 1999, the Company activated its EnterpriseEC Internet-based value-
added network, utilizing a direct connect method (not Internet or VAN
interconnection) with The Kroger Company, a major grocery industry retailer.
Also in October, 1999, the Company activated www.GroceryEC.com, its first
Vortal to allow vendors and brokers of Kroger to receive, process, create, and
transmit electronic documents to and from Kroger.
As of June, 2000, the Company added support for eight additional grocery
retailers, two connecting directly with EnterpriseEC and seven communicating
with EnterpriseEC via traditional VANs. Also as of June, 2000, development
was underway to add support for nine additional grocery retailers with the
goal of supporting 50 grocery industry retailers' e-commerce capabilities by
December, 2000.
As of June, 2000, there were approximately 450 vendors/brokers in production
on www.GroceryEC.com, to support the e-commerce initiatives of the grocery
retailers which were supported on EnterpriseEC.
The Company has also reserved additional Vortal Internet domains and intends
to add additional domains when necessary. Currently reserved domains are:
RetailEC.com
HealthcareEC.com
PetroleumEC.com
MfgEC.com
HighTechEC.com
AutomotiveEC.com
LogisticsEC.com
DrugStoreEC.com
The Company markets EnterpriseEC and Vortals utilizing its "Hub and Spoke"
marketing program whereby large "hub" companies get reduced prices or free
access to EnterpriseEC while their trading partners, "spokes", pay transaction
fees to access to the system.
PRODUCT BREAKDOWN - SOFTWARE AND SERVICES
FORMULA_ONE - PC-based software for transmitting, receiving, administrating,
and processing EDI documents. FORMULA_ONE communicates with all traditional
VANs as well as EnterpriseEC via secure File Transfer Protocol ("FTP").
FORMULA_ONE supports both integration with customers current legacy systems as
well as stand-alone processing via printed output and entry screens for
creating electronic documents.
BCLM - Bar Code Label Modules provide an add-on to FORMULA_ONE for the
creation of bar coded shipping container labels.
EnterpriseEC - An Internet-based e-commerce network providing similar
functionality as traditional VANs, but at reduced prices due to using the
Internet as a communications infrastructure. EnterpriseEC also includes
network level translation of data from one format to another (standards based
data to proprietary, etc.).
EZEC.com and EasyEC.com - A generic, web-based document processing system
similar to the Vortals but not focused on any vertical industry.
Vertical Industry Portals - Vortals - Web sites designed to allow participants
in a vertical industry the ability to process and create electronic documents
on EnterpriseEC via a web browser. Additional industry-specific value added
features can be added to a Vortal.
THE MARKET
Business-to-business e-commerce involves the automation of business processes
and transactions through the use of computers and telecommunications to
exchange and electronically process commercial information and transactions
between businesses. In the 1980's, the predominant technology for B2B e-
commerce was Electronic Data Interchange ("EDI") which involves the use of
industry standards to conduct the exchange of business documents
electronically. The transactions were communicated between businesses over
private communication networks, known as VANs, which provided security,
administration of trading partnerships, auditing, and delivery of electronic
transactions. In the 1990's, the Internet, because of its wider acceptance
among businesses, became a viable option for conducting e-commerce instead of
using private networks. This development greatly increased the opportunity or
more businesses to participate in e-commerce due primarily to a perception of
lower cost associated with using the Internet.
The advantages of B2B e-commerce typically include elimination of redundant
data entry, a reduction in administration associated with processing paper
documents, a reduction in lead-time necessary to process documents, the
ability to reduce inventory based on "just in time" philosophies, and
increased data accuracy. The use of data standards for e-commerce is
important for companies with disparate computer systems to communicate
business documents electronically in an effective manner.
As larger companies seek to garner the maximum return on their ability to do
e-commerce, many of their smaller trading partners will require applications
to manually process and generate electronic documents externally from their
business systems until such a time that the volume of e-commerce transactions
warrant the necessary investment to integrate the e-commerce data into their
legacy systems. These smaller companies utilize PC-based software or web-
based "portals" for processing and creating e-commerce documents to support
their business partners.
STRATEGY
The Company plans to become a leading provider of B2B e-commerce software and
solutions by providing software products and services to the B2B marketplace
for the broadest possible distribution. By focusing on vertical markets
within the B2B marketplace along with providing horizontal market solutions,
the Company intends to provide solutions to a broad potential customer base.
There are two major components to conducting B2B e-commerce - communications
and data processing.
In support of the first major component - communications, the Company has
developed its EnterpriseEC product which is an Internet-based e-commerce
network providing similar functionality as traditional VANs, but at reduced
prices due to using the Internet as a communications infrastructure instead of
creating and maintaining a private network. EnterpriseEC can be used by
companies that currently have e-commerce software in place, but are using
traditional VANs by using secure file transfer protocol ("FTP") or by using a
free secure FTP software product provided by the Company.
In addition, EnterpriseEC communicates with traditional VANs via an
interconnect with AT&T Easylink Services which allows EnterpriseEC to support
its customers even if their trading partner uses a traditional VAN.
EnterpriseEC also allows customers to transmit and receive data directly to
the Company's data center using other communications protocols, such as
asynchronous or bisynchronous protocols, bypassing the Internet altogether.
This is provided for those customers that have concerns about the Internet
being used for B2B e-commerce due to security or availability concerns.
In support of the second major component of B2B e-commerce - data processing,
the Company has developed both PC-based software and web-based solutions. The
processing of e-commerce data falls into two general categories - those that
are integrating the e-commerce data into their in-house legacy business
systems and those that process and generate electronic documents manually (not
integrated).
For companies that want to integrate e-commerce data into their in-house
legacy business systems, the Company offers its FORMULA_ONE EDI translation
software. This software provides connectivity to most private VANs as well as
EnterpriseEC. Once data is received into FORMULA_ONE, it can be translated
into any customer requested format using reformat programs that are custom
developed by the Company with the reformatted data being exported to in-house
legacy systems for integration.
In addition to using FORMULA_ONE for integration, EnterpriseEC has the ability
to reformat data prior to transmission to the customer for integration
purposes using custom developed applications, which are hosted on the
EnterpriseEC computer systems.
For companies that want a stand-alone solution which produces readable
documents of incoming e-commerce data and generates outgoing e-commerce
documents by using data entry screens, the Company has several solutions. In
addition to assisting companies with integration, FORMULA_ONE also has stand-
alone capabilities whereby incoming data is printed in a readable format and
data entry screens are available for generating outgoing documents. In many
cases, the outgoing documents are created from incoming data using a "document
turnaround" feature within FORMULA_ONE. This feature allows a customer to
load an incoming document (such as a purchase order) into a data entry screen
for faster generation of an outgoing document (such as an invoice). This
"turnaround" feature can be used whenever an outgoing document contains much
of the information contained in an associated incoming document.
The Company has also produced a web-based solution for processing e-commerce
data in a stand-alone environment. By generating hypertext markup language
("HTML") based readable reports of incoming electronic documents, and
utilizing Java applets and/or HTML based entry screens for creating outgoing
electronic documents, the Company has created an alternative to traditional
e-commerce software and network services. The Company provides these web-based
solutions via a generic portal on EnterpriseEC or via Vortals that target
specific industry segments.
The Company intends to utilize its many years of experience in the e-commerce
industry to market EnterpriseEC horizontally to companies currently doing e-
commerce as well as companies who will be conducting e-commerce in the future.
Because EnterpriseEC is not industry specific and utilizes both standards-
based e-commerce data formats as well as proprietary formats, any company
doing e-commerce is a potential customer of EnterpriseEC.
The Company intends to leverage its current FORMULA_ONE customer base to
increase connectivity opportunities with EnterpriseEC as most of the
FORMULA_ONE customers are currently using commercial VANs. The Company has
developed a secure FTP software program that integrates with FORMULA_ONE
providing connectivity to its EnterpriseEC service. Due to the cost savings
associated with Enterprise versus traditional VANs, the Company expects many
of its FORMULA_ONE customers to switch.
The Company also intends to provide web-based solutions for stand-alone B2B
customers via its generic portal (EZEC.com and EasyEC.com) on EnterpriseEC as
well as its Vortals. The Company plans on leveraging the Vortals and
targeting specific industries, adding value to the service provided by the
Vortals that focuses on the needs of the vertical market.
The Company's www.GroceryEC.com Vortal is currently a leading provider of web-
based B2B e-commerce in the grocery industry and supports the e-commerce
initiatives of nine grocery retailers. The Company hopes to support the
vendors and brokers of 50 grocery retailers by the end of the year 2000.
The Company plans to duplicate the process of providing broad vertical
industry support via additional Vortals.
The Company has also initiated a Hub and Spoke marketing program whereby large
companies that have a need to conduct e-commerce with a broad business partner
base can leverage the capabilities of EnterpriseEC at little or no cost,
provided they meet certain criteria. These criteria consists of:
A. A minimum of 100 potential business partners not currently doing
e-commerce with them;
B. A mandate to these business partners to conduct e-commerce combined with
a penalty for non-compliance (such as an assessment or handling fee for
processing paper-based documents) or an incentive for compliance (such as
better payment terms);
C. The Hub must provide a list of targeted business partners to the Company;
and
D. The Hub must make their business partners aware that EnterpriseEC or one
of its "Vortals" are available to satisfy the mandate.
No sole endorsement of the Company's products are necessary by the Hub company
to gain the benefits of the Hub and Spoke marketing program.
Management believes that the products and services offered by the Company,
combined with the Hub & Spoke marketing program, offer a unique service in the
B2B electronic commerce industry by combining the provision of network
services to large companies at significantly reduced cost with web-based
document processing capabilities for their trading partners which allows the
large company to get 100% participation from their potential trading partners.
This approach offers an excellent opportunity for Company growth.
COMPETITION
The B2B e-commerce market is highly competitive. Numerous companies supply B2B
e-commerce software products, private network services, Internet VAN services,
and Vortal capabilities. Many of the Company's competitors have significantly
greater financial and personnel resources than the Company, due in part either
to their revenue and profitability, or their market capitalization. The
Company's competitors range from small companies with limited resources to
large companies with substantially greater financial and marketing resources
than the Company. The Company believes that existing competitors who compete
with the Company in one segment of the market are likely to expand the range
of their e-commerce services to include other market segments the Company has
targeted or will target. In addition, the barrier to entry into the Company's
markets is not large so it is likely that new competitors will enter the
Company's markets on an ongoing basis. Also, large telecommunication, media,
and software companies may offer services in direct competition to the
Company. The Company believes the principal competitive factors in the
commercial B2B e-commerce industry include responsiveness to customer needs,
efficiency in the delivery of solutions, ease of product use, quality of
service, price and value. The Company believes it competes favorably with
regard to those factors.
INTELLECTUAL AND PROPRIETARY RIGHTS
The Company regards portions of its software products and other designs
including its web site designs, as proprietary and will attempt to protect
them by all available means including trade secret laws, employee and third-
party nondisclosure agreements, and built-in software protections.
Although the Company believes that its current technology and designs have
been independently developed, there can be no assurance that the technology
does not or will not infringe on the rights of others. The Company has no
patents or registered copyrights pertaining to its products, and it may be
possible for unauthorized third parties to copy certain portions of the
Company's products or to "reverse engineer" or otherwise obtain and use, to
the Company's detriment, information that the Company regards as proprietary.
Moreover, the laws of some countries do not offer the same protection to the
Company's proprietary rights as do those of the United States and Canada.
There can be no assurance that legal protections relied upon by the Company to
protect its proprietary position will be adequate or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to those utilized by the Company. It is the intention
of the Company to apply for patent protection of any processes or business
methods determined to be patentable and in the best interest of the Company to
do so.
The Company owns United States trademark rights to "EnterpriseEC" and
"FORMULA_ONE". Other trademarks may be acquired by the Company if and when
management determines that it is in the best interest of the Company to do so.
THIRD PARTY TECHNOLOGY
The Company incorporates in its products certain software licensed to it by
other software developers. These include software components and objects
licensed from various vendors. The Company also relies on licensed software
development tools, database software, and server software from third party
providers for the development and operation of its products.
If the Company was deprived of the right to use software incorporated in its
products for any reason, or if the tools utilized in the development of its
products were discontinued or the capabilities contained in future releases
were not up to the standards set by the Company, there could be serious
disruption to its business.
YEAR 2000 READINESS
The Year 2000 issue relates to the ability of a computer system to properly
process data after January 1, 2000. Company efforts were spent to ensure that
its computer products were "Year 2000 Ready," as defined, and that its
internal core information technology (IT) and non-IT systems were Year 2000
Ready. The Company believes it successfully implemented its Year 2000
program, as evidenced by the continued successful operation of its computer
products and core internal IT and non-IT systems. The Company has not
encountered any significant problems with its third-party customers, financial
institutions, vendors and others with whom it conducts business. The Company
will continue to monitor its product performance and core IT and non-IT
systems throughout 2000 to ensure ongoing performance. While there can be no
assurance that no Year 2000 related issues will arise, as of June 30, 2000,
the Company believes, based on information currently available, that Year 2000-
related events are not likely to have a material effect on its results of
operation, financial condition or liquidity.
EMPLOYEES
The Company believes its success depends to a significant extent on its
ability to attract, motivate and retain highly skilled vision-oriented
management and employees. To this end, the Company intends to focus on
incentive programs for its employees and, will endeavor to create a corporate
culture which is challenging, rewarding and enhances the employees career
development. As of June, 2000, the Company had 22 full-time and two part-time
employees. Sixteen employees are technical personnel engaged in developing,
maintaining or providing technical support for the Company's products and
services, four employees are marketing and sales personnel, and four are
involved in administration and finance.
RESEARCH AND DEVELOPMENT
The Company conducts research and development on two levels on a continuing
basis. First, the Company continually studies the business processes in the
B2B industry, as well as the vertical industries it targets. A pivotal part
of the success of the Company's products is in understanding the exact needs
of its customers, and applying that knowledge to its products and services.
Second, core technology research, development and engineering is conducted on
a continual basis. New technologies associated with the Internet and
standards for conducting e-commerce (such as extensible markup language or
"XML") and the commercial product development software that support it are
continually being researched and incorporated into the Company's products when
deemed necessary.
GOVERNMENT REGULATION
Based upon its experience and knowledge of the industry, the Company believes
that its products comply substantially with applicable regulations in the
markets which the Company has targeted, however, there can be no assurances
that the future regulations or laws will not be adopted which would have an
adverse effect on the Company. The Company cannot predict the extent or
impact of future legislation or regulation by federal, state or local
authorities.
RECENT PRIVATE OFFERINGS
On April 10, 2000, the Company entered into the Stock Purchase Agreement with
HFG and Beroff. This Stock Purchase Agreement was a requirement by Edict in
order to consummate the merger with Twilight. The Stock Purchase Agreement
requires HFG and Beroff, or their designees, to purchase 141,500 shares of
Common Stock each for a purchase price of $150,000 within 90 days of the
effective date of the Merger. The date of purchase has been delayed by
agreement of the parties and shall occur within 5 days after the filing of
this Form 10SB. The Stock Purchase Agreement will require that the Twilight
issue 283,000 shares of Common Stock for an aggregate consideration of
$300,000 (approximately $1.06 per share). At the time of execution of the
Stock Purchase Agreement, shares of Common Stock were trading at approximately
$1.06 per share. This offering was made pursuant to Section 4(2) under the
Securities Act of 1933.
RISK RACTORS
An investment in Common Stock is very risky. Investors should carefully
consider the following risk factors in addition to the other available
information about the Company before purchasing Common Stock. Each of the
following risks could have a material adverse effect on the business,
financial condition or operating results of the Company. In such a case, the
trading price of Common Stock would probably decline, and investors may lose
all or part of their investment.
THE COMPANY'S LIMITED OPERATING EXPERIENCE MAY CAUSE IT TO MISJUDGE ITS
MARKETS OR NEEDS
Although the Company has been providing software and solutions for the e-
commerce market since 1990, its involvement in Internet-based products and
services has been a much more recent development. Its initial Internet
product has been in operation for approximately six months. Accordingly, the
Company has an extremely limited operating history in this environment. An
investor in Common Stock must consider the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development.
THE COMPANY MAY BE UNABLE TO IMPLEMENT ITS BUSINESS STRATEGY
Although the Company believes its strategy can be successful, there are many
reasons why it may be unable to implement it, including the Company's
inability to:
1. deploy EnterpriseEC and its Vortals on a large scale due to software
development or other problems;
2. attract a sufficiently large audience of users to its Internet-based e-
commerce network and Vortals;
3. increase awareness of its brand;
4. strengthen customer loyalty;
5. continue to develop and improve its products;
6. continue to develop and upgrade its technology; and
7. attract, retain and motivate qualified personnel.
THE COMPANY HAS A RECENT HISTORY OF OPERATING LOSSES AND ANTICIPATES IT WILL
INCUR CONTINUED LOSSES FOR THE FORESEEABLE FUTURE
As the Company moves from software-only products to providing products and
services over the Internet, it has experienced increasing operating losses.
In the 1999 fiscal year, the Company experienced a net loss of $46,692 on
revenues of $824,443. The Company anticipates that operating losses will
continue for the foreseeable future and may be much larger due to the
investment of capital resources in EntepriseEC and Vortal products. Also, as
more companies move from software to Internet solutions, the Company has
experienced declining revenues for its FORMULA_ONE software product and
expects this decline to continue for the foreseeable future. The Company's
future profitability depends, in part, on:
1. the success of its product development efforts;
2. the acceptance of its business model by targeted customers; and
3. its sales and marketing activities.
The success of the Company's business model depends upon potential customers
being attracted to and using its Internet-based B2B e-commerce products and
services. This business model is not yet proven, and the Company cannot
assure that it will ever achieve or sustain profitability or that its
operating losses will not increase in the future.
THE COMPANY'S REVENUES COULD DECREASE AS IT TRANSITIONS FROM ITS HISTORICAL
SOFTWARE BUSINESS MODEL TO A TRANSACTION-BASED BUSINESS MODEL
The Company is currently transitioning its business model to focus on
providing customers with the ability to process their e-commerce documents via
the Internet for fees based on the number and/or size of the transactions.
The Company expects that this model will provide an increase in recurring
revenues, but may also result in a decrease in up-front licensing and sales
revenue the Company receives from its software products which would have
normally been offered to potential customers.
Under the new model, the Company provides transaction services which involves
customers paying for transactions that they process. The Company believes
that this service will allow its customers to receive, transmit, and process
e-commerce documents without having to bear significant up-front software and
on-going VAN expenditures. Any failure in the Company's ability to implement
and grow its Internet-based services could have a material adverse affect on
the Company's business and financial results. In addition, the Company's
business and financial results could also suffer if revenue from increased
volume experienced by existing and new customers does not make up for the
loss in revenue from the decrease in the per-customer amount of up-front
licensing fees and other charges for its software products.
THE COMPANY'S OPERATING RESULTS COULD FLUCTUATE, CAUSING ITS STOCK PRICE TO
FALL
Due to the volatile nature of "Internet Stocks" and particularly "over the
counter" or "bulletin board" stocks, the Company's stock price could be
adversely affected based on fluctuations in its operating results.
THE COMPANY MAY BE UNSUCESSFUL AT MANAGING ITS GROWTH
The Company believes its business model has the potential for rapid growth.
This growth could place a significant strain on management and operations,
including sales, marketing, customer support, research and development,
finance and administrative operations. Achieving and maintaining profitability
during a period of expansion will depend, among other things, on the Company's
ability to successfully expand its products, services and markets and to
manage its operations effectively. Difficulties in managing growth, including
difficulties in obtaining and retaining talented management and product
development personnel could have a material adverse affect on the Company's
business and financial results.
THE COMPANY HAS RECENTLY INTRODUCED SEVERAL NEW PRODUCTS, AND MARKET
ACCEPTANCE OF THESE PRODUCTS IS CRITICAL TO THE COMPANY'S SUCCESS
The Company recently introduced its EnterpriseEC and www.GroceryEC.com
products. As of June, 2000 approximately 450 customers were utilizing these
products. Broad and timely acceptance of the Company's recently-introduced
products, which is critical to its future success, is subject to a number of
significant risks. These risks include:
1. the ability to successfully market and sell these products;
2. the product's ability to support large numbers of customers;
3. the need to enhance the features and services of the
Company's products; and
4. the need to significantly expand internal resources to
support planned growth of these products.
Although the Company expects to derive a significant portion of its long-term
future revenue from its recently introduced products, it has not yet finalized
its pricing and revenue models for these products. If these products do not
achieve the level of market acceptance anticipated, the Company's business and
financial results would suffer.
SYSTEM ENHANCEMENTS, UPGRADES AND OTHER FACTORS COULD CAUSE SERVICE
DISRUPTIONS OF INTERNET-BASED PRODUCTS
As the Company enhances and upgrades its Internet-based products, customers
could suffer temporary service interruptions. Other factors, such as
unauthorized intervention and access into the Company's servers may also cause
system delays or denials of service. The Company has and will continue to take
steps to ensure that such disruptions do not occur, and that any disruptions
that do occur are insignificant. However, any problems not resolved in a
timely manner could negatively affect the Company's business and financial
results.
IF THE COMPANY ACQUIRES OTHER COMPANIES, IT MAY NOT BE ABLE TO EFFECTIVELY
INTEGRATE THEM
Currently, there are no plans to acquire any other companies, but it may be
deemed advantageous to the Company's growth to do so. If the Company is
unable to effectively integrate any acquired company, the results could
negatively affect the Company's business and financial results.
THE COMPANY'S CAPITAL RESOURCES MAY BE INSUFFICIENT TO FUND IMPLEMENTATION OF
ITS PRODUCTS, SERVICES AND MARKETING ITS ADVANTAGES TO POTENTIAL USERS
Substantial funds are required to complete the Company's planned product
development efforts and expand its sales and marketing activities. The
Company expects that existing capital resources along with cash flows
generated from its current activities will be adequate to fund its operations
through the year 2000, but the Company cannot guarantee that this will be the
case. The Company's future capital requirements and the adequacy of
available funds will depend on numerous factors, including:
1. the successful marketing of existing products;
2. progress in product development efforts to enhance and generate new
products and vertical industry support; and the
growth and success of effective sales and marketing activities.
If funds generated from the Company's operations, together with its existing
capital are insufficient to meet current or planned operating requirements,
the Company will have to obtain additional funds through equity or debt
financing, strategic alliances with corporate partners, or through other
sources. The Company does not have any committed sources of additional
financing, and it cannot provide assurance that additional funding, if
necessary, will be available on acceptable terms, if at all. If adequate
funds are not available, the Company may have to delay, scale-back or
eliminate certain aspects of its operations or attempt to obtain funds through
arrangements with collaborative partners or others. This may result in the
Company relinquishing its rights to certain of its technologies, products or
potential markets. Therefore, the inability to obtain adequate funds could
have a material adverse impact on its business, financial condition and
results of operations.
PRODUCTS MAY NOT BE ACCEPTED BY THE MARKET
To date, the Company has experienced success on a limited basis for its
FORMULA_ONE, BCLM, EntepriseEC, and Vortal products.
The FORMULA_ONE product, although initially available as a DOS program in 1992
and later available to segments of its customer base in Microsoft Windows, has
had limited success. This is primarily due to the Company's lack of sales and
marketing efforts and the Company being under-capitalized.
The BCLM products have had limited success due to the fact that they require,
in most cases, FORMULA_ONE being used.
The EnterpriseEC and the Company's first Vortal, www.GroceryEC.com, products
have only been available since October, 1999 and have experienced a moderate
level of success.
LIMITED SALES AND MARKETING EXPERIENCE
A major thrust of the Company's strategy is to make potential customers aware
of its products, their features and benefits. This will require sales and
marketing expertise. However, the Company's current sales and marketing staff
is small compared to competitors and some have limited sales and marketing
experience. Although the Company intends to identify and recruit employees
with sales and marketing experience, it may be unable to do so and may
therefore be unable to successfully establish and maintain a significant sales
and marketing organization.
THE COMPANY'S ABILITY TO RECRUIT AND RETAIN SKILLED EMPLOYEES
The Company is substantially dependent on the continued services and
performance of its president and other key employees. In addition, the
Company believes it will need to expand significantly its product development,
marketing and customer service staffs. Competition for employees in the
Company's industry is intense. If the Company is unable to attract,
assimilate and retain highly qualified employees, management may not be able
to effectively manage the business, explore opportunities and respond to
competitive challenges, and the Company's business and financial results will
suffer. Many competitors may be able to offer more lucrative compensation
packages which include stock options and other stock-based compensation and
higher-profile employment opportunities.
INABILITY TO COMPETE SUCCESSFULLY AGAINST COMPANIES OFFERING SIMILAR
FUNCTIONS
A large number of companies compete with us for customers, e-commerce
transactions and other sources of on-line revenue. The number of companies
offering B2B e-commerce services is large and increasing at a rapid rate. In
addition, other large organizations not currently in the Company's market may
enter the market. The Company believes that competition for B2B e-commerce
products and services will continue to increase as the Internet develops as a
communication and commercial medium. Although the Company believes its
products and marketing strategy are unique, the Company competes directly and
indirectly for customers with numerous Internet and non-Internet businesses,
including:
1. traditional VANs (Sterling Commerce, Harbinger, IBM, GE Information
Services, MCI, AT&T, etc.);
2. Internet VANs (Internet Commerce Corporation, Harbinger, SPS, etc.);
3. web-based B2B e-commerce companies (EB2B Inc., SPS, Harbinger, Sterling
Commerce, etc.); and
4. traditional EDI Software Vendors (Harbinger, SPS, etc.).
Many of these potential competitors are likely to enjoy substantial
competitive advantages compared to the Company, including:
1. the ability to offer a wider array of products and services;
2. larger production and technical staffs;
3. greater name recognition and larger marketing budgets and resources;
4. larger customer and user bases; and
5. substantially greater financial, technical and other resources.
To be competitive, the Company must respond promptly and effectively to the
challenges of technological change, evolving standards and competitors'
innovations by continuing to enhance its products and services, as well as its
sales and marketing channels. Increased competition could result in loss of
market share, reduced prices or reduced margins, any of which could adversely
affect the Company's business. Competition is likely to increase
significantly as new companies enter the market and current competitors expand
their services.
GOVERNMENT REGULATION COULD ADVERSELY AFFECT THE COMPANY
The Company is subject to government regulation. Laws and regulations have
been or may be adopted with respect to the Internet or other on-line services
covering issues such as:
1. user liability and privacy;
2. copyright protection; and
3. distribution.
The applicability to the Internet of existing laws in various jurisdictions
governing issues is uncertain and may take years to resolve. Demand for the
Company's features and services may be affected by additional regulation of
the Internet. Federal, State, or governments of foreign countries may attempt
to regulate the Company's transmissions, levy sales or other taxes relating to
the Company's activities or impose other restrictions on the Company's
services. The laws governing the Internet, however, remain largely unsettled,
even in areas where there has been some legislative action. In addition, the
growth and development of the market for B2B e-commerce may prompt the
adoption of more stringent laws, both in the United States and abroad, that
impose additional burdens on companies conducting business over the Internet.
The requirement that the Company comply with any new legislation or
regulation, or any unanticipated application or interpretation of existing
laws, may decrease the demand for the Company's services, increase the cost of
doing business or otherwise have a material adverse effect on the Company's
business, results of operations and financial condition.
INTERNET CAPACITY CONSTRAINTS MAY INHIBIT THE COMPANY'S SUCCESS.
The Company's success depends, in large part, on Internet access and the
ability of the Internet to accommodate rapidly increasing traffic. The
Internet may not prove to be a viable commercial medium because of inadequate
development of the necessary infrastructure (e.g., reliable network backbone),
timely development of complementary products (e.g., high speed modems), delays
in the development or adoption of new standards and protocols required to
handle increased levels of Internet activity, or increased government
regulation. If the Internet continues to experience significant growth in the
number of users and the level of use, then the Internet infrastructure may not
be able to continue to support the demands placed on it.
RISKS RELATED TO SYSTEMS OPERATION
The Company relies on the Internet and, accordingly, depends upon the
continuous, reliable and secure operation of Internet servers and related
hardware and software. Recently, several large Internet commerce companies
have suffered highly publicized system failures which resulted in adverse
reactions to their stock prices, significant negative publicity and, in
certain instances, litigation. Although agreements are in place to host the
Company's systems and provide bandwidth with suitable precautions in place to
prevent system failures and outages, it is likely that the Company will also
suffer service outages from time to time. To the extent that the Company's
service is interrupted, its users will be inconvenienced and the Company's
reputation may be diminished. Some of these outcomes could directly result in
a reduction in the Company's stock price, significant negative publicity and a
potential for litigation. Although the Company anticipates that its computer
and communications hardware will be protected through physical and software
safeguards, they will still be vulnerable to fire, storm, flood, power loss,
telecommunications failures, physical or software break-ins and other similar
events. The Company does not currently have full redundancy for all of the
Company's computer and telecommunications facilities in separate geographic
locations to counter an area-wide catastrophe where the Company does business.
A catastrophic event could have a significant negative effect on the Company's
business, results of operations, and financial condition.
The Company also depends upon third parties to provide potential users with
web browsers and Internet and on-line services necessary for access to the
Company's services. It is possible that users will experience difficulties
with the Internet and other on-line services due to system failures, including
failures unrelated to the Company's systems. Any sustained disruption in
Internet access provided by third parties could have a material adverse effect
on the Company's business, results of operations and financial condition.
The Company also retains confidential customer information in the Company's
database. It is, therefore, critical that the Company's facilities and
infrastructure remain secure and that the facilities and infrastructure are
perceived by consumers to be secure. Despite the implementation of measures
in the Internet industry, the Company's infrastructure is potentially
vulnerable to physical break-ins, computer viruses, programming errors or
similar disruptive problems. A material security breach could damage the
Company's reputation or result in liability.
THE COMPANY'S PLATFORM INFRASTRUCTURE AND ITS SCALABILITY ARE NOT PROVEN
If the Company's Internet-based products are used by an increasing number of
users, the network infrastructure would need to be expanded from time to time.
In addition, the Company will need to accommodate changing customer
requirements. The Company may not be able to accurately project the rate or
timing of increases, if any, in the use of its systems or to expand and
upgrade the systems and infrastructure to accommodate such changes on a timely
basis, at a commercially reasonable cost, or at all. The systems may not
accommodate increased use while maintaining acceptable overall performance.
POTENTIAL LIABILITY IF CONFIDENTIAL INFORMATION IS DISCLOSED INAPPROPRIATELY
These types of claims have been brought, sometimes successfully, against on-
line service providers in the past. Any such liability will have a material
adverse effect on the Company's reputation, business, results of operations or
financial position.
DEPENDENCY ON INTELLECTUAL PROPERTY RIGHTS
The Company's intellectual property is important to its business. The Company
relies on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect its
intellectual property. The Company's efforts to protect its intellectual
property may not be adequate. Competitors may independently develop similar
technology or duplicate the Company's products or services. Unauthorized
parties may infringe upon or misappropriate the Company's products, services
or proprietary information. In addition, the laws of some foreign countries
do not protect proprietary rights as well as the laws of the United States,
and the global nature of the Internet makes it difficult to control the
ultimate destination of its products and services. In the future, litigation
may be necessary to enforce the Company's intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Any
such litigation could be time-consuming and costly. The Company could be
subject to intellectual property infringement claims as the number of
competitors grows and the content and functionality of its services overlaps
with competitive offerings. Defending against these claims, even if not
meritorious, could be expensive and divert the Company's attention from its
operations. If the Company becomes liable to third parties for infringing
their intellectual property rights, it could be required to pay a substantial
damage award and forced to develop noninfringing technology, obtain a license
or cease selling the applications that contain the infringing technology. The
Company may be unable to develop noninfringing technology or obtain a license
on commercially reasonable terms, or at all. The Company also intends to rely
on a variety of technologies that it will license from third parties,
including any product development, database, and Internet server software,
which will be used to operate its products and services. These third-party
licenses may not be available to the Company on commercially reasonable terms.
If the Company were deprived of the right to use software incorporated in
its products for any reason, or if the tools utilized in the development of
its products were discontinued or the capabilities contained in future
releases were not up to the standards set by the Company, there could be a
serious disruption to the business.
THE COMPANY'S OFFICERS HAVE EFFECTIVE CONTROL OF THE COMPANY AND OTHER
STOCKHOLDERS MAY HAVE LITTLE OR NO VOICE IN CORPORATE MANAGEMENT
The President beneficially owns approximately 64.6% of the outstanding shares
of Common Stock. As a result, this Stockholder effectively controls the
election of directors and matters requiring approval by the Company's
Stockholders. Thus, he may be able to prevent corporate transactions such as
future mergers which might be favorable from the Company's standpoint or the
standpoint of the other Stockholders.
THE COMPANY MAY NOT ACHIEVE PROFITABILITY
The profit potential of the Company's business model is unproven. The
Company's revenue is dependent on the number of customers who subscribe to
its EnterpriseEC service and Vortals and the volume of the data, documents or
other information they send or retrieve utilizing this service. The success
of the EnterpriseEC service, the Vortals, and other proposed services depends
to a large extent on the future of B2B e-commerce using the Internet, which is
uncertain. In addition, the Company expects its cost of sales and operating
expenses to increase significantly, especially in the areas of marketing,
product development, and customer service. As a result, the Company expects
to incur additional losses in the future. If the Company experiences a
shortfall in its estimated revenue, it may be unable to adjust spending in a
timely manner and may not achieve profitability.
INABILITY TO OBTAIN FUTURE CAPITAL
As of the date of this filing, the Company had cash in the amount of
approximately $70,000 and is expecting to raise an additional $300,000 via a
Stock Purchase Agreement executed on April 10, 2000 whereby the participants
of the stock purchase agreement will purchase 283,000 shares of Common Stock
for $300,000 within ninety days of the agreement. The Company anticipates
that it may need to raise additional funds if its operations do not generate
the revenues anticipated. If the Company is unable to obtain necessary
additional financing, its business may suffer. It cannot be assured that any
additional financing will be available on reasonable terms or at all. In
addition, the Company may need to raise additional funds sooner if it attempts
to expand more rapidly or if competitive pressures or technological changes
are greater than anticipated. Even if the Company is able to obtain
additional financing, the Company will subsequently need to raise additional
funds if it does not become profitable or if achieving profitability takes
longer than anticipated.
INTERNET USAGE STAGNATES OR THE INTERNET'S INFRASTRUCTURE FAILS
If the Internet does not gain increased acceptance for B2B e-commerce, the
Company will not grow and profitability will be hampered. Concerns about the
security of on-line transactions and the privacy of users may inhibit the
growth of the Internet as a means of delivering business documents and data.
The Company may need to incur significant expenses and use significant
resources to protect against the threat of security breaches or to alleviate
problems caused by security breaches. The Company cannot be certain that the
infrastructure or complementary services necessary to maintain the Internet as
a useful and easy means of transferring documents and data will continue to
develop.
DEPENDENCY ON DATA CENTERS, WHICH COULD BE DESTROYED OR DAMAGED
The Company's Internet-based products are dependent upon the ability to
protect computer equipment and the information stored on this equipment
against damage that may be caused by fire, power loss, telecommunication or
Internet failures, unauthorized intrusion, computer viruses and disabling
devices, internal errors and other similar events. The Company currently
leases space in a data center located in Dayton, Ohio which provides physical
security (24 hour security guards), environment control (humidity and
temperature), and electricity (battery operated, backfilled from the Dayton
power grid, with six hours of battery backup in the event of a power failure).
Additional motor generator services are available within the six hour battery
backup timeframe if necessary) and bandwidth (three Internet backbone
providers with load balancing). The Company also maintains backup systems at
its facility in Beavercreek, Ohio located approximately twelve miles from the
data center. In the event of a regional catastrophe, the Company may suffer a
significant loss to its systems and may be unable to provide services to
customers which would have a substantial effect on the Company.
Depending on future financial position, the Company has plans to lease backup
data center space which is geographically separated from its current data
center with procedures to provide for switching to the backup data center in
the event of a catastrophic event or system failure.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of the Company's consolidated financial
condition and results of operation for the fiscal years ended December 31,
1999 and 1998, and for the fiscal quarters ended March 31, 1999 and 1998,
should be read in conjunction with the Company's consolidated financial
statements included elsewhere herein. The Company believes that the merger of
Sub into EDICT, effective as of April 10, 2000, will have substantial impact on
its future operating results.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - FISCAL YEARS 1999
AND 1998 RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR
ENDED DECEMBER 31, 1998
Due to the merger with EDICT Systems, Inc. on April 10, 2000, Twilight
Productions and EDICT Systems results of operations for the year ended
December 31, 1999 are being presented separately, and then pro-forma with
Twilight Productions and EDICT Systems combined as if the merger occurred on
January 1, 1999.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED
DECEMBER 31, 1998 FOR TWILIGHT PRODUCTIONS, LTD.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. Twilight has incurred losses since
its inception, and has an accumulated deficit of $739,192 and $351,108 for the
years ended December 31, 1999 and December 31, 1998, respectively. Twilight
has financed its operations to date primarily through the sale of Common Stock
and options to purchase Common Stock.
REVENUE
During the last two fiscal years, Twilight Productions produced no revenues
other than interest income of $11,831 in 1999 as compared to $19,025 for
fiscal 1998. The decrease in interest income is due to the nature and overall
return of the investments made by Twilight.
COST OF OPERATIONS
Cost of operations consisted of general and administrative expenses of
$123,865 for 1999 as compared to $115,937 for 1998 and a write down to the net
realizable value of zero the cost of the two feature-length films the company
developed but never sold ($276,050). The increase in cost of operations is
due to higher general and administrative costs.
NET PROFIT/LOSS
Twilight experienced a net loss in 1999 of $388,084 versus a net loss in 1998
of $96,912. The increased loss is primarily attributable to the write down to
the net realizable value of zero the cost of the two feature-length films the
company developed but never sold ($276,050).
LIQUIDITY AND CAPITAL RESOURCES
The balance of Cash, Cash Equivalents, and Short-term Investments decreased to
$229,666 in 1999 from $361,648 in 1998. The decrease is primarily
attributable to higher general and administrative fees along with lower
investment income.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED
DECEMBER 31, 1998 FOR EDICT SYSTEMS, INC.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. EDICT Systems has incurred a loss
before taxes in 1999 of $49,509 and in 1998 of $9,318. EDICT Systems has
financed its operations with internally generated cash flow from operations
and debt instruments - bank lines of credit.
REVENUE
EDICT Systems had revenues in 1999 of $824,443 versus revenues of $690,068 in
1998. The increase in revenues is due to increased sales and marketing
activity of the company's software products.
COST OF OPERATIONS
EDICT Systems had total operating expenses (including depreciation and
amortization) of $873,952 in 1999 versus $699,386 in 1998. The increase is
due to higher administrative expenses, the addition of several employees, and
investment in the development and marketing of EnterpriseEC and its first
Vortal, www.GroceryEC.com.
INCOME TAX BENEFITS
EDICT Systems recorded an income tax benefit of $2,817 in 1999 and $10,740 in
1998 due primarily to the difference between accrual basis accounting for
financial reporting purposes and the cash basis for tax purposes.
NET PROFIT/LOSS
The company experienced a net loss in 1999 of $46,692 versus a net income in
1998 of $1,422. The net loss in 1999 is primarily attributable to higher
administrative expenses, the addition of several employees, and investment in
the development and marketing of EnterpriseEC and www.GroceryEC.com.
LIQUIDITY AND CAPITAL RESOURCES
The balance of Cash, Cash Equivalents, and Short-term Investments decreased to
$3,420 in 1999 from $16,548 in 1998. The decrease is attributable primarily
to expenditures for equipment purchases and capitalized software costs that
were offset by cash provided by operations and proceeds from the bank lines
of credit.
MANAGEMENT'S DISCUSSION AND ANALYSIUS OF FINANCIAL CONDITION - 1st QUARTER
2000 AND 1999 RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2000 COMPARED TO
QUARTER ENDED MARCH 31, 1999
Due to the merger with EDICT Systems, Inc. on April 10, 2000, Twilight
Productions and EDICT Systems results of operations for the quarter ended are
being presented separately, and then pro-forma with Twilight Productions and
EDICT Systems combined as if the merger occurred on January 1, 2000.
RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED
MARCH 31, 1999 FOR TWILIGHT PRODUCTIONS, LTD.
REVENUE
During first quarter ended March 31, 2000 and the first quarter ended March
31, 1999, Twilight Productions produced no revenues other than interest income
of $1,632 in Q1 2000 as compared to $3,980 for Q1 1999. The decrease in
interest income is due to the nature and overall return of the investments
made by the company.
COST OF OPERATIONS
Cost of operations consisted of general and administrative expenses of
$15,147.40 for Q1 2000 as compared to $31,104 for Q1 1999. The decrease in
cost of operations is due to lower general and administrative costs.
NET PROFIT/LOSS
The company experienced a net loss for Q1 2000 of $13,515 versus a net loss
for Q1 1999 of $27,124. The decreased loss is primarily attributable to lower
general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
The balance of Cash, Cash Equivalents, and Short-term Investments in Q1 2000
was $216,151 versus the balance of Cash, Cash Equivalents, and Short-term
Investments in Q1 1999 of $329,880. The decrease is primarily attributable to
higher general and administrative fees along with lower investment income.
RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED
MARCH 31, 1999 FOR EDICT SYSTEMS, INC.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. EDICT Systems has incurred a loss
before taxes in Q1 2000 of $102,006 versus a net loss of $19,078 in Q1 1999.
EDICT Systems has financed its operations with internally generated cash flow
from operations and debt instruments (e.g. bank lines of credit).
REVENUE
EDICT Systems had revenues in Q1 2000 of $199,623 versus revenues of $172,952
in Q1 1999. The increase in revenues is due to increased sales and marketing
activity of the Company's software products.
COST OF OPERATIONS
EDICT Systems had total operating expenses (including depreciation and
amortization) of $301,629 in Q1 2000 versus $192,030 in Q1 1999. The increase
is due to higher administrative expenses, the addition of several employees,
and investment in the development and marketing of EnterpriseEC and its first
Vortal, www.GroceryEC.com, and charges related to the merger with Twilight
Productions, Ltd.
INCOME TAX BENEFITS
EDICT Systems recorded an income tax benefit of $20,503 in Q1 2000 and $3,835
in Q1 1999 due primarily to the difference between accrual basis accounting
for financial reporting purposes and the cash basis for tax purposes.
NET PROFIT/LOSS
The Company experienced a net loss in Q1 2000 of $81,503 versus a net loss in
Q1 1999 of $15,243. The net loss in 1999 is primarily attributable to higher
administrative expenses, the addition of several employees, and investment in
the development and marketing of EnterpriseEC and www.GroceryEC.com, and
charges related to the merger with Twilight Productions, Ltd.
LIQUIDITY AND CAPITAL RESOURCES
The balance of Cash, Cash Equivalents, and Short-term Investments for Q1 2000
was $13,724 versus the balance of Cash, Cash Equivalents, and Short-term
Investments for Q1 1999 of $26,168. The decrease is attributable primarily
to expenditures for equipment purchases and capitalized software costs that
were offset by cash provided by operations and proceeds from the bank lines
of credit.
ITEM 3. DESCRIPTION OF PROPERTY
The Company presently maintains its principal place of business in two
adjacent facilities at 1619 and 1635 Mardon Drive, Beavercreek, Ohio, 45432
with the primary address being 1619 Mardon Dr., Beavercreek, Ohio, 45432.
These buildings provide a total of approximately 3,000 square feet of useable
office space. Both facilities are leased for a total of $3,000 per month, at
below-fair market price, triple net lease from the Company's President on a
month-to-month basis.
The Company expects that the current facilities will be adequate for FY 2000
but that a larger, combined facility may be necessary if the Company adds
significant additional personnel. The Company has initiated a search for a
suitable facility located in the greater Dayton, Ohio area in the event that
additional space is necessary.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth as of May 1, 2000, the number and percentage of
the outstanding shares of Common Stock which, according to the information
supplied to the Company, were beneficially owned by (i) each person who is
currently a director of the Company, (ii) each executive officer, (iii) all
current directors and executive officers of the Company as a group and
(iv) each person who, to the knowledge of the Company, is the beneficial owner
of more than 5% of the outstanding Common Stock.
Except as otherwise indicated, the persons named in the table have sole voting
and dispositive power with respect to all shares beneficially owned, subject
to community property laws where applicable.
(i) The following table has been completed for each Director of the Company:
<TABLE>
<CAPTION>
Common Options Percent of
Name and Address Shares Class
<S> <C> <C> <C>
Jason Wadzinski 3,658,508 0 64.6
32 E. National Rd.
Englewood, OH 45322
John F. Sheffs 339,172 0 6.0
3545 Woodgreen Dr.
Beavercreek, OH 45434
</TABLE>
(ii) The following table has been completed for each of Executive Officers of
the Company:
<TABLE>
<CAPTION>
Common Options Percent of
Name and Address Shares Class
<S> <C> <C> <C>
Jason Wadzinski 3,658,508 0 64.6
32 E. National Rd.
Englewood, OH 45322
</TABLE>
(iii) The following table has been completed for all Directors and Executive
Officers of the Company as a group:
<TABLE>
<CAPTION>
Common Options Percent of
Shares Class
<S> <C> <C> <C>
All Officers and 3,997,680 0 70.6
Directors as a
Group (2 persons)
</TABLE>
(iv) The following table has been completed for those persons known to the
company as beneficial owners of five percent or more of the Company's
voting Common Stock:
<TABLE>
<CAPTION>
Common Options Percent of
Name and Address Shares Class
<S><C><C><C>
Jason Wadzinski 3,658,508 0 64.6
32 E. National Rd.
Englewood, OH 45324
John F. Sheffs 339,172 0 6.0
3545 Woodgreen Dr.
Beavercreek, OH 45434
Halter Financial Group 170,000<F1> 0 3.0
14160 Dallas Parkway, Suite 950
Dallas, TX 75240
Art Howard Beroff 275,000<F1><F2> 0 4.9
156-34 88th. Street
Howard Beach, NY 11414
5,661,173
<FN>
<F1>
Does not include 141,500 shares that Beroff and Halter Financial, or their
designees, are each required to purchase on or before July 5, 2000 pursuant to
the Stock Purchase Agreement. Neither Beroff nor Halter has purchased these
shares as of the filing date of this Form 10SB. The date of purchase has been
delayed by agreement of the parties and shall occur within 5 days after the
filing of this Form 10SB.
<F2>
Does not include 80,000 shares of which Art Howard Beroff disclaims beneficial
ownership.
</FN>
</TABLE>
Upon completion of the share purchase, assuming that Halter and Beroff
purchase all of the additional shares (as opposed to one or more of their
designees), Halter will own approximately 5.5% and Beroff will own
approximately 7.3% of Common Stock outstanding.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Jason K. Wadzinski 35 President/CEO/Director
John F. Sheffs 75 Director
Jason K. Wadzinski founded Edict in 1990 and has held the position of
President/CEO/Director since inception. Mr. Wadzinski is an Air Force veteran
and has held positions in information technology since 1982.
John F. Sheffs has been a Director of Edict since 1995. Mr. Sheffs was
President/CEO/Director and sole Shareholder of Electro Sales Associates, Inc.,
a manufacturers' representative company that sold various electronics products
to manufacturing companies located in the eastern half of the United States.
Mr. Sheffs has a lifetime of experience in management and entrepreneurship,
with special emphasis on sales and marketing.
No family relationship exists among directors and executive officers. No
egal proceedings occurred during the last five years that are material to an
evaluation of the ability or integrity of any director or executive officer.
ITEM 6. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Name and Title Year Annual Salary
<S> <C> <C>
Jason K. Wadzinski, 1999 $ 51,600
President/CEO
</TABLE>
Jason K. Wadzinski is the sole executive officer of the Company. No payments
classified as long-term compensation, other annual compensation and all other
compensation were made. The Company has no long-term incentive plans.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Twilight paid $120,000 and $109,000 to two of its former officers/directors
for services rendered during the years ended December 31, 1999 and 1998,
respectively. No transaction, proposed transaction or series of transactions
occurred in the last two years and through the date of this filing directly
or indirectly, between Edict and any director or executive officer that
exceeded $60,000 during the last two years.
Edict leases its office space from a shareholder of the Company. This space
is leased on a month to month basis for $3,000 per month. Lease payments made
under this arrangement were $34,800 and $21,800 in 1999 and 1998,
respectively. As part of this arrangement, Edict pays the real estate taxes
of the leased property. Payments made by Edict for taxes were $9,716 and
$6,033 in 1999 and 1998, respectively.
Pursuant to the Services Agreement and the Registration Rights Agreement, both
dated April 10, 2000 (the date of the Merger), the Company issued 400,000
shares of Common Stock to HFG. In return, HFG agreed to provide services to
the Company in support of the Merger and post-merger services relating to
public relations, investor relations and assisting with the Securities and
Exchange Commission ("SEC") filing requirements. On April 10, 2000, shares of
Common Stock were trading at approximately $1.06 per share.
Also on April 10, 2000, the Company entered into the Stock Purchase Agreement
with HFG and Beroff. The Stock Purchase Agreement requires HFG and Beroff, or
their designees, to each purchase 141,500 shares of Common Stock for $150,000
each on or before July 5, 2000 resulting in the issuance of 283,000 shares
of Common Stock for an aggregate consideration of $300,000 (approximately
$1.06 per share). This offering was made pursuant to Section 4(2) of the
Securities Act of 1933. HFG and Beroff have not yet purchased the additional
shares. The purchase date for the additional shares has been delayed by
agreement of the parties and shall occur within 5 days after the filing of
this Form 10SB.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, par value $.001 per share; with 619,173 issued and outstanding
at December 31, 1999, 5,378,173 issued and outstanding at April 10, 2000 (date
of Merger); and 5,661,173 to be issued and outstanding within 5 days following
the filing of this Form 10SB when 283,000 additional shares will be issued
pursuant to the Stock Purchase Agreement.
No preferred stock, debt securities or other securities of the Company are
authorized, issued or outstanding. The 400,000 shares of Common Stock issued
to HFG for services and the 283,000 shares of Common Stock to be issued to HFG
and Beroff, or their designees, pursuant to the Stock Purchase Agreement will
be subject to registration rights.
Part II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
Market Information. Since May 4, 2000, the Company's Common Stock has traded
on the Pink Sheets. Prior to this, the Common Stock traded on the OTC
Bulletin Board under the symbol "TWIP".
The following table sets forth, for the periods indicated, the high and low
per share bid information for the Company's Common Stock on the OTC Bulletin
Board or the Pink Sheets, as applicable. Such high and low bid information
reflects inter-dealer quotes, without retail mark-up, mark down or commissions
and may not represent actual transactions.
<TABLE>
<CAPTION>
Date High Low
<S> <C> <C>
03/31/98 0.750 0.250
06/30/98 0.750 0.250
09/30/98 0.750 0.350
12/31/98 0.562 0.312
03/31/99 0.375 0.375
06/30/99 0.500 0.375
09/30/99 0.468 0.250
12/31/99 0.468 0.250
03/31/00 1.187 0.250
06/27/00 3.750 0.687
</TABLE>
The Company is filing this Form 10-SB for the purpose of registering the
Company's Common Stock under the Securities and Exchange Act of 1934 in order
to resume trading on the OTC Bulletin Board. Since the Company did not file a
Form 10-SB prior to May 4, 2000, it was delisted from the OTC Bulletin Board
and its Common Stock has been trading on the Pink Sheets. After the Company
has cleared all comments by the SEC on this FORM 10-SB, the Company will
register to have its shares listed on the OTC Bulletin Board.
Approximate Number of Holders. As of June 1, 2000, the Company had
approximately 313 registered holders of record of Common Stock. Some of those
registered holders are brokers who are holding shares for multiple clients in
street names. Accordingly, the Company believes the number of actual
Shareholders of Common Stock exceeds the number of registered holders of
record.
Dividends. The Company has never paid any cash or stock dividends. The
Company presently intends to reinvest earnings, if any, to fund the
development and expansion of the Company and therefore, does not anticipate
paying dividends on Common Stock in the foreseeable future. The declaration
of dividends will be at the discretion of the Board of Directors and will
depend upon the Company's earnings, financial position, general economic
conditions and other pertinent factors.
ITEM 2. LEGAL PROCEEDINGS
The Company is not currently subject to any legal proceedings. The Company
may from time to time become a party to various legal proceedings arising in
the ordinary course of business.
ITEM 3. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
In November 1999, Edict engaged the services of Battelle & Battelle LLP for
the purpose of conducting financial audits of Edict. The Company intends to
engage the services of Battelle & Battelle LLP as the independent auditors for
the Company.
Prior to the Merger, Twilight engaged the services of Mark Bindiger, CPA, to
perform annual audits.
There are no disagreements between the Company and its auditors to report.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On April 10, 2000, pursuant to the Services Agreement and the Registration
Rights Agreement the Company issued 400,000 shares of Common Stock to HFG. In
return, HFG agreed to provide services to the Company in support of the Merger
and post-merger services relating to public relations, investor relations, and
assisting with SEC filing requirements. At the date of the Merger shares of
Common Stock were trading at approximately $1.06 per share.
On or before July 5, 2000, pursuant to the Stock Purchase Agreement, HFG and
Beroff, or their designees are required to each purchase 141,500 shares of
Common Stock for $150,000 resulting in the issuance of 283,000 shares of
Common Stock for an aggregate consideration of $300,000 (approximately $1.06
per share). This offering was made pursuant to Section 4(2) under the
Securities Act of 1933. HFG and Beroff have not yet purchased the additional
shares. The purchase date for the additional shares has been delayed by
agreement of the parties and shall occur within 5 days after the filing of this
Form 10SB.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's certificate of incorporation and bylaws contain provisions
indemnifying the directors and executive officers against liabilities. In the
certificate of incorporation, the Company has eliminated the personal
liability of the directors and executive officers to the Company and its
Stockholders for monetary damages for breach of their fiduciary duty,
including acts constituting gross negligence. However, in accordance with
Delaware law, a director will not be indemnified for a breach of its duty of
loyalty, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation or any transaction from which the director
derived improper personal benefit.
In addition, the bylaws further provide that the Company may advance to the
directors and officers expenses incurred in connection with proceedings
against them for which they are entitled to indemnification. The Company has
also agreed to indemnify, defend, and hold harmless each of the officers and
directors to the fullest extent permissible by law with regard to any and all
loss, expense or liability, including payment and advancement of reasonable
attorney's fees, arising out of or relating to claims of any kind, whether
actual or threatened, relating in any way to their service to us. The Company
plans to memorialize these provisions in written agreements.
PART F/S
Financial Statements
(a) Historic Financial Statements
The following audited financial statements are filed as part of this report:
Independent Auditors' Report of Twilight Productions, Ltd.
Audited balance sheets of Twilight Productions, Ltd. as of December 31,
1999 and 1998, and audited statements of income and accumulated deficit,
and cash flows for the years ended December 31, 1999 and 1998.
Independent Auditors' Report of Edict Systems, Inc.
Audited balance sheets of Edict Systems, Inc. as of December 31, 1999 and
1998, and audited statements of income and accumulated deficit, and cash
flows for the years ended December 31, 1999, and 1998.
The following unaudited financial statements are filed as part of this report:
Unaudited balance sheets of Twilight Productions, Ltd. as of March 31,
2000 and 1999, and unaudited statements of income and accumulated
deficit, and cash flows for the three months ended March 31, 2000 and
1999.
Unaudited balance sheets of Edict Systems, Inc. as of March 31, 2000 and
1999, and unaudited statements of income and accumulated deficit, and
cash flows for the three months ended March 31, 2000 and 1999.
(b) Pro Forma Financial Statements
The following pro forma financial information is filed as part of this report:
Unaudited pro forma consolidated balance sheet which combines the audited
balance sheet of Twilight Productions, Ltd. as of December 31, 1999 and
the audited balance sheet of Edict Systems, Inc. as of December 31, 1999,
along with a description of the unaudited pro forma adjustments.
Unaudited pro forma consolidated statement of income which combines the
statement of income of Twilight Productions, Ltd. for the year ended
December 31, 1999 and the statement of operations of Edict Systems, Inc.
for the year ended December 31, 1999, along with a description of the
unaudited pro forma adjustments.
Unaudited pro forma consolidated balance sheet which combines the
unaudited balance sheet of Twilight Productions, Ltd. as of March 31,
2000 and the unaudited balance sheet of Edict Systems, Inc. as of March
31, 2000, along with a description of the unaudited pro forma adjustments.
Unaudited pro forma consolidated statement of income which combines the
statement of income of Twilight Productions, Ltd. for the quarter ended
March 31, 2000 and the statement of operations of Edict Systems, Inc. for
the quarter ended March 31, 2000, along with a description of the
unaudited pro forma adjustments.
The aforementioned pro forma financial statements were prepared under the
assumption that the merger of Twilight Productions, Ltd. and Edict
Systems, Inc. had been consummated as of January 1, 1999 for the December
31, 1999 financial statements and as of January 1, 2000 for the March 31,
2000 financial statements. These pro forma financial statements may not
be indicative of the financial position and results of operations that
actually would have been obtained if the merger had been in effect or
that may be obtained in the future. Such statements should be read in
conjunction with the Registrant's audited financial statements. The
assumptions and adjustments used are described in the accompanying notes
to the pro forma financial statements.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Twilight Productions, Ltd.
I have audited the accompanying balance sheets of Twilight Productions, Ltd.
as of December 31, 1999 and December 31, 1998, and the related statements of
income and accumulated deficit and cash flows for the two years then ended.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a
reasonable basis for my opinion.
In my opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1999 and
December 31, 1998, and the results of its operations and its cash flows for
the two years then ended in conformity with generally accepted accounting
principles.
/s/ Mark Bindiger
February 10, 2000
<TABLE>
<CAPTION>
TWILIGHT PRODUCTIONS, LTD.
BALANCE SHEETS
Year Ended December 31,
1999 1998
<S> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 229,666 361,648
Film costs (Note 2) - 255,118
Other current assets - 625
Total current assets 229,666 617,391
PROPERTY AND EQUIPMENT
Office equipment 2,486 2,486
Less accumulated depreciation 2,486 2,153
Depreciated cost - 333
ORGANIZATION COSTS-NET - 26
Total assets 229,666 617,750
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Common stock - .001 par value, 20,000,000
shares authorized, 619,173, shares issue 619 619
Additional paid-in capital 968,239 968,239
Accumulated deficit (739,192) (351,108)
Total shareholders' equity 229,666 617,750
Total liabilities and shareholders' equity 229,666 617,750
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
TWILIGHT PRODUCTIONS, LTD.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
Year Ended December 31,
1999 1998
<S> <C> <C>
REVENUES
Interest income 11,831 19,025
Total revenues 11,831 19,025
OPERATING EXPENSES
General and administrative expenses 123,865 115,937
Write down of film costs to net realizable
value (Note 2) 276,050 -
Total operating expenses 399,915 115,937
NET LOSS (388,084) (96,912)
Accumulated deficit, beginning of year (351,108) (254,196)
ACCUMULATED DEFICIT, END OF YEAR (739,192) (351,108)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
TWILIGHT PRODUCTIONS, LTD.
STATEMENTS OF CASH FLOWS
Year Ended
December 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (388,084) (96,912)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 359 363
Write down of film costs to net realizable
value 276,050
Increase (Decrease) in cash arising from
changes in assets and liabilities:
Film costs (20,932) (41,738)
Other current assets 625 300
Net cash used in operating activities (131,982) (137,987)
NET DECREASE IN CASH AND CASH EQUIVALENTS (131,982) (137,987)
Cash and cash equivalents, beginning of year 361,648 499,635
CASH AND CASH EQUIVALENTS, END OF YEAR 229,666 361,648
SUPPLEMENTAL DISCLOSURES
Interest paid - -
Taxes paid - -
The accompanying notes are an integral part of the financial statements.
</TABLE>
TWILIGHT PRODUCTIONS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - ORGANIZATION
Twilight Productions Ltd. (The "Company") was incorporated in the State
of Delaware on March 9, 1994. The Company issued 72,700 shares of common
stock to its two officers and directors and other persons at a rate of $.06
per share ($4,362 in the aggregate). The Company is engaged in the business
of producing high quality, low budget, feature length motion pictures. Since
the Company's inception two films have been produced but not sold as of
February 10, 2000.Management has written off the value of both films to zero
even though they anticipate in the future that both films may be profitable.
In 1994 the Company raised an additional $20,496 pursuant to an offering
of 4,000 units at $6.00 a unit. 3,416 of the units were sold. Each unit
consisted of one share of common ($.001 par value) and 40 class A warrants.
Each class A warrant entitled the holder to purchase one additional share at
$5.25 per share for a period of nine months following the offering. On
February 17, 1995 the exercise price was reduced to $2.50 a share.In April
1995 a second stock placement offering was done consisting of 4,000 units at
$9.25 a unit. Each unit consisted of one share of common ($.001) and 50
class B warrants. 4,000 units were sold. Each class B warrant entitled the
holder to purchase one additional share at a price of $3.00 per share for a
period of four months following the offering.
In September 1995 another stock placement was done whereby 120,000 shares
of stock were sold to related parties at the stocks fair market value at that
date ($.25 a share).
In January 1996 option to purchase 200,000 shares of common stock was
granted to two officers/directors. In December 1996 the officers/directors
exercised their stock options to purchase 117,857 shares of stock at $.28 a
share.
In 1998 the Company increased its authorized number of shares to
20,000,000.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED OFFERING COSTS
All offering costs incurred by the Company in connection with the
offerings have been charged to additional paid in capital.
ORGANIZATIONAL COSTS
Organizational costs are expensed over a sixty month period from the
commencement of operations.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid investments
with original maturities of three months or less.
REVENUE RECOGNITION
Revenue from theatrical licensing agreements is recognized when the film
has been delivered and becomes contractually available. The primary market is
foreign theatrical releases.
ACCOUNTING FOR FILM COSTS
Inventory of film costs consists of acquisition costs, production costs
and certain exploitation costs and are stated at the lower of cost or estimate
net realizable value.
In accordance with the provisions of Financial Accounting Standards No.
53, film costs are amortized on the ratio that the revenue earned for the year
bears to management's estimate of the total gross revenue to be realized.
Such estimates are revised periodically and estimated losses, if any, are
provided for in full.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company at present uses the offices of its President for pre and post
production development at no cost to the Company. In addition, the Company
paid $120,000 and $109,000 to two of its officers/directors for services
rendered during the years ended December 31, 1999 and 1998, respectively.
NOTE 4 - INCOME TAXES
No current provision for income taxes is made due to net operating
osses. The Company currently has a substantial net operating loss
carryforward. The Company has recorded a 100% valuation allowance against net
deferred tax assets due to uncertainty of their ultimate recognition.
<TABLE>
<CAPTION>
EDICT SYSTEMS, INC.
BALANCE SHEET
31-Dec
1999 1998
<S> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 3,420 16,548
Accounts receivable, net 122,169 142,295
Refundable income tax 20,472
Other 12,017
Total current assets 137,606 179,315
SOFTWARE DEVELOPMENT COSTS, net 204,542 135,807
PROPERTY AND EQUIPMENT
Office equipment 147,838 106,331
Less accumulated depreciation 98,325 78,299
Depreciated cost 49,513 28,032
Total assets 391,661 343,154
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES
Bank notes payable 115,894 21,288
Accounts payable 63,417 70,593
Accrued expenses 19,108 8,983
Deferred income taxes 905 3,782
Deferred revenue 168,724 168,203
Total current liabilities 368,048 272,849
SHAREHOLDERS' EQUITY
Common stock 2,000 2,000
Treasury stock (75,000) (75,000)
Retained earnings 96,613 143,305
Total shareholders' equity 23,613 70,305
Total liabilities and shareholders'
Equity 391,661 343,154
The accompanying notes are an integral part of the financial
statements.</TABLE>
<TABLE>
<CAPTION>
EDICT SYSTEMS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended December 31
1999 1998
<S> <C> <C> <C>
REVENUES
Product sales and license fees 815,197 675,056
Other income 9,246 15,012
Total revenues 824,443 690,068
OPERATING EXPENSES
Cost of sales 20,877 56,768
Salaries and benefits 572,627 476,689
General and administrative expenses 187,409 127,388
Depreciation 20,026 11,886
Amortization 57,217 14,459
Bad debt expense 5,000 15,000
Interest, net 9,236 -4,399
Miscellaneous 1,560 1,595
Total operating expenses 873,952 699,386
LOSS BEFORE TAXES -49,509 -9,318
Income tax benefits -2,817 -10,740
NET (LOSS) INCOME -46,692 1,422
Retained earnings, beginning of year 143,305 141,883
RETAINED EARNINGS, END OF YEAR 96,613 143,305
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<TABLE>
<CAPTION>
EDICT SYSTEMS, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31
1999 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income (46,692) 1,422
Adjustments to reconcile net (loss) income
to cash provided by operating activities:
Depreciation 20,026 11,886
Amortization 57,217 14,459
Provision for deferred income taxes
(benefit) (2,877) 9,674
Increase (decrease) in cash arising from
changes in assets and liabilities:
Accounts receivable 20,126 (8,078)
Other assets 8,455 (20,438)
Accounts payable (7,176) 42,142
Accrued expenses 10,125 (33,812)
Deferred revenue 521 76,108
Net cash provided by operating activities 59,725 93,363
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (41,507) (19,864)
Software costs capitalized (125,952) (128,486)
Net cash used in investing activities (167,459) (148,350)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock - (50,000)
Borrowings on bank line of credit 164,033 25,000
Payments on bank line of credit (69,427) (3,712)
Net cash provided by (used in) financing
activities 94,606 (28,712)
NET DECREASE IN CASH AND CASH EQUIVALENTS (13,128) (83,699)
Cash and cash equivalents, beginning of
Year 16,548 100,247
CASH AND CASH EQUIVALENTS, END OF YEAR 3,420 16,548
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ITEMS
Income taxes paid, net of refunds - 3,227
Interest paid 4,320 1,498
The accompanying notes are an integral part of the financial
statements.</TABLE>
EDICT SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Edict Systems, Inc. develops and markets
electronic data interchange and electronic commerce software products and
services that enable its customers to send and receive business documents
electronically in standard and proprietary formats. Customers consist of
businesses across a number of industries throughout the United States.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS - The Company classifies as cash equivalents all highly
liquid investments with original maturities of three months or less.
ACCOUNTS RECEIVABLE - Accounts receivable are reported net of the
allowance for uncollectible accounts. The allowance for uncollectible
accounts was $25,000 and $20,000 in 1999 and 1998,respectively.
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost.
Costs of normal maintenance and repairs are charged to expense as incurred.
Impairment of asset value is recognized whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Depreciation is provided using accelerated methods for financial
reporting purposes at rates based on useful lives of five to seven years.
Depreciation expense was $20,026 and $11,886 in 1999 and 1998, respectively.
REVENUE RECOGNITION - Revenue from product sales are recorded when the
product is shipped. Ongoing license fees are recognized ratably over the
contract period.
DEFERRED INCOME TAXES - Deferred income taxes are provided for temporary
differences in recognition of assets and liabilities for financial statements
and for income tax purposes.In addition, deferred income taxes are provided to
recognize future tax benefits of tax credits and net operating loss carry-
forwards, to the extent realization of such benefits is more likely than not.
NOTE 2 - SOFTWARE DEVELOPMENT COSTS
The Company capitalizes certain software development costs that are
amortized by the straight-line method over the remaining estimated economic
lives of the software product, which is generally estimated to be three years.
Capitalized software costs amounted to $287,108 and $161,156 at December 31,
1999 and 1998, respectively and the related accumulated amortization was
$82,566 and $25,349, respectively.
Software costs consists of the following:
<TABLE>
<CAPTION>
Bar Code
Label Formula One? Enterprise
Module For Windows EC? Total
<S> <C> <C> <C> <C>
Balance as of
December 31, 1997 $21,780 $21,780
Costs incurred 128,486 128,486
1998 amortization (10,890) (3,569) (14,459)
Balance as of
December 31, 1998 10,890 124,917 - 135,807
Costs 125,952 125,952
1999 amortization (10,890) (42,829) (3,498) (57,217)
Balance as of
December 31, 1999 $ $ 82,088 $122,454 $204,542
</TABLE>
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company leases its office space from a Shareholder of the Company.
This space is leased on a month to month basis for 3,000 per month. Lease
payments made under this arrangement were 34,800 and $21,800 in 1999 and 1998,
respectively. As part of this arrangement, the Company pays the real estate
taxes of the leased property. Payments made by the Company for taxes were
$9,716 and $6,033 in 1999 and 1998, respectively.
NOTE 4 - BANK NOTES PAYABLE
In 1997 the Company obtained a $35,000 line of credit from Star Bank.
Outstanding borrowings accrue interest at the Bank's prime rate plus two
percent, 10.5% as of December 31, 1999. Outstanding borrowings under this
agreement were $34,794 and $21,288 at December 31, 1999 and 1998
respectively. The majority Shareholder has personally guaranteed this line
of credit. This line of credit is collateralized by substantially all
business assets of the Company.
In 1999 the Company obtained an $80,000 line of credit from Huntington
Bank. Outstanding borrowings accrue interest at the Bank's prime rate plus one-
half of one percent. During 1999 this line of credit was converted into a
$100,000 commercial note. Outstanding borrowings under this agreement were
$81,100 at December 31, 1999. The majority Shareholder has personally
guaranteed this line of credit. This loan is collateralized by substantially
all business assets of the Company.
NOTE 5 - SHAREHOLDERS' EQUITY
The Company has one class of Common Stock with no par value. As of
December 31, 1998 and 1999 the Company had 1,000 authorized shares of Common
Stock with 100 shares issued and 56 shares outstanding.
During 1998 the Company repurchased 44 shares of its stock for $75,000
which included a forgiveness of indebtedness from the former Shareholder of
$25,000. Treasury stock is accounted for using the cost method.
In connection with the purchase of the stock, the Company entered into a
consulting agreement with the former Shareholder. In addition, the former
Shareholder could receive additional consideration from the Company if
substantially all of its assets are sold within predetermined timeframes from
the stock redemption date. With the passage of time through December 31,
1999, the Company's potential liability is limited to $50,000 and this
liability is eliminated if the Company's assets are sold after May 14, 2000.
NOTE 6 - PROFIT SHARING PLAN
The Company established a profit sharing and 401(k) plan Covering
substantially all employees in 1997. The Company may make annual
discretionary contributions to the plan based on participants' contributions.
The Company's contribution to this plan was $1,018 in 1998, and $-0- for 1999.
NOTE 7 - INCOME TAX EXPENSES (BENEFITS)
Income tax expenses (benefits) are comprised of the following:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998
<S> <C> <C> <C>
Taxes current payable (refundable):
Federal $ - ($20,472)
State and local 60 58
60 -20,414
Deferred income taxes -2,877 9,674
Total income tax benefits ($2,817) ($10,740)
</TABLE>
At December 31, 1999 and 1998, deferred income tax liabilities result from
temporary differences in the recognition of income and expense for tax and
financial reporting purposes. These differences consist principally of the
difference between accrual basis accounting for financial reporting purposes
and the cash basis for tax purposes.
<TABLE>
<CAPTION>
TWILIGHT PRODUCTIONS, LTD.
BALANCE SHEET
UNAUDITED)
March 31,
2000 1999
<S> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 216,151 329,880
Film costs - 259,763
Interest receivable - 625
Total current assets 216,151 590,268
PROPERTY AND EQUIPMENT
Office equipment 2,486 2,486
Accumulated depreciation 2,486 2,154
Depreciated cost - 332
ORGANIZATION COSTS - NET - 26
Total assets 216,151 590,626
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Common stock 619 619
Additional paid-in capital 968,239 968,239
Accumulated deficit -752,707 -378,232
Total shareholders' equity 216,151 590,626
Total liabilities and shareholders'
equity 216,151 590,626
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
TWILIGHT PRODUCTIONS, LTD.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
(UNAUDITED)
Quarter Ended
March 31,
<S> <C> <C> <C>
2000 1999
REVENUES
Interest income 1,632 3,980
Total revenues 1,632 3,980
OPERATING EXPENSES
General and administrative expenses 15,147 31,104
Total operating expenses 15,147 31,104
NET LOSS (13,515) (27,124)
Accumulated deficit, beginning of (739,192) (351,108)
quarter
ACCUMULATED DEFICIT, END OF QUARTER (752,707) (378,232)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
TWILIGHT PRODUCTIONS, LTD.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Quarter Ended
March 31,
2000 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (13,515) (27,124)
Adjustments to reconcile net loss to cash
used in operating activities:
Decrease in cash arising from
changes in assets and liabilities:
Film costs - (4,644)
Net cash used in operating activities (13,515) (31,768)
NET DECREASE IN CASH AND CASH EQUIVALENTS (13,515) (31,768)
Cash and cash equivalents, beginning of
quarter 229,666 361,648
CASH AND CASH EQUIVALENTS, END OF QUARTER 216,151 329,880
The accompanying notes are an integral part of the financial statements.
</TABLE>
TWILIGHT PRODUCTIONS, LTD.
NOTES TO FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Twilight Productions, Ltd. Develops movies for
resale. During the fourth quarter of 1999, the Company charged to expense
$276,050, the entire cost of two movies the Company had produced for resale.
On April 10, 2000 the Company merged with EDICT Systems, Inc. (See also
Note 3).
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS - The Company classifies as cash equivalents
all highly liquid investments with original maturities of three months or less.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company uses the offices of its President at no cost to the Company.
The Company paid approximately $15,000 and $30,000 to two officers/directors
for services rendered during the quarters ended March 31, 2000 and 1999,
respectively.
NOTE 3 - SHAREHOLDERS' EQUITY AND SUBSEQUENT EVENT
The Company had 20,000,000 authorized shares of common stock with 619,173
shares issued and outstanding as of March 31, 2000 and 1999, respectively.
On April 10, 2000, Edict Systems, Inc. entered into a merger agreement
with Twilight. The merger agreement provides for a business combination
between Twilight and Edict in which Edict will become a wholly owned
subsidiary of Twilight. Under the terms of the merger, Edict's issued and
outstanding shares were exchanged for 4,359,000 Twilight shares. The merger
is intended to qualify as a pooling of interest for accounting purposes and as
a tax free reorganization for federal income tax purposes.
In connection with the merger described above, Twilight assigned all
rights, title and interest in and to the two films it had produced to Chaverim
Productions, Ltd. (a related party) in exchange for Twilight's release from
any and all obligations and liabilities arising from the production of the
films.
As part of the merger, Twilight entered into a service agreement with HFG
whereby HFG would provide services to Twilight in support of the Merger and
post-merger services relating to public relations,investor relations, and
assisting with regulatory filing requirements. HFG will be compensated for
these services by the issuance of 400,000 shares of Twilight's common stock.
Subsequent to the issuance of shares to Edict and HFG, as described above, the
former Edict shareholders own approximately 81% of Twilight's issued and
outstanding shares. Immediately following the merger, the sole business of
Twilight consisted of the business of Edict.
Also on April 10, 2000, Twilight entered into a stock purchase agreement
with HFG and Art Howard Beroff ("Beroff"), a former director and officer of
Twilight prior to the merger with Edict. The stock purchase agreement
requires HFG and Beroff, or their designees, to each purchase 141,500 shares
of Twilight for $150,000 each on or before July 5, 2000 resulting in
Twilight's issuance of 283,000 shares of common stock for an aggregate
consideration of $300,000 (approximately $1.06 per share). This offering was
made pursuant to Section 4(2) of the Securities Act of 1933. HFG and Beroff
have not as yet met their obligation to purchase the additional shares. The
date of purchase has been delayed by agreement of the parties and shall occur
within 5 days after the filing of a Form 10SB by Twilight.
NOTE 4 - INCOME TAXES
No current provision for income taxes is made due to net operating
losses. The Company currently has a substantial net operating loss carry-
forward. The Company has recorded a 100% valuation allowance against net
deferred tax assets due to uncertainty of their ultimate recognition.
Furthermore, the merger described in Note 3 will likely place additional
significant limitations on the ultimate utilization of net operating loss
carryforwards.
<TABLE>
<CAPTION>
EDICT SYSTEMS, INC.
BALANCE SHEET
(UNAUDITED)
March 31,
2000 1999
<S> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 13,724 26,168
Accounts receivable, net 108,052 79,705
Refundable income tax 11,844 12,640
Deferred income taxes 7,754 7,885
Prepaid expenses 9,811 3,000
Total current assets 151,185 129,398
SOFTWARE DEVELOPMENT COSTS, net 183,339 134,703
PROPERTY AND EQUIPMENT
Office equipment 148,603 117,464
Less accumulated depreciation 103,425 83,305
Depreciated cost 45,178 34,159
Total assets 379,702 298,260
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank notes payable 130,341 -
Other note payable 50,000 -
Accounts payable 72,897 53,831
Accrued expenses 37,329 19,413
Deferred revenue 147,025 169,954
Total current liabilities 437,592 243,198
(ACCUMULATED DEFICIT) SHAREHOLDERS' EQUITY
Common stock 2,000 2,000
Treasury stock (75,000) (75,000)
Retained earnings 15,110 128,062
Total (accumulated deficit)
shareholders' equity (57,890) 55,062
Total liabilities and (accumulated
deficit) shareholders' equity 379,702 298,260
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
EDICT SYSTEMS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
Quarter Ended
31-Mar
2000 1999
<S> <C> <C> <C>
REVENUES
Product sales and license fees 199,043 167,133
Other income 580 5,819
Total revenues 199,623 172,952
OPERATING EXPENSES
Cost of sales 9,025 7,779
Salaries and benefits 211,027 126,442
General and administrative expenses 39,408 33,492
Depreciation 5,100 5,006
Amortization 21,203 13,429
Bad debt expense 10,000 5,000
Interest 5,866 882
Total operating expenses 301,629 192,030
LOSS BEFORE TAXES (102,006) (19,078)
INCOME TAXES (BENEFIT) PROVISION
Current (11,844) 7,832
Deferred (8,659) (11,667)
Income tax benefit (20,503) (3,835)
NET LOSS (81,503) (15,243)
Retained earnings, beginning of quarter 96,613 143,305
RETAINED EARNINGS, END OF QUARTER 15,110 128,062
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
EDICT SYSTEMS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Quarter Ended
March 31,
2000 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (81,503) (15,243)
Adjustments to reconcile net loss to
cash used in provided by operating
activities:
Depreciation 5,100 5,006
Amortization 21,203 13,429
Deferred income tax benefit (8,659) (11,667)
Increase (decrease) in cash arising from
changes in assets and liabilities:
Accounts receivable 14,117 62,590
Other assets 2,206 (3,000)
Accounts payable 9,480 (16,762)
(Refundable) provision for current income (11,844) 7,832
Accrued expenses 18,221 10,431
Deferred revenue (21,699) 1,751
Net cash (used in) provided by operating (53,378) 54,367
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (765) (11,133)
Software costs capitalized - (12,326)
Net cash used in investing activities -765 (23,459)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit and
Other note payable 65,612 -
Payments on bank line of credit (1,165) (21,288)
Net cash provided by (used in) financing 64,447 (21,288)
activities
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,304 9,620
Cash and cash equivalents, beginning of q 3,420 16,548
CASH AND CASH EQUIVALENTS, END OF QUARTER 13,724 26,168
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ITEMS
Interest paid 4,199 882
The accompanying notes are an integral part of the financial statements.
</TABLE>
EDICT SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Edict Systems, Inc. develops and markets
electronic data interchange and electronic commerce software products and
services that enable its customers to send and receive business documents
electronically in a standard format. Customers consist of businesses across a
number of industries throughout the United States.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS - The Company classifies as cash equivalents all highly
liquid investments with original maturities of three months or less.
ACCOUNTS RECEIVABLE - Accounts receivable are reported net of the
allowance for uncollectible accounts. The allowance for uncollectible
accounts was $40,000 and $25,000 at March 31, 2000 and 1999 respectively.
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost.
Costs of normal maintenance and repairs are charged to expense as incurred.
Impairment of asset value is recognized whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Depreciation is provided using accelerated methods for financial
reporting purposes at rates based on useful lives of five to seven years.
Depreciation expense was $5,100 and $5,007 in the quarters ended March 31,
2000 and 1999 respectively.
REVENUE RECOGNITION - Revenue from product sales are recorded when the
product is shipped and the services are performed. Ongoing license fees are
recognized ratably over the contract period.
DEFERRED INCOME TAXES - Deferred income taxes are provided for temporary
differences in recognition of assets and liabilities for financial statements
and for income tax purposes. In addition, deferred income taxes are provided
to recognize future tax benefits of tax credits and net operating loss
carryforwards, to the extent realization of such benefits is more likely than
not.
NOTE 2 - SOFTWARE DEVELOPMENT COSTS
The Company capitalizes certain software development costs that are
amortized by the straight-line method over the remaining estimated economic
lives of the software product, which is generally estimated to be three years.
Capitalized software costs amounted to $287,108 and $173,482 at March 31,
2000 and March 31, 1999, respectively and the related accumulated amortization
was $103,769 and $38,779, respectively.
Software costs consists of the following:
<TABLE>
<CAPTION>
Bar Code
Label Formula One Enterprise
Matrix For Windows EC Total
<S> <C> <C> <C> <C>
Quarter Ended
March 31, 2000
Costs capitalized:
Balance as of December 31, 1999 $32,670 $128,486 $125,952 $287,108
Costs incurred - - - -
Balance as of March 31, 2000 $32,670 $128,486 $125,952 $287,108
Accumulated amortization:
Balance as of December 31,1999 $32,670 $ 46,398 $ 3,498 $ 82,566
Amortization - 10,707 10,496 21,203
Balance as of March 31, 2000 $32,670 $ 57,105 $ 13,994 $103,769
Net:
Balance as of December 1999 $ - $ 82,088 $122,454 $204,542
Costs incurred - - - -
Amortization - (10,707) (10,496) (21,203)
Balance as of March 31, 2000 $ - $ 71,381 $111,958 $183,339
Quarter Ended March 31, 1999
Costs capitalized:
Balance as of December 31, 1998 $32,670 $128,486 $ - $161,156
Costs incurred - - 12,326 12,326
Balance as of March 31, 1999 $32,670 $128,486 $ 12,326 $173,482
Accumulated amortization:
Balance as of December 31, $21,780 $ 3,569 $ - $ 25,349
Amortization 2,723 10,707 - 13,430
Balance as of March 31, 1999 $24,503 $ 14,276 $ - $ 38,779
Net:
Balance as of December 1998 $10,890 $124,916 $ - $135,806
Costs incurred - - 12,326 12,326
Amortization (2,722) (10,707) - (13,429)
Balance as of March 31, 1999 $ 8,168 $114,209 $ 12,326 $134,703
</TABLE>
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company leases its office space from a shareholder of the Company.
This space is leased on a month to month basis for 3,000 per month. Lease
payments made under this arrangement were $9,000 and $7,880, in the quarters
ended March 31, 2000 and 1999 respectively. As part of this arrangement, the
Company pays the real estate taxes of the leased property. Payments made by
the Company for taxes were $1,677 and $1,637 in the quarters ended March 31,
2000 and 1999 respectively.
NOTE 4 - BANK NOTES PAYABLE AND OTHER NOTE PAYABLE
In 1997 the Company obtained a $35,000 line of credit from Star Bank.
Outstanding borrowings accrue interest at the Bank's prime rate plus two
percent, 10.75% as of March 31, 2000. Outstanding borrowings under this
agreement were $33,629 and $0 at March 31, 2000 and 1999, respectively. The
majority shareholder has personally guaranteed this line of credit. This line
of credit is collateralized by substantially all business assets of the
Company.
In 1999 the Company obtained an $80,000 line of credit from Huntington
Bank. Outstanding borrowings accrue interest at the Bank's prime rate plus one-
half of one percent, 9.25% at March 31, 2000. During 1999 this line of credit
was converted into a $100,000 commercial note. Outstanding borrowings under
this agreement were $96,712 and $0 at March 31, 2000 and 1999, respectively.
The majority shareholder has personally guaranteed this line of credit. This
loan is collateralized by substantially all business assets of the Company.
On February 2, 2000 the Company borrowed $50,000 from an unrelated
corporation. Outstanding borrowings accrue interest at the rate of 10% per
year. The note and interest are due August 3, 2000 and is collateralized by
property owned by the Company's President.
NOTE 5 - SHAREHOLDERS' EQUITY AND SUBSEQUENT EVENT
The Company had 1,000 authorized shares of common stock with 100 shares
issued and 56 shares outstanding as of March 31, 2000 and 1999, respectively.
Treasury stock is accounted for using the cost method.
On April 10, 2000, the Company entered into a merger agreement with
Twilight Productions, Ltd. The merger agreement provides for a business
combination between Twilight and the Company in which Edict will become a
wholly owned subsidiary of Twilight. Under the terms of the merger, the
Company's issued and outstanding shares were exchanged for 4,359,000 Twilight
shares. The merger is intended to qualify as a pooling of interest for
accounting purposes and as a tax free reorganization for federal income tax
purposes.
In connection with the merger described above, Twilight assigned all
rights, title and interest in and to the two films it had produced to Chaverim
Productions, Ltd. , an entity owned by the officers and directors of Twilight,
in exchange for Twilight's release from any and all obligations and
liabilities arising from the production of the films.
As part of the merger, Twilight entered into a service agreement with HFG
whereby HFG agreed to provide services to Twilight in support of the Merger
and post-merger services relating to public relations, investor relations, and
assisting with regulatory filing requirements. HFG will be compensated for
these services by the issuance of 400,000 shares of Twilight's common stock.
Subsequent to the issuance of shares to Edict and HFG, as described above, the
former Edict shareholders own approximately 81% of Twilight's issued and
outstanding shares. Immediately following the merger, the sole business of
Twilight consisted of the business of Edict.
Also on April 10, 2000, Twilight entered into a stock purchase agreement
with HFG and Art Howard Beroff ("Beroff"), a former director and officer of
Twilight prior to the merger with Edict. The stock purchase agreement
requires HFG and Beroff, or their designees, to each purchase 141,500 shares
of Twilight for $150,000 each on or before July 5, 2000 resulting in
Twilight's issuance of 283,000 shares of common stock for an aggregate
consideration of $300,000 (approximately $1.06 per share). This offering as
made pursuant to Rule 504 under the Securities Act. HFG and Beroff have not
as yet met their obligation to purchase the additional shares. The date of
purchase has been delayed by agreement of the parties and shall occur within 5
days after the filing of a Form 10SB by Twilight.
NOTE 6 - PROFIT SHARING PLAN
In 1997 the Company established a profit sharing and 401(k) plan covering
substantially all employees. The Company may make annual discretionary
contributions to the plan based on participants' contributions. The Company
made no contributions to the plan in the quarters ended March 31, 2000 and
1999 respectively.
NOTE 7 - INCOME TAX EXPENSES (BENEFIT)
Income tax expenses (benefits) are comprised of the following:
<TABLE>
<CAPTION>
Quarter Ended March 31,
2000 1999
<S> <C> <C> <C>
Taxes current payable (refundable):
Federal $ (8,839) $ 5,845
State and local (3,005) 1,987
(11,844) 7,832
Deferred income taxes (8,659) (11,667)
Total income tax benefits $ (20,503) $(3,835)
</TABLE>
At March 31, 2000 and March 31, 1999, deferred income tax assets and
liabilities result from temporary differences in the recognition of income and
expense for tax and financial reporting purposes. These differences consist
principally of the difference between accrual basis accounting for reporting
purposes and the cash basis for tax purposes.
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL INFORMATION
EDICT SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999
AS IF THE MERGER OCCURRED ON JANUARY 1, 1999
(UNAUDITED)
Twilight Edict
Productions Systems Pro Forma Pro
Ltd. Inc. Adjustments Forma
<S> <C> <C> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalent 229,666 3,420 300,000<F4> 533,086
Accounts receivable, net - 122,169 122,169
Other - 12,017 12,017
Total current assets 229,666 137,606 300,000 667,272
SOFTWARE DEVELOPMENT COSTS - 204,542 204,542
PROPERTY AND EQUIPMENT
Office equipment 2,486 147,838 150,324
Less accumulated depreciation 2,486 98,325 100,811
Depreciated cost - 49,513 49,513
Total assets 229,666 391,661 300,000 921,327
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank notes payable - 115,894 115,894
Accounts payable - 63,417 3,417
Accrued expenses - 19,108 19,108
Deferred income taxes - 905 905
Deferred revenue - 168,724 68,724
Total current liabilities - 368,048 368,048
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common stock 619 2,000 (2,000)<F2>
4,359 <F1>
400 <F3>
283 <F4> 5,661
Additional paid in
capital 968,239 2,000 <F2>
(75,000)<F2>
(4,359)<F1>
(400)<F3>
299,717 <F4> 1,190,197
Treasury stock (75,000) 75,000 <F2>
Retained earnings
(deficit) (739,192) 96,613 (642,579)
Total shareholders'
equity 229,666 23,613 300,000 553,279
Total liabilities and
Shareholders' equity 229,666 391,661 300,000 921,327
<FN>
<F1>
1. Issuance of 4,359,000 shares pursuant to merger agreement.
<F2>
2. Cancellation of all issued and outstanding Edict Systems shares prior to
merger.
<F3>
3. Issuance of 400,000 shares of stock to Halter Financial Group in exchange
for performance of specified services.
<F4>
4. Cash from Halter Financial Group and Art Howard Beroff due on or before
July 5, 2000 in exchange for 283,000 shares of common stock pursuant to
stock purchase agreement.
<FN>
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL INFORMATION
EDICT SYSTEMS INC.
PRO FORMA COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1999
AS IF THE MERGER OCCURRED ON JANUARY 1, 1999
(UNAUDITED)
Twilight Edict
Productions Systems Pro Forma Pro
Ltd. Inc. Adjustments Forma
<S> <C> <C> <C> <C> <C>
REVENUES
Product sales and
license fee - 815,197 815,197
Interest 11,831 - 11,831
Other income - 9,246 9,246
Total revenues 11,831 824,443 836,274
OPERATING EXPENSES
Cost of sales - 20,877 20,877
Salaries and benefits - 572,627 572,627
General and administration 123,865 187,409 311,274
Depreciation - 20,026 20,026
Amortization - 57,217 57,217
Bad debt expense - 5,000 5,000
Interest - 9,236 9,236
Miscellaneous - 1,560 1,560
Write-down of film costs 276,050 - 276,050
Total operating expenses 399,915 873,952 273,867
LOSS BEFORE (388,084) (49,509) (437,593)
Income tax benefits - (2,817) (2,817)
NET LOSS (388,084) (46,692) (434,776)
Retained (deficit)
earnings, beginning
of year (351,108) 143,305 (207,803)
RETAINED (DEFICIT) EARNINGS,
END OF YEAR (739,192) 96,613 (642,579)
Average Shares
Outstanding 5,661,173 5,661,173 5,661,173
LOSS PER SHARE (0.07) (0.01) (0.08)
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL INFORMATION
EDICT SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AT MARCH 31, 2000
AS IF THE MERGER OCCURRED ON JANUARY 1, 2000
(UNAUDITED)
Twilight Edict
Productions Systems Pro Forma Pro
Ltd. Inc. Adjustments Forma
<S> <C> <C> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalent 216,151 13,724 300,000<F4> 529,875
Accounts receivable, net - 108,052 108,052
Refundable income tax - 11,844 1,844
Deferred income taxes - 7,754 7,754
Prepaid expenses - 9,811 9,811
Total current assets 216,151 151,185 300,000 667,336
SOFTWARE DEVELOPMENT COSTS, net 183,339 183,339
PROPERTY AND EQUIPMENT
Office equipment 2,486 148,603 151,089
Less accumulated depreciation 2,486 103,425 105,911
Depreciated cost - 45,178 45,178
Total assets 216,151 379,702 300,000 895,853
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank notes payable - 130,341 130,341
Other note payable - 50,000 50,000
Accounts payable - 72,897 72,897
Accrued expenses - 37,329 37,329
Deferred revenue - 147,025 147,025
Total current liabilities - 437,592 437,592
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common stock 619 2,000 (2,000)<F2>
4,359 <F1>
400 <F3>
283 <F4> 5,661
Additional paid in capital 968,239 - 2,000 <F2>
(75,000)<F2>
(4,359)<F1>
(400)<F3>
299,717 <F4> 1,190,197
Treasury stock (75,000) 75,000 <F2>
Retained earnings (deficit) (752,707) 15,110 - 737,597
Total shareholders' equity 216,151 (57,890) 300,000 458,261
Total liabilities and
shareholders' equity 216,151 379,702 300,000 895,853
<FN>
<F1>
1. Issuance of 4,359,000 shares pursuant to merger agreement.
<F2>
2. Cancellation of all issued and outstanding Edict Systems shares prior to
merger.
<F3>
3. Issuance of 400,000 shares of stock to Halter Financial Group in exchange
for performance of specified services.
<F4>
4. Cash from Halter Financial Group and Art Howard Beroff due on or before
July 5, 2000 in exchange for 283,000 shares of common stock purchase
agreement.
</FN>
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL INFORMATION
EDICT SYSTEMS INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE QUARTER ENDED MARCH 31, 2000
AS IF THE MERGER OCCURRED ON JANUARY 1, 2000
(UNAUDITED)
Twilight Edict
Productions Systems Pro Forma Pro
Ltd. Inc. Adjustments Forma
<S> <C> <C> <C> <C> <C>
REVENUES
Product sales and license fees 199,043 199,043
Interest 1,632 - 1,632
Other income - 580 580
Total revenues 1,632 199,623 201,255
OPERATING EXPENSES
Cost of sales - 9,025 9,025
Salaries and benefits - 211,027 211,027
General and administration 15,147 39,408 54,555
Depreciation - 5,100 5,100
Amortization - 21,203 21,203
Bad debt expense - 10,000 10,000
Interest - 5,866 5,866
Total operating expenses 15,147 301,629 316,776
LOSS BEFORE TAXES (13,515) (102,006) (115,521)
Income tax benefits - (20,503) (20,503)
NET LOSS (13,515) (81,503) (95,018)
Retained (deficit) earnings,
beginning of quarter (739,192) 96,613 (642,579)
RETAINED (DEFICIT) EARNINGS,
END OF QUARTER (752,707) 15,110 (737,597)
Average Shares Outstanding 5,661,173 5,661,173 5,661,173
LOSS PER SHARE - (0.01)
(0.02)
</TABLE>
PART III
ITEM 1. INDEX TO EXHIBITS
2 Agreement and Plan of Merger, dated as of April 10, 2000, among EDICT
Systems, Inc., Twilight Productions, Ltd. and Twilight Acquisition Sub,
Inc.
3(i) Amended Certificate of Incorporation
3(ii) By-laws
4 Form of Common Stock Certificate
10.1 Lease Agreement, dated as of January 1, 2000, between Jason K. Wadzinski
and EDICT Systems, Inc.
10.2 Stock Purchase Agreement, dated April 10, 2000, among Twilight
Productions, Ltd.,Halter Financial Group, Inc. and Art Howard Beroff
11 Statement regarding computation of per share earnings
21 Subsidiaries of the Company
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
TWILIGHT PRODUCTIONS, LTD.
Date: _________________ By:/s/ Jason Wadzinski
Jason Wadzinski, President
EXHIBIT 2 - AGREEMENT AND PLAN OF MERGER, DATED AS OF APRIL 10, 2000, AMONG
EDICT SYSTEMS, INC., TWILIGHT PRODUCTIONS, LTD., AND TWILIGHT
ACQUISITION SUB, INC.
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of April 10,
2000, is entered into by and among EDICT Systems, Inc., an Ohio corporation
("EDICT"), Twilight Productions Ltd., a Delaware corporation ("Parent"), and
Twilight Acquisition Sub, Inc., an Ohio corporation and wholly-owned
subsidiary of Parent ("Sub"). Certain capitalized terms used in this
Agreement are defined in Section 9.3 hereof.
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of EDICT, Parent and Sub have
determined that it would be advisable and in the best interests of the
stockholders of EDICT, Parent and Sub, respectively, for Sub to merge with and
into EDICT pursuant and subject to the terms and conditions set forth in this
Agreement (the "Merger");
WHEREAS, EDICT, Parent and Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, all of the parties hereto desire that the transaction
contemplated herein be treated as a tax-free merger transaction pursuant to
Section 368 of the Code.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the applicable provisions of
the Delaware General Corporation Law ("DGCL") and the Ohio Revised Code (the
"ORC"), the Merger shall be effected and Sub shall be merged with and into
EDICT at the Effective Time (as defined in Section 1.3), the separate
existence of Sub shall cease and EDICT shall continue as the surviving
corporation in the Merger. The surviving corporation of the Merger shall be
herein referred to as the "Surviving Corporation."
SECTION 1.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take
place as soon as practicable following the last to be satisfied or waived of
the conditions set forth in Article VII in accordance with this Agreement (the
"Closing Date"), unless another date, time or place is agreed to in writing by
the parties hereto.
SECTION 1.3. Effective Time. Contemporaneously with the Closing, the
Surviving Corporation will file with the Secretary of State of the State of
Ohio (the "Ohio Secretary of State") articles of merger or other appropriate
documents, executed in accordance with the relevant provisions of the ORC, and
make all other filings or recordings required under the ORC in connection
with the Merger. The Merger shall become effective upon the filing of the
articles of merger with the Ohio Secretary of State (the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
set forth in this Agreement and in the applicable provisions of the ORC.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises
of EDICT and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of EDICT and Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
SECTION 1.5 Articles of Incorporation; Bylaws. At the Effective Time,
(a) EDICT's articles of incorporation shall be the Articles of incorporation
of the Surviving Corporation, and (b) the bylaws of EDICT as in effect at the
Effective Time shall, from and after the Effective Time, be the bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
SECTION 1.6 Directors; Officers. (i) At the Effective Time, (a) the
directors of EDICT shall be the directors of the Surviving Corporation, each
of whom will serve until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be, (b) the officers of EDICT shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be, (c)
the number of directors of Parent shall remain at two (2) directors, (d) the
directors of Parent immediately following the Effective Time shall be the
persons named on Schedule 1.6(d), each of whom will serve until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be, and (e) the officers of Parent
immediately following the Closing shall be the persons named on Schedule
1.6(e), each of whom shall hold the office set forth opposite such person's
name and all of whom shall serve until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified,
as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Sub, EDICT or any
holder of (i) any shares of capital stock of EDICT or (ii) any shares of
capital stock of Sub:
(a) Conversion of EDICT Shares. All shares of common stock, no par
value ("EDICT Common Stock"), of EDICT ("EDICT Shares") issued and outstanding
immediately prior to the Effective Time shall be converted into an aggregate
of 4,359,000 shares of Parent Common Stock (the "Merger Consideration"), which
shares shall represent approximately 82% of the issued and outstanding Parent
Common Stock as of the Effective Time. All of the EDICT Shares shall remain
issued and outstanding and shall be owned by Parent following the conversion.
(b) Cancellation and Retirement of Shares: No Further Rights. As of
the Effective Time, all of the shares of capital stock of Sub (the "Sub
Shares") issued and outstanding immediately prior to the Effective Time, shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist.
SECTION 2.2 Adjustments. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
capital stock of Parent shall occur, including by reason of any
reclassification, recapitalization, stock dividend, stock split, or
combination, exchange or readjustment of shares of capital stock of Parent,
or any stock dividend thereof, the Merger Consideration shall be appropriately
adjusted.
SECTION 2.3 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall determine or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation the right, title or interest in, to or under any of
the rights, properties or assets of Sub acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of
Parent, Sub and EDICT, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of Parent,
Sub and EDICT or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE III
PAYMENT FOR SHARES
SECTION 3.1 Letter of Transmittal; Surrender of Certificates. Promptly
after the Effective Time, but in no event later than ten (10) business days
after the Effective Time, Parent shall mail to each holder of record (other
than EDICT or any of its Subsidiaries or Parent, Sub or any of their
Subsidiaries) of a certificate or certificates which, immediately prior to the
Effective Time, evidence outstanding shares of the capital stock of EDICT (the
"Certificates"), (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to Parent, and shall
be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for new certificates of Parent representing such
holders new interest in Parent. Upon surrender of a Certificate for
cancellation to the Parent together with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in respect thereof a new certificate evidencing such holders new interest in
Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of Parent and Sub. Parent
and Sub represent and warrant to EDICT as follows:
(a) Organization, Standing and Power. Each of the Parent and Sub is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of Parent
and Sub is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a Parent Material
Adverse Effect. For purposes of this Agreement, the term "Parent Material
Adverse Effect" means any Material Adverse Effect with respect to Parent
or Sub, taken as a whole, or any change or effect that adversely, or is
reasonably expected to adversely, affect the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement in any material
respect or materially impairs or delays Parent's or Sub's ability to perform
its obligations hereunder. Parent has made available to EDICT complete and
correct copies of the charter or organizational documents of Parent and Sub,
as amended to the date of this Agreement.
(b) Capital Structure. (i) The authorized capital stock of Parent
consists of 20,000,000shares of common stock, par value $.001 per share (the
"Parent Common Stock"). On the date hereof: (i) 1,019,173 shares of Parent
Common Stock were issued and outstanding (which includes the shares issued
pursuant to the Services Agreement (defined below)), and (ii) no shares of
Parent Common Stock were held by Parent in its treasury. All outstanding
shares of capital stock of Parent have been duly authorized and validly
issued, and are fully paid and nonassessable and not subject to preemptive or
similar rights. No bonds debentures, notes or other indebtedness of Parent
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which the stockholders of Parent
may vote are issued or outstanding. All the outstanding shares of capital
stock of Sub have been validly issued and are fully paid and nonassessable and
are owned by Parent, free and clear of Liens. Except for this Agreement,
neither Parent nor Sub has or, at or after the Effective Time will have, any
outstanding option, warrant, call, subscription or other right, agreement or
commitment which either (i) obligates Parent or Sub to issue, sell or
transfer, repurchase, redeem or otherwise acquire or vote any shares of the
capital stock of Parent or Sub, or (ii) restricts the voting, disposition or
transfer of shares of capital stock of Parent or Sub. There are no
outstanding stock appreciation rights or similar derivative securities or
rights of Parent or Sub. No Person has any right to require the registration
of any shares of Parent Common Stock or any other securities of Parent.
(c) Authority: Noncontravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement. The execution and delivery
of this Agreement by Parent and Sub and the consummation by Parent and Sub of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub. This Agreement has
been duly executed and delivered by Parent and Sub and, assuming this
Agreement constitutes the valid and binding agreement of EDICT, constitutes a
valid and binding obligation of each of Parent and Sub, enforceable against
each of Parent and Sub in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies and to general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions hereof will not, (i) conflict
with any of the provisions of the charter or organizational documents of
Parent or Sub, (ii) subject to the governmental filings and other matters
referred to in the following sentence, conflict with, result in a breach of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of first refusal, termination, cancellation or acceleration of any
obligation (including to pay any sum of money) or loss of a benefit under, or
require the consent of any person under, any indenture or other agreement,
permit, concession, ground lease, franchise, license or similar instrument or
undertaking to which Parent or Sub is a party or by which Parent or Sub or any
of their assets is bound, result in the creation or imposition of a material
Lien or other restriction or encumbrance on any material asset of Parent or
Sub, which, singly or in the aggregate, would have a Parent Material Adverse
Effect, or (iii) subject to the governmental filings and other matters
referred to in the following sentence, violate any domestic or foreign law,
rule or regulation or any order, writ, judgment, injunction, decree,
determination or award currently in effect except for such violations, which,
singly or in the aggregate, would only have an immaterial effect. No consent,
approval or authorization of, or declaration or filing with, or notice to, any
domestic or foreign governmental agency or regulatory authority (a
"Governmental Entity") or any third party which has not been received or made,
is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement by Parent or Sub or the consummation
by Parent or Sub of the transactions contemplated hereby, except for (i) the
filing of the articles of merger with the Ohio Secretary of State and (ii)
consents, approvals, authorizations, declarations, filings and notices that,
if not obtained or made, will not, individually or in the aggregate, result
in a Parent Material Adverse Effect.
(d) Subsidiaries. Except for Sub, Parent does not own, directly or
indirectly, any of the capital stock of any other corporation or any equity,
profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
(e) Intellectual Property. Neither Parent nor Sub owns or uses any
trademarks, tradenames, service marks, patents, copyrights or any applications
with respect thereto. Parent and Sub have no knowledge of any claim that, or
inquiry as to whether, any product, activity or operation of Parent or Sub
infringes upon or involves, or has resulted in the infringement of, any
trademarks, tradenames, service marks, patents, copyrights or other
proprietary rights of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened with respect
thereto.
(f) Absence of Certain Changes or Events; No Undisclosed Material
Liabilities.
(i) Since the date of the most recent audited financial
statements (Parent and Sub have conducted their business only in the ordinary
course, and there has not been (A) any change, destruction, damage, loss or
event which has had or could reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect; (B) any declaration,
setting aside or payment of any dividend or other distribution in respect of
shares of Parent's capital stock, or any repurchase, redemption or other
acquisition by Parent or Sub of any shares of their respective capital stock
or equity interests, as applicable; (C) any increase in the rate or terms of
compensation payable or to become payable by Parent or Sub to their directors,
officers or key employees, except increases occurring in the ordinary course
of business consistent with past practices or was required under any
employment, severance or termination agreements; (D) any entry into, or
increase in the rate or terms of, any bonus, insurance, severance, pension or
other employee or retiree benefit plan, payment or arrangement made to, for or
with any such directors, officers or employees, except increases occurring in
the ordinary course of business consistent with past practices or as was
required under employment agreements or employee or director benefit plans;
E) any entry into any agreement, commitment or transaction by Parent or Sub,
or waiver, termination, amendment or modification to any agreement, commitment
or transaction, which is material to Parent or Sub taken as a whole; (F) any
material labor dispute involving the employees of Parent or Sub; (G) any
change by Parent in accounting methods, principles or practices except as
required or permitted by GAAP; (H) any write-off or write-down of, or any
determination to write-off or write-down, any asset of Parent or Sub or any
portion thereof; (I) any split, combination or reclassification of any of
Parent's capital stock or issuance or authorization relating to the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of Parent's capital stock; (J) any amendment of any material term of
any outstanding security of Parent or Sub; (K) any loans, advances or capital
contributions to or investments in, any other person in existence on the date
hereof made by Parent, other than to any direct or indirect wholly-owned
subsidiary; (L) any sale or transfer by Parent of any of the assets of Parent,
cancellation of any material debts or claims or waiver of any material rights
by Parent; or (M) any agreements by Parent to (1) do any of the things
described in the preceding clauses (A) through (L) other than as expressly
contemplated or provided for herein or (2) take, whether in writing or
otherwise, any action which, if taken prior to the date of this Agreement,
would have made any representation or warranty of Parent in this Agreement
untrue or incorrect in any material respect.
(ii) Attached as Section 4.1(f)(ii) of the Disclosure Schedule
are the audited consolidated balance sheets of Parent as of December 31, 1999,
December 31, 1998 and December 31, 1997 (the "Parent Balance Sheets") and the
accompanying audited consolidated statements of operations and cash flows
(together with the Parent Balance Sheets, the "Parent Financial Statements").
The Parent Financial Statements have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto) and fairly present in all
material respects the financial position of Parent at the dates indicated
therein and the results of operations of Parent for the year then ended.
(iii) Parent has no Liabilities except: (A) Liabilities disclosed
on the Parent Balance Sheets; and (B) liabilities incurred subsequent to
December 31, 1999in the ordinary course of business consistent with past
practice and in compliance with the provisions of this Agreement. There are no
Liabilities of Parent of any kind whatsoever, whether accrued, contingent,
absolute, whether due or to become due, determined, determinable or otherwise,
that would have a Parent Material Adverse Effect, other than liabilities under
this Agreement or disclosed in the Disclosure Schedule.
(iv) Except as set forth on the Parent Balance Sheet or reserved
against on such balance sheet, Parent does not have Liabilities of the type
required to be reflected as Liabilities on a balance sheet prepared in
accordance with GAAP.
(g) Employees. Except for Art Howard Beroff and Eric Galler, the
arent's sole officers and directors, neither Parent nor Sub (i) has any
employees, (ii) owes any compensation of any kind, deferred or otherwise, to
any current or previous employees, (iii) has any written or oral employment
agreements with any officer or director of Parent or Sub or (iv) is a party to
or bound by any collective bargaining agreement. There are no loans or other
obligations payable or owing by Parent or Sub to any stockholder, officer,
director or employee of Parent or Sub, nor are there any loans or debts
payable or owing by any of such persons to Parent or Sub or any guarantees by
Parent or Sub of any loan or obligation of any nature to which any such person
is a party.
(h) Employee Benefit Plans. Parent and Sub have no (a) non-qualified
deferred or incentive compensation or retirement plans or arrangements, (b)
qualified retirement plans or arrangements, (c) other employee compensation,
severance or termination pay or welfare benefit plans, programs or
arrangements or (d) any related trusts, insurance contracts or other funding
arrangements maintained, established or contributed to by Parent or Sub
(collectively, "Employee Benefit Plans"). Parent has no liability for a
former Employee Benefit Plan or severance liabilities.
(i) Taxes. All Tax Returns for all periods ending on or before the
Closing Date that are or were required to be filed by, or with respect to,
Parent, either separately or as a member of an affiliated group of
corporations, have been or will be filed on a timely basis in accordance with
the laws, regulations and administrative requirements of each Taxing
Authority. All such Tax Returns that have been filed on or before the Closing
Date were, when filed, and continue to be, true, correct and complete.
(i) No United States federal, state and local Income Tax Returns
have been audited by any Taxing Authority. There are no adjustments or
proposed adjustments made by any representative of any Taxing Authority with
respect to Tax Returns filed by, or on behalf of, Parent, or any affiliated
group of corporations of which Parent is or was a member, for all taxable
years since 1997, and the resulting Taxes with respect to any of such Tax
Returns, if any, proposed to be assessed. There are no deficiencies proposed
(plus interest, penalties and additions to tax that were or are proposed to be
assessed thereon, if any) as a result of such examinations have been paid,
reserved against, settled, or, are being contested in good faith by
appropriate proceedings. Neither Parent nor any affiliated party has given or
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other entity) of any statute of limitations
relating to the payment of Taxes for which Parent may be liable.
(ii) Parent has paid, or made provision for the payment of, all
Taxes that have or may become due for all periods ending on or before the
Closing Date, including, without limitation, all Taxes reflected on the Tax
Returns referred to in this Section 4.1, or in any assessment, proposed
assessment, or notice, either formal or informal, received by Parent, or any
affiliated party with respect to any of them. The charges, accruals and
reserves with respect to Taxes on the books of Parent are adequate (determined
in accordance with GAAP consistently applied) and are at least equal to
Parent's actual liabilities for Taxes. All Taxes that Parent is or was
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the appropriate Taxing
Authority. There are no liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible, (except for
liens with respect to Taxes not yet due).
(iii) No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any property or assets held or acquired or
to be acquired by Parent. Neither Parent nor any of its affiliates with
respect to it shall make or cause to be made any election that could result in
any adverse tax consequences to Parent, or any affiliated group of
corporations of which Parent has been or may become a member.
(iv) There is no existing tax sharing agreement that may or will
require that any payment be made by or to Parent on or after the Closing Date.
(v) No property owned by Parent is property that EDICT or Parent
is or will be required to treat as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform Act
of 1986, or is "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code.
(vi) Parent has (i) not agreed to or are required to make any
adjustment pursuant to Section 481(a) of the Code; (ii) no knowledge that the
IRS has proposed any such adjustment or change in accounting method with
respect to Parent or any Subsidiary, or (iii) no application pending with any
Taxing Authority requesting permission for any change in accounting method.
(j) Voting Requirements. Except as required by the DGCL, no holder of
issued and outstanding shares of capital stock or other securities of Parent
is entitled to vote or otherwise approve this Agreement, the Merger or any
other matter or transaction contemplated by this Agreement.
(k) Compliance with Applicable Laws. Each of Parent and Sub has and
after giving effect to the transactions contemplated hereby will have in
effect all federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and to
the knowledge of Parent there has occurred no default under any such Permit,
except for the lack of Permits and for defaults under Permits which lack or
default individually or in the aggregate would not have a Parent Material
Adverse Effect. To Parent's knowledge, Parent and Sub are in compliance with,
and have no liability or obligation under, all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity,
including any liability or obligation to undertake any remedial action under
Hazardous Substances Laws, except for instances of non-compliance, liabilities
or obligations, which individually or in the aggregate would only have an
immaterial effect.
(l) Insurance. Neither Parent nor Sub has any insurance policies in
effect. Neither Parent nor Sub has any outstanding insurance obligations.
(m) Brokers. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by Parent, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
(n) Litigation, etc.. As of the date hereof, (i) there is no suit,
claim, action or proceeding (at law or in equity) pending or, to the knowledge
of Parent, threatened against Parent or Sub (including, without limitation,
any product liability claims) before any court or governmental or regulatory
authority or body, and (ii) neither Parent nor Sub is subject to any
outstanding order, writ, judgment, injunction, order, decree or arbitration
order that, in any such case described in clauses (i) and (ii), (A) could
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or (B) involves an allegation of criminal misconduct
or a violation of the Racketeer and Influenced Corrupt Practices Act, as
amended. As of the date hereof, there are no suits, actions, claims or
proceedings pending or, to Parent's knowledge, threatened, seeking to prevent,
hinder, modify or challenge the transactions contemplated by this Agreement.
(o) Contracts. Neither Parent nor Sub has any material contracts,
leases, arrangements or commitments (whether oral or written) or is a party to
or bound by or affected by any contract, lease, arrangement or commitment
(whether oral or written) relating to: (a) the employment of any person; (b)
collective bargaining with, or any representation of any employees by, any
labor union or association; (c) the acquisition of services, supplies,
equipment or other personal property; (d) the purchase or sale of real
property; (e) distribution, agency or construction; (f) lease of real or
personal property as lessor or lessee or sublessor or sublessee; (g) lending
or advancing of funds; (h) borrowing of funds or receipt of credit; (i)
incurring any obligation or liability; or (j) the sale of personal property.
(p) Unlawful Payments and Contributions. To the knowledge of Parent,
neither Parent, Sub nor any of their respective directors, officers or any of
their respective employees or agents has (i) used any Parent or Sub funds for
any unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee;
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any person.
(q) Real Property. (i) Neither Parent nor Sub owns or leases any real
property.
(ii) Neither Parent nor Sub has received any written notice from
any Governmental Entity that there exists any violation of any Hazardous
Substances Law (as hereinafter defined). Neither Parent nor Sub has knowledge
(i) of any Hazardous Substances (as hereinafter defined) present on, under or
about any asset, and to Parent's knowledge no discharge, spillage,
uncontrolled loss, seepage or filtration of Hazardous Substances has occurred
on, under or about any asset, (ii) that any of the assets violates, or has at
any time violated, any Hazardous Substance Laws, and to Parent's knowledge,
(iii) there is a condition on any asset for which Parent or Sub has an
obligation to undertake any remedial action pursuant to Hazardous Substance
Laws. For purposes hereof, "Hazardous Substances" means, without limitation
(1) those substances included within definitions of any one or more of the
terms "Hazardous Substance," and "Hazardous Waste," "Toxic Substance" and
"Hazardous Material" in the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. Section 90,601, et seq. ("CERCLA"),
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901, et seq. ("RCRA"), the Toxic Substances Control Act, as amended, 15
U.S.C. Section 2601, et seq., the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Sectoin 1801 et seq., the Occupational Safety and Health
Act, 29 U.S.C. Section 651, et seq., (insofar as it relates to employee health
and safety in relation to exposure to Hazardous Substances) and any other
local, state, federal or foreign laws or regulations related to the protection
of public health or the environment (collectively, "Hazardous Substances
Laws"); (2) such other substances, materials or wastes as are or become
regulated under, or as are classified as hazardous or toxic under Hazardous
Substance Laws; and (3) any materials, wastes or substances that can be
defined as (A) petroleum products or wastes; (B) asbestos; (C) polychlorinated
biphenyl; (D) flammable or explosive; or (E) radioactive.
(r) Anti-takeover Plan: State Takeover Statutes. Neither Parent nor
Sub has in effect any plan, scheme, device or arrangement, commonly or
colloquially known as a "poison pill" or "anti-takeover" plan or any similar
plan, scheme, device or arrangement. The Board of Directors of Parent has
approved the Merger and this Agreement. No other state takeover statute or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement or any of the transactions contemplated by this Agreement.
(s) Affiliate Transactions. Except to the extent disclosed in the
Parent Financial Statements and as contemplated by the Services Agreement
dated as of the date hereof by and between Halter Financial Group, Inc.
("HFG"), Parent and EDICT, the Stock Purchase Agreement dated as of the date
hereof, by and among Parent, HFG, Art Howard Beroff and EDICT, and the two
related Registration Rights Agreement, all of which has been reviewed by
EDICT, there are no transactions, agreements, arrangements or understandings
between Parent or Sub, on the one hand, and Parent's affiliates (other than
wholly-owned Subsidiaries of Parent), on the other hand ("Affiliate
Agreements"). No payments have been made to any affiliate of Parent other than
as specifically required by the Affiliate Agreements, no payments will be made
in connection with this Agreement (except as provided for herein) and, after
consummation of the Merger, neither Parent nor Sub shall have any Liabilities
to any affiliate or officer or director of any of Parent or Sub.
(t) Solicitation. Neither Parent, any of its Subsidiaries, officers,
directors, affiliates, agents, nor any other person acting on its behalf has
solicited, directly or indirectly, any person to enter into a merger or
similar business combination transaction with Parent by any form of general
solicitation, including, without limitation, any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(u) Disclosure. The representations and warranties and statements of
fact made by Parent and Sub in this Agreement are, as applicable, accurate,
correct and complete and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained herein not false or misleading.
(v) Disclosure Schedule. Items disclosed in any one Section of the
Disclosure Schedule are deemed to be disclosed in such other Sections of the
Disclosure Schedule as is necessary for purposes of the completeness and
accuracy of the related representation or warrants, but only to the extent
it is readily apparent from the description of the particular item or
disclosure that such item or disclosure would be applicable to any other such
Section of the Disclosure Schedule.
SECTION 4.2 Representations and Warranties of EDICT. EDICT represents
and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. EDICT is a
corporation duly organized, validly existing and in good standing under the
jurisdiction in which it is incorporated, and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business substantially as now conducted, except where the failure to do so
would not have, individually or in the aggregate, an EDICT Material Adverse
Effect. For purposes of this Agreement, the term "EDICT Material Adverse
Effect" means any Material Adverse Effect with respect to EDICT, taken as a
whole, or any change of effect that adversely, or is reasonably expected to
adversely, effect the ability of EDICT to consummate the transactions
contemplated by this Agreement in any material respect or materially impair or
delay EDICT's ability to perform its obligations hereunder.
(b) Authority; Noncontravention. The execution, delivery and
performance by EDICT of this Agreement and the consummation of the Merger by
EDICT has been duly authorized by all necessary corporate action on the part
of EDICT. This Agreement has been duly executed and delivered by EDICT and,
assuming this Agreement constitutes the valid and binding agreement of Parent
and Sub, constitutes a valid and binding obligation of EDICT, enforceable
against such party in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies and to general
principles of equity. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement, will not (i) conflict with
any of the provisions of the charter or organizational documents of EDICT,
(ii) subject to the governmental filings and other matters referred to in the
following sentence, conflict with, result in a breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent of any person under, any
indenture, or other material agreement, permit, concession, franchise,
license or similar instrument or undertaking to which EDICT is a party or by
which EDICT or any of its assets is bound or affected, or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
contravene any law, rule or regulation, or any order, writ, judgment,
injunction, decree, determination or award binding on or applicable to EDICT
and currently in effect, which, in the case of clauses (ii) and (iii)
above, singly or in the aggregate, would have an EDICT Material Adverse
Effect. No consent, approval or authorization of, or declaration or filing
with, or notice to, any Governmental Entity which has not been received or
made is required by or with respect to EDICT in connection with the execution
and delivery of this Agreement by EDICT or the consummation by EDICT of any of
the transactions contemplated by this Agreement, except for (i) the filing of
the articles of merger with the Ohio Secretary of State, (ii) such other
consents, approvals, authorizations, filings or notices as are set forth in
Section 4.2(b) of the Disclosure Schedule and (iii) consents, approvals,
authorizations, declarations, filings and notices that, if not obtained or
made, will not, individually or in the aggregate, result in an EDICT
Material Adverse Effect.
(c) Capital Structure. The authorized capital stock of EDICT consists
of (i) 1,000shares of EDICT common stock, no par value, and (ii) 1,000 shares
of preferred stock, par value $50.00per share. As of the date hereof: (i) 56
shares of EDICT Common Stock were issued and outstanding, (ii) 44 shares of
EDICT Common Stock were held by EDICT in its treasury, and (iii) no shares of
EDICT Preferred Stock were issued and outstanding. All outstanding shares of
capital stock of EDICT have been duly authorized and validly issued, and are
fully paid and nonassessable and not subject to preemptive or similar rights.
No bonds, debentures, notes or other indebtedness of EDICT having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the stockholders of EDICT may vote are issued or
outstanding. Except as set forth above or in Section 4.2(c) of the Disclosure
Schedule, and except for this Agreement, EDICT does not have and, at or after
the Effective Time will not have, any outstanding option, warrant, call,
subscription or other right, agreement or commitment which either (i)
obligates EDICT to issue, sell or transfer, repurchase, redeem or otherwise
acquire or vote any shares of the capital stock of EDICT, or (ii) restricts
the voting, disposition or transfer of shares of capital stock of EDICT.
There are no outstanding stock appreciation rights or similar derivative
securities or rights of EDICT.
(d) Subsidiaries. EDICT does not own, directly or indirectly, any
capital stock of any other corporation or any equity profit sharing,
participation of other interest in any corporation, partnership, joint venture
or other entity.
(e) No Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
EDICT.
(f) Intellectual Property. Other than as disclosed on Schedule
4.2(f), EDICT does not own or use any trademarks, tradenames, service marks,
patents, copyrights or any applications with respect thereto. EDICT has no
knowledge of any claim that, or inquiry as to whether, any product, activity
or operation of EDICT infringes upon or involves, or has resulted in the
infringement of, any trademarks, tradenames, service marks, patents,
copyrights or other proprietary rights of any other person, corporation or
other entity; and no proceedings have been instituted, are pending or are
threatened with respect thereto.
(g) Absence of Certain Changes or Events; No Undisclosed Material
Liabilities.
(i) Since the date of the most recent audited financial
statements, EDICT has conducted its business only in the ordinary course, and
there has not been (A) any change, destruction, damage, loss or event which
has had or could reasonably be expected to have, individually or in the
aggregate, an EDICT Material Adverse Effect; (B) any declaration, setting
aside or payment of any dividend or other distribution in respect of shares of
EDICT's capital stock, or any repurchase, redemption or other acquisition by
EDICT of any shares of its capital stock or equity interests; (C) any increase
in the rate or terms of compensation payable or to become payable by EDICT to
any of its directors, officers or key employees, except increases occurring
in the ordinary course of business consistent with past practices or was
required under any employment, severance or termination agreements; (D) any
entry into, or increase in the rate or terms of, any bonus, insurance,
severance, pension or other employee or retiree benefit plan, payment or
arrangement made to, for or with any such directors, officers or employees,
except increases occurring in the ordinary course of business consistent with
past practices or as was required under employment agreements or employee or
director benefit plans; (E) any entry into any agreement, commitment or
transaction by EDICT, or waiver, termination, amendment or modification to any
agreement, commitment or transaction, which is material to EDICT; (F) any
material labor dispute involving the employees of EDICT; (G) any change by
EDICT in accounting methods, principles or practices except as required or
permitted by GAAP; (H) any write-off or write-down of, or any determination to
write-off or write-down, any asset of EDICT or any portion thereof; (I) any
split, combination or reclassification of any of EDICT's capital stock or
issuance or authorization relating to the issuance of any other securities in
respect of, in lieu of or in substitution for shares of EDICT's capital stock;
(J) any amendment of any material term of any outstanding security of EDICT;
(K) any loans, advances or capital contributions to or investments in, any
other person in existence on the date hereof made by EDICT, other than to any
direct or indirect wholly-owned subsidiary; (L) any sale or transfer by EDICT
of any of the assets of EDICT, cancellation of any material debts or claims or
waiver of any material rights by EDICT; or (M) any agreements by EDICT to (1)
do any of the things described in the preceding clauses (A) through (L) other
than as expressly contemplated or provided for herein or (2) take, whether
in writing or otherwise, any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty of EDICT in this
Agreement untrue or incorrect in any material respect.
(ii) Attached as Section 4.2(f)(ii) of the Disclosure Schedule
are the audited consolidated balance sheets of EDICT as of December 31, 1999,
December 31, 1998 and December 31, 1997 (the "EDICT Sheets") and the
accompanying audited consolidated statements of operations and cash flows
(together with the EDICT Balance Sheets, the "EDICT Financial Statements").
The EDICT Financial Statements have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto) and fairly present in all
material respects the financial position of EDICT at the dates indicated
therein and the results of operations of EDICT for the year then ended.
(iii) EDICT has no Liabilities except: (A) as set forth on
Section 4.2(f)(iii) of the Disclosure Schedule; (B) Liabilities disclosed on
the EDICT Balance Sheets; and (C) liabilities incurred subsequent to
December 31, 1999in the ordinary course of business consistent with past
practice and in compliance with the provisions of this Agreement. There are no
Liabilities of EDICT of any kind whatsoever, whether accrued, contingent,
absolute, whether due or to become due, determined, determinable or otherwise,
that would have a EDICT Material Adverse Effect, other than liabilities under
this Agreement or disclosed in the Disclosure Schedule.
(iv) Unless otherwise disclosed on Schedule 4.2(f)(iii) of the
Disclosure Statement, as of the date of this Agreement except as set forth on
the EDICTBalance Sheet or reserved against on such balance sheet, EDICT does
not have Liabilities of the type required to be reflected as Liabilities on
a balance sheet prepared in accordance with GAAP.
(h) Employees. Except as disclosed on Schedule 4.2(h), EDICT (i) has
no other employees, (ii) does not owe any compensation of any kind, deferred
or otherwise, to any current or previous employees, (iii) has no written or
oral employment agreements with any officer or director of EDICT or (iv) is a
party to or bound by any collective bargaining agreement. There are no loans
or other obligations payable or owing by EDICT to any stockholder, officer,
director or employee of EDICT, nor are there any loans or debts payable or
owing by any of such persons to EDICT or any guarantees by EDICT of any loan
or obligation of any nature to which any such person is a party.
(i) Employee Benefit Plans. Other than the EDICT profit sharing and
401(k) plan, EDICT has no (a) non-qualified deferred or incentive compensation
or retirement plans or arrangements, (b) qualified retirement plans or
arrangements, (c) other employee compensation, severance or termination pay or
welfare benefit plans, programs or arrangements or (d) any related trusts,
insurance contracts or other funding arrangements maintained, established or
contributed to by EDICT (collectively, "EDICT Employee Benefit Plans"). EDICT
has no liability for a former EDICT Employee Benefit Plan or severance
liabilities.
(j) Taxes All Tax Returns for all periods ending on or before the
Closing Date that are or were required to be filed by, or with respect to,
EDICT, either separately or as a member of an affiliated group of
corporations, have been or will be filed on a timely basis in accordance with
the laws, regulations and administrative requirements of each Taxing
Authority. All such Tax Returns that have been filed on or before the Closing
Date were, when filed, and continue to be, true, correct and complete.
(i) Section 4.2(j)(ii) of the Disclosure Schedule lists all
United States federal, state and local Income Tax Returns that have been
audited by any Taxing Authority or are closed by the applicable statute of
limitations. Section 4.2(j)(ii) of the Disclosure Schedule describes all
adjustments and proposed adjustments made by any representative of any Taxing
Authority with respect to Tax Returns filed by, or on behalf of, EDICT, or any
affiliated group of corporations of which EDICT is or was a member, for all
taxable years since 1997, and the resulting Taxes with respect to any of such
Tax Returns, if any, proposed to be assessed. All deficiencies proposed (plus
interest, penalties and additions to tax that were or are proposed to be
assessed thereon, if any) as a result of such examinations have been paid,
reserved against, settled, or, as described in Section 4.2(j)(ii) of the
Disclosure Schedule, are being contested in good faith by appropriate
proceedings. Except as set forth in Section 4.2(j)(ii) of the Disclosure
Schedule, neither EDICT nor any affiliated party has given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other entity) of any statute of limitations relating to
the payment of Taxes for which EDICT may be liable.
(ii) EDICT has paid, or made provision for the payment of, all
Taxes that have or may become due for all periods ending on or before the
Closing Date, including, without limitation, all Taxes reflected on the Tax
Returns referred to in this Section 4.2(j), or in any assessment, proposed
assessment, or notice, either formal or informal, received by EDICT, or any
affiliated party with respect to any of them, except such Taxes, if any, as
are set forth in Section 4.2(j)(iii) of the Disclosure Schedule that are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP consistently applied) have been provided. The charges,
accruals and reserves with respect to Taxes on the books of EDICT are adequate
(determined in accordance with GAAP consistently applied) and are at least
equal to EDICT actual liabilities for Taxes. All Taxes that EDICT is or was
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the appropriate Taxing
Authority. There are no liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible, (except for
liens with respect to Taxes not yet due).
(iii) No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any property or assets held or acquired or
to be acquired by EDICT. Neither EDICT nor any of its affiliates with respect
to it shall make or cause to be made any election that could result in any
adverse tax consequences to EDICT, or any affiliated group of corporations of
which EDICT has been or may become a member.
(iv) There is no existing tax sharing agreement that may or will
require that any payment be made by or to EDICT on or after the Closing Date.
(v) No property owned by EDICT is property that EDICT is or will
be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform Act
of 1986, or is "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code.
(vi) EDICT has (i) not agreed to or are required to make any
adjustment pursuant to Section 481(a) of the Code; (ii) no knowledge that the
IRS has proposed any such adjustment or change in accounting method with
respect to EDICT or any Subsidiary, or (iii) no application pending with any
Taxing Authority requesting permission for any change in accounting method.
(k) Voting Requirements. Except as required by the ORC, no holder of
issued and outstanding shares of capital stock or other securities of EDICT is
entitled to vote or otherwise approve this Agreement, the Merger or any other
matter or transaction contemplated by this Agreement.
(l) Compliance with Applicable Laws. EDICT has and after giving
effect to the transactions contemplated hereby will have in effect all
federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and to the knowledge of
EDICT there has occurred no default under any such Permit, except for the lack
of Permits and for defaults under Permits which lack or default individually
or in the aggregate would not have a EDICT Material Adverse Effect. To
EDICT's knowledge, EDICT is in compliance with, and have no liability or
obligation under, all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, including any liability or obligation
to undertake any remedial action under Hazardous Substances Laws, except for
instances of non-compliance, liabilities or obligations, which individually or
in the aggregate would only have an immaterial effect.
(m) Insurance. The insurance policies indicated on Schedule 4.2(m)
are the only insurance policies currently in force by EDICT, and represent
standard and customary coverage for the business currently conducted by
EDICT. EDICT has no outstanding insurance obligations.
(n) Brokers. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by EDICT, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of EDICT.
(o) Litigation, etc.. As of the date hereof, (i) there is no suit,
claim, action or proceeding (at law or in equity) pending or, to the knowledge
of EDICT, threatened against EDICT (including, without limitation, any product
liability claims) before any court or governmental or regulatory authority or
body, and (ii) EDICT is not subject to any outstanding order, writ, judgment,
injunction, order, decree or arbitration order that, in any such case
described in clauses (i) and (ii), (A) could reasonably be expected to have,
individually or in the aggregate, an EDICT Material Adverse Effect or (B)
involves an allegation of criminal misconduct or a violation of the Racketeer
and Influenced Corrupt Practices Act, as amended. As of the date hereof, there
are no suits, actions, claims or proceedings pending or, to EDICT's knowledge,
threatened, seeking to prevent, hinder, modify or challenge the transactions
contemplated by this Agreement.
(p) Contracts. EDICT is not bound by any material contracts, leases,
arrangements or commitments (whether oral or written) or is a party to or
bound by or affected by any contract, lease, arrangement or commitment
(whether oral or written) relating to: (a) the employment of any person; (b)
collective bargaining with, or any representation of any employees by, any
labor union or association; (c) the acquisition of services, supplies,
equipment or other personal property; (d) the purchase or sale of real
property; (e) distribution, agency or construction; (f) lease of real or
personal property as lessor or lessee or sublessor or sublessee; (g) lending
or advancing of funds; (h) borrowing of funds or receipt of credit; (i)
incurring any obligation or liability; or (j) the sale of personal property.
(q) Unlawful Payments and Contributions. To the knowledge of EDICT,
neither EDICT nor any of its directors, officers or any of their respective
employees or agents has (i) used any EDICT funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any person.
(r) Real Property. (i) Except as described on Schedule 4.2(r), EDICT
neither owns or leases any real property.
(ii) EDICT has not received any written notice from any
governmental Entity that there exists any violation of any Hazardous
Substances Law (as hereinafter defined). EDICT has no knowledge (i) of any
Hazardous Substances (as hereinafter defined) present on, under or about any
asset, and to EDICT's knowledge no discharge, spillage, uncontrolled loss,
seepage or filtration of Hazardous Substances has occurred on, under or about
any asset, (ii) that any of the assets violates, or has at any time violated,
any Hazardous Substance Laws, and to EDICT's knowledge, (iii) there is a
condition on any asset for which EDICT has an obligation to undertake any
remedial action pursuant to Hazardous Substance Laws. For purposes hereof,
"Hazardous Substances" means, without limitation (1) those substances included
within definitions of any one or more of the terms "Hazardous Substance," and
"Hazardous Waste," "Toxic Substance" and "Hazardous Material" in the
Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 U.S.C. Section 90,601, et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq.
("RCRA"), the Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601, et seq., the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Section 1801 et seq., the Occupational Safety and Health Act, 29 U.S.C.
Section 651, et seq., (insofar as it relates to employee health and safety in
relation to exposure to Hazardous Substances) and any other local, state,
federal or foreign laws or regulations related to the protection of public
health or the environment (collectively, "Hazardous Substances Laws"); (2)
such other substances, materials or wastes as are or become regulated under,
or as are classified as hazardous or toxic under Hazardous Substance Laws; and
(3) any materials, wastes or substances that can be defined as (A) petroleum
products or wastes; (B) asbestos; (C) polychlorinated biphenyl; (D) flammable
or explosive; or (E) radioactive.
(s) Anti-takeover Plan: State Takeover Statutes. EDICT does not have
in effect any plan, scheme, device or arrangement, commonly or colloquially
known as a "poison pill" or "anti-takeover" plan or any similar plan, scheme,
device or arrangement. The Board of Directors of EDICT has approved the Merger
and this Agreement. No other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement or any
of the transactions contemplated by this Agreement.
(t) Affiliate Transactions. Except to the extent disclosed in Section
4.2(t) of the Disclosure Schedule, there are no transactions, agreements,
arrangements or understandings between EDICT, on the one hand, and EDICT's
affiliates (other than wholly-owned Subsidiaries of Parent), on the other hand
("Affiliate Agreements"). No payments have been made to any affiliate of
EDICT other than as specifically required by the Affiliate Agreements, no
payments will be made in connection with this Agreement (except as provided
for herein) and, after consummation of the Merger, EDICT shall not have any
Liabilities to any affiliate or officer or director of EDICT.
(u) Solicitation. Neither EDICT, any of its Subsidiaries, officers,
directors, affiliates, agents, nor any other person acting on its behalf has
solicited, directly or indirectly, any person to enter into a merger or
similar business combination transaction with EDICT by any form of general
solicitation, including, without limitation, any advertisement, article,
notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising.
(v) Disclosure. The representations and warranties and statements of
fact made by EDICT in this Agreement are, as applicable, accurate, correct and
complete and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained herein not false or misleading.
(w) Disclosure Schedule. Items disclosed in any one Section of the
Disclosure Schedule are deemed to be disclosed in such other Sections of the
Disclosure Schedule as is necessary for purposes of the completeness and
accuracy of the related representation or warrants, but only to the extent it
is readily apparent from the description of the particular item or disclosure
that such item or disclosure would be applicable to any other such Section of
the Disclosure Schedule.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of Parent and Sub and EDICT Prior to the
Merger. Except as set forth in Section 5.1 of the Disclosure Schedule or as
expressly contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, each of (i) Parent and Sub, and (ii)
EDICT shall, act and carry on their respective businesses in the ordinary
course of business consistent with past practice and use their reasonable best
efforts to preserve intact their current business organizations, keep
available the services of their current key officers and employees and
preserve the goodwill of those engaged in material business relationships with
them, and to that end, without limiting the generality of the foregoing,
except as expressly contemplated by this Agreement, neither Parent, Sub nor
EDICT shall not, and, except as set forth in Section 5.1 of the Disclosure
Schedule (subject, only where expressly stated therein, to the consent of the
other party):
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any
outstanding capital stock, (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (z) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares;
(ii) issue, sell, grant, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible or exchangeable
securities;
(iii) amend its charter or organizational documents;
(iv) directly or indirectly acquire, make any investment in, or
make any capital contributions to, any person or except in the ordinary course
of business consistent with past practice, acquire, lease or agree to manage
any assets or properties;
(v) directly or indirectly sell, lease, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its properties
or assets (including stock or other ownership interests in any properties or
Subsidiary);
(vi) purchase or sell any real property or other material asset
or enter into any agreement to purchase or sell the same;
(vii) modify the terms of, terminate or fail in any material
respect to comply with the terms of any lease, franchise agreement or joint
venture agreement, or enter into any new lease, franchise agreement or joint
venture agreement;
(viii) undertake any material construction or alteration with
respect to any asset;
(ix) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, other than indebtedness owing to or
guarantees of indebtedness owing to Parent or Sub, (B) issue or sell any debt
securities or warrants or other rights to acquire debt securities or (C) make
any loans or advances to any other person;
(x) make any tax election or settle or compromise any income tax
liability.;
(xi) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise);
(xii) grant or agree to grant to any employee any increase in
wages or bonus, severance, profit sharing, retirement, deferred compensation,
insurance or other compensation or benefits, or establish any new compensation
or benefit plans or arrangements, or amend or agree to amend any existing
Employee Benefit Plans or EDICT Employee Benefit Plans, as the case may be;
(xiii) enter into or amend any employment, consulting, severance
or similar agreement;
(xiv) waive any claims or rights;
(xv) make any change in any method of accounting or accounting
practice or policy except as required by any changes in GAAP;
(xvi) incur, enter into, amend, modify or terminate any material
commitment, contract or agreement (including with respect to any management
agreements, leases, capital expenditures or purchases of assets);
(xvii) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization or any agreement relating to a Takeover Proposal (as
hereinafter defined);
(xviii) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, or amend, modify or terminate
any agreement, arrangement or understanding with, directly or indirectly,
any of Parent's affiliates, officers or directors, including, without
limitation, any transactions, agreements, arrangements or understandings with
any affiliate, officer or director or other person covered under Item 404 of
Regulation S-K under the Securities Act that would be required to be disclosed
under such Item 404, other than pursuant to such agreements, arrangements, or
understandings existing on the date of this Agreement and set forth in Section
5.1 (xviii) of the Disclosure Schedule; or
(xix) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 5.2 Other Actions. Parent shall not, and shall not permit Sub
to, take any action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties set forth in Section
4.1 of this Agreement that are qualified as to materiality becoming untrue,
(ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect, or (iii) any of the conditions of the
Merger set forth in Article VII not being satisfied. EDICT shall not take any
action that would, or that could reasonably be expected to, result in (i) any
of the representations and warranties set forth in Section 4.2 of this
Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties that are not so qualified becoming untrue
in any material respect, or (iii) any of the conditions of the Merger set
forth in Article VII not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Access to Information; Confidentiality. Each of the parties
hereto shall afford the other party, and such other party's officers,
employees, counsel, financial advisors and other representatives reasonable
access during normal business hours during the period prior to the Effective
Time to all its owned and leased properties (including as required to perform
any environmental studies or reviews of such properties), books, contracts,
commitments, tax returns, personnel and records and, during such period,
furnish as promptly as practicable to the requesting party, its counsel,
financial advisors and other representatives, such information concerning its
business, properties, financial condition, operations and personnel as it may
from time to time reasonably request. Any such access or investigation shall
not affect the representations or warranties made by such party contained in
this Agreement. Except as required by law, each of the parties shall hold, and
will cause their respective directors, officers, partners, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any non-public information obtained from the other party
in confidence.
SECTION 6.2 Reasonable Best Efforts. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the
parties agrees to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including the satisfaction of the respective conditions set forth
in Article VII.
SECTION 6.3 Indemnification; Directors' and Officers' Insurance. (a)
EDICT, Parent and Surviving Corporation shall, and from and after the
Effective Time, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of either the Parent or the Surviving
Corporation (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including reasonable attorneys' fees and expenses),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party of or in connection with any threatened or
actual claim, action, suit, proceeding or investigation based on or arising
out of the fact that such person is or was a director or officer of Parent or
the Surviving Corporation whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after, the Effective Time ("Indemnified Liabilities"),
including all Indemnified Liabilities based on, or arising out of, or
pertaining to this Agreement or the transactions contemplated hereby, in
each case, to the full extent a corporation is permitted under the DGCL and
the ORC, respectively, to indemnify directors or officers.
(b) Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any Indemnified
Parties (whether arising before or after the Effective Time), (i) the
Indemnified Parties may retain counsel satisfactory to them and Parent
(or them and the Surviving Corporation after the Effective Time) and Parent
(or after the Effective Time, the Surviving Corporation) shall pay all fees
and expenses of such counsel for the Indemnified Parties promptly as
statements therefore are received; and (ii) Parent (or after the Effective
Time and the Surviving Corporation) shall use all reasonable efforts to assist
in the vigorous defense of any such matter, provided that neither Parent
nor the Surviving Corporation shall be liable for any settlement effected
without its prior written consent. Any Indemnified Party wishing to claim
indemnification under this Section 6.3, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Parent (or after
the Effective Time, EDICT and the Surviving Corporation) (but the failure so
to notify shall not relieve a party from any liability which it may have under
this Section 6.3 except to the extent such failure prejudices such party), and
shall deliver to Parent (or after the Effective Time, the Surviving
Corporation) the undertaking contemplated by the applicable Sections of the
DGCL and the TBCA. The Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. EDICT,
Parent and Sub agree that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the Indemnified Parties with respect to matters occurring
through the Effective Time, shall survive the Merger and shall continue in
full force and effect for a period of not less than four years from the
Effective Time; provided, however, that all rights to indemnification in
respect of any Indemnified Liabilities asserted or made within such period
shall continue until the disposition of such Indemnified Liabilities.
(c) The provisions of this Section 6.3 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives and shall be binding upon all
successors and assigns of Parent, Sub, EDICT and the Surviving Corporation.
SECTION 6.4 HFG Services Agreement. The parties hereto hereby
acknowledge that HFG and EDICT are subject to the terms and conditions of that
certain Services Agreement, dated as of the date hereof (the "Services
Agreement"), with Parent and Halter Financial Group, Inc. ("HFG") pursuant to
which HFG will provide the services enumerated therein following the
consummation of the Merger. The parties hereto further acknowledge that the
HFG Group and the Beroff Group (as such terms are defined in the Services
Agreement) shall receive an aggregate of 400,000 shares of Parent Common Stock
on or before the Closing Date). A copy of the Services Agreement is attached
hereto as Exhibit "A". A copy of the Registration Rights Agreement in
connection with said 400,000 shares is attached as Exhibit "B".
SECTION 6.5 Stock Purchase Agreement. The parties hereto hereby
acknowledge that Parent is subject to the terms of that certain Stock Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), by and
among Parent, HFG and Art Howard Beroff. Under the terms or the Purchase
Agreement, upon consummation of the Merger, Parent is obligated to sell and
HFG and Mr. Beroff are each obligated to purchase 141,500 shares of Parent
Common Stock for an aggregate purchase price of $300,000. A copy of the
Purchase Agreement is attached hereto as Exhibit "C". A copy of the
Registration Rights Agreement in connection with said shares is attached as
Exhibit "D".
SECTION 6.6 Public Announcements. Parent and Sub, on the one hand, and
EDICT, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or automated quotation system.
SECTION 6.7 No Solicitation; Takeover Proposals. From the date hereof
until the termination of this Agreement in accordance with its terms, neither
Parent nor EDICT shall, nor shall they authorize or permit any officer,
director or employee of or any financial advisor, attorney or other advisor,
representative or agent of either Parent or EDICT, to, (i) solicit, initiate
or encourage the submission of, any Takeover Proposal (as hereinafter
defined), (ii) enter into any agreement with respect to or approve or
recommend any Takeover Proposal or (iii) participate in any discussions or
negotiations regarding or furnish to any person any non-public information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Takeover Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any director or officer of Parent or EDICT, or any financial advisor, attorney
or other advisor, representative or agent of any of them, whether or not such
person is purporting to act on behalf thereof, shall be deemed to be a breach
of this Section 6.7 by the party with whom such person or entity is affiliated
with. For purposes of this Agreement, "Takeover Proposal" means any proposal
for a merger, sale of all or substantially all the assets of or other business
combination or recapitalization or similar transaction involving either Parent
or EDICT or any proposal or offer to acquire in any manner, directly or
indirectly, an equity interest in the voting securities of, or a substantial
portion of the assets of, either Parent or EDICT, other than the transactions
contemplated by this Agreement.
SECTION 6.8 Reorganization. During the period from the date of this
Agreement through the Effective Time, unless the other party shall otherwise
agree in writing, none of Parent or Sub shall knowingly take or fail to take
any action which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code or
would cause any of the representations and warranties set forth in Section
4.1(i) to be untrue or incorrect in any material respect.
SECTION 6.9 Consents, Approvals and Filings. (a) EDICT, on one hand,
and Parent and Sub, on the other hand, will make all necessary filings, as
soon as practicable, in order to facilitate prompt consummation of the Merger
and the other transactions contemplated by this Agreement. In addition, EDICT
and Parent will each use their reasonable best efforts, and will cooperate
fully with each other (i) to comply as promptly as practicable with all
governmental requirements applicable to the Merger and the other transactions
contemplated by this Agreement; and (ii) to obtain as promptly as practicable
all necessary permits, orders or other consents of Governmental Entities and
consents of all third parties necessary for the consummation of the Merger and
the other transactions contemplated by this Agreement. Each of EDICT and
Parent shall use reasonable efforts to provide such information and
communications to Governmental Entities as such Governmental Entities may
reasonably request.
(b) Each of the parties shall provide to the other party copies of all
applications in advance of filing or submission of such applications to
Governmental Entities in connection with this Agreement, and copies of all
correspondence with such Governmental Entities, and shall keep all the parties
timely apprized of the status of the foregoing.
SECTION 6.10 Name Change. Immediately subsequent to the Effective Time,
Parent shall cause to be filed in accordance with the applicable provisions of
the DGCL, a Certificate of Amendment to its Certificate of Incorporation to
change its name.
SECTION 6.11 Notices of Certain Events. (a) EDICT shall as promptly as
reasonably practicable notify Parent of: (i) any notice or other communication
from any person alleging that the consent of such person (or another person)
is or may be required in connection with the transactions contemplated by this
Agreement; (ii) any notice or other communication from any Governmental Entity
in connection with the transactions contemplated by this Agreement; and (iii)
any fact or occurrence between the date of this Agreement and the Effective
Time of which it becomes aware which makes any of its representations.
(b) Each of Parent and Sub shall as promptly as reasonably practicable
notify EDICT of: (i) any notice or other communication from any person
alleging that the consent of such person (or other person) is or may be
required in connection with the transactions contemplated by this Agreement,
(ii) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; (iii) any
actions, suits, claims, investigations or proceedings commenced or, to the
best of Parent's knowledge, threatened against, relating to or involving or
otherwise affecting Parent or Sub that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
4.1(n) or which relate to the consummation of the transactions contemplated by
this Agreement; and (iv) any fact or occurrence between the date of this
Agreement and the Effective Time of which it becomes aware which makes any of
its representations contained in this Agreement untrue or causes any material
breach of its obligations under this Agreement.
SECTION 6.12 Transfer Taxes. Parent, Sub and EDICT shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees or any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time.
SECTION 6.13 Resignations. On the Closing Date, Parent shall cause the
directors and officers of Parent to submit their resignations from such
positions, effective as of the Effective Time.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party hereto to effect the Closing
shall be subject to the fulfillment on or prior to the Closing Date of the
condition that no order shall have been entered and remained in effect in any
action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal the
consummation of the transactions contemplated hereby.
SECTION 7.2 Additional Conditions to EDICT's Obligations. The
obligations of EDICT to effect the Merger are subject to the satisfaction of
the following additional conditions on or before the Closing Date:
(i) The representations and warranties set forth in Section 4.1
of this Agreement will be true and correct in all material respects as of the
date hereof and at and as of the Closing Date as though then made;
(ii) Parent and Sub shall have performed, in all material
respects, each obligation and agreement and complied with each covenant to be
performed and complied with by them under Articles V and VI of this Agreement
prior to the Closing Date;
(iii) All consents by governmental or regulatory agencies or
otherwise that are required to be obtained by the Parent and Sub for the
consummation of the transactions contemplated hereby will have been obtained;
(iv) No action or proceeding before any court or governmental
body will be pending or threatened wherein a judgment, decree or order would
prevent any of the transactions contemplated hereby or cause such transactions
to be declared unlawful or rescinded;
(v) EDICT and its financial and legal representatives shall have
completed a due diligence review of the business, operations and financial
statements of Parent and Sub, the results of which shall be satisfactory to
EDICT in its sole discretion;
(vi) At the Closing, Parent and Sub shall have delivered or
caused to be delivered to EDICT the following: (i) a certificate executed on
behalf of Parent and Sub stating that the conditions set forth in Sections
7.2(a) through (d) of this Agreement have been satisfied; (ii) resolutions
duly adopted by the Boards of Directors of Parent and Sub authorizing and
approving the Merger and the execution, delivery and performance of this
Agreement; (iii) resolutions duly adopted by the stockholders of Sub approving
the Merger and the execution, delivery and performance of this Agreement;
(iv) a certificate of good standing for each of Parent and Sub, dated not
earlier than five days prior to the Closing Date; (v) a copy of the
Certificate of Incorporation of Parent and the Code of Regulations of the Sub
certified as of a recent date by the Secretary of State of the State of
Delaware and the Ohio Secretary of State, respectively; (vi) an
incumbency certificate of the officers of Parent and Sub; (vii) the
written designation of Art Howard Beroff and Eric Galler from their respective
positions as officers and directors of Parent and Sub; and (viii) the such
other documents as EDICT may reasonably request in connection with the
transactions contemplated hereby.
(g) Parent shall have net assets of at least $200,000 as of the
Closing Date and such amount shall be in cash.
SECTION 7.3 Additional Conditions to the Obligations of Parent and Sub.
The obligation of Parent and Sub to effect the Merger is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Section 4.2 of this
Agreement will be true and correct in all material respects as of the date
hereof and at and as of the Closing Date as though then made; (b) EDICT
shall have performed, in all material respects, each obligation and agreement
and complied with each covenant required to be performed and complied with by
it under Article VI of this Agreement prior to the Closing Date; (c) All
consents by governmental or regulatory agencies or otherwise that are required
to be obtained by EDICT for the consummation of the transactions contemplated
hereby will have been obtained; (d) No action or proceeding before any court
or governmental body will be pending or threatened wherein a judgment, decree
or order would prevent any of the transactions contemplated hereby or cause
such transactions to be declared unlawful or rescinded; (e) On the Closing
Date, EDICT shall have delivered to Parent the following:(i) a certificate
executed on behalf of EDICT stating that the conditions set forth in Sections
7.3(a) through (d) of this Agreement have been satisfied; (ii) resolutions
duly adopted by the Board of Directors of EDICT authorizing and approving the
Merger and the execution, delivery and performance of this Agreement; (iii) a
certificate of good standing for EDICT from the Ohio Secretary of State, dated
not earlier than five days prior to the Closing Date; (iv) a copy of the Code
of Regulations of Incorporation of EDICT certified as of a recent date by the
Ohio Secretary of State; (v) an incumbency certificate of the officers of
EDICT; (vi) certificates representing the EDICT Shares to be delivered
pursuant to this Agreement duly endorsed or accompanied by duly executed stock
powers; and (vii) such other documents as Parent may reasonably request in
connection with the transactions contemplated hereby.
SECTION 7.4 Frustration of Closing Conditions. Neither Parent nor EDICT
may rely on the failure of any condition set forth in Section 7.1, 7.2 or 7.3,
as the case may be, to be satisfied if such failure was caused by such party's
failure to use reasonable efforts to commence or complete the Merger and the
other transactions contemplated by this Agreement.
SECTION 7.5 Assignment and Assumption Agreement. Immediately upon the
Closing, Parent and Chaverim Productions Ltd. shall duly execute the
Assignment and Assumption Agreement attached hereto as Exhibit "E".
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. (a) This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, in any one of the following circumstances:
(i) By mutual written consent of Parent and EDICT.
(ii) By Parent or EDICT, if (x) any Statute, rule or regulation
shall have been promulgated by any Governmental Entity prohibiting or
restricting the Merger or (y) any federal or state court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree
or ruling, or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable; provided, that a party may
not terminate this Agreement pursuant to this clause (iii) if it has not
complied with its obligations under Sections 6.2 and 6.6.
(iii) By Parent or EDICT, if (A) the other party shall have failed
to comply in any material respect with any material respect with any of the
covenants and agreements (or in any respect with regard to covenants and
agreements qualified by materiality) contained in this Agreement to be
complied with or performed by such party at or prior to such date of
termination, and such failure continues for ten (10) business days after the
actual receipt by such party of a written notice from the other party setting
forth in detail the nature of such failure, or (B) a representation or
warranty of the other party contained in this Agreement shall be untrue in
any material respect or a representation or warranty qualified as to
materiality or Material Adverse Effect, as the case may be, shall be untrue in
any respect.
(iv) By EDICT, if any of the conditions set forth in Section 7.2
hereof shall have become incapable of being fulfilled and shall not have been
waived by EDICT, or by Parent if any of the conditions set forth in Section
7.3 hereof shall have become incapable of being fulfilled and shall not have
been waived by Parent.
SECTION 8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this
Agreement (except for the provisions of Sections 6.6, this Section 8.2,
Article IX and paragraphs (b) and (c) of Section 8.1 hereof) shall forthwith
become void and have no effect, without any liability on the part of any party
hereto or its directors, officers or stockholders; provided, however, that
nothing in this Section 8.2 shall relieve any party to this Agreement or
liability for any willful or intentional breach of this Agreement.
SECTION 8.3 Amendment. Subject to the applicable provisions of the DGCL
and the ORC, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to Section 8.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or wavier shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
SECTION 8.5 Procedure for Termination, Amendment, Extension or Waiver A
termination of this Agreement pursuant to Section 8.1 hereof, an amendment of
this Agreement pursuant to Section 8.3 hereof or an extension or waiver
pursuant to Section 8.4 hereof shall, in order to be effective, require by
Parent, Sub or EDICT, as the case may be, action by its Board of Directors or
the duly authorized committee or designee of its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Nonsurvival of Representations and Warranties. Except as
otherwise contemplated herein, none of the representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time. This Section 9.1 shall not limit any covenant or
agreement of the parties, which by its terms contemplates performance after
the Effective Time.
SECTION 9.2 Fees and Expenses. Each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
SECTION 9.3 Definitions. For purposes of this Agreement, and except as
otherwise defined in this Agreement:
(a) "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person;
(b) "business day" means any day other than Saturday, Sunday or
any other day on which banks in the City of New York are required or permitted
to close;
(c) "Code" shall mean the Internal Revenue Code of 1986;
(d) "Income Taxes" means (i) foreign, federal, state or local
income or franchise taxes or other taxes imposed on or with respect to net
income or capital, together with any interest or penalties or additions to tax
imposed with respect thereto, and (ii) any obligations under any agreements or
arrangements with respect to any taxes described in clause (i) above.
(e) "Income Tax Returns" means foreign, federal, state or local
Tax Returns required to be filed with any Taxing Authority that include any of
Parent or the Subsidiaries that pertain to Income Taxes;
(f) "Liability" means, as to any Person, all debts, liabilities
and obligations, direct, indirect, absolute or contingent of such Person,
whether accrued, vested or otherwise, whether known or unknown and whether or
not actually reflected, or required in accordance with GAAP to be reflected,
in such Person's balance sheet.
(g) .."Liens" means, collectively, all material pledges, claims,
liens, charges, mortgages, conditional sale or title retention agreements,
hypothecations, collateral assignments, security interests, easements and
other encumbrances of any kind or nature whatsoever;
(h) "Material Adverse Effect" with respect any person means an
event that has had or would reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of such
person and its Subsidiaries taken as a whole;
(i) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(j) "Tax" or "Taxes" means (i) any and all taxes (whether
federal, state, local or foreign), including, without limitation, gross
receipts, profits, sales, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, employment, excise, or property taxes,
together with any interest, penalties or additions to tax imposed with respect
thereto and (ii) any obligations under any agreements or arrangements with
respect to any taxes described in clause (i) above;
(k) "Taxing Authority" means any governmental authority, domestic
or foreign, having jurisdiction over the assessment, determination,
collection, or other imposition of any Tax; and
(l) "Tax Returns" means returns, reports and forms required to be
filed with any Taxing Authority.
SECTION 9.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(i) if to Parent or Sub, to
Twilight Productions, Ltd.
c/o Halter Financial Group, Inc.
One Panorama Center
7710 Las Colinas Ridge, Suite 250
Irving, Texas 75063
Attention: Timothy P. Halter
Telecopy: (972) 233-0388
With a copy to:
David Lubin, Esq.
Herrick, Feinstein LLP
Two Park Avenue
New York, NY 10022
Telecopy: (212) 592-1500
(ii) if to EDICT, to
EDICT Systems, Inc.
1619 Mardon Drive
Dayton, Ohio 45432
Attention: Jason Wadzinksi
Telecopy: (937)429-4309
with a copy (which shall not constitute
notice) to:
Coolidge, Wall, Womsley, and Lombard
33 West First Street
Dayton, Ohio 45402-1289
Attention: Barbara Sager, Esq.
Telecopy: (937) 223-6705
SECTION 9.5 Interpretation. When a reference is made in this Agreement
to a Section or Schedule, such reference shall be to a Section of, or a
Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
SECTION 9.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.7 Entire Agreement: Third-Party Beneficiaries. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. This Agreement is not intended to confer
upon any person other than the parties hereto and the third party
beneficiaries referred to in the following sentence, any rights or remedies.
The parties hereto expressly intend the provisions of Section 6.3 to confer a
benefit upon and be enforceable by, as third party beneficiaries of this
Agreement, the third persons referred to in, or intended to be benefited by,
such provisions.
SECTION 9.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO, REGARDLESS OF THE
LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
SECTION 9.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or
in part, by operation of law or otherwise by any of the parties without the
prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 9.11 Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party, such invalidity, illegality or unenforceability will not affect any
other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
IN WITNESS WHEREOF, Parent, Sub, and EDICT have caused this Agreement to
be signed in multiple counterparts by their respective officers thereunto duly
authorized, all as of the date first written above.
TWILIGHT PRODUCTIONS LTD.
By:_______________________________________
Name:Art Howard Beroff
Title:Chairman
TWILIGHT ACQUISITION SUB, INC.
By:_______________________________________
Name:
Title:
EDICT SYSTEMS, INC.
By:_______________________________________
Name:Jason Wadzinksi
Title:President
CERTIFICATE OF INCORPORATION
OF
TWILIGHT PRODUCTIONS LTD.
FIRST. The name of this corporation shall be: TWILIGHT PRODUCTIONS LTD.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in the City of Wilmington, County of New Castle, 19805,
and its registered agent at such address is CORPORATE AGENTS, INC.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
One Million (1,000,000) Shares With A Par Value Of $.001 Per Share,
Amounting To One Thousand Dollars ($1,000.00).
FIFTH. The name and mailing address of the incorporator is as follows:
Lamont W. Jones
Corporate Agents, Inc.
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this ninth day of March, A.D. 1994.
____________________________________
Lamont W. Jones
Incorporator
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
OF
TWILIGHT PRODUCTIONS LTD.
TWILIGHT PRODUCTIONS LTD., a corporation organized under the laws of the
State of Delaware, the Certificate of Incorporation of which was filed in the
Office of the Secretary of State on the ninth day of March A.D. 1994, the
charter of which was voided for nonpayment of taxes, now declares to procure a
restoration, renewal and revival of its charter, and hereby certifies as
follows:
1. The name of this corporation is: TWILIGHT PRODUCTIONS LTD.
2. Its registered office in the State of Delaware is located at 1013
Centre Road, in the City of Wilmington, County of New Castle and its
registered agent is THE COMPANY CORPORATION.
3. The date when the restoration, renewal, and revival of the charter
of this company is to commence is the twenty-eighth day of February, A.D.,
1998, same being prior to the date of the expiration of the charter. This
renewal and revival of the charter of this corporation is to be perpetual.
4. This corporation was duly organized and carried on the business
authorized by its charter until the first day of March, A.D., 1998, at which
time its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
TWILIGHT PRODUCTIONS LTD. has caused this certificate to be signed by Art
Beroff this 11th day of September A.D., 1998.
__________________________________
Authorized Officer
EXHIBIT 3(i) - AMENDED CERTIFICATE OF INCORPORATION
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
TWILIGHT PRODUCTIONS LTD.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is TWILIGHT PRODUCTIONS LTD.
2. The certificate of incorporation of the corporation is hereby
amended by taking out Article FOURTH hereof and by substituting in
lieu of said Article the follow new Article:
"FOURTH: The total number of shares of stock which this
corporation is authorized to issue is:
Twenty million (20,000,000) shares with a par value of $.001
per share, amounting to Twenty Thousand Dollars ($20,000)."
3. The amendment of the certificate of incorporation herein contained
has been duly amended and written consent has been given in
accordance with the provisions of sections 238 and 242 of the
General Corporation Law of the State of Delaware.
Signed on September 14, 1998.
_____________________________
ART BEROFF
EXHIBIT 3(ii) - BY-LAWS
BY-LAWS
OF
TWILIGHT PRODUCTIONS, LTD.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall be
held at such date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting, at which meeting
the stockholders shall elect by a plurality vote a Board of Directors, and
transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting
not less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman or (ii) the
President, and shall be called by any such officer or the Secretary at the
request in writing of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed meeting. Written notice
of a Special Meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the issued and
outstanding capital stock and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the
vote of the holders of a majority or the stock represented and entitled to
vote thereat. Each stockholder represented at a meeting of stockholders shall
be entitled to cast one vote for each share of the capital stock entitled to
vote thereat held by such stockholder. Such votes may be cast in person or by
proxy but no proxy shall be voted on or after three years from its date,
unless such proxy provides for a longer period. The Board of Directors, in
its discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such
meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior written notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of the outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the Stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the Corporation who
is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The business and affairs
of the Corporation shall be managed by or under the direction of a Board of
Directors consisting of not less than two directors unless and until otherwise
determined by vote of the entire Board of Directors to be determined from time
to time by resolution adopted by affirmative vote of a majority of the entire
Board of Directors. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
Section 2. Vacancies. If the number of directors is changed or there is
a vacancy on the board of directors, the remaining director may appoint a
director to fill such vacancy and such appointed director shall hold office
until the next annual meeting of shareholders. Any vacancy on the Board of
Directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Certificate of Incorporation or these By-Laws
directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman or the President and shall be called by such officer or
the Secretary on the written request of two directors. Notice thereof stating
the place, date and hour of the meeting shall be given to each director by
mail, facsimile, telex, telephone or telegram not less than ten days before
the date of the meeting, except that notice of a meeting to be held by
conference telephone call (as provided in Section 7 hereof) may be called upon
notice given by facsimile, telex or telephone not less than forty-eight hours
before the date and time of the meeting.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn
the meeting from time to time, until a quorum shall be present at a meeting
called for as provided in Section 5.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may execute all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. Unless otherwise restricted by the Certificate
of Incorporation or these By-Laws, the directors of the Corporation shall have
the authority to fix the compensation of the directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. Nothing herein shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meeting.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors
or officers, or have a financial interest, shall be void or voidable solely
for this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
or (ii) the material facts as to his or their relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a committee thereof or the
stockholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and, unless otherwise determined by the Board of
Directors, shall be a Chairman, a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose Vice-Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. In the event
the Board of Directors determines that two persons shall be chosen for a
certain position, all references herein shall be deemed to include both
persons. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these
By-Laws. The officers of the Corporation need not be stockholders of the
Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time with or without cause by the affirmative
vote of a majority of the Board of Directors. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation only by the Co-Presidents and
such officers may, in the name of and on behalf of the Corporation, take all
such action as they may deem advisable to vote in person or by proxy at any
meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which,
as the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman. The Chairman shall be the Chief Executive Officers
and shall have general direction and supervision over day-to-day matters
relating to the business and affairs of the Corporation, shall implement or
supervise the implementation of corporate policies as established by the Board
of Directors, shall preside at all meetings of the stockholders and of the
Board of Directors and shall be in charge of stockholder relations. The
Chairman may execute contracts, certificates and other instruments of the
Corporation, except where by law the signature of the President is required.
The Chairman shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 5. Co-President. The President shall be the chief operating
officer of the Corporation and perform such duties and have such powers as the
Board of Directors may from time to time prescribe. In the absence or
disability of the Chairman, he shall preside at meetings of the stockholders
and Board of Directors. He shall see that all orders and resolutions of the
Board of Directors are carried into effect and execute all contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, required by law to be signed and executed by the President,
except that the other officers of the Corporation may sign and execute
documents when so authorized by these By-Laws, the Board of Directors or the
Chairman. The President shall also perform such other duties and may exercise
such other powers as from time to time may be assigned to them by these
By-Laws or by the Board of Directors.
Section 6. Treasurer. The Treasurer shall be the chief financial
officer of the Corporation and shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Co-Chief Executive Officers and the
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his transactions as chief financial officer and of
the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for the purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors, the Chairman or the President under whose supervision he shall be.
If the Secretary shall be unable or shall refuse to cause to be given notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors or the Co-Presidents may choose another officer to cause such notice
to be given. The Secretary shall have custody of the seal of the Corporation
and the Secretary or any Assistant Secretary, if there be one, shall have
authority to affix the same to any instrument requiring it and when so affixed
, it may be attested by the signature of the Secretary or by the signature of
any such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case
may be.
Section 8. Vice-Presidents. At the request of the Chairman or the
President or in their absence or in the event of their inability or refusal to
act, the Vice-President or the Vice-Presidents if there is more than one (in
the order designated by the Board of Directors) shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Each Vice-President shall
perform such other duties and have such other powers as the Board of Directors
from time to time may prescribe.
Section 9. Assistant Secretaries. Except as may be otherwise provided
in these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the Chairman, the President, any Vice-President, if
there be one, or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Directors, the Chairman, the President,
any Vice-President, if there be one, or the Treasurer, and in the absence of
the Treasurer or in the event of his disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman, the President or a Vice-President and (ii) by
the Treasurer or an Assistant Treasurer, or the Secretary or Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at the
date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty days nor less than
ten days before the date of such meeting, nor more than sixty days prior to
any other such action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given five (5) days after the
time when the same shall be deposited in the United States mail. Written
notice may also be given personally or by telegram, telecopier or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. A person
entitled to notice of any meeting of the Board of Directors or stockholders,
as the case may be, waives such notice if he or she appears in person or, in
the case of a stockholder, by proxy at such meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the Corporation, or for any
proper purpose, and the Board of Directors may modify or abolish any such
reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by the Treasurer or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
from January 1st to December 31st unless otherwise determined by resolution of
the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
hereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Generally. The Corporation shall, to the
fullest extent permitted by the General Corporation Law of the State of
Delaware (the "GCL"), as amended from time to time, indemnify all persons whom
it may indemnify pursuant thereto.
Section 2. Good Faith Defined. For purposes of any determination under
this Article VIII, a person shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe his conduct was unlawful, if his
action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 2 shall
mean any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 2 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct.
Section 3. Indemnification by a Court. Notwithstanding any
determination on the part the Corporation or its agents that indemnification
of any director, officer, employee or agent is not proper, and notwithstanding
the absence of any determination, any director, officer, employee or agent may
apply to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under this Article VIII.
The basis of such indemnification by a court shall be a determination by such
court that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standards of
conduct set forth in this Article VIII or the GCL, as the case may be. Notice
of any application for indemnification pursuant to this Section 3 shall be
given to the Corporation promptly upon the filing of such application.
Section 4. Non-Exclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement or expenses
may be entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of any
director, officer, employee or agent of the Corporation or any director,
officer, employee or agent of the Corporation, partnership, joint venture,
trust or other enterprise who is serving at the request of the Corporation
shall be made to the fullest extent permitted by law. The provisions of this
Article VIII shall be deemed to preclude the indemnification of any director,
officer, employee or agent of the Corporation or any director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise who is serving at the request of the Corporation who is not
specified in this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the GCL, or otherwise.
Section 5. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power or
the obligation to indemnify him against such liability under the provisions of
this Article VIII.
Section 6. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, or new By-Laws may be adopted by stockholders of the Corporation
or by the Board of Directors, but no by-law adopted by the stockholders may be
altered, amended or repealed by the Board of Directors if the by-law so
provides.
EXHIBIT 4 - FORM OF COMMON STOCK CERTIFICATE
TWILIGHT PRODUCTIONS, LTD
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
TP671 ****378012
CUSIP 901373 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
This
certifies 000380
that JOHN F. SHEFFS
********************************THREE HUNDRED SEVENTY-EIGHT THOUSAND, TWELVE
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK $0.001 PAR VALUE OF
TWILIGHT PRODUCTIONS, LTD
(hereinafter called the "Corporation"), transferable upon the books of the
Corporation by the holder hereof in person or duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the facsimile seal
of the Corporation and the facsimile signatures of its duly authorized
officers.
Date: May 2, 2000
_____________________ _____________________________
SECRETARY PRESIDENT
EXHIBIT 4.1 - COMMON STOCK CERTIFICATE
COMMON STOCK CERTIFICATE
INCORPORATED UNDER THE
LAWS OF THE STATE OF TEXAS
COMMON STOCK COMMON STOCK
NUMBER ARW SHARES
This Certifies that _________________________________________________is
the owner of ________________________________________________________________
_____________.FULLY PAID AND NON-TRANSFERABLE SHARES OF COMMON STOCK, $0.01
PAR VALUE, OF ALFORD REFRIGERATED WAREHOUSES, INC. (hereinafter referred to as
the "Corporation") transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued under and shall be subject to all the provisions of the
Articles of Incorporation and the Bylaws of the Corporation and any amendments
thereto, copies of which are on file with the Corporation and the Transfer
Agent, to all of which the holder, by acceptance hereof, assents.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated: __________________
_________________________ Countersigned and Registered:
PRESIDENT Securities Transfer Corporation
P.O. Box 701829
Dallas, TX 75370-0001
_________________________
SECRETARY
EXHIBIT 10.1 -LEASE AGREEMENT DATED AS OF JANUARY 1, 2000,
BETWEEN JASON K. WADZINSKI AND EDICT SYSTEMS, INC.
LEASE AGREEMENT
This Lease Agreement is entered into as of January 1, 2000, by and between
Jason K. Wadzinski, an Individual ("Landlord") and EDICT Systems, Inc., an
Ohio corporation ("Tenant"). Upon the terms and subject to the conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from
Landlord, the real property described in attached Exhibit "A", which Exhibit A
is incorporated herein by this reference, together with all improvements now
or hereafter located thereon and all appurtenances and privileges related
thereto, all of which area is hereinafter referred to as the "Premises."
Section 1. Lease Term. The lease term shall commence on January 1, 2000, and
shall terminate on such a date that is mutually agreeable to Landlord and
Tenant.
Section 2. Rent. The annual rent for the lease term shall be $36,000,
payable in equal monthly installments of $3,000, each, in advance of the first
day of each calendar month throughout the lease term. Tenant shall pay the
first and last months's rent to Landlord at the time of the parties' execution
of this Lease. If the lease term commences on a day other than the first
day of a calendar month, the first month's rent shall be adjusted accordingly.
Section 3. Use of the Premises. Tenant's use of the Premises shall be in a
lawful, careful, safe, and proper manner, and Tenant shall carefully preserve,
protect, control and guard the same from damage. Tenant shall not use the
parking area or the ingress and egress area of the Premises in an unreasonable
manner so as to interfere with the normal flow of traffic or the use of such
areas by occupants of properties adjacent to the Premises.
Section 4. Taxes and Assessments. Tenant shall pay all real estate taxes and
assessments becoming due and payable with respect to the Premises during the
lease term and any extension thereof, and all taxes or other charges imposed
during the lease term or any extension thereof with respect to any business
conducted on the Premises by Tenant or any personal property used by Tenant in
connection therewith. Taxes, assessments or other charges which Tenant is
obligated to pay or cause to be paid hereunder and which relate to any
fraction of a tax year at the commencement or termination of this Lease shall
be prorated based upon the ratio that the number of days in such fractional
tax year bears to 365.
Tenant shall have the right to contest, object, or oppose the legality or
validity of any tax, assessment, or charge, provided that prompt notice of
such contest, objection, or opposition be given to Landlord, and provided
further that Tenant promptly thereafter set aside in a separate escrow account
funds equal to the amount of the taxes, assessments, or charges being
contested, objected, or opposed by Tenant. Tenant agrees to hold Landlord
harmless from and to fully pay and discharge the amounts finally determined to
be due following the exercise of such right to contest, object or oppose,
together with any penalties, fines, interests, costs, or expenses that may
accrue, or have accrued, thereon and Tenant shall apply the funds so set
aside under this Section 4 of fully discharge its obligations hereunder.
If at any time during the lease term or any extension thereof, the method of
taxation prevailing at the commencement of the lease term shall be altered so
as to cause the whole or any part of the taxes, assessments, or charges now or
hereafter levied, assessed or imposed on real estate and improvement thereon
to be levied, assessed or imposed wholly or partially as a capital levy, or
otherwise, on the rents received therefrom, Tenant shall pay and discharge the
same with respect to the rents due hereunder.
Section 5. Utilities. Tenant shall promptly pay or cause to be paid all
charges incurred for all utility services furnished to the Premises, including
without limitation, telephone service, sanitary sewer, water, natural gas, and
electricity. Tenant shall also provide all replacement light bulbs and tubes
and pay for all maintenance of all utilities during the lease term and any
extension thereof.
Landlord does not warrant that any of the utility services above-mentioned
will be free from interruptions caused by war, insurrection, civil commotion,
riots, acts of God or the enemy, governmental action, lockouts, picketing
(whether legal or illegal), accidents, inability of Landlord to obtain fuel or
supplies, or any other cause or causes beyond the reasonable control of
Landlord. Any such interruption of service shall not be deemed an eviction or
disturbance of Tenant's use and possession of the Premises, or any part
thereof, or render Landlord liable to Tenant for damages, or relieve Tenant
from the performance of Tenant's obligations under this Lease.
Landlord shall have no responsibility or liability for the failure of any
public or private utility to supply sufficient or adequate utility services to
the Premises.
Section 6. Compliance with Laws. If any law, ordinance, order, rule or
regulation is passed or enacted by any governmental agency or department
having jurisdiction over the Premises or Tenant's use of the same which
requires Tenant to modify or alter its operations or use of the Premises, this
Lease shall in no way be affected and Tenant shall, at its sole cost and
expense, promptly comply with such law, ordinance, order, rule, or regulation.
Section 7. Maintenance and Repair. Subject to the provisions of Section 11,
below, relating to destruction of or damage to the Premises, and Section 12,
below, relating to condemnation of the Premises, Tenant shall, at its sole
cost and expense, keep and maintain the Premises, including without
limitation, the roof, exterior, foundation, structural and operational parts
(cooling, heating, air conditioning, plumbing equipment and fixtures), paving
and landscaping, snow and ice removal, interior maintenance (floors, doors,
toilets, light replacement, etc.), and all other elements or systems of the
Premises, in a condition and repair similar to its original condition and
repair, reasonable wear and tear excepted. Replacement and repair parts,
materials, and equipment used by Tenant to fulfill its obligations hereunder
shall be of a quality equivalent to those initially installed within the
Premises. All repair and maintenance work shall be done in accordance with
the then existing federal, state, and local laws, regulations and ordinances
pertaining thereto. Except as otherwise provided in Sections 11 and 12,
below, Landlord shall have no obligation whatsoever with respect to the
maintenance and repair of the Premises.
Section 8. Indemnity and Insurance. Tenant shall indemnify Landlord for,
defend Landlord against, and save Landlord harmless from any liability, loss,
cost, injury, damage, or other expense that may occur or be claimed by or with
respect to any person or property on or about the Premises resulting form
the use, misuse, occupancy, possession, or unoccupancy of the Premises by
Tenant, its agents, employees, licensees, invitees or guests. Except where any
loss, cost, injury or damage is the result of Landlord's sole fault or
negligence, Landlord shall not have any liability for any loss, cost, injury
or damage to the Premises, to Tenant or Tenant's employees, agents, licensees,
invitees or guests or to any property of such persons. Except as set forth in
the Section 8, Landlord shall not be responsible or liable for loss or damage
to the contents of any improvements on the Premises, regardless of who owns
the contents and regardless of how or by whom the loss or damage is caused.
At its sole cost and expense, Tenant shall obtain and thereafter maintain in
full force and effect, at all times during the lease term and any extension
thereof, the following insurance with respect to the Premises:
(a) comprehensive public liability insurance having limits of not less than
$500,000 for bodily injury or death to one person, $500,00 for bodily injuries
or death arising out of one occurrence, and $200,000 for property damage;
(b) fire and extended coverage insurance in an amount equal to at least 85
percent of the current replacement value of the Premises, which replacement
value shall be redetermined by Landlord at the beginning of each year of the
lease term and any extension thereof. Landlord shall, upon each such
redetermination, give written notice to Tenant of such redetermined
replacement value. If Tenant fails to object to such redetermined replacement
value within 21 days after its receipt of written notice thereof, such value
shall be deemed acceptable to Tenant. If Tenant does object to such
redetermined replacement value, the replacement value of the Premises shall
then be determined by an appraisal by a firm or person selected by Landlord
and approved by Tenant. Such firm or person's determination of the replacement
value of the Premises shall be conclusive and binding upon Landlord and
Tenant. The cost of any such appraisal shall be borne equally by Landlord and
Tenant. If the replacement value of the Premises determined by such an
appraisal is higher than the then existing limits of fire and extended
insurance coverage, Tenant shall, at its sole cost and expense, promptly cause
such insurance limits to be increased to the new replacement value of the
Premises. The fire and extended coverage insurance policy shall specifically
provide that Landlord and any mortgagee or lessor of Landlord are additional
insureds and that all payments shall be made as their interests appear.
Each insurance policy furnished under this Section 8 shall be issued by a
responsible insurance company acceptable to Landlord which company shall be
authorized to do business in Ohio, and such insurance coverage may be written
under a blanket policy or policies obtained by Tenant, which policy or
policies may include other real estate owned or leased by Tenant. Landlord,
Tenant and any mortgagee or lessor of Landlord shall all be named as insured
parties in each such insurance policy, and each policy shall provide for
written notice to Landlord and to any mortgagee or lessor of Landlord at least
ten days prior to any cancellation, modification, or lapse thereof. Tenant
shall furnish Landlord with memorandum copies of such insurance policies prior
to the commencement of the lease term.
Section 9. Alterations and Improvements. Tenant shall have the right to
make, at no expense to Landlord, improvements, alterations, or additions
(hereinafter collectively referred to as "Alteration") to the Premises,
whether structural or nonstructural, interior or exterior, provided that: (a)
no Alteration shall be made without the prior written consent of Landlord,
which consent shall not be unreasonably withheld; (b) no Alteration shall
reduce or otherwise impair the value of the Premises; (c) no Alteration shall
be commenced until Tenant has fist obtained and paid for all required permits
and authorizations of all governmental authorities having jurisdiction with
respect to such Alteration; (d) any Alteration shall be made in a good
workmanlike manner and in compliance with all laws, ordinances, regulations,
codes, and permits; (e) Tenant shall hold Landlord harmless from and against
any liens and claims for work, labor, or materials supplied to the Premises at
the direction of Tenant, and in the event that any such liens or claims shall
be filed for work, labor or materials supplied to the Premises at the
direction of Tenant, Tenant shall, at Landlord's option, either escrow an
amount equal to the amount of the lien or claim being filed, or obtain a bond
for the protection of Landlord in an amount not less than the amount of the
lien or claim being filed; and (f) any Alteration shall become and remain the
property of Landlord unless Landlord otherwise agrees in writing.
Section 10. Signs. Tenant shall have the right to install and operate, at
its sole cost and expense, any sign or signs on the Premises which shall not
be in violation of any law, statute or ordinance, and Tenant shall have the
right to remove the same, provided that Tenant must repair any damage to the
Premises caused by such removal.
Section 11. Damage to Premises. If by fire or other casualty the Premises
are destroyed or damaged to the extent that Tenant is deprived of occupancy or
use of the Premises (meaning such destruction cannot be repaired or restored
within 120 days of the occurrence of the fire or other casualty Landlord may
elect to: (a) cause the restoration of the Premises to substantially the same
condition as existed before such damage or destruction; or (b) cancel this
Lease as of the date of such fire or casualty by giving written notice to
Tenant not more than 30 days thereafter. Should Landlord elect to proceed
under (a), above, rent shall abate unless Tenant continues to partially occupy
the Premises in which case Tenant shall pay all rent on a prorated basis,
until the Premises are restored, equal to an amount obtained by multiplying
the then existing monthly rent by a percentage equal to the fraction which has
as its numerator the amount of square feet in the improvements of the Premises
which is incapable of being used for its intended purpose and as its
denominator the total amount of square feet in the improvements on the
premises. If such damage does not deprive Tenant of occupancy or use of the
Premises, Landlord shall proceed with due diligence to cause the restoration
of the Premises to substantially the same condition as existed before such
damage. In such latter event, rent shall not abate. Tenant shall fully
cooperate with Landlord in making available to Landlord for the purpose of so
restoring the Premises all insurance proceeds payable under Section 8 as a
result of fire or other casualty damage to the Premises.
Section 12. Condemnation. If all or materially all of the Premises are taken
in appropriation proceedings or by right of eminent domain or by the threat of
the same, then this Lease shall terminate as of the date Tenant is deprived of
occupancy thereof, and Tenant's obligations under this Lease, except
obligations for rent and other charges herein to be paid by Tenant up to the
date thereof, shall terminate. For purposes of this Lease, "materially all of
the Premises" shall be considered as having been taken if the portion of the
Premises taken, due either to the area so taken or the location of the portion
taken, would leave the remaining portion not so taken insufficient to enable
tenant to effectively and economically conduct it business at the Premises.
If Less than materially all the Premises are taken in appropriation
proceedings or by right of eminent domain or by the threat thereof, then this
Lease shall not terminate as a result of such taking, but Landlord shall
promptly repair and restore the Premises to substantially the same condition
as existed immediately before such taking. Until such repair and restoration
are completed, rent shall be abated in the proportion of the number of square
feet of improvements on the Premises of which Tenant is deprived bears to the
total square feet of such improvements immediately prior to such taking.
Thereafter, if the number of square feet of improvements is less than the
total of the same prior to such taking, rent shall be reduced in the
proportion to which the number of square feet of improvements existing after
such repair and restoration is less than the total of the same prior to such
taking.
All damages awarded for any such taking shall belong to and be the property of
Landlord, whether such damages shall be awarded as compensation for diminution
in value to the leasehold or to the fee of the Premises, or otherwise,
provided, however, that Tenant shall be entitled to any portion of the award
made to Tenant for removal and reinstallation of Tenant's fixtures or for the
cost of Tenant's immovable fixtures, if any.
Section 13. Default. If Tenant fails to pay any installment of rent or make
any other payment required to be made by Tenant when the same shall become due
and payable hereunder, or if Tenant fails to observe and perform any other
provision, covenant, or condition of this Lease required under this Lease
to be observed and performed by Tenant within 15 days after Landlord shall
have given notice to Tenant of the failure of Tenant to observe and perform
the same, or if Tenant abandons or vacates the Premises during the continuance
of this Lease, or if Tenant makes an assignment for the benefit of creditors
or enters into a composition agreement with its creditors, or if the interest
of Tenant in the Premises is attached, levied upon, or seized by legal
process, or if this Lease is assigned in violation of the terms hereof or is
terminated by operation of law, then, in any such event, immediately or at any
time thereafter, at the option of Landlord, Landlord shall, as it elects,
either: (a) declare this Lease to be in default, in which event this Lease
shall immediately cease and terminate, and Landlord may possess and enjoy the
Premises as though this Lease had never been made, without prejudice, however,
to any and all rights of action when Landlord may have against Tenant for rent
and other charges payable by Tenant hereunder (both past due and future rent
due Landlord and past due and future charges payable by Tenant), damages, or
breach of covenant, in respect to which Tenant shall remain and continue
liable notwithstanding such termination; or (b) relet the Premises, or any
part thereof, for such term or terms and on such conditions, as Landlord deems
appropriate for and on behalf of Tenant, for the highest rental reasonably
attainable in the judgment of Landlord, which reletting shall not be
considered as a surrender or acceptance back of the Premises or a termination
of this Lease, and recover from Tenant any deficiency between the amount of
rent and all other charges payable by Tenant under this Lease and those
amounts obtained from such reletting, plus any expenses incurred by Landlord
in connection with such reletting, including, without limitation, the expenses
of any repairs or alterations Landlord deems necessary or appropriate to make
in connection with such reletting and all sums expended for brokerage
commissions and reasonable attorneys' fees, but Landlord shall be under no
duty to relet the Premises; or (c) declare the whole amount of the rent and
other charges which would otherwise have been paid by Tenant over the balance
of the lease term to be immediately due and payable, without prejudice,
however, to any and all other rights of action which Landlord may have against
Tenant for past due rent and other charges payable by Tenant hereunder,
damages or breach of covenant, in respect to which Tenant shall remain and
continue liable notwithstanding Landlord's election to proceed under this
clause (c).
In the event that a bankruptcy or insolvency proceeding is filed by or against
Tenant, or if a court of competent jurisdiction or other governmental
authority approves a petition seeking a reorganization, arrangement,
composition or other similar relief with respect to Tenant, or appoints a
trustee, receiver or liquidator of Tenant or of all, or substantially all, of
Tenant's property or affairs, or assumes custody or control of all, or
substantially all, of the property or affairs of Tenant, Landlord shall have
the right to elect any of the remedies set forth above. If this Lease is
assumed or assigned to a trustee, receiver, liquidator or other court-
appointed person or entity without Landlord's prior written consent, the
parties and their respective successors (whether by operation of law or
otherwise agree that, upon such an assignment or assumption, all defaults
of Tenant prior to such assignment or assumption must be cured or that
adequate assurances that such defaults will be promptly cured must be given
and that adequate assurances of future performance under this Lease must be
provided. Such adequate assurances shall mean that a bond shall be issued in
favor of Landlord in the amount equal to one year's future rent and that an
amount equal to all existing monetary obligations of Tenant which are in
default shall be escrowed with an escrow agent acceptable to Landlord.
Additionally, all past due monetary obligations of Tenant which are in default
shall be paid to Landlord within 60 days after the assignment or assumption
and rent will be currently and continually paid on a timely basis commencing
with the first day of the month following the 60th day of the assignment and
assumption.
Section 14. Non-Waiver and Right to Cure Defaults. Neither a failure by
Landlord to exercise any of its options hereunder, nor a failure to enforce
its rights or seek its remedies upon any default, nor an acceptance by
Landlord of any rent accruing before or after any default, shall affect or
constitute a waiver of Landlord's right to exercise such option, to enforce
such right, or to seek such remedy with respect to that default or to any
prior or subsequent default. The remedies provided in this Lease shall be
cumulative and shall not in any way abridge, modify or preclude any other
rights or remedies to which Landlord is entitled, either at law or in equity.
If Tenant fails to pay by their respective due dates all rents, charges or
other obligations to be paid by it pursuant to the terms hereof, or fails to
make necessary repairs to the Premises, or fails to perform any other duties
which it is required to perform hereunder, then Landlord, at its option, may
do so and the amount of any expenditure attributable to such action by
Landlord, plus accrued interest at the rate of twenty percent (20%) per annum
from the time each such expenditure is made until reimbursed, shall
immediately become due and payable to Landlord and shall be considered
additional rent hereunder; but no such payment or compliance by Landlord shall
constitute a waiver of any such failure by Tenant or affect any right or
remedy of Landlord with respect thereto.
Section 15. Cooperation Respecting Mortgages. Tenant leases the Premises
subject to any mortgages now or hereafter placed upon the Premises and agrees
to cooperate with Landlord in any attempts Landlord or Landlord's lessor may
make from time to time to obtain mortgage financing secured by the Premises.
Tenant shall furnish to Landlord or to Landlord's lessor such written
information and execute such documentation concerning this Lease as may be
requested by Landlord or Landlord's lessor in connection with existing
mortgage financing. Tenant shall, at the request of Landlord or Landlord's
lessor, formally subject and subordinate its interest in this Lease.
Section 16. Estoppel Certificate. Tenant shall, at Landlord's request upon
not less than ten days' prior notice by Landlord, execute, acknowledge, and
deliver to Landlord, or such other party as Landlord may specify, a statement
in writing certifying that this Lease has not been modified and is still in
full force and effect (or if modified, that the same is in full force and
effect as modified and stating the modifications), and the dates to which the
rent and any other obligations to be paid hereunder by Tenant have been paid,
and stating whether or not, to the best of the knowledge of Tenant, Tenant or
Landlord is in default in performance of any obligation hereunder, and if so,
specifying each such default.
Section 17. Holding Over by Tenant. If Tenant shall continue in possession
of the Premises beyond the termination of the lease term, such holding over
shall be considered an extension of this Lease for a one-month period and so
on, from month to month, until terminated by either party by giving not less
than 30 days written notice of termination to the other. Such holding over
shall be upon the same terms and conditions as are set forth in this Lease.
Section 18. Surrender of Premises. Upon termination of this Lease, whether
by lapse of time or otherwise, or upon the exercise by Landlord of the power
to enter and repossess the Premises without terminating this Lease, as
hereinbefore provided, Tenant shall at once surrender possession of the
Premises to Landlord in a condition and order of repair substantially similar
to its original condition and order of repair upon the commencement of the
lease term, reasonable wear and tear and damage by events of casualty
described in Section 1, excepted, and shall at once remove all of Tenant's
personal property and trade fixtures from the Premises. Upon any such
termination, Tenant shall, as directed by Landlord, either remodel any
addition to the Premises constructed by Tenant under Section 9, above, so as
to facilitate use of such addition for office operations or remove such
addition from the Premises. Any such remodeling or removal of any addition to
the Premises shall be made by Tenant at its sole cost and expense. If, upon
any such termination, Tenant does not at once surrender possession of the
Premises and remove such of its property as allowed by Landlord, Landlord may
forthwith re-enter and repossess the same and remove all of Tenant's property
without being guilty of trespass or of forceful entry or detainer or without
incurring any liability to Tenant for loss or damage to Tenant's property.
Upon any such removal of Tenant's property, it shall be considered to have
been abandoned and may either be retained by Landlord as its property or may
be disposed of at public or private sale as Landlord sees fit. If any such
property is either sold at public or private sale or retained by Landlord,
the proceeds of any such sale or the then current fair market value of the
property, as the case may be, shall be applied by Landlord against Landlord's
expenses of removal, storage or sale of such property, the arrears of rent and
other charges or future rent and other charges payable hereunder, and any
other damages to which Landlord may be entitled hereunder. Tenant shall
repair, at its sole cost and expense, any damage to the Premises resulting
from the removal of its property as allowed hereunder.
Section 19. Entry by Landlord. Landlord shall have the right to enter upon
the Premises at all reasonable times for the purpose of inspecting the same,
and during the last year of the lease term, or any renewal or extension
thereof, Landlord may exhibit the same for sale or rent; provided, however,
that Landlord shall not unreasonably interfere with Tenant's use of the
Premises.
Section 20. Time of the Essence. Time is of the essence in the performance
and observance of each and every term, covenant and condition of this Lease by
both Landlord and Tenant.
Section 21. Notices and Payment of Rent. Any payment of rent, notice,
exercise of option or election, communication, request or other document or
demand required or desired to be given to Landlord or Tenant shall be in
writing and shall be deemed given: (a) to Landlord when delivered personally
to the managing partner of Landlord or when deposited in the United States
mail, first-class, postage prepaid, addressed to Landlord at its address set
forth at the beginning hereof; and (b) to Tenant when delivered in person to
an officer of Tenant or when deposited in the United States mail, first-class,
postage prepaid, addressed to Tenant at its address set forth at the beginning
hereof. Either party may, from time to time, change the address at which such
written notices, exercises of options or elections, communications, requests,
or other documents or demands are to be mailed, by giving the other party
written notice of such changed address.
Section 22. Assignment. Tenant shall not assign this Lease or sublet the
Premises, or any part thereof, without the prior written consent of Landlord,
which consent may be subject to terms and conditions as Landlord considers
necessary in order to protect its interest in the premises; provided, however,
that no assignment of this Lease, whether by act of tenant or by operation of
law, and no sublease of the premises, or any part thereof, by or from tenant,
shall relieve or release tenant from any of its obligations hereunder.
Section 23. Governing Law. This Lease shall be subject to and governed by
the laws of the State of Ohio even though one or more of the parties may be or
may become a resident of a different state.
Section 24. Amendments. No amendment to this Lease shall be valid or binding
unless such amendment is in writing and executed by the parties hereto.
Section 25. Captions. The captions of the several sections of the Lease are
not a part of the context hereof and shall be ignored in construing this
Lease. They are intended only as aids in locating and reading the various
provisions hereof.
Section 26. Severability of Provisions. The invalidity or unenforceability
of any particular provision of this Lease shall not affect the other
provisions hereof and this Lease shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease Agreement as
of the date first set forth above.
Signed and acknowledged LANDLORD:
in the presence of:
______________________________ ______________________________
______________________________
TENANT:
______________________________ ______________________________
______________________________
STATE OF OHIO
COUNTY OF FRANKLIN, SS:
BE IT REMEMBERED, that before me on this ___ day of ______________, 2000,
appeared __________________________, who acknowledged the signing of the
foregoing instrument to be his voluntary act and deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
official seal, on the day set forth above.
______________________________
Notary Public
STATE OF OHIO
COUNTY OF GREEN, SS:
BE IT REMEMBERED, that before me on this ___ day of ______________, 1993,
appeared __________________________, who acknowledged the signing of the
foregoing instrument to be his voluntary act and deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
official seal, on the day set forth above.
______________________________
Notary Public
EXHIBIT 10.2 -STOCK PURCHASE AGREEMENT, DATED APRIL 10, 2000,
AMONG TWILIGHT PRODUCTIONS, LTD., HALTER
FINANCIAL GROUP, INC. AND ART HOWARD BEROFF
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated April 10, 2000,
is entered into by and among Twilight Productions Ltd., a Delaware corporation
("Seller"), Halter Financial Group, Inc., a Texas corporation ("HFG"), and Art
Howard Beroff, in his individual capacity ("Beroff" and collectively with HFG,
"Purchasers.
W I T N E S S E T H:
WHEREAS, Seller has consummated a reverse merger transaction (the "Public
Merger Transaction") whereby the shareholders and management of EDICT Systems,
Inc., an Ohio corporation assumed ownership and operational control of Seller;
WHEREAS, Purchasers desire to purchase from Seller, and Seller desires to
sell to Purchasers, an aggregate of 283,000 shares (the "Shares") of Seller's
common capital stock pursuant to the terms and conditions more particularly
set forth herein; and
WHEREAS, Purchasers and Seller desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the execution and delivery of this Agreement and certain
additional agreements related to the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the above premises and of the mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Stock Purchase Agreement. On or before July 5, 2000, HFG and
Beroff shall each be unconditionally obligated to purchase 141,500 Shares at a
purchase price of $150,000 for an aggregate purchase price of $300,000 (the
"Purchase Price"). The obligations identified above shall be several, but not
joint, obligations of Purchasers such that in no event shall either HFG or
Beroff be required to purchase more than 141,500 Shares.
1.2 Certificate. The certificates representing the Shares shall be
original certificates duly issued to and in the name of Purchasers or their
respective designees.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS BY SELLER
Set forth below are certain representations, warranties and
acknowledgements made by Seller for the benefit of Purchasers in connection
with the transactions contemplated by this Agreement. Purchasers acknowledge
that each of the representations, warranties and acknowledgements made by
Seller in Sections 2.1, 2.2 and 2.4 of this Article 2 is qualified as to the
knowledge of Seller's current management insofar as any breach or inaccuracy
in such representations, warranties and acknowledgement relates to any action
or occurrence or any other circumstances existing during any period prior to
the closing date of the Public Merger Transaction. However, for the period
following the closing date of the Public Merger Transaction, all
representations, warranties and acknowledgements made by Seller in Section 2.2
of this Article 2 shall be deemed made without qualification insofar as they
relate to any action or occurrence during the period after the closing date of
the Public Merger Transaction, unless specifically qualified therein.
2.1 Title to Shares. Upon tender of the Purchase Price by
Purchasers, Seller shall have delivered the Shares to Purchasers, free and
clear of any and all liens, pledges, security interests, encumbrances,
buy-sell agreements, preemptive rights or any adverse claims of every kind and
character.
2.2 Execution, Delivery and Performance of Agreement; Authority.
None of the execution, delivery or performance of this Agreement by Seller
shall, with or without the giving of notice or the passage of time, or both,
conflict with, result in a default, right to accelerate or loss of rights
under, or result in the creation of any lien, charge or encumbrance pursuant
to, any provision of any mortgage, loan, deed of trust, lease, license,
agreement, understanding, law, rule or regulation or any order, judgment or
decree to which Seller is a party or by which any may be bound or affected.
Seller has the full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby, all proceedings required to be
taken by it to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto have been properly taken and this
Agreement constitutes the valid and binding obligation of Seller enforceable
in accordance with its terms. There are no outstanding agreements or
arrangements of any character or nature whatever under which Seller is or may
become obligated to issue, assign or transfer the Shares. There are no voting
trust or other agreements or understandings of any kind relating to the Shares.
2.3 Exemption From Registration. The Shares are being sold to
Purchasers in reliance upon the exemption from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the "Act"), set forth
in Section 4(2) thereof.
2.4 Disclosure. No representation or warranty by Seller contained in
this Agreement contains any untrue statement of a material fact, or omits to
state any material fact required to make the statements herein contained not
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchasers represent and warrant to Seller that Purchasers are acquiring
the Shares hereunder for their own account, for investment and with no present
intention of reselling or otherwise distributing same except (i) pursuant to a
registration statement filed pursuant to the Act, or (ii) under other
circumstances which in the opinion of counsel of Purchasers at the time do not
require registration under the Act.
Purchasers acknowledge that this representation has been relied upon by
Seller in conveying the Shares pursuant to the terms and conditions of this
Agreement.
ARTICLE 4
SELLER'S OBLIGATIONS
Seller shall deliver to HFG and Beroff, or their respective designees or
assigns, certificates representing the Shares. Furthermore, Seller shall
execute and deliver that certain Registration Rights Agreement (the
"Registration Rights Agreement") to be entered into by the parties hereto,
related to the Shares the form of which is attached hereto as Exhibit "A".
ARTICLE 5
PURCHASERS' OBLIGATIONS
HFG and Beroff shall each deliver to Seller (i) that portion of the
Purchase Price for which they are obligated and (ii) a duly executed copy of
the Registration Rights Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 Headings. The descriptive headings of the several Articles and
subsections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
6.2 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other party.
6.3 Further Assurances. Consistent with the terms and conditions
hereof, each party hereto will execute and deliver such instruments,
certificates and other documents and take such other action as any other party
hereto may reasonably require in order to carry out this Agreement and the
transactions contemplated hereby.
6.4 Complete Agreement. This Agreement contains the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior arrangements or understandings with respect
thereto. There are no representations, agreements, promises, warranties,
covenants or undertakings other than those expressly set forth herein or
therein.
6.5 Modifications, Amendments, and Waivers The parties hereto may,
by written agreement, modify, amend or supplement any term or provision of
this Agreement and (ii) any term or provision of this Agreement may be waived
in writing by the party which is entitled to the benefits thereof.
6.6 Governing Law. This Agreement shall be governed by the laws of
the State of Ohio (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including but not limited
to matters of validity, construction, effect and performance.
6.7 Severability. In the event any provision of this Agreement is
held to be invalid, illegal or unenforceable for any reason and in any respect
by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall in no event affect, prejudice or disturb the validity
of the remainder of this Agreement, which shall be in full force and effect,
enforceable in accordance with its terms and the provision held to be void,
illegal or unenforceable shall be limited so that it shall remain in effect to
the extent permissible by law.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PURCHASERS:
HALTER FINANCIAL GROUP, INC.
Timothy P. Halter, President
Art Howard Beroff
SELLER:
TWILIGHT PRODUCTIONS LTD.
Jason Wadzinski, President
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS
Per share earnings are computed and displayed in the pro forma financial
information at December 31, 1999 (as if the merger occurred on January 1,
1999) and March 31, 2000 (as if the merger occurred on January 1, 2000). Due
to the significance of the number of shares issued in the merger between
Twilight Productions, Ltd. and Edict Systems, Inc., there is no display
of earnings per share for the individual company historic financial statement
presentations because these computations are not considered meaningful.
Assumed average outstanding shares used in the computation of per share
earnings for the pro forma financial statement presentations include the
following shares issued or expected to be issued:
Twilight Production, Ltd. common shares outstanding at
time of merger 619,173
Common shares issued to Edict Systems, Inc. shareholders
at time of merger 4,359,000
Common shares issued at time of merger through private
Placement 400,000
Common shares expected to be issued pursuant to stock
purchase agreement 283,000
Total shares used in computation of per share earnings 5,661,173
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
EDICT SYSTEMS, INC., AN OHIO CORPORATION
