U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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)
Delaware 88-0339012
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State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
1619 Mardon Dr., Dayton, Ohio 45432
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(Address of Principal Executive Offices) (Zip Code)
(937) 429-4288
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(Issuer's Telephone Number)
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
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Securities to be registered pursuant to Section 12 (g) of the
Act:
Common Stock, $.001 par value
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(Title of Class)
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_ONET 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_ONET software and utilize data received from business
partners for the rapid creation of shipping labels.
In 1999, the Company developed its EnterpriseECT 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.
EnterpriseECT transmits and receives electronic documents, such
as purchase orders, invoices, promotional information, and other
documents over the Internet. EnterpriseECT also allows
customers to transmit and receive data directly using other
communications protocols. In addition, EnterpriseECT
communicates with traditional VANs via an interconnect with AT&T
Easylink Services which allows EnterpriseECT to support its
customers even if their trading partner uses a traditional VAN.
EnterpriseECT allows companies to utilize their current EDI
software (including FORMULA_ONET) to process electronic
documents, but uses the Internet (via EnterpriseECT) for
communication of the electronic documents to reduce the costs
associated with traditional VANs.
EnterpriseECT also provides value-added services such as
conversion of data from one format to another. This is known as
server-side data translation.
EnterpriseECT also allows companies to utilize a web-based,
generic portal ("www.EZEC.com" and "www.EasyEC.com") to access
documents stored on EnterpriseECT 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 EnterpriseECT 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 EnterpriseECT
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 EnterpriseECT
and seven communicating with EnterpriseECT 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
EnterpriseECT.
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 EnterpriseECT and Vortals utilizing its "Hub
and Spoke" marketing program whereby large "hub" companies get
reduced prices or free access to EnterpriseECT while their
trading partners, "spokes", pay transaction fees to access to
the system.
Product Breakdown - Software and Services
FORMULA_ONET - PC-based software for transmitting, receiving,
administrating, and processing EDI documents. FORMULA_ONET
communicates with all traditional VANs as well as EnterpriseECT
via secure File Transfer Protocol ("FTP"). FORMULA_ONET
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_ONET
for the creation of bar coded shipping container labels.
EnterpriseECT - 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.
EnterpriseECT 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 EnterpriseECT 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 for 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 EnterpriseECT 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. EnterpriseECT 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, EnterpriseECT communicates with traditional VANs
via an interconnect with AT&T Easylink Services which allows
EnterpriseECT to support its customers even if their trading
partner uses a traditional VAN. EnterpriseECT 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_ONET EDI translation software. This software provides
connectivity to most private VANs as well as EnterpriseECT.
Once data is received into FORMULA_ONET, 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_ONET for integration, EnterpriseECT
has the ability to reformat data prior to transmission to the
customer for integration purposes using custom developed
applications, which are hosted on the EnterpriseECT 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_ONET 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_ONET. 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 EnterpriseECT 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 EnterpriseECT horizontally to
companies currently doing e-commerce as well as companies who
will be conducting e-commerce in the future. Because
EnterpriseECT 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
EnterpriseECT.
The Company intends to leverage its current FORMULA_ONET
customer base to increase connectivity opportunities with
EnterpriseECT as most of the FORMULA_ONET customers are
currently using commercial VANs. The Company has developed a
secure FTP software program that integrates with FORMULA_ONET
providing connectivity to its EnterpriseECT service. Due to
the cost savings associated with EnterpriseT versus traditional
VANs, the Company expects many of its FORMULA_ONET 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 EnterpriseECT 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 EnterpriseECT 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
EnterpriseECT 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 Property 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 Factors
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 EnterpriseECT 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 EntepriseECT and
Vortal products. Also, as more companies move from software to
Internet solutions, the Company has experienced declining
revenues for its FORMULA_ONET 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 EnterpriseECT 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_ONET, BCLM, EntepriseECT, and Vortal products.
The FORMULA_ONET 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_ONET being used.
The EnterpriseECT 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 EnterpriseECT service and Vortals
and the volume of the data, documents or other information they
send or retrieve utilizing this service. The success of the
EnterpriseECT 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. MANAGEMENTS 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.
Managements 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 EnterpriseECT 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 EnterpriseECT 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.
Managements Discussion and Analysis 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 EnterpriseECT 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 EnterpriseECT 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
3545 Woodgreen Dr.
Beavercreek, OH 45434
</TABLE>
(ii) The following table has been completed for each of
Executive Officer of the Company:
<TABLE>
<CAPTION>
Common Options Percent
Name and Address Shares of 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
Name and Address Shares of 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
3545 Woodgreen Dr.
Beavercreek, OH 45434
Halter Financial Group 170,000<F1> 0 3
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 legal 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 2 - 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 losses. 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' equ 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 yea 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 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 $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 OneT Enterprise
Module For Windows ECT 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.
NOTE 3 - SHAREHOLDERS' EQUITY AND SUBSEQUENT EVENT (CONTINUED)
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 carryforward. 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' 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 oth 65,612 -
note payable
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 OneT Enterprise
MatrixT For Windows ECT 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.
NOTE 5 - SHAREHOLDERS' EQUITY AND SUBSEQUENT EVENT (CONTINUED)
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 COS 204,542 204,542
PROPERTY AND EQUIPMENT
Office equipment 2,486 147,838 150,324
Less accumulated depreci 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 63,417
Accrued expenses 19,108 19,108
Deferred income taxes 905 905
Deferred revenue 168,724 168,724
Total current liabilitie 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 capit 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 (defic -739,192 96,613 -642,579
Total shareholders' equi 229,666 23,613 300,000 553,279
Total liabilities and sh 229,666 391,661 300,000 921,327
<FN>
<F1>
Issuance of 4,359,000 shares pursuant to merger agreement.
<F2>
Cancellation of all issued and outstanding Edict Systems shares prior to merger.
<F3>
Issuance of 400,000 shares of stock to Halter Financial Group in exchange for perfo
<F4>
Cash from Halter Financial Group and Art Howard Beroff due on or before July 5, 200
<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 licens 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 administrati 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 1,273,867
LOSS BEFORE TAXES -388,084 -49,509 -437,593
Income tax benefits -2,817 -2,817
NET LOSS -388,084 -46,692 -434,776
Retained (deficit) earni -351,108 143,305 -207,803
RETAINED (DEFICIT) EARNINGS,
END OF YEAR -739,192 96,613 -642,579
Average Shares Outstandi 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 11,844
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 COS 183,339 183,339
PROPERTY AND EQUIPMENT
Office equipment 2,486 148,603 151,089
Less accumulated depreci 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 liabilitie 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 capit 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 (defic -752,707 15,110 -737,597
Total shareholders' equi 216,151 -57,890 300,000 458,261
Total liabilities and sh 216,151 379,702 300,000 895,853
<FN>
<F1>
Issuance of 4,359,000 shares pursuant to merger agreement.
<F2>
Cancellation of all issued and outstanding Edict Systems shares prior to merger.
<F3>
Issuance of 400,000 shares of stock to Halter Financial Group in exchange for perfo
<F4>
Cash from Halter Financial Group and Art Howard Beroff due on or before July 5, 200
</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 administrati 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) earni -739,192 96,613 -642,579
RETAINED (DEFICIT) EARNINGS,
END OF QUARTER -752,707 15,110 -737,597
Average Shares Outstandi 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 ParentBalance
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 Parent'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) EDICI 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 7.4 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, Womsely, and Lombard
33 West First Street
Dayton, Ohio 45402-1289
Telecopy: (937) 223-6705
Attention: Barbara Sager, Esq.
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 thereon 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
3824
1
1
1
F-
2
1
F-25
301
1
11
31
11
11
131
11
71
11
11
