EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
by and among
XXXXXX MEDIA INC.
BUSINESS TRANSLATION SERVICES INC.
and
DCI TELECOMMUNICATIONS INC.
November 12, 2001
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 12, 2001 (the "Closing Date"), is by and among Xxxxxx Media Inc, a New
York corporation and a wholly owned subsidiary of Parent (the "Company"),
Business Translation Services Inc, a Nevada corporation and a majority-owned
subsidiary of Parent ("Merger Sub") and DCI Telecommunications Inc, a Colorado
corporation ("Parent").
RECITALS
WHEREAS, the respective Boards of Directors of each of Parent, Merger
Sub and the Company have approved this Agreement and the merger of Company with
and into the Merger Sub (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I.
The Merger; Closing; Effective Time; Designation
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1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the effective time (as defined in Section 1.3), Company
shall be merged with and into the Merger Sub and the separate corporate
existence of Company shall thereupon cease. The Merger Sub shall be the
surviving corporation in the Merger (sometimes referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Nevada, and the separate corporate existence of the Merger Sub with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. At the Effective Time, all the rights, privileges, immunities,
powers and franchises of the Company shall vest in the Surviving Corporation and
all of the debts, obligations and liabilities of the Company shall become debts,
obligations and liabilities of the Surviving Corporation.
1.2 Closing. The closing of the Merger and the other transactions
contemplated hereby (the "Closing") shall take place simultaneously with the
execution and delivery of this Agreement, at such place as the parties may
agree.
1.3 Effective Time. On the Closing Date, the parties will cause the
Certificate of Merger (the "Certificate of Merger") to be executed, acknowledged
and filed with the Secretary of Sate of Nevada. The Merger shall become
effective at the time when the Certificate of Merger has been duly filed with
the Secretary of State of Nevada or such other time as shall be agreed upon by
the parties and set forth in the Certificate of Merger in accordance with
applicable law (the "Effective Time").
ARTICLE II.
Certificate of Incorporation and Bylaws of the Surviving Corporation
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2.1 The Certificate of Incorporation. The certificate of incorporation
of the Merger Sub as in effect immediately prior to the Effective Time shall be
the certificate of incorporation of the Surviving Corporation (the "Charter"),
until thereafter amended as provided therein or by applicable law.
2.2 The Bylaws. The bylaws of the Merger Sub in effect at the Effective
Time shall be the bylaws of the Surviving Corporation (the "Bylaws"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III.
Officers, Directors and Management
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3.1 Directors of Surviving Corporation. The directors of the Company at
the Effective Time shall, from and after the Effective Time, be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the Bylaws.
3.2 Officers of Surviving Corporation. The officers of the Company at
the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the Bylaws.
ARTICLE IV.
Effect of the Merger on Capital Stock; Exchange of Certificates
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4.1 Effect on Capital Stock. At the Effective Time, the Merger shall
have the following effects on the capital stock of the Company and Merger Sub,
without any action on the part of the holder of any capital stock of the Company
or Merger Sub:
(a) Cancellation of Company Shares. At the Effective Time, each
share of common stock, no par value per share, of the Company (each a "Company
Share" and together the "Company Shares") issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, no longer be outstanding, shall be
canceled and retired without payment of any consideration therefore and shall
cease to exist. After the Effective Time, there shall be no transfers on the
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stock transfer books of the Company of the Company Shares that were outstanding
immediately prior to the Effective Time.
(b) Shares of Merger Sub. At the Effective Time, each share of common stock, par
value $.001 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be not be converted but shall remain outstanding as one
share of the Surviving Corporation.
ARTICLE V.
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants to Parent and Merger Sub
that:
5.1 Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership or operation of its properties or
conduct of its business requires such qualification, except where the failure to
be so qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect (as defined
below) on it. The Company has made available to Parent and Merger Sub a complete
and correct copy of its certificate of incorporation and bylaws, each as amended
to date. Such certificates of incorporation and bylaws are in full force and
effect.
The term "Subsidiary" means any entity, whether incorporated or
unincorporated, of which at least a majority of the securities or ownership
interests having, by their terms, ordinary voting power to elect at least a
majority of the Board of Directors or other persons performing similar functions
is directly or indirectly owned by such party.
The term "Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the financial condition, assets and liabilities
(taken together), business or prospects of such Person and its Subsidiaries,
taken as a whole; provided, however, that Material Adverse Effect shall exclude
any effect resulting from or related to changes or developments involving (1) a
prospective change arising out of any proposed or adopted legislation, or any
other proposal or enactment by any governmental, regulatory or administrative
authority, (2) general conditions applicable to the global economy, including
changes in interest rates, (3) conditions or effects resulting from the
announcement of the existence or terms of this Agreement or (4) conditions
affecting the global film distribution industry, in each case taken as a whole.
5.2 Capital Structure. The authorized capital stock of the Company
consists of 100 Company Shares, of which 100 Company Shares were issued and
outstanding and no Company Shares were held in treasury as of the close of
business on the Closing Date. All of the outstanding Company Shares have been
duly authorized and are validly issued, fully paid and nonassessable. Other than
Company Shares subject to issuance as set forth below,
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the Company has no Company Shares or other shares of capital stock reserved for
or otherwise subject to issuance. As of the Closing Date, there were no Company
Shares that the Company was obligated to issue pursuant to the Company's stock
plans (collectively the "Company Stock Plans"). Each of the outstanding shares
of capital stock or other securities of each of the Company's "Significant
Subsidiaries" (as defined in Rule 1-02.(w) of Regulation S-X promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including any Subsidiaries that if aggregated would together constitute a
Significant Subsidiary) is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or a direct or indirect wholly-owned
Subsidiary of the Company, free and clear of any lien, pledge, security
interest, claim or other encumbrance. Except as set forth above, there are no
preemptive or other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of the Company or any of its Significant Subsidiaries or any
securities or obligations convertible or exchangeable into or exercisable for,
or giving any Person a right to subscribe for or acquire, any securities of the
Company or any of its Significant Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. The Company does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the shareholders of the Company on any
matter. No Company Shares are held by a Subsidiary of the Company.
5.3 Corporate Authority and Approval. The Company has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
to consummate the Merger. This Agreement has been duly executed and delivered by
the Company and is a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception"). The Board of
Directors of the Company and the holders of the Company Shares, both as required
by applicable law, have approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
5.4 Government Filings; No Violations.
(a) No notices, reports or other filings are required to be made by
the Company with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any governmental or
regulatory authority, court, agency, commission, body or other governmental
entity ("Governmental Entity"), in connection with the execution and delivery of
this Agreement by the Company and the consummation by the Company of the Merger
and the other transactions contemplated by this Agreement, except those that the
failure to make or obtain are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the Company or prevent, materially
delay or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
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(b) The execution, delivery and performance of this Agreement by
the Company do not, and the consummation by the Company of the Merger and the
other transactions contemplated by this Agreement will not, constitute or result
in (A) a breach or violation of, or a default under, the certificate of
incorporation or bylaws of the Company or the comparable governing instruments
of any of its Subsidiaries or any entity in which it has an equity interest of
20% or more (collectively, with Subsidiaries, "Significant Investees"), (B) a
breach or violation of, or a default under, the acceleration of any obligations
or the creation of a lien, pledge, security interest or other encumbrance on the
assets of the Company or the assets of any of its Significant Investees (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") binding upon it or any of its Significant Investees or any Law or
governmental or non-governmental permit or license to which it or any of its
Significant Investees is subject or (C) any change in the rights or obligations
of any party under any Contracts to which the Company or its Significant
Investees are a party, except, in the case of clauses (B) or (C) above, for any
breach, violation, default, acceleration, creation or change that, individually
or in the aggregate, is not reasonably likely to have a Material Adverse Effect
on the Company or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement. There
are no Contracts of the Company and its Significant Investees pursuant to which
consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement, other than those where the failure
to obtain such consents or waivers is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company or prevent or
materially impair its ability to consummate the transactions contemplated by
this Agreement.
5.5 Financial Statements. The Company has delivered to the Parent and
the Merger Sub true and correct copies of the following financial statements of
Company and its Significant Investees (the "Company Financial Statements"), all
as of March 31, 2001 (the "Audit Date"): (i) a balance sheet, (ii) a statement
of income and (iii) a statement of cash flows. The Company Financial Statements
fairly and accurately represent the consolidated financial position of the
Company and its Subsidiaries as of the Audit Date and the consolidated results
of operations, retained earnings and cash flows, as the case may be, of the
Company and its Significant Investees for the periods set forth therein
(subject, in the case of unaudited statements, to notes and normal year-end
audit adjustments that will not be material in amount or effect), in each case
in accordance with U.S. generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein.
5.6 Absence of Certain Changes. Since the Audit Date, the Company and
its Subsidiaries have conducted their respective businesses only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such businesses and there has not been: (i) any change in
the financial condition, liabilities and assets (taken together), prospects,
business or results of operations of it and its Subsidiaries, except those
changes that are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it; (ii) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by it or any of its Subsidiaries, whether or not covered by insurance,
which damage, destruction or loss is reasonably likely,
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individually or in the aggregate, to have a Material Adverse Effect on it; (iii)
any declaration, setting aside or payment of any dividend or other distribution
in respect of its capital stock; or (iv) any change by it in accounting
principles, practices or methods, except as required by GAAP. Since the Audit
Date, there has not been any increase in the salary, wage, bonus, grants,
awards, benefits or other compensation payable or that could become payable by
the Company or any of its Subsidiaries to directors, officers or key employees
or any amendment of any of its Compensation and Benefit Plans (as defined in
Section 5.8(a)) other than increases or amendments in the normal and usual
course of its business (which may include normal periodic performance reviews
and related compensation and benefit increases and the provision of new
individual compensation and benefits for promoted or newly hired officers and
employees on terms consistent with past practice).
5.7 Litigation and Liabilities. Except as set forth in Schedule 5.7,
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the actual knowledge of
its executive officers, threatened against the Company or any of its Affiliates
(as defined in Rule 12b-2 under the Exchange Act) or (ii) obligations or
liabilities, whether or not accrued, contingent or otherwise and whether or not
required to be disclosed, including those relating to matters involving any
Environmental Law (as defined in Section 5.10), or any other facts or
circumstances, in either such case, of which its executive officers have actual
knowledge and that are reasonably likely to result in any claims against or
obligations or liabilities of the Company or any of its Affiliates, except for
those that are not, individually or in the aggregate, reasonably likely to have
a Material Adverse Effect on the Company or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement.
5.8 Employee Benefits.
(a) Except as set forth in Schedule 5.8, none of the Company nor
any ERISA Affiliate (as defined below) maintains, is a party to, participates in
or has any liability or contingent liability with respect to any employee
benefit plan (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), or any bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, consulting, termination, severance, compensation, medical, health or
fringe benefit plan, or other plan, program, agreement, policy or arrangement
for any agents, consultants, employees, directors, former employees or former
directors of the Company and or any ERISA Affiliate which does not constitute an
employee benefit plan (which employee benefit plans and other plans, programs,
agreements policies and arrangements are collectively referred to as the
"Compensation and Benefit Plans"). A true and correct copy of each Compensation
and Benefit Plan and, to the extent applicable, copies of the most recent annual
report, actuarial report, accountant's opinion of the plan's financial
statements, summary plan description and Internal Revenue Service determination
letter with respect to any Compensation and Benefit Plans and any trust
agreements or insurance contracts forming a part of such Compensation and
Benefit Plans has been made available by the Company to Parent prior to the date
of this Agreement. In the case of any Compensation and Benefit Plan which is not
in written form, the Company has supplied to Parent an accurate description of
such Compensation and Benefit Plan as in effect on the date of this
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Agreement. For purposes of this Agreement, the term "ERISA Affiliate" means any
corporation or trade or business which, together with the Company, is a member
of a controlled group of Persons or a group of trades or businesses under common
control with the Company within the meaning of Sections 414(b), (c), (m) or (o)
of the Code.
(b) All Compensation and Benefit Plans are in substantial
compliance with all requirements of applicable law, including the Code and
ERISA, and no event has occurred which will or could cause any such Compensation
and Benefit Plan to fail to comply with such requirements and no notice has been
issued by any governmental authority questioning or challenging such compliance.
There have been no acts or omissions by the Company or any ERISA Affiliate which
have given rise to or may give rise to fines, penalties, taxes or related
charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code for
which the Company or ERISA Affiliate may be liable. Each of the Compensation and
Benefit Plans that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA, other than a multiemployer plan (as defined in Section
3(37) of ERISA (each a "Pension Plan"), and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") which covers all changes in law
for which the remedial amendment period (within the meaning of Section 401(b) of
the Code and applicable regulations) has expired and none of the Company nor any
of its ERISA Affiliates is aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to the knowledge of the Company's executive officers, threatened material
litigation relating to its Compensation and Benefit Plans (other than routine
claims for benefits). Neither the Company nor any of the ERISA Affiliates has
engaged in a transaction with respect to any of the Compensation and Benefit
Plans that, assuming the taxable period of such transaction expired as of the
date of this Agreement, would subject it or any of the ERISA Affiliates to a
material tax or penalty imposed by either Section 4975 of the Code or Section
502 of ERISA.
(c) As of the date of this Agreement, no liability under Title IV
of ERISA (other than the payment of prospective premium amounts to the Pension
Benefit Guaranty Corporation in the normal course) has been or is expected to be
incurred by the Company or any ERISA Affiliate with respect to any Compensation
and Benefit Plan. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plans within the 12-month
period ending on the date of this Agreement or will be required to be filed in
connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms of any of
the Compensation and Benefit Plans as of the date of this Agreement have been
timely made or have been reflected on the Company Financial Statements. None of
the Pension Plans has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither the Company nor any ERISA Affiliate has provided, or is required to
provide, security pursuant to Section 401(a)(29) of the Code, Title IV or ERISA.
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(e) Under each of the Pension Plans as of the last day of the most
recent plan year ended prior to the date of this Agreement, the actuarially
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in such Pension Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan, and
there has been no material change in the financial condition of such Pension
Plan since the last day of the most recent plan year.
(f) None of the Company nor any ERISA Affiliate have any
obligations for post-termination health and life benefits under any of the
Compensation and Benefit Plans, except as set forth in the Company Financial
Statements or as required by applicable law.
(g) The consummation of the Merger and the other transactions
contemplated by this Agreement will not (x) entitle any employees or directors
of the Company or any employees of any of the Company's ERISA Affiliates to
severance pay, directly or indirectly, upon termination of employment or
otherwise, (y) accelerate the time of payment or vesting or trigger any payment
of compensation or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Compensation and Benefit Plans
or (z) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans.
(h) None of the Compensation and Benefit Plans is a multiemployer
plan and none of the Company or any of the ERISA Affiliates have contributed or
been obligated to contribute to a multiemployer plan at any time since December
31, 1997.
5.9 Compliance with Laws. Except as set forth in Schedule 5.9, the
businesses of each of Company and its Subsidiaries have not been, and are not
being, conducted in violation of any law, statute, ordinance, regulation,
judgment, order, decree, injunction, arbitration award, license, authorization,
opinion, agency requirement or permit of any Governmental Entity or common law
(collectively, "Laws"), except for violations or possible violations that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement.
Except as set forth in Schedule 5.9, no investigation or review by any
Governmental Entity with respect to it or any of its Subsidiaries is pending or,
to the actual knowledge of its executive officers, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, except for those
the outcome of which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement. To the actual knowledge of its executive officers, no material
change is required in the Company's, or any of its Subsidiaries', processes,
properties or procedures in connection with any such Laws, and it has not
received any notice or communication of any material noncompliance with any such
Laws that has not been cured as of the date of this Agreement, except for such
changes and noncompliance that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it or prevent, materially
delay or materially impair its ability to consummate the transactions
contemplated by this Agreement. Each of the
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Company and its Subsidiaries has all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
(collectively, "Permits"), necessary to conduct their business as presently
conducted, except for those the absence of which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement.
5.10 Environmental Matters. Except as disclosed in Schedule 5.10, and
except for such matters that, alone or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on the Company: (i) each of it and its
Subsidiaries has complied with all applicable Environmental Laws; (ii) the
properties currently owned or operated by it or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances; (iii) the properties formerly
owned or operated by it or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by it or any of
its Subsidiaries; (iv) neither it nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither it nor any Subsidiary has been associated with any
release or threat of release of any Hazardous Substance; (vi) neither it nor any
Subsidiary has received any notice, demand, letter, claim or request for
information alleging that it or any of its Subsidiaries may be in violation of
or liable under any Environmental Law; (vii) neither it nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving it or any of its Subsidiaries that could
reasonably be expected to result in any claims, liability, investigations, costs
or restrictions on the ownership, use or transfer of any of its properties
pursuant to any Environmental Law.
The term "Environmental Law" means any Law relating to: (A) the
protection, investigation or restoration of the environment, health, safety, or
natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance; or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property or notifications to government agencies or the public in connection
with any Hazardous Substance.
The term "Hazardous Substance" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, electromagnetic fields, microwave
transmission, radioactive materials or radon.
5.11 Accounting and Tax Matters. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries has taken or agreed to take any
action, nor do its executive officers have any actual knowledge of any fact or
circumstance, that would prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
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5.12 Taxes. The Company and each of its Subsidiaries have prepared in
good faith and duly and timely filed (taking into account any extension of time
within which to file) all material Tax Returns required to be filed by any of
them at or before the Effective Time and all such filed Tax Returns are complete
and accurate in all material respects. The Company and each of its Subsidiaries
as of the Effective Time (x) will have paid all Taxes that they are required to
pay prior to the Effective Time, and (y) will have withheld all federal, state
and local income taxes and other Taxes required to be withheld from amounts
owing to any employee, creditor or third party, except for such amounts that,
alone or in the aggregate, are not reasonably likely to have a Material Adverse
Effect on it. As of the date of this Agreement, there are not pending or
threatened in writing, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters. There are not, to the actual
knowledge of its executive officers, any unresolved questions, claims or
outstanding proposed or assessed deficiencies concerning the Company or any of
its Subsidiaries' Tax liability that are reasonably likely to have a Material
Adverse Effect on it. Neither the Company nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes in excess of the
amounts accrued in respect thereof that are reflected in the Company Financial
Statements, except such excess liabilities as are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it. Neither
the Company nor any of its Subsidiaries has executed any waiver of any statute
of limitations on, or extended the period for the assessment or collection of,
any Tax. No payments to be made to any of the officers and employees of it or
its Subsidiaries will, as a result of consummation of the Merger, be subject to
the deduction limitations under Section 280G of the Code.
The term "Tax" (including, with correlative meaning, the terms "Taxes,"
and "Taxable") includes all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions. The term "Tax Return"
includes all federal, state, local and foreign returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax authority relating to Taxes.
5.13 Labor Matters. Neither the Company nor any of its Subsidiaries is
the subject of any material proceeding asserting that it or any of its
Subsidiaries has committed an unfair labor practice or is seeking to compel it
to bargain with any labor union or labor organization nor is there pending or,
to the knowledge of its executive officers, threatened, nor has there been for
the past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving it or any of its Subsidiaries, except in each
case as is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it.
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ARTICLE VI.
Representations and Warranties of the Parent and the Merger Sub
---------------------------------------------------------------
The Parent, on behalf of itself and Merger Sub, hereby represents and
warrants to the Company that:
6.1 Organization, Good Standing and Qualification. Each of the Parent
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership or operation of its properties or
conduct of its business requires such qualification, except where the failure to
be so qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect on it. The
Parent has made available to the Company a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to date. Such
certificates of incorporation and bylaws are in full force and effect.
6.2 Capital Structure.
(a) The authorized capital stock of Merger Sub consists of
20,000,000 shares of Common Stock, par value $.001 per share (the "Merger Sub
Common Shares"), of which 12,200,750 shares were issued and outstanding as of
the close of business on the Closing Date, and 5,000,000 shares of Preferred
Stock, par value $.001 per share (the "Merger Sub Preferred Shares"), none of
which were issued or outstanding as of the close of business on the Closing
Date. All of the outstanding shares of Merger Sub Common Stock have been duly
authorized and are validly issued, fully paid and nonassessable. Except as set
forth in Schedule 6.2, there are (i) no other shares of capital stock or other
voting securities of Merger Sub, (ii) no securities of Merger Sub convertible
into or exchangeable for shares of capital stock or other voting securities of
Merger Sub and (iii) no options or other rights to acquire from Merger Sub, and
no obligations of Merger Sub to issue, any capital stock, other voting
securities or securities convertible into or exchangeable for capital stock or
other voting securities of Merger Sub. Merger Sub has not conducted any material
business operations prior to the date of this Agreement and has no, and prior to
the Effective Time will have no, material assets, liabilities or obligations of
any nature other than those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions contemplated by this
Agreement.
6.3 Corporate Authority and Approval. Parent and Merger Sub each has
all requisite corporate power and authority and each has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement. This Agreement has been duly executed and delivered by Parent
and Merger Sub and is a valid and binding agreement of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms,
subject to the Bankruptcy and Equity Exception. The Parent Merger Shares, when
issued pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
11
6.4 Government Filings; No Violations.
(a) No notices, reports or other filings are required to be made by
the Parent with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Parent from, any Governmental
Entity, in connection with the execution and delivery of this Agreement by it
and the consummation by it of the Merger and the other transactions contemplated
by this Agreement, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Parent or prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement by
the Parent do not, and the consummation by it of the Merger and the other
transactions contemplated by this Agreement will not, constitute or result in
(A) a breach or violation of, or a default under, its certificate of
incorporation or bylaws or the comparable governing instruments of any of its
Significant Investees, (B) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on its assets or the assets of any of its
Significant Investees (with or without notice, lapse of time or both) pursuant
to, any Contract binding upon it or any of its Significant Investees or any Law
or governmental or non-governmental permit or license to which it or any of its
Significant Investees is subject or (C) any change in the rights or obligations
of any party under any Contracts to which it or its Significant Investees are a
party, except, in the case of clauses (B) or (C) above, for any breach,
violation, default, acceleration, creation or change that, individually or in
the aggregate, is not reasonably likely to have a Material Adverse Effect on it
or prevent, materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement. Schedule 6.4 sets forth a correct
and complete list of Contracts of the Parent and its Significant Investees
pursuant to which consents or waivers are or may be required prior to
consummation of the transactions contemplated by this Agreement other than those
where the failure to obtain such consents or waivers is not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on the Parent
or prevent or materially impair its ability to consummate the transactions
contemplated by this Agreement.
6.5 Reports; Financial Statements. The Parent has made available to the
Company each registration statement, report, proxy statement or information
statement prepared by it since March 31, 1999, including its Annual Report on
Form 10-K for the years ended March 31, 1999, March 31, 2000 and March 31, 2001
in the form (including exhibits, annexes and any amendments thereto) filed with
the Securities and Exchange Commission (the "SEC") (collectively, including any
such reports filed subsequent to the date of this Agreement, its "Reports").
Since March 31, 1999, the Parent has made all filings required to be made by the
Securities Act of 1933, as amended, and the Exchange Act. As of their respective
dates, the Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Reports (including the related notes and
schedules) fairly presents the consolidated financial position of the Parent and
its Subsidiaries as of its date and each of the consolidated statements of
12
income and of cash flows included in or incorporated by reference into the
Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of the Parent and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
6.6 Absence of Certain Changes. Except as disclosed in its Reports
filed prior to the date of this Agreement or as expressly contemplated by this
Agreement, since March 31, 2001 (the "Audit Date"), the Parent and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction other than according to, the ordinary and
usual course of such businesses and there has not been: (i) any change in the
financial condition, liabilities and assets (taken together), prospects,
business or results of operations of the Parent and its Subsidiaries, except
those changes that are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on it; (ii) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by the Parent or any of its Subsidiaries, whether or not covered by
insurance, which damage, destruction or loss is reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on it; (iii) any
declaration, setting aside or payment of any dividend or other distribution in
respect of its capital stock, except publicly announced regular quarterly cash
dividends on its common stock and dividends in capital stock of Parent; or (iv)
any change by it in accounting principles, practices or methods, except as
required by GAAP.
6.7 Accounting and Tax Matters. As of the date of this Agreement,
neither the Parent nor any of its Subsidiaries has taken or agreed to take any
action, nor do its executive officers have any actual knowledge of any fact or
circumstance, that would prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
ARTICLE VII.
Covenants
---------
7.1 Publicity. The initial press release with respect to the Merger
shall be a joint press release. Thereafter, the Merger Sub and Parent shall
consult with each other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other transactions
contemplated by this Agreement and prior to making any filings with any third
party and/or any Governmental Entity (including any securities exchange) with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of any securities exchange.
7.2 Benefit Obligations. Parent shall, and shall cause the Surviving
Corporation to, honor, pursuant to their terms, all employee benefit obligations
existing at the Closing Date to current and former employees under the Company
Compensation and Benefit Plans.
13
7.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the Merger and the other transactions contemplated by this
Agreement shall be paid by the party incurring such expense.
7.4 Further Assurances. The Parent, the Merger Sub and the Company
shall execute and deliver, or cause to be executed and delivered, such further
instruments and documents and take all such action, in each case as may be
necessary or proper in the reasonable judgment of any of the parties to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
ARTICLE VIII.
Miscellaneous and General
-------------------------
8.1 Survival. Article II, Article III, Article IV, Article VII and this
Article VIII (other than Section 8.4 (Counterparts)) shall survive the
consummation of the Merger. All other representations, warranties, covenants and
agreements in this Agreement shall not survive the consummation of the Merger.
8.2 Modification or Amendment. Subject to the provisions of the
applicable law, the parties to this Agreement may modify or amend this
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties.
8.3 Waiver. No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. Except
as otherwise provided in this Agreement, the rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by Law.
8.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
8.5 Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all
respects shall be interpreted, construed and governed by and in accordance with
Nevada law without regard to the conflict of law principles thereof. The parties
hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Nevada and of the United States of
America located in Reno, Nevada (the "Nevada Courts") for any litigation arising
out of or relating to this Agreement and the transactions contemplated by this
Agreement (and agree not to commence any litigation relating thereto except in
such Nevada Courts), waive any objection to the laying of venue of any such
litigation in the Nevada Courts and agree not to plead or claim in any Nevada
Court that such litigation brought therein has been brought in an inconvenient
forum.
14
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.5.
8.6 Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
three business days following sending by registered or certified mail, postage
prepaid, (ii) when sent if sent by facsimile, provided that receipt of the fax
is promptly confirmed by telephone, (iii) when delivered, if delivered
personally to the intended recipient, and (iv) one business day later, if sent
by overnight delivery via a national courier service, and in each case,
addressed to a party at the following address for such party:
If to Parent:
DCI Telecommunications Inc.
000 Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Chief Executive Officer and General
Counsel
Fax: (000) 000 0000
If to Merger Sub:
Business Translation Services Inc.
0000 Xxxx Xxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Fax: (952) ___-____
If to the Company:
Xxxxxx Media Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX
Attention: Chief Executive Officer and General
Counsel
Fax: (000) 000 0000
15
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
8.7 Entire Agreement. This Agreement (including any schedules to this
Agreement) constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties, with respect to the subject matter of this Agreement.
EACH PARTY TO THIS AGREEMENT AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT AND MERGER SUB NOR THE
COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS
ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR
OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
8.8 No Third Party Beneficiaries. Except as provided in Section 7.2
(Benefits), this Agreement is not intended to confer upon any Person other than
the parties to this Agreement any rights or remedies under this Agreement.
8.9 Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
8.10 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions of this Agreement.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
16
8.11 Interpretation. The table of contents and headings in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement. Where a reference in this Agreement is made to a
schedule, such reference shall be to a schedule to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
8.12 Captions. The Article, Section and paragraph captions in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
8.13 Assignment. This Agreement shall not be assignable by operation of
law or otherwise. Any assignment in contravention of the preceding sentence
shall be null and void.
* * * * *
17
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been duly
executed and delivered by the duly authorized officers of the parties to this
Agreement and Plan of Merger as of the date first written above.
DCI Telecommunications Inc.
By:
-------------------------------
Name:
Title:
Xxxxxx Media Inc.
By:
-------------------------------
Name:
Title:
Business Translation Services Inc.
By:
-------------------------------
Name:
Title:
SCHEDULES
to
AGREEMENT AND PLAN OF MERGER
Representations and Warranties of the Company
---------------------------------------------
Schedule 5.7 Litigation and Liabilities
No exceptions
Schedule 5.8 Employee Benefits
No exceptions
Schedule 5.9 Compliance with Laws
No exceptions
Schedule 5.10 Environmental Matters
No exceptions
Representations and Warranties of the Parent and the Merger Sub
---------------------------------------------------------------
Schedule 6.2 Capital Structure
The Merger Sub has the following obligations to issue Common Stock of
Merger Sub:
(a) Convertible Promissory Note in original principal amount of
$300,000, payable to XxxxxxxXxxx.xxx, Inc.
(b) Common Stock Purchase Warrant for 1,200,000 shares at an
exercise price of $0.125 per share, issued to XxxxxxxXxxx.xxx,
Inc.
(c) Common Stock Purchase Warrant for 1,100,000 shares at an
exercise price of $0.025 per share, issued to Equity
Securities Investments, Inc.
(d) Commitment to issue 700,000 shares of Common Stock to Equity
Securities Investments, Inc.
Schedule 6.4 Government Filings; No Violations
Neither Parent nor any Significant Investee of Parent is a party to any
Contract pursuant to which any consent or waiver is or may be required for the
consummation of the transactions contemplated by the Agreement and Plan of
Merger, other than those where the failure to oibtain such consents or waivers
is not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Parent or prevent or materially impair its ability to
consummate the transactions contemplated by the Agreement and Plan of Merger.
