Exhibit 10.1
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AGREEMENT
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Agreement (the "Agreement") made this 28th day of February, 2005 by and
among Defense Technology Systems, Inc., a Delaware corporation with offices at
000X Xxxxxx Xxxxxxxxx, Xxxxxxxxx, XX 00000 ("DFTS"), New Market Technology,
Inc., a Nevada corporation with offices at 00000 Xxxxxxxx Xxxxx, Xxxxxx, XX
00000 ("NMKT") and Digital Computer Integration Corporation, a Texas corporation
with offices at 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxx, XX 00000 ("DCI")
WHEREAS, NMKT presently owns or has the right to acquire a 51% ownership
interest in the common stock of DCI; and
WHEREAS, NMKT wishes to transfer and exchange its stock in DCI to DFTS
solely in exchange for certain preferred stock of DFTS, it being intended that
the said transaction will qualify under ss.368 of the Internal Revenue Code of
1986, as amended, as a tax free exchange of stock; and
WHEREAS, in order for the proposed transaction to proceed, DFTS requires
that both NMKT and DCI make certain representations and warranties concerning
the proposed transaction which both NMKT and DCI are willing to do.
NOW, THEREFORE, in consideration of the provisions and covenants herein
contained, the parties hereto agree as follows.
1 Tax Free Exchange
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..1 NMKT and DCI hereby represent that NMKT presently owns or has the right to
acquire on or before the Closing Date (as hereinafter defined) 2,393,878 shares
of the common voting stock of DCI representing 51% of the total issued and
outstanding common stock of DCI ("DCI Stock Interest"). NMKT and DCI further
represent that there is only one class of stock that DCI has the authority to
issue that being common stock with each share of stock entitled to one vote.
..2 Creation by DFTS of Class C and D Preferred Stock. DFTS hereby agrees that
on or before the Closing Date it shall cause to be created $1.50 Class C
convertible preferred stock and $1.50 Class D preferred stock, having such
rights, preferences and designations as set forth in the Certificates of
Designation attached hereto as Exhibits A and B, respectively and which are made
a part of this Agreement. The parties recognize that although the $1.50 Class C
preferred stock to be issued by DFTS will be convertible into common stock of
DFTS, that at present DFTS does not have a sufficient number of authorized but
unissued shares of common stock to permit this conversion. DFTS hereby agrees,
in good faith, to take appropriate steps to attempt to cause its corporate
charter to be amended to authorize an increase in its common stock from
40,000,000shares, .001 par value to 200,000,000 shares, .001 par value and to
authorize an increase in its preferred stock from 5,000,000 shares, .01 par
value to 20,000,000, .01 par value. However, the inability of DFTS to accomplish
this amendment will not affect the validity of this Agreement.
..3 Exchange of Stock. NMKT hereby agrees to transfer and exchange its DCI
Stock Interest to DFTS solely in exchange for the shares of newly created
classes of DFTS's preferred stock as follows: (a) 600,000 shares of $1.50 Class
C convertible preferred and (b) 3,400,000 shares of $1.50 Class D preferred.
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..4 Tax Free Status. DFTS and NMKT agree that it is their mutual intention
for the exchange of stock set forth in Section 1.3 above to be accomplished, if
possible, in such manner as to qualify under ss.368 of the Internal Revenue Code
of 1986, as amended, as a tax free exchange. However, the failure or inability
of either or both DFTS and/or NMKT to have the transaction qualify as a tax free
exchange will not affect on the validity of this Agreement. DFTS and NMKT agree
to cooperate with each other and provide such documentation as may be
appropriate to claim the desired tax status.
2 Further Agreements of NMKT.
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..1 Investment Strategy. In order to strengthen DFTS and improve the value of
the stock investment being made by NMKT, the latter has agreed, on a best
efforts basis, to attempt to secure additional equity financing for DFTS in an
approximate amount of Five Million ($5,000,000) Dollars. The terms of such
equity financing will be a matter of negotiation between DFTS and prospective
investors. The parties agree that the inability of NMKT to secure such financing
will not affect the validity of this Agreement. In addition, NMKT, on a non
compensatory basis, will make available its president, Xxxxxx Xxxxxx, to explain
to the investment community and prospective investor, the benefits to be derived
by an investment in DFTS.
..2 Addition to DFTS' Board of Directors. NMKT will cause its president, Xxxxxx
Xxxxxx, to accept a position on the Board of Directors of DFTS to serve for a
minimum period of two (2) years and NMKT agrees, subject to the provision of
Section 2.3 below, to vote all of the preferred stock it will receive from DFTS
under this Agreement, to elect and retain Xx. Xxxxxx as a director of DFTS for
such minimum period.
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..3 Irrevocable Proxy. NMKT hereby agrees and this provision shall be self
executing, that upon receipt by NMKT of the preferred stock to be issued by DFTS
under this Agreement, it has granted to Messrs. Xxxxxx XxXxxx, Xxxxxx Xxxxx and
Xxxxxx Xxxxxx, acting by majority vote, an irrevocable proxy coupled with an
interest to vote all of the DFTS preferred stock that will be issued to NMKT
under this Agreement. In the event that either Xx. XxXxxx or Xx. Xxxxx dies or
is unable to act or declines to act, the remaining proxy holders may act, by
unanimous vote if there are two proxy holders or by a single vote if there is
only one proxy holder. It is understood that upon the death of Xx. Xxxxxx or
upon his inability or declination to act, NMKT may appoint a successor proxy
holder for Xx. Xxxxxx. Furthermore, if any one of the proxy holders is no longer
an officer, director or employee of DFTS or NMKT, that person may no longer be
entitled to be a proxy holder and the remaining proxy holders may vote.
Notwithstanding the foregoing, if Xx. Xxxxxx ceases to be an officer, director
or employee of NMKT, that company may appoint a successor proxy holder for Xx.
Xxxxxx. Said proxy may not be cancelled or rescinded by NMKT and shall remain
fully effective until the earlier of (a) three (3) years from the issuance of
the said preferred stock; (b) upon a permitted conversion, if any, of the
preferred stock into common stock; or (c) upon a permitted redemption by DFTS of
the preferred stock. If there is only a partial conversion or redemption of the
said preferred stock, the balance of the preferred stock not so converted or
redeemed shall remain subject to the said irrevocable proxy. At the Closing
Date, NMKT will execute such forms as may be reasonably satisfactory to legal
counsel of DFTS to memorialize the said irrevocable proxy. However, even if said
forms are not so executed, the irrevocable proxy coupled with an interest shall
nevertheless remain in full force and effect by virtue of the terms of this
Agreement.
3 Representations, Warranties and Covenants of DFTS. DFTS represents,
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warrants and covenants to NMKT as follows:
..1 Organization of DFTS. DFTS is a corporation duly organized, valid
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate and other power, authority and legal right to own, lease
and operate the properties used in its business, to carry on its business as
presently conducted and to execute, deliver and perform its obligations under
this Agreement. DFTS is qualified or licensed as a foreign corporation in each
jurisdiction or place in which it owns or leases real property or in which it
transacts business and where the nature of the business transacted legally
requires such registration or qualification and the failure to be so registered
or qualified could have a material adverse effect on the business or financial
condition of DFTS.
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..2 Corporate Documents. DFTS has heretofore furnished to NMKT complete and
correct copies of DFTS' Certificate of Incorporation, as amended to date,
certified by the Secretary of State of Delaware and DFTS's By-Laws, as currently
in effect, certified by the Secretary of DFTS.
..3 Authorization of Agreement. The execution, delivery, and performance of
this Agreement by DFTS has been duly and validly authorized and approved by the
Board of Directors of DFTS. This Agreement constitutes the legal, valid and
binding obligations of DFTS, enforceable against DFTS in accordance with the
terms of this Agreement. DFTS has taken or will take all action required by law,
its Certificate of Incorporation and By-Laws to authorize the execution,
delivery and performance of this Agreement and all other documents and
certificates as may be required to consummate the transactions contemplated
hereby.
..4 No Breach of Statute or Contract; Governmental Authorization.
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..1 Neither the execution and delivery of this Agreement, nor compliance by
DFTS with the terms and provisions of the same, nor the consummation of the
transactions contemplated hereby , will:
..1 conflict with or result in a breach of or constitute or result in a
default under any of the terms, conditions or provisions of its Certificate of
Incorporation, By-Laws or other governing instruments or any judgment, order,
injunction, decree, regulation or ruling of any court or governmental authority,
domestic or foreign, to which it is subject or of any agreement, contract or
commitment to which it is a party or otherwise bound; or
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..2 give to others any rights of termination, cancellation or acceleration,
with respect to any of such agreements, contracts or commitments.
..2 DFTS will submit all notices, reports and other filing with the SEC in
connection with its execution and consummation of the transactions as
contemplated by this Agreement. However, DFTS is not required to obtain the
consent or approval of any governmental authority in connection therewith.
..5 Capital Stock of DFTS. The authorized capital stock of DFTS consists of
40,000,000 shares of common stock, par value $.001 per share of which
approximately 36,000,000 are issued and outstanding and 5,000,000 shares of
preferred stock, par value $.01 per share, of which -0- shares of Class A
preferred stock and 1192 shares of Class B stock are issued and outstanding. No
shares of such capital stock are held in the treasury of DFTS. DFTS does not own
stock in and does not control, directly or indirectly, any corporation,
association or business organization. DFTS is not a party to any joint venture
or partnership agreement. All shares of the Class C and Class D preferred stock
that will be issued to NMKT hereunder will, when issued, be duly authorized,
validly issued and outstanding, fully paid, and nonassessable, and no person
shall have any preemptive rights in respect thereof. Except as set forth in
Schedule 3.5 to this Agreement, there is outstanding no security, option,
warrant, right, call, subscription, agreement, commitment, or understanding,
fixed or contingent, that directly or indirectly (i) calls for the issuance of,
or the granting of rights to acquire, any common or preferred stock of DFTS, or
any securities convertible into any such stock of DFTS, (ii) obligates DFTS to
grant, offer or enter into any of the foregoing, or (iii) relates to the voting
or control of such capital stock, securities or rights.
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..6 Financial.
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..1 DFTS has furnished to NMKT true and complete copies of its latest 10K
Statement filed with the Securities and Exchange Commission ("SEC") for the
annual period ending June 30, 2004 and its latest 10Q Statement filed with the
SEC for the quarter-annual period ended December 31, 2004. Both of said
statements contain the latest financial statements of DFTS for the periods
indicated on said financial statements which have been prepared in conformity
with generally accepted accounting principles applied on a basis consistent with
prior periods ("DFTS Financial Statements"). The balance sheet of DFTS furnished
to NMKT present fairly the financial position of DFTS as at the date thereof,
and the related statements of income and retained earnings and changes in
financial position to DFTS furnished to NMKT present fairly the results of the
operations and changes in the financial positions for DFTS for the periods
indicated. For the purpose of this Agreement, all financial statements referred
to in this Section shall be deemed to include any notes to such financial
statements.
..2 Except as specifically reflected or disclosed on Schedule 3.6.2 or in DFTS'
10K and 10Q Statements, or in the DFTS Financial Statements, there are no claims
against or liabilities or obligations of DFTS which individually or in the
aggregate (i) might result in a material decrease in the stockholders' equity of
DFTS from that shown in the DFTS Financial Statement; or (ii) might result in a
material charge against the annual net income of DFTS; or (iii) might result in
or cause any material adverse change in the financial condition, results of
operations, business or prospects of DFTS.
..3 Since the date of the latest DFTS Financial Statements, except as disclosed
on Schedule 3.6.3, whether or not in the ordinary course of business, there has
not been, occurred or arisen:
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..1 any material adverse change in the financial condition, results of
operations, business or prospects of DFTS; or
..2 any damage or destruction in the nature of a casualty loss, whether covered
by insurance or not, adversely affecting any property or business of DFTS which
is material to the financial condition, results of operations, business or
prospects of DFTS; or
..3 any increase in excess of $10,000 in compensation payable or to become
payable to DFTS to its directors, officers, management personnel, consultants or
agents, whether in the form of fees, salaries, bonuses or any other form of
compensation, or any increase in benefits under any bonus, insurance, pension or
other benefit plan made for or with any of such persons and no deferred salary
or similar obligations; or
..4 any actual or threatened strike or other labor trouble or dispute which
materially and adversely affects, or might materially and adversely affect, the
financial conditions, results of operations, business or prospects of DFTS; or
..5 any direct or indirect redemption, purchase or other acquisition by DFTS of
any shares of DFTS' stock, or any declaration, setting aside or payment of any
dividend or other distribution of DFTS in respect to its stock.
..4 Since the date of the latest DFTS Financial Statements, except as indicated
on Schedule 3.6.4, DFTS has not engaged in any transaction material to the
financial condition, results of operations, business or prospects of DFTS not in
the ordinary course of its business.
..5 In all material respects, the books, records and accounts of DFTS
accurately and fairly reflect, in reasonable detail, the transactions and
dispositions of the assets of DFTS.
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..7 Inventories. In all material respects, (i) the inventories shown as of the
date of the latest DFTS Financial Statement and any inventories thereafter
acquired by DFTS prior to the Closing Date consist, and will consist, of items
of a quality and quantity usable or saleable in the normal course of DFTS'
business; (ii) the value of all items of obsolete materials and all items of
below standard quality has been written down to realizable market value or
adequate reserves have been provided for such materials; and (iii) the values at
which such inventories are carried reflect the normal inventory valuation policy
of DFTS.
..8 Accounts Receivable. All accounts receivable reflected on the date of the
latest DFTS Financial Statements and any accounts receivable thereafter acquired
by DFTS prior to the Closing Date constitute, and will constitute, bona fide
receivables resulting from bona fide transactions in the ordinary course of
DFTS' business.
..9 Buildings and Equipment. The buildings, machinery and equipment owned or
used by DFTS are adequate for the conduct of DFTS' business as such business
presently is conducted and are in normal operating condition and repair,
ordinary wear and tear excepted, and free from any known defects except such
minor defects as do not substantially interfere with the continued use thereof
in the conduct of normal operations.
..10 Tax Returns and Reports. Except as specified in Schedule 3.10, all required
federal, state and local tax returns and tax reports and sales tax reports have
been filed and all required taxes have been paid.
..11 Title to Properties. Except as specified in Schedule 3.11, DFTS has good
and marketable title or other ownership interest adequate for the conduct of its
operations and business in all of its assets (including capitalized lease
agreements, if any), in each case, free and clear of all mortgages, liens,
pledges, restrictions, charges or encumbrances of any nature whatsoever, except
(i) liens for current taxes which are not yet due and payable or are being
contested in good faith in appropriate proceedings, (ii) liens of carriers,
warehousemen, mechanics, laborers and material men incurred in the ordinary
course of business for sums not yet due, and (iii) such other encumbrances and
imperfections of title, if any, as in the aggregate, are not substantial in
character, amount or extent, and do not materially detract from the value or
interfere with the use of the properties of the purposes for which they are
presently used or otherwise materially impair business operations.
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..12 Agreements, Contracts and Commitments.
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..1 Except as set forth in Schedule 3.12, DFTS does not have in effect and is
not a party to:
..1 any Welfare Plan or Pension Plan Profit Sharing Plan, except for routine
life and disability insurance plans which may be cancelled on not more than
thirty (30) days notice; or
..2 any research, development, license, consulting, distribution or sales
agency agreement, contract or commitment with any person involving aggregate
payment by or to DFTS in excess of $10,000 or extending beyond 12 months from
the date hereof; or
..3 any agreement, contract or commitment relating to capital expenditures and
involving future payments of $10,000 or more in any one instance or $50,000 or
more in the aggregate; or
..4 any agreement, indenture or other instrument relating to the money or the
guarantee of any obligation for, to service the repayment of, borrowed money; or
..5 any lease with a term of more than one year or requiring payments of
$10,000 or more;
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..6 any agreement, commitment relating to the future disposition of any
interest in any business enterprise; or
..7 any agreement, commitment (other than purchase orders in the ordinary
course of business) for the production and sale, or product or material by DFTS
requiring $20,000 or more to, or by, DFTS; or
..8 any other agreement, contract or commitment or performance or surety bond
not entered into in the ordinary course of business and involving an aggregate
payment by or to DFTS in excess of $10,000 or not terminable within four months
without payment of a penalty greater than $10,000 by DFTS.
..13 Licenses and Permits. Schedule 3.13 contains a list of all licenses,
franchises, permits and other governmental authorizations held by DFTS that are
material in connection with the ownership and conduct of the business of DFTS.
Each of such licenses, franchises, permits and other governmental authorizations
is valid and in good standing. The governmental authorizations set forth on
Schedule 3.13 constitute all governmental authorizations necessary for all
businesses currently carried on by DFTS.
..14 Litigation. Except as set forth on a schedule previously delivered by DFTS
to NMKT (which has been initialed by both parties), there are no suits, actions
or legal, administrative, arbitration or other proceedings and governmental
investigations involving DFTS pending or, to the knowledge of DFTS, threatened.
DFTS is not in default with respect to any order, writ, injunction, or decree of
any court or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
..15 Compliance with Law. Except as set forth on Schedule 3.15, to the knowledge
of DFTS after reasonable inquiry, DFTS has complied and is in compliance in all
material respects with all applicable federal, state, local and foreign laws,
statutes, licensing requirements, rules and regulations, and judicial or
administrative decisions (including without limitation, any that relate to
health and safety environmental matters, sale and distribution of products and
services, anti-competitive practices, collective bargaining, equal opportunity
and improper payments), pertaining to its properties or assets, the ownership
thereof or to the operation of its business, except for violations, if any,
which do not and will not (assuming continued operations on the same basis as
heretofore operated) have a material adverse effect on the business, operations
or financial condition of DFTS. Except as set forth on Schedule 3.15, to the
knowledge of DFTS after reasonable inquiry, no violation by DFTS is being
alleged of any applicable law, statute, order, rule or regulation promulgated or
judgment entered by any federal, state, local, foreign court or governmental
authority relating to the operation, conduct or ownership of the property or
business of DFTS.
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..16 Environmental Matters. To the knowledge of DFTS after reasonable inquiry,
DFTS is not subject to any material liability or obligation relating to (i) the
environmental conditions on, under or about the properties or assets owned or
used by DFTS, including without limitations, the soil and groundwater conditions
at such properties; or (ii) the use, management, handling, transport, treatment,
generation, storage, disposal, release or discharge of any hazardous wastes,
hazardous substances, toxic substances or related materials defined, listed or
identified under any federal, state or local statutes or regulations relating to
environmental matters (collectively, "Hazardous Materials"). DFTS has disclosed
and made available to NMKT all written information, including without
limitations, all studies, analyses and test results, in their possession,
custody or control relating to Hazardous Materials used, managed, handled,
transported, treated, generated, stored, dispose, released or discharged by DFTS
or on its properties or in connection with the operation of its business. For
purposes of this Agreement, the term "Hazardous Material" shall include, without
limitation, all hazardous substances, extremely hazardous substances, hazardous
materials, hazardous wastes, solid wastes, toxic substances and related
materials defined, listed or identified under any federal, state or local
statutes or regulations relating to environmental matters, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C.ss.ss.9601, et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. ss.ss.1802, et seq.
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..17 Labor Relations. Except as set forth on Schedule 3.17, DFTS is not a party
to any labor or collective bargaining agreement. Except as set forth on Schedule
3.17, DFTS has not received any written notice from any labor union or group of
employees that such union or group represents or believes or claims it
represents or intends to represent any of the employees of DFTS. To the
knowledge of DFTS, no strike or work interruption by any employees of DFTS is
threatened. No claim that DFTS has engaged in any unfair labor practices is
pending or, to the knowledge of DFTS, is threatened.
..18 Insurance Policies. All policies of insurance relating to the properties,
assets, business, products, operations or employees of DFTS are listed on
Schedule 3.18 and except as set forth on Schedule 3.18 are in full force and
effect and DFTS has not received any notice of the cancellation of any such
policies. DFTS is not in default with respect to any provisions contained in any
insurance policy listed on Schedule 3.18 nor has it failed to give any notice or
present any claim under any such insurance policy in due and timely fashion
which would materially and adversely affect the financial condition, results of
operations, business or prospects of DFTS.
..19 Notice from Governmental Entities. DFTS has not received any demand,
notification or other written notice form any governmental entity which, if
complied with, would require capital expenditures by DFTS aggregating in excess
of $10,000.
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..20 Broker's or Finder's Fees. No agent, broker, investment banker, person or
firm acting on behalf of DFTS or under its authority is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from DFTS in connection with any of the transactions contemplated
herein.
..21 Investment Purposes. DFTS represents and acknowledges that the DCI Stock
Interest is being acquired for its own account (and not for the account of
others) for investment purposes and not with a view to the distribution or
resale thereof. DFTS acknowledges and agrees that the DCI Stock Interest will
not be registered under the Securities Act of 1933 (as amended), and that any
certificate or other instrument issued representing the DCI Stock Interest and
any certificates or other instruments issued in substitution therefor shall bear
an appropriate restrictive legend.
..22 No Governmental Restriction. DFTS represents that neither DFTS, members of
its Board of Directors, its officers nor its employees are currently under
investigation by any federal, state or local government for contract violations
and that none of them have ever been suspended or disbarred by any such
governments for contract violations. Further, DFTS represents that no member of
its Board of Directors, officers or employees have ever been convicted of a
crime (other than minor infractions not punishable as a felony) nor are any of
such persons currently under investigation by any such governments for such
matters.
4 Representations, Warranties and Covenants of DCI. DCI represents and
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warrants to DFTS as follows:
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..1 Organization of DCI. DCI is a corporation duly organized, valid existing
and in good standing under the laws of the State of Texas and has all requisite
corporate and other power, authority and legal right to own, lease and operate
the properties used in its business, to carry on its business as presently
conducted and to execute, deliver and perform its obligations under this
Agreement. DCI is duly qualified or licensed as a foreign corporation in each
jurisdiction or place in which it owns or leases real property or in which it
transacts business and where the nature of the business transacted legally
requires such registration or qualification and the failure to be so registered
or qualified could have a material adverse effect on the business or financial
condition of DCI. DCI presently has two directors on its Board of Directors,
being Xxxxx Xxxxxxxxxxx and Xxxx Xxxxxxxxxxx. Each director is elected for a
term of one (1) year.
..2 Corporate Documents. Attached hereto as Exhibit C is a complete and correct
copy of DCI's Certificate of Incorporation, as amended to date, certified by the
Secretary of State of Texas, and DCI's By-Laws, as currently in effect,
certified by the Secretary of DCI.
..3 Authorization of Agreement. The execution, delivery and performance of this
Agreement by DCI has been duly and validly authorized and approved by the Board
of Directors of DCI. This Agreement constitutes the legal, valid and binding
obligations of DCI, enforceable against DCI in accordance with the terms of this
Agreement.
..4 Capital Stock of DCI. The authorized capital stock of DCI consists only of
10,000,000 shares of DCI's common stock, par value .01 per share, of which
4,693,878 shares are issues and outstanding. Each share of common stock is
entitled to one vote and neither DCI's Certificate of Incorporation or its
By-Laws permit the cumulative voting of its common stock. No shares of such
common stock are held in the treasury of DCI. A list of the holders of all such
common stock are set forth in Schedule 4.4. DCI does not own stock in and does
not control, directly or indirectly, any corporation, association or business
organization. DCI is not a party to any joint venture or partnership agreement.
All shares of common stock that are outstanding, including the DCI Stock
Interest are duly authorized, validly issued and outstanding, fully paid, and
nonassessable, and no person has any preemptive rights in respect thereof.
Except as set forth on Schedule 4.4, there is outstanding no security, option,
warrant, right, call, subscription, agreement, commitment, or understanding,
fixed or contingent, that directly or indirectly (i) calls for the issuance of,
or the granting of rights to acquire, any capital stock of DCI, or any
securities convertible into any stock of DCI; (ii) obligates DCI to grant, offer
or enter into any of the foregoing; or (iii) relates to the voting or control of
such stock, securities or rights.
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..5 Financial.
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..1 DCI has furnished to DFTS true and complete copies of (i) the financial
statements for DCI as follows: Balance Sheet for the calendar years ending
December 31, 2002, 2003 and 2004 and Profit & Loss Statements for those same
periods .These financial statements , while not certified by a public accounting
firm, have nevertheless been prepared in conformity with generally accepted
accounting principles applied on a basis consistent with prior periods. These
financial statements present fairly the financial position of DCI as at the
dates thereof. DCI has also furnished to DFTS financial statements as of
December 31, 2004, which have been certified by a public accounting firm,
("Certified Financials") and which are attached to this Agreement as Exhibit D.
The DCI Certified Financials have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with prior periods
and present fairly the financial position of DCI as of the date of the said
Certified Financials. For the purpose of this Agreement, the DCI Certified
Financials referred to in this Section shall be deemed to include any notes to
such financial statements, if any.
..2 As of the dates specified in the DCI Certified Financials included in
Exhibit D, DCI has no liabilities or obligations, either accrued, contingent or
otherwise, which are material to DCI which have not been specifically reflected
or disclosed in the said Certified Financials.
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..3 Except as specifically reflected or disclosed on Schedule 4.5.3 or in the
DCI Certified Financials, there are not claims against or liabilities or
obligations of, or any reasonable basis known to DCI, any claims against or
liabilities or obligations of DCI, which individually or in the aggregate (i)
might result in a material decrease in the stockholders' equity of DCI from that
shown in the DCI Certified Financials; or (ii) might result in a material charge
against the annual net income of DCI; or (iii) might result in or cause any
material adverse change in the financial condition, results of operations,
business or prospects of DCI.
..4 Since the date of the DCI Certified Financials, except as disclosed on
Schedule 4.5.4, whether or not in the ordinary course of business, there has not
been, occurred or arisen:
..1 any material adverse change in the financial condition, results of
operations, business or prospects of DCI; or
..2 any damage or destruction in the nature of a casualty loss, whether covered
by insurance or not, adversely affecting any property or business of DCI which
is material to the financial condition, results of operations, business or
prospects of DCI; or
..3 any increase in excess of $10,000 in the compensation payable or to become
payable to DCI to its directors, officers, management personnel, consultants or
agents, whether in the form of fees, salaries, bonuses or any other form of
compensation, or any increase in benefits under any bonus, insurance, pension or
other benefit plan made for or with any of such persons and no deferred salary
or similar obligation; or
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..4 any actual or threatened strike or other labor trouble or dispute which
materially and adversely affects, or might materially and adversely affect, the
financial conditions, results of operations, business or prospects of DCI; or .5
any direct or indirect redemption, purchase or other acquisition by DCI of any
shares of DCI's stock, or any declaration, setting aside or payment of any
dividend or other distribution by DCI in respect of its stock.
..5 Since the date of the DCI Certified Financials, DCI has not engaged in any
transaction material to the financial condition, results of operations, business
or prospects of DCI not in the ordinary course of its business;
..6 In all material respects, the books, records and accounts of DCI accurately
and fairly reflect, in reasonable detail, the transactions and dispositions of
the assets of DCI.
..7
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..6 No Breach of Statute or Contract; Governmental Authorization.
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..1 Neither the execution and delivery of this Agreement nor compliance by DCI
with the terms and provisions of the same, nor the consummation of the
transactions contemplated hereby will:
..1 conflict with or result in a breach of or constitute or result in a default
under any of the terms, conditions or provisions of its Certificate of
Incorporation, By-Laws or other governing instruments or any judgment, order,
injunction, decree, regulation or ruling of any court or governmental authority,
domestic or foreign, to which it is subject or of any agreement, contract, or
commitment to which it is a party or otherwise bound; or
..2 give to others any rights of termination, cancellation or acceleration,
with respect to any of such agreements, contracts or commitments.
..7 DCI is not required to submit any notice, report or other filing with, or
obtain the consent or approval of , any governmental authority in connection
with its execution or delivery of this Agreement, the consummation or the
transactions as contemplated by this Agreement.
..8 Inventories. In all material respects, (i) the inventories shown on the DCI
Certified Financials and any inventories thereafter acquired by DCI prior to the
Closing Date consist, and will consist, of items of a quality and quantity
usable or saleable in the normal course of DCI's business; (ii) the value of all
items of obsolete materials and of all items of below standard quality has been
written down to realizable market value or adequate reserves have been provided
for such materials; and (iii) the values at which such inventories are carried
reflect the normal inventory valuation policy of DCI.
19
..9 Accounts Receivable. All accounts receivable reflected on the DCI Certified
Financials and any accounts receivable thereafter acquired by DCI prior to the
Closing Date constitute, and will constitute, bona fide receivables resulting
from bona fide transactions in the ordinary course of DCI's business with
adequate reserves provided.
..10 Buildings and Equipment. The buildings, machinery and equipment owned or
used by DCI are adequate for the conduct of DCI's business as such business
presently is conducted and are in normal operating condition and repair,
ordinary wear and tear excepted, and free from any known defects except such
minor defects as do substantially interfere with the continued use thereof in
the conduct of normal operations.
..11 Tax Returns & Reports. Except as specified in Schedule 4.11, all required
federal, state and local tax returns and tax reports and sales tax reports have
been filed and all required taxes have been paid.
..12 Title to Properties. Except as specified in Schedule 4.12, DCI has good and
marketable title or other ownership interest adequate for the conduct of its
operations and business in all of its assets (including capitalized lease
agreements, if any) in each case, free and clear of all mortgages, liens,
pledges, restrictions, charges or encumbrances of any nature whatsoever, except
(i) liens for current taxes which are not yet due and payable or are being
contested in good faith in appropriate proceedings, (ii) liens of carriers,
warehousemen, mechanics, laborers and material men incurred in the ordinary
course of business for sums not yet due, and (iii) such other encumbrances and
imperfections of title, if any, as in the aggregate, and are not substantial in
character, amount or extent, and do not materially detract from the value or
interfere with the use of the properties for the purposes for which they are
presently used or otherwise materially impair business operations.
20
..13 Agreements, Contracts and Commitments.
-------------------------------------
..1 Except as set forth in Schedule 4.13, DCI does not have in effect and is
not a party to:
..1 any Welfare Plan or Pension Plan Profit Sharing Plan, except for routine
life and disability insurance plans which may be cancelled on not more than
thirty (30) days notice; or
..2 any research, development, license, consulting, distribution or sales
agency agreement, contract or commitment with any person involving aggregate
payment by or to DCI in excess of $10,000 or extending beyond 12 months from the
date hereof; or
..3 any agreement, indenture or other instrument relating to the money or the
guarantee of any obligation for, to service the repayment of, borrowed money; or
..4 any employment agreement requiring annual payment of compensation of more
than $25,000 and/or for a term more than one (1) year; or
..5 any lease with a term of more than one year or requiring payments of
$10,000 or more;
..6 any agreement, commitment relating to the future disposition of any
interest in any business enterprise; or
..7 any agreement, commitment (other than purchase orders in the ordinary
course of business) for the production and sale, or product or material by DCI
requiring $20,000 or more to, or by, DCI; or
..8 any agreement (whether or not in the ordinary course of business) involving
an amount over the duration of the agreement of $50,000 or more;
21
..9 any other agreement, contract or commitment or performance or surety bond
not entered into in the ordinary course of business involving an aggregate
payment by or to DCI in excess of $10,000 or not terminable within four months
without payment of a penalty greater than $10,000 by DCI.
..14 With respect to Schedule 4.13, DCI has not breached, and to the knowledge
of DCI, there exists no claim or threat that DCI has breached, any of the terms
or conditions of any agreement, contract or commitment set forth in said
Schedule 4.13 in such manner as would permit any other party to cancel or
terminate the same. If any such breach or breaches singly or in the aggregate
could materially and adversely affect the financial condition, results of
operations, business or prospects of DCI. Each agreement, contract, commitment
or other document set forth in Schedule 4.13 is valid and in full force and
effect and there is currently no default with respect thereto by either DCI or,
to the knowledge of DCI, by any party obligated to DCI pursuant thereto. DCI has
delivered to DFTS a true and complete original or copy of each agreement,
contract, commitment or other document set forth in Schedule 4.13.
..15 Licenses and Permits. Schedule 4.15 contains a list of all licenses,
franchises, permits and other governmental authorizations held by DCI that are
material in connection with the ownership and conduct of the business of DCI.
Each of such licenses, franchises, permits and other governmental authorizations
is valid and in good standing. The governmental authorizations set forth on
Schedule 4.15 constitute all governmental authorizations necessary for all
businesses currently carried on by DCI.
..16 Litigation. Except as set forth on Schedule 4.16, there are no suits,
actions or legal, administrative, arbitration or other proceedings and
governmental investigations involving DCI pending or, to the knowledge of DCI
threatened. DCI is not in default with respect to any order, writ, injunction,
or decree of any court or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
22
..17 Compliance with Law. Except as set forth on Schedule 4.17, to the knowledge
of DCI after reasonable inquiry, DCI has complied and is in compliance in all
material respects with all applicable federal, state, local and foreign laws,
statutes, licensing requirements, rules and regulations, and judicial or
administrative decisions (including without limitation, any that relate to
health and safety environmental matters, sale and distribution of products and
services, anti-competitive practices, collective bargaining, equal opportunity
and improper payments), pertaining to its properties or assets, the ownership
thereof or to the operation of its business, except for violations, if any,
which do not and will not (assuming continued operations on the same basis as
heretofore operated) have a material adverse effect on the business, operations
or financial condition of DCI. Except as set forth on Schedule 4.17, to the
knowledge of DCI after reasonable inquiry, no violation by DCI is being alleged
of any applicable law, statute, order, rule or regulation promulgated or
judgment entered by any federal, state, local, foreign court or governmental
authority relating to the operation, conduct or ownership of the property or
business of DCI.
..18 Environmental Matters. To the knowledge of DCI after reasonable inquiry,
DCI is not subject to any material liability or obligation relating to (i) the
environmental conditions on, under or about the properties or assets owned or
used by DCI, including without limitations, the soil and groundwater conditions
at such properties; or (ii) the use, management, handling, transport, treatment,
generation, storage, disposal, release or discharge of any hazardous wastes,
hazardous substances, toxic substances or related materials defined, listed or
identified under any federal, state or local statutes or regulations relating to
environmental matters (collectively, "Hazardous Materials"). DCI has disclosed
and made available to DFTS all written information, including without
limitations, all studies, analyses and test results, in their possession,
custody or control relating to Hazardous Materials used, managed, handled,
transported, treated, generated, stored, dispose, released or discharged by DCI
or on its properties or in connection with the operation of its business. For
purposes of this Agreement, the term "Hazardous Material" shall include, without
limitation, all hazardous substances, extremely hazardous substances, hazardous
materials, hazardous wastes, solid wastes, toxic substances and related
materials defined, listed or identified under any federal, state or local
statutes or regulations relating to environmental matters, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C.ss.ss.9601, et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. ss.ss.1802, et seq.
23
..19 Labor Relations. Except as set forth on Schedule 4.19, DCI is not a party
to any labor or collective bargaining agreement. Except as set forth on Schedule
4.19, DCI has not received any written notice from any labor union or group of
employees that such union or group represents or believes or claims it
represents or intends to represent any of the employees of DCI. To the knowledge
of DCI, no strike or work interruption by any employees of DCI is threatened. No
claim that DCI has engaged in any unfair labor practices is pending or, to the
knowledge of DFTS, is threatened.
..20 Insurance Policies. All policies of insurance relating to the properties,
assets, business, products, operations or employees of DCI are listed on
Schedule 4.20 and except as set forth on Schedule 4.20 are in full force and
effect and DCI has not received any notice of the cancellation of any such
policies. DCI is not in default with respect to any provisions contained in any
insurance policy listed on Schedule 4.20 nor has it failed to give any notice or
present any claim under any such insurance policy in due and timely fashion
which would materially and adversely affect the financial condition, results of
operations, business or prospects of DCI.
24
..21 Bank Accounts and Powers of Attorney. The name of each bank in which DCI
has an account or safe deposit box, and the names of all persons authorized to
draw thereon or have access thereto and the names of all persons, if any,
holding powers of attorney, from DCI are listed on Schedule 4.21.
..22 Minute Books. The minute books of DCI for the period since the
incorporation of DCI contain complete and accurate records of all official
meetings and other official material corporate actions of its stockholders,
Board of Directors and Committees of its Board of Directors.
..23 Notice from Governmental Entities. DCI has not received any demand,
notification or other written notice form any governmental entity which, if
complied with, would require capital expenditures by DCI aggregating in excess
of $10,000.
..24 Representation as to DCI Stock Interest. The books and records of DCI
reflect that to the best of DCI's knowledge, NMKT is the beneficial and record
owner of the DCI Stock Interest with good and marketable title to such stock,
free and clear of all liens, encumbrances, claims, charges, agreements, rights,
options and warrants of any kind; that said DCI Stock Interest represents 51% of
the issued and outstanding shares of the common stock of DCI.
5 Representations, Warranties and Covenants of NMKT. NMKT represents and
warrants to DFTS as follows:
..1 Representations of NMKT. NMKT is the beneficial owner of the DCI Stock
Interest and is the record owner thereof or will be the record owner of such
stock on or before the Closing Date and is or will have good title to the said
DCI Stock Interest on or before such Closing Date with the full power and
authority to transfer and otherwise dispose of the said DCI Stock Interest, free
and clear of all security interests, judgment, liens, pledges, adverse claims,
charges, escrows, options, warrants, rights of first refusal, rights of first
offer, mortgages, indentures or other agreements, arrangements, encumbrances or
defects of any kind or character. There are no agreements or understandings,
either written or oral, with any other person or entity with respect to the
voting (through a voting trust, proxy or otherwise), sale or other disposition
of the said DCI Stock Interest. NMKT has not granted and there is not presently
in effect any proxy for anyone other than NMKT to vote the DCI Stock Interest.
25
..2 Organization of NMKT. NMKT is a corporation duly organized, valid existing
and in good standing under the laws of the State of Nevada and has all requisite
corporate and other power, authority and legal right to execute, deliver and
perform its obligations under this Agreement.
..3 Authorization of Agreement. The execution, delivery and performance of this
Agreement by NMKT has been duly and validly authorized and approved by the Board
of Directors of NMKT. This Agreement constitutes the legal, valid and binding
obligations of NMKT, enforceable against NMKT in accordance with the terms of
this Agreement. Neither the execution and delivery of this Agreement nor the
consummation of the transaction contemplated hereby will conflict with or result
in a breach of or constitute or result in a default under any of the terms,
conditions or provisions of its Certificate of Incorporation, By-Laws or other
governing instruments or any judgment, order, injunction, decree, regulation or
ruling of any court or governmental authority, domestic or foreign, to which it
is subject. NMKT is not required to obtain the consent or approval of, any
governmental authority in connection with its execution or delivery of this
Agreement or the consummation of the transactions as contemplated by this
Agreement.
26
..4 Broker's or Finder's Fees. No agent, broker, investment banker, person or
firm acting on behalf of NMKT or under its authority is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from DFTS or DCI in connection with any of the transactions
contemplated herein.
..5 Investment Purposes. NMKT represents and warrants that it is acquiring the
Shares for its own account (and not for the account of others) for investment
purposes and not with a view to the distribution or resale thereof. However,
NMKT has stated that when and if permitted under the terms of this Agreement, it
intends to convert a portion of the Class C preferred stock that it receives
from DFTS into common stock which it will then distribute (without a sale
thereof) to the stockholders of NMKT. NMKT acknowledges and agrees that the
preferred stock it receives under this Agreement and the common stock of DFTS
that may be issued upon a permitted conversion by NMKT of the Class C preferred
stock of DFTS will not be registered under the Securities Act of 1933 (as
amended) and that any certificate or other instrument issued representing the
said stock and any certificates or other instruments issued in substitution
therefor shall bear an appropriate restrictive legend.
..6 Representations and Warranties of DCI. All of the representations and
warranties of DCI contained in this Agreement including but not limited to those
representations and warranties contained in Article 4 of this Agreement and
including all information contained on the attached Exhibits and Schedules are
true and accurate as of the date of this Agreement and will also be true and
accurate as of the Closing Date.
6 Certain Agreements.
------------------
..1 Operation of Business of DCI. Except as set forth in Schedule 6 between the
date of the execution of this Agreement and the Closing Date,
27
..1 DCI will preserve and keep intact the business organization of DCI and keep
available the services of the present officers, directors and employees of DCI,
and preserve the present relationships of DCI with persons having significant
business relations therewith; and
..2 DCI shall conduct its business only in the ordinary course and, by way of
amplification and not limitation, DCI, without prior written consent of DFTS,
will not:
..1 issue or commit to issue any capital stock of DCI;
..2 grant or commit to grant any options, warrants, convertible securities or
other rights to subscribe for, purchase or otherwise acquire any share of its
capital stock;
..3 declare, set aside, or pay any dividend or distribution with respect to the
capital stock of DCI;
..4 directly or indirectly redeem, purchase or otherwise acquire or commit to
acquire any capital stock of DCI;
..5 effect a split or reclassification of any capital stock of DCI or a
recapitalization of DCI;
..6 change the Certificate of Incorporation or By-Laws or other governing
instruments of DCI;
..7 increase or decrease the number of directors of DCI or add or remove any of
its existing directors;
..8 enter into any employment, consulting, agency, distribution or supply
agreement, contract or commitment (other than purchase orders in the ordinary
course of business) with any person or modify or cancel any such agreement,
commitment or contract in effect on the date hereof containing an obligation to
pay or accrue more than $10,000;
28
..9 enter into, or modify or cancel, any agreement, contract or commitment
relating to capital expenditures containing an obligation to pay or accrue more
than $10,000;
..10 enter into, or modify or cancel, any agreement, contract, indenture or
other instrument relating to the borrowing of money or other contracting or
payment of indebtedness or the guarantee of any obligation for the borrowing of
money or other contracting payment of indebtedness payable in more than 90 days;
..11 enter into, or modify or cancel, any lease having a term of more than one
year or containing an obligation to pay or accrue more than $10,000 other than
the exercise of existing renewal options;
..12 enter into, or modify or cancel, any agreement, contract or commitment
relating to the disposition or acquisition of any interest in any business
enterprise; or
..13 enter into, modify or cancel, any other agreement, contract or commitment
of DCI (other than any agreement, contract or commitment for the purchase of raw
materials, supplies, tools or inventory or for the production and sale of any
product by DCI entered into in the ordinary course of business) not terminable
within thirty days without payment of a penalty by DCI.
..2 Information for Governmental Filings. DFTS, DCI and NMKT hereby agree that
each will furnish the others with such information as shall be necessary in the
preparation of any filing required by any governmental or regulatory authority
in connection with the transactions contemplated by this Agreement.
29
..3 Further Assurances. Each party hereby agrees to (i) execute and deliver
such instruments and take such other actions as another party may reasonably
require in order to carry out the intent of this Agreement; (ii) use its best
efforts to obtain consent from all third parties and governmental bodies
necessary for the consummation of the transactions contemplated by this
Agreement; and (iii) diligently support this Agreement in any proceeding before
any regulatory authority whose approval of any of the transactions contemplated
hereby is required.
..4 Exchange of Information. DFTS and DCI each hereby agree to give to each
other and their respective representatives and agents full access to all the
premises and books and records of DFTS and DCI and to cause each of DFTS' and
DCI's officers and independent auditors to furnish such financial and operating
data and other information with respect to the business and properties of DFTS
and DCI as each shall from time to time request; provided, however, that any
investigation (i) shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of DFTS or DCI; and (ii) shall
not affect any of the representations and warranties hereunder. In the event the
transactions contemplated by this Agreement are not consummated for reasons
other than a breach by one or more parties of their obligations under this
Agreement, DFTS, DCI and NMKT each hereby agree to return all documents and
other material obtained from DFTS, DCI and/or NMKT, as the case may be, in
connection with the transactions contemplated hereby. Except in the event of a
breach by one or more parties to their obligations under this Agreement, the
parties will each keep confidential all inforamtion concerning DFTS, DCI or
NMKT, as the case may be, obtained pursuant to this Agreement or in connection
with the transactions contemplated hereby unless such information is readily
ascertainable from public or published information or trade sources and will
take such other steps in regard to the confidentiality of such material as have
ben mutually agreed upon.
30
..5 Transfer and Similar Taxes. All taxes or similar charges due to the
Internal Revenue Service or any state or local taxing agency imposed upon any
party arising in respect of the transfer or ownership provided for under this
Agreement shall be paid by the person or entity that incurred such liability.
7 Conditions of Closing.
---------------------
..1 Conditions of Obligations of DFTS. The obligations of DFTS to close
hereunder shall be subject to the following conditions:
..1 Each of the substantive representations and warranties of DCI and NMKT
herein contained shall be true and correct in all material respects to the
reasonable satisfaction of DFTS on and as of the Closing Date with the same
effect as though made at such time except (i) insofar as such representations
and warranties are given as of a particular date; or (ii) as affected by the
transactions contemplated by this Agreement. In all cases, except to the extent
waived hereunder or affected by the transactions contemplated or permitted
herein, DCI and NMKT shall have performed in all material respect to the
reasonable satisfaction of DFTS all obligations and complied with all covenants
and conditions required by this Agreement to be performed or complied with by
each of DCI and NMKT at or prior to the Closing Date.
..2 No suit, action or other proceeding shall be pending before any court or
governmental agency in which it is sought to restrain or prohibit the
consummation of the transactions contemplated hereby, or in which it is sought
to obtain substantial damages in connection therewith. No order of any court or
administrative agency which restrains or prohibits the transactions contemplated
hereby shall be in effect and no governmental agency shall be seeking such or
threatening to do so.
31
..3 All statutory requirements for the valid consummation by DCI and NMKT of
the transactions contemplated by this Agreement shall have been fulfilled; all
authorizations, consents and approvals of all federal, state and local
governmental agencies and authorities required to be obtained in order to permit
consummation by DCI and NMKT of the transactions contemplated by this Agreement
shall have been obtained and shall be in full force and effect.
..4 The form and substance of all legal documents and/or papers used or
delivered hereunder by DCI and NMKT shall be reasonably satisfactory to counsel
for DFTS.
..5 On or prior to the Closing Date, NMKT shall have delivered to DFTS
certified copies of the resolutions of the Board of Directors of NMKT
authorizing and consenting to the transactions contemplated hereby.
..2 Conditions of Obligations of NMKT. The obligations of NMKT to close
---------------------------------
hereunder shall be subject to the following conditions:
..1 Each of the substantive representations and warranties of DFTS herein
contained shall be true and correct in all material respects to the reasonable
satisfaction of NMKT on and as of the Closing Date with the same effect as
though made at such time except (i) insofar as such representations and
warranties are given as of a particular date; or (ii) as affected by the
transactions contemplated in this Agreement. In all cases, except to the extent
waived hereunder or affected by the transactions contemplated or permitted
herein, DFTS shall have performed in all material respects to the reasonable
satisfaction of NMKT all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with by DFTS
at or prior to the Closing Date.
32
..2 No suit, action or other proceeding shall be pending before any court or
governmental agency in which it is sought to restrain or prohibit the
consummation of the transactions contemplated hereby, or in which it is sought
to obtain substantial damages in connection therewith. No order of any court or
administrative agency which restrains or prohibits the transactions contemplated
hereby shall be in effect and no governmental agency shall be seeking such or
threatening to do so.
..3 All statutory requirements for the valid consummation by DFTS of all
transactions contemplated by this Agreement shall have been fulfilled; all
authorizations, consents and approvals of all federal, state and local
governmental agencies and authorities required to be obtained in order to permit
consummation by DFTS of the transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect.
..4 The form and substance of all legal documents, and/or papers used or
delivered hereunder by DFTS shall be reasonably satisfactory to counsel for
NMKT.
..5 On or prior to the Closing Date, DFTS shall have delivered to NMKT
certified copies of the resolutions of the Board of Directors of DFTS
authorizing and consenting to the transactions contemplated hereby.
8 Closing. The closing ("Closing") shall take place at the offices of Xxxxxx
& Xxxxxxxx, LLP, 00 Xxxxxxx Xxxxxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, XX 00000
on April 29, 2005 (the "Closing Date").
..1 DFTS' Documents. At the Closing DFTS shall deliver the following to NMKT:
---------------
..1 The stock certificates representing the Class C and Class D of preferred
stock of DFTS to be issued pursuant to Section 1.3 of this Agreement.
33
..2 Certified copies or other copies of such documents as NMKT or its counsel
may reasonably request, including but not limited to a certificate(s) signed by
the President or Chief Financial Officer of DFTS certifying that all of the
obligations of DFTS have been performed and that all warranties and
representations contained in this Agreement remain true and accurate.
..3 Copies of all consents, approvals, notices and waivers which may be
required by this Agreement in form and substance reasonably satisfactory to
NMKT.
..2 NMKT's Documents. The Purchaser shall deliver to DFTS the following:
----------------
..1 Stock certificate(s) effectively transferring the DCI Stock Interest to
DFTS (being either a stock certificate of DCI for the DCI Stock Interest
registered to DFTS or a stock certificate of DCI for the DCI Stock Interest
registered to NMKT together with an effective stock power transferring the DCI
Stock Interest to DFTS).
..2 A proxy, in the form annexed hereto as Exhibit E conveying an irrevocable
proxy coupled with an interest, as required by Section 2.3 of this Agreement.
..3 A certified copy of a resolution of the Board of Directors of DCI
appointing Xxxxxx Xxxxx to the DCI Board of Directors.
..4 Certified copies or other copies of such documents as DFTS or its counsel
may reasonably request, including but not limited to a certificate(s) signed by
the President or Chief Financial Officer of NMKT certifying that all of the
obligations of NMKT have been performed and that all warranties and
representations contained in this Agreement remain true and accurate.
..5 Copies of all consents, approvals, notices and waivers which may be
required by this Agreement in form and substance reasonably satisfactory to
DFTS.
9 Termination of Agreement.
------------------------
34
..1 Termination for Cause. DFTS or NMKT may terminate this Agreement at or
prior to the Closing Date if the non-terminating party has failed or refused to
perform its obligations under this Agreement or any of the representations and
warranties made by such non-terminating party are untrue in any material respect
and/or cannot be corrected on or prior to the Closing Date, then the other party
may terminate this Agreement. Such termination for cause shall not, in any way,
waive or relieve the non-terminating party from any remedy which may be
available at either law or equity.
..2 Termination Without Cause. In addition to the rights of the parties hereto
to terminate this Agreement under any other provision hereof, the transactions
contemplated hereby may be terminated at any time before the Closing Date, (i)
by mutual consent of DFTS and NMKT; or (ii) by either DFTS or NMKT, if the
Closing of this Agreement shall not have occurred (for reasons other than a
breach by a party of its obligations as set forth in this Agreement) on or
before the close of business on May 31, 2005, which date may be extended by
mutual agreement of DFTS and NMKT.
..3 Notice of Termination. In the event of the termination of this Agreement
pursuant to Sections 9.1 or 9.2 above, notice shall forthwith be given by the
terminating party to the other parties to this Agreement. If termination was
pursuant to Section 9.2 hereof, there shall be no liability on the part of any
party hereto to any other party.
10 Specific Performance. Each of the parties acknowledges and agrees that the
other parties would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the parties agrees that the other
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof without the need to post a bond or other surety
and without the requirement of establishing the insufficiency of monetary
damages only.
35
11 Arbitration. The parties agree that any dispute, controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
submitted to and determined by arbitration in New York City or Nassau County,
New York, pursuant to the rules of the American Arbitration Association. Unless
otherwise provided in this Agreement, any Arbitration must be commenced within
two years from the arising of the breach, dispute, controversy or claim. If not
timely commenced, no arbitration or lawsuit may be commenced thereafter with
regard to such matter nor may the same be asserted in any subsequent arbitration
or lawsuit by way of a counterclaim or affirmative defense. The issues shall be
submitted to three impartial arbitrators selected from panels of arbitrators of
the said association. The majority decision of the arbitrators shall be
sufficient. Any award rendered shall be binding upon the parties and judgment
upon such award may be entered in any court of competent jurisdiction. The
arbitrators shall have the power to award a decree of specific performance,
punitive damages, temporary or permanent injunctive relief or any other legal or
equitable remedy and said award shall be binding upon the parties as though
decreed by a court of competent jurisdiction. In addition, the arbitrators shall
retain the right to award equitable relief in order to carry out the provisions
of this Agreement and/or to effectuate the mechanisms set forth in this
Agreement. However, the decisions and rulings of the arbitrators must be in
writing setting forth findings of fact and law and shall be consistent with and
limited to the terms of this Agreement. Any decree or finding inconsistent with
this Agreement may be challenged by any party in a court of competent
jurisdiction. All costs, expenses and fees of the arbitration and attorneys'
fees shall be paid as directed by the arbitrators, who shall have the power to
award the prevailing party all attorneys' fees, costs and expenses. Each party
shall bear its own costs, fees and expenses not awarded by the arbitrators.
Notwithstanding anything to the contrary contained in this Article, any party
shall have the right to apply to a court of competent jurisdiction for and to
obtain a temporary restraining order and/or injunctive relief in order the
prevent or ameliorate irreparable damage pending the commencement and outcome of
arbitration.
36
12 Payment of Expenses. Each party hereby agrees to pay all of their own costs
and expenses incident to its negotiation and preparation of this Agreement and
their performance of and compliance with all agreements and conditions contained
herein, including the fees, expenses and disbursements of its counsel and its
auditors.
13 Survival of Representations, Warranties and Indemnities. Subject to the
limitations and other provisions of this Agreement, the representations,
warranties, indemnities, agreements and covenants made by any party in this
Agreement, or pursuant hereto, shall survive this Agreement and the Closing, for
three years from the Closing Date, notwithstanding any investigation made at any
time by or on behalf of the other parties.
14 Notices. Any notice required or given under this Agreement shall be in
writing and delivered in person, sent by certified or registered mail, return
receipt requested, or next day mail or by recognized overnight courier (such as
Federal Express or UPS) and addressed to the other party at the address set
forth below, or at such other address as the party may designate in writing.
Notices delivered in person or sent by next day mail or courier shall be deemed
to have been given on the day actually received. Notices sent by registered or
certified mail shall be deemed to have been given on the earlier of the third
day after the date such notice was sent or the day actually received; provided,
however, that if such day falls on a weekend or legal holiday, receipt shall be
deemed to occur on the business day following such weekend or legal holiday. All
such notices or communications shall be deemed intended given as provided above
unless the recipient refuses to accept the same or the notice is returned as
undeliverable because the intended recipient did not sign the requested receipt
or failed to pick up the notice from the office of the carrier. In such event,
such notice or communication shall be deemed given when such delivery was first
attempted to be made on the intended recipient.
37
If to DFTS:
000 X Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
With a copy to:
Xxxxxx & Xxxxxxxx, LLP
00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
If to NMKT:
00000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
If to DCI:
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
1 Governing Law; Jurisdiction. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
regard to the effect of principles or conflicts of laws thereof. Except as
otherwise set forth in Article 11 (Arbitration) hereof, each party hereto hereby
irrevocably submits to the jurisdiction of the Supreme Court of the State of New
York, County of Nassau or to the United States District Court, Eastern District,
in any action, suit or proceeding brought against it and related to or in
connection with this Agreement or any of the transactions contemplated hereby,
and to the extent permitted by applicable law, each party hereby waives and
agrees not to assert by way of motion, as a defense or otherwise, in any such
suit, action or proceeding any claim that it is not personally subject to the
jurisdiction of such courts, that the suit, action or proceeding is brought in
an inconvenient forum, or that the venue of the suit, action or proceeding is
improper.
2 Additional Documents. Each party hereto shall execute and deliver such
consents, proxies, certificates, instruments, agreements and documents as shall
be reasonably necessary to carry out and effectuate the terms and conditions of
this Agreement.
38
3 Complete Agreement; Amendments. This Agreement contains the entire
agreement among the parties with respect to the subject matter of this
Agreement, and supersedes each course of conduct previously pursued or
acquiesced in, and each oral agreement and representation previously made, by
the parties with respect thereto, whether or not relied or acted upon. No course
of performance or other conduct subsequently pursued or acquiesced in, and no
oral agreement or representation subsequently made by the parties, whether or
not relied or acted upon, and no usage of trade, whether or not relied or acted
upon, shall amend this Agreement or impair or otherwise affect any parties'
obligations pursuant to this Agreement or any rights and remedies of a party
pursuant to this Agreement. No amendment to this Agreement shall be effective
unless made in a writing duly executed by all parties and specifically referring
to each provision of this Agreement being amended.
4 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any Federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The parties intend that each
representation, warranty and covenant contained herein, shall have independent
significance. If any party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that such party is in
breach of the first representation, warranty, or covenant. Provided, however,
that if disclosure or other information has been provided in this Agreement or
by separate written document which relate to a particular representation,
warranty or covenant, the fact that it has not been restated or repeated with
regard to every representation, warranty or covenant to which the disclosure or
information may have applicability, will not cause a party to be considered to
be in breach of such other representation, warranty or covenant.
39
5 Plural/Gender. Whenever the singular number is used in this Agreement and
when required by the context, the same shall include the plural and vice versa,
and the masculine gender shall include the feminine and neuter genders and vice
versa.
IN WITNESS WHEREOF, the parties have executed and delivered this Stock
Purchase Agreement on the date first above written.
DEFENSE TECHNOLOGY SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxx
XXXXXX XXXXX, Chief Operating Officer
NEW MARKET TECHNOLOGY, INC.
By: /s/ Xxxxxx Xxxxxx
XXXXXX XXXXXX, Chairman & CEO
DIGITAL COMPUTER INTEGRATION CORP.
By: /s/ Xxxxx Xxxxxxxxxxx
XXXXX XXXXXXXXXXX, XX., President
40
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF CLASS C CUMULATIVE
CONVERTIBLE PREFERRED STOCK
of
DEFENSE TECHNOLOGY SYSTEMS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
Defense Technology Systems, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
FOURTH of its Certificate of Incorporation and in accordance with the provision
of Section 151 of the General Corporation Law of the State of Delaware, its
Board of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.01 per share, designated as Class C Convertible
Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of the
Corporation be hereby created and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as Class C Convertible Preferred Stock (the "Class C Preferred
Stock") and the number of shares constituting such series shall be 600,000 and
the stated value of the Class C Preferred Stock shall be $1.50 per share.
Section 2. Voting. The Class C Preferred Stock shall have the following
voting rights:
41
(A) The Corporation shall not, without the affirmative consent of the
holders of seventy-five percent of the Class C Preferred Stock, in any manner
alter or change the designations, or the powers, preferences, rights,
qualifications, limitations, or restrictions or increase the number of
authorized shares of the Class C Preferred Stock in any manner.
(B) Except as provided in Section 2(C) below, the holders of the Class C
Preferred Stock shall not have any right to vote their Class C Preferred Stock.
(C) Notwithstanding the provision of paragraph (B) above, on all matters
coming before the holders of preferred stock of the Corporation, as a class, or
coming before the holders of Class C Preferred Stock of the Corporation, as a
class, the holders of the Class C Preferred Stock shall have the right to vote
their Class C Preferred Stock with each such share of stock being entitled to
one (1) vote on any and all such matters.
Section 3. Dividends.
(A) In each year the holders of the Class C Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Corporation, out of funds legally available for that purpose, semi-annual
dividends payable in cash on July 1 and January 1 in each year (each such date
being referred to herein as "a Dividend Payment Date"), commencing January 1,
2006, in an amount equal to $.015 per share (that is, $.03 per share on an
annual basis).
(B) In the case of the original issuance of shares of Class C Preferred
Stock, dividends shall begin to accrue and be cumulative from July 1, 2005. In
the case of shares of Class C Preferred Stock issued after July 1, 2005 but
prior to any Dividend Payment Date, dividends shall begin to accrue and be
cumulative from the date of issue to the next Dividend Payment Date; provided,
however, that if dividends are not paid on any such Dividend Payment Date, then
dividends shall accrue and be cumulative from the Dividend Payment Date to the
date such dividends have been paid. Dividends paid on shares of Class C
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro-rata on a
share-by-share basis among all such Class C Preferred shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of Class C Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than sixty days prior to
the date fixed for the payment thereof.
42
(C) Whenever dividends payable on the Class C Preferred Stock as provided
in this Section 3 are in arrears, thereafter and until dividends, including all
accrued dividends, on shares of the Class C Preferred Stock outstanding shall
have been paid in full or declared and set apart for payment, the Corporation
shall not (i) pay dividends on any common stock of the Corporation; or (ii)
purchase or otherwise acquire for consideration any share of the Class C
Preferred Stock, unless required or as provided in Section 4.
Section 4. Redemption by Corporation. The Corporation may redeem shares of
its Class C Preferred Stock pursuant to the following provisions:
(A) The Corporation may, at any time and from time to time, on or after
March 1, 2008, redeem all or a portion of the then outstanding shares of Class C
Preferred Stock at the started value thereof (namely $1.50 per share) plus
accrued and unpaid dividends thereon (cumulatively the "Redemption Amount") by
either (i) a check equal to the Redemption Amount or (ii) such number of share
of common stock of the Corporation as determined by dividing the "market value"
as calculated pursuant to Section 8 hereof of such common stock as of the date
set by the Corporation for such redemption, into the Redemption Amount.
43
(B) Notice of any redemption of the Class C Preferred Stock shall be mailed
at least thirty, but no more than sixty, days prior to the date fixed for
redemption to each holder of Class C Preferred Stock to be redeemed, at such
holder's address as it appears on the books of the Corporation. In order to
facilitate the redemption of the Class C Preferred Stock, the Board of Directors
may fix a record date for the determination of holders of Class C Preferred
Stock to be redeemed, or may cause the transfer book of the Corporation to be
closed for the transfer of the Class C Preferred Stock, not more than sixty days
prior to the date fixed for such redemption.
(C) Upon any notice of redemption being sent to the holders of Class C
Preferred Stock, notwithstanding that any certificates for such share shall not
have been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends thereon shall
cease to accrue from and after the date of redemption designated in the notice
of redemption and all rights of the holders of the shares of the Class C
Preferred Stock called for redemption shall cease and terminate, excepting only
the right to receive the redemption price therefor.
(D) No fractional shares of common stock shall be issued upon redemption of
any Class C Preferred Stock. Instead any fractional share of common stock which
would otherwise be issuable upon redemption of any Class C Preferred Stock (or
specified portions thereof), shall be rounded up to the next whole number of
shares of common stock.
(E) In the case of any certificates of Class C Preferred Stock which is
redeemed in part only, upon such redemption the Corporation shall execute and
deliver, at the expense of the Corporation, a new certificate or certificates of
Class C Preferred Stock in an amount equal to those shares of the Class C
Preferred Stock which has not been redeemed by the Corporation.
44
Section 5. Reacquired Shares. Any shares of the Class C Preferred Stock
redeemed, converted or purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions or restrictions on issuance set forth in
the Corporation's Certificate of Incorporation.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (A)
to the holders of common stock of the Corporation and other stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class C Preferred Stock unless, prior thereto, the holder of Class C Preferred
Stock shall have received $1.50 per share, plus an amount equal to cumulative
unpaid dividends thereon, including accrued dividends, whether or not declared,
to the date of such payment or (B) to the holders to stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Class C Preferred Stock, except distributions made ratably on the Class C
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 7. Conversion.
(A) Conversions. Subsequent to July 1, 2005 and subject to and upon
compliance with the provisions of this Section, at the option of any holder of
Class C Preferred Stock, such holder may convert his, her or its Class C
Preferred Stock and cumulative but unpaid dividends, at any time into that
number of duly paid and nonassessable whole shares of common stock obtained as
follows:
45
(i) to the stated value of $1.50 per share shall be added the amount of
cumulative but unpaid dividend and that total dollar amount shall be multiplied
by a factor of 11.1112. The resulting figure, rounded to the next highest whole
number shall be the number of whole shares of the Corporation's common stock
which shall be issued upon conversion.
(ii) Notwithstanding anything to the contrary contained in Section 8(A)
above, no holder may exercise a conversion right unless and until the
Corporation shall have a sufficient number of authorized but unissued shares of
its common stock to accomplish that conversion.
(iii) Upon conversion of any shares of Class C Preferred Stock that portion
so converted shall result in satisfaction and redemption of such Class C
Preferred Stock so converted.
(B) Manner of Exercising Conversion Privilege.
-----------------------------------------
(i) In order to exercise the conversion privilege, the holder of any shares
of Class C Preferred Stock to be converted shall surrender the certificates
representing such Class C Preferred Stock at the principal office of the
Corporation, accompanied by written notice to the Corporation, that the holder
elects to convert such Class C Preferred Stock or, if less than the entire
amount of shares represented by such certificate, the portion thereof to be
converted. Such notice shall also state the name or names in which the
certificate or certificates for shares of common stock issuable on such
conversion are to be issued. Otherwise they shall be issuable in the same name
as the registration of such Class C Preferred Stock, be accompanied by
instruments of transfer, in form satisfactory to the Corporation and to any
person authorized by the Corporation to deliver common stock on conversion of
Class C Preferred Stock (herein referred to as the "conversion agent"), duly
executed by the holder or the duly authorized attorney of such holder. Except as
otherwise provided in this Section, no payment or adjustment shall be made on
account of any dividends on the common stock issued upon conversion.
46
(ii) The Class C Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the date of acceptance of such
Class C Preferred Stock for conversion in accordance with the foregoing
provisions and at such time the rights of the holders of the converted portion
shall cease and the persons entitled to receive the common stock issuable upon
conversion shall be treated for all purposes as the record holders of such
common stock at such times; provided, however, that any such surrender on any
date when the stock transfer books of the Corporation shall be closed, the
person or persons in whose name or names the certificate or certificates for
such shares are to be issued shall be considered as the record holder or holders
thereof for all purposes as of the opening of business on the next succeeding
day on which such stock transfer books are open; and the Class C Preferred Stock
surrendered shall not be deemed to have been converted, in whole or in part, as
the case may be, until the date such stock transfer book are open for the
purpose of determining whether any dividends are payable thereon, and on such
conversion date, the Corporation shall issue and shall deliver at said office or
agency a certificate or certificates for the number of full shares of common
stock issuable upon conversion.
(iii) In the case of any certificates of Class C Preferred Stock which is
converted in part only, upon such conversion the Corporation shall execute and
deliver to or upon the written order of the holder thereof, at the expense of
the Corporation, a new certificate or certificates of Class C Preferred Stock in
an amount equal to the unconverted portion of such certificates of the Class C
Preferred Stock.
(C) Fractional Shares. No fractional shares of common stock shall be issued
upon conversion of any Class C Preferred Stock. Instead any fractional share of
common stock which would otherwise be issuable upon conversion of any Class C
Preferred Stock (or specified portions thereof), shall be rounded up to the next
whole number of shares of common stock.
47
Section 8. Market Price; Merger or Consolidation.
-------------------------------------
(A) For the purpose of any computation under Section 4, the "market price"
per share of common stock on any date shall be deemed to be the average of the
daily closing prices for 30 consecutive trading days before the day in question.
The closing price for each day shall be the average of the closing bid and asked
prices as reported by the National Association of Securities Dealers Automated
Quotation System, or if no so reported, the average of the closing bid and asked
prices as furnished by any firm acting at that time as a market maker in the
common stock, selected from time to time by the Corporation for this purpose.
(B) In case of any consolidation of the Corporation with, or merger of the
Corporation into, any other corporation (other than a consolidation or merger in
which the Corporation is the continuing corporation), or in the case of any sale
or transfer of all or substantially all of the assets of the Corporation, the
corporation formed by such consolidation or the corporation into which the
Corporation shall have been merged or the corporation which shall have acquired
such assets, as the case may be, shall execute and deliver to holders of all
outstanding shares of Class C Preferred Stock written evidence stating that the
holder of all outstanding shares of Class C Preferred Stock shall have the right
thereafter to convert such shares of Class C Preferred Stock into the kind and
amount of shares of stock and other securities and property which are receivable
or which, but for the failure to distribute to the holders of common stock all
or substantially all of the consideration receivable upon such sale or transfer
of assets, would be receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of common stock into which such shares of
Class C Preferred Stock might have been converted immediately prior to such sale
or transfer. Such written evidence shall provide for adjustment which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 8. The provisions of this Section 8(B) shall similarly apply to
successive consolidations, mergers, sales or transfers.
48
(C) For purposes of redemption of the Class C Preferred Stock under Section
4 or conversion of the Class C Preferred Stock under Section 7, the provisions
of Section 2(A) shall not be applicable and the Corporation shall have the right
to modify, in any manner, without the approval of the holders of the Class C
Preferred Stock, such of the powers, preferences, qualifications, limitations
and restrictions as well as the number of authorized shares of the Class C
Preferred Stock, as may be appropriate to accomplish the said merger and/or
consolidation. The provisions of this Section 8(C) shall similarly apply to
successive consolidation, mergers, sales or transfers.
Section 9. Notice of Certain Corporate Action.
----------------------------------
(A) In the event that any of the following shall occur, the holders of all
Class C Preferred Stock shall have the right to receive notice as provided in
this Section 9.
(i) the Corporation shall declare a dividend (or any other distribution) on
its common stock payable otherwise than in cash;
(ii) the Corporation shall authorize the granting to the holders of its
common stock, the right to subscribe for or purchase any shares of capital stock
of any class or of any rights;
49
(iii) any capital reorganization or any reclassification of the common
stock of the Corporation (other than a subdivision or combination of its
outstanding shares of common stock), or any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of the
Corporation is required, or any sale or transfer of all or substantially all of
the assets of the Corporation; or
(iv) the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation.
(B) In the event notice must be given, the Corporation shall cause the same
to be delivered to the holders of all Class C Preferred Stock a least 20 days
(or 10 days in any case specified in clause (i) or (ii) above) prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holder of common
stock of record to be entitled to such dividend, distribution or rights is to be
determined, or (y) the date on which such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of common stock of record shall be entitled to exchange their shares of
common stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
Section 10. Corporation to Provide Stock. From and after the time when the
Corporation is able to increase its authorized common stock by an amendment to
its Certificate of Incorporation which is expected to be on or before the first
date the Class C Preferred Stock may be converted, the Corporation shall reserve
and keep available, free from pre-emptive rights, (out of its authorized but
unissued common stock or out of common stock held in its treasury) for the
purpose of effecting the conversion of the Class C Preferred Stock, the full
number of shares of common stock then issuable upon the conversion of all
outstanding Class C Preferred Stock.
50
Section 11. Taxes on Redemption or Conversion. The Corporation shall pay
any and all transfer tax stamp taxes or similar taxes that may be payable in
respect of the issue or delivery of shares of common stock on redemption or
conversion of Class C Preferred Stock. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of common stock in a name other than that of
the holders of Class C Preferred Stock to be redeemed or converted, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance had paid to the Corporation the amount of any such tax, or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
IN WITNESS WHEREOF, said Defense Technology Systems, Inc. has caused this
Certificate of Designation, Preferences and Rights of Class C Preferred Stock to
be duly executed by its President and attested to by its Secretary and caused
its corporate seal to be affixed thereof on ____________, 2005.
Attest: DEFENSE TECHNOLOGY SYSTEMS, INC.
/s/ Xxxxxx Xxxxx By: /s/ Xxxxxx XxXxxx
----------------------- -----------------
XXXXXX XXXXX, Secretary XXXXXX XxXXXX, President
51
EXHIBIT B
---------
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF CLASS D CUMULATIVE
PREFERRED STOCK
of
DEFENSE TECHNOLOGY SYSTEMS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
Defense Technology Systems, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
FOURTH of its Certificate of Incorporation and in accordance with the provision
of Section 151 of the General Corporation Law of the State of Delaware, its
Board of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.01 per share, designated as Class D Preferred
Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of the
Corporation be hereby created and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as Class D Preferred Stock (the "Class D Preferred Stock") and the
number of shares constituting such series shall be 3,400,000 and the stated
value of the Class D Preferred Stock shall be $1.50 per share.
Section 2. Voting. The Class D Preferred Stock shall have the following
voting rights:
52
(A) The Corporation shall not, without the affirmative consent of the
holders of seventy-five percent of the Class D Preferred Stock, in any manner
alter or change the designations, or the powers, preferences, rights,
qualifications, limitations, or restrictions or increase the number of
authorized shares of the Class D Preferred Stock in any manner.
(B) The holders of the Class D Preferred Stock shall have the right to vote
their Class D Preferred Stock on all matters coming before the owners of the
common stock of the Corporation to the same extent as if the holders of the
Class D Preferred Stock held the common stock of the Corporation except that the
holders of such Class D Preferred Stock shall be entitled to have twenty-two
(22) votes on any and all such matters for each share of the Class D Preferred
Stock owned.
(C) Notwithstanding the provision of paragraph (B) above, on all matters
coming before the holders of preferred stock of the Corporation, as a class, or
coming before the holders of Class D Preferred Stock of the Corporation, as a
class, the holders of the Class D Preferred Stock shall have the right to vote
their Class D Preferred Stock with each such share of stock being entitled to
one (1) vote on any and all such matters.
53
Section 3. Dividends.
---------
(A) In each year the holders of the Class D Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Corporation, out of funds legally available for that purpose, semi-annual
dividends payable in cash on July 1 and January 1 in each year (each such date
being referred to herein as "a Dividend Payment Date"), commencing January 1,
2006, in an amount equal to $.015 per share (that is, $.03 per share on an
annual basis).
(B) In the case of the original issuance of shares of Class D Preferred
Stock, dividends shall begin to accrue and be cumulative from July 1, 2005. In
the case of shares of Class D Preferred Stock issued after July 1, 2005 but
prior to any Dividend Payment Date, dividends shall begin to accrue and be
cumulative from the date of issue to the next Dividend Payment Date; provided,
however, that if dividends are not paid on any such Dividend Payment Date, then
dividends shall accrue and be cumulative from the Dividend Payment Date to the
date such dividends have been paid. Dividends paid on shares of Class D
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro-rata on a
share-by-share basis among all such Class D Preferred shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of Class D Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than sixty days prior to
the date fixed for the payment thereof.
(C) Whenever dividends payable on the Class D Preferred Stock as provided
in this Section 3 are in arrears, thereafter and until dividends, including all
accrued dividends, on shares of the Class D Preferred Stock outstanding shall
have been paid in full or declared and set apart for payment, the Corporation
shall not (i) pay dividends on any common stock of the Corporation; or (ii)
purchase or otherwise acquire for consideration any share of the Class D
Preferred Stock, unless required or as provided in Section 4.
54
Section 4. Redemption by Corporation. The Corporation may redeem shares of
its Class D Preferred Stock pursuant to the following provisions:
(A) The Corporation may, at any time and from time to time, on or after
March 1, 2008, redeem all or a portion of the then outstanding shares of Class D
Preferred Stock at the started value thereof (namely $1.50 per share) plus
accrued and unpaid dividends thereon (cumulatively the "Redemption Amount") by
either (i) a check equal to the Redemption Amount or (ii) such number of share
of common stock of the Corporation as determined by dividing the "market value"
as calculated pursuant to Section 7 hereof of such common stock as of the date
set by the Corporation for such redemption, into the Redemption Amount.
(B) Notice of any redemption of the Class D Preferred Stock shall be mailed
at least thirty, but no more than sixty, days prior to the date fixed for
redemption to each holder of Class D Preferred Stock to be redeemed, at such
holder's address as it appears on the books of the Corporation. In order to
facilitate the redemption of the Class D Preferred Stock, the Board of Directors
may fix a record date for the determination of holders of Class D Preferred
Stock to be redeemed, or may cause the transfer book of the Corporation to be
closed for the transfer of the Class D Preferred Stock, not more than sixty days
prior to the date fixed for such redemption.
(C) Upon any notice of redemption being sent to the holders of Class D
Preferred Stock, notwithstanding that any certificates for such share shall not
have been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends thereon shall
cease to accrue from and after the date of redemption designated in the notice
of redemption and all rights of the holders of the shares of the Class D
Preferred Stock called for redemption shall cease and terminate, excepting only
the right to receive the redemption price therefor.
55
(D) No fractional shares of common stock shall be issued upon redemption of
any Class D Preferred Stock. Instead any fractional share of common stock which
would otherwise be issuable upon redemption of any Class D Preferred Stock (or
specified portions thereof), shall be rounded up to the next whole number of
shares of common stock.
(E) In the case of any certificates of Class D Preferred Stock which is
redeemed in part only, upon such redemption the Corporation shall execute and
deliver, at the expense of the Corporation, a new certificate or certificates of
Class D Preferred Stock in an amount equal to those shares of the Class D
Preferred Stock which has not been redeemed by the Corporation.
Section 5. Reacquired Shares. Any shares of the Class D Preferred Stock
redeemed or purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions or restrictions on issuance set forth in
the Corporation's Certificate of Incorporation.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (A)
to the holders of common stock of the Corporation and other stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class D Preferred Stock unless, prior thereto, the holder of Class D Preferred
Stock shall have received $1.50 per share, plus an amount equal to cumulative
unpaid dividends thereon, including accrued dividends, whether or not declared,
to the date of such payment or (B) to the holders to stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Class D Preferred Stock, except distributions made ratably on the Class D
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
56
Section 7. Market Price; Merger or Consolidation.
-------------------------------------
(A) For the purpose of any computation under Section 4, the "market price"
per share of common stock on any date shall be deemed to be the average of the
daily closing prices for 30 consecutive trading days before the day in question.
The closing price for each day shall be the average of the closing bid and asked
prices as reported by the National Association of Securities Dealers Automated
Quotation System, or if no so reported, the average of the closing bid and asked
prices as furnished by any firm acting at that time as a market maker in the
common stock, selected from time to time by the Corporation for this purpose.
(B) In case of any consolidation of the Corporation with, or merger of the
Corporation into, any other corporation (other than a consolidation or merger in
which the Corporation is the continuing corporation), or in the case of any sale
or transfer of all or substantially all of the assets of the Corporation, the
corporation formed by such consolidation or the corporation into which the
Corporation shall have been merged or the corporation which shall have acquired
such assets, as the case may be, shall execute and deliver to holders of all
outstanding shares of Class D Preferred Stock written evidence stating the
voting power, preferences and relative, participating, option and other special
rights of the shares of the Class D Preferred Stock and the qualifications and
restrictions thereof. Such written evidence shall provide for adjustment which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 7. In this event, the provision of Section 2(A) shall not be
applicable and the Corporation shall have the right to modify, in any manner,
without the approval of the holders of the Class D Preferred Stock, such of the
powers, preferences, qualifications, limitations and restrictions as well as the
number of authorized shares of the Class D Preferred Stock, as may be
appropriate to accomplish the said merger and/or consolidation. The provisions
of this Section 7(B) shall similarly apply to successive consolidations,
mergers, sales or transfers.
57
Section 8. Notice of Certain Corporate Action.
----------------------------------
(A) In the event that any of the following shall occur, the holders of all
Class D Preferred Stock shall have the right to receive notice as provided in
this Section 8.
(i) the Corporation shall declare a dividend (or any other distribution) on
its common stock payable otherwise than in cash;
(ii) the Corporation shall authorize the granting to the holders of its
common stock, the right to subscribe for or purchase any shares of capital stock
of any class or of any rights;
(iii) any capital reorganization or any reclassification of the common
stock of the Corporation (other than a subdivision or combination of its
outstanding shares of common stock), or any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of the
Corporation is required, or any sale or transfer of all or substantially all of
the assets of the Corporation; or
(iv) the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation.
(B) In the event notice must be given, the Corporation shall cause the same
to be delivered to the holders of all Class D Preferred Stock a least 20 days
(or 10 days in any case specified in clause (i) or (ii) above) prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holder of common
stock of record to be entitled to such dividend, distribution or rights is to be
determined, or (y) the date on which such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of common stock of record shall be entitled to exchange their shares of
common stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
58
Section 9. Taxes on Redemption. The Corporation shall pay any and all
transfer tax stamp taxes or similar taxes that may be payable in respect of the
issue or delivery of shares of common stock on redemption of Class D Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of
shares of common stock in a name other than that of the holders of Class D
Preferred Stock to be redeemed, and no such issuance or delivery shall be made
unless and until the person requesting such issuance had paid to the Corporation
the amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
IN WITNESS WHEREOF, said Defense Technology Systems, Inc. has caused this
Certificate of Designation, Preferences and Rights of Class D Preferred Stock to
be duly executed by its President and attested to by its Secretary and caused
its corporate seal to be affixed thereof on ____________, 2005.
Attest: DEFENSE TECHNOLOGY SYSTEMS, INC.
/s/ Xxxxxx Xxxxx By: /s/ Xxxxxx XxXxxx
XXXXXX XXXXX, Secretary XXXXXX XxXXXX, President
59
EXHIBIT C
---------
-Provided directly to Defense Technology Systems, Inc.
60
EXHIBIT D
---------
-Provided directly to Defense Technology Systems, Inc.
61
EXHIBIT E
---------
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
------------------------------------------
WHEREAS, by a certain agreement dated February 28, 2005, DEFENSE TECHNOLOGY
SYSTEMS, INC. ("DFTS") was to acquire a Fifty-one (51%) percent stock interest
in DIGITAL COMPUTER INTEGRATION CORPORATION ("DCI") that was presently owned by
NEW MARKET TECHNOLOGY, INC. ("NMKT") in return for which DFTS was to issue
certain shares of its preferred stock, Class C and D, to NMKT ("Acquisition
Agreement"); and
WHEREAS, as part of the transaction and in consideration of DFTS agreeing
to issue the Class C and Class D preferred stock to NMKT, the later company
agreed to execute an irrevocable proxy under Section 2.3 of the Acquisition
Agreement; and
WHEREAS, NMKT having secured the authorization and approval of its Board of
Directors to execute the instant irrevocable proxy in accordance with the
Acquisition Agreement, NMKT hereby agrees that the following shall constitute an
irrevocable proxy according to its terms set forth herein.
1. A committee (hereinafter "Proxy Committee") is hereby established
consisting of three persons, Xx. Xxxxxx XxXxxx, Xx. Xxxxxx Xxxxx and Xx. Xxxxxx
Xxxxxx. Xx. XxXxxx is presently the President of DFTS; Xx. Xxxxx is presently
the Chief Financial Officer of DFTS; and Xx. Xxxxxx is presently the President
of NMKT.
62
2. NMKT hereby grants to the Proxy Committee, as presently constituted and/or
as subsequently changed, an irrevocable proxy coupled with an interest in
600,000 shares of the Class C preferred shares of DFTS and 3,400,000 shares of
the Class D preferred shares of DFTS which have been issued by DFTS to NMKT
pursuant to the Acquisition Agreement. As to the Class C preferred stock, this
irrevocable proxy may not be cancelled or rescinded by NMKT and shall remain
fully effective until the earlier of April 6, 2008, the permitted conversion, if
any, of the Class C preferred stock or the permitted redemption by DFTS of the
said Class C preferred stock. As to the Class D preferred stock, this
irrevocable proxy may not be cancelled or rescinded by NMKT and shall remain
fully effective until the earlier of April 6, 2008 or upon the permitted
redemption by DFTS of the said Class D preferred stock. If there is only a
partial conversion of the Class C preferred stock, the balance of the said
preferred stock not so converted will remain subject to this irrevocable proxy.
If there is only a partial redemption of either the Class C preferred stock or
Class D preferred stock which is subject to this irrevocable proxy, the balance
of the preferred stock not so redeemed shall remain subject to this irrevocable
proxy.
3. The Proxy Committee may exercise its right to vote the preferred stock
which is being issued by DFTS to NMKT, by a majority vote of the Proxy Committee
members and such majority vote shall constitute the action of the Proxy
Committee and shall be fully effective and constitute the vote of the Proxy
Committee of the shares subject to this proxy. In the event that either Xx.
XxXxxx or Xx. Xxxxx dies or is unable to act or declines to act, the remaining
two members of the Proxy Committee, may act by unanimous vote, or by a single
vote if both Messrs McPhee and Xxxxx die, are unable to act or decline to act.
In the event of the death of Xx. Xxxxxx or his inability or disinclination to
act as a member of the Proxy Committee, NMKT may appoint a successor member of
the Proxy Committee to act in the place and stead of Xx. Xxxxxx. Furthermore, if
any member of the Proxy Committee is no longer an officer, director or employee
of either DFTS or NMKT, that person may no longer be entitled to act as a member
of the Proxy Committee and the remaining members of the Proxy Committee may
vote. However, if Xx. Xxxxxx ceases to be an officer, director or employee of
NMKT, that company may appoint a successor member of the Proxy Committee.
63
4. NMKT hereby irrevocably nominates, appoints and constitutes the Proxy
Committee, as specified above, the true and lawful attorney-in-fact to act on
behalf of NMKT with full power in the Proxy Committee to act in the name, place
and stead of NMKT and to represent NMKT at all meetings of shareholders of DFTS,
and to vote thereat all shares of the Class C and Class D preferred stock issued
to NMKT, to the full extent that NMKT would be entitled to vote thereat at such
meeting and NMKT further consents that the Proxy Committee may, on behalf of
NMKT, consent in writing with respect to all of such shares in lieu of a vote of
the shareholders at a meeting of such shareholders. This irrevocable proxy shall
also be fully applicable and shall apply to all votes that may take place either
at a meeting or by consent in writing for matters that may come before the
holder of the common stock of DFTS and the holders of preferred stock of DFTS.
5. This irrevocable proxy was given in consideration of the issuance to NMKT
of Class C and Class D preferred stock by DFTS and is part of the transaction
underlying the issuance of these shares. This irrevocable proxy is intended to
be irrevocable to the full extent as permitted under Section 212 of the Delaware
General Corporation Law.
WITNESS BY HAND AND SEAL of NMKT dated this 6th day of April, 2005.
NEW MARKET TECHNOLOGY, INC.
/s/ Xxxxxx Xxxxxx by:
------------------------------------
Xxxxxx Xxxxxx, President
64
ACKNOWLEDGMENT
--------------
STATE OF )
: ss.:
COUNTY OF )
On the ___ day of __________ in the year 2005, before me personally came
XXXXXX XXXXXX, to me known, who, being by me duly sworn, did depose and say that
he resides in _______________; that he is the President of NEW MARKET
TECHNOLOGY, INC., the corporation described in and which executed the above
instrument; and that he signed his name thereto by authority of the board of
directors of said corporation.
Notary Public
65
SUPPLEMENTAL SCHEDULES
----------------------
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.5
Obligations to Issue Common Stock
---------------------------------
1. Class B Convertible Preferred Stock - 1,192 shares outstanding, $1,000 par
value. Convertible into shares of common stock at a 50% discount to lowest
bid price during preceding 30 trading days, subject to shareholder holding
maximum of 9.9% of outstanding shares. [see Exhibit to Form 10-KSB]
2. 8% Convertible Note Payable - $635,000 outstanding, due 8/28/05. Principal
plus accrued interest convertible into shares of common stock at 25%
discount to lowest bid price for preceding five trading days.
3. 8% Convertible Note Payable - $100,800 outstanding, due 3/1/06. Principal
plus accrued interest convertible into shares of common stock at average
closing price for preceding ten trading days.
4. Stock Options - 1,000,000 outstanding [see Form 10-QSB dated 12/31/04 for
schedule of outstanding stock options]
5. Amendment to Xxxxxxxxx & Xxxxxxxxx Settlement Agreement - The Company is
obligated to issue 300,000 shares of common stock before April 30, 2005, to
Xxxxxxxxx & Xxxxxxxxx, as provided for in the Amendment to the Settlement
Agreement dated 6/1/04.
66
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.6.2
See Form 10-QSB for the period ended 12/31/04 and Form 10-KSB for the year ended
6/30/04.
67
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.6.3
NONE
68
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.6.4
NONE
69
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.10
Income & Sales Tax returns
As disclosed on Form 10-QSB for the period ended December 31, 2004, the Company
is in the process of filing certain deliquent federal income tax and state
franchise tax returns. As the Company sustained significant taxable losses
during the applicable periods, there are no income tax payments that will be due
with respect to these returns.
The Company is current in its sales tax reporting obligations.
70
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.11
NONE
71
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.12
Contracts and Xxxxxxxxxxx
..0 Xxxx
..0 Xxxx
..0 Xxxx
..4 See Note 4 to Form 10-QSB for the period-ended December 31, 2004 and Note 6
to Form 10-KSB for the year-ended June 30, 2004, for a complete schedule
and description of all notes payable and debt obligations.
..5 DWS Manufacturing, Inc., a wholly-owned subsidiary of DFTS, is party to a
4-year lease agreement for office space at 000X Xxxxxx Xxxx., Xxxxxxxxx,
XX, commencing on February 10, 2004.
..6 None
..7 None
..8 None
72
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.13
Licenses and Permits
NONE
73
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.15
Compliance with Law
NONE
74
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.17
Labor Relations
DFTS is not a party to any labor or collective bargaining agreement.
DFTS has not received any written notice from any labor union or group
representing or claiming to represent employees of DFTS.
No strike or work interruption is threatened against any ongoing DFTS work.
There are no claims, pending claims, or threatened claims against DFTS related
to unfair labor practices.
75
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 3.18
DFTS Insurance Policies
Type Carrier Policy Number
---- ------- -------------
Property Fireman's Fund Insurance Company MXI97062178
Worker's Compensation The State Insurance Fund I 1405 936-4
Group Medical Oxford Health Plans DM1684
76
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.11
Tax Returns & Reports
---------------------
An extension, good through September 15, 2005, has been submitted for the 2004
federal income tax. All other returns and reports have been timely filed and
submitted.
77
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.12
Title to Properties
-------------------
The following entities have UCC liens filed against DCI assets:
Marquette Commercial Finance, Inc.
Segic Company Ltd.
78
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.13
Agreements, Contracts and Commitments
-------------------------------------
4.13.1.1 None
4.13.1.2 None
4.13.1.3 None
4.13.1.4 DCI is a party to the employment agreement by and between IP
Voice/Digital Computer Integration Corp. and Xxxxx Xxxxxx. This
agreement covers the period of June 9, 2004 through June 8, 2005. Base
salary under this agreement is $150,000 per year.
4.13.1.5 Jupiter Service Center for office lease at 0000 Xxxxxxx Xxxx, Xxxxx
000, Xxxxx, Xxxxx 00000.
4.13.1.6 None
4.13.1.7 None
4.13.1.8 Cordsen Engineering PO# 2005 R001
L3 PO# RS45113
4.13.1.9 None
79
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.15
Licenses and Permits
--------------------
None
80
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.16
Litigation
----------
Collin County filed suit for 2002 property taxes on 10/02/03. The current
balance is approximately $1,100. DCI has been making monthly payments of $800 as
per agreement with plaintiff's attorney.
81
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.17
Compliance with Law
-------------------
NONE
82
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.19
Labor Relations
---------------
NONE
83
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.20
Insurance Policies
------------------
Type Carrier
---- -------
Property Hartford
Liability Hartford
Key Man New England
All employee insurance plans are provided through Vergetech, a subsidiary of
NewMarket Technology. Vergetech processes all payrolls through ADPTotalsource.
Workers' Comp Hartford
Medical UnitedHealthcare
Dental Aetna
Disability/Group Life Prudential
84
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.21
Bank Accounts
-------------
BANK NAME TYPE ACCOUNT#
--------------------------------------------------------------------------------
LEGACY BANK OF TEXAS OPERATING 763243
LEGACY BANK OF TEXAS SAVINGS 763268
--------------------------------------------------------------------------------
Both Bud and Xxxx Xxxxxxxxxxx are authorized on all accounts listed. Xxxxx
Xxxxxx has authority to wire funds from these accounts but no check signing
authority.
85
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.4
DCI owns stock in the following corporations:
Digitec Manufacturing Corporation
---------------------------------
DCI owns 1000 shares, which represents all shares outstanding of this subsidiary
corporation. Digitec has no assets and has had no operation subsequent to
12/31/98.
Kahuna Network Security
-----------------------
DCI owns 251,256 shares of restricted common stock that is subject to an
agreement whereby DCI could forfeit the stock upon receipt of payment of a note
in the amount of $62,814.
DCI Stock Obligations
---------------------
NONE
86
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.5.3
Material Changes to Stockholders' Equity or Net Income
------------------------------------------------------
None.
87
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 4.5.4
Post Financial Statement Date Adverse Changes
---------------------------------------------
None.
88
Attachment to Agreement By and Among
Defense Technology Systems, Inc.,
New Market Technology, Inc. and
Digital Computer Integration Corp.
SCHEDULE 6
Operations of Business of DCI
-----------------------------
NONE
89
