PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of March 8, 2004, by
and between IPVoice Communications, Inc., a Nevada corporation ("Purchaser") and
Digital Computer Integration Corp., a Texas corporation ("DCI").
RECITALS
WHEREAS, DCI is engaged in the business of providing security products
and related services.
WHEREAS, Purchaser has expressed its desire to make an investment in
DCI and to obtain a controlling interest in DCI.
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
I. PURCHASE AND SALE
1.1. Purchase and Sale. On the terms and subject to the conditions set
forth herein, at the Closing, DCI will issue 2,393,877 shares of its Common
Stock, $0.01 par value, which, upon issuance, will equal 51% of the issued and
outstanding capital stock of DCI (the "Issued Stock").
1.2. Interim Financing. Purchaser and DCI acknowledge and agree that
Purchaser has advanced certain amounts to DCI, and that the total outstanding
amount of such advances, including interest accrued thereon, is $237,015.61 (the
"Advanced Amount").
1.3. Purchase Price. Subject to adjustment pursuant to Section 1.4 below,
the purchase price (the "Purchase Price") for the Purchased Stock will be
$5,000,000, which is the estimated 2004 Revenue (as defined in Section 1.4(a)
below). The Purchase Price shall be paid at the Closing as follows:
(a) $100,000 of the Advanced Amount shall be forgiven upon execution of
this Agreement;
(b) Purchaser shall provide to DCI $250,000 in additional working
capital in the form of a convertible note to be immediately available to
DCI. The amount of the Advanced Amount in excess of $100,000 shall be
included in the $250,000 working capital amount; and
(c) Purchaser shall pay the remainder of the Purchase Price by issuing
its unsecured convertible promissory note to DCI, which shall be
substantially in the form attached hereto as Exhibit A, and shall be
convertible into unregistered, restricted common stock of the Purchaser
(the "Convertible Note").
1.4. Purchase Price Adjustment.
(a) On or prior to January 31, 2005, DCI shall prepare and
deliver to the Purchaser a statement (the "Revenue Statement") of the
2004 Revenue of DCI. Unless Purchaser delivers a notice to DCI in
writing of its objection to the calculation of the 2004 year Revenue
within 20 days after its receipt of the Revenue Statement, the Revenue
Statement shall be final and binding on the parties. For the purposes
of this Section 1.3, "2004 Revenue" shall mean the gross sales of DCI
during the 2004 calendar year.
(b) Purchaser and DCI shall attempt in good faith to resolve
any disagreements raised by the Purchaser with respect to the Revenue
Statement. If, at the end of such period, Purchaser and DCI do not
resolve such disagreements, either Purchaser or DCI may submit the
matter to a mutually acceptable independent accounting firm of
recognized standing to review the Revenue Statement and resolve any
remaining disagreements regarding the calculation of the 2004 Revenue.
In the event Purchaser and DCI cannot agree upon an accounting firm,
they shall choose an accounting firm by lot from accounting firms
having no material relationship to Purchaser or DCI and their
respective affiliates and having offices in locations suitable to
conduct such review (the "Accounting Firm"). The determination by the
Accounting Firm shall be final, binding and conclusive on the parties,
and judgment may be entered thereon in a court of competent
jurisdiction. The fees and expenses of the Accounting Firm shall be
divided equally among DCI and Purchaser.
(c) In the event that the 2004 Revenue is greater than the
Purchase Price, then the Purchase Price shall be increased, dollar for
dollar, by such amount (provided, however, that in no event shall the
Purchase Price be increased by more than 30%), and the Purchaser shall
issue its unsecured convertible promissory note in principal amount of
such increase, which shall be substantially in the form attached hereto
as Exhibit B.
(d) In the event that the 2004 Revenue is less than the
Purchase Price, then the Purchase Price shall be reduced, dollar for
dollar, by such amount (provided, however, that in no event shall the
Purchase Price be reduced by more than 30%), and the principal amount
of the Convertible Note shall be reduced by such amount. DCI shall
return the Convertible Note to Purchaser, who shall deliver a new
unsecured convertible promissory note to Purchaser, of like tenor as
the Convertible Note, for such reduced principal amount. To the extent
that the reduction in the Purchase Price is greater than the amount
outstanding under the Convertible Note, DCI shall immediately pay
Purchaser such excess by wire transfer of immediately available funds.
II. CLOSING
2.1. Closing. The closing of the purchase and sale of the Stock
("Closing"), will take place on March 8, 2004, (the "Closing Date") at the
offices of Xxxxxxx Xxxxxx & Xxxxxxx LLP, 000 X. Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx or at such other time and place mutually agreed to by the
parties.
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2.2. Purchaser Closing Deliveries. At the Closing, Purchaser shall deliver
to DCI (i) a stockholders' agreement, substantially in the form attached hereto
as Exhibit B (the "Stockholders' Agreement"), duly executed by Purchaser, (ii)
the Convertible Note, (iii) a certificate of the Secretary of Purchaser as to
the Purchaser's bylaws and resolutions of its board of directors approving the
transactions contemplated by this Agreement, (iv) a certificate of the Secretary
of State of Nevada as to the good standing of Purchaser in such jurisdiction,
and (v) such other documents or instruments as DCI may reasonably request in
connection with the consummation of the transactions contemplated by this
Agreement.
2.3. DCI Closing Deliveries. At the Closing, DCI shall deliver to Purchaser
(i) a stock certificate evidencing the Issued Stock, (ii) a receipt, duly
executed by DCI, acknowledging receipt of the Purchase Price, (iii) a copy of
DCI's articles of incorporation, certified by the Secretary of State of Texas
(iv) a certificate of the Secretary of DCI as to DCI's bylaws, resolutions of
its board of directors and shareholders approving the transactions contemplated
by this Agreement, (v) a certificate of the Secretary of State of Texas as to
the good standing of DCI in such jurisdiction, (vi) the Stockholders' Agreement,
duly executed by each current shareholder of DCI, and (vii) such other documents
or instruments as Purchaser may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement.
2.4. Conditions to DCI's Obligations. The obligations of DCI to consummate
the transactions provided for in this Agreement are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by DCI:
(a) All representations and warranties of Purchaser contained
in this Agreement will be true and correct in all material respects
(except those representations and warranties that are qualified by
materiality, which will be true and correct in all respects) at and as
of the date of this Agreement and at and as of the Closing Date, and
Purchaser will have performed and satisfied all agreements and
covenants required by this Agreement to be performed by it prior to or
on the Closing Date, and the president of Purchaser will each have
delivered to Purchaser a certificate dated the Closing Date to such
effect;
(b) No action, proceeding, claim or investigation by any
governmental authority or other person will have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which could reasonably be expected to have a
Material Adverse Effect if the transactions contemplated under this
Agreement are consummated; and
(c) Purchaser will have made the deliveries to DCI described
in Section 2.2.
2.5. Conditions to Purchaser's Obligations. The obligations of Purchaser to
consummate the transactions provided for in this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Purchaser:
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(a) All representations and warranties of DCI contained in
this Agreement will be true and correct in all material respects
(except those representations and warranties that are qualified by
materiality, which will be true and correct in all respects) at and as
of the date of this Agreement and at and as of the Closing Date, and
DCI will have performed and satisfied all agreements and covenants
required by this Agreement to be performed by it prior to or on the
Closing Date, and the president of DCI will each have delivered to
Purchaser a certificate dated the Closing Date to such effect;
(b) No action, proceeding, claim or investigation by any
governmental authority or other person will have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which could reasonably be expected to have a
Material Adverse Effect if the transactions contemplated under this
Agreement are consummated;
(c) [Intentionally omitted];
(d) DCI will have made the deliveries to Purchaser described
in Section 2.3;
(e) All federal, state and local government and regulatory and
third party consents, approvals and waivers necessary to the
consummation of the transactions contemplated by this Agreement will
have been obtained; and
(f) Xxxxxx Xxxxx shall have either (i) consented to the
transactions contemplated hereby and agreed to extend the Secured Term
Loan Agreement, dated August 15, 2003, between Xxxxxx Xxxxx and DCI,
and all related obligations of DCI (collectively, the "Xxxxx
Indebtedness") beyond its current maturity date, or (ii) assigned all
of its right, title and interest in and to the Xxxxx Indebtedness,
including without limitation all related security interests in any of
DCI's assets, to Purchaser.
III. REPRESENTATIONS AND WARRANTIES OF DCI
DCI hereby represents and warrants to Purchaser that:
3.1. Organization and Good Standing; Qualification. DCI is a corporation
duly organized, validly existing and in good standing under the laws of Texas
with all requisite corporate power and authority to carry on the business in
which it is engaged, to own the properties it owns, to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and is duly
qualified and licensed to do business and is in good standing in all
jurisdictions where the nature of its business makes such qualification
necessary, except, in each case, where the failure to have such power and
authority or to be so qualified or licensed would not, when taken together with
all other such failures, reasonably be expected to have a Material Adverse
Effect. DCI does not have any assets, employees or offices in any jurisdiction
other than the State of Texas.
3.2. Capitalization of DCI. The authorized capital stock of DCI consists of
10,000,000 shares of common stock, of which 2,300,000 are issued and outstanding
(prior to the issuance to Purchaser at the Closing) and 2,050,000 shares of such
capital stock are held in the treasury of DCI. All of issued and outstanding
shares of capital stock of DCI are duly authorized, validly issued, fully paid
and nonassessable. There exist no options, warrants, subscriptions or other
rights to purchase, or securities convertible into or exchangeable for, the
capital stock of DCI. Except as set forth herein, neither DCI nor, to DCI's
knowledge, any shareholder of DCI is party to or bound by, nor do they have any
knowledge of, any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of DCI. No shares of capital stock of DCI have
been issued or disposed of in violation of the preemptive rights, if any, of any
of DCI's shareholders. All accrued dividends on the capital stock of DCI,
whether or not declared, have been paid in full.
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3.3. Corporate Records. The Articles of Incorporation and the Bylaws of DCI
delivered by DCI to Purchaser pursuant to Section 2.3 hereof are true, correct
and complete copies thereof, as in effect on the Closing Date. The minute book
of DCI, a copy of which will be delivered to Purchaser on the Closing Date,
contain accurate minutes of all meetings of, and accurate consents to all
actions taken without meetings by, the Board of Directors, any committees
thereof, and the shareholders of DCI since their respective formations.
3.4. Authorization and Validity. The execution, delivery and performance by
DCI of this Agreement and the other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by DCI and its shareholders. This Agreement and each other agreement
contemplated hereby have been duly executed and delivered by DCI and constitute
legal, valid and binding obligations of DCI, enforceable against DCI in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
3.5. Subsidiaries. DCI does not own, directly or indirectly, any of the
capital stock of any other corporation or any equity, profit sharing,
participation or other interest in any corporation, partnership, joint venture
or other entity.
3.6. No Violation. Neither the execution, delivery or performance of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation or Bylaws of DCI, or
any agreement, indenture or other instrument under which DCI is bound or to
which the assets of DCI are subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon the Issued Stock or any
of the assets of DCI, or (b) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over DCI.
3.7. Consents. Except for the consent of Xxxxxx Xxxxx, as set forth in
Section 2.5(f) hereof, no consent, authorization, approval, permit or license
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of DCI.
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3.8. Financial Statements. DCI has furnished to Purchaser copies of the
balance sheet and related statements of income, retained earnings and cash flows
for the twelve-month periods ended December 31, 2002 and 2003, including the
notes thereto (collectively, the "Financial Statements"). The Financial
Statements are in accordance with the books and records of DCI, fairly present
the financial condition and results of operations of DCI as of the dates and for
the periods indicated and have been prepared in conformity with GAAP applied on
a consistent basis with prior periods.
3.9. Liabilities and Obligations. The Financial Statements reflect all
liabilities of DCI, accrued, contingent or otherwise arising out of transactions
effected or events occurring on or prior to the date hereof. All reserves shown
in the Financial Statements are appropriate, reasonable and sufficient to
provide for losses thereby contemplated. Except as set forth in the Financial
Statements, DCI is not liable upon or with respect to, or obligated in any other
way to provide funds in respect of or to guarantee or assume in any manner, any
debt, obligation or dividend of any person, corporation, association,
partnership, joint venture, trust or other entity, and DCI knows of no basis for
the assertion of any other claims or liabilities of any nature or in any amount.
3.10. Employee Matters. Schedule 3.10(a) contains a complete and accurate
list of the names, titles and cash compensation, including without limitation
wages, salaries, bonuses (discretionary and formula) and other cash compensation
of all employees of DCI. In addition, Schedule 3.10(a) contains a complete and
accurate description of: (i) all increases in compensation of employees of DCI
during the current and immediately preceding fiscal years of DCI; and (ii) any
promised increases in compensation of employees of DCI that have not yet been
effected. Schedule 3.10(b) contains a complete and accurate list of all
compensation plans, arrangements or practices (the "Compensation Plans")
sponsored by DCI or to which DCI contributes on behalf of its employees, other
than Employee Benefit Plans listed in Schedule 3.12. The Compensation Plans
include without limitation plans, arrangements or practices that provide for
severance pay, deferred compensation, incentive, bonus or performance awards,
and stock ownership or stock options. DCI has no employment agreements or
employee handbooks or manuals, except as set forth on Schedule 3.10(c). DCI: (i)
has been and is in compliance with all laws, rules, regulations and ordinances
respecting employment and employment practices, terms and conditions of
employment and wages and hours; and (ii) is not liable for any arrears of wages
or penalties for failure to comply with any of the foregoing. DCI has not
engaged in any unfair labor practice or discriminated on the basis of race,
color, religion, sex, national origin, age or handicap in its employment
conditions or practices. There are no: (A) unfair labor practice charges or
complaints or racial, color, religious, sex, national origin, age or handicap
discrimination charges or complaints pending or threatened against DCI before
any federal, state or local court, board, department, commission or agency nor
does any basis therefor exist; or (B) existing or threatened labor strikes,
disputes, grievances, controversies or other labor troubles affecting DCI, nor
does any basis therefor exist. DCI has never been a party to any agreement with
any union, labor organization or collective bargaining unit. No employees of DCI
are represented by any union, labor organization or collective bargaining unit.
To the best knowledge of DCI, the employees of DCI have no intention to and have
not threatened to organize or join a union, labor organization or collective
bargaining unit. All employees of DCI are citizens of, or are authorized to be
employed in, the United States.
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3.11. Employee Benefit Plans. Schedule 3.11 contains a complete and
accurate list of all employee benefit plans (the "Employee Benefit Plans")
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) sponsored by DCI or to which DCI contributes
on behalf of its employees and all Employee Benefit Plans previously sponsored
or contributed to on behalf of its employees within the three years preceding
the date hereof. DCI has provided Purchaser with copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. Each
Employee Benefit Plan has been administered and maintained in compliance with
all laws, rules and regulations. No Employee Benefit Plan is currently the
subject of an audit, investigation, enforcement action or other similar
proceeding conducted by any state or federal agency. No prohibited transactions
(within the meaning of Section 4975 of the Code) have occurred with respect to
any Employee Benefit Plan. No threatened or pending claims, suits or other
proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries. DCI has received a
favorable determination letter or ruling from the Internal Revenue Service for
each Employee Benefit Plan intended to be qualified within the meaning of
Section 401(a) of the Code and/or tax-exempt within the meaning of Section
501(a) of the Code. No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan. DCI does not have any liability to pay excise taxes with
respect to any Employee Benefit Plan under applicable provisions of the Code or
ERISA. No facts or circumstances exist that would result in the imposition of
liability against Purchaser by the Pension Benefit Guaranty Corporation as a
result of any act or omission by DCI or any member of a Controlled Group, as
defined in ERISA. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA. DCI has no obligation or commitment to provide medical, dental or life
insurance benefits to or on behalf of any of its employees who may retire or any
of its former employees who have retired from employment with DCI.
3.12. Absence of Certain Changes. Since December 31, 2003, DCI has not: (a)
suffered any material adverse change in its condition (financial or otherwise),
operations, assets, liabilities, business or prospects; (b) contracted for the
purchase of any capital assets having a cost in excess of $50,000 or paid any
capital expenditures in excess of $50,000; (c) incurred any indebtedness for
borrowed money or issued or sold any debt securities; (d) incurred or discharged
any liabilities or obligations except in the ordinary course of business; (e)
paid any amount on any indebtedness prior to the due date, or forgiven or
cancelled any debts or claims; (f) mortgaged, pledged or subjected to any
security interest, lien, lease or other charge or encumbrance any of its
properties or assets; (g) suffered any damage or destruction to or loss of any
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assets (whether or not covered by insurance) that has materially and adversely
affected, or could materially and adversely affect, its business; (h) acquired
or disposed of any assets except in the ordinary course of business; (i) written
up or written down the carrying value of any of its assets; (j) changed the
costing system or depreciation methods of accounting for its assets; (k) lost or
terminated any employee, customer or supplier, the loss or termination of which
has materially and adversely affected, or could materially and adversely affect,
its business or assets; (l) increased the compensation of any director or
officer; (m) increased the compensation of any employee except in the ordinary
course of business; or (n) entered into any other commitment or transaction or
experienced any other event that is material to this Agreement or to any of the
other agreements and documents executed or to be executed pursuant to this
Agreement or to the transactions contemplated hereby or thereby, or that has
materially and adversely affected, or could materially and adversely affect, the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of DCI (a "Material Adverse Effect").
3.13. Title; Leased Assets. DCI does not own any real property. DCI has
good, valid and marketable title to all tangible and intangible personal
property owned by it (collectively, the Personal Property"). Except for the
Commercial Lease Agreement between Jupiter Service Center, Ltd. and DCI, dated
October 2, 2000, as amended on November 1, 2002 (the "Real Property Lease"),
there are no leases of real and personal property to which DCI is a party,
either as lessor or lessee. The Personal Property constitutes the only personal
property used in the conduct of the business of DCI. The Real Property Lease is
valid and enforceable in accordance with their respective terms except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
3.14. Commitments. Schedule 3.14 contains a list of all contracts,
agreements and understandings, oral or written, to which DCI is a party (the
"Commitments"). There are no existing defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of time
or both, would constitute defaults by DCI , and no penalties have been incurred
nor are amendments pending. The Commitments are in full force and effect and are
valid and enforceable obligations of the parties thereto in accordance with
their respective terms, and no defenses, off-sets or counterclaims have been
asserted or, to the best knowledge of DCI, may be made by any party thereto, nor
has DCI waived any rights thereunder. DCI has not received notice of any default
with respect to any Commitment. Except as contemplated hereby, DCI has received
no notice of any plan or intention of any other party to any Commitment to
exercise any right to cancel or terminate any Commitment or agreement, and DCI
knows of no fact that would justify the exercise of such a right. DCI does not
currently contemplate, or have reason to believe any other person or entity
currently contemplates, any amendment or change to any Commitment. None of the
customers or suppliers of DCI has refused, or communicated that it will or may
refuse, to purchase or supply goods or services, as the case may be, or has
communicated that it will or may substantially reduce the amounts of goods or
services that it is willing to purchase from, or sell to, DCI .
3.15. Insurance. DCI carries property, liability, workers' compensation and
such other types of insurance as is customary in the industry of the insured.
DCI has provided Purchaser with a list and brief description of all insurance
policies of DCI. Such insurance shall be outstanding and duly in force without
interruption up to and including the Closing Date.
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3.16. Patents, Trade-marks, Service Marks and Copyrights. DCI owns all
patents, trade-marks, service marks and copyrights, if any, necessary to conduct
its business, or possesses adequate licenses or other rights, if any, therefor,
without conflict with the rights of others. Set forth in Schedule 3.16 is a true
and correct description of the following (the "Proprietary Rights"): (i) all
trade-marks, trade-names, service marks and other trade designations, including
registrations and applications therefor, and all patents, copyrights and
applications currently owned, in whole or in part, by DCI with respect to the
business of DCI, and all licenses, royalties, assignments and other similar
agreements relating to the foregoing to which DCI is a party (including
expiration date if applicable); and (ii) all agreements relating to technology,
know-how or processes that DCI is licensed or authorized to use by others, or
which it licenses or authorizes others to use. DCI has the sole and exclusive
right to use the Proprietary Rights without infringing or violating the rights
of any third parties. Use of the Proprietary Rights does not require the consent
of any other person and the Proprietary Rights are freely transferable. No claim
has been asserted by any person to the ownership of or right to use any
Proprietary Right or challenging or questioning the validity or effectiveness of
any license or agreement constituting a part of any Proprietary Right, and DCI
knows of no valid basis for any such claim. Each of the Proprietary Rights is
valid and subsisting, has not been canceled, abandoned or otherwise terminated
and, if applicable, has been duly issued or filed. DCI has no knowledge of any
claim that, or inquiry as to whether, any product, activity or operation of DCI
infringes upon or involves, or has resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened that challenge
the rights of DCI with respect thereto.
3.17. Trade Secrets and Customer Lists. DCI has the right to use, free and
clear of any claims or rights of others, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by DCI. DCI is not using or in
any way making use of any confidential information or trade secrets of any third
party, including without limitation any past or present employee of DCI.
3.18. Taxes. DCI has duly and timely filed with the appropriate
governmental agencies all income, excise, corporate, franchise, property, sales,
use, payroll, withholding and other tax returns (including information returns)
and reports required to be filed by the United States or any state or any
political subdivision thereof or any foreign jurisdiction. All such tax returns
or reports are complete and accurate and properly reflect the taxes of DCI for
the periods covered thereby. DCI has paid or accrued all taxes, penalties and
interest which have become due with respect to any returns that it has filed and
any assessments of which it is aware, except as set forth on Schedule 3.18. DCI
is not delinquent in the payment of any tax, assessment or governmental charge,
except as set forth on Schedule 3.18. No tax deficiency or delinquency has been
asserted against DCI. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of DCI that
could be asserted by any taxing authority, except as set forth on Schedule 3.18.
There is no taxing authority audit of DCI pending, or, to the knowledge of DCI,
threatened. DCI has not violated any federal, state, local or foreign tax law.
DCI has not granted an extension to any taxing authority of the limitation
period during which any tax liability may be assessed or collected. All monies
required to be withheld by DCI and paid to governmental agencies for all income,
social security, unemployment insurance. Sales excise, use and other taxes have
been: (a) collected or withheld and either paid to the respective governmental
agencies or set aside in accounts for such purpose; or (b) properly reflected in
the Financial Statements.
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3.19. Compliance with Laws. DCI has complied with all laws, regulations and
licensing requirements and has filed with the proper authorities all necessary
statements and reports. There are no existing violations by DCI of any federal,
state or local law or regulation that could affect the property or business of
DCI. DCI possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business as now conducted.
3.20. Finder's Fee. DCI Stockholder has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
3.21. Litigation. There are no legal actions or administrative proceedings
or investigations instituted, or to the best knowledge of DCI threatened,
against or affecting, or that could affect, DCI, any of the Shares, or the
business of DCI, except as set forth on Schedule 3.21. Neither DCI nor any
Stockholder is: (i) subject to any continuing court or administrative order,
writ, injunction or decree applicable specifically to DCI or to its business,
assets, operations or employees; or (ii) in default with respect to any such
order, writ, injunction or decree. DCI knows of no basis for any such action,
proceeding or investigation.
3.22. Accuracy of Information Furnished. All information furnished to
Purchaser by DCI hereby or in connection with the transactions contemplated
hereby is true, correct and complete in all material respects. Such information
states all facts required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
are made, true, correct and complete in all material respects.
3.23. Condition of Fixed Assets. All of the plants, structures and
equipment (the "Fixed Assets") owned by DCI are in good condition and repair for
their intended use in the ordinary course of business and conform in all
material respects with all applicable ordinances, regulations and other laws and
there are no known latent defects therein.
3.24. Inventory. All of the inventory owned by DCI in good, current,
standard and merchantable condition and is not obsolete or defective. Purchase
commitments for merchandise are not in excess of normal requirements and, taken
as a whole, are not at prices in excess of reasonable market prices. DCI has
presently, and at the Closing Date will have, the types and quantities of
inventories appropriate, taken as a whole, to conduct its business consistently
with past practices.
3.25. Books of Account. The books of account of DCI have been kept
accurately in the ordinary course of business, the transactions entered therein
represent bona fide transactions and the revenues, expenses, assets and
liabilities of DCI have been properly recorded in such books.
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3.26. Corporate Name. There are no actions, suits or proceedings pending,
or to the best knowledge of DCI threatened, against or affecting DCI that could
result in any impairment of the right of DCI to use the name "Digital Computer
Integration". The use of the name "Digital Computer Integration" does not
infringe the rights of any third party nor is it confusingly similar with the
corporate name of any third party. After the Closing Date, no person or business
entity other than DCI will be authorized, directly or indirectly, to use the
name "Digital Computer Integration" or any name confusingly similar thereto.
3.27. Accounts Receivable. All accounts receivable of DCI have arisen from
bona fide transactions in the ordinary course of business and are valid and
enforceable claims subject to no right of set-off or counterclaim.
3.28. Product Warranties. There is no claim against or liability of DCI on
account of product warranties or with respect to the manufacture, sale or rental
of defective products and there is no basis for any such claim on account of
defective products heretofore manufactured, sold or rented that is not fully
covered by insurance.
3.29. Banking Relations. DCI has provided Purchaser with a complete and
accurate list of all arrangements that DCI has with any bank or other financial
institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
3.30. Environmental Matters. DCI is not currently in violation of, or
subject to any existing, pending or threatened investigation or inquiry by any
governmental authority or to any remedial obligations under, any laws or
regulations pertaining to health or the environment (hereinafter sometimes
collectively called "Environmental Laws"), and this representation and warranty
would continue to be true and correct following disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances, if
any, pertaining to the assets and operations of DCI. To the best knowledge of
DCI, the assets of DCI have never been used in a manner that would be in
violation of any of the Environmental Laws. DCI has not obtained and is not
required to obtain, and DCI has no knowledge of any reason Purchaser will be
required to obtain, any permits, licenses or similar authorizations to
construct, occupy, operate or use any buildings, improvements, fixtures and
equipment owned or leased by DCI by reason of any Environmental Laws.
3.31. Issued Stock. Upon the Closing, the Issued Stock is duly authorized
and when issued at the Closing, will be validly issued, fully paid and
nonassessable and not subject to any preemptive or similar rights.
3.32. Investment Intent. DCI is acquiring the Convertible Note for its own
account for investment and not with a view to, or for sale or other disposition
in connection with, any distribution thereof, nor with any present intention of
selling or otherwise disposing of the same.
3.33. Securities Act Applications. DCI is aware that the Convertible Note
may not be resold without registration under the Securities Act or some other
exemption therefrom and the Convertible Note. DCI believes it has received all
the information, financial and other, it considers necessary or appropriate for
deciding whether to accept the Convertible Note as consideration under this
Agreement. DCI has had an opportunity to ask questions and receive answers from
the Purchaser regarding the terms and conditions of the Convertible Note and the
business, properties, prospects and financial condition of the Purchaser.
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IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Stockholders that:
4.1. Existence; Good Standing. Purchaser is duly incorporated, validly
existing and in good standing under the laws of the state of Nevada, and has all
requisite power and authority to enter into, deliver and consummate the
transactions contemplated by this Agreement.
4.2. Authorization. Purchaser has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Purchaser. No other corporate
proceedings on the part of Purchaser are necessary to approve this Agreement or
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Purchaser and constitutes
the valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms except to the extent such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws in
effect relating to creditors' rights generally and except that the availability
of equitable remedies, including specific performance, is subject to the
discretion of the court before which any procedure may be brought (whether at
law or in equity).
4.3. No Violation; Consents. The execution, delivery and performance of
this Agreement will not (with or without notice or passage of time or both) (i)
violate any law, judgment, order, writ, injunction, decree, statute, rule or
regulation of any court, administrative agency, bureau, board, commission,
office, authority, department or other governmental entity applicable to
Purchaser, or (ii) violate or conflict with any of the provisions of the
Articles of Incorporation or By-Laws of Purchaser, nor will contravene, conflict
with or result in a violation of any resolution adopted by Purchaser, or the
board of directors or any committee of the board of directors of Purchaser or
(iii) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default or breach) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or increase the amount payable by Purchaser under any
contract or permit. No Consent of any Governmental Authority, or any other
person is necessary in connection with the execution and delivery by Purchaser
of this Agreement.
4.4. Commissions and Fees. Purchaser has not retained, and does not owe any
fees to, any finder, broker, agent, financial advisor or other intermediary in
connection with the transactions contemplated by this Agreement.
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V. COVENANTS
5.1. Closing Efforts; Additional Agreements. Each of the parties will use
its reasonable best efforts to take all action and to do all things necessary,
proper or advisable in order to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing any
further action is necessary (a) to carry out the intents and purposes of this
Agreement or (b) to vest Purchaser with full title to the Stock, free and clear
of all Liens.
5.2. Public Announcements. Except as required by applicable law, securities
rules or regulations, neither Purchaser nor DCI nor any Stockholder shall make,
issue or release any oral or written public announcement or statement
concerning, or acknowledge the existence of, or reveal the terms, conditions and
status of, the transactions contemplated by this Agreement, without the other
party's prior written approval of, and concurrence in, the contents of such
announcement, acknowledgement or statement.
5.3. Commitment to Provide Financing. Purchaser agrees to provide up to
$1,000,000 to DCI in purchase order financing in conjunction with signed
customer contracts that net DCI 18% more than the required receivables
financing.
5.4. Employment Agreement. Concurrently with the Closing, DCI shall enter
into a one-year employment agreement with Xx. Xxxxx "Xxx" Maciekowicz,
substantially in the form attached hereto as Exhibit C. For a period of one year
from and after the closing, Purchaser shall use its reasonable best efforts to
cause DCI to maintain such employment agreement in full force and effect.
VI. TERMINATION
6.1. Termination. At any time before the Closing, this Agreement may be
terminated (i) by mutual written consent of the parties; (ii) by either
Purchaser, on one hand, or DCI, on the other, if there has been a
misrepresentation or a breach of warranty or a breach or nonfulfillment of a
covenant by the other, which breach or nonfulfillment of a covenant has gone
uncured for a period of 10 days after giving notice thereof; or (iii) by either
Purchaser, on one hand, or DCI, on the other, if the Closing does not occur on
or before March 8, 2004 (or such later date as the parties may mutually agree),
unless the failure of the Closing to occur by such date will be due to the
action or failure to act of the party seeking to terminate this Agreement, which
action or failure to act constitutes a breach of this Agreement.
6.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 6.1, written notice of such will promptly (but in
any event within 5 days) be given to the other party specifying the provision
pursuant to which such termination is made, and this Agreement will, upon the
effective date of such notice, become null and void and of no further force or
effect, and no party (or any of its affiliates or representatives) will have any
liability or obligation under this Agreement, except for any liability of any
party then in breach.
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VII. INDEMNIFICATION
7.1. Indemnification by DCI. DCI shall indemnify and hold harmless the
Purchaser, its successors and assigns, and their respective officers, directors,
agents, employees and representatives (the "Purchaser Indemnitees"), from and
against, and will pay them the amount of, any and all losses, costs, claims,
liabilities, damages (including incidental and consequential damages), penalties
and expenses (including reasonable attorneys' and auditors' fees and the
reasonable costs of investigation and defense) (collectively, "Losses"),
incurred or suffered by the Purchaser Indemnitees relating to or arising out of
or in connection with any of the following: (i) any breach or inaccuracy as of
the date hereof in any representation or warranty made by DCI in Article III of
this Agreement or any closing document required to be delivered by DCI under
this Agreement or (ii) any breach or nonfulfillment by DCI of any of its
covenants, or agreements or other obligations in this Agreement or any closing
document required to be delivered by DCI under this Agreement, which breach or
nonfulfillment is not cured within 15 days after written notice thereof from
Purchaser to DCI.
7.2. Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless DCI, its successors and assigns, and their respective officers,
directors, agents, employees and representatives (the "DCI Indemnitiees"), from
and against, and will pay them the amount of, any and all Losses incurred or
suffered by the DCI Indemnitees relating to or arising out of or in connection
with any of the following: (i) any breach or inaccuracy as of the date hereof in
any representation or warranty made by Purchaser in Article IV of this Agreement
or any closing document required to be delivered by Purchaser under this
Agreement or (ii) any breach or nonfulfillment by the Purchaser of any of its
covenants, or agreements or other obligations in this Agreement or any closing
document required to be delivered by the Purchaser under this Agreement, which
breach or nonfulfillment is not cured within 15 days after written notice
thereof from DCI to Purchaser.
7.3. Claims. If a claim for indemnification is to be made by a party
entitled to indemnification under this Agreement (the "Indemnified Party"), the
Indemnified Party shall promptly give notice to the party obligated to provide
indemnification under this Agreement (the "Indemnifying Party") of such claim,
including the amount the Indemnified Party will be entitled to receive hereunder
from the Indemnifying Party; provided, however, that the failure of the
Indemnified Party to promptly give notice shall not relieve the Indemnifying
Party of its obligations under this Article VII. If the Indemnifying Party does
not object in writing to such claim within 20 days after receiving notice
thereof, the Indemnified Party shall be entitled to recover, on the 21st day
after such notice was given, from the Indemnifying Party the amount of such
claim, and no later objection by the Indemnifying Party shall be permitted or
effective. If the Indemnifying Party agrees that it has an indemnification
obligation under this Article VII with respect to such claim, but timely objects
as to the amount of such claim, the Indemnified Party shall nevertheless be
entitled to recover, on the 21st day after such notice was given, from the
Indemnifying Party the undisputed lesser or liquidated amount of such claim,
without prejudice to the Indemnified Party's claim for the difference.
7.4. Failure of Indemnifying Person to Act. In the event that the
Indemnifying Party does not assume the defense of any claim, suit, action or
proceeding covered by indemnification under this Article VII, then any failure
of the Indemnified Party to defend or to participate in the defense of any such
claim, suit, action or proceeding or to cause the same to be done, shall not
relieve the Indemnifying Party of its obligations under this Article VII.
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7.5. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing and shall be deemed to
have been relied upon and shall not be affected in any respect by the Closing,
any investigation conducted by any party or by any information which any party
may receive Notwithstanding the foregoing sentence, the representations and
warranties contained in this Agreement shall terminate on the second anniversary
of the Closing (the "Survival Period"); provided, however, that such liability
shall not terminate (but shall survive until resolved among the parties) with
respect to any claim, whether or not fixed as to liability or liquidated as to
amount, with respect to which the Indemnified Party has given notice to the
Indemnifying Party on or prior to the expiration date of the Survival Period.
VIII. MISCELLANEOUS
8.1. Counterparts; Facsimile. This Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile transmission, and a facsimile of this Agreement or of a
signature of a party thereto shall be effective as an original.
8.2. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement shall be governed by the laws of the State of Delaware,
without reference to its internal choice of law provisions.
8.3. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
8.4. Successors and Assigns. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
8.5. Headings. The descriptive headings of this Agreement are inserted for
convenience of reference only and do not constitute a part of and shall not be
utilized in interpreting this Agreement.
8.6. Specific Performance. The parties hereto shall have all rights and
remedies set forth in this Agreement and all rights and remedies available under
any applicable law. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party may, in its sole discretion, apply to any court of law or
equity of competent jurisdiction for specific performance or injunctive relief
(without posting bond or other security) in order to enforce, or prevent any
violations of, the provisions of this Agreement.
15
8.7. Entire Agreement. This Agreement and the Schedules and Exhibits hereto
constitute and encompass the entire agreement and understanding of the parties
hereto with regard to the transactions to be effected hereby.
8.8. Amendments; Waivers. This Agreement shall not be altered, amended or
supplemented except by a writing signed by Purchaser and DCI. Any failure of any
of the parties hereto to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, provided
that any such waiver of any term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition, and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any later
default thereof or of any other term, covenant, agreement or condition.
8.9. Notices. Any notices required or permitted to be sent hereunder shall
be in writing and shall be delivered personally or sent by facsimile
transmission, electronic mail or delivered by overnight courier service to the
following addresses, or such other address as any party hereto designates by
written notice to the other party, and shall be deemed to have been given upon
delivery, if delivered personally, upon the transmission thereof if sent by
facsimile (with telephonic confirmation) or by electronic mail (with delivery
notification) provided that receipt of transmission occurs during normal
business hours, or one business day after delivery to the courier, if delivered
by overnight courier service provided the deadline for overnight deliveries for
such courier service has been met:
If to Purchaser:
IPVoice Communications, Inc.
c/o Vergetech Incorporated
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Fax No. 000-000-0000
Telephone No.: 000-000-0000 (x209)
Attention: Xxxxxx Xxxxxx
With a copy to:
Xxxxxxx Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to DCI:
Digital Computer Integration Corp.
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attn: Xx. Xxxxx "Bud" Maciekowicz
Phone:
Fax:
16
With a copy to:
Xxxxx & Xxxxx, L.L.P.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxx Xxxxx, Xx.
Phone: (000) 000-0000
Fax: (000) 000-0000
17
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement
as of the date and year first above written.
IPVOICE COMMUNICATIONS, INC.
By:
--------------------------------------------------
Its:
----------------------------------------
DIGITAL COMPUTER INTERGRATION CORP.
By:
--------------------------------------------------
Its:
----------------------------------------
Exhibit A
---------
Form of Convertible Note
See Attached
Exhibit B
---------
Form of Stockholders' Agreement
See Attached
Exhibit C
---------
Form of Employment Agreement
See Attached
