Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
BETWEEN AND AMONG
DIGITAL COMPUTER INTEGRATION CORPORATION,
DEFENSE TECHNOLOGY SYSTEMS, INC.,
XXXXX XXXXXXXXXXX
AND
SKYLYNX COMMUNICATIONS, INC.
AND
SKYLYNX ACQUISITION CORP.
DATED AS OF DECEMBER 16, 2005
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into this 16th day of December, 2005, by and among DIGITAL COMPUTER INTEGRATION
CORPORATION, a Texas corporation ("DCI"); DEFENSE TECHNOLOGY SYSTEMS, INC., a
Delaware corporation ("DFTS"), a shareholder of DCI; XXXXX XXXXXXXXXXX and XXXXX
XXXX XXXXXXXXXXX, ("ZM")individually, collectively and as shareholders of DCI;
(hereafter, DFTS and ZM may each be referred to as a "Shareholder" and
collectively be referred to as "Shareholders"); SKYLYNX COMMUNICATIONS, INC., a
Delaware corporation ("SkyLynx"); and SKYLYNX ACQUISITION CORP., a Colorado
Subsidiary of SKYLYNX ("SAC"). DCI, DFTS, ZM, SKYLYNX and SAC are hereinafter
sometimes individually referred to as a "party" and collectively as the
"parties".
WITNESETH:
WHEREAS, DCI is engaged in the development, sale and installation of
high-value quality communications, information technology and security systems
for federal, state, and local governments, as well as commercial customers; and
WHEREAS, DFTS is the record and beneficial owner of shares of common stock
of DCI representing 51% of the total issued and outstanding shares of equity
securities of DCI; and ZM is the record and beneficial owner of shares of common
stock of DCI representing 49% of the total issued and outstanding shares of
equity securities of DCI; and
WHEREAS, SKYLYNX is the owner in the aggregate of ten (10) shares (the
"Shares") of the issued and outstanding Common Stock of SAC, $.001 par value per
share, representing all the issued and outstanding shares of the capital stock
of SAC;
WHEREAS, for federal income tax purposes, the merger of SAC and DCI is
intended to qualify as a tax-free reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants under which a merger of SAC and DCI will occur.
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
SECTION 1: GENERAL DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 Affiliate. "Affiliate" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.2 Agreement. "Agreement" shall include this Agreement and any and all
documents and instruments executed in connection with the Merger (as hereinafter
defined).
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1.3 Best Knowledge. "Best Knowledge" shall mean both what a Person knew as
well as what the Person should have known had the Person exercised reasonable
diligence. When used with respect to a Person other than a natural person, the
term "Best Knowledge" shall include matters that are known to the directors and
officers of the Person.
1.4 Control. "Control" and all derivations thereof shall mean the ability
to either (i) vote (or direct the vote of) 50% or more of the voting interests
in any Person or (ii) direct the affairs of another, whether through voting
power, contract or otherwise.
1.5 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.6 Fiscal Year. "Fiscal Year" shall mean a twelve-month period beginning
July 1.
1.7 Governmental Authority. "Governmental Authority "shall mean any and all
applicable foreign, federal, state or local governments, governmental
institutions, public authorities and governmental entities of any nature
whatsoever, and any subdivisions or instrumentalities thereof, including, but
not limited to, departments, boards, bureaus, commissions, agencies, courts,
administrations and panels, and any division or instrumentalities thereof,
whether permanent or ad hoc and whether now or hereafter constituted or
existing.
1.8 Governmental Requirement. "Governmental Requirement" shall mean any and
all applicable laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules regulations, interpretations,
guidelines, directions, orders, judgments, writs, injunctions, decrees,
decisions or similar items or pronouncements, promulgated, issued, passed or set
forth by any Governmental Authority.
1.9 Legal Requirements. "Legal Requirements" means applicable common law
and any applicable statute, ordinance, code or other laws, rule, regulation,
order, technical or other standard, requirement, judgment, or procedure enacted,
adopted, promulgated, applied or followed by any Governmental Authority,
including, without limitation, any order, decree, award, verdict, findings of
fact, conclusions of law, decision or judgment, whether or not final or
appealable, of any court, arbitrator, arbitration board or administrative
agency.
1.10 Net Worth. "Net Worth" shall mean the assets of a Person minus the
liabilities of the Person, as of a given date as determined in accordance with
generally accepted accounting principles consistently applied with prior
periods.
1.11 Person. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.12 Exhibit. Unless otherwise stated herein, the term "Exhibit" when used
in this Agreement shall refer to the Exhibits to this Agreement. The Exhibits to
this Agreement may be attached to this Agreement or may be set forth in a
separate document denoted as the Exhibits to this Agreement, or both, and such
Exhibits are incorporated herein by reference for all purposes.
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1.13 Section. Unless otherwise stated herein, the term "Section" when used
in this Agreement shall refer to the Sections of this Agreement.
1.14 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.15 Taxes. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
SECTION 2: THE MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 2.3 herein). SAC shall be merged (the
"Merger") with and into DCI upon the terms and conditions set forth herein as
permitted by and in accordance with the Colorado Business Corporation Act (the
"CBCA") and the Texas Business Corporation Act ("TBCA"). Thereupon, the separate
existence of SAC shall cease, and DCI, as the surviving corporation in the
Merger (the "Surviving Corporation"), shall continue to exist under and be
governed by the TBCA, with all its purposes, objects, rights, privileges,
immunities, powers and franchises continuing unaffected and unimpaired by the
Merger. The name of the Surviving Corporation shall be "DCI ."
2.2 Filing. As soon as practicable following fulfillment or waiver of the
conditions specified in Sections 8.2 and 8.3 hereof, and provided that this
Agreement has not been terminated pursuant to Section 12 hereof, SAC and DCI
will cause a Statement of Merger and Articles of Merger, in the form attached
hereto as Exhibit 2.2, to be executed, acknowledged and filed with the
Secretaries of State of each of Colorado and Texas as provided in applicable
provisions of the CBCA and TBCA and obtain a copy of the Articles of Merger,
certified by the Secretaries of State of the States of Colorado and Texas.
2.3 Effective Time of the Merger. The Merger shall become effective
immediately upon the filing of the Statement of Merger and Articles of Merger
with the Secretaries of State of the States of Colorado and Texas in accordance
with the CBCA and TBCA. The date and time of the completion of such filings is
herein sometimes referred to as the "Effective Time".
2.4 Closing: Closing Date. Subject to the terms and conditions set forth in
the Agreement, the consummation of the transactions referenced above shall take
place (the "Closing") on or before January 16, 2006, at 10:00 a.m. Eastern Time
at the offices of SKYLYNX, 000 Xxxx Xxxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxx 00000,
or at such other time, date and place as DCI and SAC shall designate (the
"Closing Date").
SECTION 3: APPROVALS AND REGULATORY MATTERS
3.1 SKYLYNX Approvals. Subject to the provisions hereof, the Board of
Directors of SKYLYNX shall approve the Merger and the transactions provided for
or contemplated by this Agreement; provided, however, that such approvals shall
be subject to their satisfaction that the consummation of the Merger shall be
and is exempt from the registration requirements of the Securities Act, is
undertaken without violation of the anti-fraud provisions of the Securities Act
and has been consummated in conformity with all other applicable Legal
Requirements.
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3.2 DFTS Board of Directors Approval. Subject to the provisions hereof, the
Board of Directors of DCI shall approve the Merger and the transactions provided
for or contemplated by this Agreement; provided, however, that such approvals
shall be subject to their satisfaction that the consummation of the Merger shall
be and is exempt from the registration requirements of the Securities Act, is
undertaken without violation of the anti-fraud provisions of the Securities Act
and has been consummated in conformity with all other applicable Legal
Requirements.
3.3 DCI Shareholder Approval; Waiver of Dissenters' Rights. By their
execution and delivery of this Agreement, DFTS and ZM, as the sole Shareholders
of DCI, hereby ratify and approve the transactions provided for herein. Further,
both DFTS and ZM waive any and all rights they may have under the TBCA to
dissent hereunder and receive payment for their shares of DCI common stock.
3.4 Income Tax Considerations. It is the intention of the parties hereto
that the Merger provided for in this Agreement will qualify for treatment as a
tax-free reorganization under Section 368(a)(2)(E) of the Code and the parties
will agree to undertake all appropriate actions necessary both before and after
the Effective Date of the Merger to effect such treatment. Notwithstanding the
foregoing, neither SKYLYNX nor any of its affiliates shall have any liability
whatsoever to DCI or the DCI shareholders for the treatment ultimately accorded
the Merger by federal or state taxing and regulatory authorities; and DCI shall
bear all responsibility for any tax or other assessment levied, imposed or
assessed by any regulatory or governmental authority on DCI by virtue of the
consummation of the Merger and the other transactions provided for in this
Agreement. The DCI shareholders shall bear all responsibility for any tax or
other assessment levied, imposed or assessed by any regulatory or governmental
authority on the DCI shareholders by virtue of the consummation of the Merger or
other transactions provided for in this Agreement.
3.5 Compliance with Securities Laws. The Merger provided for in this
Agreement shall be undertaken in reliance upon an exemption from the
registration requirements contained in Section 5 of the Securities Act and set
forth in Section 4(2) of the Securities Act and Regulation D thereunder. All
shares issued to the DCI shareholders in connection with the Merger shall be
"restricted securities" within the meaning of Rule 144 under the Securities Act.
3.6 Restrictive Legend. Certificates representing the shares of SKYLYNX
preferred stock issued in connection with the Merger shall be "restricted
securities" under the Securities Act and shall bear the following restrictive
legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 ("the Act") and
are "restricted securities" as that term is defined in Rule
144 under the Act. The shares may not be offered for sale,
sold or otherwise transferred except pursuant to an
effective registration statement under the Act, or pursuant
to an exemption from registration under the Act, the
availability of which is to be established to the
satisfaction of the Company.
SECTION 4. ADDITIONAL AGREEMENTS
4.1 DCI Financial Statements. Not later than 45 days following the Closing
Date, DCI shall use best efforts to cause to be prepared audited balance sheets,
income statements, statements of cash flows and stockholders' equity as of and
for the two year period ended June 30, 2005 and unaudited balance sheets, income
statements and statements of cash flows as of and for the interim period ended
September 30, 2005 (the "DCI Financial Statements"). The DCI Financial
Statements (including any related schedules and/or notes), will show all
liabilities, direct or contingent, required at the time of preparation to be
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shown in accordance with U.S. generally accepted accounting principles ("GAAP")
and fairly present the financial position and results of operations of DCI as of
the date thereof and for the periods indicated in accordance with GAAP,
consistently applied with all prior periods. Except as otherwise disclosed in
the Agreement, including, without limitation, Exhibit 4.1 hereof, DCI will have
no material liability or obligation of any nature (whether liquidated,
unliquidated, accrued, absolute, contingent or otherwise, whether due or to
become due) except those set forth on the DCI Financial Statements except
liabilities incurred and current liabilities (determined in accordance with
GAAP) incurred since the date of the DCI Financial Statements in the ordinary
course of business consistent with past practice. The DCI Financial Statements
shall conform in all respects to the requirements of Regulation SB, Item 310
under the Securities Act. The Financial Statements to be prepared following the
Closing shall also include pro forma financial information ("Pro Forma Financial
Information") in accordance with the requirements of Regulation SB, Item 310.
DCI agrees to indemnify, defend and hold harmless SKYLYNX and its respective
past and present officers and directors from any debt, damage, liability or
obligation whatsoever arising from any failure on the part of DCI to properly
prepare the DCI Financial Statements and Pro Forma Financial Information. All
costs and expenses incurred in connection with the preparation of the DCI
Financial Statements and the Pro Forma Financial Information, including fees and
disbursements of the Auditor, shall be borne exclusively by DCI.
4.2 DCI Financial Condition. At Closing, after giving effect to the
exchange of the DCI Note to NMKT for the SkyLynx Convertible Note (as defined in
Section 5.___ below), except for the liabilities set forth in the DCI Financial
Statements, DCI shall have no liabilities or obligations of any nature, whether
liquidated, unliquidated, accrued, absolute, contingent or otherwise, whether
due or to become due except for (i) the obligations and liabilities set forth
herein and in Exhibit 4.2 hereof, (ii) ongoing contractual commitments (the "DCI
Contracts"), and (iii) obligations incurred in the ordinary course of business.
DFTS agrees to indemnify, defend and hold harmless SKYLYNX from any debt,
damage, liability or obligation incurred prior to the Closing Date not
specifically approved in writing by SKYLYNX or otherwise disclosed in this
Agreement (an "Undisclosed Liability"). If indemnity is not promptly paid for
any Undisclosed Liability, then the shares to be distributed to DFTS from the
Closing Escrow shall be reduced by the value of any Undisclosed Liability as set
forth in the Closing Escrow.
4.3 Notification of Certain Matters. DCI shall give prompt notice to
SKYLYNX and SKYLYNX shall give prompt notice to DCI of (i) the occurrence or
non-occurrence of any event which would cause any representation or warranty
made by the respective parties in this Agreement to be materially untrue or
inaccurate when made and (ii) any failure of SKYLYNX or DCI, as the case may be,
to materially comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice and, provided
further, that the failure to give such notice shall not be treated as a breach
of covenant for the purposes of this Agreement unless the failure to give such
notice results in material prejudice to the other party.
4.4 Further Action. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use all commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
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promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to otherwise satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement.
4.5 Public Announcements. DCI and SKYLYNX shall consult with each other
before issuing any press release or other public statement with respect to the
Merger or this Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party, which
consent shall not be unreasonably withheld, delayed or conditioned; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may, upon the advice of
counsel, be required by law if it has used reasonable efforts to first consult
with the other party.
4.6 Cooperation in Securities Filings. DCI shall provide such information
regarding DCI, its business, its officers, directors and affiliates, as is
reasonably required by SKYLYNX for purposes of preparing any notices, reports
and other filings with the SEC. Moreover, following the Closing, the current
officers and directors of DCI shall provide such information as the post-closing
management of SKYLYNX shall reasonably request for the purpose of preparing any
notices, reports and other filings by SKYLYNX with the SEC, including but not
limited to, in connection with the preparation of any financial statements
required to be filed under the Exchange Act or Securities Act by SKYLYNX.
4.7 Additional Documents. The parties shall deliver or cause to be
delivered such documents or certificates as may be necessary, in the reasonable
opinion of counsel for either of the parties, to effectuate the transactions
provided for in this Agreement. If at any time the parties or any of their
respective successors or assigns shall determine that any further conveyance,
assignment or other document or any further action is necessary desirable to
further effectuate the transactions set forth herein or contemplated hereby, the
parties and their officers, directors and agents shall execute and deliver, or
cause to be executed and delivered, all such documents as may be reasonably
required to effectuate such transactions.
SECTION 5: CONVERSION OR CANCELLATION OF SHARES
5.1 Conversion or Cancellation of Shares. At the Effective Time, all the
issued and outstanding shares of Common Stock, $.___ par value, of DCI ("DCI
Common Stock") shall, by virtue of the Merger, be cancelled and converted into
the right to receive shares of the capital stock of SKYLYNX, as follows:
(a) The shares of DCI Common Stock issued and outstanding immediately
prior to the Effective Time, excluding any such shares held in the treasury
of DCI, owned by DFTS shall be converted automatically into an aggregate of
572,776 shares of SkyLynx Series B Convertible Preferred Stock having a
Stated Value of $1.00 per share (the "Series B Preferred"). Subject to the
provisions of Section 5.4 below, such right may be exercised by the
surrender of the certificates representing such shares of DCI Common Stock
in accordance with Section 5.2 hereof. The Series B Preferred Stock shall
have the following rights and preferences:
Voting Rights: Each issued and outstanding share of Series B Preferred
shall entitle a holder to one (1) vote for each share of SkyLynx
Common Stock issuable upon conversion of the Series B Preferred on any
and all matters presented to the shareholders of SkyLynx for approval,
including the election of directors. The Series B Preferred shall vote
together with all other outstanding shares of voting securities,
voting as a single class.
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Dividend: None.
Redemption Right: SkyLynx shall have the right to call for redemption
any or all of the outstanding shares of Series B Preferred upon 30
days' written notice. The redemption price to be paid for the shares
called for redemption (the "Redemption Price") shall be equal to the
Stated Value thereof. Each holder of shares of Series B Preferred
called for redemption shall have until the date immediately preceding
the redemption date to convert the shares of Series B Preferred into
Common Stock of SkyLynx.
Conversion: Each share of Series B Preferred is convertible into
shares of SkyLynx Common Stock, at any time, at the option of the
holder, at a conversion price (the "Series B Conversion Price") equal
to the average of the three highest closing prices of the Common Stock
during the twenty (20) trading days immediately preceding the
conversion date, subject to adjustment under certain circumstances. In
addition, one-third (1/3) of the Series B Preferred (190,925 shares)
will automatically convert into shares of SkyLynx Common Stock at the
Series B Conversion Price on each of the first three anniversaries
following the date of issue.
Liquidation Preference. $1.00 per share of Preferred Stock,
subordinate to the Stated Value of outstanding shares of Series A
Preferred, pari passu with the Stated Value of the Series C Preferred
Stock, and senior to the rights of holders of Common Stock.
(b) The shares of DCI Common Stock issued and outstanding immediately
prior to the Effective Time, excluding any such shares held in the treasury
of DCI, owned by ZM shall be converted automatically into an aggregate of
3,748,518 shares of SkyLynx Series C Convertible Preferred Stock having a
Stated Value of $1.00 per share (the "Series B Preferred"). Subject to the
provisions of Section 5.4 below, such right may be exercised by the
surrender of the certificates representing such shares of DCI Common Stock
in accordance with Section 5.2 hereof. The Series C Preferred Stock shall
have the following rights and preferences:
Voting Rights: Each issued and outstanding share of Series C Preferred
shall entitle a holder to one (1) vote for each share of SkyLynx
Common Stock issuable upon conversion of the Series C Preferred on any
and all matters presented to the shareholders of SkyLynx for approval,
including the election of directors. The Series C Preferred shall vote
together with all other outstanding shares of voting securities,
voting as a single class.
Dividend: None.
Redemption Right: SkyLynx shall have the right to call for redemption
any or all of the outstanding shares of Series C Preferred upon 30
days' written notice. The redemption price to be paid for the shares
called for redemption (the "Redemption Price") shall be equal to the
Stated Value thereof. Each holder of shares of Series C Preferred
called for redemption shall have until the date immediately preceding
the redemption date to convert the shares of Series C Preferred into
Common Stock of SkyLynx.
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Conversion: Each share of Series C Preferred is convertible into
shares of SkyLynx Common Stock, at any time, at the option of the
holder, at a conversion price (the "Series C Conversion Price") equal
to the average of the three highest closing prices of the Common Stock
during the twenty (20) trading days immediately preceding the
conversion date, subject to adjustment under certain circumstances.
Liquidation Preference. $1.00 per share of Preferred Stock,
subordinate to the Stated Value of outstanding shares of Series A
Preferred, pari passu with the Stated Value of the Series C Preferred
Stock, and senior to the rights of holders of Common Stock.
(c) Of the 3,748,518 shares of Series C Preferred issued on conversion
of the outstanding shares of DCI owned by ZM, an aggregate of 3,500,000
shares of Series C Preferred (the "Escrow Shares") shall be deposited and
held in escrow with SkyLynx legal counsel, as escrow agent, Xxxxxxxx X.
Xxxxxx, Esq., 0000 Xxxx Xx., Xxxxxxx, XX, under the terms of an Escrow
Agreement to be executed at Closing. The Escrow Agreement shall provide
that the Escrow Shares shall be released upon the satisfaction of the
following conditions:
1. 750,000 shares shall be released, pro rata, upon DCI achieving annual
gross revenues of at least $6.0 million.
2. 750,000 shares to be released, pro rata, upon DCI achieving a net
profit for a fiscal year of at least 5% of revenues.
3. 750,000 shares shall be released, pro rata, upon DCI achieving annual
gross revenues of at least $8.0 million.
4. 750,000 shares to be released, pro rata, upon DCI achieving a net
profit for a fiscal year of at least 8% of revenues.
5. 500,000 shall be released upon closing L3 business totaling at least
$2.5 million.
Should any of the foregoing conditions fail to be satisfied within the
first five (5) years following closing, provided, the number of Escrow
Shares allocated under such condition shall be forfeited and returned
to the unauthorized capital stock of SkyLynx. For so long as the
Escrow Shares remain in escrow, the holder(s) shall not exercise any
voting rights with respect to the Shares.
(d) Each share of Series B and Series C Preferred, issued under
paragraph (a) and (b) above, and all shares of SkyLynx Common Stock
issuable upon conversion thereof, shall be restricted securities pursuant
to Rule 144 promulgated under the Securities Act.
(e) Each share of DCI Common Stock, if any, held in DCI's treasury
immediately prior to the Effective Time shall be canceled and retired and
no payment shall be made in respect thereof.
(f) At the Effective Time, all outstanding shares of SAC shall be
converted into an aggregate of 100 shares of Common Stock of DCI. Each
share of SAC Common Stock, if any, held in SAC's treasury immediately prior
to the Effective Time shall be canceled and retired and no payment shall be
made in respect thereof.
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(g) At the Effective Time, all outstanding options, warrants and other
rights to acquire shares of DCI common stock shall be cancelled.
(h) The full rights and preferences of the Series B and Series C
Preferred respectively shall be defined in Certificates of Designation to
be attached hereto as Exhibits 5.1.1 and 5.1.2
5.2 Surrender and Payment. Subject to the provisions of Section 5.4 below,
after the Effective Time, each holder of a certificate representing an issued
and outstanding share of DCI Common Stock shall be entitled upon surrender of
such certificate along with a fully executed Subscription Agreement in the form
of Exhibit 5.3, to SKYLYNX, to receive the Series B or Series C Preferred as set
forth in Section 5.1 above. Until so surrendered, each certificate which
immediately prior to the Effective Time represented an issued and outstanding
share of DCI Common Stock shall, upon and after the Effective Time, be deemed
for all purposes to represent and evidence only the right to receive Series B or
Series C Preferred as set forth in Section 5.1. If any exchange for shares of
DCI Common Stock is to be made in a name other than that in which the
certificate therefor surrendered for exchange is registered, it shall be a
condition of such payment that the certificate so surrendered be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment either pay to SKYLYNX any transfer or other similar taxes required
by reason of the payment to a person other than the registered holder of the
certificate surrendered or establish to the satisfaction of SKYLYNX that such
tax has been paid or is not payable.
5.3 Subscription Agreements. Each of the DCI Shareholders receiving Series
B or Series C Preferred pursuant to the terms hereof shall have delivered a
fully executed Subscription Agreement substantially in the form of Exhibit 5.3.
5.4 Closing Escrow. All shares of Series B and Series C Preferred to be
issued in the merger (the "Merger Securities") shall be delivered to and
deposited into escrow (the "Closing Escrow") with the SkyLynx acting corporate
secretary, as escrow agent, pursuant to the terms of a Closing Escrow Agreement,
substantially in the form of Exhibit 5.4, attached hereto (the "Closing Escrow
Agreement"). Under the terms of the Closing Escrow Agreement, the Merger
Securities shall be held in escrow until (a) DCI shall have delivered to SkyLynx
the DCI Financial Statements and Pro Forma Financial Information required
pursuant to Section 4.1 hereof and Form 8-K under the Exchange Act, and (b)
there has been filed with the SEC a Form 8-K containing the DCI Financial
Statements and Pro Forma Financial Information in accordance with Form 8-K under
the Exchange Act and other applicable Legal Requirements, provided, however,
that in the event that any DCI Undisclosed Liability arises in connection with
the DCI Financial Statements, an amount of shares of Series B Preferred shall be
held in the Closing Escrow contemplated hereby until such DCI Undisclosed
Liability is disposed to the satisfaction of the auditors who prepared the DCI
Financial Statements. If such DCI Undisclosed Liability can not be satisfied
within 75 days after delivery of the DCI Financial Statements to SkyLynx, then
the number of shares of Series B Preferred to be distributed to the DCI
Shareholders from the Closing Escrow shall be reduced by the value of the
liability based upon a Series B Preferred value of $.50 per share.
5.5 Exchange of DCI Note. At closing SkyLynx will issue a promissory note
in the amount of $1,200,000 (the "SkyLynx" Note which is subject to adjustments)
.. DCI currently has outstanding indebtedness in the form of a promissory note
owed to NewMarket Technology, Inc., ("NMKT"), in the aggregate amount of
approximately $1.2 million including accrued interest (the "DCI Note"). At
Closing, that note (the DCI Note), shall be assigned to DFTS without recourse.
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The SkyLynx Convertible Note shall be substantially in the form of Exhibit 5.5
hereto. The SkyLynx Convertible Note shall accrue interest at the rate of 6% per
annum, payable annually, at the option of SkyLynx, in cash or shares of SkyLynx
Common Stock valued at Market Price on the date of payment. Market Price shall
mean the average of the three highest closing prices of the Common Stock on the
Principal Trading Market during the twenty trading days immediately prior to
payment. The Note shall mature and be due and payable in two (2) years from the
date of issuance. The Note shall be convertible, at the option of the holder,
into shares of SkyLynx Common Stock at a price equal to the Market Price on the
date of conversion. The holder may convert 50% of the note twelve (12) months
from the date of issuance and the balance upon maturity.
5.6 NMKT Preferred Stock. At Closing, for no additional consideration, DCI
shall transfer and assign to DFTS all of DCI's right, title and interest in and
to all shares of Series G Convertible Preferred stock of NMKT which DCI owns and
holds as portfolio securities.
5.7 DCI License. At Closing, DCI shall grant to DFTS a, license for DCI
technology in accordance with the terms of the License Agreement, which will be
substantially in the form of Exhibit 5.7 hereto.
5.8 No Further Transfers. On and after the Effective Time, no transfer of
the shares of DCI Common Stock issued and outstanding immediately prior to the
Effective Time shall be made on the stock transfer books of DCI.
SECTION 6: CERTAIN EFFECTS OF MERGER
6.1 Effect of Merger. On and after the Effective Time, the separate
existence of SAC shall cease and SAC shall be merged with and into DCI, which as
the Surviving Corporation (herein sometimes so called) shall, consistently with
its Articles of Incorporation succeed to, and without other transfer, possess
all the rights, privileges, immunities, powers and franchises of public as well
as private nature, and be subject to all restrictions, disabilities and duties
of SAC; and all rights, privileges, immunities, powers and franchises of SAC,
and all property, real, personal and mixed, causes of action and every other
asset of, and all debts due to SAC on whatever account as well as stock
subscriptions and all other things in action or belonging to SAC shall vest in
the Surviving Corporation; and all property, rights, privileges, immunities,
powers and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of SAC, and
the title to any real estate vested by deed or otherwise in SAC, and the title
to any real estate vested by deed or otherwise in SAC shall not revert or be in
any way impaired but all rights of creditors and all liens upon any property of
SAC shall be preserved unimpaired, and all debts, liabilities and duties of SAC
shall thenceforth attach to the Surviving Corporation, and may be enforced
against it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it. Any action or proceeding pending by or against SAC
may be prosecuted to judgment, which shall bind the Surviving Corporation, or
the Surviving Corporation may be proceeded against or substituted in its place.
6.2 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider any further deeds, assignments or
assurances in law or any other action necessary, desirable or proper (a) to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
the title to any property or rights of SAC acquired or to be acquired by reason
11
of, or as a result of, the Merger, or (b) otherwise to carry out the intents and
purposes of this Agreement, SAC and SKYLYNX agree that it and its proper
officers and directors shall and will execute and deliver, or cause to be
executed and delivered, all such property, deeds, assignments and assurances in
law and take all other action necessary, desirable or proper to vest, perfect or
confirm title to such property or right in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement.
SECTION 7: POST-MERGER GOVERNANCE
7.1 Articles of Incorporation and Bylaws. At the Effective Time, the
Articles of Incorporation and By-Laws of DCI as in effect immediately prior to
the Effective Time, shall be and continue to be the Articles of Incorporation
and By-Laws of DCI, as the Surviving Corporation, until duly amended in
accordance with applicable law.
7.2 Directors. Officers and Employees.
(a) Directors of SKYLYNX. The Board of Directors of SkyLynx shall
remain unchanged as a result of the Merger.
(b) Executive Officers of SKYLYNX. The executive officers of SKYLYNX
shall remain unchanged as a result of the merger.
(c) Directors of DCI. Concurrently with the Closing, the Board of
Directors of DCI shall, in accordance with the TBCA and the Articles of
Incorporation and by-laws of DCI, shall consist of three (3) directors,
which shall include Xxxxx Xxxxxxxxxxx, Xx. and two (2) persons designated
by SkyLynx.
(d) Executive Officers of DCI. Following the Closing, the executive
officers of DCI shall be as follows:
Xxxxx Xxxxxxxxxxx, Xx. President
Xxxxx Xxxxx Chief Executive Officer
Xxxxx Xxxxxx Chief Financial Officer
(e) Employment Agreements of DCI. At Closing, DCI shall enter into a
written Employment Agreement with Xxxxx Xxxxxxxxxxx, Xx. and Xxxxx Xxxxxx
substantially in the form of Exhibit 7.2(e)(i) and (ii) hereto.
SECTION 8: COVENANTS AND CONDITIONS OF CLOSING
8.1 Covenants Regarding the Closing. The parties hereto hereby covenant and
agree that they shall (i) use all commercially reasonable efforts to cause all
of their respective representations and warranties set forth in this Agreement
to be true on and as of the Closing Date, (ii) use all commercially reasonable
efforts to cause all of their respective obligations that are to be fulfilled on
or prior to the Closing Date to be so fulfilled, (iii) use all commercially
reasonable efforts to cause all conditions to the Closing set forth in this
Agreement to be satisfied on or prior to the Closing Date, and (iv) deliver to
each other at the Closing the certificates, updated lists, opinion of counsel,
notices, consents, authorizations, approvals, agreements, transfer documents,
receipts and amendments contemplated by Sections 8, 9 and 11 (with such
additions or exceptions to such items as are necessary to make the statements
set forth in such items accurate, provided that if any such additions or
exceptions cause any of the conditions to the parties' obligations hereunder as
set forth in Sections 8, 9 and 11 below not to be fulfilled, such additions and
exceptions shall in no way limit the rights of the parties to terminate this
12
Agreement or refuse to consummate the transactions contemplated hereby.) All
indemnifications, guarantees, covenants, agreements, representations and
warranties made by the parties hereunder or pursuant hereto or in connection
with the transactions contemplated hereby shall survive the Closing regardless
of any investigation at any time made by or on behalf of the parties.
8.2 Conditions to Obligation of SKYLYNX and SAC. The obligation of SKYLYNX
and SAC to complete the Merger on the Closing date on the terms set forth in
this Agreement is, at the option of SKYLYNX and SAC, subject to the satisfaction
or waiver by SKYLYNX and SAC of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties made by DCI in this Agreement shall be correct in all
material respects on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on the
Closing Date.
(b) Compliance with Covenants. All covenants which DCI is required to
perform or comply with on or before the Closing date shall have been fully
complied with or performed in all material respects.
(c) Corporate Approvals. The Board of Directors and shareholders of
DCI shall have approved and ratified this Agreement and shall have
authorized the appropriate officers of DCI to execute same and fully
perform its terms.
(d) Consents and Approvals. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which DCI is a party
shall require the consent of any person to the exchange of DCI's shares of
common stock or any other transaction provided for herein, such consent
shall have been obtained; provided, however, that DCI shall not make, as a
condition for the obtaining of any such consent, any agreements or
undertakings not approved in writing by SKYLYNX and SAC to the extent that
such condition otherwise has an adverse effect on SKYLYNX and SAC.
(e) Review and Due Diligence. SKYLYNX and SAC, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to complete,
and shall have completed, a satisfactory due diligence investigation of DCI
together with a satisfactory review of DCI's corporate status and the title
to DCI's property.
(f) No Governmental Actions. No action or proceeding before any
governmental authority shall have been instituted or threatened to restrain
or prohibit the transactions contemplated by this Agreement, and the
parties shall have delivered to each other certificates dated as of the
Closing Date and executed by such parties, stating that to their Best
Knowledge, no such items exist. No governmental authority shall have taken
any other action as a result of which the management of SKYLYNX or SAC, in
its sole discretion, reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
(g) No Material Adverse Change. No material adverse change in the
business, property or assets of any party hereto shall have occurred, and
no loss or damage to any of the assets, whether or not covered by
insurance, with respect to any party hereto has occurred, and the parties
hereto shall have delivered to each other certificates dated as of the
Closing Date and executed by each of the parties to all such effects.
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(h) Update of Contracts. The parties hereto shall have delivered to
each other an accurate list, as of the Closing Date, showing (i) all
agreements, contracts and commitments of the type listed on Exhibits 9.17
and 11.14 entered into since the date of this Agreement; and (ii) all other
agreements, contracts and commitments related to the businesses or the
assets of the respective parties entered into since the date of this
Agreement, together with true, complete and accurate copies of all such
documents (the "New Contracts"). Each party shall have had the opportunity
to review and approve the New Contracts of the other, and any of the
parties shall have the right to delay the Closing for up to ten (10) days
if it in its sole discretion deems such delay necessary to enable it to
adequately review the New Contracts.
(i) Approval of Counsel. All actions, proceedings, instruments and
documents required or incidental to carry out this Agreement, including all
schedules and exhibits thereto, and all other related legal matters shall
have been approved by the legal Counsels of DFTS and ZM respectively, and
Xxxxxxxx X. Xxxxxx, P.C., counsel to SKYLYNX and SAC.
(j) No Adverse Information. The investigations with respect to the
parties, the assets and the respective businesses performed by each party's
respective professional advisors and other representatives shall not have
revealed any information concerning the other parties, their assets or
their business that has not been made known to the discovering party, in
writing prior to the date of this Agreement and that, in the opinion of
such party and its advisors, materially and adversely affects the business
or assets of the other party or the viability of the transaction
contemplated by this Agreement.
(k) Ordinary Course of Business. During the period from the date of
this Agreement until the Closing Date, DCI shall have carried on its
business in the ordinary and usual course, and shall have delivered to
SKYLYNX and SAC a certificate to that effect.
(l) Liens. DCI shall have delivered to SKYLYNX a reasonably current
lien and judgment search (both state and county levels in each jurisdiction
where the party is qualified to or is doing business or owns material
assets) confirming the absence of any judicial liens, security interests,
tax liens and similar such liens affecting any of its business or assets.
Each and every lien or encumbrance of any nature, if any, relating to the
assets, business, or the shares of common stock of DCI shall have been
terminated and released, and proof thereof delivered to SKYLYNX.
(m) Other Documents. The parties shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as each respective party or its attorneys may have reasonably
requested.
(n) Governmental and Regulatory Approvals. The parties shall have
obtained evidence, in form and substance satisfactory to each of them, that
there have been obtained all consents, approvals and authorizations
required by this Agreement, including, without limitation, the following:
(i) SKYLYNX and DFTS Board of Directors and DCI Common Stockholder
approval of all the transactions contemplated pursuant to this
Agreement; and
(ii) All regulatory approvals necessary for DCI to conduct business in
the ordinary course in each jurisdiction where such approval may be
required and the failure to obtain such approval would cause a
material adverse affect to the financial condition, business or
operations of DCI.
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(o) Compliance with Securities Laws. SKYLYNX shall have undertaken all
actions necessary or advisable to consummate the Merger in conformity with
all Governmental and Legal Requirements including, without limitation,
applicable federal and state securities laws.
(p) Appraisal Rights and/or Dissenters' Rights. At or prior to
Closing, no beneficial or record owner of any outstanding shares of DCI
Common Stock shall have exercised or shall have given notice to SKYLYNX or
DCI of their intent to exercise any rights under applicable state law, if
any, to dissent from the Merger or obtain the payment of the fair market
value of such shares of DCI Common Stock in lieu of participating in the
Merger in accordance with the terms and subject to the conditions set forth
herein.
(q) Financial Advisory Fees. At or prior to Closing, all obligations
or commitments of SKYLYNX and DCI to their respective financial advisors
and investment bankers shall have been paid or otherwise satisfied upon
terms satisfactory to the parties, and SKYLYNX and DCI shall each have been
delivered and received such written consents, approvals, estoppel
certificates or other instruments or undertakings from its advisors or
other third parties as each may deem reasonable, necessary or advisable.
(r) Intentionally Omitted.
(s) Compliance with Sections 5 and 17 of the Securities Act. The Board
of Directors of SKYLYNX shall be satisfied that consummation of the Merger
and the issuance of SKYLYNX Preferred Stock to the DCI securityholders are
in compliance with the provisions of Sections 5 and 17 of the Securities
Act.
(t) Closing Escrow Agreement. At Closing, DCI, the DCI shareholders
and SKYLYNX shall have executed and delivered the Closing Escrow Agreement
substantially in the form of Exhibit 5.4 hereto and shall have delivered
the Series B Preferred to be held in escrow in accordance with the terms
and conditions thereof.
(u) Employment Agreements. An employment agreement between DCI, on the
one hand, and Xxxxx Xxxxxxxxxxx and Xxxxx Xxxxxx, respectively, on the
other shall have been executed and delivered at Closing.
8.3 Conditions to Obligation of DCI. The obligations of DCI to complete the
Merger on the Closing date on the terms set forth in this Agreement is, at the
option of DCI, subject to the satisfaction or waiver by DCI of each of the
following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties made by SKYLYNX and SAC in this Agreement shall be correct
in all material respects on and as of the Closing date with the same force
and effect as though such representations and warranties had been made on
the Closing date.
(b) Compliance with Covenants. All covenants which SKYLYNX and SAC is
required to perform or comply with on or before the Closing date shall have
been fully complied with or performed in all material respects.
(c) Corporate Approvals. The Board of Directors and shareholders of
SKYLYNX and SAC shall have approved and ratified this Agreement and shall
have authorized the appropriate officers to execute same and fully perform
its terms.
15
(d) Consents and Approvals. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which SKYLYNX and SAC is
a party shall require the consent of any person to the exchange of SKYLYNX
and SAC's shares of common stock or any other transaction provided for
herein, such consent shall have been obtained; provided, however, that
SKYLYNX and SAC shall not make, as a condition for the obtaining of any
such consent, any agreements or undertakings not approved in writing by DCI
to the extent that such condition otherwise has an effect on DCI or SKYLYNX
and SAC.
(e) Review and Due Diligence. DCI and its legal counsel and/or
auditors shall have had the opportunity to complete, and shall have
completed, a satisfactory due diligence investigation of SKYLYNX and SAC,
together with a satisfactory review of SKYLYNX and SAC's corporate status,
the marketability of title to SKYLYNX and SAC's property, and compliance
with all reporting requirements imposed by or on account of any federal or
state securities laws or regulations.
(f) No Governmental Actions. No action or proceeding before any
governmental authority shall have been instituted or threatened to restrain
or prohibit the transactions contemplated by this Agreement, and the
parties hereto shall have delivered to each other certificates dated as of
the Closing Date and executed by such parties, staling that to their Best
Knowledge, no such items exist. No governmental authority shall have taken
any other action as a result of which the management of any of the parties,
in its sole discretion, reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
(g) No Material Adverse Change. No material adverse change in the
business, property or assets of any party hereto shall have occurred, and
no loss or damage to any of the assets, whether or not covered by
insurance, with respect to any party hereto has occurred, and the parties
shall have delivered to each other certificates dated as of the Closing
Date and executed by each of the parties to all such effects.
(h) Update of Contracts. The parties shall have delivered to each
other an accurate list, as of the Closing Date, showing (i) all agreements,
contracts and commitments of the type listed on Exhibits 9.17 and 11.14
entered into since the date of this Agreement; and (ii) all other
agreements, contracts and commitments related to the businesses or the
assets of the respective parties entered into since the date of this
Agreement, together with true, complete and accurate copies of all such
documents (the "New Contracts"). Each party shall have had the opportunity
to review the New Contracts of the other, and any of the parties shall have
the right to delay the Closing for up to ten (10) days if it in its sole
discretion deems such delay necessary to enable it to adequately review the
New Contracts.
(i) Approval of Counsel. All actions, proceedings, instruments and
documents required or incidental to carry out this Agreement, including all
schedules and exhibits thereto, and all other related legal matters shall
have been approved as to substance and form by the legal Counsels of DFTS
and ZM respectively, and Xxxxxxxx X. Xxxxxx, P.C., counsel to SKYLYNX and
SAC.
(j) No Adverse Information. The investigations with respect to the
parties, the assets and their respective businesses performed by each
party's respective professional advisors and other representatives shall
not have revealed any information concerning the other panes, their assets
or their business that has not been made known to the discovering party, in
16
writing prior to the date of this Agreement and that, in the opinion of
such party and its advisors, materially and adversely affects the business
or assets of the other party or the viability of the transaction
contemplated by this Agreement.
(k) Ordinary Course of Business. During the period from the date of
this Agreement until the Closing Date, SKYLYNX shall have carried on its
business in the ordinary and usual course, and shall have delivered to DCI
a certificate to that effect.
(1) Other Documents. The parties shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as each respective party or its attorneys may have reasonably
requested.
(m) Governmental and Regulatory Approvals. The parties shall have
obtained evidence, in form and substance satisfactory to each of them, that
there have been obtained all consents, approvals and authorizations
required by this Agreement, including, without limitation, the following:
(i) SKYLYNX and DFTS Board of Directors and DCI Common Stockholder
approval of all the transactions contemplated pursuant to this
Agreement; and
(ii) All regulatory approvals necessary for SAC to conduct business in
the ordinary course in each jurisdiction where such approval may be
required.
(n) Compliance with Securities Laws. DCI shall have undertaken all
actions necessary or advisable to consummate the Merger in conformity with
all Governmental and Legal Requirements including, without limitation,
applicable federal and state securities laws.
(o) Appraisal Rights and/or Dissenters' Rights. At or prior to
Closing, no beneficial or record owner of any outstanding shares of DCI
Common Stock shall have exercised or shall have given notice to SKYLYNX or
DCI of their intent to exercise any rights under applicable state law, if
any, to dissent from the Merger or obtain the payment of the fair market
value of such shares of DCI Common Stock in lieu of participating in the
Merger in accordance with the terms and subject to the conditions set forth
herein.
(p) Financial Advisory Fees. At or prior to Closing, all obligations
or commitments of SKYLYNX and DCI to their respective financial advisors
and investment bankers shall have been paid or otherwise satisfied upon
terms satisfactory to the parties, and SKYLYNX and DCI shall each have been
delivered and received such written consents, approvals, estoppel
certificates or other instruments or undertakings from its advisors or
other third parties as each may deem reasonable, necessary or advisable.
(q) Intentionally Omitted.
(r) Compliance with Sections 5 and 17 of the Securities Act. The Board
of Directors of SKYLYNX shall be satisfied that consummation of the Merger
and the issuance of SKYLYNX Preferred Stock to the DCI securityholders are
in compliance with the provisions of Sections 5 and 17 of the Securities
Act.
17
(s) Closing Escrow Agreement. At Closing, DCI, the DCI shareholders
and SKYLYNX shall have executed and delivered the Closing Escrow Agreement
substantially in the form of Exhibit 5.4 hereto and shall have delivered
the Series B Preferred to be held in escrow in accordance with the terms
and conditions thereof.
(t) Employment Agreements. An employment agreement between DCI, on the
one hand, and Xxxxx Xxxxxxxxxxx and Xxxxx Xxxxxx, respectively, on the
other, shall have been executed and delivered at Closing.
8.4 Specific Items to be Delivered at the Closing. The parties shall
deliver the following items to the appropriate party at the Closing of the
transactions contemplated by this Agreement.
(a) To be delivered by DFTS and/or (in triplicate original):
(i) Copy of corporate resolutions authorizing the execution of this
Agreement, and the consummation by DFTS of the transactions
contemplated by this Agreement.
(ii) A certificate of the President of DCI stating that the
representations and warranties of DCI set forth in this Agreement are
true and correct. Said certificate shall further verify and affirm
that all consents or waivers, if any, which may be necessary to
execute and deliver this Agreement have been obtained and are in full
force and effect.
(iii) A certificate dated the Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of DCI, in form and
substance reasonably satisfactory to the other party and its legal
counsel, certifying that all conditions precedent set forth in this
Agreement to the obligations of DCI to close, have been fulfilled, and
that no event of default hereunder and no event which, with the giving
of notice or passage of time, or both, would be an event of default,
has occurred as of such date.
(iv) Certificates dated the Closing Date, signed by the Secretary of
DFTS, (i) certifying resolutions duly adopted by the Board of
Directors of DFTS, authorizing the execution of this Agreement and all
of the other transactions to be consummated pursuant thereto; (ii)
certifying the names and incumbency of the officers of DFTS who are
empowered to execute the foregoing documents for and on behalf of such
company; (v) Certificates dated the Closing Date, signed by the
Secretary of DCI, (i) certifying the authenticity of copies of the
Articles of Incorporation and Bylaws of DCI; and (ii) certifying the
authenticity of a reasonably current Certificate of Good Standing,
from all jurisdictions in which the company is qualified to conduct
business.
(vi) The Closing Escrow Agreement substantially in the form of Exhibit
5.4.
(vii) Articles of Merger and Statement of Merger in proper form to be
filed with the Secretaries of States of Colorado and Texas in such
form as may be required to consummate the Merger as of the Effective
Time.
(viii) Employment Agreements with Xxxxx Xxxxxxxxxxx, Xx. and Xxxxx
Xxxxxx, substantially in the form of Exhibits 7.2(e)(i) and (ii).
18
(ix) The NMKT Series G Convertible Preferred Stock to be delivered to
DFTS.
(x) The License Agreement to DFTS.
(xi) By DFTS, the DCI Note to NMKT in exchange for a new note from
DFTS to NMKT.
(b) To be delivered by Shareholders of DCI (in triplicate original):
(i) Certificate or certificates representing 100% of the issued and
outstanding common shares of DCI, which stock certificates shall be
endorsed in favor of SKYLYNX.
(ii) Fully executed Subscription Agreements substantially in the form
of Exhibit 5.3.
(iii) The Closing Escrow Agreement substantially in the form of
Exhibit 5.4.
(c) To be delivered by SKYLYNX and SAC (in triplicate original):
(i) Certificate or certificates representing shares of SKYLYNX Series
B and Series C Preferred, which certificates shall be issued in the
names of DFTS AND ZM, respectively, and delivered in escrow under the
Closing Escrow Agreement;
(ii) Copy of corporate resolution authorizing the execution of this
Agreement and the consummation by SKYLYNX and SAC of the transactions
contemplated by this Agreement, including, but not limited to, the
issuance of SKYLYNX Common Stock in the amounts and manner set forth
in Section 5.1 above;
(iii) A certificate dated the Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of SKYLYNX and SAC,
in form and substance reasonably satisfactory to the other party and
its legal counsel, certifying that all conditions precedent set forth
in this Agreement to the obligations of SKYLYNX and SAC to close, have
been fulfilled, and that no event of default hereunder and no event
which, with the giving of notice or passage of time, or both, would be
an event of default, has occurred as of such date.
(iv) Certificates dated the Closing Date, signed by the Secretary of
SKYLYNX and SAC, (i) certifying resolutions duly adopted by the Board
of Directors of SKYLYNX and SAC, authorizing the execution of this
Agreement and all of the other transactions to be consummated pursuant
thereto; (ii) certifying the names and incumbency of the officers of
SKYLYNX and SAC who are empowered to execute the foregoing documents
for and on behalf of such company; (iii) certifying the authenticity
of copies of the Articles of Incorporation and Bylaws of SKYLYNX and
SAC; and (iv) certifying the authenticity of a reasonably current
Certificate of Good Standing, from all jurisdictions in which SKYLYNX
and SAC are qualified to conduct business.
(v) The Closing Escrow Agreement substantially in the form of Exhibit
5.4.
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(vi) Statement of Merger and Certificate of Merger in proper form to
be filed with the Secretaries of States of Colorado and Texas in such
form as may be required to consummate the Merger as of the Effective
Time.
(vii) The SkyLynx Convertible Note to DFTS.
SECTION 9: REPRESENTATIONS AND WARRANTIES OF DCI
As a material inducement to SKYLYNX to enter into this Agreement and with
the understanding and expectations that SKYLYNX will be relying thereon in
consummating the Merger contemplated hereunder, DCI (hereinafter DCI shall be
referred to as the "Corporation" unless the context otherwise requires for the
purposes of this Section 9 only) hereby represents and warrants as follows:
9.1 Organization and Standing. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has all requisite corporate power and authority to own
its assets and properties and to carry on its business as it is now being
conducted.
9.1 Subsidiaries, Etc. The Corporation does not have any direct or indirect
Ownership Interest in any corporation, partnership, joint venture, association
or other business enterprise.
9.3 Qualification. The Corporation is not qualified to engage in business
as a foreign corporation in any state, and there is no other jurisdiction
wherein the character of the properties presently owned by the Corporation or
the nature of the activities presently conducted by the Corporation makes
necessary the qualification, licensing or domestication of the Corporation as a
foreign corporation.
9.4 Corporate Authority. Except as set forth on Exhibit 9.4 hereto, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby or the compliance by the Corporation with any
on the provisions hereof will not:
(a) Conflict with or result in a breach of any provision of its
Articles of Incorporation or By-Laws or similar documents of any
Subsidiary;
(b) Result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Corporation is a party, or by
which any of its properties or assets may be bound except for such default
(or right of termination, cancellation, or acceleration) as to which
requisite waivers or consents shall either have been obtained by the
Corporation prior to the Closing Date or the obtaining of which shall have
been waived by SKYLYNX; or
(c) Violate any order, writ, injunction, decree or, to the
Corporation's Best Knowledge, any statute, rule or regulation applicable to
the Corporation or any of its properties or assets. No consent or approval
by any Governmental Authority is required in connection with the execution
and delivery by the Corporation of this Agreement or the consummation by
the Corporation of the transactions contemplated hereby, except for
possible notice under plant closing laws.
20
9.5 Financial Information. In connection with the investigations performed
by and audit to be undertaken by DCI, DCI furnished certain financial
information and data including, without limitation, tax and accounting records,
financial records, statements, worksheets and other information requested by
SKYLYNX and its auditors necessary to undertake and complete the audited
financial examinations. DCI represents and warrants that any and all such
information furnished in connection with the conduct of such investigations and
audits shall be true, accurate and complete in all material respects and shall
not contain any material misstatements nor any material omissions of fact or
information respecting the financial condition or results of operation of the
business for the respective periods covered by the audits.
9.6 Capitalization of the Corporation. The authorized capital stock of DCI
consists of 10,000,000 shares of Common Stock, $____ par value per share, of
which 4,693,878 shares are issued and outstanding and 0 shares of preferred
stocks. The names of one hundred percent (100%) of the record owners of the
issued and outstanding Common Stock are set forth on Exhibit 9.6 hereto. All
issued and outstanding shares of DCI Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable, free and clear of any
liens, encumbrances, claims of any kind and nature except restrictions against
transferability without compliance with applicable federal and state securities
laws. There are no other outstanding rights, options, warrants, subscriptions,
calls, convertible securities or agreement of any character or nature under
which the Corporation is or may become obligated to issue any shares of its
capital stock of any kind, other than those shares indicated in this Section as
presently outstanding. There are no voting trusts, stockholder agreements, or
other voting arrangements to which the Corporation is a party or, to the Best
Knowledge of the Corporation, to which any of the Corporation's stockholders is
a party or bound.
9.7 Taxes. Except as set forth in Exhibit 9.7:
(a) The Corporation has filed (or has obtained extensions for filing)
all income, excise, sales, corporate franchise, property, payroll and other
tax returns or reports required to be filed by it, as of the date hereof by
the United States of America, any state or other political subdivision
thereof or any foreign country and has paid all Taxes or assessments
relating to the time periods covered by such returns or reports; and
(b) The Corporation has paid all tax liabilities imposed or assessed
by any governmental authority for all periods prior to the Closing Date for
which such taxes have become due and payable and has received no notice
from any such governmental authority of any deficiency or delinquency with
respect to such obligation. The Corporation is not currently undergoing any
audit conducted by any taxing authority and has received no notice of audit
covering any prior period for which taxes have been paid or are or will be
due and payable prior to the Closing Date. There are no present disputes as
to taxes of any nature payable by the Corporation.
9.8 No Actions, Proceeding, Etc. There is no action or proceeding (whether
or not purportedly on behalf of the Corporation) pending or to its Best
Knowledge threatened by or against the Corporation which might result in any
material adverse change in the condition, financial or otherwise, of the
Corporation's business or assets. No order, writ or injunction or decree has
been issued by, or requested of any court or Governmental Agency that does, nor
may result in, any material adverse change in the Corporation's assets or
properties or in the financial condition or the business of the Corporation.
Except for liabilities referred to in attached Exhibit 9.8, the Corporation is
not liable for damages to any employee or former employee as a result of any
violation of any state, federal or foreign laws directly or indirectly relating
to such employee or former employee.
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9.9 Subsequent Balance Sheet Changes. Except as set forth on the attached
Exhibit 9.9 and as contemplated by this Agreement, since the date of the DCI
Financial Statements, the Corporation has not (a) issued, bought, redeemed or
entered into any agreements, commitments or obligations to sell, buy or redeem
any shares of its capital stock; (b) incurred any obligation or liability
(absolute or contingent), other than current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities incurred in
the ordinary course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien of current
or real property taxes not yet due and payable; (e) waived any rights of
substantial value, whether or not in the ordinary course of business; (f)
suffered any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting its assets or its business; (g) made or
suffered any amendment or termination of any material contract or any agreement
which adversely affects its business; (h) received notice or had knowledge of
any labor trouble other than routine grievance matters, none of which is
material; (i) increased the salaries or other compensation of any of its
directors, officers or employees or made any increase in other benefits to which
employees may be entitled, other than employee salary increases made in the
ordinary course of business and reflected on an exhibit hereto; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its shareholders, officers or employees, other than wages and salaries
made to employees in the ordinary course of business; (l) revalued any of its
assets; or (m) entered into any transactions not in the ordinary course of
business.
9.10 No Breaches. The Corporation is not in violation of, and the
consummation of the transactions contemplated hereby do not and will not result
in any material breach of, any of the terms or conditions of any mortgage, bond,
indenture, agreement, contract, license or other instrument or obligation to
which the Corporation is a party or by which its assets are bound; nor will the
consummation of the transactions contemplated hereby cause DCI to violate any
applicable statute, regulation, judgment, writ, injunction or decree of any
court, threatened or entered in a proceeding or action in which the Corporation
is, was or may be bound or to which any of the Corporation's assets are subject.
9.11 Condition of the Corporation's Assets. Except as set forth on Exhibit
9.11, DCI's assets are currently in good and usable condition and there are no
defects or other conditions which, in the aggregate, materially and adversely
affects the operation or values of such assets taken as a whole. Except as
disclosed on Exhibit 9.11, no person other than DCI (including any officer or
employee of the Corporation) has any proprietary interest in any know-how or
other intangible assets used by the Corporation in the conduct of its business.
9.12 Corporate Contracts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of DCI, has been duly
executed and delivered by an authorized officer of DCI, and is a valid and
binding Agreement on the part of DCI that is enforceable against DCI in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, fraudulent transfers, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
to judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies.
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9.13 Registered Rights and Proprietary Information.
(a) Exhibit 9.13 hereto contains a true and complete list of all
patents, letters patent and patent applications, service marks, trademark
and service xxxx registrations and applications, copyright, copyright
registrations and applications, grants of licenses and rights to the
Corporation with respect to the foregoing, both domestic and foreign,
claimed by the Corporation or used or proposed to be used by the
Corporation in the conduct of its business (collectively herein, "DCI
Registered Rights"). Exhibit 9.13 hereto also contains a true and complete
list of all and every trade secret, know-how, process, formula, discovery,
development, research, design, technique, customer and supplier list,
contracts, product development plans, product development concepts, author
contracts, marketing and purchasing strategy, invention, and any other
matter required for, incident to, or related to the conduct of its business
(hereafter collectively the "DCI Proprietary Information"). Except as
described in Exhibit 9.13 hereto, the Corporation is not obligated or under
any liability whatever to make any payments by way of royalties, fees or
otherwise to any owner or licensor of, or other claimant to, any DCI
Registered Right or DCI Proprietary Information with respect to the use
thereof in the conduct of the business of DCI or otherwise.
(b) Except as described in Exhibit 9.13 hereto, to the Corporation's
Best Knowledge, the Corporation owns and has the unrestricted right to use
the DCI Registered Rights and DCI Proprietary Information required for or
incident to the design, development, manufacture, operation, sale and use
of all products and services sold or rendered or proposed to be sold or
rendered by the Corporation or relating to the conduct or proposed conduct
of its business free and clear of any right, title, interest, equity or
claim of others. As soon as practicable following the execution of this
Agreement, and except as described in Exhibit 9.13 hereto, the Corporation
agrees to take all necessary steps (including without limitation entering
into appropriate confidentiality, assignment of rights and non-competition
agreements with all officers, directors, employees and consultants of the
Corporation and others with access to or knowledge of the DCI Proprietary
Information) to safeguard and maintain the secrecy and confidentiality of,
and its proprietary rights in, the DCI Proprietary Information and all
related documentation and intellectual property rights therein necessary
for the conduct or proposed conduct of its business.
(c) Except as described in Exhibit 9.13 hereto, the Corporation has
not sold, transferred, assigned, licensed or subjected to any right, lien,
encumbrance or claim of others, any DCI Proprietary Information, including
without limitation any DCI Registered Right, or any interest therein,
related to or required for the design, development, manufacture, operation,
sale or use of any product or service currently under development or
manufactured, or proposed to be developed, sold or manufactured, by it.
Exhibit 9.13 contains a true and complete list and description of all
licenses of DCI Proprietary Information granted to the Corporation by
others or to others by the Corporation. Except as described in Exhibit 9.13
hereto, there are no claims or demands of any person pertaining to, or any
proceedings that are pending or threatened, which challenge the rights of
the Corporation in respect of any DCI Proprietary Information used in the
conduct of its business.
(d) Except as described in Exhibit 9.13 hereto, the Corporation owns
and on the Closing Date shall own, has and shall have, holds and shall
hold, exclusively all right, title and interest in the DCI Registered
Rights, free and clear of all liens, encumbrances, restrictions, claims and
23
equities of any kind whatsoever, has and shall have the exclusive right to
use, sell, license or dispose of, and has and shall have the exclusive
right to bring action for the infringement of the DCI Registered Rights and
the DCI Proprietary Information. To the Best Knowledge of Corporation, the
marketing, promotion, distribution or sale by the Corporation of any
products or interests subject to the DCI Registered Rights or making use of
DCI Proprietary Information shall not constitute an infringement of any
patent, copyright, trademark, service xxxx or misappropriation or violation
of any other party's proprietary rights or a violation of any license or
agreement by the Corporation. Except as described in Exhibit 9.13 hereto,
to the knowledge of the Corporation after due inquiry no facts or
circumstances exist that could result in the invalidation of any of the DCI
Registered Rights.
9.14 No Liens or Encumbrances. The Corporation has good and marketable
title to all of the property and assets, tangible and intangible, employed in
the operations of its business, free of any material mortgages, security
interests, pledges, easements or encumbrances of any kind whatsoever and except
for liens in favor of the holders of the DCI Shareholder Notes and the lien in
favor of SKYLYNX.
9.15 Employee Matters. Exhibit 9.15 attached hereto contains a true,
complete and accurate list of all employees of the Corporation and the
remuneration of each (including wages, salaries and fringe benefits). The
Corporation has no information or fact indicating that any employee listed on
Exhibit 9.15 intends to terminate his/her employment relationship with the
Corporation prior or subsequent to the Closing Date, except as may be required
by this Agreement. Except as specifically described on Exhibit 9.15, the
Corporation has no employee benefit plans (including, but not limited to,
pension plans and health or welfare plans), arrangements or understandings,
whether formal or informal. The Corporation does not now and has never
contributed to a "multi-employer plan" as defined in Section 400(a)(3) of the
ERISA. The Corporation has complied with all applicable provisions of ERISA and
all rules and regulations promulgated thereunder, and neither the Corporation
nor any trustee, administrator, fiduciary, agent or employee thereof has at any
time been involved in a transaction that would constitute a "prohibited
transaction" within the meaning of Section 406 of ERISA as to any covered plan
of the Corporation. The Corporation is not a party to any collective bargaining
or other union agreement. The Corporation has not, within the past five (5)
years had, or been threatened with, any union activities, work stoppages or
other labor trouble with respect to its employees which had a material adverse
effect on the Corporation, its business or assets. Except as set forth in
Exhibit 9.15, the Corporation has not made any commitment or agreements to
increase the wages or modify the conditions or terms of employment of any of the
employees of the Corporation used in connection with its business, and between
the date of this Agreement and the Closing Date, the Corporation will not make
any agreement to increase the wages or modify the conditions or terms of
employment of any of the employees of the Corporation used in the conduct of its
business, without the prior written consent of all parties hereto.
9.16 Legal Proceedings and Compliance with Law. DCI has not received notice
of any legal, administrative, arbitration or other proceeding or governmental
investigation pending or threatened (including those relating to the health,
safety, employment of labor, or protection of the environment) pertaining to DCI
which might result in the aggregate in money damages payable by DCI in excess of
insurance coverage or which might result in a permanent injunction against DCI.
24
Except as set forth in such Exhibit 9.16, DCI has substantially complied with,
and is not in default in any respect under any applicable laws, ordinances,
requirements, regulations, or orders applicable to the business of DCI, the
violation of which might materially and adversely affect it. Except as set forth
in such Exhibit 9.16, DCI is not a party to any agreement or instrument, nor is
it subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree, rule, regulation, code or ordinance which materially
and adversely affects, or might reasonably be expected materially and adversely
to affect the business, operations, prospects, property, assets or condition,
financial or otherwise, of DCI.
9.17 Contract Schedules.. Attached as Exhibit 9.17 hereto is an accurate
list of the following:
(a) All contracts, leases, agreements, covenants, licenses,
instruments or commitments of DCI pertaining to the business of DCI calling
for the payment of Five Thousand Dollars ($5,000) or more or which is
otherwise material to the business of DCI, including, without limitation,
the following:
(i) Licenses and contracts held in the ordinary course of business;
(ii) Executory contracts for the purchase, sale or lease of any
assets;
(iii) Management or consulting contracts;
(iv) Patent, trademark and copyright applications, registrations or
licenses, and know-how, intellectual property and trade secret
agreements or other licenses;
(v) Note agreements, loan agreements, indentures and the like, other
than those entered into and executed in the ordinary course of
business;
(vi) All sales, agency, distributorship or franchise agreements; and
(vii) Any other contracts not in the ordinary course of business.
(b) All labor contracts, employment agreements and collective
bargaining agreements to which DCI is a party.
(c) All instruments evidencing any liens or security interest securing
any indebtedness of DCI covering any asset of DCI.
(d) All profit sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance
or other employee benefit plans, agreements, arrangements or commitments of
any nature whatsoever, whether or not legally binding, and all agreements
with any present or former officer, director or shareholder of the
Corporation.
(e) Any and all documents, instruments and other writings not listed
in any other schedule hereto which are material to the business operations
of DCI.
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Except as set forth in Exhibit 9.17, all of such contracts,
agreements, leases, licenses, plans, arrangements and commitments and all
other such items set forth above are valid, binding and in full force and
effect in accordance with their terms and conditions, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, fraudulent transfer, reorganization or other similar laws
affecting the enforcement of contracts generally, and there is no existing
material default thereunder or breach thereof by the Corporation, or to
DCI's knowledge by any party to such contracts, or any conditions which,
with the passage of time or the giving of notice or both, might constitute
such a default by the Corporation or by any other party to the contracts.
9.18 Labor Matters. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes pending
or, to the knowledge of DCI or any of its agent or employees, threatened against
DCI.
9.19 Insurance. DCI maintains insurance coverage on its assets and business
as disclosed in Exhibit 9.19.
9.20 Environmental. Except as disclosed on Exhibit 9.20, DCI has never
owned or operated any real property except for leased office and warehouse
space:
(a) To the Best Knowledge of DCI, no real property (or the subsurface
soil and the ground water thereunder) now or previously leased by DCI (the
"Leased Premises") either contains any Hazardous Substance (as hereinafter
defined) or has underneath it any underground fuel or liquid storage tanks;
(b) To the Best Knowledge of DCI, there has been no generation,
transportation, storage, treatment or disposal of any Hazardous Substance
on or beneath the Leased Premises, now or in the past;
(c) DCI is not aware of any pending or threatened litigation or
proceedings before any court or administrative agency in which any person
alleges, or threatens to allege, the presence, release, threat of release,
placement on or in the Leased Premises, or the generation, transportation,
storage, treatment or disposal at the Leased Premises, of any Hazardous
Substance;
(d) DCI has not received any written notice and has no knowledge that
any Governmental Authority or any employee or agent thereof has determined
or alleged, or is investigating the possibility, that there is or has been
any presence, release, threat of release, placement on or in the Leased
Premises, or any generation, transportation, storage, treatment or disposal
at the Leased Premises, of any Hazardous Substance;
(e) To the Best Knowledge of DCI, there have been no communications or
agreements with any Governmental Authority or agency (federal, state, or
local) or any private person or entity (including, without limitation, any
prior owner of the Leased Premises and any present or former occupant or
tenant of the Leased Premises) relating in any way to the presence,
release, threat of release, placement on or in the Leased Premises, or any
generation, transportation, storage, treatment or disposal at the Leased
Premises, of any Hazardous Substance. DCI further agrees and covenants that
DCI will not store or deposit on, otherwise release or bring onto or
beneath, the Leased Premises any Hazardous Substance prior to the Closing
Date; and
26
(f) There is no litigation, proceeding, citizen's suit or governmental
or other investigation pending, or, to DCI's Best Knowledge, threatened,
against DCI, and DCI knows of no facts or circumstances which might give
rise to any future litigation, proceeding, citizen's suit or governmental
or other investigation, which relate to DCI's compliance with environmental
laws, regulations, rules, guidelines and ordinances.
For purposes of this Section 9.20, "Hazardous Substance" shall mean
and include (i) a hazardous substance as defined in 42 U.S.C. Section
9601(14), the Regulations at 40 C.F.R. Part 302, (2) any substance
regulated under the Emergency Planning and Community Right to Know Act
(including without limitation any extremely hazardous substances listed at
40 C.F.R. Part 355 and any toxic chemical listed at 40 C.F.R. Part 372),
(iii) hazardous wastes and hazardous substances as specified under any
Texas state or local Governmental Requirement governing water pollution,
groundwater protection, air pollution, solid wastes, hazardous wastes,
spills and other releases of toxic or hazardous substances, transportation
of hazardous substances, materials and wastes and occupational or employee
health and safety, and (iv) any other material, gas or substance known or
suspected to be toxic or hazardous (including, without limitation, any
radioactive substance, methane gas, volatile hydrocarbon, industrial
solvent, and asbestos) or which could cause a material detriment to, or
materially impair the beneficial use of, the Leased Premises, or constitute
a material health, safety or environmental risk to any person exposed
thereto or in contact therewith. For purposes of this Section 9.20,
"Hazardous Substance" shall not mean and shall not include the following,
to the extent used normally and required for everyday uses or normal
housekeeping or maintenance: (a) fuel oil and natural gas for heating, (b)
lubricating, cleaning, coolant and other compounds customarily used in
building maintenance, (c) materials routinely used in the day-to-day
operations of an office, such as copier toner, (d) consumer products, (e)
material reasonably necessary and customarily used in construction and
repair of an office project, and (f) fertilizers, pesticides and herbicides
commonly used for routine office landscaping.
9.21 Disclosure of Information. The Corporation represents and warrants
that all statements, data and other written information provided by it to any
party hereto as well as their respective consultants and representatives have
been accurate copies or true originals. The Corporation represents and warrants
that, to its Best Knowledge, (i) there exists no material information concerning
the Corporation which has been requested but not been disclosed to or made
available to the other parties and their representatives or consultants and
which would be material to a decision to consummate the transactions provided
for in this Agreement and (ii) in the aggregate, such information does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made in them, in light of the
circumstances under which they are made, not misleading.
9.22 Representations and Warranties. The representations and warranties
contained in this Agreement shall be true on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date. Such representations and warranties shall
survive the Closing Date and shall remain operative in full force and effect for
the period of eighteen months from the date of Closing regardless of any
investigation at any time made by or on behalf of SKYLYNX and shall not be
deemed merged in any document or instruction so executed and/or delivered by DCI
or Shareholders.
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9.23 Absence of Questionable Payments. To the Best Knowledge of DCI,
neither DCI, nor any director, officer, agent, employee or other person acting
on any its behalf has (i) used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act or any other applicable foreign, federal or
state law; or (ii) accepted or received any unlawful contributions, payments,
expenditures or gifts.
SECTION 10: COVENANTS OF DCI
10.1 Preservation of Business. Until Closing, DCI shall use its best
efforts to cause DCI to:
(a) Preserve intact the present business organization of DCI; and
(b) Maintain its property and assets in its present state of repair,
order and condition, reasonable wear and tear excepted; and
(c) Preserve and protect the goodwill and advantageous relationships
of DCI with its customers and all other persons having business dealings
with DCI; and
(d) Preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade secrets,
service marks, copyrights, bonds and other similar rights of DCI; and
(e) Comply with all laws applicable to the conduct of its business
10.2 Ordinary Course. Until Closing, DCI shall conduct its business only in
the usual, regular and ordinary course, in substantially the same manner as
previously, and shall not make any substantial change to its methods of
management or operation in respect of such business or property. Without
limiting the foregoing, DCI shall not, with respect to DCI:
(a) Sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of its property or assets, other than in the
ordinary course of business;
(b) Incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or enter into
any contract or commitment, except in the ordinary course of business.
(c) Without the consent of SKYLYNX, which consent shall not be
unreasonably withheld, pay or retire any debt or liabilities except for (i)
general, administrative and overhead expenses, (ii) salaries and other
employee obligations previously committed, (iii) normal trade payables and
vendor liabilities (iv) payments due under the Marquette Commerical
Finance, and (v) other expenses incurred in the ordinary course of
business.
10.3 Negative Covenants. Until Closing, except as contemplated by this
Agreement or as disclosed in Exhibits to this Agreement, from the date hereof
until the Closing Date, unless and until SKYLYNX otherwise consents in writing,
DCI will not:
(a) change or alter the physical contents or character of the
inventories of its business, so as to materially affect the nature of the
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Corporation's business or materially and adversely change the total dollar
valuation of such inventories, other than in the ordinary course of
business;
(b) incur any obligations or liabilities (absolute or contingent)
other than current liabilities incurred and obligations under contracts
entered into in the ordinary course of business;
(c) mortgage, pledge or voluntarily subject to lien, charge or other
encumbrance any assets, tangible or intangible, other than the lien of
current property taxes not due and payable;
(d) sell, assign or transfer any of its assets or cancel any debts or
claims, other than in the ordinary course of business;
(e) waive any right of any substantial value;
(f) declare or make any payment or distribution to Shareholders or
issue, purchase or redeem any shares of its capital stock or other equity
securities or issue or sell any rights to acquire the same or effect any
stock split, recapitalization, combination, or reclassification of its
capital stock, or reorganization;
(g) grant any increase in the salary or other compensation of any of
its directors, officers, or employees or make any increase in any benefits
to which such employees might be entitled or enter into any employment
agreement or consulting agreement;
(h) institute any bonus, benefit, profit sharing, stock option,
pension, retirement plan or similar arrangement, or make any changes in any
such plans or arrangements presently existing;
(i) enter into any transactions or series of transactions other than
in the ordinary course of business;
(j) amend or propose to amend its Articles of Incorporation or
By-Laws;
(k) make any change in accounting methods, principles or practices;
(l) authorize capital expenditures or make any acquisition of, or
investment in, assets or stock of any other Person;
(m) enter into or amend any material contract or agreement other than
in the ordinary course of business;
(n) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(o) permit any material insurance policy to be canceled or terminated,
except in the ordinary course of business;
(p) assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person or make any loans or
advances;
29
(q) maintain its real and personal properties in as good a state of
operating condition and repair as they are on the date of this Agreement,
except for ordinary wear and tear or insured casualty in amounts less than
$5,000;
(r) terminate or modify any material leases, contracts, licenses, and
permits or other authorizations or agreements affecting its business or its
real and/or personal property, or the operation thereof, or enter into any
additional lease or contract requiring expenditure by it of any amount
affecting such properties or the operation thereof; or
(s) discharge, satisfy or pay any liens, encumbrances, obligations or
liabilities relating to it, whether absolute or contingent (including
litigation claims), other than liabilities shown on Exhibit 4.1 and
liabilities incurred after the date thereof in the ordinary course of
business, and no such discharge, satisfaction or payment shall be effected
other than in accordance with the ordinary payment terms relating to the
liability discharged, satisfied or paid.
10.4 Additional Covenants.
(a) DCI will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property
or business of DCI or any subsidiary; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if DCI
shall have set aside on its books adequate reserves therefor; and provided,
further, that DCI will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien that
may have attached as security therefor. DCI will promptly pay or cause to
be paid when due, or in conformance with customary trade terms, all other
indebtedness incident to the operations of DCI;
(b) DCI will keep its properties and those of its subsidiaries in good
repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and DCI will at all times
comply with the provisions of all material leases to which any of them is a
party or under which any of them occupies property so as to prevent any
loss or forfeiture thereof or thereunder;
(c) DCI will keep its assets that are of an insurable character
insured by financially sound and reputable insurers against loss or damage
by fire, extended coverage and explosion insurance in amounts customary for
companies in similar businesses similarly situated; and immediately
following the Closing, DCI will maintain, with financially sound and
reputable insurers, insurance against other hazards, risks and liabilities
to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated;
(d) DCI will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with its past practices
consistently applied;
(e) DCI will comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, a breach of
which could have a material adverse effect on its business or credit;
30
(f) DCI shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
patents, processes, licenses, trademarks, trade names or copyrights owned
or possessed by it or any subsidiary and deemed by DCI to be necessary to
the conduct of its business;
(g) DCI will, consistent with its practices in the ordinary course of
business, endeavor to retain its business relationships with its customers
and suppliers that it believes to be advantageous; and
(h) DCI shall deliver to SKYLYNX copies of its statements of operation
and financial condition and similar statements as and when prepared (if at
all) in the ordinary course of its business.
10.5 Access to Books and Records, Premises, Etc. From the date of this
Agreement through the Closing Date, DCI will grant SKYLYNX and its authorized
representatives reasonable access during normal business hours to its books and
records, premises, products, employees and customers and other parties with whom
it has contractual relations during reasonable business hours and in a manner
not to disrupt or interfere with DCI's business relationships for purposes of
enabling SKYLYNX to fully investigate the business of DCI.
10.6 Compensation. Except as contemplated by this Agreement, DCI shall not
enter into or agree to enter into any employment contract or agreement for
consulting, professional, or other services which will adversely and materially
affect the operation of DCI prior to the Closing Date, except for any extensions
of said contracts or agreements on substantially the same terms and conditions
as were previously in effect.
10.7 No Solicitation.
(a) Except in connection with the transactions contemplated by this
Agreement, DCI shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or permit any officer, director or employee of or
any investment banker, attorney or other advisor or representative of, DCI
or any of its subsidiaries to, (i) solicit, initiate or encourage the
submission of, any takeover proposal, (ii) enter into any agreement with
respect to any takeover proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to
lead to, any takeover proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the
preceding sentence by any executive officer of DCI or any of its
subsidiaries or any investment banker, attorney or other advisor or
representatives of DCI or any of its subsidiaries or otherwise, shall be
deemed to be a breach of this Section by DCI. For purposes of this
Agreement, "takeover proposal" means any proposal for a merger,
consolidation or reorganization or other business combination involving DCI
or any of its subsidiaries or any proposal or offer to acquire in any
manner, directly or indirectly, an equity interest in, any voting
securities of, or options, rights, warrants or other interests convertible
or exercisable for or into such voting securities, or a substantial or
material portion of the assets or business of DCI or any of its
subsidiaries, other than the transactions contemplated by this Agreement.
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(b) Except upon a material breach of this Agreement by SKYLYNX or SAC
or following termination hereof and except for action permitted or
contemplated by this Agreement, including a party's right to terminate this
Agreement under certain circumstances, neither the Board of Directors of
DCI nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to SKYLYNX, the approval or
recommendation by such Board of Directors of any such committee of this
Agreement or the Exchange or (ii) approve or recommend, or propose to
approve or recommend, any takeover proposal.
(c) DCI promptly shall advise SKYLYNX orally and in writing of any
takeover proposal or any inquiry with respect to or which could lead to any
takeover proposal and the identity of the person making any such takeover
proposal or inquiry. DCI will keep SKYLYNX fully informed of the status and
details of any such takeover proposal or inquiry.
(d) The provisions of this Section 10.7 shall not be construed to
prevent any investment banker, attorney or other advisor or representative
of DCI to engage in discussions with third parties in the ordinary course
of business with respect to transactions not involving the parties to this
Agreement.
SECTION 11: REPRESENTATIONS AND WARRANTIES OF SKYLYNX AND SAC
As a material inducement to DCI to enter into this Agreement and with the
understanding and expectation that DCI will be relying thereon in consummating
the Merger contemplated hereunder, SKYLYNX and SAC (which hereafter may
collectively be referred to in Sections 11 and 12 only as the "Corporation")
represent and warrant as follows:
11.1 Organization and Standing. SKYLYNX and SAC are corporations duly
organized, validly existing and in good standing under the laws of the states of
their respective formation and organization and have all requisite corporate
power and authority to own their assets and properties and to carry on their
businesses as they are now being conducted.
11.2 Subsidiaries, etc. SAC is a subsidiary of and is wholly owned by
SKYLYNX, a Colorado. Other than its ownership interests disclosed in its SEC
Documents, as hereinafter defined, SKYLYNX has no direct or indirect ownership
interest in any corporation, partnership, joint venture, association or other
business enterprise. SAC does not have any direct or indirect ownership interest
in any corporation, partnership, joint venture, association or other business
enterprise, and, at the Effective Time, will have no assets and no liabilities.
11.3 Qualification. SKYLYNX and SAC are not qualified to engage in business
as foreign corporations in any state, and there is no other jurisdiction wherein
the character of the properties presently owned by SKYLYNX and SAC or the nature
of the activities presently conducted by SKYLYNX and SAC make necessary the
qualification, licensing or domestication of SKYLYNX or SAC as foreign
corporations.
11.4 Corporate Authority. Except as set forth on Exhibit 11.4 hereto,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by SKYLYNX and SAC with any on
the provisions hereof will:
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(a) Conflict with or result in a breach of any provision of its
Articles of Incorporation or By-Laws or similar documents of any
Subsidiary;
(b) Result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Corporation is a party, or by
which any of its properties or assets may be bound except for such default
(or right of termination, cancellation, or acceleration) as to which
requisite waivers or consents shall either have been obtained by the
Corporation prior to the Closing Date or the obtaining of which shall have
been waived by DCI; or
(c) Violate any order, writ, injunction, decree or, to the
Corporation's Best Knowledge, any statute, rule or regulation applicable to
the Corporation or any of its properties or assets. No consent or approval
by any Governmental Authority is required in connection with the execution
and delivery by the Corporation of this Agreement or the consummation by
the Corporation of the transactions contemplated hereby, except for
possible notice under plant closing laws.
11.5 SEC Documents; Financial Statements. The Common Stock of SKYLYNX is
registered pursuant to Section 12(g) of the Exchange Act. DCI has had the
opportunity to obtain on DCI's behalf true and complete copies of the SEC
Documents (except for exhibits and incorporated documents). SKYLYNX has not
provided to DCI any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by SKYLYNX but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement.
As of their respective dates, all of SKYLYNX's reports, statements and
other filings with the Commission (the "SEC Documents") complied in all material
respects with the requirements of the Act or the Exchange Act as the case may be
and the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of SKYLYNX included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of SKYLYNX as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
11.6 Capitalization of the Corporation. The authorized capital stock of
SKYLYNX consists entirely of 100,000,000 shares of Common Stock having a par
value of $.0001 per share, and 25,000,000 shares of Preferred Stock having a par
value of $.0001 per share. As of September 30, 2005, there were a total of
__________________ shares of Common Stock issued and outstanding and no shares
of Preferred Stock issued and outstanding. All outstanding shares of SKYLYNX's
33
capital stock have been validly issued, are fully paid and non-assessable, and
are not subject to pre-emptive rights. The issuance of the shares of SKYLYNX
Series A Preferred and Series B Preferred to be issued to the DCI Shareholders
on the Closing Date in accordance with Sections 5.1 and 5.5 hereof have been
duly approved by the Directors of SKYLYNX and will, upon their issuance, have
been validly issued and will be fully paid and non-assessable, free of any
liens, encumbrances and claims of any kind and nature except restrictions
against transferability without compliance with applicable federal and state
securities laws. Except as described in SKYLYNX's SEC Documents, there are no
equity securities of SKYLYNX authorized, issued or outstanding, and except as
set forth in SKYLYNX's SEC Documents or on Exhibit 11.6 hereto, there are no
authorized, issued or outstanding subscriptions, options, warrants, contracts,
calls, commitments or other purchase rights of any nature or character relating
to any of SKYLYNX's capital stock, equity securities, debt or other securities
convertible into stock or equity securities of SKYLYNX. As of the date of this
Agreement, there are no outstanding contractual obligations of SKYLYNX to
repurchase, redeem or otherwise acquire any shares of capital stock of SKYLYNX.
There are no voting trusts, stockholder agreements or other voting arrangements
to which the Corporation is a party or, to the Best Knowledge of SKYLYNX, to
which any of the SKYLYNX Common Stockholders is a party or bound.
11.7 No Actions, Proceedings, Etc. Except as listed on the attached Exhibit
11.7, there is no action or proceeding (whether or not purportedly on behalf of
the Corporation) pending or to its knowledge threatened by or against the
Corporation, which might result in any material adverse change in the condition,
financial or otherwise, of the Corporation's business or assets. No order, writ
or injunction or decree has been issued by, or requested of any court or
Governmental Agency which does nor may result in any material adverse change in
the Corporation's assets or properties or in the financial condition or the
business of the Corporation. The Corporation is not liable for damages to any
employee or former employee as a result of any violation of any state, federal
or foreign laws directly or indirectly relating to such employee or former
employee.
11.8 Taxes. Except as set forth in Exhibit 11.8:
(a) The Corporation has filed (or has obtained extensions for filing)
all income, excise, sales, corporate franchise, property, payroll and other
tax returns or reports required to be filed by it, as of the date hereof by
the United States of America, any state or other political subdivision
thereof or any foreign country and has paid all Taxes or assessments
relating to the time periods covered by such returns or reports; and
(b) The Corporation has paid all tax liabilities imposed or assessed
by any governmental authority for all periods prior to the Closing Date for
which such taxes have become due and payable and has received no notice
from any such governmental authority of any deficiency or delinquency with
respect to such obligation. The Corporation is not currently undergoing any
audit conducted by any taxing authority and has received no notice of audit
covering any prior period for which taxes have been paid or are or will be
due and payable prior to the Closing Date. There are no present disputes as
to taxes of any nature payable by the Corporation.
11.9 Subsequent Balance Sheet Changes. Except as set forth on Exhibit 11.9
and as contemplated by this Agreement, since the date of the latest financial
statements, the Corporation has not:
(a) issued, bought, redeemed or entered into any agreements,
commitments or obligations to sell, buy or redeem any shares of its capital
34
stock, including but not limited to any options or warrants to purchase any
securities of the Corporation or any securities convertible into capital
stock of the Corporation;
(b) incurred any obligation or liability (absolute or contingent),
other than current liabilities incurred, and obligations under contracts
entered into, in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities incurred in the ordinary course of business;
(d) mortgaged, pledged or subjected to lien charges, or other
encumbrance any of its assets, other than the lien of current or real
property taxes not yet due and payable;
(e) waived any rights of substantial value, whether or not in the
ordinary course of business;
(f) suffered any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting its assets or its
business;
(g) made or suffered any amendment or termination of any material
contract or any agreement which adversely affects its business;
(h) received notice or had knowledge of any labor trouble other than
routine grievance matters, none of which is material;
(i) increased the salaries or other compensation of any of its
directors, officers or employees or made any increase in other benefits to
which employees may be entitled, other than employee salary increases made
in the ordinary course of business and reflected on an exhibit hereto;
(j) sold, transferred or otherwise disposed of any of its assets,
other than in the ordinary course of business;
(k) declared or made any distribution or payments to any of its
shareholders, officers or employees, other than wages and salaries made to
employees in the ordinary course of business;
(l) revalued any of its assets; or
(m) entered into any transactions not in the ordinary course of
business.
11.10 No Breaches. Except as set forth on Exhibit 11.10, the Corporation is
not in violation of, and the consummation of the transactions contemplated
hereby do not and will not result in any material breach of, any of the terms or
conditions of any mortgage, bond, indenture, agreement, contract, license or
other instrument or obligation to which the Corporation is a party or by which
its assets are bound; nor will the consummation of the transactions contemplated
hereby cause SKYLYNX or any Subsidiary to violate any statute, regulation,
judgment, writ, injunction or decree of any court, threatened or entered in a
proceeding or action in which the Corporation is, was or may be bound or to
which any of the Corporation's assets are subject.
35
11.11 Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of SKYLYNX, has been duly
executed and delivered by authorized officers of SKYLYNX, and is a valid and
binding Agreement on the part of SKYLYNX that is enforceable against SKYLYNX in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, fraudulent transfers, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
to judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies. All corporate action necessary to issue and
deliver to the DCI Shareholders the SKYLYNX Series A Preferred (as described in
Sections 5.1) shall be completed within thirty (30) days following closing.
11.12 Legal Proceedings and Compliance with Law. Except as set forth in
Exhibit 11.12, SKYLYNX has not received notice of any legal, administrative,
arbitration or other proceeding or governmental investigation pending or
threatened (including those relating to the health, safety, employment of labor,
or protection of the environment) pertaining to SKYLYNX which might result in
the aggregate in money damages payable by SKYLYNX in excess of insurance
coverage or which might result in a permanent injunction against SKYLYNX. Except
as set forth in such Exhibit 11.12, SKYLYNX has substantially complied with, and
is not in default in any respect under any laws, ordinances, requirements,
regulations, or orders applicable to the business of SKYLYNX, the violation of
which might materially and adversely affect it. Except as set forth in such
Exhibit 11.12, SKYLYNX is not a party to any agreement or instrument, nor is it
subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree, rule, regulation, code or ordinance which materially
and adversely affects, or might reasonably be expected materially and adversely
to affect the business, operations, prospects, property, assets or condition,
financial or otherwise, of SKYLYNX.
11.13 Disclosure of Information. SKYLYNX represents and warrants that all
statements, data and other written information provided by it to any party
hereto as well as their respective consultants and representatives have been
accurate copies or true originals. SKYLYNX represents and warrants that, to its
Best Knowledge, (i) there exists no material information concerning SKYLYNX
which has been requested but not been disclosed to or made available to the
other parties and their representatives or consultants and which would be
material to a decision to consummate the transactions provided for in this
Agreement and (ii) in the aggregate, such information does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made in them, in light of the circumstances
under which they are made, not misleading.
11.14 Representations and Warranties. The representations and warranties
contained in this Agreement shall be true on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date. Such representations and warranties shall
survive the Closing Date and shall remain operative in full force and effect for
a period of eighteen months from the date of Closing regardless of any
investigation at any time made by or on behalf of DCI and shall not be deemed
merged in any document or instruction so executed and/or delivered by SKYLYNX.
11.15 Absence of Questionable Payments. To the Best Knowledge of the
Corporation, neither the Corporation, nor any director, officer, agent, employee
or other person acting on any its behalf has (i) used any corporate or other
funds for unlawful contributions, payments, gifts or entertainment, or made any
unlawful expenditures relating to political activity to government officials or
others or established or maintained any unlawful or unrecorded funds in
violation of Section 30A of the Exchange Act or any other applicable foreign,
federal or state law; or (ii) accepted or received any unlawful contributions,
payments, expenditures or gifts.
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SECTION 12: COVENANTS OF SKYLYNX AND SAC
12.1 Preservation of Business. Until Closing, except as provided for in
this Agreement, SKYLYNX shall use its best efforts to:
(a) Preserve intact the present business organization of SKYLYNX;
(b) Maintain its property and assets in its present state of repair,
order and condition, reasonable wear and tear excepted;
(c) Preserve and protect the goodwill and advantageous relationships
of the Corporation with its customers and all other persons having business
dealings with the Corporation;
(d) Preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade secrets,
service marks, copyrights, bonds and other similar rights of the
Corporation; and
(e) Comply with all laws applicable to the conduct of its business.
12.2 Additional Covenants.
(a) SKYLYNX will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property
or business of SKYLYNX or any subsidiary; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof
shall currently be contested in good faith by appropriate proceedings and
if SKYLYNX shall have set aside on its books adequate reserves therefor and
deposited at Closing into an escrow account an amount to cover any such
tax, assessment, charge or levy; and provided, further, that SKYLYNX will
pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor. The Corporation will promptly pay or cause to be paid
when due, or in conformance with customary trade terms, all other
indebtedness incident to the operations of the Corporation;
(b) SKYLYNX will keep its properties and those of its subsidiaries in
good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and SKYLYNX
will at all times comply with the provisions of all material leases to
which any of them is a party or under which any of them occupies property
so as to prevent any loss or forfeiture thereof or thereunder;
(c) SKYLYNX will keep its assets that are of an insurable character
insured by financially sound and reputable insurers against loss or damage
by fire, extended coverage and explosion insurance in amounts customary for
companies in similar businesses similarly situated; and SKYLYNX will
maintain, with financially sound and reputable insurers, insurance against
other hazards, risks and liabilities to persons and property to the extent
and in the manner customary for companies in similar businesses similarly
situated;
(d) SKYLYNX will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with its past practices
consistently applied;
37
(e) SKYLYNX will comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, a breach of
which could have a material adverse effect on its business or credit;
(f) SKYLYNX shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
patents, processes, licenses, trademarks, trade names or copyrights owned
or possessed by it or any subsidiary and deemed by SKYLYNX to be necessary
to the conduct of its business;
(g) SKYLYNX will, consistent with its practices in the
ordinary course of business, endeavor to retain its business relationships with
its customers and suppliers that it believes to be advantageous; and
(h) SKYLYNX shall deliver to DCI copies of its statements of operation
and financial condition and similar statements as and when prepared (if at
all) in the ordinary course of its business.
12.3 Access to Books and Records, Premises, Etc. From the date of this
Agreement through the Closing Date, SKYLYNX will grant DCI and its authorized
representatives reasonable access during normal business hours to its and the
Subsidiaries' books and records, premises, products, employees and customers and
other parties with whom it has contractual relations during reasonable business
hours for purposes of enabling DCI to fully investigate the business of SKYLYNX
and the Subsidiaries. SKYLYNX will also deliver copies of the monthly statements
of operations and financial condition for the period subsequent to the latest
financial statements to DCI within a reasonable time of such statements becoming
available.
SECTION 13: TERMINATION
13.1 Termination. This Agreement may be terminated and abandoned solely as
follows:
(a) At any time until the Closing Date by the mutual agreement of the
Board of Directors of DFTS, SKYLYNX, SAC, and the Shareholders of DCI,.
(b) Failure of Conditions. This Agreement may be terminated by either
party hereto, if the conditions, as set forth in this Agreement to such
terminating party's obligations under this Agreement are not fulfilled on
or prior to the Closing Date; provided that any such termination shall not
limit the remedies otherwise available to such party as a result of
misrepresentations of or breaches by the other party.
(c) Material Breach. This Agreement may be terminated by either party
if the other party is in material breach or default of its respective
covenants, agreements or other obligations hereunder, or if any of its
representations and warranties herein are not true and accurate in all
material respects when made or when otherwise required by this Agreement to
be true and accurate.
(d) By either SKYLYNX, SAC, DFTS or the Shareholders of DCI, if for
any reason the parties have failed to close this Agreement on or before
January 15, 2005, provided that neither SKYLYNX, SAC, DFTS nor the
Shareholders of DCI is then in default hereunder.
38
In the event of any termination pursuant to this Section 13.1 (other
than pursuant to subparagraph 13.1(a)), written notice setting forth the
reasons therefor shall forthwith be given by DFTS, if it is the terminating
party, to SKYLYNX, SAC, and the Sherholders of DCI, or by SKYLYNX or SAC,
if either of them is the terminating party, to DFTS and the Sharehodlers of
DCI, or by the Shareholders of DCI, if it is the terminating party, to
DFTS, SKYLYNX and SAC.
13.2 Effect of Termination. If terminated as provided for in this Section,
this Agreement shall forthwith become wholly void and of no effect, except for
the confidentiality obligations set forth in Section 15 hereof, without
liability to any party to this Agreement except for breach of this Agreement.
SECTION 14: INDEMNIFICATION
14.1 Indemnification Covenants of SKYLYNX. Subject to the limitations set
forth in this Section 14, SKYLYNX shall defend, indemnify, save and keep
harmless DFTS and its affiliates, directors, officers, agents, attorneys,
accountants, or representatives and their respective successors and permitted
assigns (the "DFTS Indemnitees") and the Sharehoders of DCI, against and from
all liability, demands, claims, actions or causes of action, assessments,
losses, fines, penalties, costs, damages and expenses, including reasonable
attorneys' fees (collectively, the "Damages") sustained or incurred by any of
the DFTS Indemnitees as a result of or arising out of or relating to:
(a) Any inaccuracy in a representation or breach of a warranty made by
the SKYLYNX or SAC and in this Agreement or in any document or instrument
delivered to DFTS and the Shareholders of DCI in connection with this
Agreement; or
(b) The failure of the SKYLYNX or SAC to comply with, or the breach by
SKYLYNX or SAC of, any of the covenants contained in this Agreement or in
any document or instrument delivered to DFTS and the Shareholders of DCI in
connection with this Agreement, to be performed by SKYLYNX or SAC.
14.2 Indemnification Covenants of DFTS and the Shareholders of DCI. Subject
to the limitations set forth in this Section 14, DFTS and the Shareholders of
DCI shall defend, indemnify, save and keep harmless SKYLYNX and its affiliates,
managers, officers, members, agents, attorneys, accountants or representatives
and their respective successors and permitted assigns (the "SKYLYNX
Indemnitees"), against and from all Damages sustained or incurred by any of the
SKYLYNX Indemnitees as a result of or arising out of or relating to:
(a) Any inaccuracy in a representation or breach of a warranty made by
DFTS and the Shareholders of DCI in this Agreement or in any document or
instrument delivered to the SKYLYNX in connection with this Agreement; or
(b) The failure of DFTS and the Shareholders of DCI to comply with, or
the breach by DFTS and the Shareholders of DCI of, any of the covenants
contained in this Agreement or in any document or instrument delivered to
SKYLYNX in connection with this Agreement, to be performed by DFTS and the
Shareholders of DCI.
14.3 Limitations on Claims and Liability.
Notwithstanding any provision of this Agreement to the contrary, no party
shall have liability to indemnify the other and neither party may assert a claim
for indemnification for damages suffered by it until and unless the party's
claims for damages for which the other party is entitled to indemnification
39
equal or exceed, in the aggregate, the sum of $10,000 (the "Damages Threshold").
Upon a party's cumulative claims for indemnification equaling the Damages
Threshold, a party may assert claims for indemnification pursuant to Section
14.4 below for the full amount of such party's damages for which it is entitled
to indemnification hereunder.
14.4 Method of Asserting Claims. For purposes of this Section 14.4, the
following terms shall be defined as follows:
(a) "Claims" shall mean all claims asserted pursuant to this Section
14, whether or not arising as a result of a Third Party Claim.
(b) "Indemnified Person" shall mean any DFTS and the Shareholders of
DCI Indemnitee, any SKYLYNX Indemnitee or DFTS and the Shareholders of DCI
Indemnitees, as the context requires.
(c) "Indemnifying Person" shall mean any person obligated to indemnify
an Indemnified Person pursuant to this Section 14, as the context requires.
(d) "Third Party Claims" shall mean any Claim asserted by any person
not a party to this Agreement (including without limitation any
Governmental Authority), asserting that an Indemnified Person is liable for
monetary or other obligations which may constitute or result in Damages for
which such Indemnified Person may be entitled to indemnification pursuant
to this Section 14.
(e) All Claims shall be made in writing and shall set forth with
reasonable specificity the facts and circumstances of the Claim, as well as
the basis upon which indemnification pursuant to this Section 14 is sought.
Notwithstanding the foregoing, no delay or failure by any Indemnified
Person to provide notification of any Claim shall preclude any Indemnified
Person from recovering for Damages pursuant to this Section 14, except to
the extent that such delay or failure materially compromises the rights of
any Indemnifying Person under this Section 14.
(f) Within ten (10) days after receipt by an Indemnifying Person of
any notification of a Claim, the Indemnifying Person may, upon written
notice thereof to the Indemnified Person, assume (at the Indemnifying
Person's expense) control of the defense of such action, suit or proceeding
with counsel reasonably satisfactory to the Indemnified Person, provided
the Indemnifying Person acknowledges in writing to the Indemnified Person
that any Damages that may be assessed against the Indemnified Person in
connection with such action, suit or proceeding constitute Damages for
which the Indemnified Person shall be entitled to indemnification pursuant
to this Section 14. If the Indemnifying Person does not so assume control
of such defense, the Indemnified Person shall control such defense, but in
so doing shall not waive or limit its right to recover under this Section
14 for any Damages that may be assessed against the Indemnified Person in
connection with such action, suit or proceeding. The party not controlling
such defense may participate therein at its own expense; provided that if
the Indemnifying Person assumes control of such defense, and the
Indemnified Person has been advised in writing by outside legal counsel
that under the applicable standards of professional conduct, the
Indemnifying Person and the Indemnified Person may not be represented by
the same counsel with respect to such action, suit or proceeding, the
reasonable fees and expenses of one law firm for the Indemnified Person
shall be paid by the Indemnifying Person. The party controlling such
40
defense shall keep the other party advised of the status of such action,
suit or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. The
Indemnified Person shall not agree to any settlement of such action, suit
or proceeding without the prior written consent of the Indemnifying Person,
which (with respect to an action, suit or proceeding as to which the
Indemnifying Person has not elected to assume control of the defense) shall
not be unreasonably withheld, conditioned or delayed. The Indemnifying
Person shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnified Person, which shall
not be unreasonably withheld, conditioned or delayed so long as the
settlement includes a complete release of the Indemnified Person from all
liability and does not contain or contemplate any payment by, or injunctive
or other equitable relief binding upon, the Indemnified Person.
SECTION 15: NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Nondisclosure of Confidential Information. Each of the parties hereto
recognizes and acknowledges that it has and will have access to certain
nonpublic information of the others which shall be deemed the confidential
information of the other party (including, but not limited to, business plans,
costs, trade secrets, licenses, research projects, profits, markets, sales,
customer lists, strategies, plans for future development, financial information
and any other information of a similar nature) that after the consummation of
the transactions contemplated hereby will be valuable, special and unique
property of the Companies. Information received by the other party or its
representatives shall not be deemed Confidential Information and afforded the
protections of this Section 15.1 if, on the Closing Date, such information has
been (i) developed by the receiving party independently of the disclosing party,
(ii) rightfully obtained without restriction by the receiving party from a third
party, provided that the third party had full legal authority to possess and
disclose such information, (iii) publicly available other than through the fault
or negligence of the receiving party, (iv) released without restriction by the
disclosing party to anyone, including the United States government, (v) properly
and lawfully known to the receiving party at the time of its disclosure, as
evidenced by written documentation conclusively established to have been in the
possession of the receiving party on the date of such disclosure, or (vi) in the
opinion of counsel to the party, required to be disclosed under applicable
Federal or state securities laws, or the rules of any national securities
exchange, Nasdaq, or any over the counter market upon which the securities of
the party are then traded. Each of the parties hereto agrees that it shall not
disclose, and that it shall use its best efforts to prevent disclosure by any
other Person of, any such confidential information to any Person for any purpose
or reason whatsoever, except to authorized representatives of the Companies who
agree to be bound by this confidentiality agreement. Notwithstanding, a party
may use and disclose any such confidential information to the extent that a
party may become compelled by Legal Requirements to disclose any such
information; provided, however, that such party shall use all reasonable efforts
and shall have afforded the other party the opportunity to obtain an appropriate
protective order or other satisfactory assurance of confidential treatment for
any such information compelled to be disclosed. In the event of termination of
this Agreement, each party shall use all reasonable efforts to cause to be
delivered to the other parties, and to retain no copies of, any documents, work
papers and other materials obtained by such party or on such party's behalf
during the conduct of the matters provided for in this Agreement, whether so
obtained before or after the execution hereof. Each of the parties recognizes
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and agrees that violation of any of the agreements contained in this Section
15.1 will cause irreparable damage or injury to the parties, the exact amount of
which may be impossible to ascertain, and that, for such reason, among others,
the parties shall be entitled to an injunction, without the necessity of posting
bond therefor, restraining any further violation of such agreements. Such rights
to any injunction shall be in addition to, and not in limitation of, any other
rights and remedies the parties may have against each other. The provisions of
this Section 15.1 shall survive any termination of this Agreement.
15.2 No Publicity. Until the Closing or the termination of this Agreement
in accordance with its terms, neither SKYLYNX nor DFTS and the Shareholders of
DCI shall, directly or indirectly, issue any press release, or make any public
statement, concerning the transactions contemplated by this Agreement without
the prior written consent of SKYLYNX (in the case of such a release or statement
by DFTS and the Shareholders of DCI) or of DFTS and the Shareholders of DCI (in
the case of such a release or statement by SKYLYNX). This Section 15.2 shall
not, however, preclude any party from making any disclosure required by
applicable law, and in the event any party, or any officer, director, employee,
agent or representative of a party, believes that any press release, public
statement or other disclosure is so required, such party will notify and consult
with the other parties with respect thereto as promptly as is practicable under
the circumstances.
SECTION 16: EXPENSES
Each of the parties will pay all costs and expenses of its performance and
compliance with this Agreement and the transactions contemplated hereby. In no
event will any party to this Agreement be liable to any other party for
incidental damages, lost profits, income tax consequences, lost savings or any
other consequential damages, even if such party has been advised of the
possibility of such damages, or for punitive damages, resulting from the breach
of any obligation under this Agreement. The provisions of this Section 16 shall
survive any termination hereof.
SECTION 17: MISCELLANEOUS
17.1 Attorney's Fees. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of the
provisions or rights or obligations under this Agreement, the unsuccessful party
to such proceeding, shall pay the successful party or parties all statutorily
recoverable costs, expenses and reasonable attorneys' fees incurred by the
successful party or parties including without limitation costs, expenses, and
fees on any appeals and the enforcement of any award, judgment or settlement
obtained, such costs, expenses and attorneys' fees shall be included as part of
the judgment. The successful party shall be that party who obtained
substantially the relief or remedy sought, whether by judgment, compromise,
settlement or otherwise.
17.2 No Brokers. SKYLYNX represents and warrants to DFTS and the
Shareholders of DCI and DFTS and the Shareholders of DCI represents and warrants
to SKYLYNX, that, except as set forth on Schedule 17.2, neither it nor any party
acting on its behalf has incurred any liability, either express or implied, to
any "broker," "finder," financial advisor, employee or similar person in respect
of any of the transactions contemplated hereby. SKYLYNX agrees to indemnify DFTS
and the Shareholders of DCI against, and hold it harmless from, and DFTS and the
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Shareholders of DCI agree to indemnify SKYLYNX against, and hold it harmless
from, any liability, cost or expense (including, but not limited to, fees and
disbursements of counsel) resulting from any agreement, arrangement or
understanding made by such party with any third party, including employees of
DFTS and DCI, for brokerage, finders' or financial advisory fees or other
commissions in connection with this Agreement or the transactions contemplated
hereby. The provisions of this Section 17.2 shall survive any termination of
this Agreement.
17.3 Survival and Incorporation of Representations. The representations,
warranties, covenants and agreements made herein or in any certificates or
documents executed in connection herewith shall survive the execution and
delivery thereof for a period of eighteen months from the Closing, and all
statements contained in any certificate or other document delivered by any party
hereunder or in connection herewith shall be deemed to constitute
representations and warranties made by that party to this Agreement.
17.4 Incorporation by Reference. All Exhibits to this Agreement and all
documents delivered pursuant to or referred to in this Agreement are herein
incorporated by reference and made a part hereof.
17.5 Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to, or shall, confer any rights or remedies under, or by
reason of, this Agreement, on any person other than the parties hereto and their
respective and proper successors and assigns and indemnitees. Nothing in this
Agreement shall act to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement.
17.6 Amendments and Waivers. This Agreement may not be amended, nor may
compliance with any term, covenant, agreement, condition or provision set forth
herein be waived (either generally or in a particular instance and either
retroactively or prospectively) unless such amendment or waiver is agreed to in
writing by all parties hereto.
17.7 Waiver. No waiver of any breach of any one of the agreements, terms,
conditions, or covenants of this Agreement by the parties shall be deemed to
imply or constitute a waiver of any other agreement, term, condition, or
covenant of this Agreement. The failure of any party to insist on strict
performance of any agreement, term, condition, or covenant, herein set forth,
shall not constitute or be construed as a waiver of the rights of either or the
other thereafter to enforce any other default of such agreement, term,
condition, or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to forego
or subvert or otherwise disregard any other agreement, term, condition, or
covenants of this Agreement.
17.8 Governing Law - Construction. This Agreement, and the rights and
obligations of the respective parties, shall be governed by and construed in
accordance with the laws of the State of Delaware. Notwithstanding the preceding
sentence, it is acknowledged that each party hereto is being represented by, or
has waived the right to be represented by, independent counsel. Accordingly, the
parties expressly agree that no provision of this Agreement shall be construed
against any party on the ground that the party or its counsel drafted the
provision. Nor may any provision of this Agreement be construed against any
party on the grounds that party caused the provision to be present.
17.9 Representations and Warranties. The representations and warranties
contained in Sections 9 and 11 of this Agreement shall survive the Closing Date
and shall remain operative in full force and effect for eighteen months from the
date of Closing regardless of any investigation at any time made by or on behalf
of either SKYLYNX, DFTS or DCI and shall not be deemed merged in any document or
instrument so executed or delivered by either SKYLYNX, DFTS or DCI.
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17.10 Notices. Any notice, communication, offer, acceptance, request,
consent, reply, or advice (herein severally and collectively, for convenience,
called "Notice"), in this Agreement provided or permitted to be given, served,
made, or accepted by any party or person to any other party or parties, person
or persons, hereunder must be in writing, addressed to the party to be notified
at the address set forth below, or such other address as to which one party
notifies the other in writing pursuant to the terms of this Section 17.10, and
must be served by (i) telefax or other similar electronic method, or (i)
depositing the same in the United States mail, certified, return receipt
requested and postage paid to the party or parties, person or persons to be
notified or entitled to receive same, or (iii) delivering the same in person to
such party.
Notice shall be deemed to have been given immediately when sent by telefax
and confirmed received or other electronic method and seventy-two hours after
being deposited in the United States mail, or when personally delivered in the
manner herein above described. Notice provided in any manner not specified above
shall be effective only if and when received by the party or parties, person or
persons to be, or provided to be notified.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be addressed as set forth below:
If SKYLYNX, to: SKYLYNX COMMUNICATIONS, INC.
000 Xxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With copy to: Xxxxxxxx X. Xxxxxx, Esq.
Xxxxxxxx X. Xxxxxx, P.C.
0000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If DFTS, to: DEFENSE TECHNOLOGY SYSTEMS, INC.
000 X Xxxxxx Xxxx.
Xxxxxxxxx, XX 00000
Fax: (000)000-0000
If DCI,to: DIGITAL COMPUTER INTEGRATION CORPORATION
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Fax (000) 000-0000
If Shareholders of DCI, to: Xxxxx Xxxxxxxxxxx, Xx.
0000 Xxxxxxxx Xxxxx
Xxxxx, XX 00000
Any party receiving a facsimile transmission shall be entitled to rely upon
a facsimile transmission to the same extent as if it were an original. Any party
may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section 17.10 for the giving of notice.
17.11 Fax/Counterparts. This Agreement may be executed by telex, telecopy
or other facsimile transmission, and such facsimile transmission shall be valid
and binding to the same extent as if it were an original. Further, this
Agreement may be signed in one or more counterparts, all of which when taken
together shall constitute the same documents. For all evidentiary purposes, any
one complete counter set of this Agreement shall be considered an original.
17.12 Captions. The caption and heading of various sections and paragraphs
of this Agreement are for convenience only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.
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17,13 Severability. Wherever there is any conflict between any provision of
this Agreement and any Governmental Requirement or judicial precedent, the
latter shall prevail, but in such event the provisions of this Agreement thus
affected shall be curtailed and limited only to the extent necessary to bring it
within the requirement of the law. In the event that any part, section,
paragraph or clause of this Agreement shall be held by a court of proper
jurisdiction to be invalid or unenforceable, the entire Agreement shall not fail
on account thereof, but the balance of the Agreement shall continue in full
force and effect unless such construction would clearly be contrary to the
intention of the parties or would result in unconscionable injustice.
17.14 Good Faith Cooperation and Additional Documents. The parties shall
use their best good faith efforts to fulfill all of the conditions set forth in
this Agreement over which it has control or influence. Each party covenants and
agrees to cooperate in good faith and to enter into and deliver such other
documents and papers as the other party reasonably shall require in order to
consummate the transactions contemplated hereby, provided in each instance, any
such document is in form and substance approved by the parties and their
respective legal counsel.
17.15 Specific Performance. The obligations of the parties under Sections 2
and 3 are unique. If either party should default in its obligations under said
Section, the parties each acknowledge that it would be extremely difficult and
impracticable to measure the resulting damages; accordingly, the non-defaulting
party, in addition to any other available rights and remedies, may xxx in equity
for injunction (mandatory or prohibitive) or specific performance (all without
the need to post a bond or undertaking of any nature), and the parties each
expressly waive the defense that a remedy at law in damages is adequate.
17.17 Assignment. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of its/their/his
rights, obligations or liabilities under this Agreement without the prior
written consent of all other parties, which consent may be withheld in their
respective sole and absolute discretion. Any purported assignment or delegation
without such consent shall be null and void.
For purposes of this Section, the term "Agreement" shall include this
Agreement and the Exhibits and other documents attached hereto or described in
this Section 17.17. This Agreement, and other documents delivered pursuant to
this Agreement, contain all of the terms and conditions agreed upon by the
parties relating to the subject matter of this Agreement and supersede all prior
and contemporaneous agreements, letters of intent, representations, warranties,
disclosures, negotiations, correspondence, undertakings and communications of
the parties, oral or written, respecting that subject matter, including but not
limited to the Original Agreement and Plan of Reorganization and the Amendment
Agreements entered into by the parties.
17.17 Time. Time is of the essence of this Agreement and each of its
provisions.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties have signed the Agreement the date and year
first above written.
SKYLYNX ACQUISITION CORP.,
a Colorado corporation
/s/ Xxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxx, COO
SKYLYNX COMMUNICATIONS, INC.,
a Delaware corporation
/s/ Xxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxx, COO
DIGITAL COMPUTER INTEGRATION CORPORATION
A Texas corporation
/s/ Xxxxx Xxxxxxxxxxx
--------------------------
Xxxxx Xxxxxxxxxxx, President
DEFENSE TECHNOLOGY SYSTEMS, INC.
A Delaware Corporation
/s/ Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx, President
DCI SHAREHOLDERS:
XXXXX XXXXXXXXXXX, XX.
/s/ Xxxxx Xxxxxxxxxxx
--------------------------
XXXXX XXXX XXXXXXXXXXX
/s/ Xxxxx Xxxx Xxxxxxxxxxx
--------------------------
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