1
Exhibit 1. Stock Purchase Agreement and Addendum
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (which together with the attached exhibits,
are referred to herein as "Agreement") is entered into this ____ day of January
1997 by and between DMI, Inc., a Colorado corporation (the "Company") and the
shareholders of DEGA Technology, Inc., a California corporation ("DEGA"), who
agree to become parties to this Agreement ("Selling Shareholders") evidenced by
their signatures hereto.
WHEREAS, the Selling Shareholders wish to sell and the Company desires to
purchase the DEGA Shares in exchange for shares of common stock of DMI, Inc.
upon the terms and conditions set forth in this Agreement, and
WHEREAS, the Selling Shareholders wish to provide additional operating
capital to DEGA through the sale of new DEGA stock, and
WHEREAS, the Company officers, and in particular Xxxxx Xxxx and Xxxxxx
XxXxxxxx propose to engage in raising funds to contribute to the operating
capital of DEGA, and
WHEREAS, the Company officers and in particular Xxxxx Xxxx and Xxxxxx
XxXxxxxx represent that they have the knowledge, expertise and contacts
necessary to successfully achieve such fund raising, and that they will be able
to raise the necessary capital to allow for Dega's growth.
NOW, THEREFORE, in consideration of and in reliance on the mutual promises
and representations and warranties contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Selling Shareholders and the Company agree as follows:
1. Definitions.
1.1 "DEGA Shares" means all the issued and outstanding shares of DEGA.
1.2 "DEGA Disclosure Documents" means the DEGA Financials (as defined
herein), material agreements and corporate documents, and other information
related to DEGA material to its operations for the three (3) fiscal years ending
December 31, 1996, and any and all interim data or through the date hereof to be
provided by DEGA pursuant to this Agreement, said documents to be part of
Exhibit B attached hereto,
1.3 "Company Disclosure Documents" means the Company Financials (as defined
herein), material agreements and corporate documents, and other information
4
2
related to the Company material to its operations for the three (3) fiscal
years ending December 31, 1995, and any and all interim data or filings through
the date hereof to be provided by the Company pursuant to this Agreement,
including but not limited to other information required pursuant to the
provisions of the Securities Exchange Act of 1934 (the "34 Act") or the
Securities Act of 1933, as amended (the "33 Act") said documents to be part of
Exhibit C attached hereto.
2. Purchase and Sale of DEGA Shares.
2.1 Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement, on the Closing Date, as defined herein, the Selling Shareholders
agree to sell and transfer the DEGA Shares to the Company and the Company agrees
to purchase the DEGA Shares for the consideration set forth in this Agreement.
2.2 Purchase Price. In exchange for the DEGA Shares, the Company shall
issue and deliver to the Selling Shareholders:
2.2.1 56,800,000 shares of common stock of DMI, Inc. (the "DMI
Shares"), subject to adjustment proportionately in the event of a Reverse Split,
as defined herein, of the common stock of DMI prior to Closing. Said adjustment
and reverse split computations are described in Exhibit D attached hereto.
2.2.2 A marketing and sales program conducted by officers of the
Company for the purpose of selling the new Dega stock and raising funds for
Dega's operational growth. This marketing and sales program is described in
Exhibit A attached hereto.
2.3 Adjustment to Purchase Price. In the event one or more of the Selling
Shareholders listed on the signature page hereof are unable to deliver any of
the DEGA Shares, the aggregate principal amount of the Purchase Price (i.e., the
DMI Shares) shall be decreased by the percentage of DEGA Shares which cannot be
delivered at Closing.
3. Closing.
3.1 Date and Place. The closing of the delivery and transfer of the DEGA
Shares (the "Closing") shall occur on a date ("Closing Date") to be mutually
agreed upon by the Selling Shareholders and the Company after (1) exchange of
all books, records, financial information, documents, and other materials
reasonably deemed necessary to completion of the transaction contemplated under
this Agreement and (2) completion of all review periods, as provided for in this
Agreement. Exchange of documents under this Agreement shall begin as soon as
possible after execution. In any case, the Closing Date shall be no later than
June 30, 1997, and the effective date of this transaction shall be the date of
Closing (the "Effective Date").
5
3
3.2 Transactions and Document Exchange at Closing. At the Closing, the
following transactions shall occur and documents shall be exchanged, all of
which shall be deemed to occur simultaneously:
(A) By the Selling Shareholders. The Selling Shareholders will
deliver, or cause to be delivered, to the Company:
(1) The documents necessary to transfer the DEGA Shares to the
Company pursuant to this Agreement, in proper form and substance reasonably
acceptable to the Company;
(2) Such other documents, instruments, and/or certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement, or which are reasonably determined by the parties to be required to
effectuate the transaction contemplated in this Agreement, or as otherwise may
be reasonably requested by the Company in furtherance of the intent of this
Agreement.
(3) Audited financial statements of DEGA dated as of its most
recent year end prior to the Closing Date covering all operations since 1994.
Such financial statements shall be prepared by a certified public accounting
firm. If audited financial statements are not available, the Selling
Shareholders shall deliver all books and records of DEGA to the extent available
and necessary to perform such audit in accordance with Regulation S-X which
books and records shall present fairly the financial condition and results of
operations of DEGA since inception, in accordance with generally accepted
accounting principles applied on a basis consistent with prior accounting
periods.
(4) A certificate dated within 30 days of the Closing Date from
the Secretary of State of California to the effect that DEGA is in good standing
in the State of California;
(B) By the Company. The Company will deliver, or cause the following
to be delivered, to the Selling Shareholders:
(1) The DMI Shares in names of the Selling Shareholders as
calculated herein.
(2) A certificate dated at or within 30 days of the date of the
Closing from the Secretary of State of Colorado to the effect that the Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Colorado;
(3) Such other documents, instruments, and/or certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement, or which are reasonably determined by the parties to be required to
effectuate the transactions
6
4
contemplated in this Agreement, or as otherwise may be reasonably requested by
the Selling Shareholders in furtherance of the intent of this Agreement.
3.3 Post-Closing Documents. From time to time after the Closing, upon the
reasonable request of any party, the party to whom the request is made shall
deliver such other and further documents, instruments, and/or certificates as
may be necessary to more fully vest in the requesting party the consideration
provided for in this Agreement or to enable the requesting party to obtain the
rights and benefits contemplated by this Agreement, including but not limited to
delivery of all books and records of DEGA since inception.
4. Representations and Warranties of the Company.
The Company represents and warrants to the Selling Shareholders that:
4.1 Organization and Authority. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Colorado, with the corporate power and authority to carry on its business as
now being conducted.
4.2 Ability to Carry Out Agreement. To the best of the Company's knowledge
and belief, the execution and performance of this Agreement will not violate, or
result in a breach of, or constitute a default in, any provisions of applicable
law, any agreement, instrument, judgment, order or decree to which the Company
is a party or to which the Company is subject.
4.3 Ability to Carry Out Marketing and Sales Campaign. The Company and its
officers are capable of conducting a marketing and sales campaign to sell the
new DEGA stock. The company and its officers possess the knowledge, expertise
and business contact to initiate and successfully carry through such a campaign.
4.4 Ability to Successfully Raise Funds. The Company and its officers are
capable of successfully raising funds through the sale of new DEGA stock. The
company and its officers possess the knowledge, expertise and business contact
to initiate and carry through such fund raising which, as described in Exhibit A
attached hereto, will provide a minimum of $450,000 of operating capital by May
15, 1997, and will provide a minimum of $4 Million and $8 Million of additional
operating capital by September 30, 1997.
4.5 Financial Information. The Company has provided to the Selling
Shareholders, or shall provide prior to Closing, copies of its Annual Report on
Form 10-K and/or 10-KSB for the three (3) years ending December 31, 1995 and the
interim quarterly financial statement on Form 10-Q or 10-QSB for the quarters
ended March 31, 1996, June 30, 1996, and September 30, 1996. The quarterly
financial statements and such Annual Reports, and all other information included
in such reports, shall be referred to as the "Company Financials". The Company
has no obligation or liabilities (whether accrued,
7
5
absolute, contingent, liquidated or otherwise, including without limitation any
tax liabilities due or to become due) which are not fully disclosed and
adequately provided for in the Company Financials, excepting current
liabilities incurred and obligations under agreements entered into in the usual
and ordinary course of business since the date of the Company Financials, none
of which (individually or in the aggregate) are material except as expressly
indicated in the Company Financials. The Company is not a guarantor or
otherwise contingently liable for any material amount of such indebtedness.
Except as indicated in the Company Financials or the Company Disclosure
Documents, there exists no default under the provisions of any instrument
evidencing such indebtedness or of any agreement relating thereto.
4.6 Tax Matters. The Company has filed or will file all federal, state,
and local income, excise, property, and other tax returns, forms, or reports,
which are due or required to be filed by it and has paid, or made adequate
provision for payment of all taxes, interest, penalty fees, assessments, or
deficiencies shown to be due or claimed to be due or which have or may become
due on or in respect to such returns or reports.
4.7 Contracts. Except as disclosed pursuant to this Agreement, or in the
Company Disclosure Documents, there are no contracts, actual or contingent
obligations, agreements, franchises, license agreements, or other commitments
between the Company and the Company or other third parties which are material to
the business, financial condition, or results of operation of the Company, taken
as a whole. For purposes of the preceding sentence, the term "material" refers
to any obligation or liability which by its terms calls for aggregate payments
of more than $50,000.
4.8 Full Disclosure. The information concerning the Company, set forth in
this Agreement, and in the Company Disclosure Documents, is, to the best of the
Company's knowledge and belief, complete and accurate in all material respects
and does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.9 Date of Representations and Warranties. Each of the representations
and warranties of the Company set forth in this Agreement is true and correct at
and as of the Closing Date, with the same force and effect as though made at and
as of the Closing Date, except for changes permitted or contemplated by this
Agreement.
5. Representations and Warranties of the Selling Shareholders.
The Selling Shareholders represent and warrant to the Company that:
5.1 Organization and Authority. DEGA is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
with the power and authority to carry on its business as now being conducted. In
addition, DEGA is duly qualified to do business in each jurisdiction in which
the nature of its business requires it to
8
6
be so qualified, except to the extent that the failure to so qualify does not
have a material adverse effect on the business of DEGA' taken as a whole.
5.2 Ability to Carry Out Agreement. To the best of the Selling
Shareholders' knowledge and belief, the execution and performance of this
Agreement will not violate, or result in a breach of, or constitute a default
in, any provisions of applicable law, any agreement, instrument, judgment, order
or decree to which DEGA is a party or to which DEGA is subject, other than such
violations, breaches, or defaults which, singly or in the aggregate, do not have
a material adverse effect on its business as a whole or on the enforceability or
validity of this Agreement.
5.3 Capitalization of DEGA. As of the date of execution of this Agreement,
the capitalization of DEGA is comprised of one class of capital stock consisting
of Two Million (2,000,000) shares of No Par value common stock, of which
2,000,000 shares were issued and are presently outstanding and held, of record,
by the Selling Shareholders in the amounts opposite their names on the signature
page hereto. All of the issued and outstanding shares are duly authorized,
validly issued, fully paid, and have been offered, issued, sold, and delivered
by DEGA in material compliance with all applicable federal and state securities
laws.
5.4 Financial Information. The Selling Shareholders have provided to the
Company, or will provide prior to Closing, financial statements of DEGA for all
fiscal years ended since December 31, 1994 and reports for such interim periods
ending since the latest fiscal year ended, and such other documents and
information relating to DEGA's current financial condition including but not
limited to its purchase, operation and disposition, if any, of any DEGA assets
and liabilities. Such financial statements and other financial information shall
be referred to as the "DEGA Financials". If not audited, the Selling
Shareholders represent that all financial statements and reports included in the
DEGA Financials have been prepared from the books and records of DEGA (subject
to normal year-end adjustments) and present fairly the financial condition of
DEGA and the results of their operations for the periods therein specified, all
in accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods. Except as set forth in the DEGA
Financials, DEGA has no obligations or liabilities (whether accrued, absolute,
contingent, liquidated or otherwise, including without limitation any tax
liabilities due or to become due) which are not fully disclosed and adequately
provided for, excepting current liabilities incurred and obligations under
agreements entered into in the usual and ordinary course of business since
September 30, 1996, none of which (individually or in the aggregate) are
material. DEGA is not a guarantor or otherwise contingently liable for any
material amount not disclosed in the DEGA Financials, nor does there exist any
default under the provisions of any instrument evidencing any indebtedness of
DEGA or of any agreement relating thereto.
5.5 Conduct of Business. Since September 30, 1996, except as disclosed in
the DEGA Disclosure Documents, DEGA has not (i) discharged or satisfied any
liens other than those securing, or paid any obligation or liability other than,
current liabilities shown
9
7
on the DEGA Financials and current liabilities incurred since the date of the
DEGA Financials, in each case in the usual or ordinary course of business, (ii)
mortgaged, pledged or subjected to lien any of their tangible or intangible
assets (other than purchase money liens incurred in the ordinary course of
business for such assets not yet paid for), (iii) sold, transferred or leased
any of their assets except in the usual and ordinary course of business, (iv)
canceled or compressed any material debt or claim, or waived or released any
right of material value, (v) suffered any physical damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting its
properties, business or prospects, (vi) entered into any transaction other than
in the usual and ordinary course of business, except as contemplated by this
Agreement, (vii) encountered any labor difficulties or labor union organizing
activities, (viii) made or agreed to any wage or salary increase or entered
into any employment agreement, (ix) issued or sold any securities or granted
any options with respect thereto, except as disclosed pursuant to this
Agreement, (x) amended its Articles of Incorporation, (xi) agreed to declare or
pay any distributions with respect to their outstanding capital stock, or (xii)
suffered or experienced any change in, or condition affecting, the condition
(financial or otherwise) of their properties, assets, liabilities, business,
operations or prospects, other than changes, events or conditions in the
ordinary course of their business none of which has (individually or in the
aggregate) been materially adverse, except as disclosed in the DEGA Financials
or Disclosure Documents.
5.6 Litigation. To the best knowledge and belief of DEGA, except as
disclosed in the DEGA Disclosure Documents, there is neither pending nor
threatened, any action, suit or arbitration to which DEGA's property, assets or
business is or is likely to be subject and in which an unfavorable outcome,
ruling or finding will or is likely to have a material adverse effect on the
condition, financial or otherwise, or properties, assets, business or operations
of DEGA, or create any material liability on the part of DEGA or conflict with
this Agreement or any action taken or to be taken in connection herewith.
5.7 Tax Matters. DEGA has filed all federal, state and local income,
payroll and sales tax returns and reports which are due or required to be filed
by it, and, except as disclosed in the DEGA Disclosure Documents, has paid, or
made adequate provision for the payment of, all taxes, interest, penalties,
assessments or deficiencies shown to be due or claimed to be due or which have
or may become due on or in respect to such tax returns and reports, Such federal
and state income, payroll and sales tax returns, to the best of the Selling
Shareholders' knowledge and belief, have not been audited and are not being
audited by any governmental authority.
5.8 Contracts and Options. Except as disclosed in the DEGA Disclosure
Documents, there are no contracts, actual or contingent obligations, agreements,
franchise, license agreements, or other commitments to which DEGA is a party or
by which it or any of its properties or assets are bound which are material to
the business, financial condition, or its results of operation. For purposes of
the preceding sentence, the term "material" refers to any obligation or
liability which by their terms calls for aggregate payments of more than
$50,000.
10
8
5.9 Material Contract Breaches, Defaults. Except as disclosed by the DEGA
Financials as reserved for therein, to the best knowledge and belief of the
Selling Shareholders, DEGA has not materially breached, nor have they any
knowledge of any pending or threatened claims or any legal basis for a claim
that DEGA has materially breached, any of the terms or conditions of any
agreements, contracts, or commitments to which they are a party or are bound and
which are material to the business, financial condition, or results of operation
of DEGA, taken as a whole. Except as disclosed by the DEGA Financials or as
reserved for therein, to the best of their knowledge and belief, neither the
Selling Shareholders nor DEGA are in default in any material respect under the
terms of any outstanding contract, agreement, lease, or other commitment which
is material to the business, operations, properties, assets, or condition of
DEGA, and there is no event of default or other event which, with notice or
lapse of time or both, would constitute a default in any material respect under
any such contract, agreement, lease, or other commitment in respect of which
DEGA has not taken adequate steps to prevent such a default from occurring.
5.10 Employee and Labor Matters. The DEGA Disclosure Documents accurately
set forth the names, positions, and annual salaries of each person employed by
DEGA, including officers, whose annual salary including bonuses exceeds One
Hundred Thousand Dollars ($100,000). Except as disclosed in the DEGA Disclosure
Documents, DEGA has no employment agreement that cannot be canceled on thirty
(30) days notice, or collective bargaining agreement covering any of its
employees and has encountered no material labor difficulties. The DEGA
Disclosure Documents also set forth a complete and accurate list of all employee
benefit plans, including all profit sharing, bonus, stock, pension, or similar
plans to which DEGA is a party or by which DEGA is bound. The Selling
Shareholders will deliver or cause to be delivered to the Company prior to
Closing complete and correct copies of all the agreements, plans, or other
written materials identified in the DEGA Disclosure Documents. There is no
existing default by DEGA under any of the agreements, plans, or arrangements
identified in the DEGA Disclosure Documents, and there exists no condition or
circumstance which, with notice or lapse of time or both, would constitute such
a default. Except as disclosed in the DEGA Disclosure Documents, there is no
pending or threatened labor dispute, strike, slowdown, or work stoppage, no
unfair labor practice pending against DEGA before the National Labor Relations
Board, DEGA is not engaged in any unfair labor practice, and there is no
grievance or arbitration proceeding pending against, or threatened to be
asserted or commenced against DEGA under any collective bargaining agreement or
other labor contract. All taxes relating to DEGA which DEGA is required by law
to withhold or collect have been duly withheld or collected and have been timely
paid over to the proper authorities to the extent due and payable.
5.11 Real Properties. Except as disclosed pursuant to this Agreement, DEGA
has good and marketable fee simple title to all of the real properties owned by
it, including without limitation those reflected in the DEGA Financials, free
and clear of any liens or encumbrances except for current local property taxes
not yet payable and any utility or
11
9
other easements that do not and will not affect operations upon or about such
real properties or the economic value or marketability thereof
5.12 Other Properties and Equipment. Except as disclosed pursuant to this
Agreement, DEGA has good title, subject to no security interests, liens,
encumbrances, or claims of others, to all structures, facilities, machinery and
equipment, supplies, raw materials, vehicles, tools, parts, office equipment,
furniture, fixtures, and all items of personal property and equipment in, at, on
or about such real properties owned or leased by it, or used or necessary in its
operations or business, including without limitation those reflected in the DEGA
Financials. All such structures, facilities, equipment, machinery, vehicles and
tools are in reasonably good operating condition and repair and are sufficient
to enable DEGA to carry on its operations.
5.13 Trademarks. Except as disclosed in the DEGA Disclosure Documents, (i)
DEGA does not own or use any trademark, service xxxx, trade name, copyright or
patent, or any registration or application for registration of any of the
foregoing, and (ii) to the best of DEGA's knowledge and belief, it has not
infringed or is infringing upon any trademark, service xxxx, trade name,
copyright, or patent that is owned or used by any other person.
5.14 Leaseholds and Executory Contracts. Except as disclosed pursuant to
this Agreement, each and every lease or executory contract to which DEGA is a
party is valid and enforceable. DEGA has not received any notice of default by
it under the terms of any such lease or executory contract which default remains
uncured, and it is not in material breach or default by them under the terms of
any such lease or executory contract.
5.15 Permits. Except as disclosed pursuant to this Agreement, DEGA has
obtained and maintained in full force and effect all franchises, permits,
certificates, authorizations, licenses and other similar authority required by
law or governmental regulations from all applicable federal, state or local
authorities and any other regulatory authorities, which are necessary for the
conduct of its business as now being conducted by it and as planned to be
conducted, and it is not in default or noncompliance in any material respect
under any of such franchises, permits, certificates, authorizations, licenses or
other similar authority.
5.16 Compliance with Laws, Rules Etc. The capitalization, business and
operations of DEGA is and has been conducted in compliance with all applicable
federal, state, and local laws, rules and regulations, and it is not in
violation of any terms of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which it is
subject, except to the extent any violation or noncompliance would not
materially and adversely affect its business, operations, properties, assets, or
financial condition, except to the extent that any violation or noncompliance
would not result in the incurring of any material liability. Further, DEGA not
been notified by any regulatory or governmental authority that it is now in
violation of any law, rule, regulation, ordinance, or order.
12
10
5.17 Conflict of Interest Transactions. Except as disclosed in the DEGA
Disclosure Documents, no past or present shareholder or employee of DEGA, or any
affiliate (i) is indebted to, or has any financial, business, or contractual
relationship or arrangement with DEGA or any affiliate, (ii) has any direct or
indirect interest in any property, asset, or right which is owned or used by
DEGA or any affiliate, or (iii) has been directly or indirectly involved in any
transaction with DEGA or any affiliate.
5.18 Corporate Records. Copies of all corporate books and records,
including but not limited to stock transfer ledgers, and any other documents and
records of DEGA shall be provided to the Company at Closing. All such records
and documents are complete, true, and correct.
5.19 Banking Records. A true, correct, and complete list of the names of
each bank in which DEGA has an account and the names of all persons authorized
to draw thereon shall be delivered to the Company as part of the DEGA Disclosure
Documents: DEGA has no safe deposit box.
5.20 Approvals. Except as otherwise provided in this Agreement, to the
best knowledge and belief of the Selling Shareholders, no authorization,
consent, or approval of, or registration or filing with, any governmental
authority or any other person is required to be obtained or made by the Selling
Shareholders or DEGA in connection with the execution, delivery, or performance
of this Agreement.
5.21 Full Disclosure. The information concerning DEGA set forth in this
Agreement, in the DEGA Disclosure Documents, and in the DEGA Financials is, to
the best of the Selling Shareholders' knowledge and belief, complete and
accurate in all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to make the statements
made, in light of the circumstances under which they were made, not misleading.
5.22 Date of Representations and Warranties. Each of the representations
and warranties of the Selling Shareholders set forth in this Agreement are joint
and several, and are true and correct at and as of the Closing Date, with the
same force and effect as though made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
6. Conditions Precedent to Obligations of the Selling Shareholders.
All obligations of the Selling Shareholders under this Agreement are subject
to the fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
6.1 Representations and Warranties. The representations and warranties by
the Company set forth in this Agreement shall be true and correct at and as of
the Closing
13
11
Date, with the same force and effect as though made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
6.2 No Breach or Default. The Company shall have performed and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
6.3 Action to Pay Purchase Price. The Company shall have taken all
corporate and other action necessary to issue and deliver the DMI Shares
representing the Purchase Price to the Selling Shareholders pursuant to this
Agreement.
6.4 Reverse Split Increase in Number of Authorized Shares. The Company
agrees to take the necessary corporate action to effect a reverse split of its
common stock ("Reverse Split"), which shall apply to all currently issued and
outstanding Company common stock, and/or increase the number of authorized
shares designated in the Company's articles of incorporation. Selling
Shareholders acknowledge the Company must hold a Shareholders' Meeting to
approve the Reverse Split or to increase the number of authorized shares prior
to issuance of the DMI Shares to the Selling Shareholders.
6.5 Company Disclosure Documents. Before Closing, the Company will have
delivered to the Selling Shareholders, or caused the delivery of, the Company
Disclosure Documents.
6.6 Name Change. Before Closing, the Company will have undertaken the
necessary action to change the name of the Company to DTI Technology, Inc.
6.7 Directors. Before Closing, the Company will appoint one Director to
serve on the new company's board of directors.
7. Conditions Precedent to Obligations of the Company.
All obligations of the Company under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
7.1 Representations and Warranties. The representations and warranties
executed by the Selling Shareholders set forth in this Agreement shall be true
and correct at and as of the Closing Date, with the same force and effect as
though made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
7.2 No Breach or Default. The Selling Shareholders shall have performed
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
7.3 Action to Transfer DEGA Shares. The Selling Shareholders shall have
taken all action necessary to transfer the DEGA Shares to the Company pursuant
to this
14
12
Agreement. In this regard, the conveyance(s) of the DEGA Shares shall contain
such good and sufficient stock powers, and other good and sufficient
instruments of sale, conveyance, transfer, and assignment, in forth and
substance reasonably satisfactory to the Company free and clear of all liens,
mortgages, conditional sales, and other title retention agreements, pledges,
assessments, covenants, restrictions, reservations, easements, and all other
encumbrances of every nature.
7.4 DEGA Financials. Before Closing, the Selling Shareholders will have
delivered the DEGA Financials and all DEGA Disclosure Documents to the Company.
The DEGA Disclosure Documents shall specifically include income statements
related to the operations of DEGA's business up to and including December 31,
1996.
7.5 Approval of Other Instruments and Documents by the Company. All
instruments and documents delivered to the Company pursuant to the provisions of
this Agreement shall be reasonably satisfactory to the Company and its legal
counsel.
8. Covenants and Agreements of the Selling Shareholders.
Up to and including the Closing Date, the Selling Shareholders covenant
that:
8.1 Access and Information. After the execution of this Agreement, the
Selling Shareholders will cause DEGA to permit the Company to have reasonable
access to all information necessary to verify the representations and warranties
made herein. After the Closing, the Selling Shareholders will cause DEGA to
continue to permit the Company access to such additional documentation and
information as is reasonably necessary to completion of the transactions
contemplated under this Agreement.
8.2 Conduct of Business as Usual. Up until the Closing Date, the Selling
Shareholders shall insure that DEGA's operations shall be conducted only in the
usual and ordinary course, and that no change will be made to such operations
which might adversely affect the value of the DEGA Shares to be transferred to
the Company.
8.3 Best Efforts. The Selling Shareholders shall use their best efforts to
fulfill all conditions of the Closing including the timely solicitation of
affirmative consent of all third parties necessary to effect a Closing under
this Agreement.
8.4 Assent to Sale of DEGA Shares. In the event the sale of DEGA Shares is
consummated, then each of the Selling Shareholders agrees to such sale and
waives, surrenders, and agrees not to exercise any rights which such Selling
Shareholders shall have to purchase any DEGA Shares or have DEGA redeem any DEGA
Shares.
15
13
9. Covenants and Agreements of the Company.
Up to and including the Closing Date, the Company covenants that:
9.1 Maintenance of Capital Structure. Up until the Closing Date, or
termination hereof, whichever is the earlier, except for the Reverse Split or as
disclosed in writing or required under the terms of this Agreement, no change
shall be made in the Articles of Incorporation or Bylaws of the Company, or the
authorized capital stock of the Company.
9.2 Avoidance of Distributions. Up until the Closing Date, the Company
shall not declare any dividends, make any payments or distributions to its
stockholders or purchase for cash or redeem any of its shares of capital stock.
9.3 Access and Information. After the execution of this Agreement, the
Company will permit the Selling Shareholders to have reasonable access to all
information necessary to verify the representations and warranties of the
Company. After the Closing, the Company will continue to permit the Selling
Shareholders access to such additional documentation and information regarding
the Company as is reasonably necessary to completion of the transactions
contemplated under this Agreement.
9.4 Best Efforts. The Company shall use its best efforts to fulfill or
obtain the fulfillment of all conditions of the Closing.
10. Termination.
10.1 Termination without Cause. This Agreement may be terminated at any
time prior to the Closing Date without cost or penalty to either party:
(A) Mutual Consent. By mutual consent of the Selling Shareholders
and the Company.
(B) Actions or Proceedings. By the Selling Shareholders or the
Company, (unless the action or proceeding referred to is caused by a breach or
default on the part of the Selling Shareholders or the Company of any of their
representations, warranties, or obligations under this Agreement), if there
shall be any actual or threatened action or proceeding by or before any court or
any other governmental body which shall seek to restrain, prohibit, or
invalidate the transactions contemplated by this Agreement and which, in the
judgment of the Selling Shareholders or the Company, made in good faith and
based upon the advice of legal counsel, makes it inadvisable to proceed with the
transactions contemplated by this Agreement.
(C) Less than 90% of DEGA Shares Participate. By the Company, if
less than 90% of the outstanding shares of DEGA are tendered to the Company at
the Closing.
(D) The Company officers fail to initiate and conduct the Marketing
and Sales campaign described in Exhibit A attached hereto. The Company officers
fail to raise the necessary capital for the new company operational growth as
described in Exhibit A attached hereto.
16
14
10.2 Termination with Cause. This Agreement may be terminated, with the
terminating party to be reimbursed by the other party for all expenses and costs
related to this Agreement, if
(A) Breach or Noncompliance by the Selling Shareholders. The Selling
Shareholders shall fail to comply in any material aspect with any of their
representations, warranties, or obligations under this Agreement, or if any of
the representations or warranties made by the Selling Shareholders, or any one
of them under this Agreement shall be inaccurate in any material respect.
(B) Breach or Noncompliance by the Company. The Company shall fail
to comply in any material aspect with any of its representations, warranties, or
obligations under this Agreement, or if any of the representations or warranties
made by the Company under this Agreement shall be inaccurate in any material
respect.
11. Securities Registration; Disclosure.
11.1 Private Transaction. The Selling Shareholders understand that the DMI
Shares issued pursuant to this Agreement, have not been nor will they be
registered under the Securities Act of 1933 as amended (the "33 Act"), but are
issued pursuant to exemptions from registration including but not limited to
Regulation D and Section 4(2) of the 33 Act, and the Company's reliance on such
exemptions in issuing the DMI Shares is predicated in part on the
representations of the Selling Shareholders set forth herein and in the
Investment Letter attached hereto as Exhibit "I" (the "Investment Letter"), to
be executed by each of the Selling Shareholders and delivered to the Company at
Closing.
11.2 Access to Information. Each of the Selling Shareholders represents
that, by virtue of their respective economic bargaining power or otherwise,
he/she has had access to or have been furnished with, prior to or concurrently
with Closing, the same kind of information that would be available in a
registration statement under the '33 Act should registration of the DMI Shares
issued pursuant to this Agreement have been necessary, and that they have had
the opportunity to ask questions of and receive answers from the Company's
officers and directors, or any party acting on their behalf, concerning the
business of the Company and that they have had the opportunity to obtain any
additional information, to the extent that the Company possesses such
information or can acquire it without unreasonable expense or effort, necessary
to verify the accuracy of information obtained or furnished by the Company.
12. Indemnification.
As provided herein, the Selling Shareholders and the Company shall each
indemnify and hold harmless the other for one (1) year following the date of
Closing under
17
15
this Agreement against and in respect of any liability, damage, or deficiency,
all actions, suits, proceedings, demands, assessments, judgments, costs and
expenses resulting from any misrepresentations, breach of covenant or warranty,
or from any misrepresentation contained in any certificate furnished hereunder.
13. Confidential Information.
Notwithstanding any termination of this Agreement, the Company, DEGA and the
Selling Shareholders, and their representatives, agree to hold in confidence any
information not generally available to the public received by them from the
Company, DEGA or the Selling Shareholders pursuant to the terms of this
Agreement. If this Agreement is terminated for any reason, the Company, DEGA and
the Selling Shareholders and their representatives will continue to hold such
information as to DEGA in confidence and will, to the extent requested by the
Selling Shareholders, promptly return to them all written material and all
copies or abstracts thereof furnished to the Company, DEGA and the Selling
Shareholders pursuant hereto. Notwithstanding any termination of this Agreement,
the Selling Shareholders and their representatives agree to hold in confidence
any information not generally available to the public received by them from the
Company pursuant to the terms of this Agreement. If this Agreement is terminated
for any reason, the Selling Shareholders and their representatives will continue
to hold such information in confidence and will, to the extent requested by the
Company, promptly return to the Company all written material and all copies or
abstracts thereof given to them or their representatives pursuant thereto.
14. Conditions Subsequent to Closing.
In the event the Reverse Split defined herein is not implemented by the
Closing, the parties to this Agreement may elect to proceed with the Closing in
which event the Company shall, as soon as legally permitted, cause the
Shareholders' Meeting to be held and the Reverse Split approved and implemented,
and the DMI Shares as set forth herein to be delivered to the Selling
Shareholders.
15. Miscellaneous Provisions.
15.1 Survival of Representations and Warranties. All representations,
warranties, and covenants made by any party in this Agreement shall survive the
Closing hereunder and the consummation of the transactions contemplated hereby
for three (3) years from the Closing Date. The Selling Shareholders and the
Company are executing and carrying out the provisions of this Agreement in
reliance on the representations, warranties, and covenants and agreements
contained in this Agreement or at the Closing of the transactions herein
provided for including any investigation upon which they might have made or any
representations, warranty, agreement, promise, or information, written or oral,
made by the other party or any other person other than as specifically set forth
herein.
18
16
15.2 Approval of the Selling Shareholders. The Company and the Selling
Shareholders understand that this Agreement requires approval and participation
by a majority of the Selling Shareholders holding at least 90% of the DEGA
Shares, and thus that all rights and obligations hereunder are subject to
securing such approval. Each Selling Shareholder, by its execution hereof,
hereby gives its consent to the transaction contemplated by this Agreement. In
the event that the requisite number of Selling Shareholders shall fail to
approve this Agreement, then notwithstanding anything contained herein to the
contrary, this Agreement shall be terminated without liability to either the
Selling Shareholders or the Company.
15.3 Costs and Expenses. Subject to paragraph 10 herein, all costs and
expenses in the proposed sale and transfer described in this Agreement shall be
borne by the Selling Shareholders and the Company in the following manner:
(A) Attorneys Fees and Costs. To the extent each party has been
represented by its own attorney(s) in this transaction, such party shall pay the
fees of its own attorney(s), except as may be expressly set forth herein to the
contrary.
(B) Costs of Closing. Each party shall bear its reasonable share of
all other Closing costs and expenses arising from this Agreement.
15.4 Further Assurances. At any time and from time to time, after the
effective date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
15.5 Waiver. Any failure of any party to this Agreement to comply with any
of its obligations, agreements, or conditions hereunder may be waived in writing
by the party to whom such compliance is owed. The failure of any party to this
Agreement to enforce at any time any of the provisions of this Agreement shall
in no way be construed to be a waiver of any such provision or a waiver of the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or non-compliance.
15.6 Headings. The paragraph and subparagraph headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.7 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.8 Governing Law. This Agreement shall be governed by the laws of the
United States, State of California.
19
17
15.9 Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors, and assigns.
15.10 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior agreements,
arrangements, or understandings between the parties relating to the subject
matter of this Agreement. No oral understandings, statements, promises, or
inducements contrary to the terms of this Agreement exist. No representations,
warranties, covenants, or conditions, express or implied, other than as set
forth herein, have been made by any party.
15.11 Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
15.12 Amendment. This Agreement may be amended only by a written
instrument executed by the parties or their respective successors or assigns.
15.13 Facsimile Counterparts. A facsimile, telecopy or other reproduction
of this Agreement may be executed by one or more parties hereto and such
executed copy may be delivered by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party hereto, all
parties agree to execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof
15.14 Time is of the Essence. Time is of the essence in the performance of
this Agreement and of each and every provision hereof
IN WITNESS THEREOF, the parties have executed this Agreement the day and
year first above written.
The "Company"
DMI, Inc., a Colorado corporation
January 31, 1997 By: /s/ XXXXX X. XXXX
------------------------
Name: Xxxxx X. Xxxx
Title: CEO
By: /s/ XXXXXX XXXXXXXXX
-------------------------
Name: Xxxxxx XxxXxxxxx
Title: President
The "Selling Shareholders"
January 31, 1997 By: /s/ X.X. XXXXXXX
--------------------------
Name: X.X. Xxxxxxx
Title: CEO DTI Technology, Inc.
20
