EXHIBIT 2.1
STOCK ACQUISITION AGREEMENT
BY AND AMONG
▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇▇
AS "STOCKHOLDER",
CONSTANT POWER MANUFACTURING
INCORPORATED
AS THE "COMPANY"
AND
INDUSTRIAL DATA SYSTEMS, CORP.
AS THE "ACQUIRING CORPORATION"
EFFECTIVE DATE: MARCH 25, 1998
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STOCK ACQUISITION AGREEMENT
INDEX
ARTICLE I
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DEFINITIONS
1.1 DEFINED TERMS
1.2 OTHER DEFINED TERMS
1.3 REFERENCES
ARTICLE II
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EFFECT OF THE AGREEMENT
2.1 EXCHANGE OF STOCK
2.2 EFFECT
ARTICLE III
-----------
CLOSING
3.1 CLOSING
3.2 DOCUMENTS TO BE DELIVERED
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
4.1 ORGANIZATION OF THE COMPANY
4.2 AUTHORIZATION
4.3 SUBSIDIARIES
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS
4.5 TITLE TO ASSETS, ETC.
4.6 CONDITION OF TANGIBLE ASSETS
4.7 CONTRACTS AND COMMITMENTS
4.8 NO CONFLICT OR VIOLATION
4.9 CONSENTS AND APPROVALS
4.10 FINANCIAL STATEMENTS
4.11 LITIGATION
4.12 LABOR MATTERS
4.13 LIABILITIES
4.14 COMPLIANCE WITH LAW
4.15 NO BROKERS
4.16 NO OTHER AGREEMENTS TO SELL THE ASSETS
OR THE COMPANY
4.17 PROPRIETARY RIGHTS
4.18 EMPLOYEE AGREEMENTS AND BENEFITS
4.19 TRANSACTIONS WITH CERTAIN PERSONS
4.20 TAX MATTERS
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4.21 SEVERANCE ARRANGEMENTS
4.22 INSURANCE
4.23 ACCOUNTS RECEIVABLE
4.24 INVENTORIES
4.25 PURCHASE COMMITMENTS AND OUTSTANDING BID
4.26 PAYMENTS
4.27 CUSTOMERS AND SUPPLIERS
4.28 ENVIRONMENTAL AND SAFETY COMPLIANCE
4.29 MATERIAL MISSTATEMENTS OR OMISSIONS
4.30 BUSINESS OF THE COMPANY
ARTICLE V
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REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
5.1 ORGANIZATION OF STOCKHOLDERS
5.2 AUTHORIZATION
5.3 CONTRACTS AND COMMITMENTS
5.4 CONSENTS AND APPROVALS
5.5 NO BROKERS
5.6 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY
5.7 TRANSACTIONS WITH CERTAIN PERSONS
5.8 MATERIAL MISSTATEMENTS OR OMISSIONS
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION
6.1 ORGANIZATION OF ACQUIRING CORPORATION
6.2 AUTHORIZATION
6.3 CONSENTS AND APPROVALS
6.4 NO BROKERS
6.5 NO CONFLICT OR VIOLATION
6.6 LITIGATION
6.7 COMPLIANCE WITH LAW
6.8 MATERIAL MISSTATEMENTS OR OMISSIONS
ARTICLE VII
-----------
ACTIONS BY STOCKHOLDER, THE COMPANY
ACQUIRING CORPORATION PRIOR TO THE CLOSING
7.1 MAINTENANCE OF BUSINESS
7.2 CERTAIN PROHIBITED TRANSACTIONS
7.3 INVESTIGATION BY ACQUIRING CORPORATION
7.4 CONSENTS AND BEST EFFORTS
7.5 NOTIFICATION OF CERTAIN MATTERS
7.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC.
7.7 MAINTENANCE OF SHAREHOLDER EQUITY
ARTICLE VIII
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CONDITIONS TO STOCKHOLDERS OBLIGATIONS
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8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
8.2 CONSENTS
8.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION
8.4 CORPORATE DOCUMENTS
ARTICLE IX
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CONDITIONS TO ACQUIRING CORPORATIONS OBLIGATION
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
9.2 CONSENTS
9.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION
9.4 CERTIFICATE
9.5 CORPORATE DOCUMENTS
9.6 INVESTIGATION
9.7 EMPLOYMENT AGREEMENTS
9.8 ACCOUNTING MATTERS
ARTICLE X
---------
ACTIONS BY STOCKHOLDER, THE COMPANY AND ACQUIRING
CORPORATION AFTER THE CLOSING
10.1 FURTHER ASSURANCES
ARTICLE XI
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INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, ETC.
11.2 INDEMNIFICATION
11.3 INDEMNIFICATION PROCEDURES
11.4 NO RIGHT OF CONTRIBUTION
ARTICLE XII
-----------
SECURITIES LAWS
12.1 ACQUISITION OF INVESTMENT
ARTICLE XIII
------------
STOCKHOLDER'S OPTION TO RESELL
TO ACQUIRING CORPORATION
13.1 SALE OPTION OF STOCKHOLDER
MISCELLANEOUS
-------------
14.1 TERMINATION
14.2 ASSIGNMENT
14.3 NOTICES
14.4 CHOICE OF LAW
14.5 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS
14.6 COUNTERPARTS
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14.7 INVALIDITY
14.8 HEADING
14.9 EXPENSES
14.10 PUBLICITY
14.11 CONFIDENTIAL INFORMATION
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STOCK ACQUISITION AGREEMENT
This Agreement is made and entered into effective the 25 day of March,
1998 by and between INDUSTRIAL DATA SYSTEMS CORP., a Nevada Corporation, having
its principal place of business in Texas located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ (hereinafter called the "Acquiring Corporation");
▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇▇, (hereinafter called "Stockholder"); and CONSTANT POWER
MANUFACTURING INCORPORATED, (hereinafter called the "Company").
RECITALS
A. CONSTANT POWER MANUFACTURING INCORPORATED, is a Texas Corporation
having its principal place of business located at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The Company is engaged in the business of
Manufacturing and Selling of uninterruptable Electrical Power Systems and
Electrical Power Conditioning Equipment.
B. The Company is authorized to issue 1,000,000 shares of common stock.
There are 1000 shares of common stock issued and outstanding.
C. The Acquiring Corporation is authorized to issue 50,000,000 shares of
common stock of which 12,723,718 shares are issued and outstanding.
D. The Stockholder has agreed to accept voting stock of the Acquiring
Corporation in exchange for all of his shares of common stock of CONSTANT POWER
MANUFACTURING INCORPORATED
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"BALANCE SHEET" shall mean the Consolidated Balance Sheet of the Company
as of December 31, 1997 together with the notes thereon prepared in accordance
with Company's historical accounting method consistently applied by the Company.
"BALANCE SHEET DATE" shall mean December 31, 1997.
"CLOSING BALANCE SHEET" shall mean the Consolidated Balance Sheet of the
Company as of the end of the month immediately preceding the Closing Date
together with notes thereon prepared in accordance with Company's historical
accounting method consistently applied by the Company.
"CLOSING DATE" shall mean the close of business on March 25, 1998, or such
other date as may be mutually agreed upon in writing by Stockholders and
Acquiring Corporation.
"CLOSING FINANCIAL STATEMENTS" shall mean the Closing Balance Sheet, and
Consolidated Statements of Income, Cash Flows and Stockholders Equity for the
Company for the period since the end of the Company's most recent fiscal year
and ending as of the date of the Closing Balance Sheet, together with the notes
thereon.
"CODE" shall mean the Internal Revenue Code of 1986, as may be amended
from time to time.
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"CONTRACTS" shall mean any of the agreements, contracts, commitments or
other documents described in Section 4.7 (a)-(g).
"DISCLOSURE SCHEDULE" means a schedule executed and delivered by
Stockholder or the Company to Acquiring Corporation on or prior to the date
hereof which sets forth exceptions to the representations and warranties
contained in Article IV and V hereof and certain other information called for by
Articles IV and V hereof and other provisions of this Agreement.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance or other rights of third
parties.
"ENVIRONMENTAL LAWS" shall mean all federal, state, and local laws,
statutes, ordinances, regulations, and rules, which (i) regulate or relate to
the protection or clean-up of the environment, the use, treatment, storage,
transportation or disposal of hazardous, toxic or otherwise dangerous
substances, wastes or materials (whether gas, liquid or solid) or the
preservation or protection of waterways, groundwater, drinking water, air,
wildlife, plants, or other natural resources or (ii) impose liability with
respect to any of the foregoing, including without limitation the Federal Water
Pollution Control Act (33 U.S.C. ss.1251 et seq.), Resource Conservation &
Recovery Act 42 U.S.C. ss.6901 et seq.) ("RCRA"), Safe Drinking Water Act (21
U.S.C. ss.349, 42 U.S.C. ss.201, 300f), Toxic Substances Control Act (15 U.S.C.
ss.2601 et seq.), Clean Water Act (42 U.S.C. ss.7401 et seq.) Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss.9601 et
seq.) ("CERCLA"), or any similar federal, state or local law of similar effect,
each as amended.
"FACILITIES" shall mean the plant, offices, manufacturing facilities,
stores, warehouses, administration buildings, etc. and all other real property
and related facilities which are owned or leased by the Company.
"FINANCIAL STATEMENTS" shall mean the Balance Sheet, and Consolidated
Statements of Income, Cash Flows and Stockholders Equity for the Company for the
period since the end of the Company's most recent fiscal year and ending as of
the Balance Sheet Date, together with the notes thereon, previously delivered to
Acquiring Corporation and attached hereto as Schedule 1.1.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings machinery and equipment owned or leased by the Company and located
in, at or upon the Facilities as of the Balance Sheet Date plus all additions,
replacements or deletions since the Balance Sheet Date in the ordinary course of
the Company's business.
"HAZARDOUS SUBSTANCES" shall mean any quantity of asbestos in any form,
urea formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products, any radioactive
substance, any toxic, infectious, reactive, corrosive, ignitable or flammable
chemical or chemical compound and any other hazardous substance, material or
waste (as defined in or for purposes of any Environmental Law), whether solid,
liquid or gas.
"REPRESENTATIVE" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"SUBSIDIARIES" shall mean all corporations, partnerships, joint ventures
or other entities in which the Company either owns capital stock or is a partner
or is in some other manner affiliated through an investment or participation in
the equity of such entity.
1.2 OTHER DEFINED TERMS. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
TERM SECTION
---- -------
Action 4.11
Assets 4.5
Closing 3.1
Damages 11.2
ERISA 4.18
Handled 4.28
Personnel 4.4
Plans 4.18
Proprietary Rights 4.17
Tax 4.20
Taxpayers 4.20
1.3 REFERENCES. As used in this Agreement, unless expressly stated
otherwise, references to "knowledge", "known", to the knowledge of", or other
similar phrases, mean, with respect to any person, the actual knowledge or
reason to have actual knowledge after reasonable independent investigation at
the time of execution of this agreement and at the closing.
ARTICLE II
EFFECT OF THE AGREEMENT
2.1 EXCHANGE OF STOCK. In accordance with the terms and conditions herein,
Stockholder shall at closing, exchange all of his shares of the Company,
representing all of the issued and outstanding shares of the Company for a total
of 300,000 shares of common voting stock in the Acquiring Corporation, par value
One Cent ($0.01) per share.
2.2 EFFECT. The transaction contemplated under the terms of this Agreement
is intended to qualify as a tax free exchange under Section 368(a)(1)(b) of the
Internal Revenue Code. Each party to this agreement has relied solely on the
opinion of its counsel as to the qualification of the transaction for a tax free
exchange pursuant to IRC 368 (a)(l)(b) Although Acquiring Corporation in no
manner guarantees that the transaction will be non-taxable, Acquiring
Corporation will make all reasonable efforts necessary to assist Company and
Stockholder in making the transaction non-taxable.
ARTICLE III
CLOSING
3.1 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall be held at 10:00 a.m. local time on the Closing Date at the
Houston office of Acquiring Corporation's counsel unless the parties hereto
otherwise agree.
3.2 DOCUMENTS TO BE DELIVERED. To effect the exchange referred to in
Section 2.1 and the delivery of the consideration described therein,
Stockholders and Acquiring Corporation shall, on the Closing Date, deliver the
following:
(a) Stockholders shall deliver to Acquiring Corporation certificate(s)
evidencing all of the issued and outstanding shares of the Company, free and
clear of any encumbrances of any nature, duly endorsed for transfer to Acquiring
Corporation.
(b) Acquiring Corporation shall deliver to Stockholder a copy of
instructions sent to its transfer agent directing the issuance to Stockholder of
three hundred thousand (300,000) of the Acquiring Corporation's fully paid
non-assessable common voting shares.
(c) All instruments and documents executed and delivered to Acquiring
Corporation pursuant hereto shall be in form and substance, and shall be
executed in a manner reasonably satisfactory to Acquiring Corporation. All
instruments and documents executed and delivered to Stockholder pursuant hereto
shall be in form and substance, and shall be executed in a manner reasonably
satisfactory to Stockholder.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedules, the Company and
Stockholder hereby represent and warrant to Acquiring Corporation as follows:
4.1 ORGANIZATION OF THE COMPANY.
(a) The Company is duly organized, validly existing and in good standing
under the laws of the State of Texas, has full corporate power and authority to
conduct its business as it is presently being conducted and to own and lease its
properties and assets. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties and where the failure to be
so qualified would have a material adverse effect on the business or financial
condition of the Company. Each jurisdiction, if any, in which the Company is
qualified to do business as a foreign corporation is listed on the Disclosure
Schedule.
(b) The Company has authorized 1,000,000 shares of Common Voting Stock.
The only shares of the Company which have been issued and the current
Stockholders of the Company are as follows:
▇▇▇▇ ▇▇▇▇▇▇ 1000 shares
(c) The company has 2 Directors whose names and titles are as follows:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
(d) The officers of the Company are as follows:
▇▇▇▇ ▇▇▇▇▇▇ - PRESIDENT, TREASURER
▇▇▇▇▇▇ ▇▇▇▇▇▇ - VICE PRESIDENT, SECRETARY
4.2 AUTHORIZATION. The Company has all necessary corporate power and
authority to enter into this agreement and has taken all corporate action
necessary to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
the Company and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
4.3 SUBSIDIARIES. The Company has no Subsidiaries.
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date,
there has not been any:
(a) change in the Company's condition (financial or otherwise), assets,
liabilities, working capital, reserves, earnings, business or prospects, except
for changes contemplated hereby or changes which have not, individually or in
the aggregate, been materially adverse;
(b) (i) except for normal periodic increases in the ordinary course of
business consistent with past practice, increase in the compensation payable or
to become payable by the Company to any of its officers, employees or agents
(collectively, "Personnel") whose total compensation for services rendered to
the Company is currently at an annual rate of more than $20,000.00, (ii) bonus,
incentive compensation, service award or other like benefit granted, made or
accrued, contingently or otherwise, for or to the credit of any of the
Personnel, (iii) employee welfare, pension, retirement, profit-sharing or
similar payment or arrangement made or agreed to by the Company for any
Personnel except pursuant to the existing plans and arrangements described in
the Disclosure Schedule or (iv) new employment agreement to which the Company is
a party;
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(c) addition to or modification of the employee benefit plans,
arrangements or practices described in the Disclosure Schedule affecting
Personnel other than (i) contributions made for most recent year in accordance
with the normal practices of the Company or (ii) the extension of coverage to
other Personnel who became eligible after the Balance Sheet Date;
(d) sale, assignment or transfer of any of the assets of the Company,
material singularly or in the aggregate, other than in the ordinary course;
(e) cancellation of any indebtedness or waiver of any rights of
substantial value to the Company, whether or not in the ordinary course of
business;
(f) amendment, cancellation or termination of any Contract, license or
other instrument material to the Company;
(g) capital expenditure or the execution of any lease, except building
lease or any incurring of liability therefor by Company, involving payments in
excess of $5,000.00 in the aggregate;
(h) failure to repay any material obligation of the Company, except in the
ordinary course of business or where such failure would not have a material
adverse effect on the business or financial condition of the Company;
(i) failure to operate the business of the Company in the ordinary course
so as to use reasonable efforts to preserve the business intact, to keep
available to Acquiring Corporation the services of the Personnel, and to
preserve for Acquiring Corporation the goodwill of the Company's suppliers,
customers and others having business relations with it except where such failure
would not have a material adverse effect on the business or financial condition
of the Company;
(j) change in accounting methods or practices by the Company affecting its
assets, liabilities or business;
(k) revaluation by the Company of any of its assets, including without
limitation writing off notes or accounts receivable;
(l) damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties, business or prospects of the Company;
(m) mortgage, pledge or other encumbrances of any assets of the Company,
material singularly or in the aggregate, except purchase money mortgages arising
in the ordinary course of business;
(n) declaration, setting aside or payment of dividends or distributions in
respect of any capital stock of the Company or any redemption, purchase or other
acquisition of any of the Company's equity securities;
(o) issuance by the Company of, or commitment of the Company to issue, any
shares of stock or other equity securities or obligations or securities
convertible into or exchangeable for shares of stock or other equity securities;
(p) indebtedness incurred by the Company for borrowed money or commitment
to borrow money entered into by the Company, or loans made or agreed to be made
by the Company;
(q) liabilities involving $5,000.00, except building lease or more except
in the ordinary course of business and consistent with past practice, or
increase or change in any assumptions underlying or methods of calculating any
bad debt, contingency or other reserves;
(r) payment, discharge or satisfaction of any liabilities other than the
payment, discharge or satisfaction (i) in the ordinary course of business and
consistent with past practice of liabilities reflected or
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reserved against in the Balance Sheet or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date and (ii)
of other liabilities involving $5,000.00 or less singularly and $10,000.00 or
less in the aggregate;
(s) payment to Stockholder by the Company;
(t) agreement by the Company to do any of the foregoing; or
(u) other event or condition of any character which in any one case or in
the aggregate has materially adversely affected, or event or condition known to
the Company (other than matters of general public knowledge relating to general
economic conditions or the Company's industry as a whole) which it is reasonable
to expect will, in any one case or in the aggregate, materially adversely affect
in the future, the condition (financial or otherwise), assets, liabilities,
working capital, reserves, earnings, business or prospects of the Company.
4.5 TITLE TO ASSETS, ETC. The Company has good and marketable fee simple
title to the assets reflected on the Balance Sheet or acquired in the ordinary
course of business since the Balance Sheet Date (the "Assets"). None of the
Assets are subject to any Encumbrances, except for minor liens which in the
aggregate are not substantial in amount, do not materially detract from the
value of the property or assets subject thereto or interfere with the present
use and have not arisen other than in the ordinary course of business. The
Company has in all material respects performed all the obligations required to
be performed by it with respect to all Assets leased by it through the date
hereof, except where the failure to perform would not have a material adverse
effect on the business or financial condition of the Company. The Company enjoys
peaceful and undisturbed possession of all Facilities owned or leased by it, and
such Facilities are not subject to any Encumbrances, encroachments, building or
use restrictions, exceptions, reservations, or limitations which in any material
respect interfere with or impair the present and continued use thereof in the
usual and normal conduct of the business of the Company. There are no pending or
threatened condemnation proceedings relating to any of the Facilities. The real
property improvements (including leasehold improvements), equipment and other
tangible assets owned or used by the Company at the Facilities are adequately
insured and are structurally sound with no known material defects. None of said
improvements, equipment and other assets is subject to any commitment or other
arrangement for their sale or use by any affiliate of the Company or third
parties. The Assets are valued at or below actual cost less an adequate and
proper depreciation charge. The Company has not depreciated any of the Assets on
an accelerated basis or in any other manner inconsistent with applicable
Internal Revenue Service guidelines, if any.
4.6 CONDITION OF TANGIBLE ASSETS. The Facilities and Fixtures and
Equipment are in good operating condition and repair (except for ordinary wear
and tear and any defect the cost of repairing which would not be material), are
sufficient for the operation of the Company's business as presently conducted
and are in conformity in all material respects with all applicable laws,
ordinances, orders, regulations and other requirements (including applicable
zoning, environmental, motor vehicle safety or standards, occupational safety
and health laws and regulations) relating thereto currently in effect, except
where the failure to conform would not have a material adverse effect on the
business or financial condition of the Company.
4.7 CONTRACTS AND COMMITMENTS. Except as listed in the Disclosure
Schedules 1.2, the Company is not a party to any written or oral:
(a) commitment, contract, note, loan, evidence of indebtedness, or letter
of credit involving any obligation or liability on the part of the Company of
more than $10,000.00 and not cancelable (without liability) within 60 days;
(b) lease of real property;
(c) lease of personal property involving any annual expense in excess of
$10,000.00 and not cancelable (without liability) within 60 days;
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(d) contracts and commitments not otherwise described above or listed in
the Disclosure Schedule (including purchase orders, franchise agreements and
undertakings or commitments to any governmental or regulatory authority)
relating to the business of the Company and otherwise materially affecting the
Company's business under contracts not in the ordinary course of business;
(e) material governmental or regulatory licenses or permits required to
conduct the business of the Company as presently conducted;
(f) contracts or agreements containing covenants limiting the freedom of
the Company to engage in any line of business or compete with any person; or
(g) employment contracts, including without limitation, contracts to
employ executive officers and other contracts with officers or directors of the
Company.
The Company is not (and, to the best knowledge of the Company, no other
party is) in material breach or violation of, or default under any of the
Contracts or other instruments, obligations, evidences of indebtedness or
commitments described in (a)-(g) above, the breach or violation of which would
have a material adverse effect on the business or financial condition of the
Company.
4.8 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of the Company, (b) a breach of, or a default under,
any term or provision of any contract, agreement, indebtedness, lease,
Encumbrance, commitment, license, franchise, permit, authorization or concession
to which the Company is a party or by which the Assets are bound, which breach
or default would have a material adverse effect on the business or financial
condition of the Company or its ability to consummate the transactions
contemplated hereby, (c) a violation by the Company of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree or award,
which violation would have a material adverse effect on the business or
financial condition of the Company or its ability to consummate the transactions
contemplated hereby, or (d) an imposition of any material Encumbrance,
restriction or charge on the business of the Company or on any of the Assets.
4.9 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
the Company in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
4.10 FINANCIAL STATEMENTS. Stockholder has heretofore delivered to
Acquiring Corporation the Financial Statements. Except as otherwise set forth
therein, the Financial Statements are complete, are in accordance with the books
and records of the Company, accurately reflect the assets, liabilities and
financial condition and results of operations indicated thereby in accordance
with COMPANY'S HISTORICAL ACCOUNTING METHOD consistently applied, and contain
and reflect all necessary adjustments for a fair representation of the Financial
Statements as of the date and for the period covered thereby.
4.11 LITIGATION. There is no action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, labor dispute,
arbitral action or investigation (collectively, "Actions") pending or, to the
knowledge of the Company, threatened or anticipated against, relating to or
affecting (i) the Company, (ii) any benefit plan for Personnel or any fiduciary
or administrator thereof or (iii) the transactions contemplated by this
Agreement. The Company is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental agency, and there are no
unsatisfied judgments against the Company or the business or activities of the
Company. There is not a reasonable likelihood of an adverse determination of any
pending Actions which would, individually or in the aggregate, have a material
adverse effect on the business or financial condition of the Company.
4.12 LABOR MATTERS. The Company is not a party to any labor agreement with
respect to its employees with any labor organization, group or association. The
Company has not experienced any attempt by organized labor or its
representatives to make the Company conform to demands of organized labor
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relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company. The Company is in material
compliance with all applicable laws respecting employment practices, terms and
conditions of employment and wages and hours and is not engaged in any unfair
labor practice. There is no unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board or any other
governmental agency arising out of the Company's activities, and the Company has
no knowledge of any facts or information which would give rise thereto; there is
no labor strike or labor disturbance pending or threatened against the Company
nor is any grievance currently being asserted; and the Company has not
experienced a work stoppage or other labor difficulty.
4.13 LIABILITIES. The Company has no liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) liabilities which are reflected and
reserved on the Balance Sheet, (ii) liabilities incurred in the ordinary course
of business and consistent with past practice since the Balance Sheet Date that
individually or in the aggregate are not material, and (iii) liabilities arising
under Contracts, letters of credit, purchase orders, licenses, permits, purchase
agreements and other agreements, business arrangements and commitments described
in the Disclosure Schedule or which are of the type described in Section 4.7 but
which because of the dollar amount or other qualifications are not required to
be listed in the Disclosure Schedule.
4.14 COMPLIANCE WITH LAW. The Company and the conduct of its business are
in compliance with all applicable laws, statutes, ordinances and regulations,
whether federal, state or local, except where the failure to comply would not
have a material adverse effect on the business or financial condition of the
Company. The Company has not received any written notice to the effect that, or
otherwise been advised that, it is not in compliance with any of such statutes,
regulations, orders, ordinances or other laws where the failure to comply would
have a material adverse effect on the business or financial condition of the
Company, and the Company has no reason to anticipate that any presently existing
circumstances are likely to result in violations of any such regulations which
would, in any one case or in the aggregate, have a material adverse effect on
the business or financial condition of the Company.
4.15 NO BROKERS. Neither Stockholder, the Company or any affiliate of the
Company has entered into or will enter into any Contract, agreement, arrangement
or understanding with any person or firm which will result in the obligation of
Acquiring Corporation to pay any finder's fee, brokerage commission or similar
payment in connection with the transactions contemplated hereby.
4.16 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY. Neither
Stockholder nor the Company has any legal obligation, absolute or contingent, to
any other person or firm to sell the Assets, to sell any capital stock of the
Company or to effect any merger, consolidation or other reorganization of the
Company or to enter into any agreement with respect thereto.
4.17 PROPRIETARY RIGHTS. All of the Company's registrations of trademarks
and of other marks, trade names or other trade rights, and all pending
applications for any such registrations and all of the Company's patents and
copyrights and all pending applications therefor; all other trademarks and other
marks, trade names and other trade rights and all other trade secrets, designs,
plans, specifications and other proprietary rights, whether or not registered
(collectively, "Proprietary Rights") are listed in the Disclosure Schedule 1.3.
The Proprietary Rights listed in the Disclosure Schedule are in all material
respects all those used in the business of the Company. No person has a right to
receive a royalty or similar payment in respect of any Proprietary Rights
pursuant to any contractual arrangements entered into by the Company, and no
person otherwise has a right to receive a royalty or similar payment in respect
of any such Proprietary Rights. The Company has no licenses granted by or to it
or no other agreements to which it is a party, relating in whole or in part to
any of the Proprietary Rights. The Company's use of the Proprietary Rights is
not infringing upon or otherwise violating the rights of any third party in or
to such Proprietary Rights, and no proceedings have been instituted against or
notices received by the Company that are presently outstanding alleging that the
Company's use of its Proprietary Rights infringes upon or otherwise violates any
rights of a third party in or to such Proprietary Rights.
4.18 EMPLOYEE AGREEMENTS AND BENEFITS.
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(a) Except as set forth on the Disclosure Schedule 1.4, no employee of the
Company is a party to, participant in, or bound by, any collective bargaining
agreement, union contract or employment, bonus, deferred compensation,
insurance, pension, profit sharing, or other personnel arrangement, any employee
termination or severance arrangements, and the employment by the Company of any
person (whether or not there is a written employment contract) can be terminated
for any reason whatsoever not inconsistent with current law, without penalty or
liability of any kind other than accrued vacation pay.
(b) The Company does not contribute to any multi-employer pension plan, as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Company is not subject to any claims, whether fixed or
contingent, for withdrawal liability relating to any such multi-employer plan.
(c) The Company has complied with all laws relating to the employment of
labor with respect to its employees, including any provisions thereof relating
to wages, hours, collective bargaining and the payment of social security and
similar taxes, and no person has asserted that the Company is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing.
(d) The employee pension benefit plans and welfare benefit plans listed in
the Disclosure Schedule (collectively, the "Plans"), constitute all such Plans
in which any employees of the Company participate and have been operated in all
material respects in compliance with the Code and with ERISA since ERISA became
applicable with respect thereto. The Company shall make available to Acquiring
Corporation true and correct copies of all such Plans, trust agreements with
respect to such Plans, all determination letters with respect thereto, insurance
contracts, administrative servicing agreements and other agreements relating to
the Plans and the most recent annual reports filed with the United States
Department of Labor and/or the Internal Revenue Service by the Company with
respect thereto. None of the Plans nor any of their respective related trusts
have been terminated, and there has been no "reportable event", as that term is
defined in Section 4043 of ERISA, required to be reported since the effective
date of ERISA which has not been reported, and none of such Plans nor their
respective related trusts have incurred any "accumulated funding deficiency", as
such term is defined in Section 302 of ERISA (whether or not waived), since the
effective date of ERISA. The Plans are the only employee benefit plans covering
employees of the Company.
4.19 TRANSACTIONS WITH CERTAIN PERSONS. Neither any officer, director or
employee of the Company nor any member of any such person's immediate family is
presently a party to any material transaction with the Company relating to the
Company's business, including without limitation, any contract, agreement or
other arrangement (i) providing for the furnishing of material services by, (ii)
providing for the rental of material real or personal property from, or (iii)
otherwise requiring material payments to any such person or corporation,
partnership, trust or other entity in which any such person has a substantial
interest as a shareholder, officer, director, trustee or partner.
4.20 TAX MATTERS. The Company, any predecessor of the Company and all
members for income tax purposes of any affiliated group of corporations of which
the Company or any such predecessor corporation is or has been a member
(hereinafter referred to collectively as the "Taxpayers") have duly filed all
tax reports and returns required to be filed by them, including all federal,
state, local and foreign tax returns and reports. The Taxpayers have paid in
full all taxes required to be paid by such Taxpayers before such payment became
delinquent. The Company has made adequate provision, in conformity with
generally accepted accounting principles consistently applied, for the payment
of all taxes which may subsequently become due. All taxes which any Taxpayer has
been required to collect or withhold have been duly collected or withheld and,
to the extent required when due, have been or will be duly paid to the proper
taxing authority.
The consolidated federal income tax returns of the Company and the federal
income tax returns of each Subsidiary of the Company whose results of operations
are not consolidated in the federal income tax returns of the Company, have been
timely filed with the Internal Revenue Service for all periods to and including
those expressly set forth in the Disclosure Schedule, and except to the extent
shown therein, all deficiencies asserted as a result of such examinations have
been paid or finally settled, and no issue has been raised by the Internal
Revenue Service in any such examination which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. There are no audits known by the Company to be
pending on the Company's tax returns, and there are no claims
14
which have been or may be asserted relating to any of the Company's tax returns
filed for any year which if determined adversely would result in the assertion
by any governmental agency of any deficiency. There have been no waivers of
statutes of limitations by the Company.
None of the Taxpayers have filed a statement under Section 341(f) of the
Code (or any comparable state income tax provision) consenting to have the
provisions of Section 341(f)(2) (collapsible corporations provisions) of the
Code (or any comparable state income tax provision) apply to any disposition of
any of the Company's assets or property, no property of the Company is property
which Acquiring Corporation or the Company is or will be required to treat as
owned by another person pursuant to the provisions of Section 168(f) (safe
harbor leasing provisions) of the Code. The Company is not a party to any
tax-sharing agreement or similar arrangement with any other party.
For the purpose of this Agreement, any federal, state, local or foreign
income, sales, use, transfer, payroll, personal property, occupancy or other
tax, levy, impost, fee, imposition, assessment or similar charge, together with
any related addition to tax, interest or penalty thereon, is referred to as a
"tax."
4.21 SEVERANCE ARRANGEMENTS. The Company has not, except to the extent
that such arrangements have been made with ▇▇▇▇ ▇▇▇▇▇▇ in the Employment
Agreement attached hereto as Exhibit `A', entered into any severance or similar
arrangement in respect of any present or former Personnel that will result in
any obligation (absolute or contingent) of Acquiring Corporation or the Company
to make any payment to any present or former Personnel following termination of
employment.
4.22 INSURANCE. The Disclosure Schedule 1.6 contains a complete and
accurate list of all policies or binders of fire, liability, title, worker's
compensation and other forms of insurance maintained by the Company on its
business, property or Personnel. All of such policies are sufficient for
compliance with all requirements of law and of all Contracts to which the
Company is a party. The Company is not in default under any of such policies or
binders, and the Company has not failed to give any notice or to present any
claim under any such policy or binder in a due and timely fashion. There are no
facts upon which an insurer might be justified in reducing coverage or
increasing premiums on existing policies or binders. There are no outstanding
unpaid claims under any such policies or binders. Such policies and binders
provide sufficient coverage for the risks insured against, are in full force and
effect on the date hereof and shall be kept in full force and effect by the
Company through the Closing Date.
4.23 ACCOUNTS RECEIVABLE. The accounts receivable reflected in the Balance
Sheet Schedule 1.7, and all accounts receivable ensuing since the Balance Sheet
Date, represent bona fide claims against debtors for sales, services performed
or other charges arising on or before the date hereof, and all the goods
delivered and services performed which gave rise to said accounts were delivered
or performed in accordance with the applicable orders, Contracts or customer
requirements. Said accounts receivable are subject to no defenses, counterclaims
or rights of offset and are fully collectible in the ordinary course of business
without cost to Acquiring Corporation in collection efforts therefor except, in
the case of accounts receivable shown on the Balance Sheet, to the extent of the
appropriate reserves set forth on the Balance Sheet, and, in the case of
accounts receivable arising since the Balance Sheet Date, to a reasonable
allowance for bad debts which does not reflect a rate of bad debts more than
percent (4%) higher than that reflected by the reserve for bad debts on the
Balance Sheet.
4.24 INVENTORIES. The values at which inventories are shown on the Balance
Sheet have been determined in accordance with the normal valuation policy of the
Company, consistently applied and in accordance with Company's historical
accounting method. The inventories (and items of inventory acquired or
manufactured subsequent to the Balance Sheet Date) consist only of items of
quality and quantity commercially usable and salable in the ordinary course of
business, except for any items of obsolete material or material below standard
quality, all of which have been written down to realizable market value, or for
which adequate reserves have been provided.
4.25 PURCHASE COMMITMENTS AND OUTSTANDING BIDS. As of the date of this
Agreement, the aggregate of all accepted and unfulfilled orders for the sale of
merchandise entered into by the Company does
15
not exceed $ 1,000,000, and the aggregate of all Contracts or commitments for
the purchase of supplies by it does not exceed $ 1,000,000, all of which orders,
Contracts and commitments were made in the ordinary course of business. As of
the date of this Agreement, there are no claims against the Company to return in
excess of an aggregate of $ 10,000 of merchandise by reason of alleged
overshipments, defective merchandise or otherwise, or of merchandise in the
hands of customers under an understanding that such merchandise would be
refundable. No outstanding purchase or outstanding lease commitment of the
Company presently is in excess of the normal, ordinary and usual requirements of
its business or was made at any price in excess of the now current market price
or contains terms and conditions more onerous than those usual and customary in
the Company's business. There is no outstanding bid, proposal, Contract or
unfilled order of the Company which when or would, if accepted, have a material
adverse effect, individually or in the aggregate, on the business or financial
condition of the Company.
4.26 PAYMENTS. The Company has not, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, government official or other party, in the
United States or any other country, which is in any manner related to the
business or operations of the Company, which the Company knows or has reason to
believe to have been illegal under any federal, state or local laws of the
United States or any other country having jurisdiction; and the Company has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers and has at all times done
business in an open and ethical manner.
4.27 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule contains a complete
and accurate list of (i) the ten (10) largest customers of the Company in terms
of sales during the Company's last fiscal year, showing the approximate total
sales by the Company to each such customer during such fiscal year; (ii) the ten
(10) largest suppliers of the Company in terms of purchases during the Company's
last fiscal year, showing the approximate total purchases by the Company from
each such supplier during such fiscal year. Since the Balance Sheet Date, there
has been no adverse change in the business relationship of the Company with any
customer or supplier named in the Disclosure Schedule which is material to the
business or financial condition of the Company.
4.28 ENVIRONMENTAL AND SAFETY COMPLIANCE. There are no present or past
Environmental Conditions in any way relating to the Facilities. The Company did
not cause or contribute to, nor did the Company negligently permit a third party
to cause or contribute to, any Environmental Condition in any way relating to
the Facilities. For purposes of this Agreement, "Environmental Condition" means
any environmental pollution, including, without limitation, any contaminant,
irritant or pollutant, from any spill, discharge, leak, emission, escape,
injection, dumping or release of any kind whatsoever or any exposure of any type
in any work places or to any medium, including, without limitation, air, land,
surface waters or groundwaters, or from any generation, transportation,
treatment, discharge, handling, storage or disposal of Hazardous Substances
used, generated, transported, treated, discharged, stored or disposed of (in any
case, "Handled"), except in all cases in the ordinary course of the operations
or business of the Company and in accordance in all material respects with all
Environmental Laws relating thereto.
Without limiting the generality of the foregoing, neither (i) the
operations of the Company, nor (ii) the collection, distribution or sale of the
processes, results or products of the Company, violates or has violated any
Environmental Law. The Company has timely obtained all licenses and permits and
timely filed all reports required to be filed under any Environmental Laws. The
Company has not Handled any Hazardous Substances on, beneath or about any of the
Facilities, except for Hazardous Substances reasonably necessary to the business
of the Company (which Hazardous Substances, if any, were Handled, in compliance
with Environmental Laws). The Company has not received any notice from any
governmental agency or private or public entity advising the Company that it is
potentially responsible for response costs with respect to a release or
threatened release of Hazardous Substances. The Company has not buried, dumped,
released or otherwise disposed of any Hazardous Substances, on, beneath or about
any of the Facilities or on, beneath or about any other property used in the
business of the Company. The Company has not received notice of any violation of
any Environmental Law or other zoning or land use ordinance, law or regulation
relating to the business or operations of the Company, or any of the processes
followed, results obtained or products made by the Company.
16
4.29 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or warranties
by the Company in this Agreement, nor any document, exhibit, statement,
certificate or schedule furnished to Acquiring Corporation pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading. The Company has disclosed all events, conditions and facts
materially affecting the business, prospects and financial condition of the
Company.
4.30 BUSINESS OF THE COMPANY. As of the Closing Date, the Company shall
only be engaged in the Manufacturing and Selling of uninterruptable Electrical
Power Systems and Electrical Power Conditioning Equipment, and the only assets
and liabilities retained by the Company as of such date shall be related to the
Manufacturing and Selling of uninterruptable Electrical Power Systems and
Electrical Power Conditioning Equipment, including, without limitation, accounts
receivable, inventory, tangible personal property, leased property, contractual
rights, records (customer and production related), government licenses, permits
and approvals, and trade name of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Except as otherwise set forth in the Disclosure Schedule, Stockholder
hereby represents and warrants to Acquiring Corporation as follows:
5.1 ORGANIZATION OF STOCKHOLDERS. ▇▇▇▇ ▇▇▇▇▇▇ is the owner of record and
beneficially of all of the issued and outstanding Stock free and clear of all
encumbrances, and upon transfer pursuant to this Agreement, Acquiring
Corporation will own shares representing 100% of the Company's issued and
outstanding capital stock free and clear of all encumbrances.
5.2 AUTHORIZATION. Stockholder has all necessary power and authority to
enter into this Agreement and has taken all action necessary to consummate the
transactions contemplated hereby and to perform his respective obligations
hereunder. This Agreement has been duly executed and delivered by Stockholder
and is a legal, valid and binding obligation of Stockholder enforceable against
Stockholder in accordance with its terms.
5.3 CONTRACTS AND COMMITMENTS. Stockholder is not a party to any written
or oral commitment, contract, lease, note, loan, evidence of indebtedness,
purchase order, letter of credit or other agreement involving any obligation or
liability on the part of the Company or relating to the business of the Company
and otherwise materially affecting the Company's business not otherwise listed
in the Disclosure Schedule.
Stockholder and the Company is not (and to the best knowledge of
Stockholder, no other party is) in material breach or violation of, or default
under any of the contracts or other instruments, obligations, evidences of
indebtedness or commitments set forth in the Disclosure Schedule, the breach or
violation of which would have a material adverse effect on the business or
financial condition of the Company.
5.4 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
Stockholder in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
5.5 NO BROKERS. Stockholder has not entered and will not enter into any
Contract, agreement, arrangement or understanding with any person or firm which
will result in the obligation of Acquiring Corporation to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
5.6 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY. Stockholder
does not have any legal obligation, absolute or contingent, to any other person
or firm to sell the Assets, to sell any capital stock
17
of the Company or to effect any merger, consolidation or other reorganization of
the Company or to enter into any agreement with respect thereto.
5.7 TRANSACTIONS WITH CERTAIN PERSONS. To the knowledge of Stockholder, no
officer, director or employee of Stockholder nor any member of any such person's
immediate family is presently a party to any material transaction with the
Company relating to the Company's business, including without limitation, any
contract, agreement or other arrangement (i) providing for the furnishing of
material services by, (ii) providing for the rental of material real or personal
property from, or (iii) otherwise requiring material payments to (other than for
services as officers, directors or employees of Stockholder) any such person or
corporation, partnership, trust or other entity in which any such person has a
substantial interest as a shareholder, officer, director, trustee or partner.
5.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or warranties
by Stockholder, in this Agreement, nor any document, exhibit, statement,
certificate or schedule furnished to Acquiring Corporation pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION
Acquiring Corporation hereby represents and warrants to Stockholder as
follows:
6.1 ORGANIZATION OF ACQUIRING CORPORATION. Acquiring Corporation is duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to conduct its business and to
own and lease its properties.
6.2 AUTHORIZATION. Acquiring Corporation has all necessary corporate
authority to enter into this Agreement and has taken all necessary corporate
action to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Acquiring Corporation and is a valid and binding obligation of Acquiring
Corporation enforceable against it in accordance with its terms.
6.3 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
declaration, filing or registration with, any United States federal or state
governmental or regulatory authority is required to be made or obtained by
Acquiring Corporation in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
6.4 NO BROKERS. Neither Acquiring Corporation nor any affiliate of
Acquiring Corporation has entered into or will enter into any agreement,
arrangement or understanding with any person or firm in which will result in the
obligation of Stockholder to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
6.5 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of Acquiring Corporation, (b) a breach of, or a
default under, any term or provision of any contract, agreement, indebtedness,
lease, commitment, license, franchise, permit, authorization or concession to
which Acquiring Corporation is a party which breach or default would have a
material adverse effect on the business or financial condition of Acquiring
Corporation or its ability to consummate the transactions contemplated hereby or
(c) a violation by Acquiring Corporation of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, which
violation would have a material adverse effect on the business or financial
condition of Acquiring Corporation or its ability to consummate the transactions
contemplated hereby.
18
6.6 LITIGATION. There is no action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, labor dispute,
arbitral action or investigation (collectively, "Actions") pending or, to the
knowledge of the Acquiring Corporation, threatened or anticipated against,
relating to or affecting (i) the Acquiring Corporation, (ii) any benefit plan
for Personnel or any fiduciary or administrator thereof or (iii) the
transactions contemplated by this Agreement. The Acquiring Corporation is not in
default with respect to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against the
Acquiring Corporation or the business or activities of the Acquiring
Corporation. There is not a reasonable likelihood of an adverse determination of
any pending Actions which would, individually or in the aggregate, have a
material adverse effect on the business or financial condition of the Acquiring
Corporation.
6.7 COMPLIANCE WITH LAW. The Acquiring Corporation and the conduct of its
business are in compliance with all applicable laws, statutes, ordinances and
regulations, whether federal, state or local, except where the failure to comply
would not have a material adverse effect on the business or financial condition
of the Acquiring Corporation. The Acquiring Corporation has not received any
written notice to the effect that, or otherwise been advised that, it is not in
compliance with any of such statutes, regulations, orders, ordinances or other
laws where the failure to comply would have a material adverse effect on the
business or financial condition of the Acquiring Corporation, and the Acquiring
Corporation has no reason to anticipate that any presently existing
circumstances are likely to result in violations of any such regulations which
would, in any one case or in the aggregate, have a material adverse effect on
the business or financial condition of the Acquiring Corporation.
6.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or warranties
by the Acquiring Corporation in this Agreement, nor any document, exhibit,
statement, certificate or schedule furnished to Stockholder pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading. The Acquiring Corporation's annual report has disclosed all
events, conditions and facts materially affecting the business, prospects and
financial condition of the Acquiring Corporation.
ARTICLE VII
ACTIONS BY STOCKHOLDER, THE COMPANY AND
ACQUIRING CORPORATION PRIOR TO THE CLOSING
Stockholder, the Company and Acquiring Corporation covenant as follows for
the period from the date hereof through the Closing Date:
7.1 MAINTENANCE OF BUSINESS. The company shall diligently carry on its
business in the ordinary course consistent with past practice. In conjunction
herewith, it is agreed that ▇▇▇▇ ▇▇▇▇▇▇ shall remain as President of the Company
and shall have the authority and responsibility of cash flow management.
7.2 CERTAIN PROHIBITED TRANSACTIONS. The Company shall not without the
prior written approval of Acquiring Corporation and Stockholder:
(a) incur any indebtedness for borrowed money, assume, guarantee, endorse
or otherwise become responsible for obligations of any other individual,
partnership, firm or corporation, or make any loans or advances to any
individual, partnership, firm or corporation, except in the ordinary course of
business and consistent with past practice;
(b) issue any shares of its capital stock or any other securities or any
securities convertible into shares of its capital stock or any other securities;
(c) pay or incur any obligation to pay any dividend on its capital stock
or make or incur any obligation to make any distribution or redemption with
respect to capital stock;
19
(d) make any change to its Certificate of Incorporation or bylaws;
(e) mortgage, pledge or otherwise encumber any of its properties or assets
or sell, transfer or otherwise dispose of any of its properties or assets or
cancel, release or assign any indebtedness owed to it or any claims held by it,
except in the ordinary course of business and consistent with past practice;
(f) make any investment of a capital nature either by purchase of stock or
securities, contributions to capital, property transfer or otherwise, or by the
purchase of any property or assets of any other individual, partnership, firm or
corporation, except in the ordinary course of business and consistent with past
practice;
(g) enter into or terminate any material contract or agreement, or make
any material change in any of its leases and Contracts, other than in the
ordinary course of business and consistent with past practice; or
(h) engage in any business other than the type it currently conducts; or
(i) do any other act which would cause any representation or warranty of
Acquiring Corporation and the Company in this Agreement to be or become untrue
in any material respect.
7.3 INVESTIGATION BY ACQUIRING CORPORATION. Stockholder and the Company
shall allow Acquiring Corporation during regular business hours through
Acquiring Corporation's employees, agents and representatives, to make such
investigation of the business, properties, books and records of the Company, and
to conduct such examination of the condition of the Company, as Acquiring
Corporations deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to verify
the representations and warranties of Stockholder and the Company hereunder.
Stockholder and the Company shall allow Acquiring Corporation to contact the
Company's vendors, customers and any other person having business dealings with
the Company. Acquiring Company's investigation shall be done in such a manner
that it does not interfere with the Company's business operations.
7.4 CONSENTS AND BEST EFFORTS. Stockholder and the Company will, as soon
as possible, commence to take all action required to obtain all consents,
approvals and agreements of, and to give all notices and make all other filings
with, any third parties, including governmental authorities, necessary to
authorize, approve or permit the full and complete sale, conveyance, assignment
or transfer of all of the Stock, and Acquiring Corporation shall cooperate with
Stockholder with respect thereto; provided, however, that Acquiring Corporation
shall not be required to agree to any unfavorable modification of any existing
contract or agreement in order to obtain such consent. In addition, subject to
the terms and conditions herein provided, each of the parties hereto covenants
and agrees to use its best efforts to take, or cause to be taken, all action or
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder.
7.5 NOTIFICATION OF CERTAIN MATTERS. Stockholder shall give prompt notice
to Acquiring Corporation, and Acquiring Corporation shall give prompt notice to
Stockholder, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
any time from the date hereof to the Closing Date and (ii) any material failure
of Stockholder, the Company or Acquiring Corporation, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder, and each party shall use all reasonable efforts to
remedy same.
7.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. The Company and
Stockholder will not, directly or indirectly, solicit any inquiries or proposals
or enter into or continue any discussions, negotiations or agreements relating
to the sale or exchange of the Stock, the merger of the Company with, or the
direct or indirect disposition of a significant amount of the Company's assets
or business to any person other than Acquiring Corporation or its affiliates or
provide any assistance or any information to or otherwise cooperate
20
with any person in connection with any such inquiry, proposal or transaction. In
the event that the Company or Stockholder receives an unsolicited offer for such
a transaction or obtains information that such an offer is likely to be made,
the Company or Stockholder will provide Acquiring Corporation with notice
thereof as soon as practical after receipt, including the identity of the
prospective purchaser or soliciting party.
ARTICLE VIII
CONDITIONS TO STOCKHOLDERS' OBLIGATIONS
The obligations of Stockholder to transfer the Stock to Acquiring
Corporation on the Closing Date are subject, in the discretion of Stockholder,
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Acquiring Corporation contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Acquiring Corporation shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date.
8.2 CONSENTS. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit Stockholders to transfer the
Stock to Acquiring Corporation as contemplated hereby shall have been obtained,
unless the failure to obtain any such consent, approval or waiver would not have
a material adverse effect upon Stockholder.
8.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected materially to damage Stockholder if the transactions
contemplated hereunder are consummated.
8.4 CORPORATE DOCUMENTS. Stockholder shall have received from Acquiring
Corporation resolutions adopted by the Board of Directors of Acquiring
Corporation approving this Agreement and the transactions contemplated hereby,
certified by Acquiring Corporation's corporate secretary.
ARTICLE IX
CONDITIONS TO ACQUIRING CORPORATION'S OBLIGATIONS
The obligations of Acquiring Corporation to purchase the Stock as provided
hereby are subject, in the discretion of Acquiring Corporation, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Stockholder and the Company contained in this Agreement shall be
true and correct as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Stockholder and the
Company shall have performed all agreements and covenants required hereby to be
performed by them prior to or at the Closing Date. There shall be delivered to
Acquiring Corporation certificates from each of the Stockholder and the Company
(signed by the President or a Vice President of the Company and Stockholder) to
the foregoing effect.
9.2 CONSENTS. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit Stockholder to transfer the
Stock to Acquiring Corporation as contemplated hereby shall have been obtained,
unless the failure to obtain any such consent, approval or waiver would not have
a material adverse effect upon Acquiring Corporation.
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9.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected materially and adversely to affect the value of the Stock
or business of the Company.
9.4 CERTIFICATES. The Company shall furnish Acquiring Corporation with
such certificates of the respective officers of the Company and others to
evidence compliance with the conditions set forth in this Article IX as may be
reasonably requested by Acquiring Corporation.
9.5 CORPORATE DOCUMENTS. Acquiring Corporation shall have also received
the corporate minute books, Certificates of Incorporation, Bylaws and stock
transfer books of the Company.
9.6 INVESTIGATION. Acquiring Corporation or its Representatives shall have
investigated the Company's properties (including without limitation, an
environment audit), business, books and records, and in Acquiring Corporation's
sole discretion, Acquiring Corporation shall be satisfied on the basis of such
investigation that the representations and warranties of Stockholder and the
Company made pursuant to this Agreement are accurate and complete.
9.7 EMPLOYMENT AGREEMENTS. Stockholder shall execute and deliver to
Company on or before closing an Employment Agreement in a form substantially the
same as attached hereto as Exhibit A. Company and R. ▇▇▇▇▇▇ ▇▇▇▇▇ shall enter
into an Employment Agreement on or before closing in a form substantially the
same as attached hereto as Exhibit `B'.
9.8 ACCOUNTING MATTERS. Prior to closing Company shall have a financial
audit (if required) and shall convert its accounting books and records from the
cash method to the accrual method of accounting.
ARTICLE X
ACTIONS BY STOCKHOLDER, THE COMPANY
AND ACQUIRING CORPORATION AFTER THE CLOSING
10.1 FURTHER ASSURANCES. On and after the Closing Date, Stockholder, the
Company and Acquiring Corporation will take all appropriate action and execute
all documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof.
ARTICLE XI
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in the
Disclosure Schedule or in any certificate or instrument of conveyance delivered
by or on behalf of the parties pursuant to this Agreement or in connection with
the transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations and warranties of
Stockholder, the Company and Acquiring Corporation contained herein shall
survive the Closing Date until the 24th day of June, 2002, without regard to any
investigation made by any of the parties hereto; provided, however, that such
representations and warranties shall survive as to any claim or demand made
prior to the 24th day of June, 2002 until such claim or demand is fully paid or
otherwise resolved by the parties hereto in writing or by a court of competent
jurisdiction.
11.2 INDEMNIFICATION. To the extent of the value of 300,000 shares of
Acquiring Corporation's stock in the first year of this Agreement, 150,000
shares of Acquiring Corporation's stock in the second year of this Agreement and
60,000 shares of Acquiring Corporation's stock there after until the 24th day of
June, 2002, Stockholder shall indemnify Acquiring Corporation against, and hold
Acquiring Corporation harmless from, any damage, claim, liability or expense,
including without limitation, interest, penalties and reasonable attorneys' fees
(collectively "Damages"), that exceed the sum of $ 25,000.00, arising out of the
breach of any
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warranty, representation, covenant or agreement of Stockholder contained in this
Agreement. Stockholder shall pledge the stock he acquired in Acquiring
Corporation to secure this indemnification and the stock issued to Stockholder
shall be the sole source of funds for the indemnification. The Acquiring
Corporation shall indemnify and hold Stockholder harmless from any Damages
arising out of the breach of any warranty, representation, covenant or agreement
of Acquiring Corporation contained in this Agreement. The Company shall
indemnify and hold Acquiring Corporation harmless from any Damages arising out
of the breach of any warranty, representation, covenant or agreement of Company
contained in this Agreement. The term "Damages" as used in Article XI is not
limited to matters asserted by third parties against Stockholder, the Company or
Acquiring Corporation, but includes Damages incurred or sustained by the
Company, Stockholder or Acquiring Corporation in the absence of third party
claims. No claims for indemnification by Acquiring Corporation or Stockholder
may be made or instituted after two years following the effective date of this
Agreement, except for any claim for indemnification of Acquiring Corporation for
damages arising out of any claims or causes of action asserted by ▇▇▇▇▇ ▇▇▇▇▇▇▇
which shall continue until the 24th day of June, 2002. All claims for
indemnification made prior to the end of the two year period shall continue
until a final determination is made in regard to the validity of the
indemnification claim by either settlement, arbitration or litigation. The
security securing the indemnification shall remain as security until a final
determination is made in regard to any outstanding claim notwithstanding the
fact that two or more years may have elapsed from the effective date of this
Agreement.
11.3 INDEMNIFICATION PROCEDURES. Upon Acquiring Corporation becoming aware
of a fact, condition or event which constitutes a breach of any of the
representations, warranties, covenants or agreements of Stockholder or the
Company contained herein or a products liability claim, if a claim for Damages
in respect thereof is to be made against Stockholder under this Article XI,
Acquiring Corporation will with reasonable promptness notify Stockholder or the
Company, as the case may be, in writing of such fact, condition or event. If
such fact, condition or event is the assertion of a claim by a third party,
Stockholder or the Company, as the case may be, will be entitled to participate
in or take charge of the defense against such claim, provided that Stockholder
or the Company, as the case may be, and its counsel, shall proceed with
diligence and in good faith with respect thereto.
11.4 NO RIGHT OF CONTRIBUTION. After the Closing, the Company shall have
no liability to indemnify the Stockholder on account of the breach of any
representation or warranty or the nonfulfillment of any covenant or agreement of
the Company; and Stockholder shall have no right of contribution against the
Company. In addition to any other remedy which may be available at law or in
equity, Acquiring Corporation or the Company shall be entitled to specific
performance and injunctive relief, without posting bond or other security.
ARTICLE XII
SECURITIES LAWS
12.1 ACQUISITION FOR INVESTMENT. Acquiring Corporation and Stockholder
hereby acknowledge that the shares of Stock to be purchased pursuant to the
terms of this Agreement shall be acquired in good faith for investment for its
own account and not with a view to a distribution or resale of any of such
Stock, and shall not for a period of two (2) years after closing transfer, sell,
exchange or encumber the same except as provided for herein.
ARTICLE XIII
STOCKHOLDER'S OPTION TO RESELL
TO ACQUIRING CORPORATION
13.1 SALE OPTION OF STOCKHOLDER. Stockholder for a period of one year
following the closing of the transaction shall be entitled to require Acquiring
Corporation to repurchase all or any portion of his 300,000 shares of common
voting stock in the Acquiring Corporation for cash consideration of One Dollar
($1.00) per share. Stockholder shall exercise this option by written
notification, in accordance with Article 14.3 herein, to
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Acquiring Corporation. The written notification shall state the number of shares
Acquiring Corporation shall be required to repurchase and the date and time,
which time and date shall be at least ten (10) days from the date of the notice,
when the transaction shall occur.
ARTICLE XIV
MISCELLANEOUS
14.1 TERMINATION. This Agreement may be terminated as follows:
(a) This Agreement may be terminated and the transactions contemplated
hereby abandoned by any party if the conditions set forth in Articles VIII and
IX have not been satisfied on or before March 30, 1998 (unless waived by the
party entitled to the benefit thereof), without liability of any party hereto;
provided, however, that no party shall be released from liability hereunder if
this Agreement is terminated and the transactions abandoned by reason of (i)
willful failure of any party to have performed its obligations hereunder, or
(ii) any knowing misrepresentation made by any party of any matter set forth
herein.
(b) This agreement may be terminated by Acquiring Corporation in its
sole discretion at any time between March 25, 1998 and closing should:
1. After completion of a complete financial audit of the
Company, Acquiring Company shall determine in its sole discretion that it does
not desire to complete the closing of the transaction.
2. After completion of a legal audit of the Company, Acquiring
Company shall determine in its sole discretion that it does not desire to
complete the closing of the transaction.
14.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Stockholder without the prior written
consent of Acquiring Corporation, or by Acquiring Corporation without the prior
written consent of Stockholder. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and no other person shall have any right,
benefit or obligation hereunder.
14.3 NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the others
shall be in writing and delivered in person or by courier, telegraphed, telexed
or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested (such mailed notice to be effective on the date such
receipt is acknowledged), as follows:
If to Stockholders: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Company: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Acquiring Corporation: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
14.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Texas except with respect to matters of law concerning the internal corporate
affairs of any corporate entity which is a party to or the subject of this
Agreement, and as to those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.
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14.5 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
14.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.7 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
14.8 HEADINGS. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
14.9 EXPENSES. Company, Stockholder and Acquiring Corporation will each be
liable for their own costs and expenses incurred in connection with the
negotiation, preparation, execution or performance of this Agreement, except for
the fees incurred in the financial audit of Company and conversion of Company
from the cash to the accrual method of accounting. The fees for such audit and
conversion shall be split equally between Acquiring Corporation and the
Stockholder.
14.10 PUBLICITY. No party shall issue any press release or make any public
statement regarding the transactions contemplated hereby, without the prior
approval of the other party, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after the Closing Date.
14.11 CONFIDENTIAL INFORMATION. The parties acknowledge that the
transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, or as required by law,
until such time as the parties make a public announcement regarding the
transaction as provided in Section 14.10. Neither Stockholder nor Acquiring
Corporation shall make any public disclosure of the specific terms of this
Agreement, except as required by law. In connection with the negotiation of this
Agreement and the preparation for the consummation of the transactions
contemplated hereby, each party acknowledges that it will have access to
confidential information relating to the other party. Each party shall treat
such information as confidential, preserve the confidentiality thereof and not
duplicate or use such information, except to advisors, consultants and
affiliates in connection with the transactions contemplated hereby. Stockholder,
at a time and in a manner which he reasonably determines and after prior notice
to and consultation with Acquiring Corporation, may notify employees, unions and
bargaining agents of the fact of the subject transaction. In the event of the
termination of this Agreement for any reason whatsoever, each party shall return
to the other all documents, work papers and other material (including all copies
thereof) obtained in connection with the transactions contemplated hereby and
will use all reasonable efforts, including instructing its employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available to
the general public.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, to be effective as of the
day and year first above written.
INDUSTRIAL DATA SYSTEMS, CORP.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, PRESIDENT
CONSTANT POWER MANUFACTURING INCORPORATED
/s/▇▇▇▇ ▇▇▇▇▇▇
BY: ▇▇▇▇ ▇▇▇▇▇▇, PRESIDENT
/s/▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇▇
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