STOCK ACQUISITION AGREEMENT
BY AND AMONG
▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, TRUSTEE
ACTING ON BEHALF OF THE
PHD NO. 1 QUALIFIED S-CORPORATION TRUST
AND
BH NO. 1 QUALIFIED S-CORPORATION TRUST;
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ AND; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
AS "STOCKHOLDERS",
THERMAIRE INC.
D/B/A/ THERMAL CORP.
AS THE "COMPANY"
AND
INDUSTRIAL DATA SYSTEMS, CORP.
AS THE "ACQUIRING CORPORATION"
DATED: AUGUST 15, 1995
STOCK ACQUISITION AGREEMENT
This Agreement is made and entered into this 15th day of August, 1995 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"); and the
PHD NO. 1 QUALIFIED S-CORPORATION TRUST and ▇▇ ▇▇. ▇ ▇▇▇▇▇▇▇▇▇ ▇-▇▇▇▇▇▇▇▇▇▇▇
TRUST acting herein through ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇, Trustees; ▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (hereinafter called "Stockholders");
and THERMAIRE INC., (hereinafter called the "Company").
RECITALS
A. THERMAIRE INC. d/b/a/ THERMAL CORP. (hereinafter called the
"Company"), is a Texas Corporation having its principal place of business
located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇. The Company is engaged
in the manufacture of commercial and industrial air handling equipment.
B. The Company is authorized to issue 1,500,000 shares of common stock
divided into the following categories: 500,000 shares of Class A voting, 500,000
shares of Class B voting and 500,000 shares of Class C non-voting. There are
8,000 shares of Class A voting, 2,000 shares of Class B voting and 451,292
shares of Class C non-voting issued and outstanding.
C. The Acquiring Corporation is authorized to issue 50,000,000 shares of
common stock of which 10,000,000 shares are issued and outstanding.
D. The conditions prevailing in the industry have made it increasingly
difficult for the Company to operate profitably, and the Stockholders have
agreed to accept voting stock of the Acquiring Corporation in exchange for their
shares so that the business of the Company can be continued by the Acquiring
Corporation on a more profitable basis.
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 July 31, 1995 together with the notes thereon prepared in accordance with
GAAP consistently applied by the Company.
"BALANCE SHEET DATE" shall mean July 31, 1995.
"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 GAAP consistently
applied by the Company.
"CLOSING DATE" shall mean the close of business on August 18, 1995, 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.
"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
Stockholders 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. SECTION 1251 ET SEQ.), Resource Conservation &
Recovery Act 42 U.S.C. SECTION 6901 ET SEQ.) ("RCRA"), Safe Drinking Water Act
(21 U.S.C. SECTION 349, 42 U.S.C. SECTION 201, 300f), Toxic Substances Control
Act (15 U.S.C. SECTION 2601 ET SEQ.), Clean Water Act (42 U.S.C. SECTION 7401 ET
SEQ.) Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. SECTION 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
otherise, references to "knowledge", "known", "to the knowledge of", or
other similar phrases, mean, with respect to any person, the
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actual knowledge at the time of execution of this Agreement and at the Closing
(without independent investigation) of persons on the Disclosure Schedule.
ARTICLE II
EFFECT OF THE AGREEMENT
2.1 EXCHANGE OF STOCK. In accordance with the terms and conditions
herein, Stockholders shall at closing, exchange all of their shares of the
Company, representing all of the issued and outstanding shares of the Company
for a total of 600,000 shares of common voting stock in the Acquiring
Corporation, par value One Cent ($0.01) per share. The PHD NO. 1 QUALIFIED
S-CORPORATION Trust shall receive 118,966 shares of voting stock and the BH NO.
1 QUALIFIED S-CORPORATION Trust shall receive 29,742 shares of voting stock, ▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ shall receive 316,855 shares of voting stock and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall receive 134,437 shares of voting stock.
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.
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 Stockholders a copy of written
instructions to its transfer agent directing the issuance of certificates
evidencing shares of the Acquiring Corporation voting stock in the amounts set
forth in Section 2.1 above, representing fully paid non-assessable voting shares
in the Acquiring Corporation.
(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 Stockholders pursuant hereto
shall be in form and substance, and shall be executed in a manner reasonably
satisfactory to Stockholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedules, the Company and
Stockholders 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.
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(b) The Company has authorized 1,500,000 shares of Common Stock, no par
value, divided into three classes as follows: 500,000 shares Class A voting,
500,000 shares Class B voting, 500,000 shares Class C non-voting. The only
shares of the Company which have been issued and the current Stockholders of the
Company are as follows:
PHD NO. 1 QUALIFIED S-CORPORATION 8,000 Shares Class A Voting
TRUST
BH NO. 1 QUALIFIED S-CORPORATION 2,000 shares Class B Voting
TRUST
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ 316,855 shares Class C
Non-voting
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 134,437 shares Class C
Non-voting
(c) The Company has three Directors whose names and titles are as follows:
▇▇▇ ▇▇▇▇▇▇▇ Class A Director
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Class B Director
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ Class A, B Director
(d) The officers of the Company are as follows:
▇▇▇ ▇▇▇▇▇▇▇ President, Assistant Secretary and
Treasurer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Vice-President and 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;
(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;
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(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 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 Stockholders or any general partner of Stockholders by the
Company other than those payments permitted under Section 9.9 hereof;
(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
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(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, the Company is not a party to any written or oral:
(a) commitment, contract, note, loan, evidence of indebtedness, purchase
order 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;
(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.
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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. Stockholders has heretofore delivered to
Acquiring Corporation the Financial Statements. Except as otherwise set forth
therein, the Financial Statements are complete, accurately reflect the assets,
liabilities and financial condition and results of operations indicated thereby
in accordance with generally accepted accounting principles 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 anticipate 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
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.
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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 Stockholders, 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
Stockholders 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.
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. (a) Except as set forth on the
Disclosure Schedule, 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
8
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
examined by 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 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 purposes 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."
9
4.21 SEVERANCE ARRANGEMENTS. The Company has not 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 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, 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 setoff 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 generally
accepted accounting principles. 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 not exceed $275,000.00, and the
aggregate of all Contracts or commitments for the purchase of supplies by it
does not exceed $50,000.00, 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
$10,000.00 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 win
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
10
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 three (3) 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
three (3) 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 ▇▇▇▇ 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.
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 manufacture of Air Handling Equipment, and the only
assets and liabilities retained by the Company as of such date shall be related
to the manufacture of Air Handling 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.
11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Except as otherwise set forth in the Disclosure Schedule, Stockholders
hereby represents and warrants to Acquiring Corporation as follows:
5.1 ORGANIZATION OF STOCKHOLDERS.
(a) Two of the Stockholders are trusts duly established under the laws of
the State of Texas, validly existing under the laws of the State of Texas.
(b) the Trustees of the PHD NO. 1 QUALIFIED S-CORPORATION TRUST are: ▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇.
(c) The Trustees of the BH NO. 1 QUALIFIED S-CORPORATION TRUST are: ▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇.
(d) Stockholders collectively own of record and beneficially 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. Stockholders have all necessary power and authority to
enter into this Agreement and have taken all action necessary to consummate the
transactions contemplated hereby and to perform their respective obligations
hereunder. This Agreement has been duly executed and delivered by Stockholders
and is a legal, valid and binding obligation of Stockholders enforceable against
Stockholders in accordance with its terms.
5.3 CONTRACTS AND COMMITMENTS. Stockholders are 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.
Stockholders and the Company are 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
Stockholders in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
5.5 NO BROKERS. Stockholders have 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. Stockholders
do not have 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.
5.7 TRANSACTIONS WITH CERTAIN PERSONS. To the knowledge of Stockholders,
no officer, director or employee of Stockholders or any general partner of
Stockholders 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
12
or employees of Stockholders) 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 Stockholders, 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 Stockholders 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 Stockholders 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.
ARTICLE VII
ACTIONS BY STOCKHOLDERS, THE COMPANY AND
ACQUIRING CORPORATION PRIOR TO THE CLOSING
Stockholders, the Company and Acquiring Corporation covenant as follows for
the period from the date hereof through 18 months following 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, Assistant
Secretary, Treasurer and a Director of the Company and shall have the authority
and responsibility of cash flow management. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ shall remain as
Vice-President, Secretary and a Director of the Company.
13
7.2 CERTAIN PROHIBITED TRANSACTIONS. The Company shall not without the
prior written approval of Acquiring Corporation and Stockholders:
(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;
(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 claim 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. Stockholders 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 Stockholders and the Company hereunder.
7.4 CONSENTS AND BEST EFFORTS. Stockholders 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. Stockholders shall give prompt
notice to Acquiring Corporation, and Acquiring Corporation shall give prompt
notice to Stockholders, 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 Stockholders, 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.
14
7.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. The Company and
Stockholders 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 with any person in connection with any such inquiry, proposal or
transaction. In the event that the Company or Stockholders receive an
unsolicited offer for such a transaction or obtains information that such an
offer is likely to be made, the Company or Stockholders will provide Acquiring
Corporation with notice thereof as soon as practical after receipt, including
the identity of the prospective purchaser or soliciting party.
7.7 MAINTENANCE OF SHAREHOLDER EQUITY. The Company and Acquiring
Corporation shall abstain from any action reasonably calculated to result in a
diminution of Shareholder equity. In conjunction herewith, Acquiring Corporation
agrees to cover cumulative operating losses of the Company, if any, EXCLUSIVE of
such non cash items as depreciation, reserves for bad debt, depletions
allowances, loss carry forwards or other similar adjustments which do not
represent an actual cash outlay of the Company, but INCLUDING any deferred
rental payments on the building and premises incurred between Closing Date and
the sooner of (i) the date Acquiring Corporation exercises its option to
repurchase its stock pursuant to paragraph 10.2 below, (ii) the date specified
by Acquiring Corporation of its intent to abandon its option to repurchase its
stock pursuant to paragraph 10.2 below or, (iii) 18 months from the date hereof
(The Loss Coverage Period).
Acquiring Corporation agrees to promptly cover operating losses (other than
deferred rental) on a monthly basis, however, Acquiring Corporation shall be
entitled to reimbursement from operating profits, if any, earned from subsequent
months during the Loss Coverage Period. Acquiring Corporation further agrees to
promptly pay deferred rental on the building accrued during the Loss Coverage
Period should it not consummate the ▇▇▇▇▇▇▇ Money Contact to acquire the
premises referred to in Paragraph 9.7 below.
ARTICLE VIII
CONDITIONS TO STOCKHOLDERS' OBLIGATIONS
The obligations of Stockholders 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. There shall be delivered by it prior to or at the Closing
Date. There shall be delivered to Stockholders a certificate (signed by the
President or a Vice President of Acquiring Corporation) to the foregoing effect.
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 Stockholders.
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 Stockholders if the transactions
contemplated hereunder are consummated.
8.4 CORPORATE DOCUMENTS. Stockholders 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.
15
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 Stockholders 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 Stockholders 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 Stockholders and the Company
(signed by the President or a Vice President of each of Stockholders and the
Company) to the foregoing effect.
9.2 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 Acquiring Corporation.
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
reasonable be expected materially and adversely to affect the value of the Stock
or business of the Company.
9.4 CERTIFICATES. Stockholders and the Company shall furnish Acquiring
Corporation with such certificates of the respective officers of Stockholders
and 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 Stockholders and the
Company made pursuant to this Agreement are accurate and complete.
9.7 Acquiring Corporation shall have entered into a valid binding ▇▇▇▇▇▇▇
Money Contract with the owner of the building located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, to acquire such property and improvements (being
Site No. 1) together with sites 13 & 14 of the same site plan.
9.8 Resignations of ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ as a Director of the Company has
been received and Acquiring Corporation's nominee has been elected in his place
and stead.
9.10 The Company and owners of the building located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ have entered into a binding Lease Agreement
acceptable to Acquiring Corporation.
ARTICLE X
ACTIONS BY STOCKHOLDERS, THE COMPANY
AND ACQUIRING CORPORATION AFTER THE CLOSING
10.1 FURTHER ASSURANCES. On and after the Closing Date, Stockholders, 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, including
without limitation a good faith effort of Acquiring Corporation to have a public
offering of its stock.
10.2 REPURCHASE OPTION OF ACQUIRING CORPORATION. For a period of 18
months following the date of closing, Acquiring Corporation shall have the
option to repurchase all of the shares transferred to
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Stockholders herein for a cash consideration of One Dollar ($1.00) per share. At
any time during such 18 month period, Acquiring Corporation may notify
Stockholders of its election to exercise the option on a specific date or of its
intent to abandon the option on a specific date. Such repurchase option must be
exercised simultaneously with the consummation of the agreement referred to in
paragraph 9.7 above. Provided, however, in the event the Sellers of the real
property should be unwilling or unable to consummate the transaction as agreed,
Acquiring Corporation may then exercise this option by written notification to
Stockholders of its intent to exercise this option on a specific date at 10:00
a.m. at the Acquiring Corporation's principal place of business in Texas.
10.3 REPURCHASE OPTION OF STOCKHOLDERS. In the event Acquiring
Corporation does not execute its option described in Paragraph 10.2 above within
the designated time period or should it notify Stockholders of its intent to
abandon the option, Stockholders shall reacquire all the shares of the Company
transferred to Acquiring Corporation herein, in exchange for all of the shares
of Acquiring Corporation transferred to Stockholders herein and all parties
shall be relieved of any further obligations or liability hereunder, except any
unfulfilled obligations of Acquiring Corporation to cover operating losses
during the Loss Coverage Period described in paragraph 7.7 above.
10.4 ESCROW. To facilitate the foregoing, at closing, Stockholders and
Acquiring Corporation shall enter into a mutually acceptable Escrow Agreement
with ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Escrow Agent to hold the respective parties shares,
accompanied by executed stock powers pending the occurrence of events described
in paragraphs 10.2 or 10.3 above.
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
Stockholders, the Company and Acquiring Corporation contained herein shall
survive the Closing Date until the date that is the first anniversary of the
Closing Date, 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 first anniversary of the
Closing Date, 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
(a) To the extent of the purchase price, Stockholders 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"), arising out
of the breach of any warranty, representation, covenant or agreement of
Stockholders 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. Acquiring Corporation shall indemnify and hold Stockholders harmless
from any Damages arising out of the breach of any warranty, representation,
covenant or agreement of Acquiring Corporation contained in this Agreement. The
term "Damages" as used in Article XI is not limited to matters asserted by
third parties against Stockholders, the Company or Acquiring Corporation, but
includes Damages incurred or sustained by Stockholders, the Company or Acquiring
Corporation in the absence of third party claims.
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 Stockholders or the
Company contained herein or a products liability claim, if a claim for Damages
in respect thereof is to be made against Stockholders under this Article XI,
Acquiring Corporation will with reasonable promptness notify Stockholders 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,
Stockholders
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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 Stockholders or the
Company, as the case may be, and its counsel, shall proceed with diligence and
in good faith with respect thereto.
Upon Stockholders becoming aware of a fact, condition or event which
constitutes a breach of any of the representations, warranties, covenants or
agreements of Acquiring Corporation contained herein, if a claim for Damages in
respect thereof is to be made against Acquiring Corporation under this Article
XI, Stockholders will with reasonable promptness notify Acquiring Corporation in
writing of such fact, condition or event. If such fact, condition or event is
the assertion of a claim by a third party, Acquiring Corporation will be
entitled to participate in or take charge of the defense against such claim,
provided that Acquiring Corporation 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 Stockholders on account of the breach of any
representation or warranty or the nonfulfillment of any covenant or agreement of
the Company; and Stockholders 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 Stockholders
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 herein.
ARTICLE XIII
MISCELLANEOUS
13.1 TERMINATION. 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 August 18, 1995
(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.
13.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Stockholders without the prior written
consent of Acquiring Corporation, or by Acquiring Corporation without the prior
written consent of Stockholders. 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.
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13.3 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 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.
13.4 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.
13.5 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.
13.6 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.
13.7 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.
13.8 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.
13.9 EXPENSES. Company and Acquiring Corporation will each be liable for
its own, and Company shall be liable for the Company's, costs and expenses
incurred in connection with the negotiation, preparation, execution or
performance of this Agreement.
13.10 PUBLICITY. Neither 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.
13.11 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 13.10. Neither Stockholders 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
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duplicate or use such information, except to advisors, consultants and
affiliates in connection with the transactions contemplated hereby.
Stockholders, at a time and in a manner which it 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, as of the day and year
first above written.
FED NO. 1 QUALIFIED S-CORPORATION INDUSTRIAL DATA SYSTEMS, CORP.
TRUST
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Trustee President
and
By /s/ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
Trustee
BH NO. 1 QUALIFIED S-CORPORATION THERMAIRE INC.
TRUST
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Trustee President
and
By /s/ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
Trustee
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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