Exhibit 10.1
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (the "AGREEMENT") is entered into effective
as of March 31, 2000, by and among TSI HANDLING, INC., a Nevada corporation
("TSIH"), DYNA-CAM ENGINE CORPORATION, a California corporation ("DCEC") and
certain SHAREHOLDERS OF DCEC as listed on Exhibit A hereto (the "DCEC
SHAREHOLDERS").
RECITALS:
A. DCEC is a development stage company that has developed and is further
developing a newly designed gasoline powered engine and intends to manufacture
and distribute these engines on a commercial basis (the "BUSINESS").
B. The DCEC Shareholders own approximately 80% of the outstanding shares of
DCEC.
C. The Board of Directors of DCEC has approved, subject to the terms of
this Agreement, the transfer of substantially all of the assets of DCEC to TSIH.
D. The Board of Director of TSIH has approved, subject to the terms of this
Agreement, the acquisition of the assets of DCEC in exchange for common stock of
and assumption of certain liabilities by TSIH.
E. The DCEC Shareholders, subject to the terms of this Agreement, have
agreed to approve such transfer.
F. TSIH, DCEC and DCEC Shareholders hereby enter into this Agreement to
effectuate the foregoing on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, DCEC, DCEC Shareholders and TSIH and hereby agree as follows:
ARTICLE 1
EXCHANGE
1.1 PROPERTIES AND ASSETS TO BE EXCHANGED. On the Closing Date (as defined
herein) DCEC shall assign and deliver to TSIH, and TSIH shall acquire from DCEC,
all of the properties and assets comprising the Business, of every kind and
description, real, personal and mixed, tangible and intangible, wheresoever
located, and whether or not carried on the books of DCEC, all as the same shall
exist on March 31, 2000 (the "EFFECTIVE TIME"), excepting only the Excluded
Assets described in Section 1.2 hereof (the "ACQUIRED ASSETS"). Without limiting
the foregoing, but to identify more particularly certain of the properties and
assets to be exchanged hereunder, the Acquired Assets shall include:
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(a) All inventories at or otherwise relating to the Business including
those listed in Schedule 1.1(a) attached hereto;
(b) All patents, patents pending, designs, copyrights, trademarks,
service marks, trademark and service mark registration or applications, label
filings, trade names, manufacturing processes, trade secrets or other
intellectual property related to the Business including that listed on Schedule
1.1(b) hereto;
(c) All furniture, fixtures, equipment, shelving, office supplies and
miscellaneous items including that listed in Schedule 1.1(c) attached hereto;
(d) All interest in and to the trade names and trademarks and all
other right of DCEC related to the use of the name "DYNA-CAM ENGINE" or any
combination or variation thereof;
(e) All accounts receivable, cash on hand, bank checking and savings
account and certificates of deposit including that listed on Schedule 1.1(e)
attached hereto;
(f) All leasehold interests of DCEC in the real estate (the
"PREMISES") as set forth in the lease agreements listed in Schedule 1.1(f)
attached hereto (the "LEASES") and all easements, rights of way, licenses,
permits, rights, tenements, appurtenances and privileges owned or used by DCEC
in connection with the Business;
(g) All leasehold interests of DCEC in personal property as set forth
in the lease agreements listed in Schedule 1.1(g) attached hereto;
(h) All prepaid expenses, insurance premiums and utility and other
deposits listed in Schedule 1.1(h) attached hereto;
(i) All benefits and rights under all contracts, leases, commitments
and agreements, oral or written, to which DCEC is a party and which are
described in Schedule 1.1(i) attached hereto;
(j) All licenses, permits, franchises, authorizations, approvals,
consents and rights relating to the Business listed in Schedule 1.1(j) attached
hereto;
(k) All engineering plans, designs and drawings, system maps,
abstracts, blueprints, surveys and reproducible drawings of the facilities and
improvements on the Premises as listed in Schedule 1.1(k) attached hereto;
(l) All warranties and guarantees of manufacturers, contractors or
suppliers which pertain to the Acquired Assets, the Business or the Premises;
(m) All interest in and to the telephone numbers and listings of DCEC
pertaining to the Business in all telephone books, directories and other
publications;
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(n) All computer software and licenses with respect to the Business;
and
(o) The business of DCEC as a going concern, including the goodwill,
and all vendor, employee, payroll and other records, files, data, information
and documents relating to the Business.
1.2 EXCLUDED ASSETS. DCEC shall retain all returns and records relating to
local, state and federal income taxes and may retain copies of all financial
records as related to the Business as necessary for the purpose of winding-up
and liquidating DCEC and distributing its assets after the Closing Date. DCEC
shall make all financial records available to TSIH as necessary for the
preparation of TSIH's audited financial statements.
1.3 PURCHASE PRICE. In consideration for the Acquired Assets, TSIH shall
issue to DCEC 30,000,000 shares of its common stock and 200,000 shares of its
Series A 10% Cumulative Convertible Preferred stock ("SERIES A PREFERRED") and
TSIH shall assume as of the Effective Time the executory commitments and
obligations related to the Leases set forth in Schedule 1.1(f), the lease
agreements set forth in Schedule 1.1(g), the contracts, leases, commitments and
agreements set forth in Schedule 1.1(i), and the liabilities as listed and in
the amounts set forth on Schedule 1.3 hereto (collectively, the "ASSUMED
OBLIGATIONS"). TSIH shall not assume nor be liable for and DCEC expressly agrees
to remain liable for and to pay, perform and discharge all debts, liabilities
and obligations of DCEC except for the Assumed Obligations as existing on or
accruing prior to, upon or after the Effective Time (the "EXCLUDED
OBLIGATIONS"), including, without limitation:
(a) All federal, state and local income taxes which have accrued or
may accrue or become due and payable as a result of income, gains or revenues
received, realized or accrued by DCEC or its shareholders after the Effective
Time, together with all interest, penalties and other charges and fees in
connection therewith;
(b) All liabilities, obligations and claims based on or arising from
occurrences, circumstances or events, or exposure to conditions, existing or
occurring prior to or on the Effective Time arising in connection with the
negligence or misconduct of DCEC or any of its directors, officers, employees,
contractors, subcontractors or agents;
(c) All other debts, liabilities, obligations, contracts and
commitments (whether known or unknown, contingent or fixed, liquidated or
unliquidated) arising out of or related to the ownership, operation or use of
any of the Acquired Assets and the Business on or prior to the Effective Time or
the conduct of the business of DCEC, whether incurred before, on or after the
Effective Time.
1.4 CLOSING DATE. The sale and purchase provided for herein shall be
consummated and closed (the "CLOSING") at the offices of Lewis and Roca LLP, 40
North Central Avenue, Phoenix, Arizona 85004, at such time and date as the
parties hereto may agree upon (herein referred to as the "CLOSING DATE"). All
Acquired Assets and the Business shall be deemed transferred as of the Effective
Time and all documents delivered on the Closing Date shall reflect the transfer
as occurring at the Effective Time.
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1.5 NO-COMPETITION COVENANTS. Upon the Closing, DCEC Shareholders shall
become officers and directors of TSIH and its successor as contemplated in
Section 6.2(e) hereof. For the period of five years from the Closing Date or
three years from termination of service as an officer and director of TSIH or
its successor, whichever is longer, DCEC and the DCEC Shareholders agree that
they will not be an officer, director, partner, member, employee, agent,
representative, consultant or an owner of any equity interest in any entity, or
directly or indirectly provide any assistance, financial or otherwise, to, any
entity, or an owner of any interest in, or employee, agent or representative of
any other form of business which competes directly or indirectly with the
Business or any component thereof in any geographic area where the Business is
then conducted.
1.6 REORGANIZATION STATUS. The parties intend that the transactions
contemplated under this Agreement qualify as a "REORGANIZATION" as defined in
I.R.C.ss. 368(a)(1)(C) and shall file all required elections and returns to
report this transaction consistent with such intent.
ARTICLE 2
ADDITIONAL TERMS
2.1 SERIES A PREFERRED. TSIH shall, immediately upon the Closing, designate
6,000,000 shares and offer for sale up to 5,000,000 shares of its Series A
Preferred which shall have the rights, privileges and restrictions as set forth
in the Certificate of Designation attached hereto as Exhibit B.
(a) TSIH shall, immediately upon designation, issue 200,000 shares of
Series A Preferred to DCEC as part of the consideration specified in Section 1.3
above.
(b) TSIH shall enter into an agreement in the form of Exhibit C
attached hereto with Sunset Financial Services for the private placement of the
Series A Preferred shares in a placement that qualifies under Rule 506 of
Regulation D as promulgated under the Securities Act of 1933 as amended
("SECURITIES ACT"). If at least 2,000,000 shares of Series A Preferred are sold,
TSIH shall investigate and, to the extent deemed practical, shall pursue patent
application on a global basis for the patent protection of the Dyna-Cam Engine
and its derivatives. If at least 4,000,000 shares of Series A Preferred are
sold, TSIH shall pay in full that certain SBA Loan in the approximate amount of
$324,500.
2.2 EMPLOYMENT. Patricia J. Wilks and Dennis C. Palmer, each a current
employee of DCEC, shall be offered employment with TSIH under the terms and
conditions of the Employment Agreement attached hereto as Exhibit D.
2.3 OTHER AGREEMENTS. At the Closing, TSIH shall enter into that certain
Capital Advisory and Financial Consulting Services Agreement in form attached
hereto as Exhibit E and that certain Existing Shareholders' Rights Agreement in
form attached hereto as Exhibit F.
2.4 LISTING. After the Closing, TSIH shall take all action as necessary to
cause its shares to be listed for trading on the OTC Bulletin Board, which shall
include: (a) filing for registration of its common stock under the Securities
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Exchange Act of 1934, as amended, and filing all subsequent annual and quarterly
reports to maintain such registration; (b) participating with market makers to
make such filings as necessary with the NASD for the listing of the common
stock; (c) listing the stock in applicable corporate manuals to facilitate the
trading of such stock in compliance with certain states' securities law
regulations; and (d) amending and updating any such report or filings as
necessary to maintain such listing.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND
AGREEMENTS OF DCEC AND DCEC SHAREHOLDERS
As an inducement to TSIH to enter into and perform this Agreement, DCEC and
the DCEC Shareholders covenant, represent and warrant to, and agree with, TSIH
as follows:
3.1 AUTHORITY. DCEC has the full legal power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not violate any
provision of law, DCEC's Articles of Incorporation or DCEC's bylaws. DCEC has or
at the Closing Date will have taken all necessary action (including action of
DCEC's board of directors and shareholders, as required) to authorize and
approve the execution and delivery of this Agreement and the performance of the
transactions contemplated hereby.
3.2 ORGANIZATION AND GOOD STANDING. DCEC is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
California, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
3.3 CONDITION OF ACQUIRED ASSETS; DAMAGES TO THE BUSINESS. To the best
knowledge and belief of DCEC and the DCEC Shareholders, the Premises and the
Acquired Assets are in good condition and free from defects. At the Effective
Time, the inventories set forth on Schedule 1.1(a) had the book value as
determined under generally accepted accounting principles as set forth in such
schedule and the accounts receivable set forth on Schedule 1.1(e) are in the
amount as set forth in such schedule and are collectible to the extent thereof,
with allowance for doubtful accounts as set forth in such schedule. At the
Closing Date, the Premises and the Acquired Assets shall be in substantially the
same condition as on the date of this Agreement, excepting ordinary wear and
tear. In the event that prior to the Closing Date any improvements on the
Premises or any of the Acquired Assets shall be destroyed or damaged and
provided such improvements or Acquired Assets are material to the operation of
the Business, TSIH shall have the option to terminate this Agreement. If TSIH
does not so elect to terminate this Agreement and proceeds to close hereunder,
TSIH shall be entitled to settle any loss with insurance carriers and to receive
from such carriers the proceeds of all insurance applicable to such loss. DCEC
shall execute and deliver any and all such documents and take all such action as
may be necessary or appropriate to comply with the terms of this Section 3.3.
3.4 CONDEMNATION. If, prior to the Closing Date, any part of the Premises
shall be taken by eminent domain or if any proceeding in the nature of eminent
domain is filed against or affecting the Premises, TSIH shall become entitled to
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the award of compensation in any such taking, and DCEC shall thereafter deliver
or cause to be delivered all instruments reasonably required to assign such
award to TSIH.
3.5 TITLE TO PROPERTIES. DCEC has good title to all Acquired Assets, free
and clear of any mortgages, liens, pledges, charges or other encumbrances except
for the liabilities and liens listed in Schedule 1.3 hereto and expressly
assumed or taken subject to by TSIH.
3.6 NO VIOLATION. DCEC has not received notice of any violation of any
applicable zoning regulation, ordinance or other law, order, regulation or
requirement relating to their operations or properties; to the best knowledge
and belief of DCEC, no such violation presently exists; and all buildings,
improvements and other structures owned or used by DCEC in the Business conform
to all applicable laws, ordinances, codes and regulations, including, without
limitation, the Americans With Disabilities Act ("ADA"). To the best knowledge
and belief of DCEC, DCEC and its services, practices, billings, properties,
equipment, machinery, buildings and operations relating to the Business are in
full compliance with all applicable federal, state and local laws, statutes,
ordinances, codes, regulations, rules, orders, restrictions and requirements,
governmental, administrative, judicial and otherwise, including, without
limitation, those relating to wages, prices, equal opportunity, environmental
protection, safety, health, building and zoning, and the ADA, and to the best
knowledge and belief of DCEC, no changes in any such laws, statutes, ordinances,
codes, regulations, rules, orders, restrictions or requirements have been
proposed or are in process with which TSIH could not comply after the Closing
Date without materially adversely affecting the Business, and the Acquired
Assets or their operation or profitability.
3.7 LICENSES, PERMITS AND APPROVALS. DCEC holds all licenses, permits,
franchises, authorizations, approvals, consents and rights from all appropriate
federal, state, local or other public governmental or administrative or judicial
authorities necessary in connection with the operation of the Business by DCEC,
all of which are listed and described in Schedule 1.1(j) and, between the date
hereof and the Closing Date, DCEC will maintain all such licenses, permits,
franchises, authorizations, approvals, consents and rights, none of which will
be adversely affected by the transactions contemplated by this Agreement except
for those which cannot be legally transferred to TSIH under the terms hereof as
specifically described in Schedule 1.1(j).
3.8 TAXES. DCEC has filed with appropriate federal, state and local
governmental agencies all tax returns and reports required to be filed by DCEC
and, to the best knowledge of DCEC and the DCEC Shareholders, has paid all taxes
and assessments which became due prior to the date hereof.
3.9 CONTRACTS.
(a) Except as set forth on Schedule 1.1(i) attached hereto, DCEC is
not a party to or bound by any contracts, agreements or instruments which relate
to or affect the Business. DCEC has provided TSIH with a true, accurate and
complete copy of each document listed in Schedule 1.1(i).
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(b) DCEC has, to the best knowledge of DCEC and the DCEC Shareholders,
performed all obligations required to be performed by it to date and is not in
default under, and no event has occurred which, with the lapse of time or action
by a third party, could result in a default under, any outstanding indenture,
mortgage, deed of trust, contract, agreement, lease or other commitment to which
it is a party or by which it is bound and relates to the Business or under any
provision of DCEC's Articles of Incorporation or by-laws.
3.10 EMPLOYMENT MATTERS. Except as set forth on Schedule 3.10 hereto, all
full or part-time employees employed in connection with the operation of the
Business are terminable by DCEC at will at any time without any obligation for
severance pay, vacation pay or other liability.
3.11 CONDUCT OF BUSINESS. Except as set forth on Schedule 3.11 hereto, DCEC
has not:
(a) experienced any material adverse change in the assets, liabilities
or business relating to the Business or the Acquired Assets;
(b) suffered the filing, or learned of any basis for the institution
of, any action, suit, proceeding or governmental investigation, with respect to
the business, properties, assets or goodwill relating to the Business or the
Acquired Assets;
(c) entered into any contract to provide or reserve any future use of
the Business or the Acquired Assets by any persons;
(d) billed any accounts relating to the Business in advance or
collected any advance payment or deposit under any contract relating to the
future use of the Business; or
(e) entered into any other transaction relating to the sale, lease or
other disposition of the Business or the Acquired Assets.
3.12 CONDUCT OF BUSINESS PENDING CLOSING. From and after the date hereof
and until the Effective Time, with respect to the Business or the Acquired
Assets, DCEC will: (a) maintain the Acquired Assets in their present state of
repair, order and condition, reasonable wear and tear excepted; (b) comply with
all laws applicable to the Business; (c) not sell, mortgage, subject to lien,
pledge or encumber or otherwise dispose of any of the Acquired Assets; (d) not
enter into any written or oral contract, lease, plan, commitment or agreement
relating to the Business without the prior consent of TSIH; and (e) continue to
operate the Business in its normal course.
3.13 INSURANCE. DCEC has in effect the insurance coverage with respect to
the Business described in Schedule 3.13 attached hereto, which description
includes the name of the insurer, the policy number, the name of the insured,
the type and amount of coverage and risks insured, and DCEC has delivered to
TSIH complete and accurate copies of all such insurance policies. Such insurance
coverage, as to amounts and types of coverage and risks insured, is adequate for
the Business as presently conducted.
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3.14 LITIGATION. Except as set forth in Schedule 3.14, DCEC is not engaged
in or threatened with any claim, action, litigation, investigation, audit,
arbitration, dispute or proceeding relating to the Business or the Acquired
Assets, and DCEC are not now subject to any order, decree or other governmental
restriction adversely affecting the business or assets of the Business or the
Acquired Assets or which would prevent or hamper the consummation of the
transactions contemplated by this Agreement or TSIH's intended use or operation
of the Acquired Assets.
3.15 PRIMARY SUPPLIERS. Schedule 3.15 attached hereto contains a list of
all vendors and suppliers of services or goods to the Business.
3.16 COPYRIGHTS, TRADEMARKS, ETC. To the best knowledge of DCEC and the
DCEC Shareholders, except as listed on Schedule 1.16 hereto there are no claims
or demands of any person, firm or corporation pertaining to the patent, patent
pending, designs, copyrights, trademarks, service marks, trademark or service
mark registrations or applications, label filings or trade names, or, as the
case may be, the rights of DCEC under trademarks, service marks, label filings
or trade names listed in Schedule 1.1(b) as owned by DCEC, and no proceedings
have been instituted, or are pending or threatened which challenge the rights of
DCEC in respect thereof, and none of the issued trademarks, service marks,
trademark registrations, label filings or trade names or, as the case may be,
the rights granted to DCEC in respect thereof and listed in Schedule 1.1(b) as
owned by DCEC, is subject to any outstanding order, decree, judgment,
stipulation, injunction, restriction or agreement restricting the scope of the
use of such patents, copyrights, trademarks, service marks, trademark
registrations, label filings or trade names. To the best knowledge of DCEC and
the DCEC Shareholders, except as listed on Schedule 1.16 hereto DCEC is not
infringing or violating, and during the past five years has not infringed or
violated, any adversely held copyright, trademark, service mark or trade name,
nor engaged in any kind of unfair or unlawful competition nor wrongfully used
any confidential information or trade secretes or patentable inventions of any
former employee of DCEC or any other person, firm or corporation. DCEC is not
wrongfully using any such information nor has any knowledge of any patented
device or application thereof which would materially and adversely affect any
aspect of the Business or its operations.
3.17 UTILITIES. All utilities necessary for the present use and operation
of the Acquired Assets are available to the Business, including, without
limitation, electric power, natural gas, storm sewer, water, sanitary sewer and
telephone over public rights of way.
3.18 FINANCIAL STATEMENTS. Schedule 3.18 attached hereto sets forth the
financial statements delivered to TSIH by DCEC. To the best knowledge of DCEC
and the DCEC Shareholders, all such financial statements are true, accurate and
complete and present fairly the financial position of DCEC as of the dates
stated and results of operations of DCEC for the periods depicted.
3.19 DISCLOSURE. No representation or warranty made herein by DCEC or the
DCEC Shareholders and no written statement, certificate, schedule or document,
including without limitation any projection, report or summary given or to be
given to TSIH pursuant to this Agreement, or with respect to the transactions
contemplated hereunder, contains or will contain any untrue statement of a
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material fact, or will omit to state a material fact necessary to make the
statements contained herein or therein under the circumstances under which they
were made not misleading, and DCEC and the DCEC Shareholders have made, and will
make in good faith through the Closing Date, full disclosure of all material
facts with respect to the Business and the Acquired Assets, including, without
limitation, the operations, assets and prospects which a prudent TSIH would deem
relevant.
3.20 INVESTMENT INTENT. The shares of TSIH's common stock transferred to
DCEC in exchange for the Acquired Assets and to be distributed to the DCEC
Shareholders upon the liquidation of DCEC are being acquired by the DCEC
Shareholders for their own account, with the intention of holding for investment
and with no present intention of dividing or allowing others to participate in
this investment or of reselling or otherwise participating directly or
indirectly in a distribution of such shares. The DCEC Shareholders understand
that such shares are "RESTRICTED SECURITIES" as defined under Rule 144 as
promulgated under the Securities Act and will bear an appropriate legend
indicating that such shares can not be sold or transferred without registration
under the Securities Act or pursuant to applicable exemption from such
registration.
3.21 UPDATING OF SCHEDULES. There has been no material adverse change in
any of the matters reflected in any Schedule made a part of this Agreement from
the respective dates thereof to and including the date of this Agreement, nor
will there be any material adverse change in such matters from the date hereof
to and including the Closing Date. All Schedules attached hereto are true,
accurate and complete in all material respects and will be updated by DCEC to
include information as of such date as may be requested by TSIH and delivered to
TSIH prior to or on the Closing Date with any and all changes marked so that all
such Schedules are true, accurate and complete in all respects.
3.22 BASIS FOR REPRESENTATIONS AND WARRANTIES. Prior to executing this
Agreement, DCEC and the DCEC Shareholders have made such affirmative and
thorough reviews, searches, inspections and inquiries relating to DCEC, the
Business and the Acquired Assets, and have consulted with such third parties,
which a prudent person might deem necessary or advisable in order to gain
knowledge concerning the matters to which the representations and warranties
relate. With respect to the subject matter of any representation and warranty
which is subject to the "BEST KNOWLEDGE AND belief" of DCEC or the DCEC
Shareholders or similar qualification, such representation or warranty shall be
deemed to include matters which DCEC or the DCEC Shareholders should have known
with respect to the subject matter of such representations and warranties.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TSIH
As an inducement to DCEC and the DCEC Shareholders to enter into and
perform this Agreement, TSIH covenants, represent and warrants to, and agrees
with, DCEC and the DCEC Shareholders as follows:
4.1 AUTHORITY. TSIH has the full legal power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not violate any
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provision of law, TSIH's Articles of Incorporation or TSIH's bylaws. TSIH has
taken all necessary action (including action of TSIH's board of directors, as
required but excluding consent of TSIH's shareholders) to authorize and approve
the execution and delivery of this Agreement and the performance of the
transactions contemplated hereby.
4.2 ORGANIZATION AND GOOD STANDING. TSIH is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
4.3 CAPITALIZATION.
(a) AUTHORIZED CAPITAL STOCK. As of the Effective Time (i) the
authorized capital stock of TSIH consists of 75,000,000 shares, of which
65,000,000 shares are designated as common stock with a par value of $.001 per
share and 10,000,000 shares are designated as preferred stock with a par value
of $.001 per share, and (ii) TSIH has issued and outstanding a total of
35,000,000 shares of common stock and no shares of preferred stock.
(b) WARRANTS OUTSTANDING. As of the Effective Time, TSIH has
outstanding a total of 400,000 A Warrants which entitle the holder thereof to
purchase one share of TSIH's common stock at $2.00 per share and which expire on
June 30, 2001, 400,000 B Warrants which entitle the holder thereof to purchase
one share of TSIH's common stock at $2.00 per share and which expire on June 30,
2001, 400,000 C Warrants which entitle the holder thereof to purchase one share
of TSIH's common stock at $4.00 per share and which expire on June 30, 2001,
400,000 D Warrants which entitle the holder thereof to purchase one share of
TSIH's common stock at $4.00 per share and which expire on June 30, 2001,
400,000 E Warrants which entitle the holder thereof to purchase one share of
TSIH's common stock at $6.00 per share and which expire on June 30, 2002 and
400,000 F Warrants which entitle the holder thereof to purchase one share of
TSIH's common stock at $6.00 per share and which expire on June 30, 2002.
(c) DULY ISSUED. All of the outstanding shares of capital stock of
TSIH are duly and validly authorized and issued, fully paid and non-assessable
and all outstanding warrants representing binding obligations of TSIH to issue
additional shares in accordance with the terms thereof.
(d) NO PRE-EMPTIVE RIGHTS. Except for the Warrants, TSIH has no
outstanding obligations for the issuance of or conversion into any shares of its
capital stock and there are no pre-emptive or other rights held by any current
or former shareholder of TSIH with respect to the issuance of any shares of its
capital stock.
4.4 VALID ISSUE. Upon issuance, the 30,000,000 shares of common stock and
the 200,000 shares of Series A Preferred issued in exchange for the Acquired
Assets shall be duly and validly authorized and issued, fully paid and
non-assessable.
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4.5 TAXES. TSIH has filed with appropriate federal, state and local
governmental agencies all tax returns and reports required to be filed by TSIH
and has paid all taxes and assessments which became due prior to the date hereof
and shall pay all such taxes and assessments which become due on or prior to the
Effective Time.
4.6 LITIGATION. TSIH is not engaged in or threatened with any claim,
action, litigation, investigation, audit, arbitration, dispute or proceeding,
and TSIH is not now subject to any order, decree or other governmental
restriction adversely affecting its business or assets or which would prevent or
hamper the consummation of the transactions contemplated by this Agreement or
TSIH's intended use or operation of the Acquired Assets.
4.7 FINANCIAL STATEMENTS. Schedule 4.7 attached hereto sets forth the
financial statements delivered to DCEC by TSIH. All such financial statements
are true, accurate and complete and present fairly the financial position of
TSIH as of the dates stated and results of operations of DCEC for the periods
depicted.
4.8 DISCLOSURE. No representation or warranty made herein by TSIH and no
written statement, certificate, schedule or document, including without
limitation any projection, report or summary given or to be given to DCEC or the
DCEC Shareholders pursuant to this Agreement, or with respect to the
transactions contemplated hereunder, contains or will contain any untrue
statement of a material fact, or will omit to state a material fact necessary to
make the statements contained herein or therein under the circumstances under
which they were made not misleading, and TSIH has made, and will make in good
faith through the Closing Date, full disclosure of all material facts with
respect to its operations, assets and prospects which a prudent TSIH would deem
relevant.
4.9 UPDATING OF SCHEDULES. There has been no material adverse change in any
of the matters reflected in any Schedule made a part of this Agreement from the
respective dates thereof to and including the date of this Agreement, nor will
there be any material adverse change in such matters from the date hereof to and
including the Closing Date. All Schedules attached hereto are true, accurate and
complete in all material respects and will be updated by TSIH to include
information as of such date as may be requested by DCEC and delivered to DCEC
prior to Closing Date with any and all changes marked so that all such Schedules
are true, accurate and complete in all respects.
4.10 BASIS FOR REPRESENTATIONS AND WARRANTIES. Prior to executing this
Agreement, TSIH has made such affirmative and thorough reviews, searches,
inspections and inquiries relating to TSIH, and has consulted with such third
parties, which a prudent person might deem necessary or advisable in order to
gain knowledge concerning the matters to which the representations and
warranties relate. With respect to the subject matter of any representation and
warranty which is subject to the "BEST KNOWLEDGE AND BELIEF" of TSIH a similar
qualification, such representation or warranty shall be deemed to include
matters which TSIH should have known with respect to the subject matter of such
representations and warranties.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 ACCESS TO RECORDS AND PROPERTIES. Upon execution of this Agreement and
through the Closing Date, TSIH and DCEC, and their respective accountants,
counsel and other representatives, shall have full access to all of the
properties, assets, books, records, tax returns, leases, contracts and
agreements, and all information concerning the business and properties of the
other as each may request. Each party shall provide reasonable assistance to the
other in connection with the conduct of the due diligence review of the
business, properties and financial condition of the other.
5.2 BULK SALES LAWS. TSIH shall assume all trade payables in connection
with the acquisition of the Acquired Assets and shall waive compliance by DCEC
with any bulk transfer or other advance notice provisions to trade creditors as
may be required under the applicable bulk transfer laws.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TSIH. Notwithstanding any
other provision of this Agreement, the obligation of TSIH to consummate the
transactions hereunder shall be subject to the satisfaction on the Closing Date
of the following conditions precedent, unless waived in writing by TSIH:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of DCEC and the DCEC Shareholders contained in Article 3 hereof shall
be true and correct as of the date when made and as of the Effective Time and
the Closing Date, except to the extent necessary to reflect the consummation of
the transactions provided for herein and except as otherwise contemplated by
this Agreement. DCEC and the DCEC Shareholders shall have duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date. DCEC and DCEC Shareholders shall have delivered to TSIH a certificate
dated the day of the Closing Date to the effect set forth in this Section
6.1(a).
(b) LICENSES, PERMITS, APPROVALS, ETC. TSIH shall have applied for and
obtained all governmental, administrative and other licenses, permits,
approvals, consents and authorizations, which, in the opinion of TSIH, are
required or desirable in connection with TSIH's purchase of the Acquired Assets,
and its intended use and operation of the Acquired Assets and the Business and
which could not be transferred directly from DCEC to TSIH, all of which shall be
in full force and effect and not subject to appeal. Additionally, DCEC shall
have delivered to TSIH all governmental, administrative and other licenses,
permits, approvals, consents and authorizations which DCEC is permitted by
applicable law to transfer directly to TSIH.
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(c) DUE DILIGENCE OF TSIH. TSIH shall have conducted the such
diligence checks as desired and shall have affirmatively elected to proceed with
the transactions contemplated under this Agreement.
(d) CONSENTS. All required consents, authorizations and approvals of
third parties to the consummation of the transactions contemplated hereby, and
the ownership and operation of the Acquired Assets by TSIH, shall have been
obtained by DCEC in form and substance satisfactory to TSIH.
(e) NO ADVERSE CHANGES. There shall have been no adverse changes in
the operations, conditions (financial or otherwise), properties, assets,
business or prospects of the Business. DCEC shall have delivered to TSIH a
certificate dated the day of the Closing Date to the effect set forth in this
Section 6.1(e).
(f) LEGAL MATTERS. There shall have been furnished to counsel for TSIH
certified copies of such corporate records of DCEC and copies of such other
documents as such counsel may reasonably have requested. All legal matters and
proceedings in connection with this Agreement and the transactions contemplated
hereby shall have been approved by such counsel.
(g) RECEIPT OF CLOSING DOCUMENTS. TSIH shall have received all of the
closing documents referred to in Section 7.1 hereof.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF DCEC. Notwithstanding any
other provision of this Agreement, the obligation of DCEC to consummate the
transactions contemplated hereby shall be subject to the satisfaction on the
Closing Date of the following conditions precedent, unless waived in writing by
DCEC:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of TSIH contained in Article 4 hereof shall be true and correct in
all material respects as of the date when made and as of the Closing Date,
except to the extent necessary to reflect the consummation of the transactions
provided for herein and except as otherwise contemplated by this Agreement. TSIH
shall have duly performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with by TSIH
prior to or on the Closing Date. TSIH shall have delivered to DCEC a certificate
dated the day of the Closing Date to the effect set forth in this Section
6.2(a).
(b) DUE DILIGENCE OF DCEC. DCEC shall have conducted the due diligence
checks desired and shall have affirmatively elected to proceed with the
transactions contemplated under this Agreement.
(c) NO ADVERSE CHANGES. There shall have been no adverse changes in
the operations, conditions (financial or otherwise), properties, assets,
business or prospects of the TSIH. TSIH shall have delivered to DCEC a
certificate dated the day of the Closing Date to the effect set forth in this
Section 6.2(c).
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(d) LEGAL MATTERS. There shall have been furnished to counsel for DCEC
certified copies of such corporate records of TSIH and copies of such other
documents as such counsel may reasonably have requested. All legal matters and
proceedings in connection with this Agreement and the transactions contemplated
hereby shall have been approved by such counsel.
(e) OFFICERS AND DIRECTORS. TSIH shall cause Lanny R. Lang to tender
his resignation as the Treasurer and director of TSIH and Michael S. Williams as
the President of TSIH. At the conclusion of the Closing, the following persons
shall be members of the Board of Directors and the officers of the corporation:
Michael S. Williams Chairman of the Board
Patricia J. Wilks President and Director
Dennis C. Palmer Executive Vice President, Treasurer,
Chief Engineer and Director
Ambrose Hope Director of Research and Development
and Director
Lanny R. Lang Secretary
(f) RECEIPT OF CLOSING DOCUMENTS. DCEC shall have received all of the
closing documents referred to in Section 7.2 hereof.
ARTICLE 7
CLOSING DOCUMENTS
7.1 SECTION DOCUMENTS TO BE DELIVERED BY DCEC. DCEC agrees to deliver to
TSIH on the Closing Date the following:
(a) BILLS OF SALE, ASSIGNMENTS AND TRANSFERS. Good and sufficient
bills of sale, certificates of title, assignments and other instruments of
transfer with covenants of warranty and good title and in form and substance
satisfactory to TSIH as shall be necessary or appropriate to assign and transfer
to and vest in TSIH or their nominee or nominees good and marketable title to
all the Acquired Assets free and clear of any and all liabilities, liens,
claims, restrictions on transfer or encumbrances.
(b) CERTIFICATES. A certificate of DCEC dated the Closing Date
certifying as to the matters set forth in Sections 6.1(a) and (e) hereof.
(c) GOOD STANDING CERTIFICATE FOR DCEC. A certificate of good standing
of DCEC issued by the applicable authority of the State of California dated not
more than 10 days prior to the Closing Date.
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(d) CONSENTS TO ASSIGNMENTS. All consents of third parties which are
necessary, in the opinion of TSIH, to effectively transfer the Acquired Assets
in the manner provided for herein, free and clear of all liens, claims and
encumbrances and in form and substance satisfactory to such counsel.
(e) CERTIFICATE OF SECRETARIAL OFFICER OF DCEC. Certificate of the
Secretary of DCEC dated the Closing Date with respect to corporate proceedings
authorizing this Agreement and the transactions contemplated thereunder.
(f) OTHER DOCUMENTS. Such other documents and showings as shall
reasonably be requested by TSIH.
7.2 DOCUMENTS TO BE DELIVERED BY TSIH. TSIH agrees to deliver to DCEC on
the Closing Date the following:
(a) CERTIFICATE. A certificate of TSIH dated the Closing Date
certifying as to matters set forth in Sections 6.2(a) and (c) hereof.
(b) GOOD STANDING CERTIFICATE FOR TSIH. A certificate of good standing
of TSIH issued by the applicable authority of the State of Nevada dated not more
than 10 days prior to the Closing Date.
(c) CERTIFICATE OF SECRETARIAL OFFICER OF TSIH. Certificate of the
Secretary of TSIH dated the Closing Date with respect to corporate proceedings
authorizing this Agreement and the transactions contemplated thereunder.
(d) OTHER DOCUMENTS. Such other documents and showings as shall
reasonably be requested by DCEC.
ARTICLE 8
TERMINATION, AMENDMENTS, WAIVER AND ASSIGNMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date:
(a) By mutual consent of TSIH and DCEC;
(b) By TSIH (i) if in good faith opinion of TSIH, upon written notice
with reasonable rights to cure within a minimum of five days from such notice,
DCEC has breached any of the representations, warranties or covenants of this
Agreement or (ii) if any of the conditions precedent as set forth in Section 6.1
above have not been performed by the Closing Date;
(c) By DCEC (i) if in good faith opinion of DCEC, upon written notice
with reasonable rights to cure within a minimum of five days from such notice,
TSIH has breached any of the representations, warranties or covenants of this
Agreement or (ii) if any of the conditions precedent as set forth in Section 6.2
above have not been performed by the Closing Date; or
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(d) By DCEC in its discretion upon payment of $30,000 to TSIH.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
pursuant to Section 8.1 hereof, there shall be no liability on the part of
either party to the other, PROVIDED, HOWEVER, that (a) this Section 8.2 shall
not preclude liability attaching to a party who has caused the termination
hereof by willful act or willful failure to act in violation of the terms and
provisions of this Agreement, and (b) termination of this Agreement shall not
terminate or affect the agreements of the parties hereto set forth in Sections
9.3 or 9.5 hereof.
8.3 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 WAIVER. Any terms or provisions of this Agreement may be waived in
writing at any time by the party which is entitled to the benefits thereof. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect such party's right at a later time to
enforce the same. No waiver by any party of a condition or of the breach of any
term, covenant, representation or warranty contained in this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term, covenant,
representation or warranty of this Agreement.
8.5 ASSIGNMENT. This Agreement shall not be assigned by either party
without the prior written consent of the other party and any attempted
assignment without such written consent shall be null, void and without legal
effect.
ARTICLE 9
GENERAL PROVISIONS
9.1 SECTION SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties herein made by DCEC in Article 3 hereof or by TSIH under Article
4 hereof, shall be deemed to be remade at and survive the Closing Date for a
period of two years.
9.2 INDEMNIFICATION.
(a) DCEC'S INDEMNIFICATION. DCEC and the DCEC Shareholders agree to
indemnify and hold harmless TSIH, from and against any claim, loss, damage, cost
or expense whatsoever, including attorneys' fees and expenses of litigation,
which TSIH may incur or suffer by reason, either directly or indirectly, of any
of the following:
(i) The inaccuracy of any representation or warranty made by DCEC
and the DCEC Shareholders hereunder;
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(ii) The breach of any of the agreements or covenants of DCEC
contained herein or in any certificate or other document delivered by DCEC
to TSIH in accordance with the terms hereof;
(iii) The failure of DCEC to satisfy and discharge all of the
Excluded Obligations; and
(iv) All litigation, suits, claims, demands, proceedings or
matters relating, to the ownership of the Acquired Assets or the operation
of the Business on or prior to the Closing Date. TSIH may contest any claim
or liability, which, if established, would be the subject of
indemnification hereunder, and in such event all legal fees, disbursements
and other costs and expenses of such contest shall also be an item of
indemnification by DCEC and the DCEC Shareholders hereunder.
(b) TSIH'S INDEMNIFICATION. TSIH agrees to indemnify and hold harmless
DCEC from and against, any claim, loss, damage, cost or expense whatsoever,
including attorneys' fees and expenses of litigation, which DCEC may incur or
suffer by reason, either directly or indirectly of the following:
(i) The inaccuracy of any representation or warranty made by TSIH
hereunder;
(ii) The breach of any of the agreements or covenants of TSIH
contained herein or in any certificate or other document delivered by TSIH
to DCEC in accordance with the terms hereof, and
(iii) The failure of TSIH to satisfy and discharge the Assumed
Obligations. DCEC may contest any claim or liability, which, if
established, would be the subject of indemnification hereunder, and in such
event all legal fees, disbursements and other costs and expenses of such
contest shall also be an item of indemnification by TSIH hereunder.
9.3 BROKERAGE COMMISSION. Each party hereto represents and warrants that it
has not had any negotiations or dealings with any advisors, brokers or finders,
and that no obligation or liability, contingent or otherwise, for advisory,
brokerage or finder's commissions or fees has been incurred in connection with
the transactions contemplated hereunder. The parties each further agree to
indemnify and hold the other harmless from and against the claims of any person,
firm or corporation claiming any brokerage commission, finder's fee or similar
compensation based on any alleged negotiations or dealings with the indemnity
contrary to the foregoing representations.
9.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by such party by like notice):
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If to DCEC or the DCEC Shareholders:
Dyna-Cam Engine Corporation
23960 Madison
Torrance, California 90505
Attn: Patricia J. Wilks
If to TSIH:
TSI Capital Corp.
2117 South 48th Street, Suite 105
Tempe, Arizona 85282
Attn: Michael S. Williams
Written notice given by any other method shall be deemed effective only
when actually received by the party to whom given.
9.5 EXPENSES. Except as set forth below, the parties shall bear their own
respective legal, accounting, title and other related expenses in connection
with this Agreement and the sale and purchase provided for hereunder. In the
event of termination of this Agreement under Section 8.1 (a) or (b), DCEC agrees
to reimburse TSIH for its costs and expenses, including legal fees incurred in
connection with preparation of this Agreement, in an amount up to $20,000.
9.6 LEGAL REPRESENTATION. The parties hereto acknowledge that the law firm
of Lewis and Roca LLP has represented TSIH in connection with the negotiation
and consummation of this Agreement and the transactions contemplated herein.
DCEC and the DCEC Shareholders have been advised to seek independent legal and
accounting advice in connection with this Agreement and the transactions
contemplated herein and have obtained such advice to the extent desired by them.
9.7 FURTHER ASSURANCES. After the Closing Date, DCEC, at its own expense,
shall do, execute, acknowledge and deliver all further acts, conveyances,
transfers, documents and assurances necessary or proper to vest in TSIH good
title to the Acquired Assets, free and clear of any liens, claims, charges or
encumbrances whatsoever, and otherwise to effect such sale in accordance with
the provisions of this Agreement.
9.8 MISCELLANEOUS. This Agreement (a) constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both written and oral,
between the parties, with respect to the subject matter hereof; (b) is not
intended to confer upon any other person any rights or remedies hereunder; (c)
shall be binding upon and inure to the benefit of TSIH and DCEC, and their
respective successors and assigns; and (d) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Arizona as applied without regard to conflict of law principles. This Agreement
may be executed in counterparts which together shall constitute a single
agreement. Article headings and Section headings as contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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9.9 GENDER. Where in this Agreement masculine pronouns are used, such words
shall be considered feminine or neuter pronouns where the context indicates the
propriety of such use.
9.10 ILLEGALITY. In the event that any provision of this Agreement shall be
held to be invalid, illegal or unenforceable, such provision shall be deemed
modified to the least extent necessary to cause such provision to be valid,
legal or enforceable, and the validity, legality and enforceability of the other
provisions of the Agreement shall not be affected or impaired thereby.
9.11 EFFECT OF ATTACHMENTS. Each Schedule and Exhibit referred to herein
shall be deemed a part of this Agreement to the same extent as if each such
Schedule and Exhibit was set forth herein in its entirety.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first written above.
TSIH:
TSI HANDLING, INC.
By /s/ Michael S. Williams
-------------------------------------
Michael S. Williams
President
DCEC:
DYNA-CAM ENGINE CORPORATION
By /s/ Patricia J. Wilks
-------------------------------------
Patricia J. Wilks
President
DCEC SHAREHOLDERS:
/s/ Patricia J. Wilks
----------------------------------------
Patricia J. Wilks
/s/ Dennis C. Palmer
----------------------------------------
Dennis C. Palmer
/s/ Ambrose D. Hope
----------------------------------------
Ambrose D. Hope
/s/ Claude Palmer
----------------------------------------
Claude Palmer
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EXHIBIT AND SCHEDULE LIST
Exhibit A DCEC Shareholders
Exhibit B Certificate of Designation
Exhibit C Placement Agreement
Exhibit D Employment Agreement
Exhibit E Capital Advisory and Financial Consulting
Services Agreement
Exhibit F Existing Shareholders' Rights Agreement
Schedules
1.1(a) Inventories
1.1(b) Intellectual Property
1.1(c) Furniture, Fixtures and Equipment
1.1(e) Accounts Receivable and Bank Accounts
1.1(f) Real Estate Leases
1.1(g) Equipment Leases
1.1(h) Prepaid Expenses, Insurance and Deposits
1.1(I) Other Contracts
1.1(j) Licenses, Permits and Certifications
1.1(k) Premises, Blueprints and Designs
1.3 Liabilities Assumed
3.10 Employment Contracts
3.11 Adverse Changes
3.13 Insurance Policies
3.14 Litigation and Claims
3.15 Venders and Supplies
3.16 Infringement
3.18 Financial Statements of DCEC
4.7 Financial Statements of TSIH
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EXHIBIT A
DCEC SHAREHOLDERS
Patricia J. Wilks
Dennis C. Palmer
Ambrose D. Hope
Claude Palmer
