UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
(UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934)
INDUSTRIAL DATA SYSTEMS CORPORATION
(Name of Small Business Issuer in its Charter)
NEVADA 76-0157248
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 CENTURY PLAZA DRIVE, BUILDING 140
HOUSTON, TEXAS 77073-6016
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (281) 821-3200
SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK:
75,000,000 $.001 PAR VALUE
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PART I
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONNECTION WITH THE MORE DETAILED INFORMATION CONTAINED HEREIN AND IN
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, AND THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS REGISTRATION STATEMENT. THE DISCUSSION IN THIS REGISTRATION
STATEMENT CONTAINS FORWARD LOOKING STATEMENTS WHICH INVOLVE RISKS AND OTHER
UNCERTAINTIES. REFERENCES TO THE "COMPANY" OR TO "IDS" REFER TO INDUSTRIAL DATA
SYSTEMS CORPORATION.
BUSINESS
GENERAL
Industrial Data Systems Corporation ("IDS") was incorporated in the
State of Nevada in June 1994. The Company's principal executive offices are
located at 600 Century Plaza Drive, Building 140, Houston, Texas 77073. The
Company's telephone number is (281) 821-3200.
IDS has never filed for protection under the bankruptcy protection
act, nor has the Company or any of its assets been in receivership or any other
similar proceedings.
The Company's revenue is derived from two operating segments: the
Industrial Products Division ("IPD") and the IDS Engineering Division ("IED").
The IPD is a provider of specialized microcomputer products that are targeted to
be sold to the industrial market. The IPD manufactures and sells industrial and
portable computers, microcomputers and color CRT monitors under the Company's
trade name, which include the SafeCase Series 3000, 4000, 5000 and 7000. The
microcomputer and peripheral products are designed to be used in industrial
applications, which include manufacturing, process control, discrete
manufacturing, data acquisition and man-machine interfaces. The computers and
monitors that are manufactured by the Company are different from conventional,
commercial desktop and portable computers by its architecture, packaging,
functionality, integration services and value-added software. The computer
products manufactured by the IPD are "open systems" that support "off-the-shelf"
software operated under DOS or Windows. The Company also derives revenue from
the integration and resale of industrial computer products manufactured by other
companies.
The IPD positions itself to provide engineered industrial personal
computers. The IPD adds value to standard computer components by packaging these
components in enclosures which withstand tough environmental conditions and/or
enclosures that have a special form factor. The Company also adds value by
integrating and technically supporting advanced microcomputer systems.
The IDS Engineering Division ("IED") offers engineering services to
the pipeline division of major integrated oil companies. These services are
performed on facilities that include cross-country pipelines, pipeline pump
stations, compressor stations, metering facilities, underground storage
facilities, tank storage facilities and product loading terminals. The
management team of the IED has the capability of developing a project from the
initial planning stages through detailed design and
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construction management. The services provided include project scoping, cost
estimating, engineering design, material procurement, mechanical fabrication, in
addition to project and construction management.
The IED has ten blanket service contracts currently in place to
provide services on a time and materials reimbursable basis. The IED also
performs services for its clients on a turnkey lump sum basis. The Company has a
long standing relationship with Exxon Pipeline Company, Arco Pipeline Company,
Marathon Pipeline Company and Texas Eastern Products Pipeline Company. New
business relationships with other major oil companies are developed through
in-house personnel.
ACQUISITION OF INDUSTRIAL DATA SYSTEMS, INC.
On August 1, 1994, the Company entered into an agreement to purchase
all of the issued and outstanding shares of Industrial Data Systems, Inc., a
Texas corporation, in a tax-free exchange of Common Stock. The Company issued
9,500,000 shares of its Common Stock to William A. Coskey and Hulda L. Coskey,
with each individual beneficially holding 4,762,800, and 4,750,000,
respectively. William A. Coskey and Hulda L. Coskey beneficially held all of the
issued and outstanding shares of the Common Stock of Industrial Data Systems,
Inc., a Texas corporation, at the time of the acquisition. William A. Coskey
held the positions of Chairman of the Board, Chief Executive Officer and
President of Industrial Data Systems, Inc., and Hulda L. Coskey held the
positions of Director, Vice President and Secretary/Treasurer of Industrial Data
Systems, Inc. The executive officers, management team and beneficial ownership
of securities held by the executive officers were the same in both companies at
the time of the transaction.
ACQUISITION OF THERMAIRE, INC.
The Company entered into an Agreement with the owners of Thermaire,
Inc. on August 15, 1995 to acquire Thermaire, Inc. in a contingent purchase
transaction. The Company issued 600,000 shares of Common Stock which are
currently held in an escrow account pending completion of the acquisition by the
Company exercising its option to pay $600,000 and obtain a release of the
shares. The Company's option to acquire Thermaire, Inc. will expire on February
15, 1997. In connection with this transaction, the Company has entered into an
agreement to purchase the facilities of Thermaire, Inc., subject to the
completion of the contingent purchase transaction for cash consideration of
$500,000, on or before February 15, 1997. The Company exercised its option to
purchase Thermaire, Inc., effective as of December 31, 1996, with the delivery
of all documentation and funds to occur and be fully exchanged on February 15,
1997.
INTRODUCTION OF SAFECASE SERIES 400
On August 14, 1996, the Company announced the introduction of the
SafeCase Series 400 computer as its latest entry into the industrial portable
computer market. This computer is the industrial equivalent of a contemporary
commercial grade notebook computer. The size of the computer is 9" wide by 12"
in length and 5" in height and provides the same basic footprint as commercial
grade laptop computers, and complements the performance, durability and
reliability of the Company's other
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industrial computers. The SafeCase Series 400 is designed to be utilized in an
environment with mild and severe weather conditions, from light rain to gusting
winds and temperatures ranging from nine to 50 degrees Celsius, and is
constructed to withstand shock at 10G and vibration loads of 0.5mm within a five
to 100 Hz range. The SafeCase Series 400 is a fully featured portable computer
with an introduction price of $3,995. Initial deliveries of this computer are
scheduled to commence during the first quarter of 1997.
The Company plans to increase sales through the introduction of
additional computer products in 1997, and it is in the process of researching
complementary computer products which are suitable to the industrial computer
market.
INDUSTRY OVERVIEW
The market for computer products and services has experienced
significant growth in recent years and the use of such products and services
within organizations has been impacted by several concurrent trends. The
introduction of LANs (local area networks) and WANs (wide area networks) has
allowed organizations to supplement or replace expensive, centralized mainframe
computer systems with more flexible and affordable PC-based client/server
platforms. The emergence of widely accepted industry standards for hardware and
software has increased the acceptance of open architecture LANs and WANs which
can and frequently do contain products from numerous manufacturers and
suppliers. Industrial personal computers and workstations are displacing other
controllers in a growing number of applications. Suppliers of office grade
(white box) personal computers have a price advantage. However, the necessity of
"hardened" units for difficult industrial environments ensures growth in the
sales of industrial personal computers and workstations.
The worldwide industrial personal computer and workstation industry
is one that predominantly services OEM and systems integrator applications.
Growth is expected to be slightly higher for OEM and systems integrator
applications than for end-user applications. Quality, reliability, shock
resistance and speed of operation are key factors of significance for the user.
The ability of the user to use the industrial personal computer in rugged
environments, such as harsh office, light industrial and heavy industrial
applications is also essential.
Users have needs and expectations that will affect product designs in
the industrial computer market. The type of backplane that is used, is of
critical importance as it affects ruggedness, expandability and price. The
supply side of the market is moving in diverse directions depending on price and
performance. High-end industrial personal computer and workstation vendors are
shifting more to active backplanes in order to lower prices, while low-end
vendors are continuing to use predominantly passive backplanes to meet user
demands for expansion and ease of servicing.
The industrial personal computer market is following the desktop
market in terms of bus architectures with industrial modifications. The ISA
(Industry Standard Architecture) bus will remain the industry standard for
primary buses, and will be integrated in hybrid form with PCI (Peripheral
Component Interconnect) in a large percentage of shipments. The average number
of board expansion slots is expected to increase over the next five years. The
number of PCMCIA slots is expected to
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remain the same, but more industrial PCI computers and workstations will have
these features. The industrial personal computer and workstation market is
moving heavily in the direction of Pentium, which will be followed by P-6, P-7
and Power PC microprocessors.
The most popular enclosure type for industrial personal computers and
workstations is rack mount. Panel mount is the second most popular enclosure for
light and heavy industrial conditions, and third most popular for harsh office
conditions. Bench top, desktop and tabletop is the second most popular for harsh
office, and the third most popular enclosure type for light and heavy industrial
environments. Relative use of these enclosures are expected to shift only
slightly over the next five years, as are those of lesser used pedestal mounts,
hand held, notebooks and luggable portables.
Distribution channels for computer products changed significantly
commencing in the early 1990's. During that period, many manufacturers of
computers began to scale back their sales forces and, in order to ensure the
continued wide distribution of their products, started to offer their products
to wholesale computer distributors which previously had sold only software and
peripheral equipment. In addition, manufacturers also began allowing resellers
to purchase products from more than one distributor, a practice known as "open
sourcing". Expanding computer sales to distributors and allowing open sourcing
intensified price competition among suppliers.
Rapid technological improvements in computer hardware and the
introduction of new software operating systems have also created the need to
expand or upgrade existing networks and systems. At the same time, price
decreases have made such networks and systems affordable to a larger number of
organizations. The Company believes that these trends have increased the general
demand for computer products and related information technology services.
The advent of open architecture networks has also impacted the market
for information technology services. Wider use of complex networks involving a
variety of manufacturer's equipment, operating systems and application software
has made it increasingly difficult to diagnose problems and maintain the
technical knowledge and repair parts necessary to provide support services.
Increasingly, organizations seeking computer products often require prospective
vendors not only to offer products from many manufacturers and suppliers, but to
have available and proficient service expertise to assist them in product
selection, system design, installation and post-installation assistance and
service. The Company believes that the ability to offer customers a
comprehensive solution to their information technology needs, including the
ability to work within its customers' industrial environments as integral
members of their management information system staff, are increasingly important
in the marketplace.
BUSINESS STRATEGY
The Company intends to increase market share and market penetration
through its existing product line, and also increase its sales through strategic
relationships with other computer manufacturers. On September 20, 1996, the
Company announced that it had entered into a Volume Purchasing Agreement with
Texas Microsystems, a division of Sequoia Systems, Inc. Under the terms of the
Purchasing Agreement, the Company will purchase OEM subsystems from Texas
Microsystems and act as an authorized systems integrator for their industrial
computer products. Texas Microsystems
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is a leading manufacturer of industrial computer CPU boards and chassis
products. The Company is actively pursuing similar OEM contracts with several
major suppliers in the industrial computer and desktop workstation marketplace.
The Company also intends to continue to pursue potential acquisitions
of complementary businesses. The success of this strategy depends not only upon
the Company's ability to acquire complementary businesses on a cost-effective
basis, but also upon its ability to integrate acquired operations into its
organization effectively, to retain and motivate key personnel and to retain
customers of acquired firms. No specific acquisitions are being negotiated or
planned as of the date of this Registration Statement and there can be no
assurance that the Company will be able to find suitable acquisition candidates
or be successful in acquiring or integrating such businesses. Furthermore, there
can be no assurance that financing required for any such transactions will be
available on satisfactory terms.
In order to achieve its growth objective, the Company intends to
commence with the expansion of its national marketing network to increase sales
of its current line of proprietary industrial computer products. This expansion
into new locations within the United States will require additional in-house
sales personnel and sales representatives.
PRODUCTS
INDUSTRIAL PRODUCTS DIVISION
The Company's Industrial Products Division ("IPD") provides Intel
microprocessor-based microcomputer systems and system components that are
extremely dependable and can withstand harsh weather conditions and demanding
work environments. These computer systems are designed to withstand a wide
fluctuation in temperatures, shock waves, vibration, electromagnetic and radio
frequency interference, in addition to airborne dust particles and excessive
moisture.
SAFECASE SERIES 3000
The SafeCase Series 3000 is a microcomputer designed to be operated
at sites where temperature, vibration and airborne dust particles are of primary
concern. This microcomputer is designed to accommodate either active motherboard
CPUs or passive backplanes with plug-in CPUs. Being extremely adaptable, it can
be configured to accommodate various types of CPU boards, in addition to the
installation of various floppy and hard drives. The microcomputer enclosure is
constructed of 16 gauge steel and is pressurized by a filtered push-pull fan
cooling system to prevent dust particles and other matter from entering into the
computer. All of the computer components are modularly installed and shock
mounted. The SafeCase Series 3000 is suitable for installation in a standard 19"
equipment rack.
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SAFECASE SERIES 4000
The SafeCase Series 4000 is a durable, rugged portable computer
designed to be operated under extremely harsh environmental conditions normally
encountered at industrial and commercial locations. The computer is constructed
with a four slot passive backplane and three full-size open bus slots to allow
the user to customize it with industry standard add-in boards. These computers
are designed with dual cooling fans to control heat build-up, are fully gasketed
to prevent the penetration of moisture and dust particles, and has a shock
mounted disk drive which together enhance its service life. The locations and
sites under which these computers are generally operated are unlike the
environmental conditions under which the plastic notebook and laptop computers
are operated. To complement the durability of the SafeCase Series 4000, its
sturdy aluminum carrying case has been designed to withstand excessive
mechanical loads.
SAFECASE SERIES 5000
The SafeCase Series 5000 is a color CRT computer monitor designed
with a resolution of 1024 x 768 pixels, positive pressure fan and filter which
protects against internal damage from airborne dust particles, and is mountable
in a 19" equipment rack. This monitor can be interfaced with a touch screen
adapter. The color CRT computer monitor is available in 14" and 20" diagonal
models.
SAFECASE SERIES 7000
The SafeCase Series 7000 is a microcomputer designed for applications
which require an industrial computer to be mounted on a wall or attached to
machinery or other equipment. The features of this microcomputer include a six
slot passive backplane and plug-in CPU board, a positive pressure, filtered
cooling system, two drives which will accommodate either floppy or hard disks in
addition to a 150 watt power supply.
IPD PRODUCT DEVELOPMENT
The Company's engineering strategy is to continue to develop
differentiated microprocessor based capabilities that can be delivered in
"open-systems" using industry standard technology. Through this product
development strategy, the Company is able to provide highly reliable and readily
available microcomputers that are compatible with "off-the-shelf" application
software and hardware. These microcomputers can also provide a much greater
degree of system availability to users by focusing on reliability as its main
feature.
Product development during calendar 1997 will be concentrated on the
completion of and revisions to the previously announced SafeCase 400 product.
Revisions will also be made to the current SafeCase 4000 product line to
increase functionality and reduce cost. In addition, the Company will continue
to extend its products offerings to include high-end computer platforms. These
enhancements will include the latest Pentium, Pentium Pro and/or Sun Sparc
processors.
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SALES AND MARKETING
IPD
Revenues derived from the IPD are approximately 53% in-house direct
sales, approximately 42% from sales representatives and approximately 5% from
catalog distributors sales.
IED
Revenues derived from the Company's IED are 100% direct in-house
sales.
DIRECT SALES
The Company's SafeCase Series of computer products are primarily
marketed through commissioned third-party sales representatives. These sales
representatives are teamed with in-house sales managers and are assigned to
territories within the United States. The Company believes that this method of
selling leads to increased account penetration, proper management of its
products, and enhanced customer service which create and maintain the foundation
for long-term relationships with its customers. The Company's in-house sales
personnel receive a salary in addition to commission, which is based upon a
percentage of their sales. The Company believes that its past and future growth
depends in large measure on its ability to attract and retain qualified sales
representatives and sales management personnel. The Company promotes its
products and services through general and trade advertising, participation in
trade shows and through telemarketing. The Company believes that a significant
percentage of new customers of its SafeCase Series of computer products
originates through word-of-mouth referrals from existing customers and industry
members, such as manufacturers representatives. Additionally, the sales
personnel of its IPD seek to capitalize on customer relationships that have been
developed by its IED personnel. Sales leads developed by this synergy are then
jointly pursued. The IPD's customer base of over 200 accounts consists primarily
of Fortune 500 companies in all industry segments within the United States.
OTHER METHODS OF SALES
Sales of the IPD are primarily through commissioned sales
representatives and its in-house direct sales force. The Company also has an
arrangement with two catalog distributors that offer industrial computer
products and related peripherals. The SafeCase 4000 product is sold through
catalog distribution. This method of sales currently accounts for approximately
5% of IPD's total revenue.
All in-house sales personnel are located at the Company's principal
executive offices in Houston, Texas. The IPD does not anticipate hiring direct
regional sales managers who would be located in other states.
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GOVERNMENT CONTRACTS
Sales to branches of the United States government have accounted for
less than 1% of total revenue.
CUSTOMERS
The Company's top ten customers (which varied from period to period)
accounted in the aggregate for approximately 76%, 90% and 86% of the Company's
total revenue during 1994, 1995 and the nine month period ended September 30,
1996, respectively. The Company had one customer that accounted for 39%, 62% and
40% of the Company's total revenue for the same periods. Based upon historical
results and existing relationships with customers, the Company believes that a
substantial portion of its total revenue and gross profit will continue to be
derived from sales to existing customers. There are no long-term commitments by
such customers to purchase products or services from the Company. Sales of the
Company's computer products are typically made on a purchase order basis. A
significant reduction in orders from any of the Company's largest customers
could have a material adverse effect on the Company's financial condition and
results of operations. Similarly, the loss of any one of the Company's largest
customers or the failure of any one of such customers to pay its accounts
receivable on a timely basis could have a material adverse effect on the
Company's financial condition and results of operations. There can be no
assurance that the Company's largest customers will continue to place orders
with the Company or that orders by such customers will continue at their
previous levels. There can be no assurance that the Company's customers for its
engineering services will continue to enter into contracts with the Company for
such services or that existing contracts will not be terminated. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- "Business" and "Customers."
CUSTOMER SERVICE AND SUPPORT
The Company provides service and technical support to its customers
in varying degrees depending upon the product line and on customer contractual
arrangements. The Company's Houston based technical support staff provides
initial telephone trouble shooting services for end-user customers and
distributors. These services include isolating and verifying reported product
failures, authorizing product returns and tracking completion of repaired goods
in support of customer requirements. Technical support also provides on-site
engineering support in the event that a technical issue can not be resolved over
the telephone. The Company generally provides end-user purchasers of its systems
with a one year warranty.
DEPENDENCE UPON SUPPLIERS
The Company's business depends upon its ability to obtain an adequate
supply of products and parts at competitive prices and on reasonable terms. The
Company's suppliers are not obligated to have products on hand for timely
delivery to the Company nor can they guarantee product availability in
sufficient quantities to meet the Company's demands. There can be no assurance
that such products will be available as required by the Company at prices or on
terms acceptable to the Company. The
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Company procures a majority of its computers, computer systems and computer
components from distributors in order to obtain competitive pricing, maximize
product availability and maintain quality control. In some cases, the Company's
computer components are purchased through a single source. The Company does not
always have a long term purchasing contract in place to purchase computer
components from single sources. In the normal course of business, the Company
executes blanket purchase orders with its major suppliers for a period of one
year in order to maintain competitive pricing and service. The purchase orders
include provisions for the delivery, on a monthly basis, of an adequate supply
of computer parts to fulfill the Company's orders for a one year period.
The Company relies on a few key contract manufacturers for the
manufacture of some components used in the assembly of its microcomputers.
Although such subcontracting arrangements offer cost and capacity advantages,
and would eliminate the need to incur certain capital expenditures associated
with manufacturing, reliance on third party manufacturers gives the Company less
control over the manufacturing process for these components than if it undertook
such activities itself. Any failure of such subcontractors to manufacture and
deliver components as planned, or any problems with the quality of such
components, could have a material adverse effect on the Company's operations.
The Company purchases from other manufacturers substantially all
peripheral devices and components used in its products. A majority of the
components and peripherals are available from a number of different suppliers,
although certain major items are procured from single sources. The Company
believes that alternate sources could be developed for such single source items,
if necessary, however, in the event that certain peripheral or component
shortages were to occur, it could have an adverse effect on the Company's
operations.
There can be no assurance that the Company will be able to continue
to obtain the necessary computer components from its single sources on terms
acceptable to the Company, if at all. There can be no assurance that such
relationship will continue or that, in the event of a termination of its
relationship, it would be able to obtain alternative sources of supply without a
material disruption in the Company's ability to provide products to its
customers. Any material disruption in the Company's supply of products would
have a material adverse effect on the Company' financial condition and results
of operations.
RAPID TECHNOLOGICAL CHANGE
The business in which the Company competes is characterized by rapid
technological change and frequent introduction of new products and product
enhancements. The Company's success depends in large part on its ability to
identify and obtain products that meet the changing requirements of the
marketplace. There can be no assurance that the Company will be able to identify
and offer products necessary to remain competitive or avoid losses related to
obsolete inventory and drastic price reductions. The Company attempts to
maintain a level of inventory required to meet its near term delivery
requirements by relying on the ready availability of products from its principal
suppliers. Accordingly, the failure of the Company's suppliers to maintain
adequate inventory levels of computer products demanded by the Company's
existing and potential customers and to react effectively to new product
introductions could have a material adverse affect on the Company's financial
condition and
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results of operations. In addition, certain of its computer products are subject
to manufacturer or distributor allocations, which limit the number of units
available to the Company, therefore, there can be no assurance that the Company
will be able to offer new products or product enhancements in sufficient
quantities to satisfy customer demand. Failure of the Company to gain sufficient
access to new products or product enhancements could also have a material
adverse affect on the Company's financial condition and results of operations.
PATENTS, TRADEMARKS, LICENSES
The Company's success depends in part upon its proprietary
technology, and relies primarily on trade secrecy and confidentiality agreements
to establish and protect its rights in its proprietary technology. The Company
does not own the rights to any U.S. or foreign patents. There can be no
assurance that the Company's present protective measures will be adequate to
prevent unauthorized use or disclosure of its technology or independent third
party development of the same or similar technology. Although the Company's
competitive position could be affected by its ability to protect its proprietary
and trade secret information, the Company believes other factors, such as the
technical expertise and knowledge of the Company's management and technical
personnel, and the timeliness and quality of support services provided by the
Company, to be more significant in maintaining the Company's competitive
position.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 48
individuals. Of these, approximately four were employed in sales, marketing and
customer services, 40 were employed in engineering and technical production
positions and four were employed in administration, finance and MIS. The Company
believes that its ability to recruit and retain highly skilled and experienced
technical, sales and management personnel has been, and will continue to be,
critical to its ability to execute its business plan. None of the Company's
employees are represented by a labor union or are subject to a collective
bargaining agreement. The Company believes that relations with its employees are
good.
COMPETITION
The Company competes against various companies across its different
product lines. The Company's line of industrial portable computers compete with
products manufactured by Fieldworks, Dolch and Kontron. The Company's industrial
computer products which are mountable in a 19" equipment rack compete with
products from Advantek, Contec and Industrial Computer Source. There is also
competition from much larger suppliers of commercial grade computers, such as
Compaq, Dell, Toshiba and IBM. This commercial competition effectively sets
pricing for the Company's product line, since the Company's customers are
willing to pay a premium for industrial grade computers which is usually limited
to approximately two times the equivalent of commercial grade products.
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The Company believes that its products compete effectively based on
its engineering responsiveness to specific industrial market requirements, the
resulting functional specialization of its products, and its strategy of
focusing on relatively "sheltered" market niches where major competitors have
difficulty in tailoring their offerings to specific application requirements.
These strategies help offset the greater name recognition and broader service
and support resources of the Company's major competitors.
The Company is engaged in business activities that are targeted to
industrial markets which are less competitive and typically generate greater
profit margins. The Company believes that the principal competitive factors in
the business in which it operates are price and performance, product
availability, technical expertise, adherence to industry standards, financial
stability, service support and reputation. The pricing competition for the
Company's IPD segment is from large manufacturers of commercial grade computer
products. The IPD's pricing of its computer product line is governed by pricing
in the commercial market. The pricing competition of the IED segment has
intensified as a result of an increase in temporary personnel contracting
agencies who can perform services at a higher volume level and lower profit
margin. Some of the Company's current and potential competitors have longer
operating histories and financial, sales, marketing, manufacturing,
distribution, technical and other competitive resources which are substantially
greater than those of the Company. As a result, the Company's competitors may be
able to adapt more quickly to changes in customer demands or to commit resources
to sales and service of its products than the Company has available. Such
competitors could also seek to increase their presence in the markets where the
Company is providing sales and services by creating strategic alliances with
other competitors of the Company, by offering new or improved products and
services to the Company's customers or increasing their efforts to gain and
retain market share through competitive pricing.
FACILITIES
The Company does not own any real property and currently leases all
of its existing facilities. The Company leases its principal executive offices
in Houston, Texas, which consists of approximately 18,155 square feet that has
been divided into administrative offices, computer production operations and
warehouse facilities. This lease will expire on August 31, 2000. The Company
also leases office space which consists of approximately 180 square feet in
Clarksburg, West Virginia, for the purpose of providing an office facility for
engineering and technical employees who reside in that State. This lease will
expire on May 31, 1997. The Company believes that suitable facilities will be
available as needed.
HISTORY
Industrial Data Systems, Inc., a Texas corporation, was incorporated
in May 1985, to provide engineering consulting services to the pipeline
divisions of major integrated oil companies. The Company grew slowly to ten
employees in 1989. At that time, a strategic decision was made by management to
enter the industrial computer marketplace. In 1989, the Company designed and
built its first industrial computer and in 1991, hired its first marketing
manager. The Company continued
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to support both businesses and developed its industrial computer business
through nationwide advertising. Its product sales grew through the creation of
new product lines.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is qualified in its entirety by, and should
be read in conjunction with, the Company's Consolidated Financial Statements
including the Notes thereto, included elsewhere in this Registration Statement.
OVERVIEW
The Company was formed in 1985 to engage in the business of providing
engineering consulting services to the pipeline divisions of major integrated
oil and gas companies. For the period 1985 through 1989, most of its revenues
were derived from the IED segment. In 1989, the Company introduced its IPD
segment and has continued to introduce new products to the marketplace. The IPD
segment has generated sales as a percent of total revenue of 55%, 30% and 34.8%,
for 1994, 1995 and the nine months of 1996, respectively, while the IED segment
has generated sales as a percent of total revenue of 45%, 70% and 65.2% for the
same period.
The Company commenced operations at its current facility on February
1, 1994. The computer products are assembled and distributed from its facility
in Houston, Texas.
The gross margin varies between each of its operating segments.
Computer product sales have produced a gross margin ranging from 26.8% to 35.4%
over the past two years and nine months ended September 30, 1996, due to the
intense price competition characteristic of the computer products market. The
gross margin for pipeline engineering services, which reflects direct labor
costs, has ranged from 29.1% to 37.5% for the same period. The variation is
primarily attributable to the pricing and the mix of services provided, and to
the level of direct labor as a component of cost during any given period. The
gross margin for Industrial Data Systems Corporation, which includes both
product sales and pipeline consulting services, has varied between 29.2% and
36.4% since 1994. This variation reflects the different mix of product sales and
the amount of revenue derived from pipeline engineering consulting services from
period to period. The gross margin for computer product sales was 34.1% for the
nine months ended September 30, 1996, primarily due to the Company's decision to
lower gross margin requirements in order to increase sales volume, coupled with
one higher margin sale. Revenue from computer product sales accounted for 34.8%
of the Company's total revenue for the nine months ended September 30, 1996. The
gross margin for pipeline engineering consulting services was 29.1% for the nine
months ended September 30, 1996, primarily due to an increase in payroll expense
not being offset by an increase in billing rates to customers. Revenue from
pipeline engineering consulting services accounted for 65.2% of the Company's
total revenue for the nine months ended September 30, 1996.
13
<PAGE>
The Company's largest supplier, Microbus, Inc., a vendor of CPU
boards accounted for approximately 18% of total purchases for the nine months
ended September 30, 1996. The CPU boards are purchased on individual purchase
orders. The Company does not have a long term contract with Microbus, Inc. to
purchase the CPU boards. In the event that this supplier could not provide CPU
boards to the Company, the Company believes that it would not have an adverse
affect on the Company's results of operations due to an abundance of suppliers
of CPU boards in the marketplace.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data derived from the Company's consolidated statements of operations
and indicates percentage of total revenue for each item.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1994 1995 1995 1996
---- ---- ---- ----
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
----------- ----- ---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Computer Products ......................... $ 941,477 55.0 $1,354,888 29.9 $1,023,377 29.2 $1,443,425 34.8
Consulting Services ....................... 770,179 45.0 3,170,298 70.1 2,485,753 70.8 2,709,084 65.2
----------- ----- ---------- ----- ---------- ----- ---------- -----
Total revenue .......................... 1,711,656 100.0 4,525,186 100.0 3,509,130 100.0 4,152,510 100.0
Gross Profit:
Computer Products ......................... 334,400 35.5 372,466 27.5 329,687 32.2 492,462 34.1
Consulting Services ....................... 288,784 37.5 947,017 29.9 818,312 32.9 788,071 29.1
----------- ----- ---------- ----- ---------- ----- ---------- -----
Total gross profit ..................... 623,184 36.4 1,319,483 29.2 1,147,999 32.7 1,280,533 30.8
Selling, general and
administrative expenses ..................... 313,280 18.3 833,473 18.4 532,582 15.2 907,341 21.9
Depreciation ................................ 5,988 0.3 17,631 0.4 13,395 0.4 21,691 0.5
----------- ----- ---------- ----- ---------- ----- ---------- -----
Operating income ........................ 303,916 17.8 468,379 10.3 602,022 17.1 351,502 8.5
Other income (expense) ...................... (4,942) (0.3) 143,153 3.2 100,034 2.9 136,152 3.2
----------- ----- ---------- ----- ---------- ----- ---------- -----
Income before provision
for income taxes ....................... 298,974 17.5 611,532 13.5 702,056 20.0 487,654 11.7
Provision for income taxes .................. 56,855 3.3 244,109 5.4 263,000 7.5 179,098 4.3
Pro forma income taxes ...................... 56,230 3.3 -- -- -- -- -- --
----------- ----- ---------- ----- ---------- ----- ---------- -----
Net income after pro
forma income taxes ...................... $ 186,859 10.9 $ 367,423 8.1 $ 439,056 12.5 $ 309,656 7.4
=========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
TOTAL REVENUE. Total revenue increased $643,380, or 15% from
$4,152,510 for the nine months ended September 30, 1996, when compared to
$3,509,130 for the same period in 1995. Revenue from computer products, which
comprised 34.8% of total revenue, increased 29.2%. The increase in computer
products revenue was generally attributable to increased sales of its SafeCase
4000 product. Revenue from consulting services, which comprised 65.2% of total
revenue, increased 15%. Revenue from pipeline engineering consulting services
increased as a result of additional blanket service contracts with new clients.
The IED had much greater diversity in its client base, with an
14
<PAGE>
increase from one to six clients during the nine months ended September 30,
1996, as compared to the same period in 1995.
GROSS PROFIT. Gross profit increased by $132,534 or 11.5% from
$1,147,999 in the first nine months of 1995 to $1,280,533 in the first nine
months of 1996, while gross margin decreased from 32.7% in the first nine months
of 1995 to 30.8% in the first nine months of 1996. The gross margin for the IED
decreased from 32.9% in 1995 to 29.1% in the corresponding period in 1996. The
decrease was attributable to an increase in payroll expense not being offset by
an increase in billing rates to clients. The gross margin for the IPD increased
from 32.2% in the first nine months of 1995 to 34.1% for the same period in
1996. This increase was primarily attributable to a sales blend of products that
have higher gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $334,809 or 37% from $532,582 in the first
nine months of 1995 to $907,341 in the corresponding period in 1996. As a
percentage of total revenue, selling, general and administrative expenses
increased from 15.2% in the nine months ended September 30, 1995 to 21.9% for
the corresponding 1996 period. Of the dollar increase a large portion, or 5.8%
was attributable to an increase in personnel, compensation costs and lease
expenses which were expended in anticipation of future growth.
OPERATING INCOME. Operating income decreased by $250,520 or 41.6%
from $602,022 in the first nine months of 1995 to $351,502 in the same period in
1996. Operating income decreased as a percentage of total revenue from 17.1% in
the 1995 period to 8.5% in the 1996 period. The decrease in operating income was
a result of a decrease in the gross profit of the IED, coupled with increased
selling, general and administrative expenses.
OTHER INCOME (EXPENSE). Other income increased by $36,118 or 36.1%
from $100,034 in the first nine months of 1995 to $136,152 in the first nine
months of 1996. This increase was primarily due to gains in marketable
securities, which were slightly offset by additional interest expense due to
higher utilization of the Company's line of credit.
NET INCOME. Net income decreased by $129,500 or 29.5% from $439,056
in the 1995 period to $309,556 in the 1996 period. Net income as a percentage of
total revenue decreased from 12.5% in the first nine months of 1995 to 7.5% in
the same period in 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
TOTAL REVENUE. Total revenue increased by $2,813,530 or 164.4% from
$1,711,656 in 1994 to $4,525,186 in 1995. Revenue from the IPD, which comprised
29.9% of total revenue in 1995 increased by $413,411 or 43.9%. The increase in
IPD revenue was generally attributable to increased sales to new and existing
customers which resulted from the hiring of additional sales personnel, in
addition to the introduction of new product lines. Revenue from the IED which
comprised 70.1% of total revenue in 1995 increased by $2,400,119 or 311.6%. The
increase in IED revenue was primarily attributable to increased project activity
of its only customer.
15
<PAGE>
GROSS PROFIT. Gross profit increased by $696,299 or 111.7% from
$623,184 in 1994 to $1,319,483 in 1995. The gross margin for the IED decreased
from 37.5% in 1994 to 29.9% in 1995. The gross margin for IPD decreased from
35.5% in 1994 to 27.5% in 1995. In anticipation of future growth, management
made a decision to increase the manufacturing capabilities of the IPD, which
affected the gross margin due to increased personnel and related costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $520,193 or 166.1% from $313,280 in 1994 to
$833,473 in 1995. As a percentage of total revenue, selling, general and
administrative expenses increased from 18.3% in 1994 to 18.4% in 1995. The
dollar increase was primarily attributable to an increase in general and
administrative expenses and sales compensation to accommodate the Company's
growth. Personnel costs, the largest other component of general and
administrative expenses, increased at a slower rate than total revenue. Certain
general and administrative expenses are relatively fixed, and the Company was
able to leverage these expenses as revenue increased during 1995.
OPERATING INCOME. Operating income increased by $164,463 or 54.1%
from $303,916 in 1994 to $468,379 in 1995. Operating income decreased as a
percentage of total revenue from 17.8% in 1994 to 10.3% in 1995.
OTHER INCOME (EXPENSE). Other income increased by $148,045 from
$(4,942) in 1994 to $143,152 in 1995. This increase was primarily due to gains
in marketable securities, which were slightly offset by additional interest
expense due to higher utilization of the Company's line of credit.
NET INCOME. Net income after pro forma income taxes increased by
$180,564 or 96.6% from $186,859 in 1994 to $367,423 in 1995. Net income after
pro forma income taxes decreased as a percentage of total revenue from 10.9% in
1994 to 8.1% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its cash requirements
principally through borrowings under its line of credit and through operations.
As of September 30, 1996, the Company's cash position, including marketable
securities, was sufficient to meet its working capital requirements. In
addition, the Company had, as of September 30, 1996, $250,000 in additional
advances available under its line of credit agreement with a bank. The Company's
working capital was $1,158,758 and $1,655,491 at December 31, 1995 and September
30, 1996, respectively.
CASH FLOW
Operating activities used net cash totaling $169,209 and $317,205
during 1994 and 1995, and $118,727 for the nine months ended September 30, 1996.
The Company has not generated cash flow from operating activities due to the
working capital requirements resulting from the rapid growth of the Company.
Trade accounts receivable increased $167,109 and $281,908 for 1994 and 1995,
respectively, and increased $229,157 for the nine months ended September 30,
1996. Inventory increased by $44,638, $42,200, and $216,667 for the same
periods.
16
<PAGE>
Investing activities used cash totaling $36,493,$28,805 and $243,182,
respectively, during the years ended December 31, 1994 and 1995 and the nine
months ended September 30, 1996. The Company's investing activities that used
cash during these periods were primarily related to cash advances to an
affiliate (Thermaire, Inc.) and capital expenditures.
Financing activities provided (used) cash totaling $(8,548) and
$16,375 during 1994 and 1995. During 1994, $81,227 was provided from the
issuance of Common Stock. For the first nine months of 1996, financing
activities provided net cash of $92,324 as a result of the sale of treasury
stock, and an increase in borrowings of $50,000 under its line of credit. The
Company's primary source of additional financing is from amounts available on
its line of credit ($250,000 at September 30, 1996), and the proceeds of
$1,000,000 from a private placement of common stock. The line of credit has been
used principally to finance accounts receivable and inventory purchases. Of the
proceeds received from the sale of securities, $350,000 is expected to be used
for working capital, and the balance of $650,000 to be used to purchase
Thermaire, Inc.
During the next twelve months, the Company expects to incur an
estimated $100,000 for capital expenditures, a majority of which is expected to
be incurred for specialized computer production equipment. The actual amount and
timing of such capital expenditures may vary substantially depending upon, among
other things, the Company's level of growth.
ASSET MANAGEMENT
The Company's cash flow from operations has been affected primarily
by the timing of its collection of trade accounts receivable. The Company
typically sells its products and services on short-term credit terms and seeks
to minimize its credit risk by performing credit checks and conducting its own
collection efforts. The Company had trade accounts receivable of $340,605 and
$622,512 at December 31, 1994 and 1995, respectively, and $851,669 at September
30, 1996. The number of days' sales outstanding in trade accounts receivable was
73 days, 50 days and 56 days at those dates. Bad debt expenses have been
insignificant (less than .01%) for each of these periods.
DESCRIPTION OF PROPERTY
The Company has a lease for a term of five years in Houston, Texas,
which consists of 18,155 square feet of office space, which will expire on
August 31, 2000. This lease has been divided into administrative offices,
computer production operations and warehouse facilities. Management believes
that it has the ability to sustain a 100% sales growth without having to expand
its facilities or relocate its offices. The Company also leases a small office
in Clarksburg, West Virginia to provide a facility for its technical and
engineering personnel who reside in that State. The Company does not own any
real property.
Rent expense for the years ended December 31, 1994 and 1995, and the
nine months ended September 30, 1996 was $33,910, $79,269 and $75,000,
respectively. The Company is obligated to pay rent expense under its lease in
the amounts of $109,000, $109,000, $109,000 and $73,000 for each of the years
ending 1997, 1998, 1999 and 2000, respectively.
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the date of this
Registration Statement, by (i) each person or entity known to the Company to own
beneficially 5% or more of the outstanding shares of Common Stock, (ii) each of
the Company's directors, (iii) each of the named executive officers, and (iv)
all officers and directors as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------- -------------------- --------
<S> <C> <C> <C>
Common William A. Coskey, P.E.(1) 4,762,899 36.27%
600 Century Plaza Drive
Building 140
Houston, Texas 77073
Common Hulda L. Coskey(2) 4,750,000 36.18%
600 Century Plaza Drive
Building 140
Houston, Texas 77073
All executive officers and directors as a group (2) 9,512,899 72.45%
</TABLE>
(1) William A. Coskey is the beneficial owner of 4,750,000 shares of the
Company's Common Stock. Include in this amount is 12,800 shares of
the Company's Common Stock that are held in the name William A.
Coskey, as Custodian for minor children.
(2) Hulda L. Coskey is the beneficial owner of 4,750,000 shares of the
Company's Common Stock.
CHANGE IN CONTROL
The Company does not have any agreements in place with any of its
executive officers or employees that would be affected by a change in control of
the Company.
18
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION HELD
- --------------------------- --- -------------
William A. Coskey, P.E. (1) 44 Chairman of the Board, Chief
Executive Officer and President
Hulda L. Coskey (1) 41 Chief Financial Officer, Vice President
- Finance, Director
Rex S. Zerger 60 Vice President - Sales & Marketing,
Director
David W. Gent, P.E. 43 Director
Robert S. Moreland (2) 46 Director
- ------------
(1) William A. Coskey and Hulda L. Coskey are husband and wife.
(2) Mr. Moreland resigned as a director effective as of September 15,
1996.
WILLIAM A. COSKEY is the founder of the Company and has served as
Chairman of the Board, Chief Executive Officer and President since the Company's
formation in September 1985. Prior to founding the Company, Mr. Coskey served as
Manager of Corporate Development for Keystone International, Inc., a public
company listed on the New York Stock Exchange, and was responsible for all
acquisition and merger activities of Keystone International, Inc. during the
period 1984 to 1985. Mr. Coskey had formerly held the position of President of
Syntech Associates, Inc., an engineering services company located in Houston,
Texas for the period 1979 to 1984. Mr. Coskey, an Honors Graduate, received a
B.S. in Electrical Engineering from Texas A&M University in 1975. He is a
Registered Professional Engineer, and is also a member of the Instrument Society
of America.
HULDA L. COSKEY has served as Chief Financial Officer of the Company
since June 1994. Prior to that time, and since 1985, Mrs. Coskey has held the
positions of Vice President and Secretary/Treasurer of Industrial Data Systems,
Inc., a Texas corporation. Her primary responsibilities were to develop and
initiate procedures for daily operations of the company and to oversee those
operations, including but not limited to all accounting, finance and personnel
functions. Mrs. Coskey received a B.S. in Accounting from the University of
Houston in 1978.
REX S. ZERGER has served as Vice President - Sales and Marketing for
the Industrial Products Division since June 1, 1996. Mr. Zerger was elected as a
Director on December 15, 1996. For more than the past ten years, Mr. Zerger held
various management positions with Texas Microsystems, including Senior Vice
President - Sales and Marketing and Senior Vice President Mobile Products Group.
His responsibilities included the establishment of domestic and international
sales channels. Most recently, Mr. Zerger was responsible for the establishment
of the Mobile Products Group of
19
<PAGE>
Texas Microsystems which developed the hand held, rugged PC branded "Hardbody".
He was also responsible for the formation of Texas Micro Express, a direct
marketing channel. Mr. Zerger received a B.S. in Mechanical Engineering from the
University of SW Louisiana in 1960.
DAVID W. GENT, P.E. has served as a director of the Company since
June 1994. Mr. Gent has held the position of Vice President - Engineering of
Bray Valve & Controls, a subsidiary of Bray International, Inc., located in
Houston, Texas, with the responsibility of overseeing several departments that
include Engineering, Data Processing, Quality Control and Purchasing, since
September 1991. Prior to that time, Mr. Gent founded and served as President of
SofTest Design Corporation, a privately held electronic test equipment company
for the period 1986 to 1991. Mr. Gent, an Honors Graduate, received a B.S. in
Electrical Engineering from Texas A&M University in 1975. He is a Registered
Professional Engineer, and a member of the Instrument Society of America.
ROBERT S. MORELAND resigned as a member of the board of directors in
September 1996 to pursue other personal interests. Mr. Moreland served as a
Director for the period June 1994 to September 15, 1996. Mr. Moreland is the
President and Chief Executive Officer of Micrologic, Inc., a company engaged in
electronics manufacturing, located in Houston, Texas.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a Compensation Committee. Compensation for
the past several years for the Company's executive officers and employees has
been determined by the President and Chief Executive Officer.
EXECUTIVE COMPENSATION
DIRECTOR'S COMPENSATION
Employee directors of the Company do not receive any additional
compensation for their services as a member of the board of directors of the
Company. Independent directors do not receive any compensation for each board
meeting attended, nor do they receive compensation for each committee meeting
attended. The Company does not pay out-of-pocket expenses incurred by
independent directors to attend board and committee meetings.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation
for services in all capacities awarded to, earned by, or paid to, the Company's
Chief Executive Officer and the most highly compensated executive officer of the
Company whose aggregate cash compensation exceeded $100,000 (the "Named
Executive Officers") during the years ended December 31, 1994, 1995 and for the
nine months ended September 30, 1996.
20
<PAGE>
ANNUAL COMPENSATION
-------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- ------------------ ---- ------ ----- ------------ ------------
($) ($) ($) ($)
William A. Coskey, 1996 54,000 - - -
P.E., Chief Executive 1995 72,000 103,305 - -
Officer and President 1994 51,000 - - -
At December 31, 1995, investments in real estate limited
partnerships were assigned to William and Hulda Coskey. The transaction was
recorded on the Company's books at a value of $103,305, and was in lieu of cash
compensation during 1995.
The Company believes that its success is attributed in part to its
ability to attract and keep quality management personnel. The Company intends to
pursue growth using an entrepreneurial management style, giving responsible
management broad latitude to manage the administration, sales, consulting and
production operations, including profit and loss responsibility.
EMPLOYMENT AGREEMENTS
The Company has not entered into any employment agreements with
any of its executive officers or employees.
401(K) PLAN
On January 1, 1993, the Company adopted a Section 401(k) Profit
Sharing Plan and Trust (the "Plan"). The Plan is intended to qualify for tax
exemption under Section 401(k) of the Code and is subject to the Employee
Retirement Income Security Act of 1974. The Plan is administered by management
of the Company and all of the Company's employees are allowed to participate,
who, as of the enrollment eligibility dates under the Plan, have completed at
least 90 days of service with the Company and have elected to participate in the
Plan. Employees may contribute up to 15% of their annual compensation, which is
matched by the Company under a defined formula. In addition, the Company may
make discretionary contributions to the Plan, for the benefit of all
participants, at the election of the board of directors. Employee contributions
are fully vested at all times and contributions by the Company vest on a
schedule of 20% per year over a six-year period, commencing with the second year
of employment.
KEY MAN INSURANCE
William A. Coskey is a key employee of the Company and the loss of
Mr. Coskey could adversely affect the Company's business. The Company maintains,
and is the beneficiary of, a life insurance policy on the life of Mr. Coskey.
The face amount of such policy is $600,000. The continuance of such policy is at
the discretion of the Board of Directors and may or may not continue in the
future.
21
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The board of directors has adopted a policy requiring that all
transactions between the Company and its officers, directors, principal
stockholders and their affiliates be on terms no less favorable to the Company
than could be obtained from unrelated third parties and that any such
transactions be approved by a majority of the disinterested members of the
Company's board.
CERTAIN SHAREHOLDER AGREEMENTS
The Company does not have, nor has it ever had, any shareholder
agreements in place with any of its shareholders.
CONSULTING AGREEMENT
The Company has entered into consulting agreements with
professionals who provide engineering and design services on a contract basis.
LOANS
The Company has not made any loans to any of its directors,
executive officers or employees.
CERTAIN RELATED BUSINESS TRANSACTIONS
During the past several years, the Company has not entered into
any related party transactions with any of its directors, employees or
shareholders.
DESCRIPTION OF SECURITIES
The following summary outlines certain provisions with respect to
the number of shares authorized, par value, and does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Company's
Articles of Incorporation and Bylaws are being filed herein as Exhibits to this
Registration Statement, in accordance with applicable laws.
COMMON STOCK
The Company is authorized to issue 75,000,000 shares of its Common
Stock, $.001 par value, of which 13,129,999 shares were issued and outstanding
prior to this Registration Statement. Holders of shares of the Company's Common
Stock are entitled to one vote for each share held of record on matters to be
voted on by the stockholders of the Company. Holders of shares of Common Stock
will be entitled to receive dividends if any, when, as and if declared by the
board of directors and to share ratably in the assets of the Company legally
available for distribution to its stockholders, in the event of the liquidation,
dissolution or winding-up of the Company. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. On August 15, 1995,
the Company
22
<PAGE>
issued 600,000 shares of Common Stock which are currently held in an escrow
account pending completion of the acquisition by the Company exercising its
option to pay $600,000 and obtain a release of the shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
Pacific Stock Transfer, P.O. Box 93385, Las Vegas, Nevada 89193.
PART II
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON STOCK AND OTHER SHAREHOLDER MATTERS
The Company's Common Stock, $.001 par value per share, is traded
on the NASDAQ Electronic Bulletin Board System under the symbol "IDDS".
HIGH LOW
YEAR ENDED DECEMBER 31, 1995
First Quarter............................. 0.750 0.750
Second Quarter............................ 1.000 0.375
Third Quarter............................. 1.000 0.875
Fourth Quarter............................ 1.000 0.750
NINE MONTHS ENDED SEPTEMBER 30, 1996
First Quarter............................. 1.125 0.750
Second Quarter............................ 0.875 0.375
Third Quarter............................. 4.250 0.875
The foregoing figures, are based on information published by
financial sources, do not reflect retail markups or markdowns and may not
represent actual trades.
As of the date of this Registration Statement, the Common Stock
was held by approximately 320 shareholders of record.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on the
Common Stock. The payment of dividends in the future will depend on the
Company's earnings, capital requirements, operating and financial position and
general business conditions. The Company intends to retain any future earnings
for reinvestment in its business and does not intend to pay cash dividends in
the foreseeable future. The Company has not entered into any agreement which
restricts its ability to pay
23
<PAGE>
dividends on its Common Stock in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal
proceedings arising in the ordinary course of business. To management's
knowledge, the Company is not currently involved in any material legal
proceedings and is not aware of any legal proceeding threatened against it.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no changes in and disagreements with the Company's
accountants on accounting and financial disclosure.
RECENT SALES OF UNREGISTERED SECURITIES
The following table summarizes the date, name, title and amount of
all transactions which relate to the sale of the Company's Common Stock that
have not been registered under the Securities Act of 1934, as amended, during
the past three years:
AMOUNT OF
DATE NAME AND TITLE OF PURCHASER SECURITIES SOLD
- ---------------- --------------------------- ---------------
July 23, 1994 John Cameron (1) 15,000
July 23, 1994 Charles Pollock, et ux (2) 15,000
July 26, 1994 Nevada investors - 504 Reg. D Offering 500,000
(1994) (3)
August 1, 1994 William A. Coskey (4) 4,762,800
Chairman, President, Chief Executive
Officer, Director
August 1, 1994 Hulda L. Coskey (5) 4,750,000
Chief Financial Officer,
Vice President - Finance, Director
July 30, 1996 Investors 504 Reg. D Offering (1996)(6) 2,499,000
(1) The amount of 15,000 shares of the Company's Common Stock were issued
to John Cameron in consideration of a loan that was made to the
Company in the amount of $5,000 on July 23, 1994. These shares of
Common Stock were issued in reliance upon the "private placement"
exemption under the Securities Act of 1933 (the "Act'). These shares
of Common Stock will not be available for sale in the open market
without prior registration and are subject to Rule 144 under the Act.
(2) The amount of 15,000 shares of the Company's Common Stock were issued
to Charles Pollock, et ux, in consideration of a loan that was made
to the Company in the amount of $5,000, on July 23, 1994.
24
<PAGE>
These shares of Common Stock were issued in reliance upon the
"private placement" exemption under the Securities Act of 1933 (the
"Act'). These shares of Common Stock will not be available for sale
in the open market without prior registration and are subject to Rule
144 under the Act.
(3) The amount of 500,000 shares of the Company's Common Stock were
issued in reliance upon the exemption contained in Rule 504,
promulgated by the Securities and Exchange Commission as part of
Regulation D.
(4) The amount of 4,762,800 shares of Common Stock issued to William A.
Coskey, a founder of the Company, include 4,750,000 shares that were
issued in exchange for the consideration of fifty percent (50%) or
100,000 shares of Industrial Data Systems, Inc., a Texas corporation
that was merged into Industrial Data Systems Corporation on August 1,
1994, and 12,800 shares of Common Stock that are held in the name of
William A. Coskey, as Custodian for Minor Children. The 12,800 shares
of Common Stock were purchased through the private placement offering
on November 5, 1994. The 12,800 shares of Common Stock were issued in
reliance upon the "private placement" exemption under the Securities
Act of 1933 (the "Act'). The 4,762,800 shares of Common Stock will
not be available for sale in the open market without prior
registration and are subject to Rule 144 under the Act.
(5) The amount of 4,750,000 shares of Common Stock were issued to Hulda
L. Coskey, a founder of the Company in exchange for the consideration
of fifty percent (50%) or 100,000 shares of Industrial Data Systems,
Inc., a Texas corporation which was merged into Industrial Data
Systems Corporation on August 1, 1994. These shares of Common Stock
were issued in reliance upon the "private placement" exemption under
the Securities Act of 1933 (the "Act'). The 4,750,000 shares of
Common Stock will not be available for sale in the open market
without prior registration and are subject to Rule 144 under the Act.
(6) On July 30, 1996, the Company issued 2,499,999 shares of Common Stock
to five (5) investors in exchange for the consideration of nine
hundred ninety-nine thousand and nine-hundred ninety-nine dollars
($999,999). These shares of Common Stock were issued in reliance on
the exemption of Rule 504, promulgated by the Securities and Exchange
Commission as part of Regulation D.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that, to the
fullest extent permitted under Nevada corporation law, the Company will
indemnify any officer or director who is, was, or is threatened to be made a
party to any proceeding because he or she (1) is or was a director or officer,
or (2) while a director or officer, at the Company's request, was serving as a
director, officer, partner, venturer, proprietor, trustee, employee or agent of
another entity.
The Company's Articles of Incorporation also provide that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages from breaches of fiduciary duties, except for
liability (i) for any breach of the duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or in knowing
violation of the law; or (iii) for any transaction from which a director or
officer has derived an improper personal benefit.
25
<PAGE>
PART IV
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report .............................................. 27
Consolidated Balance Sheets, December 31, 1994 and 1995 and September 30,
1996 (unaudited) ............................................ 28
Consolidated Statements of Income for the Years Ended December 31, 1994
and 1995 and for the Nine Months Ended September 30, 1995
and 1996 (unaudited) ........................................ 29
Consolidated Statement of Stockholders' Equity for the Period from
January 1, 1994 through September 30, 1996 .................. 30
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994 and 1995 and for the Nine Months Ended September 30,
1995 and 1996 (unaudited) ...................................31-32
Notes to Consolidated Financial Statements ................................33-38
26
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Industrial Data Systems Corporation and Subsidiary
d.b.a. IDS Technical Services
We have audited the accompanying consolidated balance sheets of Industrial Data
Systems Corporation and Subsidiary as of December 31, 1994 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Industrial Data Systems
Corporation and Subsidiary as of December 31, 1994 and 1995, and the results of
its operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Hein & Associates, L.L.P.
Houston, Texas
March 12, 1996
27
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ September 30,
1994 1995 1996
---------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents:
Cash in bank ................................. $ 254,968 $ 342,304 $ 191,099
Mutual funds ................................. 14,089 231,528 350,602
---------- ----------- -----------
269,057 573,832 541,701
Marketable securities, at market value:
Trading ...................................... 156,988 238,423 233,104
Available-for-sale ........................... 83,268 32,655 54,953
---------- ----------- -----------
240,256 271,078 288,057
Account receivable - trade, less allowance
for doubtful accounts of $22,453 in
1994 and $16,121 in 1995 and 1996,
respectively ................................. 340,605 622,512 851,669
Advances and note receivable due from an affiliate -- -- 144,046
Inventory ........................................ 97,314 139,514 356,181
Note receivable from sale of common stock ........ -- -- 999,999
Note receivable from employee .................... 10,570 -- --
---------- ----------- -----------
Total current assets ...................... 957,802 1,606,936 3,181,653
---------- ----------- -----------
PROPERTY AND EQUIPMENT, net .......................... 38,526 106,283 126,754
OTHER ASSETS ......................................... 111,052 2,000 38,804
---------- ----------- -----------
Total assets .............................. $1,107,380 $ 1,715,219 $ 3,347,211
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank ............................. $ -- $ 50,000 $ 100,000
Demand note due brokers (collateralized
by marketable securities) .................... 7,896 -- --
Accounts payable ................................. 70,513 113,478 315,577
Accrued expenses and other current liabilities ... 68,823 117,714 178,205
Income taxes payable ............................. 65,560 166,986 132,381
---------- ----------- -----------
Total current liabilities ................. 212,792 448,178 726,163
DEFERRED INCOME TAX .................................. -- 31,423 31,423
COMMITMENTS (Notes 6 and 11)
STOCKHOLDERS' EQUITY:
Note receivable from sale of common stock ........ -- -- (799,999)
Net unrealized gain on marketable securities, net 3,057 1,289 3,417
Common stock, .001 par value; 75,000,000 shares
authorized; 10,000,000 shares issued in
1994; 10,630,000 shares issued in 1995;
13,129,999 shares issued in 1996 ............. 10,000 10,630 13,130
Additional paid-in capital ....................... 808,977 817,397 1,839,683
Retained earnings ................................ 72,554 439,977 749,533
---------- ----------- -----------
894,588 1,269,293 2,605,763
Treasury stock, 38,700 shares in
1995 and 19,800 in 1996, at cost ............. -- (33,675) (16,138)
---------- ----------- -----------
Total stockholders' equity ................ 894,588 1,235,618 2,589,625
---------- ----------- -----------
Total liabilities and stockholders' equity $1,107,380 $ 1,715,219 $ 3,347,211
========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
28
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ------------
1994 1995 1995 1996
----------- ----------- ----------- ------------
(unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Product sales ......................... $ 941,477 $ 1,354,888 $ 1,023,377 $ 1,443,425
Consulting fees ....................... 770,179 3,170,298 2,485,753 2,709,085
----------- ----------- ----------- ------------
1,711,656 4,525,186 3,509,130 4,152,510
OPERATING EXPENSES:
Cost of revenues:
Product ........................... 607,077 982,422 693,690 950,963
Consulting ........................ 481,395 2,223,281 1,667,441 1,921,013
Selling, general and administrative ... 313,280 833,473 532,582 907,341
Depreciation .......................... 5,988 17,631 13,395 21,691
----------- ----------- ----------- ------------
1,407,740 4,056,807 2,907,108 3,801,008
OTHER INCOME (EXPENSE):
Realized gains on marketable securities 25,990 97,727 58,578 136,668
Other income .......................... 4,372 6,841 -- 13,619
Unrealized gain (loss) on marketable
securities ........................ (36,898) 29,932 35,078 (9,711)
Interest income (expense), net ........ 1,594 8,653 6,378 (4,424)
----------- ----------- ----------- ------------
(4,942) 143,153 100,034 136,152
----------- ----------- ----------- ------------
INCOME BEFORE INCOME TAXES ................ 298,974 611,532 702,056 487,654
PROVISION FOR INCOME TAXES:
Federal ............................... 38,975 217,572 239,000 161,478
State ................................. 16,910 26,537 24,000 16,620
----------- ----------- ----------- ------------
55,885 244,109 263,000 178,098
----------- ----------- ----------- ------------
NET INCOME BEFORE PRO FORMA
INCOME TAXES .......................... 243,089 367,423 439,056 309,556
PRO FORMA INCOME TAXES .................... 56,230 -- -- --
----------- ----------- ----------- ------------
NET INCOME AFTER PRO FORMA
INCOME TAXES .......................... $ 186,859 $ 367,423 $ 439,056 $ 309,556
=========== =========== =========== ============
PRO FORMA NET INCOME
PER COMMON SHARE ...................... $ .02 $ .04 $ .04 $ .03
=========== =========== =========== ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING .................... 9,604,100 10,002,630 10,000,000 10,030,000
=========== =========== =========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
29
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JANUARY 1, 1994 THROUGH SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
UNREALIZED
Note Receivable COMMON STOCK ADDITIONAL GAIN (LOSS)
from sale of -------------------- PAID-IN TREASURY ON MARKETABLE RETAINED
Common Stock SHARES AMOUNT CAPITAL STOCK SECURITIES EARNINGS TOTAL
--------- ---------- ------- ----------- -------- ------- --------- -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1,
1994 ......................... $ -- 9,500,000 $ 9,500 0 $ -- $(2,609) $ 627,490 $ 634,381
Net income prior to
conversion to C
Corporation .................. -- -- -- -- -- -- 170,535 170,535
Conversion of S
Corporation to
C Corporation ................ -- -- -- 798,025 -- -- (798,025) --
Net income after
conversion to
C Corporation ................ -- -- -- -- -- -- 72,554 72,554
Change in unrealized
gain on marketable
securities ................... -- -- -- -- -- 5,666 -- 5,666
Distributions to
stockholders ................. -- -- -- (69,775) -- -- -- (69,775)
Issuance of common stock;
$.30 per share ............... -- 500,000 500 149,500 -- -- -- 150,000
Offering costs ............... -- -- -- (68,773) -- -- -- (68,773)
--------- ---------- ------- ----------- -------- ------- --------- -----------
BALANCES, December 31,
1994 ......................... -- 10,000,000 10,000 808,977 -- 3,057 72,554 894,588
Issuance of common
stock; $.30 share ............ -- 30,000 30 8,970 -- -- -- 9,000
Purchases of treasury
stock; 64,500 shares ......... -- -- -- -- (58,750) -- -- (58,750)
Sales of stock from
treasury; 25,800
shares ....................... -- -- -- 50 25,075 -- -- 25,125
Stock issued in
connection with
contingent purchase
transaction .................. -- 600,000 600 (600) -- -- -- --
Change in unrealized
gain on marketable
securities ................... -- -- -- -- -- (1,768) -- (1,768)
Net income ................... -- -- -- -- -- -- 367,423 367,423
--------- ---------- ------- ----------- -------- ------- --------- -----------
BALANCES, December 31,
1995 ......................... -- 10,630,000 10,630 817,397 (33,675) 1,289 439,977 1,235,618
Issuance of common
stock; 8.40 per
share (unaudited) ............ (799,999) 2,499,999 2,500 997,499 -- -- -- 200,000
Purchases of treasury
stock; 10,500
shares (unaudited) ........... -- -- -- -- (8,188) -- -- (8,188)
Sales of stock for
treasury; 29,400
shares (unaudited) ........... -- -- -- 24,787 25,725 -- -- 50,512
Change in unrealized
gain on marketable
securities (unaudited) ....... -- -- -- -- -- 2,128 -- 2,128
Net income (unaudited) ....... -- -- -- -- -- -- 309,556 309,556
--------- ---------- ------- ----------- -------- ------- --------- -----------
BALANCES, September 30,
1996 (unaudited) ............. $(799,999) 13,129,999 $13,130 $ 1,839,683 $(16,138) $ 3,417 $ 749,533 $ 1,789,626
========= ========== ======= =========== ======== ======= ========= ===========
</TABLE>
30
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, September 30,
----------------------- -------------------------
1994 1995 1995 1996
--------- --------- --------- -----------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................... $ 243,089 $ 367,423 $ 439,056 $ 309,556
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation ............................................................. 5,988 17,631 13,395 21,691
Increase (decrease) in
trading securities, net .................................................. (20,043) (81,435) (142,466) 5,319
Increase in:
Receivables, net ......................................................... (167,109) (281,908) (585,931) (229,157)
Inventory ................................................................ (44,638) (42,200) (48,155) (216,667)
Accounts payable ......................................................... 54,489 42,965 161,579 202,099
Other current liabilities ................................................ 100,025 150,317 246,868 25,886
Deferred income tax expense
(benefit) ................................................................ (9,675) 41,098 -- --
Non-cash compensation provided
to officers .............................................................. 103,305 -- --
Other, net ............................................................... 7,083 9 -- --
--------- --------- --------- -----------
Net cash provided by
operating activities ..................................................... 169,209 317,205 84,346 118,727
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ..................................................... (30,118) (85,388) (59,490) (42,162)
Advances to affiliate .................................................... -- -- -- (144,046)
Purchases of available-for-sale
securities ............................................................... (7,375) (76,367) -- (21,872)
Proceeds from sale of available-for-sale securities ...................... 1,000 132,950 21,762 1,702
Other .................................................................... -- -- (2,156) (36,804)
--------- --------- --------- -----------
Net cash used in investing activities .................................... (36,493) (28,805) (39,884) (243,182)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in notes payable, net ........................................... (20,000) 50,000 50,000 50,000
Proceeds from issuance of common stock, net .............................. 81,227 -- 9,000 --
Purchase of treasury stock ............................................... -- (58,750) (20,687) (8,188)
Sales of stock from treasury ............................................. -- 25,125 13,587 50,512
Distributions to stockholders ............................................ (69,775) -- -- --
--------- --------- --------- -----------
Net cash provided by (used in)
financing activities ..................................................... (8,548) 16,375 51,900 92,324
--------- --------- --------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................................ 124,168 304,775 96,362 (32,131)
CASH AND CASH EQUIVALENTS, at
beginning of year ........................................................ 144,889 269,057 269,057 573,832
--------- --------- --------- -----------
CASH AND CASH EQUIVALENTS, at
end of year .............................................................. $ 269,057 $ 573,832 $ 365,419 $ 541,701
========= ========= ========= ===========
- - Continued -
See accompanying notes to these consolidated financial statements
31
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, September 30,
----------------------- -------------------------
1994 1995 1995 1996
--------- --------- --------- -----------
(unaudited)
SUPPLEMENTAL DISCLOSURES:
Interest paid $ .......................................................... 1,577 $ 4,103 $ 3,190 $ 8,328
Income taxes paid ........................................................ $ -- $ 40,000 $ 40,000 $ 79,616
========= ========= ========= ===========
NON-CASH TRANSACTIONS:
Issuance of common stock for
services provided ........................................................ $ -- $ 9,000 $ 9,000 $ --
Issuance of common stock (600,000
shares) in connection with a
contingent business acquisition .......................................... -- -- -- --
Common stock issued in exchange
for a note receivable .................................................... $ -- $ -- $ -- $ 1,000,000
========= ========= ========= ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
32
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The Information Subsequent to December 31, 1995 is Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION - The accompanying consolidated financial statements
include the accounts of Industrial Data Systems Corporation (IDS), a
Nevada corporation, and its wholly-owned subsidiary Industrial Data
Systems, Inc., a Texas corporation, d.b.a. IDS Technical Services.
Effective August 1, 1994, IDS (the Company) exchanged 9,500,000
shares of its common stock for the outstanding shares of Industrial
Data Systems, Inc. (Texas), a corporation wholly owned by the
majority stockholders of the Company. This transaction involved
companies under common control and, therefore, is accounted for
similar to a pooling of interests. The accompanying consolidated
financial statements include the accounts of Industrial Data Systems,
Inc. (Texas) beginning January 1, 1994. All significant intercompany
balances and transactions have been eliminated in consolidation.
INVENTORY - Inventory is composed of computer components and finished
goods and is carried at the lower of cost or market value on the
first-in, first-out (FIFO) method of accounting. The majority of
inventory at December 31, 1994 and 1995 and September 30, 1996
consisted of computer components.
MARKETABLE SECURITIES - Marketable securities to be held to maturity
are stated at amortized cost. Marketable securities classified as
available-for-sale are stated at market value, with unrealized gains
and losses reported as a separate component of stockholders' equity,
net of deferred income taxes. If a decline in market value is
determined to be other than temporary, any such loss is charged to
earnings. Trading securities are stated at market value, with
unrealized gains and losses recognized in earnings.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost,
adjusted for accumulated depreciation. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
related assets, which range from five to seven years.
INVESTMENTS IN REAL ESTATE LIMITED PARTNERSHIPS - Investments in real
estate limited partnerships were carried at the lower of cost or
estimated fair market value of the underlying real estate. These
investments were assigned to two officers, who are also major
stockholders of the Company, during 1995 in lieu of cash
compensation.
INCOME TAXES - IDS accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
INCOME TAXES. Under this method, deferred income taxes are recognized
for the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between
the financial statement and tax bases of its existing assets and
liabilities. Income tax expense or benefit
33
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The Information Subsequent to December 31, 1995 is Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):
represents the current tax payable or refundable for the period plus
or minus the tax effect of the net change in the deferred tax assets
and liabilities during the period.
Prior to its merger with IDS in fiscal 1994, Industrial Data Systems,
Inc. (Texas) was a Subchapter S Corporation as provided under the
Internal Revenue Code. Accordingly, the taxable income or loss for
this entity was reported in the stockholders' individual tax returns.
Upon its merger with IDS, deferred taxes were recorded on the date of
the merger for the differences between the financial and tax bases of
its assets and liabilities at that date. Pro forma income taxes have
been provided in the accompanying statement of income for the year
ended December 31, 1994 as if the Company had been taxable for the
entire year.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash in
bank and investments in highly liquid money market mutual funds.
USE OF ESTIMATES - The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting
principles requires the Company's management to make estimates and
assumptions that affect the amounts reported in these financial
statements and accompanying results. Actual results could differ from
these estimates.
NET INCOME PER COMMON SHARE - Net income per common share was
computed by dividing net income by the weighted average number of
average common shares outstanding. There were no common equivalent
shares outstanding during the periods presented. For purposes of
computing the weighted average number of common shares outstanding,
common stock held in escrow accounts for issuance upon the closing of
the contingent purchase transaction (see Note 11) and upon payment of
the $1,000,000 note issued in exchange for 2,499,999 shares of common
stock (see Note 9) have not been reflected as outstanding.
INTERIM FINANCIAL INFORMATION - The accompanying financial
information as of September 30, 1996 and for the nine months ended
September 30, 1995 and 1996 has been prepared, without audit,
pursuant to the rules and regulations of the United States Securities
and Exchange Commission. The financial information reflects all
adjustments, consisting of normal recurring accruals, which are, in
the opinion of management, necessary to fairly present such
information in accordance with generally accepted accounting
principles.
34
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The Information Subsequent to December 31, 1995 is Unaudited)
2. CONCENTRATION OF CREDIT RISK:
The Company manufactures and distributes industrial and portable
computers and computer monitors to commercial companies primarily in
the United States and provides pipeline engineering services
primarily to major integrated oil and gas companies. The caption
product sales in the accompanying income statement represents sales
of industrial and portable computers. The caption consulting fees
represents pipeline engineering service revenues. The Company
performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company assesses its credit risk and
provides an allowance for doubtful accounts for any accounts which it
deems doubtful for collection.
The Company maintains deposits in banks which may exceed the amount
of federal deposit insurance available. Management periodically
assesses the financial condition of the institutions and believes
that any possible deposit loss is minimal.
3. MARKETABLE SECURITIES:
Marketable securities at December 31, 1994 are summarized as follows:
Gross Fair
Unrealized Market
Cost Gains Losses Value
-------- -------- --------- --------
Trading:
Common stocks ........... $168,886 $ 2,493 $ (41,391) $129,988
Other ................... 25,000 2,000 -- 27,000
-------- -------- --------- --------
193,886 4,493 (41,391) 156,988
Available-for-sale:
Corporate bonds ......... 36,992 -- (3,375) 33,617
Municipal bond .......... 43,219 6,432 -- 49,651
-------- -------- --------- --------
80,211 6,432 (3,375) 83,268
-------- -------- --------- --------
$274,097 $ 10,925 $ (44,766) $240,256
======== ======== ========= ========
Marketable securities at December 31, 1995 are summarized as follows:
Gross Fair
Unrealized Market
Cost Gains Losses Value
-------- -------- --------- --------
Trading:
Common stocks ........... $183,491 $ 26,896 $ (6,973) $203,414
Other ................... 25,000 10,009 -- 35,009
-------- -------- --------- --------
208,491 36,905 (6,973) 238,423
Available-for-sale -
Mutual fund ............. 31,366 1,289 -- 32,655
-------- -------- --------- --------
$239,857 $ 38,194 $ (6,973) $271,078
======== ======== ========= ========
35
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The Information Subsequent to December 31, 1995 is Unaudited)
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
December 31,
------------------------- September 30,
1994 1995 1996
--------- --------- ---------
Furniture and fixtures ......... $ 22,237 $ 42,859 $ 46,758
Computer equipment ............. 39,460 104,226 144,040
--------- --------- ---------
61,697 147,085 190,798
Accumulated depreciation ....... (23,171) (40,802) (64,044)
--------- --------- ---------
$ 38,526 $ 106,283 $ 126,754
========= ========= =========
5. NOTE PAYABLE TO BANK:
The Company has a line of credit with a bank of $350,000 at prime
plus 1% (9.5% at September 30, 1996). The line of credit, which
expires on June 11, 1997, is collateralized by inventory and is
guaranteed by the stockholders of the Company. There was $100,000
outstanding under the line at September 30, 1996.
6. LEASE:
The Company leases office space under a non-cancelable operating
lease. In 1995, the Company leased additional space in the same
building. Total rent expense for the year ended December 31, 1994 and
1995 and for the nine months periods ended September 30, 1995 and
1996 was $33,910, $79,269, $52,494 and $79,865 respectively. Future
minimum rentals due under non-cancelable operating leases with an
original term of at least one year are as follows:
YEAR ENDING DECEMBER 31,
------------------------
1996 $102,000
1997 109,000
1998 109,000
1999 109,000
2000 73,000
--------
$502,000
36
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The Information Subsequent to December 31, 1995 is Unaudited)
7. PROFIT SHARING PLAN:
The Company has a 401(k) profit sharing plan covering substantially
all employees. Under the terms of the plan, the Company will make
matching contributions equal to 50% of employee contributions up to
3% of employee compensation, as defined. Employees may make
contributions up to 15% of their compensation, subject to certain
maximum contribution limitations. The employer's contributions vest
on a schedule of 20% per year beginning in the second year for the
first six years of employment. The Company made contributions of
$8,813, $33,214, $20,626 and $30,573 for the years ended December 31,
1994 and 1995 and for the nine month periods ended September 30, 1995
and 1996, respectively.
8. MAJOR CUSTOMERS:
The Company had sales to one major customer totaling approximately
$2,927,000 for 1995, representing 63% of total revenue for the year.
At December 31, 1995, amounts due from customers in excess of 10 % of
trade accounts receivable amounted to $220,680, all of which was due
from a single customer.
9. STOCKHOLDERS' EQUITY:
During October of 1994, the Company issued 500,000 shares of common
stock at $.30 per share in a private placement transaction. Proceeds
from the offering totaled $81,227, net of offering expenses.
The Company issued 2,499,999 shares of common stock in exchange for
three non-interest bearing notes totaling $999,999. As of September
30, 1996, the shares of common stock were being held in escrow.
Subsequent to September 30, 1996, the Company was paid the entire
amounts due under the notes.
10. FEDERAL INCOME TAXES:
The Company has deferred tax assets and liabilities at December 31,
1994 and 1995 as follows:
1994 1995
-------- --------
Deferred tax assets .............. $ 16,667 $ 6,000
Deferred tax liabilities ......... (6,992) (37,423)
-------- --------
Net deferred tax asset (liability) $ 9,675 $(31,423)
======== ========
37
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The Information Subsequent to December 31, 1995 is Unaudited)
10. FEDERAL INCOME TAXES (CONTINUED):
The expected actual income tax expense (based upon the federal rate
of 34%) for the year ended December 31, 1995 and for the nine month
periods ended September 30, 1995 and 1996 differs from actual income
tax expense, primarily because of state income taxes incurred by the
Company.
11. COMMITMENTS:
The Company has issued 600,000 shares of its common stock to acquire
another company in a contingent purchase transaction. These shares
are currently held in an escrow account pending completion of the
acquisition by the Company exercising its option to repurchase the
shares of the Company's stock held in escrow for one dollar per
share. Should the Company not elect to exercise this option, these
shares will be returned to the Company without cost and the proposed
business combination will be rescinded. The Company's option to
acquire this company expires in February 1997. In connection with
this transaction, the Company has entered into an agreement to
purchase the facilities of this company, subject to completion of the
contingent purchase transaction, for $500,000 cash on or before
February 15, 1997. Should the Company not complete the property
purchase, it will lose its $100 earnest money deposit.
The Company's financial statements do not reflect the accounts of the
company to be acquired as of any date or for any period covered by
the accompanying financial statements. Should the business
combination be completed, it will be accounted for on the purchase
method of accounting. The shares of common stock issued by the
Company and held in escrow have been reflected as issued and
outstanding in the accompanying financial statements.
The Company has advanced $144,046 to this company as of October 31,
1996. Of the amounts advanced, $30,100 has no stated terms. The
remaining $113,946 was advanced under a factoring agreement. Advances
under the factoring agreement are collateralized by substantially all
tangible assets of the borrower.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of trade receivables and
payables, investments in mutual funds, marketable securities and a
revolving note payable due a bank. The investments in mutual funds
and marketable securities are carried at their estimated fair value
in the accompanying balance sheet. Management believes the carrying
values of the remaining financial instruments approximate their fair
values.
38
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DESCRIPTION AND INDEX OF EXHIBITS
2 Agreement and Plan of Reorganization for the Purchase of Industrial
Data Systems, Incorporated, dated August 1, 1994
2.1 Action by Written Consent of the Board of Directors for the Purchase
of Industrial Data Systems, Incorporated, a Texas corporation, dated
August 1, 1994
2.2 Action by Written Consent of the Shareholders for the Purchase of
Industrial Data Systems, Incorporated, a Texas corporation, dated
August 1, 1994
2.3 Stock Acquisition Agreement for the Purchase of Thermaire
Incorporated, d.b.a. Thermal Corporation, dated August 15, 1995
2.4 Escrow Agreement for the Purchase of Thermaire Incorporated, d.b.a.
Thermal Corporation, dated August 15, 1995
2.5 Earnest Money Contract for the Purchase of Thermal Corporation's
Manufacturing Facility, dated August 15, 1995
2.6 Offering Memorandum, 504D Offering of 500,000 Shares of Common Stock
in the State of Nevada, dated July 26, 1994
2.7 Action by the Board of Directors regarding the 504D Stock Offering of
2,499,999 Shares of Common Stock, dated July 10,1996
2.8 Agreement for Amendment and Substitution of Subscription Agreement
and Notes, dated July10, 1996
2.9 Stock Purchase Subscription Agreement from World Glory Company
Limited, dated July 10, 1996
2.10 Stock Purchase Subscription Agreement from Asian Harvest Corporation
Limited., dated July 10, 1996
2.11 Stock Purchase Subscription Agreement from Silver Course Corporation,
dated July 10, 1996
2.13 Stock Purchase Subscription Agreement from Pines Intervest
Corporation, dated July 10, 1996
2.14 Stock Purchase Subscription Agreement from Wilton Assets Corp., dated
July 10, 1996
39
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3 Articles of Incorporation, dated June 20, 1994
3.1 Corporate Charter, dated June 22, 1994
3.2 Bylaws dated June 22, 1994
4.1 Revolving Credit Line with Texas Commerce Bank, N.A., dated June 11,
1996
4.2 Promissory Note plus Restricted Common Stock to John H. Cameron,
dated July 23, 1994
4.3 Promissory Note plus Restricted Common Stock to Charles B. Pollock,
et ux, dated July 23, 1994
4.4 Promissory Note payable to Industrial Data Systems Corporation from
World Glory Company Limited., dated July 15, 1996
4.5 Promissory Note payable to Industrial Data Systems Corporation from
Asian Harvest Corporation, Ltd., dated July 15, 1996
4.6 Promissory Note payable to Industrial Data Systems Corporation from
Silver Course Corporation, dated July 15, 1996
4.7 Promissory Note payable to Industrial Data Systems Corporation from
Pines Intervest Corporation, dated July 15, 1996
4.8 Promissory Note payable to Industrial Data Systems Corporation from
Wilton Assets Corp. dated July 15, 1996
10 Lease Agreement between Industrial Data Systems, Incorporated, a
Texas corporation, and American General Life Insurance Company, dated
January 16, 1991
10.1 First Amendment to Lease Agreement between Industrial Data Systems,
Incorporated, a Texas corporation, and American General Life
Insurance Company, dated December 7, 1993
10.2 Second Amendment to Lease Agreement between Industrial Data Systems
Corporation, a Nevada corporation, and American General Life
Insurance Company, dated December 29, 1994
10.3 Third Amendment to Lease Agreement between Industrial Data Systems
Corporation, a Nevada corporation, and American General Life
Insurance Company, dated December 8, 1995
40
<PAGE>
10.4 Lease Agreement between Industrial Data Systems Corporation, a Nevada
corporation, and Clarksburg,WestVirginia Masonic Building, dated June
1, 1995
10.5 Adoption Agreement for Nonstandardized Code 401(k) Profit Sharing
Plan, dated January 1, 1993
21 Subsidiary of the Registrant
24 Power of Attorney
41
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
INDUSTRIAL DATA SYSTEMS CORPORATION
Dated: January 24, 1997 By: /S/ WILLIAM A. COSKEY
William A. Coskey, P.E., Chairman of
the Board, President and Chief
Executive Officer
By: /S/ HULDA L. COSKEY
Hulda L. Coskey, Chief Financial
Officer, Director
By: /S/ REX S. ZERGER
Rex S. Zerger, Vice President - Sales &
Marketing, Director
By: /S/ DAVID W. GENT
David W. Gent, P.E., Director
42
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") dated this 1st
day of August, 1994, is entered into by and among INDUSTRIAL DATA SYSTEMS
CORPORATION, a Nevada corporation ("BUYER") and WILLIAM A. COSKEY and HULDA L.
COSKEY, (collectively "SELLERS").
THE PARTIES RECITE THAT:
1. The BUYER desires to buy all of the SELLERS issued and outstanding
shares of INDUSTRIAL DATA SYSTEMS, INC., a Texas corporation ("ACQUIRED
COMPANY").
2. All of the issued and outstanding shares of the ACQUIRED COMPANY'S
common stock are owned by SELLERS.
3. SELLERS are willing to transfer 200,000 shares of ACQUIRED COMPANY'S
common stock to the BUYER in exchange for 9,500,000 shares of BUYER'S common
stock under the terms and conditions as set forth in this AGREEMENT. SELLERS are
further willing to cancel their interests in the 100,000 shares of the BUYER'S
common stock that was to be issued pursuant to the Minutes of the Organizational
Meeting of the BUYER dated June 22, 1994. Thus, the total shares issued under
this transaction is 9,500,000 which represents the total shares issued and
outstanding of the BUYER as of this date.
4. Both the BUYER and the SELLERS desire this exchange to qualify as a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
TRANSFER OF STOCK AND CONSIDERATION
1.1. TRANSFER OF STOCK. Subject to the terms and conditions contained in
this AGREEMENT on the closing date as defined in Article VI, each of the SELLERS
shall transfer and deliver to BUYER all the shares of ACQUIRED COMPANY stock
being owned by that SELLER and each SELLER shall deliver to the BUYER a
certificate or certificates evidencing all the shares of the acquired stock then
owned by him, which certificate shall be duly endorsed and in blank for transfer
or accompanied by a duly executed stock powers in blank. Each SELLER shall pay
all stock transfer taxes becoming due by reason of the exchange of the shares
transferred by him hereunder and shall affix, to their certificate or
certificates for those shares all required transfer tax stamps.
1.2. EXCHANGES OF SHARES. BUYER shall issue and deliver to SELLERS in
exchange for the 200,000 the shares of ACQUIRED COMPANY'S stock and the release
and cancellation of the Seller's interest in the 100,000 shares of common stock
of the BUYER, 9,500,000 shares of BUYER'S common stock duly and validly issued,
fully paid and nonaccessible. BUYER shall issue to the SELLERS in their joint
names all of the above-mentioned shares.
1.3. ALL OF THE ACQUIRED COMPANY'S STOCK. The AGREEMENT shall be deemed
to be a single AGREEMENT for the transfer of all of the ACQUIRED COMPANY'S stock
and shall not be deemed an AGREEMENT for the transfer of less than all of that
stock, it being specifically understood that the BUYER shall be under no
obligation to acquire less than all of the ACQUIRED COMPANY'S stock.
ARTICLE II
WARRANTIES OF SELLERS
2.1. JOINT AND SEVERAL REPRESENTATIONS. The SELLERS jointly and severally
represent and warrant to BUYER that:
(a) ACQUIRED COMPANY is a corporation duly organized, validly
existing, and in good standing, under and by virtue of the laws of the
State of Texas and is qualified to do business as a foreign corporation in
all other states in which it owns real or personal property, or the states
in which failure to qualify would adversely effect ACQUIRED COMPANY'S
ownership of its assets or subject the ACQUIRED COMPANY to fine or penalty.
<PAGE>
(b) The ACQUIRED COMPANY has the power to own its property and to
carry on its business where that business is now conducted. The ACQUIRED
COMPANY has no equity interest in any other corporation, partnership, joint
venture, or association.
(c) There are no outstanding options, contracts, calls, commitments,
pre-emptive rights, or demands of any nature relating to the capital stock
of ACQUIRED COMPANY.
(d) The SELLERS have offered to the BUYER the ACQUIRED COMPANY'S
bylaws, list of officers and directors, and financial statements.
2.2. Each SELLER represents and warrants to BUYER as follows:
(a) SELLER is the owner of, and has the right to transfer and
deliver, the 200,000 of shares of ACQUIRED COMPANY'S stock represented to
be owned by him and on the closing date SELLER will own and have the right
to transfer and deliver that number of shares of ACQUIRED COMPANY'S stock.
(b) The shares of ACQUIRED COMPANY'S stock are now owned by the
SELLER are and on the closing date will be, free and clear of any liens,
encumbrances, charges, and security interests and those shares are not
subject to any restrictions on transferability.
(c) The title to the shares that are transferred to the BUYER on the
closing date will be good and marketable and free and clear of any and all
liens, encumbrances, charges, and security interests.
2.3. This AGREEMENT has been duly and validly executed and delivered by
SELLER and is legally binding upon and enforceable against SELLER in accordance
with its terms in either the execution or delivery of this AGREEMENT, nor the
consummation of the transaction contemplated by it, will conflict with, or will
result in a breach of, any of the terms, conditions or provisions of, or
constitute a default under, or result in a creation of any lien, charge, or
encumbrance, on the shares of SELLER under, any agreement, instrument, order,
judgment, or decree, to which the SELLER is a party, is bound or subject.
2.4. Each SELLER is sufficiently experienced in financial business matters
to be capable of utilizing the information furnished to evaluate the risk of his
investment, and to make an informed decision relating thereto.
2.5. Each SELLER understands that the shares of the BUYER'S common stock
are not being registered under the Securities Act of 1933 on the grounds that
issuant thereof is exempt under Section 4(2) of the 1933 Act as transaction not
involving any public offering.
2.6. The shares of the common stock have not been registered under the
1933 Act and therefore, cannot be sold unless they are subsequently registered
under the 1933 Act or an exemption from such registration is available.
ARTICLE III
CONDUCT OF ACQUIRED COMPANY'S BUSINESS BEFORE CLOSING
3.1. FULL ACCESS. BUYER and its authorized representatives shall have
full access, during normal business hours, to all properties, books, records,
contracts, and documents of ACQUIRED COMPANY, and ACQUIRED COMPANY shall furnish
or cause to be furnished to BUYER and its authorized representatives all
information with respect to the affairs and business of ACQUIRED COMPANY that
BUYER may request.
3.2. CARRY ON IN REGULAR COURSE. ACQUIRED COMPANY shall carry on its
business diligently and substantially in the same manner as it was previously
carried on, and shall not make or institute any unusual or novel methods of
manufacture, purchase, sale, lease, management, accounting, or operation.
3.4. CONTRACTS AND COMMITMENTS. ACQUIRED COMPANY shall not enter into any
contract or commitment or engage in any transaction not in the usual and
ordinary course of business and
2
<PAGE>
consistent with past practices unless BUYER gives its prior written consent to
that contract, commitment, or transaction.
3.5. SALE OF CAPITAL ASSETS. Without the prior written consent of BUYER,
ACQUIRED COMPANY shall not sell or dispose of (i) any capital asset that has an
original cost in excess of $10,000 or (ii) any capital assets, the aggregate
original cost of which exceeds $20,000.
3.6. INDEBTEDNESS. ACQUIRED COMPANY shall not create any indebtedness,
other than indebtedness that is either (i) incurred in the usual and ordinary
course of business, or (ii) incurred under existing contracts disclosed in the
Schedules attached to this AGREEMENT or which were previously delivered to
BUYER, or (iii) incurred under commitments permitted by this AGREEMENT, or (iv)
reasonably incurred in doing the acts and things contemplated by this AGREEMENT.
3.7. INVESTMENTS. ACQUIRED COMPANY shall not make any investment, loan,
advance, or contribution to any other person, corporation, partnership, joint
venture, or association; provided, however, that ACQUIRED COMPANY may invest in
the United States government obligations and in certificates of deposit and
commercial paper rated A-1 by Standard & Poor's Corporation.
3.8. DIVIDENDS AND DISTRIBUTIONS. ACQUIRED COMPANY shall not declare or
pay any dividend, or make any distribution with respect to its capital stock, or
directly or indirectly redeem, purchase, or otherwise acquire any of its capital
stock, or issue or in any way dispose of any shares of its capital stock or any
rights in or to its capital stock.
3.9. AMENDMENT OF CHARTER, ETC. Without the prior written consent of
BUYER, ACQUIRED COMPANY shall not amend its Certificate of Incorporation or
Bylaws or make any change in the authorized or unissued capital stock or its
officers or directors.
3.10. INSURANCE. All property, real and personal, owned or leased by
ACQUIRED COMPANY shall be adequately insured by reputable insurance companies
against all insurable risks normally insured against by companies conducting a
business the same as, or similar to, the business conducted by ACQUIRED COMPANY,
and all that property shall be used, operated, maintained, and repaired in a
normal business manner.
3.11. PRESERVATION OF ORGANIZATION. ACQUIRED COMPANY shall use its best
efforts (without making any commitments on behalf of BUYER) to preserve its
business organization intact, to keep available to BUYER the present key
officers and employees of ACQUIRED COMPANY, and to preserve for BUYER the
present relationships of ACQUIRED COMPANY with its suppliers and customers and
others having business relations with them. The mere failure of any suppliers
and customers to continue those relationships shall not be deemed to be a
default under this AGREEMENT.
3.12. NO DEFAULT. ACQUIRED COMPANY shall not do any act or omit to do any
act, or permit any act or omission to act, that will cause a material breach by
it of any of its contracts, commitments, or obligations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1. BUYER REPRESENTS AND WARRANTS TO SELLERS THAT:
(a) BUYER is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada.
(b) BUYER has the power to own its properties and to carry on its
business.
(c) The execution, delivery, and performance of this AGREEMENT has
been authorized by all necessary corporate action.
(d) The SELLERS have offered the BUYER full opportunity to examine
the books and records of the BUYER.
3
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
5.1. EACH AND EVERY OBLIGATION OF BUYER TO BE PERFORMED ON THE CLOSING
DATE OR THEREAFTER, AS THE CASE MAY BE, SHALL BE SUBJECT TO THE SATISFACTION ON
OR BEFORE THE CLOSING DATE OF THE FOLLOWING CONDITIONS:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. The
representations and warranties made by SELLERS in this AGREEMENT shall be
true on and as of the Closing Date, subject to any changes required as
contemplated by this AGREEMENT, with the same effect as though those
representations and warranties had been made or given on and as the Closing
Date, subject to those changes.
(b) NO ADVERSE CHANGE. The business, assets, and properties of
ACQUIRED COMPANY shall not have been materially and adversely affected in
any way between the date of this AGREEMENT and the Closing Date as a result
of fire, explosion, earthquake, disaster, accident, labor trouble or
dispute, any action by the United States or any other governmental
authority, flood, drought, embargo, riot, civil disturbance, uprising,
activity of armed forces, or act of God or public enemy.
(c) COMPLIANCE WITH AGREEMENT. SELLERS shall have performed and
complied with all of their obligations under this AGREEMENT which are to be
performed or complied with by them on or before the Closing Date.
(d) PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken on or before the Closing Date in connection
with the transaction contemplated by this AGREEMENT, and all documents
incident to that transaction, shall be satisfactory in form and substance
to BUYER, and ACQUIRED COMPANY and SELLERS shall have made available to
BUYER on or before the Closing Date for examination the originals or true
and correct copies of all records and documents relating to the business
and affairs of ACQUIRED COMPANY and SELLERS which BUYER may request in
connection with the transaction. SELLERS shall have complied with all
statutory requirements for the valid consummation by SELLERS on the Closing
Date of the transactions contemplated by this AGREEMENT.
(e) CONDITION OF PROPERTY. The property of ACQUIRED COMPANY shall
not, prior to the Closing Date, have been damaged by fire or other casualty
in an aggregate amount exceeding $5,000.
(f) NO LITIGATION. No investigation, suit, action, or other
proceeding shall be threatened or pending before any court or governmental
agency which, in the opinion of BUYER'S counsel, is likely to result in the
restraint, prohibition or the obtaining of damages, or other relief, in
connection with this AGREEMENT or the consummation of the transactions
contemplated hereby, or in connection with any claim against the Company or
the SELLERS, not disclosed by the Schedules previously delivered to BUYER.
(g) ALL OUTSTANDING ACQUIRED COMPANY STOCK TRANSFERRED. All of
SELLERS shall assign, transfer, and deliver to BUYER all the shares of
ACQUIRED COMPANY stock to be sold and transferred by them respectively and
shall deliver to BUYER certificates for those shares as provided in this
AGREEMENT. (Without limitation of the foregoing, BUYER shall be under no
obligation to acquire less than all of the shares of ACQUIRED COMPANY stock
outstanding on the Closing Date and may refuse to purchase any of those
shares unless all of them are available for purchase.)
(h) RIGHTS OF FIRST REFUSAL. Rights of first refusal or preemption
have been released.
4
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO SELLERS OBLIGATIONS
6.1. EACH AND EVERY OBLIGATION OF THE SELLERS TO BE PERFORMED ON THE
CLOSING DATE SHALL BE SUBJECT TO THE SATISFACTION ON OR BEFORE THE CLOSING DATE
OF THE FOLLOWING CONDITIONS:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. BUYER'S
representations and warranties contained in this AGREEMENT shall be true at
and as of the Closing Date.
(b) COMPLIANCE WITH AGREEMENT. BUYER shall have performed and
complied with its obligations under this AGREEMENT which are to be
performed or complied with before or on the Closing Date.
(c) PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken on or before the Closing Date in connection
with the transaction contemplated by this AGREEMENT and all documents
incident thereto, shall be satisfactory in form and substance to SELLERS.
(d) RESOLUTIONS. BUYER shall have delivered to SELLERS certified
copies of resolutions of the Board of Directors of BUYER, authorizing the
execution, delivery and performance of this AGREEMENT and all documents
incident thereto, shall be satisfactory in form and substance to SELLERS.
(e) ALL DOCUMENTS. All documents required by subsection (c) of this
AGREEMENT shall have been delivered to SELLERS by BUYER on or before the
Closing Date.
ARTICLE VII
CLOSING DATE
The Closing with respect to the exchange of shares provided for in this
AGREEMENT shall take place at a mutually convenient place on the 1st day of
August, 1994, or other date as agreed to by the parties.
ARTICLE VIII
BROKERAGE
SELLERS (a) represent and warrant to BUYER that no broker, finder, or other
person, employed by, or acting under the authority of, SELLERS is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from the BUYER or ACQUIRED COMPANY in connection with
the transactions contemplated by this AGREEMENT, and (b) agree to indemnify the
BUYER against, and hold the BUYER harmless from, any claims for any broker's or
finder's fee, or any other commission or similar fee, by any person, claiming to
have been employed by, or to have acted under the authority of SELLERS in
connection with those transactions.
BUYER (a) represents and warrants to SELLERS that no broker, finder, or
other person, employed by, or acting under the authority of, BUYER is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from SELLERS or any of them in connection with the
transactions contemplated by this AGREEMENT, and (b) agrees to indemnify SELLERS
(and each of them) against, and to hold SELLERS (and each of them) harmless
from, any claims for any broker's fee or finder's fee, or any other commission
or similar fee, by any person claiming to have been employed by, or to have
acted under the authority of, BUYER in connection with those transactions.
ARTICLE IX.
MISCELLANEOUS
9.1. FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties to do all acts necessary to carry out the terms of this agreement.
5
<PAGE>
9.2. SEVERABILITY. All terms and conditions contained herein are
severable, and in the event that any of them shall be held or considered to be
unenforceable by any court of competent jurisdiction, this agreement shall be
interpreted as if such unenforceable term or condition were not contained
herein.
9.3. MODIFICATION OF AGREEMENT. No waiver or modification of this
agreement or of any term or condition herein contained shall be valid unless in
writing and duly executed, nor shall any waiver or modification of this
agreement not duly executed as provided herein be deemed to be a part of this
agreement under any circumstances.
9.4. APPLICABLE LAW. This agreement shall be governed by sand interpreted
according to the laws of the State of Nevada. Each party submits to the personal
jurisdiction of all courts, whether Federal or State, within Nevada, and agrees
that any action pertaining to this agreement shall be brought in a court in
Nevada.
9.5. ENFORCEMENT COSTS. A party in breach of this agreement shall pay all
costs incurred by the nonbreaching party for damages or to enforce the terms of
this agreement, whether or not court action is instituted, and whether any court
action is brought in law or equity, which costs include, without limitation,
court costs and reasonable attorneys' fees.
9.6. NECESSARY DOCUMENTS. Each party shall, upon the request of the
other, execute, acknowledge, and deliver any instruments appropriate or
necessary to carry in to effect the intentions and provisions of this agreement.
9.7. WAIVER OF BREACH. The waiver of the breach of any term or condition
of this agreement shall not be deemed to constitute the waiver of any other or
subsequent breach of the same or any other term or condition.
9.8. EXECUTION IN COUNTERPARTS. This agreement may be executed in
multiple copies and by counterparts.
INDUSTRIAL DATA SYSTEMS CORPORATION,
A Nevada Corporation
By /s/ LEISA C. STILWELL
LEISA C. STILWELL, President
INDUSTRIAL DATA SYSTEMS, INC.,
A Texas Corporation
By /s/ WILLIAM A. COSKEY
WILLIAM A. COSKEY, President
By /s/ WILLIAM A. COSKEY
WILLIAM A. COSKEY
By /s/ HULDA L. COSKEY
HULDA L. COSKEY
6
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On this 25th day of August, 1994, personally appeared before me LEISA C.
STILWELL, President of INDUSTRIAL DATA SYSTEMS, CORPORATION, a Nevada
corporation, who duly acknowledged that he executed the foregoing document in
his capacity herein set forth as the free and voluntary act, deed, and agreement
of said corporation.
/s/ DENA LOGAN
Dena Logan
NOTARY PUBLIC
Notary Public-State of Nevada
COUNTY OF CLARK
DENA LOGAN
My Commission Expires
March 3, 1996
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
On this 29th day of August, 1994, personally appeared before me WILLIAM A.
COSKEY, President of INDUSTRIAL DATA SYSTEMS, INC., a Texas corporation, who
duly acknowledged that he executed the foregoing document in his capacity herein
set forth as the free and voluntary act, deed, and agreement of said
corporation.
Signature Illegible
NOTARY PUBLIC
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On this day of , 1994, personally appeared before me WILLIAM A.
COSKEY, who duly acknowledged that he executed the foregoing document in his
capacity herein set forth as the free and voluntary act, deed, and agreement of
said corporation.
______________________________________
NOTARY PUBLIC
7
ACTION BY WRITTEN CONSENT OF THE DIRECTORS OF
INDUSTRIAL DATA SYSTEMS CORPORATION
The undersigned, being all of the members of the Board of Directors of
INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "CORPORATION"),
do hereby consent to the following action and adopt the following resolutions,
as if at a meeting, in accordance with NRS 78.315:
1. WHEREAS, the Board of Directors has determined that it is
advisable and in the best interests of the CORPORATION to execute an
agreement and plan of reorganization by and among INDUSTRIAL DATA SYSTEMS
CORPORATION, a Nevada corporation ("BUYERS") and WILLIAM A. COSKEY and
HULDA L. COSKEY ("SELLERS") and incorporated by reference herein; it is
RESOLVED, that the Agreement and Plan of Reorganization by and among
INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation and WILLIAM A.
COSKEY and HULDA L. COSKEY be executed.
2. WHEREAS, the Board of Directors has determined that it is
advisable and in the best interests of the CORPORATION to execute the
above-described Agreement wherein the SELLERS are willing to transfer
200,000 shares of INDUSTRIAL DATA SYSTEMS, INC.'s, a Texas corporation,
Common Stock to the BUYERS in exchange for 9,500,000 shares of
CORPORATION'S Common Stock under the terms and conditions as set forth in
the AGREEMENT AND PLAN OF REORGANIZATION and incorporated by reference
herein, it is
RESOLVED, that the CORPORATION upon the signing of the Agreement will
issue 9,500,000 (4,750,000 each to WILLIAM A. COSKEY AND HULDA L. COSKEY)
of its Common Stock to the SELLERS in exchange for 200,000 shares of
INDUSTRIAL DATA SYSTEMS, INC.'S, a Texas corporation Common Stock under the
terms and conditions as set forth in the AGREEMENT AND PLAN OF
REORGANIZATION.
IT IS FURTHER RESOLVED that in connection with the issue of the
9,500,000, the Seller's interest in the 100,000 shares of the CORPORATION
indicated by the Minutes of the Organizational Meeting of the CORPORATION
be cancelled and such cancelled shares be included and issued in the
9,500,000 shares issued under the aforementioned AGREEMENT AND PLAN OF
REORGANIZATION.
3. WHEREAS, the Board of Directors has determined that it is
advisable and in the best interests of the CORPORATION that this exchange
qualify as a tax-free reorganization under ^368(a) of the Internal Revenue
Code of 1986, it is
RESOLVED, that both the CORPORATION and the SELLERS will qualify as a
tax-free reorganization under 368(a) of the Internal Revenue Code of 1986.
August 1, 1994 /s/ LEISA C. STILWELL
Date LEISA C. STILWELL, Director
1
ACTION BY WRITTEN CONSENT OF THE SHAREHOLDERS OF
INDUSTRIAL DATA SYSTEMS CORPORATION
The undersigned, being all the shareholders of INDUSTRIAL DATA SYSTEMS
CORPORATION, a Nevada corporation (the "CORPORATION"), do hereby consent to
the following action and adopt the following resolutions, as if at a meeting, in
accordance with NRS 78.320:
1. WHEREAS, all the shareholders have determined that it is advisable
and in the best interests of the CORPORATION to execute an agreement and
plan of reorganization by and among INDUSTRIAL DATA SYSTEMS CORPORATION, a
Nevada corporation ("BUYERS") and WILLIAM A. COSKEY and HULDA L. COSKEY
("SELLERS") and incorporated by reference herein; it is
RESOLVED, that the Agreement and Plan of Reorganization by and among
INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation and WILLIAM A.
COSKEY and HULDA L. COSKEY be executed.
2. WHEREAS, all of the shareholders have determined that it is
advisable and in the best interests of the CORPORATION to execute the
above-described Agreement wherein the SELLERS are willing to transfer
200,000 shares of INDUSTRIAL DATA SYSTEMS, INC.'S, a Texas corporation,
Common Stock to the BUYERS in exchange for 9,500,000 shares of
CORPORATION'S Common Stock under the terms and conditions as set forth in
the AGREEMENT AND PLAN OF REORGANIZATION and incorporated by reference
herein, it is
RESOLVED, that the CORPORATION upon the signing of the Agreement will
issue 9,500,000 (4,750,000 shares each to WILLIAM A. COSKEY and HULDA L.
COSKEY) of its Common Stock to the SELLERS in exchange for 200,000 shares
of INDUSTRIAL DATA SYSTEMS, INC'S, a Texas corporation, Common Stock under
the terms and conditions as set forth in the AGREEMENT AND PLAN OF
REORGANIZATION.
IT IS FURTHER RESOLVED that in connection with the issue of the
9,500,000, the Seller's interest in the 100,000 shares of the CORPORATION
indicated by the Minutes of the Organization Meeting of the CORPORATION be
cancelled and such shares be included and issued in the 9,500,000 shares
issued under the aforementioned AGREEMENT AND PLAN OF REORGANIZATION.
3. WHEREAS, all of the shareholders have determined that it is
advisable and in the best interests of the CORPORATION that this exchange
qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, it is
RESOLVED, that both the CORPORATION and the SELLERS will qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code
of 1986.
June 30, 1994 /s/ WILLIAM A. COSKEY
Date WILLIAM A. COSKEY, Shareholder
June 30, 1994 /s/ HULDA L. COSKEY
Date HULDA L. COSKEY, Shareholder
3
STOCK ACQUISITION AGREEMENT
BY AND AMONG
PAM DIAMONT, TRUSTEE
AND
BERNIE HOLLINGSWORTH, TRUSTEE
ACTING ON BEHALF OF THE
PHD NO. 1 QUALIFIED S-CORPORATION TRUST
AND
BH NO. 1 QUALIFIED S-CORPORATION TRUST;
JOE B. HOLLINGSWORTH AND; WILLIAM A. JACKSON
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
<PAGE>
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 600 Century Place Drive, Suite
600, Houston, Texas (hereinafter called the "Acquiring Corporation"); and the
PHD NO. 1 QUALIFIED S-CORPORATION TRUST and BH NO. 1 QUALIFIED S-CORPORATION
TRUST acting herein through BERNIE HOLLINGSWORTH, and PAM DIAMONT, Trustees; JOE
B. HOLLINGSWORTH and WILLIAM B. JACKSON, (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 10500 Windfern, Houston, Harris County, Texas. 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.
<PAGE>
"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
2
<PAGE>
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, JOE
B. HOLLINGSWORTH shall receive 316,855 shares of voting stock and WILLIAM A.
JACKSON 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.
3
<PAGE>
(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
JOE B. HOLLINGSWORTH 316,855 shares Class C
Non-voting
WILLIAM A. JACKSON 134,437 shares Class C
Non-voting
(c) The Company has three Directors whose names and titles are as follows:
PAM DIAMONT Class A Director
BERNIE HOLLINGSWORTH Class B Director
JOE B. HOLLINGSWORTH Class A, B Director
(d) The officers of the Company are as follows:
PAM DIAMONT President, Assistant Secretary and
Treasurer
BERNIE HOLLINGSWORTH 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;
4
<PAGE>
(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
5
<PAGE>
(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
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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."
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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
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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 coss 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.
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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: PAM
DIAMONT and BERNIE HOLLINGSWORTH.
(c) The Trustees of the BH NO. 1 QUALIFIED S-CORPORATION TRUST are: PAM
DIAMONT and BERNIE HOLLINGSWORTH.
(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
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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 PAM DIAMONT shall remain as President, Assistant
Secretary, Treasurer and a Director of the Company and shall have the authority
and responsibility of cash flow management. BERNIE HOLLINGSWORTH shall remain as
Vice-President, Secretary and a Director of the Company.
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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.
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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 Earnest 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.
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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 Earnest
Money Contract with the owner of the building located at 10500 Windfern Road,
Houston, Harris County, Texas, to acquire such property and improvements (being
Site No. 1) together with sites 13 & 14 of the same site plan.
9.8 Resignations of JOE B. HOLLINGSWORTH 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 10500 Windfern,
Houston, Harris County, Texas 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 JOHN J. WILLIAMS, 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: 10500 Windfern Rd.
Houston, Texas 77064
If to Company: 10500 Windfern Rd.
Houston, Texas 77064
If to Acquiring Corporation: 600 Century Plaza Drive
Suite 600
Houston, Texas 77073
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/ BERNIE HOLLINGSWORTH By /s/ WILLIAM A. COSKEY
Bernie Hollingsworth William A. Coskey
Trustee President
and
By /s/ PAM DIAMONT
Pam Diamont
Trustee
BH NO. 1 QUALIFIED S-CORPORATION THERMAIRE INC.
TRUST
By /s/ BERNIE HOLLINGSWORTH By /s/ PAM DIAMONT
Bernie Hollingsworth Pam Diamont
Trustee President
and
By /s/ PAM DIAMONT
Pam Diamont
Trustee
/s/ JOE B. HOLLINGSWORTH /s/ WILLIAM A. JACKSON
JOE B. HOLLINGSWORTH WILLIAM A. JACKSON
20
ESCROW AGREEMENT
This Escrow Agreement is made by and between INDUSTRIAL DATA SYSTEMS,
CORP., a Nevada corporation ("Corporation"); PAM DIAMONT, Trustee and BERNIE
HOLLINGSWORTH, Trustee, acting on behalf of the PHD NO. 1 QUALIFIED
S-CORPORATION TRUST AND BH NO. 1 QUALIFIED S-CORPORATION TRUST; JOE B.
HOLLINGSWORTH and WILLIAM A. JACKSON, ("Stockholders") and JOHN J. WILLIAMS,
("Escrow Agent"), this 15th day of August, 1995.
RECITALS
WHEREAS the parties hereto have executed and consummated that certain Stock
Acquisition Agreement dated August 15, 1955 whereby the Corporation acquired
from Trustees 8,000 shares of Class A stock, 2,000 shares of Class B stock and
451,292 shares of Class C stock of THERMAIRE, INC. in exchange for 600,000
shares of INDUSTRIAL DATA SYSTEMS, CORP. common stock, $.01 par value, and
WHEREAS it is the intent of the parties that the Corporation will
repurchase its stock from Stockholders on or before February 15, 1997 for cash
consideration of $1.00 per share or the stock exchange will be rescinded; and
WHEREAS the parties hereto desire to engage Escrow Agent to hold the below
described escrow items and disburse them in accordance with the terms of the
Stock Acquisition Agreement and this Escrow Agreement; and
WHEREAS JOHN J. WILLIAMS has agreed to act as Escrow Agent subject to the
terms hereof;
NOW THEREFORE the parties hereto have agreed as follows:
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1. ITEMS OF ESCROW. The following items have been delivered to Escrow Agent
on the data(s) set forth following the description of each item:
(i) A true and correct copy of an agreement entitled "Stock Acquisition
Agreement" dated August 15, 1995 between the parties hereto. Received
August 18, 1995. JJM
(ii) Stock Certificate No. 3 issued to INDUSTRIAL DATA SYSTEMS, CORP.
representing 8,000 shares of Class A stock of THERMAIRE, INC.
accompanied by a stock power endorsed to PAM DIAMONT and BERNIE
HOLLINGSORTH, Trustees for such shares executed by INDUSTRIAL DATA
SYSTEMS, CORP.
Received August 18, 1995 JJM
(iii) Stock Certificate No. 3 issued to INDUSTRIAL DATA SYSTEMS, CORP.
representing 2,000 shares of Class B stock of THERMAIRE, INC.
accompanied by a stock power endorsed to PAM DIAMONT and BERNIE
HOLLINGSWORTH, Trustees for such shares executed by INDUSTRIAL DATA
SYSTEMS, CORP.
Received August 18, 1995 JJM
(iv) Stock Certificate No. 3 issued to INDUSTRIAL DATA SYSTEMS, CORP.
representing 316,855 shares of Class C stock of THERMAIRE, INC.
accompanied by a stock power endorsed to JOE B. HOLLINGSWORTH, for
such shares executed by INDUSTRIAL DATA
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SYSTEMS, CORP.
Received August 18, 1995 JJM
(v) Stock Certificate No. 4 issued to INDUSTRIAL DATA SYSTEMS, CORP.
representing 134,437 shares of Class C stock of THERMAIRE, INC.
accompanied by a stock power endorsed to WILLIAM A. JACKSON, for such
shares executed by INDUSTRIAL DATA SYSTEMS, CORP.
Received August 18, 1995 JJM
(vi) Stock Certificate No. issued to PAM DIAMONT and BERNIE HOLLINGSWORTH,
Trustees of PHD NO. 1 QUALIFIED S-CORPORATION TRUST representing
118,966 share of common stock of INDUSTRIAL DATA SYSTEMS, CORP.
accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS,
CORP. for such shares executed by PAM DIAMONT and BERNIE
HOLLINGSWORTH, Trustees.
Received , 1995
(vii) Stock Certificate No. issued to PAM DIAMONT and BERNIE HOLLINGSWORTH,
Trustees of BH NO. 1 QUALIFIED S-CORPORATION TRUST representing 29,742
shares of common stock of INDUSTRIAL DATA SYSTEMS, CORP. accompanied
by a stock power endorsed to INDUSTRIAL DATA SYSTEMS, CORP. for such
shares executed by PAM DIAMONT and BERNIE HOLLINGSWORTH, Trustees.
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Received , 1995
(viii) Stock Certificate No. issued to JOE B. HOLLINGSWORTH, representing
316,855 shares of common stock of INDUSTRIAL DATA SYSTEMS, CORP.
accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS,
CORP. for such shares executed by JOE B. HOLLINGSWORTH.
Received , 1995
(ix) Stock Certificate No. issued to WILLIAM A. JACKSON, representing
134,437 shares of common stock of INDUSTRIAL DATA SYSTEMS, CORP.
accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS,
CORP. for such shares executed by WILLIAM A. JACKSON.
Received , 1995
2. DELIVERY UPON EXECUTION OF INDUSTRIAL DATA SYSTEMS, CORP. OPTION TO
REACQUIRE ITS STOCK. It is the intent of the parties that the Corporation
exercise its option to reacquire its stock under Article 10.2 of the Stock
Acquisition Agreement, accordingly, upon the delivery to Escrow Agent of
the sum of $600,000.00 U.S. in readily available funds, Escrow Agent is
authorized and directed to deliver to Corporation, escrow items (ii)
through (ix). Escrow Agent shall also immediately deliver to Stockholders,
by way of cashier's check or wire transfer, their respective interest in
the funds.
3. DELIVERY UPON FAILURE OF INDUSTRIAL DATA SYSTEMS, CORP.
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TO REACQUIRE ITS STOCK. It is the intent of the parties that in the event
Corporation fails to timely exercise its option or elects not to exercise
its option to reacquire its stock for the cash consideration specified OR
should it become financially impaired where it is apparent it will not be
able to exercise its option, then in either event, the Stock Acquisition
Agreement dated August 15, 1996, shall be rescinded and the parties shall
be relieved of any further obligations thereunder. For purposes of this
Agreement, Corporation shall be deemed financial impaired at anytime its
current assets (less inventory) is below a multiple of 1.5 times its
non-contingent current liabilities. Corporation shall provide a copy of its
monthly income statement and balance sheet to Stockholders and Escrow Agent
within thirty (30) days following the end of each calendar month.
Should Corporation fail to exercise its option to reacquire its stock
on or before February 15, 1997 OR should Corporation elect not to exercise
its option to reacquire its stock for cash OR should Corporation become
financially impaired during such period and Stockholders notify Escrow
Agent in writing of their desire to rescind the Stock Acquisition Agreement
based upon such financial impairment, in either event, Escrow Agent is
authorized and directed to immediately deliver to Stockholders, escrow
items (ii), (iii), (iv) and (v) and to Corporation escrow items (vi),
(vii), (viii) and (ix).
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4. ESCROW AGENT'S VERIFICATION PERIOD. Escrow Agent shall have a period of
5 business days following the day notice is received by any party in which
to verify authenticity of any facts and perform any action required
hereunder. Any deposit of funds with Escrow Agent must be verified as
"Collected Funds" immediately available for disbursement before Escrow
Agent's time period begins.
5. NOTICE TO ESCROW AGENT. Corporation and Stockholders hereby agree to
notify Escrow Agent in writing of any modifications whatsoever to this or
the Stock Acquisition Agreement. Corporation and Stockholders further agree
that accompanying such notice shall be a true and correct copy of any
instrument proporting to modify this or the Stock Acquisition Agreement.
Escrow Agent may conclusively rely upon any such notice, shall conclusively
evidence that these Agreements have not been modified.
6. DISPUTE BETWEEN THE PARTIES. In the event that any disputes arise
between Corporation and/or Stockholders regarding construction of this or
the Stock Acquisition Agreement or rights arising therefrom, Escrow Agent
is hereby authorized and directed to file and appropriate interpleader
action in a court of competent jurisdiction and shall be entitled to
recover from the Corporation and Stockholders, all costs, fees, and
expenses associated therewith, including reasonable attorney's fees.
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7. TERMINATION OF ESCROW DUTIES. The duties of Escrow Agent shall terminate
upon occurrence of any of the following events: (i) delivery of the escrow
items pursuant to Paragraph 2 hereof, (ii) delivery of the escrow items
pursuant to Paragraph 3 hereof, (iii) tender of the escrow items into the
registry of any court pursuant to Paragraph 6 hereof, (iv) written notice
executed by both Corporation and Stockholders or their respective
successors in interest, terminating this Escrow Agreement setting forth
instructions for delivery of the escrow items. Upon termination as above
stated Escrow Agent shall have no further liability hereunder.
8. INDEMNITY OF ESCROW AGENT. Corporation and Stockholders, on behalf of
themselves and their successors in interest, if any, individually, jointly
and severally hereby agree and shall, upon demand, indemnify, protect, save
and hold harmless Esrow Agent, its agents, servants, officers, directors,
shareholders, employees, representatives and any and all others acting by
or through the Escrow Agent, from and against any and all debts,
liabilities, losses, damages, penalties, claims, actions, suits, costs,
expenses, disbursements, including limitation, reimbursement for all
reasonable attorney fees, of whatsoever kind and nature, imposed upon,
incurred by, paid by and/or asserted against Escrow Agent, in any way or
form, directly or indirectly arising out of this Agreement, any and all
aspects hereof and/or any and all disputes which may arise between the
parties hereto or between
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the parties hereto and third persons as well as claims by third persons
against Escrow Agent, including but not limited to, claims or demands by
any governmental entity whatsoever, asserted by reason of this Agreement.
9. NOTICES. Any notice required or permitted hereunder shall be send to the
party entitled to receive the same by certified United States mail, return
receipt requested, or shall be hand delivered. Any notice send by mail
shall be deemed received five (5) business days following deposit of the
same in the United States mail, in a properly addressed wrapper with proper
postage affixed thereto.
10. CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
EXECUTED this 18th day of August, 1995.
PHD NO. 1 QUALIFIED S-CORPORATION INDUSTRIAL DATA SYSTEMS,
TRUST CORP.
By: /s/ PAM DIAMONT By: /s/ WILLIAM COSKEY
PAM DIAMONT, Trustee WILLIAM COSKEY, President
/s/ BERNIE HOLLINGSWORTH
BERNIE HOLLINGSWORTH, Trustee
BH NO. 1 QUALIFIED S-CORPORATION /s/ JOHNNY J. WILLIAMS
TRUST JOHNNY J. WILLIAMS
By: /s/ PAM DIAMONT
PAM DIAMONT, Trustee
/s/ BERNIE HOLLINGSWORTH
BERNIE HOLLINGSWORTH
/s/ JOE B. HOLLINGSWORTH
JOE B. HOLLINGSWORTH
/s/ WILLIAM A. JACKSON
WILLIAM A. JACKSON
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EARNEST MONEY CONTRACT
THIS IS A CONTRACT whereby JOE B. HOLLINGSWORTH, TRUSTEE herein called
Seller, agrees to sell to INDUSTRIAL DATA SYSTEMS, CORP., herein called Buyer,
who agrees to purchase, upon terms and provisions hereof, the following
described real property and improvements, in its present condition, situated in
Harris County, Texas, to-wit:
4.5995 acres of land, lying and being situated in the L.M. Prior Survey,
Abstract 635, Harris County, Texas and being a part of Lots 17 and 18 of
North Houston Gardens Subdivision, Section 3, according to plat thereof
recorded in Volume 275, Page 263, Deed Records of Harris County, Texas
and being more particularly described by metes and bounds as follows:
Commencing at a point in the centerline of Windfern Road, formerly known
as Reid Road, based on 80 feet in width, same being the southwest corner
said Lot 17;
Thence N 87 (degrees) 49 (minutes) 54 (seconds) E, 40.00 feet to a point
in the east right of way line of said road;
Thence N 02 (degrees) 10 (minutes) 06 (seconds) W, along said right of
way line, 305.00 feet to a 3/4 (inch) iron pipe and the place of
beginning of the tract herein described;
Thence N 02 (degrees) 10 (minutes) 06 (seconds) W, continuing along the
east right of way line of Windfern Road, 260.00 feet to a 1 (inch) iron
pipe for corner;
Thence N 87 (degrees) 49 (minutes) 54 (seconds) E, parallel to the south
line of Lots 17 and 18, a distance of 770.60 feet to a 1 (inch) iron
pipe in the east line of Lot 18 for corner;
Thence S 02 (degrees) 10 (minutes) 06 (seconds) E, along the east line
of Lot 18, a distance of 260.00 feet to a 5/8 (inch) iron rod for
corner;
Thence S 87 (degrees) 49 (minutes) 54 (seconds) W, parallel to the south
line of Lots 17 and 18, a distance of 770.60 feet to the point or place
of beginning and containing as aforesaid 4.5995 acres of land.
The total sales price is $500,000.00 payable as follows: $500,000.00 cash,
of which Buyer agrees to forthwith deposit with Stewart Title Company, Escrow
Agent, the sum of $100.00 as Earnest Money, to bind this sale.
Closing date shall be February 15, 1997 or such earlier date as mutually
agreed upon by the parties.
At least sixty (60) days prior to Closing, Seller shall cause the Title
Company to issue and deliver a Commitment for Title Insurance (the "Title
Commitment") to Buyer, accompanied by true and legible copies of all recorded
instruments creating or evidencing encumbrances against all or part of the
Property and committing the Title Company to furnish the Title Policy to Buyer
at Closing. The Owner's Title Policy shall be in the amount of the Purchase
Price. If any encumbrance or other matters referred to in the Title Commitment
are unacceptable to Purchaser in its sole discretion, Purchaser shall give
written notice to Seller given on or before thirty (30) days after the date on
which Purchaser's attorney receives the Title Commitment, true and legible
copies of such instruments, whereupon Seller may, but shall not be obligated to
cure the same; provided, however, Seller shall be obligated to satisfy any liens
encumbering the Property which have arisen by, through or under Seller or which
are created after the effective date of this Agreement. Matters listed on
Exhibit "A" shall be deemed permitted exceptions and shall not constitute
objections to title. In the event Seller is unable to cure such objectionable
matters on or before the thirty (30) days following notice from Buyer, Buyer
shall elect to either (a) terminate this Agreement whereupon all Earnest Money
(hereinafter defined) shall be refunded to Purchaser and neither party hereto
shall have any further rights, duties or obligations one to the other hereunder
or (b) waive such uncured objections and proceed to Closing without reduction in
the Purchase Price.
Seller is to furnish Buyer an Owner's Policy of Title Insurance issued by
Stewart and Title Company, tax certificates showing no delinquent taxes,
(current taxes to be prorated to date of closing) a General Warranty Deed to be
recorded at Buyer's expense, conveying good and marketable title subject only to
any liens to be created or assumed hereunder and the following:
1. Present restrictions, if any, existing against said property,
2. Existing Building and Zoning Ordinances, if any,
3. Rights of parties in possession,
4. All oil, gas and minerals reserved by Seller's predecessors in
title, and all currently valid oil, gas and mineral leases.
5. All visible and apparent easements.
<PAGE>
6. Permitted exceptions shown as Exhibit "A".
7. Lease Agreement between Seller and THERMAIRE, INC.
If Owner's Policy of Title Insurance is to be furnished hereunder, the same
is to be delivered as and when the sale is closed, which shall be on or before
February 15, 1997, unless attorneys for said Title Company discover objections
to title, in which case sale is to be closed when objections are removed,
provided the objections are removed within a reasonable time, which in no event
shall extent beyond 18 months from date hereof.
Time is of the essence of this contract.
Upon failure of Buyer to comply herewith, Sellers' sole remedy shall be to
retain the earnest money as liquidated damages. If title is found objectionable
and is not cleared within the time herein provided, or upon failure of Seller to
comply herewith for any other reason, Buyer may demand back the earnest money,
thereby releasing Seller from this contract, or Buyer may either enforce
specific performance hereof or seek such other relief as may be provided by law.
Within 60 days from the date hereof, Buyer shall at its own cost and
expense have such environmental, structural or other inspections, tests, or
studies as it deems necessary in order to assure it that the property and
building are suitable for its intended purpose. Provided however, Buyer agrees
to indemnify Seller from and against any costs of such inspections or tests. If
Buyer determines in its sole discretion that the property or building is not
suitable for its intended purposes it may terminate this Contract.
An environmental study of the property has revealed unacceptable levels of
lead on a portion of the property. Seller has agreed to remediate the
contamination prior to closing at Seller's expense. After remediation, readings
for total lead will be less than 100 ppm (mg/mk) based on test method
SW-846/6010. Confirmation test results will be furnished.
Taxes are to be prorated to date of Closing.
Seller is to pay for costs of title policy and one-half (1/2) of other
Closing costs. Buyer is to pay for cost of survey if desired, costs of all
inspections and one-half (1/2) of other Closing costs.
Seller shall also assign all rights to receive accrued and unpaid rental
under the current lease without adjustment to the purchase price.
EXECUTED in multiple copies this 15th day of August, 1995.
SELLER: BUYER:
INDUSTRIAL DATA SYSTEMS, CORP.
/s/ JOE B. HOLLINGSWORTH /s/ WILLIAM A. COSKEY
JOE B. HOLLINGSWORTH, TRUSTEE Name: WILLIAM A. COSKEY
Title: President
Receipt of check in the amount of $
is hereby acknowledged.
Escrow Agent
2
<PAGE>
EXHIBIT "A"
PERMITTED EXCEPTIONS
1. Ten foot utility easement to Houston Lighting & Power Co. with ten foot by
twenty foot aerial easement adjacent thereto as reflected by instrument
recorded in Volume 4759, Page 36 Deed Records of Harris County, Texas.
2. Easement for power line running north and south through property as shown by
survey dated August 4, 1972 made by Thomas J. Sanders, Registered Public
Surveyor, No. 1578.
3. Power line on a portion of the east side and across the north part of above
property as shown by survey dated August 4, 1972 made by Thomas J. Sanders,
Registered Public Surveyor No. 1578.
4. Mineral lease dated August 16, 1966 recorded in Volume 2004, Page 497
Contract Records from Geo. J. Knigge, et al to Weldon B. Hill and assigned
to Pan American Petroleum Corp. by instrument recorded in Volume 2012, Page
429 Contract Records of Harris County, Texas.
3
OFFERING MEMORANDUM
INDUSTRIAL DATA SYSTEMS CORPORATION
(A NEVADA CORPORATION)
4350 E. SUNSET ROAD #101
HENDERSON, NEVADA 89014
500,000 Shares
Common Stock Capital Shares (Par Value $0.001 Per Share)
Offering Price $.30 per Share
INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada Corporation (the Company) was
incorporated June 22, 1994 and is now offering up to 500,000 Shares of its
Common Stock, $.001 par value per share (the "Shares") on a "best efforts"
basis under the terms and conditions of this Offering Memorandum ("Memorandum").
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IS SPECULATIVE. INVESTORS
SHOULD STUDY THE RISKS AS SHOWN HEREIN. (SEE "RISK FACTORS").
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION IN RELIANCE ON THE EXEMPTION CONTAINED IN RULE 504
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION AS PART OF REGULATION D.
THESE SECURITIES HAVE BEEN REGISTERED WITH THE ADMINISTRATOR OF THE SECURITIES
DIVISION OF THE NEVADA SECRETARY OF STATE PURSUANT TO THE REQUIREMENTS OF NRS
90.460. SUCH REGISTRATION DOES NOT CONSTITUTE NOR IMPLY THE RECOMMENDATION OR
ENDORSEMENT OF THE DIVISION, WHICH DOES NOT PASS UPON THE MERITS OF THE
SECURITIES OR THE ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
PUBLIC OFFERING
This offering is for 500,000 shares of the Company's Common Stock (Par
Value .001) for thirty cents per share (.30).
<TABLE>
<CAPTION>
PUBLIC PROCEEDS
NUMBER OFFERING GROSS SALES 5% TO
SHARES PRICE(1) PROCEEDS(2) COMMISSION(3) CO.(4)
--------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
Min. ................................ 250,000 .30 $ 75,000 $ 3,750 $ 71,500
Max. ................................ 500,000 .30 $ 150,000 $ 7,500 $142,500
</TABLE>
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK OF THE COMPANY, AND THERE CAN BE NO ASSURANCE THAT A MARKET WILL DEVELOP.
<PAGE>
SALES AGENT
TO BE SOLD BY
LEISA C. STILWELL (CRD 1534987)
DATE OF OFFERING MEMORANDUM: AUGUST , 1994
TRANSFER AGENT
PACIFIC STOCK TRANSFER
2576 E. CHARLESTON BOULEVARD
LAS VEGAS, NEVADA 89104
NOTES
1. These securities are offered hereby for cash only. The offering price
has been arbitrarily established by the Company, and this price has no
relationship to the Company's assets, earnings, book value or other recognized
criteria of value.
2. The initial proceeds of this offering will be deposited into an escrow
account at Southwest Escrow Company in Las Vegas, Nevada until $75,000 of gross
proceeds is received and has been so deposited. In the event that less than
$75,000.00 of gross proceeds are received and deposited by the Company under
this offering within one (1) year from the date of this Offering Memorandum, all
gross proceeds will be returned to purchasers in full by the escrow agent
without any deductions for commissions or other expenses and without interest,
and the Company will bear all costs of any such refunds.
3. These shares are offered on a "best efforts" basis by registered
agents of the Company. There is no assurance that any or all of the shares
offered hereby will be sold. The sales agent will receive a commission of five
percent (5%).
4. The Company will deduct expenses for legal and accounting fees,
printing costs and other expenses of this offering from the proceeds of this
offering. It is estimated, but not guaranteed, that such expenses will not
exceed $20,500.
NO SALESMAN, DEALER, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFERING
MEMORANDUM IN CONNECTION WITH THE DISTRIBUTION OF SECURITIES TO WHICH THIS
OFFERING MEMORANDUM RELATES. PRACTICES TO THE CONTRARY ARE CRIMINAL OFFENSES.
REPRESENTATIONS NOT CONTAINED HEREIN, IF GIVEN OR MADE, MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS OFFERING
MEMORANDUM SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THE
COMPANY WILL ATTEMPT TO CONTINUE TO DEVELOP AND MARKET ITS PRODUCT(S) AND/OR
SERVICES DURING THE OFFERING PERIOD. THE COMPANY WILL HOWEVER, UNDERTAKE TO
AMEND THIS OFFERING MEMORANDUM IF ANY MATERIAL CHANGES OCCUR AND WILL PROVIDE
PURCHASERS AND THE NEVADA SECURITIES DIVISION WITH A COPY THEREOF.
THE SHARES OFFERED HEREBY ARE OFFERED FOR CASH ONLY, SUBJECT TO PRIOR SALE AND
WITHDRAWAL, CANCELLATION OR MODIFICATION OF THIS OFFERING WITHOUT NOTICE.
REGISTRATION OF THESE SECURITIES IS EFFECTIVE FOR ONE YEAR. THEREAFTER,
NON-ISSUER "TRADING TRANSACTIONS" REQUIRE EFFECTIVE REGISTRATION OR AN
APPROPRIATE EXEMPTION. THESE SECURITIES ARE TO BE OFFERED AND SOLD EXCLUSIVELY
WITHIN THE STATE OF NEVADA.
2
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
------------------------
TABLE OF CONTENTS
Page
MEMORANDUM SUMMARY................... 1
RISK FACTORS......................... 2
DILUTION............................. 9
THE COMPANY.......................... 11
SUMMARY OF HISTORICAL FINANCIAL
DATA............................... 12
USE OF PROCEEDS...................... 13
BUSINESS PLAN........................ 14
CAPITALIZATION....................... 17
DESCRIPTION OF COMMON STOCK.......... 17
COMPANY POLICIES..................... 18
MANAGEMENT........................... 19
STOCK OWNERSHIP AND CONTROL.......... 20
CERTAIN TRANSACTIONS................. 21
CONFLICTS OF INTEREST................ 22
FIDUCIARY RESPONSIBILITIES OF
OFFICERS AND DIRECTORS............. 22
REMUNERATION......................... 23
PLAN OF DISTRIBUTION................. 23
LEGAL AND ACCOUNTING................. 24
LITIGATION........................... 25
ADDITIONAL INFORMATION............... 25
<PAGE>
MEMORANDUM SUMMARY
The information contained in the summary is distilled information contained
elsewhere in the memorandum. Prospective investors are urged to read the
complete memorandum to get full and accurate information on the company.
THE COMPANY
INDUSTRIAL DATA SYSTEMS CORPORATION (the "Company") is a Nevada
Corporation organized on June 22, 1994. The Company subsequently acquired
Industrial Data Systems Inc. of Texas. (See "Certain Transactions")
The Company's current statutory office is located at 4350 East Sunset Road,
Suite 101, Henderson, Nevada 89014. The Company's operational headquarters is
currently located at 14900 Woodham, Suite 170, Houston, Texas 77073.
The Company is engaged in business activity in Texas in the areas of
engineering and technical support services for the pipeline industry as well as
the design manufacturing and marketing of ruggedized computer hardware suitable
for industrial and construction applications.
It is this secondary area in which the Company plans to focus its expansion
into southern Nevada through the use of proceeds from this offering. (See "The
Company")
THE OFFERING
SECURITIES OFFERED: 500,000 Shares of Common Stock, par value
$.001, to be offered on a "best efforts"
basis at .30 per share
COMMON STOCK TO BE OUTSTANDING AFTER
THE COMPLETION OF THE OFFERING: 10,000,000 of 75,000,000 authorized
SHARES HELD BY THE PUBLIC:
If maximum ($150,000 is
raised)....................... 500,000 Shares
If minimum ($75,000 is
raised)....................... 250,000 Shares
USE OF PROCEEDS
If the minimum number of 250,000 shares is sold the Company will net
approximately $58,250 of $75,000 raised. The cost of legal, accounting, sales
commission, printing and miscellaneous offering costs will be approximately
$16,750.
Should the Company raise the maximum of $150,000, it will net approximately
$129,500 after subtracting legal, accounting, sales commission, printing and
other miscellaneous costs of approximately $20,500.
The balance of the proceeds will be used to continue the predecessor
Company's business and expand its computer division into southern Nevada. (See
"Use of Proceeds")
RISK FACTORS
Investment of the Shares offered by the Company involve a high degree of
risk. Prospective investors considering subscription of these shares should be
able to sustain a loss of their entire investment without undue hardship. (See
"Risk Factors" and "Dilution")
RISK FACTORS
THE SHARES BEING OFFERED HEREIN INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED EXTREMELY SPECULATIVE. THESE SECURITIES SHOULD BE PURCHASED BY ONLY
THOSE PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. THE PURCHASE
OF THESE SHARES INVOLVES NUMEROUS RISK FACTORS INCLUDING BUT NOT LIMITED TO,
THOSE FACTORS ASSOCIATED WITH A NEW VENTURE, RISK FACTORS ASSOCIATED WITH A
SMALL DEVELOPMENT STAGE COMPANY TRYING TO COMPETE
<PAGE>
WITH LARGER, MORE ESTABLISHED COMPANIES, RISK FACTORS ASSOCIATED WITH STRONG
COMPETITION, AND RISK FACTORS ASSOCIATED WITH SUBSTANTIAL DILUTION FROM THE
PUBLIC OFFERING PRICE.
PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE OFFERING MEMORANDUM CAREFULLY
AND CONSIDER IF SUCH AN INVESTMENT IS SUITABLE FOR THEM.
RISK FACTORS RELATED TO THE OFFERING
POSSIBLE LOSS OF ENTIRE INVESTMENT
Investors could lose all or part of their investment in the securities
should they decide to invest.
SUBSTANTIAL AND IMMEDIATE DILUTION
This offering involves immediate and substantial dilution in book value
from the public offering price.
BEST EFFORTS OFFERING
The offering of these securities is being done on a "best efforts" basis.
No individual firm or corporation has agreed to purchase any of the shares
offered herein. Provisions have been made to deposit all funds received from the
sale of these securities in escrow. If the minimum shares are not subscribed for
within one (1) calendar year from the effective date of this Offering
Memorandum, all funds being held in escrow will be returned. The escrow period
may last up to one (1) calendar year, so subscribers will not have use of their
funds for up to one (1) full year, nor will they receive any interest for the
use of their money should the offering not be completed.
NO PUBLIC MARKET FOR SECURITY
Prior to this offering there was no public market for the shares being
offered. Should the offering be successful, and no representation can be given
that it will be, there is no assurance that a market will develop. If such a
market develops there is no assurance that the market price will be equal to or
greater than the offering price. This could result in a loss of all or part of
the money invested in these shares.
NO DIVIDENDS ANTICIPATED
The Company has not paid any dividends nor does it contemplate or
anticipate paying a dividend in the foreseeable future.
RISKS OF ADVERSE ADMINISTRATIVE ACTION; OTHER SALES
The shares of common stock described in this Offering Memorandum are
offered under an exemption from federal registration as contained In Section 504
of Regulation D. Because the offering is to be made exclusively in Nevada, where
the securities have been registered, and because delivery of a disclosure
document is required under Nevada law, it is the Company's position that the
offering is not subject to the federal limitations on the manner of offering or
resale of securities. However, it is possible that the U.S. Securities and
Exchange Commission (the "S.E.C.") may seek to impose such requirements, which
could cause the offering to be terminated, result in penalties or assessments
against the Company, or result in shares purchased in this offering being
considered "restricted shares". If the shares were to become restricted, they
would not be saleable in any location by purchasers in the absence of
registration of the shares or use of any exemption from registration. The
Company does not intend to register the shares described in this Offering
Memorandum with the S.E.C.
Presently there are 9,500,000 shares outstanding, all of which are
restricted shares. While resale of the presently outstanding shares is limited,
it is possible that these shares could be sold by federal registration or an
exemption from such registration, (17 C.F.R. S230.144 "Rule 144") is the most
commonly available exemption. Possible future sales of the presently outstanding
shares under registration or an exemption from registration may have a
depressive effect on the price of the Company's stock in any market which may
develop.
2
<PAGE>
LIMITATION ON RESALE
The shares are registered only in the State of Nevada and may not be resold
or assigned outside of Nevada without registration/qualification from such laws.
The Company has no obligation or intent to register or qualify the shares for
sales outside Nevada. Accordingly, the ability of investors to resell shares
pursuant to this Offering Memorandum may be limited.
NOT AN INVESTMENT COMPANY
Because the Company seeks to obtain public financing prior to entry into
specific, identifiable business interests, it must carefully conduct its
activities so as to avoid becoming inadvertently classified as an "investment
company" under the Investment Company Act of 1940 (the "1940 Act") which
classification would involve a number of negative considerations. Accordingly,
the Company intends to expend a majority of proceeds hereof for the
investigation, evaluation and acquisition of business opportunities as soon as
reasonably practicable. Should the Company delay in locating and obtaining
opportunities and in expanding a majority of the proceeds of this offering on
opportunities other than investment securities, the S.E.C. may find that the
Company is deemed subject to provisions of the 1940 Act, and direct the Company
to register under such Act. The Company would vigorously resist any such order
or finding by the S.E.C. However, whether the S.E.C. or the Company prevailed in
such dispute, the Company would be damaged by the costs and delays involved.
NO CUMULATIVE VOTING OR PRE-EMPTIVE RIGHTS
There are no pre-emptive rights in connection with the Company's common
stock. The shareholders' purchasing in this offering may be further diluted in
their percentage ownership of the Company in the event additional shares are
issued by the Company in the future. Cumulative voting in the election of the
directors is not allowed. Accordingly, the holders of a majority of the shares
of common stock, present in person or by proxy, will be able to elect all of the
Company's Board of Directors. (See "Capitalization" and "Description of
Common Stock")
PURCHASES BY AFFILIATED PARTIES
Officers, directors, principal shareholders and affiliates may purchase
shares owned by non-affiliated parties and increase the holdings of affiliated
parties. This reduction in shares owned by the non-affiliated public
shareholders could result in limited level of interest by the investing public
and shareholders may lose their entire investment. Such purchases may be
necessary to assure that the minimum amount of escrow will be met.
Affiliates will not purchase in excess of 10% of the offering and no
representation is given that they will insure the offerings successful
completion.
RISK FACTORS RELATING TO THE COMPANY'S
ORGANIZATION AND MANAGEMENT
RECENT DEVELOPMENTS
The Company was recently reorganized via the acquisition of Industrial Data
System Inc. of Texas by Industrial Data Systems Corporation of Nevada. (See
"Certain Transactions")
The Company believes that it can grow through development and expansion
into the southern Nevada area while keeping its technical services business in
Texas. Such expansion could prove very costly. Should costs exceed management
expectations or revenues fall short of projections, the negative effect on the
Company would be substantial. Prospective investors should be aware of
unforeseen risks that may occur in the Company's proposed expansion.
DEPENDENCE ON KEY PERSONNEL
The Company is extremely dependent on Key Personnel. A loss of such
personnel for any reason could have a material adverse effect upon the Company's
business. Specifically the loss of William A. Coskey
3
<PAGE>
would be catastrophic to the Company. Currently the Company has a key man life
insurance policy on Mr. Coskey for $600.000.
No assurance is given that the Company could continue as an ongoing concern
even with proceeds from this policy.
Additionally, because of the Company's somewhat limited resources,
personnel to assist the Company's expansion plans may not be available in the
marketplace laden with larger better capitalized companies more able to recruit
and reward desired personnel. Without the ability to keep existing personnel and
hire qualified new personnel to assist the Company in its expansion no assurance
can be given that the Company will be successful in its endeavors.
POTENTIAL CONFLICTS OF INTEREST
Conflicts of interest may from time to time arise. Management will endeavor
to resolve conflicts of interest in shareholders behalf notwithstanding such
conflicts may have an adverse effect upon the Company and pose additional risk
to shareholders. (See "Certain Transactions" and "Conflicts of Interest")
RISK FACTORS RELATING TO
THE COMPANY'S COMPUTER BUSINESS
SUBSTANTIAL COMPETITION
The computer industry is one of the most competitive industries in the
world. Competition comes from both foreign and domestic entities. The size and
scope of many of these companies cannot be overstated.
The Company's small stature and limited financial capacity pose certain
problems and risks to shareholders. Economics of scale will offer a substantial
advantage to the companies in the industry and while the Company hopes to be a
"niche" player, larger companies hold substantial advantages and can easily
penetrate any market through competitive pricing advantages gained by economics
of scale.
Should larger better capitalized computer companies seek entrance into the
Company's niche in the market, the competitive pricing may reduce or eliminate
the Company's profitability and pose a risk of opportunity loss to the Company.
Because of the Company's limited capital, it is doubtful it could sustain such a
loss over an extended period of time. This could result in loss of the investors
entire investment.
CAPITAL INTENSIVE NATURE OF THE BUSINESS
The computer business is a very capital intensive business. Once again this
puts the Company at a strategic disadvantage.
Inventories need to be purchased and such being the case, larger better
capitalized companies are able to have a delivery time advantage to customers.
If such a disadvantage becomes too great, the Company may seek additional
financing. (See "Need for Additional Financing")
TECHNOLOGICAL OBSOLESCENCE
The computer industry is a fast paced, ever changing business. Such rapid
change in technology often renders today technologies useless in tomorrows
world. Once again the advantage is with large well capitalized companies that
have superior research and development divisions. No representation is made to
prospective shareholders that the Company will continue to develop new and
additional products and technologies.
4
<PAGE>
RISK FACTORS RELATED TO THE COMPANY'S
ENGINEERING AND TECHNICAL SUPPORT BUSINESS
SUBSTANTIAL COMPETITION
As in the computer business, the pipeline service and engineering field is
dominated by large established and well capitalized firms. The Company has
established itself as a small efficient entity, but it is still competing with
companies who by economics of scale are in a position of extreme advantage.
CYCLICAL NATURE OF THE BUSINESS
The Company's services are performed primarily for oil and gas companies.
As such, these services are subject to the risk of a cyclical industry. Oil and
gas prices are extremely volatile and impacted by many factors on a global
scale. Hence, the Company could be negatively impacted by cyclical factors in
the global economy over which it has no control. This translates to additional
risk for prospective investors.
RELIANCE ON MAJOR CUSTOMERS
From time to time the Company may do a large portion of its engineering
business with one or more major customers.
The Company currently has one major client, Exxon, which provides the
Company with 50% of the Company's revenue through its pipeline engineering
services. The Company has no written agreements with any such customer to assure
future level of sales. The loss of such a major customer would have an extremely
adverse impact on the Company's operations.
The factors of dependence on major customers coupled with the cyclical
nature of the oil and gas industry, which the Company serves, combine to make
this portion of the Company's business extremely subject to volatility. This
volatility translates to investors risk. Prospective investors should be aware
that their entire investment is at risk in such a volatile industry.
RISK FACTORS RELATING THE COMPANY'S
OVERALL BUSINESS, FINANCES AND CAPITALIZATION
RISK ASSOCIATED WITH EXPANSION
The Company wishes to use the proceeds to finance its expansion of its
computer business. Such expansion is costly and no assurances can be given that
it will be fruitful. The expansion will occur in two ways. First, the Company
will seek to expand market for its ruggerized computers by more aggressively
marketing through trade journals and trade show in the construction and
industrial areas.
Second, the Company hopes to expand the target of its geographic bounds
westward into southern Nevada. The Company views this expansion as a great
opportunity to capitalize on the growth of construction in this area.
Prospective investors should be aware that corporate expansion in both areas
adds risk to the Company because of the increased level of expenses. No
assurance can be given to prospective investors that such expenses will
ultimately result in increased corporate revenue.
UNINSURED LIABILITY
As the Company pursues its business, it may a party to a lawsuit. Should
the Company sustain an uninsured liability, the limited capital of the Company
could be completely depleted forcing the Company into bankruptcy. In such case
it is likely shareholders would lose their entire investment.
NEED FOR ADDITIONAL FINANCING
The survival of the Company may at some time depend upon additional
financing. No assurance can be made that such financing would be available, and
if available that it take either the form of debt or equity. In either case, the
financing could have a negative impact on the conditions of the Company and its
shareholders.
5
<PAGE>
To seek additional financing, the Company may pursue one of the following
methods:
(1) DEBT FINANCING IN THE FORM OF A LOAN. The loan could be from an
individual or financial institution. Such loan could put the Company at
risk for amounts greater than its assets and if such a loan was not
promptly repaid, could result in bankruptcy. In such a case, the shares of
the Company would most likely become worthless.
(2) EQUITY FINANCING. Equity financing could take the form of either
a private placement or a secondary public offering. Either type of equity
offering would consist of offering more of the Company's shares for sale at
prices that may be below the offering price of this offering.
No assurance can be given that such an offering would be successful if
attempted. Even if such an offering were to be successful, the existing
shareholders from this offering would most likely experience dilution in
addition to that disclosed in this Offering Memorandum. (See "Dilution").
PARTNERSHIPS AND JOINT VENTURES
The Company's limited capital may necessitate partnership or joint
ventures.
While no agreements to form partnerships or joint ventures currently exist,
the Company could pursue them in the future. Sales revenue would be split among
other entities which could negatively affect the Company's potential earnings.
No guarantee can be made that if partnerships or joint venture were entered
into that they would be profitable.
DILUTION
Dilution is the difference between the public offering price of a security
and the net book value immediately after the offering of said security,
reflecting the receipt of net proceeds from the offering. Net book value is the
amount that results from subtracting total liabilities from total assets. Net
book value per share takes the net book value and divides by the number of
shares issued and outstanding. For purposes of determination of dilution of
stock only, the value of services (an intangible asset) contributed as capital
is excluded from net book value and investment capital amounts stated.
In the event that the minimum number of shares are sold and there can be no
assurance made that such will be the case, public investors will own 250,000
shares (approximately 2.56%) of the Company's common voting shares then issued
and outstanding, for which they will have paid in cash $75,000 (approximately
9.7% of investment capital), and the present shareholders, consisting of
officers, directors and founders will own 9,500,000 shares (approximately
97.44%) of the Company's issued and outstanding shares for which they have paid
$698,006 (approximately 90.3% of the investment capital).
In the event that the maximum number of shares are sold, and no assurance
is given that such will be the case, public investors will own 500,000 shares
(approximately 5%) of the Company's voting shares then issued and outstanding,
for which they will have paid in cash $150,000 (approximately 17.69% of
investment capital) and the present shareholders consisting of officers,
directors and founders will own 9,500,000 shares (approximately 95%) of the
Company's issued and outstanding shares for which they will have paid $698,006
(approximately 82.31%) of investment capital.
As of the date of this Offering Memorandum, the Company has 9,500,000
issued and outstanding with a net book value of $.0735 per share. Assuming the
minimum number of shares being offered, 250,000 shares are sold, the Company
will have a net book value of $756,256 (after offering costs) or approximately
$.0776 per share. Thus the present stockholders, being officers, directors and
founders of the Company will have experienced a substantial increase in the
value of their shares from $.0735 to $.0776. Conversely the public investors
will experience a substantial and immediate dilution of $.2224 or 74.13% of the
offering price paid for such shares.
Should the maximum of 500,000 shares be sold, the Company will have a net
book value of $827,506 (after offering costs) or approximately $.0828 per share.
Thus the present shareholders being the officers,
6
<PAGE>
directors and founders will experience a substantial increase in the book value
of their shares from $.0735 to $.0828. Conversely the public investors will
experience substantial and immediate dilution of $.2172 per share or 72.4% of
the offering price paid.
Hence one may conclude that if the minimum number of shares are sold, the
public investor will have provided approximately 9.7% of the capital and
retained 2.56% of the equity, while if the maximum number of shares is sold the
public investor will have provided 17.69% of the capital and retained
approximately 5% of the equity.
7
<PAGE>
THE COMPANY
INTRODUCTION
INDUSTRIAL DATA SYSTEMS CORPORATION (the "Company") was formed in Nevada
on June 22, 1994 for the purpose of designing, manufacturing and marketing
ruggetized computers.
The Company's local office and statutory office in Nevada is located at
4350 E. Sunset Rd. #101, Henderson, Nevada 89014. The Company's operational
office is currently located at 14900 Woodham, Suite 170, Houston, Texas 77073.
ACQUISITION
On August 1, 1994, the Company acquired through a tax-free exchange of
common stock, 100% of Industrial Data Systems, Inc. (a Texas corporation).
Industrial Data Systems, Inc. of Texas was founded in 1985 by current president
and director William A. Coskey for the purpose of providing engineering
services. (See "Certain Transactions").
HISTORY
Industrial Data Systems, Inc. (Texas) dba Industrial Data Systems Tech, has
been profitable since inception and has grown to a company with two distinct
areas of business. Industrial Data Systems Tech continue to service the pipeline
industry with a wide range of engineering and design, construction, supervision,
material procurement, cost and material control, testing and start-up services.
In 1993, Industrial Data Systems Tech was expanded to provide full pipeline
services to clients such as Exxon Pipeline Company, Texas Eastern Products
Pipeline and Texaco Pipeline Inc.
Industrial Data Systems PC, the Company's computer division designs,
manufactures and sells industrial PCs for applications in hostile work
environments.
To date Industrial Data Systems Corporation of Nevada's only activities
have been related to corporate organization, the acquisition of Industrial Data
Systems (Texas) and the preparation of this Offering Memorandum.
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The selected financial information for the year ended December 31, 1992,
for the year ended December 31, 1993 and were compiled from unaudited financials
of the acquired company Industrial Data Systems, Inc. (a Texas corporation).
This information should be read with the Company's Financial Statement and notes
thereto appearing elsewhere in this Prospectus, and is by no means meant to be a
complete representation of the Company's financial picture.
YEAR ENDED YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1993
----------------- -----------------
STATEMENTS OF INCOME
Net Sales............................. $ 838,293 $ 1,100,096
Cost of Goods......................... 202,815 330,232
Gross Profit.......................... 635,478 769,864
Operating Expenses.................... 586,827 627,976
Income before Federal Income Tax...... 48,650 141,889
Net Income............................ $ 48,650 $ 141,889
================= =================
Earning per Share..................... $0.005 $0.014
================= =================
DECEMBER 31, 1993
-----------------
BALANCE SHEET DATA:
Total Assets............................ $ 642,899
Total Long-Term Debt.................... -0-
Shareholders' Equity.................... $ 603,085
9
<PAGE>
USE OF PROCEEDS
The Company plans to sell a minimum of 250,000 shares and a maximum of
500,000 shares of its Common Stock which is authorized but unissued at a price
of $.30 per share. The sales of the minimum of 250,000 shares will result in a
gross of $75,000 for the Company and should the Company sell all of the Shares
offered hereby, the gross proceeds to the Company would be $150,000.
The Company anticipates incurring costs related to the Offering. Set forth
below are estimates of such costs the Company believes to be accurate. The
actual costs of the Offering could be more or less expensive.
MINIMUM MAXIMUM
-------- --------
Legal and Filing..................... $ 5,000 $ 5,000
Accounting........................... 7,000 7,000
Commissions.......................... 3,750 7,500
Printing............................. 500 500
Miscellaneous........................ 500 500
-------- --------
$16,750 $20,500
After incurring the preceding Offering costs, the Company will receive net
proceeds of $58,250 should the minimum dollar amount of $75,000 be raised from
the Offering. In the event the maximum of $150,000 is raised from the Offering,
the Company will incur offering expenses of $20,500 and receive net proceeds
from the Offering of $129,500.
After incurring the preceding Offering costs, the Company plans to use the
net proceeds from the Offering as noted on page 10.
Management wished to point out that these are only estimates and if costs
overrun and unforeseen costs occur, such costs will likely have an adverse
effect upon the Company's financial condition and pose additional risk for
shareholders.
In the event that the Company has overestimated costs in any given area,
such a surplus would be added to working capital.
MINIMUM MAXIMUM
------- --------
Salaries................................ $15,000 $30,000
Inventories............................. 15,000 50,000
Packaging............................... 1,000 2,000
Production Equipment.................... 2,000 4,000
Rent.................................... 6,000 6,000
Utilities............................... 1,200 1,200
Printing................................ 4,000 6,000
Legal................................... 2,000 2,000
Accounting.............................. 2,000 2,000
Advertising............................. 5,000 12,000
Travel.................................. 2,000 5,000
Working Capital......................... 3,050 9,300
------- --------
$58,250 $129,500
BUSINESS PLAN
The "Use of Proceeds" section outlined how the Company plans to use
proceeds from the Offering. It should be noted that the Company will still
remain operational in Texas operating as Industrial Data Systems Inc. The focus
of this Offering is to expand the Company's computer division. The Company hopes
revenues will continue from its technical/engineering division, IDS Technical
Services to allow additional funds for the computer division to grow and expand
particularly into southern Nevada. No
10
<PAGE>
assurance can be given that this will be the case and prospective investors are
urged to evaluate the Company accordingly. Hence, the following business plan
and preceding "Use of Proceeds" are related only to the Company's computer
division. Management believes that IDS Technical Services is fully self
sustaining.
Should IDS Technical Services see a reduction in revenues, the consequences
would jeopardize the Company's future plans and possibly threaten the Company's
ability to continue to do business.
THE MARKET
The industrial PC market is expected to increase from sales of $453 million
in 1992 to $757 million in 1997. Fully integrated Industrial PCs (IPCs) are
expected to grow from $315 million or 69.2% of the 1992 market to $538.4 million
or 71.1% of the 1997 market while modular IPCs are expected to grow from 96.7
million or 30.8% of the 1992 market to 28.9% of the 1997 market. (Information
provided from Venture Development Corp. of Nantick, MA)
THE PRODUCT
In the growing industrial PC market, the Company has found its niche by
designing, manufacturing and selling industrial PCs that are suitable for
hostile work environments. The Industrial Data Systems PCs are personal
computers incased in a way that "hardens" them to protect them from vibration,
heat, dust, moisture and in some cases electrical flux.
The Company has two main products which are similar but do not compete with
each other. The "Safecase 4000", intended for industrial use, is a product for
extremely hostile environments while the "Powercase 8000" has a lower cost and
unlimited uses but is not quite so durable in hostile environments. The Company
sees huge opportunities for the "Powercase 8000", intended for commercial use,
as various software applications evolve.
THE COMPETITION
The Company recognizes that there are larger better capitalized firms in
the industrial PC business but believes its products to be highly competitive in
the current market environment. The Company believes it can be a "niche"
player and target particularly harsh environments and develop new software
applications for the "Powercase 8000".
The Company will endeavor to seek strategic alliances of acquisitions to
assist towards this objective.
Currently the Company holds no patents or trademarks on its products but is
in the process of securing trademarks for the hardened industrial computer
design and the name Industrial Data Systems. Although the Company is currently
in the process of obtaining trademarks, no assurance or guarantee can be made at
this time that the Company trademarks will be granted. As such, any investment
in the Company shall not be done in reliance upon the Company obtaining the
above trademarks.
MARKETING
The Company will market its products in three ways.
First: The Company will market to trade shows focussing on the
construction and industrial conventions and trade shows. Because of the large
number of such shows in Las Vegas, the Company sees a golden opportunity upon
which it can market its product.
Second: The Company will use advertising in trade journals and
publications. Such advertising should generate orders as well as leads for the
Company's third area of marketing which utilized direct sales representatives.
Third: Direct Sales Representatives. These representatives will follow
leads from magazine and trade journal ads and market directly to end users as
well as wholesalers.
11
<PAGE>
Numerous studies have shown Texas and Nevada to be two of the fastest
growing states in the nation. Being located in both states will afford the
Company the opportunity to market to these fast growing areas with their
numerous construction projects.
PRODUCT MANUFACTURING
The Company operates a manufacturing facility in its Texas location and
will explore locating such a facility in southern Nevada if sales justify such a
venture. If this were to occur, such cost would be borne by the Company and
could negatively affect corporate earnings.
PRODUCT DEVELOPMENT
Because of the Company's limited capital, product development will mainly
focus on new applications for the "Powercase 8000".
The Company hopes revenues and strategic alliances develop that will allow
the Company more opportunity for new product development but no assurance can be
given that this will occur.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of the
date of this Offering Memorandum and adjusts to reflect the issuance of all
shares offered hereby:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
OUTSTANDING OUTSTANDING
IF MINIMUM IF MAXIMUM
TITLE OF CLASS AUTHORIZED OUTSTANDING SHARES SOLD SHARES SOLD
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Common Stock $.001 Par Value......... 75,000,000 9,500,000 9,750,000 10,000,000
</TABLE>
No assurance can be given that any number of shares offered herein will be sold.
DESCRIPTION OF COMMON STOCK
The capital stock of the Company consists of 75,000,000 authorized shares
of common stock with a par value of one mill ($.001) per share, 9,500,000 shares
of which are issued and outstanding on the date hereof. The offering to the
public by this Offering Memorandum is 500,000 shares of common stock at a price
of $.30 per share with a par value of one mill ($.001) per share. The shares are
all of one class, common, with like rights and privileges. Each share is
entitled to participate equally in dividends and distributions declared by the
Company. Each share is entitled to one (1) vote on each matter for which
shareholders are entitled to vote. The shares of common voting stock, when
issued and paid for, shall be fully paid and non-assessable and will have no
preference, preemptive, conversion or exchange rights. The Company has no senior
securities or long-term debt authorized, issued or outstanding, and has no
present intention of issuing either such security or debt instrument. All voting
is non-cumulative. Accordingly, the holders of more than fifty percent (50%) of
the shares of the Company's common stock will be able to elect all
representatives to the Board of Directors, and holders of less than fifty
percent (50%) will not be able to elect any of the members of the Board of
Directors.
OPTIONS, WARRANTS OR CALLS
There are no issued or outstanding options, warrants or calls entitling any
person to purchase any shares of the Company's common stock. The Company may,
however, adopt a plan in the future, pursuant to which options, warrants or
calls would be an incentive to attract and maintain their services on behalf of
the Company.
Presently, the Company has no agreement or understanding, expressed or
implied, with anyone concerning such options, warrants or calls entitling the
future purchase of the Company's common voting stock, and any such plan will
first be submitted to the stockholders of the Company for their approval before
becoming effective.
SHARES ELIGIBLE FOR FUTURE SALE
All of the 9,500,000 Shares of Common Stock which is owned by William A.
Coskey and Hulda L. Coskey issued in reliance on the "private placement"
exemption under the Securities Act of 1933, as amended (the "Act"). Such
shares will not be available for sale in the open market without registration
except in reliance upon Rule 144 under the Act. In general, under Rule 144 a
person (or persons whose shares are aggregated) who has beneficially owned
shares acquired in a non-public transaction for at least two years, including
persons who may be deemed "affiliates" of the Company, as that term is defined
under the Act, would be entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock, or the average weekly reported trading volume on all
national securities exchanges and through NASDAQ during the four calendar weeks
preceding such sale, provided that certain current public information is then
available. In August, 1996, all of the shares of Common Stock acquired by the
initial shareholders may be eligible for public sale under Rule 144 subject to
the foregoing restrictions. If a substantial number of the shares owned by the
initial shareholders were sold pursuant to Rule 144 or registered offering, the
market price of the Common Stock could be adversely affected.
13
<PAGE>
COMPANY POLICIES
DIVIDENDS
The Company is a new corporation and no assurance can be given that it will
generate earnings on which cash dividends can be paid. If cash earnings are
generated, management intends to follow policy of retaining all such earnings to
finance the development of its business. It is expected that this policy will be
maintained as long as necessary to provide funds for the Company's operations.
Any dividends that may be paid in the future will be dependent upon the earnings
and financial requirements of the Company and all other relevant factors.
ANNUAL REPORTS
The Company has initially elected a December 31 calendar year-end.
Thereafter, the Company will furnish its shareholders with annual reports
containing unaudited financial statements within ninety (90) days after the
Company's year-end. From time to time, the Company may also furnish its
stockholders with such other information as it may deem appropriate, relative to
the business operations of the Company. Such information may include news of a
change of management, purpose and control of the Company, or any material
condition affecting the Company. The Company may change its tax year, accounting
methods and procedures according to its business needs.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The names, ages and positions of the executive officers and directors of
the Company are as follows:
NAME AGE POSITION
- ------------------------------------- --- ---------------------------------
William A. Coskey.................... 41 President & Chairman of the Board
of Directors
Hulda L. Coskey...................... Chief Financial/Operations Officer
39 Secretary/Treasurer
Joe F. Moore, Jr..................... 41 Board of Directors
David W. Gent, P.E................... 41 Board of Directors
WILLIAM A. COSKEY has served as Chairman of the Board and President of
Industrial Data Systems (a Texas corporation) since its inception in September,
1985. From 1984 to 1985, Mr. Coskey served as Manager of Corporate Development
for Keystone International Inc. a NYSE listed company. In this position, he was
responsible for Keystone's merger and acquisition activities. From 1979 to 1984,
Mr. Coskey was president of Syntech Associates, Inc., an engineering services
company located in Houston, Texas. From 1975 to 1979, Mr. Coskey was a Project
Manager for Texas, Inc. and responsible for pipeline and petrochemical related
projects.
HULDA L. COSKEY has served as Chief Financial/Operations Officer of the
Company since its creation. Prior to that time, and since 1985, Mrs. Coskey was
Vice President and Secretary/Treasurer of Industrial Data Systems, Inc. (a Texas
corporation). Her primary responsibilities were to develop and initiate
procedures for daily operations of the Company and oversee those operations,
including but not limited to all Accounting, Finance, and Personnel functions.
From 1972 to 1982 Mrs. Coskey was involved in the credit industry as an Officer
at various banks in the Houston area. Mrs. Coskey is the spouse of William A.
Coskey, President and CEO.
JOE F. MOORE, JR. has served as a Director for the Company since its
creation. Mr. Moore for the last 10 years has been a Financial Consultant in
Houston, Texas. Because of his knowledge in business, Mr. and Mrs. Coskey
nominated and elected Mr. Moore to sit on the Board.
DAVID W. GENT, P.E. has served as a Director for the Company since its
creation. Mr. Gent is presently responsible for the Engineering, Data
Processing, Quality Control and Purchasing Departments of Bray International,
Inc. since 1991. From 1986-1991 he founded as well as served as President of
SofTest Design Corporation an electronic test equipment company. From 1981-1986,
Mr. Gent served as General
14
<PAGE>
Manager, at Keystone International, Inc., in the Controls Division of $6,000,000
manufacturer of flow control products. From 1975 to 1981, Mr. Gent held several
managerial positions at Southwestern Bell, all in the technical communication
field.
STOCK
OWNERSHIP AND CONTROL
As of the date of this Offering Memorandum, there were 9,500,000 shares of
Common Stock issued and outstanding which are owned entirely by William A.
Coskey and Hulda L. Coskey, the Company's president and secretary, who are
husband and wife. These shares were acquired in a tax-free exchange for 100% of
the shares of Industrial Data Systems, Inc. (of Texas) (See "Certain
Transactions").
All of these shares were acquired on August 1st, 1994. The transfer and
sale of all of these shares is restricted under S.E.C. Rule 144, which prohibits
the sale of these restricted securities for a minimum of two years from date of
issuance. (See previous section "Shares Eligible for Future Sale").
The following table sets forth the ownership of common stock of the Company
on the date of this Offering Memorandum by all officers, directors, affiliates
and owners of more than 5% of the Company's Common stock:
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
NAME & ADDRESS SHARES OWNED IF MINIMUM IF MAXIMUM
OF PRINCIPAL PRIOR TO SHARES ARE SHARES ARE
SHAREHOLDER OFFERING SOLD SOLD
- ------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Coskey.................... 9,500,000 100% 9,500,000 98% 9,500,000 95%
& Hulda L. Coskey
14900 Woodham #170
Houston, TX 77073
All officers &....................... 9,500,000 100% 9,500,000 98% 9,500,000 95%
Directors as a
group
</TABLE>
CERTAIN TRANSACTIONS
On August 1st, 1994, all of the issued and outstanding shares of Industrial
Data Systems Inc. (Texas) were acquired by Industrial Data Systems Corporation,
a Nevada Corporation duly incorporated in June of 1994 in a tax-free exchange of
Common Stock. All 9,500,000 Shares issued in this transaction were issued to
William A. Coskey and Hulda L. Coskey who are President and Secretary of both
Companies. The management team and ownership of both Companies are essentially
one in the same.
The Company used audited financial statements dated June 30, 1994 to
provide financial information contained in the exhibits at the end of this
Offering Memorandum. The 9,500,000 shares discussed in this section represents
all of the issued and outstanding shares of the new company. Mr. and Mrs. Coskey
were the sole owners of Industrial Data Systems Inc. of Texas prior to the
Company's acquisition of Industrial Data Systems Corp. of Nevada hence there is
no apparent conflict of interest in the aforementioned transactions. Mr. and
Mrs. Coskey believe all material facts of the acquisition to be done in
accordance with the state laws of Nevada and Texas.
CONFLICTS OF INTEREST
It is the opinion of management that no conflict of interest existed in the
transaction discussed in the section prior as the beneficial ownership was not
effected.
Management will endeavor to uphold the highest of standards in all future
dealings.
The Company's management may become involved in other business entities
which may create conflicts of interest with respect to the Company's activities
and unforeseen conflicts of interest could develop. In such an event, it would
be expected of the original incorporators to resolve said conflicts of
15
<PAGE>
interest in the best interest of the Company. Although it is not contemplated,
the Company may become involved in joint ventures or acquisitions with or from
companies which are controlled by or otherwise associated with the Company's
management. If such transactions do occur, they will be handled on terms and
conditions which would prevail in an "arms-length" transaction. If such
transactions do occur, it is expected that management of the Company will ask
for shareholders' approval or ratification of said transactions, or will have
such transactions approved by majority of the disinterested members of the Board
of Directors. Failure by the Company to conduct its business in the best
interest of the Company could result in liability upon the Company's officers,
directors and controlling persons under Nevada State Laws.
FIDUCIARY RESPONSIBILITY OF THE OFFICERS AND DIRECTORS
The officers and directors have a fiduciary responsibility to the
shareholders and others to exercise good faith and integrity in matters
involving the Company.
The shareholders retain rights to inspect the Company's books and records.
Should there be a breach of fiduciary responsibility to shareholders, they may
seek remedy in a court of law.
The officers and directors of the Company are not responsible for errors in
judgement or acts of omission which do not constitute fraud or a knowing
violation of the law. Additionally, the officers and directors are indemnified
for liability suffered by them while acting in the Company's behalf unless they
were knowingly violating a law. Therefore, shareholders may have a more limited
right of action then otherwise afforded by law.
In the opinion of the S.E.C., indemnification for liabilities arising under
the Securities Act of 1933 is contrary to public policy and therefore
unenforceable.
REMUNERATION
Mr. William A. Coskey and Mrs. Hulda C. Coskey both will receive salaries
from the Company. Mr. Coskey's salary will be $72,000 and Mrs. Coskey's salary
will be $48,000 per year. The Company will maintain a policy of scheduled annual
salary reviews with adjustments based on performance. The Company will provide
bonuses to employees including management based on profitability.
PLAN OF DISTRIBUTION
The securities described in this Memorandum may be offered only in the
State of Nevada. The Company will sell a minimum of 250,000 and a maximum of
500,000 shares of its Common Stock, par value $.001 per Share, to the public on
a "best efforts" basis, at the public offering price. There can be no
assurance that any of these Shares will be sold. If the Company fails to sell
250,000 Shares within the offering period of one year from the date of this
Memorandum, the Offering will be terminated and the subscription payments will
be promptly refunded in full to subscribers, without paying interest or
deducting expenses.
At such time as the escrow agent receives in good funds a minimum of
$75,000, the proceeds of this offering will be made available to the Company.
While funds are held in escrow, subscribers will not receive interest or have
the right of use of such funds and this period may last for up to one calendar
year.
Shares offered hereby are subject to prior sale and the Company reserves
the right to reject all or part of any subscription.
RESTRICTIONS ON SUBSCRIBING AND RESALE
Shares offered hereby are registered in the state of Nevada to bona fide
Nevada residents or entities or to persons whose dealings with regard to this
Offering have taken place within the state of Nevada.
Such being the case, the Common Stock offered hereby has not been
registered under the Securities Act of 1933 as amended. Restrictions on the
resale of such Common Stock may be imposed by state Blue Sky Laws or Federal
Securities Laws.
16
<PAGE>
SALES AGENT
Leisa C. Stilwell is the registered sales agent for the Company for which
she will receive a commission of 5% at such time as escrowed funds are released.
Should the Offering fail to meet the minimum subscription in the amount of
$75,000, no commission will be paid.
Leisa C. Stilwell is the only person authorized to solicit or sell the
shares offered herein.
TO SUBSCRIBE
Investors wishing to purchase shares offered hereby should carefully read
the entire Offering Memorandum with particular attention to "RISK FACTORS."
Prospective investors will represent to the Company at the time of subscription
on the subscription agreement that they have read and understand the Offering
Memorandum and that they can bear the risk of loss of their entire investment
and that they are either a Nevada Resident or subscribed for shares within the
state of Nevada.
To subscribe, the subscription agreement must be completed and signed.
Checks should be made payable to:
SOUTHWEST ESCROW COMPANY
3430 East Flamingo, Suite #103
Las Vegas, Nevada 89121
where funds will be held until such time that the minimum or greater amount has
been received or the registration expiration date on the one year anniversary of
the effective date of this prospectus.
Should the Company be unable for any reason to complete the Offering, the
funds received will be returned in full to the investors.
LEGAL AND ACCOUNTING MATTER
Robert L. Bolick, Ltd., 3216 W. Charleston Boulevard, Suite B, Las Vegas,
Nevada 89102, is special legal counsel for the Company for purpose of
preparation of this Offering Memorandum.
The Certified Public Accountant of the Company is Hein & Associates, 5075
Westheimer, Suite 970, Houston, Texas 77056. They have prepared the accompanying
Audited Financial Statement. (See "Exhibit A").
LITIGATION
To the best knowledge of the Company, its officers, directors and founders,
neither the Company, its officers, directors or founders are party to any
material legal proceeding or litigation, nor is any contemplated as of the date
of this Offering Memorandum.
ADDITIONAL INFORMATION
The Company has filed with the Nevada Securities Division an application
for registration with respect to the securities offered hereby. That application
contains certain information, the majority of which is contained in this
Offering Memorandum, which investors may wish to review. Copies of all such
documents filed with the Nevada Securities Division are matters of public record
and may be inspected by the public during regular business hours.
Statements contained in this Offering Memorandum with respect to the
contents of any contract or documents described herein are not necessarily
complete, and where such contract or document is an exhibit to the application
is qualified in all respects by the provisions or such exhibit to which
reference is hereby made for full statement of the provisions thereof.
The stockholders will be promptly notified in writing of any material
change in the management purposes and control of the corporation, or any
material or adverse condition affecting the corporation.
17
<PAGE>
FINANCIALS
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
FINANCIAL STATEMENT AND
INDEPENDENT AUDITOR'S REPORT
JUNE 30, 1994
<PAGE>
HEIN + ASSOCIATES
Certified Public Accountants and Consultants
with offices in Denver, Dallas and Los Angeles.
5075 Westheimer, Suite 970
Houston, Texas 77056
Telephone (713) 850-9814
Telecopier (713) 850-0725
INDEPENDENT AUDITOR'S REPORT
July 26, 1994
Board of Directors and Stockholders
Industrial Data Systems Corporation
We have audited the accompanying balance sheet of Industrial Data Systems
Corporation as of June 30, 1994. This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Industrial Data Systems Corporation
as of June 30, 1994, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES
HEIN + ASSOCIATES
Certified Public Accountants
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
BALANCE SHEET
JUNE 30, 1994
ASSETS
Current asset -- cash................... $ 4,000
Organization costs...................... 500
Deferred financing costs................ 5,000
---------
$ 9,500
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Commitments (Notes 1 and 3)
Stockholders' equity -- common stock,
.001 par value; 75,000,000 shares; no
shares issued; subscription to acquire
100,000 shares of common stock........ $ 9,500
=========
See notes to financial statement.
2
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENT
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY: Industrial Data Systems Corporation (the Company), was
incorporated on June 22, 1994. The Company was organized to consummate the
acquisition of Industrial Data Systems, Inc. (IDS). IDS is a manufacturer of
industrial and portable computers and computer monitors. The acquisition of IDS
will be accounted for as a reverse acquisition, whereby, for accounting
purposes, IDS will be deemed to be the acquiror of the Company.
NOTE 2 -- STOCKHOLDERS' EQUITY
The stockholders of the Company contributed $4,000 to the Company and paid
organization and financing costs amounting to $5,500 on behalf of the Company in
exchange for 100,000 shares of its common stock. As of June 30, 1994, the common
stock had not been issued.
NOTE 3 -- INVESTMENT BANKING AND CONSULTING AGREEMENT
The Company has entered into an agreement under which another company will
act as a broker and/or finder in connection with obtaining financing for the
Company and to assist the Company in the orchestration of a public offering. The
total estimated costs to be paid under this contract amount to $25,000. As of
June 30, 1994, $5,000 has been paid to such company.
3
<PAGE>
INDUSTRIAL DATA SYSTEMS, INC.
DBA IDS TECHNICAL SERVICES
FINANCIAL STATEMENT AND
INDEPENDENT AUDITOR'S REPORT
JUNE 30, 1994
<PAGE>
HEIN + ASSOCIATES
Certified Public Accountants and Consultants
with offices in Denver, Dallas and Los Angeles.
5075 Westheimer, Suite 970
Houston, Texas 77056
Telephone (713) 850-9814
Telecopier (713) 850-0725
INDEPENDENT AUDITOR'S REPORT
June 18, 1994
Board of Directors and Stockholders
Industrial Data Systems, Inc.
dba IDS Technical Services
We have audited the accompanying balance sheet of Industrial Data Systems,
Inc. dba IDS Technical Services as of June 30, 1994. This financial statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Industrial Data Systems, Inc. dba
IDS Technical Services as of June 30, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the balance sheet, the Company's investment in
real estate limited partnerships amounting to $82,616 was valued based upon a
valuation of the underlying real estate prepared by a commercial real estate
broker as opposed to a qualified real estate appraiser. We have reviewed the
aforementioned valuation and underlying documentation, and in the circumstances,
we believe the valuation to be reasonable. However, because of the inherent
uncertainty valuation, the commercial real estate broker's valuation of the
underlying real estate may differ significantly from the actual fair market
value of such real estate, and the differences could be material.
HEIN + ASSOCIATES
HEIN + ASSOCIATES
Certified Public Accountants
<PAGE>
INDUSTRIAL DATA SYSTEMS, INC.
DBA IDS TECHNICAL SERVICES
BALANCE SHEET
JUNE 30, 1994
ASSETS
Current assets:
Cash............................... $ 165,348
Marketable securities:
Trading....................... 161,456
Available for sale............ 87,177
----------
248,633
Account receivable -- trade, less
allowance for doubtful accounts of
$24,953........................... 180,301
Inventory.......................... 80,783
Note receivable.................... 10,571
----------
Total current assets..... 685,636
----------
Property and equipment, net............. 20,088
Other assets:
Advances to affiliate.............. 9,500
Investments in real estate limited
partnerships...................... 82,616
Other.............................. 16,199
----------
108,315
----------
Total assets............. $ 814,039
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank............... $ 20,000
Demand notes due brokers
collateralized by marketable
securities........................ 40,949
Accounts payable................... 29,996
Accrued expenses and other current
liabilities....................... 25,088
----------
Total current
liabilities.............. 116,033
----------
Commitments (Note 6)
Stockholders' equity:
Net unrealized gain on marketable
securities........................ 2,442
Common stock, no par value;
1,000,000 shares authorized;
200,000 shares issued and
outstanding....................... 2,500
Retained earnings.................. 693,064
----------
Total stockholders'
equity................... 698,006
----------
Total liabilities and
stockholders' equity..... $ 814,039
==========
See notes to financial statements.
2
<PAGE>
INDUSTRIAL DATA SYSTEMS, INC.
DBA IDS TECHNICAL SERVICES
NOTES TO FINANCIAL STATEMENT
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY: Industrial Data Systems, Inc. dba IDS Technical
Services (the Company), which was formed in September 1985, is a manufacturer of
industrial and portable computers and computer monitors.
INVENTORY: Inventory is composed of computer components and finished goods
and is carried at the lower of cost or market value. The majority of inventory
at June 30, 1994 consisted of computer components.
MARKETABLE SECURITIES: Marketable securities to be held to maturity are
stated at amortized cost. Marketable securities classified as available for sale
are stated at market value, with unrealized gains and leases reported as a
separate component of stockholders' equity. If a decline in market value is
determined to be other than temporary, any such loss is charged to earnings.
Trading securities are stated at market value, with unrealized gains and losses
recognized in earnings.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost,
adjusted for accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the related assets,
which range from five to seven years.
INVESTMENTS IN REAL ESTATE LIMITED PARTNERSHIPS: Investments in real
estate limited partnerships are carried at the lower of cost or fair market
value of the underlying real estate based upon a valuation prepared by a
commercial real estate broker.
INCOME TAXES: The Company has elected Subchapter S corporation status
under the Internal Revenue Code. In lieu of corporate taxes, the stockholders of
an S corporation are taxed on their proportionate share of the Company's taxable
income.
NOTE 2 -- MARKETABLE SECURITIES
Marketable securities at June 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
FAIR
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Trading:
Common stocks................... $ 169,952 $ 8,472 $ (46,512) $131,552
Other........................... 25,000 4,904 -- 29,904
---------- ----------- ----------- --------
$ 194,592 $13,376 $ (46,512) $161,456
========== =========== =========== ========
Available for sale:
Mutual fund..................... $ 4,524 $ -- $ -- $ 4,524
Corporate bonds................. 36,992 -- (2,813) 34,179
Municipal Bond.................. 43,219 5,255 -- 48,474
---------- ----------- ----------- --------
$ 84,735 $ 5,255 $ (2,813) $ 87,177
========== =========== =========== ========
</TABLE>
3
<PAGE>
INDUSTRIAL DATA SYSTEMS, INC.
DBA IDS TECHNICAL SERVICES
NOTES TO FINANCIAL STATEMENT
NOTE 2 -- MARKETABLE SECURITIES (CONTINUED)
Contractual maturities of the municipal and corporate bonds are as follows:
FAIR
MARKET
COST VALUE
------- -------
Due in one year or less................. $43,219 $48,474
Due after one year through five years... 10,292 10,077
Due after five years through ten
years................................. 8,504 8,176
Due after ten years..................... 18,196 15,926
------- -------
$80,211 $82,653
======= =======
NOTE 3 -- NOTE RECEIVABLE
The note receivable consists of a demand note due from a former employee of
the Company. The note is unsecured and bears interest at 5% per annum.
NOTE 4 -- ADVANCES TO AFFILIATE
The Company paid certain organization and consulting fees totaling $9,500
on behalf of a corporation related by common ownership. The advances, which do
not bear interest and have no defined repayment terms, are carried as advances
to affiliate in the accompanying balance sheet.
NOTE 5 -- NOTE PAYABLE TO BANK
The Company has a line of credit with a bank of $75,000 at prime plus 1%
(8.25% at June 30, 1994). The line of credit, which expires on February 28,
1995, is collateralized by inventory and is guaranteed by the stockholders of
the Company. Borrowings outstanding under the line of credit at June 30, 1994
were $20,000.
NOTE 6 -- LEASE
The Company leases office space under a noncancelable operating lease.
Future minimum rentals due under the lease are as follows:
YEAR ENDING JUNE 30,
- ----------------------------------------
1995............................... $ 30,262
1996............................... 31,612
1997............................... 18,900
---------
$ 80,744
=========
4
<PAGE>
INDUSTRIAL DATA SYSTEMS, INC.
DBA IDS TECHNICAL SERVICES
NOTES TO FINANCIAL STATEMENT
NOTE 7 -- PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan covering substantially all
employees. Under the terms of the plan, the Company will make matching
contributions equal to 50% of employee contributions up to 3% of employee
compensation, as defined. Employees may make contributions up to 15% of their
compensation, subject to certain maximum contribution limitations.
NOTE 8 -- MAJOR CUSTOMERS
The Company had amounts due from an integrated oil and gas exploration and
marketing company of $116,785 as of June 30, 1994. No other customers had
amounts in excess of 15 percent of trade accounts receivable.
5
<PAGE>
OFFER TO PURCHASE AND SUBSCRIPTION AGREEMENT
INDUSTRIAL DATA SYSTEMS CORPORATION
(A NEVADA CORPORATION)
4350 E. SUNSET ROAD #101
HENDERSON, NEVADA 89014
702-451-7218
1. OFFER TO PURCHASE: The undersigned offeror(s) (individually or
collectively referred to as"subscriber") makes the following offer for the
purchase of shares of INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation
(the "Company"). With this document, the subscriber is submitting the sum of
$ as payment for shares upon acceptance of this offer.
2. REPRESENTATION: The subscriber hereby represents and warrants that:
a. The subscriber, if a natural person, is over the age of twenty-one
(21) years.
b. The subscriber has received and read a copy of the Offering
Memorandum of INDUSTRIAL DATA SYSTEMS CORPORATION. No other representations
are being relied on in making this offer.
c. The subscriber acknowledges that this investment involves a high
degree of risk. Subscriber acknowledges that there are other risks of
investment, as described in the Offering Memorandum. The subscriber
acknowledges that he/she has reviewed the suitability of this investment to
his/her personal situation and is willing and able to bear the economic
risk of this investment. In making this statement, consideration has been
given to whether he/she could afford to hold the shares for an indefinite
period, and whether he/she could afford a complete loss of the investment.
Subscriber acknowledges that the Company and its agents and representatives
have made no representation that any dividends will be paid for the shares
or that the investment will be profitable.
d. The subscriber acknowledges that the shares have not been
registered with the U.S. Securities and Exchange Commission ("S.E.C.")
under the Securities Act of 1933, as amended, or in any jurisdiction other
than Nevada, that the Company does not intend to register the shares with
the S.E.C. or in any jurisdiction other than Nevada, and that subscriber
has no right to require such registration.
e. The subscriber acknowledges that neither the Nevada Securities
Division, the S.E.C., nor any other state, federal or foreign government
agency has made any determination as to the merits of purchasing any such
shares.
f. The subscriber acknowledges that the Company is attempting to
qualify for an exemption from federal registration requirements and that if
all requirements of such exemption are not met, a liability for failing to
register could be created, thereby affecting the Company and its
shareholders.
g. The subscriber acknowledges that the application for purchases may
be accepted in whole or in part or rejected by the Company, and that the
Offering is subject to prior sales.
h. The subscriber acknowledges that the shares cannot be sold outside
of the State of Nevada without registration and/or qualification under any
applicable state, federal, or foreign government securities laws or
exemptions from such laws.
i. The subscriber has conducted all dealings with respect to the
Offering solely within the State of Nevada. Without limitation of the
foregoing, and except that subscriber may have been invited to a meeting
for the purpose of discussing an investment opportunity, the subscriber has
not received a copy of the Offering Memorandum outside the State of Nevada;
has received no written information concerning the substance of the
Offering outside the State of Nevada; has had no discussions, whether by
telephone or verbally, concerning the substance of the Offering with anyone
outside the State of Nevada; and has had no correspondence with anyone
whatsoever relating to the substance of the Offering outside the State of
Nevada. In addition, the subscriber has not been informed of any of the
following outside the State of Nevada: (1) the name of the Company; (2) the
nature of its business; (3) any information concerning the financial
condition of the Company, including assets, liabilities, revenues,
properties and capital structure; (4) the identification and background of
its management; (5)
1
<PAGE>
any terms of the proposed Offering, including its size or the price per
share; or (6) the proposed future activities of the Company; and the only
discussion which the subscriber has heard or participated in as to the
Offering is such discussions as may have taken place in the State of
Nevada. If the signatory is signing this agreement on behalf of a
corporation, partnership, trust or other form of business organization, the
signatory further represents that he/she has ascertained, and hereby
assures the Company, that no other individual associated in any such way
with such entity (whether as director, officer, partner, employee, agent,
shareholder or beneficial owner of any nature whatsoever has had any such
dealings, communications, correspondence or discussions of any nature
whatsoever with anyone with respect to the Offering which have taken place
outside the State of Nevada and has not received outside the State of
Nevada any such verbal or written information of any nature whatsoever
(including, without limitation, a copy of the Offering Memorandum)
concerning the Offering.
j. The subscriber is not purchasing the shares for the account of, or
for the beneficial interest of, or with the intent to transfer any such
shares to, any party other than the purchaser.
3. AFFIRMATION OF PLACE OF OFFER AND SALE: As an inducement to the
Company to accept this offer, the subscriber represents and warrants that he/she
has offered to purchase the shares within the State of Nevada and that such sale
has occurred within the State of Nevada. Additionally, the subscriber hereby
represents that the purchaser is qualified to purchase the shares on the
following basis (initial and complete the applicable provisions):
(a) The subscriber is a natural
person who is a resident of the State
of Nevada and maintains his/her
principal residence at
(b) The subscriber has consummated
the purchase of shares within the
State of Nevada.
(c) The subscriber is a corporation,
partnership, trust or other form of
business organization (describe)
not formed for the purpose of
acquiring shares, which has its
principal office within the State of
Nevada at
(d) the subscriber is a corporation,
partnership, trust or other form of
business formed for the purpose of
acquiring shares, but which has its
principal office within the State of
Nevada at
and all of whose beneficial owners or
residents of the State of Nevada
(names and principal residence
addresses of all beneficial owners):
4. TITLE TO SHARES: Title to shares will be held as follows:
Name(s) held in: ______________________________________________________________
__ Community Property __ Tenants in Common
__ Community Property with Survivorship __ Married, Separate Property
__ Joint Tenants, with Right of __ Single Person, Separate Property
Survivorship
__ Other (Corporation, Trust, etc. Please indicate).
2
<PAGE>
THE UNDERSIGNED HEREBY SWEARS AND AFFIRMS THAT HE/SHE HAS READ THE
FOREGOING OFFERING MEMORANDUM OF INDUSTRIAL DATA SYSTEMS CORPORATION AND IS
FAMILIAR WITH THE CONTENTS THEREOF AND THAT THE REPRESENTATIONS CONTAINED HEREIN
ARE TRUE AND ACCURATE.
Subscriber (print name) Subscriber or Authorized Agent
of Subscriber
Subscriber signature Street Address
Tax Identification Number or Social City, State, Zip
Security Number of Subscriber
Phone
City where signed Date
ACCEPTED BY:
OFFICER OR DIRECTOR OF:
INDUSTRIAL DATA SYSTEMS CORPORATION
3
EXHIBIT 2.7
ACTION OF THE BOARD OF DIRECTORS OF
INDUSTRIAL DATA SYSTEMS CORPORATION
BY UNANIMOUS CONSENT
IN LIEU OF SPECIAL MEETING
July 10, 1996
The undersigned, constituting all of the current directors of INDUSTRIAL
DATA SYSTEMS CORPORATION (the "Corporation"), do, by this writing, consent to
adopt the following resolution:
RESOLVED, that the Corporation issue the following shares of common stock
of the Corporation for the consideration stated:
PURCHASER NO. SHARES CONSIDERATION
--------- ---------- -------------
Silver Course Corporation 833,333 Promissory Note in the amount of $333,333
with the principal due and payable on or
before October 10, 1996
World Glory Corporation 833,333 Promissory Note in the amount of $333,333
with the principal due and payable on or
before October 10, 1996
Asian Harvest 833,333 Promissory Note in the amount of $333,333
Developments Limited with the principal due and payable on or
before October 10, 1996
This Consent is executed pursuant to Section 78.315 of the Nevada Revised
Statutes Annotated and the Bylaws of this Corporation which authorizes the
taking any action which the Board may take at a meeting of Directors by
unanimous consent in lieu of special meeting.
/s/ WILLIAM A. COSKEY
William A. Coskey, Director
/s/ HULDA L. COSKEY
Hulda L. Coskey, Director
/s/ DAVID W. GENT
David W. Gent, Director
/s/ ROBERT MORELAND
Robert Moreland, Director
AGREEMENT FOR AMENDMENT AND SUBSTITUTION
OF SUBSCRIPTION AGREEMENT AND NOTES
WHEREAS, Silver Course Corporation, World Glory Company Limited, and Asian
Harvest Developments Ltd. purchased, respectively, 833,333 shares of common
stock of Industrial Data Systems Corporation pursuant to a Stock Purchase
Subscription Agreement dated July 15, 1996, and accepted on July 30, 1996, by
Industrial Data Systems Corporation; and
WHEREAS, the original three purchasers have agreed to adjust the number of
shares purchased by substituting Pines Intervest Corporation and Wilton Assets
Corp. as additional subscribers and purchasers in equal portions of the
originally subscribed shares, thereby four would purchase 500,000 shares and one
would acquire 499,999 shares; and
WHEREAS, Wilton Assets Corp. has signed a Stock Purchase Subscription
Agreement to purchase 499,999 shares in consideration for the delivery of a
Promissory Note in the amount of $199,999; and Pines Intervest Corporation has
agreed to purchase 500,000 shares and deliver a Promissory Note in the amount of
$200,000; and
WHEREAS, Silver Course Corporation World Glory Company Limited, and Asian
Harvest Developments Ltd. have agreed to delivery Stock Purchase Subscription
Agreements for 500,000 shares and Promissory Notes for $200,000, respectively,
as consideration for the purchase the shares.
NOW, THEREFORE, in consideration for the promises made and the actions
taken, Industrial Data Systems Corporation agrees to exchange the three
Promissory Notes in the amount of $333,333, respectively, made by Silver Course
Corporation, World Glory Company Limited, and Asian Harvest Developments Ltd.
for four Promissory Notes of $200,000 each, made by Silver Course Corporation,
World Glory Company Limited, Asian Harvest Developments Ltd., and Pines
Intervest Corporation, respectively, and one Promissory Note for $199,999 made
by Wilton Assets Corp., and each of the original subscribing companies will
submit certain of the certificates held by them for purposes of reissuing
500,000 shares to
Page 1 of 2
<PAGE>
Pines Intervest Corporation and 499,999 to Wilton Assets Corp.
Industrial Data Systems Corporation agrees to advise the transfer agent to
exchange the shares.
Executed this _________ day of __________________, 19___.
INDUSTRIAL DATA SYSTEMS CORPORATION
By /s/ WILLIAM A. COSKEY
SILVER COURSE CORPORATION
By /s/ CHRIS HARLESS
WORLD GLORY COMPANY LIMITED
By /s/ CHRIS HARLESS
ASIAN HARVEST DEVELOPMENTS LTD.
By /s/ CHRIS HARLESS
Page 2 of 2
INDUSTRIAL DATA SYSTEMS CORPORATION
STOCK PURCHASE SUBSCRIPTION AGREEMENT
TO: William A. Coskey, President
Industrial Data Systems Corporation
The undersigned subscriber ("Subscriber") hereby agrees to purchase
500,000 shares of the common stock (the "Stock") of Industrial Data Systems
Corporation (the "Corporation"), for the consideration stated on the signature
page of this Subscription Agreement. This Subscription Agreement is submitted to
the Corporation upon the following terms and conditions:
1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a
continuing offer and will stay open during the term of this offering but
not later than August 1, 1996 (unless extended), and is made subject to
the right of the Corporation to accept or reject the subscription, in
whole or in part, during the term of this offering.
2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to
purchase the Stock, and Subscriber agrees that this Subscription Agreement
will be governed by and construed in accordance with the laws of the State
of Nevada. The offer is made pursuant to Section 504 of the Regulation D.
3. RISK FACTORS. Subscriber understands that the purchase of the Stock
involves a high degree of risk. Each offeree should carefully consider the
risks and speculative factors inherent in this offering and affecting the
business of the Corporation.
4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents
and warrants to the Corporation that:
a. No offer, offer to sell, offer for sale, or prospect of sale was
made to the Subscriber by means of general solicitation or general
advertising, and the Subscriber (i) is familiar with the business
and affairs of the Corporation, (ii) has not been furnished any
offering literature or prospectus relating to the offering of the
Stock, other than the financial reports of the Corporation, and
(iii) has been furnished with all information including an adequate
opportunity to ask any questions of officers of the Corporation
concerning the Stock, the business and operations of the
Corporation, the use of proceeds and any other matter necessary for
the purpose of making an informed investment decision;
b. Subscriber, or the Subscriber's Representative or Financial Advisor,
has such knowledge and experience in financial and business matters
to evaluate the merits and risks of an investment in the Stock and
to make an informed investment decision with respect thereto;
<PAGE>
c. Subscriber understands and has conducted an independent review
evaluating the merits and risks of an investment in the Stock
including the potential tax consequences of such investment;
d. Subscriber, or the Subscriber's Representative or Financial Advisor,
has knowledge of finance, securities and investments generally, and
experience and skill in investments and business matters of the sort
encompassed by this transaction;
e. Subscriber is a person who is able to bear the economic risk of an
investment in the Corporation, can afford to hold the Stock for an
indefinite period and can afford a complete loss of the investment
in the Corporation for which Subscriber is hereby subscribing;
f. Subscriber recognizes that it is a speculative venture;
g. Subscriber understands that (i) no state or federal government
authority has made any finding or determination relating to the
fairness for investment of the Stock, and (ii) no state or federal
government authority has recommended or will recommend the
investment;
h. The foregoing representations and warranties shall be true and
accurate as of the date hereof and as of the date of delivery of the
Subscriber's payment of the Stock and shall survive such delivery.
5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation,
and each other subscriber for any loss, damage or liability incurred by
reason of any material breach of the Subscription Agreement or Promissory
Note by Subscriber or if any of the representations and warranties of
Subscriber made herein are proven false in any material respect.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Subscription Agreement, or a breach thereof, including any claims based on
allegations of fraud, misrepresentation or breach of fiduciary duty, shall
be settled by arbitration under the laws of the State of Nevada, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
7. DOCUMENTS BEING TENDERED.
a. Subscriber hereby subscribes and delivers herewith the following
documents:
i. One completed copy of this Subscription Agreement;
ii. One Promissory Note in the principal amount of the purchase
price, payable on or before 90 days from the date of issue.
<PAGE>
b. Corporation shall exchange for the Promissory Note certificates
representing the shares. These certificates will be without
restrictive legends and will be free trading.
8. MISCELLANEOUS.
a. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid to the
Subscriber at the address set forth below, or to the Corporation.
b. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
<PAGE>
SUBSCRIPTION
NUMBER OF SHARES....................................................... 500,000
PURCHASE PRICE......................................................... $200,000
CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM
ISSUE DATE OF THE SHARES.
WORLD GLORY COMPANY LIMITED
Please print here the exact name (registration)
Subscriber desires on records of Corporation.
This Subscription Agreement is executed this the 10th day of July, 1996.
WORLD GLORY COMPANY LIMITED
By /s/ CHRIS HARLESS
Chris Harless
Address: Palm Chambers No. 3
P.O. Box 3152
Road Town, Tortola
British Virgin Islands
ACCEPTANCE OF SUBSCRIPTION AGREEMENT
After reviewing this Subscription Agreement and taking all appropriate
steps to determine that Subscriber is a suitable investor as described herein,
the Corporation hereby accepts Subscriber as a purchaser of Stock.
Dated this 15th day of July, 1996.
INDUSTRIAL DATA SYSTEMS CORPORATION
By /s/ WILLIAM A. COSKEY
William A. Coskey, President
INDUSTRIAL DATA SYSTEMS CORPORATION
STOCK PURCHASE SUBSCRIPTION AGREEMENT
TO: William A. Coskey, President
Industrial Data Systems Corporation
The undersigned subscriber ("Subscriber") hereby agrees to purchase
500,000 shares of the common stock (the "Stock") of Industrial Data Systems
Corporation (the "Corporation"), for the consideration stated on the signature
page of this Subscription Agreement. This Subscription Agreement is submitted to
the Corporation upon the following terms and conditions:
1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a
continuing offer and will stay open during the term of this offering but
not later than August 1, 1996 (unless extended), and is made subject to
the right of the Corporation to accept or reject the subscription, in
whole or in part, during the term of this offering.
2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to
purchase the Stock, and Subscriber agrees that this Subscription Agreement
will be governed by and construed in accordance with the laws of the State
of Nevada. The offer is made pursuant to Section 504 of the Regulation D.
3. RISK FACTORS. Subscriber understands that the purchase of the Stock
involves a high degree of risk. Each offeree should carefully consider the
risks and speculative factors inherent in this offering and affecting the
business of the Corporation.
4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents
and warrants to the Corporation that:
a. No offer, offer to sell, offer for sale, or prospect of sale was
made to the Subscriber by means of general solicitation or general
advertising, and the Subscriber (i) is familiar with the business
and affairs of the Corporation, (ii) has not been furnished any
offering literature or prospectus relating to the offering of the
Stock, other than the financial reports of the Corporation, and
(iii) has been furnished with all information including an adequate
opportunity to ask any questions of officers of the Corporation
concerning the Stock, the business and operations of the
Corporation, the use of proceeds and any other matter necessary for
the purpose of making an informed investment decision;
b. Subscriber, or the Subscriber's Representative or Financial Advisor,
has such knowledge and experience in financial and business matters
to evaluate the merits and risks of an investment in the Stock and
to make an informed investment decision with respect thereto;
<PAGE>
c. Subscriber understands and has conducted an independent review
evaluating the merits and risks of an investment in the Stock
including the potential tax consequences of such investment;
d. Subscriber, or the Subscriber's Representative or Financial Advisor,
has knowledge of finance, securities and investments generally, and
experience and skill in investments and business matters of the sort
encompassed by this transaction;
e. Subscriber is a person who is able to bear the economic risk of an
investment in the Corporation, can afford to hold the Stock for an
indefinite period and can afford a complete loss of the investment
in the Corporation for which Subscriber is hereby subscribing;
f. Subscriber recognizes that it is a speculative venture;
g. Subscriber understands that (i) no state or federal government
authority has made any finding or determination relating to the
fairness for investment of the Stock, and (ii) no state or federal
government authority has recommended or will recommend the
investment;
h. The foregoing representations and warranties shall be true and
accurate as of the date hereof and as of the date of delivery of the
Subscriber's payment of the Stock and shall survive such delivery.
5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation,
and each other subscriber for any loss, damage or liability incurred by
reason of any material breach of the Subscription Agreement or Promissory
Note by Subscriber or if any of the representations and warranties of
Subscriber made herein are proven false in any material respect.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Subscription Agreement, or a breach thereof, including any claims based on
allegations of fraud, misrepresentation or breach of fiduciary duty, shall
be settled by arbitration under the laws of the State of Nevada, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
7. DOCUMENTS BEING TENDERED.
a. Subscriber hereby subscribes and delivers herewith the following
documents:
i. One completed copy of this Subscription Agreement;
ii. One Promissory Note in the principal amount of the purchase
price, payable on or before 90 days from the date of issue.
<PAGE>
b. Corporation shall exchange for the Promissory Note certificates
representing the shares. These certificates will be without
restrictive legends and will be free trading.
8. MISCELLANEOUS.
a. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid to the
Subscriber at the address set forth below, or to the Corporation.
b. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
<PAGE>
SUBSCRIPTION
NUMBER OF SHARES....................................................... 500,000
PURCHASE PRICE......................................................... $200,000
CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM
ISSUE DATE OF THE SHARES.
ASIAN HARVEST CORPORATION LIMITED
Please print here the exact name (registration)
Subscriber desires on records of Corporation.
This Subscription Agreement is executed this the 10th day of July, 1996.
ASIAN HARVEST CORPORATION LIMITED
By /s/ CHRIS HARLESS
Chris Harless
Address: Palm Chambers No. 3
P.O. Box 3152
Road Town, Tortola
British Virgin Islands
ACCEPTANCE OF SUBSCRIPTION AGREEMENT
After reviewing this Subscription Agreement and taking all appropriate
steps to determine that Subscriber is a suitable investor as described herein,
the Corporation hereby accepts Subscriber as a purchaser of Stock.
Dated this 15th day of July, 1996.
INDUSTRIAL DATA SYSTEMS CORPORATION
By /s/ WILLIAM A. COSKEY
William A. Coskey, President
INDUSTRIAL DATA SYSTEMS CORPORATION
STOCK PURCHASE SUBSCRIPTION AGREEMENT
TO: William A. Coskey, President
Industrial Data Systems Corporation
The undersigned subscriber ("Subscriber") hereby agrees to purchase
500,000 shares of the common stock (the "Stock") of Industrial Data Systems
Corporation (the "Corporation"), for the consideration stated on the signature
page of this Subscription Agreement. This Subscription Agreement is submitted to
the Corporation upon the following terms and conditions:
1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a
continuing offer and will stay open during the term of this offering but
not later than August 1, 1996 (unless extended), and is made subject to
the right of the Corporation to accept or reject the subscription, in
whole or in part, during the term of this offering.
2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to
purchase the Stock, and Subscriber agrees that this Subscription Agreement
will be governed by and construed in accordance with the laws of the State
of Nevada. The offer is made pursuant to Section 504 of the Regulation D.
3. RISK FACTORS. Subscriber understands that the purchase of the Stock
involves a high degree of risk. Each offeree should carefully consider the
risks and speculative factors inherent in this offering and affecting the
business of the Corporation.
4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents
and warrants to the Corporation that:
a. No offer, offer to sell, offer for sale, or prospect of sale was
made to the Subscriber by means of general solicitation or general
advertising, and the Subscriber (i) is familiar with the business
and affairs of the Corporation, (ii) has not been furnished any
offering literature or prospectus relating to the offering of the
Stock, other than the financial reports of the Corporation, and
(iii) has been furnished with all information including an adequate
opportunity to ask any questions of officers of the Corporation
concerning the Stock, the business and operations of the
Corporation, the use of proceeds and any other matter necessary for
the purpose of making an informed investment decision;
b. Subscriber, or the Subscriber's Representative or Financial Advisor,
has such knowledge and experience in financial and business matters
to evaluate the merits and risks of an investment in the Stock and
to make an informed investment decision with respect thereto;
<PAGE>
c. Subscriber understands and has conducted an independent review
evaluating the merits and risks of an investment in the Stock
including the potential tax consequences of such investment;
d. Subscriber, or the Subscriber's Representative or Financial Advisor,
has knowledge of finance, securities and investments generally, and
experience and skill in investments and business matters of the sort
encompassed by this transaction;
e. Subscriber is a person who is able to bear the economic risk of an
investment in the Corporation, can afford to hold the Stock for an
indefinite period and can afford a complete loss of the investment
in the Corporation for which Subscriber is hereby subscribing;
f. Subscriber recognizes that it is a speculative venture;
g. Subscriber understands that (i) no state or federal government
authority has made any finding or determination relating to the
fairness for investment of the Stock, and (ii) no state or federal
government authority has recommended or will recommend the
investment;
h. The foregoing representations and warranties shall be true and
accurate as of the date hereof and as of the date of delivery of the
Subscriber's payment of the Stock and shall survive such delivery.
5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation,
and each other subscriber for any loss, damage or liability incurred by
reason of any material breach of the Subscription Agreement or Promissory
Note by Subscriber or if any of the representations and warranties of
Subscriber made herein are proven false in any material respect.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Subscription Agreement, or a breach thereof, including any claims based on
allegations of fraud, misrepresentation or breach of fiduciary duty, shall
be settled by arbitration under the laws of the State of Nevada, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
7. DOCUMENTS BEING TENDERED.
a. Subscriber hereby subscribes and delivers herewith the following
documents:
i. One completed copy of this Subscription Agreement;
ii. One Promissory Note in the principal amount of the purchase
price, payable on or before 90 days from the date of issue.
<PAGE>
b. Corporation shall exchange for the Promissory Note certificates
representing the shares. These certificates will be without
restrictive legends and will be free trading.
8. MISCELLANEOUS.
a. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid to the
Subscriber at the address set forth below, or to the Corporation.
b. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
<PAGE>
SUBSCRIPTION
NUMBER OF SHARES....................................................... 500,000
PURCHASE PRICE......................................................... $200,000
CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM
ISSUE DATE OF THE SHARES.
SILVER COURSE CORPORATION
Please print here the exact name (registration)
Subscriber desires on records of Corporation.
This Subscription Agreement is executed this the 10th day of July, 1996.
SILVER COURSE CORPORATION
By /s/ CHRIS HARLESS
Chris Harless
Address: Palm Chambers No. 3
P.O. Box 3152
Road Town, Tortola
British Virgin Islands
ACCEPTANCE OF SUBSCRIPTION AGREEMENT
After reviewing this Subscription Agreement and taking all appropriate
steps to determine that Subscriber is a suitable investor as described herein,
the Corporation hereby accepts Subscriber as a purchaser of Stock.
Dated this 15th day of July, 1996.
INDUSTRIAL DATA SYSTEMS CORPORATION
By /s/ WILLIAM A. COSKEY
William A. Coskey, President
INDUSTRIAL DATA SYSTEMS CORPORATION
STOCK PURCHASE SUBSCRIPTION AGREEMENT
TO: William A. Coskey, President
Industrial Data Systems Corporation
The undersigned subscriber ("Subscriber") hereby agrees to purchase
500,000 shares of the common stock (the "Stock") of Industrial Data Systems
Corporation (the "Corporation"), for the consideration stated on the signature
page of this Subscription Agreement. This Subscription Agreement is submitted to
the Corporation upon the following terms and conditions:
1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a
continuing offer and will stay open during the term of this offering but
not later than August 1, 1996 (unless extended), and is made subject to
the right of the Corporation to accept or reject the subscription, in
whole or in part, during the term of this offering.
2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to
purchase the Stock, and Subscriber agrees that this Subscription Agreement
will be governed by and construed in accordance with the laws of the State
of Nevada. The offer is made pursuant to Section 504 of the Regulation D.
3. RISK FACTORS. Subscriber understands that the purchase of the Stock
involves a high degree of risk. Each offeree should carefully consider the
risks and speculative factors inherent in this offering and affecting the
business of the Corporation.
4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents
and warrants to the Corporation that:
a. No offer, offer to sell, offer for sale, or prospect of sale was
made to the Subscriber by means of general solicitation or general
advertising, and the Subscriber (i) is familiar with the business
and affairs of the Corporation, (ii) has not been furnished any
offering literature or prospectus relating to the offering of the
Stock, other than the financial reports of the Corporation, and
(iii) has been furnished with all information including an adequate
opportunity to ask any questions of officers of the Corporation
concerning the Stock, the business and operations of the
Corporation, the use of proceeds and any other matter necessary for
the purpose of making an informed investment decision;
b. Subscriber, or the Subscriber's Representative or Financial Advisor,
has such knowledge and experience in financial and business matters
to evaluate the merits and risks of an investment in the Stock and
to make an informed investment decision with respect thereto;
<PAGE>
c. Subscriber understands and has conducted an independent review
evaluating the merits and risks of an investment in the Stock
including the potential tax consequences of such investment;
d. Subscriber, or the Subscriber's Representative or Financial Advisor,
has knowledge of finance, securities and investments generally, and
experience and skill in investments and business matters of the sort
encompassed by this transaction;
e. Subscriber is a person who is able to bear the economic risk of an
investment in the Corporation, can afford to hold the Stock for an
indefinite period and can afford a complete loss of the investment
in the Corporation for which Subscriber is hereby subscribing;
f. Subscriber recognizes that it is a speculative venture;
g. Subscriber understands that (i) no state or federal government
authority has made any finding or determination relating to the
fairness for investment of the Stock, and (ii) no state or federal
government authority has recommended or will recommend the
investment;
h. The foregoing representations and warranties shall be true and
accurate as of the date hereof and as of the date of delivery of the
Subscriber's payment of the Stock and shall survive such delivery.
5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation,
and each other subscriber for any loss, damage or liability incurred by
reason of any material breach of the Subscription Agreement or Promissory
Note by Subscriber or if any of the representations and warranties of
Subscriber made herein are proven false in any material respect.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Subscription Agreement, or a breach thereof, including any claims based on
allegations of fraud, misrepresentation or breach of fiduciary duty, shall
be settled by arbitration under the laws of the State of Nevada, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
7. DOCUMENTS BEING TENDERED.
a. Subscriber hereby subscribes and delivers herewith the following
documents:
i. One completed copy of this Subscription Agreement;
ii. One Promissory Note in the principal amount of the purchase
price, payable on or before 90 days from the date of issue.
<PAGE>
b. Corporation shall exchange for the Promissory Note certificates
representing the shares. These certificates will be without
restrictive legends and will be free trading.
8. MISCELLANEOUS.
a. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid to the
Subscriber at the address set forth below, or to the Corporation.
b. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
<PAGE>
SUBSCRIPTION
NUMBER OF SHARES....................................................... 500,000
PURCHASE PRICE........................................................ $200,000
CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM
ISSUE DATE OF THE SHARES.
PINES INTERVEST CORPORATION
Please print here the exact name (registration)
Subscriber desires on records of Corporation.
This Subscription Agreement is executed this the 10th day of July, 1996.
PINES INTERVEST CORPORATION
By /s/ SAMUEL BALLOU
Samuel Ballou
Address: Palm Chambers No. 3
P.O. Box 3152
Road Town, Tortola
British Virgin Islands
ACCEPTANCE OF SUBSCRIPTION AGREEMENT
After reviewing this Subscription Agreement and taking all appropriate
steps to determine that Subscriber is a suitable investor as described herein,
the Corporation hereby accepts Subscriber as a purchaser of Stock.
Dated this 15th day of July, 1996.
INDUSTRIAL DATA SYSTEMS CORPORATION
By /s/ WILLIAM A. COSKEY
William A. Coskey, President
INDUSTRIAL DATA SYSTEMS CORPORATION
STOCK PURCHASE SUBSCRIPTION AGREEMENT
TO: William A. Coskey, President
Industrial Data Systems Corporation
The undersigned subscriber ("Subscriber") hereby agrees to purchase
499,999 shares of the common stock (the "Stock") of Industrial Data Systems
Corporation (the "Corporation"), for the consideration stated on the signature
page of this Subscription Agreement. This Subscription Agreement is submitted to
the Corporation upon the following terms and conditions:
1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a
continuing offer and will stay open during the term of this offering but
not later than August 1, 1996 (unless extended), and is made subject to
the right of the Corporation to accept or reject the subscription, in
whole or in part, during the term of this offering.
2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to
purchase the Stock, and Subscriber agrees that this Subscription Agreement
will be governed by and construed in accordance with the laws of the State
of Nevada. The offer is made pursuant to Section 504 of the Regulation D.
3. RISK FACTORS. Subscriber understands that the purchase of the Stock
involves a high degree of risk. Each offeree should carefully consider the
risks and speculative factors inherent in this offering and affecting the
business of the Corporation.
4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents
and warrants to the Corporation that:
a. No offer, offer to sell, offer for sale, or prospect of sale was
made to the Subscriber by means of general solicitation or general
advertising, and the Subscriber (i) is familiar with the business
and affairs of the Corporation, (ii) has not been furnished any
offering literature or prospectus relating to the offering of the
Stock, other than the financial reports of the Corporation, and
(iii) has been furnished with all information including an adequate
opportunity to ask any questions of officers of the Corporation
concerning the Stock, the business and operations of the
Corporation, the use of proceeds and any other matter necessary for
the purpose of making an informed investment decision;
b. Subscriber, or the Subscriber's Representative or Financial Advisor,
has such knowledge and experience in financial and business matters
to evaluate the merits and risks of an investment in the Stock and
to make an informed investment decision with respect thereto;
<PAGE>
c. Subscriber understands and has conducted an independent review
evaluating the merits and risks of an investment in the Stock
including the potential tax consequences of such investment;
d. Subscriber, or the Subscriber's Representative or Financial Advisor,
has knowledge of finance, securities and investments generally, and
experience and skill in investments and business matters of the sort
encompassed by this transaction;
e. Subscriber is a person who is able to bear the economic risk of an
investment in the Corporation, can afford to hold the Stock for an
indefinite period and can afford a complete loss of the investment
in the Corporation for which Subscriber is hereby subscribing;
f. Subscriber recognizes that it is a speculative venture;
g. Subscriber understands that (i) no state or federal government
authority has made any finding or determination relating to the
fairness for investment of the Stock, and (ii) no state or federal
government authority has recommended or will recommend the
investment;
h. The foregoing representations and warranties shall be true and
accurate as of the date hereof and as of the date of delivery of the
Subscriber's payment of the Stock and shall survive such delivery.
5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation,
and each other subscriber for any loss, damage or liability incurred by
reason of any material breach of the Subscription Agreement or Promissory
Note by Subscriber or if any of the representations and warranties of
Subscriber made herein are proven false in any material respect.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Subscription Agreement, or a breach thereof, including any claims based on
allegations of fraud, misrepresentation or breach of fiduciary duty, shall
be settled by arbitration under the laws of the State of Nevada, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
7. DOCUMENTS BEING TENDERED.
a. Subscriber hereby subscribes and delivers herewith the following
documents:
i. One completed copy of this Subscription Agreement;
ii. One Promissory Note in the principal amount of the purchase
price, payable on or before 90 days from the date of issue.
<PAGE>
b. Corporation shall exchange for the Promissory Note certificates
representing the shares. These certificates will be without
restrictive legends and will be free trading.
8. MISCELLANEOUS.
a. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid to the
Subscriber at the address set forth below, or to the Corporation.
b. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
<PAGE>
SUBSCRIPTION
NUMBER OF SHARES....................................................... 499,999
PURCHASE PRICE......................................................... $199,999
CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM
ISSUE DATE OF THE SHARES.
WILTON ASSETS CORP.
Please print here the exact name (registration)
Subscriber desires on records of Corporation.
This Subscription Agreement is executed this the 10th day of July, 1996.
WILTON ASSETS CORP.
By /s/ RUTH HARLESS
Ruth Harless
Address: Palm Chambers No. 3
P.O. Box 3152
Road Town, Tortola
British Virgin Islands
ACCEPTANCE OF SUBSCRIPTION AGREEMENT
After reviewing this Subscription Agreement and taking all appropriate
steps to determine that Subscriber is a suitable investor as described herein,
the Corporation hereby accepts Subscriber as a purchaser of Stock.
Dated this 15th day of July, 1996.
INDUSTRIAL DATA SYSTEMS CORPORATION
By /s/ WILLIAM A. COSKEY
William A. Coskey, President
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUN 22 1994
9629-94
CHERYL A. LAU SECRETARY OF STATE
CHERYL A. LAU
No. ______________________________
ARTICLES OF INCORPORATION
OF
INDUSTRIAL DATA SYSTEMS CORPORATION
FIRST. The name of the corporation is:
INDUSTRIAL DATA SYSTEMS CORPORATION
SECOND. Its registered office in the State of Nevada is located at 4350 E.
Sunset Road Suite 101, Henderson, Nevada 89014, that this Corporation may
maintain an office, or offices, insuch other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this Corporation is formed are: To engage in
any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred upon
corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when not
inconsistent with the purposes and objects for which this corporation is
organized.
(C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have the power to effect litigation in its own behalf and
interest in any court of law.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal estate
and mortgage or lease any such real and personal estate with its franchises. The
power to hold real and personal estate shall include the power to take the same
by devise or bequest in the State of Nevada, or in any other state, territory or
country.
(G) Shall have power to appoint such officers and agents as the affairs of
the corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make By-Laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, the transaction of its business, and the calling and holding of
meetings of its stockholders.
(I) Shall have power to dissolve itself.
(J) Shall have power to adopt and use a common seal or stamp, and alter
the same. The use of a seal or stamp by the corporation on any corporate
documents is not necessary. The corporation may use a seal or stamp, if it
desires, but such use or nonuse shall not in any way affect the legality of the
document.
1
<PAGE>
(K) Shall have power to borrow money and contract debts when necessary for
the transaction of its business, or for the exercise of its corporate rights,
privileges or franchises, of for any other lawful purpose of its incorporation;
to issue bonds, promissory notes, bills of exchange, debentures, and other
obligations and evidences of indebtedness, payable at a specified time or times,
or payable upon the happening of a specified event or events, whether secured by
mortgage, pledge or otherwise, or unsecured, for money borrowed, or in payment
for property purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock of, or
any bonds, securities or evidences of the indebtedness created by, any other
corporation or corporations of the State of Nevada, or any other state or
government, and while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock and use therefor its capital, capital surplus, or other
property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and foreign
countries.
(O) Shall have power to do all and everything necessary and proper for the
accomplishment of the objects enumerated in its certificates or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general to carry on any
lawful business necessary or incidental to the attainment of the objects of the
corporation, whether or not such business is similar in nature to the objects
set forth in the certificate or articles of incorporation of the corporation, or
any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures in connection with any lawful activities.
FOURTH. The aggregate number of shares the corporation shall have
authority to issue shall be SEVENTY FIVE MILLION (75,000,000) shares of common
stock, par value one mil ($.001) per share, each share of common stock having
equal rights and preferences, voting privileges and preferences.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
The name and post office address of the first Board of Directors shall be
one (1) in number and listed as follows:
NAME POST OFFICE ADDRESS
- ------------------------------------- -----------------------
4350 E. SUNSET RD. #101
LEISA C. STILWELL HENDERSON, NEVADA 89014
SIXTH. The capital stock, after the amount of the subscription price, or
par value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH. The name and post office address of the Incorporator signing the
Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
- ------------------------------------- -----------------------
4350 E. SUNSET RD. #101
LEISA C. STILWELL HENDERSON, NEVADA 89014
EIGHTH. The resident agent for this corporation shall be:
LEISA C. STILWELL
2
<PAGE>
The address of said agent, and the registered or statutory address of this
corporation in the state of Nevada shall be:
4350 E. Sunset Road Ste. #101
Henderson, Nevada 89014
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to make, alter
or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one (1)
or more committees, each committee to consist of one or more of the Directors of
the Corporation, which, to the extent provided in the resolution, or in the
By-Laws of the Corporation, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation.
Such committee, or committees shall have such name, or names as may be stated in
the By-Laws of the Corporation, or as may be determined from time to time by
resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a Stockholders meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the Board of Directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its Board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided however, that the foregoing provision shall
not eliminate or limit the liability or a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes. Any repeal or modification of this Article by the
stockholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts of omissions prior to such repeal or
modification.
THIRTEENTH. This Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation, and
all rights conferred upon Stockholders herein are granted subject to this
reservation.
3
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 20th day of June, 1994.
/s/ LEISA C. STILWELL
Leisa C. Stilwell
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On this the 20th day of June, 1994, in Las Vegas, Nevada before me, the
undersigned, a Notary Public in and for Las Vegas, State of Nevada personally
appeared Leisa C. Stilwell, known to me to be the person whose name is
subscribed to the foregoing document and acknowledged to me that he executed the
same.
/s/ B. EICHELBERGER
B. Eichelberger
Notary Public
NOTARY PUBLIC
STATE OF NEVADA
County of Clark
B. EICHELBERGER
My Appointment Expires Oct. 27, 1994
I, Leisa C. Stilwell, hereby accept as Resident Agent for the previously named
Corporation.
6/20/94 /s/ LEISA C. STILWELL
Date Leisa C. Stilwell
4
SECRETARY OF STATE
STATE OF NEVADA
THE GREAT SEAL OF THE STATE OF NEVADA
CORPORATE CHARTER
I, CHERYL A. LAU, Secretary of State of the State of Nevada, do hereby certify
that INDUSTRIAL DATA SYSTEMS CORPORATION did on the TWENTY-SECOND day of JUNE,
1994, file in this office the original Articles of Incorporation; that said
Articles are now on file and of record in the office of the Secretary of State
of the State of Nevada, and further, that said Articles contain all of the
provisions required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed the Great Seal
of State, at my office, in Carson
City, Nevada, this TWENTY-SECOND day
of JUNE, 1994.
Secretary of State
By
Deputy
THE GREAT SEAL OF THE STATE OF NEVADA
BYLAWS
OF
INDUSTRIAL DATA SYSTEMS CORPORATION
1. OFFICES
1.01 REGISTERED OFFICE. The registered office of the corporation shall be
located at 4350 E. Sunset Road, Suite 101, Henderson, County of Clark, State of
Nevada.
1.02 OTHER OFFICES. In addition to the registered office, other offices
may also be maintained by such other place or places, either within or without
the State of Nevada, as may be designated from time to time by the board of
directors, where any and all business of the corporation may be transacted, and
where meetings of the shareholders and of the directors may be held with the
same effect as though done or held at said registered office.
2. MEETING OF SHAREHOLDERS
2.01 ANNUAL MEETINGS. The annual meeting of the shareholders, commencing
with the year 1994, shall be held at the registered office of the corporation,
or at such other place as may be specified or fixed in the notice of such
meetings in the month of or the month preceding the due date of the annual list
of the officers and directors of the corporation at such time as the
shareholders shall decide, for the election of directors and for the transaction
of such other business as may properly come before said meeting.
2.02 NOTICE OF ANNUAL MEETINGS. Unless notice is waived by the
shareholders, the secretary shall mail, in the manner provided in Section 2.05
of these bylaws, or deliver a written or printed notice of each annual meeting
to each shareholder of record, entitled to vote thereat, or may notify by
telegram, at least ten and not more than sixty days before the date of such
meeting.
2.03 PLACE OF MEETING. The board of directors may designate any place
either within or without the State of Nevada as the place of meeting for any
annual meeting or for any special meeting called by the board of directors. A
waiver of notice signed by all shareholders may designate any place either
within or without the State of Nevada, as the place for the holding of such
meeting. If no designation is made, or if a special meeting be otherwise called,
the place of meeting shall be the registered office of the corporation in the
State of Nevada, except as otherwise called, the place of meeting shall be the
registered office of the corporation in the State of Nevada, except as otherwise
provided in Section 2.06 of these bylaws, entitled "Meeting Without Notice."
2.04 SPECIAL MEETINGS. Special meetings of the shareholders shall be held
at the registered office of the corporation or at such other place as shall be
specified or fixed in a notice thereof. Such meetings of the shareholders may be
called at any time by the president or secretary, or by a majority of the board
of directors then in office, and shall be called by the president with or
without board approval on the written request of the holders of record of at
least fifty percent (50%) of the number of shares of the corporation then
outstanding and entitled to vote, which written request shall state the object
of such meeting.
2.05 NOTICE OF MEETINGS. Unless waived by the shareholders, written or
printed notice stating the place, day and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered not less than ten nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the president
or the secretary to each shareholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his address as it appears on
the records of the corporation, with postage prepaid. Notwithstanding the above,
if either notice of two consecutive annual meetings and notices of all meetings
and actions taken by shareholder consent in the interim or two payments of
dividends or interest on securities sent by first class mail during a twelve
month period are returned as undeliverable, the giving of further notices is not
required. In that event, any action taken without notice to the shareholder
shall be deemed to have been taken with notice to the shareholder.
Any shareholder may at any time, by a duly signed statement in writing to
that effect, waive any statutory or other notice of any meeting, whether such
statement be signed before or after such meeting.
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2.06 MEETING WITHOUT NOTICE. If all the shareholders shall meet at any
time and place, either within or without the State of Nevada, and consent to the
holding of the meeting at such time and place, such meeting shall be valid
without call or notice and at such meeting any corporate action may be taken.
2.07 QUORUM AND SHAREHOLDER ACTS. At all shareholders' meetings, the
presence in person or by proxy of the holders of a majority of the outstanding
stock entitled to vote shall be necessary to constitute a quorum for the
transaction of business, but a lesser number may adjourn to some future time not
less than seven nor more than twenty-one (21) days later, and the secretary
shall thereupon give at least three days notice by mail to each shareholder
entitled to vote who is absent from such meeting. Except where a higher
percentage is expressly required by the bylaws or by law, an act of the holders
of the majority of voting shares that are present at a meeting is an act of the
shareholders.
2.08 MODE OF VOTING. At all meetings of the shareholders the voting may
be voice vote, but any qualified voter may demand a stock vote whereupon such
stock vote shall be taken by ballot, each of which shall state the name of the
shareholder voting and the number of shares voted by him and, if such ballot be
cast by proxy, it shall also state the name of such proxy; provided, however,
that the mode of voting prescribed by statute for any particular case shall be
in such case followed.
2.09 PROXIES. At any meeting of the shareholders, any shareholder may be
represented and vote by a proxy or proxies appointed by an instrument in
writing. Execution may be accomplished by the signing of the writing by the
shareholder or other persons authorized to sign on his behalf, or by causing the
signature of the shareholder to be made by any reasonable means including, but
not limited to, a facsimile signature. In the event any such instrument in
writing shall designate two or more persons to act as proxies, a majority of
such persons present at the meeting, or, if only one shall be present, then that
one shall have and may exercise all of the powers conferred by such written
instrument upon all of the persons so designated unless the instrument shall
otherwise provide. Additionally, a shareholder may designate a proxy by
transmission of a telegram or cablegram that sets forth sufficient information
to determine that the transmission was authorized by the shareholder. No such
proxy shall be valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specified therein the length of time for which it is to continue in force, which
in no case shall exceed seven years from the date of its execution. Subject to
the above, any proxy duly executed is not revoked and continues in full force
and effect until an instrument revoking it or a duly executed proxy bearing a
later date is filed with the secretary of the corporation. At no time shall any
proxy be valid which shall be filed less than ten hours before the commencement
of the meeting.
2.10 VOTING LISTS. The officer or agent in charge of the transfer books
for shares of the corporation shall make, at least three days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order with the number of shares held by
each, which list for a period of two days prior to such meeting shall be kept on
file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during the whole time of the meeting.
The original share ledger or transfer book, or duplicate thereof, kept in this
state, shall be prima facie evidence as to who are the shareholders entitled to
examine such list or share ledger or transfer book or to vote at any meeting of
shareholders.
2.11 CLOSING TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of
determining shareholders entitled to notice or to vote for any meeting of
shareholders, the board of directors of the corporation may provide that the
stock transfer books be closed for a stated period but not to exceed in any case
sixty (60) days before such determination. If the stock transfer books be closed
for the purpose of determining shareholders entitled to notice of a meeting of
shareholders, such books shall be closed for at least fifteen days immediately
preceding such meeting. In lieu of closing the stock transfer books, the board
of directors may fix, in advance, a date in any case to be not more than sixty
(60) days, nor less than ten (10) days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken. If the
stock transfer books are not closed and no record date is fixed for
determination of shareholders entitled to notice of a meeting of shareholders,
or shareholders entitled to receive payment of a
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dividend, the date of which notice of the meeting is mailed or the date on which
the resolution of the board of directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determinations of
shareholders.
2.12 VOTING OF SHARES. Subject to the provisions of Section 2.14, each
outstanding share entitled to vote shall be entitled to one vote upon each
matter submitted to vote at a meeting of shareholders.
2.13 VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the bylaws of such corporation may prescribe, or, in the absence of
such provisions, as the board of directors of such corporation may determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator or trustee may be voted by such fiduciary either
in person or by proxy, but no guardian, conservator, or trustee shall be
entitled, as such fiduciary, to vote shares held by him without a transfer of
such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court at which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any time, but shares of its own stock
held by it in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given time.
2.14 ELECTION OF DIRECTORS. Directors shall be elected by a majority
vote. At each selection of directors, every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote. A shareholder does not have a right
to cumulate his vote for any one director. A shareholder may only cast a vote
for each director to be elected which does not exceed the number of shares owned
by that shareholder. Directors of this corporation shall not be elected
otherwise.
2.15 INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at
a meeting of the shareholders or any other action which may be taken at a
meeting of the shareholders may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by a majority of the
shareholders entitled to vote with respect to the subject matter thereof.
2.16 ATTENDANCE BY CONFERENCE CALL. Shareholders may participate in a
meeting of shareholders by means of a telephone conference or similar method of
communication by which all persons participating in the meeting can hear each
other. Attendance by this method shall constitute presence in person at the
meeting.
3. DIRECTORS
3.01 GENERAL POWERS. The board of directors shall have the control and
general management of the affairs and business of the corporation. Such
directors shall in all cases act as a board, regularly convened, by a majority,
and they may adopt such rules and regulations for the conduct of their meetings
and the management of the corporation, as they may deem proper, not inconsistent
with these bylaws, the Articles of Incorporation and the laws of the State of
Nevada. The board of directors shall further have the right to delegate certain
other powers to the Executive Committee as provided in these bylaws.
3.02 NUMBER OF DIRECTORS. The affairs and business of this corporation
shall be managed by a board of directors consisting of at least one member who
must be at least eighteen (18) years old.
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3.03 ELECTION. The directors of the corporation shall be elected at the
annual meeting of the shareholders, except as hereinafter otherwise provided for
the filling of vacancies. Each director shall hold office for a term of one year
and until his successor shall have been duly chosen and shall have qualified, or
until his death, or until he shall resign or shall have been removed in the
manner hereinafter provided.
3.04 VACANCIES IN THE BOARD. Any vacancy in the board of directors
occurring through the year through death, resignation, removal or other cause,
including vacancies caused by an increase in the number of directors, shall be
filled for the unexpired portion of the director's term by the remaining
directors. A majority of the remaining directors shall constitute a quorum, at
any special meeting of the board called for the purpose of filling a vacancy on
the board, or at any regular meeting thereof.
3.05 DIRECTORS MEETINGS. The annual meeting of the board of directors
shall be held each year immediately following the annual meeting of the
shareholders. Other regular meetings of the board of directors shall from time
to time by resolution be prescribed. No further notice of such annual or regular
meeting of the board of directors need by given.
3.06 SPECIAL MEETINGS. Special meetings of the board of directors may be
called by or at the request of the president or any director. The person or
persons authorized to call special meetings of the board of directors may fix
any place, either within or without the State of Nevada, as the place for
holding any special meeting of the board of directors called by them.
3.07 NOTICE. Notice of any special meeting shall be given at least
twenty-four hours previous thereto by written notice if personally delivered, or
five days previous thereto if mailed to each director at his business address,
or by telegram. If mailed, such notice shall be deemed to have been delivered
when deposited in the United States mail so addressed, with postage thereon
prepaid. If notice is given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. Any director
may waive notice of any meeting. The attendance of a director at any meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
3.08 CHAIRMAN. At all meetings of the board of directors, the president
shall serve as chairman, or in the absence of the president, the directors
present shall choose by majority vote a director to preside as chairman.
3.09 QUORUM AND MANNER OF ACTING. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting and the act
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the board of directors. In the absence of a quorum,
the majority of the directors present may adjourn any meeting from time to time
until a quorum be had. Notice of any adjourned meeting need not be given. The
directors shall act only as a board and the individual directors shall have no
power as such. Directors may participate in the meeting by telephone conference
or similar methods of communication by which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at the meeting.
3.10 REMOVAL OF DIRECTORS. Any one or more of the directors may be
removed either with or without cause at any time by the vote or written consent
of the shareholders representing two-thirds of the issued and outstanding
capital stock entitle to voting power. However, if cumulative voting is provided
under Section 2.14, a particular director may not be removed if any shareholder
who has the ability to elect the director does not consent to his removal.
3.11 VOTING. At all meetings of the board directors, each director is to
have one vote, irrespective of the number of shares of stock that he may hold.
3.12 COMPENSATION. By resolution of the board of directors, the directors
may be paid their expenses, if any of attendance at each meeting of the board,
and may be paid a fixed sum for attendance at meetings or a stated salary of
directors. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
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3.13 PRESUMPTION OF ASSENT. A director of the corporation who is present
at a meeting of the board of directors at which action on any corporate matter
is taken, shall be conclusively presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by certified or registered mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
4. EXECUTIVE COMMITTEE
4.01 NUMBER AND ELECTION. The board of directors may, in its discretion,
appoint from its membership one or more Executive Committee(s). Each committee
shall include at least one director and may include natural persons who are not
directors. Each committee member shall serve at the pleasure of the board of
directors.
4.02 AUTHORITY. An Executive Committee is authorized to take any action
which the board of directors could take, except that an Executive Committee
shall not have the power either to issue or authorize the issuance of shares of
capital stock, to amend the bylaws, or to take any action specifically
prohibited by the bylaws, or a resolution of the board of directors. Any
authorized action taken by an Executive Committee shall be as effective as if it
had been taken by the full board of directors.
4.03 REGULAR MEETINGS. Regular meetings of an Executive Committee may be
held within or without the State of Nevada at such time and place as the
Executive Committee may provide from time to time.
4.04 SPECIAL MEETINGS. Special meetings of an Executive Committee may be
called by or at the request of the president or any member of the Executive
Committee.
4.05 NOTICE. Notice of any special meeting shall be given at least one
day previous thereto by written notice, telephone, telegram or in person.
Neither the business to be transacted, nor the purpose of a regular or special
meeting of an Executive Committee need be specified in the notice or waiver of
such notice of such meeting. A member may waive notice of any meeting of an
Executive Committee. The attendance of a member at any meeting shall constitute
a waiver of notice of such meeting, except where a member attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
4.06 QUORUM. A majority of the members of an Executive Committee shall
constitute a quorum for the transaction of business at any meeting of the
Executive Committee; provided that if fewer than a majority of the members are
present at said meeting a majority of the members present may adjourn the
meeting from time to time without further notice.
4.07 MANNER OF ACTING. The act of the majority of the members present at
a meeting at which a quorum is present shall be the act of an Executive
Committee, and said Committee shall keep regular minutes of its proceedings
which shall at all times be open for inspection by the board of directors.
Members of an Executive Committee may participate in a meeting by telephone
conference or similar methods of communication by which all persons
participating in the meeting can hear each other. Such participation shall
constitute presence in person at the meeting.
4.08 PRESUMPTION OF ASSENT. A member of an Executive Committee who is
present at a meeting of the Executive Committee at which action on any corporate
matter is taken, shall be conclusively presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof, or shall forward such
dissent by certified or registered mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a member of an Executive Committee who voted in favor of such
action.
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5. OFFICERS
5.01 NUMBER. The officers of the corporation shall be a president, a
treasurer and a secretary and such other or subordinate officers as the board of
directors may from time to time elect. One person may hold the office and
perform the duties of one or more of said officers. No officer need be a member
of the board of directors.
5.02 ELECTION, TERM OF OFFICE, QUALIFICATIONS. The officers of the
corporation shall be chosen by the board of directors and they shall be elected
annually at the meeting of the board of directors held immediately after each
annual meeting of the shareholders except as hereinafter otherwise provided for
filling vacancies. Each officer shall hold his office until his successor has
been duly chosen and has qualified, or until his death, or until he resigns or
has removed in the manner hereinafter provided.
5.03 REMOVAL. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors at any time whenever in its
judgment the best interests of the corporation would be served thereby, and such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
5.04 VACANCIES. All vacancies in any office shall be filled by the board
of directors without undue delay, at any regular meeting, or at a meeting
specially called for that purpose.
5.05 PRESIDENT. The president shall be the chief executive officer of the
corporation and shall have general supervision over the business of the
corporation and over its several officers, subject, however, to the control of
the board of directors. He may sign, with the treasurer or with the secretary or
any other proper officer of the corporation authorized by the board of
directors, certificates for shares of the capital stock of the corporation; may
sign and execute in the name of the corporation deeds, mortgages, bonds,
contracts or other instruments authorized by the board of directors, except in
cases where the signing and execution thereof shall be expressly delegated by
the board of directors or by these bylaws to some other officer or agent of the
corporation; and in general shall perform all duties incident to the duties of
the president, and such other duties as from time to time may be assigned to him
by the board of directors.
5.06 VICE PRESIDENT. If the board elects a vice president, such vice
president shall in the absence or incapacity of the president, or as ordered by
the board of directors, perform the duties of the president, or such other
duties or functions as may be given to him by the board of directors from time
to time.
5.07 TREASURER. The treasurer shall have the care and custody of all the
funds and securities of the corporation and deposit the same in the name of the
corporation in such bank or trust company as the board of directors may
designate; he may sign or countersign all checks, drafts and orders for the
payment of money and may pay out and dispose of same under the direction of the
board of directors, and may sign or countersign all notes or other obligations
of indebtedness of the corporation; he may sign with the president or vice
president, certificates for shares of stock of the corporation; he shall at all
reasonable times exhibit the books and accounts to any director or shareholder
of the corporation under application at the office of the company during
business hours; and he shall, in general, perform all duties as from time to
time may be assigned to him by the president or by the board of directors. The
board of directors may at its discretion require that each officer authorized to
disburse the funds of the corporation be bonded in such account as it may deem
adequate.
5.08 SECRETARY. The secretary shall keep the minutes of the meetings of
the board of directors and also the minutes of the meetings of the shareholders;
he shall attend to the giving and serving of all notices of the corporation and
shall affix the seal of the corporation to all certificates of stock, when
signed and countersigned by the duly authorized officers; he may sign
certificates for shares of stock of the corporation; he may sign or countersign
all checks, drafts and orders for payment of money; he shall have charge of the
certificate book and such other books and papers as the board may direct; he
shall keep a stock book containing the names, alphabetically arranged, of all
persons who are shareholders of the corporation, showing their places or
residence, the number of shares of stock held by them respectively, the time
when they respectively became the owners thereof, and the amount paid thereof,
and he shall, in general, perform
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all duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the board of
directors.
5.09 OTHER OFFICERS. The board of directors may authorized and empower
other persons or other officers appointed by it to perform the duties and
functions of the officers specifically designated above by special resolution in
each case.
5.10 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant
treasurers shall respectively, as may be required by the board of directors,
give bonds for the faithful discharge of their duties, in such sums and with
such sureties as the board of directors shall determine. The assistant
secretaries as thereunto authorized by the board of directors may sign with the
president or vice president certificates for shares of the capital stock of the
corporation, the issue of which have been authorized by resolution of the board
of directors. The assistant treasurer and assistant secretaries shall, in
general, perform such duties as may be assigned to them by the treasurer or the
secretary respectively, or by the president or by the board of directors.
6. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Except as hereinabove stated otherwise, the corporation shall indemnify all
of its officers and directors, past, present and future, against any and all
expenses incurred by them, and each of them including but not limited to legal
fees, judgments and penalties which may be incurred, rendered or levied in any
legal action brought against any or all of them for or on account of any act or
omission alleged to have been committed while acting within the scope of their
duties as officers of directors of this corporation.
7. CONTRACTS, LOANS CHECKS AND DEPOSITS
7.01 CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
7.02 LOANS. No loans shall be contracted on behalf of the corporation and
no evidence of indebtedness shall be issued in its name unless authorized by the
board of directors or approved by a loan committee appointed by the board of
directors and charged with the duty of supervising investments. Such authority
may be general or confined to specific instances.
7.03 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be determined by
resolutions of the board of directors.
7.04 DEPOSITS. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the board of directors may select.
8. CAPITAL STOCK
8.01 CERTIFICATES FOR SHARES. Certificates for shares of stock of the
corporation shall be in such form as shall be approved by the incorporators or
by the board of directors. The certificates shall be numbered in the order of
their issue, shall be signed by the president or the vice president and by the
secretary or the treasurer, or by such other person or officer as may be
designated by the board of directors; and the seal of the corporation shall be a
fixed thereto, which said signatures of the said duly designated officers and of
the seal of the corporation. Every certificate authenticated by a facsimile of
such signatures and seal must be countersigned by a transfer agent to be
appointed by the board of directors, before issuance.
8.02 TRANSFER OF STOCK. Shares of the stock of the corporation may be
transferred by the delivery of the certificate accompanied either by an
assignment in writing on the back of the certificate or by written power of
attorney to sell, assign, and transfer the same on the books of the corporation,
signed by
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the person appearing by the certificate to be the owner of the shares
represented thereby, together with all necessary documents. Such transfer shall
be made on the books of the corporation upon surrender thereof so signed or
endorsed. The person registered on the books of the corporation as the owner of
any shares of stock shall be entitled to all the rights of ownership with
respect to such shares.
8.03 REGULATIONS. The board of directors may make such rules and
regulations as it may deem expedient not inconsistent with the bylaws or with
the articles of incorporation, concerning the issue, transfer and registration
of certificates for shares of stock of the corporation. It may appoint a
transfer agent or a registrar of transfers, or both, and it may require all
certificates to bear the signature of either or both.
8.04 LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate of stock to be lost or destroyed. When authorized such issue of
a new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
9. DIVIDENDS
9.01 The corporation shall be entitled to treat the holder of any share or
shares of stock as the holder in fact thereof, and accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as expressly provided in the laws of Nevada.
9.02 Dividends on the capital stock of the corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law.
9.03 The board of directors may close the transfer books in its discretion
for a period not exceeding fifteen (15) days preceding the date fixed for
holding any meeting, annual or special of the shareholders, or the day appointed
for the payment of a dividend.
9.04 Before payment of any dividend or making any distribution or profits,
there may be set aside out of funds of the corporation available for dividends,
such sum or sums as the directors may from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for any such other purpose as the directors shall think
conducive to the interest of the corporation, and the directors shall modify or
abolish any such reserve in the manner in which it was created.
10. SEAL
The board of directors shall provide a corporate seal which shall be in the
form of a circle and shall bear the full name of the corporation, the year of
its incorporation and the words "Corporate Seal, State of Nevada".
11. WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of these bylaws, or under the laws of the State of Nevada, or under the
provisions of the articles of incorporation, a waiver in writing signed by the
person or person entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
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12. DOCUMENT COPIES
Except as provided in Section 8.01 and where otherwise limited by law, any
photocopy, facsimile copy, or other reliable reproduction of any writing may be
substituted for the original writing or any original signature affixed thereto
for any corporate purpose for which the original could be used, provided that
the copy or reproduction is a complete reproduction of the entire original
writing.
13. AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be
adopted at any regular or special meeting of the shareholders by a vote of the
shareholders owning a majority of the shares and entitled to vote thereat. These
bylaws may also be altered, amended or repealed and new bylaws may be adopted at
any regular or special meeting of the board of directors of the corporation (if
notice of such alteration or repeal be contained in the notice of such special
meeting) by a majority vote of the directors present at the meeting at which a
quorum is present, but any such amendment shall not be inconsistent with or
contrary to the provision of the amendment adopted by the shareholders. If
cumulative voting is provided, no amendment may restrict the rights of any
shareholder to elect or remove directors except by the unanimous vote of all
shareholders.
The undersigned, being the secretary of INDUSTRIAL DATA SYSTEMS
CORPORATION, a Nevada corporation, hereby acknowledges that the above and
foregoing bylaws were duly adopted as the bylaws of said corporation on the 22nd
day of June, 1994.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 22nd day of
June, 1994.
/s/ LEISA C. STILWELL
LEISA C. STILWELL, Secretary
9
REVOLVING PROMISSORY NOTE
(FLOATING RATE)
(THIS "NOTE")
THIS NOTE IS SECURED BY ALL SECURITY THIS IS A RENEWAL, EXTENSION,
AGREEMENTS COVERING PERSONAL PROPERTY MODIFICATION OR DEFERRAL OF NOTE
EXECUTED BY BORROWER(S) IN FAVOR OF BANK 4004/0040001628/000001
BEFORE OR AT THE SAME TIME AS THIS NOTE.
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF BORROWERS
INDUSTRIAL DATA SYSTEMS, INC.
600 CENTURY PLAZA DRIVE BUILDING 140 HOUSTON TX 77073-
- --------------------------------------------------------------------------------
U.S. $ (THE "DATE")
350,000.00 JUNE 11, 1996
- --------------------------------------------------------------------------------
ACCOUNT NUMBER/NOTE NUMBER TRANSACTION CODE TELLER OFFICER
4004/0040001628/000001 RI JMY 913220
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the "Borrower," (jointly and severally if more than
one), promises to pay to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION
("Bank") on or before JUNE 11, 1997, at its office at 712 MAIN HOUSTON, TEXAS
77252-2558, or at such other location as Bank may designate, in immediately
available funds, ***THREE HUNDRED FIFTY THOUSAND AND NO/100*** UNITED STATES
DOLLARS (U.S. $350,000.00) (the "Maximum Amount of Note") or the aggregate
unpaid amount of all advances hereunder, whichever is less. Borrower will also
pay interest on the unpaid principal balance outstanding from time to time at a
rate per annum equal to the lesser of (i) the sum of the Prime Rate (as
hereinafter defined) from time to time in effect plus ***ONE AND NO/1000 ***
percent (1.000%), (the "STATED RATE") or (ii) the maximum nonusurious rate of
interest from time to time permitted by applicable law, (the "HIGHEST LAWFUL
RATE"). If the Stated Rate at any time exceeds the Highest Lawful Rate, the
actual rate of interest to accrue on the unpaid principal amount of this Note
will be limited to the Highest Lawful Rate, but any subsequent reductions in the
Stated Rate due to reductions in the Prime Rate will not reduce the interest
rate payable upon the unpaid principal amount of this note below the Highest
Lawful Rate until the total amount of interest accrued on this Note equals the
amount of interest which would have accrued if the Stated Rate had at all times
been in effect.
"PRIME RATE" means the rate determined from time to time by Bank as its
prime rate. The Prime Rate shall change automatically from time to time without
notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND
MAY NOT BE BANK'S LOWEST RATE.
If Texas law determines the Highest Lawful Rate, Bank has elected the
"indicated" (weekly) ceiling as defined in the Texas Credit Code or any
successor statute. Bank may from time to time, as to current and future
balances, elect and implement any other ceiling under such Code and/or revise
the Index, formula or provisions of law used to compute the rate on this
open-end account by notice to Borrower, if and to the extent permitted by, and
in the manner provided in such Code.
Each advance must be at least
N/A
UNITED STATES DOLLARS (U.S.$ N/A ) unless the amount available for
borrowing under this Note is less.
Accrued and unpaid interest is due and payable MONTHLY, beginning on JULY
11, 1996, and continuing on the 11TH day of each MONTH thereafter and at
maturity when all unpaid principal and accrued and unpaid interest is finally
due and payable.
Interest will be computed on the basis of the actual number of days elapsed
and a year comprised of: H 365 (or 366 as the case may be) days H 360 days,
unless such calculation would result in a usurious interest rate, in which case
such interest will be calculated on the basis of a 365 or 366 day year, as the
case may be.
All past-due principal and interest on this Note will, at Bank's option,
bear interest at the Highest Lawful Rate, or if applicable law does not provide
for a maximum nonusurious rate of interest, at a rate per annum equal to 18%.
In addition to all principal and accrued interest on this Note, Borrower
agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all
owners and holders of this Note in collecting this Note through probate,
reorganization, bankruptcy or any other proceeding; and (b) reasonable
attorney's fees if and when this Note is placed in the hands of an attorney for
collection.
Borrower and Bank intend to conform strictly to applicable usury laws.
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the
contract or charge to conform to applicable law, and if excess interest has been
received, Bank will either refund the excess to Borrower or credit the excess on
the unpaid principal amount of this Note. All amounts constituting interest will
be spread throughout the full term of this Note in determining whether interest
exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the total
amounts advanced by Bank, less the amount of all payments or prepayments of
principal. Absent manifest error, the records of Bank will be conclusive as to
amounts owed. Subject to the terms and conditions of this Note and the Loan
Documents, Borrower may use all or any part of the credit provided for herein at
any time before the maturity of this Note and may borrow, repay and reborrow.
There is no limitation on the number of advances made so long as the total
unpaid principal amount at any time outstanding does not exceed the Maximum
Amount of Note.
Borrower may at any time pay the full amount or any part of this Note
without the payment of any premium or fee. Any partial prepayment will be in the
amount of U.S.$ N/A
(U.S.$ N/A ), or an integral multiple thereof. All payments may, at Bank's
sole option, be applied to
accrued interest, to principal, or to both.
"LOAN DOCUMENT" means this Note and any document or instrument
evidencing, securing, guaranteeing or given in connection with this Note.
"OBLIGATIONS" means all principal, interest and other amounts which are or
become owing under this Note or any other Loan Document. "OBLIGOR" means
Borrower and any guarantor, surety, co-signer, general partner or other person
who may now or hereafter be obligated to pay all or any part of the Obligations.
Where appropriate the neuter gender includes the feminine and the masculine and
the singular number includes the plural number.
Each of the following events or conditions is an "EVENT OF DEFAULT:" (1)
any Obligor fails to pay any of the Obligations when due; (2) any warranty,
representation or statement now or hereafter contained in or made in connection
with any Loan Document was false or misleading in any respect when made; (3) any
Obligor violates any covenant, condition or agreement contained in any Loan
Document; (4) any Obligor fails or refuses to submit financial information
requested by Bank or to permit Bank to inspect its books and records on request;
(5) any event of default occurs under any other Loan Document; (6) any
individual Obligor dies, or any Obligor that is an entity dissolves; (7) a
receiver, conservator or similar official is appointed for any Obligor or any
Obligor's assets; (8) any petition is filed by or against any Obligor under any
bankruptcy, insolvency or similar law; (9) any Obligor makes an assignment for
the benefit of creditors; (10) a final judgment is entered against any Obligor
and remains unsatisfied for 30 days after entry, or any property of any Obligor
is attached, garnished or otherwise made subject to legal process; (11) any
material adverse change occurs in the business, assets, affairs or financial
condition of any Obligor; and (12) Borrower is in default of any other
obligations to or any other agreement with Bank.
If any Event of Default occurs, then Bank may do any or all of the
following: (i) cease making advances hereunder; (ii) declare the Obligations to
be immediately due and payable, without notice of acceleration or of intention
to accelerate, presentment and demand or protest or notice of any kind, all of
which are hereby expressly waived; (iii) set off, in any order, against the
Obligations any debt owing by Bank to any Obligor, including, but not limited
to, any deposit account, which right is hereby granted by each Obligor to Bank;
and (iv) exercise any and all other rights under the Loan Document, at law, in
equity or otherwise.
No waiver of any default is a waiver of any other default. Bank's delay in
exercising any right or power under any Loan Document is not a waiver of such
right or power.
Each Obligor severally waives notice, demand, presentment for payment,
notice of nonpayment, notice of intent to accelerate, notice of acceleration,
protest, notice of protest, and the filing of suit and diligence in collecting
this Note and all other demands and notices, and consents and agrees that its
liabilities and obligations will not be released or discharged by any or all of
the following, whether with or without notice to it or any other Obligor, and
whether before or after the stated maturity hereof: (i) extensions of the time
of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases
or substitutions of any collateral or any Obligor; and (v) failure, if any, to
perfect or maintain perfection of any security interest in any collateral. Each
Obligor agrees that acceptance of any partial payment will not constitute a
waiver and that waiver of any default will not constitute waiver of any prior or
subsequent default.
Page 1 of 2
<PAGE>
Borrower represents and agrees that: all advances evidenced by this Note
are and will be for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use as such terms are used
in Chapter One of the Texas Credit Code.
Borrower represents and agrees that each of the following statements is
true unless the box preceding that statement is checked and initialed by
Borrower and Bank: (i) [ ]_______ ________ No advances will be used primarily
for agricultural purposes as such term is used in the Texas Credit Code (ii) [ ]
________ ________ No advances will be used for the purpose of purchasing or
carrying any margin stock as that term is defined in Regulation U of the Board
of Governors of the Federal Reserve System (the "Board"). Notwithstanding
anything contained herein or in any other Loan Document, if this is a consumer
credit obligation (as defined or described in 12 C.F.R. 227, Regulation AA,
promulgated by the Board), the security for this credit obligation will not
extend to any non-possessory security interest in household goods (as defined in
Regulation AA) other than a purchase money security interest, and no waiver of
any notice contained herein or therein will extend to any waiver of notice
prohibited by Regulation AA.
Chapter 15 of the Texas Credit Code shall not apply to this Note or to any
advance evidenced by this Note.
This Note is governed by Texas law. If any provision of this Note is
illegal or unenforceable, that illegality or unenforceability will not affect
the remaining provisions of this Note. BORROWERS(S) AND BANK AGREED THAT THIS
NOTE WILL BE PERFORMED IN THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED
IN TEXAS, AND THAT SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING
BROUGHT BY BORROWER(S) OR BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY
ACTION OR PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY IRREVOCABLY (A) SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM.
BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED ABOVE. BANK
MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY ACTION
OR PROCEEDING AGAINST BORROWER(S) OR WITH RESPECT TO ANY OF ITS PROPERTY IN
COURTS IN OTHER PROPER JURISDICTIONS OR VENUES.
For purposes of this Note, any assignee or subsequent holder of this Note
will be considered the "Bank," and each successor to Borrower will be
considered the "Borrower."
Each Borrower and cosigner represents that if it is not a natural person,
it is duly organized and validly existing and in good standing under the laws of
the state of its incorporation or organization; has full power to own its
properties and to carry on its business as now conducted; is duly qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it makes such qualification desirable; and has not
commenced any dissolution proceedings. Each Borrower and cosigner that is
subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not
required to comply with Section 3.05(d) of the TRPA and agrees that Bank may
proceed directly against one or more partners or their property without first
seeking satisfaction from partnership property. Each Borrower and cosigner
represents that if it conducts business under an assumed business or
professional name it has properly filed Assumed Name Certificate(s) in the
office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each
of the persons signing below as Borrower or cosigner represents that he/she has
full requisite power and authority to execute and deliver this Note to Bank on
behalf of the party for whom he/she signs and to bind such party to the terms
and conditions of this Note and that this Note is enforceable against such
party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE,
NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO
CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date.
Signature(s) of BORROWER(S):
INDUSTRIAL DATA SYSTEMS, INC.
/s/ HULDA L. COSKEY VP Date:6/11/96
BY: HULDA L. COSKEY TITLE:
Date:
Date:
Date:
Date:
Date:
The undersigned hereby cosigns this Note:
Signature of COSIGNER: _________________________________________________________
Address of Cosigner: ___________________________________________________________
(Bank's signature is provided as its acknowledgement of the above as the final
written agreement between the parties and as its agreement with each Borrower
subject to TRPA that Bank is not required to comply with Section 3.05(d) of
TRPA.)
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ JOHN BYERSON
John Byerson
Title: BANKING OFFICER
Page 2 of 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE NOTE MAY
NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER
SUCH ACT OR AN OPINION OF COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, HYPOTHECATION OR OTHER ASSIGNMENT
IS AVAILABLE UNDER THE ACT.
INDUSTRIAL DATA SYSTEMS CORPORATION
12% PROMISSORY NOTE
PLUS RESTRICTED COMMON STOCK
FOR VALUE RECEIVED, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada
corporation, located at 14900 Woodham, Suite 170, Houston, Texas 77073
(HEREINAFTER REFERRED TO AS "MAKER"), promises to pay to the order of JOHN H.
CAMERON (HEREINAFTER REFERRED TO AS "PAYEE"), at 1602 Hovenden, Katy, Texas
77450 or at such other place and to such other party or parties as the owner and
holder hereof may from time to time designate, in writing, the sum of
$5,000.000, together with interest (COMPUTED ON THE BASIS OF A 360-DAY YEAR OF
TWELVE 30-DAY MONTHS) on the principal amount that remains unpaid from the date
hereof until maturity at a rate of 12% per annum (THE "STATED RATE"). All past
due principal and interest (SUBJECT TO THE PROVISIONS OF THIS NOTE CONCERNING
THE CALCULATION OF INTEREST HEREUNDER) shall bear interest at the Stated Rate.
All principal and accrued interest on this Note shall be due and payable on
December 31, 1994 (THE "DUE DATE"). Contemporaneously with the execution of
this Note, the Maker is issuing to Lender 15,000 shares of Maker's Restricted
Common Stock. Other terms and provisions of such Restricted Common Stock are as
set forth therein.
Upon the nonpayment of this Note on the Due Date, and the same is placed in
the hands of an attorney for collection, or suit is brought on same, or the same
is collected through any judicial proceeding whatsoever, or if any action or
foreclosure be had hereon, then the undersigned agrees and promises to pay an
additional amount as reasonable, calculated and foreseeable attorneys' and
collection fees incurred by Payee in connection with enforcing its rights herein
contemplated.
It is expressly provided and stipulated that notwithstanding any provision
of this Note or any other instrument evidencing or securing the loan herein set
forth, in no event shall the aggregate of all interest paid by the Maker to the
Payee hereunder ever exceed the Maximum Non-Usurious Rate (AS DEFINED BELOW) of
interest that may lawfully be charged Maker under the laws of the State of Texas
or United States Federal Government, as applicable, on the principal balance of
this Note remaining unpaid. In this connection, it is expressly stipulated and
agreed that it is the intent of the Payee and the Maker in the execution and
delivery of this Note to contract in furtherance thereof, none of the terms of
this Note, or said other instruments, shall ever be construed to create a
contract to pay for the use, forbearance or detention of money, at any interest
rate in excess of the Maximum Non-Usurious Rate of interest permitted to be
charged the Maker under the laws of the State of Texas or United States Federal
Government, as applicable. The Maker or any guarantors, endorsers or other
parties now or hereinafter becoming liable for payment of the Note shall never
be liable for interest in excess of the Maximum Non-Usurious Rate of interest
that may lawfully be charged under the laws of the State of Texas or United
States Federal Government, as applicable, and the provisions of this paragraph
shall govern over all other provisions of this Note, and all other instruments
evidencing or securing the loan evidenced hereby, should such provision be in
apparent conflict herewith.
<PAGE>
Specifically and without limiting the generality of the foregoing paragraph, it
is expressly provided that:
(i) In the event of prepayment of the principal of this Note, which shall be
permitted hereunder, or the payment of the principal of this Note prior to
the stated maturity date hereof resulting from acceleration of maturity of
this Note, if the aggregate amounts of interest accruing hereon prior to
such payment plus the amount of any interest accruing after maturity and
plus any other amount paid or accrued in connection with the loan
evidenced hereby which by law are deemed interest on the loan evidenced by
the Note and which aggregate amounts paid or accrued (IF CALCULATED IN
ACCORDANCE WITH THE PROVISIONS OF THIS NOTE OTHER THAN THIS PARAGRAPH)
would exceed the Maximum Non-Usurious Ratio of interest that could
lawfully be charged as above mentioned on the unpaid principal balance of
the loan evidenced by this Note from time to time advanced (LESS ANY
DISCOUNT) and remaining unpaid from the date hereof to the date of final
payment thereof, then in such event the amount of such excess shall be
credited, as of the date paid, toward the payment of the principal of this
Note so as to reduce the amount of the final payment of principal due on
this Note.
(ii) If under any circumstances the aggregate amounts paid on the loan
evidenced by this Note prior to and incident to the final payment hereof
include amounts that by law are deemed interest and which would exceed the
Maximum Non-Usurious Rate of interest that could lawfully have been
charged or collected on this Note, as above mentioned, Maker stipulates
that such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Maker and the
holder of this Note, and the party receiving such excess payment shall
promptly refund the amount of such excess (TO THE EXTENT ONLY OF THE
EXCESS OF SUCH INTEREST PAYMENTS ABOVE THE MAXIMUM AMOUNT WHICH COULD
LAWFULLY HAVE BEEN COLLECTED AND RETAINED) upon the discovery of such
error by the party receiving such payment. Time shall be of the essence in
performing all actions.
This Note has been executed and delivered and shall be construed in
accordance with and governed by the laws of the State of Texas and of the United
States of America.
In connection with Article 5069-1.04, Vernon's Annotated Civil Statutes, as
amended, Maker hereby agrees that the "Maximum Non-Usurious Rate of interest"
which may be charged as herein contemplated shall be the "indicated weekly
ceiling rate" as defined by said Article, as amended, provided that Payee may
also rely on any alternative Maximum Non-Usurious Rate of interest provided by
other applicable laws if such other rates are higher than that allowed by said
Article, as amended.
It is agreed that if the Maximum Non-Usurious Rate is, subsequent to the
date hereof, increased or decreased by statute or other official action, then
Maker agrees that the new Maximum Non-Usurious Rate will be applicable to this
Note and this loan shall be evidenced hereby from the effective date of the new
Maximum Non-Usurious Rate forward, unless such application is precluded by the
relevant statute or official action, or by the general law of the applicable
jurisdictions.
The Maker of this Note agrees that this Note shall be freely assignable to
any assignee of Payee, subject to compliance with applicable securities laws.
------------------------------------------------------
Page 2 of 3
INDUSTRIAL DATA SYSTEMS CORPORATION
12% Promissory Note
Plus Restricted Common Stock
<PAGE>
This Note may be prepaid in whole or in part at any time provided that all
accrued and unpaid interest is concurrently paid and in the event that interest
has not accrued and been paid for a period of at least 60 days, the Company
shall, in addition to all accrued and unpaid interest on the entire outstanding
balance of the Note, be required to pay an additional amount equal to the
difference between 60 days of interest on the prepaid amount, determined at the
aforestated interest rate and the actual amount of interest accrued on such
prepaid amount. Any partial prepayment shall be applied first to accrued
interest and then to the principal hereof.
INDUSTRIAL DATA SYSTEMS CORPORATION
By: /s/ JOE F. MOORE, JR.
Joe F. Moore, Jr. Director
Dated this 23rd day of July, 1994.
____________________________________________________________
Page 3 of 3
INDUSTRIAL DATA SYSTEMS CORPORATION
12% Promissory Note
Plus Restricted Common Stock
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE NOTE MAY
NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER
SUCH ACT OR AN OPINION OF COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, HYPOTHECATION OR OTHER ASSIGNMENT
IS AVAILABLE UNDER THE ACT.
INDUSTRIAL DATA SYSTEMS CORPORATION
12% PROMISSORY NOTE
PLUS RESTRICTED COMMON STOCK
FOR VALUE RECEIVED, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada
corporation, located at 14900 Woodham, Suite 170, Houston, Texas 77073
(HEREINAFTER REFERRED TO AS "MAKER"), promises to pay to the order of CHARLES &
ELIZABETH POLLOCK (HEREINAFTER REFERRED TO AS "PAYEE"), at 1962 Norcrest,
Houston Texas 77055 or at such other place and to such other party or parties as
the owner and holder hereof may from time to time designate, in writing, the sum
of $5,000.00, together with interest (COMPUTED ON THE BASIS OF A 360-DAY YEAR OF
TWELVE 30-DAY MONTHS) on the principal amount that remains unpaid from the date
hereof until maturity at a rate of 12% per annum (THE "STATED RATE"). All past
due principal and interest (SUBJECT TO THE PROVISIONS OF THIS NOTE CONCERNING
THE CALCULATION OF INTEREST HEREUNDER) shall bear interest at the Stated Rate.
All principal and accrued interest on this Note shall be due and payable
on December 31, 1994 (THE "DUE DATE"). Contemporaneously with the execution of
this Note, the Maker is issuing to Lender 15,000 shares of Maker's Restricted
Common Stock. Other terms and provisions of such Restricted Common Stock are as
set forth therein.
Upon the nonpayment of this Note on the Due Date, and the same is placed
in the hands of an attorney for collection, or suit is brought on same, or the
same is collected through any judicial proceeding whatsoever, or if any action
or foreclosure be had hereon, then the undersigned agrees and promises to pay an
additional amount as reasonable, calculated and foreseeable attorney's and
collection fees incurred by Payee in connection with enforcing its rights herein
contemplated.
It is expressly provided and stipulated that notwithstanding any provision
of this Note or any other instrument evidencing or securing the loan herein set
forth, in no event shall the aggregate of all interest paid by the Maker to the
Payee hereunder ever exceed the Maximum Non-Usurious Rate (AS DEFINED BELOW) of
interest that may lawfully be charged Maker under the laws of the State of Texas
or United States Federal Government, as applicable, on the principal balance of
this Note remaining unpaid. In this connection, it is expressly stipulated and
agreed that it is the intent of the Payee and the Maker in the execution and
delivery of this Note to contract in furtherance thereof, none of the terms of
this Note, or said other instruments, shall ever be construed to create a
contract to pay for the use, forbearance or detention of money, at any interest
rate in excess of the Maximum Non-Usurious Rate of interest permitted to be
charged the Maker under the laws of the State of Texas or United States Federal
Government, as applicable. The Maker or any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of the Note shall never be
liable for interest in excess of the Maximum Non-Usurious Rate of interest that
may lawfully be charged under the laws of the State of Texas or United States
Federal Government, as applicable, and the provisions of this paragraph shall
govern over all other provisions of this Note, and all other instruments
evidencing or securing the loan evidenced hereby, should such provision be in
apparent conflict herewith.
<PAGE>
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly provided that:
(i) In the event of prepayment of the principal of this Note, which
shall be permitted hereunder, or the payment of the principal of
this Note prior to the stated maturity date hereof resulting from
acceleration of maturity of this Note, if the aggregate amounts of
interest accruing hereon prior to such payment plus the amount of
any interest accruing after maturity and plus any other amount paid
or accrued in connection with the loan evidenced hereby which by law
are deemed interest on the loan evidenced by the Note and which
aggregate amounts paid or accrued (IF CALCULATED IN ACCORDANCE WITH
THE PROVISIONS OF THIS NOTE OTHER THAN THIS PARAGRAPH) would exceed
the Maximum Non-Usurious Rate of interest that could lawfully be
charged as above mentioned on the unpaid principal balance of the
loan evidenced by this Note from time to time advanced (LESS ANY
DISCOUNT) and remaining unpaid from the date hereof to the date of
final payment thereof, then in such event the amount of such excess
shall be credited, as of the date paid, toward the payment of the
principal of this Note so as to reduce the amount of the final
payment of principal due on this Note.
(ii) If under any circumstances the aggregate amounts paid on the loan
evidenced by this Note prior to and incident to the final payment
hereof include amounts that by law are deemed interest and which
would exceed the Maximum Non-Usurious Rate of interest that could
lawfully have been charged or collected on this Note, as above
mentioned, Maker stipulates that such payment and collection will
have been and will be deemed to have been the result of a
mathematical error on the part of both Maker and the holder to this
Note, and the party receiving such excess payment shall promptly
refund the amount of such excess (TO THE EXTENT ONLY OF THE EXCESS
OF SUCH INTEREST PAYMENTS ABOVE THE MAXIMUM AMOUNT WHICH COULD
LAWFULLY HAVE BEEN COLLECTED AND RETAINED) upon the discovery of
such error by the party receiving such payment. Time shall be of the
essence in performing all actions.
This Note has been executed and delivered and shall be construed in
accordance with and governed by the laws of the State of Texas and of the United
States of America.
In connection with Article 5069-1.04, Vernon's Annotated Civil Statutes,
as amended, Maker hereby agrees that the "Maximum Non-Usurious Rate of interest"
which may be charged as herein contemplated shall be the "indicated weekly
ceiling rate" as defined by said Article, as amended, provided that Payee may
also rely on any alternative Maximum Non-Usurious Rate of interest provided by
other applicable laws if such other rates are higher than that allowed by said
Article, as amended.
It is agreed that if the Maximum Non-Usurious Rate is, subsequent to the
date hereof, increased or decreased by statute or other official action, then
Maker agrees that the new Maximum Non-Usurious Rate will be applicable to this
Note and this Loan shall be evidenced hereby from the effective date of the new
Maximum Non-Usurious Rate forward, unless such application is precluded by the
relevant statute or official action, or by the general law of the applicable
jurisdiction.
The Maker of this Note agrees that this Note shall be freely assignable to
any assignee of Payee, subject to compliance with applicable securities laws.
-------------------------------
PAGE -2- OF 3
INDUSTRIAL DATA SYSTEMS CORPORATION
12% PROMISSORY NOTE
PLUS RESTRICTED COMMON STOCK
<PAGE>
This Note may be prepaid in whole or in part at any time provided that all
accrued and unpaid interest is concurrently paid and in the event that interest
has not accrued and been paid for a period of at least 60 days, the Company
shall, in addition to all accrued and unpaid interest on the entire outstanding
balance of the Note, be required to pay an additional amount equal to the
difference between 60 days of interest on the prepaid amount, determined at the
aforestated interest rate and the actual amount of interest accrued on such
prepaid amount. Any partial prepayment shall be applied first to accrued
interest and then to the principal hereof.
INDUSTRIAL DATA SYSTEMS CORPORATION
By: /s/ JOE F. MOORE, JR.
Joe F. Moore, Jr., Director
Dated this 23rd day of July, 1994.
-------------------------------
PAGE -3- OF 3
INDUSTRIAL DATA SYSTEMS CORPORATION
12% PROMISSORY NOTE
PLUS RESTRICTED COMMON STOCK
PROMISSORY NOTE
$200,000 July 15, 1996
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in
the amounts stipulated, the undersigned,
WORLD GLORY COMPANY LIMITED
PROMISES TO PAY TO THE ORDER OF
INDUSTRIAL DATA SYSTEMS CORPORATION
the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United
States of America, and to pay interest on the unpaid sum from the date of the
Note until maturity at the rate of 0.0% per annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before February 15, 1997
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in connection
with that certain Subscription Agreement dated July 10, 1996, between Maker and
Industrial Data Systems Corporation. If Maker defaults in payment, then the
Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including an
additional 10% on the amount of principal and interest due as attorney's fees,
all of which shall become a part of the principal, if this Note is placed in the
hands of an attorney for collection, or if collected by suit or through any
probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice, presentment
for payment, and protest and agrees and consents that this Note and the liens
securing its payment, may be renewed, and the time of payment extended without
notice, and without releasing any of the parties.
WORLD GLORY COMPANY LIMITED
By
PROMISSORY NOTE
$200,000 July 15, 1996
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in
the amounts stipulated, the undersigned,
ASIAN HARVEST DEVELOPMENTS LIMITED
PROMISES TO PAY TO THE ORDER OF
INDUSTRIAL DATA SYSTEMS CORPORATION
the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United
States of America, and to pay interest on the unpaid sum from the date of the
Note until maturity at the rate of 0.0% per annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before February 15, 1997.
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in connection
with that certain Subscription Agreement dated July 10, 1996, between Maker and
Industrial Data Systems Corporation. If Maker defaults in payment, then the
Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including an
additional 10% on the amount of principal and interest due as attorney's fees,
all of which shall become a part of the principal, if this Note is placed in the
hands of an attorney for collection, or if collected by suit or through any
probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice, presentment
for payment, and protest and agrees and consents that this Note and the liens
securing its
Page 1 of 2 Pages
<PAGE>
payment, may be renewed, and the time of payment extended without
notice, and without releasing any of the parties.
ASIAN HARVEST DEVELOPMENTS LIMITED
By
PROMISSORY NOTE
$200,000 July 15, 1996
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in
the amounts stipulated, the undersigned,
SILVER COURSE CORPORATION
PROMISES TO PAY TO THE ORDER OF
INDUSTRIAL DATA SYSTEMS CORPORATION
the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United
States of America, and to pay interest on the unpaid sum from the date of the
Note until maturity at the rate of 0.0% per annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before February 15, 1997.
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in connection
with that certain Subscription Agreement dated July 10, 1996, between Maker and
Industrial Data Systems Corporation. If Maker defaults in payment, then the
Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including an
additional 10% on the amount of principal and interest due as attorney's fees,
all of which shall become a part of the principal, if this Note is placed in the
hands of an attorney for collection, or if collected by suit or through any
probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice, presentment
for payment, and protest and agrees and consents that this Note and the liens
securing its payment, may be renewed, and the time of payment extended without
notice, and without releasing any of the parties.
SILVER COURSE CORPORATION
By
PROMISSORY NOTE
$200,000 July 15, 1996
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in
the amounts stipulated, the undersigned,
PINES INTERVEST CORPORATION
PROMISES TO PAY TO THE ORDER OF
INDUSTRIAL DATA SYSTEMS CORPORATION
the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United
States of America, and to pay interest on the unpaid sum from the date of the
Note until maturity at the rate of 0.0% per annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before February 15, 1997
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in connection
with that certain Subscription Agreement dated July 10, 1996, between Maker and
Industrial Data Systems Corporation. If Maker defaults in payment, then the
Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including an
additional 10% on the amount of principal and interest due as attorney's fees,
all of which shall become a part of the principal, if this Note is placed in the
hands of an attorney for collection, or if collected by suit or through any
probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice, presentment
for payment, and protest and agrees and consents that this Note and the liens
securing its payment, may be renewed, and the time of payment extended without
notice, and without releasing any of the parties.
PINES INTERVEST CORPORATION
By
PROMISSORY NOTE
$199,999 July 15, 1996
FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in
the amounts stipulated, the undersigned,
WILTON ASSETS CORP
PROMISES TO PAY TO THE ORDER OF
INDUSTRIAL DATA SYSTEMS CORPORATION
the sum of ONE HUNDRED NINETY NINE THOUSAND NINE HUNDRED NINETY NINE ($199,999)
in lawful money of the United States of America, and to pay interest on the
unpaid sum from the date of the Note until maturity at the rate of 0.0% per
annum, payable as stipulated.
This Note is payable as follows:
Principal is due on or before February 15, 1997
It is agreed that time is of the essence of this agreement, and that in
the event of default in the payment when due, the holder of this Note may
declare the entirety of the Note immediately due and payable without notice, and
failure to exercise this option shall not constitute a waiver on the part of the
holder of the right to exercise it at any other time.
This Note was made in consideration for the sale of shares in connection
with that certain Subscription Agreement dated July 10, 1996, between Maker and
Industrial Data Systems Corporation. If Maker defaults in payment, then the
Shares purchased shall be returned.
The undersigned hereby agrees to pay all expenses incurred, including an
additional 10% on the amount of principal and interest due as attorney's fees,
all of which shall become a part of the principal, if this Note is placed in the
hands of an attorney for collection, or if collected by suit or through any
probate, bankruptcy or any other legal proceedings.
Each maker, surety and endorser waives demand, grace, notice, presentment
for payment, and protest and agrees and consents that this Note and the liens
securing its payment, may be renewed, and the time of payment extended without
notice, and without releasing any of the parties.
WILTON ASSETS CORP
By
5625 Square Feet
14900 Woodham Drive
Suite #A170
Houston, Texas 77073
LEASE AGREEMENT
This Lease Agreement is made and entered into by and between:
AMERICAN GENERAL LIFE INSURANCE COMPANY
HEREINAFTER REFERRED TO AS "LANDLORD", AND
INDUSTRIAL DATA SYSTEMS
HEREINAFTER REFERRED TO AS "TENANT".
WITNESSETH:
1. PREMISES AND TERM.
In consideration of the obligation of Tenant to pay rent as herein
provided, and in consideration of the other terms, provisions and covenants
hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby takes
from Landlord certain premises ("Premises") situated within the County of
Harris, State of Texas, more particularly described on Exhibits "A" and
"A-1" attached hereto and incorporated herein by reference, together with all
rights, privileges, easements, appurtenances and immunities belonging to or in
any way pertaining to the Premises.
TO HAVE AND TO HOLD the same for a term commencing on February 1, 1991
("Commencement Date") and ending January 31, 1994 thereafter; provided,
however, that in the event the "Commencement Date" is a date other than the
first day of a calendar month, said term shall extend for said number of months
in addition to the remainder of the calendar month following the "Commencement
Date".
Tenant accepts the Premises on an "as-is" basis, except that the Premises
will be cleaned and the lighting and air conditioning systems will be
operational. Tenant acknowledges that no representations as to the condition of
the Premises have been made by Landlord, unless such are expressly set forth in
this Lease. After such Commencement Date Tenant shall, upon demand, execute and
deliver to Landlord a letter of acceptance of delivery of the Premises. Landlord
will furnish miniblinds in all front offices with windows.
2. RENT AND SECURITY DEPOSIT.
A. As part of the consideration for the execution of this Lease, and for
the Lease and use of the Premises, Tenant covenants and agrees and promises to
pay as rental to Landlord or Landlord's assignees, a total sum of Seventy Three
Thousand Five Hundred Seventy Five Dollars and 00/100 DOLLARS ($73,575.00),
payable in the amount of One Thousand Eight Hundred Dollars and 00/100 DOLLARS
($1,800.00) per month for months one through twelve, One Thousand Nine Hundred
Twelve Dollars and 50/100 DOLLARS ($1,912.50) per month for months thirteen (13)
through twenty-four (24) and Two Thousand Four Hundred Eighteen Dollars and
75/100 DOLLARS ($2,418.75) per month for months twenty-five (25) through
thirty-six (36). The first such monthly installment shall be due and payable on
the date hereof and the appropriate monthly installment shall be due and payable
in advance without demand, deduction or set off, on or before the first day of
each calendar month succeeding the Commencement Date during the hereby demised
term, except that the rental payment for any fractional calendar month at the
commencement or end of the Lease period shall be prorated. Failure by Tenant to
pay any monthly installment of rent by the fifth (5th) day from the date such
payment was due shall be considered an event of default in accordance with the
provisions of Paragraph 18(a) of this lease Agreement.
B. Tenant agrees to pay Landlord, as additional rental, all charges for
any service, goods, or materials furnished by Landlord at Tenant's request which
are not required to be furnished by Landlord under this Lease, (as well as all
other sums payable by Tenant hereunder), within ten (10) days after Landlord
renders a statement therefor to Tenant. All past due additional rental amounts
shall bear interest from the date due until paid at the maximum rate allowed by
law.
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<PAGE>
C. In addition, Tenant agrees to deposit with Landlord on the date hereof
the sum of One Thousand Eight Hundred Dollars and 00/100 DOLLARS ($1,800.00),
which sum shall be held by Landlord, without obligation for interest, as
security for the performance of Tenant's covenants and obligations under this
Lease, it being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in case of Tenant's
default. Upon the occurrence of any event of default by Tenant, Landlord may,
from time to time, without prejudice to any other remedy provided herein or
provided by law, use such fund to the extent necessary to make good any arrears
of rent or other payments due Landlord hereunder, and any other damage, injury,
expense or liability caused by such event of default; and Tenant shall pay to
Landlord, on demand, the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant at such time after termination of this Lease
providing that all of Tenant's obligations under this Lease have been fulfilled.
3. USE.
The Premises shall be used only for the purposes of receiving, storing,
shipping, and selling (other than retail) products, materials and merchandise
made and/or distributed by Tenant and for such other lawful purposes as may be
incidental thereto. Tenant shall conduct such activities in such a manner as to
not constitute a violation of the covenants and deed restrictions of Century
Plaza. Outside storage, including, without limitation, trucks and other
vehicles, is prohibited without Landlord's prior written consent. Tenant shall
obtain, at its own cost and expense, any and all licenses and permits necessary
for any such use. Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises, and shall promptly comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances in, upon, or in connection with the Premises, all at
Tenant's sole expense. Tenant shall not permit any objectional or unpleasant
odors, smoke, dust, gas, noise or vibrations to emanate from the Premises, nor
take any other action which would constitute a nuisance or would disturb or
endanger any other Tenants of the building situated on the Premises or
unreasonably interfere with their use of their respective Premises. Without
Landlord's prior written consent, Tenant shall not receive, store or otherwise
handle any product, material or merchandise which is explosive or highly
inflammable. Tenant will not permit the Premises to be used for any purpose or
in any manner, (including, without limitation, any method of storage) which
would render the insurance thereon void or the insurance risk more hazardous or
cause the State Board of Insurance or other insurance authority to disallow any
sprinkler credits.
4. TAXES.
A. Landlord agrees to pay, before they become delinquent, all taxes,
assessments, and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the Premises. If the Tenant's proportionate share of Taxes on the
Premises, during a real estate tax year, occurring within the term hereof or
during any renewal or extension of this term, shall exceed an amount equal to
$1991 EXPENSE/sq. ft. of net rental area in the Premises/year, Tenant shall pay
to Landlord as additional rent, upon demand, the amount of such excess. In the
event any such amount is not paid within ten (10) days after the date of
Landlord's invoice to Tenant, the unpaid amount shall bear interest from the
date due until paid at the maximum interest rate allowed by law.
B. Tenant's "proportionate share", as used in this Lease, shall mean a
fraction, the numerator of which is the net rentable square footage of the space
contained in the Premises and the denominator of which is the net rentable
square footage of the entire space contained in the building of which the
Premises is a part, as further defined in Subparagraph 27.0.
C. If at any time during the term of this Lease the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents from the Premises, then all such taxes,
assessments, levies or charges or the part thereof so measured or based, shall
be deemed to be included within the term "taxes" for the purposes hereof.
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<PAGE>
D. The Landlord shall have the right to employ a tax consulting firm to
attempt to assure a fair tax burden on the building and grounds of which the
Premises is a part within the applicable taxing jurisdictions.
Tenant shall pay to Landlord the amount of Tenant's "proportionate share"
(as defined in Subparagraph 4B above) of the cost of such service.
E. Any payment to be made pursuant to this Paragraph 4 with respect to the
real estate tax year in which this Lease commences or terminates shall be
prorated.
F. Tenant shall pay all ad valorem and similar taxes or assessments levied
upon or applicable to all equipment, fixtures, furniture, and other property
placed by Tenant in the Premises and all license and other fees or charges
imposed on the business conducted by Tenant on the Premises. It is agreed that
Tenant will also be responsible for ad valorem taxes on the value of Leasehold
improvements to the extent that such leasehold improvements exceed standard
building allowances.
5. LANDLORD'S REPAIRS.
Landlord shall, at his expense, maintain only the roof, foundation, and the
structural soundness of the exterior walls of the building in good repair,
reasonable wear and tear excepted. Tenant shall repair and pay for any damage
caused by the negligence of Tenant, or Tenant's employees, agents or invitees,
or caused by Tenant's default hereunder. The term "walls" as used herein shall
not include windows, glass or plate glass, doors, special store fronts or office
entries. Tenant shall immediately give Landlord written notice of defect or need
for repairs, after which Landlord shall have reasonable opportunity to repair
same or cure such defect. Landlord's liability with respect to any defects,
repairs or maintenance for which Landlord is responsible under any of the
provisions of this Lease shall be limited to cost of such repairs or maintenance
or the curing of such defect.
6. TENANT'S REPAIRS.
A. Tenant shall, at his own cost and expense, keep and maintain all parts
of the Premises (except those for which Landlord is expressly responsible under
the terms of this Lease) in good condition, promptly making all necessary
repairs and replacements, including, but not limited to, windows, glass and
plate glass doors, special store fronts or office entries, interior walls and
finish work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems, truck doors, dock bumpers, paving, plumbing work and
fixtures, termite and pest extermination, regular removal of trash and debris,
keeping the parking areas, driveways, alleys, and the whole of the Premises in a
clean and sanitary condition. Tenant shall not be obligated to repair any damage
caused by fire, tornado or other casualty covered by the insurance to be
maintained by Landlord pursuant to Subparagraph 13A below, except that Tenant
shall be obligated to repair all wind damage to glass, except with respect to
tornado or hurricane damage.
B. Tenant shall not damage any demising wall or disturb the integrity and
support provided by any demising wall and shall, at its sole cost and expense,
promptly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees.
C. Tenant and its employees, customers and licensees shall have the right
to use the parking areas, if any, as may be designated by Landlord in writing,
subject to such reasonable rules and regulations as Landlord may from time to
time prescribe and subject to rights of ingress and egress of other Tenant's.
Landlord shall not be responsible for enforcing Tenant's parking rights against
any third parties. Landlord reserves the right to perform the paving and
landscape maintenance, exterior painting, common sewage line plumbing, and care
for the grounds around the building of which the Premises is a part, and Tenant
shall be liable for its proportionate share (as defined in Subparagraph 4B
above) of the cost and expense. If Tenant or any other particular Tenant of the
building of which the Premises is a part can be clearly identified as being
responsible for obstructions or stoppage of the common sanitary sewage line,
then Tenant, if Tenant is responsible, or such other responsible Tenant, shall
pay the entire cost thereof, upon demand, as additional rent. Tenant shall pay,
when due, its share, determined as aforesaid, of such costs and expenses along
with the other Tenants of the building to Landlord, upon demand, as additional
rent, for the amount of
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<PAGE>
its share as aforesaid of such costs and expenses in the event Landlord elects
to perform or cause to be performed such work. In the event any such amount is
not paid within ten (10) days after the date of Landlord's invoice to Tenant,
the unpaid amount shall bear interest from the date due until paid at the
maximum interest rate allowed by law.
D. Tenant shall, at its own cost and expense maintain and service all hot
water, heating and air conditioning systems and equipment within the Premises.
This maintenance should include regular filter changes and lubrication of
equipment, as well as other prudent preventive maintenance procedures.
Landlord's representatives will inspect and service the heating and air
conditioning equipment prior to the Commencement Date and will certify the
equipment to be operational on the Commencement Date.
7. COMMON AREA MAINTENANCE.
A. Tenant agrees to pay Landlord as additional rent $.04 PER SQUARE FOOT
of net rentable area in the Premises per month as its estimated share of the
common area services which are provided by Landlord for mutual benefit of all
Tenants. These services may include but are limited to general landscaping,
mowing of grass, care of shrubs (including replacement of dead or diseased
plants); operation and maintenance of lawn sprinkler system; operation and
maintenance of exterior security lighting; water service and sewer charges;
repainting of exterior surfaces of truck doors, handrails, downspouts, and other
parts of the building which require periodic preventative maintenance; and the
prorata share of Century Plaza common area maintenance and security service
charges.
B. The actual cost of these services shall be prorated among Tenants on a
basis of net rentable square footage occupied in the same manner as provided in
Subparagraph 4B above. Landlord shall send Tenant an annual statement of actual
common area service costs along with either an invoice or a rebate for the
amount that Tenant's actual proportionate share exceeded, or was less than,
Tenant's $.04/SQ. FT. of net rentable area in the Premises per month common area
service payment for the year then ended. Tenant agrees to reimburse Landlord
within ten (10) days after receipt of such invoice from Landlord. Subject to
Landlord's reasonable discretion, this monthly common area service charge may be
renegotiated periodically based upon increases in Landlord's annual cost of
providing these services.
8. ALTERATIONS.
Tenant shall not make any alterations, additions or improvements to the
Premises (including, but not limited to, roof and wall penetrations) without the
prior written consent of Landlord. If Landlord consents to Tenant's contractors
doing the work, Landlord may require, at Landlord's sole option, that Tenant
provide, at Tenant's expense, a lien and completion bond in an amount equal to
one and one half (1-1/2) times any and all estimated costs of improvements,
additions or alterations in the Premises to insure Landlord against any
liability or mechanic's and materialmen's liens which may arise in accordance
with Paragraph 23 of this Lease Agreement and to insure completion of the work.
Tenant may, without the consent of Landlord, but at its own cost and expense and
in a good workmanlike manner, erect such shelves, bins, machinery and trade
fixtures as it may deem advisable, without altering the basic character of the
building or improvements and without overloading or damaging the building or
improvements, and in each case complying with all applicable governmental laws,
ordinances, regulations and other requirements. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this Lease and Tenant shall, unless Landlord
otherwise elects as hereinafter provided, remove all alterations, additions,
improvements, and partitions erected by Tenant and restore the Premises to their
original condition by the date of termination of this Lease or upon earlier
vacating of the Premises; provided, however, that if Landlord so elects prior to
termination of this Lease or upon earlier vacating of the Premises, such
alterations, additions, improvements, and partitions shall become the property
of Landlord as of the date of termination of this Lease or upon earlier vacating
of the Premises and shall be delivered up to the Landlord with the Premises. All
shelves, bins, machinery and trade fixtures installed by Tenant may be removed
by Tenant prior to the termination of this Lease if Tenant so elects, and shall
be removed by the date of termination of this Lease or upon earlier vacating of
the Premises if required by Landlord. Upon any such removal, Tenant shall
restore the Premises to their original condition. All such
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<PAGE>
removals and restoration shall be accomplished in a good workmanlike manner so
as not to damage the primary structure or structural qualities of the building
and other improvements situated on the Premises.
9. SIGNS.
Tenant shall have the right to install signs upon the Premises only when
first approved in writing by Landlord and subject to any applicable governmental
laws, ordinances, regulations, Landlord's standard sign criteria and other
requirements. At Landlord's direction, Tenant shall be responsible for the
removal of all such signs by the termination of this Lease. Such installations
and removals shall be made in such a manner as to avoid injury or defacement,
including, without limitation, discoloration caused by such installation and/or
removal.
10. INSPECTION.
Landlord and Landlord's agents and representatives shall have the right to
enter and inspect the Premises at any reasonable time during business hours, for
the purpose of ascertaining the condition of the Premises or in order to make
such repairs as may be required or permitted to be made by Landlord under the
terms of this Lease. During the period that is six (6) months prior to the end
of the term hereof, Landlord and Landlord's agents and representatives shall
have the right to enter the Premises at any reasonable time during business
hours for the purpose of showing the Premises and shall have the right to erect
on the Premises a suitable sign indicating the Premises are available. Tenant
shall give written notice to Landlord at least thirty (30) days prior to
vacating the Premises and shall arrange to meet with Landlord for a joint
inspection of the Premises prior to vacating. In the event of Tenant's failure
to give such notice or arrange such joint inspection, Landlord's inspection at
or after Tenant's vacating the Premises shall be conclusively deemed corrected
for purposes of determining Tenant's responsibility for repairs and restoration.
11. UTILITIES.
Landlord agrees to provide, at its cost, water, electricity and telephone
service connections into the Premises; but Tenant shall pay for all water, gas,
heat, light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the Premises, together with any taxes, penalties,
surcharges or the like pertaining thereto and any maintenance charges for
utilities and shall furnish all electric light bulbs and tubes. If any such
services are not separately metered to Tenant, Tenant shall pay it's
proportionate share as determined by Landlord of all charges jointly metered
with other premises. Landlord shall in no event be liable for any interruption
or failure of utility services on the Premises.
12. ASSIGNMENT AND SUBLETTING.
Tenant shall not have the right to assign this Lease or to sublet the whole
or any part of the Premises without the prior written consent of Landlord.
Notwithstanding any permitted assignment or subletting, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of the rent herein specified and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease. Upon the
occurrence of an "event of default" as hereinafter defined, if the Premises or
any part thereof are then assigned or sublet, Landlord, in addition to any other
remedies herein provided, or provided by law, may, at its option, collect
directly from such assignee or subtenant all rents becoming due to Tenant under
such assignment or sublease and apply such rent against any sums due to Landlord
from Tenant hereunder, and no such collection shall be construed to constitute a
novation or a release of Tenant from the further performance of Tenant's
obligations hereunder.
Notwithstanding the terms above, Landlord reserves the right to either: 1)
enter into a new Lease Agreement with the proposed assignee or subtenant and
terminate the Lease coincident with occupancy by the new Tenant and commencement
of the new Lease; or, 2) Landlord and Tenant may mutually agree to terminate
this Lease.
13. INSURANCE; FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain standard fire and extended coverage
insurance covering the building, of which the Premises are a part, in any amount
not less than ninety (90) percent (or such greater percentage as may be
necessary to comply with the provisions of any co-insurance clauses of the
policy) of the
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"replacement cost" thereof, as such term is defined in the Replacement Cost
Endorsement to be attached thereto insuring against the perils of Fire,
Lightning and Extended Coverage, such coverages and endorsements to be defined,
provided and limited in the standard bureau forms prescribed by the insurance
regulatory authority for the State of Texas for use by insurance companies
admitted in the State of Texas for the writing of such insurance on risks
located with the State of Texas. Subject to the provisions of Subparagraphs 13C,
13D, and 13E below, such insurance shall be for the sole benefit of Landlord and
under its sole control. In addition Landlord agrees to maintain general
liability coverage insurance in an amount deemed prudent and necessary by
landlord or required by mortgagee presently (or in the future) holding a
mortgage and/or deed(s) of trust constituting a lien against the building of
which the Premises are a part. If the annual premiums charged Landlord for
insurance exceed the standard premium rates because the nature of the Tenant's
operation results in extra hazardous exposure, and if Landlord permits such
operations, then Tenant, upon receipt of appropriate premium notices, shall
reimburse landlord for such increase in such premiums as additional rent
hereunder. Tenant shall maintain, at its own expense, fire and extended coverage
insurance on all of its personal property, including removable trade fixtures
located in the Premises and on all additions and improvements made by Tenant and
not required to be insured by Landlord. In addition, Tenant shall reimburse
Landlord annually, as additional rent and upon receipt of notice from Landlord,
for Tenant's proportionate share of all amounts paid by landlord for insurance
premiums which exceed an amount equal to 1991 EXPENSE/SQ. FT. of net rentable
area in the Premises/year. In the event the Premises constitute a portion of a
multiple occupancy building, Tenant shall be responsible for reimbursing
Landlord for Tenant's full proportionate share of such excess, as such share is
defined in Subparagraph 4B above. Said payments shall be made to Landlord within
ten (10) days after presentation to Tenant of Landlord's statement setting forth
the amount due. Any payment to be made pursuant to this Subparagraph A with
respect to the year in which this Lease commences or terminates shall bear the
same ratio to the payment which would be required to be made for the full year
as the part of such year covered by the term of this Lease bears to a full year.
In the event any such additional rental amount is not paid within ten (10) days
after the date of Landlord's invoice to Tenant, the unpaid amount shall bear
interest from the date due until paid at the maximum interest rate allowed by
law.
B. If the Premises should be damaged or destroyed by fire, tornado or
other casualty, Tenant shall give immediate written notice thereof to Landlord.
C. If the Premises should be totally destroyed by fire, tornado, or other
casualty, or if they should be so damaged thereby that rebuilding or repairs
cannot, in Landlord's estimation, be completed within two hundred (200) days
after the date upon which Landlord is notified by Tenant of such damage, this
Lease shall terminate and the rent shall be abated during the unexpired portion
of this Lease, effective upon the date of the occurrence of such damage.
D. If the Premises should be damaged by any peril covered by the insurance
to be provided by Landlord under Subparagraph 13A above, but only to such extent
that rebuilding or repairs can, in Landlord's estimation, be completed within
two hundred (200) days after the date upon which Landlord is notified by Tenant
of such damage, this lease shall not terminate, and Landlord shall, at its sole
cost and expense, thereupon proceed with reasonable diligence to rebuild and
repair such building to substantially the condition in which it existed prior to
such damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
which may have been placed in, on or about the Premises by Tenant. if the
Premises are untenantable in whole or in part following such damage, the rent
payable hereunder during the period in which they are untenantable shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord should fail to complete such repairs
and rebuilding within two hundred (200) days after the date upon which Landlord
is notified by Tenant of such damage, Tenant may, at its option, terminate this
lease by delivering written notice of termination to Landlord as Tenant's
exclusive remedy, whereupon all rights and obligations hereunder shall cease and
terminate.
E. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
building of which the Premises are a part requires that
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the insurance proceeds be applied to such indebtedness, then Landlord shall have
the right to terminate this Lease by delivering written notice of termination of
Tenant within fifteen (15) days after such requirement is made by any such
holder, whereupon all rights and obligations hereunder shall cease and
terminate.
F. Landlord and Tenant each hereby release the other from any loss or
damage to the property caused by fire or any other perils insured through or
under them by way of subrogation, or otherwise for any loss or damage to
property caused by fire or any other perils insured in policies of insurance
covering such property, even if such loss or damage shall have been caused by
the fault of negligence of the other party or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such times
in which the releasers policies contain a clause or endorsement stating that any
such release shall not adversely affect or impair said policies or prejudice the
right of the releasor to recover thereunder and then only to the extent of the
insurance proceeds payable under such policies. Both Landlord and Tenant agree
that they will request their insurance carriers to include such a clause or
endorsement in their policies. If extra cost shall be charged therefor, each
party shall advise the other thereof and of the amount of the extra cost, and
the other party, at its election, may pay the same, but shall not be obligated
to do so.
G. If the Premises should be damaged or destroyed by a casualty other than
a peril covered by the insurance to be provided under Subparagraph 13A above,
and the casualty or loss was the result of an action or failure to act by Tenant
or Tenant's employees, agents, guests, customers, representatives or invitees,
Tenant shall at its sole cost and expense thereupon proceed with reasonable
diligence to rebuild and repair the Premises to substantially the condition in
which they existed prior to such damage or destruction, subject to Landlord's
approval of the plans and specifications for such rebuilding and repairing.
14. LIABILITY.
Landlord shall not be liable to Tenant or Tenant's employees, agents,
patrons or visitors, or to any other person whomsoever, for any injury to person
or damage to property on or about the Premises, resulting from and/or caused in
part or whole by the negligence or misconduct of Tenant, its agents, servants,
employees, or of any other person entering upon the Premises, or caused by the
buildings and improvements located on the Premises becoming out of repair, or
caused by leakage of gas, oil, water or steam or by electricity emanating from
the Premises, or due to any cause whatsoever, and Tenant hereby covenants and
agrees that it will at all times indemnify and hold safe and harmless the
property, the Landlord (including, without limitation, the trustee and
beneficiaries if Landlord is a trust), Landlord's agents and employees from any
loss, liability, claims, suits, costs, expenses, including, without limitation,
attorney's fees and damages, both real and alleged, arising out of any such
damage or injury; except injury to persons or damage to property the sole cause
of which is negligence of Landlord or the failure of Landlord to repair any part
of the Premises which Landlord is obligated to repair and maintain hereunder
within a reasonable time after the receipt of written notice from Tenant of
needed repairs. Tenant shall procure and maintain throughout the term of this
Lease a policy or policies of insurance, at its sole cost and expense, insuring
both the Landlord and Tenant against all claims, demands or actions arising out
of or in connection with (i) the Premises; (ii) the condition of the Premises;
(iii) Tenant's operations in maintenance and use of the Premises; and (iv)
Tenant's liability assumed under this Lease, the limits of such policy or
policies to be the amount of not less than One Million and 00/100 Dollars
($1,000,000.00) for bodily injury or death of one person, Three Hundred Thousand
and 00/100 Dollars ($300,000.00) for any one occurrence, and not less than Fifty
Thousand and 00/100 Dollars ($50,000.00) for property damage or destruction,
including loss of use thereof. All such policies shall be procured by Tenant
from responsible insurance companies satisfactory to Landlord. Certified copies
of such policies, together with receipt evidencing payment of premiums therefor,
shall be delivered to Landlord prior to the Commencement Date of this Lease. Not
less than fifteen (15) days prior to the expiration date of any such policies,
certified copies of the renewals thereof (bearing notations evidencing the
payment of renewal premiums) shall be delivered to Landlord. Such policies shall
further provide that not less than thirty (30) days written notice shall be
given to Landlord before such policy may be canceled or changed to reduce
insurance provided thereby.
15. CONDEMNATION.
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A. If the whole or any substantial part of the Premises should be taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of the
Premises for the purpose for which they are being used, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective when the physical taking of said premises shall occur.
B. If part of the Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and the taking does not prevent
or materially interfere with the use of the Premises, and this Lease is not
terminated as provided in the subparagraph above, this Lease shall not terminate
but the rent payable hereunder during the unexpired portion of this Lease shall
be reduced to such extent as may be fair and reasonable under all of the
circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord shall be entitled to receive and retain all compensation awarded in any
condemnation proceedings.
16. HOLDING OVER.
Tenant will, at the termination of this Lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Landlord agrees in
writing that Tenant may hold over after the expiration or termination of this
Lease, unless the parties hereto otherwise agree in writing on the terms of such
holding over, the hold over Tenancy shall be subject to termination by Landlord
at any time upon not less than five (5) days advance written notice, or by
Tenant at any time upon not less than thirty (30) days advanced written notice,
and all of the other terms and provisions of this Lease shall be applicable
during that period, except that Tenant shall pay Landlord from time to time upon
demand, as rental for the period of any hold over, an amount equal to two (2)
times the rent, including any additional rents defined in the Lease, in effect
on the termination date, computed on a daily basis for each day of the hold over
period. No holding over by the Tenant, whether with or without consent of
Landlord, shall operate to extend this Lease except as otherwise expressly
provided. The preceding provisions of this paragraph 16 shall not be construed
as Landlord's consent for Tenant to hold over.
17. QUIET ENJOYMENT.
Landlord covenants that it now has, or will acquire before Tenant takes
possession of the Premises, good title to the Premises, free and clear of all
liens and encumbrances, excepting only the lien for current taxes not yet due,
such mortgage or mortgages as are permitted by the terms of this Lease, zoning
ordinances and other building and fire ordinances and governmental regulations
relating to the use of such property, and easements, restrictions and other
conditions of record. In the event this Lease is a sublease, then Tenant agrees
to take the Premises subject to the provisions of the prior Leases. Landlord
represents and warrants that it has full right and authority to enter into this
Lease and that Tenant, upon paying the rental herein set forth and performing
its other covenants and agreements herein set forth, shall peaceably and quietly
have, hold and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and provisions of this Lease.
18. EVENTS OF DEFAULT.
The following events shall be deemed to be events of default by Tenant
under this Lease:
(a) Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes hereunder when due,
or any other payment or reimbursement to Landlord required herein when due,
and such failure shall continue for a period of five (5) days from the date
such payment was due.
(b) Tenant shall become insolvent, or shall make a transfer in fraud
of creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any state thereof; or Tenant shall be adjudged
bankrupt or insolvent in procedings filed against Tenant thereunder.
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(d) A receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
Premises.
(f) Tenant shall fail to comply with any term, provision or covenant
of this Lease (other than the foregoing in this Paragraph 18), and shall
not cure such failure within ten (10) days after written notice thereof to
Tenant.
19. REMEDIES.
Upon the occurrence of any of such events of default described in Paragraph
18 hereof, Landlord shall have the option to pursue any one or more of the
following remedies without any notice or demand whatsoever.
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, by force if necessary, without being liable for prosecution or any
claim of damages therefor; and Tenant agrees to pay Landlord, on demand, the
amount of all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the Premises on satisfactory
terms or otherwise. TENANT HEREBY WAIVES ITS RIGHT TO THREE DAYS NOTICE OF
LANDLORD'S INTENT TO FILE A FORCIBLE DETAINER OR FORCIBLE ENTRY AND DETAINER
ACTION AS PROVIDED IN V.T.C.A., PROPERTY CODE, SECTION 24.005.
(b) Enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, by force if necessary, without being liable for prosecution or any
claim for damages therefor, and relet the Premises and receive the rent
therefor, and Tenant agrees to pay the Landlord, or demand, any deficiency that
may arise by reason of such reletting. In the event Landlord is successful in
reletting the Premises at a rental in excess of that agreed to the paid by
Tenant pursuant to the terms of this Lease, Landlord and Tenant each mutually
agree that Tenant shall not be entitled, under any circumstances, to such excess
rental, and Tenant does hereby specifically waive any claim to such excess
rental.
(c) Terminate this Lease and treat the event of default as an entire
breach of the Lease and Tenant immediately shall become liable to Landlord for
damages for the entire breach in the amount equal to the amount by which the
total rent now due and payable as adjusted by the amount of additional rent
which would be payable by Tenant during the unexpired balance of the term of
this Lease and all other p;ayments due for the balance of the term is in excess
of the fair market rent value of the Premises for the balance of the term as of
the time of default, both discounted at the rate of six (6) percent per annum to
the then present value. Such amount shall be due and payable upon Lessor's
notice to Lessee of termination of the Lease and shall bear interest until paid
at the maximum annual rate permitted by law.
(d) Enter upon the Premises, by force if necessary, without being liable
for prosecution or any claim for damages therefor, and do whatever Tenant is
obligated to do under the terms of this Lease; and Tenant agrees to reimburse
Landlord, on demand, for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease, and Tenant further agrees
that Landlord shall not be liable for any damages resulting to the Tenant from
such action, whether caused by the negligence of Landlord or otherwise.
(e) Alter locks and other security devices at the Premises, without being
liable for prosecution or any claim of damages therefor, and such alteration of
locks and security devices shall not be deemed or unauthorized or constitute a
conversion.
(f) Receive payment from Tenant, in addition to any sum provided to be
paid above, for any and all of the following expenses for which Tenant shall be
considered liable:
1. Broker's fees incurred by Landlord in connection with reletting the
whole or any part of the Premises;
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2. The cost of removing and storing Tenant's or other occupant's property;
3. The cost of repairing, altering, remodeling or otherwise putting
Premises into condition acceptable to a new Tenant or Tenants, plus a
reasonable charge to cover overhead; and
4. All reasonable expenses incurred by Landlord in enforcing Landlord's
remedies.
In the event Tenant fails to pay any installment of rent hereunder as and
when such installment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord on demand a late
charge in the amount equal to five (5) percent of such installment; and the
failure to pay such amount within ten (10) days after demand therefor shall be
an event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or another remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. No act or thing done by the Landlord or its agents during the term
hereby granted shall be deemed a termination of this Lease or any acceptance of
the surrender of the Premises, and no agreement to terminate this Lease or
accept a surrender of said Premises shall be valid unless it is in writing and
signed by Landlord. No waiver by Landlord of any violation or breach of any of
the terms, provisions and covenants herein contained shall be deemed or
construed to constitute a waiver of any other violation or breach of any of the
other terms, provisions and covenants herein contained. Landlord's acceptance of
the payment of rental or other payments hereunder after the occurrence of an
event of default shall not be construed as a waiver of such default, unless
Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce one
or more of the remedies herein provided upon an event of default shall not be
deemed or construed to constitute a waiver of such default or of Landlord's
right to enforce any such remedies with respect to such default of any
subsequent default. If, on account of any breach or default by Tenant in
Tenant's obligations under the terms and conditions of this Lease, it shall
become necessary or appropriate of Landlord to employ or consult with an
attorney concerning any of Landlord's rights or remedies hereunder or to enforce
or defend any of the Landlord's rights or remedies hereunder, Tenant agrees to
pay any reasonable attorney's fees so incurred.
20. LANDLORD'S LIEN.
IN ADDITION TO ANY STATUTORY LIEN FOR RENT IN LANDLORD'S FAVOR, LANDLORD
SHALL HAVE, AND TENANT HEREBY GRANTS TO LANDLORD, A CONTINUING SECURITY INTEREST
FOR ALL RENTALS AND OTHER SUMS OF MONEY BECOMING DUE HEREUNDER FROM TENANT, UPON
ALL GOODS, WARES, EQUIPMENT, FIXTURES, FURNITURE, INVENTORY, ACCOUNTS, CONTRACT
RIGHTS, CHATTEL PAPER ANOTHER PERSONAL PROPERTY OF TENANT SITUATED ON THE
PREMISES, AND SUCH PROPERTY SHALL NOT BE REMOVED THEREFROM WITHOUT THE CONSENT
OF LANDLORD UNTIL ALL ARREARAGES IN RENT AS WELL AS ANY AND ALL OTHER SUMS OF
MONEY THEN DUE TO LANDLORD HEREUNDER SHALL FIRST HAVE BEEN PAID AND DISCHARGED.
IN THE EVENT OF A DEFAULT UNDER THIS LEASE, LANDLORD SHALL HAVE, IN ADDITION TO
ANY OTHER REMEDIES PROVIDED HEREIN OR BY LAW, ALL RIGHTS AND REMEDIES UNDER THE
UNIFORM COMMERCIAL CODE, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO SELL THE
PROPERTY DESCRIBED IN THIS PARAGRAPH 20 AT PUBLIC OR PRIVATE SALE UPON FIVE (5)
DAYS NOTICE TO TENANT. TENANT HEREBY AGREES TO EXECUTE SUCH FINANCING STATEMENTS
AND OTHER INSTRUMENTS NECESSARY OR DESIRABLE IN LANDLORD'S DISCRETION TO PERFECT
THE SECURITY INTEREST HEREBY CREATED. ANY STATUTORY LIEN FOR RENT IS NOT HEREBY
WAIVED, THE EXPRESS CONTRACTUAL LIEN HEREIN GRANTED BEING IN ADDITION AND
SUPPLEMENTARY THERETO.
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21. MORTGAGES.
Tenant accepts this lease subject and subordinate to any mortgage(s) and/or
deed(s) of trust now or at any time hereafter constituting a lien or charge upon
the Premises or the improvements situated thereon; provided, however, that if
the mortgagee, trustee or holder of any such mortgage or deed of trust elects to
have Tenant's interest in this lease superior to any such instrument, then by
notice to Tenant from such mortgagee, trustee, or holder, this Lease shall be
deemed superior to such lien, whether this Lease was executed before or after
said mortgage or deed of trust. Tenant shall at any time hereafter on demand
execute any instruments, releases or other documents which may be required by
any mortgagee for the purpose of subjecting and subordinating this Lease to the
lien of any such mortgage.
22. LANDLORD'S DEFAULT.
A. In the event Landlord should default in any of its obligations
hereunder, Tenant shall simultaneously give Landlord and Landlord's mortgagee
written notice specifying such default and Landlord shall thereupon have thirty
(30) days (plus an additional reasonable period as may be required in the
exercise by Landlord of due diligence) in which to cure any such default. In
addition, Landlord's mortgagee shall have the right (but not the obligation) to
cure or remedy such default during the period that is permitted to Landlord
hereunder, and Tenant will accept such curative or remedial action taken by
Landlord's mortgagee with the same effect as if such action had been taken by
the Landlord.
B. Upon the failure of Landlord or Landlord's mortgagee to cure such
default in accordance with the provisions of Paragraph 22A hereof, Tenant shall
be authorized and empowered to pay any such items for and on behalf of Landlord,
and the amount of any item so paid by Tenant for and on behalf of Landlord,
together with any interest or penalty required to be paid in connection
therewith, shall be payable on demand by Landlord to Tenant; provided, however,
that Tenant shall not be authorized and empowered to make any payment under the
terms of this Paragraph 22 unless the item paid shall be superior to Tenant's
interest hereunder. Tenant's exclusive remedy shall by an action for damages
against Landlord, and Tenant hereby waives the benefit of any laws granting it a
lien upon the property of Landlord and/or upon rent due Landlord. In the event
Tenant pays any mortgage debt in full, in accordance with this paragraph, it
shall, at its election, be entitled to the mortgage security by assignment or
subrogation.
23. MECHANIC'S LIENS.
Tenant shall have no authority, express or implied, to create or place any
lien or encumbrance of any kind or nature whatsoever upon, or in any manner to
bind, the interest of Landlord in the Premises or to charge the rentals payable
hereunder for any claim in favor of any person dealing with Tenant, including
those who may furnish materials or perform labor for any construction or
repairs, and each such claim shall affect and each such lien shall attach to, if
at all, only the leasehold interest granted to Tenant by this instrument. Tenant
covenants and agrees that it will pay or cause to be paid all sums legally due
and payable by it on account of any labor performed or materials furnished in
connection with any work performed on the Premises on which any lien is or can
be validly and legally asserted against its leasehold interest in the premises
or the improvements thereon, and that it will save and hold Landlord harmless
from any and all loss, cost or expense based on or arising out of asserted
claims or liens against the leasehold estate or against the right, title and
interest of the Landlord in the Premises or under the terms of this Lease.
24. ASSIGNMENT BY LANDLORD.
Landlord shall have the right to assign or transfer, in whole or in part,
every feature of its rights and obligations hereunder and in the building or
real property of which the Premises is a part. Such assignments or transfers may
be made to a corporation, trust, trust company, individual or group of
individuals, and howsoever made shall be in all things respected and recognized
by Tenant.
25. DISCLAIMER.
This Lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on the part of the Tenant to
be performed shall not be affected, impaired or executed because Landlord is
unable to fulfill any of its covenants and obligations under this Lease,
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expressly or impliedly to be performed by Landlord, if Landlord is prevented or
delayed from doing so by reason of strikes, labor troubles, accident, power
outages, adjustment of insurance, or by any reason or cause whatsoever
reasonable beyond Landlord's control. Reasons beyond Landlord's control shall
include, but not be limited to, laws, governmental preemption in connection with
a National Emergency or by any reason of any rule, order or regulation of any
governmental agency, federal, state, county or municipal authority or any
department or subdivision thereof, or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency.
26. NOTICES.
Each provision of this instrument or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to the sending,
mailing or delivery of any notice or the making of any payment by Landlord to
Tenant or with reference to the sending, mailing or delivery of any notice or
the making of any payment by Tenant to Landlord shall be deemed to be complied
with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow
set forth or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith. Tenant's
obligation to pay rent and any other amounts to Landlord under the terms of
this Lease shall not be deemed satisfied until such rent and other amounts
have been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith. All
such payments shall be sent by Certified U.S. Mail, return receipt
requested.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered, whether actually received or
not, when deposited in the United States Mail, postage prepaid, Certified
or Registered Mail, addressed to the parties hereto at the respective
addresses set out below, or at such other address as they have theretofore
specified by written notice delivered in accordance herewith.
Landlord: Tenant:
AMERICAN GENERAL INVESTMENT CORP. INDUSTRIAL DATA SYSTEMS
c/o MAXICORP, INC. 14900 Woodham Drive #A170
1726 Augusta, Suite 128 Houston, Texas 7702?
Houston, Texas 77057
If and when included within the term "Landlord", as used in this instrument,
there is more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there is more than one person, firm or corporation, all such jointly
arrange among themselves for their joint execution of such a notice specifying
some individual at some specific address within the continental United States
for the receipt of notices and payments to Tenant. All parties included within
the terms "Landlord" and "Tenant", respectively, shall be bound by notices
given in accordance with the provisions to this Paragraph to the same effect as
if each had received such notice.
27. MISCELLANEOUS.
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided.
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C. Whenever a clause or provision of this Lease requires Landlord's
consent or approval, Landlord agrees not to withhold or delay its consent or
approval unreasonably.
D. The captions inserted in this Lease are for the convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
E. Tenant agrees, if requested in writing by Landlord, to furnish
financial statements, bank references, credit references, or any other financial
data to Landlord as may be required to establish Tenant's financial stability
and credit worthiness. Such information will be furnished within ten (10) days
of request.
F. This Lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration of
earlier termination of the term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the Premises, including, without limitation, all
heating and air conditioning systems and equipment therein, in good condition
and repair. Tenant shall also, prior to vacating the Premises, pay to Landlord
the amount, as estimated by Landlord, of Tenant's obligation hereunder for real
estate taxes and insurance premiums for the year in which the Lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefor upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Paragraph 27G.
H. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that, in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the Premises are on the open market and are presently being
shown, this Lease shall be treated as an offer with the Premises being subject
to prior Lease and such offer subject to withdraw or non-acceptance by Landlord
or to other use of the Premises without notice, and this Lease shall not be
valid or binding unless and until accepted by Landlord in writing and a fully
executed copy delivered to both parties hereto.
J. All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
K. Tenant agrees, from time to time within ten (10) days after request of
Landlord, to deliver an estoppel certificate to Landlord or Landlord's designee.
Such estoppel certificate shall state that this Lease is in full force and
effect, the date to which rent has been paid, the unexpired term of this Lease
and such other matters pertaining to this Lease as may be requested by Landlord.
L. Landlord and Tenant acknowledge and agree that this Lease shall be
interpreted and enforced in accordance with the laws of the State of Texas and
all obligations and duties are performable exclusively in Houston, Harris
County, Texas.
M. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease.
N. This Lease may be signed in any number of counterparts, each of which
shall be an original for all purposes, but all of which taken together shall
constitute only one agreement. The production of any
13
<PAGE>
executed counterpart of this Lease shall be sufficient for all purposes without
producing or accounting for the other counterparts hereof.
O. Any reference to a building on the demised Premises, means the plural
"buildings" in a multiple building complex. All expenses, for example, but not
limited to taxes, property insurance, and common area maintenance, are prorated
for the total net rentable area in all buildings.
Executed by the parties this 16th day of January, 1991.
AMERICAN GENERAL LIFE INSURANCE CO. INDUSTRIAL DATA SYSTEMS
(Name of Landlord) (Name of Tenant)
/s/ RISHER RANDALL /s/ WILLIAM COSKEY
BY: Mr. Risher Randall BY: Mr. William Coskey
TITLE: R.E. Investment Officer TITLE: President
Landlord Tenant
14
<PAGE>
EXHIBIT "A-1"
[FLOORPLAN GRAPHIC OMITTED]
BUILDING A
14900 WOODHAM DRIVE
SUITE A170
5625 GRA
<PAGE>
EXHIBIT "A"
MAXICORP, INC.
713-229-0060
[CENTURY CENTER GRAPHIC OMITTED]
SITE PLAN
LAND AREA 9,068 ACRES
132310 S.F.
GROSS LEASEABLE AREA
BLDG. A 34250 S.F. BLDG. B 39880 S.F.
(14000 Woodhaven Drive) (14000 Woodhaven Drive)
BLDG. C 30730 S.F. BLDG. D 27450 S.F.
(800 Century Plaza Drive) (800 Century Plaza Drive)
PARKING 398 CARS (33/1000 S.F.)
CENTURY CENTER
MAP
<PAGE>
ADDENDUM TO LEASE
OPTION TO RENEW:
Landlord hereby grants Tenant the option to renew and extend this Lease for
an additional three (3) year term at the then prevailing market rental rates.
Said option is granted only if Tenant is in full compliance of the terms and
conditions of this Lease. Additionally, within ninety (90) days of the
expiration of the initial term of this Lease, Tenant is required to notify
Landlord in writing of tenants intent to exercise said renewal option.
AMERICAN GENERAL LIFE INS. CO. INDUSTRIAL DATA SYSTEMS
Landlord Tenant
/s/ RISHER RANDALL /s/ WILLIAM COSKEY
By: Mr. Risher Randall By: Mr. William Coskey
Title: R.E. Invest. Officer Title: President
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement ("Amendment") is entered into as
of the 7th day of December, 1993 by and between 600 C.C. Business Park Ltd.
("Landlord") and Industrial Data Systems ("Tenant").
RECITALS
WHEREAS, Landlord who has succeeded the rights, title, and interests of
American General Life Insurance Company, as "Landlord", and Industrial Data
Systems, as "Tenant", entered into a Lease Agreement dated January 16, 1991
(the "Lease") for certain premises known as 14900 Woodham Drive, Suite A-170,
Houston, Texas 77073 consisting of approximately 5,625 square feet and;
WHEREAS, Landlord and Tenant desire to modify the Lease so as to extend the
term of the Lease and to modify certain terms and provisions outlined in the
original lease;
All defined terms used in this Amendment shall have the same meaning
assigned to them in the original Lease, unless the context herein expressly
provides otherwise.
NOW, THEREFORE, for one dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency which are hereby acknowledged,
Landlord and Tenant hereby agree that the Lease shall be Amended as follows:
AGREEMENTS:
1) Section One (1) Paragraph Two (2) shall be amended to read: "To have and to
hold the same for a term commencing on February 1, 1991 ("Commencement
Date") and ending January 31, 1997 thereafter".
2) Section 2 Paragraph A shall be amended to allow for the following base rent
schedule which shall apply to months thirty seven through seventy-two of the
lease term. Base Rental shall remain as scheduled in the original lease
until February 1, 1994 at which time the following base rent shall apply:
February 1, 1994 - January 31, 1995 = $2,081.25 per month
February 1, 1995 - January 31, 1996 = $2,193.75 per month
February 1, 1996 - January 31, 1997 = $2,306.25 per month
3) Taxes and Insurance Charges as specified in Section 4 and Section 13 of the
Lease shall be modified to allow that the Tenant shall be responsible for
any additional taxes and insurance costs which exceed an amount equal to the
1994 expense for these items per square foot of net rentable area in the
premises per year. All other defining terms and calculations of assessments
and charges pursuant to these paragraphs shall remain as specified in the
original lease.
4) Common Area Maintenance -- Tenant shall be required to pay its estimated
prorata share of Common Area Maintenance expenses of the property. On a
monthly basis, Tenant shall pay an amount equal to $.07 per square foot per
month as Tenant's estimated prorata share of the common area expenses as
outlined in Section 7 of the Lease. Therefore, beginning February 1, 1994,
Tenant shall pay an amount of $393.75 per month in addition to the base
rental scheduled above as its estimated monthly share of these common area
maintenance costs. Landlord agrees that Tenant's payment of its prorata of
Common Area Maintenance costs will not exceed $.07 per square foot per month
during the term of the Lease.
PAGE 1 OF 2
<PAGE>
5) Therefore, as an example of rental and expense obligations as modified in
this Amendment and as ratified in the original agreement, the following is
an outline of Tenant's charges:
For example, total charges for the month of February 1994 shall be as
follows:
Base Rent: $ 2,081.25
Common Area Maintenance: $ 393.75
-----------
TOTAL PAYMENT FOR FEBRUARY 1994: $ 2,475.00
Rent and expense charges will remain as scheduled in the original Agreement
and as are currently be paid by Tenant until January 31, 1994.
6) Option to Renew -- Provided that Tenant is not in default on any of the
terms and conditions set forth in the lease in this Amendment, Landlord
hereby grants Tenant one option to renew the Lease for an additional
thirty-six (36) month term at rental rates to be negotiated prior to Tenant
exercising said renewal option. In order for Tenant to exercise said option,
Tenant must notify Landlord of its intention to renew the Lease at least
ninety (90) days prior to the expiration of the lease term.
7) Lease Space Condition -- Tenant accepts the premises in its current
condition ("as is"); however, Landlord agrees to make certain that the air
conditioning units are fully operational and to provide any necessary
repairs recommended by a reputable air conditioning contractor.
EXCEPT as expressly provided herein, all other terms, covenants, and
conditions of the Lease shall remain the same in full force and effect, and are
hereby ratified by both parties.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
LANDLORD: TENANT:
600 C.C. Business Park Ltd. Industrial Data Systems
BY: /s/ JOHN W. COSTELLO BY: /s/ WILLIAM COSKEY
NAME: John W. Costello NAME: William Coskey
TITLE: General Partner TITLE: President
DATE: December 7/1993 DATE: 11/23/93
PAGE 2 OF 2
SECOND AMENDMENT TO LEASE
STATE OF TEXAS
COUNTY OF HARRIS
This Second Amendment to Lease ("Amendment") is made and entered into as
of December 29, 1994 by and between 600 C.C. Business Park, Ltd. ("Landlord")
and Industrial Data Systems ("Tenant").
RECITALS
A. Whereas, Landlord who has succeeded the rights, title, and interest of
American General Life Insurance Company as "Landlord" and Industrial Data
Systems, as "Tenant", entered into a Lease Agreement dated January 16, 1991,
(the "Lease") which lease was amended by the First Amendment to Lease
Agreement dated December 7, 1993 for certain premises known as 14900 Woodham
Drive, Suite A-170, Houston, Texas 77073 consisting of approximately 5,625
square feet and;
B. Whereas, Landlord and Tenant desire to modify the Lease so as to modify
certain terms and provisions outlined in the original Lease and the First
Amendment to Lease to allow for the relocation of Tenant's lease space within
Century Center Business Park, the extension of the lease term and to increase
the square footage of the premises that the tenant will occupy under the terms
and conditions of the original Lease, the First Amendment to Lease, and this
Second Amendment to Lease agreement and;
C. Tenant and Landlord hereby agree that no other document has been
executed or exchanged between the parties hereto other than the original Lease
Agreement and the First Amendment to Lease specified above and that there are no
side letters or any oral agreements between the parties and;
D. Landlord and Tenant agree that all defined terms used in this Amendment
shall have the same meaning assigned to them in the Lease and First Amendment to
Lease, unless the context herein expressly provides otherwise.
NOW, THEREFORE, for one dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree as follows:
AGREEMENTS
1. Effective January 1, 1995, Landlord and Tenant mutually agree to expand
the "Leased Premises" to a total leasable area of 12,230 square feet and to
"relocate" the lease premises to 600 Century Plaza Drive, Suite C-140 ("New
Lease Premises") which is located within the development known as Century
Center Business Park (see attached Exhibit "A" and Exhibit "A-1").
2. Landlord and Tenant agree to extend the expiration date of the existing
lease term to January 31, 1999.
3. It is agreed and understood by both parties that as of the date of this
Amendment, the existing Lease and First Amendment to Lease shall govern the
"New Lease Premises" as outlined in Item 1 above.
PAGE 1 OF 3
<PAGE>
SECOND AMENDMENT TO LEASE (CONTINUED)
4. The monthly base rental shall remain as scheduled in the original Lease
and First Amendment to Lease until the earlier of February 1, 1995, or when
Tenant occupies the "New Lease Premises", at which time the base rental shall
be modified and scheduled as follows:
February 1, 1995 - January 31, 1996: $4,769.70 ($.39 psf per month)
February 1, 1996 - January 31, 1997: $5,014.30 ($.41 psf per month)
February 1, 1997 - January 31, 1999: $5,258.90 ($.43 psf per month)
5. Taxes and Insurance charges as specified in Section 4 and Section 13 of the
Lease, shall remain as modified in the First Amendment to Lease Agreement
allowing that Tenant shall be responsible for any additional taxes and insurance
costs which exceed an amount equal to the 1994 expense for these items per
square foot of net rentable area in the total lease premises. All other defining
terms and calculations of assessments and charges pursuant to these paragraphs
shall remain as specified in the original Lease.
6. Common Area Maintenance -- Tenant shall be required to pay its prorata
share of common area maintenance expenses of the property. On a monthly basis,
tenant shall pay an amount equal to $.07 per square foot per month as Tenant's
prorata share of common area expenses as outlined in Section 7 of the Lease.
THEREFORE, BEGINNING FEBRUARY 1, 1995, TENANT SHALL PAY $856.10 PER MONTH AS ITS
ESTIMATED PRORATA SHARE OF THESE EXPENSES. LANDLORD AGREES THAT TENANT'S PAYMENT
OF ITS PRORATA OF COMMON AREA MAINTENANCE COSTS WILL NOT EXCEED $.07 PER SQUARE
FOOT PER MONTH DURING THE TERM OF THE LEASE.
7. As an example of rental and expense obligations as modified in this
Second Amendment to Lease and as ratified in the original Lease Agreement and
the First Amendment to Lease Agreement, the following is an outline of Tenant's
charges for February, 1995, rent and other charges:
Base Rent: $ 4,769,70
Common Area Maintenance: $ 856.10
-----------
TOTAL PAYMENT FOR FEBRUARY 1995: $ 5,625.80
Rent and expense charges will remain as scheduled in the original Lease
Agreement and First Amendment to Lease Agreement and as are currently being paid
by Tenant until February 1, 1995.
8. Whereas, Tenant agrees to accept the "New Lease Premises" in an "As
Is", "Where Is" condition subject to Landlord making minor modifications to
the lease premises which will include and be limited to re-carpeting of the
carpeted areas ($10.00 per yard allowance), re-painting of the interior walls,
removal of up to seventy-five feet (75') of interior walls, relocation of up to
three (3) interior doors, the addition of up to eighteen (18) light fixtures,
four (4) duplex plugs, and four (4) additional light switches, and Landlord
shall make certain that the existing HVAC, electrical, and plumbing systems are
in good operational order prior to Tenant's occupancy. Any costs of additional
modifications above those stated herein, shall be the responsibility of Tenant.
Tenant shall be allowed occupancy of the premises immediately upon completion of
Landlord's described work and Tenant's acceptance of said work.
9. Except as otherwise stated herein, all other terms and conditions of
the Original Lease Agreement dated January 16, 1991, and the First Amendment to
Lease Agreement dated December 7, 1993, by and between 600 C.C. Business Park,
as Landlord and Industrial Data Systems, as Tenant shall remain in full force
and effect and shall apply to the ("New Lease Premises") located at 600
Century Plaza Drive, Suite 140, Houston, Texas 77073.
PAGE 2 OF 3
<PAGE>
SECOND AMENDMENT TO LEASE (CONTINUED)
10. Landlord agrees to pay for Tenant's cost of relocating the existing
lease premises into the "New Lease Premises", which costs shall include moving
of furniture fixtures and equipment, installation of telephone system (labor
only), and wiring of existing computer network and other reasonable moving
costs. Landlord's allowance for these moving costs shall not exceed $5,000.
11. TENANT RIGHT TO ASSIGN OR SUB-LET -- Tenant shall have the right to
assign this Lease or to sub-let the whole or any part of the premises with
Landlord's prior written consent. Landlord's consent shall not be unreasonably
withheld. Should Tenant desire to assign or sub-let the premises, Tenant shall
supply Landlord with required information regarding the assignee and/or
sub-lessee, and shall await written authorization from Landlord to proceed with
said sub-lease or assignment. All other terms outlined in the original lease
which are not in conflict with the terms stated herein shall remain in full
force and effect.
12. FIRST NOTICE -- So long as Tenant is not in default of any of the
terms and conditions of the Lease, if during the term of the Lease, any
adjacent/contiguous space should become available for lease. Landlord shall use
its best efforts to notify Tenant of such available space. Additionally, should
Landlord obtain a prospective tenant which is interested in leasing such
available space, Landlord shall provide Tenant notice of such. After Landlord
has provided Tenant said notice, Tenant shall have five (5) working days to
notify Landlord if Tenant wishes to lease additional space. Should Tenant notify
Landlord of its intention to lease such space, Tenant shall then have five (5)
working days after receipt of a formal agreement from the Landlord to execute
said agreement regarding the leasing of this additional space.
This Amendment shall be binding upon and insure to the benefit of Landlord
and Tenant and their successors and assigns; however, this provision shall not
permit any additional transfer or assignment of the Lease by Tenant which is
otherwise limited by the terms of the Lease and this amendment required by
Landlord's consent.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
to Lease as of this 29th day of December, 1994.
Exhibit List:
Exhibit "A" -- Site Plan
Exhibit "A-1" -- Lease Premises
TENANT: LANDLORD:
INDUSTRIAL DATA SYSTEMS 600 C.C. BUSINESS PARK, LTD.
BY: /s/ WILLIAM COSKEY BY: /s/ JOHN W. COSTELLO
NAME: William Coskey NAME: John W. Costello
TITLE: President TITLE: General Partner
DATE: December 28, 1994 DATE: December 29, 1994
PAGE 3 OF 3
<PAGE>
EXHIBIT "A"
SITE PLAN
[CENTURY CENTER BUSINESS PARK GRAPHIC OMITTED]
"Current Lease Premises"
"Temporary Premises"
Approximately
2,370 s.f.
"New Lease Premises"
Approximately
12,230 s.f.
<PAGE>
EXHIBIT "A-1"
[LEASE PREMISES GRAPHIC OMITTED]
"LEASE PREMISES"
"Temporary Premises"
To be occupied by
Tenant until January
31, 1995, only
"New Lease Premises"
Approximately 12,230 GRA
FLOOR PLAN
THIRD AMENDMENT TO LEASE
STATE OF TEXAS
COUNTY OF HARRIS
This Third Amendment to Lease ("Amendment") is made and entered into as
of 8/8/95 by and between 600 C.C. Business Park, Ltd. ("Landlord") and
Industrial Data Systems ("Tenant").
RECITALS
A. Whereas, Landlord who has succeeded the rights, title, and interest of
American General Life Insurance Company as "Landlord" and Industrial Data
Systems, as "Tenant", entered into a Lease Agreement dated January 16, 1991,
(the "Lease") which lease was amended by the First Amendment to Lease
Agreement dated December 7, 1993, and the Second Amendment to Lease dated
December 29, 1994, for certain premises known as 600 Century Plaza Drive, Suite
140, Houston, Texas 77073 consisting of approximately 12,230 square feet and;
B. Whereas, Landlord and Tenant desire to modify the Lease so as to modify
certain terms and provisions outlined in the original Lease, the First Amendment
to Lease and the Second Amendment to Lease to allow for the extension of the
lease term and to increase the square footage of the premises that the tenant
will occupy under the terms and conditions of the original Lease, the First
Amendment to Lease, the Second Amendment to Lease, and this Third Amendment to
Lease; and
C. Whereas, Tenant and Landlord hereby agree that no other document has
been executed or exchanged between the parties hereto other than the original
Lease Agreement and the First Amendment to Lease specified above and that there
are no side letters or any oral agreements between the parties; and
D. Whereas, Landlord and Tenant agree that all defined terms used in this
Amendment shall have the same meaning assigned to them in the Lease and First
Amendment to Lease, unless the context herein expressly provides otherwise.
NOW, THEREFORE, for one dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree as follows:
AGREEMENTS
1. Effective September 1, 1995, Landlord and Tenant mutually agree to
expand the "Leased Premises" to a total leasable area of 18,155 square feet
(see attached Exhibit "A"-Site Plan and Exhibit "A-1"-Expansion Premises).
2. Landlord and Tenant agree to extend the expiration date of the existing
lease term to August 31, 2000.
3. It is agreed and understood by both parties that as of the date of this
Amendment, the existing Lease, First Amendment to Lease, and Second Amendment to
Lease shall govern the "Expansion Premises" as outlined in Item 1 above with
the exception of the provisions contained herein to the contrary.
PAGE 1 OF 3
<PAGE>
THIRD AMENDMENT TO LEASE (CONTINUED)
4. The monthly base rental shall remain as scheduled in the Second
Amendment to Lease until August 31, 1995, at which time the base rental shall be
modified and scheduled as follows:
September 1, 1995 - February 28, 1996: $6,378.23 per month
March 1, 1996 - January 31, 1997: $7,443.55 per month
February 1, 1997 - August 31, 2000: $7,806.65 per month
5. Taxes and Insurance charges as specified in Section 4 and Section 13 of
the Lease, shall remain as modified in the First Amendment to Lease Agreement
and the Second Amendment to Lease allowing that Tenant shall be responsible for
any additional taxes and insurance costs which exceed an amount equal to the
1994 expense for these items per square foot of net rentable area in the total
lease premises. All other defining terms and calculations of assessments and
charges pursuant to these paragraphs shall remain as specified in the original
Lease.
6. Common Area Maintenance -- Tenant shall be required to pay its prorata
share of common area maintenance expenses of the property. On a monthly basis,
tenant shall pay an amount equal to $.07 per square foot per month as Tenant's
prorata share of common area expenses as outlined in Section 7 of the Lease.
THEREFORE, BEGINNING SEPTEMBER 1, 1995, TENANT SHALL PAY $1,270.85 PER MONTH AS
ITS ESTIMATED PRORATA SHARE OF THESE EXPENSES. LANDLORD AGREES THAT TENANT'S
PAYMENT OF ITS PRORATA OF COMMON AREA MAINTENANCE COSTS WILL NOT EXCEED $.07 PER
SQUARE FOOT PER MONTH DURING THE TERM OF THE LEASE.
7. As an example of rental and expense obligations as modified in this
Second Amendment to Lease and as ratified in the original Lease Agreement and
the First Amendment to Lease Agreement, the following is an outline of Tenant's
charges for September, 1995, rent and other charges:
Base Rent: $ 6,387.23
Common Area Maintenance: $ 1,270.85
-----------
TOTAL PAYMENT FOR SEPTEMBER, 1995: $ 7,658.08
===========
Rent and expense charges will remain as scheduled in the Second Amendment to
Lease Agreement and as are currently being paid by Tenant until August 31, 1995.
8. Landlord agrees to perform miscellaneous interior improvements to the
expansion premises which shall include patch and repair of the acoustical
ceiling, demolition of some existing interior walls, relocation of existing
doors and hardware, installation of new interior walls where indicated on the
construction drawings, miscellaneous electrical additions including outlets,
switches and other requirements, replacement of existing flooring with carpet or
tile and new cove base pursuant to Tenant's desires, servicing the existing HVAC
systems and relocating ductwork as needed, repainting of the interior of the
leased premises, and minor plumbing work which will include capping off existing
service to one/two restrooms. LANDLORD SHALL PROVIDE TENANT AN ALLOWANCE EQUAL
TO $20,000 FOR THE ABOVE REFERENCED IMPROVEMENTS. SHOULD THE COST OF THE SPACE
IMPROVEMENTS EXCEED $20,000, TENANT SHALL BE REQUIRED TO PAY ANY OF THESE
ADDITIONAL EXPENSES. THIS ALLOWANCE DOES NOT INCLUDE CONSTRUCTION MANAGEMENT FEE
AND ARCHITECTURAL FEES WHICH WILL BE PAID BY LANDLORD. LANDLORD WILL HIRE AN
ARCHITECT TO COMPILE A SIMPLE CONSTRUCTION DRAWING DEPICTING THE SPECIFIC ITEMS
REQUESTED BY TENANT FOR THE SPACE IMPROVEMENTS REFERRED TO HEREIN.
9. Except as otherwise stated herein, all other terms and conditions of
the Original Lease Agreement dated January 16, 1991, the First Amendment to
Lease Agreement dated December 7, 1993, and the Second Amendment to Lease dated
December 29, 1994, by and between 600 C.C. Business Park, as Landlord and
Industrial Data Systems, as Tenant shall remain in full force and effect and
shall apply to the "Expansion Premises" located at 600 Century Plaza Drive,
Suite 140, Houston, Texas 77073.
PAGE 2 OF 3
<PAGE>
THIRD AMENDMENT TO LEASE (CONTINUED)
This Amendment shall be binding upon and inure to the benefit of Landlord
and Tenant and their successors and assigns; however, this provision shall not
permit any additional transfer or assignment of the Lease by Tenant which is
otherwise limited by the terms of the Lease and this amendment required by
Landlord's consent.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
to Lease as of this 8th day of August, 1995.
Exhibit List:
Exhibit "A" -- Site Plan
Exhibit "A-1" -- Expansion Premises
TENANT: LANDLORD:
INDUSTRIAL DATA SYSTEMS 600 C.C. BUSINESS PARK, LTD.
BY: WILLIAM COSKEY BY: JOHN W. COSTELLO
NAME: William Coskey NAME: John W. Costello
TITLE: President TITLE: General Partner
DATE: 8/4/95 DATE: 8/8/95
PAGE 3 OF 3
<PAGE>
EXHIBIT "A"
[SITE PLAN GRAPHIC OMITTED]
CENTURY CENTER
MAP
MAXICORP, INC.
713 228-0060
SITE PLAN
LAND AREA 9.058 ACRES
GROSS LEASABLE AREA 132310 S.F.
BLDG. A 34260 S.F. BLDG. B 39880 S.F.
(94900 Woodham Drive) (14250 Woodham Drive)
BLDG. C 30730 S.F. BLDG. D 27450 S.F.
(609 Century Plaza Drive) (609 Century Plaza Drive)
PARKING 398 CARS (3.1/1000 S.F.)
EXPANSION
PREMISES
CURRENT
LEASED
PREMISES
<PAGE>
EXHIBIT "A-1"
[EXPANSION PREMISES GRAPHIC OMITTED]
CURRENT LEASE PREMISES
APPROXIMATELY 12,230 SQ. FT.
EXPANSION PREMISES
APPROXIMATELY 5,925 SQ. FT.
Made and entered into this 1st day of June, 1995, by and between CLARKSBURG
MASONIC BUILDING, a West Virginia corporation, of 427 West Pike Street,
Clarksburg, West Virginia (Lessor), and INDUSTRIAL DATA SYSTEMS, INC., 600
Century Plaza Drive, Building 140, Houston, Texas 77073-6016, (Lessee).
WITNESSETH: That the Lessor and Lessee agree to the following:
1. The Lessor leases to Lessee and Lessee takes and hires from the Lessor,
office space being approximately 180 square feet, situate on the fifth floor of
the Masonic Temple Building located at 427 West Pike Street, Clarksburg, West
Virginia, together with the right to ingress and egress through the front door
and lobby and through the back door.
2. The term of the Lease shall commence June 1, 1995 at 12:01 a.m. and
shall extend for a period of one year expiring at midnight May 31, 1996, and
shall be automatically renewed for two additional consecutive one-year extended
terms unless Lessee shall notify Lessor in writing of its election not to renew
the Lease at least three calendar months prior to the end of the original term
or any extended one-year term.
3. Lessee shall pay the Lessor, at the latters previously mentioned
address, rent in the amount of One Hundred Forty Four Dollars ($144.00) monthly
on or before the first day of the month for which payment is made during the
original term and any extended term provided for in Paragraph Two.
4. Lessee shall use the leased premises for office space and related
functions and for no other purpose unless written approval of Lessor is first
obtained.
5. The Lessor shall maintain the leased premises in good, safe, usable,
tenable condition (except of Lessee's obligations, hereinafter specified),
including the heating system, plumbing system, toilet facilities, air
conditioning system, electrical system, entry ways and common facilities of the
entire building as they include or affect the leased premises.
7. Lessee, may at its cost, paint and repair the leased premises, change
and add lighting fixtures and facilities, install additional electric wiring and
outlets, repair and replace floor coverings, and remove, rearrange or install
new partitions between rooms in the leased premises. All leasehold improvements
of the nature described in this paragraph shall become the property of the
Lessor when this tenancy terminates.
8. Lessee may install such trade fixtures, equipment and appliances in the
lease premises as it deems necessary or convenient at the beginning of the term
or any extended term and from time to time during its tenancy, and may remove or
replace them at will. These trade fixtures, equipment, and appliances shall
remain the property of Lessee or the persons from which it may have leased them.
Lessee shall refrain from permanent damage or substantial alteration of the
building in such installation, use or removal.
9. If, during the term or any extended term of this Lease, the building is
so injured by fire or other casualty not occurring through the Lessee's
negligence that the leased premises are rendered wholly unfit for occupancy and
said leased premises cannot be repaired within sixty (60) days of the happening
of such injury, then this lease may be terminated by either party giving written
notice of such intentions. In the event of a partial destruction by fire or
other casualty that does not result in the leased premises becoming wholly
untenable, Lessor agrees to proceed diligently with the necessary repairs of the
damage and this Lease shall continue in force except that rentals shall be
equitably prorated during the period of such damage, based upon the degree of
interference sustained by Lessee resulting from said fire and casualty.
10. The Lessor shall supply keys for all access doors to the leased
premises and shall provide access to the leased premises at least between the
hours of 7:00 a.m. and 11:00 p.m., seven days a week. Lessee may duplicate keys
for use of its employees working in the leased premises and shall return all
keys to Lessor at the end of the tenancy.
11. This Lease constitutes the entire agreement between the parties and
shall not be modified or amended except in writing signed by both parties.
12. Any waiver or a provision of or a right given in the Lease shall be
deemed a waiver for that occasion only and shall not be construed as a waiver of
the provisions or right on any other occasion.
13. The provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
CLARKSBURG MASONIC BUILDING COMPANY
By:
INDUSTRIAL DATA SYSTEMS, INC.
By: /s/ WILLIAM A. COSKEY
William A. Coskey
ADOPTION AGREEMENT #004
NONSTANDARDIZED CODE SECTION 401(K) PROFIT SHARING PLAN
The undersigned, INDUSTRIAL DATA SYSTEMS, INC. ("Employer"), by executing
this Adoption Agreement, elects to become a participating Employer in the
Powell, Townsend & Associates, Inc. Defined Contribution Prototype Plan (basic
plan, document #01) by adopting the accompanying Plan and Trust in full as if
the Employer were a signatory to that Agreement. The Employer makes the
following elections granted under the provisions of the Prototype Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (CHOOSE
(a) OR (b))
[X] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[ ] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [NOTE:
THE EMPLOYER MAY NOT ELECT OPTION (B) IF A CUSTODIAN EXECUTES THE ADOPTION
AGREEMENT.]
1.03 PLAN. The name of the Plan as adopted by the Employer is INDUSTRIAL
DATA SYSTEMS, INC. 401(K) PROFIT SHARING PLAN.
1.07 EMPLOYEE. The following Employees are not eligible to participate in
the Plan: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (g))
[ ] (a) No exclusions.
[X] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [NOTE: IF THE EMPLOYER EXCLUDES UNION EMPLOYEES FROM THE PLAN, THE
EMPLOYER MUST BE ABLE TO PROVIDE EVIDENCE THAT RETIREMENT BENEFITS WERE THE
SUBJECT OF GOOD FAITH BARGAINING.]
[ ] (c) Nonresident aliens who do not receive any earned income (as defined in
Code Section 911(d)(2)) from the Employer which constitutes United States
source income (as defined in Code Section 861(a)(3)).
[ ] (d) Commission Salesmen.
[ ] (e) Any Employee compensated on a salaried basis.
[ ] (f) Any Employee compensated on an hourly basis.
[ ] (g) (SPECIFY) _________________________________________________________.
LEASED EMPLOYEES. Any Leased Employee treated as an Employee under Section 1.31
of the Plan, is: (CHOOSE (h) OR (i))
[X] (h) Not eligible to participate in the Plan.
[ ] (i) Eligible to participate in the Plan, unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07.
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RELATED EMPLOYERS. If any of the Employer's related group (as defined in
Section 1.30 of the Plan) executes a Participation Agreement, such member's
Employees are eligible to participate in this Plan, unless excluded by reason of
an exclusion classification elected under this Adoption Agreement Section 1.07.
In addition: (CHOOSE (j) OR (k))
[X] (j) No other related group member's Employees are eligible to participate
in the Plan.
[ ] (k) The following nonparticipating related group member's Employees are
eligible to participate in the Plan unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07: _____________________________________________________________________
1.12 COMPENSATION
TREATMENT OF ELECTIVE CONTRIBUTIONS. (CHOOSE (a) OR (b))
[X] (a) "Compensation" includes elective contributions made by the Employer
on the Employee's behalf.
[ ] (b) "Compensation" does not include elective contributions.
MODIFICATIONS TO COMPENSATION DEFINITION. (CHOOSE (c) OR AT LEAST ONE OF (d)
THROUGH (j))
[X] (c) No modifications other than as elected under Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $___________ .
[ ] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax
withholding purposes, subject to any other election under this Adoption
Agreement Section 1.12.
[ ] (f) The Plan excludes bonuses.
[ ] (g) The Plan excludes overtime.
[ ] (h) The Plan excludes Commissions.
[ ] (i) Compensation will not include Compensation from a related employer (as
defined in Section 1.30 of the Plan) that has not executed a Participation
Agreement in this Plan unless, pursuant to Adoption Agreement Section 1.
07, the Employees of that related employer are eligible to participate in
this Plan.
[ ] (j) (SPECIFY) _________________________________________________________ .
If, for any Plan Year, the Plan uses permitted disparity in the contribution or
allocation formula elected under Article III, any election of Options (f), (g),
(h) or (j) is ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
SPECIAL DEFINITION FOR MATCHING CONTRIBUTIONS. "Compensation" for purposes of
any matching contribution formula under Article III means: (CHOOSE (k) OR (l)
ONLY IF APPLICABLE)
[X] (k) Compensation as defined in this Adoption Agreement Section 1.12.
[ ] (l) (SPECIFY) ____________________________________________________________
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SPECIAL DEFINITION FOR SALARY REDUCTION CONTRIBUTIONS. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (CHOOSE (m) OR AT LEAST ONE OF (n) OR (o), IF APPLICABLE)
[X] (m) No exceptions.
[ ] (n) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the
amount of the Employee's salary reduction contribution for the withholding
period: (CHOOSE (1) OR (2))
[ ] (1) After the reduction for such period of elective contributions to
the other plan(s).
[ ] (2) Prior to the reduction for such period of elective
contributions to the other plan(s).
[ ] (o) (SPECIFY) __________________________________________________________
.
1.17 PLAN YEAR/LIMITATION YEAR.
PLAN YEAR. Plan Year means: (CHOOSE (a) OR (b))
[X] (a) The 12 consecutive month period ending every DECEMBER 31.
[ ] (b) (SPECIFY) __________________________________________________________
.
LIMITATION YEAR. The Limitation Year is: (CHOOSE (c) OR (d))
[X] (c) The Plan Year.
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[ ] (d) The 12 consecutive month period ending every _________ .
1.18 EFFECTIVE DATE.
NEW PLAN. The "Effective Date" of the Plan is ____________________ .
RESTATED PLAN. The restated Effective Date is JANUARY 1, 1996.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established JANUARY 1, 1993. [NOTE: SEE THE EFFECTIVE DATE ADDENDUM.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is:
(CHOOSE (a) OR (b))
[X] (a) The actual method.
[ ] (b) The _____ equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of: (CHOOSE AT LEAST ONE)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under Section 3.06.
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[NOTE: ON THE BLANK LINE, INSERT "DAILY," "WEEKLY," "SEMI-MONTHLY PAYROLL
PERIODS" OR "MONTHLY."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
service the Plan must credit by reason of Section 1.29 of the Plan, the Plan
credits Service with the following predecessor employer(s): N/A. Service with
the designated predecessor employers(s) applies: (CHOOSE AT LEAST ONE OF (a) OR
(b); (c) IS AVAILABLE ONLY IN ADDITION TO (a) OR (b))
[ ] (a) For purposes of participation under Article II.
[ ] (b) For purposes of vesting under Article V.
[ ] (c) Except the following Service: ________________________________________
[NOTE: IF THE PLAN DOES NOT CREDIT ANY PREDECESSOR SERVICE UNDER THIS PROVISION,
INSERT "N/A" IN THE FIRST BLANK LINE. THE EMPLOYER MAY ATTACH A SCHEDULE TO
THIS ADOPTION AGREEMENT, IN THE SAME FORMAT AS THIS SECTION 1.29, DESIGNATING
ADDITIONAL PREDECESSOR EMPLOYERS AND THE APPLICABLE SERVICE CREDITING
ELECTIONS.]
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan
and also participates in a plan maintained by the leasing organization: (CHOOSE
(a) OR (b))
[ ] (a) The Advisory Committee will determine the Leased Employee's allocation
of Employer contributions under Article III without taking into account the
Leased Employee's allocation, if any, under the leasing organization's
plan.
[X] (b) The Advisory Committee will reduce a Leased Employee's allocation of
Employer nonelective contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased Employee's
allocation under the leasing organization's plan, but only to the extent
that allocation is attributable to the Leased Employee's service provided
to the Employer. The leasing organization's plan:
[X] (1) Must be a money purchase plan which would satisfy the definition
under Section 1.31 of a safe harbor plan, irrespective of whether the
safe harbor exception applies.
[ ] (2) Must satisfy the features and, if a defined benefit plan, the
method of reduction described in an addendum to this Adoption
Agreement, numbered 1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (CHOOSE (A) OR (B) OR BOTH; (C) IS
OPTIONAL AS AN ADDITIONAL ELECTION)
[X] (a) Attainment of age 21 (SPECIFY AGE, NOT EXCEEDING 21).
[X] (b) Service requirement. (CHOOSE ONE OF (1) THROUGH (3))
[ ] (1) One Year of Service.
[X] (2) 3 months (not exceeding 12) following the Employee's Employment
Commencement Date.
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[ ] (3) One Hour of Service.
[ ] (c) Special requirements for non-401(k) portion of plan. (MAKE ELECTIONS
UNDER (1) AND UNDER (2))
(1) The requirements of this Option (c) apply to participation in: (CHOOSE
AT LEAST ONE OF (i) THROUGH (iii))
[ ] (i) The allocation of Employer nonelective contributions and
Participant forfeitures.
[ ] (ii) The allocation of Employer matching contributions
(including forfeitures allocated as matching contributions).
[ ] (iii) The allocation of Employer qualified nonelective
contributions.
(2) For participation in the allocations described in (1), the eligibility
conditions are: (CHOOSE AT LEAST ONE OF (I) THROUGH (IV))
[ ] (i) _ (one or two) Year(s) of Service, without an intervening
Break in Service (as described in Section 2.03(A) of the Plan) if
the requirement is two Years of Service.
[ ] (ii) _ months (not exceeding 24) following the Employee's
Employment Commencement Date.
[ ] (iii) One Hour of Service.
[ ] (iv) Attainment of age _ (SPECIFY AGE, NOT EXCEEDING 21).
PLAN ENTRY DATE. "Plan Entry Date" and: (CHOOSE (d), (e) OR (f))
[ ] (d) Semi-annual Entry Dates. The first day of the Plan Year and the first
day of the seventh month of the Plan Year.
[ ] (e) The first day of the Plan Year.
[X] (f) (SPECIFY ENTRY DATES) January 1, April 1, July 1 or October 1.
TIME OF PARTICIPATION. An employee will become a Participant (and, if
applicable, will participate in the allocations described in Option (c)(1)),
unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date
(if employed on that date): (CHOOSE (g), (h) OR (i))
[X] (g) immediately following
[ ] (h) immediately preceding
[ ] (i) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement
Section 2.01 [NOTE: THE EMPLOYER MUST COORDINATE THE SELECTION OF (G), (H) OR
(I) WITH THE "PLAN ENTRY DATE" SELECTION IN (D), (E) OR (F). UNLESS OTHERWISE
EXCLUDED UNDER SECTION 1.07, THE EMPLOYEE MUST BECOME A PARTICIPANT BY THE
EARLIER OF: (1) THE FIRST DAY OF THE PLAN YEAR BEGINNING AFTER THE DATE THE
EMPLOYEE COMPLETES THE AGE AND SERVICE REQUIREMENTS OF CODE SECTION 410(A); OR
(2) 6 MONTHS AFTER THE DATE THE EMPLOYEE COMPLETES THOSE REQUIREMENTS.]
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DUAL ELIGIBILITY. The eligibility conditions of this Section 2.01 apply to:
(CHOOSE (j) OR (k))
[X] (j) All Employees of the Employer, except: (CHOOSE (1) OR (2))
[X] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as of the Effective
Date.
[ ] (k) Solely to an Employee employed by the Employer after
__________________. If the Employee was employed by the Employer on or
before the specified date, the Employee will become a Participant: (CHOOSE
(1), (2) OR (3))
[ ] (1) On the latest of the Effective Date, his Employment Commencement
Date or the date he attains age _____ (not to exceed 21).
[ ] (2) Under the eligibility conditions in effect under the Plan prior
to the restated Effective Date. If the restated Plan required more
than one Year of Service to participate, the eligibility condition
under this Option (2) for participation in the Code (Section) 401(k)
arrangement under this Plan is one Year of Service for Plan Years
beginning after December 31, 1988. [FOR RESTATED PLANS ONLY] [ ] (3)
(SPECIFY) ____________________________________________.
2.02 YEAR OF SERVICE -- PARTICIPATION.
HOURS OF SERVICE. An Employee must complete: (CHOOSE (A) OR (B))
[ ] (a) 1,000 Hours of Service
[ ] (b) ___ Hours of Service
during an eligibility computation period to receive credit for a Year of
Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY NOT EXCEED 1,000.]
ELIGIBILITY COMPUTATION PERIOD. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (CHOOSE (C) OR (D))
[ ] (c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
[X] (d) The Plan Year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE -- PARTICIPATION. The Break in Service rule
described in Section 2.02(B) of the Plan: (CHOOSE (A) OR (B))
[ ] (a) Does not apply to the Employer's Plan.
[X] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE: The Plan: (CHOOSE (A) OR (B))
[X] (a) Does not permit an eligible Employee or a Participant to elect not to
participate.
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[ ] (b) Does permit an eligible Employee or a Participant to elect not to
participate in accordance with Section 2.06 and with the following rules:
(COMPLETE (1), (2), (3) AND (4))
(1) An election is effective for a Plan Year if filed no later than
_____________________.
(2) An election not to participate must be effective for at least Plan
Year(s).
(3) Following a re-election to participate, the Employee or Participant:
[ ] (i) May not again elect not to participate for any subsequent Plan
Year.
[ ] (ii) May again elect not to participate, but not earlier than the
____ Plan Year following the Plan Year in which the re-election first
was effective.
(4) (SPECIFY) __________________________________________________________
[INSERT "N/A" IF NO OTHER RULES APPLY].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
PART I. [OPTIONS (a) THROUGH (g)] AMOUNT OF EMPLOYER'S CONTRIBUTION. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (CHOOSE ANY COMBINATION OF (a), (b), (c) AND (d), OR CHOOSE (e))
[X] (a) DEFERRED CONTRIBUTIONS (CODE (SECTION) 401(K) ARRANGEMENT). (CHOOSE (1)
OR (2) OR BOTH)
[X] (1) Salary reduction arrangement. The Employer must contribute the
amount by which the Participants have reduced their Compensation for
the Plan Year, pursuant to their salary reduction agreements on file
with the Advisory Committee. A reference in the Plan to salary
reduction contributions is a reference to these amounts.
[ ] (2) Cash or deferred arrangement. The Employer will contribute on
behalf of each Participant the portion of the Participant's
proportionate share of the cash or deferred contribution which he has
not elected to receive in cash. See Section 14.02 of the Plan. The
Employer's cash or deferred contribution is the amount the Employer
may from time to time deem advisable which the Employer designates as
a cash or deferred contribution prior to making that contribution to
the Trust.
[X] (b) MATCHING CONTRIBUTIONS. The Employer will make matching contributions
in accordance with the formula(s) elected in Part II of this Adoption
Agreement Section 3.01.
[X] (c) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS. The Employer, in its
sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[X] (d) NONELECTIVE CONTRIBUTIONS. (CHOOSE ANY COMBINATION OF (1) THROUGH (4))
[X] (1) Discretionary contribution. The amount (or additional amount) the
Employer may from time to time deem advisable.
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[ ] (2) The amount (or additional amount) the Employer may from time to
time deem advisable, separately determined for each of the following
classifications of Participants: (CHOOSE (I) OR (II))
[ ] (i) Nonhighly Compensated Employees and Highly Compensated
Employees. [ ] (ii) (SPECIFY CLASSIFICATIONS)
______________________.
Under this Option (2), the Advisory Committee will allocate the amount
contributed for each Participant classification in accordance with
Part II of Adoption Agreement 3.04, as if the Participants in that
classification were the only Participants in the Plan.
[ ] (3) __% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes the
contribution [NOTE: THE PERCENTAGE SELECTED MAY NOT EXCEED 15%.]
[ ] (4) __% of Net Profits but not more than $ .
[ ] (e) FROZEN PLAN. This Plan is a frozen Plan effective _______. The
Employer will not contribute to the Plan with respect to any period
following the stated date.
NET PROFITS. The Employer: (CHOOSE (f) OR (g))
[X] (f) Need not have Net Profits to make its annual contribution under this
Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding $ _______ to
make the following contributions: (CHOOSE AT LEAST ONE)
[ ] (1) Cash or deferred contributions described in Option (a)(2).
[ ] (2) Matching contributions described in Option (b), except:
__________.
[ ] (3) Qualified nonelective contributions described in Option (c).
[ ] (4) Nonelective contributions described in Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes ____________________________________________________________. [NOTE:
ENTER "N/A" IF NO EXCLUSIONS APPLY.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits under Option (g), it will reduce the
matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated
Net Profits.
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PART II. [OPTIONS (H) THROUGH (J)] MATCHING CONTRIBUTION FORMULA. [NOTE: IF THE
EMPLOYER ELECTED OPTION (B), COMPLETE OPTIONS (H), (I) AND (J).]
[X] (h) AMOUNT OF MATCHING CONTRIBUTIONS. For each Plan Year, the Employer's
matching contribution is: (CHOOSE ANY COMBINATION OF (1), (2), (3), (4) AND
(5))
[X] (1) An amount equal to 50% of each Participant's eligible
contributions for the Plan Year.
[ ] (2) An amount equal to __% of each Participant's first tier of
eligible contributions for the Plan Year, plus the following matching
percentage(s) for the following subsequent tiers of eligible
contributions for the Plan ______________________________.
[X] (3) Discretionary formula.
[X] (i) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
the Participant's eligible contributions for the Plan Year.
[ ] (ii) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
each tier of the Participant's eligible contributions for the
Plan Year.
[ ] (4) An amount equal to the following percentage of each
Participant's eligible contributions for the Plan Year, based on the
Participant's Years of Service:
NUMBER OF YEARS OF SERVICE MATCHING PERCENTAGE
-------------------------- -------------------
-- --
-- --
-- --
-- --
The Advisory Committee will apply this formula by determining Years of
Service as follows:__________________________________________________.
[ ] (5) A Participant's matching contribution may not: (CHOOSE (i) OR
(ii))
[ ] (i) Exceed _____________________________________________.
[ ] (ii) Be less than ______________________________________.
RELATED EMPLOYERS. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the related employers may elect different
matching contribution formulas by attaching to the Adoption Agreement a
separately completed copy of this Part II. NOTE: SEPARATE MATCHING
CONTRIBUTION FORMULAS CREATE SEPARATE CURRENT BENEFIT STRUCTURES THAT MUST
SATISFY THE MINIMUM PARTICIPATION TEST OF CODE SECTION 401(A)(26).]
[X] (i) DEFINITION OF ELIGIBLE CONTRIBUTIONS. Subject to the requirements of
Option (j), the term "eligible contributions" means: (CHOOSE ANY
COMBINATION OF (1) THROUGH (3))
[X] (1) salary reduction contributions
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[ ] (2) Cash or deferred contributions (including any part of the
Participant's proportionate share of the cash or deferred contribution
which the Employer defers without the Participant's election).
[ ] (3) Participant mandatory contributions, as designated in Adoption
Agreement Section 4.01. See Section 14.04 of the Plan.
[X] (j) AMOUNT OF ELIGIBLE CONTRIBUTIONS TAKEN INTO ACCOUNT. When determining
a Participant's eligible contributions taken into account under the
matching contributions formula(s), the following rules apply: (CHOOSE ANY
COMBINATION OF (1) THROUGH (4))
[ ] (1) The Advisory Committee will take into account all eligible
contributions credited for the Plan Year.
[X] (2) The Advisory Committee will disregard eligible contributions
exceeding 6% of compensation.
[ ] (3) The Advisory Committee will treat as the first tier of eligible
contributions, an amount not exceeding:_____________________________ .
The subsequent tiers of eligible contributions are: ___ .
[ ] (4) (SPECIFY)_______________________________________________________ .
PART III. [OPTIONS (K) AND (L)]. SPECIAL RULES FOR CODE SECTION 401(K)
ARRANGEMENT. (CHOOSE (K) OR (L), OR BOTH, AS APPLICABLE)
[X] (k) SALARY REDUCTION AGREEMENTS. The following rules and restrictions
apply to an Employee's salary reduction agreement: (MAKE A SELECTION UNDER
(1), (2), (3) AND (4))
(1) Limitation on amount. The Employee's salary reduction contributions:
(CHOOSE (i) OR AT LEAST ONE OF (ii) OR (iii))
[ ] (i) No maximum limitation other than as provided in the Plan.
[X] (ii) May not exceed 15% of Compensation for the Plan Year,
subject to the annual additions limitation described in Part 2 of
Article III and the 402(g) limitation described in Section 14.07
of the Plan. [ ] (iii) Based on percentages of Compensation must
equal at least ___________________________________________ .
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (CHOOSE (I), (II), (III) OR (IV))
[ ] (i) Once during any Plan Year but not later than
____________________ of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[ ] (iii) As of the first day of any month.
[X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR) any day
of the plan year.
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(3) An Employee who revokes his salary reduction agreement may file a new
salary reduction agreement with an effective (CHOOSE (I), (II), (III) OR
(IV)
[ ] (i) No earlier than the first day of the next Plan Year.
[X] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent to the month in
which he revoked an Agreement.
[X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR FOLLOWING
THE PLAN YEAR OF REVOCATION) _____________________________________
(4) A Participant may increase or may decrease, on a prospective basis, his
salary reduction percentage or dollar amount: (CHOOSE (I), (II), (III) OR
(IV))
[ ] (i) As of the beginning of each payroll period.
[ ] (ii) As of the first day of each month.
[X] (iii) As of any Plan Entry Date.
[ ] (iv) (SPECIFY, BUT MUST PERMIT AN INCREASE OR A DECREASE AT LEAST
ONCE PER PLAN YEAR)_______________________________________________
[ ] (1) CASH OR DEFERRED CONTRIBUTIONS. For each Plan Year for which the
Employer makes a designated cash or deferred contribution, a Participant
may elect to receive directly in cash not more than the following portion
(or, if less the 402(g) limitation described in Section 14.07 of the Plan)
of his proportionate share of that cash or deferred contribution: (CHOOSE
(1) OR (2))
[ ] All or any portion.
[ ] (2) ______________________________%.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions in accordance with Section 14.06 and
the elections under this Adoption Agreement Section 3.04.
PART I. [OPTIONS (a) THROUGH (d)]. SPECIAL ACCOUNTING ELECTIONS. (CHOOSE
WHICHEVER ELECTIONS ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[X] (a) MATCHING CONTRIBUTIONS ACCOUNT. The Advisory Committee will allocate
matching contributions to a Participant's: (CHOOSE (1) OR (2); (3) IS
AVAILABLE ONLY IN ADDITION TO (1))
[X] (1) Regular Matching Contributions Account.
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under Options(s) ___ of Adoption
Agreement Section 3.01 are allocable to the Qualified Matching
Contributions Account.
[X] (b) SPECIAL ALLOCATION DATES FOR SALARY REDUCTION CONTRIBUTIONS. The
Advisory Committee will allocate reduction contributions as of the
Accounting Date and as of the following additional allocation dates: EACH
PAYROLL DATE.
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[X] (c) SPECIAL ALLOCATION DATES FOR MATCHING CONTRIBUTIONS. The Advisory
Committee will allocate matching contributions as of the Accounting Date
and as of the following additional allocation dates: EACH PAYROLL DATE.
[X] (d) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS -- DEFINITION OF
PARTICIPANT. For purposes of allocating the designated qualified
nonelective contribution, "Participant" means: (CHOOSE (1), (2) OR (3))
[ ] (1) All Participants.
[X] (2) Participants who are Nonhighly Compensated Employees for the Plan
Year.
[ ] (3) (SPECIFY) __________________________________.
PART II. METHOD OF ALLOCATION -- NONELECTIVE CONTRIBUTION. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual nonelective contribution (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfied the conditions of Section 3.06, in
accordance with the allocation method selected under this Section 3.04. If the
Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of
Compensation allocated to all Participants, "Compensation" does not include
any exclusions elected under Adoption Agreement Section 1.12 (other than the
exclusion of elective contributions), and the Advisory Committee must take into
account the Participant's Compensation for the entire Plan Year. (CHOOSE AN
ALLOCATION METHOD UNDER (E), (F), (G) OR (H); (I) IS MANDATORY IF THE EMPLOYER
ELECTS (F), (G) OR (H); (J) IS OPTIONAL IN ADDITION TO ANY OTHER ELECTION.)
[X] (e) NONINTEGRATED ALLOCATION FORMULA. (CHOOSE (1) OR (2))
[X] (1) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year.
[ ] (2) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year. For purposes of this Option (2), "Participant"
means, in addition to a Participant who satisfied the requirements of
Section 3.06 for the Plan Year, any other Participant entitled to a
top heavy minimum allocation under Section 3.04(B), but such
Participant's allocation will not exceed 3% of his Compensation for
the Plan Year.
[ ] (f) TWO-TIERED INTEGRATED ALLOCATION FORMULA -- MAXIMUM DISPARITY. First,
the Advisory Committee will allocate the annual Employer nonelective
contributions in the same ratio that each Participant's Compensation plus
Excess Compensation for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Compensation
plus Excess Compensation, must not exceed the applicable percentage (5.7%,
5.4% or 4.3%) listed under the Maximum Disparity Table following Option
(i).
The Advisory Committee then will allocate any remaining contributions in
the same ratio that each Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year.
12
<PAGE>
[ ] (g) THREE-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in
the same ratio that each Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year. The
allocation under this paragraph, as a percentage of each Participant's
Compensation may not exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following Option (i). Solely for
purposes of the allocation in this first paragraph, "Participant" means,
in addition to a Participant who satisfies the requirements of Section 3.06
for the Plan Year: (CHOOSE (1) OR (2))
[ ] (1) No other Participant.
[ ] (2) Any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B), but such Participant's allocation under this
Option (g) will not exceed 3% of his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year. The allocation under this paragraph, as
a percentage of each Participant's Excess Compensation, may not exceed the
allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
[ ] (h) FOUR-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in
the same ratio that each Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year, but not
exceeding 3% of each Participant's Compensation. Solely for purposes of
this first tier allocation, a "Participant" means, in addition to any
Participant who satisfies the requirements of Section 3.06 for the Plan
Year, any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B) of the Plan.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year, but not exceeding 3% of each
Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
Employer contributions in the same ratio that each Participant's
Compensation plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed the
applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum
Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
13
<PAGE>
[ ] (i) EXCESS COMPENSATION. For purposes of Option (f), (g) or (h), "Excess
Compensation" means Compensation in excess of the following Integration
Level: (CHOOSE (1) OR (2))
[ ] (1) __% (not exceeding 100%) of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first
day of the Plan Year: (CHOOSE ANY COMBINATION OF (i) AND (ii) OR
CHOOSE (iii))
[ ] (i) Rounded to _____________________________________________
(but not exceeding the taxable wage base).
[ ] (ii) But not greater than $_____.
[ ] (iii) Without any further adjustment or limitation.
[ ] (2) $_________ [NOTE: NOT EXCEEDING THE TAXABLE WAGE BASE FOR THE
PLAN YEAR IN WHICH THIS ADOPTION AGREEMENT FIRST IS EFFECTIVE.]
MAXIMUM DISPARITY TABLE. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
INTEGRATION LEVEL (AS APPLICABLE PERCENTAGES FOR APPLICABLE PERCENTAGES
PERCENTAGE OF TAXABLE WAGE BASE) OPTION (F) OR OPTION (G) FOR OPTION (H)
- ------------------------------------ -------------------------- ------------------------
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than
$10,001) and not more than 80% 4.3% 1.3%
20% (or $10,000, if greater) or less 5.7% 2.7%
</TABLE>
[ ] (j) ALLOCATION OFFSET. The Advisory Committee will reduce a Participant's
allocation otherwise made under Part II of this Section 3.04 by the
Participant's allocation under the following qualified plan(s) maintained
by the Employer: _______________________________ .
The Advisory Committee will determine this allocation reduction: (CHOOSE
(1) OR (2))
11
<PAGE>
[ ] (1) By treating the term "nonelective contribution" as including all
amounts paid or accrued by the Employer during the Plan Year to the
qualified plan(s) referenced under this Option (j). If a Participant
under this Plan also participates in that other plan, the Advisory
Committee will treat the amount the Employer contributes for or during
a Plan Year on behalf of a particular Participant under such other
plan as an amount allocated under this Plan to that Participant's
Account for that Plan Year. The Advisory Committee will make the
computation of allocation required under the immediately preceding
sentence before making any allocation of nonelective contributions
under this Section 3.04.
[ ] (2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(j).
14
<PAGE>
TOP HEAVY MINIMUM ALLOCATION -- METHOD OF COMPLIANCE. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): CHOOSE (K) OR (L))
[X] (k) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
[ ] (l) The Employer will satisfy the top heavy minimum allocation under the
following plan(s) it maintains:__________________________________________ .
However, the Employer will make any necessary additional contribution to
satisfy the top heavy minimum allocation for an Employee covered only under
this Plan and not under the other plan(s) designated in this Option (l).
See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code Section 416.
RELATED EMPLOYERS. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
nonelective contributions (and forfeitures treated as nonelective contributions)
to each Participant in the Plan, in accordance with the elections in this
Adoption Agreement Section 3.04: (CHOOSE (M) OR (N))
[X] (m) Without regard to which contributing related group member employs the
Participant.
[ ] (n) Only to the Participants directly employed by the contributing
Employer. If a Participant receives Compensation from more than one
contributing Employer, the Advisory Committee will determine the
allocations under this Adoption Agreement Section 3.04 by prorating among
the participating Employers the Participant's Compensation and, if
applicable, the Participant's Integration Level under Option (i).
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required
under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture in accordance with Section 3.04: (CHOOSE (a) OR (b); (c) AND (d) ARE
OPTIONAL IN ADDITION TO (a) OR (b))
[X] (a) As an Employer nonelective contribution for the Plan Year in which
the forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.
[ ] (b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year: (CHOOSE (1) OR (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeiture
occurs.
[X] (c) To the extent attributable to matching contributions: (CHOOSE (1),
(2) OR (3))
[ ] (1) In the manner elected under Options (a) or (b).
[X] (2) First to reduce Employer matching contributions for the Plan
Year: (CHOOSE (i) OR (ii))
[X] (i) in which the forfeiture occurs,
15
<PAGE>
[ ] (ii) immediately following the Plan Year in which the forfeiture
occurs, then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching contribution for the Plan Year in
which the forfeiture occurs, in lieu of the manner elected under
Options (a) or (b).
[ ] (d) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year and then will advocate any remaining forfeitures
in the manner described in Options (a), (b) or (c), whichever applies. If
the Employer elects Option (c), the forfeitures used to reduce Plan
expenses: (CHOOSE (1) OR (2))
[ ] (1) relate proportionately to forfeitures described in Option (c) and
to forfeitures described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in Options ____.
ALLOCATION OF FORFEITED EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (CHOOSE (E), (F) OR (G))
[ ] (e) To reduce Employer matching contributions for the Plan Year: (CHOOSE
(1) OR (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeitures
occurs.
[ ] (f) As Employer discretionary matching contributions for the Plan Year in
which forfeited, except the Advisory Committee will not allocate these
forfeitures to the Highly Compensated Employees who incurred the
forfeitures.
[X] (g) In accordance with Options (a) through (d), whichever applies, except
the Advisory Committee will not allocate these forfeitures under Option (a)
or under Option (c)(3) to the Highly Compensated Employees who incurred the
forfeitures.
3.06 ACCRUAL OF BENEFIT.
COMPENSATION TAKEN INTO ACCOUNT. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any cash or deferred contribution, designated qualified nonelective contribution
or nonelective contribution by taking into account: (CHOOSE (A) OR (B))
[X] (a) The Employee's Compensation for the entire Plan Year.
[ ] (b) The Employee's Compensation for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan.
16
<PAGE>
ACCRUAL REQUIREMENTS. Subject to the suspension of accrual requirements of
Section 3.06(E) of the Plan, to receive an allocation of cash or deferred
contributions, matching contributions, designated qualified nonelective
contributions, nonelective contributions and Participant forefeitures, if any,
for the Plan Year, a Participant must satisfy the conditions described in the
following elections: (CHOOSE (C) OR AT LEAST ONE OF (D) THROUGH (F))
[ ] (c) SAFE HARBOR RULE. If the Participant is employed by the Employer on
the last day of the Plan Year, the Participant must complete at least one
Hour of Service for that Plan Year. If the Participant is not employed by
the Employer on the last day of the Plan Year, the Participant must
complete at least 501 Hours of Service during the Plan Year.
[X] (d) HOURS OF SERVICE CONDITIONS. The Participant must complete the
following minimum number of Hours of Service during the Plan Year: (CHOOSE
AT LEAST ONE OF (1) THROUGH (5))
[X] (1) 1,000 Hours of Service.
[ ] (2) (SPECIFY, BUT THE NUMBER OF HOURS OF SERVICE THAT MAY NOT EXCEED
1,000) ___________________________________________________________________.
[X] (3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (CHOOSE (I), (II) OR
(III))
[X] (i) Death.
[X] (ii) Disability.
[X] (iii) Attainment of Normal Retirement Age in the current Plan
Year or in a prior Plan Year.
[ ] (4) _ Hours of Service (not exceeding 1,000) if the Participant
terminates employment with the Employer during the Plan Year, subject
to any election in Option (3).
[ ] (5) No Hour of Service requirement for an allocation of the
following contributions:_____________________________________________
[X] (e) EMPLOYMENT CONDITIONS. The Participant must be employed by the
Employer on the last day of the Plan Year, irrespective of whether he
satisfies any Hours of Service condition under Option (d), with the
following exceptions: (CHOOSE (1) OR AT LEAST ONE OF (2) THROUGH (5))
[ ] (1) No exceptions.
[ ] (2) Termination of employment because of death.
[ ] (3) Termination of employment because of disability.
[ ] (4) Termination of employment following attainment of Normal
Retirement Age.
[ ] (5) No employment condition for the following contributions:_________
___________________________________________________________________.
[ ] (f) (SPECIFY OTHER CONDITIONS, IF APPLICABLE, IF APPLICABLE): ___________.
17
<PAGE>
SUSPENSION OF ACCRUAL REQUIREMENTS. The suspension of accrual requirements of
Section 3.06(E) of the Plan: (CHOOSE (g), (h) OR (i))
[X] (g) Applies to the Employer's Plan.
[ ] (h) Does not apply to the Employer's Plan.
[ ] (i) Applies in modified form to the Employer's Plan, as described in an
addendum to this Adoption Agreement, numbered Section 3.06(E).
SPECIAL ACCRUAL REQUIREMENTS FOR MATCHING CONTRIBUTIONS. If the Plan allocates
matching contributions on two or more allocation dates for a Plan Year, the
Advisory Committee, unless otherwise specified in Option (l), will apply any
Hours of Service condition by dividing the required Hours of Service on a
prorata basis to the allocation periods included in that Plan Year. Furthermore,
a Participant who satisfies the conditions described in this Adoption Agreement
Section 3.06 will receive an allocation of matching contributions (and
forfeitures treated as matching contributions) only if the Participant satisfies
the following additional condition(s): (CHOOSE (j) OR AT LEAST ONE OF (k) OR
(l))
[ ] (j) No additional conditions.
[ ] (k) The Participant is not a Highly Compensated Employee for the Plan
Year. This Option (k) applies to: (CHOOSE (1) OR (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in Option(s) __________________
of Adoption Agreement Section 3.01.
[X] (l) (SPECIFY) ACCRUAL CONDITIONS UNDER 3.06(D) AND 3.06(E) DO NOT APPLY.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed to this Plan equals: (CHOOSE (A), (B) OR
(C))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated but for
the limitations of Code Section 415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount allocated
as of such date under all qualified defined contribution plans
(determined without regard to the limitations of Code Section 415).
[ ] (b) The total Excess Amount.
[X] (c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
APPLICATION OF LIMITATION. The limitation under Section 3.18 of the Plan:
(CHOOSE (a) OR (b))
[X] (a) Does not apply to the Employer's Plan because the Employer does not
maintain and never has maintained a defined benefit plan covering any
Participant in this Plan.
18
<PAGE>
[ ] (b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (CHOOSE (1) OR
(2))
[ ] (1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
[ ] (2) Its contribution or allocation on behalf of the Participant to
the defined contribution plan under which the Participant participates
and then, if necessary, the Participant's projected annual benefit
under the defined benefit plan under which the Participant
particpates.
[NOTE: IF THE EMPLOYER SELECTS (a), THE REMAINING OPTIONS IN THIS SECTION 3.18
DO NOT APPLY TO THE EMPLOYER'S PLAN.]
COORDINATION WITH TOP HEAVY MINIMUM ALLOCATION. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications: (CHOOSE (c) OR AT LEAST ONE OF (d) OR (e))
[ ] (c) No modifications.
[ ] (d) For Non-Key Employees participating only in this Plan, the top heavy
minimum allocation is the minimum allocation described in Section 3.04(B)
determined by substituting __% (not less than 4%) for "3%," except:
(CHOOSE (i) OR (ii))
[ ] (i) No exceptions.
[ ] (ii) Plan Years in which the top heavy ratio exceeds 90%.
[ ] (e) For Non-Key Employees also participating in the defined benefit plan,
the top heavy minimum is: (CHOOSE (1) OR (2))
[ ] (1) 5% of Compensation (as determined under Section 3.04(B) or the
Plan) irrespective of the contribution rate of any Key Employee,
except: (CHOOSE (i) OR (ii))
[ ] (i) No exceptions.
[ ] (ii) Substituting "7 1/2%" for "5%" if the top heavy ratio
does not exceed 90%.
[ ] (2) 0%. [NOTE: THE EMPLOYER MAY NOT SELECT THIS OPTION (2) UNLESS
THE DEFINED BENEFIT PLAN SATISFIES THE TOP HEAVY MINIMUM BENEFIT
REQUIREMENTS OF CODE SECTION 416 FOR THESE NON-KEY EMPLOYEES.]
ACTUARIAL ASSUMPTIONS FOR TOP HEAVY CALCULATION. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and mortality
assumptions to value accrued benefits under a defined benefit plan:_____________
_____________________________________________
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code Section
416, the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
19
<PAGE>
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (CHOOSE (a) OR
(b); (c) IS AVAILABLE ONLY WITH (b))
[X] (a) Does not permit Participant nondeductible contributions.
[ ] (b) Permits Participant nondeductible contributions, pursuant to Section
14.04 of the Plan.
[ ] (c) The following portion of the Participant's nondeductible contributions
for the Plan Year are mandatory contributions under Option (i)(3) of
Adoption Agreement Section 3.01: (CHOOSE (1) OR (2))
[ ] (1) The amount which is not less than:_______________________________.
[ ] (2) The amount which is not greater than:____________________________.
ALLOCATION DATES. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates: (CHOOSE (D) OR (E))
[ ] (d) No other allocation dates.
[ ] (e) (SPECIFY) _________________________________________________________
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (e), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
4.05 PARTICIPANT CONTRIBUTION -- WITHDRAWAL/DISTRIBUTION. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Mandatory Contributions Account, if any, prior to his Separation
from Service: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (d))
[ ] (a) No distribution options prior to Separation from Service.
[ ] (b) The same distribution options applicable to the Deferral Contributions
Account prior to the Participant's Separation from Service, as elected in
Adoption Agreement Section 6.03.
[ ] (c) Until he retires, the Participant has continuing election to receive
all or any portion of his Mandatory Contributions Account if: (CHOOSE (1)
OR AT LEAST ONE OF (2) THROUGH (4))
[ ] (1) No conditions.
[ ] (2) The mandatory contributions have accumulated for at least Plan
Years since the Plan Year for which contributed.
[ ] (3) The Participant suspends making nondeductible contributions for
a period of months.
[ ] (4) (SPECIFY)_______________________________________________________.
[ ] (d) (SPECIFY)___________________________________________________________.
20
<PAGE>
ARTICLE V
TERMINATION OF SERVICE -- PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (CHOOSE (a)
OR (b))
[ ] (a) _____ [STATE AGE, BUT MAY NOT EXCEED AGE 65].
[X] (b) The later of the date the Participant attains 65 years of age or the
5TH anniversary of the first day of the Plan Year in which the Participant
commenced participation in the Plan. [THE AGE SELECTED MAY NOT EXCEED AGE
65 AND THE ANNIVERSARY SELECTED MAY NOT EXCEED THE 5TH.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
5.02 of the Plan: (CHOOSE (A) OR CHOOSE ONE OR BOTH OF (B) AND (C))
[ ] (a) Does not apply.
[X] (b) Applies to death.
[X] (c) Applies to disability.
5.03 VESTING SCHEDULE.
DEFERRAL CONTRIBUTIONS ACCOUNT/QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT/
QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT/MANDATORY CONTRIBUTIONS ACCOUNT. A
Participant has a 100% Nonforfeitable interest at all times in his Deferral
Contributions Account, his Qualified Matching Contributions Account, his
Qualified Nonelective Contributions Account and in his Mandatory Contributions
Account.
REGULAR MATCHING CONTRIBUTIONS ACCOUNT/EMPLOYER CONTRIBUTIONS ACCOUNT. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
CHOOSE (a) OR (b); (c) AND (d) ARE AVAILABLE ONLY AS ADDITIONAL OPTIONS)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times. [NOTE: THE
EMPLOYER MUST ELECT OPTION (a) IF THE ELIGIBILITY CONDITIONS UNDER ADOPTION
AGREEMENT SECTION 2.01(C) REQUIRE 2 YEARS OF SERVICE OR MORE THAN 12 MONTHS
OF EMPLOYMENT.]
[X] (b) Graduated Vesting Schedules.
TOP HEAVY SCHEDULE
(MANDATORY)
YEARS OF NONFORFEITABLE
SERVICE PERCENTAGE
- ------------------------------------- --------------
Less than 1.......................... 0%
1............................... 25%
2............................... 50%
3............................... 75%
4............................... 100%
5............................... 100%
6 or more....................... 100%
NON TOP HEAVY SCHEDULE
(OPTIONAL)
YEARS OF NONFORFEITABLE
SERVICE PERCENTAGE
- ------------------------------------- --------------
Less than 1.......................... 0%
1............................... 25%
2............................... 50%
3............................... 75%
4............................... 100%
5............................... 100%
6............................... 100%
7 or more....................... 100%
21
<PAGE>
[ ] (c) Special vesting election for Regular Matching Contributions Account.
In lieu of the election under Options (a) or (b), the Employer elects the
following vesting schedule for a Participant's Regular Matching
Contributions Account: (CHOOSE (1) OR (2))
[ ] (1) 100% Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule described in the addendum
to this Adoption Agreement, numbered 5.03(c). [NOTE: IF THE EMPLOYER
ELECTS THIS OPTION (c)(2), THE ADDENDUM MUST DESIGNATE THE APPLICABLE
VESTING SCHEDULE(S) USING THE SAME FORMAT AS USED IN OPTION (b).]
[NOTE: UNDER OPTIONS (b) AND (c)(2), THE EMPLOYER MUST COMPLETE A TOP HEAVY
SCHEDULE WHICH SATISFIES CODE SECTION 416. THE EMPLOYER, AT ITS OPTION, MAY
COMPLETE A NON TOP HEAVY SCHEDULE. THE NON TOP HEAVY SCHEDULE MUST SATISFY CODE
SECTION 411(A)(2). ALSO SEE SECTION 7.05 OF THE PLAN.]
[X] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under
Option (c)(2)) applies: (CHOOSE (1) OR (2))
[ ] (1) Only in a Plan Year for which the Plan is top heavy.
[X] (2) In the Plan Year for which the Plan first is top heavy and then in
all subsequent Plan Years. [NOTE: THE EMPLOYER MAY NOT ELECT OPTION
(d) UNLESS IT HAS COMPLETED A NON TOP HEAVY SCHEDULE.]
MINIMUM VESTING. (CHOOSE (E) OR (F))
[X] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be less than
the lesser of $___ or his entire Accrued Benefit, even if the application
of a graduated vesting schedule under Options (b) or (c) would result in a
smaller Nonforfeitable Accrued Benefit.
LIFE INSURANCE INVESTMENTS. The Participant's Accrued Benefit attributable to
insurance contracts purchased on his behalf under Article XI is: (CHOOSE (g) OR
(h))
[X] (g) Subject to the vesting election under Options (a), (b) or (c).
[ ] (h) 100% Nonforfeitable at all times, irrespective of the vesting
election under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C)
of the Plan: (CHOOSE (a) OR (b))
[ ] (a) Does not apply.
[X] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a
Deferral Contributions Account.
22
<PAGE>
5.06 YEAR OF SERVICE -- VESTING.
VESTING COMPUTATION PERIOD. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods: (CHOOSE (A) OR (B))
[X] (a) Plan Years.
[ ] (b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each
successive 12 consecutive month period measured from each anniversary of
that Employment Commencement Date.
HOURS OF SERVICE. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (CHOOSE (c) OR (d))
[X] (c) 1,000 Hours of Service.
[ ] (d) _____ Hours of Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY
NOT EXCEED 1,000.]
5.08 INCLUDED YEARS OF SERVICE -- VESTING. The Employer specifically
excludes the following Years of Service: (CHOOSE (a) OR AT LEAST ONE OF (b)
THROUGH (e))
[ ] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the age of __.
Note: The age selected may not exceed age 18.]
[X] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[ ] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or the
aggregate number of the Years of Service prior to the Break. This exception
applies only if the Participant is 0% vested in his Accrued Benefit derived
from Employer contributions at the time he has a Break in Service.
Furthermore, the aggregate number of Years of Service before a Break in
Service do not include any Years of Service not required to be taken into
account under this exception by reason of any prior Break in Service.
[ ] (e) Any Year of Service earned prior to the effective date of ERISA if the
Plan would have disregarded that Year of Service on account of an
Employee's Separation from Service under a Plan provision in effect and
adopted before January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
CODE SECTION 411(d)(6) PROTECTED BENEFITS. The elections under this Article VI
may not eliminate Code Section 411(d)(6) protected benefits. To the extent the
elections would eliminate a Code Section 411(d)(6) protected benefit, see
Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional
forms of benefit under the Plan, the more liberal options apply on the later of
the adoption date or the Effective Date of this Adoption Agreement.
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<PAGE>
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
DISTRIBUTION DATE. A distribution date under the Plan means any day of the Plan
Year. [NOTE: THE EMPLOYER MUST SPECIFY THE APPROPRIATE DATE(S). THE SPECIFIED
DISTRIBUTION DATES PRIMARILY ESTABLISH ANNUITY STARTING DATES AND THE NOTICE AND
CONSENT PERIODS PRESCRIBED BY THE PLAN. THE PLAN ALLOWS THE TRUSTEE AN
ADMINISTRATIVELY PRACTICABLE PERIOD OF TIME TO MAKE THE ACTUAL DISTRIBUTION
RELATING TO A PARTICULAR DISTRIBUTION DATE.]
NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (CHOOSE (a), (b), (c),
(d) OR (e))
[ ] (a)______________________________________________________________________ of
the ________________________ Plan Year beginning after the Participant's
Separation from Service.
[X] (b) As soon as administratively feasible following the Participant's
Separation from Service.
[ ] (c)______________________________________________________________________ of
the Plan Year after the Participant incurs ___ Break(s) in Service (as
defined in Article V).
[ ] (d) __________________________________________________ following the
Participant's attainment of Normal Retirement Age, but not earlier than
_________________ days following his Separation from Service.
[ ] (e) (SPECIFY) ____________________________________________________________
__________________.
NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections under Section
6.03.
DISABILITY. The distribution date, subject to Section 6.01(A)(3), is (CHOOSE
(f), (g) OR (h))
[ ] (f) ______________________________________________________________________
after the Participant terminates employment because of disability.
[X] (g) The same as if the Participant had terminated employment without
disability.
[ ] (h) (SPECIFY) ____________________________________________________________
__________________.
HARDSHIP. (CHOOSE (I) OR (J))
[X] (i) The Plan does not permit a hardship distribution to a Participant who
has separated from Service.
[ ] (j) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship distribution policy
stated in: (CHOOSE (1), (2) OR (3))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
[ ] (3) The addendum to this Adoption Agreement, numbered Section 6.01.
24
<PAGE>
DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (CHOOSE (k), (l) OR (m))
[ ] (k) Treats the default as a distributable event. The Trustee, at the time
of the default, will reduce the Participant's Nonforfeitable Accrued
Benefit by the lesser of the amount in default (plus accrued interest) or
the Plan's security interest in that Nonforfeitable Accrued Benefit. To the
extent the loan is attributable to the Participant's Deferral Contributions
Account, Qualified Matching Contributions Account or Qualified Nonelective
Contributions Account, the Trustee will not reduce the Participant's
Nonforfeitable Accrued Benefit unless the Participant has separated from
Service or unless the Participant has attained age 59 1/2.
[X] (l) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to section 6.01 or Section 6.03
of the Plan, the Trustee will reduce the Participant's Nonforfeitable
Accrued Benefit by the lesser of the amount in default (plus accrued
interest) or the Plan's security interest in that Nonforfeitable Accrued
Benefit.
[ ] (m) (SPECIFY)______________________________________________________________
_______________.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (CHOOSE (A) OR
AT LEAST ONE OF (B), (C), (D) AND (E))
[ ] (a) No modifications.
[ ] (b) Except as required under Section 6.01 of the Plan, a lump sum
distribution is not available:
___________________________________________________________________________
____________________________________________________________
[X] (c) An installment distribution: (CHOOSE (1) OR AT LEAST ONE OF (2) OR (3))
[ ] (1) Is not available under the Plan.
[X] (2) May not exceed the lesser of 20 years or the maximum period
permitted under Section 6.02.
[ ] (3) (SPECIFY) __________________________________________________
__________.
[ ] (d) The Plan permits the following annuity options: _______________________
________________________________________________________________________.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section
6.04(E). [NOTE: THE EMPLOYER MAY SPECIFY ADDITIONAL ANNUITY OPTIONS IN AN
ADDENDUM TO THIS ADOPTION AGREEMENT, NUMBERED 6.02(d).]
[ ] (e) If the Plan invests in qualifying Employer securities, as described
in Section 10.03(F), a Participant eligible to elect distribution under
Section 6.03 may elect to receive that distribution in Employer securities
only in accordance with the provisions of the addendum to this Adoption
Agreement, numbered 6.02(e).
25
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS.
PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (CHOOSE AT LEAST
ONE OF (a) THROUGH (c))
[ ] (a) As of any distribution date, but not earlier than
________________________________ of the ___________ Plan Year beginning
after the Participant's Separation from Service.
[X] (b) As of the following date(s): (CHOOSE AT LEAST ONE OF OPTIONS (1)
THROUGH (6))
[ ] (1) Any distribution date after the close of the Plan Year in which
the Participant attains Normal Retirement Age.
[X] (2) Any distribution date following his Separation from Service with
the Employee.
[ ] (3) Any distribution date in the ______________ Plan Year(s)
beginning after his Separation from Service.
[ ] (4) Any distribution date in the Plan Year after the Participant
incurs _________________ Break(s) in Service (as defined in Article
V).
[ ] (5) Any distribution date following attainment of age ________ and
completion of at least ______ Years of Service (as defined in Article
V). ____________.
[ ] (6) (SPECIFY) ______________________________
[ ] (c) (SPECIFY) ____________________________________________________________
___________________________________________________________________________
__________________.
The distribution events described in the election(s) made under Options
(a), (b) or (c) apply equally to all Accounts maintained for the Participant
unless otherwise specified in Option (c).
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE -- REGULAR MATCHING
CONTRIBUTIONS ACCOUNT AND EMPLOYER CONTRIBUTIONS ACCOUNT. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (CHOOSE (d) OR AT LEAST ONE OF (E)
THROUGH (h))
[X] (d) No distribution options prior to Separation from Service.
[ ] (e) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of this Nonforfeitable
interest in these Accounts after he attains: (CHOOSE (1) OR (2))
[ ] (1) Normal Retirement Age.
[X] (2) ______________ years of age and is at least _______________%
vested in these Accounts. [NOTE: IF THE PERCENTAGE IS LESS THAN 100%,
SEE THE SPECIAL VESTING FORMULA IN SECTION 5.03.]
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<PAGE>
[ ] (f) After a Participant has participated in the Plan for a period of not
less than _ years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or any
portion of the Accounts. [NOTE: THE NUMBER IN THE BLANK SPACE MAY NOT BE
LESS THAN 5.]
[ ] (g) Hardship. A Participant may elect a hardship distribution prior to
his Separation from Service in accordance with the hardship distribution
policy: (CHOOSE (1), (2) OR (3); (4) IS AVAILABLE ONLY AS AN ADDITIONAL
OPTION)
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[ ] (2) Under Section 14.11 of the Plan.
[ ] (3) Provided in the addendum to this Adoption Agreement, numbered
Section 6.03.
[ ] (4) In no event may a Participant receive a hardship distribution
before he is at least ___% vested in these Accounts. [NOTE: IF THE
PERCENTAGE IN THE BLANK IS LESS THAN 100%, SEE THE SPECIAL VESTING
FORMULA IN SECTION 5.03.]
[ ] (h) (SPECIFY) __________________________________________________________
[NOTE: THE EMPLOYER MAY USE AN ADDENDUM, NUMBERED 6.03, TO PROVIDE ADDITIONAL
LANGUAGE AUTHORIZED BY OPTIONS (B)(6), (C), (G)(3) OR (H) OF THIS ADOPTION
AGREEMENT SECTION 6.03.]
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE -- DEFERRAL CONTRIBUTIONS
ACCOUNT, QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT AND QUALIFIED NONELECTIVE
CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (CHOOSE (i) OR AT LEAST ONE OF (j)
THROUGH (l))
[ ] (i) No distribution options prior to Separation from Service.
[ ] (j) Until he retires, the Participant has a continuing election to
receive all or any portion of these Accounts after he attains: (CHOOSE (1)
OR (2))
[ ] (1) The later of Normal Retirement Age or age 59 1/2.
[ ] (2) Age __ (at least 59 1/2).
[X] (k) Hardship. A Participant, prior to his Separation from Service, may
elect a hardship distribution from his Deferral Contributions Account in
accordance with the hardship distribution policy under Section 14.11 of the
Plan.
[ ] (l) (SPECIFY) ________________________________________________________
_________________ . [NOTE: OPTION (L) MAY NOT PERMIT IN SERVICE
DISTRIBUTIONS PRIOR TO AGE 59 1/2 (OTHER THAN HARDSHIP) AND MAY NOT MODIFY
THE HARDSHIP POLICY DESCRIBED IN SECTION 14.11.]
27
<PAGE>
SALE OF TRADE OR BUSINESS/SUBSIDIARY. If the Employer sells substantially all of
the assets (within the meaning of Code Section 409(d)(2)) used in a trade or
business or sells a subsidiary (within the meaning of Code Section 409(d)(3)), a
Participant who continues employment with the acquiring corporation is eligible
for distribution from his Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions Account: (CHOOSE
(m) OR (n))
[ ] (m) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[X] (n) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this Option (n) must constitute
a lump sum distribution, determined in a manner consistent with Code
Section 401(k)(10) and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
annuity distribution requirements of Section 6.04: (CHOOSE (a) OR (b))
[X] (a) Apply only to a Participant described in Section 6.04(E) of the Plan
(relating to the profit sharing exception to the joint and survivor
requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE -- DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other
than a distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (CHOOSE (A), (B) OR (C))
[X] (a) 0% per annum [NOTE: THE PERCENTAGE MAY EQUAL 0%.]
[ ] (b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
[ ] (c) (SPECIFY) ____________________________________________________________
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to
Section 14.12, to determine the allocation of net income, gain or loss:
(COMPLETE ONLY THOSE ITEMS, IF ANY, WHICH ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[X] (a) For salary reduction contributions, the Advisory Committee will:
(CHOOSE (1), (2), (3), (4) OR (5))
[X] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12,
based on a _______________________ weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period __% of the salary reduction contributions. (CHOOSE
(i) OR (ii))
[ ] (i) made during that valuation period.
28
<PAGE>
[ ] (ii) made by the following specified time: ___________________
.
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(a).
[X] (b) For matching contributions, the Advisory Committee will: (CHOOSE (1),
(2), (3) OR (4))
[X] (1) Apply Section 9.11 without modification.
[ ] (2) Use the weighted average method described in Section 14.12, based
on a _________________ weighting period.
[ ] (3) Treat as part of the relevant Account at the beginning of the
valuation period ___% of the matching contributions allocated during
the valuation period.
[ ] (4) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(b).
[ ] (c) For Participant nondeductible contributions, the Advisory Committee
will: (CHOOSE (1), (2), (3), (4) OR (5))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12, based
on a _________________ weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period ___% of the Participant nondeductible contributions:
(CHOOSE (i) OR (ii))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified time: _____________ .
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(c).
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (CHOOSE (A) OR (B))
[X] (a) May not exceed 10% of Plan assets.
[ ] (b) May not exceed ___% of Plan assets. [NOTE: THE PERCENTAGE MAY NOT
EXCEED 100%.]
10.14 VALUATION OF TRUST. In addition to each Account Date, the Trustee
must value the Trust Fund on the following valuation date(s): (CHOOSE (a) OR
(b))
[X] (a) No other mandatory valuation dates.
29
<PAGE>
[ ] (b) (SPECIFY) ________________________________________________________ .
30
<PAGE>
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective
Date specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (CHOOSE WHICHEVER ELECTIONS APPLY)
[ ] (A) COMPENSATION DEFINITION. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning
after __________________. [NOTE: MAY NOT BE EFFECTIVE LATER THAN THE FIRST
DAY OF THE FIRST PLAN YEAR BEGINNING AFTER THE EMPLOYER EXECUTES THIS
ADOPTION AGREEMENT TO RESTATE THE PLAN FOR THE TAX REFORM ACT OF 1986, IF
APPLICABLE.]
[ ] (b) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning
after __________________.
[ ] (c) SUSPENSION OF YEARS OF SERVICE. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for Plan
Years beginning after __________________.
[ ] (d) Contribution/Allocation Formula. The contribution formula elected
under Adoption Agreement Section 3.01 and the method of allocation elected
under Adoption Agreement Section 3.04 is effective for Plan Years beginning
after __________________.
[ ] (e) ACCRUAL REQUIREMENTS. The accrual requirements of section 3.06 are
effective for Plan Years beginning after __________________.
[ ] (f) EMPLOYMENT CONDITION. The employment condition of Section 3.06 is
effective for Plan Years beginning after __________________
[ ] (g) ELIMINATION OF NET PROFITS. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after _________________ [NOTE: THE DATE SPECIFIED MAY NOT BE
EARLIER THAN DECEMBER 31, 1985.]
[X] (h) VESTING SCHEDULE. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after DECEMBER
31, 1995.
[ ] (i) ALLOCATION OF EARNINGS. The special allocation provisions elected
under Adoption Agreement Section 9.11 are effective for Plan Years
beginning after __________________.
[ ] (j) (SPECIFY) ___________________________________________________________
__________________________________________________________________.
For Plan Years prior to the special Effective Date, the terms of the Plan
prior to its restatement under this Adoption Agreement will control for purposes
of the designated provisions. A special Effective Date may not result in the
delay of a Plan provision beyond the permissible Effective Date under any
applicable law requirements.
31
<PAGE>
EXECUTION PAGE
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Prototype Plan and Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee (and
Custodian, if applicable) signified its acceptance, on this
__________________________ day of ___________________________, 19______.
Name and EIN of Employer: INDUSTRIAL DATA SYSTEMS, INC. 76-0157248
Signed: /s/ WILLIAM A. COSKEY
William A. Coskey
Name(s) of Trustee: HULDA L. COSKEY, WILLIAM A. COSKEY
Signed: /s/ WILLIAM A. COSKEY
William A. Coskey
/s/ HULDA L. COSKEY
Hulda L. Coskey
Name of Custodian: _____________________________________________________________
Signed: ________________________________________________________________________
[NOTE: A TRUSTEE IS MANDATORY, BUT A CUSTODIAN IS OPTIONAL. SEE SECTION 10.03 OF
THE PLAN.]
PLAN NUMBER. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 001.
USE OF ADOPTION AGREEMENT. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Regional Prototype Plan Sponsor's recordkeeping purposes and does not
necessarily correspond to the plan number the Employer designated in the prior
paragraph.
RELIANCE ON NOTIFICATION LETTER. The Employer may not rely on the Regional
Prototype Plan Sponsor's notification letter covering this Adoption Agreement.
For reliance on the Plan's qualification, the Employer must obtain a
determination letter from the applicable IRS Key District office.
32
<PAGE>
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects
to become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Prototype
Plan as made by INDUSTRIAL DATA SYSTEMS, INC., the Signatory Employer to the
Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
Plan is:
_________________________________________________________________________ .
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as _________, and having an original
effective date of ______________________________
Dated this __________________________ day of ____________, 19___
Name of Participating Employer:
Signed:
Participating Employer's EIN
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE ADOPTION
AGREEMENT AND BY THE TRUSTEE.
Name of Signatory Employer: INDUSTRIAL DATA SYSTEMS, INC.
Accepted: Signed:
Name(s) of Trustee:
Accepted:
[Date] Signed:
[NOTE: EACH PARTICIPATING EMPLOYER MUST EXECUTE A SEPARATE PARTICIPATION
AGREEMENT. SEE THE EXECUTION PAGE OF THE ADOPTION AGREEMENT FOR IMPORTANT
PROTOTYPE PLAN INFORMATION.]
33
EXHIBIT 21
SUBSIDIARY OF REGISTRANT
1. Industrial Data Systems, Inc., a Texas Corporation doing business as IDS
Technical Services.
INDUSTRIAL DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
(Form 10-SB)
WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1993, as amended (the "Act"), a
Registration Statement on Form 10-SB, with such amendments (including
pre-effective and post-effective amendments) to said Registration Statement and
any supplement or supplements to the Form 10-SB as may be necessary or
appropriate, together with any and all exhibits and documents related to said
Registration Statement, in connection with the registration of 75,000,000 shares
of common stock, $.001 par value, pursuant to Section 12(g) of the Act;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint William A.
Coskey and Hulda Coskey, and each of them severally, his true and lawful
attorney or attorneys-in-fact, with power to act with or without the others and
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as a director or officer or both, as the case
may be, of the Company, each such Registration Statement referred to above, and
any and all amendments (including pre-effective and post-effective amendments)
thereto, and any supplements to the Registration Statement as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all instruments necessary or incidental in connection therewith, to file
the same or cause the same to be filed with the Commission, and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done, as fully and for all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys-in-fact and each of them
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
23rd day of January, 1997.
/S/ WILLIAM A. COSKEY
William A. Coskey, Director
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
(Form 10-SB)
WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1993, as amended (the "Act"), a
Registration Statement on Form 10-SB, with such amendments (including
pre-effective and post-effective amendments) to said Registration Statement and
any supplement or supplements to the Form 10-SB as may be necessary or
appropriate, together with any and all exhibits and documents related to said
Registration Statement, in connection with the registration of 75,000,000 shares
of common stock, $.001 par value, pursuant to Section 12(g) of the Act;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint William A.
Coskey and Hulda Coskey, and each of them severally, his true and lawful
attorney or attorneys-in-fact, with power to act with or without the others and
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as a director or officer or both, as the case
may be, of the Company, each such Registration Statement referred to above, and
any and all amendments (including pre-effective and post-effective amendments)
thereto, and any supplements to the Registration Statement as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all instruments necessary or incidental in connection therewith, to file
the same or cause the same to be filed with the Commission, and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done, as fully and for all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys-in-fact and each of them
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
23rd day of January, 1997.
/S/ HULDA L. COSKEY
Hulda L. Coskey, Director
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
(Form 10-SB)
WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1993, as amended (the "Act"), a
Registration Statement on Form 10-SB, with such amendments (including
pre-effective and post-effective amendments) to said Registration Statement and
any supplement or supplements to the Form 10-SB as may be necessary or
appropriate, together with any and all exhibits and documents related to said
Registration Statement, in connection with the registration of 75,000,000 shares
of common stock, $.001 par value, pursuant to Section 12(g) of the Act;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint William A.
Coskey and Hulda Coskey, and each of them severally, his true and lawful
attorney or attorneys-in-fact, with power to act with or without the others and
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as a director or officer or both, as the case
may be, of the Company, each such Registration Statement referred to above, and
any and all amendments (including pre-effective and post-effective amendments)
thereto, and any supplements to the Registration Statement as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all instruments necessary or incidental in connection therewith, to file
the same or cause the same to be filed with the Commission, and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done, as fully and for all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys-in-fact and each of them
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
23rd day of January, 1997.
/S/ REX S. ZERGER
Rex S. Zerger, Director
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
(Form 10-SB)
WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1993, as amended (the "Act"), a
Registration Statement on Form 10-SB, with such amendments (including
pre-effective and post-effective amendments) to said Registration Statement and
any supplement or supplements to the Form 10-SB as may be necessary or
appropriate, together with any and all exhibits and documents related to said
Registration Statement, in connection with the registration of 75,000,000 shares
of common stock, $.001 par value, pursuant to Section 12(g) of the Act;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint William A.
Coskey and Hulda Coskey, and each of them severally, his true and lawful
attorney or attorneys-in-fact, with power to act with or without the others and
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as a director or officer or both, as the case
may be, of the Company, each such Registration Statement referred to above, and
any and all amendments (including pre-effective and post-effective amendments)
thereto, and any supplements to the Registration Statement as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all instruments necessary or incidental in connection therewith, to file
the same or cause the same to be filed with the Commission, and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done, as fully and for all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys-in-fact and each of them
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
23rd day of January, 1997.
/S/ DAVID W. GENT
David W. Gent, Director
