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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________________ TO ______________________
COMMISSION FILE NO. 001-14217
INDUSTRIAL DATA SYSTEMS CORPORATION
(Name of Small Business Issuer in its Charter)
NEVADA 88-0322261
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 Century Plaza Drive, Suite 140, Houston, Texas 77073-6013
Issuer's telephone number (281) 821-3200
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
COMMON AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Exchange Act:
NOT APPLICABLE
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months or for such
shortened period that the issuer was required to file such reports, and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB/A or any amendment to this Form 10-KSB/A. X
---
The issuer's revenues for fiscal year ended December 31, 1998 were
$13,432,825.
The aggregate market value of the voting stock held by non-affiliates of
the registrant on December 31, 1998 was $26,192,708.
The number of shares outstanding of the registrant's classes of stock on
December 31, 1998 is as follows:
$0.001 Par Value Common Stock...................13,073,718 shares
DOCUMENTS INCORPORATED BY REFERENCE
Responses to Items 9, 10, 11 and 12 of Part III of this report are incorporated
herein by reference to certain information contained in the Company's definitive
proxy statement for its 1999 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 1999.
Transitional Small Business Disclosure Format: Yes No X
--- ---
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INDUSTRIAL DATA SYSTEMS CORPORATION
1998 FORM 10-KSB/A
TABLE OF CONTENTS
<TABLE>
PART I
<S> <C>
Item 1. Description of Business............................................... 1
Item 2. Description of Property...............................................15
Item 3. Legal Proceedings.....................................................16
Item 4. Submission of Matters to a Vote of Security Holders...................16
PART II
Item 5. Market for Common Equity and Related Stockholder Matters..............17
Item 6. Management's Discussion and Analysis or Plan of Operation.............18
Item 7. Financial Statements .................................................23
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure..................................................40
PART III
Item 9. Directors and Executive Officers; Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act.....................40
Item 10. Executive Compensation................................................40
Item 11. Security Ownership of Certain Beneficial Owners and Management........40
Item 12. Certain Relationships and Related Transactions........................40
PART IV
Item 13. Exhibits and Reports on Form 8-K .....................................40
Signatures......................................................................48
</TABLE>
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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 ANNUAL REPORT ON FORM 10-KSB/A. THE DISCUSSION IN THIS ANNUAL
REPORT ON FORM 10-KSB/A CONTAINS FORWARD LOOKING STATEMENTS WHICH INVOLVE RISKS
AND OTHER UNCERTAINTIES. IN PARTICULAR, THE COMPANY'S BUSINESS AND FINANCIAL
AFFAIRS COULD BE ADVERSELY EFFECTED BY DECREASES IN OIL PRICES, BY INABILITY TO
GET PARTS FROM VENDORS AND BY ITS INABILITY TO RENEW ITS LINE OF CREDIT.
REFERENCES TO THE "COMPANY" OR TO "IDSC" REFER TO INDUSTRIAL DATA SYSTEMS
CORPORATION. REFERENCES TO "IDS" REFER TO THE COMPANY'S WHOLLY OWNED SUBSIDIARY,
INDUSTRIAL DATA SYSTEMS, INC. REFERENCES TO "IED" REFER TO THE COMPANY'S WHOLLY
OWNED SUBSIDIARY, IDS ENGINEERING, INC. REFERENCES TO "THERMAL" REFERS TO THE
COMPANY'S WHOLLY OWNED SUBSIDIARY, THERMAIRE, INC. DBA THERMAL CORP. REFERENCES
TO "CPM" REFERS TO THE COMPANY'S WHOLLY OWNED SUBSIDIARY, CONSTANT POWER
MANUFACTURING, INC. REFERENCES TO "IDS FAB" REFERS TO THE COMPANY'S WHOLLY OWNED
SUBSIDIARY, IDS FABRICATED SYSTEMS, INC. DBA MARINE AND INDUSTRIAL FIRE AND
SAFETY AND MARINE AND INDUSTRIAL SUPPLY COMPANY. THE CONSOLIDATED HISTORICAL
FINANCIAL STATEMENTS RELATED TO THESE SUBSIDIARIES ARE INCLUDED IN THIS ANNUAL
REPORT ON FORM 10-KSB/A.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
IDSC was incorporated in the State of Nevada in June 1994. The
Company's Common Stock trades on the American Stock Exchange under the symbol
"IDS." Prior to June 16, 1998, the Company's Common Stock was traded on the
NASDAQ Electronic Bulletin Board under the symbol "IDDS."
The Company 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 its five operating wholly owned
subsidiaries.
IDS
IDS is a Texas corporation, which was formed in May 1985, and is a
wholly owned subsidiary of the Company. IDS was originally formed 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 to
support both businesses and developed its industrial computer business through
nationwide advertising.
On August 1, 1994, the Company entered into an agreement to purchase
all of the issued and outstanding shares of Industrial Data Systems, Inc., 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 4,750,000, respectively. At the time
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of acquisition, 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. William A. Coskey held the positions of
Chairman of the Board, Chief Executive Office 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.
IDS is a provider of specialized microcomputer products that are
targeted to be sold to the industrial market. IDS manufactures, provides systems
integration and resells industrial and portable computers, microcomputers and
color CRT monitors. The microcomputer and peripheral products are designed to be
used in industrial applications, which include manufacturing, process control,
discrete manufacturing, data acquisition, telecommunications and man-machine
interfaces. The computers and monitors that are manufactured by the Company are
different from conventional, commercial desktop and portable computers by their
architecture, packaging, functionality, integration services and value-added
software. The computer products manufactured by IDS are "open systems" that
support "off-the-shelf" software operated under DOS or Windows.
IDS seeks to add value to standard computer components by packaging
these components in enclosures that withstand tough environmental conditions
and/or enclosures that have a special form factor. IDS also seeks to add value
by integrating and technically supporting advanced microcomputer systems.
IED
On October 15, 1997 the consulting engineering segment of the Company,
formerly known as Industrial Data Systems, Inc. doing business as IDS
Engineering, was incorporated in the State of Texas and now operates as IED. The
Company issued all of its 1,000 shares of Common Stock to Industrial Data
Systems Corporation. William A. Coskey was appointed Chairman of the Board,
President and Treasurer of IED and Hulda L. Coskey was appointed the positions
of Director, Vice President and Secretary of the newly formed corporation. The
management structure and operations of the newly formed corporation remain
unchanged. The Company believes that the restructuring of IED more clearly
distinguishes it from the Company's other operating segments.
IED offers engineering services to major integrated oil and gas
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 IED has the capability of developing a project
from the initial planning stages through detailed design and construction
management. The services provided include project scoping, cost estimating,
engineering design, material procurement, mechanical fabrication, in addition to
project and construction management.
IED has blanket service contracts currently in place to provide
services on a time and materials reimbursable basis. IED also performs services
for its clients on a turnkey lump sum
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basis. The Company has long standing relationships with several major oil and
gas pipeline companies. New business relationships with other major oil
companies are developed through in-house personnel.
THERMAL
The Company acquired Thermal Corp. (Thermal) on February 15, 1997. The
Company issued 600,000 shares of Common Stock which were 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 Thermal was later renegotiated and exercised on February 14, 1997
with the exchange of 193,719 shares of Common Stock and $212,563 in cash. Upon
completion of the acquisition, the 600,000 shares of Common Stock previously
included in the original Escrow Agreement were canceled. In connection with this
transaction, Thermal purchased its previously leased facilities on February 28,
1997 for a cash consideration of $500,000, subject to the completion of the
contingent purchase transaction. Bank financing in the amount of $450,000 was
obtained for the purpose of purchasing these facilities.
Mr. Joe Hollingsworth, the former President and owner, acquired the
industrial air handling subsidiary assets of a predecessor business known as
Thermal Engineering ("Old Thermaire") in 1972, and operated the Company until
1990, at which time Old Thermaire was sold to 20th Century Holding Company,
as a wholly owned subsidiary. 20th Century Holding Company encountered
financial difficulties and filed for protection under the bankruptcy laws in
July 1992. The assets of Old Thermaire were placed in receivership and Mr.
Hollingsworth reacquired these assets in October 1992, with the intention of
continuing the company in its present form. Thermal was incorporated on
November 17, 1992 for this purpose.
Throughout its history, Thermal has built a reputation in the
commercial and industrial air handling industry for its quality products which
are distributed throughout the United States.
CPM
On February 19, 1998, the Company signed a letter of intent to acquire
CPM, a Texas corporation formed in June, 1989. The acquisition was consummated
on March 25, 1998 with the exchange of 300,000 shares of the Company's Common
Stock for 100% of CPM's shares. CPM's previous owner, Jack Ripley, has remained
with CPM as Vice President of Sales and Marketing under an employment contract.
CPM's previous Sales Manager, Tilden Smith, has remained with CPM in the same
position under an employment contract.
CPM is a thirteen-year-old company firmly established in the
uninterruptible and conditioned power systems marketplace. CPM manufactures
proprietary products and packages systems in a wide array of power ranges which
include: battery chargers and monitoring systems, DC power supplies, DC/AC
inverters, uninterruptible power systems, regulation and isolation transformers
and power conditioners. CPM sells to industrial and commercial accounts across
the United States.
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IDS FAB
Effective November 1, 1998, the Company acquired MLC Enterprises, Inc.,
a Texas corporation formed on August 7, 1995, doing business as Marine and
Industrial Fire & Safety (MIFS) and Marine and Industrial Supply Company (MISC).
As agreed upon in the Stock Acquisition Agreement, the Company issued 50,000
shares of Common Stock and cash consideration of $100,000 in exchange for 100%
of MLC's shares. Immediately following the acquisition, the name of the company
was changed to IDS FAB and will continue to do business as MIFS. It is the
Company's intention to sell or otherwise dispose of the MISC portion of IDS FAB.
IDS FAB's previous owner, Michael Moore, has remained with IDS FAB as
Managing Director and Vice President of Sales under an employment contract.
IDS FAB operates in the fire safety, fabrication and oil-field supply
marketplaces. It's primary operating division, MIFS, designs, manufactures,
fabricates and distributes specialized safety equipment to petroleum related
facilities which are both offshore and onshore. MISC is an oil-field supplier
specializing in pipe, valves and fittings for the drilling and production
industry which primarily sells to one account.
PRODUCTS AND SERVICES
IDS
IDS 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. IDS also provides microcomputer systems that
are packaged into enclosures which have special form factors.
The SafeCase Series 4000 is a proprietary design of IDS and its
primary product. 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.
IDS also derives revenue from the systems integration and resale of
industrial computer products manufactured by other companies. These products are
typically designed with enclosures that withstand tough environmental conditions
and/or with enclosures that have a special form factor. In the area of systems
integration and resale, IDS designates three series of industrial computer
products and systems. The SafeCase Series 3000 represents industrial
microcomputer systems which are suitable for installation in a standard 19 inch
equipment rack.
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The SafeCase Series 5000 represents color CRT computer monitor products which
are available in 14 inch, 17 inch and 20 inch diagonal models. The SafeCase
Series 7000 represents industrial microcomputer systems which are designed to
be mounted on a wall or attached to machinery or other equipment.
In 1996, the Company announced the introduction of the SafeCase Series
400 computer as its latest entry into the industrial portable computer market.
This computer was specified to be the industrial equivalent of a commercial
grade notebook computer. Primarily as a result of the compact nature of the
proposed design, IDS encountered technical problems during the product design
phase, which resulted in significant project delays. The Company felt it did not
have sufficient technical resources to complete this product. In addition, the
Company believed that the resulting higher cost of the product would limit its
marketability. Therefore, IDS entered into an agreement with a major customer to
license the manufacturing rights for the SafeCase Series 400 limiting the sale
of this product only in their marketplace. IDS also simultaneously sold this
customer all product related inventory at cost. The value of this product
licensing and inventory sale transaction was approximately $350,000. At the
present time, IDS does not intend to further pursue design or production of the
SafeCase Series 400 product.
IED
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 IED has the capability of
developing a project from the initial planning stages through detailed design
and construction management. IED's expertise offers its clients a wide range of
services from a single source provider. The services provided include project
scoping, feasibility studies, cost estimating, engineering design, material
procurement, mechanical fabrication, analyzing and implementing automation and
control systems, along with project and construction management. Typical
engineering projects include revamps or expansions of existing pipelines as well
as new construction.
THERMAL
Thermal has manufactured quality air handling equipment since 1945.
Because Thermal stocks a larger number of fans and manufactures coils, dampers,
curbs and most other accessories, it aims to offer the quickest delivery
available in the industry, usually six to eight weeks, depending on order size
and scope. Thermal also reserves production capacity to accomplish premium,
expedited deliveries of two to four weeks, when necessary. Thermal is well known
for its design and manufacturing expertise and flexibility which is often
required to meet the special needs for custom installations. Thermal's product
lines consist of a variety of cooling, heating and ventilating equipment. The
wide range of sizes and models in each product line coupled with Thermal's
manufacturing flexibility provides vast freedom in air handling equipment
choice. Thermal's quality air handling products include central plant air
conditioners, multizone air conditioners, high pressure air conditioners, and
air cooled condensers. Thermal also manufactures fan coil units, cooling and
heating coils, and roof
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top air handlers. Thermal distributes its products exclusively through its
United States and international network of non-stocking sales representatives.
Central plant air handlers can be built to specification in either a
single or multizone configuration, from 1,000 to 50,000 cubic feet per minute
(CFM). The design of these units allows for either horizontal or vertical
applications. Single wall models are constructed in modular sections and double
wall units feature unitized construction. Basic designs and high quality
materials have been field-proven for over fifty years. The welded frame
construction allows panels to be removed without affecting the structural
integrity of the unit. All units are built using heavy gauge, galvanized panels
on die-formed and welded galvanized steel frames. On double wall insulated
units, the most often specified design, all wall panels and doors are fully
gasketed and removable. All fans are statically and dynamically balanced during
assembly. Custom features include but are not limited to view glass windows,
factory applied epoxy and custom coatings, variable pitch drives, internal motor
base with spring isolators, solid or stainless steel fan shafts, spiral or plate
fin coils, motor and unit controls, filter gauges, and convenience outlets.
Rooftop air handlers can be built to specification in either a single
or multizone configuration, from 1,000 to 32,000 CFM. Standard features for all
rooftop air handlers include a structural channel base, galvanized steel frame,
galvanized steel panels, pitched roof with continuous ridge cap and integral
drip ledge, 2 to 1.5 pounds per cubic foot (pcf) insulation, double inlet double
width fan and open drip proof motor mounted on 1 foot deflection spring
isolators, 2 foot 30% pleated filters and pitched, double wall drain pan. Custom
units can feature plenum fan, gravity economizer, internal piping vestibule
motor controls and special base designed for field rollproof unloading.
CPM
CPM designs, manufactures, and sells standard and custom back-up and
conditioned power systems including battery chargers, battery monitors, DC power
supplies, converters, inverters, uninterruptible power systems, regulation and
isolation transformers, power conditioners, power distribution systems and solar
photo-voltaic systems. Additionally, CPM provides field service support for
installation and maintenance of these products. Most of the products
manufactured by CPM are made pursuant to specifications required for a
particular order. The products sold by CPM are utilized by refineries,
petrochemical plants, utilities, offshore platforms and other commercial,
industrial and governmental facilities.
IDS FAB
IDS FAB designs, engineers and fabricates fire protection systems and
equipment for the energy and marine industries worldwide, through the MIFS
portion of the business. Systems and equipment manufactured by MIFS includes
foam skids, CO2 suppression systems, deluge systems, fire pumps, oscillating
fire monitors and remote controlled fire monitors. MIFS also distributes fire
protection products manufactured by other companies, including Chubb, Kidde,
Akron and Elkhart. MIFS also fabricates process piping and skids which are not
related to the fire protection industry, but are utilized by MIFS's energy and
marine
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customers. MIFS provides field service support for installation and
maintenance of these products and systems. Most of the systems manufactured
by MIFS are made pursuant to specifications required for a particular order.
The products and systems sold by MIFS are utilized by refineries,
petrochemical plants, offshore drilling rigs, offshore production platforms
and other industrial facilities. MISC, the oilfield supply portion of the
business, buys and resells oilfield equipment, primarily to one account.
PRODUCT DEVELOPMENT
IDS
IDS is currently not developing any new proprietary product designs. In
order to satisfy customer requirements, IDS makes frequent modifications to its
proprietary SafeCase 4000 design. Revisions also are being made to this product
to increase functionality and reduce cost. Being an integrator and re-seller of
industrial microcomputer systems, IDS is continuously evaluating products in its
marketplace which serves to increase its range of offerings and enhance its
ability to sell systems to its customers. In this activity, IDS evaluates
microcomputer enclosures, CPU boards, components and peripheral products from a
variety of manufacturers.
IED
IED continues to provide engineering services to the pipeline industry
as its base of business. During 1998, IED signed two new blanket service
contracts with pipeline industry clients. In February 1999, the Company
announced the opening of a satellite office in Tulsa, Oklahoma which will
facilitate the expansion of its market area. IED plans to increase its range of
engineering capabilities and begin marketing its services to new industries such
as the refining, petrochemical and process industries.
THERMAL
During 1998, Thermal redesigned their line of rooftop air handlers in
order to increase capacity and provide for a narrower unit to better fit
shipping platforms and reduce freight costs. Thermal also was successful in
obtaining Environmental Testing Laboratories certification for its products,
which will open new markets for its products to municipalities and other
industries requiring such certification. During 1999, Thermal plans to add the
in-house capability of manufacturing industry certified plate-fin coils with
0.625 inch diameter tubing. Thermal believes the addition of this plate-fin coil
production line will improve its competitive position in the marketplace by
reducing product costs and production time. Thermal currently purchases all
plate-fin coils from outside sources.
CPM
CPM is currently in the developmental stages of designing a proprietary
battery monitor product. The proposed product will continuously monitor
parameters associated with battery systems, including current, voltage and
temperature. The battery monitor will provide status and historical information
about the battery system to which it is connected, and also will have a
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feature to optimize recharging. In 1999, CPM will also be redesigning some of
its existing charger line in order to improve cost effectiveness as well as
to decrease manufacturing time required to produce these products.
IDS FAB
IDS FAB currently has no products or services under development.
COMPETITION
IDS
IDS competes against various companies across its different product
lines. IDS' line of industrial portable computers compete with products
manufactured by Fieldworks, Dolch and Panasonic. IDS' industrial computer
products which are mountable in a 19 inch 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 its
product line, since IDS' 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.
Management believes that its industrial computer 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 tailoring their offerings to specific application
requirements. These strategies help offset the greater name recognition and
broader service and support resources of IDS' major competitors.
IDS is engaged in business activities that are targeted to industrial
markets which are less competitive and typically generate greater profit
margins. Management 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. Pricing competition for IDS' products is from
large manufacturers of commercial grade computer products. IDS' pricing of its
computer product line is governed by pricing in the commercial market.
Some of the IDS' 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 IDS. As a result, IDS' 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 IDS has available. Such competitors could also seek
to increase their presence in the markets where IDS is providing sales and
services by creating strategic alliances with other competitors, by offering new
or improved products and services to IDS' customers or increasing their efforts
to gain and retain market share through competitive pricing.
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IED
IED operates in a highly competitive environment with many other
organizations which are substantially larger and have greater financial and
other resources. IED competes with other consulting engineering companies on the
basis of price, performance, and its experience as a provider of quality
personnel to perform projects. The pricing competition of IED 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. Because the
engineering business may require small amounts of capital, market entry can be
rather effortless for a potential new competitor possessing acceptable
professional qualifications. Therefore, IED competes with a wide array of both
national and regional specialty firms.
THERMAL
Thermal operates in a highly competitive environment with many other
organizations which are substantially larger and have greater financial
resources. Management believes that the principal competitive factors in its
market include time to market, flexibility and design of its products, breadth
of product features, product quality, customer service, and price. Thermal
competes with other air handling equipment manufacturers on the basis of
quality, quick delivery and its capability to provide custom applications.
Thermal is cost competitive with many well respected manufacturers, such as
Pace, Temtrol, and Buffalo. Thermal has distinguished itself by being responsive
to customer requests for custom products and is able to expedite delivery of
these units faster than other commercial manufacturers due to the flexibility of
their manufacturing facility and staff.
CPM
CPM is engaged in a highly competitive business which is characterized
by a small number of larger companies that dominate the bulk of the market and a
large number of similarly sized companies that compete for a limited share of
the market. In the opinion of management, the competitive position of CPM is
dependent on the ability of to provide quality products to a customer's
specifications, on a timely basis, at a competitive price, utilizing
state-of-the-art materials, design and production methods. Some of CPM's
principal competitors are larger and have greater capital and management
resources. However, management believes that it can capitalize on its ability to
provide custom packaged systems more effectively than its competition.
IDS FAB
IDS FAB's business is also highly competitive. IDS FAB competes with a
variety of industrial and safety supply distributors, many of which may have
greater financial and other resources than IDS FAB. IDS FAB competes not only
with companies of similar size selling to customers within the same geographic
area but also with much larger distributors that provide integrated supply
programs and outsourcing services which may be able to supply their products in
a more efficient and cost-effective manner than does IDS FAB. However, IDS FAB
remains competitive through its product application, engineering and fabricating
expertise offered by its professional staff and it's after-the-sale services
provided by IDS FAB.
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BUSINESS STRATEGY
IDS intends to increase market penetration by focusing on systems
integration and the resale of industrial microcomputer products that are
manufactured by outside sources. IDS believes that it does not have the
personnel or financial resources to broaden its line of proprietary industrial
computer products. In addition, the Company believes that an effort to develop a
broad line of proprietary industrial computer products cannot be financially
justified, given the rapid pace of change and resulting short product lifetimes
typical of the computer industry. IDS will seek to add value by integrating and
technically supporting advanced microcomputer systems primarily comprised of
components from outside sources. IDS has continued to develop and expand its
market presence in the eastern and mid-western portion of the United States
since the opening of its sales office in Connecticut in 1997.
IED's strategy is to increase revenues per employee by developing and
marketing the capability of performing turnkey or EPC (Engineering, Procurement
and Construction) projects. IED has traditionally only been responsible for the
engineering portion of its projects, which is normally between five to fifteen
percent of the project's total installed cost. On the majority of projects to
date, IED has invoiced for hours worked by its personnel with billing rates that
are specified in client generated blanket services contracts. In order to
execute this EPC strategy, IED will have to greatly enhance its project proposal
and bidding capability. In the first quarter of 1999, IED has hired two people
with extensive EPC project proposal experience. While executing this EPC
strategy, IED plans to expand its area of engineering expertise beyond its
traditional focus on the pipeline industry. IED plans to market its services and
submit proposals outside of the pipeline industry, which over a period of time,
will serve to diversify its client base.
Thermal continues to focus on establishing and supporting a qualified
sales representative network within the U.S. The planned addition in 1999 of a
plate-fin coil manufacturing line will help reduce product costs and production
time.
CPM plans to expand its marketing activities beyond the Texas-Gulf
Coast region. As of February 1999, CPM has signed contracts with three sales
representative firms outside of this region. CPM is focusing on obtaining a
reliable source for industrial quality uninterruptible power supply (UPS)
systems. CPM is currently evaluating this marketplace and plans to either
strategically align itself with an outside UPS supplier or initiate its own UPS
design project.
With the expansion of IED's project scope into the EPC arena, it is
anticipated that increased opportunities will arise for growth in the IDS FAB
subsidiary through the cross-selling of fabrication services.
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. There can be no assurance that the Company will be
able to find
10
<PAGE>
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.
SALES AND MARKETING
The Company's various subsidiaries derive revenues from in-house direct
sales, sales representatives and catalog distributor sales. IDSC's 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. Management 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 are normally compensated utilizing incentive
commissions which are based on either a percentage of revenues or gross
profitability which can be attributed to their efforts. Management 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's subsidiaries promote their products and services through
general and trade advertising, participation in trade shows and through
telemarketing and most recently through on-line Internet communication via
IDSC's corporate home page which provides links to each of the subsidiaries
webpages. Much of the Company's business is repeat business, and the source of
new customers has been largely through word-of-mouth referrals from existing
customers and industry members, such as manufacturer's representatives.
The Company's sales personnel focus on building long-term relationships
with customers and, through their product and industry expertise, providing
customers with product application, engineering and after-the-sale services.
Additionally, the sales personnel of IDSC subsidiaries seek to capitalize on
customer relationships that have been developed by each subsidiary through
cross-selling of the various products and services offered by each subsidiary.
Sales leads developed by this synergy are then jointly pursued.
CUSTOMERS
IDSC's customer base consists primarily of Fortune 500 companies in
numerous industry segments within the United States.
The Company's largest ten customers (which varied from period to
period) accounted in the aggregate for approximately 77% and 63% of the
Company's total revenue during 1997 and 1998, respectively.
Currently, the Company's major customers include:
IDS: Baker Hughes Inteq, SAIC
IED: EXXON Pipeline Co., Marathon Pipeline Co., Jacobs Engineering
THERMAL: Hollingsworth Equipment, South Texas Equipment
CPM: Powell Equipment, Gulf Interstate
11
<PAGE>
IDS FAB: Baker Hughes Processing, Chevron, Amfels, Texaco
Based upon historical results and existing relationships with
customers, the Company believes that although efforts are being made to
diversify its client base, 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 IDSC's subsidiaries 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.
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 support staff provides initial telephone
troubleshooting 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
provides limited warranty coverage for its products for varying time periods
depending on a variety of factors.
DEPENDENCE UPON SUPPLIERS
The Company's businesses depend upon the 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 Company procures a majority of its
components from distributors in order to obtain competitive pricing, maximize
product availability and maintain quality control.
In some cases, IDS' computer components are purchased through a single
source. IDS does not always have a long term purchasing contract in place to
purchase computer components from single sources. In the normal course of
business, IDS 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 period
of one year
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IDS purchases from other manufacturers substantially all peripheral
devices and components used in its products and systems. A majority of the
components and peripherals are available from a number of different suppliers,
although certain major items are procured from single sources. Management
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 IDS' operations.
The business in which IDS competes is characterized by rapid
technological change and frequent introduction of new products and product
enhancements. IDS' success depends in large part on its ability to identify and
obtain products that meet the changing requirements of the marketplace. IDS
could experience delays in the receipt of these integral products. There can be
no assurance that IDS will be able to identify and offer products necessary to
remain competitive or avoid losses related to obsolete inventory and drastic
price reductions. IDS 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 IDS'
suppliers to maintain adequate inventory levels of computer products demanded by
its 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 results of operations. Failure of IDS 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.
Thermal currently stocks key components due to long lead times. Fans
are purchased on individual purchase orders. Thermal has increased its stocking
level of this component, because of the potential delays in manufacturing which
would be caused by its inability to procure this important element.
All of CPM's products are manufactured using components and materials
that are readily available from numerous domestic suppliers. CPM has
approximately ten principal suppliers of components and each of those could be
replaced with several competitors; therefore, CPM anticipates no difficulty in
obtaining components in sufficient quantities and in a timely manner to support
its manufacturing and assembly operations.
IDS FAB acquires its products through numerous original equipment
manufacturers, fabricators and distributors. The company believes that
alternative sources of supply could be obtained in a timely manner if any of
these relationships were canceled. The Company does not believe that the loss of
any one of these relationships with its distributors would have a material
adverse effect on the financial condition or results of operations of IDS FAB.
Representative manufacturers of products distributed by IDS FAB include Chubb,
Kidde, Keystone Valve, Elkhart and Akron.
There can be no assurance that IDSC's subsidiaries will be able to
continue to obtain the necessary components from any of its single sources on
terms acceptable to the Company, if at all. There can be no assurance that such
relationships 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
13
<PAGE>
Company's financial condition and results of operations. No one manufacturer
or vendor provides products that account for 10% or more of the Company's
revenues.
PATENTS, TRADEMARKS, LICENSES
The Company's success depends in part upon its proprietary technology,
and it 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.
The Company currently has no patents, trademarks, licenses or royalty
agreements.
GOVERNMENT REGULATIONS
Certain of the Company's subsidiaries are subject to various laws and
regulations relating to its business and operations, and various health and
safety regulations as established by the Occupational Safety and Health
Administration. The Company is not currently aware of any situation or condition
that it believes is likely to have a material adverse effect on its results of
operations or financial condition.
RESEARCH AND DEVELOPMENT
Research and development cost for 1998 was $25,049. 1997 expenditures
for research and development was $148,259. As of December 31, 1998 there were no
ongoing research and development activities.
EMPLOYEES
As of December 31, 1998, the Company employed approximately 135
individuals within its five subsidiaries; approximately twelve were employed in
sales, marketing and customer services; fifty-one were employed in engineering;
fifty-four were employed in technical production positions; and seventeen were
employed in administration, finance and management information systems. 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.
14
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
Except as noted below, the Company leases its principal executive
offices in Houston, Texas, which consist of approximately 20,525 square feet
that has been divided into administrative, sales, and engineering offices.
Approximately 12,000 square feet of this space is currently utilized for
production operations and warehouse space for the IDS and CPM operations. On
September 1, 1998 the Company leased 2,370 square feet of adjoining office space
for expansion of its' IED operation. As a result of this expansion, a fourth
amendment of its lease was executed which extended the lease to August 31, 2002.
On February 10, 1999, IED signed a lease for its newly established
office in Tulsa, Oklahoma. This office space consists of 5,400 square feet in a
one-story office building. The lease is for a term of two years, ending on
February 28, 2001. The base monthly rent is $2,925. with an additional Common
Area fee of $225. per month. Management believes that it has the ability to
sustain substantial additional sales growth without having to expand its
facilities or relocate its offices.
As a result of the acquisition of Thermal, the land and property
previously leased by Thermal was purchased by Thermal for $500,000, consisting
of $50,000 cash advance from the Company and a note payable in the amount of
$450,000. The balance on this note at December 31, 1998 was $420,830. This
property consists of 4.5995 acres of land improved with a 37,725 square foot
concrete tiltwall office/manufacturing facility located in Houston, Texas.
Thermal owns and occupies a 37,735 square foot facility on approximately 4.5
acres which consists of approximately 2,500 square feet of office space and
35,200 square feet of manufacturing area located in Houston, Texas.
As a result of the acquisition of CPM, the Company was able to allocate
a portion of its available space occupied by IDS to serve as office and
manufacturing space for the CPM. In consolidating its facilities, the Company
was successful in reducing overhead and increasing operating efficiencies by
vacating the existing space leased by CPM.
The newly acquired, IDS FAB subsidiary leases a 12,650 square foot
office/warehouse building situated on approximately 25,000 square feet of land
in Houston, Texas. The term of the lease is three years from December 1, 1997
and ending on November 30, 2000 unless sooner terminated. A deposit in the
amount of $3,795.00 for the last month's rent was paid in advance. This facility
serves as the IDS FAB's sales office, warehouse, and fabrication plant. From
time to time, IDS FAB subleases property adjacent to its fabrication facility on
an as-needed basis to facilitate implementation of large projects. At year-end
1998, IDS FAB was the sublessor of 16,500 square feet of office/warehouse space.
The term of the sublease was for three months from October 8, 1998 and ending
January 8, 1999 unless sooner terminated at a monthly rate of $4,950. The
sub-lease was renewed for a ninety (90) day period terminating March 8, 1999.
At the time of the acquisition by the Company, IDS FAB had additional
leased office/warehouse space of approximately 3,915 square feet in Houston,
Texas. The operations of
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<PAGE>
the two business units had been consolidated into the existing lease space
occupied by the MIFS unit leaving this space unoccupied. The original term of
the lease was for 36 months beginning December 15, 1996 and ending December
14, 1999; however, IDSC was able to negotiate a Lease Termination Agreement
that allowed for early termination of the lease effective November 18, 1998
for payment of $1,570. By doing so, the Company was successful in reducing
overhead and increasing operating efficiencies.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. The Company is not currently
involved in any material legal proceedings and is not aware of any legal
proceeding threatened against it.
ITEM 4. SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of the fiscal year ended December 31, 1998.
16
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.001 par value per share, is quoted on the
American Stock Exchange effective June 16, 1998, under the symbol "IDS. Prior to
June 16, 1998, the Company's Common Stock was traded on the NASDAQ Electronic
Bulletin Board under the symbol "IDDS."
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter.................................... 9.000 6.500
Second Quarter................................... 10.620 7.500
Third Quarter.................................... 10.000 8.370
Fourth Quarter................................... 10.500 4.500
YEAR ENDED DECEMBER 31, 1998
First Quarter.................................... 6.750 3.125
Second Quarter................................... 6.000 3.250
Third Quarter.................................... 8.688 6.000
Fourth Quarter................................... 9.375 5.875
</TABLE>
The foregoing figures are based on information published by Dow Jones
Retrieval Service, do not reflect retail markups or markdowns and may not
represent actual trades.
As of December 31, 1998, the Common Stock was held by approximately 170
stockholders 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 dividends on its Common Stock in the future. See
"Management's Discussion and Analysis or Plan of Operation."
17
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 Annual Report on Form
10-KSB/A. Footnote 12 to the Financial Statements contains segment information.
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 from 1985 through 1989, most of its
revenues were derived from the IED segment. In 1989, the Company introduced its
Industrial Products segment and has continued to introduce new products to the
marketplace. In 1997, with the acquisition of Thermal, the Company expanded into
the manufacture and distribution of air handling equipment for HVAC systems. The
Products segment has generated sales as a percent of total revenue of 24.5% and
11.4%, for 1997 and 1998, respectively, while the Engineering segment has
generated sales as a percent of total revenue of 40.5% and 32.8% for the same
periods. The Air Handling segment has generated sales as a percent of total
revenue of 34.9% and 27.6%, for 1997 and 1998, respectively. In 1998, with the
acquisition of CPM, the Company expanded into the manufacture and distribution
of uninterrupitable power systems and battery charger units and with the
acquisition of IDS FAB, the Company expanded into the design and fabrication of
fire detection, fire prevention equipment, environmental and safety equipment.
The Power Systems segment generated sales as a percent of total revenue of 22.5%
for the nine months ended December 31, 1998, and the Fabricating segment
generated sales as a percent of total revenue of 5.7% for the two month period
ended December 31, 1998.
The gross margin varies between each of its operating segments. The
Product segment has produced a gross margin ranging from 31.4% in 1997 to 20.2%
in 1998 due to the decrease in sales volume between 1997 and 1998. The gross
margin for Engineering segment which reflects direct labor costs, has ranged
from 24.5% in 1997 to 28.7% in 1998. The gross margin produced by the Air
Handling segment decreased from 20.4% in 1997 to 19.3% in 1998. The Power
Systems segment produced a gross margin in 1998 of 30.7%. The Fabricating
segment produced a gross margin of (17.1%) for a two-month period ended December
31, 1998. The overall gross margin for IDSC, which includes Products,
Engineering and Air Handling was 24.8% in 1997. The 1998 overall gross margin
which includes Products, Engineering, Air Handling, Power Systems for nine
months and Fabricating for two months was 23.0%.
YEAR 2000 (Y2K) ISSUES AND CONSEQUENCES
The Company's program to address its Year 2000 issues has progressed
as planned. Testing of the Company's internal hardware systems has been
completed and all systems have been brought into Y2K compliance. Upgrading of
non-compliant software systems is underway and will be completed by the end
of the third quarter of 1999. Costs expended to address Year
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<PAGE>
2000 issues has been approximately $50,000 and an estimated additional
$200,000 will be spent to correct Year 2000 issues. The cost to address these
issues is being funded from internally-generated cash flow and are expensed
as incurred.
The Company does not own or maintain any computer controlled machinery
or operations outside its primary offices and production facilities, which would
be effected by non-complaint Y2K components.
Over the past three years, the Company has required Y2K compliant
components on all parts procured for its manufacturing process and has received
certification from the manufacturers and suppliers to this effect. The Company
does not rely heavily upon any single vendor for goods and services and does not
have significant suppliers or vendors who share information systems.
The Company's program to deal with Year 2000 issues includes evaluation
of the effects of third-party non-compliance and the effect that non-compliance
would have on the Company's ability to do business. The Company has banking
relations with one major financial institution, which has indicated that they
are Y2K compliant. The Company does not believe that the inability of external
agents to complete their Year 2000 remediation process in a timely manner will
have a material effect on the financial position or results of operation of the
Company. No material adverse effects have been identified, but the Company
intends to continue its evaluation process throughout the 1999 year. However,
the effect of non-compliance by external agents is not readily determinable.
There can be no guarantee that the Company's current efforts or its
contingency plan will successfully address all the contingencies that may arise.
The Company has defined critical activities which would be maintained manually
in case third party utility failures, such as electrical and telephone
systems. In the event the Company is unsuccessful in addressing all its Year
2000 issues, there could be material adverse effect on the Company's financial
condition and liquidity. Disruptions in the economy generally resulting from
Year 2000 issues could adversely effect the Company's ability to do business.
The amount of potential liability or lost revenue cannot be reasonably estimated
at this time.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements, which are statements
of future expectation and not facts. Actual results or development might differ
materially from those included in the forward-looking statements because of
factors such as competition and industry restructuring, changes in economic
conditions, changes in laws, regulations, regulatory policies or public
policies, technological developments, and other presently unknown or unforeseen
factors.
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<PAGE>
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>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998
---- ----
AMOUNT % AMOUNT %
------ --- ------ ---
<S> <C> <C> <C> <C>
Revenue:
Products.................................... $ 2,581,633 24.5 $ 1,535,915 11.4
Engineering................................. 4,265,446 40.5 4,406,585 32.8
Air Handling................................ 3,676,898 34.9 3,707,672 27.6
Power Systems............................... -- 0.0 3,016,286 22.5
Fabricating................................. -- 0.0 766,367 5.7
-------------- -------- ------------- -------
Total Revenue............................... $ 10,523,977 100.0 $ 13,432,825 100.0
Gross Profit:
Products..................................... 810,982 31.4 309,727 20.2
Engineering.................................. 1,046,371 24.5 1,263,454 28.7
Air Handling................................. 748,444 20.4 715,547 19.3
Power Systems................................ 00 0.0 926,760 30.7
Fabricating.................................. 00 0.0 (131,124) (17.1)
-------------- -------- ------------- -------
Total Gross Profit............................. $ 2,605,797 24.8 $ 3,084,724 23.0
Selling, general and administrative expenses..... 1,914,818 18.2 2,203,008 16.4
Depreciation and amortization.................... 97,101 .9 170,564 1.3
-------------- -------- ------------- -------
Operating income............................. 593,878 5.6 710,702 5.3
Other income (expense) (3,134) (.03) (5,494) (.04)
Income before provision for
Income Taxes............................. 590,744 5.6 705,208 5.3
Provision for income taxes....................... 208,249 2.0 285,376 2.1
-------------- -------- ------------- -------
Net income after income taxes.................... $ 382,495 3.6 $ 419,832 3.1
-------------- -------- ------------- -------
-------------- -------- ------------- -------
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
TOTAL REVENUE. Total revenue increased by $2,908,848 or 27.6% from
$10,523,977 in 1997 to $13,432,825 in 1998. Revenue from the Products
segment, which comprised 24.5% and 11.4% of total revenue in 1997 and 1998,
respectively, decreased by $1,045,718 or 40.5%. The decrease in Products
segment revenue was generally attributable to the overall decline in sales
due to lack of sales initiative in 1998. Revenue from the Enginneering
segment, which comprised
20
<PAGE>
40.3% and 32.8% of total revenue in 1997 and 1998, respectively, increased by
$141,139 or 3.3%. This slight increase was due to the segment adding lump-sum
projects to its existing scope of jobs performed. Revenue from the Air
Handling segment comprised 24.9% and 27.6% of total revenue in 1997 and 1998,
respectively, increased by $30,774 or .8%. No sales were recorded in 1997 for
the Power Systems segment or the Fabricating segment, since each was acquired
during 1998. The Power Systems segment contributed $3,016,286 to the total
revenue in 1998 during the nine months from April 1 to December 31, 1998, and
IDS FAB contributed $766,367 to the total revenues during the two months from
November 1 to December 31, 1998.
GROSS PROFIT. Gross profit increased by $478,477 or 18.4% from
$2,605,797 in 1997 to $3,084,724 in 1998. The gross margin for the Products
segment decreased from 31.4% in 1997 to 20.2% in 1998. This decrease was
attributable to the overall decline in sales revenue without offsetting
reductions in production costs. The gross margin for the Engineering segment
increased from 24.6% in 1997 to 28.7% in 1998. This increase was attributable
to changes in the scope of jobs being performed generating higher margins,
plus the addition of lump-sum projects being added to the product line of
jobs performed by the segment. The gross margin for the Air Handling segment
decreased slightly from 20.4% in 1997 to 19.3% in 1998. This decrease was due
to general competition in the market. The Power Systems segment generated a
gross margin of 30.7% for 1998. The Fabricating segment's gross margin for
1998 was a negative 17.1%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $288,190 or 15.1% from $1,914,818 in 1997
to $2,203,008 in 1998. As a percentage of total revenue, selling, general and
administrative expenses decreased from 18.2% in 1997 to 16.4% in 1998. The
increase was attributable to the acquisitions of CPM and IDS FAB which added
additional personnel costs and increased overall general and administrative
expenses. The increases were more than offset by the increased revenue generated
by the additional operations.
OPERATING INCOME. Operating income increased by $116,824 or 19.7%
from $593,878 in 1997 to $710,702 in 1998. Operating income decreased as a
percentage of total revenue from 5.6% in 1997 to 5.3% in 1998. This decrease
was brought about by the lower gross margins in the Products segment, in the
Air Handling segment and the effect of the negative gross margin in the
Fabricating segment.
NET INCOME. Net income after taxes increased by $37,337 or 9.8% from
$382,495 in 1997 to $419,832 in 1998. Net income after taxes decreased as a
percentage of total revenue from 3.6% in 1997 to 3.1% in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its cash requirements
principally through operations and as needed by borrowing under its line of
credit. As of December 31, 1998, the Company's cash position, including
marketable securities, was, in management's judgment sufficient to meet its
working capital requirements. The Company had, as of December 31, 1998,
$1,150,000 in additional advances available under its line of credit with a
bank. This line of credit provides for maximum borrowings of $1,150,000,
which bears interest at prime plus 1%
21
<PAGE>
is for a term of one year and matures on May 12, 1999. The Company expects
the line of credit will be renewed at that time. The line of credit is
secured by accounts receivable, inventory and the personal guarantees of
certain stockholders and officers of the Company. The Company has an
additional term note maturing May 12, 1999, in the amount of $375,000 and
bears interest at prime plus 1%. This note also is secured by accounts
receivable, inventory and the personal guarantees of certain stockholders.
Interest on the outstanding balance of this note is paid on a monthly basis.
At its maturity on May 12, 1999, the Company expects that the line of credit
term note will be renewed.
The Company believes that it has sufficient working capital and does
not intend to sell shares of its Common Stock within the next twelve months.
The Company's working capital was $2,790,559 and $3,047,291 at December
31, 1997 and December 31, 1998, respectively.
CASH FLOW
Operating activities provided (used) net cash totaling ($818,061)
and $551,975 during 1997 and 1998, respectively. The Company has not
generated significant cash flow from operating activities due to the working
capital requirements resulting from its rapid growth. Trade accounts
receivable over the prior year increased $1,301,632 and decreased $660,162
for the years ended December 31, 1997 and 1998, respectively. Inventory
increased by $300,149 and decreased $177,745 for the same periods.
Investing activities used cash totaling $1,066,995 and generated
$208,515 respectively, during the years ended December 31, 1997 and 1998. In
1997, the Company's investing activities that used cash were primarily related
to the acquisition of Thermal and capital expenditures. In 1998, the Company's
investing activities were executed primarily with the common Stock of the
Company for the acquisition of CPM and IDS FAB.
As of December 31, 1998, the Company had a portfolio of marketable
securities with a fair market value of $676,647 and consisted of bonds and
mutual funds. The mutual funds that the Company owns are open-end stock funds
managed by Aim, Pioneer, and Smith Barney & Co. These mutual fund investments
are generally held for longer than one year. These securities are traded by the
Company as part of its plan to provide additional cash for working capital
requirements.
The marketable securities to be held until 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 stockholder's 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. Marketable securities accounted for as trading securities are
stated at market value, with unrealized gains and losses charged to income.
William A. Coskey, the Company's President and Chief Executive Officer, is
responsible for managing the Company's portfolio of marketable securities. The
funds used in this portfolio were from generally available cash reserves.
22
<PAGE>
The Company has implemented a policy that restricts it from purchasing
any securities on margin, and also limits the investment of any one security or
mutual fund to represent no more than 10% of the Company's investment portfolio.
The Company believes that the risks associated with its investment portfolio are
slightly higher than the risk of loss in a Standard & Poor's 500 Index Fund.
This higher risk is due to the less diverse distribution of the Company's
portfolio as compared to the broadly based Standard & Poor's 500 Stock Index.
Financing activities provided cash totaling $1,367,657 and $7,630
during 1997 and 1998. During 1997, $811,929 was provided from the collection of
notes receivable that were received as consideration for sales of Common Stock
in 1996. Additionally, financing activities provided an increase in borrowings
of $554,913 under its line of credit. The Company has additional financing
amounts available on its line of credit ($1,150,000 at December 31, 1998 and at
March 30, 1999). The line of credit has been used principally to finance
accounts receivable and inventory purchases. Additional bank financing in the
amount of $450,000 was obtained for the purchase of the facilities that Thermal
had been leasing.
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 $2,268,864 and $2,193,128
at December 31, 1997 and 1998, respectively. The number of days' sales
outstanding in trade accounts receivable was 78 days and 70 days, respectively.
Bad debt expenses have been insignificant (approximately .01%) for each of these
periods.
ITEM 7. FINANCIAL STATEMENTS
The audited financial statements for Industrial Data Systems
Corporation, Inc., as of December 31, 1998 and 1997 are attached hereto and
made part hereof.
23
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT....................................... 25
CONSOLIDATED BALANCE SHEET - December 31, 1998..................... 26
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME -
Years Ended December 31, 1998 and 1997..................... 27
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Years Ended
December 31, 1998 and 1997................................. 28
CONSOLIDATED STATEMENTS OF CASH FLOWS - Years Ended
December 31, 1998 and 1997................................. 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......................... 30
</TABLE>
24
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Industrial Data Systems Corporation
We have audited the accompanying consolidated balance sheet of Industrial Data
Systems Corporation and Subsidiaries as of December 31, 1998, and the related
consolidated statements of income and comprehensive income, stockholders' equity
and cash flows for the years ended December 31, 1998 and 1997. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Industrial Data Systems Corporation and Subsidiaries as of December 31, 1998,
and the results of their operations and their cash flows for the years ended
December 31, 1998 and 1997, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Houston, Texas
March 10, 1999
25
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,225,821
Marketable securities, at market value -
Trading 676,647
Accounts receivable - trade, less allowance for doubtful
accounts of approximately $40,000 2,913,128
Inventory 917,097
Notes receivable from stockholders 162,000
Deferred income taxes 8,000
Prepaid and other 228,115
---------------
Total current assets 6,130,808
PROPERTY AND EQUIPMENT, net 1,050,568
OTHER ASSETS 1,500
GOODWILL 745,760
---------------
Total assets $ 7,928,636
---------------
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 620,383
Current maturities of long-term debt 52,530
Accounts payable 1,557,985
Income taxes payable 157,000
Accrued expenses and other current liabilities 695,619
---------------
Total current liabilities 3,083,517
LONG-TERM DEBT 422,483
DEFERRED INCOME TAXES 14,000
COMMITMENTS AND CONTINGENCIES (Notes 7, 8, 13 and 15)
STOCKHOLDERS' EQUITY :
Common stock, $.001 par value; 75,000,000 shares authorized;
13,073,718 shares issued 13,074
Additional paid-in capital 2,766,163
Retained earnings 1,644,722
---------------
4,423,959
Treasury stock, 15,323 shares, at cost (15,323)
---------------
Total stockholders' equity 4,408,636
---------------
Total liabilities and stockholders' equity $ 7,928,636
---------------
---------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
26
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1997 1998
---------------- ----------------
<S> <C> <C>
OPERATING REVENUES $ 10,523,977 $ 13,432,825
OPERATING EXPENSES:
Cost of goods sold 7,918,180 10,348,551
Selling, general and administrative 1,914,818 2,203,008
Depreciation and amortization 97,101 170,564
--------------- ---------------
9,930,099 12,722,123
--------------- ---------------
Operating profit 593,878 710,702
OTHER INCOME (EXPENSE):
Realized gains on marketable securities, net 52,358 14,510
Net unrealized gains (losses) on marketable securities (26,334) 3,772
Interest income 36,357 55,070
Interest expense (64,381) (78,846)
Other income (1,134) -
--------------- ---------------
(3,134) (5,494)
--------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES 590,744 705,208
PROVISION FOR INCOME TAXES:
Federal 176,830 292,810
State 24,095 24,900
Deferred 7,324 (32,334)
--------------- ---------------
208,249 285,376
--------------- ---------------
NET INCOME 382,495 419,832
OTHER COMPREHENSIVE LOSS -
Unrealized loss on securities (1,068) -
--------------- ---------------
COMPREHENSIVE INCOME $ 381,427 $ 419,832
--------------- ---------------
--------------- ---------------
BASIC EARNINGS PER COMMON SHARE $ .03 $ .03
--------------- ---------------
--------------- ---------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,756,564 12,947,280
--------------- ---------------
--------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS
27
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------------- Paid-in Retained
Shares Amount Capital Earnings
--------------- --------------- --------------- ---------------
<S> <C> <C> <C>
BALANCES, December 31, 1996 13,129,999 $ 13,130 $ 1,829,684 $ 842,395
Rescission of stock previously issued for
contingent transaction (600,000) (600) - -
Stock issuance in conjunction with acquisition 193,719 194 387,029 -
Sale of stock from treasury (1,000 shares) - - - -
1996 offering costs - - (40,000) -
Change in unrealized gain on marketable
securities - - - -
Net income - - - 382,495
------------- ------------- ------------- -------------
BALANCES, December 31, 1997 12,723,718 12,724 2,176,713 1,224,890
Stock issuances in conjunction with acquisitions 350,000 350 589,450 -
Net income - - - 419,832
------------- ------------- ------------- -------------
BALANCES, December 31, 1998 13,073,718 $ 13,074 $ 2,766,163 $ 1,644,722
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
Accumulated
Comprehensive Treasury
Loss Stock Total
--------------- --------------- ---------------
<S> <C> <C> <C>
BALANCES, December 31, 1996 $ 1,068 $ (16,138) $ 2,670,139
Rescission of stock previously issued for
contingent transaction - - (600)
Stock issuance in conjunction with acquisition - - 387,223
Sale of stock from treasury (1,000 shares) - 815 815
1996 offering costs - - (40,000)
Change in unrealized gain on marketable
securities (1,068) - (1,068)
Net income - - 382,495
------------- ------------- -------------
BALANCES, December 31, 1997 - (15,323) 3,399,004
Stock issuances in conjunction with acquisitions - - 589,800
Net income - - 419,832
------------- ------------- -------------
BALANCES, December 31, 1998 $ - $ (15,323) $ 4,408,636
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS
28
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1997 1998
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 382,495 $ 419,832
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization 97,101 170,564
Deferred income tax expense 7,324 (32,334)
Increase in trading securities, net (82,044) (301,602)
Changes in operating assets and liabilities, net of assets
acquired in business combinations:
Accounts receivable - trade (1,301,632) 660,162
Inventory (300,149) 177,745
Accounts payable 425,640 (832,867)
Income taxes payable (47,813) 77,302
Accrued expenses and other current liabilities 4,939 270,488
Other, net (3,922) (57,315)
--------------- ---------------
Net cash provided by (used in) operating activities (818,061) 551,975
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Thermal Corporation (212,563) -
Purchase of IDS Fabricated Systems, Inc., net of cash received - 125,387
Purchase of Constant Power Manufacturing, Inc., net of cash received - 112,289
Note receivable from affiliate 84,936 -
Payments (advances) on note receivable from stockholder (150,000) 50,000
Capital expenditures (833,822) (84,707)
Purchases of available-for-sale securities 24,000 -
Proceeds from sale of available-for-sale securities (4,000) -
Repayments from affiliate 24,454 5,546
--------------- ---------------
Net cash provided by (used in) investing activities (1,066,995) 208,515
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable, net 554,913 -
Short-term repayments - (12,470)
Long-term borrowings - 20,100
Proceeds from notes receivable issued for issuance of common stock,
net 811,929 -
Sales of stock from treasury 815 -
--------------- ---------------
Net cash provided by financing activities 1,367,657 7,630
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (517,399) 768,120
CASH AND CASH EQUIVALENTS, at beginning of year 975,100 457,701
--------------- ---------------
CASH AND CASH EQUIVALENTS, at end of year $ 457,701 $ 1,225,821
--------------- ---------------
--------------- ---------------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 12,458 $ 81,000
Income taxes paid $ 160,631 $ 232,632
--------------- ---------------
--------------- ---------------
NON-CASH TRANSACTIONS:
Issuance of common stock in conjunction with purchase of Thermal
Corporation $ 387,223 $ -
Issuance of common stock in conjunction with purchase of IDS
Fabricated Systems, Inc. $ - $ 289,800
Issuance of common stock in conjunction with purchase of Constant
Power Manufacturing, Inc. $ - $ 300,000
Assumption of $200,000 note payable in conjunction with purchase of
IDS Fabricated Systems, Inc. $ - $ 200,000
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS
29
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The accompanying consolidated financial statements
include the accounts of Industrial Data Systems Corporation ("IDSC" or
the "Company"), a Nevada corporation, and its wholly-owned subsidiaries
Industrial Data Systems, Inc., a Texas corporation, dba IDS Technical
Services ("IDS"); Thermaire, Inc., a Texas corporation, dba Thermal
Corporation ("Thermal"); Constant Power Manufacturing, Inc. ("CPM"), a
Texas corporation, IDS Engineering, Inc. ("IED"), a Texas corporation;
and IDS Fabricated Systems, Inc. ("IDS FAB"), a Texas corporation. All
significant intercompany balances and transactions have been eliminated
in consolidation.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash in
bank and investments in highly liquid money market mutual funds.
INVENTORY - Inventory is composed primarily of raw materials and
component parts (computer components, sheet metal, copper tubing, blower
fans and fan motors) and is carried at the lower of cost or market
value, with cost determined on the first-in, first out ("FIFO") method
of accounting.
REVENUE RECOGNITION - The Company's revenues are composed of product
sales and engineering service revenue. The Company recognizes service
revenue when such services are performed and product sales upon shipment
to the customer.
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 fair value, with unrealized gains and losses
recognized in earnings. The Company records the purchases and sales of
marketable securities and records realized gains and losses on the trade
date. Realized gains or losses on the sale of securities are recognized
on the specific identification method.
PROPERTY AND EQUIPMENT - All property and equipment is stated at cost,
adjusted for accumulated depreciation. Depreciation on all property and
equipment, other than land, building and improvements, is calculated
using an accelerated method over the estimated useful lives of the
related assets, which is five years. Depreciation on the building is
calculated using a straight-line method over the useful life, which is
40 years. Leasehold improvements are amortized over the term of the
related lease.
30
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GOODWILL - The Company capitalizes the excess purchase price over the
fair value of net assets acquired ("goodwill") and amortizes this
intangible asset on a straight-line basis over 5-10 years.
LONG-LIVED ASSETS - The Company reviews for the impairment of long-lived
assets and certain identifiable intangibles whenever events or changes
in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount. The Company has
not identified any such impairment losses.
INCOME TAXES - The Company accounts for deferred income taxes in
accordance with the asset and liability method, whereby 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. The provision for income taxes
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.
EARNINGS PER SHARE - Basic earnings per share was computed by dividing
net income by the weighted average common shares outstanding as of
December 31, 1997 and 1998. There were no dilutive securities at
December 31, 1997 and 1998.
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.
SIGNIFICANT ESTIMATE - The Company's management has made significant
estimates related to the realizability of the Company's goodwill
associated with the acquisition of IDS FAB (see Note 14). The estimation
process involved in determining if assets have been impaired is
inherently uncertain since it requires estimates of current market
yields as well as future events and conditions, which could change these
estimates in the near term.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of financial
instruments, primarily accounts receivable, accounts payable and notes
payable, closely approximate the carrying values of the instruments due
to the short-term maturities of such instruments.
31
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMPREHENSIVE INCOME - Comprehensive income is defined as all changes in
stockholders' equity, exclusive of transactions with owners, such as
capital investments. Comprehensive income includes net income or loss,
changes in certain assets and liabilities that are reported directly in
equity, such as translation adjustments on investments in foreign
subsidiaries and certain changes in minimum pension liabilities.
RECLASSIFICATIONS - Amounts in prior years' financial statements are
reclassified as necessary to conform with the current year's
presentation. Such reclassifications had no effect on net income.
1. MARKETABLE SECURITIES
Marketable securities at December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Trading:
Common stocks $ 291,830 $ 2,456 $ - $ 294,286
Bond 300,000 - - 300,000
Other 50,000 32,361 - 82,361
------------- ------------- ------------- -------------
$ 641,830 $ 34,817 $ - $ 676,647
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
2. AFFILIATE RECEIVABLES
The Company has several notes receivable due from stockholders. The
notes receivable are unsecured, due on demand and bear interest at a
rate of 9% per annum. Interest on the notes is due annually. During the
years ended December 31, 1997 and 1998, the Company recognized interest
income of approximately $10,000 and $18,000, respectively, on these
notes.
32
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31,
1998:
<TABLE>
<S> <C>
Land $ 90,000
Furniture and fixtures 110,118
Computer equipment 258,044
Building 605,000
Shop equipment 203,031
Leasehold improvements 85,118
-------------
1,351,311
Accumulated depreciation and amortization (300,743)
-------------
$ 1,050,568
-------------
-------------
</TABLE>
4. NOTES PAYABLE
The Company entered into a Revolving Credit Note with a bank on July 12,
1998 in the amount of $1,150,000, bearing interest at prime + 1% (8.75%
at December 31, 1998) and maturing on May 12, 1999. The Company made no
draws under the agreement during the year ended December 31, 1998.
In June of 1998, the Bank lines of credit for IDS and Thermal were
converted into a term note that matures on May 12, 1999. The note bears
interest at prime + 1% (8.75% at December 31, 1998). The outstanding
balance due at December 31, 1998 was $375,000. The note is
collateralized by the accounts receivable and inventory of the Company.
The Company assumed a term note payable with a bank of $200,000 bearing
interest at 6.9% as part of the acquisition of IDS FAB (see Note 14).
This note, which expires on June 25, 1999, is collateralized by a
certificate of deposit at the bank. The entire $200,000 was outstanding
at December 31, 1998. Interest on the outstanding amount is due and
payable monthly.
The Company is financing a portion of its insurance each year on a
short-term basis, with a balance of $45,383 at December 31, 1998.
33
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT
The Company has a term note payable with a bank of $450,000 at 8.88%
(Ordinary Interest). The loan, which expires on February 28, 2002, is
collateralized by land and building acquired in the purchase of Thermal
(see Note 14). There was $420,671 outstanding under this note at
December 31, 1998. Interest on the outstanding amount is due and payable
monthly.
The Company is financing a portion of its insurance over 23 months
bearing interest at 7.95% with a remaining balance of $54,342 at
December 31, 1998.
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
1999 $ 52,530
2000 39,046
2001 21,238
2002 362,199
--------------
Total 475,013
Less current portion (52,530)
--------------
Long-term debt $ 422,483
--------------
--------------
</TABLE>
6. LEASES
The Company leases office space under two non-cancelable operating
leases. Total rent expense for the years ended December 31, 1998 and
1997 was $205,000 and $109,000, respectively. Future minimum rentals due
under the non-cancelable operating leases with an original term of at
least one year are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
1999 $ 195,000
2000 198,000
2001 203,000
2002 165,000
--------------
$ 761,000
--------------
--------------
</TABLE>
34
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan (the "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 25% per year for four years. The Company made contributions
to the Plan of $72,000 and $93,000 for the years ended December 31, 1997
and 1998, respectively.
8. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
The Company manufactures and distributes industrial and portable
computers and computer monitors, power systems and battery chargers, and
air handling equipment for air conditioning and heating systems to
commercial companies primarily in the southern states and provides
pipeline engineering and fabricated systems and services primarily to
major integrated oil and gas companies. 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.
For the year ended December 31, 1997, the Company had sales to five
major customers in the Engineering and Thermal segments totaling
approximately $6,630,000, representing 63% of total revenues for the
year. For the year ended December 31, 1998, the Company had sales to one
major customer in the Engineering segment totaling approximately
$2,533,000 which represents 19% of total revenues. At December 31, 1998,
amounts due from three customers who individually had amounts due in
excess of 10% of trade receivables totaled $1,068,000.
35
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY
In 1997, the Company issued 193,719 shares of common stock as part of
the acquisition of Thermal Corporation (see Note 14).
In 1998, the Company issued 300,000 shares of common stock as part of
the CPM acquisition and 50,000 shares as part of the IDS FAB acquisition
(see Note 14).
10. FEDERAL INCOME TAXES
The following is a reconciliation of expected to actual income tax
expense:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1998
----------------- ----------------
<S> <C> <C>
Federal income tax expense at 34% $ 200,853 $ 239,770
State and foreign taxes 15,902 16,434
Nondeductible expenses 1,665 16,775
Other (10,171) 12,397
--------------- ---------------
$ 208,249 $ 285,376
--------------- ---------------
--------------- ---------------
</TABLE>
The components of the Company's deferred tax liability consisted of the
following as of December 31, 1998:
<TABLE>
<S> <C>
Deferred tax asset:
Allowance for doubtful accounts $ 8,000
Tax accounting change from cash basis to accrual basis -
IDS-FAB acquisition 143,000
Deferred tax liabilities:
Tax accounting change from cash basis to accrual basis -
CPM Acquisition (142,000)
Depreciation (15,000)
---------------
Deferred tax liability, net $ (6,000)
---------------
---------------
</TABLE>
36
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SEGMENT INFORMATION
The Company operates in five business segments: (1) the manufacture and
distribution of industrial computer systems to industrial and commercial
companies; (2) engineering consulting services primarily to major
integrated oil and gas companies; (3) the manufacture and distribution
of air handling equipment for HVAC systems to commercial companies; (4)
the manufacture and distribution of uninterruptible power systems and
battery chargers; and (5) the design and fabrication of fire and safety
equipment primarily for the oil and gas industry. Sales, operating
income, identifiable assets, capital expenditures and depreciation set
forth in the following table are the results of the five segments. The
amount in corporate and eliminations includes amounts to eliminate
intercompany items, including notes receivable and notes payable.
Segment information for the years 1997 and 1998 was as follows:
<TABLE>
<CAPTION>
(Thousands)
-----------------------------------------------------------------------------------------------------------
1 9 9 7
-----------------------------------------------------------------------------------------------------------
Air Power
Products Engineering Handling Systems Fabricating Corporate Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales from
external
customers $ 2,582 $ 4,265 $ 3,677 $ - $ - $ - $10,524
Operating earnings 190 310 94 - - - 594
Depreciation and
amortization 5 29 55 - - 8 97
Total assets 996 1,625 2,002 - - 745 5,368
Capital
expenditures $ 60 $ 97 $ 677 $ - $ - $ - $ 834
-----------------------------------------------------------------------------------------------------------
1 9 9 8
-----------------------------------------------------------------------------------------------------------
Net sales from
external
customers $ 1,536 $ 4,407 $ 3,708 $ 3,016 $ 766 $ - $13,433
Operating earnings (362) 603 60 638 (228) - 711
Depreciation and
amortization 29 47 59 - - 36 171
Total assets 536 2,100 1,755 1,677 1,646 215 7,929
Capital
expenditures $ 25 $ 19 $ 32 $ - $ 4 $ 5 $ 85
-----------------------------------------------------------------------------------------------------------
</TABLE>
12. TRANSACTION WITH AFFILIATE
In July 1997, the Company entered into a management contract with BHC
Management Corporation ("BHC"), a Texas corporation. As compensation for
services provided hereunder, IDS agreed to pay BHC the sum of $4,000 per
month plus expenses not to exceed $500 per month. The principals of BHC
are stockholders of IDS. The total payments made to BHC during 1998 and
1997 were approximately $48,000.
13. ACQUISITIONS
37
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 1997, the Company acquired Thermal in a stock purchase. The
Company paid $600,000, consisting of $212,563 in cash and 193,719 shares
of the Company's common stock, which may have been put back to the
Company for $2 per share at the option of the holder. Additionally, the
Company purchased the facilities that Thermal had been leasing from an
affiliate for $500,000. The Company obtained bank financing totaling
$450,000 related to the acquisition of these facilities. This
acquisition has been accounted for on the purchase method of accounting.
The purchase price exceeded the fair value of the net assets acquired by
approximately $60,000. Previously, in 1995, the Company had issued
600,000 shares of its common stock to Thermal on a contingent basis.
These shares were held in an escrow account pending completion of the
acquisition, at which time these shares were released from escrow and
cancelled. The aforementioned 193,719 shares were issued under revised
terms of the purchase agreement. The operating results of Thermal have
been included in the Company's consolidated financial statements since
the date of acquisition.
In April 1998, the Company acquired CPM in a stock purchase. The Company
paid $500,000, consisting of $200,000 in cash and 300,000 shares of the
Company's common stock, which may be put back to the Company for $1 per
share at the option of the holder. This acquisition has been accounted
for on the purchase method of accounting. The purchase price exceeded
the fair value of the net assets acquired by approximately $132,000. The
operating results of CPM have been included in the Company's
consolidated financial statements since the date of acquisition.
In November 1998, the Company acquired IDS FAB in a stock purchase. The
Company paid $389,800, consisting of $100,000 in cash and 50,000 shares
of the Company's common stock, whose fair market value at the date of
exchange was $289,800. This acquisition has been accounted for on the
purchase method of accounting. The purchase price exceeded the fair
value of the net assets acquired by approximately $593,000. The
operating results of IDS FAB have been included in the Company's
consolidated financial statements since the date of acquisition.
The following unaudited proforma consolidated results of operations of
the years ended December 31, 1997 and 1998 assumes the Thermal, CPM and
IDS FAB acquisitions occurred as of January 1, 1997.
<TABLE>
<CAPTION>
(thousands, except per share data) 1997 1998
-------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 16,695 $ 19,488
Net earnings 737 306
Basic earnings per share .06 .02
-------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In management's opinion, the unaudited proforma combined results of
operations are not indicative of the actual results that would have
occurred had the acquisitions been consummated at the beginning of
fiscal 1997 or of future operations of the combined companies under the
ownership and management of the Company.
14. YEAR 2000
The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations. The Year
2000 problem may impact or be impacted by other entities with which
the Company transacts business.
The Company has begun to address possible remedial efforts in connection
with computer software that could be affected by the Year 2000 problem.
The Company has incurred approximately $50,000 of remediation costs
and estimates another $200,000 will be incurred toward remediation of
the Year 2000 problem. Such costs are expensed as incurred.
39
<PAGE>
ITEM 8. 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.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
Incorporated herein by reference in the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 1999.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated herein by reference in the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference in the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 1999.
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Incorporated herein by reference in the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 1999.
40
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS
The consolidated financial statements are contained herein as listed on
the "Index" on page 24 hereof.
B. REPORTS ON FORM 8-K
There were no Current Reports on Form 8-K filed by the Company during
the quarter ended December 31, 1998 that have not been previously reported in
the Company's Quarterly Reports on Form 10-Q.
C. DESCRIPTION AND INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
2 Agreement and Plan of Reorganization for the Purchase of
Industrial Data Systems, Incorporated, dated August 1, 1994(1)
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(1)
2.2 Action by Written Consent of the Stockholders for the Purchase
of Industrial Data Systems, Incorporated, a Texas corporation,
dated August 1, 1994(1)
2.3 Stock Acquisition Agreement for the Purchase of Thermaire
Incorporated, dba Thermal Corp., dated August 15, 1995(1)
2.4 Escrow Agreement for the Purchase of Thermaire Incorporated, dba
Thermal Corp., dated August 15, 1995(1)
2.5 Earnest Money Contract for the Purchase of Thermaire Incorporated,
dba Thermal Corp.'s Manufacturing Facility, dated August 15, 1995(1)
2.6 Offering Memorandum, 504D Offering of 500,000 Shares of
Common Stock in the State of Nevada, dated July 26, 1994(1)
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(1)
2.8 Agreement for Amendment and Substitution of Subscription
Agreement and Notes, dated July 10, 1996(1)
41
<PAGE>
2.9 Stock Purchase Subscription Agreement from World Glory Company Limited,
dated July 10, 1996(1)
2.10 Stock Purchase Subscription Agreement from Asian Harvest Corporation
Limited dated July 10, 1996(1)
2.11 Stock Purchase Subscription Agreement from Silver Course Corporation,
dated July 10, 1996(1)
2.13 Stock Purchase Subscription Agreement from Pines Intervest Corporation,
dated July 10, 1996(1)
2.14 Stock Purchase Subscription Agreement from Wilton Assets Corp., dated
July 10, 1996(1)
2.15 Stock Acquisition Agreement, dated March 25, 1998, by and
among Industrial Data Systems Corporation, John L. "Jack"
Ripley, and Constant Power Manufacturing Incorporated.
Previously filed as Exhibit 2.1 on (8).
2.16 Stock Acquisition Agreement between MLC Enterprises, Inc.
and Industrial Data Systems Corporation, dated November 13,
1998(10)
2.17 Escrow Agreement by and between Industrial Data Systems
Corporation, Michael L. Moore and MLC Enterprises, Inc. and
Johnny J. Williams (Escrow Agent) dated November 13,
1998(10)
2.18 MLC Enterprises, Inc. Written Consent of all Directors in
Lieu of Meeting Resolving MLC Enterprises, Inc. to enter
into Stock Acquisition Agreement (Exhibit 2.16)(10)
2.19 MLC Enterprises, Inc. Certificate of Corporate Resolution(10)
2.20 Employment Agreement dated November 1, 1998 by and between
MLC Enterprises, Inc. and Michael L. Moore(10)
2.21 Amendment to Employment Agreement (Exhibit 2.20) dated
January 16, 1999(10)
42
<PAGE>
2.22 Industrial Data Systems Corporation Written Consent of All
Directors in Lieu of Meeting Resolving Purchase of MLC
Enterprises, Inc.(10)
3 Articles of Incorporation, Industrial Data Systems
Corporation, dated June 20, 1994(1)
3.1 Corporate Charter, Industrial Data Systems Corporation,
dated June 22, 1994(1)
3.2 Corporate Bylaws, Industrial Data Systems Corporation,
dated June 22, 1994(1)
3.3 Articles of Incorporation, IDS Engineering, Inc., dated
October 15, 1997. Previously filed as Exhibit 3 on (7)
3.4 Corporate Charter, IDS Engineering, Inc., dated October 15,
1997. Previously filed as Exhibit 3.1 on (7)
3.5 Corporate Bylaws, IDS Engineering, Inc., dated October 15,
1997. Previously filed as Exhibit 3.2 on (7)
3.6 Corporate Bylaws, MLC Enterprises, Inc. dated November 13, 1998
effective August 7, 1995(10)
3.7 Corporate Charter, MLC Enterprises, Inc., dated August 7,
1995(10)
3.8 Amended Articles of Incorporation, MLC Enterprises, Inc.,
dated November 13, 1998)(10)
3.9 Certificate of Amendment for IDS Fabricated Systems, Inc.
formerly MLC Enterprises, Inc.(10)
4.1 Revolving Credit Line with Texas Commerce Bank, N.A.,
dated June 11, 1996(1)
4.2 Promissory Note plus Restricted Common Stock to John H.
Cameron, dated July 23, 1994(1)
4.3 Promissory Note plus Restricted Common Stock to Charles
B. Pollock, et ux, dated July 23, 1994(1)
4.4 Promissory Note payable to Industrial Data Systems
Corporation from World Glory Company Limited, dated July
15, 1996(1)
4.5 Promissory Note payable to Industrial Data Systems
Corporation from Asian Harvest Corporation, Ltd., dated July
15, 1996(1)
43
<PAGE>
4.6 Promissory Note payable to Industrial Data Systems
Corporation from Silver Course Corporation, dated July
15, 1996(1)
4.7 Promissory Note payable to Industrial Data Systems
Corporation from Pines Intervest Corporation, dated July
15, 1996(1)
4.8 Promissory Note payable to Industrial Data Systems
Corporation from Wilton Assets Corp. dated July
15, 1996(1)
10 Lease Agreement between Industrial Data Systems,
Incorporated, a Texas corporation, and American General
Life Insurance Company, dated January 16, 1991(1)
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(1)
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(1)
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(1)
10.4 Lease Agreement between Industrial Data Systems Corporation, a Nevada
corporation, and Clarksburg, West Virginia Masonic
Building, dated June 1, 1995(1)
10.5 Adoption Agreement for Nonstandardized Code 401(k) Profit
Sharing Plan, dated January 1, 1993(1)
10.6 Blanket Service Contract - Exxon Pipeline Company (3)
10.7 Blanket Service Contract - Marathon Oil Company (3)
10.8 Blanket Service Contract - Texas Eastern Transmission
Corporation (3)
10.9 Blanket Service Contract - Trunkline Gas Company (3)
10.10 Blanket Service Contract - Panhandle Eastern Pipeline Company (3)
10.11 Blanket Service Contract - ARCO Pipe Line Company (3)
10.12 Blanket Service Contract - CNG Transmission Corporation (3)
10.13 Blanket Service Contract - Columbia Gas Transmission
Corporation (3)
10.14 Blanket Service Contract - Praxair, Inc. (3)
44
<PAGE>
10.15 Blanket Service Contract - Texas Products Pipeline Company (3)
10.16 Volume Purchase Agreement (3)
10.17 Lease between Industrial Data Systems, Incorporated, a Texas
corporation, and 319 Century Plaza Associates, Ltd.,
August 18, 1997. Previously filed as Exhibit 10 on (7)
10.18 First Amendment to Lease Agreement between Industrial Data
Systems, Incorporated, a Texas corporation, and 319 Century
Plaza Associates, dated September 19, 1997. Previously filed
as Exhibit 10.1 on (7)
10.19 Second Amendment to Lease Agreement between Industrial Data
Systems, Incorporated, a Texas corporation, and 319 Century
Plaza Associates, dated November 19, 1997. Previously filed as
Exhibit 10.2 on (7)
10.20 Employment Agreement, dated March 25, 1998, by and between
Constant Power Manufacturing Incorporated and Jack Ripley.
Previously filed as Exhibit 10.19 on (8)
10.21 First Amendment to Employment Agreement, dated April 3, 1998,
by and between Jack Ripley and Constant Power Manufacturing
Incorporated. Previously filed as Exhibit 10.20 on (8)
10.22 Employment Agreement, dated March 25, 1998, by and between
Constant Power Manufacturing Company, Inc. and R. Tilden
Smith. Previously filed as Exhibit 10.21 on (8)
10.23 Pledge Agreement, dated March 25, 1998, by and between
Industrial Data Systems Corporation and John L. "Jack" Ripley.
Previously filed as Exhibit 10.22 on (8)
10.24 Fourth Amendment to Lease between Industrial Data Systems,
Inc., a Texas corporation and 600 C.C. Business Park Ltd.,
dated September 1, 1998 (10)
10.25 Lease Agreement between IDS Engineering, Inc. and d/b/a
Wilshire Square, dated February 8, 1999 (10)
10.26 Lease Agreement between MLC Enterprises, Inc. dba Marine and
Industrial Supply and Trust Management Company, dated
November 5, 1997 (10)
10.27 Sublease between Marine and Industrial Supply Company and
Input/Output, Inc., dated October 8, 1998 (10)
10.28 Lease Agreement between MLC Enterprises, Inc. dba Marine and
Industrial Supply and Vantage Houston, Inc., as Agent for
Greenbriar Holdings Houston, Ltd., dated December 15,
1996 (10)
45
<PAGE>
10.29 Termination of Lease between MLC Enterprises, Inc. dba
Marine and Industrial Supply and Vantage Houston, Inc., as
Agent for Greenbriar Holdings Houston, Ltd., dated November
18, 1998 (10)
10.30 Blanket Service Contract with Texaco Pipeline Company. Previously
filed as Exhibit 10.18 on (4)
11 Statement Regarding Computation of Per Share Earnings (4)(5)
21 Subsidiaries of the Registrant (11)
23 Consent of Lindsey, Keys & Shannon (2)
24 Power of Attorney (2)
27 Financial Data Schedule (11)(12)
99 Audited Financial Statements of Thermaire, Inc. dba
Thermal Corp. as of and for the year ended December 31,
1996 (3)
99.1 Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Statement of Income as of and for the year ended
December 31, 1996 for Industrial Data Systems Corporation
and Thermaire, Inc. dba Thermal Corp. (3)
</TABLE>
(1) Exhibits incorporated by reference on the Company's Registration Statement
on Form 10-SB filed with the Securities and Exchange Commission on January
27, 1997.
(2) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996 filed with the Securities and
Exchange Commission on April 14, 1997.
(3) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB/A for the year ended December 31, 1996 filed with the Securities and
Exchange Commission on May 14, 1997.
(4) Exhibits incorporated by reference on the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1997 filed with the Securities
and Exchange Commission on August 14, 1997.
(5) Exhibits incorporated by reference on the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1997 filed with the
Securities and Exchange Commission on November 14, 1997.
(6) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997 filed with the Securities and
Exchange Commission on March 31, 1998.
(7) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB/A for the year ended December 31, 1997 filed with the Securities and
Exchange Commission on April 10, 1998.
(8) Exhibits incorporated by reference on the Company's Form 8-K filed April
10, 1998 and Form 8-K/A filed April 29, 1998.
(9) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998 filed with the Securities and
Exchange Commission on March 31, 1999.
46
<PAGE>
(10) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB/A for the year ended December 31, 1998.
(11) Exhibit incorporated by reference on the Company's Annual Reports on Form
10-KSB.
(12) Exhibit incorporated by reference on the Company's Annual Reports on Form
10-QSB.
47
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange act of
1934, the Registrant has caused this Annual Report on Form 10 KSB/A to be
signed no its behalf by the undersigned, thereunto duly authorized.
INDUSTRIAL DATA SYSTEMS CORPORATION
<TABLE>
<S> <C>
Dated: April 7, 1999
-----------------
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,
Secretary, Treasurer, Director
By: /s/ David W. Gent
----------------------------
David W. Gent, P.E., Director
By: /s/ Gordon R. Wingate
----------------------------
Gordon R. Wingate, Director
By: /s/ Ken J. Hedrick
----------------------------
Ken J. Hedrick, Controller, Director
</TABLE>
48
<PAGE>
EXHIBIT 2.16
STOCK ACQUISITION AGREEMENT
BY AND AMONG
MICHAEL L. MOORE
AS "STOCKHOLDER",
M L C ENTERPRISES, INC.
AS THE "COMPANY"
AND
INDUSTRIAL DATA SYSTEMS, CORP.
AS THE "ACQUIRING CORPORATION"
EFFECTIVE DATE: NOVEMBER 1, 1998
1
<PAGE>
STOCK ACQUISITION AGREEMENT
INDEX
Page
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
1.2 OTHER DEFINED TERMS
1.3 REFERENCES
ARTICLE II
EFFECT OF THE AGREEMENT
2.1 EXCHANGE OF STOCK
2.2 EFFECT
ARTICLE III
CLOSING
3.1 CLOSING
3.2 DOCUMENTS TO BE DELIVERED
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 ORGANIZATION OF THE COMPANY
4.2 AUTHORIZATION
4.3 SUBSIDIARIES
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS
4.5 TITLE TO ASSETS, ETC.
4.6 CONDITION OF TANGIBLE ASSETS
4.7 CONTRACTS AND COMMITMENTS
4.8 NO CONFLICT OR VIOLATION
4.9 CONSENTS AND APPROVALS
4.10 FINANCIAL STATEMENTS
4.11 LITIGATION
4.12 LABOR MATTERS
4.13 LIABILITIES
4.14 COMPLIANCE WITH LAW
4.15 NO BROKERS
4.16 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY
4.17 PROPRIETARY RIGHTS
4.18 EMPLOYEE AGREEMENTS AND BENEFITS
4.19 TRANSACTIONS WITH CERTAIN PERSONS
4.20 TAX MATTERS
2
<PAGE>
4.21 SEVERANCE ARRANGEMENTS
4.22 INSURANCE
4.23 ACCOUNTS RECEIVABLE
4.24 INVENTORIES
4.25 PURCHASE COMMITMENTS AND OUTSTANDING BID
4.26 PAYMENTS
4.27 CUSTOMERS AND SUPPLIERS
4.28 ENVIRONMENTAL AND SAFETY COMPLIANCE
4.29 MATERIAL MISSTATEMENTS OR OMISSIONS
4.30 BUSINESS OF THE COMPANY
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
5.1 ORGANIZATION OF STOCKHOLDERS
5.2 AUTHORIZATION
5.3 CONTRACTS AND COMMITMENTS
5.4 CONSENTS AND APPROVALS
5.5 NO BROKERS
5.6 NO OTHER AGREEMENTS TO SELL THE ASSETS
OR THE COMPANY
5.7 TRANSACTIONS WITH CERTAIN PERSONS
5.8 MATERIAL MISSTATEMENTS OR OMISSIONS
5.9 NO KNOWLEDGE OF INDEMNIFICATION EVENTS
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION
6.1 ORGANIZATION OF ACQUIRING CORPORATION
6.2 AUTHORIZATION
6.3 CONSENTS AND APPROVALS
6.4 NO BROKERS
6.5 NO CONFLICT OR VIOLATION
6.6 LITIGATION
6.7 COMPLIANCE WITH LAW
6.8 MATERIAL MISSTATEMENTS OR OMISSIONS
ARTICLE VII
ACTIONS BY STOCKHOLDER, THE COMPANY
ACQUIRING CORPORATION PRIOR TO THE CLOSING
5.1 MAINTENANCE OF BUSINESS
5.2 CERTAIN PROHIBITED TRANSACTIONS
5.3 INVESTIGATION BY ACQUIRING CORPORATION
5.4 CONSENTS AND BEST EFFORTS
5.5 NOTIFICATION OF CERTAIN MATTERS
5.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC.
5.7 MAINTENANCE OF SHAREHOLDER EQUITY
3
<PAGE>
ARTICLE VIII
CONDITIONS TO STOCKHOLDERS OBLIGATIONS
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
8.2 CONSENTS
8.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION
8.4 CORPORATE DOCUMENTS
ARTICLE IX
CONDITIONS TO ACQUIRING CORPORATIONS OBLIGATION
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
9.2 CONSENTS
9.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION
9.4 CERTIFICATE
9.5 CORPORATE DOCUMENTS
9.6 INVESTIGATION
9.7 EMPLOYMENT AGREEMENTS
9.8 ACCOUNTING MATTERS
9.9 COMPLETION OF BUY OUT
ARTICLE X
ACTIONS BY STOCKHOLDER, THE COMPANY AND ACQUIRING
CORPORATION AFTER THE CLOSING
10.1 FURTHER ASSURANCES
ARTICLE XI
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, ETC.
11.2 INDEMNIFICATION
11.3 INDEMNIFICATION PROCEDURES
11.4 NO RIGHT OF CONTRIBUTION
ARTICLE XII
SECURITIES LAWS
10.1 ACQUISITION OF INVESTMENT
ARTICLE XIII
STOCKHOLDER'S OPTION TO RESELL
TO ACQUIRING CORPORATION
10.1 SALE OPTION OF STOCKHOLDER
4
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 TERMINATION
14.2 ASSIGNMENT
14.3 NOTICES
14.4 CHOICE OF LAW
14.5 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS
14.6 COUNTERPARTS
14.7 INVALIDITY
14.8 HEADING
14.9 EXPENSES
14.10 PUBLICITY
14.11 CONFIDENTIAL INFORMATION
5
<PAGE>
STOCK ACQUISITION AGREEMENT
This Agreement is made and entered into effective the 25 day of
November, 1998 by and between INDUSTRIAL DATA SYSTEMS CORP., a Nevada
Corporation, having its principal place of business in Texas located at 600
Century Place Drive, Building 140, Houston, Texas (hereinafter called the
"Acquiring Corporation"); MICHAEL L. MOORE, (hereinafter called "Stockholder");
and M L C ENTERPRISES, INC., (hereinafter called the "Company").
RECITALS
A) M L C ENTERPRISES, INC., is a Texas Corporation having its
principal place of business located at 10913 Metronome, Houston, Harris County,
Texas 77043. The Company is engaged in the business of manufacture,
distribution and sale of oil and gas related products and industrial fire
suppression systems.
B) The Company is authorized to issue 100,000 shares of common
stock. There are 1000 shares of common stock issued and outstanding.
C) The Acquiring Corporation is authorized to issue 75,000,000
shares of common stock of which 13,023,718 shares are issued and outstanding.
D) The Stockholder has agreed to accept voting stock of the
Acquiring Corporation in exchange for all of his shares of common stock of the
Company.
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 September 30, 1998 together with the notes thereon prepared in accordance
with Generally Accepted Accounting Principles.
"BALANCE SHEET DATE" shall mean September 30, 1998.
"CLOSING BALANCE SHEET" shall mean the Consolidated Balance Sheet of the
Company as of the end of the month immediately
6
<PAGE>
preceding the Closing Date together with notes thereon prepared in accordance
with Generally Accepted Accounting Principles.
"CLOSING DATE" shall mean the close of business on November 15, 1998, or
such other date as may be mutually agreed upon in writing by Stockholders and
Acquiring Corporation.
"CLOSING FINANCIAL STATEMENTS" shall mean the Closing Balance Sheet, and
Consolidated Statements of Income, Cash Flows and Stockholders Equity for the
Company for the period since the end of the Company's most recent fiscal year
and ending as of the date of the Closing Balance Sheet, together with the notes
thereon.
"CODE" shall mean the Internal Revenue Code of 1986, as may be amended
from time to time.
"CONTRACTS" shall mean any of the agreements, contracts, commitments or
other documents described in Section 4.7 (a)-(g).
"DISCLOSURE SCHEDULE" means a schedule executed and delivered by
Stockholder or the Company to Acquiring Corporation on or prior to the date
hereof which sets forth exceptions to the representations and warranties
contained in Article IV and V hereof and certain other information called for by
Articles IV and V hereof and other provisions of this Agreement.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance or other rights of third
parties.
"ENVIRONMENTAL LAWS" shall mean all federal, state, and local laws,
statutes, ordinances, regulations, and rules, which (i) regulate or relate to
the protection or clean-up of the environment, the use, treatment, storage,
transportation or disposal of hazardous, toxic or otherwise dangerous
substances, wastes or materials (whether gas, liquid or solid) or the
preservation or protection of waterways, groundwater, drinking water, air,
wildlife, plants, or other natural resources or (ii) impose liability with
respect to any of the foregoing, including without limitation the Federal Water
Pollution Control Act (33 U.S.C. 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
7
<PAGE>
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:
<TABLE>
<CAPTION>
Term Section
<S> <C>
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
</TABLE>
8
<PAGE>
1.3 References. As used in this Agreement, unless expressly stated
otherwise, references to "knowledge", "known", to the knowledge of", or other
similar phrases, mean, with respect to any person, the actual knowledge or
reason to have actual knowledge after reasonable independent investigation at
the time of execution of this agreement and at the closing.
ARTICLE II
EFFECT OF THE AGREEMENT
2.1 EXCHANGE OF STOCK. In accordance with the terms and conditions
herein, Stockholder shall at closing, exchange all of his shares of the Company,
representing all of the issued and outstanding shares of the Company for a total
of 50,000 shares of common voting stock in the Acquiring Corporation, par value
One Cent ($0.01) per share.
2.2 EFFECT. The transaction contemplated under the terms of this
Agreement is intended to qualify as a tax free exchange under Section
368(a)(1)(b) of the Internal Revenue Code. Each party to this agreement has
relied solely on the opinion of its counsel as to the qualification of the
transaction for a tax free exchange pursuant to IRC 368 (a)(l)(b) Although
Acquiring Corporation in no manner guarantees that the transaction will be
non-taxable, Acquiring Corporation will make all reasonable efforts necessary to
assist Company and Stockholder in making the transaction non-taxable.
ARTICLE III
CLOSING
3.1 CLOSING. The closing of the transactions contemplated herein
(the "Closing") shall be held at 10:00 a.m. local time on the Closing Date at
the Houston office of Acquiring Corporation's counsel unless the parties hereto
otherwise agree.
3.2 DOCUMENTS TO BE DELIVERED. To effect the exchange referred to in
Section 2.1 and the delivery of the consideration described therein,
Stockholders and Acquiring Corporation shall, on the Closing Date, deliver the
following:
(a) Stockholders shall deliver to Acquiring Corporation certificate(s)
evidencing all of the issued and outstanding shares of the Company, free and
clear of any encumbrances of any nature, duly endorsed for transfer to Acquiring
Corporation.
(b) Acquiring Corporation shall deliver to Stockholder a copy of
instructions sent to its transfer agent directing the issuance to
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Stockholder of fifty thousand (50,000) of the Acquiring Corporation's fully paid
non-assessable common voting shares.
(c) All instruments and documents executed and delivered to Acquiring
Corporation pursuant hereto shall be in form and substance, and shall be
executed in a manner reasonably satisfactory to Acquiring Corporation. All
instruments and documents executed and delivered to Stockholder pursuant hereto
shall be in form and substance, and shall be executed in a manner reasonably
satisfactory to Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedules, the Company and
Stockholder hereby represent and warrant to Acquiring Corporation as follows:
4.1 ORGANIZATION OF THE COMPANY.
(a) The Company is duly organized, validly existing and in good standing
under the laws of the State of Texas, has full corporate power and authority to
conduct its business as it is presently being conducted and to own and lease its
properties and assets. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties and where the failure to be
so qualified would have a material adverse effect on the business or financial
condition of the Company. Each jurisdiction, if any, in which the Company is
qualified to do business as a foreign corporation is listed on the Disclosure
Schedule. The Company has duly filed assumed names of HOUSTON SUPPLY
INTERNATIONAL; MARINE & INDUSTRIAL FIRE & SAFETY; VALVCO INDUSTRIAL SUPPLY CO.
and MARINE & INDUSTRIAL SUPPLY CO.
(b) The Company has authorized 100,000 shares of Common Voting Stock.
The only shares of the Company which have been issued and the current
Stockholders of the Company are as follows:
MICHAEL L. MOORE 1000 shares
(c) The company has one Director whose names is as follows:
MICHAEL L. MOORE
(d) The officers of the Company are as follows:
MICHAEL L. MOORE - PRESIDENT, TREASURER
MICHAEL L. MOORE - VICE PRESIDENT, SECRETARY
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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;
(f) amendment, cancellation or termination of any Contract, license or
other instrument material to the Company;
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(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, or more except in the ordinary
course of business and consistent with past practice, or
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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 Stockholder by the Company;
(t) agreement by the Company to do any of the foregoing; or
(u) other event or condition of any character which in any one case or
in the aggregate has materially adversely affected, or event or condition known
to the Company (other than matters of general public knowledge relating to
general economic conditions or the Company's industry as a whole) which it is
reasonable to expect will, in any one case or in the aggregate, materially
adversely affect in the future, the condition (financial or otherwise), assets,
liabilities, working capital, reserves, earnings, business or prospects of the
Company.
4.5 TITLE TO ASSETS, ETC. The Company has good and marketable fee
simple title to the assets reflected on the Balance Sheet or acquired in the
ordinary course of business since the Balance Sheet Date (the "Assets"). None
of the Assets are subject to any Encumbrances, except for minor liens which in
the aggregate are not substantial in amount, do not materially detract from the
value of the property or assets subject thereto or interfere with the present
use and have not arisen other than in the ordinary course of business. The
Company has in all material respects performed all the obligations required to
be performed by it with respect to all Assets leased by it through the date
hereof, except where the failure to perform would not have a material adverse
effect on the business or financial condition of the Company. The Company
enjoys peaceful and undisturbed possession of all Facilities owned or leased by
it, and such Facilities are not subject to any Encumbrances, encroachments,
building or use restrictions, exceptions, reservations, or limitations which in
any material respect interfere with or impair the present and continued use
thereof in the usual and normal conduct of the business of the Company. There
are no pending or threatened condemnation proceedings relating to any of the
Facilities. The real property improvements (including leasehold improvements),
equipment and other tangible assets owned or used by the Company at the
Facilities are adequately insured and are structurally sound with no known
material defects. None of said improvements, equipment and other assets is
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subject to any commitment or other arrangement for their sale or use by any
affiliate of the Company or third parties. The Assets are valued at or below
actual cost less an adequate and proper depreciation charge. The Company has
not depreciated any of the Assets on an accelerated basis or in any other manner
inconsistent with applicable Internal Revenue Service guidelines, if any.
4.6 CONDITION OF TANGIBLE ASSETS. The Facilities and Fixtures and
Equipment are in good operating condition and repair (except for ordinary wear
and tear and any defect the cost of repairing which would not be material), are
sufficient for the operation of the Company's business as presently conducted
and are in conformity in all material respects with all applicable laws,
ordinances, orders, regulations and other requirements (including applicable
zoning, environmental, motor vehicle safety or standards, occupational safety
and health laws and regulations) relating thereto currently in effect, except
where the failure to conform would not have a material adverse effect on the
business or financial condition of the Company.
4.7 CONTRACTS AND COMMITMENTS. Except as listed in the Disclosure
Schedules 1.2, the Company is not a party to any written or oral:
(a) commitment, contract, note, loan, evidence of indebtedness, or
letter of credit involving any obligation or liability on the part of the
Company of more than $10,000.00 and not cancelable (without liability) within 60
days;
(b) lease of real property;
(c) lease of personal property involving any annual expense in excess of
$10,000.00 and not cancelable (without liability) within 60 days;
(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
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(g) employment contracts, including without limitation, contracts to
employ executive officers and other contracts with officers or directors of the
Company.
The Company is not (and, to the best knowledge of the Company, no other
party is) in material breach or violation of, or default under any of the
Contracts or other instruments, obligations, evidences of indebtedness or
commitments described in (a)-(g) above, the breach or violation of which would
have a material adverse effect on the business or financial condition of the
Company.
4.8 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of the Company, (b) a breach of, or a default under,
any term or provision of any contract, agreement, indebtedness, lease,
Encumbrance, commitment, license, franchise, permit, authorization or concession
to which the Company is a party or by which the Assets are bound, which breach
or default would have a material adverse effect on the business or financial
condition of the Company or its ability to consummate the transactions
contemplated hereby, (c) a violation by the Company of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree or award,
which violation would have a material adverse effect on the business or
financial condition of the Company or its ability to consummate the transactions
contemplated hereby, or (d) an imposition of any material Encumbrance,
restriction or charge on the business of the Company or on any of the Assets.
4.9 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
the Company in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
4.10 FINANCIAL STATEMENTS. Stockholder has heretofore delivered to
Acquiring Corporation the Financial Statements. Except as otherwise set forth
therein, the Financial Statements are complete, are in accordance with the books
and records of the Company, accurately reflect the assets, liabilities and
financial condition and results of operations indicated thereby in accordance
with 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.
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4.11 LITIGATION. There is no action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, labor
dispute, arbitral action or investigation (collectively, "Actions") pending or,
to the knowledge of the Company, threatened or anticipated against, relating to
or affecting (i) the Company, (ii) any benefit plan for Personnel or any
fiduciary or administrator thereof or (iii) the transactions contemplated by
this Agreement. The Company is not in default with respect to any judgment,
order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against the Company or the business or activities
of the Company. There is not a reasonable likelihood of an adverse determination
of any pending Actions which would, individually or in the aggregate, have a
material adverse effect on the business or financial condition of the Company.
4.12 LABOR MATTERS. The Company is not a party to any labor agreement
with respect to its employees with any labor organization, group or association.
The Company has not experienced any attempt by organized labor or its
representatives to make the Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company. The Company is in material
compliance with all applicable laws respecting employment practices, terms and
conditions of employment and wages and hours and is not engaged in any unfair
labor practice. There is no unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board or any other
governmental agency arising out of the Company's activities, and the Company has
no knowledge of any facts or information which would give rise thereto; there is
no labor strike or labor disturbance pending or threatened against the Company
nor is any grievance currently being asserted; and the Company has not
experienced a work stoppage or other labor difficulty.
4.13 LIABILITIES. The Company has no liabilities or obligations
(absolute, accrued, contingent or otherwise) except (i) liabilities which are
reflected and reserved on the Balance Sheet, (ii) liabilities incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date that individually or in the aggregate are not material, and (iii)
liabilities arising under Contracts, letters of credit, purchase orders,
licenses, permits, purchase agreements and other agreements, business
arrangements and commitments described in the Disclosure Schedule or which are
of the type described in Section 4.7 but which because of the dollar amount or
other qualifications are not required to be listed in the Disclosure Schedule.
4.14 COMPLIANCE WITH LAW. The Company and the conduct of its business
are in compliance with all applicable laws, statutes, ordinances and
regulations, whether federal, state or local, except
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where the failure to comply would not have a material adverse effect on the
business or financial condition of the Company. The Company has not received
any written notice to the effect that, or otherwise been advised that, it is not
in compliance with any of such statutes, regulations, orders, ordinances or
other laws where the failure to comply would have a material adverse effect on
the business or financial condition of the Company, and the Company has no
reason to anticipate that any presently existing circumstances are likely to
result in violations of any such regulations which would, in any one case or in
the aggregate, have a material adverse effect on the business or financial
condition of the Company.
4.15 NO BROKERS. Neither Stockholder, the Company or any affiliate of
the Company has entered into or will enter into any Contract, agreement,
arrangement or understanding with any person or firm which will result in the
obligation of Acquiring Corporation to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
4.16 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY. Neither
Stockholder nor the Company has any legal obligation, absolute or contingent, to
any other person or firm to sell the Assets, to sell any capital stock of the
Company or to effect any merger, consolidation or other reorganization of the
Company or to enter into any agreement with respect thereto.
4.17 PROPRIETARY RIGHTS. All of the Company's registrations of
trademarks and of other marks, trade names or other trade rights, and all
pending applications for any such registrations and all of the Company's patents
and copyrights and all pending applications therefor; all other trademarks and
other marks, trade names and other trade rights and all other trade secrets,
designs, plans, specifications and other proprietary rights, whether or not
registered (collectively, "Proprietary Rights") are listed in the Disclosure
Schedule 1.3. The Proprietary Rights listed in the Disclosure Schedule are in
all material respects all those used in the business of the Company. No person
has a right to receive a royalty or similar payment in respect of any
Proprietary Rights pursuant to any contractual arrangements entered into by the
Company, and no person otherwise has a right to receive a royalty or similar
payment in respect of any such Proprietary Rights. The Company has no licenses
granted by or to it or no other agreements to which it is a party, relating in
whole or in part to any of the Proprietary Rights. The Company's use of the
Proprietary Rights is not infringing upon or otherwise violating the rights of
any third party in or to such Proprietary Rights, and no proceedings have been
instituted against or notices received by the Company that are presently
outstanding alleging that the Company's use of its Proprietary Rights infringes
upon or otherwise violates any rights of a third party in or to such Proprietary
Rights.
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4.18 EMPLOYEE AGREEMENTS AND BENEFITS.
(a) Except as set forth on the Disclosure Schedule 1.4, no employee of
the Company is a party to, participant in, or bound by, any collective
bargaining agreement, union contract or employment, bonus, deferred
compensation, insurance, pension, profit sharing, or other personnel
arrangement, any employee termination or severance arrangements, and the
employment by the Company of any person (whether or not there is a written
employment contract) can be terminated for any reason whatsoever not
inconsistent with current law, without penalty or liability of any kind other
than accrued vacation pay.
(b) The Company does not contribute to any multi-employer pension plan,
as defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Company is not subject to any claims, whether fixed or
contingent, for withdrawal liability relating to any such multi-employer plan.
(c) The Company has complied with all laws relating to the employment of
labor with respect to its employees, including any provisions thereof relating
to wages, hours, collective bargaining and the payment of social security and
similar taxes, and no person has asserted that the Company is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing.
(d) The employee pension benefit plans and welfare benefit plans listed
in the Disclosure Schedule (collectively, the "Plans"), constitute all such
Plans in which any employees of the Company participate and have been operated
in all material respects in compliance with the Code and with ERISA since ERISA
became applicable with respect thereto. The Company shall make available to
Acquiring Corporation true and correct copies of all such Plans, trust
agreements with respect to such Plans, all determination letters with respect
thereto, insurance contracts, administrative servicing agreements and other
agreements relating to the Plans and the most recent annual reports filed with
the United States Department of Labor and/or the Internal Revenue Service by the
Company with respect thereto. None of the Plans nor any of their respective
related trusts have been terminated, and there has been no "reportable event",
as that term is defined in Section 4043 of ERISA, required to be reported since
the effective date of ERISA which has not been reported, and none of such Plans
nor their respective related trusts have incurred any "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA (whether or not
waived), since the effective date of ERISA. The Plans are the only employee
benefit plans covering employees of the Company.
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4.19 TRANSACTIONS WITH CERTAIN PERSONS. Neither any officer, director
or employee of the Company nor any member of any such person's immediate family
is presently a party to any material transaction with the Company relating to
the Company's business, including without limitation, any contract, agreement or
other arrangement (i) providing for the furnishing of material services by, (ii)
providing for the rental of material real or personal property from, or (iii)
otherwise requiring material payments to any such person or corporation,
partnership, trust or other entity in which any such person has a substantial
interest as a shareholder, officer, director, trustee or partner.
4.20 TAX MATTERS. The Company, any predecessor of the Company and all
members for income tax purposes of any affiliated group of corporations of which
the Company or any such predecessor corporation is or has been a member
(hereinafter referred to collectively as the "Taxpayers") have duly filed all
tax reports and returns required to be filed by them, including all federal,
state, local and foreign tax returns and reports. The Taxpayers have paid in
full all taxes required to be paid by such Taxpayers before such payment became
delinquent. The Company has made adequate provision, in conformity with
generally accepted accounting principles consistently applied, for the payment
of all taxes which may subsequently become due. All taxes which any Taxpayer
has been required to collect or withhold have been duly collected or withheld
and, to the extent required when due, have been or will be duly paid to the
proper taxing authority.
The consolidated federal income tax returns of the Company and the
federal income tax returns of each Subsidiary of the Company whose results of
operations are not consolidated in the federal income tax returns of the
Company, have been timely filed with the Internal Revenue Service for all
periods to and including those expressly set forth in the Disclosure Schedule,
and except to the extent shown therein, all deficiencies asserted as a result of
such examinations have been paid or finally settled, and no issue has been
raised by the Internal Revenue Service in any such examination which, by
application of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined. There are no audits
known by the Company to be pending on the Company's tax returns, and there are
no claims 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
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tax provision) apply to any disposition of any of the Company's assets or
property, no property of the Company is property which Acquiring Corporation or
the Company is or will be required to treat as owned by another person pursuant
to the provisions of Section 168(f) (safe harbor leasing provisions) of the
Code. The Company is not a party to any tax-sharing agreement or similar
arrangement with any other party.
For the purpose of this Agreement, any federal, state, local or foreign
income, sales, use, transfer, payroll, personal property, occupancy or other
tax, levy, impost, fee, imposition, assessment or similar charge, together with
any related addition to tax, interest or penalty thereon, is referred to as a
"tax."
4.21 SEVERANCE ARRANGEMENTS. The Company has not, except to the
extent that such arrangements have been made with Michael L. Moore in the
Employment Agreement attached hereto as Schedule 1.5, entered into any severance
or similar arrangement in respect of any present or former Personnel that will
result in any obligation (absolute or contingent) of Acquiring Corporation or
the Company to make any payment to any present or former Personnel following
termination of employment.
4.22 INSURANCE. The Disclosure Schedule 1.6 contains a complete and
accurate list of all policies or binders of fire, liability, title, worker's
compensation and other forms of insurance maintained by the Company on its
business, property or Personnel. All of such policies are sufficient for
compliance with all requirements of law and of all Contracts to which the
Company is a party. The Company is not in default under any of such policies or
binders, and the Company has not failed to give any notice or to present any
claim under any such policy or binder in a due and timely fashion. There are no
facts upon which an insurer might be justified in reducing coverage or
increasing premiums on existing policies or binders. There are no outstanding
unpaid claims under any such policies or binders. Such policies and binders
provide sufficient coverage for the risks insured against, are in full force and
effect on the date hereof and shall be kept in full force and effect by the
Company through the Closing Date.
4.23 ACCOUNTS RECEIVABLE. The accounts receivable reflected in the
Balance Sheet Schedule 1.7, and all accounts receivable ensuing since the
Balance Sheet Date, represent bona fide claims against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in accordance with the applicable orders, Contracts
or customer requirements. Said accounts receivable are subject to no defenses,
counterclaims or rights of offset and are fully collectible in the ordinary
course of business without cost to Acquiring Corporation in collection efforts
therefor except, in the
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case of accounts receivable shown on the Balance Sheet, to the extent of the
appropriate reserves set forth on the Balance Sheet, and, in the case of
accounts receivable arising since the Balance Sheet Date, to a reasonable
allowance for bad debts which does not reflect a rate of bad debts more than
percent (4%) higher than that reflected by the reserve for bad debts on the
Balance Sheet.
4.24 INVENTORIES. The values at which inventories are shown on the
Balance Sheet have been determined in accordance with the normal valuation
policy of the Company, consistently applied and in accordance with Company's
historical accounting method. The inventories (and items of inventory acquired
or manufactured subsequent to the Balance Sheet Date) consist only of items of
quality and quantity commercially usable and salable in the ordinary course of
business, except for any items of obsolete material or material below standard
quality, all of which have been written down to realizable market value, or for
which adequate reserves have been provided.
4.25 PURCHASE COMMITMENTS AND OUTSTANDING BIDS. As of the date of
this Agreement, the aggregate of all accepted and unfulfilled orders for the
sale of merchandise entered into by the Company does not exceed $ 750,000.00 and
the aggregate of all Contracts or commitments for the purchase of supplies by it
does not exceed $ 200,000.00, 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 of merchandise by reason of alleged overshipments, defective merchandise
or otherwise, or of merchandise in the hands of customers under an understanding
that such merchandise would be refundable. No outstanding purchase or
outstanding lease commitment of the Company presently is in excess of the
normal, ordinary and usual requirements of its business or was made at any price
in excess of the now current market price or contains terms and conditions more
onerous than those usual and customary in the Company's business. There is no
outstanding bid, proposal, Contract or unfilled order of the Company which when
or would, if accepted, have a material adverse effect, individually or in the
aggregate, on the business or financial condition of the Company.
4.26 PAYMENTS. The Company has not, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, government official or other party, in the
United States or any other country, which is in any manner related to the
business or operations of the Company, which the Company knows or has reason to
believe to have been illegal under any federal, state or local laws of the
United States or any other country having jurisdiction; and the Company has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers
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and has at all times done business in an open and ethical manner.
4.27 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule contains a
complete and accurate list of (i) the ten (10) largest customers of the Company
in terms of sales during the Company's last fiscal year, showing the approximate
total sales by the Company to each such customer during such fiscal year; (ii)
the ten (10) largest suppliers of the Company in terms of purchases during the
Company's last fiscal year, showing the approximate total purchases by the
Company from each such supplier during such fiscal year. Since the Balance
Sheet Date, there has been no adverse change in the business relationship of the
Company with any customer or supplier named in the Disclosure Schedule which is
material to the business or financial condition of the Company.
4.28 ENVIRONMENTAL AND SAFETY COMPLIANCE. There are no present or
past Environmental Conditions in any way relating to the Facilities. The
Company did not cause or contribute to, nor did the Company negligently permit a
third party to cause or contribute to, any Environmental Condition in any way
relating to the Facilities. For purposes of this Agreement, "Environmental
Condition" means any environmental pollution, including, without limitation, any
contaminant, irritant or pollutant, from any spill, discharge, leak, emission,
escape, injection, dumping or release of any kind whatsoever or any exposure of
any type in any work places or to any medium, including, without limitation,
air, land, surface waters or groundwaters, or from any generation,
transportation, treatment, discharge, handling, storage or disposal of Hazardous
Substances used, generated, transported, treated, discharged, stored or disposed
of (in any case, "Handled"), except in all cases in the ordinary course of the
operations or business of the Company and in accordance in all material respects
with all Environmental Laws relating thereto.
Without limiting the generality of the foregoing, neither (i) the
operations of the Company, nor (ii) the collection, distribution or sale of the
processes, results or products of the Company, violates or has violated any
Environmental Law. The Company has timely obtained all licenses and permits and
timely filed all reports required to be filed under any Environmental Laws. The
Company has not handled any Hazardous Substances on, beneath or about any of the
Facilities, except for Hazardous Substances reasonably necessary to the business
of the Company (which Hazardous Substances, if any, were Handled, in compliance
with Environmental Laws). The Company has not received any notice from any
governmental agency or private or public entity advising the Company that it is
potentially responsible for response costs with respect to a release or
threatened release of Hazardous Substances. The Company has not buried, dumped,
released or otherwise disposed of any Hazardous Substances, on, beneath or about
any of the Facilities
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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, distribution and sale of Oil and Gas
Products and fire suppression systems and related equipment, and the only assets
and liabilities retained by the Company as of such date shall be related to the
manufacturing, distribution and selling of Oil and Gas products and fire
suppression systems, including, without limitation, accounts receivable,
inventory, tangible personal property, leased property, contractual rights,
records (customer and production related), government licenses, permits and
approvals, and trade name of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Except as otherwise set forth in the Disclosure Schedule, Stockholder
hereby represents and warrants to Acquiring Corporation as follows:
5.1 ORGANIZATION OF STOCKHOLDERS. MICHAEL L. MOORE is the owner of
record and beneficially of all of the issued and outstanding Stock free and
clear of all encumbrances, and upon transfer pursuant to this Agreement,
Acquiring Corporation will own shares representing 100% of the Company's issued
and outstanding capital stock free and clear of all encumbrances.
5.2 AUTHORIZATION. Stockholder has all necessary power and authority
to enter into this Agreement and has taken all action necessary to consummate
the transactions contemplated hereby and to perform his respective obligations
hereunder. This Agreement has been duly executed and delivered by Stockholder
and is a legal,
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valid and binding obligation of Stockholder enforceable against Stockholder in
accordance with its terms.
5.3 CONTRACTS AND COMMITMENTS. Stockholder is not a party to any
written or oral commitment, contract, lease, note, loan, evidence of
indebtedness, purchase order, letter of credit or other agreement involving any
obligation or liability on the part of the Company or relating to the business
of the Company and otherwise materially affecting the Company's business not
otherwise listed in the Disclosure Schedule.
Stockholder and the Company is not (and to the best knowledge of
Stockholder, no other party is) in material breach or violation of, or default
under any of the contracts or other instruments, obligations, evidences of
indebtedness or commitments set forth in the Disclosure Schedule, the breach or
violation of which would have a material adverse effect on the business or
financial condition of the Company.
5.4 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
Stockholder in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
5.5 NO BROKERS. Stockholder has not entered and will not enter into
any Contract, agreement, arrangement or understanding with any person or firm
which will result in the obligation of Acquiring Corporation to pay any finder's
fee, brokerage commission or similar payment in connection with the transactions
contemplated hereby.
5.6 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY.
Stockholder does not have any legal obligation, absolute or contingent, to any
other person or firm to sell the Assets, to sell any capital stock of the
Company or to effect any merger, consolidation or other reorganization of the
Company or to enter into any agreement with respect thereto.
5.7 TRANSACTIONS WITH CERTAIN PERSONS. To the knowledge of
Stockholder, no officer, director or employee of Stockholder nor any member of
any such person's immediate family is presently a party to any material
transaction with the Company relating to the Company's business, including
without limitation, any contract, agreement or other arrangement (i) providing
for the furnishing of material services by, (ii) providing for the rental of
material real or personal property from, or (iii) otherwise requiring material
payments to (other than for services as officers, directors or employees of
Stockholder) any such person or corporation,
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partnership, trust or other entity in which any such person has a substantial
interest as a shareholder, officer, director, trustee or partner.
5.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by Stockholder, in this Agreement, nor any document, exhibit,
statement, certificate or schedule furnished to Acquiring Corporation pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements or facts contained
therein not misleading.
5.9 NO KNOWLEDGE OF INDEMNIFICATION EVENTS. Stockholder has no
knowledge of the existence of any event or combination of events, disclosed or
undisclosed, which have occurred prior to closing for which any person or entity
would be entitled to seek Indemnification against Stockholder, Company or
Acquiring Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION
Acquiring Corporation hereby represents and warrants to Stockholder as follows:
6.1 ORGANIZATION OF ACQUIRING CORPORATION. Acquiring Corporation is
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has full corporate power and authority to conduct its
business and to own and lease its properties.
6.2 AUTHORIZATION. Acquiring Corporation has all necessary corporate
authority to enter into this Agreement and has taken all necessary corporate
action to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Acquiring Corporation and is a valid and binding obligation of Acquiring
Corporation enforceable against it in accordance with its terms.
6.3 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or declaration, filing or registration with, any United States federal or
state governmental or regulatory authority is required to be made or obtained by
Acquiring Corporation in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
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6.4 NO BROKERS. Neither Acquiring Corporation nor any affiliate of
Acquiring Corporation has entered into or will enter into any agreement,
arrangement or understanding with any person or firm in which will result in the
obligation of Stockholder to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
6.5 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of Acquiring Corporation, (b) a breach of, or a
default under, any term or provision of any contract, agreement, indebtedness,
lease, commitment, license, franchise, permit, authorization or concession to
which Acquiring Corporation is a party which breach or default would have a
material adverse effect on the business or financial condition of Acquiring
Corporation or its ability to consummate the transactions contemplated hereby or
(c) a violation by Acquiring Corporation of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, which
violation would have a material adverse effect on the business or financial
condition of Acquiring Corporation or its ability to consummate the transactions
contemplated hereby.
6.6 LITIGATION. There is no action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, labor
dispute, arbitral action or investigation (collectively, "Actions") pending or,
to the knowledge of the Acquiring Corporation, threatened or anticipated
against, relating to or affecting (i) the Acquiring Corporation, (ii) any
benefit plan for Personnel or any fiduciary or administrator thereof or (iii)
the transactions contemplated by this Agreement. The Acquiring Corporation is
not in default with respect to any judgment, order, writ, injunction or decree
of any court or governmental agency, and there are no unsatisfied judgments
against the Acquiring Corporation or the business or activities of the Acquiring
Corporation. There is not a reasonable likelihood of an adverse determination of
any pending Actions which would, individually or in the aggregate, have a
material adverse effect on the business or financial condition of the Acquiring
Corporation.
6.7 COMPLIANCE WITH LAW. The Acquiring Corporation and the conduct
of its business are in compliance with all applicable laws, statutes, ordinances
and regulations, whether federal, state or local, except where the failure to
comply would not have a material adverse effect on the business or financial
condition of the Acquiring Corporation. The Acquiring Corporation has not
received any written notice to the effect that, or otherwise been advised
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that, it is not in compliance with any of such statutes, regulations, orders,
ordinances or other laws where the failure to comply would have a material
adverse effect on the business or financial condition of the Acquiring
Corporation, and the Acquiring Corporation has no reason to anticipate that any
presently existing circumstances are likely to result in violations of any such
regulations which would, in any one case or in the aggregate, have a material
adverse effect on the business or financial condition of the Acquiring
Corporation.
6.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by the Acquiring Corporation in this Agreement, nor any document,
exhibit, statement, certificate or schedule furnished to Stockholder pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements or facts contained
therein not misleading. The Acquiring Corporation's annual report has disclosed
all events, conditions and facts materially affecting the business, prospects
and financial condition of the Acquiring Corporation.
ARTICLE VII
ACTIONS BY STOCKHOLDER, THE COMPANY AND
ACQUIRING CORPORATION PRIOR TO THE CLOSING
Stockholder, the Company and Acquiring Corporation covenant as follows
for the period from the date hereof through the Closing Date:
7.1 MAINTENANCE OF BUSINESS. The company shall diligently carry on
its business in the ordinary course consistent with past practice.
7.2 CERTAIN PROHIBITED TRANSACTIONS. The Company shall not without
the prior written approval of Acquiring Corporation and Stockholder:
(a) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other individual,
partnership, firm or corporation, or make any loans or advances to any
individual, partnership, firm or
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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 claims held by
it, except in the ordinary course of business and consistent with past practice;
(f) make any investment of a capital nature either by purchase of stock
or securities, contributions to capital, property transfer or otherwise, or by
the purchase of any property or assets of any other individual, partnership,
firm or corporation, except in the ordinary course of business and consistent
with past practice;
(g) enter into or terminate any material contract or agreement, or make
any material change in any of its leases and Contracts, other than in the
ordinary course of business and consistent with past practice; or
(h) engage in any business other than the type it currently conducts; or
(i) do any other act which would cause any representation or warranty of
Acquiring Corporation and the Company in this Agreement to be or become untrue
in any material respect.
7.3 INVESTIGATION BY ACQUIRING CORPORATION. Stockholder and the
Company shall allow Acquiring Corporation during regular business hours through
Acquiring Corporation's employees, agents and representatives, to make such
investigation of the business, properties, books and records of the Company, and
to conduct such examination of the condition of the Company, as Acquiring
Corporations deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to verify
the representations and warranties of Stockholder and the Company hereunder.
Stockholder and the Company shall allow Acquiring Corporation to contact the
Company's vendors, customers and any other person having business dealings with
the
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Company. Acquiring Company's investigation shall be done in such a manner that
it does not interfere with the Company's business operations.
7.4 CONSENTS AND BEST EFFORTS. Stockholder and the Company will, as
soon as possible, commence to take all action required to obtain all consents,
approvals and agreements of, and to give all notices and make all other filings
with, any third parties, including governmental authorities, necessary to
authorize, approve or permit the full and complete sale, conveyance, assignment
or transfer of all of the Stock, and Acquiring Corporation shall cooperate with
Stockholder with respect thereto; provided, however, that Acquiring Corporation
shall not be required to agree to any unfavorable modification of any existing
contract or agreement in order to obtain such consent. In addition, subject to
the terms and conditions herein provided, each of the parties hereto covenants
and agrees to use its best efforts to take, or cause to be taken, all action or
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder.
7.5 NOTIFICATION OF CERTAIN MATTERS. Stockholder shall give prompt
notice to Acquiring Corporation, and Acquiring Corporation shall give prompt
notice to Stockholder, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect any time from the date hereof to the Closing Date and (ii) any material
failure of Stockholder, the Company or Acquiring Corporation, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, and each party shall use all
reasonable efforts to remedy same.
7.6 NO MERGERS CONSOLIDATIONS, SALE OF STOCK, ETC. The Company and
Stockholder will not, directly or indirectly, solicit any inquiries or proposals
or enter into or continue any discussions, negotiations or agreements relating
to the sale or exchange of the Stock, the merger of the Company with, or the
direct or indirect disposition of a significant amount of the Company's assets
or business to any person other than Acquiring Corporation or its affiliates or
provide any assistance or any information to or otherwise cooperate with any
person in connection with any such inquiry, proposal or transaction. In the
event that the Company or Stockholder receives an unsolicited offer for such a
transaction or obtains information that such an offer is likely to be made, the
Company or Stockholder will provide Acquiring Corporation with notice thereof as
soon as practical after receipt, including the identity of the prospective
purchaser or soliciting party.
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ARTICLE VIII
CONDITIONS TO STOCKHOLDERS' OBLIGATIONS
The obligations of Stockholder to transfer the Stock to Acquiring
Corporation on the Closing Date are subject, in the discretion of Stockholder,
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
and warranties of Acquiring Corporation contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date, and
Acquiring Corporation shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date.
8.2 CONSENTS. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit Stockholders to transfer the
Stock to Acquiring Corporation as contemplated hereby shall have been obtained,
unless the failure to obtain any such consent, approval or waiver would not have
a material adverse effect upon Stockholder.
8.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected materially to damage Stockholder if the transactions
contemplated hereunder are consummated.
8.4 CORPORATE DOCUMENTS. Stockholder shall have received from
Acquiring Corporation resolutions adopted by the Board of Directors of Acquiring
Corporation approving this Agreement and the transactions contemplated hereby,
certified by Acquiring Corporation's corporate secretary.
ARTICLE IX
CONDITIONS TO ACQUIRING CORPORATION'S OBLIGATIONS
The obligations of Acquiring Corporation to purchase the Stock as
provided hereby are subject, in the discretion of Acquiring Corporation, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
and warranties of Stockholder and the Company
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contained in this Agreement shall be true and correct as of the Closing Date as
if such representations and warranties were made at and as of the Closing Date,
and Stockholder and the Company shall have performed all agreements and
covenants required hereby to be performed by them prior to or at the Closing
Date. There shall be delivered to Acquiring Corporation certificates from each
of the Stockholder and the Company (signed by the President or a Vice President
of the Company and Stockholder) to the foregoing effect.
9.2 CONSENTS. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit Stockholder to transfer the
Stock to Acquiring Corporation as contemplated hereby shall have been obtained,
unless the failure to obtain any such consent, approval or waiver would not have
a material adverse effect upon Acquiring Corporation.
9.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected materially and adversely to affect the value of the Stock
or business of the Company.
9.4 CERTIFICATES. The Company shall furnish Acquiring Corporation
with such certificates of the respective officers of the Company and others to
evidence compliance with the conditions set forth in this Article IX as may be
reasonably requested by Acquiring Corporation.
9.5 CORPORATE DOCUMENTS. Acquiring Corporation shall have also
received the corporate minute books, Certificates of Incorporation, Bylaws and
stock transfer books of the Company.
9.6 INVESTIGATION. Acquiring Corporation or its Representatives
shall have investigated the Company's properties (including without limitation,
an environment audit), business, books and records, and in Acquiring
Corporation's sole discretion, Acquiring Corporation shall be satisfied on the
basis of such investigation that the representations and warranties of
Stockholder and the Company made pursuant to this Agreement are accurate and
complete.
9.7 EMPLOYMENT AGREEMENTS. Stockholder shall execute and deliver to
Company on or before closing an Employment Agreement in a form substantially the
same as attached hereto as Exhibit A. Aarron Phillips shall execute an
instrument in acceptable form releasing the Company from any obligations arising
out of that certain letter agreement between the parties dated April 30, 1998.
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9.8 ACCOUNTING MATTERS. Prior to closing Company shall have
performed the following accounting functions in addition to any other
obligations contained herein:
1. Filed its 1997 1120S return;
2. Provided the Balance Sheets and Financial Statements required
herein;
3. All billings have been brought up to date;
4. Completion of a detailed inventory valuation;
5. Completion of a detailed fixed assets schedule with supporting
documentation; and
6. Compilation of "job cost" detail on a minimum of four jobs
completed in 1998 as representative of profit margins.
9.9 COMPLETION OF BUY OUT. Prior to Closing Stockholder shall have
provided fully executed copies of all buy out documents and proof of payment by
and between Company, Stockholder and Michael L. Cooper.
ARTICLE X
ACTIONS BY STOCKHOLDER, THE COMPANY
AND ACQUIRING CORPORATION AFTER THE CLOSING
10.1 FURTHER ASSURANCES. On and after the Closing Date, Stockholder,
the Company and Acquiring Corporation will take all appropriate action and
execute all documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the provisions hereof.
ARTICLE XI
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in
the Disclosure Schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the parties hereunder. The representations
and warranties of Stockholder, the Company and Acquiring Corporation contained
herein shall survive the Closing Date until the 15th day of November, 2002,
without regard to any investigation made by any of the parties hereto; provided,
however, that such representations and warranties shall survive as to any claim
or demand made prior to the 15th day of November, 2002 until such claim or
demand is fully paid or otherwise resolved by the parties hereto in writing or
by a court of competent jurisdiction.
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11.2 INDEMNIFICATION. Stockholder shall indemnify Acquiring
Corporation and Company against, and hold Acquiring Corporation and Company
harmless from, any damage, claim, liability or expense, including without
limitation, interest, penalties and reasonable attorneys' fees, INCLUDING
WITHOUT LIMITATION ANY UNDISCLOSED TAX LIABILITIES OF COMPANY INCURRED PRIOR TO
NOVEMBER 1, 1998 WHETHER KNOWN OR UNKNOWN TO STOCKHOLDER, (collectively
"Damages"), arising out of the breach of any warranty, representation, covenant
or agreement of Stockholder contained in this Agreement. The Acquiring
Corporation shall indemnify and hold Stockholder harmless from any Damages
arising out of the breach of any warranty, representation, covenant or agreement
of Acquiring Corporation contained in this Agreement. The Company shall
indemnify and hold Acquiring Corporation harmless from any Damages arising out
of the breach of any warranty, representation, covenant or agreement of Company
contained in this Agreement. The term "Damages" as used in Article XI is not
limited to matters asserted by third parties against Stockholder, the Company or
Acquiring Corporation, but includes Damages incurred or sustained by the
Company, Stockholder or Acquiring Corporation in the absence of third party
claims. No claims for indemnification by Acquiring Corporation or Stockholder
may be made or instituted after four years following the Closing date of this
Agreement. All claims for indemnification made prior to the end of the four year
period shall continue until a final determination is made in regard to the
validity of the indemnification claim by either settlement, arbitration or
litigation.
11.3 INDEMNIFICATION PROCEDURES. Upon Acquiring Corporation becoming
aware of a fact, condition or event which constitutes a breach of any of the
representations, warranties, covenants or agreements of Stockholder or the
Company contained herein or a products liability claim, if a claim for Damages
in respect thereof is to be made against Stockholder under this Article XI,
Acquiring Corporation will with reasonable promptness notify Stockholder or the
Company, as the case may be, in writing of such fact, condition or event. If
such fact, condition or event is the assertion of a claim by a third party,
Stockholder or the Company, as the case may be, will be entitled to participate
in or take charge of the defense against such claim, provided that Stockholder
or the Company, as the case may be, and its counsel, shall proceed with
diligence and in good faith with respect thereto.
11.4 NO RIGHT OF CONTRIBUTION. After the Closing, the Company shall
have no liability to indemnify the Stockholder on account of the breach of any
representation or warranty or the nonfulfillment of any covenant or agreement of
the Company; and Stockholder shall have no right of contribution against the
Company. In addition to any other remedy which may be available at law or in
equity, Acquiring Corporation or the Company shall be entitled to specific
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performance and injunctive relief, without posting bond or other security.
ARTICLE XII
SECURITIES LAWS
12.1 ACQUISITION FOR INVESTMENT. Acquiring Corporation and
Stockholder hereby acknowledge that the shares of Stock to be purchased pursuant
to the terms of this Agreement shall be acquired in good faith for investment
for its own account and not with a view to a distribution or resale of any of
such Stock, and shall not for a period of one (1) years after closing transfer,
sell, exchange or encumber the same except as provided for herein.
ARTICLE XIII
STOCKHOLDER'S OPTION TO RESELL
TO ACQUIRING CORPORATION
13.1 SALE OPTION OF STOCKHOLDER. Stockholder for a period of one year
following the closing of the transaction shall be entitled to require Acquiring
Corporation to repurchase all or any portion of his 50,000 shares of common
voting stock in the Acquiring Corporation for cash consideration of One Dollar
($1.00) per share. Stockholder shall exercise this option by written
notification, in accordance with Article 14.3 herein, to Acquiring Corporation.
The written notification shall state the number of shares Acquiring Corporation
shall be required to repurchase and the date and time, which time and date shall
be at least ten (10) days from the date of the notice, when the transaction
shall occur.
ARTICLE XIV
MISCELLANEOUS
14.1 TERMINATION. This Agreement may be terminated as follows:
(a) This Agreement may be terminated and the transactions contemplated
hereby abandoned by any party if the conditions set forth in Articles VIII and
IX have not been satisfied on or before November 15, 1998 (unless waived by the
party entitled to the benefit thereof), without liability of any party hereto;
provided, however, that no party shall be released from liability hereunder if
this Agreement is terminated and the transactions abandoned by reason of (i)
willful failure of any party to have performed its obligations hereunder, or
(ii) any knowing misrepresentation made by any party of any matter set forth
herein.
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(b) This agreement may be terminated by Acquiring Corporation in its
sole discretion at any time between November 1, 1998 and closing should:
1. After completion of a complete financial audit of the
Company, Acquiring Company shall determine in its sole discretion that it does
not desire to complete the closing of the transaction.
2. After completion of a legal audit of the Company, Acquiring
Company shall determine in its sole discretion that it does not desire to
complete the closing of the transaction.
14.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Stockholder without the prior written
consent of Acquiring Corporation, or by Acquiring Corporation without the prior
written consent of Stockholder. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and no other person shall have any right,
benefit or obligation hereunder.
14.3 NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the others
shall be in writing and delivered in person or by courier, telegraphed, telexed
or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested (such mailed notice to be effective on the date such
receipt is acknowledged), as follows:
If to Stockholders: 410 Butterfly Court
Houston, Texas 77079
If to Company: 10913 Metronome
Houston, Texas 77043
If to Acquiring Corporation: 600 Century Plaza Drive
Building 140
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.
14.4 CHOICE OF LAW. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of Texas except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
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14.5 ENTIRE AGREEMENT: Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
14.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.7 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
14.8 HEADINGS. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
14.9 EXPENSES. Company, Stockholder and Acquiring Corporation will
each be liable for their own costs and expenses incurred in connection with the
negotiation, preparation, execution or performance of this Agreement, except for
the fees incurred in the financial audit of Company and conversion of Company
from the cash to the accrual method of accounting. The fees for such audit and
conversion shall be split equally between Acquiring Corporation and the
Stockholder.
14.10 PUBLICITY. No party shall issue any press release or make any
public statement regarding the transactions contemplated hereby, without the
prior approval of the other party, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after the Closing Date.
14.11 CONFIDENTIAL INFORMATION. The parties acknowledge that the
transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, or as required by law,
until such time as the parties make a public announcement regarding the
transaction as provided in Section 14.10. Neither Stockholder nor Acquiring
Corporation shall make any public disclosure of the specific terms of this
Agreement,
36
<PAGE>
except as required by law. In connection with the negotiation of this Agreement
and the preparation for the consummation of the transactions contemplated
hereby, each party acknowledges that it will have access to confidential
information relating to the other party. Each party shall treat such
information as confidential, preserve the confidentiality thereof and not
duplicate or use such information, except to advisors, consultants and
affiliates in connection with the transactions contemplated hereby.
Stockholder, at a time and in a manner which he reasonably determines and after
prior notice to and consultation with Acquiring Corporation, may notify
employees, unions and bargaining agents of the fact of the subject transaction.
In the event of the termination of this Agreement for any reason whatsoever,
each party shall return to the other all documents, work papers and other
material (including all copies thereof) obtained in connection with the
transactions contemplated hereby and will use all reasonable efforts, including
instructing its employees and others who have had access to such information, to
keep confidential and not to use any such information, unless such information
is now, or is hereafter disclosed, through no act or omission of such party, in
any manner making it available to the general public.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have
caused this Agreement to be duly executed on their respective behalf by their
respective officers thereunto duly authorized, to be effective as of the day and
year first above written.
INDUSTRIAL DATA SYSTEMS, CORP.
/s/ William A. Coskey
- ---------------------
By: WILLIAM A. COSKEY, PRESIDENT
MLC ENTERPRISES, INC.
/s/ Michael L. Moore
- --------------------
BY: MICHAEL L. MOORE, PRESIDENT
/s/ Michael L. Moore
- --------------------
MICHAEL L. MOORE, STOCKHOLDER
37
<PAGE>
Exhibit 2.17
ESCROW AGREEMENT
This Escrow Agreement is made by and between INDUSTRIAL DATA SYSTEMS CORP.
(IDS) MICHAEL L. MOORE (MOORE) and MLC ENTERPRISES, INC. (MLC), and JOHNNY J.
WILLIAMS, (ESCROW AGENT).
RECITALS
WHEREAS, IDS, MOORE, and MLC have entered into a Stock Acquisition
Agreement dated November 1, 1998, whereby IDS will acquire all of MOORE's common
stock in MLC, a Texas Corporation upon fulfillment of the conditions precedent
setforth herein, and;
WHEREAS, IDS, MOORE and MLC have agreed to place the Closing Documents into
Escrow until a letter is received from R.V. "Skip" Wagoner completing the
closing of the transaction;
WHEREAS JOHNNY J. WILLIAMS has agreed to act as Escrow Agent subject to the
terms hereof;
NOW THEREFORE the parties hereto have agreed as follows:
1. Items of Escrow. The following items have been delivered to Escrow
Agent on the date(s) set forth following the description of each item:
(i) A fully executed original Stock Acquisition Agreement dated
November 1, 1998 between the parties hereto.
Received November 13, 1998 __________
(ii) Stock Certificate No. 2 issued to MICHAEL L. MOORE representing
1000 shares of common stock of MLC ENTERPRISES, INC.
Received November 13, 1998 __________
(iii) A certificate of Corporate Resolution signed by MICHAEL L.
MOORE dated November 13, 1998.
Received November 13, 1998. __________
(iv) By laws of MLC ENTERPRISES, INC. signed on November 13, 1998.
Received on November 13, 1998 __________
(v) Affidavit of List of Misplaced Documents dated November 13, 1998.
Received on November 13, 1998. __________
(vi) Written Consent of all Directors In Lien of Meeting for MLC
ENTERPRISES, INC.
Received on November 13, 1998. __________
(vii) Employment Agreement dated November 1, 1998 by and between
MLC and Moore.
Received on November 13, 1998. __________
(viii) Agreement from Aaron Phillips dated November 1, 1998.
Received on November 13, 1998. __________
(ix) Letter from IDS to its transfer agent requesting the issuance of
50,000 shares of its common stock to MICHAEL L. MOORE.
-1-
<PAGE>
Received on November 13, 1998. __________
(x) A check from IDS to MOORE in the sum of $63,438.14.
Received on November 13, 1998. __________
(2) In the event that the letter from Wagoner is received prior to 5:00
p.m. Houston, Texas time on November 16, 1998, Escrow Agent is directed to take
the steps necessary to complete the closing of the transaction
(3) In the event that the letter from Wagoner is not received prior
to 5:00 p.m. Houston, Texas time on November 16, 1998 or the requirement is
waived by IDS, Escrow Agent is directed to return the Escrow items as follows:
(a) IDS Item(s) i, v, ix, x
(b) MOORE Item(s) ii, iii, iv, v
(c) MLC Item(s) iv, vi, vii, viii
5. Notice to Escrow Agent. IDS, MOORE and MLC hereby agree to notify
Escrow Agent in writing of any modifications whatsoever to this Agreement. IDS,
MOORE and MLC further agree that accompanying such notice shall be a true and
correct copy of any instrument purporting to modify the agreement alleged to
have been modified. Escrow Agent may conclusively rely upon any such notice as
evidence of such modification. Absence of 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 IDS, MOORE and MLC regarding construction of this or any other agreement
or rights arising therefrom, Escrow Agent is hereby authorized and directed to
file an appropriate interpleader action in a court of competent jurisdiction and
shall be entitled to recover from the IDS, MOORE and MLC, all costs, fees, and
expenses associated therewith, including reasonable attorney's fees.
7. Termination of Escrow Duties. The duties of Escrow Agent shall
terminate upon occurrence of any of the following events: (i) completion of the
transaction, (ii) return of the Escrowed items to the appropriate party, (iii)
written notice executed by the parties 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. IDS, MOORE and MLC, 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 Escrow Agent, his 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
without 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 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.
-2-
<PAGE>
9. Notices. Any notice required or permitted hereunder shall be sent to
the party entitled to receive the same by certified United States mail, return
receipt requested, or shall be hand delivered. Any notice sent 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 13th day of November, 1998.
ESCROW AGENT: IDS:
/s/ Johnny J. Williams /s/ Bill Coskey
- ----------------------- ---------------------------
JOHNNY J. WILLIAMS BY: BILL COSKEY, PRESIDENT
MLC:
/s/ Michael L. Moore /s/ Michael L. Moore
- ----------------------- ---------------------------
MICHAEL L. MOORE BY: MICHAEL L. MOORE, PRESIDENT
-3-
<PAGE>
EXHIBIT 2.18
M L C ENTERPRISES, INC.
(the "Company")
WRITTEN CONSENT OF ALL DIRECTORS
IN LIEU OF MEETING
The undersigned, being all the directors of M L C ENTERPRISES, INC., a
Texas Corporation, do hereby vote for, approve and consent to the following
resolutions:
RESOLVED, that the Board of Directors of M L C ENTERPRISES, INC. the
Company entering into the Stock Acquisition Agreement by and between
INDUSTRIAL DATA SYSTEMS CORP., MICHAEL L. MOORE and M L C ENTERPRISES,
INC.
RESOLVED FURTHER, that Michael L. Moore, the President of the Company,
is hereby authorized, empowered and directed to do and perform all such acts and
execute any and all documents necessary to consummate the foregoing transaction.
This consent is executed pursuant to Business Corporation law
authorizing the taking of action by the Board of Directors by unanimous written
consent without a meeting.
IN WITNESS WHEREOF, we have signed this consent effective the 13th day
of November, 1998.
/s/ Michael L. Moore
-------------------------------------
MICHAEL L. MOORE, Sole
Shareholder and Director
IDS/MLC/CONSENT.1
<PAGE>
EXHIBIT 2.19
CERTIFICATE OF CORPORATE RESOLUTION
I, MICHAEL L. MOORE, President and Secretary of M L C ENTERPRISES,
INC., a Texas corporation, do hereby certify that said corporation is duly
organized and existing under the laws of the State of Texas; that all franchise
and other taxes required to maintain its corporate existence have been paid when
due and that no such taxes are delinquent; that it is duly qualified to do
business in the State of Texas and is in good standing in such State; that the
By-Laws attached hereto as Exhibit "A" are the current By-Laws of the
corporation.
I further certify that the following persons are the officers of M L C
ENTERPRISES, INC, and are the persons authorized to act and sign on behalf of
the corporation:
MICHAEL L. MOORE President
MICHAEL L. MOORE Secretary
IN WITNESS WHEREOF, I have hereunto set my hand as President and
Secretary, respectively, of said corporation and have attached hereto the
official seal of said corporation, this 13th day of November, 1998.
/s/ Michael L. Moore
-------------------------------------
MICHAEL L. MOORE, President
-------------------------------------
MICHAEL L. MOORE, Secretary
corporate
Seal
<PAGE>
Exhibit 2.20
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") dated November 1, 1998, between MLC
Enterprises, Inc., a Texas corporation ("Company"), and Michael L. Moore, a
Texas resident ("Employee"), evidences that, in consideration of the mutual
covenants and agreements contained herein, the Company hereby employs Employee
and Employee hereby accepts such employment and agrees to perform the services
specified herein upon the terms and conditions set forth in this Agreement.
1. DUTIES AND RESPONSIBILITIES. During the Term of Employment (as defined in
Section 2), Employee shall:
(a) serve as the Managing Director of the Company promoting the products
and services offered by the Company for sale, subject in all events to the
direction and control of the board of directors of the Company;
(b) serve in such other capacities, perform such other services and have
such duties and responsibilities with the Company and its affiliates and
subsidiaries as are assigned to Employee, subject in all events to the direction
and control of the board of directors of the Company. To the extent that
Employee is requested to perform services and/or is assigned duties and
responsibilities with an affiliate of the Company, Employee shall be entitled to
additional compensation. To the extent that the Company and Employee are unable
to agree on such additional compensation, Employee may decline to perform duties
or services for an affiliate of the Company;
(c) be a full-time employee of the Company, subject to Employee's
obligations to Flameout Design & Fabrication, Inc. as detailed in paragraph 6
(b), and devote Employee's full business time, attention, efforts and energy to
the affairs of the Company, subject to Employee's right to vacations as provided
herein, and subject to absences on account of temporary illness;
(d) faithfully, diligently, competently and to the best of Employee's
ability perform all duties incident to Employee's employment hereunder;
(e) use Employee's best efforts to promote the interests of the Company;
and
2. TERM OF EMPLOYMENT. The "Term of Employment" as used in this Agreement
shall means the three year period commencing on November 13, 1998 ("Effective
Date"). The Term of Employment shall be earlier terminated as follows:
<PAGE>
(a) Should Employee die, the Term of Employment shall be terminated upon
Employee's death.
(b) Should Employee become disabled and should Employee's disability
exceed the period of paid leave plus twelve unpaid work weeks during any twelve
month period, the Term of Employment may, at the option of the Company, be
terminated by the Company upon ten days written notice to Employee.
(c) Should Employee (i) violate any of the terms and provisions of this
Agreement or otherwise fail to satisfactorily perform any obligation due to the
Company hereunder or otherwise, (ii) engage in misrepresentation, dishonesty,
embezzlement, fraud or disloyalty in matters affecting the Company or the
employment relationship or usurpation of a benefit that rightfully belongs to
the Company, (iii) be negligent with respect to matters involving or affecting
the Company or the duties and responsibilities of Employee to the Company, or
(iv) engage in any crime (other than minor traffic violations), the Term of
Employment, at the option of the Company, may be terminated by the Company
immediately upon written notice to Employee. Any such termination by virtue of
this Section 2(c) shall be deemed "for cause" and shall not prejudice any remedy
that the Company may have at law, in equity, or under this Agreement for breach
hereof by Employee.
3. DISABILITY. If, because of illness or otherwise, Employee should
become physically or mentally disabled and is therefore unable to perform
Employee's duties hereunder, Employee shall be entitled to such paid temporary
leaves of absence as may be in the Company's policies and procedure. Should the
duration of any such disability exceed the Company's period of paid leave,
Employee shall be entitled to unpaid leave of up to twelve work weeks during any
twelve month period. Should Employee's disability exceed the period of paid
leave plus twelve unpaid work weeks during any twelve month period, Employee may
be subject to termination at the sole discretion of Company.
4. COMPENSATION. As compensation ("Compensation") for Employee's
services, during the Term of Employment, the Company shall pay the following
compensation or provide the following benefits, as the case may be, to Employee:
(a) DRAW AGAINST COMMISSIONS. Company shall allow Employee a draw
against commissions in the amount of Sixty Thousand and No/100 Dollars
($60,000.00) per year, payable bi-weekly in equal installments.
EXPENSES. Employee shall be responsible for all expenses incurred by
Employee in generating sales on behalf of Company.
COMMISSION. Employee shall be entitled to a commission of six percent
(6%) of the Gross
<PAGE>
Profits on sales generated by Company and received by Company as hereinafter
defined.
Gross Profits Received shall be equal to gross revenue ACTUALLY RECEIVED
during the contract term on sales generated by Company, adjusted to reflect all
costs other than General and Administrative expenses, together with any
backcharges, discounts, reductions or rebates associated with the sales
generating such revenue.
Commissions less accumulated draws due shall be paid on the 15th
day of the next calendar month following receipt of payment by Company.
(b) Coverage for Employee under group medical, life, accidental death,
long-term disability, and dental insurance policies provided by the Company, if
any, all on such terms as the Company extends to its employees from time to
time. Employee shall not be entitled to be paid any additional cash
Compensation for accrued, unused sick leave, if any.
(c) Prior Commissions. Prior to execution of this Agreement Employee has
accrued unpaid commissions in the amount of $250,000.00 owed by Company to
Employee. Upon Execution of this Agreement, Employee shall receive the amount
of $63,438.14 cash and title to a 1999 Chevrolet Suburban free and clear of any
liens, which the parties agree has a value of $36,561.86. The balance due in the
amount of $150,000.00, which shall not bear interest, shall be due and payable
as follows:
<TABLE>
<S> <C>
February 1, 1999 $ 25,000.00
May 1, 1999 25,000.00
August 1, 1999 25,000.00
November 1, 1999 25,000.00
February 1, 2000 25,000.00
May 1, 2000 25,000.00
</TABLE>
The February 1, 1999 and May 1, 1999 payments shall be made irregardless of
the Company's Accumulated Profits. The remaining payments shall be made only to
such extent as the Company has Accumulated Profits that exceed the amount of all
cumulative payments made to the Employee pursuant to this paragraph including
the February 1, 1999 and May 1, 1999 payments. Should the Company fail to have
Accumulated Profits sufficient to make any such payment, such payments will be
deferred until such as the Company has accumulated profits to make the payment.
Company may prepay this amount in whole or in part, without penalty, at any
time.
<PAGE>
In consideration of this sum, Employee does hereby Release and Discharge
Company from any claim for compensation in any form, be it salary, commissions,
bonus or otherwise arising out of Employee's employment and/or ownership with/of
Company prior to November 1, 1998.
<PAGE>
5. TERMINATION PAYMENTS. In the event of termination of the Term of
Employment, whether by action of the Company, Employee or by mutual agreement,
voluntary or involuntary, the Company shall no longer be obligated to make any
payments of any kind to Employee, except for accrued unpaid commissions and
commissions for orders booked prior to the date of termination and paid
following the date of termination, if any, which payments shall be paid in the
same manner as setforth above. Upon any termination, Employee shall pay the
Company any amounts owed by Employee to the Company by reason of the breach
hereof or otherwise and the Company shall be entitled to offset against any
amounts owed to Employee any amounts owed by Employee to the Company or any of
its subsidiaries or affiliates, whether under this Agreement or otherwise,
without prejudice to any other rights or remedies of the Company or its
subsidiaries or affiliates available at law or equity.
6. NON-COMPETITION COVENANT.
(a) Except as provided in paragraph 6 (b), Employee represents that
Employee is subject to no obligation to any third party that would restrict or
interfere with Employee's ability to perform hereunder. Employee agrees that
from the date hereof and for the one year period following the termination of
the Term of Employment ("Covenant Trigger"), whether by action of the Company,
Employee, or by mutual agreement, voluntary or involuntary, other than by
violation of this agreement by the Company, Employee will not, directly or
indirectly, (i) own, manage, operate, join, control, or participate in the
ownership, management, operation or control of, or be employed by, or otherwise
engage in or become interested in or be connected in any manner with any
business located in the United States of America which offers goods or services
of the type offered by the Company ("Competing Business"), (ii) solicit, on
behalf of Employee or any business in the same or similar business as that
engaged in by the Company ("Competing Business"), any person or entity that has
been a customer of the Company, either directly or indirectly through a broker
or otherwise, at any time during the two year period preceding the Covenant
Trigger ("Company Customer"), to purchase or otherwise acquire or use any
products or services of the same or similar nature as products or services
offered by the Company, (iii) solicit any person who, at any time within the two
year period preceding the Covenant Trigger, has been an employee of the Company
("Company Employee"), except a Company Employee who was terminated by the
Company, to become an employee of Employee or any Competing Business. Employee
shall not be deemed to be so competing solely by reason of purchasing stock of
companies listed on the New York Stock Exchange, the American Stock Exchange, or
quoted on the National Association of Securities Dealers Automatic Quotation
System (NASDAQ), provided that Employee's direct and beneficial ownership of any
class of securities in any of such entities is less than 5% of the aggregate
number of outstanding units, interests or shares of such class of securities.
The term "solicit" as used herein shall refer, in addition to its common usages,
to communications or transactions with intent to violate this paragraph whether
initiated by Employee or a third party. All parties acknowledge that the
restrictions and restraints contained in
<PAGE>
this covenant are reasonable. Should any court of competent jurisdiction
determine that, consistent with the established precedent of the forum
jurisdiction, the public policy of such jurisdiction requires a more limited
restriction, duration, nature of restricted activity, or any combination
thereof, it would be in furtherance of the intentions of the parties hereto
for the court to so interpret and construe the terms of this Section 6 to
apply only to the extent of such limited restriction. In the event of a
breach of this covenant the running of the non-competition period herein
provided shall be tolled for the duration of such breach. In the event of
any breach or attempted or threatened breach of this covenant any aggrieved
party shall have the right in addition to all other rights and remedies at
law and in equity, to obtain an injunction prohibiting such breach or
attempted or threatened breach and commanding compliance with this covenant
merely by proving the existence of such breach or threatened or attempted
breach, and without the necessity of proving irreparable harm or inadequacy
of legal remedies.
(b) Company acknowledges that Employee is an officer, director and
shareholders of Flameout Design & Fabrication, Inc., (Flameout), that Employee
has obligations to Flameout, and that Flameout has in the past engaged in the
same or similar business as that engaged in by the Company. The Company agrees
that Employee may engage in such corporate governance activity as is necessary
to keep Flameout as an active corporation for the purpose of pursuing the
litigation in Cause No. 01-98-00543-CV; Flameout Design & Fabrication, Inc.,
Appellant v. Pennzoil Caspian Corporation, Pennzoil Corporation and Pennzoil
Exploration and Production Company, Appellees; In the Court of Appeals for the
First District of Texas at Houston, Texas. Such governance activity shall not
constitute a violation of paragraph 6(a). Employee agrees not to engage in any
other activity for Flameout other than the activity specifically described
herein.
7. CONFIDENTIALITY OF INFORMATION. Employee acknowledges that Employee
has had and will have access to certain confidential information of the Company
or its subsidiaries or affiliates, including, without limitation, product
designs, employee lists, customer lists, supplier lists, manuals, forms,
documentation, data, trade secrets, specifications, methods, procedures,
systems, plans, techniques, know-how, plans, and computer programs
("Information") and that such Information constitutes valuable, special and
unique assets of the Company or such other entities. Employee will cause the
Information obtained by Employee to be treated as strictly confidential.
Employee shall not use or knowingly permit others to use any such Information in
a manner detrimental to the Company or its subsidiaries or affiliates, or for
Employee's own account and shall not directly or indirectly disclose any such
Information to any person, firm, corporation, association or other entity for
any reason or purpose, except to such parties to whom such information is
furnished in the normal course of business under established policies approved
by the Company, authorized representatives of the Company, or upon the written
consent of the Company, or as required by law, or to a governmental agency
pursuant to a valid subpoena or other order or pursuant to applicable
governmental regulations, rules or statutes unless such
<PAGE>
information is otherwise available in the public domain. For purposes
hereof, authorized representatives of the Company shall be directors and
officers of the Company to which such Information is furnished in the normal
course of business under established policies approved by the Company.
Employee further agrees that, upon termination of the Term of Employment,
Employee will not take with Employee or retain, or disclose to others without
written authorization from the Company, any Information, papers, files or
other documents or copies thereof of any kind belonging to the Company or any
of its subsidiaries or affiliates.
The obligations of this Section 7 shall continue as to each item of such
Information, both during and after termination of the Term of Employment, until
the Company's competitors have become cognizant of such item of Information from
published sources through no fault of or action by Employee.
8. PROPRIETARY DEVELOPMENTS. Employee agrees promptly to fully disclose
and assign and does hereby assign to the Company the entire right, title and
interest throughout the world in and to all product formulations, inventions,
improvements, discoveries, know-how, trade secrets, information, processes,
machines, manufactures, compositions, apparatus or products ("Proprietary
Information"), whether or not patentable, made or conceived or discovered or
developed or reduced to practice, solely or jointly, by Employee during the Term
of Employment that are related to the manufacture, distribution and sale of oil
and gas products and industrial fire suppression systems (Company's Business):
(a) Regardless of whether or not during working time chargeable to the
Company, which relate in any manner to the Company's Business or are suggested
by or to Employee or result from work performed by Employee for the Company or
are made by the use of the Company's materials or equipment, or
(b) While on the Company's time pursuing Company's Business.
It shall be presumed, subject to clear and convincing proof to the
contrary, that all Inventions, whether or not patentable, relating to the
Company's Business and developed by Employee during the six month period
beginning on the date of termination of the Term of Employment were, for the
purposes of this Agreement, conceived prior to the termination of the Term of
Employment.
Employee will cooperate with the Company in all lawful ways in order to
carry into effect the provisions of this Section 8, including the execution of
any papers or documents deemed by the Company to be desirable or necessary to
enable the Company to apply for, secure and maintain patent or copyright
protection thereon in the United States of America and in foreign countries
<PAGE>
including, but not limited to applications, assignments and other legal
instruments.
9. ENFORCEMENT. Employee acknowledges that the rights reserved to the
Company under Sections 6, 7, and 8 hereof are necessarily of a special, unique
and extraordinary nature and that the loss arising from a breach or threatened
breach thereof cannot reasonably and adequately be compensated by money damages
and will cause the Company to suffer irreparable harm and that a remedy at law
for any breach thereof will be inadequate. Accordingly, Employee hereby agrees
that the Company shall be entitled to injunctive or other extraordinary relief
in case of any such breach or threatened breach, and without the necessity of
proving irreparable harm or inadequacy of legal remedies, which shall, however,
in no way limit any other rights, including the recovery of damages, which the
Company may have at law or in equity. In addition, and without limitation of
the foregoing or any other rights the Company may have at law or in equity, if
Employee shall at any time before, during, or following the Term of Employment
violate Sections 6, 7, and 8 or use any Confidential Information or Proprietary
Information for Employee's personal benefit or the benefit of any third party,
Employee agrees to pay to the Company immediately without demand seventy five
percent of the gross receipts therefrom.
10. NOTICES. All notices, requests, demands and other communications
under this Agreement or any instrument contemplated hereby shall be in writing
and shall be personally delivered or mailed by United States registered or
certified mail, first class, postage prepaid, return receipt requested, to the
address of the respective parties hereto as shown under their names on the
signature page hereof and shall be deemed given on the earlier of actual receipt
(as evidenced by return receipt if mailed) or the date five days after mailing.
Any party hereto may change his or its address for such notices by giving notice
of such change pursuant to this Section 10.
11. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the Company and its successors and assigns and upon
Employee and Employee's personal representatives and heirs. The provisions of
Sections 5 through 18 hereof shall survive any termination of this Agreement.
If the Company has or adopts an employee manual or policies of a similar nature
that conflict with this Agreement the terms and provisions of this Agreement
shall control.
12. WAIVER. No failure to insist upon strict compliance
with any provision hereof shall be deemed a waiver of such provision or any
other provision hereof. No failure to exercise and no delay in exercising, on
the part of the Company, any right, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law or in any other agreement.
<PAGE>
13. GOVERNING LAW: VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCEPT THOSE
RELATING TO THE CONFLICT OF LAWS) AND SHALL BE PERFORMABLE IN HARRIS COUNTY.
EACH PARTY HERETO SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS AND THE FEDERAL COURTS IN AND FOR THE SOUTHERN DISTRICT OF TEXAS IN
CONNECTION WITH ANY DISPUTE ARISING UNDER THIS AGREEMENT OR ANY DOCUMENT OR
INSTRUMENT ENTERED INTO IN CONNECTION HEREWITH. ALL ACTIONS HEREUNDER MUST BE
BROUGHT IN THE STATE COURTS OF HARRIS COUNTY, TEXAS OR THE FEDERAL COURTS IN AND
FOR THE SOUTHERN DISTRICT OF TEXAS.
<PAGE>
14. SEVERABILITY. If any provision of this Agreement, or the application
thereof to any person or circumstance, is for any reason or to any extent,
invalid or unenforceable, the remainder of the Agreement and the application of
such provision to the other persons or circumstances shall not be affected
thereby, but rather is to be enforced to the greatest extent permitted by law.
15. ASSIGNMENT. The rights and interest of Employee under this
Agreement including Employee's right to receive Employee's Compensation
hereunder, may not be assigned, sold, transferred, pledged or hypothecated, nor
may the duties and obligations of Employee hereunder be delegated. The rights
and interests of the Company hereunder are freely assignable and delegable by
the Company with Employees consent which shall not be unreasonably withheld.
16. PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole
agreement of the parties hereto concerning the within subject matter and
supersedes any prior understandings or written or oral agreements between the
parties, SPECIFICALLY TERMINATING AND SUPERSEDING THE EMPLOYMENT AGREEMENT
EXECUTED BY AND BETWEEN M L C ENTERPRISES, INC. D/B/A MARINE & INDUSTRIAL FIRE &
SAFETY, COMPANY, AND MICHAEL L. MOORE, EMPLOYEE, DATED APRIL 28, 1998, A TRUE
AND CORRECT COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT "A", respecting the
within subject matter.
17. CAPTIONS. The captions used in this Agreement are for convenience
only and are not to be construed in interpreting this Agreement.
18. AMENDMENT. This Agreement may be amended only by a written
instrument signed by each party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
Company: MLC ENTERPRISES, INC.
By: /s/ William A. Coskey
------------------------
Name: William A. Coskey
Title: President
Address: 600 Century Plaza, Bldg. 140
Houston, Texas 77060
Employee: /s/ Michael L. Moore
---------------------
<PAGE>
Name: MICHAEL L. MOORE
<PAGE>
EXHIBIT 2.21
Amendment to Employment Agreement
This amendment is made to that certain Employment Agreement dated
November 1, 1998, by and between MLC Enterprises, Inc., a Texas Corporation
("Company") now known as IDS Fabricated Systems, Inc. and Michael L. Moore, a
Texas resident, ("Employee") in connection with the acquisition of all the
outstanding common stock of Company from Employee by Industrial Data Systems,
Corp. pursuant to a Stock Acquisition Agreement of even date therewith.
Whereas, since the acquisition date additional undisclosed liabilities
of MLC Enterprises, Inc. have come to the attention of the parties; and
Whereas, Employee's entitlement to prior commissions was premised, in
part, on the absence of such undisclosed liabilities; and
Whereas, the parties hereto desire to adjust Employee's Compensation
for accrued unpaid commissions as a dollar for dollar offset against such
undisclosed liabilities of Company;
Now therefore in consideration of the premises and the further
consideration of a dollar for dollar credit against any undisclosed liabilities
of Company as of the Acquisition Date, Paragraph 4(c) of the Employment
Agreement is amended to reduce the amount of accrued unpaid commissions by
$125,000.00 as of November 1, 1998 and deleting payments due on May 1, 1999;
August 1, 1999; November 1, 1999; February 1, 2000 and May 1, 2000.
Signed this 16th day of January, 1999.
IDS Fabricated Systems, Inc.
formerly known as
MLC Enterprises, Inc.
by: /s/ William A. Coskey
---------------------------
William A. Coskey, President
/s/ Michael L. Moore
------------------------------
Michael L. Moore
<PAGE>
EXHIBIT 2.22
INDUSTRIAL DATA SYSTEMS, CORP.
(the "Company")
WRITTEN CONSENT OF ALL DIRECTORS
IN LIEU OF MEETING
The undersigned, being all the directors of INDUSTRIAL DATA SYSTEMS,
CORP., a Nevada Corporation, do hereby vote for, approve and consent to the
following resolutions:
1. PURCHASE OF M L C ENTERPRISES, INC.
RESOLVED, that the Board of Directors of Industrial Data Systems Corp.
hereby approves the acquisition of 1,000 shares of Common stock of M L C
ENTERPRISES, INC., a Texas Corporation from Michael L. Moore in exchange for
50,000 shares of the Company's common stock.
RESOLVED FURTHER, that William A. Coskey, the President of the Company,
is hereby authorized, empowered and directed to do and perform all such acts and
execute any and all documents necessary to consummate the foregoing transaction.
This consent is executed pursuant to Business Corporation law
authorizing the taking of action by the Board of Directors by unanimous written
consent without a meeting.
IN WITNESS WHEREOF, we have signed this consent effective the 13th day
of November, 1998.
/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/ Gordon Wingate
---------------------------------
GORDON WINGATE, Director
/s/ Ken Hedrick
---------------------------------
<PAGE>
EXHIBIT 2.22
KEN HEDRICK, Director
<PAGE>
Exhibit 3.6
BYLAWS OF
M L C ENTERPRISES, INC.
CONTENTS OF INITIAL BYLAWS
<TABLE>
<CAPTION>
Page
<S> <C>
1.00 CORPORATE CHARTER AND BYLAWS
1.01 Corporate Charter Provisions.......................... 4
1.02 Registered Agent or Office - Requirement
of Filing Changes with Secretary of State............. 4
1.03 Initial Business office............................... 4
1.04 Amendment of Bylaws................................... 5
2.00 DIRECTORS AND DIRECTORS' MEETINGS
2.01 Action Without Meeting................................ 5
2.02 Telephone Meetings.................................... 5
2.03 Place of Meeting...................................... 5
2.04 Regular Meeting....................................... 5
2.05 Call of Special Meeting............................... 6
2.06 Quorum................................................ 6
2.07 Adjournment - Notice of Adjourned Meetings............ 6
2.08 Conduct of Meetings................................... 6
2.09 Powers of the Board of Directors...................... 7
2.10 Board Committees - Authority to Appoint............... 7
2.11 Transactions with Interested Directors................ 7
2.12 Number of Directors................................... 8
2.13 Term of Office........................................ 8
2.14 Removal of Directors.................................. 8
2.15 Vacancies............................................. 8
2.15(a) Declaration of Vacancy................................ 8
2.15(b) Filing Vacancies by Directors......................... 8
2.15(c) Filing Vacancies by Shareholders...................... 9
2.16 Compensation.......................................... 9
2.17 Indemnification of Directors and Officers............. 9
2.18 Insuring Directors, Officers, and Employees...........10
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BYLAWS, PAGE 1
<PAGE>
<CAPTION>
Page
<S> <C>
3.00 SHAREHOLDERS' MEETINGS
3.01 Action without Meeting................................10
3.02 Telephone Meetings....................................10
3.03 Place of Meetings.....................................10
3.04 Notice of Meetings....................................10
3.05 Voting List...........................................11
3.06 Votes per Share.......................................11
3.07 Cumulative Voting.....................................12
3.08 Proxies...............................................12
3.09 Quorum................................................12
3.09(a) Quorum of Shareholders................................12
3.09(b) Adjourn for Lack or Loss..............................12
3.10 Voting by Voice or Ballot.............................13
3.11 Conduct of Meetings...................................13
3.12 Failure to Hold Annual Meeting........................13
3.13 Special Meeting.......................................13
4.00 OFFICERS
4.01 Title and Appointment.................................13
4.02 Removal and Resignation...............................14
4.03 Vacancies.............................................14
4.04 Chairman of the Corporation...........................14
4.05 President.............................................14
4.06 Vice President........................................15
4.07 Secretary.............................................15
4.08 Treasurer.............................................16
4.09 Assistant Secretary or Assistant Treasurer............16
4.10 Compensation..........................................16
5.00 AUTHORITY TO EXECUTE INSTRUMENTS
5.01 No Authority Absent Specific Authorization............17
5.02 Execution of Certain Instruments......................17
6.00 ISSUANCE AND TRANSFER OF SHARES
6.01 Classes and Series of Shares..........................17
6.02 Certificates for Fully Paid Shares....................18
6.03 Consideration for Shares..............................18
6.04 Replacement of Certificates...........................18
6.05 Signing Certificates - Facsimile Signatures...........18
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BYLAWS, PAGE 2
<PAGE>
<CAPTION>
Page
<S> <C>
6.06 Transfer Agents and Registrars........................18
6.07 Conditions of Transfer................................19
6.08 Reasonable Doubts as to Right to Transfer.............19
7.00 CORPORATE RECORDS AND FISCAL YEAR
7.01 Minutes of Corporate Meetings.........................19
7.02 Share Register........................................19
7.03 Books of Account......................................20
7.04 Fiscal Year...........................................20
8.00 ADOPTION OF INITIAL BYLAWS.........................................21
</TABLE>
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BYLAWS, PAGE 3
<PAGE>
ARTICLE ONE - CORPORATE CHARTER AND BYLAWS
1.01 CORPORATE CHARTER PROVISIONS
The Corporation's Charter authorizes One Hundred Thousand (100,000) shares
to be issued. The Officers and transfer agents issuing shares of the
Corporation shall not exceed this matter. Such officers and agents shall advise
the Board at least annually of the authorized shares remaining available to be
issued. No shares shall be issued for less than par value stated in the
Articles of Incorporation. Each Charter provision shall be observed until
amended by Restated Articles or Articles of Amendment duly filed with the
Secretary of State.
1.02 REGISTERED AGENT OR OFFICE - REQUIREMENT OF FILING CHANGES WITH SECRETARY
OF STATE
The address of the Registered Office provided in the initial Articles of
Incorporation, as duly placed of record with the Secretary of State for the
State of Texas is 444 East Medical Center Blvd. #411 Webster, Texas 77598-4339.
The name of the Registered Agent of the Corporation at such address, as
duly set forth in its initial Articles of Incorporation, is MICHAEL L. COOPER.
The Registered Agent or Office may be changed by filing appropriate
documents with the Secretary of State, and not otherwise. Such filing shall be
made promptly with each change. Arrangements for each change in Registered
Agent or Office shall ensure that the corporation is not exposed to the
possibility of a default judgment. Each successive Registered Agent shall be of
reliable character and well informed of the necessity of immediately furnishing
the papers of any lawsuit against the corporation to its attorneys.
1.03 INITIAL BUSINESS OFFICE
The address of the initial principal business office of the Corporation is
hereby established to be 10913 Metronome Houston, Texas 77043.
The corporation may have additional business offices within the State of
Texas, and where it may be duly qualified to do business outside of Texas, as
the Board of Directors may from time to time designate or the business of the
Corporation may require.
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BYLAWS, PAGE 4
<PAGE>
1.04 AMENDMENT OF BYLAWS
The Board of Directors may alter, amend, or repeal these Bylaws, and adopt
new Bylaws. All such Bylaw changes shall take effect upon adoption by the
Directors, subject to repeal or change by the shareholders. Notice of Bylaws
changes shall be given in or before notice of the Shareholders' Meeting
following their adoption.
ARTICLE TWO - DIRECTORS AND DIRECTORS' MEETINGS
2.01 ACTION BY CONSENT OF BOARD WITHOUT MEETING
Any action required or permitted to be taken by the Board of Directors may
be taken without a meeting, and shall have the same force and effect as a
unanimous vote of Directors, if all members of the Board consent in writing to
the action. Such consent may be given individually or collectively.
2.02 TELEPHONE MEETINGS
Subject to the notice provisions required by these Bylaws and by the
Business Corporation Act, Directors of the Corporation may participate in and
hold a meeting by means of conference call or similar communication by which all
persons participating can hear each other. Participation in such a meeting
shall constitute presence in person at such meeting, except participation for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
2.03 PLACE OF MEETING
Meetings of the Board of Directors shall be held at the business office of
the Corporation or at such other place within or without the State of Texas as
may be designated by the Board.
2.04 REGULAR MEETINGS
Regular meetings of the Board of Directors shall be held, without call or
notice, immediately following each annual meeting of the Shareholders of this
Corporation, and at such other regular times as the Directors may determine.
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BYLAWS, PAGE 5
<PAGE>
2.05 CALL OF SPECIAL MEETING
Special meetings of the Board of Directors for any purpose may be called at
any time by the President or, if the President is absent or unable or refuses to
act, by any Vice President or any two Directors. Written notices of the special
meetings, stating the time and place of the meeting, shall be mailed ten days
before, or telegraphed or personally delivered so as to be received by each
Director not later than two days before, the day appointed for the meeting.
Notice of meetings need not indicate an agenda. Generally a tentative agenda
will be included, but the meeting shall not be confined to any agenda included
with the notice.
Meetings provided in these Bylaws shall not be invalid for lack of notice
if all persons entitled to notice are present at the meeting in person or by
proxy and do not object to the notice given; or if such persons consent to the
meeting in writing.
Upon receiving notice, the Secretary or other officer sending notice shall
sign and file in the Corporate Record Book a statement of the details of giving
notice to each Director. If such statement should later not be found in the
Corporate Record Book, due notice shall be presumed.
2.06 QUORUM
The presence at any Directors' Meeting of a majority of the authorized
number of Directors shall be necessary to constitute a quorum to transact any
business, except to adjourn. If a quorum is present, every act done or
resolution passed by a majority of the Directors present shall be the act of the
Board of Directors.
2.07 ADJOURNMENT - NOTICE OF ADJOURNED MEETINGS
A quorum of the Directors may adjourn any Directors' meeting to meet again
at a stated hour on a stated day. Notice of the time and place where an
adjourned meeting will be held need not be given to absent Directors if the time
and place is fixed at the adjourned meeting. In the absence of a quorum, a
majority of the Directors present may adjourn to a set time and place if notice
is duly given to the absent members, or until the time of the next regular
meeting of the Board.
2.08 CONDUCT OF MEETINGS
At every meeting of the Board of Directors, the Chairman of the Board of
Directors, if there is such an officer, and if not, the President, or in the
President's absence, a Vice President designated by the President, or in the
absence of such designation, a Chairman chosen by a majority of the Directors
present, shall preside. The Secretary of the Corporation shall act as
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BYLAWS, PAGE 6
<PAGE>
Secretary of the Board of Directors. When the Secretary is absent from any
meeting, the Chairman may appoint any person to act as Secretary of that
meeting.
2.09 POWERS OF THE BOARD OF DIRECTORS
The business and affairs of the Corporation and all corporate powers shall
be exercised by or under authority of the Board of Directors, subject to
limitations imposed by law, the Articles of Incorporation, any applicable close
corporation shareholders' agreement, or by these Bylaws.
2.10 BOARD COMMITTEES - AUTHORITY TO APPOINT
The Board of Directors may designate an executive committee and one or more
other committees to conduct business and affairs of the Corporation, to the
extent authorized by the resolution. The Board shall have the power at any time
to change the powers and membership of any committee, fill vacancies, and
dissolve any committee. Members of any committee shall receive such
compensation as the Board of Directors may from time to time provide. The
designation of any committee and the delegation of authority thereto shall not
operate to relieve the Board of Directors, or of any member thereof, of any
responsibility imposed by law.
2.11 TRANSACTIONS WITH INTERESTED DIRECTORS
Any contract or other transaction between the Corporation and any of its
Directors (or any corporation or firm in which any of its Directors are directly
or indirectly interested) shall be valid for all purposes notwithstanding the
presence of that Director at the meeting during which the contract or
transaction was authorized, and notwithstanding the Director's participation in
that meeting. This section shall apply only if the contract or transaction is
just and reasonable to the Corporation at the time it is authorized and
ratified, the interest of each Director is known or disclosed to the Board of
Directors, and the Board nevertheless authorizes or ratifies the contract or
transaction by a majority of the disinterested Directors present. Each
interested Director is to be counted in determining whether a quorum is present,
but shall not vote and shall not be counted in calculating the majority
necessary to carry the vote. This section shall not be construed to invalidate
contracts or transactions that would be valid in its absence.
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BYLAWS, PAGE 7
<PAGE>
2.12 NUMBER OF DIRECTORS
The number of Directors of this Corporation shall be one (1). No Director
need be a Shareholder or a resident of Texas. The number of Directors may be
increased or decreased from time to time by amendment of these Bylaws. Any
decrease in the number of Directors shall not have the effect of shortening the
tenure which any incumbent Director would otherwise enjoy.
2.13 TERM OF OFFICE
Directors shall be entitled to hold office until their successors are
elected and qualified. Election of Directors shall occur at each annual meeting
of the Shareholders and may be held at any special meeting of Shareholders
called specifically for that purpose.
2.14 REMOVAL FROM DIRECTORS
The entire Board of Directors or any individual Director may be removed
from office by a vote of Shareholders holding a majority of the outstanding
shares entitled to vote at an election of Directors. However, if less than the
entire Board is to be removed, no one of the Directors may be removed if the
votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors. No director
may be so removed except at an election of the class of Directors of which he is
a part. If any or all Directors are so removed, new Directors may be elected at
the same meeting. Whenever a class or series of shares is entitled to elect one
or more Directors under authority granted by the Articles of Incorporation, the
provisions of this Paragraph apply to the vote of that class or series and not
to the vote of the outstanding shares as a whole.
2.15 VACANCIES
Vacancies on the Board of Directors shall exist upon the occurrence of any
of the following events: (a) the death, resignation, or removal of any
Director; (b) an increase in the authorized number of Directors; or (c) the
failure of the Shareholders to elect the full authorized number of Directors to
be voted for at any annual, regular, or special Shareholders' meeting at which
any Director is to be elected.
2.15(a) DECLARATION OF VACANCY
The Board of Directors may declare vacant the office of a Director if the
Director is adjudged incompetent by a court order, is convicted of a crime
involving moral turpitude, or fails to accept the office of Director, in writing
or by attending a meeting of the Board of Directors, within thirty (30) days of
notice of election.
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BYLAWS, PAGE 8
<PAGE>
2.15(b) FILLING VACANCIES BY DIRECTORS
Vacancies other than those caused by an increase in the number of Directors
may be filled by a majority vote of the remaining Directors, though less than a
quorum, or by a sole remaining Director. Each Director so elected shall hold
office until a qualified successor is elected at a Meeting of the Shareholders.
2.15(c) FILLING VACANCIES BY SHAREHOLDERS
Any vacancy caused by an increase in the number of Directors shall be
filled by the Shareholders at an annual meeting or at a special meeting called
for that purpose. The Shareholders may also elect a Director at any time to
fill any vacancy not filled by the Directors. Upon the resignation of a
Director tendered to take effect at a future time, the Board or the Shareholders
may elect a successor to take office when the resignation becomes effective.
2.16 COMPENSATION
Directors shall receive such compensation for their services as Directors
as shall be determined from time to time by resolution of the Board. Any
Director may serve the Corporation in any other capacity as an officer, agent,
employee, or otherwise, and receive compensation therefor.
2.17 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Board of Directors shall authorize the Corporation to pay or reimburse
any present or former Director or officer of the Corporation any costs or
expenses actually and necessarily incurred by that officer in any action, suit,
or proceeding to which the officer is made a party by reason of holding that
position, provided, however, that no officer shall receive such indemnification
if finally adjudicated therein to be liable for negligence or misconduct in
office. This indemnification shall extend to good-faith expenditures incurred
in anticipation of threatened or proposed litigation. The Board of Directors
may, in proper cases, extend the indemnification to cover the good-faith
settlement of any such action, suit, or proceeding, whether formally instituted
or not.
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BYLAWS, PAGE 9
<PAGE>
2.18 INSURING DIRECTORS, OFFICERS, AND EMPLOYEES
The Corporation may purchase and maintain insurance on behalf of any
Director, officer, employee, or agent of the Corporation, or on behalf of any
person serving at the request of the Corporation as a Director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against any liability asserted against that person and
incurred by that person in any such corporation, whether or not the Corporation
has the power to indemnify that person against liability for any of those acts.
ARTICLE THREE - SHAREHOLDERS' MEETINGS
3.01 ACTION WITHOUT MEETING
Any action that may be taken at a meeting of the Shareholders under any
provision of the Texas Business Corporation Act may be taken without a meeting
if authorized by a consent or waiver filed with the Secretary of the Corporation
and signed by all persons who would be entitled to vote on that action at a
shareholders' meeting. Each such signed consent or waiver, or a true copy
thereof, shall be placed in the minute book of the Corporation.
3.02 TELEPHONE MEETINGS
Subject to the notice provisions required by these Bylaws and by the
Business Corporation Act, Shareholders of the Corporation may participate in and
hold a meeting by means of conference call or similar communication by which all
persons participating can hear each other. Participation in such a meeting
shall constitute presence in person at such meeting, except participation for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
3.03 PLACE OF MEETINGS
Meetings of Shareholders shall be held at the business office of the
Corporation, or at such other place within or without the State of Texas as may
be designated by the Board of Directors or by the Shareholders.
3.04 NOTICE OF MEETINGS
The President, the Secretary, or the officer or persons calling a
Shareholders' Meeting, shall give notice, or cause it to be given, in writing to
each Director and to each Shareholder
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BYLAWS, PAGE 10
<PAGE>
entitled to vote at the meeting at least ten (10) but no more than fifty (50)
days before the date of the meeting. Such notice shall state 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. Such written notice may be given
personally, by mail, or other means. Such notice shall be addressed to each
recipient at such address as appears on the Books of the Corporation or was
given by the recipient to the Corporation for the purpose of notice. Any
meeting provided herein shall not be invalid for lack of notice if consent to
the meeting is given in writing by all persons entitled to vote at the
meeting and is filed with the Secretary of the Corporation. Such consent may
be given either before or after the meeting. Notice of the reconvening of an
adjourned meetings is not necessary unless the meeting is adjourned more than
thirty days past the date stated in the notice in which care notice of the
adjourned meeting shall be given as in the case of any special meeting.
Notice may be waived by a written waiver signed either before or after the
meeting by the person entitled to the notice.
3.05 VOTING LIST
At least ten (10) days before each Shareholders' meeting, the officer or
agent having charge of the stock transfer books for shares of the Corporation
shall make a complete list of the Shareholders entitled to vote at that meeting
or any adjournment thereof, arranged in alphabetical order, with the address and
the number of shares held by each. The list shall be kept on file at the
registered office of the Corporation for a period of ten (10) days prior to the
meeting, and shall be subject to inspection by any Shareholder at any time
during usual business hours. The list shall also be produced and kept open at
the time and place of the meeting and shall be subject, during the whole time of
the meeting, to the inspection of any Shareholder. The original share transfer
books shall be PRIMA FACIE evidence as to the Shareholders entitled to examine
such list or transfer books or to vote at any meeting of Shareholders. However,
failure to prepare and to make the list available in the manner provided above
shall not affect the validity of any action taken at the meeting.
3.06 VOTES PER SHARE
Each outstanding share, regardless of class, shall be entitled to one (1)
vote on each matter submitted to a vote at a meeting of Shareholders, except to
the extent that the voting rights of the shares of any class or classes are
limited or denied pursuant to the Articles of Incorporation. A Shareholder may
vote either in person, or by proxy executed in writing by the shareholder, or by
the Shareholder's duly authorized attorney-in-fact.
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BYLAWS, PAGE 11
<PAGE>
3.07 CUMULATIVE VOTING
Subject to any limitations stated in the Articles of Incorporation, every
Shareholder entitled to vote at any election for Directors may cumulate votes.
For this purpose, each Shareholder shall have a number of votes equal to the
number of Directors to be elected multiplied by the number of votes to which the
Shareholder's shares are entitled. The Shareholder may cast all these votes for
one candidate or may distribute the votes among any number of candidates. The
candidate receiving the highest number of votes are elected, up to the number of
vacancies to be filled. No Shareholder may cumulate votes unless that
Shareholder shall have given written notice of his or her intention to do so to
the Secretary of the Corporation on or before the day preceding the election at
which the votes will be cumulated. If any Shareholder gives written notice as
provided above, all Shareholders may cumulate their votes.
3.08 PROXIES
A Shareholder may vote either in person or by proxy executed in writing by
the Shareholder on his duly authorized attorney in fact. Unless otherwise
provided in the proxy or by law, each proxy shall be revocable and shall not be
valid after eleven (11) months from the date of its execution.
3.09 QUORUM
3.09(a) QUORUM OF SHAREHOLDERS
The presence (in person or by proxy) of the persons who are entitled to
vote a majority of the outstanding voting shares shall constitute the quorum
necessary for the transaction of business at a meeting of the Shareholders of
the Corporation. The vote of the holders of a majority of the shares entitled
to vote and represented at a meeting at which a quorum is present shall be the
act of the Shareholders' meeting.
3.09(b) ADJOURNMENT FOR LACK OR LOSS OF QUORUM
No business may be transacted in the absence of a quorum, or upon
withdrawal of enough Shareholders to leave less than a quorum, other than to
adjourn the meeting from time to time by the vote of a majority of the shares
the holders of which are present in person or by proxy.
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BYLAWS, PAGE 12
<PAGE>
3.10 VOTING BY VOICE OR BALLOT
Elections for Directors need not be by ballot unless a Shareholder demands
election by ballot at the election before the voting begins.
3.11 CONDUCT OF MEETING
Meetings of the Shareholders shall be chaired by the President, or, in the
President's absence, a Vice President designated by the President, or, in the
absence of such designation, any other person chosen by a majority of the
Shareholders of the Corporation present in person or by proxy and entitled to
vote. The Secretary of the Corporation, or, in the Secretary's absence, an
Assistant Secretary, shall act as Secretary of all meetings of Shareholders. In
the absence of the Secretary or Assistant Secretary, the Chairman shall appoint
another person to act as Secretary of the meeting.
3.12 FAILURE TO HOLD ANNUAL MEETING
If within any 13-month period, an annual Shareholders' Meeting is not held,
any Shareholder may apply to a court of competent jurisdiction in the county in
which the principal office of the Corporation is located for a summary order
that an annual meeting be held.
3.13 SPECIAL MEETINGS
Special Shareholders' meetings may be called at any time by any of the
following: (a) the President; (b) the Board of Directors; (c) one or more
Shareholders holding in the aggregate one-tenth or more of all the shares
entitled to vote at the meetings. Special Shareholders' meetings may be called
for any purpose. The notice of a special Shareholders' meeting must state the
purpose or purposes of the meeting and absent consent of every shareholder to
the specific action taken, shall be limited to purposes plainly stated in the
notice, other provisions herein notwithstanding.
ARTICLE FOUR - OFFICERS
4.01 TITLE AND APPOINTMENT
The officers of the Corporation shall be President, a Secretary, and a
Treasurer. The Corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant
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BYLAWS, PAGE 13
<PAGE>
Treasurers. Any two offices, including President and Secretary, may be held
by one person. All officers shall be elected by and hold office at the
pleasure of the Board of Directors, which shall fix the compensation and
tenure of all officers.
4.02 REMOVAL AND RESIGNATION
Any officer may be removed, either with or without cause, by vote of a
majority of the Directors, at any regular or special meeting of the Board, or,
except in case of an officer chosen by the Board of Directors, by any committee
or officer upon whom that power of removal may be conferred by the Board of
Directors. Such removal shall be without prejudice to the contract rights, if
any, of the person removed. Any officer may resign at any time by giving
written notice to the Board of Directors, the President, or the Secretary of the
Corporation. Any resignation shall take effect on the date of the receipt of
that notice or at any later time specified therein, and, unless otherwise
specified therein, the acceptance of that resignation shall not be necessary to
make it effective.
4.03 VACANCIES
Upon the occasion of any vacancy occurring in any office of the
Corporation, by reason of death, resignation, removal, or otherwise, the Board
of Directors may elect an acting successor to hold office for the unexpired
term, or until a permanent successor is elected.
4.04 CHAIRMAN OF THE CORPORATION
The Chairman, if there shall be such an officer, shall, if present, preside
at the meeting of the Board of Directors and exercise and perform such other
powers and duties as may from time to time be assigned to the Chairman by the
Board of Directors or prescribed by these Bylaws.
4.05 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the Chairman, if there is an officer, the President shall be the
chief executive officer of the Corporation and shall, subject to the control of
the Board of Directors, have general supervision, direction, and control of the
business and officers of the Corporation. The President shall have the general
powers and duties of management usually vested in the office of President of a
Corporation; shall have such other powers and duties as may be prescribed by
the Board of Directors or the Bylaws; and shall be ex officio a member of all
standing committees, including the executive committee, in any. In addition,
the President shall preside at all meetings of the Shareholders and in the
absence of the Chairman, or if there is no Chairman, at all meetings of the
Board of Directors.
- -------------------------------------------------------------------------------
BYLAWS, PAGE 14
<PAGE>
4.06 VICE PRESIDENT
Any Vice President shall have such powers and perform such duties as from
time to time may be prescribed by these Bylaws, by the Board of Directors, or by
the President. In the absence or disability of the President, the senior or
duly appointed Vice President, if any, shall perform all the duties of the
President, pending action by the Board of Directors. When so acting, such Vice
President shall have all the powers of, and be subject to all the restrictions
on, the President.
4.07 SECRETARY
The Secretary shall:
(A) See that all notices are duly given in accordance with the provisions
of these Bylaws or as required by law. In case of the absence or disability of
the Secretary, or the Secretary's refusal or neglect to act, notice may be given
and served by an Assistant Secretary or by the Chairman, the President, any Vice
President, or by the Board of Directors.
(B) Keep the minutes of corporate meetings, and the corporate record book,
as set out in Article 7.01 hereof.
(C) Maintain, in the official record book of the Corporation, a record of
all share certificates issued or canceled and all shares of the corporation
canceled or transferred.
(D) Be custodian of the Corporation's records, and of any seal which the
Corporation may from time to time adopt. When the Corporation exercises its
right to use a seal, the Secretary shall see that the seal is emblazoned on all
share certificates prior to their issuance and on all documents authorized to be
executed under seal in accordance with the provisions of these Bylaws.
(E) In general, perform all duties incident to the office of Secretary,
and such other duties as from time to time may be required by Bylaws 7.01, 7.02,
and 7.03, by these Bylaws generally, by the Board of Directors, or by the
President.
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BYLAWS, PAGE 15
<PAGE>
4.08 TREASURER
The Treasurer shall:
(A) Have charge of the custody of, and be responsible for, all funds and
securities of the Corporation, and deposit all funds in the name of the
Corporation in those banks, trust companies, or other depositors that shall be
selected by the Board of Directors.
(B) Receive, and give receipt for, monies due and payable to the
Corporation.
(C) Disburse or cause to be disbursed the funds at the Corporation as may
be directed by the Board of Directors, taking proper vouchers for those
disbursements.
(D) If required by the Board of Directors or the President, give to the
Corporation a bond to assure the faithful performance of the duties of the
Treasurer's office and the restoration to the Corporation of all corporate
books, papers, vouchers, money, and other property of whatever kind in the
Treasurer's possession or control, in case of the Treasurer's death,
resignation, retirement or removal from office. Any such bond shall be in a sum
satisfactory to the Board of Directors.
(E) In general, perform all duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to the Treasurer by
Bylaws 7.04 and 7.05, by these Bylaws generally, by the Board of Directors, or
by the President.
4.09 ASSISTANT SECRETARY OR ASSISTANT TREASURER
The Assistant Secretary or Assistant Treasurer shall have such powers and
perform such duties as the Secretary or Treasurer, respectively, or as the Board
of Directors or President may prescribe. In case of the absence of the
Secretary or Treasurer, the senior Assistant Secretary or Assistant Treasurer,
may respectively perform all of the functions of the Secretary or Treasurer.
4.10 COMPENSATION
The compensation of the officers shall be fixed from time to time by the
Board of Directors, and no officer shall be prevented from receiving a salary by
reason of the fact that the officer is also a Shareholder or a Director of the
Corporation, or both.
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BYLAWS, PAGE 16
<PAGE>
ARTICLE FIVE - AUTHORITY TO EXECUTE INSTRUMENTS
5.01 NO AUTHORITY ABSENT SPECIFIC AUTHORIZATION
These Bylaws provide certain authority for the execution of instruments.
The Board of Directors, except as otherwise provided in these Bylaws, may
additionally 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. Unless expressly authorized by these Bylaws or the Board of
Directors, no officer, agent, or employee shall have any power or authority to
bind the Corporation by any contract or engagement nor to pledge its credit not
to render it liable pecuniarily for any purpose or in any amount.
5.02 EXECUTION OF CERTAIN INSTRUMENTS
Formal contracts of the Corporation, promissory notes, deeds, deeds of
trust, mortgages, pledges, and other evidences of indebtedness of the
Corporation, other corporate documents, and certificates of ownership of liquid
assets held by the Corporation shall be signed or endorsed by the President or
any Vice President and by the Secretary or the Treasurer, unless otherwise
specifically determined by the Board of Directors or otherwise required by law.
ARTICLE SIX - ISSUANCE AND TRANSFER OF SHARES
6.01 CLASSES AND SERIES OF SHARES
The Corporation may issue one or more classes or series of shares, or both.
Any of these classes or series may have full, limited, or no voting rights, and
may have such other preferences, rights, privileges, and restrictions as are
stated or authorized in the Articles of Incorporation. All shares of any one
class shall have the same voting rights, conversion, redemption, and other
rights, preferences, privileges, and restriction, unless the class is divided
into series. If a class is divided into series, all the shares of any one
series shall have the same voting rights, conversion, redemption, and other
rights, preferences, privileges, and restrictions. There shall always be a
class or series of shares outstanding that has complete voting rights except as
limited or restricted by voting rights conferred on some other class or series
of outstanding shares.
- -------------------------------------------------------------------------------
BYLAWS, PAGE 17
<PAGE>
6.02 CERTIFICATES FOR FULLY PAID SHARES
Neither shares nor certificates representing shares may be issued by the
Corporation until the full amount of the consideration has been received. When
the consideration has been paid to the Corporation, the shares shall be deemed
to have been issued and the certificate representing the shares shall be issued
to the shareholder.
6.03 CONSIDERATION FOR SHARES
Shares may be issued for consideration as may be fixed from time to time by
the Board of Directors at not less than the par value stated in the Articles of
Incorporation. The consideration paid for the issuance of shares shall consist
of money paid, labor done, or property actually received, and neither promissory
notes nor the promise of future services shall constitute payment nor partial
payment for shares of the Corporation.
6.04 REPLACEMENT OF CERTIFICATES
No replacement share certificates shall be issued until the former
certificates for the shares represented thereby shall have been surrendered and
canceled, except that replacements for lost or destroyed certificates may be
issued, upon such terms, conditions, and guarantees as the Board may see fit to
impose, including the filing of sufficient indemnity.
6.05 SIGNING CERTIFICATES - FACSIMILE SIGNATURES
All share certificates shall be signed by the officer(s) designated by the
Board of Directors. The signatures of the foregoing officers may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar, either of which is not the Corporation itself or an employee of the
Corporation. If the officer who has signed or whose facsimile signature has
been placed on the certificate has ceased to be such officer before the
certificate issued, the certificate may be issued by the corporation with the
same effect as if he or she were such officer on the date of its issuance.
6.06 TRANSFER AGENTS AND REGISTRARS
The Board of Directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, at such times and places as the requirements
of the Corporation may necessitate and the Board of Directors may designate.
Each registrar appointed, if any, shall be an incorporate bank or trust company,
either domestic or foreign.
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BYLAWS, PAGE 18
<PAGE>
6.07 CONDITIONS OF TRANSFER
The party in whose name shares of stock stand on the books of the
Corporation shall be deemed the owner thereof as regards the Corporation,
provided that whenever any transfer of shares shall be made for collateral
security, and not absolutely, and prior written notice thereof shall be given to
the Secretary of the Corporation, or to its transfer agent, if any, such fact
shall be stated in the entry of the transfer.
6.08 REASONABLE DOUBTS AS TO RIGHT TO TRANSFER
When a transfer of shares is requested and there is reasonable doubt as to
the right of the person seeking the transfer, the Corporation or its transfer
agent, before recording the transfer of the shares of on its books or issuing
any certificate therefor, may require from the person seeking the transfer
reasonable proof of that person's right to transfer. If there remains a
reasonable doubt of the right to the transfer, the Corporation may refuse a
transfer unless the person gives adequate security or a bond of indemnity
executed by a corporate surety or by two individual sureties satisfactory to the
Corporation as to form, amount, and responsibility of sureties. The bond shall
be conditioned to protect the Corporation, its officers, transfer agents, and
registrars, or any of them, against any loss, damage, expense, or other
liability to the transfer or the issuance of a new certificate for shares.
ARTICLE SEVEN - CORPORATE RECORDS AND FISCAL YEAR
7.01 MINUTES OF CORPORATE MEETINGS
The corporation shall keep at the registered or principal office, or such
other place as the Board of Directors may order, a book recording the minutes of
all the meetings of its Directors and of its Shareholders, with the time and
place of each meeting, whether such meeting was regular or special, a copy of
the notice given of such meeting, or of the written waiver thereof, and, if
special, how the meeting was authorized. The record book shall further show the
names of those present at Directors' meetings, the number of shares present or
represented at Shareholders' meetings, and the proceedings of all meetings.
7.02 SHARE REGISTER
The Corporation shall keep at the registered or principal office, or at the
transfer agent, a share register, showing the names of the Shareholders, their
addresses, the number and class of shares issued by each, the number and date of
certificates issued for such shares, and the number
- -------------------------------------------------------------------------------
BYLAWS, PAGE 19
<PAGE>
and date of cancellation of every certificate surrendered for cancellation.
The above specified information may be kept on an information storage device
such as electronic data processing equipment, provided that the equipment is
capable of reproducing the information in clearly legible form for the
purpose of inspection by any Shareholder, Director, Officer, or agent of the
Corporation during regular business hours. If the Corporation elects taxation
under Internal Revenue Code '1244 or Subchapter S, the officer issuing shares
shall ensure the appropriate requirements regarding issuance of shares are
maintained in effect.
7.03 BOOKS OF ACCOUNT
The Corporation shall maintain correct and adequate accounts of its
properties and business transactions, including accounts of its assets,
liabilities, receipts, disbursement, gains, losses capital, surplus, and shares.
The corporate bookkeeping procedures shall conform to accepted accounting
practices for the business or businesses in which the corporation is engaged.
Subject to the foregoing, the chart of financial accounts shall be taken from,
and designed to facilitate preparation of, current corporate tax returns. Any
surplus, including earned surplus, paid-in surplus, and surplus arising from a
reduction of stated capital, shall be classified according to source and shown
in a separate account. If the Corporation elects taxation under Internal
Revenue Code '1244 or Subchapter S, the officers and agents maintaining the
books of account and issuing shares shall ensure that the appropriate
requirements are maintained in effect.
7.04 FISCAL YEAR
The fiscal year of the Corporation shall be as determined by the Board of
Directors and approved by the Internal Revenue Service. The Treasurer shall
forthwith arrange a consultation with the Corporation's tax advisers, to
determine if the Corporation is to have a fiscal year other than the calendar
year. If so, the Treasurer shall file an election with the Internal Revenue
Service as early as possible, and all correspondence with the I.R.S., including
the application for the Corporation's Employer Identification Number, shall
reflect such non-calendar year election.
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BYLAWS, PAGE 20
<PAGE>
ARTICLE EIGHT - ADOPTION OF INITIAL BYLAWS
The foregoing bylaws were adopted by the Board of Directors on November 13,
1998 to be effective August 7, 1995.
/s/ Michael L. Moore
---------------------
MICHAEL L. MOORE, Director
Corporate Seal
Attested to, and certified by:
/s/ Michael L. Moore
- --------------------
MICHAEL L. MOORE, Secretary
BYLAWS1.1
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BYLAWS, PAGE 21
<PAGE>
EXHIBIT 3.7
The State of Texas
Secretary of State
CERTIFICATE OF INCORPORATION
OF
M L C ENTERPRISES, INC.
CHARTER NUMBER 01365098
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED ARTICLES OF INCORPORATION FOR THE ABOVE NAMED
CORPORATION HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY, THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE OF
THE AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS CERTIFICATE OF
INCORPORATION.
ISSUANCE OF THIS CERTIFICATE OF INCORPORATION DOES NOT AUTHORIZE THE
USE OF A CORPORATE NAME IN THIS STATE IN VIOLATION OF THE RIGHTS OF ANOTHER
UNDER THE FEDERAL TRADEMARK ACT OF 1946, THE TEXAS TRADEMARK LAW, THE ASSUMED
BUSINESS OR PROFESSIONAL NAME ACT OR THE COMMON LAW.
DATED AUG. 7, 1995
EFFECTIVE AUG. 7, 1995
Antonio 0. Garza, Jr., Secretary of State
<PAGE>
EXHIBIT 3.8
ARTICLES OF AMENDMENT TO THE ARTICLES OF
OF M L C ENTERPRISES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE I
The name of the corporation is M L C ENTERPRISES, INC.
The Charter Number of the Corporation is 01365098.
ARTICLE II
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the corporation on November 13, 1998 changing the name of
the corporation:
BE IT RESOLVED, that the name of the corporation be changed from M L C
ENTERPRISES, INC. to IDS FABRICATED SYSTEMS, INC.
The amendment alters or changes Article 1 of the original Articles of
Incorporation and the full text of each provision altered is as follows:
"IDS FABRICATED SYSTEMS, INC."
The amendment deletes a portion of Article 1 of the original Articles
of Incorporation. The part that was deleted read as follows:
"M L C ENTERPRISES, INC."
ARTICLE III
The following amendment to the Articles of Incorporation was adopted by
the Shareholders of the corporation on November 13, 1998 changing the purpose
clause of the corporation:
BE IT RESOLVED, that the purpose clause of the corporation be changed
from "The purpose for which the corporation is organized is to sell oil field
equipment." to "The purpose for which the Corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act."
1
<PAGE>
The amendment alters or changes Article III of the original Articles of
Incorporation and the full text of each provision altered is as follows:
"The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the Texas Business Corporation Act."
The amendment deletes a portion of Article III of the original Articles
of Incorporation. The part that was deleted read as follows:
"The purpose for which the Corporation is organized is to sell oil
field equipment."
ARTICLE IV
The following amendment to the Articles of Incorporation was adopted by
the Shareholders of the corporation on November 13, 1998 deleting Article 7 of
the Articles of Incorporation.
BE IT RESOLVED, that Article 7 be deleted from the Articles of
Incorporation.
The amendment deletes Articles 7 of the original Articles of
Incorporation and the full text of the deleted Article 7 is as follows:
The name and address of the individuals who are to be the shareholders
of the Corporation are:
Michael L. Cooper
444 East Medical Center Blvd #441
Webster, Tx. 77598
R.V. Wagoner
12714 Huntingwick
Houston, Texas 77024
ARTICLE V
The number of shares of the corporation outstanding at the time of such
adoption was 1000; and the number of shares entitled to vote on the amendment
was 1000.
2
<PAGE>
ARTICLE VI
The holders of all of the shares outstanding and entitled to vote on
the amendments unanimously adopted the amendments at a special meeting held on
November 13, 1998.
Dated: November 13, 1998
M L C ENTERPRISES, INC.
By: /s/ William A. Coskey
-------------------------
WILLIAM A. COSKEY, President
IDS\MLC\AOA.1
3
<PAGE>
EXHIBIT 3.9
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
FOR
IDS FABRICATED SYSTEMS, INC.
FORMERLY
M L C ENTERPRISES, INC.
CHARTER NUMBER 01365098
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS,
HEREBY CERTIFIES THAT THE ATTACHED ARTICLES OF AMENDMENT FOR THE ABOVE NAMED
ENTITY HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE OF
THE AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS CERTIFICATE OF
AMENDMENT.
DATED JAN. 7, 1999
EFFECTIVE JAN. 7, 1999
Alberto R. Gonzales, Secretary of State
<PAGE>
EXHIBIT 10.24
FOURTH AMENDMENT TO LEASE AGREEMENT
This Fourth Amendment to Lease Agreement ("First Amendment") is entered
as of the 1st day of September, 1998 by and between 600 C.C. Business Park Ltd.
("Landlord") and Industrial Data Systems, Inc. ("Tenant");
RECITALS
A. WHEREAS, 600 C.C. Business Park Ltd. as Landlord and Tenant entered a Lease
executed on January 16, 1991 (the "Lease"), and 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, and the Third Amendment
to Lease dated August 8, 1995 for certain premises known as Suite A-140,
located at 600 Century Plaza Drive, Houston, Texas ("Leased Premises")
described as consisting of a total leaseable area of 18,155 square feet;
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, the Second Amendment to Lease, and the Third 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, the Third Amendment to Lease and this Fourth
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, the First Amendment to Lease, the Second Amendment to
Lease, and the Third 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 desire to enter into this Fourth
Amendment,
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by Landlord and Tenant,
Landlord and Tenant agree as follows:
AGREEMENTS
1. The Lease for the Leased Premises is hereby agreed to be renewed and
extended an additional twenty-four (24) month term. Therefore, the new
lease expiration date shall be modified to be August 31, 2002.
2. Effective immediately upon full execution of this Fourth Amendment,
Landlord and Tenant mutually agree to expand the "Leased Premises" by 2,370
square feet of leaseable area
Page 1 of 3
<PAGE>
("Expansion Premises") making a total leaseable area of 20,525 square feet.
(See Attached Exhibit "A" Site Plan and Expansion Premises).
3. Landlord and Tenant agree that the monthly base rental scheduled in the
Original Lease, the First Amendment to Lease, the Second Amendment to
Lease, and the Third Amendment to Lease shall be modified and scheduled as
follows:
<TABLE>
<S> <C> <C>
September 1, 1998 - September 31, 1998: $ .44 per sf per month ($9,077.50 per month)
October 1,1998 - August 31, 2000: $ .50 per sf per month ($10,262.50 per month)
September 1, 2000 - August 31, 2002: $ .53 per sf per month ($10,878.15 per month)
</TABLE>
4. COMMON AREA MAINTENANCE, TAXES, INSURANCE (OPERATING EXPENSES): Tenant
shall be responsible for it's pro-rata share of any increases in these
expenses (as defined in Sections 4, 7, 11, and 13 of the original lease)
above a base year 1997. Effective September 1, 1998 Tenant's proportionate
share shall change from 13.72% to 15.51%.
5. TENANT IMPROVEMENT ALLOWANCE: Landlord shall provide Tenant with an
allowance of up to $12,000 for improvements to the 2,370 sf expansion space
and any improvements required in the Tenant's 18,155 sf existing/current
premises. Tenant shall be responsible for having the improvements to the
premises performed by qualified contractors and Landlord shall pay to
Tenant an amount equal to the cost of the improvements up to a maximum of
$12,000. Tenant shall provide Landlord a list of all contractors/suppliers
which will perform work at the Premises and copies of their appropriate
insurance certificates prior to commencement of construction.
EXCEPT as expressly provided herein, all other terms, covenants, and
conditions of the lease shall remain the same and in full force and effect, and
are hereby ratified by both parties.
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 have executed this Fourth Amendment to Lease as
of the date first written above.
Attachments: Exhibit "A" - Site Plan and Expansion Premises
Page 2 of 3
<PAGE>
Executed effective the 31 day of August 1998.
LANDLORD TENANT
- -------- ------
600 C.C. BUSINESS PARK, LTD. INDUSTRIAL DATA SYSTEMS, INC.
By: /s/ John W. Costello By: /s/ William A. Coskey
------------------------------ ----------------------------------
Name: John W. Costello Name: William A. Coskey
----------------------------- ----------------------------------
Title: General Partner Title: President
--------------------------- --------------------------------
Page 3 of 3
<PAGE>
BUSINESS PARK LEASE
ARTICLE ONE
BASIC LEASE PROVISIONS
<TABLE>
<S> <C> <C>
Date: February 8, 1999
Landlord: d/b/a Wilshire Square
Address of Landlord: Wilshire Square
7912 East 31st Court, Suite 200
Tulsa, Oklahoma 74145-1346
Tenant: IDS Engineering, Inc.
Address of Tenant: 600 Century Drive, Building 140
Houston, Texas 77073
Address of Tenant
at Wilshire Square: 11 08 East 51st Street
Tulsa, Oklahoma 74146
Tenant's Trade Name: IDS Engineering, Inc.,
Size of Leased Premises: One Story Business Location containing
approximately 5,400 square feet
of ground area. (Article 2)
Use of Premises by Tenant: Engineering Office (Article 4)
Lease Term: 24 Lease Months plus a Partial Lease
Month, if any prior to the first month. (Article 3)
Commencement Date: February 10, 1999 (Article 3)
Ending Date: February 28, 2001 (Article 3)
Rental:
1. Minimum Rental: $ 72,184.82 for the term of the Lease
payable in equal monthly installments of
$ 2,925.00 subject to adjustment with
the first month's installment due at the
execution of the Lease. (Article 5)
2. Additional Rental: $ 2,700.00 Common Area Fee for the first
year of the Lease payable in equal monthly
installments of $ 225.00 subject to
adjustment. (Article 6)
Security Deposit: $ 2,925.00 due upon execution of Lease.
Guarantor: None
Broker: Tulsa Properties, Inc. - Matt Klimisch
Expiration of Offer Date: February 28, 1999 (Article 26.1)
</TABLE>
<PAGE>
1.1 Each reference in this Business Park Lease (herein sometimes called
"Lease") to any of the Basic Lease Provisions contained about shall be
deemed and construed to incorporate all of the terms provided under each
such Basic Lease Provision.
1.2 The exhibits enumerated in this Section and attached to this Lease are
incorporated in this Lease by reference and are to be construed as part of
this Lease.
Exhibit "N" - Plot Plan of the Business Park
Exhibit "B" - Legal Description of the Business Park
Exhibit "C" - Description of Landlord's Work
Exhibit "D" - Changes, Alterations and Modifications
Exhibit "E" - Signage Specifications
Exhibit "F" - Rules and Regulations
ARTICLE TWO
PREMISES, IMPROVEMENTS, POSSESION
2.1 The Leased Premises consist of a one-story space having square footage set
out in Article One. The Premises are shown and outlined in red on the
drawing identified as Exhibit "A", which is attached hereto and made a part
hereof. The Premises are located within a portion of the Business Park
buildings (the "Building") and upon a portion of certain real property (the
"Property") situated in the City of Tulsa, Tulsa County, Oklahoma, which
said real property is more particularly bounded and described in Exhibit
"B", hereto annexed and made a part hereof. Should there exist a
discrepancy between the exact dimensions of the Premises, as set forth on
Exhibit "A", and the locations of the boundary walls of the Premises, as
finally constructed, the actual physical location of the boundary walls
shall control. In addition to the leased Premises, Tenant is hereby
granted a license (the "License") for the non-exclusive use, in connection
with the Tenant's permitted uses of the Premises, in common with Landlord
and other licensees of Landlord, of the parking areas, roadways, service
areas and sidewalks constructed on the Property as indicated approximately
on said Exhibit "A". Said License shall be limited to the use for which
such areas are intended and shall be subject to such reasonable rules and
regulations as the Landlord may prescribe, from time to time, for the
common benefit of Landlord and its licensees and of Tenant and other
tenants of the Property.
2.2 Landlord shall deliver possession of the Premises to Tenant, and Tenant
shall accept the Premises from Landlord, in their present condition as of
the date hereof; provided, however, prior to delivery of possession of the
Premises to Tenant, Landlord shall have made such repairs and improvements
and shall, at Landlord's sole cost and expense, have substantially
performed such work and installation of improvements to the Premises as are
set forth as "Landlord's Work" in Exhibit "C", annexed hereto and made a
part hereof. Any and all improvements to the Premises for the use of
Tenant, other than Landlord's Work, shall be performed at Tenant's sole
cost and expense, in accordance with Article Twenty-Two herein below
contained.
2.3 In the event of any disagreement of dispute between Landlord and Tenant
with reference to work to be performed with respect to the Premises
pursuant to Exhibits "C" or "D", or with respect to whether or not the
Premises are available for Tenant's modifications or Tenant's occupancy,
the certification in writing upon an approved AIA form, of Landlord's
supervising architect, Holmes and Bjornberg Architects, shall be conclusive
and binding upon the parties hereto.
ARTICLE THREE
TERM AND TERMINATION
3.1 Landlord does hereby lease, let and demise the Premises to Tenant for the
term specified in Article One above. Subject to the provisions hereof
relating to making the Premises ready for occupancy, the Commencement Date
and Ending Date shall be as specified in Article One.
3.2 Landlord agrees to exercise due diligence in making the Premises available
for Tenant's use and occupancy and to deliver the Premises to Tenant not
later than the Commencement Date specified in Article One above. However,
should Landlord be unable to complete said Premises by said date, which
delay in completion is due to any occurrence or eventuality outside the
direct control of Landlord, the date of delivery of the Premises to Tenant
shall be extended until such time as Landlord is able to substantially
complete the Premises and the Commencement Date and Ending Date of the term
of this Lease shall be adjusted to take into account the delay in making
the premises available for Tenant's use and occupancy. Tenant agrees that
no such delay shall be grounds for cancellation or alteration of the terms
and conditions of this Lease unless such delay exceeds 45 days. In the
event of any delay in delivery of the Premises to Tenant, Landlord shall
not be subject to any liability for failure to give possession after said
date. Tenant shall have thirty days after taking possession to notify
Landlord of any deficiencies in the Premises. Failure of
<PAGE>
Tenant to so notify Landlord shall be conclusive evidence that the
Premises were in good order and satisfactory condition when Tenant took
possession, unless otherwise agreed in writing.
3.3 This Lease and the tenancy herein created shall cease and terminate at the
end of the lease term set forth above or at the end of any period of
extension or renewal as provided by written extension agreement or as
otherwise provided herein without the necessity of any notice from
either Landlord or Tenant to terminate the same. The Tenant hereby
waives notice to vacate the Premises and agrees that Landlord shall be
entitled to the benefit of all provisions of law respecting the
summary recovery of possession of Premises from Tenant holding over
without the consent of Landlord to the same extend as if a notice had
been given. In the event Tenant holds over and beyond the term of
this Lease, for any reason, without the express written consent of
Landlord, Tenant shall be deemed a "hold over tenant" in violation of
the terms of this Lease, and shall be subject to all covenants and
conditions of this Lease Agreement, except however, that the minimum
monthly rental installment during each month, or fractional part
thereof, of continued occupancy shall be two hundred percent (200%) of
the amount payable by Tenant as total rental during the last one (1)
month of the lease term. If Tenant holds over and beyond the term of
this Lease with the consent of Landlord, then, except as otherwise
provided by written agreement, the tenancy of Tenant shall be a
month-to-month tenancy at will, subject to all covenants and conditions of
this Lease Agreement including the monthly rental installment
provisions which shall be applied on a month-to-month basis. Thirty
(30) days written notice (computed from the date of delivery of such
notice) shall be required in order for either party to terminate the
tenancy at will.
ARTICLE FOUR
USE OF THE PREMISES
4.1 The Premises shall be used by the Tenant solely for the purpose provided
for in Article One above, and for no other use or purpose without the prior
written consent of Landlord.
4.2 Tenant further covenants and agrees that its use and occupancy of the
Premises shall strictly comply with and not involve any violation of any
federal, state or municipal statute, rule, ordinance or zoning law or any
regulation, rule or directive of any governmental or regulatory agency as
may now exist or may hereafter exist concerning the use, operation or
safety of the Premises. In addition, Tenant covenants and agrees to
operate the Premises in conformance with the Rules and Regulations which
are attached to this Agreement as Exhibit "F", and made a part hereof.
Tenant shall not use the Premises or the building in which the Premises are
contained for any purpose that will increase the insurance rate or risk of
the building above that which is customary and normal for the uses set
forth above and, in such event, Landlord, as an additional remedy for the
violation of this provision, may elect to recover, as "Additional Rental"
(defined below), the total cost of such increase from Tenant, without
contribution of other tenants of the Business Park. (See Article 8.6.)
4.3 All damages to the Premises, the Common Areas or the building in which the
Premises are contained, caused by Tenant's negligence, shall be repaired at
Tenant's expense. Tenant shall not commit waste or allow waste to be
committed on the Premises or the Common Areas. Tenant shall not perform
any acts or carry on any practices which will constitute a nuisance or
menace, or be offensive, to the other tenants or occupants or to the
general public. Tenant shall keep the Premises, its use of the Common
Areas and all its improvements in sound condition, in good repair and safe
for the incidental use of its business invitees.
4.4 Tenant shall not make or permit any noise or odor that is objectionable to
the public, to other tenants of the Business Park or to Landlord to emanate
from the Premises and shall not create or maintain a nuisance thereon.
Tenant shall not disturb, solicit or canvas the users of the Common Areas
without the consent of Landlord and shall not do any act tending to injure
the reputation of the Landlord or the Business Park.
4.5 Lessee shall not place or permit any radio antenna, loud speakers, sound
amplifiers or any other thing or item on the exterior of the roof or
outside of the building or the Premises.
4.6 Lessee shall not obstruct, encumber or use the parking areas, sidewalks,
entrances, passages, vestibules, stairways, corridors and halls for any
purpose other than ingress or egress to and from the Premises and for
parking only in the delegated areas for such use.
ARTICLE FIVE
RENTAL
5.1 The total agreed rental (the "Rental") for the term of this Lease is the
sum of: (i) the "Minimum Rental" (defined below) and (ii) the "Additional
Rental" (defined below).
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5.2 (a) The Minimum Rental for the lease term shall be in the amount provided
in Article One. In the event the first day of the lease term shall
not be the first day of a calendar month, then the rental for the
first month of the term shall be prorated on a daily basis.
(b) Tenant shall pay the Minimum Rental, in advance, in equal monthly
installments as provided in Article One.
(c) An amount equal to the first installment of Minimum Rental payment
shall be paid by Tenant upon the execution of this Lease. Tenant will
receive, on any prorated minimum rent due and for the first full
month's minimum rent due a credit in an amount equal to this
installment. Any minimum rental for the first full month under this
Lease for which minimum rental is payable, after the application of
the above described credit, will be due on or before the first day of
the month to which it is applicable. other installments of the minimum
rental payment shall be due on or before the first day of the month to
which it is applicable and the rental obligation of Tenant shall be
deemed delinquent if any given monthly installment is not received by
Landlord on or before the fifth day of the month in which it is due.
Any Additional Rental or Rental Adjustments which are not paid within
five (5) days of when they are due shall be deemed delinquent.
All rentals shall be paid by Tenant without any right of offset or
deductions therefrom for any purpose. All rent is, and shall be,
payable in legal tender at Landlord's address as set forth herein
for notice or at such other address as Tenant may be directed from
time to time by notice from Landlord.
(Items 5.2(d) through 5.5 were stricken from the Lease Agreement at time of
execution.)
5.6 The term "Additional Rental" shall include any cost, charge or expense of
any kind whatsoever which is or may become payable and due to Landlord by
Tenant in accordance with the terms, covenants and conditions of this
Lease, excluding Minimum Rental. Additional Rental includes, but is not
limited to, Tenant's Common Area Maintenance Fees (Article Six), Tenant's
Proportionate Share of Excess Taxes (Article Seven) and Excess Premiums
(Article Eight) and any and all Rental Taxes which are in existence or
which may come into existence, and which are based upon or measured by the
payment of Minimum Rental or items of Additional Rental other than said
Rental Taxes.
5.7 Any installment of rent accruing under the provisions of this Lease that
shall not be paid when due shall bear interest at the annual rate of three
percent (3%) above the prime rate reported from time to time by the Wall
Street Journal as the base rate on corporate loans at large U. S. Money
Center commercial banks from the date when the same was payable by the
terms hereof until the same shall be paid by Tenant.
ARTICLE SIX
COMMON AREA MAINTENANCE FEE
6.1 Tenant covenants and agrees to pay to the Landlord, in addition to the
rentals specified in Article Five hereof, as Additional Rental, a Common
Area Maintenance Fee payable in equal monthly installments as provided for
in Article One. Landlord shall have the responsibility of Business Park's
Common Area (defined below) specifically including, without limitation
gardening and landscaping, lighting, removal of Common Area trash, rubbish,
garbage and other refuse, parking lot cleaning, snow removal, outside
window cleaning (monthly), Common Area utilities and lawn maintenance.
"Common Area" means all areas and space provided by Landlord for the common
use and joint use of the occupants of the Business Park and/or their
employees, agents, servants and customers and other invitees, including,
without limitation, parking area, access roads, driveways, retaining walls,
interior store boundary walls, exterior walls and trim (but not store
fronts), exterior utilities and service lines, landscaped areas, truck
service ways loading docks, stairs, ramps and sidewalks.
6.2 Within one hundred twenty days following the end of the year 1999 and each
year thereafter Landlord shall furnish Tenant a statement covering the
calendar year just ended, certified as correct by a certified public
accountant or an authorized representative of Landlord and showing the
total Business Park Common Area Maintenance Costs and the amount of
Tenant's share for such costs. If Tenant's share exceeds the Common Area
Fee provided for in Article One, then Tenant's Common Area Fee will be
increased to reflect the increase in the Common Area Maintenance Cost and
will be payable as Additional Rental pursuant to Section 6.1 above.
6.3 Common Area Maintenance Fees will not escalate more than 5% of base rate
for the term of the lease.
<PAGE>
ARTICLE SEVEN
TAXES
7.1 Landlord agrees to pay all taxes, assessments and governmental charges of
any kind and nature whatsoever (hereinafter collectively referred to as
"Taxes") lawfully levied or assessed against the Business Park, including
the buildings and the grounds, parking areas, driveways and alleys around
the buildings, provided, however, that the maximum in taxes attributable to
the Business Park to be paid by Landlord during any one real estate tax
year shall be those taxes levied against the Business Park during the year
1999. If in any real estate tax year during the term of this Lease, or any
renewal or extension of this lease, the taxes levied against the buildings
and the grounds, parking areas, driveways and alleys around the buildings
during such tax year shall exceed the amount levied during the year 1999.
Tenant shall pay to Landlord as additional rental, Tenant's proportionate
share of the amount of such excess ("Excess Taxes"). Tenant's
proportionate share, as used herein, shall mean a fraction, the numerator
of which is the floor area contained in the Premises as provided in Article
One above and the denominator of which is the total contracted floor area
in the Business Park.
7.2 At Tenant's request Landlord shall employ a tax consulting firm to attempt
to assure a fair tax burden on the buildings and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand
from time to time, as additional rent, the amount of Tenant's proportionate
share of the cost of such service.
7.3 Any payment to be made pursuant to this Article Seven with respect to the
real estate tax year in any partial lease year shall be prorated.
ARTICLE EIGHT
INSURANCE
8.1 The Landlord agrees that it will keep the buildings in the Business Park of
which the Premises is a part (excluding Tenant's improvements and the
contents of the Premises) insured by standard form fire and extended
coverage casualty insurance in an amount not less than eighty percent (80%)
of the original cost thereof (excluding excavations, footings and
foundations).
8.2 The Landlord agrees to maintain public liability insurance covering the
Business Park of which the Premises is a part, it being understood that
such coverage may not insure against the negligence of the Tenant.
8.3 Tenant will keep in force, at its own expense so long as this Lease remains
in effect or during such other time as the Tenant occupies the leased
Premises or any part thereof, public liability insurance with respect to
the leased Premises with minimum limits of One Million Dollars
($1,000,000.00) on account of bodily injury or death of one person, and One
Million Dollars ($1,000,000.00) on account of bodily injuries or death of
more than one person as a result of any one accident or disaster; and
property damage insurance at the minimum limits of 2,000,000. Tenant shall
cause Landlord to be named as an additional insured party thereon.
Insurance coverage, as provided, shall be issued by insurance companies
licensed to do business in the State of Oklahoma with a Best's rating of
"A" or better. Tenant shall deliver to the Landlord a certificate or
certificates of insurance of all such insurance coverage, a copy of all
such insurance policies and proof of payment of annual premiums.
8.4 Landlord shall insure at its sole cost and expense any and all plate and
other glass damaged or broken from any cause whatsoever in and about the
Premises.
8.5 Tenant agrees that it will not keep, use, sell or offer for sale in or upon
the Leased Premises any article which may be prohibited by the standard
from of fire insurance policy. Tenant agrees to pay any increases in
premiums for fire and extended coverage insurance that may be charged
during the Lease Term on the amount of such insurance which may be carried
by Landlord on the Premises or the Business Park, resulting from the type
of materials kept or stored by Tenant in the Premises, whether or not
Landlord has consented to the same. In determining whether increased
premiums are the result of Tenant's use of the Premises, a schedule, issued
by the organization making the insurance rate on the Premises, showing the
various components of such rate, shall be conclusive evidence of the
several items and charges which make up the fire insurance rate on the
Premises.
8.6 In the event Tenant's occupancy causes any increase of premium for the fire
and/or casualty rates on the Premises or Business Park or any part thereof
above the rate for the least hazardous type of occupancy legally permitted
in the Premises, the Tenant shall pay the additional premium on the fire,
and/or casualty insurance policies by reason thereof. The Tenant also
shall pay, in such event, any additional premium on the rent insurance
policy that may be carried by the Landlord for its
<PAGE>
protection against rent loss through fire. Bills for such additional
premiums shall be rendered by Landlord to Tenant at such times as
Landlord may elect, and shall be due from, and payable by, Tenant
when rendered, and the amount thereof shall be deemed to be, and be paid
as, additional rent.
8.7 If during the year 1999, or during any subsequent year of the primary term
or any renewal or extension, Landlord's cost of maintaining the insurance
provided for in this Article shall exceed Landlord's cost of maintaining
such insurance for the year 1999. Tenant agrees to pay to Landlord, as
additional rental, Tenant's full Proportionate Share, as defined in
Paragraph 7.1 above, of such excess ("Excess Premiums").
8.8 Any payment to be made pursuant to this paragraph with respect to a partial
lease year shall be subject to a pro rata adjustment based on the ratio of
the partial lease year to a full lease year.
ARTICLE NINE
DEFAULT
9.1 In the event of a default, as herein described, on the part of the Tenant,
Landlord shall have the following remedies which shall be cumulative and
shall not exclude any other right or remedy given to Landlord as Landlord
under the laws of the State of Oklahoma.
9.2 If Tenant shall file a petition in voluntary bankruptcy or be adjudged
bankrupt in involuntary proceedings or make all assignment for benefit of
creditors or like arrangements or composition or file a petition in the
federal court for reorganization or otherwise seek relief under the Code of
Bankruptcy of the United States of America or files for the appointment of
a receiver or trustee or discontinues business in the Premises for any
reason whatsoever, except as otherwise permitted by this Lease, such is to
be considered a default under this Lease and Landlord, without further
notice or demand and either with or without entry upon Premises, at its
discretion at anytime thereafter, may elect to terminate Tenant's rights
under this Lease and thereafter be entitled to recover damages in the
amount equal to the then present value of the then remaining and unpaid
portion of the Minimum Rental for the remaining and unexpired portion of
the term of this Lease. Said present value shall be calculated using a
discount factor equal to the then cost of funds published by the Eleventh
District Federal Home Loan Bank; and/or
9.3 Upon the following events of default by Tenant:
(a) The payment of any Rental not being made upon the day the same shall
become due and same remains unpaid for five (5) days after written
notice from Landlord to Tenant of such nonpayment of Rental.
(b) The neglect, failure or refusal by the Tenant in the performance of
any of the other terms, conditions or covenants of this Lease by said
Tenant to be performed, and the continued neglect, failure or refusal
for a period of ten (10) days after the service of written notice of
such default by the Landlord on Tenant; then the Landlord may enter
into and upon the Premises or any part thereof and repossess the same
with or without terminating this Lease and, without prejudice to any
of its remedies for rent or breach of covenant and in any such event,
may, at its option: (i) terminate said Lease by giving written notice
of its election to so do, or may, at its option, (ii) lease the
Premises or any part thereof as the agent of the Tenant, or otherwise,
or may, at its option, (iii) accelerate to the entire remaining unpaid
balance of Minimum Rental, in which event the then present value of
the entire unpaid balance of Minimum Rental shall be immediately due
and payable as similarly provided in Article 10.2 below. In the event
of any such re-letting, as described in (ii) above, the Tenant shall,
without demand or further process of law, pay to Landlord at the end
of each month during the full term of this Lease, the deficiency of
the net Minimum Rental.
9.4 Landlord shall, in addition thereto, have a lien against all merchandise,
fixtures, furniture, equipment or other personal property located in the
Premises for the payment of rents or other amounts due hereunder.
9.5 In the event of breach or Rental default as provided herein, Landlord shall
be entitled to common law and statutory (Oklahoma) remedy of distraint and
Landlord shall be entitled to the immediate possession of the Premises and
may sell and dispose of the leasehold, as well as the property of the said
Tenant, at public auction. Tenant hereby acknowledges that this is a lease
for business purposes only and does, by these presents, waive any rights
granted to Tenant pursuant to any statutes of the State of Oklahoma.
Tenant shall be liable to Landlord for all sums remaining unpaid in the
event of such a sale and all of the expenses incident to the collection
thereof, including reasonable attorney's fees.
<PAGE>
ARTICLE TEN
FIRE OR OTHER CASUALTY
10.1 If the Premises (excluding Tenant improvements or contents of the Premises)
shall be damaged by fire or other risk covered by standard form fire and
extended coverage casualty insurance and is not thereby rendered
untenantable, in whole or in part, Landlord shall promptly, upon receipt of
insurance proceeds, cause such damage to be repaired and the rent shall not
be abated; if, by reason of such occurrence, the Premises shall be rendered
untenantable only in part, the Landlord shall promptly, upon receipt of
insurance proceeds, cause the damage to be repaired and the minimum rent,
meanwhile, shall be abated proportionately as to the portion of the
Premises rendered untenantable; if, by reason of such occurrence, the
Premises should be rendered wholly untenantable, the Landlord shall
promptly, upon receipt of insurance proceeds, cause such damage to be
repaired, and the minimum annual rent, meanwhile, shall be abated in whole;
provided, however, if the leased Premises shall be damaged, whether or not
from a risk of the type covered by Landlord's fire and extended coverage
casualty insurance, to the extent that such damage is fifty percent (50%)
or more of the then replacement cost of the leased Premises, then, in such
event, the Landlord shall have the right, at Landlord's option, to declare
this Lease canceled by giving appropriate written notice to the Tenant
within thirty (30) days first following said occurrence, whereupon this
Lease Agreement and tenancy hereby created shall cease as of the date of
damage occurrence, all rentals to be adjusted as of such date. The
obligation of Landlord, where such obligation exists under the foregoing
sentence, to repair damages shall be limited to repair and restoration of
the damaged portion of the Premises to substantially the condition of the
Premises as existed upon delivery of possession of the Premises to Tenant
at the commencement of the term of this Lease, is modified by ordinary wear
and tear preceding such damage. If the Premises shall be damaged, whether,
or nt from a risk of the type covered by Landlord's fire and extended
coverage insurance, provided such damage was not caused by the negligent or
willful acts of the Tenant, and is thereby rendered untenantable, wholly or
in part, following which the Landlord is unable to repair the Premises
within 120 days after receipt by the Landlord of the insurance proceeds,
then, in such event, the Tenant shall have the right, at Tenant's option,
to declare this Lease canceled by giving appropriate written notice to the
Landlord within ten (10) days first following said 120 day period,
following which this Lease Agreement and tenancy hereby created shall cease
as of the date of such notice.
10.2 It is further understood and agreed that, if fifty percent (50%) or more of
the gross floor area of the building of the Business Park wherein the
Premises are located (whether or not the Premises are damaged) are rendered
untenantable by fire or other casualty, following which the Landlord does
not elect to commence restoration of said damages within sixty (60) days
after such occurrence of damages, then, in such event, the Landlord shall
have the option right to declare this Lease canceled by giving appropriate
written notice, within thirty (30) days first following said sixty (60) day
period, following which this Lease Agreement and tenancy hereby created
shall cease as of the last day of the next full calendar month first
following the date of such termination notice.
ARTICLE ELEVEN
REPAIRS AND MAINTENANCE
11.1 Landlord will keep the exterior, including the roof and structural portions
of the Premises, except doors in good repair; provided, however, Landlord
shall not be responsible for the repair of any damage that shall be caused
by the negligence of the Tenant or its agents, servants, employees,
assignees, sublessees, contractors, customers, or invitees. The Landlord
agrees to keep in good repair and to maintain, to the extent reasonably
necessary and consistent with good business practices, the Common Area of
the Business Park, to keep the same reasonably free from debris and to
illuminate such areas adequately. Landlord shall be under no other
liability for repair, maintenance, alteration or other action with
reference to the Premises or any part thereof, or any plumbing, heating,
electrical, air conditioning or other mechanical installation therein,
except as otherwise provided by Article Eleven of this Lease Agreement
relating to repair of damage from a casualty. Landlord shall be
responsible for all repair in excess of $250.00 per occurrence.
11.2 Landlord agrees to provide and maintain the necessary mains, feeders, ducts
and conduits within the Business Park in order to bring gas and electricity
up to the boundary of the Premises; it being understood that all means of
distribution of such services within the Premises shall be maintained by
the Tenant at the Tenant's expense.
11.3 Tenant hereby agrees to keep the interior of the Premises, including any
doors, together with all lighting, electrical, plumbing, heat, ventilating
and air conditioning systems and other mechanical installations therein, in
good order and repair and will make all replacements thereto at its own
expense. Tenant will surrender the leased Premises at the expiration of
the term or at such other
<PAGE>
time as it may vacate the Premises in as good a condition as when received,
excepting depreciation caused by ordinary wear and tear and damage by
other causes not required hereunder to be repaired by Tenant.
11.4 Landlord agrees that on all new interior construction, the normal
contractor and equipment warranties will inure to the benefit of Tenant.
ARTICLE TWELVE
UTILITIES
12.1 All utility services except for water and sewage services, used by the
Tenant in connection with the occupancy of the Premises, shall be paid by
Tenant directly to the provider of such services, and the Tenant shall
keep all bills for such services current as they come due. Tenant hereby
indemnities and agrees to save Landlord harmless from all such liability
for said services. In the event Tenant fails to pay for any such services
as and when they come due, Landlord may elect to pay same and charge
Tenant, as Additional Rental, the amounts paid. It is understood that
utility services, excluding water and sewage, have been designed for
separate metering and that Tenant will provide such deposits, if any,
as may be required by any utility company in order to cause commencement
of utility services to the Premises occupied by Tenant. Water and sewage
services for the Premises shall be provided through a Landlord's common
use meter at Landlord's expense. In no event shall Landlord be liable
for an interruption or failure in the supply of water and sewage services
to the Premises. Water and sewage service shall be paid for by Landlord.
Tenant will be billed periodically for its pro rata share of these charges
as Additional Rental.
ARTICLE THIRTEEN
SIGNS AND ADVERTISING
13.1 Tenant will not place or suffer to be placed or maintained on the exterior
of the Premises any sign, advertising matter or other thing of any kind,
and will not place or maintain any decoration, lettering or advertising
matter on the door or any glass of the Premises without first obtaining the
Landlord's written approval thereof. The cost of all signage of any kind
whatsoever shall be borne by Tenant, unless otherwise provided herein.
Upon the installation or removal of any signs or advertising matter, Tenant
shall, at its sole expense, repair any damages to the Building or to the
Common Usage Areas occasioned by such installation or removal, including
restorations occasioned thereby. Any sign or advertising matter placed or
maintained by Tenant will be in conformance with the provisions of Exhibit
"E" attached hereto and made a part hereof.
13.2 The Landlord reserves the right to place any sign or advertisement on the
Building or the Common Usage Areas as it desires and to place restrictions
on the sources furnishing sign painting, lettering or construction, and on
the appearance of such signage.
ARTICLE FOURTEEN
ASSIGNMENTS OR SUBLETTING
14.1 Tenant will not assign this Lease, in whole or in part, nor sublet all or
any part of the Premises without the prior written consent of the Landlord
being first obtained, which consent shall not be unreasonably withheld.
Any such assignment or subletting shall not affect or relieve the Tenant
from any of its obligations under this Lease, including, without
limitation, the obligations to pay the Rentals when due and the obligations
of Tenant to perform all of its covenants hereunder. The terms "assign"
and "sublet" shall be construed to include assignment or subletting by
operation of law.
14.2 If at any time during the Lease Term, any part, or all, of the corporate
shares of Tenant shall be transferred by sale, assignment, bequest,
inheritance, operation of law or other disposition so as to result in a
change in the present effective voting control of Tenant by the person, or
persons, owning a majority of said corporate shares on the date of this
Lease, Tenant shall promptly notify Landlord in writing of such change and
Landlord may terminate this Lease at any time after such change in control
by giving Tenant thirty (30) days' prior written notice of such
termination.
ARTICLE FIFTEEN
PARKING AREAS
15.1 Landlord reserves the right to designate in its sole discretion, certain
portions of the Common Area to be used as parking areas for the exclusive
use of certain tenants and/or their business invitees and to designate
other portions of the Common Area to be used as parking areas for the
general use of all the tenants of the Business Park and their business
invitees.
<PAGE>
ARTICLE SIXTEEN
INSPECTION
16.1 Landlord or Landlord's agents shall have the right to enter the Premises
during normal business hours to examine the same and to show them to
prospective purchasers, mortgagees or tenants of the Landlord or to make
such decorations, repairs, alterations, improvements or additions as the
Landlord may deem necessary or desirable.
16.2 In the event of an emergency, Landlord or Landlord's agent may enter the
Premises using whatever means is reasonable under the circumstances to
accomplish such entry.
16.3 Tenant shall, upon termination of the Lease or of Tenant's possession,
surrender all keys of the Premises to Landlord at the place then fixed
for the payment of rent and shall make known to Landlord the explanation
of all combination locks on safes, cabinets and vaults in the Premises.
ARTICLE SEVENTEEN
SUBORDINATION TO MORTGAGE
17.1 At the option of the holder of any present or future mortgage of the land
and buildings of which the Premises are a part, this Lease shall be subject
and subordinate to such mortgage to the full extent of all sums and amounts
secured thereby and, at the request of Landlord or Landford's mortgagee,
without any way diminishing or negating the effectiveness of the
subordination provided for herein, Tenant shall execute any instruments or
documents that may be deemed necessary or proper by counsel for Landlord or
Landlord's mortgagee to effect such subordination; provided, however, that,
at such time as any subordination is requested, Landlord shall furnish
Tenant evidence that Tenant shall have the right to remain in possession of
the Premises under the terms of this Lease, notwithstanding any default in
such mortgage or trust deed or after foreclosure thereof, so long as Tenant
is not in default under any of the covenants, conditions and agreements
contained in this Lease. In the event any proceedings are brought for the
foreclosure of any mortgage on property on which the Premises is located,
Tenant will attorn to the purchase at a foreclosure sale and recognize the
purchaser as Landlord under the Lease.
17.2 At Landlord's request, Tenant will execute either an estoppel certificate
addressed to Landlord's mortgagee or any prospective successor of Landlord
or a three-party agreement among Landlord, Tenant and said mortgagee or
successor, certifying to such facts (if true) regarding the status and
terms of this Lease as may be requested and agreeing to such notice
provisions and other matters as such mortgagee or successor may reasonably
require in connection with Landlord's financing or the conveyance of the
Building.
ARTICLE EIGHTEEN
WARRANTY, COMPLIANCE WITH LAWS
18.1 The Landlord covenants and warrants that it has full right, power and
authority to enter into this Lease for the term herein granted and that, as
of the date hereof, the said Premises may be used by Tenant for the
purposes herein set forth. The Tenant agrees, during its occupancy of the
Premises, to promptly execute, observe and comply with all present and
future laws, ordinances, rules, requirements and regulations of any
federal, state, county, city or any other governmental agency and of any or
all of their respective several departments, offices and bureaus affecting
the Premises.
ARTICLE NINETEEN
NOTICES
19.1 For all purposes hereunder, the addresses of the parties hereto are as
follows:
Landlord: Wilshire Square
c/o Tulsa Properties Management, Inc.
7912 East 31st Court, Suite 200
Tulsa, Oklahoma 74145-1346
Tenant: At address shown in Article One.
19.2 The parties hereto shall have the right, from time to time, to designate
different addresses than those above set forth by giving written notice to
the other party designating such new address.
19.3 Any notice to be given by either party to the other shall be in writing and
shall be deemed to have been served upon the party to whom it shall be
directed: (i) as of the date of deposit in the United States mail, postage
prepaid, certified or registered mail, addressed to such party at the
address above given, or at such other address as such party may, from time
to time, designate in accordance
<PAGE>
with the provisions hereof or (ii) as of the date of hand delivery to the
Landlord or Tenant as the case may be.
ARTICLE TWENTY
PREMISES ALTERATIONS
20.1 The Tenant shall have the right, at any time and from time to time during
the term of this Lease, to make such changes and alterations to the
interior of the Premises as the Tenant shall deem necessary or desirable in
connection with the requirements of the Tenant's business; provided,
however:
(a) no change or alteration shall weaken, either temporarily or
permanently, the structure of the Premises nor, when completed,
shall be of such a character as to:
(1) affect adversely the value of the Premises;
(2) materially reduce the cubic content of said Premises; or
(3) diminish the general utility of the Premises; and
(b) no change or alteration involving a reasonably estimated (by the
Landlord) cost of more than Five Thousand Dollars ($5,000.00) (excluding
trade fixtures) shall be undertaken except pursuant to the provisions
contained in Exhibit "D" attached hereto.
Tenant shall not make any changes or alterations to the exterior of the
Premises and shall not make any penetrations in the roof or demising walls
of the Premises, regardless of the estimated cost thereof, without the
prior written consent of Landlord in each, such occasion obtained.
20.2 All alterations and improvements of said Premises by Tenant shall be and
become a part of the real estate, except such machinery, equipment,
appurtenances, furnishings and fixtures placed therein by Tenant as trade
equipment and fixtures.
ARTICLE TWENTY-ONE
INDEMNIFICATION
21.1 Except as to injury, death or property damage proximately caused by the
negligence of Landlord for which Landlord is legally liable, Tenant agrees
to indemnify and hold Landlord harmless from all claims, suits, actions,
damages, liability and claims (including costs and expenses of defending
against all of the aforesaid) arising (or alleged to arise) from any act or
omission of Tenant or Tenant's agents, employees, assignees, sublessees,
contractors, customers or invitees, or arising from any injury to or death
of any person or persons or damage to or destruction of the property of any
person or persons occurring at the Premises, and Common Areas attendant
thereto, and Tenant assumes responsibility for the condition of the
Premises and agrees to give Landlord written notice in the event of any
damage, defect or disrepair therein.
21.2 Tenant agrees to use and occupy the Premises and place its fixtures,
equipment, merchandise and other property thereon at its own risk and
hereby releases Landlord and its agents from all claims for any damage or
injury to the full extent permitted by law. Tenant agrees that Landlord
shall not be responsible or liable to Tenant, or those claiming under
Tenant, for any injury, death or damage or loss occasioned by the acts or
omissions of persons occupying any part of the Premises or, occasioned by
the condition of the Premises, the upkeep for which Tenant is responsible
under the terms of this Lease.
ARTICLE TWENTY-TWO
SECURITY DEPOSIT
22.1 Tenant, contemporaneously with the execution of this Lease, will deposit
with Landlord a security deposit in the sum provided for in Article One,
receipt of which is hereby acknowledged by Landlord. Said deposit shall be
held by Landlord, without liability for interest, as security for the
faithful performance by Tenant of all of the terms, covenants, and
conditions of this Lease by said Tenant to be kept and performed during the
Lease Term. At the end of the Lease Term or upon any earlier termination
of the lease, Landlord shall return the deposit to Tenant, less any portion
thereof needed to compensate Landlord for damages other than those caused
by normal wear and tear.
<PAGE>
ARTICLE TWENTY-THREE
CONDEMNATION
23.1 Should so much of the Premises be condemned for public or quasi-public use
so as to render the Premises untenantable for Tenant's use under this
Lease, then either Landlord or Tenant, upon written notice to the other
within 20 days of the taking date, shall be entitled to terminate this
Lease and upon such termination, the rent shall be adjusted to the date of
termination.
23.2 The Tenant shall have no claim against the Landlord for the value of any
unexpired term of the Lease and no right or claim to any part of any
condemnation award for any reason related to the Premises or this Lease,
except that the Tenant shall be entitled in any such condemnation
proceeding to prove and collect damages, if any, for the taking of its
trade fixtures that are not part of the realty. The provisions of the
foregoing paragraphs shall apply whether or not the Lease is terminated as
aforesaid.
ARTICLE IWENTY-FOUR
MISCELLANEOUS PROVISIONS
24.1 OFFER AND ACCEPTANCE. The submission of this "Lease Agreement" for
examination does not constitute agreement between the parties hereto.
This document becomes effective only upon execution and delivery thereof by
Landlord and Tenant on or before the Expiration of Offer Date provided for
in Article One, failing which no reservation or option shall later exist to
complete this "Lease Agreement".
24.2 RENT TAX. If, at any time during the term of this Lease or any extension
thereof, a tax or excise on rents is levied or assessed against Landlord by
a lawful taxing authority on account of Landlord's interest in this Lease
or the rents or other charges reserved hereunder, Tenant agrees to pay to
Landlord, upon demand, as Additional Rent under Article 5.4 hereof, the
amount of such tax or excise. In the event any such tax or excise is
levied or assessed directly against Tenant, the Tenant shall be responsible
for and shall pay the same at such times and in such manner as the taxing
authority shall require.
24.3 RECORDING. Tenant shall not record this Lease without the prior written
consent of the Landlord. However, Tenant and Landlord, upon the request of
either, agree to execute and deliver a memorandum of this Lease in
recordable form for the purposes of recordation at Tenant's expense.
24.4 TIME. Time is of the essence of this Lease.
24.5 ENTIRE AGREEMENT. This instrument (including all attachments hereto)
constitutes the entire agreement between Landlord and Tenant and the same
may not be amended or modified orally.
24.6 SUCCESSORS. This Lease shall inure to the benefit of and be binding upon
Landlord and Tenant, their successors and assigns (or heirs, executors and
administrators, as the case may be) subject to the terms, covenants and
conditions stated. In the event of the assignment of this Lease by
Landlord, Tenant agrees to attorn to the rights of the assignee.
24.7 CONSTRUCTION OF LEASE
(a) The term "Landlord", as herein used, means and includes the named
Landlord, its successors and assigns, and the term "Tenant," as herein
used, means and includes the named Tenant, its successors and any assignees
to whom this Lease may be validly assigned as hereinabove provided, and all
of the terms and provisions of this Lease shall be binding on and inure to
the benefit of such successors and assigns.
(b) This Lease shall be governed by and enforced in accordance with the
laws of the State of Oklahoma.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
LANDLORD
D/B/A WILSHIRE SQUARE, BY ITS AGENT,
TULSA PROPERTIES MANAGEMENT, INC.
By: /s/ Lori Bryant Donovan
-----------------------------------
Lori Bryant Donovan, President
TENANT
IDS ENGINEERING, INC.
By: /s/ William A. Coskey
---------------------
Name: William A. Coskey
Title: President
ATTEST:
/s/ Hulda L. Coskey
- -------------------
Secretary
14
<PAGE>
Exhibit 10.26
INDUSTRIAL LEASE
-NET-NET-.NET-
1. PARTIES. This Lease, dated, for reference purposes only, NOVEMBER 5, 1997
is made by and between TRUST MANAGEMENT COMPANY (herein called "Landlord") and
MLC ENTERPRISES INC. dba MARINE & INDUSTRIAL SUPPLY (herein called "Tenant").
2. PREMISES. Landlord hereby leases to Tenant and Tenant leases from
Landlord for the term, at the rental, and upon all of the conditions set forth
herein, that certain real property situated in the City of HOUSTON, County of
HARRIS, State of TEXAS, commonly known as 10913 METRONOME, HOUSTON, TEXAS 77043
and described as a 12,650 square foot office/warehouse building situated on
approximately 25,000 square feet of land. Said property, including the land and
all improvements thereon, is herein called "the Premises".
3. TERM.
3.1 TERM. The term of this tease shall be for THREE (3) YEARS,
commencing on I DECEMBER 1997 and ending on 30 NOVEMBER 2000 unless sooner
terminated pursuant to any provision hereof.
4. RENT.
4.1 Tenant shall pay to Landlord as rent for the Premises equal monthly
installments of THREE THOUSAND SEVEN HUNDRED NINETY-FIVE AND NO 100 DOLLARS
($3,795.00), in advance, on the FIRST day of each month of the term hereof.
Tenant shall pay Landlord upon the execution hereof the sum of SEVEN THOUSAND
FIVE HUNDRED NINETY AND N01100 DOLLARS ($7,590.00) as rent for THE FIRST AND
LAST MONTHS HEREOF. Rent for any period during the term hereof which is for
less than one month shall be a pro rata portion of the monthly installment.
Rent shall be payable without notice or demand and without any deduction,
offset, or abatement in lawful money of the United States of America to Landlord
at the address stated herein or to such other persons or at such other places as
Landlord may designate in writing.
4.2 ADDITIONAL CHARGES. This Lease is what is commonly called a "net
lease", it being understood that Landlord shall receive the rent set forth in
Article 4.1 free and clear of any and all impositions, taxes, real estate taxes,
liens, charges or expenses of any nature whatsoever in connection with the
ownership and operation of the Premises. In addition to the rent reserved by
Article 4.1, Tenant shall pay to the parties respectively entitled thereto all
impositions, insurance premiums, operating charges, maintenance charges,
construction costs, and any other charges, costs and expenses which arise or may
be contemplated under any provisions of this Lease during the term hereof. All
of such charges, costs and expenses shall constitute additional charges, and
upon the failure of Tenant to pay any of such costs, charges and expenses,
Landlord shall have the same rights and remedies as otherwise provided in this
Lease for the failure of Tenant to pay rent. It is the intention of the parties
hereto that this Lease shall not be terminable for any reason by the Tenant and
that the Tenant shall in no event be entitled to any abatement of or reduction
in rent payable hereunder, except as herein expressly provided. Any present or
future law to the contrary shall not alter this agreement of the parties.
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5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon execution hereof
the sum of NONE ($-O-) Dollars as security for Tenant's faithful performance of
Tenant's obligations hereunder. If Tenant fails to way rent or other charges
due hereunder, or otherwise defaults with respect to any provision of this
Lease, Landlord may use, apply or retain all or any portion of said deposit for
the payment of any rent or other charges in default or for the payment of any
other sum to which Landlord may become obligated by reason of Tenant's default,
or to compensate Landlord for any loss or damage which Landlord may suffer
thereby. If Landlord so uses or applies all or any portion of said deposit,
Tenant shall within ten (10) days after written demand therefor deposit cash
with Landlord in an amount sufficient to restore said deposit to the full amount
hereinabove stated and Tenant's failure to do so shall be a breach of this
Lease, and Landlord may at his option terminate this Lease. Landlord shall
not be required to keep said deposit separate from its general accounts. If
Tenant performs all of Tenant's obligations hereunder, said deposit or so much
thereof as had not theretofore been applied by Landlord, shall be returned,
without payment of interest or other increment for its use, to Tenant (or, at
Landlord's option, to the last assignee, if any, of Tenant's interest
hereunder) within fifteen (15) days after the expiration of the term hereof,
or after Tenant has vacated the Premises, whichever is later.
6. USE.
6.1 USE. The Premises shall be used and occupied only for ANY LEGAL
BUSINESS.
6.2 COMPLIANCE WITH LAW. Tenant shall, at Tenant's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect during the term or any part of the term hereof
regulating the use by Tenant of the Premises. Tenant shall not use or permit
the use of the Premises in any manner that will tend to create waste or a
nuisance, or, if there shall be more than one tenant of the building containing
the Premises, which shall tend to unreasonably disturb such other tenants.
6.3 CONDITION OF PREMISES. Tenant hereby accepts the Premises in their
condition existing as of the date of possession hereunder, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Tenant acknowledges that neither Landlord nor Tenant's agent has made
any representation or warranty as to the suitability of the Premises for the
conduct of Tenant's business.
6.4 INSURANCE CANCELLATION. Notwithstanding the provisions of Article 6.1
hereinabove, no use shall be made or permitted to be made of the Premises nor
acts done which will cause the cancellation of any insurance policy covering
said Premises or any building of which the Premises may be a part, and if
Tenant's use of the Premises causes an increase in said insurance rates Tenant
shall pay any such increase.
6.5 LANDLORD'S RULES AND REGULATIONS. Tenant shall faithfully observe and
comply with the rules and regulations that Landlord shall from time to time
promulgate. A copy of said rules and regulations is attached hereto. Landlord
reserves the right from time to time to make all reasonable modifications to
said rules and regulations. The additions and modifications to said rules and
regulations shall be binding upon the Tenant upon delivery of a copy of them to
Tenant. Landlord shall not be responsible to Tenant for the nonperformance of
any of said rules and regulations by any other tenants or occupants.
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7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 TENANT'S OBLIGATIONS. Tenant shall, during the term of this Lease,
keep in good order, condition and repair, the Premises and every part thereof,
structural or non-structural, and all adjacent sidewalks, landscaping,
driveways, parking lots, fences and signs located in the areas which are
adjacent to and included with the Premises. Landlord shall incur no expense nor
have any, obligation of any kind whatsoever in connection with maintenance of
the Premises, and Tenant expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord's expense or to terminate this Lease because of Landlord's
failure to keep the Premises in good order, condition and repair.
7.2 SURRENDER. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in good condition,
broom clean, ordinary wear and tear excepted. Tenant shall repair any damage to
the Premises occasioned by its use thereof, or by the removal of Tenant's trade
fixtures, furnishings and equipment pursuant to Article 7.4(c), which repair
shall include the patching and filling of holes and repairs of structural
damage.
7.3 LANDLORD'S RIGHTS. If Tenant fails to perform Tenant's obligations
under this Article 7, Landlord may at its option (but shall not be required to)
enter upon the Premises, after ten (10) days' prior written notice to Tenant,
and put the same in good order, condition and repair, and the cost thereof
together with interest thereon at the rate of ten (10%) percent per annum shall
become due and payable as additional rental to Landlord together with Tenant's
next rental installment.
7.4 ALTERATIONS AND ADDITIONS.
(a) Tenant shall not, without Landlord's prior written consent, make
any alterations, improvements, or additions, in, on or about the Premises,
except for non-structural alterations not exceeding $1,000 in cost. As a
condition to giving such consent, Landlord may require that Tenant remove
any such alterations, improvements, additions or utility installations at
the expiration of the term, and to restore the Premises to their prior
condition.
(b) Before commencing any work relating to alterations, additions and
improvements affecting the Premises, Tenant shall notify Landlord in
writing of the expected date of commencement thereof. Landlord shall then
have the right at any time and from time to time to post and maintain on
the Premises such notices as Landlord reasonably deems necessary to protect
the Premises and Landlord from mechanics' liens, materialmen's liens or any
other liens. In any event, Tenant shall pay, when due, all claims for
labor or materials furnished to or for Tenant at or for use in the
Premises. Tenant shall not permit any mechanics, or materialmen's liens
to be levied against the Premises for any labor or material furnished to
Tenant or claimed to have been furnished to Tenant or to Tenant's agents or
contractors in connection with work of any character performed or claimed
to have been performed on the Premises by or at the direction of Tenant.
(c) Unless Landlord requires their removal, as set forth in Article
7.4 (a), all alterations, improvements or additions which may be made on
the Premises, shall become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Article 7.4(c), Tenant's machinery,
equipment and other trade fixtures other than that which is affixed to the
Premises so that it cannot be removed without material damage to the
Premises, shall
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remain the property of Tenant and may be removed by Tenant subject to the
provisions of Article 7.2.
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<PAGE>
8. INSURANCE; INDEMNITY.
8.1 INSURING PARTY. As used in this Article 8, the term "insuring party"
shall mean the party who has the obligation to obtain the insurance required
hereunder. The insuring party in this case shall be designated in Article 20.
Whether the insuring party is the Landlord or the Tenant, Tenant shall, as
additional rent for the Premises, pay the cost of all insurance required
hereunder. If Landlord is the insuring party Tenant shall, within ten (10) days
following demand by Landlord, reimburse Landlord for the cost of the insurance
so obtained.
8.2 LIABILITY INSURANCE. The Tenant shall obtain and keep in force during
the term of this Lease a policy of comprehensive public liability insurance
insuring Landlord and Tenant against any liability arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be in an amount of not less than $300,000 for injury to or
death of one person in any one accident or occurrence and in an amount of not
less than $500,000 for injury or death of more than one person in any one
accident or occurrence. Such insurance shall further insure Landlord and Tenant
against liability for property damage of at least $50,000. The limits of said
insurance shall not, however, limit the liability of Tenant hereunder. In the
event that the Premises constitute a part of a larger property said insurance
shall have a Landlord's Protective Liability endorsement attached thereto. If
the Tenant shall fail to procure and maintain said insurance the Landlord may,
but shall not be required to, procure and maintain the same, but at the expense
of Tenant.
8.3 PROPERTY INSURANCE. The insuring party shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Premises, in the amount of the full replacement value thereof,
providing protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, special extended perils
(all risk), sprinkler leakage and flood insurance if required. Said insurance
shall provide for payment for loss thereunder to Landlord and, if applicable, to
the holder of a first mortgage or deed of trust on the Premises. If the
insuring party shall fail to procure and maintain said insurance the other party
may, but shall not be required to, procure and maintain the same, but at expense
of Tenant.
8.4 INSURANCE POLICIES. Insurance required hereunder shall be in
companies rated A+, AAA or better in "Best's Insurance Guide". The insuring
party shall deliver prior to possession to the other party copies of policies of
such insurance or certificates evidencing the existence and amounts of such
insurance with loss payable clauses satisfactory to Landlord. No such policy
shall be cancelable or subject to reduction of coverage or other modification
except after ten (10) days' prior written notice to Landlord. If Tenant is the
insuring party, Tenant shall, within ten (10) days prior to the expiration of
such policies, furnish Landlord with renewals or "binders" thereof, or Landlord
may order such insurance and charge the cost thereof to Tenant, which amount
shall be payable by Tenant upon demand. Tenant shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in
Article 8.3. Tenant shall forthwith, upon Landlord's demand reimburse Landlord
for any additional premiums attributable to any act or omission or operation of
Tenant causing such increase in the cost of insurance. If Landlord is the
insuring party, and if the insurance policies maintained hereunder cover other
improvements in addition to the Premises, Landlord shall deliver to Tenant a
written statement setting forth the amount of any such insurance cost increase
and showing in reasonable detail the manner in which it has been computed.
8.5 WAIVER OF SUBROGATION. Tenant and Landlord each waives any and all
rights of recovery against the other, or against the officers, employees, agents
and representatives of the
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other, for loss of or damage to such waiving party or its property or the
property of others under its control, where such loss of damage is- insured
against under any insurance policy in force at the time of such loss or
damage. Tenant and Landlord shall, upon obtaining the policies of insurance
required hereunder, give notice to the insurance carriers that the foregoing
mutual waiver of subrogation is contained in this Lease.
8.6 HOLD HARMLESS. Tenant shall indemnify, defend and hold Landlord
harmless from any and all claims arising from Tenant's use of the Premises or
from the conduct of its business or from any activity, work or things which may
be permitted or suffered by Tenant in or about the Premises and shall further
indemnify, defend and hold Landlord harmless from and against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the provision of this Lease arising from any
negligence of tenant or any of its agents, contractors, employees or invitees
and from any and all costs, attorneys' fees, expenses and liabilities incurred
in the defense of any such claim or any action or proceeding brought thereon.
Tenant hereby assumes all risk or damage to property or injury to persons in or
about the Premises from any cause, and Tenant hereby waives all claims in
respect thereof against Landlord, excepting where said damages arises out of
negligence of Landlord.
8.7 EXEMPTION OF LANDLORD FROM LIABILITY. Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or any other person
in or about the Premises; nor, unless through its negligence, shall Landlord be
liable for injury to the person of Tenant, Tenant's employees, agents or
contractors and invitees, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said damage or injury results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Landlord or Tenant. Landlord shall not be liable for any damages arising from
any act or neglect of any other tenant, if any, of the building in which the
Premises are located.
9. DAMAGE OR DESTRUCTION.
9.1 In the event the improvements on the Premises are damaged or
destroyed, partially or totally, from any cause whatsoever, whether or not such
damage or destruction is covered by any insurance required to be maintained
under Article 8, the Tenant shall repair, restore and rebuild the Premises to
their condition existing immediately prior to such damage or destruction and
this Lease shall continue in full force and effect. Such repair, restoration
and rebuilding (all of which are herein called the "repair") shall be commenced
within a reasonable time after such damage or destruction and shall be
diligently prosecuted to completion. There shall be no abatement of rent or of
any other obligation of Tenant hereunder by reason of such damage or
destruction. The proceeds of any insurance maintained under Article 8.3 shall
be made available to Tenant for payment of the cost and expense of the repair,
provided, however, that such proceeds may be made available to Tenant subject to
reasonable conditions "including, but not limited to, architect's certification
of costs and retention of a percentage of such proceeds pending final notice of
completion. In the event that such proceeds are not made available to Tenant
within ninety (90) days after such damage or destruction, Tenant shall have the
(option for thirty (30) days, commencing on the expiration of such ninety (90)
day period of canceling this Lease. If Tenant shall exercise such option,
Tenant shall have no further obligation
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hereunder and shall have no further claim against Landlord; provided,
however, that Landlord shall return to Tenant so much of Tenant's security
deposit as has not theretofore been applied by Landlord. Tenant shall
exercise such option by written notice to Landlord -within said thirty (30)
day period. In the event that the insurance proceeds are insufficient
to cover the cost of the repair, then any amount in excess thereof required
to complete the repair shall be paid by Tenant.
9.2 DAMAGE NEAR END OF TERM. If the Premises are partially destroyed or
damaged during the last six (6) months of the term of this Lease, Landlord may,
at Landlord's option, cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Tenant of Landlord's
election to do so within thirty (30) days after the date of occurrence of such
damage.
9.3 PRORATIONS. Upon termination of this Lease pursuant to this Article
9, a pro rata adjustment of rent based upon a thirty (30) day month shall be
made. Landlord shall, in addition, return to Tenant so much of Tenant's
security deposit as has not theretofore been applied by Landlord.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Landlord shall pay all real property taxes
applicable to the Premises during the term of this Lease and bill Tenant for
same. If any such taxes shall cover any period of the time prior to or after
the expiration of the term hereof, Tenant's share of such taxes shall be
equitably prorated to cover only the period of time within the tax fiscal year
during which this Lease shall be in effect. If Tenant shall fail to pay any
such taxes when billed and due, Tenant shall pay Landlord a late fee equal to
ten (10%) percent of said taxes.
10.2 DEFINITION OF "REAL PROPERTY" TAXES. As used herein, the term "real
property tax" shall include any form of assessment, license fee, rent tax, levy,
penalty, or tax (other than inheritance or estate taxes) , imposed by any
authority having the direct or indirect power to tax, including anv city,
county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Premises or in the real property of which
the Premises are a part, as against Landlord's right to rent or other income
therefrom, or as against Landlord's business of leasing the Premises, and,
Tenant shall pay any and all charges and fees which may be imposed by the EPA or
other similar government regulations or authorities.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Tenant's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Landlord from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Landlord's reasonable determination thereof, in good
faith, shall be conclusive.
10.4 PERSONAL PROPERTY TAXES.
(a) Tenant shall pay prior to delinquency all taxes assessed against
and levied upon leasehold improvements, trade fixtures, furnishings,
equipment and all other personal property of Tenant contained in the
Premises or elsewhere. Tenant shall cause said leasehold improvements,
trade fixtures, furnishings, equipment and all other personal property to
be assessed and billed separately from the real property of Landlord.
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(b) If any of Tenant's said personal property shall be assessed with
landlord's real property, Tenant shall pay Landlord the taxes attributable
to Tenant within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Tenant's property.
11. COMMON AREAS. When, in fact, there are Common Areas, then the following
shall apply.
11.1 DEFINITIONS. The phrase "Common Areas" means all areas and facilities
outside the Premises that are provided and designated for general use and
convenience of Tenant and other tenants and their respective officers, agents
and employees, customers, and invitees. Common Areas include (but are not
limited to) pedestrian sidewalks, landscaped areas, roadways, parking areas and
railroad tracks, if any. Landlord reserves the right from time to time to make
changes in the shape, size, location, number, and extent of the land and
improvements constituting the Common Areas. Landlord may designate from time to
time additional parcels of land for use as a part thereof; and any additional
land so designated by Landlord for such use shall be included until such
designation is revoked by Landlord.
11.2 MAINTENANCE. During the term of this Lease, Landlord shall operate,
manage, and maintain the Common Areas so that they are clean and free from
accumulations of debris, filth, rubbish, and garbage. The manner in which such
Common Areas shall be so maintained, and the expenditures for such maintenance,
shall be at the sole discretion of Landlord, and the use of the Common Areas
shall be subject to such reasonable regulations and changes therein as Landlord
shall make from time to time, including (but not by way of limitation) the right
to close from time to time, if necessary, all or any portion of the Common Areas
to such extent as may be legally sufficient, in the opinion of Landlord's
counsel, to prevent a dedication thereof or the accrual of rights of any person
or of the public therein, or to close temporarily all or any portion of such
Common Areas for such purposes.
11.3 TENANT'S RIGHTS AND OBLIGATIONS. Landlord hereby grants to Tenant,
during the term of this Lease, the license to use, for the benefit of Tenant and
its officers, agents, employees, customers, and invitees, in common with the
others entitled to such use, the Common Areas as they from time to time exist,
subject to the rights, powers, and privileges herein reserved to Landlord.
Storage, either permanent or temporary, of any materials, supplies or equipment
in the Common Area is strictly prohibited. Should Tenant violate this provision
of the Lease, then in such event, Landlord may, at his option either terminate
this Lease or, without notice to Tenant, remove said materials, supplies and
equipment from the Common Area and place such items in storage, the cost thereof
to be reimbursed by Tenant within ten (10) days from receipt of a statement
submitted by Landlord. All subsequent costs in connection with the storage of
said items shall be paid to Landlord by Tenant as accrued. Failure of Tenant to
pay these charges within ten (10) days from receipt of statement shall
constitute a breach of this Lease. Tenant and its officers, agents, employees,
customers and invitees shall park their motor vehicles only in areas designated
by Landlord for that purpose from time to time. Within five (5) days after
request from Landlord, Tenant shall furnish to Landlord a list of the license
numbers assigned to its motor vehicles, and those of its officers, agents and
employees. Tenant shall not at any time park or permit the parking of motor
vehicles, belonging to it or to others, 'so as to interfere with the pedestrian
sidewalks, roadways, and loading areas, or in any portion of the parking areas
not designated by Landlord for such use by Tenant. Tenant agrees that receiving
and shipping of goods and merchandise and all removal of refuse shall be made
only by way of the loading areas constituting part of the Premises. Tenant
shall repair, at its cost, all deteriorations or damages to the Common Areas,
occasioned by its lack of ordinary care.
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11.4 CONSTRUCTION. Landlord, while engaged in constructing improvements or
making repairs or alterations in or about the Premises or in their vicinity,
shall have the right to make reasonable use of the Common Areas.
12. UTILITIES. Tenant shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of
all charges jointly metered with other premises.
13. ASSIGNMENT AND SUBLETTING.
13.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent, which Landlord shall not be deemed
consent to any subsequent assignment or subletting.
14. DEFAULTS; REMEDIES.
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as And when due, where
such failure shall continue for a period of three (3) days after written
notice thereof from Landlord to Tenant.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by
Tenant, other than described in Paragraph (b) above, where such failure
shall continue for a period of thirty (30) days after written notice
thereof from Landlord to Tenant, provided, however, that if the nature of
Tenant's default is such that more than thirty (30) days are reasonably
required for its cures, then Tenant shall not be deemed to be in default if
Tenant commenced such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Tenant of any general assignment, or general
arrangement for the benefit of creditors; (ii) the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is
dismissed within sixty (60) days); (iii) The appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located
at the Premises or of Tenant's interest in this Lease, where possession is
not restored to Tenant within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days.
14.2 REMEDIES IN DEFAULT. In the event of any such default or breach of
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default including, but not
limited to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable
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attorney's fees, and any real estate commission actually paid; the
worth at the time of award by the court having jurisdiction thereof of
the amount by which the unpaid rent for the balance of the term after the
time of such award exceeds the amount of such rental loss for the same
period that Tenant proves could be reasonably avoided; and that portion of
the leasing commission paid by Landlord applicable to the unexpired term of
this Lease. Unpaid installments of rent or other sums shall bear interest
from the date due at the rate of ten (10%) percent per annum. In the event
Tenant shall have abandoned the Premises, Landlord shall have the option of
(i) retaking possession of the Premises and recovering from Tenant the
amount specified in this Article 14.2(a), or (ii) proceeding under Article
14.2(b).
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Premises are
located.
14.3 DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable time, but
in no event later than thirty (30) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for performance then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
14.4 LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent and other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain . Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage cr trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
due, then Tenant shall pay to Landlord a late charge equal to ten (10%) percent
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the cost Landlord will incur by
reason of late payment by Tenant. Acceptance of such late charge by Landlord
shall in no event constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
15. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold by Landlord under the threat of the exercise of
said power (all of which is herein referred to as "condemnation"), this Lease
shall terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever occurs first. If more than twenty-five
(25%) percent of the floor area of any building on the Premises, or more than
twenty-five (25%) percent of the land area of the Premises not covered with
buildings, is taken by condemnation, either Landlord or Tenant may terminate
this Lease as of the date the condemning authority takes possession by notice in
writing of such election within twenty (20) days after Landlord shall have
notified Tenant of the taking or, in the absence of such notice, then within
twenty (20) days after the condemning authority shall have taken possession. If
this Lease is not terminated by either Landlord or Tenant then it shall remain
in full force and effect
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as to the portion of the Premises remaining, provided the rental shall be
reduced in proportion to the floor area of the building taken within the
Premises as bears to the total floor area of all building located on the
Premises. In the event this Lease is not so terminated then Landlord agrees,
at Landlord's sole cost, to as soon as reasonably possible restore the
Premises to a complete unit of like quality and character as existed prior to
the condemnation. All awards for the taking of any part of the Premises or
any payment made under the threat of the exercise of power of eminent domain
shall be the property of Landlord, whether made as compensation for
diminution of value of the leasehold or for the taking of the fee or as
severance damages; provided, however, that Tenant shall be entitled to any
reward for loss of or damage to Tenant's trade fixtures and removable
personal property.
16. GENERAL PROVISIONS.
16.1 OFFSET STATEMENT.
(a) Tenant shall at any time upon not less than ten (10) days' prior
written notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full
force and effect) and the date to which the rent, security deposit, and
other charges are paid in advance, if any, and (ii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, or specifying such defaults, if any, which are claimed.
Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not
more than one (1) month's rent has been paid in advance.
(c) If Landlord desires to finance or refinance the Premises, or any
part thereof, Tenant hereby agrees to deliver to any lender designated by
Landlord such financial statements of Tenant as may be reasonably required
by such lender. Such statements shall include the past three (3) years,
financial statements of Tenant. All such financial statements shall be
received by Landlord in confidence and shall be used only for the purposes
herein set forth.
16.2 LANDLORD'S INTEREST. The term "Landlord," as used herein shall mean
only the owner or owners at the time in question of the fee title or a tenant' s
interest in a ground lease of the Premises. In the event of any transfer of
all liability as respects Landlord's obligations thereafter to be preformed,
provided that any funds in the hands of Landlord or the then grantor at the time
of such transfer, in which Tenant has an interest, shall be delivered to
grantee. The obligations contained in this Lease to be performed by Landlord
shall, subject as aforesaid, be binding on Landlord's successors and assigns,
only during their respective periods of ownership.
16.3 SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
16.4 INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
ten (10%) percent per annum from the date due. Payment of such interest shall
not excuse or cure any default by Tenant under this Lease.
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16.5 TIME OF ESSENCE. Time is of the essence.
16.6 CAPTIONS. Article and paragraph captions are not a part hereof.
16.7 INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification.
16.8 WAIVERS. No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval of
any act shall not be deemed to render unnecessary the obtaining of Landlord's
consent to or approval of -any subsequent act by Tenant. The acceptance of rent
hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of
any provision hereof, other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such rent.
16.9 RECORDING. Tenant shall not record this Lease. Any such recordation
shall be a breach under this Lease.
16.10 HOLDING OVER. If Tenant remains in possession of the Premises or
any part thereof after the expiration of the term hereof with the express
written consent of Landlord, such occupancy shall be a tenancy from month to
month at a rental in the amount of the last monthly rental plus all other
charges payable hereunder, and upon the terms hereof applicable to
month-to-month tenancy.
16.11 CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive, but shall wherever possible, be cumulative with all other
remedies at law or in equity.
16.12 COVENANTS AND CONDITIONS. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.
16.13 BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Tenant and subject to the provisions of
Article 16.2, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the state
where the Premises are located.
16.14 SUBORDINATION.
(a) This Lease, at Landlord's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for
security now or hereafter placed upon the real property of which the
Premises are a part and to any and all 'advances made on the security
thereof and to all renewals, modifications, consolidations, replacements
and extensions thereof. Notwithstanding such subordination, Tenant's
right to quiet possession of the Premises shall not be disturbed if Tenant
is not in default and so long as Tenant shall pay the rent and observe and
perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground
lessor shall elect to have this Lease prior to the lien of its mortgage,
deed of trust or ground lease, and shall give written notice thereof to
Tenant, this Lease shall be deemed prior to such mortgage, deed of trust,
or ground lease, whether this Lease is dated
<PAGE>
prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
(b) Tenant agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any mortgage,
deed of trust or ground lease, as the case may be, and failing to do so
within ten (10) days after written demand, does hereby make, constitute and
irrevocably appoint Landlord as Tenant's attorney in fact and in Tenant's
name, place and stead, to do so.
16.15 ATTORNEY'S FEES. If either party named herein brings an action
to enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court.
16.16 LANDLORD'S ACCESS. Landlord and Landlord's agents shall have the
right to enter the Premises at reasonable times for the purpose of inspecting
the same, showing the same to prospective purchasers, or lenders, and making
such alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Landlord may deem necessary or desirable.
Landlord may at any time place on or about the Premises any ordinary "For Sale"
signs and Landlord may at any time during the last one hundred twenty (120) days
of the term hereof place on or about the Premises any ordinary "For Sale or
Lease" signs, all without rebate of rent or liability to Tenant.
16.17 AUCTIONS. Tenant shall not place any auction sign upon the
Premises or conduct any auction thereon without Landlord's prior written
consent.
16.18 MERGER. The voluntary or other surrender of this Lease by
Tenant, or mutual cancellation thereof, shall not work a merger, and shall, at
the option of Landlord, terminate all or any existing subtenancies or may, at
the option of Landlord, operate as an assignment to Landlord of any or all of
such subtenancies.
16.19 CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
16.20 LANDLORD'S LIABILITY. If Landlord is a limited partnership, the
liability of the partners of the Landlord pursuant to this Lease shall be
limited to the assets of the partnership; and Tenant, its successors and assigns
hereby waive all rights to proceed against any of the partners, or the officers,
shareholders, or directors of any corporate partner of Landlord, except to the
extent of their interest in the partnership. The term "Landlord", as used in
this Article, shall mean only the owner or owners at the time in question of the
fee title or its interest in the ground lease of the Premises, and in the event
of any transfer of such title or interest, Landlord herein named (and in case of
any subsequent transfers the then grantor) shall be relieved from and after the
date of such transfer of all liability as respects Landlord's obligations
thereafter to be performed by Landlord shall, subject as aforesaid, be binding
on Landlord's successors and assigns, only during their respective period of
ownership.
17. PERFORMANCE BOND. At any time Tenant either desires to or is required to
make any repairs, alternations, additions, improvements or utility installation
thereon, pursuant to Articles 7.4 or 9.2 herein, or otherwise, Landlord may at
his sole option require Tenant, at
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Tenant's sole cost and expense, to obtain and provide to Landlord a lien and
completion bond in an amount equal to one and one-half (1 1/2) times the
estimated cost of such improvements, to insure Landlord against liability for
mechanics' and materialmen's liens and to insure completion of the work.
18. BROKERS. The parties hereto acknowledge that N/A were the real estate
brokers that represented the parties herein, and that no other commissions are
due to any brokers whatsoever, other than the above-named brokers.
19. NOTICES. Whenever under this Lease provision is made for any demand,
notice or declaration of any kind, or where it is deemed desirable or necessary
by either party to give or serve such notice, demand or declaration to the other
party, it shall be in writing and served either personally or sent by United
States mail, postage prepaid, addressed at the addresses set forth herein below:
To Landlord at: P.O. BOX 42262
HOUSTON, TX 77242-2262
713/975-6969
To Tenant at:
-----------------------------
20. INSURING PARTY. The insuring party under this Lease shall be the Landlord,
unless Tenant should decide to carry its own building coverage, in which case
Tenant must immediately notify Landlord. See Condition #23.
21. LANDLORD' S LIEN. As security for Lessee's payment of rent, damages and
all other payments required to be made by this Lease, Lessee hereby grants to
Lessor a lien upon all property of Lessee now or subsequently located upon the
leased premises. If Lessee abandons or vacates any substantial portion of the
leased premises or is in default in the payment of any rentals, damages or other
payments required to be made by this Lease or is in default of any other
provision of this Lease, Lessor may enter upon the leased premises, by picking
or changing locks if necessary, and take possession of all or any part of the
personal. property, and may sell all or any part of the personal property at a
public or private sale, in one or successive sales, with or without notice, to
the highest bidder for cash, and, on behalf of Lessee, sell and convey all or
part of the personal property to the highest bidder, delivering to the highest
bidder all of Lessee's title and interest in the personal property sold to him.
The proceeds of the sale of the personal property shall be applied by Lessor
toward the reasonable costs and expenses of the sale, including attorneys fee
and then toward the payment of all sums then due by Lessee to Lessor under the
terms of this Lease: any excess remaining shall be paid to Lessee or any other
person entitled thereto by Law.
22. UNIFORM COMMERCIAL CODES. To the extent, if any, this Lease grants Lessor
any lien or lien rights greater than provided by the laws of this State (the
State in which the Teased premises are located) pertaining to "Landlord's
Liens", this Lease is intended as and constitutes a security agreement within
the meaning of the Uniform Commercial Code of this State and Lessor, in
addition to the rights prescribed in this Lease, shall have all of the rights,
titles, liens and interests in and to Lessee's property now or hereafter located
upon the leased premises which are granted a secured party, as that term is
defined, under this State's Uniform Commercial Code to secure the payment to
Lessor of the various amounts provided in this Lease. Lessee will on request
execute and deliver to Lessor a financing statement for the purpose of
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perfecting Lessor's security interest under this Lease or Lessor may file this
Lease or a copy thereof as a financing statement.
23. Coverage afforded under Landlord's Texas Commercial Package Policy shall be
for the full replacement cost of the building, all risk, subject to a $1,000.00
deductible. Tenant shall be responsible for the deductible on any loss. Should
Tenant desire coverage on plate glass, signs or fences, Tenant should discuss
with Landlord. Depending on the policy year, such coverage may or may not be
included in the basic coverage.
24. Landlord grants Tenant a ninety (90) day warranty on all systems in the
building, i.e. plumbing, electrical, HVAC, etc. Thereafter, Condition #7 shall
apply.
25. Assuming Tenant is not in default under any term or condition of this Lease
and by giving Landlord notice in writing ninety (90) days prior to its
expiration, Tenant shall have the option to renew this Lease for three (3) years
upon the same terms and conditions contained herein, except for the monthly
rental rate which shall be the lesser of 50% of the Consumer Price Index (CPI)
increase during the primary term of this Lease or 10t.
26. Tenant shall take the Premises in an "as is" condition.
27. Upon full execution hereof, Tenant shall take immediate occupancy; however,
Lease payments shall not commence until December 1, 1997.
The parties hereto have executed this Lease at the place and on the dates
specified immediately adjacent to their respective signatures.
Executed at TRUST MANAGEMENT COMPANY
---------------------------
On By
---------------------------------- ----------------------------------
Robert B. Cole
"LANDLORD"
Executed at MLC ENTERPRISES INC.
------------------------- ------------------------------------
Dba MARINE & INDUSTRIAL SUPPLY
On By: /s/ Michael L. Cooper
---------------------------------- -------------------------------
Michael L. Cooper, President
By: /s/ Michael L. Cooper
-------------------------------
Michael L. Cooper, Individually
"Tenant"
If this Lease has been filled in it has been prepared for submission to your
attorney for his approval. No representation recommendation is made by the real
estate broker or its agents or employees as to the legal sufficiency, legal
effect, or tax consequences of this Lease or the transaction relating thereto.
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Exhibit 10.27
SUBLEASE AGREEMENT
This "Sublease Agreement" by and between INPUT/OUTPUT, INC., ("Sublessor"), who
hereby agrees to sublease the 10905 Metronome Street space, Houston, Harris Co.,
Texas, to MARINE & INDUSTRIAL SUPPLY CO., ("Sublessee"), on a three (3) month
basis for Forty Nine Hundred and Fifty Dollars ($4,950.00/Month) per month on a
net/net/net basis. This Sublease should begin on October 8, 1998, upon first
month's payment and execution of subject agreement by Marine & Industrial Supply
Co. Both parties acknowledge Grubb & Ellis as the only broker, involved in this
transaction and shall be paid by Sublessor by separate agreement. Either party
may cancel this Sublease by giving the other party fifteen (15) days prior
written notice. If the Sublessee is in an holdover position, he agrees to pay
two hundred (200%) percent of the above referenced monthly rental to Sublessor.
All other terms and conditions and precedents of the Master Lease attached
hereto and thereby made a part hereof shall prevail.
Agreed and Accepted this 8th day of October, 1998.
SUBLESSOR: SUBLESSEE:
By: /s/ Ronald A. Harris By: /s/ Michael Moore
---------------------------------- --------------------------
Ronald A. Harris Michael Moore
Vice President and Controller
<PAGE>
EXHIBIT 10.28
STANDARD COMMERCIAL LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01 PARTIES. This lease agreement ("Lease") is entered into by and between
the following Lessor and Lessee:
VANTAGE HOUSTON, INC. AS AGENT FOR GREENBRIAR HOLDINGS HOUSTON, LTD. ("Lessor")
MLC ENTERPRISES, INC. DBA MARINE & INDUSTRIAL SUPPLY ("Lessee")
1.02 LEASED PREMISES. In consideration of the rents, terms, provisions and
covenants of this lease, Lessor hereby leases, lets and demises to Lessee the
following described premises ("leased premises"):
3,915 (APPROXIMATE SQ. FT.) (JOB NO.)
- -------------------------------------------------------------------------------
PINEWAY SERVICE CENTER II (Name of Building or project)
- ---------------------------------------------
4455 SOUTH PINEMONT, SUITE 204 (Street address/suite number)
- ---------------------------------------------
HOUSTON, TEXAS 77041 (City, State, and Zip Code)
- ---------------------------------------------
1.03 TERM. Subject to and upon the conditions set forth herein, the term of
this Lease shall commence on (DECEMBER 15, 1996 the "commencement date") and
shall terminate 36 months thereafter.
1.04 BASE RENT AND SECURITY DEPOSIT. Base rent is $1,570.00 per month.
Security deposit is $1,570.00.
1.05. ADDRESSES.
Lessor's Address Lessee's Address:
4635 Southwest Freeway 4544 South Pinemont
Suite 425 Suite 204
Houston, Texas 77027 Houston, Texas 77041
1.06 PERMITTED USE. General offices/Storage and distribution of marine &
industrial supplies.
ARTICLE 2.00 RENT
2.01 BASE RENT. Lessee agrees to pay monthly as base rent during the term
of this Lease the sum of money set forth in section 1.04 of this Lease, which
amount shall be payable to Lessor at the address shown above. One monthly
installment of rent shall be due and payable on the date of execution of this
Lease by Lessee for the first month's rent and a like monthly installment shall
be due and payable on or before the first day of each calendar month succeeding
the commencement date or completion date during the term of this lease;
provided, if the commencement date or the completion date other than be the
first day of a calendar month, the monthly rental set forth above shall be
prorated to the end of that calendar month, and all
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succeeding installments of rent shall be payable on or before the first day of
each succeeding calendar month during the term of this Lease. Lessee shall pay,
as additional rent, all other sums due under this Lease.
2.02 OPERATING EXPENSES. In the event Lessor's operating expenses for
the building and/or project of which the leased premises are in part shall,
in any calendar year during the term of this Lease, exceed the sum of $*1.30
per square foot, Lessee agrees to pay as additional rent Lessee's pro rata
share of such excess operating expenses. Lessor nay invoice Lessee monthly
for Lessee's pro rata share of the estimated operating expenses for each
calendar year, which amount shall be adjusted each year band upon anticipated
operating expenses. Within nine months following the close of each calendar
year, Lessor shall provide Lessee an accounting showing in reasonable detail
all computations of additional rent due under this section. In the event the
accounting shows that the total of the monthly payments made by Lessee
exceeds the amount of additional rent due by Lessee under this section the
accounting shall be accompanied by a refund. In the event the accounting
shows that the total of the monthly payments made by Lessee is less than the
amount of additional rent due by Lessee under this section, the account shall
be accompanied by an invoice for the additional rent. Notwithstanding any
other provision in this Lease, during the year in which the Lease terminates,
Lessor, prior to the termination date, shall have the option to invoice
Lessee for Lessee's pro rata share of the excess operating expenses based
upon the previous year's operating expenses. If this Lease shall terminate on
a day other than the last day of a calendar year, the amount of any
additional rent payable by Lessee applicable to the year in which such
termination shall occur shall be prorated on the ratio that the number of
days from the commencement of the calendar year to and including the
termination date bears to 365. Lessee shall have the right, at its own
expense and within a reasonable time, to audit Lessor's books relevant to the
additional rent payable under this section. Lessee agrees to pay any
additional rent due under this section within ten days following receipt of
the invoice or accounting showing additional rent due.
*OR BASE YEAR 1996, WHICHEVER IS HIGHER
2.03 DEFINITION OF OPERATING EXPENSES. The term "operating expenses"
includes all expenses incurred by Lessor with respect to the maintenance and
operation of the building of which the leased premises are a part, including,
but not limited to, the following: maintenance, repair and replacement costs;
security; management fees, wages and benefits payable to employees of Lessor
whose duties are directly connected with the operation and maintenance of the
building; all services, utilities, supplies, repairs, replacements or other
expenses for maintaining and operating the common parking and plaza areas; the
cost, including interest, amortized over its useful life, of any capital
improvement made to the building by Lessor after the date of this Lease which is
required under any governmental law or regulation that was not applicable to the
building at the time it was constructed: the cost, including interest, amortized
over its useful life, of installation of any device or other equipment which
improves the operating efficiency of any system within the leased premises and
thereby reduces operating expenses; all other expenses which would generally be
regarded as operating and maintenance expenses which would reasonably be
amortized over a period not to exceed five years; all real property taxes and
installments of special assessment, including dues and assessments by means of
deed restrictions and/or owners' associations which accrue against the building
of which the leased premises are a part during the term of this Lease; and all
insurance premiums Lessor is required to pay or deems necessary to pay,
including public liability insurance, with respect to the building. The term
operating expenses does not include the following; repairs. restoration or other
work occasioned
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by fire, wind, the elements or other casualty; income and franchise taxes of
Lessor; expenses incurred in leasing to or procuring of lessees, leasing
commissions, advertising expenses and expenses for their renovating of space
for new lessee; interest or principal payments on any mortgage or other
indebtedness of Lessor; compensation paid to any employee of Lessor above the
grade of property manager; any depreciation allowance or expense; or
operating expenses which are the responsibility of Lessee.
2.04 LATE PAYMENT CHARGE. Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor on or
before the tenth day of the month for which the rent is due, or if any other
payment due Lessor by Lessee is not received by Lessor on or before the tenth
day of the month next following the month in which Lessee was invoiced, a late
payment charge of five percent of such past due amount shall become due and
payable in addition to such amounts owed under this Lease.
2.05 INCREASE IN INSURANCE PREMIUMS. If an increase in any insurance
premiums paid by Lessor for the building is caused by Lessee's use of the leased
premises in a manner other than as set forth in section 1.06, or if Lessee
vacates the leased premises and causes an increase in such premiums, then Lessee
shall pay as additional rent the amount of such increase to Lessor.
2.06 SECURITY DEPOSIT. The security deposit set forth above shall be held
by Lessor for the performance of Lessee's covenants and obligations under this
Lease, it being expressly understood that the deposit shall not be considered an
advance payment of rental or a measure of Lessor's damage in case of default by
Lessee. Upon the occurrence of any event of default by Lessee or breach by
Lessee of Lessee's covenants under this Lease, Lessor may, from time to time,
without prejudice to any other remedy, use the security deposit to the extent
necessary to make good any arrears of rent or to repair any damage or injury, or
pay any expense or liability incurred by Lessor as a result of the event of
default or breach of covenant, and any remaining balance of the security deposit
shall be returned by Lessor to Lessee upon termination of this Lease. If any
portion of the security deposit is so used or applied, Lessee shall upon ten
days written notice from Lessor, deposit with Lessor by cash or cashier's check
an amount sufficient to restore the security deposit to its original amount.
2.07 HOLDING OVER. In the event that Lessee does not vacate the leased
premises upon the expiration or termination of this Lease, Lessee shall be a
tenant at will for the holdover period and all of the terms and provisions of
this Lease shall be applicable during that period, except that Lessee shall
pay Lessor as base rental for the period of such holdover an amount equal to
two times the base rent which would have been payable by Lessee had the
holdover period been a part of the original term of this Lease. Lessee agrees
to vacate and deliver the leased premises to Lessor upon Lessee's receipt of
notice from Lessor to vacate. The rental payable during the holdover period
shall be payable to Lessor on demand. No holding over by Lessee, whether with
or without the consent of Lessor, shall operate to extend the term of this
Lease.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 USE. Lessee warrants and represents to Lessor that the leased premises
shall be used and occupied only for the purpose as set forth in section 1.06.
Lessee shall occupy the leased premises, conduct its business and control its
agents, employees, invitees and visitors in
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such a manner as is lawful, reputable and will not create a nuisance. Lessee
shall not permit any operation which emits any odor or matter which intrudes
into other portions of the building, use any apparatus or machine which makes
undue noise or causes vibration in any portion of the building or otherwise
interfere with, annoy or disturb any other lessee in its normal business
operations or Lessor in its management of the building. Lessee shall neither
permit any waste on the leased premises nor allow the leased premises to be
used in any way which would, in the opinion of Lessor, be extra hazardous on
account of fire or which would in any way increase or render void the fire
insurance on the building. Lessee warrants to Lessor that the insurance
questionnaire (filled out by Lessee, signed and presented to Lessor prior to
the execution of this Lease) accurately reflects Lessee's original intended
use of the leased premises. The insurance questionnaire is made a part of
this Lease by reference as though fully copied herein. If at any time during
the term of this Lease the State Board of Insurance or other insurance
authority disallows any of Lessor's sprinkler credits or imposes an
additional penalty or surcharge in Lessor's insurance premiums because of
Lessee's original or subsequent placement or use of storage racks or bins,
method of storage or nature of Lessee's inventory or any other act of Lessee,
Lessee agrees to pay as additional rent the increase (between fire walls) in
Lessor's insurance premiums.
3.02 SIGNS. No sign of any type or description shall be erected, placed or
painted in or about the leased premises or project except those signs submitted
to Lessor in writing, and approved by Lessor in writing, and which signs are in
conformance with lessor's sign criteria established for the project.
3.03 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. * Lessee, at Lessee's
sole cost and expense, shall comply with all laws, ordinances, orders, rules
and regulations of state, federal, municipal or other agencies or bodies
having jurisdiction over use, condition and occupancy of the leased premises.
Lessee will comply with the rules and regulations of the building adopted by
Lessor which art, set forth on a schedule attached to this Lease. Lessor
shall have the right at all times to change and amend the rules and
regulations in any reasonable manner as may be deemed advisable for the
safety, care, cleanliness, preservation of good order and operation or use of
the building or the leased premises. All changes and amendments to the rules
and regulations of the building will be sent by Lessor to Lessee in writing
and shall thereafter be carried out and observed by Lessee. *SEE ARTICLE
16.02 FOR CONTINUATION.
3.04 WARRANTY OF POSSESSION. Lessor warrants that it has the right and
authority to execute this Lease, and Lessee, upon payment of the required rents
and subject to the terms, conditions, covenants and agreements contained in this
Lease, shall have possession of the leased premises during the full term of this
Lease as well as any extension of renewal thereof. Lessor shall not be
responsible for the acts or omissions of any other lessee or third party that
may interfere with Lessee's use and enjoyment of the leased premises.
3.05 INSPECTION. Lessor or its authorized agents shall at any and all
reasonable times have the right to enter the leased premises to inspect the
same, to supply janitorial service or any other service to be provided by
Lessor, to show the leased premises to prospective purchasers or lessees, and to
alter, improve or repair the leased premises or any other portion of the
building. Lessee hereby waives any claim for damages for injury or inconvenience
to or interference with Lessee's business, any loss of occupancy or use of the
leased premises, and any other loss occasioned thereby. Lessor shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the leased premises. Lessee shall not change Lessor's lock system
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or in any other manner prohibit Lessor from entering the leased premises.
Lessor shall have the right to use any and all means which lessor may deem
proper to open any door in an emergency without liability therefor.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 BUILDING SERVICES. Lessor shall provide the normal utility service
connections to the building. Lessee shall pay the cost of all utility services,
including, but not limited to, initial connection charges, all charges for gas,
electricity, water, sanitary and storm sewer service, and for all electric
lights. However, in a multi-occupancy building, Lessor may provide water to the
leased premises, in which case Lessee agrees to pay to Lessor its pro rata share
of the cost of such water. Lessee shall pay all costs caused by Lessee
introducing excessive pollutants or solids other than ordinary human waste into
the sanitary sewer system, including permits, fees and charges levied by any
governmental subdivision for any such pollutants or solids. Lessee shall be
responsible for the installation and maintenance of any dilution tanks, holding
tanks, settling tanks, sewer sampling devices, sand traps, grease traps or
similar devices as may be required by any governmental subdivision for Lessee's
use of the sanitary sewer system. If the leased premises are in a
multi-occupancy building, Lessee shall pay all surcharges levied due to Lessee's
use of sanitary sewer or waste removal services insofar as such surcharge affect
Lessor or other lessees in the building. Lessor shall not be required to pay for
any utility service, supplies or upkeep in connection with the leased premises
or building.
4.02 THEFT OR BURGLARY. Lessor shall not be liable to Lessee for losses to
Lessee's property or personal injury caused by criminal acts or entry by
unauthorized persons into the leased Premises or the building.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 LESSOR REPAIRS. Lessor shall not be required to make any improvements,
replacements or repairs of any kind or character to the leased premises or the
project during the term of this Lease except as are set forth in this section.
Lessor shall maintain only the roof, foundation, parking and common areas, and
the structural soundness of the exterior walls (excluding windows, window glass,
plate glass and doors). Lessor's costs of maintaining the items set forth in
this section are subject to the additional rent provisions in section 2.02.
Lessor shall not be liable to Lessee, except as expressly provided in this
Lease, for any damage or inconvenience, and Lessee shall not be entitled to any
abatement or reduction of rent by reason of any repairs, alterations or
additions made by Lessor under this Lease.
5.02 LESSEE REPAIRS. Lessee shall, at its sole cost and expense, maintain,
repair and replace all other parts of the leased premises in good repair and
condition, including, but not limited to, heating, ventilating and air
conditioning systems, down spouts, fire sprinkler system, dock bumpers, lawn
maintenance, pest control and extermination, trash pick-up and removal, and
painting the building and exterior doors. Lessee shall repair and pay for any
damage caused by any act or omission of Lessee or Lessee's agents, employees,
invitees, licensees or visitors. If the leased premises are in a multi-occupancy
building or project, Lessor reserves the right to perform, on behalf of Lessee,
lawn maintenance, painting, and trash pick-up and removal; Lessee agrees to pay
Lessor, as additional rent, Lessee's pro rata share of the cost of such services
within ten days from receipt of Lessor's invoice, or Lessor may by monthly
invoice direct Lessee to prepay the estimated costs for the current calendar
year, and such amount shall be adjusted
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annually. If the leased premises are served by rail, Lessee agrees, if
requested by the railroad, to enter into a joint maintenance agreement with
the railroad and bear its pro rata share of the cost of maintaining the
railroad spur. If Lessee fails to make the repairs or replacements promptly
as required herein, Lessor may, at its option, make the repairs and
replacements and the cost of such repairs and replacements shall be charged
to Lessee as additional rent and shall become due and payable by Lessee
within ten days from receipt of Lessor's invoice. Costs incurred under this
section are the total responsibility of Lessee and do constitute operating
expenses under section 2.02.
5.03 REQUEST FOR REPAIRS. All requests for repairs or maintenance that are
the responsibility of Lessor pursuant to any provision of this Lease must be
made in writing to Lessor at the address in section 1.05.
5.04 LESSEE DAMAGES. Lessee shall not allow any damage to be committed on
any portion of the leased premises or building, and at the termination of this
Lease, by lapse of time or otherwise, Lessee shall deliver the leased premises
to Lessor in as good condition as existed at the commencement date of this
Lease, ordinary wear and tear expected. The cost and expense of any repairs
necessary to restore the condition of the leased premises shall be borne by
Lessee.
5.05 MAINTENANCE CONTRACT. Lessee shall at its sole cost and expense,
during the term of this Lease maintain a regularly scheduled preventative
maintenance/service contract with a maintenance contractor for the servicing
of all hot water, heating and air conditioning systems and equipment within
the leased premises. The maintenance contractor and contract must be
approved by Lessor and must include all services suggested by the equipment
manufacturer.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 LESSOR IMPROVEMENTS. If construction to the leased premises is to be
performed by Lessor prior to or during Lessee's occupancy, Lessor will complete
the construction of the improvements to the leased premises, in accordance with
plan and specifications agreed to by Lessor and Lessee, which plans and
specifications are made a part of this Lease by reference. Lessee shall execute
a copy of the plans and specifications and change orders, if applicable, setting
forth the amount of any costs to be borne by Lessee within seven days of receipt
of the plans and specifications. In the event Lessee fails to execute the plans
and specifications and change order within the seven day period, Lessor may, at
its sole option, declare this Lease cancelled or notify Lessee that the base
rent shall commence on the completion date even though the improvements to be
constructed by Lessor may not be complete. Any Changes or modifications to the
approved plans and specifications shall be made and accepted by written change
order or agreement signed by Lessor and Lessee and shall constitute an amendment
to this Lease.
6.02 LESSEE IMPROVEMENTS. Lessee shall not make or allow to be made any
alterations or physical additions in or to the leased premises without first
obtaining the written consent of Lessor, which consent may in the sole and
absolute discretion of Lessor be denied. Any alterations, physical additions or
improvements to the leased premises made by Lessee shall at once become the
property of Lessor and shall be surrendered to Lessor upon the termination of
this Lease provided, however, Lessor, at its option, may require Lessee to
remove any physical additions and/or repair any alterations in order to restore
the leased promises to the condition existing at the time Lessee took
possession, all costs of removal and/or alterations to be borne by
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Lessee. This clause shall not apply to moveable equipment or furniture owned
by Lessee, which may be removed by Lessee at the end of the term of this
Lease if Lessee is not then in default and if such equipment and furniture
are not then subject to any other rights, liens and interest of Lessor.
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01 SUBSTANTIAL DESTRUCTION. If the leased premises should be totally
destroyed by fire or other casualty, or if the leased premises should be damaged
so that rebuilding cannot reasonably be completed within ninety working days
after the date of written notification by Lessee to Lessor of the destruction,
this Lease shall terminate and the rent shall be abated for the unexpired
portion of the Lease, effective as of the date of the written notification.
7.02 PARTIAL DESTRUCTION. If the leased premises should be partially
damaged by fire or other casualty, and rebuilding or repairs can reasonably be
completed within ninety working days from the date of written notification by
Lessee to Lessor of the destruction, this Lease shall not terminate, and Lessor
shall at its sole risk and expense proceed with reasonable diligence to rebuild
or repair the building or other improvements to substantially the same condition
in which they existed prior to the damage. If the leased premises are to be
rebuilt or repaired and are untenantable in whole or in part following the
damage, and the damage or destruction was not caused or contributed to by act or
negligence of Lessee, its agents, employees, invitees or those for whom Lessee
is responsible, the rent payable under this Lease during the period for which
the leased premises are untenantable shall be adjusted to such an extent as may
be fair and reasonable under the circumstances. In the event that Lessor fails
to complete the necessary repairs or rebuilding within ninety working days from
the date of written notification by Lessee to Lessor of the destruction, Lessee
may at its option terminate this Lease by delivering written notice of
termination to Lessor, whereupon all rights and obligations under this Lease
shall cease to exist.
7.03 PROPERTY INSURANCE. Lessor shall at all times during the term of this
Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and binding upon some solvent insurance company, insuring the
building against all risk of direct physical loss in an amount equal to at least
ninety percent of the full replacement cost of the building structure and its
improvements as of the date of the loss: provided, Lessor shall not be obligated
in any way or manner to insure any personal property (including, but not limited
to, any furniture, machinery, goods or supplies) of Lessee upon or within the
leased premises, any fixtures installed or paid for by Lessee upon or within the
leased premises, or any improvements which Lessee may construct on the leased
premises. Lessee shall have no right in or claim to the proceeds of any policy
of insurance maintained by Lessor even if the cost of such insurance is borne by
Lessee as set forth in article 2.00.
7.04 WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all right of recovery, claim, action or cause of action against
each other, their agents, officers and employees, for any loss or damage that
may occur to the leased premises, improvements to the building of which the
leased premises are a part, or personal property within the building, by reason
of fire or the elements, regardless of cause or origin including negligence of
Lessor or Lessee and their agents, officers and employees. Lessor and Lessee
agree immediately to give their respective insurance companies which have issued
policies of insurance covering all risk of direct physical loss,
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written notice of the terms of the mutual waivers contained in this section,
and to have its insurance policies properly endorsed, if necessary, to
prevent the invalidation of the insurance coverages by reason of the mutual
waivers.
7.05 HOLD HARMLESS. Lessor shall not be liable to Lessee's employees
agents, invitees, licensees or visitors, or to any other person, for an injury
to person or damage to property on or about the leased premises caused by any
act or omission of Lessee, its agents, servants or employees, or of any other
person entering upon the leased premises under express or implied invitation by
Lessee, or caused by the improvements located on the leased premises becoming
out of repair, the failure or cessation of any service provided by Lessor
(including security service and devices), or caused by leakage of gas, oil,
water or steam or by electricity emanating from the leased premises. Lessee
agrees to indemnify and hold harmless Lessor of and from any loss attorney's
fees, expenses or claims arising out of any such damage or injury.
ARTICLE 8.00 CONDEMNATION
8.01 SUBSTANTIAL TAKING. If all or a substantial part of the leased
premises are taken for any public or quasi-public use under any governmental
law, ordinance or regulation, or by right of eminent domain or by purchase in
lieu thereof, and the taking would prevent or materially interfere with the use
of the leases premises for the purpose for which it is then being used, this
Lease shall terminate and the rent shall be abated during the unexpired portion
of this Lease effective on the date physical possession is taken by the
condemning authority. Lessee shall have no claim to the condemnation award or
proceeds in lieu thereof.
8.02 PARTIAL TAKING. If a portion of the leased premises shall be taken for
any public of quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in section 8.01 above, Lessor shall at
Lessor's sole risk and expense, restore and reconstruct the building and other
improvements on the leased premises to the extent necessary to make it
reasonably tenantable. The rent payable under this Lease during the unexpired
portion of the term shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. Lessee shall have no claim to the
condemnation award or proceeds in lieu thereof.
ARITCLE 9.00 ASSIGNMNT OR SUBLEASE
9.01 LESSOR ASSIGNMENT. Lessor shall have the right to sell, transfer or
assign, in whole or in part its rights and obligations under this Lease and in
the building. Any such sale, transfer or assignment shall operate to release
Lessor from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer.
9.02 LESSEE ASSIGNMENT. Lessee shall not assign, in whole or in part, this
Lease, or allow it to be assigned in whole or in part, by operation of law or
otherwise (including without limitation by transfer of a majority interest of
stock, merger, or dissolution, which transfer of majority interest of stock,
merger or dissolution shall be deemed an assignment) or mortgage or pledge, the
same, or sublet the leased premises, in whole or in part, without the prior
written consent of Lessor, and in no event shall any such assignment or sublease
ever release Lessee or any guarantor from any obligation or liability hereunder.
No assignee or subleases of the leased premises or any portion thereof my assign
or sublet the leased premises or any portion thereof.
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9.03 CONDITION OF ASSIGNMENT. If Lessee desires to assign or sublet all or
any part of the leased premises, it shall so notify Lessor at least thirty days
in advance of the date on which Lessee desires to make such assignment or
sublease. Lessee shall provide Lessor with a copy of the proposed assignment or
sublease and such information as Lessor might request concerning the proposed
subleases or assignee to allow Lessor to make informed judgements as to the
financial condition, reputation, operations and general desirability of the
proposed sublessee or assignee. Within fifteen days after Lessor's receipt of
Lessee's proposed assignment or sublease and all required information concerning
the proposed sublessee or assignee, Lessor shall have the following options: (1)
cancel this Lease as to the leased premises or portion thereof proposed to be
assigned or sublet; (2) consent to the proposed assignment or sublease, and, if
the rent due and payable by any assignee or sublessee under any such permitted
assignment or sublease (or a combination of the rent payable under such
assignment or sublease plus any bonus or any other consideration or any payment
incident thereto) exceeds the rent payable under this Lease for such space,
Lessee shall pay to Lessor all such excess rent and other excess consideration
within ten days following receipt thereof by Lessee: or (3) refuse, in its sole
and absolute discretion and judgment, to consent to the proposed assignment or
sublease which refusal shall be deemed to have been excised unless Lessor gives
Lessee written notice providing otherwise. Upon the occurrence of an event of
default if all or any part of the leased premises are then assigned or sublet,
Lessor, in addition to any other remedies provided by this Lease or provided by
law may at its option, collect directly from the assignee or sublessee all rents
becoming due to Lessee by reason of the assignment or sublease and Lessor shall
have a security interest in all properties on the leased premises to secure
payment of such sums. Any collection directly by Lessor from the assignee or
sublessee shall not be construed to constitute a novation or a release of Lessee
or any guarantor from the further performance of its obligations under this
Lease.
9.04 RIGHTS OF MORTGAGEE. Lessee accepts this Lease subject and subordinate
to any recorded mortgage or deed of trust lien presently existing or hereafter
created upon the building or project and to all existing recorded restrictions,
covenants, casements and agreements with respect to the building or project.
Lessor is hereby irrevocably vested with full power and authority to subordinate
Lessee's interest under this Lease to any first mortgage or deed of trust lien
hereafter placed on the leased premises, and Lessee agrees upon demand to
execute additional instruments subordinating this Lease as Lessor may require.
If the interest of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first mortgage or deed
of trust on the leased premises, Lessee shall be bound to the transferee
(sometimes called the "Purchaser") at the option of the Purchaser, under the
terms, covenants and conditions of this Lease for the balance of the term
remaining, including any extensions or renewals, with the same force and effect
as if the Purchaser were Lessor under this Lease, and, if requested by the
Purchaser, Lessee agrees to atorn to the Purchaser, including the first mortgage
under any such mortgage if it be the Purchaser, as it's Lessor.
9.05 ESTOPPEL CERTIFICATES. Lessee agrees to furnish, from time to time,
within ten days after receipt of a request from Lessor or Lessor's mortgage a
statement certifying, if applicable, the following: Lessee is in possession of
the leased premises: the leased premises are acceptable: the Lease is in full
force and effect: the Lease is unmodified: Lessee claims no present charge,
lien, or claim of offset against rent: the rent is paid for the current month,
but is not prepaid for more than one month and will not be prepaid for more than
one month in advance: there is no existing default by reason of some act or
omission by Lessor; and such other matters as may be reasonably required by
Lessor or Lessor's mortgagee. Lessee's failure to deliver such statement, in
addition to being a default under this Lease, shall be deemed to
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establish conclusively that this Lease is in full force and effect except as
declared by Lessor, that Lessor is not in default of any of its obligations
under this Lease and that Lessor has not received more than one month's rent
in advance.
ARTICLE 10.00 LIENS
10.01 LANDLORD'S LIEN. As security for payment of rent, damages and all
other payments required to be made by this Lease, Lessee hereby grants to Lessor
a lien upon all property of Lessee now or subsequently located upon the leased
premises. If Lessee abandons or vacates any substantial portion of the leased
premises or is in default in the payment of any rentals, damages or other
payments required to be made by this Lease or is in default of any other
provision of this Lease, Lessor may enter upon the Leased premises, by picking
or changing locks if necessary, and take possession of all or any part of the
personal property, and may sell all or any part of the personal property at a
public or private sale, in one or successive sales, with or without notice, to
the highest bidder for cash, and, on behalf of Lessee, sell and convey all or
part of the personal property to the highest bidder, delivering to the highest
bidder all of Lessee's title and interest in the personal property sold. The
proceeds of the sale of the personal property shall be applied by Lessor toward
the reasonable costs and expenses of the sale, including attorney's fees, and
then toward the payment of all sums then due by Lessee to Lessor under the terms
of this Lease. Any excess remaining shall be paid to Lessee or any other person
entitled thereto by law.
10.02 UNIFORM COMMERCIAL CODE. This Lease is intended as and constitutes a
security agreement within the meaning of the Uniform Commercial Code of the
state in which the leased premises are situated. Lessor, in addition to the
rights prcscribcd in this Lease, shall have all of the rights, titles, liens and
interests in and to Lessee's property, now or hereafter located upon the leased
premises, which may be granted a secured party, as that term is defined, under
the Uniform Commercial Code to secure to Lessor payment of all sums due and the
full performance of all Lessee's covenants under this Lease. Lessee will on
request execute and deliver to Lessor a financing statement for the purpose of
perfecting Lessor's security interest under this Lease or Lessor may file this
Lease or a copy thereof as a financing statement. Unless otherwise provided by
law and for the purpose of exercising any right pursuant to this section, Lessor
and Lessee agree that reasonable notice shall be met if such notice is given by
ten days written notice, certified mail, return receipt requested, to Lessor or
Lessee at the addresses specified herein.
ARTICLE 11.00 DEFAULT AND REMEDIES
11.01 DEFAULT BY LESSEE. The following shall be deemed to be events of
default by Lessee under this Lease: (1) Lessee shall fail to pay when due any
installment of rent or any other payment required pursuant to this Lease; (2)
Lessee shall abandon any substantial portion of the leased premises; (3) Lessee
shall fail to comply with any term, provision or covenant of this Lease, other
than the payment of rent, and the failure is not cured within ten days after
written notice to Lessee; (4) Lessee shall file a petition or be adjudged
bankrupt or insolvent under any applicable federal or state bankruptcy or
insolvency law or admit that it cannot meet its financial obligations as they
become due; or a receiver or trustee shall be appointed for all or substantially
all of the assets of Lessee; or Lessee shall make, a transfer in fraud of
creditors or shall make an assignment for the benefit of creditors; or (5)
Lessee shall do or permit to be done any act which results in a lien being filed
against the leased premises or the building and/or project of which the leased
premises are a part.
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11.02 REMEDIES FOR LESSEE'S DEFAULT. Upon the occurrence of any event of
default set forth in this Lease, Lessor shall have the option to pursue any
one or more of the remedies set forth herein without any notice or demand.
(1) Lessor may enter upon and take possession of the leased premises, by
picking or changing locks if necessary, and lock out, expel or remove Lessee
and any other person who may be occupying all or any part of the leased
premises without being liable for any claim for damages, and relent the
leased premises on behalf of Lessee and receive the rent directly by reason
of the reletting. Lessee agrees to pay Lessor on demand any deficiency that
may arise by reason of any reletting of the leased premises; further, Lessee
agrees to reimburse Lessor for any expenditures made by it in order to relet
the leased premises, including, but not limited to, remodeling and repair
costs. (2) Lessor may enter upon the leased premises, by picking or changing
locks if necessary, without being liable for any claim for damages, and do
whatever Lessee is obligated to do under the terms of this Lease. Lessee
agrees to reimburse Lessor on demand for any expenses which Lessor may incur
in effecting compliance with Lessee's obligations under this Lease; further,
Lessee agrees that Lessor shall not be liable for any damages resulting to
Lessee from effecting compliance with Lessee's obligations under this Lease
caused by the negligence of Lessor or otherwise. (3) Lessor may terminate
this Lease, in which event Lessee shall immediately surrender the leased
premises to Lessor, and if Lessee fails to surrender the leased premises,
Lessor may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the
leased premises, by picking or changing locks if necessary, and lock out,
expel or remove Lessee and any other person who may be occupying all or any
part of the leased premises without being liable for any claim for damages.
Lessee agrees to pay on demand the amount of all loss and damage which Lessor
may suffer by reason of the termination of this Lease under this section,
whether through inability to relet the leased premises on satisfactory terms
or otherwise. Notwithstanding any other remedy set forth in this Lease, in
the event Lessor has made rent concessions of any type or character, or
waived any base rent, and Lessee fails to take possession of the leased
premises on the commencement or completion date or otherwise defaults at any
time during the term of this Lease, the rent concessions, including any
waived base rent, shall be cancelled and the amount of the base rent or other
rent concessions shall be due and payable immediately as if no rent
concessions or waiver of any base rent had ever been granted. A rent
concession or waiver of the base rent shall not relieve Lessee of any
obligation to pay any other charge due and payable under this Lease including
without limitation any sum due under section 2.02. Notwithstanding anything
contained in this Lease to the contrary, this Lease may be terminated by
Lessor only by mailing or delivering written notice of such termination to
Lessee, and no other act or omission of Lessor shall be constructed as a
termination of this Lease.
ARTICLE 12.00 RELOCATION
12.01 RELOCATION OPTION. In the event Lessor determines to utilize the
leased premises for other purposes during the term of this Lease, Lessee agrees
to relocate to other space in the building and/or project designated by Lessor,
provided such other space is of equal or larger size than the leased premises.
12.02 EXPENSES. Lessor shall pay all out-of-pocket expenses of any such
relocation, including the expenses of moving and reconstruction of all Lessee
furnished and Lessor furnished improvements. In the event of such relocation,
this Lease shall continue in full force
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and effect without any change in the terms or conditions of this Lease, but
with new location substituted for the old location set forth in section 1.02
of this Lease.
ARTICLE 13.00 DEFINITIONS
13.01 ABANDON. "Abandon" means the vacating of all or a substantial portion
of the leased premise by Lessee, whether or not Lessee is in default of the
rental payments due under this Lease.
13.02 ACT OF GOD OR FORCE MAJEURE. An "Act Of God" or "force majeure" is
defined for purposes of this Lease as strike, lockouts, sitdowns, material or
restrictions by any governmental authority, unusual transportation delays,
riots, floods washouts, explosions, earthquakes, fire, storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections and any other cause not reasonably
within the control of Lessor and which by the exercise of due diligence Lessor
is unable, wholly or in part to prevent or overcome.
13.03 BUILDING OR PROJECT. "Building" or "project" as used in this Lease
means the building and/or project described in section 1.02, including the
leased premises and the land upon which the building or project is situated.
13.04 COMMENCEMENT DATE. "Commencement date" shall be the date set forth in
section 1.03. The commencement date shall constitute the commencement of the
term of this Lease for all purposes, whether or not Lessee has actually taken
possession.
13.05 COMPLETION DATE. "Completion date" shall be the date on which the
improvements erected and to be erected upon the leased premises shall have been
completed in accordance with the plans and specifications described in article
6.00. The completion date shall constitute the commencement of the term of this
Lease for all purposes, whether or not Lessee has actually taken possession.
Lessor shall use its best efforts to establish the completion date as the date
set forth in section 1.03. In the event that the improvements have not in fact
been completed as of that date, Lessee shall notify Lessor in writing of its
objections. Lessor shall have a reasonable time after delivery of the notice in
which to take such corrective action as may be necessary and shall notify Lessee
in writing as soon as it deems such corrective action has been completed and the
improvements are ready for occupancy. Upon completion of construction, Lessee
shall deliver to Lessor a letter accepting the leased premises as suitable for
the purposes for which they are let and the date of such letter shall constitute
the commencement of the term of this Lease. Whether or not Lessee has executed
such letter of acceptance, taking possession of the leased premises by Lessee
shall be deemed to establish conclusively that the improvements have been
completed in accordance with the plans and specifications, are suitable for the
purposes for which the leased premises are let, and that the leased premises are
in good and satisfactory condition as of the date possession was so taken by
Lessee except for latent defects, if any.
13.06 SQUARE FEET. "Square feet" or "square foot" as used in this Lease
includes the area contained within the leased premises together with a common
area percentage factor of the leased premises proportionate to the total
building area.
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ARTICLE 14.00 MISCELLANEOUS
14.01 WAIVER. Failure of Lessor to declare an event of default immediately
upon its occurrence, or delay in taking any action in connection with an event
of default shall not constitute a waiver of the default but Lessor shall have
the right to declare the default at any time and take such action as is lawful
or authorized under this Lease. Pursuit of any one or more of the remedies set
forth in article 11.00 above shall not preclude pursuit of any one or more of
the other remedies provided elsewhere in this Lease or provided by law, nor
shall pursuit of any remedy constitute forfeiture or waiver of any rent or
damages accruing to Lessor by reason of the violation of any of the terms,
provisions or covenants of this Lease. Failure by Lessor to enforce one or more
of the remedies provided upon an event of default shall not be deemed or
construed to constitute a waiver of the default or of any other violation or
breach of any of the terms, provisions and covenants contained in this Lease
14.02 ACT OF GOD. Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
or prevented by an act of God, force majeure or by Lessee.
14.03 ATTORNEY'S FEES. In the event Lessee defaults in the performance of
any of the terms, covenants, agreements or conditions contained in this Lease
and Lessor places in the hands of an attorney the enforcement of all or any part
of this Lease, the collection of any rent due or to become due or recovery of
the possession of the leased premises, Lessee agrees to pay Lessor's costs of
collection, including reasonable attorney's fees for the services of the
attorney, whether suit is actually filed or not.
14.04 SUCCESSORS. This Lease shall be binding upon and inure to the benefit
of Lessor and Lessee and their respective heirs, personal representatives,
successors and assigns. It is hereby covenanted and agreed that should Lessor's
interest in the leased premises cease to exist for any reason during the term of
this Lease, then notwithstanding the happening of such event this Lease
nevertheless shall remain unimpaired and in full force and effect, and Lessee
hereunder agrees to attorn to the then owner of the leased premises.
14.05 RENT TAX. If applicable in the jurisdiction where the leased premises
are situated, Lessee shall pay and be liable for all rental. sales and use taxes
or other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Lessor by Lessee under the terms of this
Lease. Any such payment shall be paid concurrently with the payment of the rent,
additional rent, operating expenses or other charge upon which the tax is based
as set forth above.
14.06 CAPTIONS. The captions appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or intent of any section.
14.07 NOTICE. All rent and other payments required to be made by Lessee
shall be payable to Lessor at the address set forth in section 1.05. All
payments required to be made by Lessor to Lessee shall be payable to Lessee at
the address set forth in section 1.05, or at any other address within the United
States as Lessee may specify from time to time by written notice. Any notice or
document required or permitted to be delivered by terms of this Lease shall be
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deemed to be delivered (whether or not actually received) when deposited in
the United States Mail, postage prepaid, certified mail, return receipt
requested addressed to the parties at the respective addresses set forth in
section 1.05.
14.08 SUBMISSION OF LEASE. Submission of this Lease to Lessor for signature
does not constitute a reservation of space or an option to lease. This Lease is
not effective until execution by and delivery to both Lessor and Lessee.
14.09 CORPORATE AUTHORITY. If Lessee executes this Lease as a corporation,
each of the persons executing this Lease on behalf of Lessee does hereby
personally represent and warrant that Lessee is a duly authorized and existing
corporation, that Lessee is qualified to do business in the state in which the
leased premises are located, that the corporation has full right and authority
to enter into this Lease, and that each person signing on behalf of the
corporation is authorized to do so. In the event any representation or warranty
is false, all persons who execute this lease shall be liable, individually, as
Lessee.
14.10 SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
14.11 LESSOR'S LIABILITY. It Lessor shall be in default under this Lease
and, if as a consequence of such default, Lessee shall recover a money judgment
against Lessor such judgment shall be satisfied only out of the right, title and
interest of Lessor in the building as the same may then be encumbered and
neither Lessor nor any person or entity comprising Lessor shall be liable for
any deficiency. In no event shall Lessee have the right to levy execution
against any property of Lessor nor any person or entity comprising Lessor other
than its interest in the building as herein expressly provided.
14.12 INDEMNITY. Lessor agrees to indemnify and hold harmless Lessee from
and against any liability or claim, whether meritorious or not, arising with
respect to any broker whose claim arises by, through or on behalf of Lessor.
Lessee agrees to indemnify and hold harmless Lessor from and against any
liability or claim, whether meritorious or not arising with respect to any
broker whose claim arises by, through or on behalf of Lessee.
ARTITCLE 15.00 AMENDMENT AND LIMITATION OF WARRANTIES
15.01 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY LESSEE AS A MATERIAL
CONSIDERATON FOR THE EXECUITON OF THIS LEASE, THAT THIS LEASE, WITH THE SPECIFIC
REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF THE
PARTIES; THAT THERE ARE AND WERE NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN
WRITING IN WRITING IN THIS LEASE.
15.02 AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED. AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
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15.03 LIMITATION OF WARRANTIES. LESSOR AND LESSEE EXPRESSLY AGREE THAT
THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE,
AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN
THIS LEASE.
ARTICLE 16.00 OTHER PROVISIONS
16.01 MECHANICAL WARRANTY. Lessor shall certify and repair or replace to
good and proper working condition the existing heating, ventilating, air
conditioning plumbing and electrical systems. Also, in the event a major
component, i.e., compressor, fan motor, evaporator coils or heat exchanger must
be placed or repaired during Lessee's first twelve (12) months of occupancy, the
cost of such replacement or repair shall be the responsibility of the Lessor.
This warranty, however, is contingent upon Lessee maintaining a regularly
scheduled preventative maintenance/service contract as per paragraph 5.05 of
this Lease Agreement.
16.02 ADDENDUM TO LEASE: See Attached
16.03 BUILDINGS RULES AND REGULATIONS. See Attached.
ARTICLE 17.00 SIGNATURES
SIGNED at HOUSTON, TX this 21ST day of NOVEMBER 1996
LESSEE
Vantage Houston. Inc. as agent for MLC-Enterprines, Inc. dba
Greenbriar Holdings Houston, Ltd. Marine & Industrial Supply
By: /S/ KIT DOLAN By: /S/ MICHAEL L. COOPER
Kit Dolan, President Michael L- Cooper, President
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EXHIBIT 10.28
ADDENDUM TO LEASE
HAZARDOUS WASTE. The term "Hazardous Substances." as used in this lease shall
mean pollutants, contaminants, toxic or hazardous wastes, or any other
substances, the use and/or the removal of which is required or the use of which
is restricted, prohibited or penalized by any "Environmental Law," which term
shall mean any federal, state or local law, ordinance or other statute of a
governmental or quasi-governmental authority relating to pollution or protection
of the environment. Lessee hereby agrees that (i) no activity will be conducted
on the premises that will produce any Hazardous Substance, except for such
activities that are part of the ordinary course of Lessee's business activities
(the "Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Lesssor. Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency: (ii) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Lessee's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Lessor. Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the premises will be used as a landfill
or a dump; (iv) Lessee will not install any underground or above ground tanks of
any type; (v) Lessee will not allow any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time may
constitute a public or private nuisance; (vi) Lessee will not permit any
Hazardous Substances to be brought onto the premises, except for the Permitted
Materials described below, and if so brought or found located thereon, the same
shall be immediately removed, with proper disposal and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental Laws.
Lessor or Lessor's representative shall have the right but not the obligation to
enter the premises for the purpose of inspecting the storage, use and disposal
of Permitted Materials to ensure compliance with all Environmental Laws. Should
it be determined, in Lessor's sole opinion, that said Permitted Materials are
being improperly stored, used, or disposed of then Lessee shall immediately take
such corrective action as requested by Lessor. Should Lessee fail to take such
corrective action within 24 hours, Lessor shall have the right to perform such
work and Lessee shall promptly reimburse Lessor for any and all costs associated
with said work. If at any time during or after the term of the lease, the
premises is found to be so contaminated or subject to said conditions, Lessee
shall diligently institute proper and thorough cleanup procedure at Lessee's
sole cost. Before taking any action to comply with hazardous material laws or to
clean up hazardous material contaminating the premises, Lessee shall submit to
Lessor a plan of action, including any and all plans and documents required by
any hazardous material law to be submitted to a governmental authority
(collectively, a "plan of action"). Before Lessee begins the actions necessary
to comply with hazardous material laws or to clean up contamination from
hazardous materials Lessor shall have (1) approved the nature, scope and timing
of the plan of action, and (2) approved any and all covenants and agreements to
effect the plan of action. Lessee agrees to indemnify and hold Lessor harmless
from all claims, demands, actions, liabilities, costs, expenses, damages and
obligations of any nature arising from or as a result of the use of the premises
by Lessee. The foregoing indemnification and the responsibilities of Lessee
shall survive the termination of expiration of this Lease.
Permitted Materials: None.
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CERTFICATE OF OCCUPANCY. Upon Occupancy of the leased premises, Lessee shall be
required to obtain a Certificate of Occupancy (the CO) from the municipality in
which the building is located. Failure of Lessee to obtain and deliver the CO to
Lessor upon occupancy shall be a default which shall allow Lessor to pursue the
remedies set forth in Article 11.02 of this Lease.
3.03 (cont'd) COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Should the building
of which the leased premises are a part not be classified as a "commercial
facility which is a place of public accommodations" as defined in Title III of
the American With Disabilities Act of 1990 (the Act) on the date hereof, and
Lessee's use, alterations or improvements thereafter causes the building to be
classified as such, Lessee shall be responsible for and shall indemnify Lessor
against any and all costs and expenses of Lessor associated with complying with
the Act.
LIABILITY INSURANCE. Lessee shall, at its sole expense, maintain at all times
during the term of this Lease public liability insurance with respect to the
leased premises and the conduct or operation of Lessee's business therein naming
Lessor as an additional insured with limits of not less that $1,000,000 for
death or bodily injury to any one or more persons in a single occurrence and
$500,000.00 for property damage. Lessee shall deliver a certificate of such
insurance to Lessor on or before the commencement date and thereafter from time
to time upon request.
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EXHIBIT 10.28
RULES AND REGULATIONS
1. Lessor agrees to furnish two keys without charge. Additional keys will be
furnished at nominal charge. Lessee shall change locks or install
additional locks on doors without prior written consent of Lessor. Lessee
shall not make or cause keys to be made duplicates of keys produced from
Lessor without prior approval of Lessor. All keys to lease premises shall
be surrendered to Lessor upon termination of this Lease.
2. Lessee will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the leased Premises
for Lessee to Lessor for Lessor's approval before performance of any
contractual service. Lessee's contractors and installation technicians
shall comply with Lessor's rules and regulations pertaining to construction
and installation. This provision shall apply to all work performed on or
about the leased premises or project including installation of telephones,
telegraph equipment, electrical devices and attachments and installations
of any nature affecting floors, walls, woodwork, trim, windows, ceilings
and equipment or any other physical portion of the leased premises or
project.
3. Lessee shall not at any time occupy any part of the leased premises or
project as sleeping or lodging quarters.
4. Lessee shall not place, install or operate on the leased premises or in any
part of the building any engine, stove or machinery, or conduct mechanical
operations or cook thereon or therein, or place or use in or about the
leased premises or project any explosives, gasoline, kerosene, oil acids,
caustics, or any flammable, explosive or hazardous material without written
consent of Lessor.
5. Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the leased premises or the project
regardless of whether such loss occurs when the area is looked against
entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or
about the leased premises or project.
7. Employees of Lessor shall not receive or carry messages for or to any
Lessee or other person or contract with or render free or paid services to
any Lessee or to any of lessee's agents, employees or invitees.
8. None of the parking plaza, recreation or lawn areas, entries, passages,
doors, elevators, hallways, or stairways shall be blocked or obstructed or
any rubbish, litter, trash, or material of any nature places, emptied or
thrown into these areas or such area used by Lessee's agents, employees or
invitees at any time for purposes inconsistent with their designation by
Lessor.
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or by the defacing or injury of any part of
the building shall be borne by the person who shall occasion it. No person
shall waste water by inferring with the faucets or otherwise.
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10. No person shall disturb occupants of the building by the use of any radios,
record players, tape recorders, musical instruments, the making of unseemly
noises or any unreasonable use.
11. Nothing shall be thrown out of the windows of the building or down the
stairways or other passages.
12. Lessee and its employees, agents and invitees shall Park their vehicles
only in those parking areas designated by Lessor. Lessee shall furnish
Lessor with state automobile license numbers of Lessee's vehicles and its
employees' vehicles within five days, after taking possession of the leased
premises and shall notify Lessor of any changes within five days after such
change occurs. Lessee shall not leave any vehicle in a state of disrepair
(including without limitation, flat tires, out of date inspection stickers
or license plates) on the leased premises or project. If Lessee or its
employees, agents or invitees park their vehicles in areas other than the
designated parking areas or leave any vehicle in a state of disrepair,
Lessor after giving written notice to Lessee of such violation, will have
the right to remove such vehicles at Lessee's expense.
13. Parking in a parking garage or area shall be in compliance with all parking
rules and regulations including any sticker or other identification system
established by Lessor. Failure to observe and regulations shall terminate
Lessee's right to use the parking garage or area and subject the vehicle in
violation of the parking rules and regulations to removal and impoundment.
No termination of parking privileges or removal of impoundment of a vehicle
shall create any liability on Lessor or be deemed to interfere with
Lessee's right to possession of its leased premises. Vehicles must be
parked entirely within the stall lines and all directional signs, arrows
and posted speed limits must be observed. Parking is prohibited in areas
not striped for parking, in aisles, where "No Parking" signs are posted, on
ramps, in cross hatched areas, and in other areas as may be designated by
Lessor. Parking stickers or other forms of identification supplied by
Lessor shall remain the property of Lessor and not the property of Lessee
and are not transferable. Every person is required to park and lock his
vehicle. All responsibility for damage to vehicles or persons is assumed by
he owner of the vehicle or its driver.
14. Movement in or out of the building of furniture or office supplies and
equipment, or dispatch or receipt by Lessee of any merchandise or materials
which requires use of elevators or stairways, or movement through the
building entrances or lobby, shall be restricted to our designated by
Lessor. All such movement shall be under supervision of Lessor and carried
out in the manner agreed between Lessee and Lessor by prearrangement before
performance. Such prearrangement will include determination by Lessor of
time, method, and routing of movement and limitations imposed by safety or
other concerns which may prohibit any article, equipment or any other item
from being brought into the building. Lessee assumes, and shall indemnify
Lessor against, all risks and claims of damage to persons and properties
arising in connection with any said movement.
15. Lessor shall not be liable for any damages from the stoppage of elevators
for necessary or desirable repairs or improvements or delays of any sort or
duration in connection with the elevator service.
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16. Lessee not lay floor covering within the leased premises without written
approval of the Lessor. The use of cement or other similar adhesive
materials not easily removed with water is expressly prohibited.
17. Lessee agrees to cooperate and assist Lessor in the prevention of
canvassing, soliciting and peddling within the building or project.
18. Lessor reserves the right to exclude from the building or project, between
the hours of 6:00 p.m. and 7;00 a.m. on weekdays and at all hours on
Saturday, Sunday and legal holidays, all persons who are not known to the
building or project security personnel and who do not present a pass to the
building signed by the Lessee. Each Lessee shall be responsible for all
persons for whom he supplies a pass.
19. It is Lessor's desire to maintain the building or project the highest
standard of dignity and good taste consistent with the comfort and
convenience for Lessees. Any action or condition not meeting this high
standard should be reported directly to Lessor. Your cooperation will be
mutually beneficial and sincerely appreciated. Lessor reserves the right to
make such other and further reasonable rules and regulations as in its
judgment may from time to time be necessary, for the safety, care, and
cleanliness of the leased premises and for the preservation of good order
therein.
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EXHIBIT 10.29
TERMINATION OF LEASE
WHEREAS, by that certain written Lease Agreement dated the 21st day of
November, 1996("Lease"), Vantage Houston, Inc. as agent for Greenbriar Holdings
Houston, Ltd., as Lessor, leased to MLC Enterprises, Inc. d.b.a. Marine and
Industrial Supply, as Lessee, approximately 3,915 square feet of space located
at 4544 South Pinemont, Suite 204, Houston, Texas 77041("leased premises")
WHEREAS, Lessee is desirous of terminating its obligations under the
Lease.
NOW, THEREFORE, for and in consideration of the promises herein
contained it is herewith agreed that Lessee shall be released from all liability
under the Lease, and the Lease shall be canceled and of no further force and
effect, as of Midnight, November 19th, 1998 upon payment by Lessee in the amount
of $1,570.00, to be paid upon execution of this document. Lessee waives all
claim to any monies previously paid to Lessor, including security deposit of
$1,570.00.
EXECUTED THIS 18TH DAY OF NOVEMBER, 1998.
LESSOR:
Vantage Houston, Inc. as Agent for
Greenbriar Holdings Houston, Ltd.
By:
-------------------------------------
Stephen Dunn
Title: Executive Vice President
----------------------------------
LESSEE:
MLC Enterprises, Inc. d.b.a. Marine and
Industrial Supply
By: /s/ William A. Coskey
-------------------------------------
Title: President
----------------------------------
