-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J70XqCrOFp+mmFfy1oDohlVuY5/WRWgzrxR6hmnA4FnzvxB+K3cbECPGcYjgdyHH MXf56iKs+M8VYIWLC3+TjQ== 0000890566-97-000102.txt : 19970128 0000890566-97-000102.hdr.sgml : 19970128 ACCESSION NUMBER: 0000890566-97-000102 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 34 FILED AS OF DATE: 19970127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL DATA SYSTEMS CORP CENTRAL INDEX KEY: 0000933738 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 760157248 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: 1934 Act SEC FILE NUMBER: 000-22061 FILM NUMBER: 97511084 BUSINESS ADDRESS: STREET 1: 600 CENTURY PLZ STREET 2: BLDG 140 CITY: HOUSTON STATE: TX ZIP: 77073-6016 BUSINESS PHONE: 2818213200 MAIL ADDRESS: STREET 1: 600 CENTURY PLAZA DR STREET 2: BLDG 140 CITY: HOUSTON STATE: TX ZIP: 77073-6016 10SB12G 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS (UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934) INDUSTRIAL DATA SYSTEMS CORPORATION (Name of Small Business Issuer in its Charter) NEVADA 76-0157248 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 600 CENTURY PLAZA DRIVE, BUILDING 140 HOUSTON, TEXAS 77073-6016 (Address of principal executive offices) (Zip Code) Issuer's Telephone Number: (281) 821-3200 SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT: Title of each class Name of each exchange on which to be so registered each class is to be registered None None SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK: 75,000,000 $.001 PAR VALUE PART I THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONNECTION WITH THE MORE DETAILED INFORMATION CONTAINED HEREIN AND IN THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, AND THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS REGISTRATION STATEMENT. THE DISCUSSION IN THIS REGISTRATION STATEMENT CONTAINS FORWARD LOOKING STATEMENTS WHICH INVOLVE RISKS AND OTHER UNCERTAINTIES. REFERENCES TO THE "COMPANY" OR TO "IDS" REFER TO INDUSTRIAL DATA SYSTEMS CORPORATION. BUSINESS GENERAL Industrial Data Systems Corporation ("IDS") was incorporated in the State of Nevada in June 1994. The Company's principal executive offices are located at 600 Century Plaza Drive, Building 140, Houston, Texas 77073. The Company's telephone number is (281) 821-3200. IDS has never filed for protection under the bankruptcy protection act, nor has the Company or any of its assets been in receivership or any other similar proceedings. The Company's revenue is derived from two operating segments: the Industrial Products Division ("IPD") and the IDS Engineering Division ("IED"). The IPD is a provider of specialized microcomputer products that are targeted to be sold to the industrial market. The IPD manufactures and sells industrial and portable computers, microcomputers and color CRT monitors under the Company's trade name, which include the SafeCase Series 3000, 4000, 5000 and 7000. The microcomputer and peripheral products are designed to be used in industrial applications, which include manufacturing, process control, discrete manufacturing, data acquisition and man-machine interfaces. The computers and monitors that are manufactured by the Company are different from conventional, commercial desktop and portable computers by its architecture, packaging, functionality, integration services and value-added software. The computer products manufactured by the IPD are "open systems" that support "off-the-shelf" software operated under DOS or Windows. The Company also derives revenue from the integration and resale of industrial computer products manufactured by other companies. The IPD positions itself to provide engineered industrial personal computers. The IPD adds value to standard computer components by packaging these components in enclosures which withstand tough environmental conditions and/or enclosures that have a special form factor. The Company also adds value by integrating and technically supporting advanced microcomputer systems. The IDS Engineering Division ("IED") offers engineering services to the pipeline division of major integrated oil companies. These services are performed on facilities that include cross-country pipelines, pipeline pump stations, compressor stations, metering facilities, underground storage facilities, tank storage facilities and product loading terminals. The management team of the IED has the capability of developing a project from the initial planning stages through detailed design and 2 construction management. The services provided include project scoping, cost estimating, engineering design, material procurement, mechanical fabrication, in addition to project and construction management. The IED has ten blanket service contracts currently in place to provide services on a time and materials reimbursable basis. The IED also performs services for its clients on a turnkey lump sum basis. The Company has a long standing relationship with Exxon Pipeline Company, Arco Pipeline Company, Marathon Pipeline Company and Texas Eastern Products Pipeline Company. New business relationships with other major oil companies are developed through in-house personnel. ACQUISITION OF INDUSTRIAL DATA SYSTEMS, INC. On August 1, 1994, the Company entered into an agreement to purchase all of the issued and outstanding shares of Industrial Data Systems, Inc., a Texas corporation, in a tax-free exchange of Common Stock. The Company issued 9,500,000 shares of its Common Stock to William A. Coskey and Hulda L. Coskey, with each individual beneficially holding 4,762,800, and 4,750,000, respectively. William A. Coskey and Hulda L. Coskey beneficially held all of the issued and outstanding shares of the Common Stock of Industrial Data Systems, Inc., a Texas corporation, at the time of the acquisition. William A. Coskey held the positions of Chairman of the Board, Chief Executive Officer and President of Industrial Data Systems, Inc., and Hulda L. Coskey held the positions of Director, Vice President and Secretary/Treasurer of Industrial Data Systems, Inc. The executive officers, management team and beneficial ownership of securities held by the executive officers were the same in both companies at the time of the transaction. ACQUISITION OF THERMAIRE, INC. The Company entered into an Agreement with the owners of Thermaire, Inc. on August 15, 1995 to acquire Thermaire, Inc. in a contingent purchase transaction. The Company issued 600,000 shares of Common Stock which are currently held in an escrow account pending completion of the acquisition by the Company exercising its option to pay $600,000 and obtain a release of the shares. The Company's option to acquire Thermaire, Inc. will expire on February 15, 1997. In connection with this transaction, the Company has entered into an agreement to purchase the facilities of Thermaire, Inc., subject to the completion of the contingent purchase transaction for cash consideration of $500,000, on or before February 15, 1997. The Company exercised its option to purchase Thermaire, Inc., effective as of December 31, 1996, with the delivery of all documentation and funds to occur and be fully exchanged on February 15, 1997. INTRODUCTION OF SAFECASE SERIES 400 On August 14, 1996, the Company announced the introduction of the SafeCase Series 400 computer as its latest entry into the industrial portable computer market. This computer is the industrial equivalent of a contemporary commercial grade notebook computer. The size of the computer is 9" wide by 12" in length and 5" in height and provides the same basic footprint as commercial grade laptop computers, and complements the performance, durability and reliability of the Company's other 3 industrial computers. The SafeCase Series 400 is designed to be utilized in an environment with mild and severe weather conditions, from light rain to gusting winds and temperatures ranging from nine to 50 degrees Celsius, and is constructed to withstand shock at 10G and vibration loads of 0.5mm within a five to 100 Hz range. The SafeCase Series 400 is a fully featured portable computer with an introduction price of $3,995. Initial deliveries of this computer are scheduled to commence during the first quarter of 1997. The Company plans to increase sales through the introduction of additional computer products in 1997, and it is in the process of researching complementary computer products which are suitable to the industrial computer market. INDUSTRY OVERVIEW The market for computer products and services has experienced significant growth in recent years and the use of such products and services within organizations has been impacted by several concurrent trends. The introduction of LANs (local area networks) and WANs (wide area networks) has allowed organizations to supplement or replace expensive, centralized mainframe computer systems with more flexible and affordable PC-based client/server platforms. The emergence of widely accepted industry standards for hardware and software has increased the acceptance of open architecture LANs and WANs which can and frequently do contain products from numerous manufacturers and suppliers. Industrial personal computers and workstations are displacing other controllers in a growing number of applications. Suppliers of office grade (white box) personal computers have a price advantage. However, the necessity of "hardened" units for difficult industrial environments ensures growth in the sales of industrial personal computers and workstations. The worldwide industrial personal computer and workstation industry is one that predominantly services OEM and systems integrator applications. Growth is expected to be slightly higher for OEM and systems integrator applications than for end-user applications. Quality, reliability, shock resistance and speed of operation are key factors of significance for the user. The ability of the user to use the industrial personal computer in rugged environments, such as harsh office, light industrial and heavy industrial applications is also essential. Users have needs and expectations that will affect product designs in the industrial computer market. The type of backplane that is used, is of critical importance as it affects ruggedness, expandability and price. The supply side of the market is moving in diverse directions depending on price and performance. High-end industrial personal computer and workstation vendors are shifting more to active backplanes in order to lower prices, while low-end vendors are continuing to use predominantly passive backplanes to meet user demands for expansion and ease of servicing. The industrial personal computer market is following the desktop market in terms of bus architectures with industrial modifications. The ISA (Industry Standard Architecture) bus will remain the industry standard for primary buses, and will be integrated in hybrid form with PCI (Peripheral Component Interconnect) in a large percentage of shipments. The average number of board expansion slots is expected to increase over the next five years. The number of PCMCIA slots is expected to 4 remain the same, but more industrial PCI computers and workstations will have these features. The industrial personal computer and workstation market is moving heavily in the direction of Pentium, which will be followed by P-6, P-7 and Power PC microprocessors. The most popular enclosure type for industrial personal computers and workstations is rack mount. Panel mount is the second most popular enclosure for light and heavy industrial conditions, and third most popular for harsh office conditions. Bench top, desktop and tabletop is the second most popular for harsh office, and the third most popular enclosure type for light and heavy industrial environments. Relative use of these enclosures are expected to shift only slightly over the next five years, as are those of lesser used pedestal mounts, hand held, notebooks and luggable portables. Distribution channels for computer products changed significantly commencing in the early 1990's. During that period, many manufacturers of computers began to scale back their sales forces and, in order to ensure the continued wide distribution of their products, started to offer their products to wholesale computer distributors which previously had sold only software and peripheral equipment. In addition, manufacturers also began allowing resellers to purchase products from more than one distributor, a practice known as "open sourcing". Expanding computer sales to distributors and allowing open sourcing intensified price competition among suppliers. Rapid technological improvements in computer hardware and the introduction of new software operating systems have also created the need to expand or upgrade existing networks and systems. At the same time, price decreases have made such networks and systems affordable to a larger number of organizations. The Company believes that these trends have increased the general demand for computer products and related information technology services. The advent of open architecture networks has also impacted the market for information technology services. Wider use of complex networks involving a variety of manufacturer's equipment, operating systems and application software has made it increasingly difficult to diagnose problems and maintain the technical knowledge and repair parts necessary to provide support services. Increasingly, organizations seeking computer products often require prospective vendors not only to offer products from many manufacturers and suppliers, but to have available and proficient service expertise to assist them in product selection, system design, installation and post-installation assistance and service. The Company believes that the ability to offer customers a comprehensive solution to their information technology needs, including the ability to work within its customers' industrial environments as integral members of their management information system staff, are increasingly important in the marketplace. BUSINESS STRATEGY The Company intends to increase market share and market penetration through its existing product line, and also increase its sales through strategic relationships with other computer manufacturers. On September 20, 1996, the Company announced that it had entered into a Volume Purchasing Agreement with Texas Microsystems, a division of Sequoia Systems, Inc. Under the terms of the Purchasing Agreement, the Company will purchase OEM subsystems from Texas Microsystems and act as an authorized systems integrator for their industrial computer products. Texas Microsystems 5 is a leading manufacturer of industrial computer CPU boards and chassis products. The Company is actively pursuing similar OEM contracts with several major suppliers in the industrial computer and desktop workstation marketplace. The Company also intends to continue to pursue potential acquisitions of complementary businesses. The success of this strategy depends not only upon the Company's ability to acquire complementary businesses on a cost-effective basis, but also upon its ability to integrate acquired operations into its organization effectively, to retain and motivate key personnel and to retain customers of acquired firms. No specific acquisitions are being negotiated or planned as of the date of this Registration Statement and there can be no assurance that the Company will be able to find suitable acquisition candidates or be successful in acquiring or integrating such businesses. Furthermore, there can be no assurance that financing required for any such transactions will be available on satisfactory terms. In order to achieve its growth objective, the Company intends to commence with the expansion of its national marketing network to increase sales of its current line of proprietary industrial computer products. This expansion into new locations within the United States will require additional in-house sales personnel and sales representatives. PRODUCTS INDUSTRIAL PRODUCTS DIVISION The Company's Industrial Products Division ("IPD") provides Intel microprocessor-based microcomputer systems and system components that are extremely dependable and can withstand harsh weather conditions and demanding work environments. These computer systems are designed to withstand a wide fluctuation in temperatures, shock waves, vibration, electromagnetic and radio frequency interference, in addition to airborne dust particles and excessive moisture. SAFECASE SERIES 3000 The SafeCase Series 3000 is a microcomputer designed to be operated at sites where temperature, vibration and airborne dust particles are of primary concern. This microcomputer is designed to accommodate either active motherboard CPUs or passive backplanes with plug-in CPUs. Being extremely adaptable, it can be configured to accommodate various types of CPU boards, in addition to the installation of various floppy and hard drives. The microcomputer enclosure is constructed of 16 gauge steel and is pressurized by a filtered push-pull fan cooling system to prevent dust particles and other matter from entering into the computer. All of the computer components are modularly installed and shock mounted. The SafeCase Series 3000 is suitable for installation in a standard 19" equipment rack. 6 SAFECASE SERIES 4000 The SafeCase Series 4000 is a durable, rugged portable computer designed to be operated under extremely harsh environmental conditions normally encountered at industrial and commercial locations. The computer is constructed with a four slot passive backplane and three full-size open bus slots to allow the user to customize it with industry standard add-in boards. These computers are designed with dual cooling fans to control heat build-up, are fully gasketed to prevent the penetration of moisture and dust particles, and has a shock mounted disk drive which together enhance its service life. The locations and sites under which these computers are generally operated are unlike the environmental conditions under which the plastic notebook and laptop computers are operated. To complement the durability of the SafeCase Series 4000, its sturdy aluminum carrying case has been designed to withstand excessive mechanical loads. SAFECASE SERIES 5000 The SafeCase Series 5000 is a color CRT computer monitor designed with a resolution of 1024 x 768 pixels, positive pressure fan and filter which protects against internal damage from airborne dust particles, and is mountable in a 19" equipment rack. This monitor can be interfaced with a touch screen adapter. The color CRT computer monitor is available in 14" and 20" diagonal models. SAFECASE SERIES 7000 The SafeCase Series 7000 is a microcomputer designed for applications which require an industrial computer to be mounted on a wall or attached to machinery or other equipment. The features of this microcomputer include a six slot passive backplane and plug-in CPU board, a positive pressure, filtered cooling system, two drives which will accommodate either floppy or hard disks in addition to a 150 watt power supply. IPD PRODUCT DEVELOPMENT The Company's engineering strategy is to continue to develop differentiated microprocessor based capabilities that can be delivered in "open-systems" using industry standard technology. Through this product development strategy, the Company is able to provide highly reliable and readily available microcomputers that are compatible with "off-the-shelf" application software and hardware. These microcomputers can also provide a much greater degree of system availability to users by focusing on reliability as its main feature. Product development during calendar 1997 will be concentrated on the completion of and revisions to the previously announced SafeCase 400 product. Revisions will also be made to the current SafeCase 4000 product line to increase functionality and reduce cost. In addition, the Company will continue to extend its products offerings to include high-end computer platforms. These enhancements will include the latest Pentium, Pentium Pro and/or Sun Sparc processors. 7 SALES AND MARKETING IPD Revenues derived from the IPD are approximately 53% in-house direct sales, approximately 42% from sales representatives and approximately 5% from catalog distributors sales. IED Revenues derived from the Company's IED are 100% direct in-house sales. DIRECT SALES The Company's SafeCase Series of computer products are primarily marketed through commissioned third-party sales representatives. These sales representatives are teamed with in-house sales managers and are assigned to territories within the United States. The Company believes that this method of selling leads to increased account penetration, proper management of its products, and enhanced customer service which create and maintain the foundation for long-term relationships with its customers. The Company's in-house sales personnel receive a salary in addition to commission, which is based upon a percentage of their sales. The Company believes that its past and future growth depends in large measure on its ability to attract and retain qualified sales representatives and sales management personnel. The Company promotes its products and services through general and trade advertising, participation in trade shows and through telemarketing. The Company believes that a significant percentage of new customers of its SafeCase Series of computer products originates through word-of-mouth referrals from existing customers and industry members, such as manufacturers representatives. Additionally, the sales personnel of its IPD seek to capitalize on customer relationships that have been developed by its IED personnel. Sales leads developed by this synergy are then jointly pursued. The IPD's customer base of over 200 accounts consists primarily of Fortune 500 companies in all industry segments within the United States. OTHER METHODS OF SALES Sales of the IPD are primarily through commissioned sales representatives and its in-house direct sales force. The Company also has an arrangement with two catalog distributors that offer industrial computer products and related peripherals. The SafeCase 4000 product is sold through catalog distribution. This method of sales currently accounts for approximately 5% of IPD's total revenue. All in-house sales personnel are located at the Company's principal executive offices in Houston, Texas. The IPD does not anticipate hiring direct regional sales managers who would be located in other states. 8 GOVERNMENT CONTRACTS Sales to branches of the United States government have accounted for less than 1% of total revenue. CUSTOMERS The Company's top ten customers (which varied from period to period) accounted in the aggregate for approximately 76%, 90% and 86% of the Company's total revenue during 1994, 1995 and the nine month period ended September 30, 1996, respectively. The Company had one customer that accounted for 39%, 62% and 40% of the Company's total revenue for the same periods. Based upon historical results and existing relationships with customers, the Company believes that a substantial portion of its total revenue and gross profit will continue to be derived from sales to existing customers. There are no long-term commitments by such customers to purchase products or services from the Company. Sales of the Company's computer products are typically made on a purchase order basis. A significant reduction in orders from any of the Company's largest customers could have a material adverse effect on the Company's financial condition and results of operations. Similarly, the loss of any one of the Company's largest customers or the failure of any one of such customers to pay its accounts receivable on a timely basis could have a material adverse effect on the Company's financial condition and results of operations. There can be no assurance that the Company's largest customers will continue to place orders with the Company or that orders by such customers will continue at their previous levels. There can be no assurance that the Company's customers for its engineering services will continue to enter into contracts with the Company for such services or that existing contracts will not be terminated. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- "Business" and "Customers." CUSTOMER SERVICE AND SUPPORT The Company provides service and technical support to its customers in varying degrees depending upon the product line and on customer contractual arrangements. The Company's Houston based technical support staff provides initial telephone trouble shooting services for end-user customers and distributors. These services include isolating and verifying reported product failures, authorizing product returns and tracking completion of repaired goods in support of customer requirements. Technical support also provides on-site engineering support in the event that a technical issue can not be resolved over the telephone. The Company generally provides end-user purchasers of its systems with a one year warranty. DEPENDENCE UPON SUPPLIERS The Company's business depends upon its ability to obtain an adequate supply of products and parts at competitive prices and on reasonable terms. The Company's suppliers are not obligated to have products on hand for timely delivery to the Company nor can they guarantee product availability in sufficient quantities to meet the Company's demands. There can be no assurance that such products will be available as required by the Company at prices or on terms acceptable to the Company. The 9 Company procures a majority of its computers, computer systems and computer components from distributors in order to obtain competitive pricing, maximize product availability and maintain quality control. In some cases, the Company's computer components are purchased through a single source. The Company does not always have a long term purchasing contract in place to purchase computer components from single sources. In the normal course of business, the Company executes blanket purchase orders with its major suppliers for a period of one year in order to maintain competitive pricing and service. The purchase orders include provisions for the delivery, on a monthly basis, of an adequate supply of computer parts to fulfill the Company's orders for a one year period. The Company relies on a few key contract manufacturers for the manufacture of some components used in the assembly of its microcomputers. Although such subcontracting arrangements offer cost and capacity advantages, and would eliminate the need to incur certain capital expenditures associated with manufacturing, reliance on third party manufacturers gives the Company less control over the manufacturing process for these components than if it undertook such activities itself. Any failure of such subcontractors to manufacture and deliver components as planned, or any problems with the quality of such components, could have a material adverse effect on the Company's operations. The Company purchases from other manufacturers substantially all peripheral devices and components used in its products. A majority of the components and peripherals are available from a number of different suppliers, although certain major items are procured from single sources. The Company believes that alternate sources could be developed for such single source items, if necessary, however, in the event that certain peripheral or component shortages were to occur, it could have an adverse effect on the Company's operations. There can be no assurance that the Company will be able to continue to obtain the necessary computer components from its single sources on terms acceptable to the Company, if at all. There can be no assurance that such relationship will continue or that, in the event of a termination of its relationship, it would be able to obtain alternative sources of supply without a material disruption in the Company's ability to provide products to its customers. Any material disruption in the Company's supply of products would have a material adverse effect on the Company' financial condition and results of operations. RAPID TECHNOLOGICAL CHANGE The business in which the Company competes is characterized by rapid technological change and frequent introduction of new products and product enhancements. The Company's success depends in large part on its ability to identify and obtain products that meet the changing requirements of the marketplace. There can be no assurance that the Company will be able to identify and offer products necessary to remain competitive or avoid losses related to obsolete inventory and drastic price reductions. The Company attempts to maintain a level of inventory required to meet its near term delivery requirements by relying on the ready availability of products from its principal suppliers. Accordingly, the failure of the Company's suppliers to maintain adequate inventory levels of computer products demanded by the Company's existing and potential customers and to react effectively to new product introductions could have a material adverse affect on the Company's financial condition and 10 results of operations. In addition, certain of its computer products are subject to manufacturer or distributor allocations, which limit the number of units available to the Company, therefore, there can be no assurance that the Company will be able to offer new products or product enhancements in sufficient quantities to satisfy customer demand. Failure of the Company to gain sufficient access to new products or product enhancements could also have a material adverse affect on the Company's financial condition and results of operations. PATENTS, TRADEMARKS, LICENSES The Company's success depends in part upon its proprietary technology, and relies primarily on trade secrecy and confidentiality agreements to establish and protect its rights in its proprietary technology. The Company does not own the rights to any U.S. or foreign patents. There can be no assurance that the Company's present protective measures will be adequate to prevent unauthorized use or disclosure of its technology or independent third party development of the same or similar technology. Although the Company's competitive position could be affected by its ability to protect its proprietary and trade secret information, the Company believes other factors, such as the technical expertise and knowledge of the Company's management and technical personnel, and the timeliness and quality of support services provided by the Company, to be more significant in maintaining the Company's competitive position. EMPLOYEES As of December 31, 1996, the Company employed approximately 48 individuals. Of these, approximately four were employed in sales, marketing and customer services, 40 were employed in engineering and technical production positions and four were employed in administration, finance and MIS. The Company believes that its ability to recruit and retain highly skilled and experienced technical, sales and management personnel has been, and will continue to be, critical to its ability to execute its business plan. None of the Company's employees are represented by a labor union or are subject to a collective bargaining agreement. The Company believes that relations with its employees are good. COMPETITION The Company competes against various companies across its different product lines. The Company's line of industrial portable computers compete with products manufactured by Fieldworks, Dolch and Kontron. The Company's industrial computer products which are mountable in a 19" equipment rack compete with products from Advantek, Contec and Industrial Computer Source. There is also competition from much larger suppliers of commercial grade computers, such as Compaq, Dell, Toshiba and IBM. This commercial competition effectively sets pricing for the Company's product line, since the Company's customers are willing to pay a premium for industrial grade computers which is usually limited to approximately two times the equivalent of commercial grade products. 11 The Company believes that its products compete effectively based on its engineering responsiveness to specific industrial market requirements, the resulting functional specialization of its products, and its strategy of focusing on relatively "sheltered" market niches where major competitors have difficulty in tailoring their offerings to specific application requirements. These strategies help offset the greater name recognition and broader service and support resources of the Company's major competitors. The Company is engaged in business activities that are targeted to industrial markets which are less competitive and typically generate greater profit margins. The Company believes that the principal competitive factors in the business in which it operates are price and performance, product availability, technical expertise, adherence to industry standards, financial stability, service support and reputation. The pricing competition for the Company's IPD segment is from large manufacturers of commercial grade computer products. The IPD's pricing of its computer product line is governed by pricing in the commercial market. The pricing competition of the IED segment has intensified as a result of an increase in temporary personnel contracting agencies who can perform services at a higher volume level and lower profit margin. Some of the Company's current and potential competitors have longer operating histories and financial, sales, marketing, manufacturing, distribution, technical and other competitive resources which are substantially greater than those of the Company. As a result, the Company's competitors may be able to adapt more quickly to changes in customer demands or to commit resources to sales and service of its products than the Company has available. Such competitors could also seek to increase their presence in the markets where the Company is providing sales and services by creating strategic alliances with other competitors of the Company, by offering new or improved products and services to the Company's customers or increasing their efforts to gain and retain market share through competitive pricing. FACILITIES The Company does not own any real property and currently leases all of its existing facilities. The Company leases its principal executive offices in Houston, Texas, which consists of approximately 18,155 square feet that has been divided into administrative offices, computer production operations and warehouse facilities. This lease will expire on August 31, 2000. The Company also leases office space which consists of approximately 180 square feet in Clarksburg, West Virginia, for the purpose of providing an office facility for engineering and technical employees who reside in that State. This lease will expire on May 31, 1997. The Company believes that suitable facilities will be available as needed. HISTORY Industrial Data Systems, Inc., a Texas corporation, was incorporated in May 1985, to provide engineering consulting services to the pipeline divisions of major integrated oil companies. The Company grew slowly to ten employees in 1989. At that time, a strategic decision was made by management to enter the industrial computer marketplace. In 1989, the Company designed and built its first industrial computer and in 1991, hired its first marketing manager. The Company continued 12 to support both businesses and developed its industrial computer business through nationwide advertising. Its product sales grew through the creation of new product lines. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is qualified in its entirety by, and should be read in conjunction with, the Company's Consolidated Financial Statements including the Notes thereto, included elsewhere in this Registration Statement. OVERVIEW The Company was formed in 1985 to engage in the business of providing engineering consulting services to the pipeline divisions of major integrated oil and gas companies. For the period 1985 through 1989, most of its revenues were derived from the IED segment. In 1989, the Company introduced its IPD segment and has continued to introduce new products to the marketplace. The IPD segment has generated sales as a percent of total revenue of 55%, 30% and 34.8%, for 1994, 1995 and the nine months of 1996, respectively, while the IED segment has generated sales as a percent of total revenue of 45%, 70% and 65.2% for the same period. The Company commenced operations at its current facility on February 1, 1994. The computer products are assembled and distributed from its facility in Houston, Texas. The gross margin varies between each of its operating segments. Computer product sales have produced a gross margin ranging from 26.8% to 35.4% over the past two years and nine months ended September 30, 1996, due to the intense price competition characteristic of the computer products market. The gross margin for pipeline engineering services, which reflects direct labor costs, has ranged from 29.1% to 37.5% for the same period. The variation is primarily attributable to the pricing and the mix of services provided, and to the level of direct labor as a component of cost during any given period. The gross margin for Industrial Data Systems Corporation, which includes both product sales and pipeline consulting services, has varied between 29.2% and 36.4% since 1994. This variation reflects the different mix of product sales and the amount of revenue derived from pipeline engineering consulting services from period to period. The gross margin for computer product sales was 34.1% for the nine months ended September 30, 1996, primarily due to the Company's decision to lower gross margin requirements in order to increase sales volume, coupled with one higher margin sale. Revenue from computer product sales accounted for 34.8% of the Company's total revenue for the nine months ended September 30, 1996. The gross margin for pipeline engineering consulting services was 29.1% for the nine months ended September 30, 1996, primarily due to an increase in payroll expense not being offset by an increase in billing rates to customers. Revenue from pipeline engineering consulting services accounted for 65.2% of the Company's total revenue for the nine months ended September 30, 1996. 13 The Company's largest supplier, Microbus, Inc., a vendor of CPU boards accounted for approximately 18% of total purchases for the nine months ended September 30, 1996. The CPU boards are purchased on individual purchase orders. The Company does not have a long term contract with Microbus, Inc. to purchase the CPU boards. In the event that this supplier could not provide CPU boards to the Company, the Company believes that it would not have an adverse affect on the Company's results of operations due to an abundance of suppliers of CPU boards in the marketplace. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain financial data derived from the Company's consolidated statements of operations and indicates percentage of total revenue for each item.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ----------------------- ------------- 1994 1995 1995 1996 ---- ---- ---- ---- AMOUNT % AMOUNT % AMOUNT % AMOUNT % ----------- ----- ---------- ----- ---------- ----- ---------- ----- Revenue: Computer Products ......................... $ 941,477 55.0 $1,354,888 29.9 $1,023,377 29.2 $1,443,425 34.8 Consulting Services ....................... 770,179 45.0 3,170,298 70.1 2,485,753 70.8 2,709,084 65.2 ----------- ----- ---------- ----- ---------- ----- ---------- ----- Total revenue .......................... 1,711,656 100.0 4,525,186 100.0 3,509,130 100.0 4,152,510 100.0 Gross Profit: Computer Products ......................... 334,400 35.5 372,466 27.5 329,687 32.2 492,462 34.1 Consulting Services ....................... 288,784 37.5 947,017 29.9 818,312 32.9 788,071 29.1 ----------- ----- ---------- ----- ---------- ----- ---------- ----- Total gross profit ..................... 623,184 36.4 1,319,483 29.2 1,147,999 32.7 1,280,533 30.8 Selling, general and administrative expenses ..................... 313,280 18.3 833,473 18.4 532,582 15.2 907,341 21.9 Depreciation ................................ 5,988 0.3 17,631 0.4 13,395 0.4 21,691 0.5 ----------- ----- ---------- ----- ---------- ----- ---------- ----- Operating income ........................ 303,916 17.8 468,379 10.3 602,022 17.1 351,502 8.5 Other income (expense) ...................... (4,942) (0.3) 143,153 3.2 100,034 2.9 136,152 3.2 ----------- ----- ---------- ----- ---------- ----- ---------- ----- Income before provision for income taxes ....................... 298,974 17.5 611,532 13.5 702,056 20.0 487,654 11.7 Provision for income taxes .................. 56,855 3.3 244,109 5.4 263,000 7.5 179,098 4.3 Pro forma income taxes ...................... 56,230 3.3 -- -- -- -- -- -- ----------- ----- ---------- ----- ---------- ----- ---------- ----- Net income after pro forma income taxes ...................... $ 186,859 10.9 $ 367,423 8.1 $ 439,056 12.5 $ 309,656 7.4 =========== ===== ========== ===== ========== ===== ========== =====
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1995 TOTAL REVENUE. Total revenue increased $643,380, or 15% from $4,152,510 for the nine months ended September 30, 1996, when compared to $3,509,130 for the same period in 1995. Revenue from computer products, which comprised 34.8% of total revenue, increased 29.2%. The increase in computer products revenue was generally attributable to increased sales of its SafeCase 4000 product. Revenue from consulting services, which comprised 65.2% of total revenue, increased 15%. Revenue from pipeline engineering consulting services increased as a result of additional blanket service contracts with new clients. The IED had much greater diversity in its client base, with an 14 increase from one to six clients during the nine months ended September 30, 1996, as compared to the same period in 1995. GROSS PROFIT. Gross profit increased by $132,534 or 11.5% from $1,147,999 in the first nine months of 1995 to $1,280,533 in the first nine months of 1996, while gross margin decreased from 32.7% in the first nine months of 1995 to 30.8% in the first nine months of 1996. The gross margin for the IED decreased from 32.9% in 1995 to 29.1% in the corresponding period in 1996. The decrease was attributable to an increase in payroll expense not being offset by an increase in billing rates to clients. The gross margin for the IPD increased from 32.2% in the first nine months of 1995 to 34.1% for the same period in 1996. This increase was primarily attributable to a sales blend of products that have higher gross margins. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased by $334,809 or 37% from $532,582 in the first nine months of 1995 to $907,341 in the corresponding period in 1996. As a percentage of total revenue, selling, general and administrative expenses increased from 15.2% in the nine months ended September 30, 1995 to 21.9% for the corresponding 1996 period. Of the dollar increase a large portion, or 5.8% was attributable to an increase in personnel, compensation costs and lease expenses which were expended in anticipation of future growth. OPERATING INCOME. Operating income decreased by $250,520 or 41.6% from $602,022 in the first nine months of 1995 to $351,502 in the same period in 1996. Operating income decreased as a percentage of total revenue from 17.1% in the 1995 period to 8.5% in the 1996 period. The decrease in operating income was a result of a decrease in the gross profit of the IED, coupled with increased selling, general and administrative expenses. OTHER INCOME (EXPENSE). Other income increased by $36,118 or 36.1% from $100,034 in the first nine months of 1995 to $136,152 in the first nine months of 1996. This increase was primarily due to gains in marketable securities, which were slightly offset by additional interest expense due to higher utilization of the Company's line of credit. NET INCOME. Net income decreased by $129,500 or 29.5% from $439,056 in the 1995 period to $309,556 in the 1996 period. Net income as a percentage of total revenue decreased from 12.5% in the first nine months of 1995 to 7.5% in the same period in 1996. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 TOTAL REVENUE. Total revenue increased by $2,813,530 or 164.4% from $1,711,656 in 1994 to $4,525,186 in 1995. Revenue from the IPD, which comprised 29.9% of total revenue in 1995 increased by $413,411 or 43.9%. The increase in IPD revenue was generally attributable to increased sales to new and existing customers which resulted from the hiring of additional sales personnel, in addition to the introduction of new product lines. Revenue from the IED which comprised 70.1% of total revenue in 1995 increased by $2,400,119 or 311.6%. The increase in IED revenue was primarily attributable to increased project activity of its only customer. 15 GROSS PROFIT. Gross profit increased by $696,299 or 111.7% from $623,184 in 1994 to $1,319,483 in 1995. The gross margin for the IED decreased from 37.5% in 1994 to 29.9% in 1995. The gross margin for IPD decreased from 35.5% in 1994 to 27.5% in 1995. In anticipation of future growth, management made a decision to increase the manufacturing capabilities of the IPD, which affected the gross margin due to increased personnel and related costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased by $520,193 or 166.1% from $313,280 in 1994 to $833,473 in 1995. As a percentage of total revenue, selling, general and administrative expenses increased from 18.3% in 1994 to 18.4% in 1995. The dollar increase was primarily attributable to an increase in general and administrative expenses and sales compensation to accommodate the Company's growth. Personnel costs, the largest other component of general and administrative expenses, increased at a slower rate than total revenue. Certain general and administrative expenses are relatively fixed, and the Company was able to leverage these expenses as revenue increased during 1995. OPERATING INCOME. Operating income increased by $164,463 or 54.1% from $303,916 in 1994 to $468,379 in 1995. Operating income decreased as a percentage of total revenue from 17.8% in 1994 to 10.3% in 1995. OTHER INCOME (EXPENSE). Other income increased by $148,045 from $(4,942) in 1994 to $143,152 in 1995. This increase was primarily due to gains in marketable securities, which were slightly offset by additional interest expense due to higher utilization of the Company's line of credit. NET INCOME. Net income after pro forma income taxes increased by $180,564 or 96.6% from $186,859 in 1994 to $367,423 in 1995. Net income after pro forma income taxes decreased as a percentage of total revenue from 10.9% in 1994 to 8.1% in 1995. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has satisfied its cash requirements principally through borrowings under its line of credit and through operations. As of September 30, 1996, the Company's cash position, including marketable securities, was sufficient to meet its working capital requirements. In addition, the Company had, as of September 30, 1996, $250,000 in additional advances available under its line of credit agreement with a bank. The Company's working capital was $1,158,758 and $1,655,491 at December 31, 1995 and September 30, 1996, respectively. CASH FLOW Operating activities used net cash totaling $169,209 and $317,205 during 1994 and 1995, and $118,727 for the nine months ended September 30, 1996. The Company has not generated cash flow from operating activities due to the working capital requirements resulting from the rapid growth of the Company. Trade accounts receivable increased $167,109 and $281,908 for 1994 and 1995, respectively, and increased $229,157 for the nine months ended September 30, 1996. Inventory increased by $44,638, $42,200, and $216,667 for the same periods. 16 Investing activities used cash totaling $36,493,$28,805 and $243,182, respectively, during the years ended December 31, 1994 and 1995 and the nine months ended September 30, 1996. The Company's investing activities that used cash during these periods were primarily related to cash advances to an affiliate (Thermaire, Inc.) and capital expenditures. Financing activities provided (used) cash totaling $(8,548) and $16,375 during 1994 and 1995. During 1994, $81,227 was provided from the issuance of Common Stock. For the first nine months of 1996, financing activities provided net cash of $92,324 as a result of the sale of treasury stock, and an increase in borrowings of $50,000 under its line of credit. The Company's primary source of additional financing is from amounts available on its line of credit ($250,000 at September 30, 1996), and the proceeds of $1,000,000 from a private placement of common stock. The line of credit has been used principally to finance accounts receivable and inventory purchases. Of the proceeds received from the sale of securities, $350,000 is expected to be used for working capital, and the balance of $650,000 to be used to purchase Thermaire, Inc. During the next twelve months, the Company expects to incur an estimated $100,000 for capital expenditures, a majority of which is expected to be incurred for specialized computer production equipment. The actual amount and timing of such capital expenditures may vary substantially depending upon, among other things, the Company's level of growth. ASSET MANAGEMENT The Company's cash flow from operations has been affected primarily by the timing of its collection of trade accounts receivable. The Company typically sells its products and services on short-term credit terms and seeks to minimize its credit risk by performing credit checks and conducting its own collection efforts. The Company had trade accounts receivable of $340,605 and $622,512 at December 31, 1994 and 1995, respectively, and $851,669 at September 30, 1996. The number of days' sales outstanding in trade accounts receivable was 73 days, 50 days and 56 days at those dates. Bad debt expenses have been insignificant (less than .01%) for each of these periods. DESCRIPTION OF PROPERTY The Company has a lease for a term of five years in Houston, Texas, which consists of 18,155 square feet of office space, which will expire on August 31, 2000. This lease has been divided into administrative offices, computer production operations and warehouse facilities. Management believes that it has the ability to sustain a 100% sales growth without having to expand its facilities or relocate its offices. The Company also leases a small office in Clarksburg, West Virginia to provide a facility for its technical and engineering personnel who reside in that State. The Company does not own any real property. Rent expense for the years ended December 31, 1994 and 1995, and the nine months ended September 30, 1996 was $33,910, $79,269 and $75,000, respectively. The Company is obligated to pay rent expense under its lease in the amounts of $109,000, $109,000, $109,000 and $73,000 for each of the years ending 1997, 1998, 1999 and 2000, respectively. 17 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock as of the date of this Registration Statement, by (i) each person or entity known to the Company to own beneficially 5% or more of the outstanding shares of Common Stock, (ii) each of the Company's directors, (iii) each of the named executive officers, and (iv) all officers and directors as a group.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS -------------- ------------------- -------------------- -------- Common William A. Coskey, P.E.(1) 4,762,899 36.27% 600 Century Plaza Drive Building 140 Houston, Texas 77073 Common Hulda L. Coskey(2) 4,750,000 36.18% 600 Century Plaza Drive Building 140 Houston, Texas 77073 All executive officers and directors as a group (2) 9,512,899 72.45%
(1) William A. Coskey is the beneficial owner of 4,750,000 shares of the Company's Common Stock. Include in this amount is 12,800 shares of the Company's Common Stock that are held in the name William A. Coskey, as Custodian for minor children. (2) Hulda L. Coskey is the beneficial owner of 4,750,000 shares of the Company's Common Stock. CHANGE IN CONTROL The Company does not have any agreements in place with any of its executive officers or employees that would be affected by a change in control of the Company. 18 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The directors and executive officers of the Company are as follows: NAME AGE POSITION HELD - --------------------------- --- ------------- William A. Coskey, P.E. (1) 44 Chairman of the Board, Chief Executive Officer and President Hulda L. Coskey (1) 41 Chief Financial Officer, Vice President - Finance, Director Rex S. Zerger 60 Vice President - Sales & Marketing, Director David W. Gent, P.E. 43 Director Robert S. Moreland (2) 46 Director - ------------ (1) William A. Coskey and Hulda L. Coskey are husband and wife. (2) Mr. Moreland resigned as a director effective as of September 15, 1996. WILLIAM A. COSKEY is the founder of the Company and has served as Chairman of the Board, Chief Executive Officer and President since the Company's formation in September 1985. Prior to founding the Company, Mr. Coskey served as Manager of Corporate Development for Keystone International, Inc., a public company listed on the New York Stock Exchange, and was responsible for all acquisition and merger activities of Keystone International, Inc. during the period 1984 to 1985. Mr. Coskey had formerly held the position of President of Syntech Associates, Inc., an engineering services company located in Houston, Texas for the period 1979 to 1984. Mr. Coskey, an Honors Graduate, received a B.S. in Electrical Engineering from Texas A&M University in 1975. He is a Registered Professional Engineer, and is also a member of the Instrument Society of America. HULDA L. COSKEY has served as Chief Financial Officer of the Company since June 1994. Prior to that time, and since 1985, Mrs. Coskey has held the positions of Vice President and Secretary/Treasurer of Industrial Data Systems, Inc., a Texas corporation. Her primary responsibilities were to develop and initiate procedures for daily operations of the company and to oversee those operations, including but not limited to all accounting, finance and personnel functions. Mrs. Coskey received a B.S. in Accounting from the University of Houston in 1978. REX S. ZERGER has served as Vice President - Sales and Marketing for the Industrial Products Division since June 1, 1996. Mr. Zerger was elected as a Director on December 15, 1996. For more than the past ten years, Mr. Zerger held various management positions with Texas Microsystems, including Senior Vice President - Sales and Marketing and Senior Vice President Mobile Products Group. His responsibilities included the establishment of domestic and international sales channels. Most recently, Mr. Zerger was responsible for the establishment of the Mobile Products Group of 19 Texas Microsystems which developed the hand held, rugged PC branded "Hardbody". He was also responsible for the formation of Texas Micro Express, a direct marketing channel. Mr. Zerger received a B.S. in Mechanical Engineering from the University of SW Louisiana in 1960. DAVID W. GENT, P.E. has served as a director of the Company since June 1994. Mr. Gent has held the position of Vice President - Engineering of Bray Valve & Controls, a subsidiary of Bray International, Inc., located in Houston, Texas, with the responsibility of overseeing several departments that include Engineering, Data Processing, Quality Control and Purchasing, since September 1991. Prior to that time, Mr. Gent founded and served as President of SofTest Design Corporation, a privately held electronic test equipment company for the period 1986 to 1991. Mr. Gent, an Honors Graduate, received a B.S. in Electrical Engineering from Texas A&M University in 1975. He is a Registered Professional Engineer, and a member of the Instrument Society of America. ROBERT S. MORELAND resigned as a member of the board of directors in September 1996 to pursue other personal interests. Mr. Moreland served as a Director for the period June 1994 to September 15, 1996. Mr. Moreland is the President and Chief Executive Officer of Micrologic, Inc., a company engaged in electronics manufacturing, located in Houston, Texas. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company does not have a Compensation Committee. Compensation for the past several years for the Company's executive officers and employees has been determined by the President and Chief Executive Officer. EXECUTIVE COMPENSATION DIRECTOR'S COMPENSATION Employee directors of the Company do not receive any additional compensation for their services as a member of the board of directors of the Company. Independent directors do not receive any compensation for each board meeting attended, nor do they receive compensation for each committee meeting attended. The Company does not pay out-of-pocket expenses incurred by independent directors to attend board and committee meetings. EXECUTIVE COMPENSATION The following table sets forth information concerning compensation for services in all capacities awarded to, earned by, or paid to, the Company's Chief Executive Officer and the most highly compensated executive officer of the Company whose aggregate cash compensation exceeded $100,000 (the "Named Executive Officers") during the years ended December 31, 1994, 1995 and for the nine months ended September 30, 1996. 20 ANNUAL COMPENSATION ------------------------------------- NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION - ------------------ ---- ------ ----- ------------ ------------ ($) ($) ($) ($) William A. Coskey, 1996 54,000 - - - P.E., Chief Executive 1995 72,000 103,305 - - Officer and President 1994 51,000 - - - At December 31, 1995, investments in real estate limited partnerships were assigned to William and Hulda Coskey. The transaction was recorded on the Company's books at a value of $103,305, and was in lieu of cash compensation during 1995. The Company believes that its success is attributed in part to its ability to attract and keep quality management personnel. The Company intends to pursue growth using an entrepreneurial management style, giving responsible management broad latitude to manage the administration, sales, consulting and production operations, including profit and loss responsibility. EMPLOYMENT AGREEMENTS The Company has not entered into any employment agreements with any of its executive officers or employees. 401(K) PLAN On January 1, 1993, the Company adopted a Section 401(k) Profit Sharing Plan and Trust (the "Plan"). The Plan is intended to qualify for tax exemption under Section 401(k) of the Code and is subject to the Employee Retirement Income Security Act of 1974. The Plan is administered by management of the Company and all of the Company's employees are allowed to participate, who, as of the enrollment eligibility dates under the Plan, have completed at least 90 days of service with the Company and have elected to participate in the Plan. Employees may contribute up to 15% of their annual compensation, which is matched by the Company under a defined formula. In addition, the Company may make discretionary contributions to the Plan, for the benefit of all participants, at the election of the board of directors. Employee contributions are fully vested at all times and contributions by the Company vest on a schedule of 20% per year over a six-year period, commencing with the second year of employment. KEY MAN INSURANCE William A. Coskey is a key employee of the Company and the loss of Mr. Coskey could adversely affect the Company's business. The Company maintains, and is the beneficiary of, a life insurance policy on the life of Mr. Coskey. The face amount of such policy is $600,000. The continuance of such policy is at the discretion of the Board of Directors and may or may not continue in the future. 21 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The board of directors has adopted a policy requiring that all transactions between the Company and its officers, directors, principal stockholders and their affiliates be on terms no less favorable to the Company than could be obtained from unrelated third parties and that any such transactions be approved by a majority of the disinterested members of the Company's board. CERTAIN SHAREHOLDER AGREEMENTS The Company does not have, nor has it ever had, any shareholder agreements in place with any of its shareholders. CONSULTING AGREEMENT The Company has entered into consulting agreements with professionals who provide engineering and design services on a contract basis. LOANS The Company has not made any loans to any of its directors, executive officers or employees. CERTAIN RELATED BUSINESS TRANSACTIONS During the past several years, the Company has not entered into any related party transactions with any of its directors, employees or shareholders. DESCRIPTION OF SECURITIES The following summary outlines certain provisions with respect to the number of shares authorized, par value, and does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Company's Articles of Incorporation and Bylaws are being filed herein as Exhibits to this Registration Statement, in accordance with applicable laws. COMMON STOCK The Company is authorized to issue 75,000,000 shares of its Common Stock, $.001 par value, of which 13,129,999 shares were issued and outstanding prior to this Registration Statement. Holders of shares of the Company's Common Stock are entitled to one vote for each share held of record on matters to be voted on by the stockholders of the Company. Holders of shares of Common Stock will be entitled to receive dividends if any, when, as and if declared by the board of directors and to share ratably in the assets of the Company legally available for distribution to its stockholders, in the event of the liquidation, dissolution or winding-up of the Company. Holders of Common Stock have no preemptive, subscription, redemption or conversion rights. On August 15, 1995, the Company 22 issued 600,000 shares of Common Stock which are currently held in an escrow account pending completion of the acquisition by the Company exercising its option to pay $600,000 and obtain a release of the shares. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Company's Common Stock is Pacific Stock Transfer, P.O. Box 93385, Las Vegas, Nevada 89193. PART II MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON STOCK AND OTHER SHAREHOLDER MATTERS The Company's Common Stock, $.001 par value per share, is traded on the NASDAQ Electronic Bulletin Board System under the symbol "IDDS". HIGH LOW YEAR ENDED DECEMBER 31, 1995 First Quarter............................. 0.750 0.750 Second Quarter............................ 1.000 0.375 Third Quarter............................. 1.000 0.875 Fourth Quarter............................ 1.000 0.750 NINE MONTHS ENDED SEPTEMBER 30, 1996 First Quarter............................. 1.125 0.750 Second Quarter............................ 0.875 0.375 Third Quarter............................. 4.250 0.875 The foregoing figures, are based on information published by financial sources, do not reflect retail markups or markdowns and may not represent actual trades. As of the date of this Registration Statement, the Common Stock was held by approximately 320 shareholders of record. DIVIDEND POLICY The Company has never declared or paid a cash dividend on the Common Stock. The payment of dividends in the future will depend on the Company's earnings, capital requirements, operating and financial position and general business conditions. The Company intends to retain any future earnings for reinvestment in its business and does not intend to pay cash dividends in the foreseeable future. The Company has not entered into any agreement which restricts its ability to pay 23 dividends on its Common Stock in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." LEGAL PROCEEDINGS From time to time, the Company is involved in various legal proceedings arising in the ordinary course of business. To management's knowledge, the Company is not currently involved in any material legal proceedings and is not aware of any legal proceeding threatened against it. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There are no changes in and disagreements with the Company's accountants on accounting and financial disclosure. RECENT SALES OF UNREGISTERED SECURITIES The following table summarizes the date, name, title and amount of all transactions which relate to the sale of the Company's Common Stock that have not been registered under the Securities Act of 1934, as amended, during the past three years: AMOUNT OF DATE NAME AND TITLE OF PURCHASER SECURITIES SOLD - ---------------- --------------------------- --------------- July 23, 1994 John Cameron (1) 15,000 July 23, 1994 Charles Pollock, et ux (2) 15,000 July 26, 1994 Nevada investors - 504 Reg. D Offering 500,000 (1994) (3) August 1, 1994 William A. Coskey (4) 4,762,800 Chairman, President, Chief Executive Officer, Director August 1, 1994 Hulda L. Coskey (5) 4,750,000 Chief Financial Officer, Vice President - Finance, Director July 30, 1996 Investors 504 Reg. D Offering (1996)(6) 2,499,000 (1) The amount of 15,000 shares of the Company's Common Stock were issued to John Cameron in consideration of a loan that was made to the Company in the amount of $5,000 on July 23, 1994. These shares of Common Stock were issued in reliance upon the "private placement" exemption under the Securities Act of 1933 (the "Act'). These shares of Common Stock will not be available for sale in the open market without prior registration and are subject to Rule 144 under the Act. (2) The amount of 15,000 shares of the Company's Common Stock were issued to Charles Pollock, et ux, in consideration of a loan that was made to the Company in the amount of $5,000, on July 23, 1994. 24 These shares of Common Stock were issued in reliance upon the "private placement" exemption under the Securities Act of 1933 (the "Act'). These shares of Common Stock will not be available for sale in the open market without prior registration and are subject to Rule 144 under the Act. (3) The amount of 500,000 shares of the Company's Common Stock were issued in reliance upon the exemption contained in Rule 504, promulgated by the Securities and Exchange Commission as part of Regulation D. (4) The amount of 4,762,800 shares of Common Stock issued to William A. Coskey, a founder of the Company, include 4,750,000 shares that were issued in exchange for the consideration of fifty percent (50%) or 100,000 shares of Industrial Data Systems, Inc., a Texas corporation that was merged into Industrial Data Systems Corporation on August 1, 1994, and 12,800 shares of Common Stock that are held in the name of William A. Coskey, as Custodian for Minor Children. The 12,800 shares of Common Stock were purchased through the private placement offering on November 5, 1994. The 12,800 shares of Common Stock were issued in reliance upon the "private placement" exemption under the Securities Act of 1933 (the "Act'). The 4,762,800 shares of Common Stock will not be available for sale in the open market without prior registration and are subject to Rule 144 under the Act. (5) The amount of 4,750,000 shares of Common Stock were issued to Hulda L. Coskey, a founder of the Company in exchange for the consideration of fifty percent (50%) or 100,000 shares of Industrial Data Systems, Inc., a Texas corporation which was merged into Industrial Data Systems Corporation on August 1, 1994. These shares of Common Stock were issued in reliance upon the "private placement" exemption under the Securities Act of 1933 (the "Act'). The 4,750,000 shares of Common Stock will not be available for sale in the open market without prior registration and are subject to Rule 144 under the Act. (6) On July 30, 1996, the Company issued 2,499,999 shares of Common Stock to five (5) investors in exchange for the consideration of nine hundred ninety-nine thousand and nine-hundred ninety-nine dollars ($999,999). These shares of Common Stock were issued in reliance on the exemption of Rule 504, promulgated by the Securities and Exchange Commission as part of Regulation D. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's Articles of Incorporation provide that, to the fullest extent permitted under Nevada corporation law, the Company will indemnify any officer or director who is, was, or is threatened to be made a party to any proceeding because he or she (1) is or was a director or officer, or (2) while a director or officer, at the Company's request, was serving as a director, officer, partner, venturer, proprietor, trustee, employee or agent of another entity. The Company's Articles of Incorporation also provide that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages from breaches of fiduciary duties, except for liability (i) for any breach of the duty of loyalty to the Company or its stockholders; (ii) for acts or omissions not in good faith or in knowing violation of the law; or (iii) for any transaction from which a director or officer has derived an improper personal benefit. 25 PART IV INDEX TO FINANCIAL STATEMENTS PAGE Independent Auditor's Report .............................................. 27 Consolidated Balance Sheets, December 31, 1994 and 1995 and September 30, 1996 (unaudited) ............................................ 28 Consolidated Statements of Income for the Years Ended December 31, 1994 and 1995 and for the Nine Months Ended September 30, 1995 and 1996 (unaudited) ........................................ 29 Consolidated Statement of Stockholders' Equity for the Period from January 1, 1994 through September 30, 1996 .................. 30 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994 and 1995 and for the Nine Months Ended September 30, 1995 and 1996 (unaudited) ...................................31-32 Notes to Consolidated Financial Statements ................................33-38 26 INDEPENDENT AUDITOR'S REPORT Board of Directors and Stockholders Industrial Data Systems Corporation and Subsidiary d.b.a. IDS Technical Services We have audited the accompanying consolidated balance sheets of Industrial Data Systems Corporation and Subsidiary as of December 31, 1994 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Industrial Data Systems Corporation and Subsidiary as of December 31, 1994 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Hein & Associates, L.L.P. Houston, Texas March 12, 1996 27 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------ September 30, 1994 1995 1996 ---------- ----------- ----------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents: Cash in bank ................................. $ 254,968 $ 342,304 $ 191,099 Mutual funds ................................. 14,089 231,528 350,602 ---------- ----------- ----------- 269,057 573,832 541,701 Marketable securities, at market value: Trading ...................................... 156,988 238,423 233,104 Available-for-sale ........................... 83,268 32,655 54,953 ---------- ----------- ----------- 240,256 271,078 288,057 Account receivable - trade, less allowance for doubtful accounts of $22,453 in 1994 and $16,121 in 1995 and 1996, respectively ................................. 340,605 622,512 851,669 Advances and note receivable due from an affiliate -- -- 144,046 Inventory ........................................ 97,314 139,514 356,181 Note receivable from sale of common stock ........ -- -- 999,999 Note receivable from employee .................... 10,570 -- -- ---------- ----------- ----------- Total current assets ...................... 957,802 1,606,936 3,181,653 ---------- ----------- ----------- PROPERTY AND EQUIPMENT, net .......................... 38,526 106,283 126,754 OTHER ASSETS ......................................... 111,052 2,000 38,804 ---------- ----------- ----------- Total assets .............................. $1,107,380 $ 1,715,219 $ 3,347,211 ========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Note payable to bank ............................. $ -- $ 50,000 $ 100,000 Demand note due brokers (collateralized by marketable securities) .................... 7,896 -- -- Accounts payable ................................. 70,513 113,478 315,577 Accrued expenses and other current liabilities ... 68,823 117,714 178,205 Income taxes payable ............................. 65,560 166,986 132,381 ---------- ----------- ----------- Total current liabilities ................. 212,792 448,178 726,163 DEFERRED INCOME TAX .................................. -- 31,423 31,423 COMMITMENTS (Notes 6 and 11) STOCKHOLDERS' EQUITY: Note receivable from sale of common stock ........ -- -- (799,999) Net unrealized gain on marketable securities, net 3,057 1,289 3,417 Common stock, .001 par value; 75,000,000 shares authorized; 10,000,000 shares issued in 1994; 10,630,000 shares issued in 1995; 13,129,999 shares issued in 1996 ............. 10,000 10,630 13,130 Additional paid-in capital ....................... 808,977 817,397 1,839,683 Retained earnings ................................ 72,554 439,977 749,533 ---------- ----------- ----------- 894,588 1,269,293 2,605,763 Treasury stock, 38,700 shares in 1995 and 19,800 in 1996, at cost ............. -- (33,675) (16,138) ---------- ----------- ----------- Total stockholders' equity ................ 894,588 1,235,618 2,589,625 ---------- ----------- ----------- Total liabilities and stockholders' equity $1,107,380 $ 1,715,219 $ 3,347,211 ========== =========== ===========
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS. 28 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------------- ------------ 1994 1995 1995 1996 ----------- ----------- ----------- ------------ (unaudited) OPERATING REVENUES: Product sales ......................... $ 941,477 $ 1,354,888 $ 1,023,377 $ 1,443,425 Consulting fees ....................... 770,179 3,170,298 2,485,753 2,709,085 ----------- ----------- ----------- ------------ 1,711,656 4,525,186 3,509,130 4,152,510 OPERATING EXPENSES: Cost of revenues: Product ........................... 607,077 982,422 693,690 950,963 Consulting ........................ 481,395 2,223,281 1,667,441 1,921,013 Selling, general and administrative ... 313,280 833,473 532,582 907,341 Depreciation .......................... 5,988 17,631 13,395 21,691 ----------- ----------- ----------- ------------ 1,407,740 4,056,807 2,907,108 3,801,008 OTHER INCOME (EXPENSE): Realized gains on marketable securities 25,990 97,727 58,578 136,668 Other income .......................... 4,372 6,841 -- 13,619 Unrealized gain (loss) on marketable securities ........................ (36,898) 29,932 35,078 (9,711) Interest income (expense), net ........ 1,594 8,653 6,378 (4,424) ----------- ----------- ----------- ------------ (4,942) 143,153 100,034 136,152 ----------- ----------- ----------- ------------ INCOME BEFORE INCOME TAXES ................ 298,974 611,532 702,056 487,654 PROVISION FOR INCOME TAXES: Federal ............................... 38,975 217,572 239,000 161,478 State ................................. 16,910 26,537 24,000 16,620 ----------- ----------- ----------- ------------ 55,885 244,109 263,000 178,098 ----------- ----------- ----------- ------------ NET INCOME BEFORE PRO FORMA INCOME TAXES .......................... 243,089 367,423 439,056 309,556 PRO FORMA INCOME TAXES .................... 56,230 -- -- -- ----------- ----------- ----------- ------------ NET INCOME AFTER PRO FORMA INCOME TAXES .......................... $ 186,859 $ 367,423 $ 439,056 $ 309,556 =========== =========== =========== ============ PRO FORMA NET INCOME PER COMMON SHARE ...................... $ .02 $ .04 $ .04 $ .03 =========== =========== =========== ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .................... 9,604,100 10,002,630 10,000,000 10,030,000 =========== =========== =========== ============
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS. 29 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY PERIOD FROM JANUARY 1, 1994 THROUGH SEPTEMBER 30, 1996
UNREALIZED Note Receivable COMMON STOCK ADDITIONAL GAIN (LOSS) from sale of -------------------- PAID-IN TREASURY ON MARKETABLE RETAINED Common Stock SHARES AMOUNT CAPITAL STOCK SECURITIES EARNINGS TOTAL --------- ---------- ------- ----------- -------- ------- --------- ----------- BALANCES, January 1, 1994 ......................... $ -- 9,500,000 $ 9,500 0 $ -- $(2,609) $ 627,490 $ 634,381 Net income prior to conversion to C Corporation .................. -- -- -- -- -- -- 170,535 170,535 Conversion of S Corporation to C Corporation ................ -- -- -- 798,025 -- -- (798,025) -- Net income after conversion to C Corporation ................ -- -- -- -- -- -- 72,554 72,554 Change in unrealized gain on marketable securities ................... -- -- -- -- -- 5,666 -- 5,666 Distributions to stockholders ................. -- -- -- (69,775) -- -- -- (69,775) Issuance of common stock; $.30 per share ............... -- 500,000 500 149,500 -- -- -- 150,000 Offering costs ............... -- -- -- (68,773) -- -- -- (68,773) --------- ---------- ------- ----------- -------- ------- --------- ----------- BALANCES, December 31, 1994 ......................... -- 10,000,000 10,000 808,977 -- 3,057 72,554 894,588 Issuance of common stock; $.30 share ............ -- 30,000 30 8,970 -- -- -- 9,000 Purchases of treasury stock; 64,500 shares ......... -- -- -- -- (58,750) -- -- (58,750) Sales of stock from treasury; 25,800 shares ....................... -- -- -- 50 25,075 -- -- 25,125 Stock issued in connection with contingent purchase transaction .................. -- 600,000 600 (600) -- -- -- -- Change in unrealized gain on marketable securities ................... -- -- -- -- -- (1,768) -- (1,768) Net income ................... -- -- -- -- -- -- 367,423 367,423 --------- ---------- ------- ----------- -------- ------- --------- ----------- BALANCES, December 31, 1995 ......................... -- 10,630,000 10,630 817,397 (33,675) 1,289 439,977 1,235,618 Issuance of common stock; 8.40 per share (unaudited) ............ (799,999) 2,499,999 2,500 997,499 -- -- -- 200,000 Purchases of treasury stock; 10,500 shares (unaudited) ........... -- -- -- -- (8,188) -- -- (8,188) Sales of stock for treasury; 29,400 shares (unaudited) ........... -- -- -- 24,787 25,725 -- -- 50,512 Change in unrealized gain on marketable securities (unaudited) ....... -- -- -- -- -- 2,128 -- 2,128 Net income (unaudited) ....... -- -- -- -- -- -- 309,556 309,556 --------- ---------- ------- ----------- -------- ------- --------- ----------- BALANCES, September 30, 1996 (unaudited) ............. $(799,999) 13,129,999 $13,130 $ 1,839,683 $(16,138) $ 3,417 $ 749,533 $ 1,789,626 ========= ========== ======= =========== ======== ======= ========= ===========
30 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, September 30, ----------------------- ------------------------- 1994 1995 1995 1996 --------- --------- --------- ----------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................... $ 243,089 $ 367,423 $ 439,056 $ 309,556 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ............................................................. 5,988 17,631 13,395 21,691 Increase (decrease) in trading securities, net .................................................. (20,043) (81,435) (142,466) 5,319 Increase in: Receivables, net ......................................................... (167,109) (281,908) (585,931) (229,157) Inventory ................................................................ (44,638) (42,200) (48,155) (216,667) Accounts payable ......................................................... 54,489 42,965 161,579 202,099 Other current liabilities ................................................ 100,025 150,317 246,868 25,886 Deferred income tax expense (benefit) ................................................................ (9,675) 41,098 -- -- Non-cash compensation provided to officers .............................................................. 103,305 -- -- Other, net ............................................................... 7,083 9 -- -- --------- --------- --------- ----------- Net cash provided by operating activities ..................................................... 169,209 317,205 84,346 118,727 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ..................................................... (30,118) (85,388) (59,490) (42,162) Advances to affiliate .................................................... -- -- -- (144,046) Purchases of available-for-sale securities ............................................................... (7,375) (76,367) -- (21,872) Proceeds from sale of available-for-sale securities ...................... 1,000 132,950 21,762 1,702 Other .................................................................... -- -- (2,156) (36,804) --------- --------- --------- ----------- Net cash used in investing activities .................................... (36,493) (28,805) (39,884) (243,182) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable, net ........................................... (20,000) 50,000 50,000 50,000 Proceeds from issuance of common stock, net .............................. 81,227 -- 9,000 -- Purchase of treasury stock ............................................... -- (58,750) (20,687) (8,188) Sales of stock from treasury ............................................. -- 25,125 13,587 50,512 Distributions to stockholders ............................................ (69,775) -- -- -- --------- --------- --------- ----------- Net cash provided by (used in) financing activities ..................................................... (8,548) 16,375 51,900 92,324 --------- --------- --------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS ................................ 124,168 304,775 96,362 (32,131) CASH AND CASH EQUIVALENTS, at beginning of year ........................................................ 144,889 269,057 269,057 573,832 --------- --------- --------- ----------- CASH AND CASH EQUIVALENTS, at end of year .............................................................. $ 269,057 $ 573,832 $ 365,419 $ 541,701 ========= ========= ========= =========== - - Continued - See accompanying notes to these consolidated financial statements 31 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, September 30, ----------------------- ------------------------- 1994 1995 1995 1996 --------- --------- --------- ----------- (unaudited) SUPPLEMENTAL DISCLOSURES: Interest paid $ .......................................................... 1,577 $ 4,103 $ 3,190 $ 8,328 Income taxes paid ........................................................ $ -- $ 40,000 $ 40,000 $ 79,616 ========= ========= ========= =========== NON-CASH TRANSACTIONS: Issuance of common stock for services provided ........................................................ $ -- $ 9,000 $ 9,000 $ -- Issuance of common stock (600,000 shares) in connection with a contingent business acquisition .......................................... -- -- -- -- Common stock issued in exchange for a note receivable .................................................... $ -- $ -- $ -- $ 1,000,000 ========= ========= ========= ===========
See accompanying notes to these consolidated financial statements. 32 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (The Information Subsequent to December 31, 1995 is Unaudited) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION - The accompanying consolidated financial statements include the accounts of Industrial Data Systems Corporation (IDS), a Nevada corporation, and its wholly-owned subsidiary Industrial Data Systems, Inc., a Texas corporation, d.b.a. IDS Technical Services. Effective August 1, 1994, IDS (the Company) exchanged 9,500,000 shares of its common stock for the outstanding shares of Industrial Data Systems, Inc. (Texas), a corporation wholly owned by the majority stockholders of the Company. This transaction involved companies under common control and, therefore, is accounted for similar to a pooling of interests. The accompanying consolidated financial statements include the accounts of Industrial Data Systems, Inc. (Texas) beginning January 1, 1994. All significant intercompany balances and transactions have been eliminated in consolidation. INVENTORY - Inventory is composed of computer components and finished goods and is carried at the lower of cost or market value on the first-in, first-out (FIFO) method of accounting. The majority of inventory at December 31, 1994 and 1995 and September 30, 1996 consisted of computer components. MARKETABLE SECURITIES - Marketable securities to be held to maturity are stated at amortized cost. Marketable securities classified as available-for-sale are stated at market value, with unrealized gains and losses reported as a separate component of stockholders' equity, net of deferred income taxes. If a decline in market value is determined to be other than temporary, any such loss is charged to earnings. Trading securities are stated at market value, with unrealized gains and losses recognized in earnings. PROPERTY AND EQUIPMENT - Property and equipment is stated at cost, adjusted for accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, which range from five to seven years. INVESTMENTS IN REAL ESTATE LIMITED PARTNERSHIPS - Investments in real estate limited partnerships were carried at the lower of cost or estimated fair market value of the underlying real estate. These investments were assigned to two officers, who are also major stockholders of the Company, during 1995 in lieu of cash compensation. INCOME TAXES - IDS accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement and tax bases of its existing assets and liabilities. Income tax expense or benefit 33 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (The Information Subsequent to December 31, 1995 is Unaudited) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): represents the current tax payable or refundable for the period plus or minus the tax effect of the net change in the deferred tax assets and liabilities during the period. Prior to its merger with IDS in fiscal 1994, Industrial Data Systems, Inc. (Texas) was a Subchapter S Corporation as provided under the Internal Revenue Code. Accordingly, the taxable income or loss for this entity was reported in the stockholders' individual tax returns. Upon its merger with IDS, deferred taxes were recorded on the date of the merger for the differences between the financial and tax bases of its assets and liabilities at that date. Pro forma income taxes have been provided in the accompanying statement of income for the year ended December 31, 1994 as if the Company had been taxable for the entire year. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash in bank and investments in highly liquid money market mutual funds. USE OF ESTIMATES - The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying results. Actual results could differ from these estimates. NET INCOME PER COMMON SHARE - Net income per common share was computed by dividing net income by the weighted average number of average common shares outstanding. There were no common equivalent shares outstanding during the periods presented. For purposes of computing the weighted average number of common shares outstanding, common stock held in escrow accounts for issuance upon the closing of the contingent purchase transaction (see Note 11) and upon payment of the $1,000,000 note issued in exchange for 2,499,999 shares of common stock (see Note 9) have not been reflected as outstanding. INTERIM FINANCIAL INFORMATION - The accompanying financial information as of September 30, 1996 and for the nine months ended September 30, 1995 and 1996 has been prepared, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. The financial information reflects all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary to fairly present such information in accordance with generally accepted accounting principles. 34 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (The Information Subsequent to December 31, 1995 is Unaudited) 2. CONCENTRATION OF CREDIT RISK: The Company manufactures and distributes industrial and portable computers and computer monitors to commercial companies primarily in the United States and provides pipeline engineering services primarily to major integrated oil and gas companies. The caption product sales in the accompanying income statement represents sales of industrial and portable computers. The caption consulting fees represents pipeline engineering service revenues. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company assesses its credit risk and provides an allowance for doubtful accounts for any accounts which it deems doubtful for collection. The Company maintains deposits in banks which may exceed the amount of federal deposit insurance available. Management periodically assesses the financial condition of the institutions and believes that any possible deposit loss is minimal. 3. MARKETABLE SECURITIES: Marketable securities at December 31, 1994 are summarized as follows: Gross Fair Unrealized Market Cost Gains Losses Value -------- -------- --------- -------- Trading: Common stocks ........... $168,886 $ 2,493 $ (41,391) $129,988 Other ................... 25,000 2,000 -- 27,000 -------- -------- --------- -------- 193,886 4,493 (41,391) 156,988 Available-for-sale: Corporate bonds ......... 36,992 -- (3,375) 33,617 Municipal bond .......... 43,219 6,432 -- 49,651 -------- -------- --------- -------- 80,211 6,432 (3,375) 83,268 -------- -------- --------- -------- $274,097 $ 10,925 $ (44,766) $240,256 ======== ======== ========= ======== Marketable securities at December 31, 1995 are summarized as follows: Gross Fair Unrealized Market Cost Gains Losses Value -------- -------- --------- -------- Trading: Common stocks ........... $183,491 $ 26,896 $ (6,973) $203,414 Other ................... 25,000 10,009 -- 35,009 -------- -------- --------- -------- 208,491 36,905 (6,973) 238,423 Available-for-sale - Mutual fund ............. 31,366 1,289 -- 32,655 -------- -------- --------- -------- $239,857 $ 38,194 $ (6,973) $271,078 ======== ======== ========= ======== 35 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (The Information Subsequent to December 31, 1995 is Unaudited) 4. PROPERTY AND EQUIPMENT: Property and equipment consists of the following: December 31, ------------------------- September 30, 1994 1995 1996 --------- --------- --------- Furniture and fixtures ......... $ 22,237 $ 42,859 $ 46,758 Computer equipment ............. 39,460 104,226 144,040 --------- --------- --------- 61,697 147,085 190,798 Accumulated depreciation ....... (23,171) (40,802) (64,044) --------- --------- --------- $ 38,526 $ 106,283 $ 126,754 ========= ========= ========= 5. NOTE PAYABLE TO BANK: The Company has a line of credit with a bank of $350,000 at prime plus 1% (9.5% at September 30, 1996). The line of credit, which expires on June 11, 1997, is collateralized by inventory and is guaranteed by the stockholders of the Company. There was $100,000 outstanding under the line at September 30, 1996. 6. LEASE: The Company leases office space under a non-cancelable operating lease. In 1995, the Company leased additional space in the same building. Total rent expense for the year ended December 31, 1994 and 1995 and for the nine months periods ended September 30, 1995 and 1996 was $33,910, $79,269, $52,494 and $79,865 respectively. Future minimum rentals due under non-cancelable operating leases with an original term of at least one year are as follows: YEAR ENDING DECEMBER 31, ------------------------ 1996 $102,000 1997 109,000 1998 109,000 1999 109,000 2000 73,000 -------- $502,000 36 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (The Information Subsequent to December 31, 1995 is Unaudited) 7. PROFIT SHARING PLAN: The Company has a 401(k) profit sharing plan covering substantially all employees. Under the terms of the plan, the Company will make matching contributions equal to 50% of employee contributions up to 3% of employee compensation, as defined. Employees may make contributions up to 15% of their compensation, subject to certain maximum contribution limitations. The employer's contributions vest on a schedule of 20% per year beginning in the second year for the first six years of employment. The Company made contributions of $8,813, $33,214, $20,626 and $30,573 for the years ended December 31, 1994 and 1995 and for the nine month periods ended September 30, 1995 and 1996, respectively. 8. MAJOR CUSTOMERS: The Company had sales to one major customer totaling approximately $2,927,000 for 1995, representing 63% of total revenue for the year. At December 31, 1995, amounts due from customers in excess of 10 % of trade accounts receivable amounted to $220,680, all of which was due from a single customer. 9. STOCKHOLDERS' EQUITY: During October of 1994, the Company issued 500,000 shares of common stock at $.30 per share in a private placement transaction. Proceeds from the offering totaled $81,227, net of offering expenses. The Company issued 2,499,999 shares of common stock in exchange for three non-interest bearing notes totaling $999,999. As of September 30, 1996, the shares of common stock were being held in escrow. Subsequent to September 30, 1996, the Company was paid the entire amounts due under the notes. 10. FEDERAL INCOME TAXES: The Company has deferred tax assets and liabilities at December 31, 1994 and 1995 as follows: 1994 1995 -------- -------- Deferred tax assets .............. $ 16,667 $ 6,000 Deferred tax liabilities ......... (6,992) (37,423) -------- -------- Net deferred tax asset (liability) $ 9,675 $(31,423) ======== ======== 37 INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (The Information Subsequent to December 31, 1995 is Unaudited) 10. FEDERAL INCOME TAXES (CONTINUED): The expected actual income tax expense (based upon the federal rate of 34%) for the year ended December 31, 1995 and for the nine month periods ended September 30, 1995 and 1996 differs from actual income tax expense, primarily because of state income taxes incurred by the Company. 11. COMMITMENTS: The Company has issued 600,000 shares of its common stock to acquire another company in a contingent purchase transaction. These shares are currently held in an escrow account pending completion of the acquisition by the Company exercising its option to repurchase the shares of the Company's stock held in escrow for one dollar per share. Should the Company not elect to exercise this option, these shares will be returned to the Company without cost and the proposed business combination will be rescinded. The Company's option to acquire this company expires in February 1997. In connection with this transaction, the Company has entered into an agreement to purchase the facilities of this company, subject to completion of the contingent purchase transaction, for $500,000 cash on or before February 15, 1997. Should the Company not complete the property purchase, it will lose its $100 earnest money deposit. The Company's financial statements do not reflect the accounts of the company to be acquired as of any date or for any period covered by the accompanying financial statements. Should the business combination be completed, it will be accounted for on the purchase method of accounting. The shares of common stock issued by the Company and held in escrow have been reflected as issued and outstanding in the accompanying financial statements. The Company has advanced $144,046 to this company as of October 31, 1996. Of the amounts advanced, $30,100 has no stated terms. The remaining $113,946 was advanced under a factoring agreement. Advances under the factoring agreement are collateralized by substantially all tangible assets of the borrower. 12. FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's financial instruments consist of trade receivables and payables, investments in mutual funds, marketable securities and a revolving note payable due a bank. The investments in mutual funds and marketable securities are carried at their estimated fair value in the accompanying balance sheet. Management believes the carrying values of the remaining financial instruments approximate their fair values. 38 DESCRIPTION AND INDEX OF EXHIBITS 2 Agreement and Plan of Reorganization for the Purchase of Industrial Data Systems, Incorporated, dated August 1, 1994 2.1 Action by Written Consent of the Board of Directors for the Purchase of Industrial Data Systems, Incorporated, a Texas corporation, dated August 1, 1994 2.2 Action by Written Consent of the Shareholders for the Purchase of Industrial Data Systems, Incorporated, a Texas corporation, dated August 1, 1994 2.3 Stock Acquisition Agreement for the Purchase of Thermaire Incorporated, d.b.a. Thermal Corporation, dated August 15, 1995 2.4 Escrow Agreement for the Purchase of Thermaire Incorporated, d.b.a. Thermal Corporation, dated August 15, 1995 2.5 Earnest Money Contract for the Purchase of Thermal Corporation's Manufacturing Facility, dated August 15, 1995 2.6 Offering Memorandum, 504D Offering of 500,000 Shares of Common Stock in the State of Nevada, dated July 26, 1994 2.7 Action by the Board of Directors regarding the 504D Stock Offering of 2,499,999 Shares of Common Stock, dated July 10,1996 2.8 Agreement for Amendment and Substitution of Subscription Agreement and Notes, dated July10, 1996 2.9 Stock Purchase Subscription Agreement from World Glory Company Limited, dated July 10, 1996 2.10 Stock Purchase Subscription Agreement from Asian Harvest Corporation Limited., dated July 10, 1996 2.11 Stock Purchase Subscription Agreement from Silver Course Corporation, dated July 10, 1996 2.13 Stock Purchase Subscription Agreement from Pines Intervest Corporation, dated July 10, 1996 2.14 Stock Purchase Subscription Agreement from Wilton Assets Corp., dated July 10, 1996 39 3 Articles of Incorporation, dated June 20, 1994 3.1 Corporate Charter, dated June 22, 1994 3.2 Bylaws dated June 22, 1994 4.1 Revolving Credit Line with Texas Commerce Bank, N.A., dated June 11, 1996 4.2 Promissory Note plus Restricted Common Stock to John H. Cameron, dated July 23, 1994 4.3 Promissory Note plus Restricted Common Stock to Charles B. Pollock, et ux, dated July 23, 1994 4.4 Promissory Note payable to Industrial Data Systems Corporation from World Glory Company Limited., dated July 15, 1996 4.5 Promissory Note payable to Industrial Data Systems Corporation from Asian Harvest Corporation, Ltd., dated July 15, 1996 4.6 Promissory Note payable to Industrial Data Systems Corporation from Silver Course Corporation, dated July 15, 1996 4.7 Promissory Note payable to Industrial Data Systems Corporation from Pines Intervest Corporation, dated July 15, 1996 4.8 Promissory Note payable to Industrial Data Systems Corporation from Wilton Assets Corp. dated July 15, 1996 10 Lease Agreement between Industrial Data Systems, Incorporated, a Texas corporation, and American General Life Insurance Company, dated January 16, 1991 10.1 First Amendment to Lease Agreement between Industrial Data Systems, Incorporated, a Texas corporation, and American General Life Insurance Company, dated December 7, 1993 10.2 Second Amendment to Lease Agreement between Industrial Data Systems Corporation, a Nevada corporation, and American General Life Insurance Company, dated December 29, 1994 10.3 Third Amendment to Lease Agreement between Industrial Data Systems Corporation, a Nevada corporation, and American General Life Insurance Company, dated December 8, 1995 40 10.4 Lease Agreement between Industrial Data Systems Corporation, a Nevada corporation, and Clarksburg,WestVirginia Masonic Building, dated June 1, 1995 10.5 Adoption Agreement for Nonstandardized Code 401(k) Profit Sharing Plan, dated January 1, 1993 21 Subsidiary of the Registrant 24 Power of Attorney 41 SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized. INDUSTRIAL DATA SYSTEMS CORPORATION Dated: January 24, 1997 By: /S/ WILLIAM A. COSKEY William A. Coskey, P.E., Chairman of the Board, President and Chief Executive Officer By: /S/ HULDA L. COSKEY Hulda L. Coskey, Chief Financial Officer, Director By: /S/ REX S. ZERGER Rex S. Zerger, Vice President - Sales & Marketing, Director By: /S/ DAVID W. GENT David W. Gent, P.E., Director 42 EX-2 2 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") dated this 1st day of August, 1994, is entered into by and among INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation ("BUYER") and WILLIAM A. COSKEY and HULDA L. COSKEY, (collectively "SELLERS"). THE PARTIES RECITE THAT: 1. The BUYER desires to buy all of the SELLERS issued and outstanding shares of INDUSTRIAL DATA SYSTEMS, INC., a Texas corporation ("ACQUIRED COMPANY"). 2. All of the issued and outstanding shares of the ACQUIRED COMPANY'S common stock are owned by SELLERS. 3. SELLERS are willing to transfer 200,000 shares of ACQUIRED COMPANY'S common stock to the BUYER in exchange for 9,500,000 shares of BUYER'S common stock under the terms and conditions as set forth in this AGREEMENT. SELLERS are further willing to cancel their interests in the 100,000 shares of the BUYER'S common stock that was to be issued pursuant to the Minutes of the Organizational Meeting of the BUYER dated June 22, 1994. Thus, the total shares issued under this transaction is 9,500,000 which represents the total shares issued and outstanding of the BUYER as of this date. 4. Both the BUYER and the SELLERS desire this exchange to qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986. NOW, THEREFORE, the parties agree as follows: ARTICLE I TRANSFER OF STOCK AND CONSIDERATION 1.1. TRANSFER OF STOCK. Subject to the terms and conditions contained in this AGREEMENT on the closing date as defined in Article VI, each of the SELLERS shall transfer and deliver to BUYER all the shares of ACQUIRED COMPANY stock being owned by that SELLER and each SELLER shall deliver to the BUYER a certificate or certificates evidencing all the shares of the acquired stock then owned by him, which certificate shall be duly endorsed and in blank for transfer or accompanied by a duly executed stock powers in blank. Each SELLER shall pay all stock transfer taxes becoming due by reason of the exchange of the shares transferred by him hereunder and shall affix, to their certificate or certificates for those shares all required transfer tax stamps. 1.2. EXCHANGES OF SHARES. BUYER shall issue and deliver to SELLERS in exchange for the 200,000 the shares of ACQUIRED COMPANY'S stock and the release and cancellation of the Seller's interest in the 100,000 shares of common stock of the BUYER, 9,500,000 shares of BUYER'S common stock duly and validly issued, fully paid and nonaccessible. BUYER shall issue to the SELLERS in their joint names all of the above-mentioned shares. 1.3. ALL OF THE ACQUIRED COMPANY'S STOCK. The AGREEMENT shall be deemed to be a single AGREEMENT for the transfer of all of the ACQUIRED COMPANY'S stock and shall not be deemed an AGREEMENT for the transfer of less than all of that stock, it being specifically understood that the BUYER shall be under no obligation to acquire less than all of the ACQUIRED COMPANY'S stock. ARTICLE II WARRANTIES OF SELLERS 2.1. JOINT AND SEVERAL REPRESENTATIONS. The SELLERS jointly and severally represent and warrant to BUYER that: (a) ACQUIRED COMPANY is a corporation duly organized, validly existing, and in good standing, under and by virtue of the laws of the State of Texas and is qualified to do business as a foreign corporation in all other states in which it owns real or personal property, or the states in which failure to qualify would adversely effect ACQUIRED COMPANY'S ownership of its assets or subject the ACQUIRED COMPANY to fine or penalty. (b) The ACQUIRED COMPANY has the power to own its property and to carry on its business where that business is now conducted. The ACQUIRED COMPANY has no equity interest in any other corporation, partnership, joint venture, or association. (c) There are no outstanding options, contracts, calls, commitments, pre-emptive rights, or demands of any nature relating to the capital stock of ACQUIRED COMPANY. (d) The SELLERS have offered to the BUYER the ACQUIRED COMPANY'S bylaws, list of officers and directors, and financial statements. 2.2. Each SELLER represents and warrants to BUYER as follows: (a) SELLER is the owner of, and has the right to transfer and deliver, the 200,000 of shares of ACQUIRED COMPANY'S stock represented to be owned by him and on the closing date SELLER will own and have the right to transfer and deliver that number of shares of ACQUIRED COMPANY'S stock. (b) The shares of ACQUIRED COMPANY'S stock are now owned by the SELLER are and on the closing date will be, free and clear of any liens, encumbrances, charges, and security interests and those shares are not subject to any restrictions on transferability. (c) The title to the shares that are transferred to the BUYER on the closing date will be good and marketable and free and clear of any and all liens, encumbrances, charges, and security interests. 2.3. This AGREEMENT has been duly and validly executed and delivered by SELLER and is legally binding upon and enforceable against SELLER in accordance with its terms in either the execution or delivery of this AGREEMENT, nor the consummation of the transaction contemplated by it, will conflict with, or will result in a breach of, any of the terms, conditions or provisions of, or constitute a default under, or result in a creation of any lien, charge, or encumbrance, on the shares of SELLER under, any agreement, instrument, order, judgment, or decree, to which the SELLER is a party, is bound or subject. 2.4. Each SELLER is sufficiently experienced in financial business matters to be capable of utilizing the information furnished to evaluate the risk of his investment, and to make an informed decision relating thereto. 2.5. Each SELLER understands that the shares of the BUYER'S common stock are not being registered under the Securities Act of 1933 on the grounds that issuant thereof is exempt under Section 4(2) of the 1933 Act as transaction not involving any public offering. 2.6. The shares of the common stock have not been registered under the 1933 Act and therefore, cannot be sold unless they are subsequently registered under the 1933 Act or an exemption from such registration is available. ARTICLE III CONDUCT OF ACQUIRED COMPANY'S BUSINESS BEFORE CLOSING 3.1. FULL ACCESS. BUYER and its authorized representatives shall have full access, during normal business hours, to all properties, books, records, contracts, and documents of ACQUIRED COMPANY, and ACQUIRED COMPANY shall furnish or cause to be furnished to BUYER and its authorized representatives all information with respect to the affairs and business of ACQUIRED COMPANY that BUYER may request. 3.2. CARRY ON IN REGULAR COURSE. ACQUIRED COMPANY shall carry on its business diligently and substantially in the same manner as it was previously carried on, and shall not make or institute any unusual or novel methods of manufacture, purchase, sale, lease, management, accounting, or operation. 3.4. CONTRACTS AND COMMITMENTS. ACQUIRED COMPANY shall not enter into any contract or commitment or engage in any transaction not in the usual and ordinary course of business and 2 consistent with past practices unless BUYER gives its prior written consent to that contract, commitment, or transaction. 3.5. SALE OF CAPITAL ASSETS. Without the prior written consent of BUYER, ACQUIRED COMPANY shall not sell or dispose of (i) any capital asset that has an original cost in excess of $10,000 or (ii) any capital assets, the aggregate original cost of which exceeds $20,000. 3.6. INDEBTEDNESS. ACQUIRED COMPANY shall not create any indebtedness, other than indebtedness that is either (i) incurred in the usual and ordinary course of business, or (ii) incurred under existing contracts disclosed in the Schedules attached to this AGREEMENT or which were previously delivered to BUYER, or (iii) incurred under commitments permitted by this AGREEMENT, or (iv) reasonably incurred in doing the acts and things contemplated by this AGREEMENT. 3.7. INVESTMENTS. ACQUIRED COMPANY shall not make any investment, loan, advance, or contribution to any other person, corporation, partnership, joint venture, or association; provided, however, that ACQUIRED COMPANY may invest in the United States government obligations and in certificates of deposit and commercial paper rated A-1 by Standard & Poor's Corporation. 3.8. DIVIDENDS AND DISTRIBUTIONS. ACQUIRED COMPANY shall not declare or pay any dividend, or make any distribution with respect to its capital stock, or directly or indirectly redeem, purchase, or otherwise acquire any of its capital stock, or issue or in any way dispose of any shares of its capital stock or any rights in or to its capital stock. 3.9. AMENDMENT OF CHARTER, ETC. Without the prior written consent of BUYER, ACQUIRED COMPANY shall not amend its Certificate of Incorporation or Bylaws or make any change in the authorized or unissued capital stock or its officers or directors. 3.10. INSURANCE. All property, real and personal, owned or leased by ACQUIRED COMPANY shall be adequately insured by reputable insurance companies against all insurable risks normally insured against by companies conducting a business the same as, or similar to, the business conducted by ACQUIRED COMPANY, and all that property shall be used, operated, maintained, and repaired in a normal business manner. 3.11. PRESERVATION OF ORGANIZATION. ACQUIRED COMPANY shall use its best efforts (without making any commitments on behalf of BUYER) to preserve its business organization intact, to keep available to BUYER the present key officers and employees of ACQUIRED COMPANY, and to preserve for BUYER the present relationships of ACQUIRED COMPANY with its suppliers and customers and others having business relations with them. The mere failure of any suppliers and customers to continue those relationships shall not be deemed to be a default under this AGREEMENT. 3.12. NO DEFAULT. ACQUIRED COMPANY shall not do any act or omit to do any act, or permit any act or omission to act, that will cause a material breach by it of any of its contracts, commitments, or obligations. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 4.1. BUYER REPRESENTS AND WARRANTS TO SELLERS THAT: (a) BUYER is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. (b) BUYER has the power to own its properties and to carry on its business. (c) The execution, delivery, and performance of this AGREEMENT has been authorized by all necessary corporate action. (d) The SELLERS have offered the BUYER full opportunity to examine the books and records of the BUYER. 3 ARTICLE V CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS 5.1. EACH AND EVERY OBLIGATION OF BUYER TO BE PERFORMED ON THE CLOSING DATE OR THEREAFTER, AS THE CASE MAY BE, SHALL BE SUBJECT TO THE SATISFACTION ON OR BEFORE THE CLOSING DATE OF THE FOLLOWING CONDITIONS: (a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. The representations and warranties made by SELLERS in this AGREEMENT shall be true on and as of the Closing Date, subject to any changes required as contemplated by this AGREEMENT, with the same effect as though those representations and warranties had been made or given on and as the Closing Date, subject to those changes. (b) NO ADVERSE CHANGE. The business, assets, and properties of ACQUIRED COMPANY shall not have been materially and adversely affected in any way between the date of this AGREEMENT and the Closing Date as a result of fire, explosion, earthquake, disaster, accident, labor trouble or dispute, any action by the United States or any other governmental authority, flood, drought, embargo, riot, civil disturbance, uprising, activity of armed forces, or act of God or public enemy. (c) COMPLIANCE WITH AGREEMENT. SELLERS shall have performed and complied with all of their obligations under this AGREEMENT which are to be performed or complied with by them on or before the Closing Date. (d) PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings, corporate or other, to be taken on or before the Closing Date in connection with the transaction contemplated by this AGREEMENT, and all documents incident to that transaction, shall be satisfactory in form and substance to BUYER, and ACQUIRED COMPANY and SELLERS shall have made available to BUYER on or before the Closing Date for examination the originals or true and correct copies of all records and documents relating to the business and affairs of ACQUIRED COMPANY and SELLERS which BUYER may request in connection with the transaction. SELLERS shall have complied with all statutory requirements for the valid consummation by SELLERS on the Closing Date of the transactions contemplated by this AGREEMENT. (e) CONDITION OF PROPERTY. The property of ACQUIRED COMPANY shall not, prior to the Closing Date, have been damaged by fire or other casualty in an aggregate amount exceeding $5,000. (f) NO LITIGATION. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency which, in the opinion of BUYER'S counsel, is likely to result in the restraint, prohibition or the obtaining of damages, or other relief, in connection with this AGREEMENT or the consummation of the transactions contemplated hereby, or in connection with any claim against the Company or the SELLERS, not disclosed by the Schedules previously delivered to BUYER. (g) ALL OUTSTANDING ACQUIRED COMPANY STOCK TRANSFERRED. All of SELLERS shall assign, transfer, and deliver to BUYER all the shares of ACQUIRED COMPANY stock to be sold and transferred by them respectively and shall deliver to BUYER certificates for those shares as provided in this AGREEMENT. (Without limitation of the foregoing, BUYER shall be under no obligation to acquire less than all of the shares of ACQUIRED COMPANY stock outstanding on the Closing Date and may refuse to purchase any of those shares unless all of them are available for purchase.) (h) RIGHTS OF FIRST REFUSAL. Rights of first refusal or preemption have been released. 4 ARTICLE VI CONDITIONS PRECEDENT TO SELLERS OBLIGATIONS 6.1. EACH AND EVERY OBLIGATION OF THE SELLERS TO BE PERFORMED ON THE CLOSING DATE SHALL BE SUBJECT TO THE SATISFACTION ON OR BEFORE THE CLOSING DATE OF THE FOLLOWING CONDITIONS: (a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. BUYER'S representations and warranties contained in this AGREEMENT shall be true at and as of the Closing Date. (b) COMPLIANCE WITH AGREEMENT. BUYER shall have performed and complied with its obligations under this AGREEMENT which are to be performed or complied with before or on the Closing Date. (c) PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings, corporate or other, to be taken on or before the Closing Date in connection with the transaction contemplated by this AGREEMENT and all documents incident thereto, shall be satisfactory in form and substance to SELLERS. (d) RESOLUTIONS. BUYER shall have delivered to SELLERS certified copies of resolutions of the Board of Directors of BUYER, authorizing the execution, delivery and performance of this AGREEMENT and all documents incident thereto, shall be satisfactory in form and substance to SELLERS. (e) ALL DOCUMENTS. All documents required by subsection (c) of this AGREEMENT shall have been delivered to SELLERS by BUYER on or before the Closing Date. ARTICLE VII CLOSING DATE The Closing with respect to the exchange of shares provided for in this AGREEMENT shall take place at a mutually convenient place on the 1st day of August, 1994, or other date as agreed to by the parties. ARTICLE VIII BROKERAGE SELLERS (a) represent and warrant to BUYER that no broker, finder, or other person, employed by, or acting under the authority of, SELLERS is or will be entitled to any broker's or finder's fee or any other commission or similar fee, directly or indirectly, from the BUYER or ACQUIRED COMPANY in connection with the transactions contemplated by this AGREEMENT, and (b) agree to indemnify the BUYER against, and hold the BUYER harmless from, any claims for any broker's or finder's fee, or any other commission or similar fee, by any person, claiming to have been employed by, or to have acted under the authority of SELLERS in connection with those transactions. BUYER (a) represents and warrants to SELLERS that no broker, finder, or other person, employed by, or acting under the authority of, BUYER is or will be entitled to any broker's or finder's fee or any other commission or similar fee, directly or indirectly, from SELLERS or any of them in connection with the transactions contemplated by this AGREEMENT, and (b) agrees to indemnify SELLERS (and each of them) against, and to hold SELLERS (and each of them) harmless from, any claims for any broker's fee or finder's fee, or any other commission or similar fee, by any person claiming to have been employed by, or to have acted under the authority of, BUYER in connection with those transactions. ARTICLE IX. MISCELLANEOUS 9.1. FURTHER ASSURANCES. Each party agrees to cooperate fully with the other parties to do all acts necessary to carry out the terms of this agreement. 5 9.2. SEVERABILITY. All terms and conditions contained herein are severable, and in the event that any of them shall be held or considered to be unenforceable by any court of competent jurisdiction, this agreement shall be interpreted as if such unenforceable term or condition were not contained herein. 9.3. MODIFICATION OF AGREEMENT. No waiver or modification of this agreement or of any term or condition herein contained shall be valid unless in writing and duly executed, nor shall any waiver or modification of this agreement not duly executed as provided herein be deemed to be a part of this agreement under any circumstances. 9.4. APPLICABLE LAW. This agreement shall be governed by sand interpreted according to the laws of the State of Nevada. Each party submits to the personal jurisdiction of all courts, whether Federal or State, within Nevada, and agrees that any action pertaining to this agreement shall be brought in a court in Nevada. 9.5. ENFORCEMENT COSTS. A party in breach of this agreement shall pay all costs incurred by the nonbreaching party for damages or to enforce the terms of this agreement, whether or not court action is instituted, and whether any court action is brought in law or equity, which costs include, without limitation, court costs and reasonable attorneys' fees. 9.6. NECESSARY DOCUMENTS. Each party shall, upon the request of the other, execute, acknowledge, and deliver any instruments appropriate or necessary to carry in to effect the intentions and provisions of this agreement. 9.7. WAIVER OF BREACH. The waiver of the breach of any term or condition of this agreement shall not be deemed to constitute the waiver of any other or subsequent breach of the same or any other term or condition. 9.8. EXECUTION IN COUNTERPARTS. This agreement may be executed in multiple copies and by counterparts. INDUSTRIAL DATA SYSTEMS CORPORATION, A Nevada Corporation By /s/ LEISA C. STILWELL LEISA C. STILWELL, President INDUSTRIAL DATA SYSTEMS, INC., A Texas Corporation By /s/ WILLIAM A. COSKEY WILLIAM A. COSKEY, President By /s/ WILLIAM A. COSKEY WILLIAM A. COSKEY By /s/ HULDA L. COSKEY HULDA L. COSKEY 6 STATE OF NEVADA ) ) ss. COUNTY OF CLARK ) On this 25th day of August, 1994, personally appeared before me LEISA C. STILWELL, President of INDUSTRIAL DATA SYSTEMS, CORPORATION, a Nevada corporation, who duly acknowledged that he executed the foregoing document in his capacity herein set forth as the free and voluntary act, deed, and agreement of said corporation. /s/ DENA LOGAN Dena Logan NOTARY PUBLIC Notary Public-State of Nevada COUNTY OF CLARK DENA LOGAN My Commission Expires March 3, 1996 STATE OF TEXAS ) ) ss. COUNTY OF HARRIS ) On this 29th day of August, 1994, personally appeared before me WILLIAM A. COSKEY, President of INDUSTRIAL DATA SYSTEMS, INC., a Texas corporation, who duly acknowledged that he executed the foregoing document in his capacity herein set forth as the free and voluntary act, deed, and agreement of said corporation. Signature Illegible NOTARY PUBLIC STATE OF NEVADA ) ) ss. COUNTY OF CLARK ) On this day of , 1994, personally appeared before me WILLIAM A. COSKEY, who duly acknowledged that he executed the foregoing document in his capacity herein set forth as the free and voluntary act, deed, and agreement of said corporation. ______________________________________ NOTARY PUBLIC 7 EX-2.1 3 ACTION BY WRITTEN CONSENT OF THE DIRECTORS OF INDUSTRIAL DATA SYSTEMS CORPORATION The undersigned, being all of the members of the Board of Directors of INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "CORPORATION"), do hereby consent to the following action and adopt the following resolutions, as if at a meeting, in accordance with NRS 78.315: 1. WHEREAS, the Board of Directors has determined that it is advisable and in the best interests of the CORPORATION to execute an agreement and plan of reorganization by and among INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation ("BUYERS") and WILLIAM A. COSKEY and HULDA L. COSKEY ("SELLERS") and incorporated by reference herein; it is RESOLVED, that the Agreement and Plan of Reorganization by and among INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation and WILLIAM A. COSKEY and HULDA L. COSKEY be executed. 2. WHEREAS, the Board of Directors has determined that it is advisable and in the best interests of the CORPORATION to execute the above-described Agreement wherein the SELLERS are willing to transfer 200,000 shares of INDUSTRIAL DATA SYSTEMS, INC.'s, a Texas corporation, Common Stock to the BUYERS in exchange for 9,500,000 shares of CORPORATION'S Common Stock under the terms and conditions as set forth in the AGREEMENT AND PLAN OF REORGANIZATION and incorporated by reference herein, it is RESOLVED, that the CORPORATION upon the signing of the Agreement will issue 9,500,000 (4,750,000 each to WILLIAM A. COSKEY AND HULDA L. COSKEY) of its Common Stock to the SELLERS in exchange for 200,000 shares of INDUSTRIAL DATA SYSTEMS, INC.'S, a Texas corporation Common Stock under the terms and conditions as set forth in the AGREEMENT AND PLAN OF REORGANIZATION. IT IS FURTHER RESOLVED that in connection with the issue of the 9,500,000, the Seller's interest in the 100,000 shares of the CORPORATION indicated by the Minutes of the Organizational Meeting of the CORPORATION be cancelled and such cancelled shares be included and issued in the 9,500,000 shares issued under the aforementioned AGREEMENT AND PLAN OF REORGANIZATION. 3. WHEREAS, the Board of Directors has determined that it is advisable and in the best interests of the CORPORATION that this exchange qualify as a tax-free reorganization under ^368(a) of the Internal Revenue Code of 1986, it is RESOLVED, that both the CORPORATION and the SELLERS will qualify as a tax-free reorganization under 368(a) of the Internal Revenue Code of 1986. August 1, 1994 /s/ LEISA C. STILWELL Date LEISA C. STILWELL, Director 1 EX-2.2 4 ACTION BY WRITTEN CONSENT OF THE SHAREHOLDERS OF INDUSTRIAL DATA SYSTEMS CORPORATION The undersigned, being all the shareholders of INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "CORPORATION"), do hereby consent to the following action and adopt the following resolutions, as if at a meeting, in accordance with NRS 78.320: 1. WHEREAS, all the shareholders have determined that it is advisable and in the best interests of the CORPORATION to execute an agreement and plan of reorganization by and among INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation ("BUYERS") and WILLIAM A. COSKEY and HULDA L. COSKEY ("SELLERS") and incorporated by reference herein; it is RESOLVED, that the Agreement and Plan of Reorganization by and among INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation and WILLIAM A. COSKEY and HULDA L. COSKEY be executed. 2. WHEREAS, all of the shareholders have determined that it is advisable and in the best interests of the CORPORATION to execute the above-described Agreement wherein the SELLERS are willing to transfer 200,000 shares of INDUSTRIAL DATA SYSTEMS, INC.'S, a Texas corporation, Common Stock to the BUYERS in exchange for 9,500,000 shares of CORPORATION'S Common Stock under the terms and conditions as set forth in the AGREEMENT AND PLAN OF REORGANIZATION and incorporated by reference herein, it is RESOLVED, that the CORPORATION upon the signing of the Agreement will issue 9,500,000 (4,750,000 shares each to WILLIAM A. COSKEY and HULDA L. COSKEY) of its Common Stock to the SELLERS in exchange for 200,000 shares of INDUSTRIAL DATA SYSTEMS, INC'S, a Texas corporation, Common Stock under the terms and conditions as set forth in the AGREEMENT AND PLAN OF REORGANIZATION. IT IS FURTHER RESOLVED that in connection with the issue of the 9,500,000, the Seller's interest in the 100,000 shares of the CORPORATION indicated by the Minutes of the Organization Meeting of the CORPORATION be cancelled and such shares be included and issued in the 9,500,000 shares issued under the aforementioned AGREEMENT AND PLAN OF REORGANIZATION. 3. WHEREAS, all of the shareholders have determined that it is advisable and in the best interests of the CORPORATION that this exchange qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, it is RESOLVED, that both the CORPORATION and the SELLERS will qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986. June 30, 1994 /s/ WILLIAM A. COSKEY Date WILLIAM A. COSKEY, Shareholder June 30, 1994 /s/ HULDA L. COSKEY Date HULDA L. COSKEY, Shareholder 3 EX-2.3 5 STOCK ACQUISITION AGREEMENT BY AND AMONG PAM DIAMONT, TRUSTEE AND BERNIE HOLLINGSWORTH, TRUSTEE ACTING ON BEHALF OF THE PHD NO. 1 QUALIFIED S-CORPORATION TRUST AND BH NO. 1 QUALIFIED S-CORPORATION TRUST; JOE B. HOLLINGSWORTH AND; WILLIAM A. JACKSON AS "STOCKHOLDERS", THERMAIRE INC. D/B/A/ THERMAL CORP. AS THE "COMPANY" AND INDUSTRIAL DATA SYSTEMS, CORP. AS THE "ACQUIRING CORPORATION" DATED: AUGUST 15, 1995 STOCK ACQUISITION AGREEMENT This Agreement is made and entered into this 15th day of August, 1995 by and between INDUSTRIAL DATA SYSTEMS, CORP., a Nevada Corporation, having its principal place of business in Texas located at 600 Century Place Drive, Suite 600, Houston, Texas (hereinafter called the "Acquiring Corporation"); and the PHD NO. 1 QUALIFIED S-CORPORATION TRUST and BH NO. 1 QUALIFIED S-CORPORATION TRUST acting herein through BERNIE HOLLINGSWORTH, and PAM DIAMONT, Trustees; JOE B. HOLLINGSWORTH and WILLIAM B. JACKSON, (hereinafter called "Stockholders"); and THERMAIRE INC., (hereinafter called the "Company"). RECITALS A. THERMAIRE INC. d/b/a/ THERMAL CORP. (hereinafter called the "Company"), is a Texas Corporation having its principal place of business located at 10500 Windfern, Houston, Harris County, Texas. The Company is engaged in the manufacture of commercial and industrial air handling equipment. B. The Company is authorized to issue 1,500,000 shares of common stock divided into the following categories: 500,000 shares of Class A voting, 500,000 shares of Class B voting and 500,000 shares of Class C non-voting. There are 8,000 shares of Class A voting, 2,000 shares of Class B voting and 451,292 shares of Class C non-voting issued and outstanding. C. The Acquiring Corporation is authorized to issue 50,000,000 shares of common stock of which 10,000,000 shares are issued and outstanding. D. The conditions prevailing in the industry have made it increasingly difficult for the Company to operate profitably, and the Stockholders have agreed to accept voting stock of the Acquiring Corporation in exchange for their shares so that the business of the Company can be continued by the Acquiring Corporation on a more profitable basis. ARTICLE I DEFINITIONS 1.1 DEFINED TERMS. As used herein, the terms below shall have the following meanings: "BALANCE SHEET" shall mean the Consolidated Balance Sheet of the Company as of July 31, 1995 together with the notes thereon prepared in accordance with GAAP consistently applied by the Company. "BALANCE SHEET DATE" shall mean July 31, 1995. "CLOSING BALANCE SHEET" shall mean the Consolidated Balance Sheet of the Company as of the end of the month immediately preceding the Closing Date together with notes thereon prepared in accordance with GAAP consistently applied by the Company. "CLOSING DATE" shall mean the close of business on August 18, 1995, or such other date as may be mutually agreed upon in writing by Stockholders and Acquiring Corporation. "CLOSING FINANCIAL STATEMENTS" shall mean the Closing Balance Sheet, and Consolidated Statements of Income, Cash Flows and Stockholders Equity for the Company for the period since the end of the Company's most recent fiscal year and ending as of the date of the Closing Balance Sheet, together with the notes thereon. "CODE" shall mean the Internal Revenue Code of 1986, as may be amended from time to time. "CONTRACTS" shall mean any of the agreements, contracts, commitments or other documents described in Section 4.7 (a) - (g). "DISCLOSURE SCHEDULE" means a schedule executed and delivered by Stockholders or the Company to Acquiring Corporation on or prior to the date hereof which sets forth exceptions to the representations and warranties contained in Article IV and V hereof and certain other information called for by Articles IV and V hereof and other provisions of this Agreement. "ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge, easement, security interest, right-of-way, encumbrance or other rights of third parties. "ENVIRONMENTAL LAWS" shall mean all federal, state, and local laws, statutes, ordinances, regulations, and rules, which (i) regulate or relate to the protection or clean-up of the environment, the use, treatment, storage, transportation or disposal of hazardous, toxic or otherwise dangerous substances, wastes or materials (whether gas, liquid or solid) or the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants, or other natural resources or (ii) impose liability with respect to any of the foregoing, including without limitation the Federal Water Pollution Control Act (33 U.S.C. SECTION 1251 ET SEQ.), Resource Conservation & Recovery Act 42 U.S.C. SECTION 6901 ET SEQ.) ("RCRA"), Safe Drinking Water Act (21 U.S.C. SECTION 349, 42 U.S.C. SECTION 201, 300f), Toxic Substances Control Act (15 U.S.C. SECTION 2601 ET SEQ.), Clean Water Act (42 U.S.C. SECTION 7401 ET SEQ.) Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. SECTION 9601 ET SEQ.) ("CERCLA"), or any similar federal, state or local law of similar effect, each as amended. "FACILITIES" shall mean the plant, offices, manufacturing facilities, stores, warehouses, administration buildings, etc. and all other real property and related facilities which are owned or leased by the Company. "FINANCIAL STATEMENTS" shall mean the Balance Sheet, and Consolidated Statements of Income, Cash Flows and Stockholders Equity for the Company for the period since the end of the Company's most recent fiscal year and ending as of the Balance Sheet Date, together with the notes thereon, previously delivered to Acquiring Corporation and attached hereto as Schedule 1.1. "FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures, furnishings machinery and equipment owned or leased by the Company and located in, at or upon the Facilities as of the Balance Sheet Date plus all additions, replacements or deletions since the Balance Sheet Date in the ordinary course of the Company's business. "HAZARDOUS SUBSTANCES" shall mean any quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products, any radioactive substance, any toxic, infectious, reactive, corrosive, ignitable or flammable chemical or chemical compound and any other hazardous substance, material or waste (as defined in or for purposes of any Environmental Law), whether solid, liquid or gas. "REPRESENTATIVE" shall mean any officer, director, principal, attorney, agent, employee or other representative. "SUBSIDIARIES" shall mean all corporations, partnerships, joint ventures or other entities in which the Company either owns capital stock or is a partner or is in some other manner affiliated through an investment or participation in the equity of such entity. 1.2 OTHER DEFINED TERMS. The following terms shall have the meanings defined for such terms in the Sections set forth below: TERM SECTION - ------------------------------------- ------- Action 4.11 Assets 4.5 Closing 3.1 Damages 11.2 ERISA 4.18 Handled 4.28 Personnel 4.4 Plans 4.18 Proprietary Rights 4.17 Tax 4.20 Taxpayers 4.20 1.3 REFERENCES. As used in this Agreement, unless expressly stated otherise, references to "knowledge", "known", "to the knowledge of", or other similar phrases, mean, with respect to any person, the 2 actual knowledge at the time of execution of this Agreement and at the Closing (without independent investigation) of persons on the Disclosure Schedule. ARTICLE II EFFECT OF THE AGREEMENT 2.1 EXCHANGE OF STOCK. In accordance with the terms and conditions herein, Stockholders shall at closing, exchange all of their shares of the Company, representing all of the issued and outstanding shares of the Company for a total of 600,000 shares of common voting stock in the Acquiring Corporation, par value One Cent ($0.01) per share. The PHD NO. 1 QUALIFIED S-CORPORATION Trust shall receive 118,966 shares of voting stock and the BH NO. 1 QUALIFIED S-CORPORATION Trust shall receive 29,742 shares of voting stock, JOE B. HOLLINGSWORTH shall receive 316,855 shares of voting stock and WILLIAM A. JACKSON shall receive 134,437 shares of voting stock. 2.2 EFFECT. The transaction contemplated under the terms of this Agreement is intended to qualify as a tax free exchange under Section 368(a)(1)(b) of the Internal Revenue Code. ARTICLE III CLOSING 3.1 CLOSING. The closing of the transactions contemplated herein (the "Closing") shall be held at 10:00 a.m. local time on the Closing Date at the Houston office of Acquiring Corporation's counsel unless the parties hereto otherwise agree. 3.2 DOCUMENTS TO BE DELIVERED. To effect the exchange referred to in Section 2.1 and the delivery of the consideration described therein, Stockholders and Acquiring Corporation shall, on the Closing Date, deliver the following: (a) Stockholders shall deliver to Acquiring Corporation certificate(s) evidencing all of the issued and outstanding shares of the Company, free and clear of any encumbrances of any nature, duly endorsed for transfer to Acquiring Corporation. (b) Acquiring Corporation shall deliver to Stockholders a copy of written instructions to its transfer agent directing the issuance of certificates evidencing shares of the Acquiring Corporation voting stock in the amounts set forth in Section 2.1 above, representing fully paid non-assessable voting shares in the Acquiring Corporation. (c) All instruments and documents executed and delivered to Acquiring Corporation pursuant hereto shall be in form and substance, and shall be executed in a manner reasonably satisfactory to Acquiring Corporation. All instruments and documents executed and delivered to Stockholders pursuant hereto shall be in form and substance, and shall be executed in a manner reasonably satisfactory to Stockholders. ARTICLE IV REPRESENTATIONS AND WARRANTIES Except as set forth in the Disclosure Schedules, the Company and Stockholders hereby represent and warrant to Acquiring Corporation as follows: 4.1 ORGANIZATION OF THE COMPANY. (a) The Company is duly organized, validly existing and in good standing under the laws of the State of Texas, has full corporate power and authority to conduct its business as it is presently being conducted and to own and lease its properties and assets. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is necessary under the applicable law as a result of the conduct of its business or the ownership of its properties and where the failure to be so qualified would have a material adverse effect on the business or financial condition of the Company. Each jurisdiction, if any, in which the Company is qualified to do business as a foreign corporation is listed on the Disclosure Schedule. 3 (b) The Company has authorized 1,500,000 shares of Common Stock, no par value, divided into three classes as follows: 500,000 shares Class A voting, 500,000 shares Class B voting, 500,000 shares Class C non-voting. The only shares of the Company which have been issued and the current Stockholders of the Company are as follows: PHD NO. 1 QUALIFIED S-CORPORATION 8,000 Shares Class A Voting TRUST BH NO. 1 QUALIFIED S-CORPORATION 2,000 shares Class B Voting TRUST JOE B. HOLLINGSWORTH 316,855 shares Class C Non-voting WILLIAM A. JACKSON 134,437 shares Class C Non-voting (c) The Company has three Directors whose names and titles are as follows: PAM DIAMONT Class A Director BERNIE HOLLINGSWORTH Class B Director JOE B. HOLLINGSWORTH Class A, B Director (d) The officers of the Company are as follows: PAM DIAMONT President, Assistant Secretary and Treasurer BERNIE HOLLINGSWORTH Vice-President and Secretary 4.2 AUTHORIZATION. The company has all necessary corporate power and authority to enter into this agreement and has taken all corporate action necessary to consummate the transactions contemplated hereby and to perform its obligations hereunder. This Agreement has been duly executed and delivered by the Company and is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 4.3 SUBSIDIARIES. The Company has no Subsidiaries. 4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date, there has not been any: (a) change in the Company's condition (financial or otherwise), assets, liabilities, working capital, reserves, earnings, business or prospects, except for changes contemplated hereby or changes which have not, individually or in the aggregate, been materially adverse; (b) (i) except for normal periodic increases in the ordinary course of business consistent with past practice, increase in the compensation payable or to become payable by the Company to any of its officers, employees or agents (collectively, "Personnel") whose total compensation for services rendered to the Company is currently at an annual rate of more than $20,000.00, (ii) bonus, incentive compensation, service award or other like benefit granted, made or accrued, contingently or otherwise, for or to the credit of any of the Personnel, (iii) employee welfare, pension, retirement, profit-sharing or similar payment or arrangement made or agreed to by the Company for any Personnel except pursuant to the existing plans and arrangements described in the Disclosure Schedule or (iv) new employment agreement to which the Company is a party; (c) addition to or modification of the employee benefit plans, arrangements or practices described in the Disclosure Schedule affecting Personnel other than (i) contributions made for most recent year in accordance with the normal practices of the Company or (ii) the extension of coverage to other Personnel who became eligible after the Balance Sheet Date; (d) sale, assignment or transfer of any of the assets of the Company, material singularly or in the aggregate, other than in the ordinary course; (e) cancellation of any indebtedness or waiver of any rights of substantial value to the Company, whether or not in the ordinary course of business; 4 (f) amendment, cancellation or termination of any Contract, license or other instrument material to the Company; (g) capital expenditure or the execution of any lease, except building lease or any incurring of liability therefor by Company, involving payments in excess of $5,000.00 in the aggregate; (h) failure to repay any material obligation of the Company, except in the ordinary course of business or where such failure would not have a material adverse effect on the business or financial condition of the Company; (i) failure to operate the business of the Company in the ordinary course so as to use reasonable efforts to preserve the business intact, to keep available to Acquiring Corporation the services of the Personnel, and to preserve for Acquiring Corporation the goodwill of the Company's suppliers, customers and others having business relations with it except where such failure would not have a material adverse effect on the business or financial condition of the Company; (j) change in accounting methods or practices by the Company affecting its assets, liabilities or business; (k) revaluation by the Company of any of its assets, including without limitation writing off notes or accounts receivable; (l) damage, destruction or loss (whether or not covered by insurance) adversely affecting the properties, business or prospects of the Company; (m) mortgage, pledge or other encumbrances of any assets of the Company, material singularly or in the aggregate, except purchase money mortgages arising in the ordinary course of business; (n) declaration, setting aside or payment of dividends or distributions in respect of any capital stock of the Company or any redemption, purchase or other acquisition of any of the Company's equity securities; (o) issuance by the Company of, or commitment of the Company to issue, any shares of stock or other equity securities or obligations or securities convertible into or exchangeable for shares of stock or other equity securities; (p) indebtedness incurred by the Company for borrowed money or commitment to borrow money entered into by the Company, or loans made or agreed to be made by the Company; (q) liabilities involving $5,000.00, except building lease or more except in the ordinary course of business and consistent with past practice, or increase or change in any assumptions underlying or methods of calculating any bad debt, contingency or other reserves; (r) payment, discharge or satisfaction of any liabilities other than the payment, discharge or satisfaction (i) in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the Balance Sheet or incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date and (ii) of other liabilities involving $5,000.00 or less singularly and $10,000.00 or less in the aggregate; (s) payment to Stockholders or any general partner of Stockholders by the Company other than those payments permitted under Section 9.9 hereof; (t) agreement by the Company to do any of the foregoing; or (u) other event or condition of any character which in any one case or in the aggregate has materially adversely affected, or event or condition known to the Company (other than matters of general public knowledge relating to general economic conditions or the Company's industry as a whole) which it is reasonable to expect will, in any one case or in the aggregate, materially adversely affect in the future, the condition (financial or otherwise), assets, liabilities, working capital, reserves, earnings, business or prospects of the Company. 4.5 TITLE TO ASSETS, ETC. The Company has good and marketable fee simple title to the assets reflected on the Balance Sheet or acquired in the ordinary course of business since the Balance Sheet Date 5 (the "Assets"). None of the Assets are subject to any Encumbrances, except for minor liens which in the aggregate are not substantial in amount, do not materially detract from the value of the property or assets subject thereto or interfere with the present use and have not arisen other than in the ordinary course of business. The Company has in all material respects performed all the obligations required to be performed by it with respect to all Assets leased by it through the date hereof, except where the failure to perform would not have a material adverse effect on the business or financial condition of the Company. The Company enjoys peaceful and undisturbed possession of all Facilities owned or leased by it, and such Facilities are not subject to any Encumbrances, encroachments, building or use restrictions, exceptions, reservations, or limitations which in any material respect interfere with or impair the present and continued use thereof in the usual and normal conduct of the business of the Company. There are no pending or threatened condemnation proceedings relating to any of the Facilities. The real property improvements (including leasehold improvements), equipment and other tangible assets owned or used by the Company at the Facilities are adequately insured and are structurally sound with no known material defects. None of said improvements, equipment and other assets is subject to any commitment or other arrangement for their sale or use by any affiliate of the Company or third parties. The Assets are valued at or below actual cost less an adequate and proper depreciation charge. The Company has not depreciated any of the Assets on an accelerated basis or in any other manner inconsistent with applicable Internal Revenue Service guidelines, if any. 4.6 CONDITION OF TANGIBLE ASSETS. The Facilities and Fixtures and Equipment are in good operating condition and repair (except for ordinary wear and tear and any defect the cost of repairing which would not be material), are sufficient for the operation of the Company's business as presently conducted and are in conformity in all material respects with all applicable laws, ordinances, orders, regulations and other requirements (including applicable zoning, environmental, motor vehicle safety or standards, occupational safety and health laws and regulations) relating thereto currently in effect, except where the failure to conform would not have a material adverse effect on the business or financial condition of the Company. 4.7 CONTRACTS AND COMMITMENTS. Except as listed in the Disclosure Schedules, the Company is not a party to any written or oral: (a) commitment, contract, note, loan, evidence of indebtedness, purchase order or letter of credit involving any obligation or liability on the part of the Company of more than $10,000.00 and not cancelable (without liability) within 60 days; (b) lease of real property; (c) lease of personal property involving any annual expense in excess of $10,000.00 and not cancelable (without liability) within 60 days; (d) contracts and commitments not otherwise described above or listed in the Disclosure Schedule (including purchase orders, franchise agreements and undertakings or commitments to any governmental or regulatory authority) relating to the business of the Company and otherwise materially affecting the Company's business under contracts not in the ordinary course of business; (e) material governmental or regulatory licenses or permits required to conduct the business of the Company as presently conducted; (f) contracts or agreements containing covenants limiting the freedom of the Company to engage in any line of business or compete with any person; or (g) employment contracts, including without limitation, contracts to employ executive officers and other contracts with officers or directors of the Company. The Company is not (and, to the best knowledge of the Company, no other party is) in material breach or violation of, or default under any of the Contracts or other instruments, obligations, evidences of indebtedness or commitments described in (a)-(g) above, the breach or violation of which would have a material adverse effect on the business or financial condition of the Company. 6 4.8 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in (a) a violation of or a conflict with any provision of the Certificate of Incorporation or Bylaws of the Company, (b) a breach of, or a default under, any term or provision of any contract, agreement, indebtedness, lease, Encumbrance, commitment, license, franchise, permit, authorization or concession to which the Company is a party or by which the Assets are bound, which breach or default would have a material adverse effect on the business or financial condition of the Company or its ability to consummate the transactions contemplated hereby, (c) a violation by the Company of any statute, rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or award, which violation would have a material adverse effect on the business or financial condition of the Company or its ability to consummate the transactions contemplated hereby, or (d) an imposition of any material Encumbrance, restriction or charge on the business of the Company or on any of the Assets. 4.9 CONSENTS AND APPROVALS. No consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority, or any other person or entity, is required to be made or obtained by the Company in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 4.10 FINANCIAL STATEMENTS. Stockholders has heretofore delivered to Acquiring Corporation the Financial Statements. Except as otherwise set forth therein, the Financial Statements are complete, accurately reflect the assets, liabilities and financial condition and results of operations indicated thereby in accordance with generally accepted accounting principles consistently applied, and contain and reflect all necessary adjustments for a fair representation of the Financial Statements as of the date and for the period covered thereby. 4.11 LITIGATION There is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, labor dispute, arbitral action or investigation (collectively, "Actions") pending or, to the knowledge of the company, threatened or anticipate against, relating to or affecting (i) the Company, (ii) any benefit plan for Personnel or any fiduciary or administrator thereof or (iii) the transactions contemplated by this Agreement. The Company is not in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments against the Company or the business or activities of the Company. There is not a reasonable likelihood of an adverse determination of any pending Actions which would, individually or in the aggregate, have a material adverse effect on the business or financial condition of the Company. 4.12 LABOR MATTERS. The Company is not a party to any labor agreement with respect to its employees with any labor organization, group or association. The Company has not experienced any attempt by organized labor or its representatives to make the Company conform to demands of organized labor relating to its employees or to enter into a binding agreement with organized labor that would cover the employees of the Company. The Company is in material compliance with all applicable laws respecting employment practices, terms and conditions of employment and wages and hours and is not engaged in any unfair labor practice. There is no unfair labor practice charge or complaint against the Company pending before the National Labor Relations Board or any other governmental agency arising out of the Company's activities, and the Company has no knowledge of any facts or information which would give rise thereto; there is no labor strike or labor disturbance pending or threatened against the Company nor is any grievance currently being asserted; and the Company has not experienced a work stoppage or other labor difficulty. 4.13 LIABILITIES. The Company has no liabilities or obligations (absolute, accrued, contingent or otherwise) except (i) liabilities which are reflected and reserved on the Balance sheet, (ii) liabilities incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date that individually or in the aggregate are not material, and (iii) liabilities arising under Contracts, letters of credit, purchase orders, licenses, permits, purchase agreements and other agreements, business arrangements and commitments described in the Disclosure Schedule or which are of the type described in Section 4.7 but which because of the dollar amount or other qualifications are not required to be listed in the Disclosure Schedule. 7 4.14 COMPLIANCE WITH LAW. The Company and the conduct of its business are in compliance with all applicable laws, statutes, ordinances and regulations, whether federal, state or local, except where the failure to comply would not have a material adverse effect on the business or financial condition of the Company. The Company has not received any written notice to the effect that, or otherwise been advised that, it is not in compliance with any of such statutes, regulations, orders, ordinances or other laws where the failure to comply would have a material adverse effect on the business or financial condition of the Company, and the Company has no reason to anticipate that any presently existing circumstances are likely to result in violations of any such regulations which would, in any one case or in the aggregate, have a material adverse effect on the business or financial condition of the Company. 4.15 NO BROKERS. Neither Stockholders, the Company or any affiliate of the Company has entered into or will enter into any Contract, agreement, arrangement or understanding with any person or firm which will result in the obligation of Acquiring Corporation to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 4.16 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY. Neither Stockholders nor the Company has any legal obligation, absolute or contingent, to any other person or firm to sell the Assets, to sell any capital stock of the Company or to effect any merger, consolidation or other reorganization of the Company or to enter into any agreement with respect thereto. 4.17 PROPRIETARY RIGHTS. All of the Company's registrations of trademarks and of other marks, trade names or other trade rights, and all pending applications for any such registrations and all of the Company's patents and copyrights and all pending applications therefor; all other trademarks and other marks, trade names and other trade rights and all other trade secrets, designs, plans, specifications and other proprietary rights, whether or not registered (collectively, "Proprietary Rights") are listed in the Disclosure Schedule. The Proprietary Rights listed in the Disclosure Schedule are in all material respects all those used in the business of the Company. No person has a right to receive a royalty or similar payment in respect of any Proprietary Rights pursuant to any contractual arrangements entered into by the Company, and no person otherwise has a right to receive a royalty or similar payment in respect of any such Proprietary Rights. The Company has no licenses granted by or to it or no other agreements to which it is a party, relating in whole or in part to any of the Proprietary Rights. The Company's use of the Proprietary Rights is not infringing upon or otherwise violating the rights of any third party in or to such Proprietary Rights, and no proceedings have been instituted against or notices received by the Company that are presently outstanding alleging that the Company's use of its Proprietary Rights infringes upon or otherwise violates any rights of a third party in or to such Proprietary Rights. 4.18 EMPLOYEE AGREEMENTS AND BENEFITS. (a) Except as set forth on the Disclosure Schedule, no employee of the Company is a party to, participant in, or bound by, any collective bargaining agreement, union contract or employment, bonus, deferred compensation, insurance, pension, profit sharing, or other personnel arrangement, any employee termination or severance arrangements, and the employment by the Company of any person (whether or not there is a written employment contract) can be terminated for any reason whatsoever not inconsistent with current law, without penalty or liability of any kind other than accrued vacation pay. (b) The Company does not contribute to any multi-employer pension plan, as defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Company is not subject to any claims, whether fixed or contingent, for withdrawal liability relating to any such multi-employer plan. (c) The Company has complied with all laws relating to the employment of labor with respect to its employees, including any provisions thereof relating to wages, hours, collective bargaining and the payment of social security and similar taxes, and no person has asserted that the Company is liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing. (d) The employee pension benefit plans and welfare benefit plans listed in the Disclosure Schedule (collectively, the "Plans"), constitute all such Plans in which any employees of the Company participate 8 and have been operated in all material respects in compliance with the Code and with ERISA since ERISA became applicable with respect thereto. The Company shall make available to Acquiring Corporation true and correct copies of all such Plans, trust agreements with respect to such Plans, all determination letters with respect thereto, insurance contracts, administrative servicing agreements and other agreements relating to the Plans and the most recent annual reports filed with the United States Department of Labor and/or the Internal Revenue Service by the Company with respect thereto. None of the Plans nor any of their respective related trusts have been terminated, and there has been no "reportable event", as that term is defined in Section 4043 of ERISA, required to be reported since the effective date of ERISA which has not been reported, and none of such Plans nor their respective related trusts have incurred any "Accumulated funding deficiency", as such term is defined in Section 302 of ERISA (whether or not waived), since the effective date of ERISA. The Plans are the only employee benefit plans covering employees of the Company. 4.19 TRANSACTIONS WITH CERTAIN PERSONS. Neither any officer, director or employee of the Company nor any member of any such person's immediate family is presently a party to any material transaction with the Company relating to the Company's business, including without limitation, any contract, agreement or other arrangement (i) providing for the furnishing of material services by, (ii) providing for the rental of material real or personal property from, or (iii) otherwise requiring material payments to any such person or corporation, partnership, trust or other entity in which any such person has a substantial interest as a shareholder, officer, director, trustee or partner. 4.20 TAX MATTERS. The Company, any predecessor of the Company and all members for income tax purposes of any affiliated group of corporations of which the Company or any such predecessor corporation is or has been a member (hereinafter referred to collectively as the "Taxpayers") have duly filed all tax reports and returns required to be filed by them, including all federal, state, local and foreign tax returns and reports. The Taxpayers have paid in full all taxes required to be paid by such Taxpayers before such payment became delinquent. The Company has made adequate provision, in conformity with generally accepted accounting principles consistently applied, for the payment of all taxes which may subsequently become due. All taxes which any Taxpayer has been required to collect or withhold have been duly collected or withheld and, to the extent required when due, have been or will be duly paid to the proper taxing authority. The consolidated federal income tax returns of the Company and the federal income tax returns of each Subsidiary of the Company whose results of operations are not consolidated in the federal income tax returns of the Company, have been examined by the Internal Revenue Service for all periods to and including those expressly set forth in the Disclosure Schedule, and except to the extent shown therein, all deficiencies asserted as a result of such examinations have been paid or finally settled, and no issue has been raised by the Internal Revenue Service in any such examination which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. There are no audits known by the Company to be pending on the Company's tax returns, and there are no claims which have been or may be asserted relating to any of the Company's tax returns filed for any year which if determined adversely would result in the assertion by any governmental agency of any deficiency. There have been no waivers of statutes of limitations by the Company. None of the Taxpayers have filed a statement under Section 341(f) of the Code (or any comparable state income tax provision) consenting to have the provisions of Section 341(f)(2) (collapsible corporations provisions) of the Code (or any comparable state income tax provision) apply to any disposition of any of the Company's assets or property, no property of the Company is property which Acquiring Corporation or the Company is or will be required to treat as owned by another person pursuant to the provisions of Section 168(f) (safe harbor leasing provisions) of the Code. The Company is not a party to any tax-sharing agreement or similar arrangement with any other party. For the purposes of this Agreement, any federal, state, local or foreign income sales, use, transfer, payroll, personal property, occupancy or other tax, levy, impost, fee, imposition, assessment or similar charge, together with any related addition to tax, interest or penalty thereon, is referred to as a "tax." 9 4.21 SEVERANCE ARRANGEMENTS. The Company has not entered into any severance or similar arrangement in respect of any present or former Personnel that will result in any obligation (absolute or contingent) of Acquiring Corporation or the Company to make any payment to any present or former Personnel following termination of employment. 4.22 INSURANCE. The Disclosure Schedule contains a complete and accurate list of all policies or binders of fire, liability, title, worker's compensation and other forms of insurance maintained by the Company on its business, property or Personnel. All of such policies are sufficient for compliance with all requirements of law and of all Contracts to which the Company is a party. The Company is not in default under any of such policies or binders, and the Company has not failed to give any notice or to present any claim under any such policy or binder in a due and timely fashion. There are no facts upon which an insurer might be justified in reducing coverage or increasing premiums on existing policies or binders. There are no outstanding unpaid claims under any such policies or binders. Such policies and binders provide sufficient coverage for the risks insured against, are in full force and effect on the date hereof and shall be kept in full force and effect by the Company through the Closing Date. 4.23 ACCOUNTS RECEIVABLE. The accounts receivable reflected in the Balance Sheet, and all accounts receivable ensuing since the Balance Sheet Date, represent bona fide claims against debtors for sales, services performed or other charges arising on or before the date hereof, and all the goods delivered and services performed which gave rise to said accounts were delivered or performed in accordance with the applicable orders, Contracts or customer requirements. Said accounts receivable are subject to no defenses, counterclaims or rights of setoff and are fully collectible in the ordinary course of business without cost to Acquiring Corporation in collection efforts therefor except, in the case of accounts receivable shown on the Balance Sheet, to the extent of the appropriate reserves set forth on the Balance Sheet, and, in the case of accounts receivable arising since the Balance Sheet Date, to a reasonable allowance for bad debts which does not reflect a rate of bad debts more than percent (4%) higher than that reflected by the reserve for bad debts on the Balance Sheet. 4.24 INVENTORIES. The values at which inventories are shown on the Balance Sheet have been determined in accordance with the normal valuation policy of the Company, consistently applied and in accordance with generally accepted accounting principles. The inventories (and items of inventory acquired or manufactured subsequent to the Balance Sheet Date) consist only of items of quality and quantity commercially usable and salable in the ordinary course of business, except for any items of obsolete material or material below standard quality, all of which have been written down to realizable market value, or for which adequate reserves have been provided. 4.25 PURCHASE COMMITMENTS AND OUTSTANDING BIDS. As of the date of this Agreement, the aggregate of all accepted and unfulfilled orders for the sale of merchandise entered into by the Company does not exceed $275,000.00, and the aggregate of all Contracts or commitments for the purchase of supplies by it does not exceed $50,000.00, all of which orders, Contracts and commitments were made in the ordinary course of business. As of the date of this Agreement, there are no claims against the Company to return in excess of an aggregate of $10,000.00 of merchandise by reason of alleged overshipments, defective merchandise or otherwise, or of merchandise in the hands of customers under an understanding that such merchandise would be refundable. No outstanding purchase or outstanding lease commitment of the Company presently is in excess of the normal, ordinary and usual requirements of its business or was made at any price in excess of the now current market price or contains terms and conditions more onerous than those usual and customary in the Company's business. There is no outstanding bid, proposal, Contract or unfilled order of the Company which win or would, if accepted, have a material adverse effect, individually or in the aggregate, on the business or financial condition of the Company. 4.26 PAYMENTS. The Company has not, directly or indirectly, paid or delivered any fee, commission or other sum of money or item or property, however characterized, to any finder, agent, government official or other party, in the United States or any other country, which is in any manner related to the business or operations of the Company, which the Company knows or has reason to believe to have been illegal under any federal, state or local laws of the United States or any other country having jurisdiction; and the 10 Company has not participated, directly or indirectly, in any boycotts or other similar practices affecting any of its actual or potential customers and has at all times done business in an open and ethical manner. 4.27 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule contains a complete and accurate list of (i) the three (3) largest customers of the Company in terms of sales during the Company's last fiscal year, showing the approximate total sales by the Company to each such customer during such fiscal year; (ii) the three (3) largest suppliers of the Company in terms of purchases during the Company's last fiscal year, showing the approximate total purchases by the Company from each such supplier during such fiscal year. Since the Balance Sheet Date, there has been no adverse change in the business relationship of the Company with any customer or supplier named in the Disclosure Schedule which is material to the business or financial condition of the Company. 4.28 ENVIRONMENTAL AND SAFETY COMPLIANCE. There are no present or past Environmental Conditions in any way relating to the Facilities. The Company did not cause or contribute to, nor did the Company negligently permit a third party to cause or contribute to, any Environmental Condition in any way relating to the Facilities. For purposes of this Agreement, "Environmental Condition" means any environmental pollution, including, without limitation, any contaminant, irritant or pollutant, from any spill, discharge, leak, emission, escape, injection, dumping or release of any kind whatsoever or any exposure of any type in any work places or to any medium, including, without limitation, air, land, surface waters or groundwaters, or from any generation, transportation, treatment, discharge, handling, storage or disposal of Hazardous Substances used, generated, transported, treated, discharged, stored or disposed of (in any case, "Handled"), except in all cases in the ordinary course of the operations or business of the Company and in accordance in all material respects with all Environmental Laws relating thereto. Without limiting the generality of the foregoing, neither (i) the operations of the Company, nor (ii) the collection, distribution or sale of the processes, results or products of the Company, violates or has violated any Environmental Law. The Company has timely obtained all licenses and permits and timely filed all reports required to be filed under any Environmental Laws. The Company has not Handled any Hazardous Substances on, beneath or about any of the Facilities, except for Hazardous Substances reasonably necessary to the business of the Company (which Hazardous Substances, if any, were Handled, in compliance with Environmental Laws). The Company has not received any notice from any governmental agency or private or public entity advising the Company that it is potentially responsible for response coss with respect to a release or threatened release of Hazardous Substances. The Company has not buried, dumped, released or otherwise disposed of any Hazardous Substances, on, beneath or about any of the Facilities or on, beneath or about any other property used in the business of the Company. The Company has not received notice of any violation of any Environmental Law or other zoning or land use ordinance, law or regulation relating to the business or operations of the Company, or any of the processes followed, results obtained or products made by the Company. 4.29 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or warranties by the Company in this Agreement, nor any document, exhibit, statement, certificate or schedule furnished to Acquiring Corporation pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary to make the statements or facts contained therein not misleading. The Company has disclosed all events, conditions and facts materially affecting the business, prospects and financial condition of the Company. 4.30 BUSINESS OF THE COMPANY. As of the Closing Date, the Company shall only be engaged in the manufacture of Air Handling Equipment, and the only assets and liabilities retained by the Company as of such date shall be related to the manufacture of Air Handling Equipment, including, without limitation, accounts receivable, inventory, tangible personal property, leased property, contractual rights, records (customer and production related), government licenses, permits and approvals, and trade name of the Company. 11 ARTICLE V REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Except as otherwise set forth in the Disclosure Schedule, Stockholders hereby represents and warrants to Acquiring Corporation as follows: 5.1 ORGANIZATION OF STOCKHOLDERS. (a) Two of the Stockholders are trusts duly established under the laws of the State of Texas, validly existing under the laws of the State of Texas. (b) the Trustees of the PHD NO. 1 QUALIFIED S-CORPORATION TRUST are: PAM DIAMONT and BERNIE HOLLINGSWORTH. (c) The Trustees of the BH NO. 1 QUALIFIED S-CORPORATION TRUST are: PAM DIAMONT and BERNIE HOLLINGSWORTH. (d) Stockholders collectively own of record and beneficially all of the issued and outstanding Stock free and clear of all encumbrances, and upon transfer pursuant to this Agreement, Acquiring Corporation will own shares representing 100% of the Company's issued and outstanding capital stock free and clear of all encumbrances. 5.2 AUTHORIZATION. Stockholders have all necessary power and authority to enter into this Agreement and have taken all action necessary to consummate the transactions contemplated hereby and to perform their respective obligations hereunder. This Agreement has been duly executed and delivered by Stockholders and is a legal, valid and binding obligation of Stockholders enforceable against Stockholders in accordance with its terms. 5.3 CONTRACTS AND COMMITMENTS. Stockholders are not a party to any written or oral commitment, contract, lease, note, loan, evidence of indebtedness, purchase order, letter of credit or other agreement involving any obligation or liability on the part of the Company or relating to the business of the Company and otherwise materially affecting the Company's business not otherwise listed in the Disclosure Schedule. Stockholders and the Company are not (and to the best knowledge of Stockholder, no other party is) in material breach or violation of, or default under any of the contracts or other instruments, obligations, evidences of indebtedness or commitments set forth in the Disclosure Schedule, the breach or violation of which would have a material adverse effect on the business or financial condition of the Company. 5.4 CONSENTS AND APPROVALS. No consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority, or any other person or entity, is required to be made or obtained by Stockholders in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 5.5 NO BROKERS. Stockholders have not entered and will not enter into any Contract, agreement, arrangement or understanding with any person or firm which will result in the obligation of Acquiring Corporation to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 5.6 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY. Stockholders do not have any legal obligation, absolute or contingent, to any other person or firm to sell the Assets, to sell any capital stock of the Company or to effect any merger, consolidation or other reorganization of the Company or to enter into any agreement with respect thereto. 5.7 TRANSACTIONS WITH CERTAIN PERSONS. To the knowledge of Stockholders, no officer, director or employee of Stockholders or any general partner of Stockholders nor any member of any such person's immediate family is presently a party to any material transaction with the Company relating to the Company's business, including without limitation, any contract, agreement or other arrangement (i) providing for the furnishing of material services by, (ii) providing for the rental of material real or personal property from, or (iii) otherwise requiring material payments to (other than for services as officers, directors 12 or employees of Stockholders) any such person or corporation, partnership, trust or other entity in which any such person has a substantial interest as a shareholder, officer, director, trustee or partner. 5.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or warranties by Stockholders, in this Agreement, nor any document, exhibit, statement, certificate or schedule furnished to Acquiring Corporation pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary to make the statements or facts contained therein not misleading. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION Acquiring Corporation hereby represents and warrants to Stockholders as follows: 6.1 ORGANIZATION OF ACQUIRING CORPORATION. Acquiring Corporation is duly organized, validly existing and in good standing under the laws of the State of Nevada and has full corporate power and authority to conduct its business and to own and lease its properties. 6.2 AUTHORIZATION. Acquiring Corporation has all necessary corporate authority to enter into this Agreement and has taken all necessary corporate action to consummate the transactions contemplated hereby and to perform its obligations hereunder. This Agreement has been duly executed and delivered by Acquiring Corporation and is a valid and binding obligation of Acquiring Corporation enforceable against it in accordance with its terms. 6.3 CONSENTS AND APPROVALS. No consent, approval or authorization of, or declaration, filing or registration with, any United States federal or state governmental or regulatory authority is required to be made or obtained by Acquiring Corporation in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 6.4 NO BROKERS. Neither Acquiring Corporation nor any affiliate of Acquiring Corporation has entered into or will enter into any agreement, arrangement or understanding with any person or firm in which will result in the obligation of Stockholders to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 6.5 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in (a) a violation of or a conflict with any provision of the Certificate of Incorporation or Bylaws of Acquiring Corporation, (b) a breach of, or a default under, any term or provision of any contract, agreement, indebtedness, lease, commitment, license, franchise, permit, authorization or concession to which Acquiring Corporation is a party which breach or default would have a material adverse effect on the business or financial condition of Acquiring Corporation or its ability to consummate the transactions contemplated hereby or (c) a violation by Acquiring Corporation of any statute, rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or award, which violation would have a material adverse effect on the business or financial condition of Acquiring Corporation or its ability to consummate the transactions contemplated hereby. ARTICLE VII ACTIONS BY STOCKHOLDERS, THE COMPANY AND ACQUIRING CORPORATION PRIOR TO THE CLOSING Stockholders, the Company and Acquiring Corporation covenant as follows for the period from the date hereof through 18 months following the Closing Date: 7.1 MAINTENANCE OF BUSINESS. The company shall diligently carry on its business in the ordinary course consistent with past practice. In conjunction herewith, it is agreed that PAM DIAMONT shall remain as President, Assistant Secretary, Treasurer and a Director of the Company and shall have the authority and responsibility of cash flow management. BERNIE HOLLINGSWORTH shall remain as Vice-President, Secretary and a Director of the Company. 13 7.2 CERTAIN PROHIBITED TRANSACTIONS. The Company shall not without the prior written approval of Acquiring Corporation and Stockholders: (a) incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise become responsible for obligations of any other individual, partnership, firm or corporation, or make any loans or advances to any individual, partnership, firm or corporation, except in the ordinary course of business and consistent with past practice; (b) issue any shares of its capital stock or any other securities or any securities convertible into shares of its capital stock or any other securities; (c) pay or incur any obligation to pay any dividend on its capital stock or make or incur any obligation to make any distribution or redemption with respect to capital stock; (d) make any change to its Certificate of Incorporation or bylaws; (e) mortgage, pledge or otherwise encumber any of its properties or assets or sell, transfer or otherwise dispose of any of its properties or assets or cancel, release or assign any indebtedness owed to it or any claim held by it, except in the ordinary course of business and consistent with past practice; (f) make any investment of a capital nature either by purchase of stock or securities, contributions to capital, property transfer or otherwise, or by the purchase of any property or assets of any other individual, partnership, firm or corporation, except in the ordinary course of business and consistent with past practice; (g) enter into or terminate any material contract or agreement, or make any material change in any of its leases and Contracts, other than in the ordinary course of business and consistent with past practice; or (h) engage in any business other than the type it currently conducts; or (i) do any other act which would cause any representation or warranty of Acquiring Corporation and the Company in this Agreement to be or become untrue in any material respect. 7.3 INVESTIGATION BY ACQUIRING CORPORATION. Stockholders and the Company shall allow Acquiring Corporation during regular business hours through Acquiring Corporation's employees, agents and representatives, to make such investigation of the business, properties, books and records of the Company, and to conduct such examination of the condition of the Company, as Acquiring Corporations deems necessary or advisable to familiarize itself with such business, properties, books, records, condition and other matters, and to verify the representations and warranties of Stockholders and the Company hereunder. 7.4 CONSENTS AND BEST EFFORTS. Stockholders and the Company will, as soon as possible, commence to take all action required to obtain all consents, approvals and agreements of, and to give all notices and make all other filings with, any third parties, including governmental authorities, necessary to authorize, approve or permit the full and complete sale, conveyance, assignment or transfer of all of the Stock, and Acquiring Corporation shall cooperate with Stockholder with respect thereto; PROVIDED, HOWEVER, that Acquiring Corporation shall not be required to agree to any unfavorable modification of any existing contract or agreement in order to obtain such consent. In addition, subject to the terms and conditions herein provided, each of the parties hereto covenants and agrees to use its best efforts to take, or cause to be taken, all action or do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated hereby and to cause the fulfillment of the parties' obligations hereunder. 7.5 NOTIFICATION OF CERTAIN MATTERS. Stockholders shall give prompt notice to Acquiring Corporation, and Acquiring Corporation shall give prompt notice to Stockholders, of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect any time from the date hereof to the Closing Date and (ii) any material failure of Stockholders, the Company or Acquiring Corporation, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder, and each party shall use all reasonable efforts to remedy same. 14 7.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. The Company and Stockholders will not, directly or indirectly, solicit any inquiries or proposals or enter into or continue any discussions, negotiations or agreements relating to the sale or exchange of the Stock, the merger of the Company with, or the direct or indirect disposition of a significant amount of the Company's assets or business to any person other than Acquiring Corporation or its affiliates or provide any assistance or any information to or otherwise cooperate with any person in connection with any such inquiry, proposal or transaction. In the event that the Company or Stockholders receive an unsolicited offer for such a transaction or obtains information that such an offer is likely to be made, the Company or Stockholders will provide Acquiring Corporation with notice thereof as soon as practical after receipt, including the identity of the prospective purchaser or soliciting party. 7.7 MAINTENANCE OF SHAREHOLDER EQUITY. The Company and Acquiring Corporation shall abstain from any action reasonably calculated to result in a diminution of Shareholder equity. In conjunction herewith, Acquiring Corporation agrees to cover cumulative operating losses of the Company, if any, EXCLUSIVE of such non cash items as depreciation, reserves for bad debt, depletions allowances, loss carry forwards or other similar adjustments which do not represent an actual cash outlay of the Company, but INCLUDING any deferred rental payments on the building and premises incurred between Closing Date and the sooner of (i) the date Acquiring Corporation exercises its option to repurchase its stock pursuant to paragraph 10.2 below, (ii) the date specified by Acquiring Corporation of its intent to abandon its option to repurchase its stock pursuant to paragraph 10.2 below or, (iii) 18 months from the date hereof (The Loss Coverage Period). Acquiring Corporation agrees to promptly cover operating losses (other than deferred rental) on a monthly basis, however, Acquiring Corporation shall be entitled to reimbursement from operating profits, if any, earned from subsequent months during the Loss Coverage Period. Acquiring Corporation further agrees to promptly pay deferred rental on the building accrued during the Loss Coverage Period should it not consummate the Earnest Money Contact to acquire the premises referred to in Paragraph 9.7 below. ARTICLE VIII CONDITIONS TO STOCKHOLDERS' OBLIGATIONS The obligations of Stockholders to transfer the Stock to Acquiring Corporation on the Closing Date are subject, in the discretion of Stockholder, to the satisfaction on or prior to the Closing Date, of each of the following conditions: 8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties of Acquiring Corporation contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, and Acquiring Corporation shall have performed in all material respects all agreements and covenants required hereby to be performed by it prior to or at the Closing Date. There shall be delivered by it prior to or at the Closing Date. There shall be delivered to Stockholders a certificate (signed by the President or a Vice President of Acquiring Corporation) to the foregoing effect. 8.2 CONSENTS. All consents, approvals and waivers from governmental authorities and other parties necessary to permit Stockholders to transfer the Stock to Acquiring Corporation as contemplated hereby shall have been obtained, unless the failure to obtain any such consent, approval or waiver would not have a material adverse effect upon Stockholders. 8.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action, investigation, inquiry or other proceeding by any governmental authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected materially to damage Stockholders if the transactions contemplated hereunder are consummated. 8.4 CORPORATE DOCUMENTS. Stockholders shall have received from Acquiring Corporation resolutions adopted by the Board of Directors of Acquiring Corporation approving this Agreement and the transactions contemplated hereby, certified by Acquiring Corporation's corporate secretary. 15 ARTICLE IX CONDITIONS TO ACQUIRING CORPORATION'S OBLIGATIONS The obligations of Acquiring Corporation to purchase the Stock as provided hereby are subject, in the discretion of Acquiring Corporation, to the satisfaction, on or prior to the Closing Date, of each of the following conditions: 9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties of Stockholders and the Company contained in this Agreement shall be true and correct as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, and Stockholders and the Company shall have performed all agreements and covenants required hereby to be performed by them prior to or at the Closing Date. There shall be delivered to Acquiring Corporation certificates from each of the Stockholders and the Company (signed by the President or a Vice President of each of Stockholders and the Company) to the foregoing effect. 9.2 CONSENTS. All consents, approvals and waivers from governmental authorities and other parties necessary to permit Stockholders to transfer the Stock to Acquiring Corporation as contemplated hereby shall have been obtained, unless the failure to obtain any such consent, approval or waiver would not have a material adverse effect upon Acquiring Corporation. 9.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action, investigation, inquiry or other proceeding by any governmental authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonable be expected materially and adversely to affect the value of the Stock or business of the Company. 9.4 CERTIFICATES. Stockholders and the Company shall furnish Acquiring Corporation with such certificates of the respective officers of Stockholders and the Company and others to evidence compliance with the conditions set forth in this Article IX as may be reasonably requested by Acquiring Corporation. 9.5 CORPORATE DOCUMENTS. Acquiring Corporation shall have also received the corporate minute books, Certificates of Incorporation, Bylaws and stock transfer books of the Company. 9.6 INVESTIGATION. Acquiring Corporation or its Representatives shall have investigated the Company's properties (including without limitation, an environment audit), business, books and records, and in Acquiring Corporation's sole discretion, Acquiring Corporation shall be satisfied on the basis of such investigation that the representations and warranties of Stockholders and the Company made pursuant to this Agreement are accurate and complete. 9.7 Acquiring Corporation shall have entered into a valid binding Earnest Money Contract with the owner of the building located at 10500 Windfern Road, Houston, Harris County, Texas, to acquire such property and improvements (being Site No. 1) together with sites 13 & 14 of the same site plan. 9.8 Resignations of JOE B. HOLLINGSWORTH as a Director of the Company has been received and Acquiring Corporation's nominee has been elected in his place and stead. 9.10 The Company and owners of the building located at 10500 Windfern, Houston, Harris County, Texas have entered into a binding Lease Agreement acceptable to Acquiring Corporation. ARTICLE X ACTIONS BY STOCKHOLDERS, THE COMPANY AND ACQUIRING CORPORATION AFTER THE CLOSING 10.1 FURTHER ASSURANCES. On and after the Closing Date, Stockholders, the Company and Acquiring Corporation will take all appropriate action and execute all documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the provisions hereof, including without limitation a good faith effort of Acquiring Corporation to have a public offering of its stock. 10.2 REPURCHASE OPTION OF ACQUIRING CORPORATION. For a period of 18 months following the date of closing, Acquiring Corporation shall have the option to repurchase all of the shares transferred to 16 Stockholders herein for a cash consideration of One Dollar ($1.00) per share. At any time during such 18 month period, Acquiring Corporation may notify Stockholders of its election to exercise the option on a specific date or of its intent to abandon the option on a specific date. Such repurchase option must be exercised simultaneously with the consummation of the agreement referred to in paragraph 9.7 above. Provided, however, in the event the Sellers of the real property should be unwilling or unable to consummate the transaction as agreed, Acquiring Corporation may then exercise this option by written notification to Stockholders of its intent to exercise this option on a specific date at 10:00 a.m. at the Acquiring Corporation's principal place of business in Texas. 10.3 REPURCHASE OPTION OF STOCKHOLDERS. In the event Acquiring Corporation does not execute its option described in Paragraph 10.2 above within the designated time period or should it notify Stockholders of its intent to abandon the option, Stockholders shall reacquire all the shares of the Company transferred to Acquiring Corporation herein, in exchange for all of the shares of Acquiring Corporation transferred to Stockholders herein and all parties shall be relieved of any further obligations or liability hereunder, except any unfulfilled obligations of Acquiring Corporation to cover operating losses during the Loss Coverage Period described in paragraph 7.7 above. 10.4 ESCROW. To facilitate the foregoing, at closing, Stockholders and Acquiring Corporation shall enter into a mutually acceptable Escrow Agreement with JOHN J. WILLIAMS, Escrow Agent to hold the respective parties shares, accompanied by executed stock powers pending the occurrence of events described in paragraphs 10.2 or 10.3 above. ARTICLE XI INDEMNIFICATION 11.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in the Disclosure Schedule or in any certificate or instrument of conveyance delivered by or on behalf of the parties pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the parties hereunder. The representations and warranties of Stockholders, the Company and Acquiring Corporation contained herein shall survive the Closing Date until the date that is the first anniversary of the Closing Date, without regard to any investigation made by any of the parties hereto; provided, however, that such representations and warranties shall survive as to any claim or demand made prior to the first anniversary of the Closing Date, until such claim or demand is fully paid or otherwise resolved by the parties hereto in writing or by a court of competent jurisdiction. 11.2 INDEMNIFICATION (a) To the extent of the purchase price, Stockholders shall indemnify Acquiring Corporation against, and hold Acquiring Corporation harmless from, any damage, claim, liability or expense, including without limitation, interest, penalties and reasonable attorneys' fees (collectively "Damages"), arising out of the breach of any warranty, representation, covenant or agreement of Stockholders contained in this Agreement. The Company shall indemnify and hold Acquiring Corporation harmless from any Damages arising out of the breach of any warranty, representation, covenant or agreement of Company contained in this Agreement. Acquiring Corporation shall indemnify and hold Stockholders harmless from any Damages arising out of the breach of any warranty, representation, covenant or agreement of Acquiring Corporation contained in this Agreement. The term "Damages" as used in Article XI is not limited to matters asserted by third parties against Stockholders, the Company or Acquiring Corporation, but includes Damages incurred or sustained by Stockholders, the Company or Acquiring Corporation in the absence of third party claims. 11.3 INDEMNIFICATION PROCEDURES. Upon Acquiring Corporation becoming aware of a fact, condition or event which constitutes a breach of any of the representations, warranties, covenants or agreements of Stockholders or the Company contained herein or a products liability claim, if a claim for Damages in respect thereof is to be made against Stockholders under this Article XI, Acquiring Corporation will with reasonable promptness notify Stockholders or the Company, as the case may be, in writing of such fact, condition or event. If such fact, condition or event is the assertion of a claim by a third party, Stockholders 17 or the Company, as the case may be, will be entitled to participate in or take charge of the defense against such claim, provided that Stockholders or the Company, as the case may be, and its counsel, shall proceed with diligence and in good faith with respect thereto. Upon Stockholders becoming aware of a fact, condition or event which constitutes a breach of any of the representations, warranties, covenants or agreements of Acquiring Corporation contained herein, if a claim for Damages in respect thereof is to be made against Acquiring Corporation under this Article XI, Stockholders will with reasonable promptness notify Acquiring Corporation in writing of such fact, condition or event. If such fact, condition or event is the assertion of a claim by a third party, Acquiring Corporation will be entitled to participate in or take charge of the defense against such claim, provided that Acquiring Corporation and its counsel shall proceed with diligence and in good faith with respect thereto. 11.4 NO RIGHT OF CONTRIBUTION. After the Closing, the Company shall have no liability to indemnify the Stockholders on account of the breach of any representation or warranty or the nonfulfillment of any covenant or agreement of the Company; and Stockholders shall have no right of contribution against the Company. In addition to any other remedy which may be available at law or in equity, Acquiring Corporation or the Company shall be entitled to specific performance and injunctive relief, without posting bond or other security. ARTICLE XII SECURITIES LAWS 12.1 ACQUISITION FOR INVESTMENT. Acquiring Corporation and Stockholders hereby acknowledge that the shares of Stock to be purchased pursuant to the terms of this Agreement shall be acquired in good faith for investment for its own account and not with a view to a distribution or resale of any of such Stock, and shall not for a period of two (2) years after closing transfer, sell, exchange or encumber the same except as provided herein. ARTICLE XIII MISCELLANEOUS 13.1 TERMINATION. This Agreement may be terminated and the transactions contemplated hereby abandoned by any party if the conditions set forth in Articles VIII and IX have not been satisfied on or before August 18, 1995 (unless waived by the party entitled to the benefit thereof), without liability of any party hereto; PROVIDED, however, that no party shall be released from liability hereunder if this Agreement is terminated and the transactions abandoned by reason of (i) willful failure of any party to have performed its obligations hereunder, or (ii) any knowing misrepresentation made by any party of any matter set forth herein. 13.2 ASSIGNMENT. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by Stockholders without the prior written consent of Acquiring Corporation, or by Acquiring Corporation without the prior written consent of Stockholders. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation hereunder. 18 13.3 NOTICES. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered in person or by courier, telegraphed or by facsimile transmission or mailed by certified mail, postage prepaid, return receipt requested (such mailed notice to be effective on the date such receipt is acknowledged), as follows: If to Stockholders: 10500 Windfern Rd. Houston, Texas 77064 If to Company: 10500 Windfern Rd. Houston, Texas 77064 If to Acquiring Corporation: 600 Century Plaza Drive Suite 600 Houston, Texas 77073 or to such other place and with such other copies as either party may designate as to itself by written notice to the others. 13.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Texas except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. 13.5 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement, together with all exhibits and schedules hereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 13.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.7 INVALIDITY. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 13.8 HEADINGS. The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 13.9 EXPENSES. Company and Acquiring Corporation will each be liable for its own, and Company shall be liable for the Company's, costs and expenses incurred in connection with the negotiation, preparation, execution or performance of this Agreement. 13.10 PUBLICITY. Neither party shall issue any press release or make any public statement regarding the transactions contemplated hereby, without the prior approval of the other party, and the parties hereto shall issue a mutually acceptable press release as soon as practicable after the Closing Date. 13.11 CONFIDENTIAL INFORMATION. The parties acknowledge that the transaction described herein is of a confidential nature and shall not be disclosed except to consultants, advisors and affiliates, or as required by law, until such time as the parties make a public announcement regarding the transaction as provided in Section 13.10. Neither Stockholders nor Acquiring Corporation shall make any public disclosure of the specific terms of this Agreement, except as required by law. In connection with the negotiation of this Agreement and the preparation for the consummation of the transactions contemplated hereby, each party acknowledges that it will have access to confidential information relating to the other party. Each party shall treat such information as confidential, preserve the confidentiality thereof and not 19 duplicate or use such information, except to advisors, consultants and affiliates in connection with the transactions contemplated hereby. Stockholders, at a time and in a manner which it reasonably determines and after prior notice to and consultation with Acquiring Corporation, may notify employees, unions and bargaining agents of the fact of the subject transaction. In the event of the termination of this Agreement for any reason whatsoever, each party shall return to the other all documents, work papers and other material (including all copies thereof) obtained in connection with the transactions contemplated hereby and will use all reasonable efforts, including instructing its employees and others who have had access to such information, to keep confidential and not to use any such information, unless such information is now, or is hereafter disclosed, through no act or omission of such party, in any manner making it available to the general public. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have caused this Agreement to be duly executed on their respective behalf by their respective officers thereunto duly authorized, as of the day and year first above written. FED NO. 1 QUALIFIED S-CORPORATION INDUSTRIAL DATA SYSTEMS, CORP. TRUST By /s/ BERNIE HOLLINGSWORTH By /s/ WILLIAM A. COSKEY Bernie Hollingsworth William A. Coskey Trustee President and By /s/ PAM DIAMONT Pam Diamont Trustee BH NO. 1 QUALIFIED S-CORPORATION THERMAIRE INC. TRUST By /s/ BERNIE HOLLINGSWORTH By /s/ PAM DIAMONT Bernie Hollingsworth Pam Diamont Trustee President and By /s/ PAM DIAMONT Pam Diamont Trustee /s/ JOE B. HOLLINGSWORTH /s/ WILLIAM A. JACKSON JOE B. HOLLINGSWORTH WILLIAM A. JACKSON 20 EX-2.4 6 ESCROW AGREEMENT This Escrow Agreement is made by and between INDUSTRIAL DATA SYSTEMS, CORP., a Nevada corporation ("Corporation"); PAM DIAMONT, Trustee and BERNIE HOLLINGSWORTH, Trustee, acting on behalf of the PHD NO. 1 QUALIFIED S-CORPORATION TRUST AND BH NO. 1 QUALIFIED S-CORPORATION TRUST; JOE B. HOLLINGSWORTH and WILLIAM A. JACKSON, ("Stockholders") and JOHN J. WILLIAMS, ("Escrow Agent"), this 15th day of August, 1995. RECITALS WHEREAS the parties hereto have executed and consummated that certain Stock Acquisition Agreement dated August 15, 1955 whereby the Corporation acquired from Trustees 8,000 shares of Class A stock, 2,000 shares of Class B stock and 451,292 shares of Class C stock of THERMAIRE, INC. in exchange for 600,000 shares of INDUSTRIAL DATA SYSTEMS, CORP. common stock, $.01 par value, and WHEREAS it is the intent of the parties that the Corporation will repurchase its stock from Stockholders on or before February 15, 1997 for cash consideration of $1.00 per share or the stock exchange will be rescinded; and WHEREAS the parties hereto desire to engage Escrow Agent to hold the below described escrow items and disburse them in accordance with the terms of the Stock Acquisition Agreement and this Escrow Agreement; and WHEREAS JOHN J. WILLIAMS has agreed to act as Escrow Agent subject to the terms hereof; NOW THEREFORE the parties hereto have agreed as follows: -1- 1. ITEMS OF ESCROW. The following items have been delivered to Escrow Agent on the data(s) set forth following the description of each item: (i) A true and correct copy of an agreement entitled "Stock Acquisition Agreement" dated August 15, 1995 between the parties hereto. Received August 18, 1995. JJM (ii) Stock Certificate No. 3 issued to INDUSTRIAL DATA SYSTEMS, CORP. representing 8,000 shares of Class A stock of THERMAIRE, INC. accompanied by a stock power endorsed to PAM DIAMONT and BERNIE HOLLINGSORTH, Trustees for such shares executed by INDUSTRIAL DATA SYSTEMS, CORP. Received August 18, 1995 JJM (iii) Stock Certificate No. 3 issued to INDUSTRIAL DATA SYSTEMS, CORP. representing 2,000 shares of Class B stock of THERMAIRE, INC. accompanied by a stock power endorsed to PAM DIAMONT and BERNIE HOLLINGSWORTH, Trustees for such shares executed by INDUSTRIAL DATA SYSTEMS, CORP. Received August 18, 1995 JJM (iv) Stock Certificate No. 3 issued to INDUSTRIAL DATA SYSTEMS, CORP. representing 316,855 shares of Class C stock of THERMAIRE, INC. accompanied by a stock power endorsed to JOE B. HOLLINGSWORTH, for such shares executed by INDUSTRIAL DATA -2- SYSTEMS, CORP. Received August 18, 1995 JJM (v) Stock Certificate No. 4 issued to INDUSTRIAL DATA SYSTEMS, CORP. representing 134,437 shares of Class C stock of THERMAIRE, INC. accompanied by a stock power endorsed to WILLIAM A. JACKSON, for such shares executed by INDUSTRIAL DATA SYSTEMS, CORP. Received August 18, 1995 JJM (vi) Stock Certificate No. issued to PAM DIAMONT and BERNIE HOLLINGSWORTH, Trustees of PHD NO. 1 QUALIFIED S-CORPORATION TRUST representing 118,966 share of common stock of INDUSTRIAL DATA SYSTEMS, CORP. accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS, CORP. for such shares executed by PAM DIAMONT and BERNIE HOLLINGSWORTH, Trustees. Received , 1995 (vii) Stock Certificate No. issued to PAM DIAMONT and BERNIE HOLLINGSWORTH, Trustees of BH NO. 1 QUALIFIED S-CORPORATION TRUST representing 29,742 shares of common stock of INDUSTRIAL DATA SYSTEMS, CORP. accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS, CORP. for such shares executed by PAM DIAMONT and BERNIE HOLLINGSWORTH, Trustees. -3- Received , 1995 (viii) Stock Certificate No. issued to JOE B. HOLLINGSWORTH, representing 316,855 shares of common stock of INDUSTRIAL DATA SYSTEMS, CORP. accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS, CORP. for such shares executed by JOE B. HOLLINGSWORTH. Received , 1995 (ix) Stock Certificate No. issued to WILLIAM A. JACKSON, representing 134,437 shares of common stock of INDUSTRIAL DATA SYSTEMS, CORP. accompanied by a stock power endorsed to INDUSTRIAL DATA SYSTEMS, CORP. for such shares executed by WILLIAM A. JACKSON. Received , 1995 2. DELIVERY UPON EXECUTION OF INDUSTRIAL DATA SYSTEMS, CORP. OPTION TO REACQUIRE ITS STOCK. It is the intent of the parties that the Corporation exercise its option to reacquire its stock under Article 10.2 of the Stock Acquisition Agreement, accordingly, upon the delivery to Escrow Agent of the sum of $600,000.00 U.S. in readily available funds, Escrow Agent is authorized and directed to deliver to Corporation, escrow items (ii) through (ix). Escrow Agent shall also immediately deliver to Stockholders, by way of cashier's check or wire transfer, their respective interest in the funds. 3. DELIVERY UPON FAILURE OF INDUSTRIAL DATA SYSTEMS, CORP. -4- TO REACQUIRE ITS STOCK. It is the intent of the parties that in the event Corporation fails to timely exercise its option or elects not to exercise its option to reacquire its stock for the cash consideration specified OR should it become financially impaired where it is apparent it will not be able to exercise its option, then in either event, the Stock Acquisition Agreement dated August 15, 1996, shall be rescinded and the parties shall be relieved of any further obligations thereunder. For purposes of this Agreement, Corporation shall be deemed financial impaired at anytime its current assets (less inventory) is below a multiple of 1.5 times its non-contingent current liabilities. Corporation shall provide a copy of its monthly income statement and balance sheet to Stockholders and Escrow Agent within thirty (30) days following the end of each calendar month. Should Corporation fail to exercise its option to reacquire its stock on or before February 15, 1997 OR should Corporation elect not to exercise its option to reacquire its stock for cash OR should Corporation become financially impaired during such period and Stockholders notify Escrow Agent in writing of their desire to rescind the Stock Acquisition Agreement based upon such financial impairment, in either event, Escrow Agent is authorized and directed to immediately deliver to Stockholders, escrow items (ii), (iii), (iv) and (v) and to Corporation escrow items (vi), (vii), (viii) and (ix). -5- 4. ESCROW AGENT'S VERIFICATION PERIOD. Escrow Agent shall have a period of 5 business days following the day notice is received by any party in which to verify authenticity of any facts and perform any action required hereunder. Any deposit of funds with Escrow Agent must be verified as "Collected Funds" immediately available for disbursement before Escrow Agent's time period begins. 5. NOTICE TO ESCROW AGENT. Corporation and Stockholders hereby agree to notify Escrow Agent in writing of any modifications whatsoever to this or the Stock Acquisition Agreement. Corporation and Stockholders further agree that accompanying such notice shall be a true and correct copy of any instrument proporting to modify this or the Stock Acquisition Agreement. Escrow Agent may conclusively rely upon any such notice, shall conclusively evidence that these Agreements have not been modified. 6. DISPUTE BETWEEN THE PARTIES. In the event that any disputes arise between Corporation and/or Stockholders regarding construction of this or the Stock Acquisition Agreement or rights arising therefrom, Escrow Agent is hereby authorized and directed to file and appropriate interpleader action in a court of competent jurisdiction and shall be entitled to recover from the Corporation and Stockholders, all costs, fees, and expenses associated therewith, including reasonable attorney's fees. -6- 7. TERMINATION OF ESCROW DUTIES. The duties of Escrow Agent shall terminate upon occurrence of any of the following events: (i) delivery of the escrow items pursuant to Paragraph 2 hereof, (ii) delivery of the escrow items pursuant to Paragraph 3 hereof, (iii) tender of the escrow items into the registry of any court pursuant to Paragraph 6 hereof, (iv) written notice executed by both Corporation and Stockholders or their respective successors in interest, terminating this Escrow Agreement setting forth instructions for delivery of the escrow items. Upon termination as above stated Escrow Agent shall have no further liability hereunder. 8. INDEMNITY OF ESCROW AGENT. Corporation and Stockholders, on behalf of themselves and their successors in interest, if any, individually, jointly and severally hereby agree and shall, upon demand, indemnify, protect, save and hold harmless Esrow Agent, its agents, servants, officers, directors, shareholders, employees, representatives and any and all others acting by or through the Escrow Agent, from and against any and all debts, liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses, disbursements, including limitation, reimbursement for all reasonable attorney fees, of whatsoever kind and nature, imposed upon, incurred by, paid by and/or asserted against Escrow Agent, in any way or form, directly or indirectly arising out of this Agreement, any and all aspects hereof and/or any and all disputes which may arise between the parties hereto or between -7- the parties hereto and third persons as well as claims by third persons against Escrow Agent, including but not limited to, claims or demands by any governmental entity whatsoever, asserted by reason of this Agreement. 9. NOTICES. Any notice required or permitted hereunder shall be send to the party entitled to receive the same by certified United States mail, return receipt requested, or shall be hand delivered. Any notice send by mail shall be deemed received five (5) business days following deposit of the same in the United States mail, in a properly addressed wrapper with proper postage affixed thereto. 10. CONSTRUCTION. This Agreement shall be construed and enforced in accordance with the laws of the State of Texas. EXECUTED this 18th day of August, 1995. PHD NO. 1 QUALIFIED S-CORPORATION INDUSTRIAL DATA SYSTEMS, TRUST CORP. By: /s/ PAM DIAMONT By: /s/ WILLIAM COSKEY PAM DIAMONT, Trustee WILLIAM COSKEY, President /s/ BERNIE HOLLINGSWORTH BERNIE HOLLINGSWORTH, Trustee BH NO. 1 QUALIFIED S-CORPORATION /s/ JOHNNY J. WILLIAMS TRUST JOHNNY J. WILLIAMS By: /s/ PAM DIAMONT PAM DIAMONT, Trustee /s/ BERNIE HOLLINGSWORTH BERNIE HOLLINGSWORTH /s/ JOE B. HOLLINGSWORTH JOE B. HOLLINGSWORTH /s/ WILLIAM A. JACKSON WILLIAM A. JACKSON -8- EX-2.5 7 EARNEST MONEY CONTRACT THIS IS A CONTRACT whereby JOE B. HOLLINGSWORTH, TRUSTEE herein called Seller, agrees to sell to INDUSTRIAL DATA SYSTEMS, CORP., herein called Buyer, who agrees to purchase, upon terms and provisions hereof, the following described real property and improvements, in its present condition, situated in Harris County, Texas, to-wit: 4.5995 acres of land, lying and being situated in the L.M. Prior Survey, Abstract 635, Harris County, Texas and being a part of Lots 17 and 18 of North Houston Gardens Subdivision, Section 3, according to plat thereof recorded in Volume 275, Page 263, Deed Records of Harris County, Texas and being more particularly described by metes and bounds as follows: Commencing at a point in the centerline of Windfern Road, formerly known as Reid Road, based on 80 feet in width, same being the southwest corner said Lot 17; Thence N 87 (degrees) 49 (minutes) 54 (seconds) E, 40.00 feet to a point in the east right of way line of said road; Thence N 02 (degrees) 10 (minutes) 06 (seconds) W, along said right of way line, 305.00 feet to a 3/4 (inch) iron pipe and the place of beginning of the tract herein described; Thence N 02 (degrees) 10 (minutes) 06 (seconds) W, continuing along the east right of way line of Windfern Road, 260.00 feet to a 1 (inch) iron pipe for corner; Thence N 87 (degrees) 49 (minutes) 54 (seconds) E, parallel to the south line of Lots 17 and 18, a distance of 770.60 feet to a 1 (inch) iron pipe in the east line of Lot 18 for corner; Thence S 02 (degrees) 10 (minutes) 06 (seconds) E, along the east line of Lot 18, a distance of 260.00 feet to a 5/8 (inch) iron rod for corner; Thence S 87 (degrees) 49 (minutes) 54 (seconds) W, parallel to the south line of Lots 17 and 18, a distance of 770.60 feet to the point or place of beginning and containing as aforesaid 4.5995 acres of land. The total sales price is $500,000.00 payable as follows: $500,000.00 cash, of which Buyer agrees to forthwith deposit with Stewart Title Company, Escrow Agent, the sum of $100.00 as Earnest Money, to bind this sale. Closing date shall be February 15, 1997 or such earlier date as mutually agreed upon by the parties. At least sixty (60) days prior to Closing, Seller shall cause the Title Company to issue and deliver a Commitment for Title Insurance (the "Title Commitment") to Buyer, accompanied by true and legible copies of all recorded instruments creating or evidencing encumbrances against all or part of the Property and committing the Title Company to furnish the Title Policy to Buyer at Closing. The Owner's Title Policy shall be in the amount of the Purchase Price. If any encumbrance or other matters referred to in the Title Commitment are unacceptable to Purchaser in its sole discretion, Purchaser shall give written notice to Seller given on or before thirty (30) days after the date on which Purchaser's attorney receives the Title Commitment, true and legible copies of such instruments, whereupon Seller may, but shall not be obligated to cure the same; provided, however, Seller shall be obligated to satisfy any liens encumbering the Property which have arisen by, through or under Seller or which are created after the effective date of this Agreement. Matters listed on Exhibit "A" shall be deemed permitted exceptions and shall not constitute objections to title. In the event Seller is unable to cure such objectionable matters on or before the thirty (30) days following notice from Buyer, Buyer shall elect to either (a) terminate this Agreement whereupon all Earnest Money (hereinafter defined) shall be refunded to Purchaser and neither party hereto shall have any further rights, duties or obligations one to the other hereunder or (b) waive such uncured objections and proceed to Closing without reduction in the Purchase Price. Seller is to furnish Buyer an Owner's Policy of Title Insurance issued by Stewart and Title Company, tax certificates showing no delinquent taxes, (current taxes to be prorated to date of closing) a General Warranty Deed to be recorded at Buyer's expense, conveying good and marketable title subject only to any liens to be created or assumed hereunder and the following: 1. Present restrictions, if any, existing against said property, 2. Existing Building and Zoning Ordinances, if any, 3. Rights of parties in possession, 4. All oil, gas and minerals reserved by Seller's predecessors in title, and all currently valid oil, gas and mineral leases. 5. All visible and apparent easements. 6. Permitted exceptions shown as Exhibit "A". 7. Lease Agreement between Seller and THERMAIRE, INC. If Owner's Policy of Title Insurance is to be furnished hereunder, the same is to be delivered as and when the sale is closed, which shall be on or before February 15, 1997, unless attorneys for said Title Company discover objections to title, in which case sale is to be closed when objections are removed, provided the objections are removed within a reasonable time, which in no event shall extent beyond 18 months from date hereof. Time is of the essence of this contract. Upon failure of Buyer to comply herewith, Sellers' sole remedy shall be to retain the earnest money as liquidated damages. If title is found objectionable and is not cleared within the time herein provided, or upon failure of Seller to comply herewith for any other reason, Buyer may demand back the earnest money, thereby releasing Seller from this contract, or Buyer may either enforce specific performance hereof or seek such other relief as may be provided by law. Within 60 days from the date hereof, Buyer shall at its own cost and expense have such environmental, structural or other inspections, tests, or studies as it deems necessary in order to assure it that the property and building are suitable for its intended purpose. Provided however, Buyer agrees to indemnify Seller from and against any costs of such inspections or tests. If Buyer determines in its sole discretion that the property or building is not suitable for its intended purposes it may terminate this Contract. An environmental study of the property has revealed unacceptable levels of lead on a portion of the property. Seller has agreed to remediate the contamination prior to closing at Seller's expense. After remediation, readings for total lead will be less than 100 ppm (mg/mk) based on test method SW-846/6010. Confirmation test results will be furnished. Taxes are to be prorated to date of Closing. Seller is to pay for costs of title policy and one-half (1/2) of other Closing costs. Buyer is to pay for cost of survey if desired, costs of all inspections and one-half (1/2) of other Closing costs. Seller shall also assign all rights to receive accrued and unpaid rental under the current lease without adjustment to the purchase price. EXECUTED in multiple copies this 15th day of August, 1995. SELLER: BUYER: INDUSTRIAL DATA SYSTEMS, CORP. /s/ JOE B. HOLLINGSWORTH /s/ WILLIAM A. COSKEY JOE B. HOLLINGSWORTH, TRUSTEE Name: WILLIAM A. COSKEY Title: President Receipt of check in the amount of $ is hereby acknowledged. Escrow Agent 2 EXHIBIT "A" PERMITTED EXCEPTIONS 1. Ten foot utility easement to Houston Lighting & Power Co. with ten foot by twenty foot aerial easement adjacent thereto as reflected by instrument recorded in Volume 4759, Page 36 Deed Records of Harris County, Texas. 2. Easement for power line running north and south through property as shown by survey dated August 4, 1972 made by Thomas J. Sanders, Registered Public Surveyor, No. 1578. 3. Power line on a portion of the east side and across the north part of above property as shown by survey dated August 4, 1972 made by Thomas J. Sanders, Registered Public Surveyor No. 1578. 4. Mineral lease dated August 16, 1966 recorded in Volume 2004, Page 497 Contract Records from Geo. J. Knigge, et al to Weldon B. Hill and assigned to Pan American Petroleum Corp. by instrument recorded in Volume 2012, Page 429 Contract Records of Harris County, Texas. 3 EX-2.6 8 OFFERING MEMORANDUM INDUSTRIAL DATA SYSTEMS CORPORATION (A NEVADA CORPORATION) 4350 E. SUNSET ROAD #101 HENDERSON, NEVADA 89014 500,000 Shares Common Stock Capital Shares (Par Value $0.001 Per Share) Offering Price $.30 per Share INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada Corporation (the Company) was incorporated June 22, 1994 and is now offering up to 500,000 Shares of its Common Stock, $.001 par value per share (the "Shares") on a "best efforts" basis under the terms and conditions of this Offering Memorandum ("Memorandum"). THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IS SPECULATIVE. INVESTORS SHOULD STUDY THE RISKS AS SHOWN HEREIN. (SEE "RISK FACTORS"). THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION IN RELIANCE ON THE EXEMPTION CONTAINED IN RULE 504 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION AS PART OF REGULATION D. THESE SECURITIES HAVE BEEN REGISTERED WITH THE ADMINISTRATOR OF THE SECURITIES DIVISION OF THE NEVADA SECRETARY OF STATE PURSUANT TO THE REQUIREMENTS OF NRS 90.460. SUCH REGISTRATION DOES NOT CONSTITUTE NOR IMPLY THE RECOMMENDATION OR ENDORSEMENT OF THE DIVISION, WHICH DOES NOT PASS UPON THE MERITS OF THE SECURITIES OR THE ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. PUBLIC OFFERING This offering is for 500,000 shares of the Company's Common Stock (Par Value .001) for thirty cents per share (.30).
PUBLIC PROCEEDS NUMBER OFFERING GROSS SALES 5% TO SHARES PRICE(1) PROCEEDS(2) COMMISSION(3) CO.(4) --------- -------- ----------- ------------- -------- Min. ................................ 250,000 .30 $ 75,000 $ 3,750 $ 71,500 Max. ................................ 500,000 .30 $ 150,000 $ 7,500 $142,500
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY, AND THERE CAN BE NO ASSURANCE THAT A MARKET WILL DEVELOP. SALES AGENT TO BE SOLD BY LEISA C. STILWELL (CRD 1534987) DATE OF OFFERING MEMORANDUM: AUGUST , 1994 TRANSFER AGENT PACIFIC STOCK TRANSFER 2576 E. CHARLESTON BOULEVARD LAS VEGAS, NEVADA 89104 NOTES 1. These securities are offered hereby for cash only. The offering price has been arbitrarily established by the Company, and this price has no relationship to the Company's assets, earnings, book value or other recognized criteria of value. 2. The initial proceeds of this offering will be deposited into an escrow account at Southwest Escrow Company in Las Vegas, Nevada until $75,000 of gross proceeds is received and has been so deposited. In the event that less than $75,000.00 of gross proceeds are received and deposited by the Company under this offering within one (1) year from the date of this Offering Memorandum, all gross proceeds will be returned to purchasers in full by the escrow agent without any deductions for commissions or other expenses and without interest, and the Company will bear all costs of any such refunds. 3. These shares are offered on a "best efforts" basis by registered agents of the Company. There is no assurance that any or all of the shares offered hereby will be sold. The sales agent will receive a commission of five percent (5%). 4. The Company will deduct expenses for legal and accounting fees, printing costs and other expenses of this offering from the proceeds of this offering. It is estimated, but not guaranteed, that such expenses will not exceed $20,500. NO SALESMAN, DEALER, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM IN CONNECTION WITH THE DISTRIBUTION OF SECURITIES TO WHICH THIS OFFERING MEMORANDUM RELATES. PRACTICES TO THE CONTRARY ARE CRIMINAL OFFENSES. REPRESENTATIONS NOT CONTAINED HEREIN, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS OFFERING MEMORANDUM SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THE COMPANY WILL ATTEMPT TO CONTINUE TO DEVELOP AND MARKET ITS PRODUCT(S) AND/OR SERVICES DURING THE OFFERING PERIOD. THE COMPANY WILL HOWEVER, UNDERTAKE TO AMEND THIS OFFERING MEMORANDUM IF ANY MATERIAL CHANGES OCCUR AND WILL PROVIDE PURCHASERS AND THE NEVADA SECURITIES DIVISION WITH A COPY THEREOF. THE SHARES OFFERED HEREBY ARE OFFERED FOR CASH ONLY, SUBJECT TO PRIOR SALE AND WITHDRAWAL, CANCELLATION OR MODIFICATION OF THIS OFFERING WITHOUT NOTICE. REGISTRATION OF THESE SECURITIES IS EFFECTIVE FOR ONE YEAR. THEREAFTER, NON-ISSUER "TRADING TRANSACTIONS" REQUIRE EFFECTIVE REGISTRATION OR AN APPROPRIATE EXEMPTION. THESE SECURITIES ARE TO BE OFFERED AND SOLD EXCLUSIVELY WITHIN THE STATE OF NEVADA. 2 INDUSTRIAL DATA SYSTEMS CORPORATION ------------------------ TABLE OF CONTENTS Page MEMORANDUM SUMMARY................... 1 RISK FACTORS......................... 2 DILUTION............................. 9 THE COMPANY.......................... 11 SUMMARY OF HISTORICAL FINANCIAL DATA............................... 12 USE OF PROCEEDS...................... 13 BUSINESS PLAN........................ 14 CAPITALIZATION....................... 17 DESCRIPTION OF COMMON STOCK.......... 17 COMPANY POLICIES..................... 18 MANAGEMENT........................... 19 STOCK OWNERSHIP AND CONTROL.......... 20 CERTAIN TRANSACTIONS................. 21 CONFLICTS OF INTEREST................ 22 FIDUCIARY RESPONSIBILITIES OF OFFICERS AND DIRECTORS............. 22 REMUNERATION......................... 23 PLAN OF DISTRIBUTION................. 23 LEGAL AND ACCOUNTING................. 24 LITIGATION........................... 25 ADDITIONAL INFORMATION............... 25 MEMORANDUM SUMMARY The information contained in the summary is distilled information contained elsewhere in the memorandum. Prospective investors are urged to read the complete memorandum to get full and accurate information on the company. THE COMPANY INDUSTRIAL DATA SYSTEMS CORPORATION (the "Company") is a Nevada Corporation organized on June 22, 1994. The Company subsequently acquired Industrial Data Systems Inc. of Texas. (See "Certain Transactions") The Company's current statutory office is located at 4350 East Sunset Road, Suite 101, Henderson, Nevada 89014. The Company's operational headquarters is currently located at 14900 Woodham, Suite 170, Houston, Texas 77073. The Company is engaged in business activity in Texas in the areas of engineering and technical support services for the pipeline industry as well as the design manufacturing and marketing of ruggedized computer hardware suitable for industrial and construction applications. It is this secondary area in which the Company plans to focus its expansion into southern Nevada through the use of proceeds from this offering. (See "The Company") THE OFFERING SECURITIES OFFERED: 500,000 Shares of Common Stock, par value $.001, to be offered on a "best efforts" basis at .30 per share COMMON STOCK TO BE OUTSTANDING AFTER THE COMPLETION OF THE OFFERING: 10,000,000 of 75,000,000 authorized SHARES HELD BY THE PUBLIC: If maximum ($150,000 is raised)....................... 500,000 Shares If minimum ($75,000 is raised)....................... 250,000 Shares USE OF PROCEEDS If the minimum number of 250,000 shares is sold the Company will net approximately $58,250 of $75,000 raised. The cost of legal, accounting, sales commission, printing and miscellaneous offering costs will be approximately $16,750. Should the Company raise the maximum of $150,000, it will net approximately $129,500 after subtracting legal, accounting, sales commission, printing and other miscellaneous costs of approximately $20,500. The balance of the proceeds will be used to continue the predecessor Company's business and expand its computer division into southern Nevada. (See "Use of Proceeds") RISK FACTORS Investment of the Shares offered by the Company involve a high degree of risk. Prospective investors considering subscription of these shares should be able to sustain a loss of their entire investment without undue hardship. (See "Risk Factors" and "Dilution") RISK FACTORS THE SHARES BEING OFFERED HEREIN INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THESE SECURITIES SHOULD BE PURCHASED BY ONLY THOSE PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. THE PURCHASE OF THESE SHARES INVOLVES NUMEROUS RISK FACTORS INCLUDING BUT NOT LIMITED TO, THOSE FACTORS ASSOCIATED WITH A NEW VENTURE, RISK FACTORS ASSOCIATED WITH A SMALL DEVELOPMENT STAGE COMPANY TRYING TO COMPETE WITH LARGER, MORE ESTABLISHED COMPANIES, RISK FACTORS ASSOCIATED WITH STRONG COMPETITION, AND RISK FACTORS ASSOCIATED WITH SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE. PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE OFFERING MEMORANDUM CAREFULLY AND CONSIDER IF SUCH AN INVESTMENT IS SUITABLE FOR THEM. RISK FACTORS RELATED TO THE OFFERING POSSIBLE LOSS OF ENTIRE INVESTMENT Investors could lose all or part of their investment in the securities should they decide to invest. SUBSTANTIAL AND IMMEDIATE DILUTION This offering involves immediate and substantial dilution in book value from the public offering price. BEST EFFORTS OFFERING The offering of these securities is being done on a "best efforts" basis. No individual firm or corporation has agreed to purchase any of the shares offered herein. Provisions have been made to deposit all funds received from the sale of these securities in escrow. If the minimum shares are not subscribed for within one (1) calendar year from the effective date of this Offering Memorandum, all funds being held in escrow will be returned. The escrow period may last up to one (1) calendar year, so subscribers will not have use of their funds for up to one (1) full year, nor will they receive any interest for the use of their money should the offering not be completed. NO PUBLIC MARKET FOR SECURITY Prior to this offering there was no public market for the shares being offered. Should the offering be successful, and no representation can be given that it will be, there is no assurance that a market will develop. If such a market develops there is no assurance that the market price will be equal to or greater than the offering price. This could result in a loss of all or part of the money invested in these shares. NO DIVIDENDS ANTICIPATED The Company has not paid any dividends nor does it contemplate or anticipate paying a dividend in the foreseeable future. RISKS OF ADVERSE ADMINISTRATIVE ACTION; OTHER SALES The shares of common stock described in this Offering Memorandum are offered under an exemption from federal registration as contained In Section 504 of Regulation D. Because the offering is to be made exclusively in Nevada, where the securities have been registered, and because delivery of a disclosure document is required under Nevada law, it is the Company's position that the offering is not subject to the federal limitations on the manner of offering or resale of securities. However, it is possible that the U.S. Securities and Exchange Commission (the "S.E.C.") may seek to impose such requirements, which could cause the offering to be terminated, result in penalties or assessments against the Company, or result in shares purchased in this offering being considered "restricted shares". If the shares were to become restricted, they would not be saleable in any location by purchasers in the absence of registration of the shares or use of any exemption from registration. The Company does not intend to register the shares described in this Offering Memorandum with the S.E.C. Presently there are 9,500,000 shares outstanding, all of which are restricted shares. While resale of the presently outstanding shares is limited, it is possible that these shares could be sold by federal registration or an exemption from such registration, (17 C.F.R. S230.144 "Rule 144") is the most commonly available exemption. Possible future sales of the presently outstanding shares under registration or an exemption from registration may have a depressive effect on the price of the Company's stock in any market which may develop. 2 LIMITATION ON RESALE The shares are registered only in the State of Nevada and may not be resold or assigned outside of Nevada without registration/qualification from such laws. The Company has no obligation or intent to register or qualify the shares for sales outside Nevada. Accordingly, the ability of investors to resell shares pursuant to this Offering Memorandum may be limited. NOT AN INVESTMENT COMPANY Because the Company seeks to obtain public financing prior to entry into specific, identifiable business interests, it must carefully conduct its activities so as to avoid becoming inadvertently classified as an "investment company" under the Investment Company Act of 1940 (the "1940 Act") which classification would involve a number of negative considerations. Accordingly, the Company intends to expend a majority of proceeds hereof for the investigation, evaluation and acquisition of business opportunities as soon as reasonably practicable. Should the Company delay in locating and obtaining opportunities and in expanding a majority of the proceeds of this offering on opportunities other than investment securities, the S.E.C. may find that the Company is deemed subject to provisions of the 1940 Act, and direct the Company to register under such Act. The Company would vigorously resist any such order or finding by the S.E.C. However, whether the S.E.C. or the Company prevailed in such dispute, the Company would be damaged by the costs and delays involved. NO CUMULATIVE VOTING OR PRE-EMPTIVE RIGHTS There are no pre-emptive rights in connection with the Company's common stock. The shareholders' purchasing in this offering may be further diluted in their percentage ownership of the Company in the event additional shares are issued by the Company in the future. Cumulative voting in the election of the directors is not allowed. Accordingly, the holders of a majority of the shares of common stock, present in person or by proxy, will be able to elect all of the Company's Board of Directors. (See "Capitalization" and "Description of Common Stock") PURCHASES BY AFFILIATED PARTIES Officers, directors, principal shareholders and affiliates may purchase shares owned by non-affiliated parties and increase the holdings of affiliated parties. This reduction in shares owned by the non-affiliated public shareholders could result in limited level of interest by the investing public and shareholders may lose their entire investment. Such purchases may be necessary to assure that the minimum amount of escrow will be met. Affiliates will not purchase in excess of 10% of the offering and no representation is given that they will insure the offerings successful completion. RISK FACTORS RELATING TO THE COMPANY'S ORGANIZATION AND MANAGEMENT RECENT DEVELOPMENTS The Company was recently reorganized via the acquisition of Industrial Data System Inc. of Texas by Industrial Data Systems Corporation of Nevada. (See "Certain Transactions") The Company believes that it can grow through development and expansion into the southern Nevada area while keeping its technical services business in Texas. Such expansion could prove very costly. Should costs exceed management expectations or revenues fall short of projections, the negative effect on the Company would be substantial. Prospective investors should be aware of unforeseen risks that may occur in the Company's proposed expansion. DEPENDENCE ON KEY PERSONNEL The Company is extremely dependent on Key Personnel. A loss of such personnel for any reason could have a material adverse effect upon the Company's business. Specifically the loss of William A. Coskey 3 would be catastrophic to the Company. Currently the Company has a key man life insurance policy on Mr. Coskey for $600.000. No assurance is given that the Company could continue as an ongoing concern even with proceeds from this policy. Additionally, because of the Company's somewhat limited resources, personnel to assist the Company's expansion plans may not be available in the marketplace laden with larger better capitalized companies more able to recruit and reward desired personnel. Without the ability to keep existing personnel and hire qualified new personnel to assist the Company in its expansion no assurance can be given that the Company will be successful in its endeavors. POTENTIAL CONFLICTS OF INTEREST Conflicts of interest may from time to time arise. Management will endeavor to resolve conflicts of interest in shareholders behalf notwithstanding such conflicts may have an adverse effect upon the Company and pose additional risk to shareholders. (See "Certain Transactions" and "Conflicts of Interest") RISK FACTORS RELATING TO THE COMPANY'S COMPUTER BUSINESS SUBSTANTIAL COMPETITION The computer industry is one of the most competitive industries in the world. Competition comes from both foreign and domestic entities. The size and scope of many of these companies cannot be overstated. The Company's small stature and limited financial capacity pose certain problems and risks to shareholders. Economics of scale will offer a substantial advantage to the companies in the industry and while the Company hopes to be a "niche" player, larger companies hold substantial advantages and can easily penetrate any market through competitive pricing advantages gained by economics of scale. Should larger better capitalized computer companies seek entrance into the Company's niche in the market, the competitive pricing may reduce or eliminate the Company's profitability and pose a risk of opportunity loss to the Company. Because of the Company's limited capital, it is doubtful it could sustain such a loss over an extended period of time. This could result in loss of the investors entire investment. CAPITAL INTENSIVE NATURE OF THE BUSINESS The computer business is a very capital intensive business. Once again this puts the Company at a strategic disadvantage. Inventories need to be purchased and such being the case, larger better capitalized companies are able to have a delivery time advantage to customers. If such a disadvantage becomes too great, the Company may seek additional financing. (See "Need for Additional Financing") TECHNOLOGICAL OBSOLESCENCE The computer industry is a fast paced, ever changing business. Such rapid change in technology often renders today technologies useless in tomorrows world. Once again the advantage is with large well capitalized companies that have superior research and development divisions. No representation is made to prospective shareholders that the Company will continue to develop new and additional products and technologies. 4 RISK FACTORS RELATED TO THE COMPANY'S ENGINEERING AND TECHNICAL SUPPORT BUSINESS SUBSTANTIAL COMPETITION As in the computer business, the pipeline service and engineering field is dominated by large established and well capitalized firms. The Company has established itself as a small efficient entity, but it is still competing with companies who by economics of scale are in a position of extreme advantage. CYCLICAL NATURE OF THE BUSINESS The Company's services are performed primarily for oil and gas companies. As such, these services are subject to the risk of a cyclical industry. Oil and gas prices are extremely volatile and impacted by many factors on a global scale. Hence, the Company could be negatively impacted by cyclical factors in the global economy over which it has no control. This translates to additional risk for prospective investors. RELIANCE ON MAJOR CUSTOMERS From time to time the Company may do a large portion of its engineering business with one or more major customers. The Company currently has one major client, Exxon, which provides the Company with 50% of the Company's revenue through its pipeline engineering services. The Company has no written agreements with any such customer to assure future level of sales. The loss of such a major customer would have an extremely adverse impact on the Company's operations. The factors of dependence on major customers coupled with the cyclical nature of the oil and gas industry, which the Company serves, combine to make this portion of the Company's business extremely subject to volatility. This volatility translates to investors risk. Prospective investors should be aware that their entire investment is at risk in such a volatile industry. RISK FACTORS RELATING THE COMPANY'S OVERALL BUSINESS, FINANCES AND CAPITALIZATION RISK ASSOCIATED WITH EXPANSION The Company wishes to use the proceeds to finance its expansion of its computer business. Such expansion is costly and no assurances can be given that it will be fruitful. The expansion will occur in two ways. First, the Company will seek to expand market for its ruggerized computers by more aggressively marketing through trade journals and trade show in the construction and industrial areas. Second, the Company hopes to expand the target of its geographic bounds westward into southern Nevada. The Company views this expansion as a great opportunity to capitalize on the growth of construction in this area. Prospective investors should be aware that corporate expansion in both areas adds risk to the Company because of the increased level of expenses. No assurance can be given to prospective investors that such expenses will ultimately result in increased corporate revenue. UNINSURED LIABILITY As the Company pursues its business, it may a party to a lawsuit. Should the Company sustain an uninsured liability, the limited capital of the Company could be completely depleted forcing the Company into bankruptcy. In such case it is likely shareholders would lose their entire investment. NEED FOR ADDITIONAL FINANCING The survival of the Company may at some time depend upon additional financing. No assurance can be made that such financing would be available, and if available that it take either the form of debt or equity. In either case, the financing could have a negative impact on the conditions of the Company and its shareholders. 5 To seek additional financing, the Company may pursue one of the following methods: (1) DEBT FINANCING IN THE FORM OF A LOAN. The loan could be from an individual or financial institution. Such loan could put the Company at risk for amounts greater than its assets and if such a loan was not promptly repaid, could result in bankruptcy. In such a case, the shares of the Company would most likely become worthless. (2) EQUITY FINANCING. Equity financing could take the form of either a private placement or a secondary public offering. Either type of equity offering would consist of offering more of the Company's shares for sale at prices that may be below the offering price of this offering. No assurance can be given that such an offering would be successful if attempted. Even if such an offering were to be successful, the existing shareholders from this offering would most likely experience dilution in addition to that disclosed in this Offering Memorandum. (See "Dilution"). PARTNERSHIPS AND JOINT VENTURES The Company's limited capital may necessitate partnership or joint ventures. While no agreements to form partnerships or joint ventures currently exist, the Company could pursue them in the future. Sales revenue would be split among other entities which could negatively affect the Company's potential earnings. No guarantee can be made that if partnerships or joint venture were entered into that they would be profitable. DILUTION Dilution is the difference between the public offering price of a security and the net book value immediately after the offering of said security, reflecting the receipt of net proceeds from the offering. Net book value is the amount that results from subtracting total liabilities from total assets. Net book value per share takes the net book value and divides by the number of shares issued and outstanding. For purposes of determination of dilution of stock only, the value of services (an intangible asset) contributed as capital is excluded from net book value and investment capital amounts stated. In the event that the minimum number of shares are sold and there can be no assurance made that such will be the case, public investors will own 250,000 shares (approximately 2.56%) of the Company's common voting shares then issued and outstanding, for which they will have paid in cash $75,000 (approximately 9.7% of investment capital), and the present shareholders, consisting of officers, directors and founders will own 9,500,000 shares (approximately 97.44%) of the Company's issued and outstanding shares for which they have paid $698,006 (approximately 90.3% of the investment capital). In the event that the maximum number of shares are sold, and no assurance is given that such will be the case, public investors will own 500,000 shares (approximately 5%) of the Company's voting shares then issued and outstanding, for which they will have paid in cash $150,000 (approximately 17.69% of investment capital) and the present shareholders consisting of officers, directors and founders will own 9,500,000 shares (approximately 95%) of the Company's issued and outstanding shares for which they will have paid $698,006 (approximately 82.31%) of investment capital. As of the date of this Offering Memorandum, the Company has 9,500,000 issued and outstanding with a net book value of $.0735 per share. Assuming the minimum number of shares being offered, 250,000 shares are sold, the Company will have a net book value of $756,256 (after offering costs) or approximately $.0776 per share. Thus the present stockholders, being officers, directors and founders of the Company will have experienced a substantial increase in the value of their shares from $.0735 to $.0776. Conversely the public investors will experience a substantial and immediate dilution of $.2224 or 74.13% of the offering price paid for such shares. Should the maximum of 500,000 shares be sold, the Company will have a net book value of $827,506 (after offering costs) or approximately $.0828 per share. Thus the present shareholders being the officers, 6 directors and founders will experience a substantial increase in the book value of their shares from $.0735 to $.0828. Conversely the public investors will experience substantial and immediate dilution of $.2172 per share or 72.4% of the offering price paid. Hence one may conclude that if the minimum number of shares are sold, the public investor will have provided approximately 9.7% of the capital and retained 2.56% of the equity, while if the maximum number of shares is sold the public investor will have provided 17.69% of the capital and retained approximately 5% of the equity. 7 THE COMPANY INTRODUCTION INDUSTRIAL DATA SYSTEMS CORPORATION (the "Company") was formed in Nevada on June 22, 1994 for the purpose of designing, manufacturing and marketing ruggetized computers. The Company's local office and statutory office in Nevada is located at 4350 E. Sunset Rd. #101, Henderson, Nevada 89014. The Company's operational office is currently located at 14900 Woodham, Suite 170, Houston, Texas 77073. ACQUISITION On August 1, 1994, the Company acquired through a tax-free exchange of common stock, 100% of Industrial Data Systems, Inc. (a Texas corporation). Industrial Data Systems, Inc. of Texas was founded in 1985 by current president and director William A. Coskey for the purpose of providing engineering services. (See "Certain Transactions"). HISTORY Industrial Data Systems, Inc. (Texas) dba Industrial Data Systems Tech, has been profitable since inception and has grown to a company with two distinct areas of business. Industrial Data Systems Tech continue to service the pipeline industry with a wide range of engineering and design, construction, supervision, material procurement, cost and material control, testing and start-up services. In 1993, Industrial Data Systems Tech was expanded to provide full pipeline services to clients such as Exxon Pipeline Company, Texas Eastern Products Pipeline and Texaco Pipeline Inc. Industrial Data Systems PC, the Company's computer division designs, manufactures and sells industrial PCs for applications in hostile work environments. To date Industrial Data Systems Corporation of Nevada's only activities have been related to corporate organization, the acquisition of Industrial Data Systems (Texas) and the preparation of this Offering Memorandum. 8 SUMMARY HISTORICAL FINANCIAL DATA The selected financial information for the year ended December 31, 1992, for the year ended December 31, 1993 and were compiled from unaudited financials of the acquired company Industrial Data Systems, Inc. (a Texas corporation). This information should be read with the Company's Financial Statement and notes thereto appearing elsewhere in this Prospectus, and is by no means meant to be a complete representation of the Company's financial picture. YEAR ENDED YEAR ENDED DECEMBER 31, 1992 DECEMBER 31, 1993 ----------------- ----------------- STATEMENTS OF INCOME Net Sales............................. $ 838,293 $ 1,100,096 Cost of Goods......................... 202,815 330,232 Gross Profit.......................... 635,478 769,864 Operating Expenses.................... 586,827 627,976 Income before Federal Income Tax...... 48,650 141,889 Net Income............................ $ 48,650 $ 141,889 ================= ================= Earning per Share..................... $0.005 $0.014 ================= ================= DECEMBER 31, 1993 ----------------- BALANCE SHEET DATA: Total Assets............................ $ 642,899 Total Long-Term Debt.................... -0- Shareholders' Equity.................... $ 603,085 9 USE OF PROCEEDS The Company plans to sell a minimum of 250,000 shares and a maximum of 500,000 shares of its Common Stock which is authorized but unissued at a price of $.30 per share. The sales of the minimum of 250,000 shares will result in a gross of $75,000 for the Company and should the Company sell all of the Shares offered hereby, the gross proceeds to the Company would be $150,000. The Company anticipates incurring costs related to the Offering. Set forth below are estimates of such costs the Company believes to be accurate. The actual costs of the Offering could be more or less expensive. MINIMUM MAXIMUM -------- -------- Legal and Filing..................... $ 5,000 $ 5,000 Accounting........................... 7,000 7,000 Commissions.......................... 3,750 7,500 Printing............................. 500 500 Miscellaneous........................ 500 500 -------- -------- $16,750 $20,500 After incurring the preceding Offering costs, the Company will receive net proceeds of $58,250 should the minimum dollar amount of $75,000 be raised from the Offering. In the event the maximum of $150,000 is raised from the Offering, the Company will incur offering expenses of $20,500 and receive net proceeds from the Offering of $129,500. After incurring the preceding Offering costs, the Company plans to use the net proceeds from the Offering as noted on page 10. Management wished to point out that these are only estimates and if costs overrun and unforeseen costs occur, such costs will likely have an adverse effect upon the Company's financial condition and pose additional risk for shareholders. In the event that the Company has overestimated costs in any given area, such a surplus would be added to working capital. MINIMUM MAXIMUM ------- -------- Salaries................................ $15,000 $30,000 Inventories............................. 15,000 50,000 Packaging............................... 1,000 2,000 Production Equipment.................... 2,000 4,000 Rent.................................... 6,000 6,000 Utilities............................... 1,200 1,200 Printing................................ 4,000 6,000 Legal................................... 2,000 2,000 Accounting.............................. 2,000 2,000 Advertising............................. 5,000 12,000 Travel.................................. 2,000 5,000 Working Capital......................... 3,050 9,300 ------- -------- $58,250 $129,500 BUSINESS PLAN The "Use of Proceeds" section outlined how the Company plans to use proceeds from the Offering. It should be noted that the Company will still remain operational in Texas operating as Industrial Data Systems Inc. The focus of this Offering is to expand the Company's computer division. The Company hopes revenues will continue from its technical/engineering division, IDS Technical Services to allow additional funds for the computer division to grow and expand particularly into southern Nevada. No 10 assurance can be given that this will be the case and prospective investors are urged to evaluate the Company accordingly. Hence, the following business plan and preceding "Use of Proceeds" are related only to the Company's computer division. Management believes that IDS Technical Services is fully self sustaining. Should IDS Technical Services see a reduction in revenues, the consequences would jeopardize the Company's future plans and possibly threaten the Company's ability to continue to do business. THE MARKET The industrial PC market is expected to increase from sales of $453 million in 1992 to $757 million in 1997. Fully integrated Industrial PCs (IPCs) are expected to grow from $315 million or 69.2% of the 1992 market to $538.4 million or 71.1% of the 1997 market while modular IPCs are expected to grow from 96.7 million or 30.8% of the 1992 market to 28.9% of the 1997 market. (Information provided from Venture Development Corp. of Nantick, MA) THE PRODUCT In the growing industrial PC market, the Company has found its niche by designing, manufacturing and selling industrial PCs that are suitable for hostile work environments. The Industrial Data Systems PCs are personal computers incased in a way that "hardens" them to protect them from vibration, heat, dust, moisture and in some cases electrical flux. The Company has two main products which are similar but do not compete with each other. The "Safecase 4000", intended for industrial use, is a product for extremely hostile environments while the "Powercase 8000" has a lower cost and unlimited uses but is not quite so durable in hostile environments. The Company sees huge opportunities for the "Powercase 8000", intended for commercial use, as various software applications evolve. THE COMPETITION The Company recognizes that there are larger better capitalized firms in the industrial PC business but believes its products to be highly competitive in the current market environment. The Company believes it can be a "niche" player and target particularly harsh environments and develop new software applications for the "Powercase 8000". The Company will endeavor to seek strategic alliances of acquisitions to assist towards this objective. Currently the Company holds no patents or trademarks on its products but is in the process of securing trademarks for the hardened industrial computer design and the name Industrial Data Systems. Although the Company is currently in the process of obtaining trademarks, no assurance or guarantee can be made at this time that the Company trademarks will be granted. As such, any investment in the Company shall not be done in reliance upon the Company obtaining the above trademarks. MARKETING The Company will market its products in three ways. First: The Company will market to trade shows focussing on the construction and industrial conventions and trade shows. Because of the large number of such shows in Las Vegas, the Company sees a golden opportunity upon which it can market its product. Second: The Company will use advertising in trade journals and publications. Such advertising should generate orders as well as leads for the Company's third area of marketing which utilized direct sales representatives. Third: Direct Sales Representatives. These representatives will follow leads from magazine and trade journal ads and market directly to end users as well as wholesalers. 11 Numerous studies have shown Texas and Nevada to be two of the fastest growing states in the nation. Being located in both states will afford the Company the opportunity to market to these fast growing areas with their numerous construction projects. PRODUCT MANUFACTURING The Company operates a manufacturing facility in its Texas location and will explore locating such a facility in southern Nevada if sales justify such a venture. If this were to occur, such cost would be borne by the Company and could negatively affect corporate earnings. PRODUCT DEVELOPMENT Because of the Company's limited capital, product development will mainly focus on new applications for the "Powercase 8000". The Company hopes revenues and strategic alliances develop that will allow the Company more opportunity for new product development but no assurance can be given that this will occur. 12 CAPITALIZATION The following table sets forth the capitalization of the Company as of the date of this Offering Memorandum and adjusts to reflect the issuance of all shares offered hereby:
AMOUNT AMOUNT OUTSTANDING OUTSTANDING IF MINIMUM IF MAXIMUM TITLE OF CLASS AUTHORIZED OUTSTANDING SHARES SOLD SHARES SOLD - ------------------------------------- ---------- ----------- ----------- ----------- Common Stock $.001 Par Value......... 75,000,000 9,500,000 9,750,000 10,000,000
No assurance can be given that any number of shares offered herein will be sold. DESCRIPTION OF COMMON STOCK The capital stock of the Company consists of 75,000,000 authorized shares of common stock with a par value of one mill ($.001) per share, 9,500,000 shares of which are issued and outstanding on the date hereof. The offering to the public by this Offering Memorandum is 500,000 shares of common stock at a price of $.30 per share with a par value of one mill ($.001) per share. The shares are all of one class, common, with like rights and privileges. Each share is entitled to participate equally in dividends and distributions declared by the Company. Each share is entitled to one (1) vote on each matter for which shareholders are entitled to vote. The shares of common voting stock, when issued and paid for, shall be fully paid and non-assessable and will have no preference, preemptive, conversion or exchange rights. The Company has no senior securities or long-term debt authorized, issued or outstanding, and has no present intention of issuing either such security or debt instrument. All voting is non-cumulative. Accordingly, the holders of more than fifty percent (50%) of the shares of the Company's common stock will be able to elect all representatives to the Board of Directors, and holders of less than fifty percent (50%) will not be able to elect any of the members of the Board of Directors. OPTIONS, WARRANTS OR CALLS There are no issued or outstanding options, warrants or calls entitling any person to purchase any shares of the Company's common stock. The Company may, however, adopt a plan in the future, pursuant to which options, warrants or calls would be an incentive to attract and maintain their services on behalf of the Company. Presently, the Company has no agreement or understanding, expressed or implied, with anyone concerning such options, warrants or calls entitling the future purchase of the Company's common voting stock, and any such plan will first be submitted to the stockholders of the Company for their approval before becoming effective. SHARES ELIGIBLE FOR FUTURE SALE All of the 9,500,000 Shares of Common Stock which is owned by William A. Coskey and Hulda L. Coskey issued in reliance on the "private placement" exemption under the Securities Act of 1933, as amended (the "Act"). Such shares will not be available for sale in the open market without registration except in reliance upon Rule 144 under the Act. In general, under Rule 144 a person (or persons whose shares are aggregated) who has beneficially owned shares acquired in a non-public transaction for at least two years, including persons who may be deemed "affiliates" of the Company, as that term is defined under the Act, would be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of 1% of the then outstanding shares of Common Stock, or the average weekly reported trading volume on all national securities exchanges and through NASDAQ during the four calendar weeks preceding such sale, provided that certain current public information is then available. In August, 1996, all of the shares of Common Stock acquired by the initial shareholders may be eligible for public sale under Rule 144 subject to the foregoing restrictions. If a substantial number of the shares owned by the initial shareholders were sold pursuant to Rule 144 or registered offering, the market price of the Common Stock could be adversely affected. 13 COMPANY POLICIES DIVIDENDS The Company is a new corporation and no assurance can be given that it will generate earnings on which cash dividends can be paid. If cash earnings are generated, management intends to follow policy of retaining all such earnings to finance the development of its business. It is expected that this policy will be maintained as long as necessary to provide funds for the Company's operations. Any dividends that may be paid in the future will be dependent upon the earnings and financial requirements of the Company and all other relevant factors. ANNUAL REPORTS The Company has initially elected a December 31 calendar year-end. Thereafter, the Company will furnish its shareholders with annual reports containing unaudited financial statements within ninety (90) days after the Company's year-end. From time to time, the Company may also furnish its stockholders with such other information as it may deem appropriate, relative to the business operations of the Company. Such information may include news of a change of management, purpose and control of the Company, or any material condition affecting the Company. The Company may change its tax year, accounting methods and procedures according to its business needs. MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The names, ages and positions of the executive officers and directors of the Company are as follows: NAME AGE POSITION - ------------------------------------- --- --------------------------------- William A. Coskey.................... 41 President & Chairman of the Board of Directors Hulda L. Coskey...................... Chief Financial/Operations Officer 39 Secretary/Treasurer Joe F. Moore, Jr..................... 41 Board of Directors David W. Gent, P.E................... 41 Board of Directors WILLIAM A. COSKEY has served as Chairman of the Board and President of Industrial Data Systems (a Texas corporation) since its inception in September, 1985. From 1984 to 1985, Mr. Coskey served as Manager of Corporate Development for Keystone International Inc. a NYSE listed company. In this position, he was responsible for Keystone's merger and acquisition activities. From 1979 to 1984, Mr. Coskey was president of Syntech Associates, Inc., an engineering services company located in Houston, Texas. From 1975 to 1979, Mr. Coskey was a Project Manager for Texas, Inc. and responsible for pipeline and petrochemical related projects. HULDA L. COSKEY has served as Chief Financial/Operations Officer of the Company since its creation. Prior to that time, and since 1985, Mrs. Coskey was Vice President and Secretary/Treasurer of Industrial Data Systems, Inc. (a Texas corporation). Her primary responsibilities were to develop and initiate procedures for daily operations of the Company and oversee those operations, including but not limited to all Accounting, Finance, and Personnel functions. From 1972 to 1982 Mrs. Coskey was involved in the credit industry as an Officer at various banks in the Houston area. Mrs. Coskey is the spouse of William A. Coskey, President and CEO. JOE F. MOORE, JR. has served as a Director for the Company since its creation. Mr. Moore for the last 10 years has been a Financial Consultant in Houston, Texas. Because of his knowledge in business, Mr. and Mrs. Coskey nominated and elected Mr. Moore to sit on the Board. DAVID W. GENT, P.E. has served as a Director for the Company since its creation. Mr. Gent is presently responsible for the Engineering, Data Processing, Quality Control and Purchasing Departments of Bray International, Inc. since 1991. From 1986-1991 he founded as well as served as President of SofTest Design Corporation an electronic test equipment company. From 1981-1986, Mr. Gent served as General 14 Manager, at Keystone International, Inc., in the Controls Division of $6,000,000 manufacturer of flow control products. From 1975 to 1981, Mr. Gent held several managerial positions at Southwestern Bell, all in the technical communication field. STOCK OWNERSHIP AND CONTROL As of the date of this Offering Memorandum, there were 9,500,000 shares of Common Stock issued and outstanding which are owned entirely by William A. Coskey and Hulda L. Coskey, the Company's president and secretary, who are husband and wife. These shares were acquired in a tax-free exchange for 100% of the shares of Industrial Data Systems, Inc. (of Texas) (See "Certain Transactions"). All of these shares were acquired on August 1st, 1994. The transfer and sale of all of these shares is restricted under S.E.C. Rule 144, which prohibits the sale of these restricted securities for a minimum of two years from date of issuance. (See previous section "Shares Eligible for Future Sale"). The following table sets forth the ownership of common stock of the Company on the date of this Offering Memorandum by all officers, directors, affiliates and owners of more than 5% of the Company's Common stock:
SHARES OWNED SHARES OWNED NAME & ADDRESS SHARES OWNED IF MINIMUM IF MAXIMUM OF PRINCIPAL PRIOR TO SHARES ARE SHARES ARE SHAREHOLDER OFFERING SOLD SOLD - ------------------------------------- ---------------------- ---------------------- ---------------------- William A. Coskey.................... 9,500,000 100% 9,500,000 98% 9,500,000 95% & Hulda L. Coskey 14900 Woodham #170 Houston, TX 77073 All officers &....................... 9,500,000 100% 9,500,000 98% 9,500,000 95% Directors as a group
CERTAIN TRANSACTIONS On August 1st, 1994, all of the issued and outstanding shares of Industrial Data Systems Inc. (Texas) were acquired by Industrial Data Systems Corporation, a Nevada Corporation duly incorporated in June of 1994 in a tax-free exchange of Common Stock. All 9,500,000 Shares issued in this transaction were issued to William A. Coskey and Hulda L. Coskey who are President and Secretary of both Companies. The management team and ownership of both Companies are essentially one in the same. The Company used audited financial statements dated June 30, 1994 to provide financial information contained in the exhibits at the end of this Offering Memorandum. The 9,500,000 shares discussed in this section represents all of the issued and outstanding shares of the new company. Mr. and Mrs. Coskey were the sole owners of Industrial Data Systems Inc. of Texas prior to the Company's acquisition of Industrial Data Systems Corp. of Nevada hence there is no apparent conflict of interest in the aforementioned transactions. Mr. and Mrs. Coskey believe all material facts of the acquisition to be done in accordance with the state laws of Nevada and Texas. CONFLICTS OF INTEREST It is the opinion of management that no conflict of interest existed in the transaction discussed in the section prior as the beneficial ownership was not effected. Management will endeavor to uphold the highest of standards in all future dealings. The Company's management may become involved in other business entities which may create conflicts of interest with respect to the Company's activities and unforeseen conflicts of interest could develop. In such an event, it would be expected of the original incorporators to resolve said conflicts of 15 interest in the best interest of the Company. Although it is not contemplated, the Company may become involved in joint ventures or acquisitions with or from companies which are controlled by or otherwise associated with the Company's management. If such transactions do occur, they will be handled on terms and conditions which would prevail in an "arms-length" transaction. If such transactions do occur, it is expected that management of the Company will ask for shareholders' approval or ratification of said transactions, or will have such transactions approved by majority of the disinterested members of the Board of Directors. Failure by the Company to conduct its business in the best interest of the Company could result in liability upon the Company's officers, directors and controlling persons under Nevada State Laws. FIDUCIARY RESPONSIBILITY OF THE OFFICERS AND DIRECTORS The officers and directors have a fiduciary responsibility to the shareholders and others to exercise good faith and integrity in matters involving the Company. The shareholders retain rights to inspect the Company's books and records. Should there be a breach of fiduciary responsibility to shareholders, they may seek remedy in a court of law. The officers and directors of the Company are not responsible for errors in judgement or acts of omission which do not constitute fraud or a knowing violation of the law. Additionally, the officers and directors are indemnified for liability suffered by them while acting in the Company's behalf unless they were knowingly violating a law. Therefore, shareholders may have a more limited right of action then otherwise afforded by law. In the opinion of the S.E.C., indemnification for liabilities arising under the Securities Act of 1933 is contrary to public policy and therefore unenforceable. REMUNERATION Mr. William A. Coskey and Mrs. Hulda C. Coskey both will receive salaries from the Company. Mr. Coskey's salary will be $72,000 and Mrs. Coskey's salary will be $48,000 per year. The Company will maintain a policy of scheduled annual salary reviews with adjustments based on performance. The Company will provide bonuses to employees including management based on profitability. PLAN OF DISTRIBUTION The securities described in this Memorandum may be offered only in the State of Nevada. The Company will sell a minimum of 250,000 and a maximum of 500,000 shares of its Common Stock, par value $.001 per Share, to the public on a "best efforts" basis, at the public offering price. There can be no assurance that any of these Shares will be sold. If the Company fails to sell 250,000 Shares within the offering period of one year from the date of this Memorandum, the Offering will be terminated and the subscription payments will be promptly refunded in full to subscribers, without paying interest or deducting expenses. At such time as the escrow agent receives in good funds a minimum of $75,000, the proceeds of this offering will be made available to the Company. While funds are held in escrow, subscribers will not receive interest or have the right of use of such funds and this period may last for up to one calendar year. Shares offered hereby are subject to prior sale and the Company reserves the right to reject all or part of any subscription. RESTRICTIONS ON SUBSCRIBING AND RESALE Shares offered hereby are registered in the state of Nevada to bona fide Nevada residents or entities or to persons whose dealings with regard to this Offering have taken place within the state of Nevada. Such being the case, the Common Stock offered hereby has not been registered under the Securities Act of 1933 as amended. Restrictions on the resale of such Common Stock may be imposed by state Blue Sky Laws or Federal Securities Laws. 16 SALES AGENT Leisa C. Stilwell is the registered sales agent for the Company for which she will receive a commission of 5% at such time as escrowed funds are released. Should the Offering fail to meet the minimum subscription in the amount of $75,000, no commission will be paid. Leisa C. Stilwell is the only person authorized to solicit or sell the shares offered herein. TO SUBSCRIBE Investors wishing to purchase shares offered hereby should carefully read the entire Offering Memorandum with particular attention to "RISK FACTORS." Prospective investors will represent to the Company at the time of subscription on the subscription agreement that they have read and understand the Offering Memorandum and that they can bear the risk of loss of their entire investment and that they are either a Nevada Resident or subscribed for shares within the state of Nevada. To subscribe, the subscription agreement must be completed and signed. Checks should be made payable to: SOUTHWEST ESCROW COMPANY 3430 East Flamingo, Suite #103 Las Vegas, Nevada 89121 where funds will be held until such time that the minimum or greater amount has been received or the registration expiration date on the one year anniversary of the effective date of this prospectus. Should the Company be unable for any reason to complete the Offering, the funds received will be returned in full to the investors. LEGAL AND ACCOUNTING MATTER Robert L. Bolick, Ltd., 3216 W. Charleston Boulevard, Suite B, Las Vegas, Nevada 89102, is special legal counsel for the Company for purpose of preparation of this Offering Memorandum. The Certified Public Accountant of the Company is Hein & Associates, 5075 Westheimer, Suite 970, Houston, Texas 77056. They have prepared the accompanying Audited Financial Statement. (See "Exhibit A"). LITIGATION To the best knowledge of the Company, its officers, directors and founders, neither the Company, its officers, directors or founders are party to any material legal proceeding or litigation, nor is any contemplated as of the date of this Offering Memorandum. ADDITIONAL INFORMATION The Company has filed with the Nevada Securities Division an application for registration with respect to the securities offered hereby. That application contains certain information, the majority of which is contained in this Offering Memorandum, which investors may wish to review. Copies of all such documents filed with the Nevada Securities Division are matters of public record and may be inspected by the public during regular business hours. Statements contained in this Offering Memorandum with respect to the contents of any contract or documents described herein are not necessarily complete, and where such contract or document is an exhibit to the application is qualified in all respects by the provisions or such exhibit to which reference is hereby made for full statement of the provisions thereof. The stockholders will be promptly notified in writing of any material change in the management purposes and control of the corporation, or any material or adverse condition affecting the corporation. 17 FINANCIALS INDUSTRIAL DATA SYSTEMS CORPORATION FINANCIAL STATEMENT AND INDEPENDENT AUDITOR'S REPORT JUNE 30, 1994 HEIN + ASSOCIATES Certified Public Accountants and Consultants with offices in Denver, Dallas and Los Angeles. 5075 Westheimer, Suite 970 Houston, Texas 77056 Telephone (713) 850-9814 Telecopier (713) 850-0725 INDEPENDENT AUDITOR'S REPORT July 26, 1994 Board of Directors and Stockholders Industrial Data Systems Corporation We have audited the accompanying balance sheet of Industrial Data Systems Corporation as of June 30, 1994. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Industrial Data Systems Corporation as of June 30, 1994, in conformity with generally accepted accounting principles. HEIN + ASSOCIATES HEIN + ASSOCIATES Certified Public Accountants INDUSTRIAL DATA SYSTEMS CORPORATION BALANCE SHEET JUNE 30, 1994 ASSETS Current asset -- cash................... $ 4,000 Organization costs...................... 500 Deferred financing costs................ 5,000 --------- $ 9,500 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Commitments (Notes 1 and 3) Stockholders' equity -- common stock, .001 par value; 75,000,000 shares; no shares issued; subscription to acquire 100,000 shares of common stock........ $ 9,500 ========= See notes to financial statement. 2 INDUSTRIAL DATA SYSTEMS CORPORATION NOTES TO FINANCIAL STATEMENT NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS ACTIVITY: Industrial Data Systems Corporation (the Company), was incorporated on June 22, 1994. The Company was organized to consummate the acquisition of Industrial Data Systems, Inc. (IDS). IDS is a manufacturer of industrial and portable computers and computer monitors. The acquisition of IDS will be accounted for as a reverse acquisition, whereby, for accounting purposes, IDS will be deemed to be the acquiror of the Company. NOTE 2 -- STOCKHOLDERS' EQUITY The stockholders of the Company contributed $4,000 to the Company and paid organization and financing costs amounting to $5,500 on behalf of the Company in exchange for 100,000 shares of its common stock. As of June 30, 1994, the common stock had not been issued. NOTE 3 -- INVESTMENT BANKING AND CONSULTING AGREEMENT The Company has entered into an agreement under which another company will act as a broker and/or finder in connection with obtaining financing for the Company and to assist the Company in the orchestration of a public offering. The total estimated costs to be paid under this contract amount to $25,000. As of June 30, 1994, $5,000 has been paid to such company. 3 INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES FINANCIAL STATEMENT AND INDEPENDENT AUDITOR'S REPORT JUNE 30, 1994 HEIN + ASSOCIATES Certified Public Accountants and Consultants with offices in Denver, Dallas and Los Angeles. 5075 Westheimer, Suite 970 Houston, Texas 77056 Telephone (713) 850-9814 Telecopier (713) 850-0725 INDEPENDENT AUDITOR'S REPORT June 18, 1994 Board of Directors and Stockholders Industrial Data Systems, Inc. dba IDS Technical Services We have audited the accompanying balance sheet of Industrial Data Systems, Inc. dba IDS Technical Services as of June 30, 1994. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Industrial Data Systems, Inc. dba IDS Technical Services as of June 30, 1994, in conformity with generally accepted accounting principles. As discussed in Note 1 to the balance sheet, the Company's investment in real estate limited partnerships amounting to $82,616 was valued based upon a valuation of the underlying real estate prepared by a commercial real estate broker as opposed to a qualified real estate appraiser. We have reviewed the aforementioned valuation and underlying documentation, and in the circumstances, we believe the valuation to be reasonable. However, because of the inherent uncertainty valuation, the commercial real estate broker's valuation of the underlying real estate may differ significantly from the actual fair market value of such real estate, and the differences could be material. HEIN + ASSOCIATES HEIN + ASSOCIATES Certified Public Accountants INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES BALANCE SHEET JUNE 30, 1994 ASSETS Current assets: Cash............................... $ 165,348 Marketable securities: Trading....................... 161,456 Available for sale............ 87,177 ---------- 248,633 Account receivable -- trade, less allowance for doubtful accounts of $24,953........................... 180,301 Inventory.......................... 80,783 Note receivable.................... 10,571 ---------- Total current assets..... 685,636 ---------- Property and equipment, net............. 20,088 Other assets: Advances to affiliate.............. 9,500 Investments in real estate limited partnerships...................... 82,616 Other.............................. 16,199 ---------- 108,315 ---------- Total assets............. $ 814,039 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable to bank............... $ 20,000 Demand notes due brokers collateralized by marketable securities........................ 40,949 Accounts payable................... 29,996 Accrued expenses and other current liabilities....................... 25,088 ---------- Total current liabilities.............. 116,033 ---------- Commitments (Note 6) Stockholders' equity: Net unrealized gain on marketable securities........................ 2,442 Common stock, no par value; 1,000,000 shares authorized; 200,000 shares issued and outstanding....................... 2,500 Retained earnings.................. 693,064 ---------- Total stockholders' equity................... 698,006 ---------- Total liabilities and stockholders' equity..... $ 814,039 ========== See notes to financial statements. 2 INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES NOTES TO FINANCIAL STATEMENT NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS ACTIVITY: Industrial Data Systems, Inc. dba IDS Technical Services (the Company), which was formed in September 1985, is a manufacturer of industrial and portable computers and computer monitors. INVENTORY: Inventory is composed of computer components and finished goods and is carried at the lower of cost or market value. The majority of inventory at June 30, 1994 consisted of computer components. MARKETABLE SECURITIES: Marketable securities to be held to maturity are stated at amortized cost. Marketable securities classified as available for sale are stated at market value, with unrealized gains and leases reported as a separate component of stockholders' equity. If a decline in market value is determined to be other than temporary, any such loss is charged to earnings. Trading securities are stated at market value, with unrealized gains and losses recognized in earnings. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost, adjusted for accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, which range from five to seven years. INVESTMENTS IN REAL ESTATE LIMITED PARTNERSHIPS: Investments in real estate limited partnerships are carried at the lower of cost or fair market value of the underlying real estate based upon a valuation prepared by a commercial real estate broker. INCOME TAXES: The Company has elected Subchapter S corporation status under the Internal Revenue Code. In lieu of corporate taxes, the stockholders of an S corporation are taxed on their proportionate share of the Company's taxable income. NOTE 2 -- MARKETABLE SECURITIES Marketable securities at June 30, 1994 are summarized as follows:
FAIR UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE ---------- ----------- ----------- -------- Trading: Common stocks................... $ 169,952 $ 8,472 $ (46,512) $131,552 Other........................... 25,000 4,904 -- 29,904 ---------- ----------- ----------- -------- $ 194,592 $13,376 $ (46,512) $161,456 ========== =========== =========== ======== Available for sale: Mutual fund..................... $ 4,524 $ -- $ -- $ 4,524 Corporate bonds................. 36,992 -- (2,813) 34,179 Municipal Bond.................. 43,219 5,255 -- 48,474 ---------- ----------- ----------- -------- $ 84,735 $ 5,255 $ (2,813) $ 87,177 ========== =========== =========== ========
3 INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES NOTES TO FINANCIAL STATEMENT NOTE 2 -- MARKETABLE SECURITIES (CONTINUED) Contractual maturities of the municipal and corporate bonds are as follows: FAIR MARKET COST VALUE ------- ------- Due in one year or less................. $43,219 $48,474 Due after one year through five years... 10,292 10,077 Due after five years through ten years................................. 8,504 8,176 Due after ten years..................... 18,196 15,926 ------- ------- $80,211 $82,653 ======= ======= NOTE 3 -- NOTE RECEIVABLE The note receivable consists of a demand note due from a former employee of the Company. The note is unsecured and bears interest at 5% per annum. NOTE 4 -- ADVANCES TO AFFILIATE The Company paid certain organization and consulting fees totaling $9,500 on behalf of a corporation related by common ownership. The advances, which do not bear interest and have no defined repayment terms, are carried as advances to affiliate in the accompanying balance sheet. NOTE 5 -- NOTE PAYABLE TO BANK The Company has a line of credit with a bank of $75,000 at prime plus 1% (8.25% at June 30, 1994). The line of credit, which expires on February 28, 1995, is collateralized by inventory and is guaranteed by the stockholders of the Company. Borrowings outstanding under the line of credit at June 30, 1994 were $20,000. NOTE 6 -- LEASE The Company leases office space under a noncancelable operating lease. Future minimum rentals due under the lease are as follows: YEAR ENDING JUNE 30, - ---------------------------------------- 1995............................... $ 30,262 1996............................... 31,612 1997............................... 18,900 --------- $ 80,744 ========= 4 INDUSTRIAL DATA SYSTEMS, INC. DBA IDS TECHNICAL SERVICES NOTES TO FINANCIAL STATEMENT NOTE 7 -- PROFIT SHARING PLAN The Company has a 401(k) profit sharing plan covering substantially all employees. Under the terms of the plan, the Company will make matching contributions equal to 50% of employee contributions up to 3% of employee compensation, as defined. Employees may make contributions up to 15% of their compensation, subject to certain maximum contribution limitations. NOTE 8 -- MAJOR CUSTOMERS The Company had amounts due from an integrated oil and gas exploration and marketing company of $116,785 as of June 30, 1994. No other customers had amounts in excess of 15 percent of trade accounts receivable. 5 OFFER TO PURCHASE AND SUBSCRIPTION AGREEMENT INDUSTRIAL DATA SYSTEMS CORPORATION (A NEVADA CORPORATION) 4350 E. SUNSET ROAD #101 HENDERSON, NEVADA 89014 702-451-7218 1. OFFER TO PURCHASE: The undersigned offeror(s) (individually or collectively referred to as"subscriber") makes the following offer for the purchase of shares of INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "Company"). With this document, the subscriber is submitting the sum of $ as payment for shares upon acceptance of this offer. 2. REPRESENTATION: The subscriber hereby represents and warrants that: a. The subscriber, if a natural person, is over the age of twenty-one (21) years. b. The subscriber has received and read a copy of the Offering Memorandum of INDUSTRIAL DATA SYSTEMS CORPORATION. No other representations are being relied on in making this offer. c. The subscriber acknowledges that this investment involves a high degree of risk. Subscriber acknowledges that there are other risks of investment, as described in the Offering Memorandum. The subscriber acknowledges that he/she has reviewed the suitability of this investment to his/her personal situation and is willing and able to bear the economic risk of this investment. In making this statement, consideration has been given to whether he/she could afford to hold the shares for an indefinite period, and whether he/she could afford a complete loss of the investment. Subscriber acknowledges that the Company and its agents and representatives have made no representation that any dividends will be paid for the shares or that the investment will be profitable. d. The subscriber acknowledges that the shares have not been registered with the U.S. Securities and Exchange Commission ("S.E.C.") under the Securities Act of 1933, as amended, or in any jurisdiction other than Nevada, that the Company does not intend to register the shares with the S.E.C. or in any jurisdiction other than Nevada, and that subscriber has no right to require such registration. e. The subscriber acknowledges that neither the Nevada Securities Division, the S.E.C., nor any other state, federal or foreign government agency has made any determination as to the merits of purchasing any such shares. f. The subscriber acknowledges that the Company is attempting to qualify for an exemption from federal registration requirements and that if all requirements of such exemption are not met, a liability for failing to register could be created, thereby affecting the Company and its shareholders. g. The subscriber acknowledges that the application for purchases may be accepted in whole or in part or rejected by the Company, and that the Offering is subject to prior sales. h. The subscriber acknowledges that the shares cannot be sold outside of the State of Nevada without registration and/or qualification under any applicable state, federal, or foreign government securities laws or exemptions from such laws. i. The subscriber has conducted all dealings with respect to the Offering solely within the State of Nevada. Without limitation of the foregoing, and except that subscriber may have been invited to a meeting for the purpose of discussing an investment opportunity, the subscriber has not received a copy of the Offering Memorandum outside the State of Nevada; has received no written information concerning the substance of the Offering outside the State of Nevada; has had no discussions, whether by telephone or verbally, concerning the substance of the Offering with anyone outside the State of Nevada; and has had no correspondence with anyone whatsoever relating to the substance of the Offering outside the State of Nevada. In addition, the subscriber has not been informed of any of the following outside the State of Nevada: (1) the name of the Company; (2) the nature of its business; (3) any information concerning the financial condition of the Company, including assets, liabilities, revenues, properties and capital structure; (4) the identification and background of its management; (5) 1 any terms of the proposed Offering, including its size or the price per share; or (6) the proposed future activities of the Company; and the only discussion which the subscriber has heard or participated in as to the Offering is such discussions as may have taken place in the State of Nevada. If the signatory is signing this agreement on behalf of a corporation, partnership, trust or other form of business organization, the signatory further represents that he/she has ascertained, and hereby assures the Company, that no other individual associated in any such way with such entity (whether as director, officer, partner, employee, agent, shareholder or beneficial owner of any nature whatsoever has had any such dealings, communications, correspondence or discussions of any nature whatsoever with anyone with respect to the Offering which have taken place outside the State of Nevada and has not received outside the State of Nevada any such verbal or written information of any nature whatsoever (including, without limitation, a copy of the Offering Memorandum) concerning the Offering. j. The subscriber is not purchasing the shares for the account of, or for the beneficial interest of, or with the intent to transfer any such shares to, any party other than the purchaser. 3. AFFIRMATION OF PLACE OF OFFER AND SALE: As an inducement to the Company to accept this offer, the subscriber represents and warrants that he/she has offered to purchase the shares within the State of Nevada and that such sale has occurred within the State of Nevada. Additionally, the subscriber hereby represents that the purchaser is qualified to purchase the shares on the following basis (initial and complete the applicable provisions): (a) The subscriber is a natural person who is a resident of the State of Nevada and maintains his/her principal residence at (b) The subscriber has consummated the purchase of shares within the State of Nevada. (c) The subscriber is a corporation, partnership, trust or other form of business organization (describe) not formed for the purpose of acquiring shares, which has its principal office within the State of Nevada at (d) the subscriber is a corporation, partnership, trust or other form of business formed for the purpose of acquiring shares, but which has its principal office within the State of Nevada at and all of whose beneficial owners or residents of the State of Nevada (names and principal residence addresses of all beneficial owners): 4. TITLE TO SHARES: Title to shares will be held as follows: Name(s) held in: ______________________________________________________________ __ Community Property __ Tenants in Common __ Community Property with Survivorship __ Married, Separate Property __ Joint Tenants, with Right of __ Single Person, Separate Property Survivorship __ Other (Corporation, Trust, etc. Please indicate). 2 THE UNDERSIGNED HEREBY SWEARS AND AFFIRMS THAT HE/SHE HAS READ THE FOREGOING OFFERING MEMORANDUM OF INDUSTRIAL DATA SYSTEMS CORPORATION AND IS FAMILIAR WITH THE CONTENTS THEREOF AND THAT THE REPRESENTATIONS CONTAINED HEREIN ARE TRUE AND ACCURATE. Subscriber (print name) Subscriber or Authorized Agent of Subscriber Subscriber signature Street Address Tax Identification Number or Social City, State, Zip Security Number of Subscriber Phone City where signed Date ACCEPTED BY: OFFICER OR DIRECTOR OF: INDUSTRIAL DATA SYSTEMS CORPORATION 3 EX-2.7 9 EXHIBIT 2.7 ACTION OF THE BOARD OF DIRECTORS OF INDUSTRIAL DATA SYSTEMS CORPORATION BY UNANIMOUS CONSENT IN LIEU OF SPECIAL MEETING July 10, 1996 The undersigned, constituting all of the current directors of INDUSTRIAL DATA SYSTEMS CORPORATION (the "Corporation"), do, by this writing, consent to adopt the following resolution: RESOLVED, that the Corporation issue the following shares of common stock of the Corporation for the consideration stated: PURCHASER NO. SHARES CONSIDERATION --------- ---------- ------------- Silver Course Corporation 833,333 Promissory Note in the amount of $333,333 with the principal due and payable on or before October 10, 1996 World Glory Corporation 833,333 Promissory Note in the amount of $333,333 with the principal due and payable on or before October 10, 1996 Asian Harvest 833,333 Promissory Note in the amount of $333,333 Developments Limited with the principal due and payable on or before October 10, 1996 This Consent is executed pursuant to Section 78.315 of the Nevada Revised Statutes Annotated and the Bylaws of this Corporation which authorizes the taking any action which the Board may take at a meeting of Directors by unanimous consent in lieu of special meeting. /s/ WILLIAM A. COSKEY William A. Coskey, Director /s/ HULDA L. COSKEY Hulda L. Coskey, Director /s/ DAVID W. GENT David W. Gent, Director /s/ ROBERT MORELAND Robert Moreland, Director EX-2.8 10 AGREEMENT FOR AMENDMENT AND SUBSTITUTION OF SUBSCRIPTION AGREEMENT AND NOTES WHEREAS, Silver Course Corporation, World Glory Company Limited, and Asian Harvest Developments Ltd. purchased, respectively, 833,333 shares of common stock of Industrial Data Systems Corporation pursuant to a Stock Purchase Subscription Agreement dated July 15, 1996, and accepted on July 30, 1996, by Industrial Data Systems Corporation; and WHEREAS, the original three purchasers have agreed to adjust the number of shares purchased by substituting Pines Intervest Corporation and Wilton Assets Corp. as additional subscribers and purchasers in equal portions of the originally subscribed shares, thereby four would purchase 500,000 shares and one would acquire 499,999 shares; and WHEREAS, Wilton Assets Corp. has signed a Stock Purchase Subscription Agreement to purchase 499,999 shares in consideration for the delivery of a Promissory Note in the amount of $199,999; and Pines Intervest Corporation has agreed to purchase 500,000 shares and deliver a Promissory Note in the amount of $200,000; and WHEREAS, Silver Course Corporation World Glory Company Limited, and Asian Harvest Developments Ltd. have agreed to delivery Stock Purchase Subscription Agreements for 500,000 shares and Promissory Notes for $200,000, respectively, as consideration for the purchase the shares. NOW, THEREFORE, in consideration for the promises made and the actions taken, Industrial Data Systems Corporation agrees to exchange the three Promissory Notes in the amount of $333,333, respectively, made by Silver Course Corporation, World Glory Company Limited, and Asian Harvest Developments Ltd. for four Promissory Notes of $200,000 each, made by Silver Course Corporation, World Glory Company Limited, Asian Harvest Developments Ltd., and Pines Intervest Corporation, respectively, and one Promissory Note for $199,999 made by Wilton Assets Corp., and each of the original subscribing companies will submit certain of the certificates held by them for purposes of reissuing 500,000 shares to Page 1 of 2 Pines Intervest Corporation and 499,999 to Wilton Assets Corp. Industrial Data Systems Corporation agrees to advise the transfer agent to exchange the shares. Executed this _________ day of __________________, 19___. INDUSTRIAL DATA SYSTEMS CORPORATION By /s/ WILLIAM A. COSKEY SILVER COURSE CORPORATION By /s/ CHRIS HARLESS WORLD GLORY COMPANY LIMITED By /s/ CHRIS HARLESS ASIAN HARVEST DEVELOPMENTS LTD. By /s/ CHRIS HARLESS Page 2 of 2 EX-2.9 11 INDUSTRIAL DATA SYSTEMS CORPORATION STOCK PURCHASE SUBSCRIPTION AGREEMENT TO: William A. Coskey, President Industrial Data Systems Corporation The undersigned subscriber ("Subscriber") hereby agrees to purchase 500,000 shares of the common stock (the "Stock") of Industrial Data Systems Corporation (the "Corporation"), for the consideration stated on the signature page of this Subscription Agreement. This Subscription Agreement is submitted to the Corporation upon the following terms and conditions: 1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a continuing offer and will stay open during the term of this offering but not later than August 1, 1996 (unless extended), and is made subject to the right of the Corporation to accept or reject the subscription, in whole or in part, during the term of this offering. 2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to purchase the Stock, and Subscriber agrees that this Subscription Agreement will be governed by and construed in accordance with the laws of the State of Nevada. The offer is made pursuant to Section 504 of the Regulation D. 3. RISK FACTORS. Subscriber understands that the purchase of the Stock involves a high degree of risk. Each offeree should carefully consider the risks and speculative factors inherent in this offering and affecting the business of the Corporation. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents and warrants to the Corporation that: a. No offer, offer to sell, offer for sale, or prospect of sale was made to the Subscriber by means of general solicitation or general advertising, and the Subscriber (i) is familiar with the business and affairs of the Corporation, (ii) has not been furnished any offering literature or prospectus relating to the offering of the Stock, other than the financial reports of the Corporation, and (iii) has been furnished with all information including an adequate opportunity to ask any questions of officers of the Corporation concerning the Stock, the business and operations of the Corporation, the use of proceeds and any other matter necessary for the purpose of making an informed investment decision; b. Subscriber, or the Subscriber's Representative or Financial Advisor, has such knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Stock and to make an informed investment decision with respect thereto; c. Subscriber understands and has conducted an independent review evaluating the merits and risks of an investment in the Stock including the potential tax consequences of such investment; d. Subscriber, or the Subscriber's Representative or Financial Advisor, has knowledge of finance, securities and investments generally, and experience and skill in investments and business matters of the sort encompassed by this transaction; e. Subscriber is a person who is able to bear the economic risk of an investment in the Corporation, can afford to hold the Stock for an indefinite period and can afford a complete loss of the investment in the Corporation for which Subscriber is hereby subscribing; f. Subscriber recognizes that it is a speculative venture; g. Subscriber understands that (i) no state or federal government authority has made any finding or determination relating to the fairness for investment of the Stock, and (ii) no state or federal government authority has recommended or will recommend the investment; h. The foregoing representations and warranties shall be true and accurate as of the date hereof and as of the date of delivery of the Subscriber's payment of the Stock and shall survive such delivery. 5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation, and each other subscriber for any loss, damage or liability incurred by reason of any material breach of the Subscription Agreement or Promissory Note by Subscriber or if any of the representations and warranties of Subscriber made herein are proven false in any material respect. 6. ARBITRATION. Any controversy or claim arising out of or relating to this Subscription Agreement, or a breach thereof, including any claims based on allegations of fraud, misrepresentation or breach of fiduciary duty, shall be settled by arbitration under the laws of the State of Nevada, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. 7. DOCUMENTS BEING TENDERED. a. Subscriber hereby subscribes and delivers herewith the following documents: i. One completed copy of this Subscription Agreement; ii. One Promissory Note in the principal amount of the purchase price, payable on or before 90 days from the date of issue. b. Corporation shall exchange for the Promissory Note certificates representing the shares. These certificates will be without restrictive legends and will be free trading. 8. MISCELLANEOUS. a. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid to the Subscriber at the address set forth below, or to the Corporation. b. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties hereto. SUBSCRIPTION NUMBER OF SHARES....................................................... 500,000 PURCHASE PRICE......................................................... $200,000 CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM ISSUE DATE OF THE SHARES. WORLD GLORY COMPANY LIMITED Please print here the exact name (registration) Subscriber desires on records of Corporation. This Subscription Agreement is executed this the 10th day of July, 1996. WORLD GLORY COMPANY LIMITED By /s/ CHRIS HARLESS Chris Harless Address: Palm Chambers No. 3 P.O. Box 3152 Road Town, Tortola British Virgin Islands ACCEPTANCE OF SUBSCRIPTION AGREEMENT After reviewing this Subscription Agreement and taking all appropriate steps to determine that Subscriber is a suitable investor as described herein, the Corporation hereby accepts Subscriber as a purchaser of Stock. Dated this 15th day of July, 1996. INDUSTRIAL DATA SYSTEMS CORPORATION By /s/ WILLIAM A. COSKEY William A. Coskey, President EX-2.10 12 INDUSTRIAL DATA SYSTEMS CORPORATION STOCK PURCHASE SUBSCRIPTION AGREEMENT TO: William A. Coskey, President Industrial Data Systems Corporation The undersigned subscriber ("Subscriber") hereby agrees to purchase 500,000 shares of the common stock (the "Stock") of Industrial Data Systems Corporation (the "Corporation"), for the consideration stated on the signature page of this Subscription Agreement. This Subscription Agreement is submitted to the Corporation upon the following terms and conditions: 1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a continuing offer and will stay open during the term of this offering but not later than August 1, 1996 (unless extended), and is made subject to the right of the Corporation to accept or reject the subscription, in whole or in part, during the term of this offering. 2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to purchase the Stock, and Subscriber agrees that this Subscription Agreement will be governed by and construed in accordance with the laws of the State of Nevada. The offer is made pursuant to Section 504 of the Regulation D. 3. RISK FACTORS. Subscriber understands that the purchase of the Stock involves a high degree of risk. Each offeree should carefully consider the risks and speculative factors inherent in this offering and affecting the business of the Corporation. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents and warrants to the Corporation that: a. No offer, offer to sell, offer for sale, or prospect of sale was made to the Subscriber by means of general solicitation or general advertising, and the Subscriber (i) is familiar with the business and affairs of the Corporation, (ii) has not been furnished any offering literature or prospectus relating to the offering of the Stock, other than the financial reports of the Corporation, and (iii) has been furnished with all information including an adequate opportunity to ask any questions of officers of the Corporation concerning the Stock, the business and operations of the Corporation, the use of proceeds and any other matter necessary for the purpose of making an informed investment decision; b. Subscriber, or the Subscriber's Representative or Financial Advisor, has such knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Stock and to make an informed investment decision with respect thereto; c. Subscriber understands and has conducted an independent review evaluating the merits and risks of an investment in the Stock including the potential tax consequences of such investment; d. Subscriber, or the Subscriber's Representative or Financial Advisor, has knowledge of finance, securities and investments generally, and experience and skill in investments and business matters of the sort encompassed by this transaction; e. Subscriber is a person who is able to bear the economic risk of an investment in the Corporation, can afford to hold the Stock for an indefinite period and can afford a complete loss of the investment in the Corporation for which Subscriber is hereby subscribing; f. Subscriber recognizes that it is a speculative venture; g. Subscriber understands that (i) no state or federal government authority has made any finding or determination relating to the fairness for investment of the Stock, and (ii) no state or federal government authority has recommended or will recommend the investment; h. The foregoing representations and warranties shall be true and accurate as of the date hereof and as of the date of delivery of the Subscriber's payment of the Stock and shall survive such delivery. 5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation, and each other subscriber for any loss, damage or liability incurred by reason of any material breach of the Subscription Agreement or Promissory Note by Subscriber or if any of the representations and warranties of Subscriber made herein are proven false in any material respect. 6. ARBITRATION. Any controversy or claim arising out of or relating to this Subscription Agreement, or a breach thereof, including any claims based on allegations of fraud, misrepresentation or breach of fiduciary duty, shall be settled by arbitration under the laws of the State of Nevada, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. 7. DOCUMENTS BEING TENDERED. a. Subscriber hereby subscribes and delivers herewith the following documents: i. One completed copy of this Subscription Agreement; ii. One Promissory Note in the principal amount of the purchase price, payable on or before 90 days from the date of issue. b. Corporation shall exchange for the Promissory Note certificates representing the shares. These certificates will be without restrictive legends and will be free trading. 8. MISCELLANEOUS. a. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid to the Subscriber at the address set forth below, or to the Corporation. b. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties hereto. SUBSCRIPTION NUMBER OF SHARES....................................................... 500,000 PURCHASE PRICE......................................................... $200,000 CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM ISSUE DATE OF THE SHARES. ASIAN HARVEST CORPORATION LIMITED Please print here the exact name (registration) Subscriber desires on records of Corporation. This Subscription Agreement is executed this the 10th day of July, 1996. ASIAN HARVEST CORPORATION LIMITED By /s/ CHRIS HARLESS Chris Harless Address: Palm Chambers No. 3 P.O. Box 3152 Road Town, Tortola British Virgin Islands ACCEPTANCE OF SUBSCRIPTION AGREEMENT After reviewing this Subscription Agreement and taking all appropriate steps to determine that Subscriber is a suitable investor as described herein, the Corporation hereby accepts Subscriber as a purchaser of Stock. Dated this 15th day of July, 1996. INDUSTRIAL DATA SYSTEMS CORPORATION By /s/ WILLIAM A. COSKEY William A. Coskey, President EX-2.11 13 INDUSTRIAL DATA SYSTEMS CORPORATION STOCK PURCHASE SUBSCRIPTION AGREEMENT TO: William A. Coskey, President Industrial Data Systems Corporation The undersigned subscriber ("Subscriber") hereby agrees to purchase 500,000 shares of the common stock (the "Stock") of Industrial Data Systems Corporation (the "Corporation"), for the consideration stated on the signature page of this Subscription Agreement. This Subscription Agreement is submitted to the Corporation upon the following terms and conditions: 1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a continuing offer and will stay open during the term of this offering but not later than August 1, 1996 (unless extended), and is made subject to the right of the Corporation to accept or reject the subscription, in whole or in part, during the term of this offering. 2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to purchase the Stock, and Subscriber agrees that this Subscription Agreement will be governed by and construed in accordance with the laws of the State of Nevada. The offer is made pursuant to Section 504 of the Regulation D. 3. RISK FACTORS. Subscriber understands that the purchase of the Stock involves a high degree of risk. Each offeree should carefully consider the risks and speculative factors inherent in this offering and affecting the business of the Corporation. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents and warrants to the Corporation that: a. No offer, offer to sell, offer for sale, or prospect of sale was made to the Subscriber by means of general solicitation or general advertising, and the Subscriber (i) is familiar with the business and affairs of the Corporation, (ii) has not been furnished any offering literature or prospectus relating to the offering of the Stock, other than the financial reports of the Corporation, and (iii) has been furnished with all information including an adequate opportunity to ask any questions of officers of the Corporation concerning the Stock, the business and operations of the Corporation, the use of proceeds and any other matter necessary for the purpose of making an informed investment decision; b. Subscriber, or the Subscriber's Representative or Financial Advisor, has such knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Stock and to make an informed investment decision with respect thereto; c. Subscriber understands and has conducted an independent review evaluating the merits and risks of an investment in the Stock including the potential tax consequences of such investment; d. Subscriber, or the Subscriber's Representative or Financial Advisor, has knowledge of finance, securities and investments generally, and experience and skill in investments and business matters of the sort encompassed by this transaction; e. Subscriber is a person who is able to bear the economic risk of an investment in the Corporation, can afford to hold the Stock for an indefinite period and can afford a complete loss of the investment in the Corporation for which Subscriber is hereby subscribing; f. Subscriber recognizes that it is a speculative venture; g. Subscriber understands that (i) no state or federal government authority has made any finding or determination relating to the fairness for investment of the Stock, and (ii) no state or federal government authority has recommended or will recommend the investment; h. The foregoing representations and warranties shall be true and accurate as of the date hereof and as of the date of delivery of the Subscriber's payment of the Stock and shall survive such delivery. 5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation, and each other subscriber for any loss, damage or liability incurred by reason of any material breach of the Subscription Agreement or Promissory Note by Subscriber or if any of the representations and warranties of Subscriber made herein are proven false in any material respect. 6. ARBITRATION. Any controversy or claim arising out of or relating to this Subscription Agreement, or a breach thereof, including any claims based on allegations of fraud, misrepresentation or breach of fiduciary duty, shall be settled by arbitration under the laws of the State of Nevada, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. 7. DOCUMENTS BEING TENDERED. a. Subscriber hereby subscribes and delivers herewith the following documents: i. One completed copy of this Subscription Agreement; ii. One Promissory Note in the principal amount of the purchase price, payable on or before 90 days from the date of issue. b. Corporation shall exchange for the Promissory Note certificates representing the shares. These certificates will be without restrictive legends and will be free trading. 8. MISCELLANEOUS. a. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid to the Subscriber at the address set forth below, or to the Corporation. b. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties hereto. SUBSCRIPTION NUMBER OF SHARES....................................................... 500,000 PURCHASE PRICE......................................................... $200,000 CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM ISSUE DATE OF THE SHARES. SILVER COURSE CORPORATION Please print here the exact name (registration) Subscriber desires on records of Corporation. This Subscription Agreement is executed this the 10th day of July, 1996. SILVER COURSE CORPORATION By /s/ CHRIS HARLESS Chris Harless Address: Palm Chambers No. 3 P.O. Box 3152 Road Town, Tortola British Virgin Islands ACCEPTANCE OF SUBSCRIPTION AGREEMENT After reviewing this Subscription Agreement and taking all appropriate steps to determine that Subscriber is a suitable investor as described herein, the Corporation hereby accepts Subscriber as a purchaser of Stock. Dated this 15th day of July, 1996. INDUSTRIAL DATA SYSTEMS CORPORATION By /s/ WILLIAM A. COSKEY William A. Coskey, President EX-2.13 14 INDUSTRIAL DATA SYSTEMS CORPORATION STOCK PURCHASE SUBSCRIPTION AGREEMENT TO: William A. Coskey, President Industrial Data Systems Corporation The undersigned subscriber ("Subscriber") hereby agrees to purchase 500,000 shares of the common stock (the "Stock") of Industrial Data Systems Corporation (the "Corporation"), for the consideration stated on the signature page of this Subscription Agreement. This Subscription Agreement is submitted to the Corporation upon the following terms and conditions: 1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a continuing offer and will stay open during the term of this offering but not later than August 1, 1996 (unless extended), and is made subject to the right of the Corporation to accept or reject the subscription, in whole or in part, during the term of this offering. 2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to purchase the Stock, and Subscriber agrees that this Subscription Agreement will be governed by and construed in accordance with the laws of the State of Nevada. The offer is made pursuant to Section 504 of the Regulation D. 3. RISK FACTORS. Subscriber understands that the purchase of the Stock involves a high degree of risk. Each offeree should carefully consider the risks and speculative factors inherent in this offering and affecting the business of the Corporation. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents and warrants to the Corporation that: a. No offer, offer to sell, offer for sale, or prospect of sale was made to the Subscriber by means of general solicitation or general advertising, and the Subscriber (i) is familiar with the business and affairs of the Corporation, (ii) has not been furnished any offering literature or prospectus relating to the offering of the Stock, other than the financial reports of the Corporation, and (iii) has been furnished with all information including an adequate opportunity to ask any questions of officers of the Corporation concerning the Stock, the business and operations of the Corporation, the use of proceeds and any other matter necessary for the purpose of making an informed investment decision; b. Subscriber, or the Subscriber's Representative or Financial Advisor, has such knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Stock and to make an informed investment decision with respect thereto; c. Subscriber understands and has conducted an independent review evaluating the merits and risks of an investment in the Stock including the potential tax consequences of such investment; d. Subscriber, or the Subscriber's Representative or Financial Advisor, has knowledge of finance, securities and investments generally, and experience and skill in investments and business matters of the sort encompassed by this transaction; e. Subscriber is a person who is able to bear the economic risk of an investment in the Corporation, can afford to hold the Stock for an indefinite period and can afford a complete loss of the investment in the Corporation for which Subscriber is hereby subscribing; f. Subscriber recognizes that it is a speculative venture; g. Subscriber understands that (i) no state or federal government authority has made any finding or determination relating to the fairness for investment of the Stock, and (ii) no state or federal government authority has recommended or will recommend the investment; h. The foregoing representations and warranties shall be true and accurate as of the date hereof and as of the date of delivery of the Subscriber's payment of the Stock and shall survive such delivery. 5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation, and each other subscriber for any loss, damage or liability incurred by reason of any material breach of the Subscription Agreement or Promissory Note by Subscriber or if any of the representations and warranties of Subscriber made herein are proven false in any material respect. 6. ARBITRATION. Any controversy or claim arising out of or relating to this Subscription Agreement, or a breach thereof, including any claims based on allegations of fraud, misrepresentation or breach of fiduciary duty, shall be settled by arbitration under the laws of the State of Nevada, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. 7. DOCUMENTS BEING TENDERED. a. Subscriber hereby subscribes and delivers herewith the following documents: i. One completed copy of this Subscription Agreement; ii. One Promissory Note in the principal amount of the purchase price, payable on or before 90 days from the date of issue. b. Corporation shall exchange for the Promissory Note certificates representing the shares. These certificates will be without restrictive legends and will be free trading. 8. MISCELLANEOUS. a. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid to the Subscriber at the address set forth below, or to the Corporation. b. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties hereto. SUBSCRIPTION NUMBER OF SHARES....................................................... 500,000 PURCHASE PRICE........................................................ $200,000 CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM ISSUE DATE OF THE SHARES. PINES INTERVEST CORPORATION Please print here the exact name (registration) Subscriber desires on records of Corporation. This Subscription Agreement is executed this the 10th day of July, 1996. PINES INTERVEST CORPORATION By /s/ SAMUEL BALLOU Samuel Ballou Address: Palm Chambers No. 3 P.O. Box 3152 Road Town, Tortola British Virgin Islands ACCEPTANCE OF SUBSCRIPTION AGREEMENT After reviewing this Subscription Agreement and taking all appropriate steps to determine that Subscriber is a suitable investor as described herein, the Corporation hereby accepts Subscriber as a purchaser of Stock. Dated this 15th day of July, 1996. INDUSTRIAL DATA SYSTEMS CORPORATION By /s/ WILLIAM A. COSKEY William A. Coskey, President EX-2.14 15 INDUSTRIAL DATA SYSTEMS CORPORATION STOCK PURCHASE SUBSCRIPTION AGREEMENT TO: William A. Coskey, President Industrial Data Systems Corporation The undersigned subscriber ("Subscriber") hereby agrees to purchase 499,999 shares of the common stock (the "Stock") of Industrial Data Systems Corporation (the "Corporation"), for the consideration stated on the signature page of this Subscription Agreement. This Subscription Agreement is submitted to the Corporation upon the following terms and conditions: 1. SUBSCRIPTION REQUIREMENTS. The subscription expressed herein is a continuing offer and will stay open during the term of this offering but not later than August 1, 1996 (unless extended), and is made subject to the right of the Corporation to accept or reject the subscription, in whole or in part, during the term of this offering. 2. CONTROLLING LAW. This Subscription Agreement evidences a subscription to purchase the Stock, and Subscriber agrees that this Subscription Agreement will be governed by and construed in accordance with the laws of the State of Nevada. The offer is made pursuant to Section 504 of the Regulation D. 3. RISK FACTORS. Subscriber understands that the purchase of the Stock involves a high degree of risk. Each offeree should carefully consider the risks and speculative factors inherent in this offering and affecting the business of the Corporation. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber hereby represents and warrants to the Corporation that: a. No offer, offer to sell, offer for sale, or prospect of sale was made to the Subscriber by means of general solicitation or general advertising, and the Subscriber (i) is familiar with the business and affairs of the Corporation, (ii) has not been furnished any offering literature or prospectus relating to the offering of the Stock, other than the financial reports of the Corporation, and (iii) has been furnished with all information including an adequate opportunity to ask any questions of officers of the Corporation concerning the Stock, the business and operations of the Corporation, the use of proceeds and any other matter necessary for the purpose of making an informed investment decision; b. Subscriber, or the Subscriber's Representative or Financial Advisor, has such knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Stock and to make an informed investment decision with respect thereto; c. Subscriber understands and has conducted an independent review evaluating the merits and risks of an investment in the Stock including the potential tax consequences of such investment; d. Subscriber, or the Subscriber's Representative or Financial Advisor, has knowledge of finance, securities and investments generally, and experience and skill in investments and business matters of the sort encompassed by this transaction; e. Subscriber is a person who is able to bear the economic risk of an investment in the Corporation, can afford to hold the Stock for an indefinite period and can afford a complete loss of the investment in the Corporation for which Subscriber is hereby subscribing; f. Subscriber recognizes that it is a speculative venture; g. Subscriber understands that (i) no state or federal government authority has made any finding or determination relating to the fairness for investment of the Stock, and (ii) no state or federal government authority has recommended or will recommend the investment; h. The foregoing representations and warranties shall be true and accurate as of the date hereof and as of the date of delivery of the Subscriber's payment of the Stock and shall survive such delivery. 5. INDEMNITY. Subscriber will indemnify and hold harmless the Corporation, and each other subscriber for any loss, damage or liability incurred by reason of any material breach of the Subscription Agreement or Promissory Note by Subscriber or if any of the representations and warranties of Subscriber made herein are proven false in any material respect. 6. ARBITRATION. Any controversy or claim arising out of or relating to this Subscription Agreement, or a breach thereof, including any claims based on allegations of fraud, misrepresentation or breach of fiduciary duty, shall be settled by arbitration under the laws of the State of Nevada, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. 7. DOCUMENTS BEING TENDERED. a. Subscriber hereby subscribes and delivers herewith the following documents: i. One completed copy of this Subscription Agreement; ii. One Promissory Note in the principal amount of the purchase price, payable on or before 90 days from the date of issue. b. Corporation shall exchange for the Promissory Note certificates representing the shares. These certificates will be without restrictive legends and will be free trading. 8. MISCELLANEOUS. a. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid to the Subscriber at the address set forth below, or to the Corporation. b. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties hereto. SUBSCRIPTION NUMBER OF SHARES....................................................... 499,999 PURCHASE PRICE......................................................... $199,999 CONSIDERATION FOR SHARES IS A PROMISSORY NOTE PAYABLE ON OR BEFORE 90 DAYS FROM ISSUE DATE OF THE SHARES. WILTON ASSETS CORP. Please print here the exact name (registration) Subscriber desires on records of Corporation. This Subscription Agreement is executed this the 10th day of July, 1996. WILTON ASSETS CORP. By /s/ RUTH HARLESS Ruth Harless Address: Palm Chambers No. 3 P.O. Box 3152 Road Town, Tortola British Virgin Islands ACCEPTANCE OF SUBSCRIPTION AGREEMENT After reviewing this Subscription Agreement and taking all appropriate steps to determine that Subscriber is a suitable investor as described herein, the Corporation hereby accepts Subscriber as a purchaser of Stock. Dated this 15th day of July, 1996. INDUSTRIAL DATA SYSTEMS CORPORATION By /s/ WILLIAM A. COSKEY William A. Coskey, President EX-3 16 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA JUN 22 1994 9629-94 CHERYL A. LAU SECRETARY OF STATE CHERYL A. LAU No. ______________________________ ARTICLES OF INCORPORATION OF INDUSTRIAL DATA SYSTEMS CORPORATION FIRST. The name of the corporation is: INDUSTRIAL DATA SYSTEMS CORPORATION SECOND. Its registered office in the State of Nevada is located at 4350 E. Sunset Road Suite 101, Henderson, Nevada 89014, that this Corporation may maintain an office, or offices, insuch other place within or without the State of Nevada as may be from time to time designated by the Board of Directors, or by the By-Laws of said Corporation, and that this Corporation may conduct all Corporation business of every kind and nature, including the holding of all meetings of Directors and Stockholders, outside the State of Nevada as well as within the State of Nevada. THIRD. The objects for which this Corporation is formed are: To engage in any lawful activity, including, but not limited to the following: (A) Shall have such rights, privileges and powers as may be conferred upon corporations by any existing law. (B) May at any time exercise such rights, privileges and powers, when not inconsistent with the purposes and objects for which this corporation is organized. (C) Shall have power to have succession by its corporate name for the period limited in its certificate or articles of incorporation, and when no period is limited, perpetually, or until dissolved and its affairs wound up according to law. (D) Shall have the power to effect litigation in its own behalf and interest in any court of law. (E) Shall have power to make contracts. (F) Shall have power to hold, purchase and convey real and personal estate and mortgage or lease any such real and personal estate with its franchises. The power to hold real and personal estate shall include the power to take the same by devise or bequest in the State of Nevada, or in any other state, territory or country. (G) Shall have power to appoint such officers and agents as the affairs of the corporation shall require, and to allow them suitable compensation. (H) Shall have power to make By-Laws not inconsistent with the constitution or laws of the United States, or of the State of Nevada, for the management, regulation and government of its affairs and property, the transfer of its stock, the transaction of its business, and the calling and holding of meetings of its stockholders. (I) Shall have power to dissolve itself. (J) Shall have power to adopt and use a common seal or stamp, and alter the same. The use of a seal or stamp by the corporation on any corporate documents is not necessary. The corporation may use a seal or stamp, if it desires, but such use or nonuse shall not in any way affect the legality of the document. 1 (K) Shall have power to borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, of for any other lawful purpose of its incorporation; to issue bonds, promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at a specified time or times, or payable upon the happening of a specified event or events, whether secured by mortgage, pledge or otherwise, or unsecured, for money borrowed, or in payment for property purchased, or acquired, or for any other lawful object. (L) Shall have power to guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of the indebtedness created by, any other corporation or corporations of the State of Nevada, or any other state or government, and while owners of such stock, bonds, securities or evidences of indebtedness, to exercise all the rights, powers and privileges of ownership, including the right to vote, if any. (M) Shall have power to purchase, hold, sell and transfer shares of its own capital stock and use therefor its capital, capital surplus, or other property or fund. (N) Shall have power to conduct business, have one or more offices, and hold, purchase, mortgage and convey real and personal property in the State of Nevada, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and foreign countries. (O) Shall have power to do all and everything necessary and proper for the accomplishment of the objects enumerated in its certificates or articles of incorporation, or any amendment thereof, or necessary or incidental to the protection and benefit of the corporation, and, in general to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether or not such business is similar in nature to the objects set forth in the certificate or articles of incorporation of the corporation, or any amendment thereof. (P) Shall have power to make donations for the public welfare or for charitable scientific or educational purposes. (Q) Shall have power to enter into partnerships, general or limited, or joint ventures in connection with any lawful activities. FOURTH. The aggregate number of shares the corporation shall have authority to issue shall be SEVENTY FIVE MILLION (75,000,000) shares of common stock, par value one mil ($.001) per share, each share of common stock having equal rights and preferences, voting privileges and preferences. FIFTH. The governing board of this corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the By-Laws of this Corporation, providing that the number of directors shall not be reduced to fewer than one (1). The name and post office address of the first Board of Directors shall be one (1) in number and listed as follows: NAME POST OFFICE ADDRESS - ------------------------------------- ----------------------- 4350 E. SUNSET RD. #101 LEISA C. STILWELL HENDERSON, NEVADA 89014 SIXTH. The capital stock, after the amount of the subscription price, or par value, has been paid in, shall not be subject to assessment to pay the debts of the corporation. SEVENTH. The name and post office address of the Incorporator signing the Articles of Incorporation is as follows: NAME POST OFFICE ADDRESS - ------------------------------------- ----------------------- 4350 E. SUNSET RD. #101 LEISA C. STILWELL HENDERSON, NEVADA 89014 EIGHTH. The resident agent for this corporation shall be: LEISA C. STILWELL 2 The address of said agent, and the registered or statutory address of this corporation in the state of Nevada shall be: 4350 E. Sunset Road Ste. #101 Henderson, Nevada 89014 NINTH. The corporation is to have perpetual existence. TENTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: Subject to the By-Laws, if any, adopted by the Stockholders, to make, alter or amend the By-Laws of the Corporation. To fix the amount to be reserved as working capital over and above its capital stock paid in; to authorize and cause to be executed, mortgages and liens upon the real and personal property of this Corporation. By resolution passed by a majority of the whole Board, to designate one (1) or more committees, each committee to consist of one or more of the Directors of the Corporation, which, to the extent provided in the resolution, or in the By-Laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. Such committee, or committees shall have such name, or names as may be stated in the By-Laws of the Corporation, or as may be determined from time to time by resolution adopted by the Board of Directors. When and as authorized by the affirmative vote of the Stockholders holding stock entitling them to exercise at least a majority of the voting power given at a Stockholders meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions as its Board of Directors deems expedient and for the best interests of the Corporation. ELEVENTH. No shareholder shall be entitled as a matter of right to subscribe for or receive additional shares of any class of stock of the Corporation, whether now or hereafter authorized, or any bonds, debentures or securities convertible into stock, but such additional shares of stock or other securities convertible into stock may be issued or disposed of by the Board of Directors to such persons and on such terms as in its discretion it shall deem advisable. TWELFTH. No director or officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer; provided however, that the foregoing provision shall not eliminate or limit the liability or a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation for acts of omissions prior to such repeal or modification. THIRTEENTH. This Corporation reserves the right to amend, alter, change or repeal any provision contained in the Articles of Incorporation, in the manner now or hereafter prescribed by statute, or by the Articles of Incorporation, and all rights conferred upon Stockholders herein are granted subject to this reservation. 3 I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose of forming a Corporation pursuant to the General Corporation Law of the State of Nevada, do make and file these Articles of Incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand this 20th day of June, 1994. /s/ LEISA C. STILWELL Leisa C. Stilwell STATE OF NEVADA ) ) ss. COUNTY OF CLARK ) On this the 20th day of June, 1994, in Las Vegas, Nevada before me, the undersigned, a Notary Public in and for Las Vegas, State of Nevada personally appeared Leisa C. Stilwell, known to me to be the person whose name is subscribed to the foregoing document and acknowledged to me that he executed the same. /s/ B. EICHELBERGER B. Eichelberger Notary Public NOTARY PUBLIC STATE OF NEVADA County of Clark B. EICHELBERGER My Appointment Expires Oct. 27, 1994 I, Leisa C. Stilwell, hereby accept as Resident Agent for the previously named Corporation. 6/20/94 /s/ LEISA C. STILWELL Date Leisa C. Stilwell 4 EX-3.1 17 SECRETARY OF STATE STATE OF NEVADA THE GREAT SEAL OF THE STATE OF NEVADA CORPORATE CHARTER I, CHERYL A. LAU, Secretary of State of the State of Nevada, do hereby certify that INDUSTRIAL DATA SYSTEMS CORPORATION did on the TWENTY-SECOND day of JUNE, 1994, file in this office the original Articles of Incorporation; that said Articles are now on file and of record in the office of the Secretary of State of the State of Nevada, and further, that said Articles contain all of the provisions required by the law of said State of Nevada. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal of State, at my office, in Carson City, Nevada, this TWENTY-SECOND day of JUNE, 1994. Secretary of State By Deputy THE GREAT SEAL OF THE STATE OF NEVADA EX-3.2 18 BYLAWS OF INDUSTRIAL DATA SYSTEMS CORPORATION 1. OFFICES 1.01 REGISTERED OFFICE. The registered office of the corporation shall be located at 4350 E. Sunset Road, Suite 101, Henderson, County of Clark, State of Nevada. 1.02 OTHER OFFICES. In addition to the registered office, other offices may also be maintained by such other place or places, either within or without the State of Nevada, as may be designated from time to time by the board of directors, where any and all business of the corporation may be transacted, and where meetings of the shareholders and of the directors may be held with the same effect as though done or held at said registered office. 2. MEETING OF SHAREHOLDERS 2.01 ANNUAL MEETINGS. The annual meeting of the shareholders, commencing with the year 1994, shall be held at the registered office of the corporation, or at such other place as may be specified or fixed in the notice of such meetings in the month of or the month preceding the due date of the annual list of the officers and directors of the corporation at such time as the shareholders shall decide, for the election of directors and for the transaction of such other business as may properly come before said meeting. 2.02 NOTICE OF ANNUAL MEETINGS. Unless notice is waived by the shareholders, the secretary shall mail, in the manner provided in Section 2.05 of these bylaws, or deliver a written or printed notice of each annual meeting to each shareholder of record, entitled to vote thereat, or may notify by telegram, at least ten and not more than sixty days before the date of such meeting. 2.03 PLACE OF MEETING. The board of directors may designate any place either within or without the State of Nevada as the place of meeting for any annual meeting or for any special meeting called by the board of directors. A waiver of notice signed by all shareholders may designate any place either within or without the State of Nevada, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the registered office of the corporation in the State of Nevada, except as otherwise called, the place of meeting shall be the registered office of the corporation in the State of Nevada, except as otherwise provided in Section 2.06 of these bylaws, entitled "Meeting Without Notice." 2.04 SPECIAL MEETINGS. Special meetings of the shareholders shall be held at the registered office of the corporation or at such other place as shall be specified or fixed in a notice thereof. Such meetings of the shareholders may be called at any time by the president or secretary, or by a majority of the board of directors then in office, and shall be called by the president with or without board approval on the written request of the holders of record of at least fifty percent (50%) of the number of shares of the corporation then outstanding and entitled to vote, which written request shall state the object of such meeting. 2.05 NOTICE OF MEETINGS. Unless waived by the shareholders, written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the president or the secretary to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the corporation, with postage prepaid. Notwithstanding the above, if either notice of two consecutive annual meetings and notices of all meetings and actions taken by shareholder consent in the interim or two payments of dividends or interest on securities sent by first class mail during a twelve month period are returned as undeliverable, the giving of further notices is not required. In that event, any action taken without notice to the shareholder shall be deemed to have been taken with notice to the shareholder. Any shareholder may at any time, by a duly signed statement in writing to that effect, waive any statutory or other notice of any meeting, whether such statement be signed before or after such meeting. 2.06 MEETING WITHOUT NOTICE. If all the shareholders shall meet at any time and place, either within or without the State of Nevada, and consent to the holding of the meeting at such time and place, such meeting shall be valid without call or notice and at such meeting any corporate action may be taken. 2.07 QUORUM AND SHAREHOLDER ACTS. At all shareholders' meetings, the presence in person or by proxy of the holders of a majority of the outstanding stock entitled to vote shall be necessary to constitute a quorum for the transaction of business, but a lesser number may adjourn to some future time not less than seven nor more than twenty-one (21) days later, and the secretary shall thereupon give at least three days notice by mail to each shareholder entitled to vote who is absent from such meeting. Except where a higher percentage is expressly required by the bylaws or by law, an act of the holders of the majority of voting shares that are present at a meeting is an act of the shareholders. 2.08 MODE OF VOTING. At all meetings of the shareholders the voting may be voice vote, but any qualified voter may demand a stock vote whereupon such stock vote shall be taken by ballot, each of which shall state the name of the shareholder voting and the number of shares voted by him and, if such ballot be cast by proxy, it shall also state the name of such proxy; provided, however, that the mode of voting prescribed by statute for any particular case shall be in such case followed. 2.09 PROXIES. At any meeting of the shareholders, any shareholder may be represented and vote by a proxy or proxies appointed by an instrument in writing. Execution may be accomplished by the signing of the writing by the shareholder or other persons authorized to sign on his behalf, or by causing the signature of the shareholder to be made by any reasonable means including, but not limited to, a facsimile signature. In the event any such instrument in writing shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. Additionally, a shareholder may designate a proxy by transmission of a telegram or cablegram that sets forth sufficient information to determine that the transmission was authorized by the shareholder. No such proxy shall be valid after the expiration of six months from the date of its execution, unless coupled with an interest, or unless the person executing it specified therein the length of time for which it is to continue in force, which in no case shall exceed seven years from the date of its execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation. At no time shall any proxy be valid which shall be filed less than ten hours before the commencement of the meeting. 2.10 VOTING LISTS. The officer or agent in charge of the transfer books for shares of the corporation shall make, at least three days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order with the number of shares held by each, which list for a period of two days prior to such meeting shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder at any time during the whole time of the meeting. The original share ledger or transfer book, or duplicate thereof, kept in this state, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. 2.11 CLOSING TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining shareholders entitled to notice or to vote for any meeting of shareholders, the board of directors of the corporation may provide that the stock transfer books be closed for a stated period but not to exceed in any case sixty (60) days before such determination. If the stock transfer books be closed for the purpose of determining shareholders entitled to notice of a meeting of shareholders, such books shall be closed for at least fifteen days immediately preceding such meeting. In lieu of closing the stock transfer books, the board of directors may fix, in advance, a date in any case to be not more than sixty (60) days, nor less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for determination of shareholders entitled to notice of a meeting of shareholders, or shareholders entitled to receive payment of a 2 dividend, the date of which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determinations of shareholders. 2.12 VOTING OF SHARES. Subject to the provisions of Section 2.14, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to vote at a meeting of shareholders. 2.13 VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provisions, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by his administrator or executor, either in person or by proxy. Shares standing in the name of a guardian, conservator or trustee may be voted by such fiduciary either in person or by proxy, but no guardian, conservator, or trustee shall be entitled, as such fiduciary, to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court at which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. 2.14 ELECTION OF DIRECTORS. Directors shall be elected by a majority vote. At each selection of directors, every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote. A shareholder does not have a right to cumulate his vote for any one director. A shareholder may only cast a vote for each director to be elected which does not exceed the number of shares owned by that shareholder. Directors of this corporation shall not be elected otherwise. 2.15 INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders or any other action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by a majority of the shareholders entitled to vote with respect to the subject matter thereof. 2.16 ATTENDANCE BY CONFERENCE CALL. Shareholders may participate in a meeting of shareholders by means of a telephone conference or similar method of communication by which all persons participating in the meeting can hear each other. Attendance by this method shall constitute presence in person at the meeting. 3. DIRECTORS 3.01 GENERAL POWERS. The board of directors shall have the control and general management of the affairs and business of the corporation. Such directors shall in all cases act as a board, regularly convened, by a majority, and they may adopt such rules and regulations for the conduct of their meetings and the management of the corporation, as they may deem proper, not inconsistent with these bylaws, the Articles of Incorporation and the laws of the State of Nevada. The board of directors shall further have the right to delegate certain other powers to the Executive Committee as provided in these bylaws. 3.02 NUMBER OF DIRECTORS. The affairs and business of this corporation shall be managed by a board of directors consisting of at least one member who must be at least eighteen (18) years old. 3 3.03 ELECTION. The directors of the corporation shall be elected at the annual meeting of the shareholders, except as hereinafter otherwise provided for the filling of vacancies. Each director shall hold office for a term of one year and until his successor shall have been duly chosen and shall have qualified, or until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. 3.04 VACANCIES IN THE BOARD. Any vacancy in the board of directors occurring through the year through death, resignation, removal or other cause, including vacancies caused by an increase in the number of directors, shall be filled for the unexpired portion of the director's term by the remaining directors. A majority of the remaining directors shall constitute a quorum, at any special meeting of the board called for the purpose of filling a vacancy on the board, or at any regular meeting thereof. 3.05 DIRECTORS MEETINGS. The annual meeting of the board of directors shall be held each year immediately following the annual meeting of the shareholders. Other regular meetings of the board of directors shall from time to time by resolution be prescribed. No further notice of such annual or regular meeting of the board of directors need by given. 3.06 SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the president or any director. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the State of Nevada, as the place for holding any special meeting of the board of directors called by them. 3.07 NOTICE. Notice of any special meeting shall be given at least twenty-four hours previous thereto by written notice if personally delivered, or five days previous thereto if mailed to each director at his business address, or by telegram. If mailed, such notice shall be deemed to have been delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice is given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 3.08 CHAIRMAN. At all meetings of the board of directors, the president shall serve as chairman, or in the absence of the president, the directors present shall choose by majority vote a director to preside as chairman. 3.09 QUORUM AND MANNER OF ACTING. A majority of the directors shall constitute a quorum for the transaction of business at any meeting and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors. In the absence of a quorum, the majority of the directors present may adjourn any meeting from time to time until a quorum be had. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such. Directors may participate in the meeting by telephone conference or similar methods of communication by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at the meeting. 3.10 REMOVAL OF DIRECTORS. Any one or more of the directors may be removed either with or without cause at any time by the vote or written consent of the shareholders representing two-thirds of the issued and outstanding capital stock entitle to voting power. However, if cumulative voting is provided under Section 2.14, a particular director may not be removed if any shareholder who has the ability to elect the director does not consent to his removal. 3.11 VOTING. At all meetings of the board directors, each director is to have one vote, irrespective of the number of shares of stock that he may hold. 3.12 COMPENSATION. By resolution of the board of directors, the directors may be paid their expenses, if any of attendance at each meeting of the board, and may be paid a fixed sum for attendance at meetings or a stated salary of directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 4 3.13 PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken, shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by certified or registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 4. EXECUTIVE COMMITTEE 4.01 NUMBER AND ELECTION. The board of directors may, in its discretion, appoint from its membership one or more Executive Committee(s). Each committee shall include at least one director and may include natural persons who are not directors. Each committee member shall serve at the pleasure of the board of directors. 4.02 AUTHORITY. An Executive Committee is authorized to take any action which the board of directors could take, except that an Executive Committee shall not have the power either to issue or authorize the issuance of shares of capital stock, to amend the bylaws, or to take any action specifically prohibited by the bylaws, or a resolution of the board of directors. Any authorized action taken by an Executive Committee shall be as effective as if it had been taken by the full board of directors. 4.03 REGULAR MEETINGS. Regular meetings of an Executive Committee may be held within or without the State of Nevada at such time and place as the Executive Committee may provide from time to time. 4.04 SPECIAL MEETINGS. Special meetings of an Executive Committee may be called by or at the request of the president or any member of the Executive Committee. 4.05 NOTICE. Notice of any special meeting shall be given at least one day previous thereto by written notice, telephone, telegram or in person. Neither the business to be transacted, nor the purpose of a regular or special meeting of an Executive Committee need be specified in the notice or waiver of such notice of such meeting. A member may waive notice of any meeting of an Executive Committee. The attendance of a member at any meeting shall constitute a waiver of notice of such meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 4.06 QUORUM. A majority of the members of an Executive Committee shall constitute a quorum for the transaction of business at any meeting of the Executive Committee; provided that if fewer than a majority of the members are present at said meeting a majority of the members present may adjourn the meeting from time to time without further notice. 4.07 MANNER OF ACTING. The act of the majority of the members present at a meeting at which a quorum is present shall be the act of an Executive Committee, and said Committee shall keep regular minutes of its proceedings which shall at all times be open for inspection by the board of directors. Members of an Executive Committee may participate in a meeting by telephone conference or similar methods of communication by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at the meeting. 4.08 PRESUMPTION OF ASSENT. A member of an Executive Committee who is present at a meeting of the Executive Committee at which action on any corporate matter is taken, shall be conclusively presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof, or shall forward such dissent by certified or registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a member of an Executive Committee who voted in favor of such action. 5 5. OFFICERS 5.01 NUMBER. The officers of the corporation shall be a president, a treasurer and a secretary and such other or subordinate officers as the board of directors may from time to time elect. One person may hold the office and perform the duties of one or more of said officers. No officer need be a member of the board of directors. 5.02 ELECTION, TERM OF OFFICE, QUALIFICATIONS. The officers of the corporation shall be chosen by the board of directors and they shall be elected annually at the meeting of the board of directors held immediately after each annual meeting of the shareholders except as hereinafter otherwise provided for filling vacancies. Each officer shall hold his office until his successor has been duly chosen and has qualified, or until his death, or until he resigns or has removed in the manner hereinafter provided. 5.03 REMOVAL. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors at any time whenever in its judgment the best interests of the corporation would be served thereby, and such removal shall be without prejudice to the contract rights, if any, of the person so removed. 5.04 VACANCIES. All vacancies in any office shall be filled by the board of directors without undue delay, at any regular meeting, or at a meeting specially called for that purpose. 5.05 PRESIDENT. The president shall be the chief executive officer of the corporation and shall have general supervision over the business of the corporation and over its several officers, subject, however, to the control of the board of directors. He may sign, with the treasurer or with the secretary or any other proper officer of the corporation authorized by the board of directors, certificates for shares of the capital stock of the corporation; may sign and execute in the name of the corporation deeds, mortgages, bonds, contracts or other instruments authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation; and in general shall perform all duties incident to the duties of the president, and such other duties as from time to time may be assigned to him by the board of directors. 5.06 VICE PRESIDENT. If the board elects a vice president, such vice president shall in the absence or incapacity of the president, or as ordered by the board of directors, perform the duties of the president, or such other duties or functions as may be given to him by the board of directors from time to time. 5.07 TREASURER. The treasurer shall have the care and custody of all the funds and securities of the corporation and deposit the same in the name of the corporation in such bank or trust company as the board of directors may designate; he may sign or countersign all checks, drafts and orders for the payment of money and may pay out and dispose of same under the direction of the board of directors, and may sign or countersign all notes or other obligations of indebtedness of the corporation; he may sign with the president or vice president, certificates for shares of stock of the corporation; he shall at all reasonable times exhibit the books and accounts to any director or shareholder of the corporation under application at the office of the company during business hours; and he shall, in general, perform all duties as from time to time may be assigned to him by the president or by the board of directors. The board of directors may at its discretion require that each officer authorized to disburse the funds of the corporation be bonded in such account as it may deem adequate. 5.08 SECRETARY. The secretary shall keep the minutes of the meetings of the board of directors and also the minutes of the meetings of the shareholders; he shall attend to the giving and serving of all notices of the corporation and shall affix the seal of the corporation to all certificates of stock, when signed and countersigned by the duly authorized officers; he may sign certificates for shares of stock of the corporation; he may sign or countersign all checks, drafts and orders for payment of money; he shall have charge of the certificate book and such other books and papers as the board may direct; he shall keep a stock book containing the names, alphabetically arranged, of all persons who are shareholders of the corporation, showing their places or residence, the number of shares of stock held by them respectively, the time when they respectively became the owners thereof, and the amount paid thereof, and he shall, in general, perform 6 all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. 5.09 OTHER OFFICERS. The board of directors may authorized and empower other persons or other officers appointed by it to perform the duties and functions of the officers specifically designated above by special resolution in each case. 5.10 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant treasurers shall respectively, as may be required by the board of directors, give bonds for the faithful discharge of their duties, in such sums and with such sureties as the board of directors shall determine. The assistant secretaries as thereunto authorized by the board of directors may sign with the president or vice president certificates for shares of the capital stock of the corporation, the issue of which have been authorized by resolution of the board of directors. The assistant treasurer and assistant secretaries shall, in general, perform such duties as may be assigned to them by the treasurer or the secretary respectively, or by the president or by the board of directors. 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS Except as hereinabove stated otherwise, the corporation shall indemnify all of its officers and directors, past, present and future, against any and all expenses incurred by them, and each of them including but not limited to legal fees, judgments and penalties which may be incurred, rendered or levied in any legal action brought against any or all of them for or on account of any act or omission alleged to have been committed while acting within the scope of their duties as officers of directors of this corporation. 7. CONTRACTS, LOANS CHECKS AND DEPOSITS 7.01 CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. 7.02 LOANS. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors or approved by a loan committee appointed by the board of directors and charged with the duty of supervising investments. Such authority may be general or confined to specific instances. 7.03 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolutions of the board of directors. 7.04 DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select. 8. CAPITAL STOCK 8.01 CERTIFICATES FOR SHARES. Certificates for shares of stock of the corporation shall be in such form as shall be approved by the incorporators or by the board of directors. The certificates shall be numbered in the order of their issue, shall be signed by the president or the vice president and by the secretary or the treasurer, or by such other person or officer as may be designated by the board of directors; and the seal of the corporation shall be a fixed thereto, which said signatures of the said duly designated officers and of the seal of the corporation. Every certificate authenticated by a facsimile of such signatures and seal must be countersigned by a transfer agent to be appointed by the board of directors, before issuance. 8.02 TRANSFER OF STOCK. Shares of the stock of the corporation may be transferred by the delivery of the certificate accompanied either by an assignment in writing on the back of the certificate or by written power of attorney to sell, assign, and transfer the same on the books of the corporation, signed by 7 the person appearing by the certificate to be the owner of the shares represented thereby, together with all necessary documents. Such transfer shall be made on the books of the corporation upon surrender thereof so signed or endorsed. The person registered on the books of the corporation as the owner of any shares of stock shall be entitled to all the rights of ownership with respect to such shares. 8.03 REGULATIONS. The board of directors may make such rules and regulations as it may deem expedient not inconsistent with the bylaws or with the articles of incorporation, concerning the issue, transfer and registration of certificates for shares of stock of the corporation. It may appoint a transfer agent or a registrar of transfers, or both, and it may require all certificates to bear the signature of either or both. 8.04 LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost or destroyed. When authorized such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. 9. DIVIDENDS 9.01 The corporation shall be entitled to treat the holder of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided in the laws of Nevada. 9.02 Dividends on the capital stock of the corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. 9.03 The board of directors may close the transfer books in its discretion for a period not exceeding fifteen (15) days preceding the date fixed for holding any meeting, annual or special of the shareholders, or the day appointed for the payment of a dividend. 9.04 Before payment of any dividend or making any distribution or profits, there may be set aside out of funds of the corporation available for dividends, such sum or sums as the directors may from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for any such other purpose as the directors shall think conducive to the interest of the corporation, and the directors shall modify or abolish any such reserve in the manner in which it was created. 10. SEAL The board of directors shall provide a corporate seal which shall be in the form of a circle and shall bear the full name of the corporation, the year of its incorporation and the words "Corporate Seal, State of Nevada". 11. WAIVER OF NOTICE Whenever any notice whatever is required to be given under the provisions of these bylaws, or under the laws of the State of Nevada, or under the provisions of the articles of incorporation, a waiver in writing signed by the person or person entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 8 12. DOCUMENT COPIES Except as provided in Section 8.01 and where otherwise limited by law, any photocopy, facsimile copy, or other reliable reproduction of any writing may be substituted for the original writing or any original signature affixed thereto for any corporate purpose for which the original could be used, provided that the copy or reproduction is a complete reproduction of the entire original writing. 13. AMENDMENTS These bylaws may be altered, amended or repealed and new bylaws may be adopted at any regular or special meeting of the shareholders by a vote of the shareholders owning a majority of the shares and entitled to vote thereat. These bylaws may also be altered, amended or repealed and new bylaws may be adopted at any regular or special meeting of the board of directors of the corporation (if notice of such alteration or repeal be contained in the notice of such special meeting) by a majority vote of the directors present at the meeting at which a quorum is present, but any such amendment shall not be inconsistent with or contrary to the provision of the amendment adopted by the shareholders. If cumulative voting is provided, no amendment may restrict the rights of any shareholder to elect or remove directors except by the unanimous vote of all shareholders. The undersigned, being the secretary of INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation, hereby acknowledges that the above and foregoing bylaws were duly adopted as the bylaws of said corporation on the 22nd day of June, 1994. IN WITNESS WHEREOF, I have hereunto subscribed my name this 22nd day of June, 1994. /s/ LEISA C. STILWELL LEISA C. STILWELL, Secretary 9 EX-4.1 19 REVOLVING PROMISSORY NOTE (FLOATING RATE) (THIS "NOTE") THIS NOTE IS SECURED BY ALL SECURITY THIS IS A RENEWAL, EXTENSION, AGREEMENTS COVERING PERSONAL PROPERTY MODIFICATION OR DEFERRAL OF NOTE EXECUTED BY BORROWER(S) IN FAVOR OF BANK 4004/0040001628/000001 BEFORE OR AT THE SAME TIME AS THIS NOTE. - -------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF BORROWERS INDUSTRIAL DATA SYSTEMS, INC. 600 CENTURY PLAZA DRIVE BUILDING 140 HOUSTON TX 77073- - -------------------------------------------------------------------------------- U.S. $ (THE "DATE") 350,000.00 JUNE 11, 1996 - -------------------------------------------------------------------------------- ACCOUNT NUMBER/NOTE NUMBER TRANSACTION CODE TELLER OFFICER 4004/0040001628/000001 RI JMY 913220 - -------------------------------------------------------------------------------- FOR VALUE RECEIVED, the "Borrower," (jointly and severally if more than one), promises to pay to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Bank") on or before JUNE 11, 1997, at its office at 712 MAIN HOUSTON, TEXAS 77252-2558, or at such other location as Bank may designate, in immediately available funds, ***THREE HUNDRED FIFTY THOUSAND AND NO/100*** UNITED STATES DOLLARS (U.S. $350,000.00) (the "Maximum Amount of Note") or the aggregate unpaid amount of all advances hereunder, whichever is less. Borrower will also pay interest on the unpaid principal balance outstanding from time to time at a rate per annum equal to the lesser of (i) the sum of the Prime Rate (as hereinafter defined) from time to time in effect plus ***ONE AND NO/1000 *** percent (1.000%), (the "STATED RATE") or (ii) the maximum nonusurious rate of interest from time to time permitted by applicable law, (the "HIGHEST LAWFUL RATE"). If the Stated Rate at any time exceeds the Highest Lawful Rate, the actual rate of interest to accrue on the unpaid principal amount of this Note will be limited to the Highest Lawful Rate, but any subsequent reductions in the Stated Rate due to reductions in the Prime Rate will not reduce the interest rate payable upon the unpaid principal amount of this note below the Highest Lawful Rate until the total amount of interest accrued on this Note equals the amount of interest which would have accrued if the Stated Rate had at all times been in effect. "PRIME RATE" means the rate determined from time to time by Bank as its prime rate. The Prime Rate shall change automatically from time to time without notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE BANK'S LOWEST RATE. If Texas law determines the Highest Lawful Rate, Bank has elected the "indicated" (weekly) ceiling as defined in the Texas Credit Code or any successor statute. Bank may from time to time, as to current and future balances, elect and implement any other ceiling under such Code and/or revise the Index, formula or provisions of law used to compute the rate on this open-end account by notice to Borrower, if and to the extent permitted by, and in the manner provided in such Code. Each advance must be at least N/A UNITED STATES DOLLARS (U.S.$ N/A ) unless the amount available for borrowing under this Note is less. Accrued and unpaid interest is due and payable MONTHLY, beginning on JULY 11, 1996, and continuing on the 11TH day of each MONTH thereafter and at maturity when all unpaid principal and accrued and unpaid interest is finally due and payable. Interest will be computed on the basis of the actual number of days elapsed and a year comprised of: H 365 (or 366 as the case may be) days H 360 days, unless such calculation would result in a usurious interest rate, in which case such interest will be calculated on the basis of a 365 or 366 day year, as the case may be. All past-due principal and interest on this Note will, at Bank's option, bear interest at the Highest Lawful Rate, or if applicable law does not provide for a maximum nonusurious rate of interest, at a rate per annum equal to 18%. In addition to all principal and accrued interest on this Note, Borrower agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all owners and holders of this Note in collecting this Note through probate, reorganization, bankruptcy or any other proceeding; and (b) reasonable attorney's fees if and when this Note is placed in the hands of an attorney for collection. Borrower and Bank intend to conform strictly to applicable usury laws. Therefore, the total amount of interest (as defined under applicable law) contracted for, charged or collected under this Note will never exceed the Highest Lawful Rate. If Bank contracts for, charges or receives any excess interest, it will be deemed a mistake. Bank will automatically reform the contract or charge to conform to applicable law, and if excess interest has been received, Bank will either refund the excess to Borrower or credit the excess on the unpaid principal amount of this Note. All amounts constituting interest will be spread throughout the full term of this Note in determining whether interest exceeds lawful amounts. The unpaid principal balance of this Note at any time will be the total amounts advanced by Bank, less the amount of all payments or prepayments of principal. Absent manifest error, the records of Bank will be conclusive as to amounts owed. Subject to the terms and conditions of this Note and the Loan Documents, Borrower may use all or any part of the credit provided for herein at any time before the maturity of this Note and may borrow, repay and reborrow. There is no limitation on the number of advances made so long as the total unpaid principal amount at any time outstanding does not exceed the Maximum Amount of Note. Borrower may at any time pay the full amount or any part of this Note without the payment of any premium or fee. Any partial prepayment will be in the amount of U.S.$ N/A (U.S.$ N/A ), or an integral multiple thereof. All payments may, at Bank's sole option, be applied to accrued interest, to principal, or to both. "LOAN DOCUMENT" means this Note and any document or instrument evidencing, securing, guaranteeing or given in connection with this Note. "OBLIGATIONS" means all principal, interest and other amounts which are or become owing under this Note or any other Loan Document. "OBLIGOR" means Borrower and any guarantor, surety, co-signer, general partner or other person who may now or hereafter be obligated to pay all or any part of the Obligations. Where appropriate the neuter gender includes the feminine and the masculine and the singular number includes the plural number. Each of the following events or conditions is an "EVENT OF DEFAULT:" (1) any Obligor fails to pay any of the Obligations when due; (2) any warranty, representation or statement now or hereafter contained in or made in connection with any Loan Document was false or misleading in any respect when made; (3) any Obligor violates any covenant, condition or agreement contained in any Loan Document; (4) any Obligor fails or refuses to submit financial information requested by Bank or to permit Bank to inspect its books and records on request; (5) any event of default occurs under any other Loan Document; (6) any individual Obligor dies, or any Obligor that is an entity dissolves; (7) a receiver, conservator or similar official is appointed for any Obligor or any Obligor's assets; (8) any petition is filed by or against any Obligor under any bankruptcy, insolvency or similar law; (9) any Obligor makes an assignment for the benefit of creditors; (10) a final judgment is entered against any Obligor and remains unsatisfied for 30 days after entry, or any property of any Obligor is attached, garnished or otherwise made subject to legal process; (11) any material adverse change occurs in the business, assets, affairs or financial condition of any Obligor; and (12) Borrower is in default of any other obligations to or any other agreement with Bank. If any Event of Default occurs, then Bank may do any or all of the following: (i) cease making advances hereunder; (ii) declare the Obligations to be immediately due and payable, without notice of acceleration or of intention to accelerate, presentment and demand or protest or notice of any kind, all of which are hereby expressly waived; (iii) set off, in any order, against the Obligations any debt owing by Bank to any Obligor, including, but not limited to, any deposit account, which right is hereby granted by each Obligor to Bank; and (iv) exercise any and all other rights under the Loan Document, at law, in equity or otherwise. No waiver of any default is a waiver of any other default. Bank's delay in exercising any right or power under any Loan Document is not a waiver of such right or power. Each Obligor severally waives notice, demand, presentment for payment, notice of nonpayment, notice of intent to accelerate, notice of acceleration, protest, notice of protest, and the filing of suit and diligence in collecting this Note and all other demands and notices, and consents and agrees that its liabilities and obligations will not be released or discharged by any or all of the following, whether with or without notice to it or any other Obligor, and whether before or after the stated maturity hereof: (i) extensions of the time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases or substitutions of any collateral or any Obligor; and (v) failure, if any, to perfect or maintain perfection of any security interest in any collateral. Each Obligor agrees that acceptance of any partial payment will not constitute a waiver and that waiver of any default will not constitute waiver of any prior or subsequent default. Page 1 of 2 Borrower represents and agrees that: all advances evidenced by this Note are and will be for business, commercial, investment or other similar purpose and not primarily for personal, family, or household use as such terms are used in Chapter One of the Texas Credit Code. Borrower represents and agrees that each of the following statements is true unless the box preceding that statement is checked and initialed by Borrower and Bank: (i) [ ]_______ ________ No advances will be used primarily for agricultural purposes as such term is used in the Texas Credit Code (ii) [ ] ________ ________ No advances will be used for the purpose of purchasing or carrying any margin stock as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the "Board"). Notwithstanding anything contained herein or in any other Loan Document, if this is a consumer credit obligation (as defined or described in 12 C.F.R. 227, Regulation AA, promulgated by the Board), the security for this credit obligation will not extend to any non-possessory security interest in household goods (as defined in Regulation AA) other than a purchase money security interest, and no waiver of any notice contained herein or therein will extend to any waiver of notice prohibited by Regulation AA. Chapter 15 of the Texas Credit Code shall not apply to this Note or to any advance evidenced by this Note. This Note is governed by Texas law. If any provision of this Note is illegal or unenforceable, that illegality or unenforceability will not affect the remaining provisions of this Note. BORROWERS(S) AND BANK AGREED THAT THIS NOTE WILL BE PERFORMED IN THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS, AND THAT SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY BORROWER(S) OR BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED ABOVE. BANK MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER(S) OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER JURISDICTIONS OR VENUES. For purposes of this Note, any assignee or subsequent holder of this Note will be considered the "Bank," and each successor to Borrower will be considered the "Borrower." Each Borrower and cosigner represents that if it is not a natural person, it is duly organized and validly existing and in good standing under the laws of the state of its incorporation or organization; has full power to own its properties and to carry on its business as now conducted; is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification desirable; and has not commenced any dissolution proceedings. Each Borrower and cosigner that is subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not required to comply with Section 3.05(d) of the TRPA and agrees that Bank may proceed directly against one or more partners or their property without first seeking satisfaction from partnership property. Each Borrower and cosigner represents that if it conducts business under an assumed business or professional name it has properly filed Assumed Name Certificate(s) in the office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each of the persons signing below as Borrower or cosigner represents that he/she has full requisite power and authority to execute and deliver this Note to Bank on behalf of the party for whom he/she signs and to bind such party to the terms and conditions of this Note and that this Note is enforceable against such party. NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT. THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date. Signature(s) of BORROWER(S): INDUSTRIAL DATA SYSTEMS, INC. /s/ HULDA L. COSKEY VP Date:6/11/96 BY: HULDA L. COSKEY TITLE: Date: Date: Date: Date: Date: The undersigned hereby cosigns this Note: Signature of COSIGNER: _________________________________________________________ Address of Cosigner: ___________________________________________________________ (Bank's signature is provided as its acknowledgement of the above as the final written agreement between the parties and as its agreement with each Borrower subject to TRPA that Bank is not required to comply with Section 3.05(d) of TRPA.) BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ JOHN BYERSON John Byerson Title: BANKING OFFICER Page 2 of 2 EX-4.2 20 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE NOTE MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER SUCH ACT OR AN OPINION OF COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER THE ACT. INDUSTRIAL DATA SYSTEMS CORPORATION 12% PROMISSORY NOTE PLUS RESTRICTED COMMON STOCK FOR VALUE RECEIVED, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation, located at 14900 Woodham, Suite 170, Houston, Texas 77073 (HEREINAFTER REFERRED TO AS "MAKER"), promises to pay to the order of JOHN H. CAMERON (HEREINAFTER REFERRED TO AS "PAYEE"), at 1602 Hovenden, Katy, Texas 77450 or at such other place and to such other party or parties as the owner and holder hereof may from time to time designate, in writing, the sum of $5,000.000, together with interest (COMPUTED ON THE BASIS OF A 360-DAY YEAR OF TWELVE 30-DAY MONTHS) on the principal amount that remains unpaid from the date hereof until maturity at a rate of 12% per annum (THE "STATED RATE"). All past due principal and interest (SUBJECT TO THE PROVISIONS OF THIS NOTE CONCERNING THE CALCULATION OF INTEREST HEREUNDER) shall bear interest at the Stated Rate. All principal and accrued interest on this Note shall be due and payable on December 31, 1994 (THE "DUE DATE"). Contemporaneously with the execution of this Note, the Maker is issuing to Lender 15,000 shares of Maker's Restricted Common Stock. Other terms and provisions of such Restricted Common Stock are as set forth therein. Upon the nonpayment of this Note on the Due Date, and the same is placed in the hands of an attorney for collection, or suit is brought on same, or the same is collected through any judicial proceeding whatsoever, or if any action or foreclosure be had hereon, then the undersigned agrees and promises to pay an additional amount as reasonable, calculated and foreseeable attorneys' and collection fees incurred by Payee in connection with enforcing its rights herein contemplated. It is expressly provided and stipulated that notwithstanding any provision of this Note or any other instrument evidencing or securing the loan herein set forth, in no event shall the aggregate of all interest paid by the Maker to the Payee hereunder ever exceed the Maximum Non-Usurious Rate (AS DEFINED BELOW) of interest that may lawfully be charged Maker under the laws of the State of Texas or United States Federal Government, as applicable, on the principal balance of this Note remaining unpaid. In this connection, it is expressly stipulated and agreed that it is the intent of the Payee and the Maker in the execution and delivery of this Note to contract in furtherance thereof, none of the terms of this Note, or said other instruments, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, at any interest rate in excess of the Maximum Non-Usurious Rate of interest permitted to be charged the Maker under the laws of the State of Texas or United States Federal Government, as applicable. The Maker or any guarantors, endorsers or other parties now or hereinafter becoming liable for payment of the Note shall never be liable for interest in excess of the Maximum Non-Usurious Rate of interest that may lawfully be charged under the laws of the State of Texas or United States Federal Government, as applicable, and the provisions of this paragraph shall govern over all other provisions of this Note, and all other instruments evidencing or securing the loan evidenced hereby, should such provision be in apparent conflict herewith. Specifically and without limiting the generality of the foregoing paragraph, it is expressly provided that: (i) In the event of prepayment of the principal of this Note, which shall be permitted hereunder, or the payment of the principal of this Note prior to the stated maturity date hereof resulting from acceleration of maturity of this Note, if the aggregate amounts of interest accruing hereon prior to such payment plus the amount of any interest accruing after maturity and plus any other amount paid or accrued in connection with the loan evidenced hereby which by law are deemed interest on the loan evidenced by the Note and which aggregate amounts paid or accrued (IF CALCULATED IN ACCORDANCE WITH THE PROVISIONS OF THIS NOTE OTHER THAN THIS PARAGRAPH) would exceed the Maximum Non-Usurious Ratio of interest that could lawfully be charged as above mentioned on the unpaid principal balance of the loan evidenced by this Note from time to time advanced (LESS ANY DISCOUNT) and remaining unpaid from the date hereof to the date of final payment thereof, then in such event the amount of such excess shall be credited, as of the date paid, toward the payment of the principal of this Note so as to reduce the amount of the final payment of principal due on this Note. (ii) If under any circumstances the aggregate amounts paid on the loan evidenced by this Note prior to and incident to the final payment hereof include amounts that by law are deemed interest and which would exceed the Maximum Non-Usurious Rate of interest that could lawfully have been charged or collected on this Note, as above mentioned, Maker stipulates that such payment and collection will have been and will be deemed to have been the result of a mathematical error on the part of both Maker and the holder of this Note, and the party receiving such excess payment shall promptly refund the amount of such excess (TO THE EXTENT ONLY OF THE EXCESS OF SUCH INTEREST PAYMENTS ABOVE THE MAXIMUM AMOUNT WHICH COULD LAWFULLY HAVE BEEN COLLECTED AND RETAINED) upon the discovery of such error by the party receiving such payment. Time shall be of the essence in performing all actions. This Note has been executed and delivered and shall be construed in accordance with and governed by the laws of the State of Texas and of the United States of America. In connection with Article 5069-1.04, Vernon's Annotated Civil Statutes, as amended, Maker hereby agrees that the "Maximum Non-Usurious Rate of interest" which may be charged as herein contemplated shall be the "indicated weekly ceiling rate" as defined by said Article, as amended, provided that Payee may also rely on any alternative Maximum Non-Usurious Rate of interest provided by other applicable laws if such other rates are higher than that allowed by said Article, as amended. It is agreed that if the Maximum Non-Usurious Rate is, subsequent to the date hereof, increased or decreased by statute or other official action, then Maker agrees that the new Maximum Non-Usurious Rate will be applicable to this Note and this loan shall be evidenced hereby from the effective date of the new Maximum Non-Usurious Rate forward, unless such application is precluded by the relevant statute or official action, or by the general law of the applicable jurisdictions. The Maker of this Note agrees that this Note shall be freely assignable to any assignee of Payee, subject to compliance with applicable securities laws. ------------------------------------------------------ Page 2 of 3 INDUSTRIAL DATA SYSTEMS CORPORATION 12% Promissory Note Plus Restricted Common Stock This Note may be prepaid in whole or in part at any time provided that all accrued and unpaid interest is concurrently paid and in the event that interest has not accrued and been paid for a period of at least 60 days, the Company shall, in addition to all accrued and unpaid interest on the entire outstanding balance of the Note, be required to pay an additional amount equal to the difference between 60 days of interest on the prepaid amount, determined at the aforestated interest rate and the actual amount of interest accrued on such prepaid amount. Any partial prepayment shall be applied first to accrued interest and then to the principal hereof. INDUSTRIAL DATA SYSTEMS CORPORATION By: /s/ JOE F. MOORE, JR. Joe F. Moore, Jr. Director Dated this 23rd day of July, 1994. ____________________________________________________________ Page 3 of 3 INDUSTRIAL DATA SYSTEMS CORPORATION 12% Promissory Note Plus Restricted Common Stock EX-4.3 21 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE NOTE MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER SUCH ACT OR AN OPINION OF COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER THE ACT. INDUSTRIAL DATA SYSTEMS CORPORATION 12% PROMISSORY NOTE PLUS RESTRICTED COMMON STOCK FOR VALUE RECEIVED, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation, located at 14900 Woodham, Suite 170, Houston, Texas 77073 (HEREINAFTER REFERRED TO AS "MAKER"), promises to pay to the order of CHARLES & ELIZABETH POLLOCK (HEREINAFTER REFERRED TO AS "PAYEE"), at 1962 Norcrest, Houston Texas 77055 or at such other place and to such other party or parties as the owner and holder hereof may from time to time designate, in writing, the sum of $5,000.00, together with interest (COMPUTED ON THE BASIS OF A 360-DAY YEAR OF TWELVE 30-DAY MONTHS) on the principal amount that remains unpaid from the date hereof until maturity at a rate of 12% per annum (THE "STATED RATE"). All past due principal and interest (SUBJECT TO THE PROVISIONS OF THIS NOTE CONCERNING THE CALCULATION OF INTEREST HEREUNDER) shall bear interest at the Stated Rate. All principal and accrued interest on this Note shall be due and payable on December 31, 1994 (THE "DUE DATE"). Contemporaneously with the execution of this Note, the Maker is issuing to Lender 15,000 shares of Maker's Restricted Common Stock. Other terms and provisions of such Restricted Common Stock are as set forth therein. Upon the nonpayment of this Note on the Due Date, and the same is placed in the hands of an attorney for collection, or suit is brought on same, or the same is collected through any judicial proceeding whatsoever, or if any action or foreclosure be had hereon, then the undersigned agrees and promises to pay an additional amount as reasonable, calculated and foreseeable attorney's and collection fees incurred by Payee in connection with enforcing its rights herein contemplated. It is expressly provided and stipulated that notwithstanding any provision of this Note or any other instrument evidencing or securing the loan herein set forth, in no event shall the aggregate of all interest paid by the Maker to the Payee hereunder ever exceed the Maximum Non-Usurious Rate (AS DEFINED BELOW) of interest that may lawfully be charged Maker under the laws of the State of Texas or United States Federal Government, as applicable, on the principal balance of this Note remaining unpaid. In this connection, it is expressly stipulated and agreed that it is the intent of the Payee and the Maker in the execution and delivery of this Note to contract in furtherance thereof, none of the terms of this Note, or said other instruments, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, at any interest rate in excess of the Maximum Non-Usurious Rate of interest permitted to be charged the Maker under the laws of the State of Texas or United States Federal Government, as applicable. The Maker or any guarantors, endorsers or other parties now or hereafter becoming liable for payment of the Note shall never be liable for interest in excess of the Maximum Non-Usurious Rate of interest that may lawfully be charged under the laws of the State of Texas or United States Federal Government, as applicable, and the provisions of this paragraph shall govern over all other provisions of this Note, and all other instruments evidencing or securing the loan evidenced hereby, should such provision be in apparent conflict herewith. Specifically and without limiting the generality of the foregoing paragraph, it is expressly provided that: (i) In the event of prepayment of the principal of this Note, which shall be permitted hereunder, or the payment of the principal of this Note prior to the stated maturity date hereof resulting from acceleration of maturity of this Note, if the aggregate amounts of interest accruing hereon prior to such payment plus the amount of any interest accruing after maturity and plus any other amount paid or accrued in connection with the loan evidenced hereby which by law are deemed interest on the loan evidenced by the Note and which aggregate amounts paid or accrued (IF CALCULATED IN ACCORDANCE WITH THE PROVISIONS OF THIS NOTE OTHER THAN THIS PARAGRAPH) would exceed the Maximum Non-Usurious Rate of interest that could lawfully be charged as above mentioned on the unpaid principal balance of the loan evidenced by this Note from time to time advanced (LESS ANY DISCOUNT) and remaining unpaid from the date hereof to the date of final payment thereof, then in such event the amount of such excess shall be credited, as of the date paid, toward the payment of the principal of this Note so as to reduce the amount of the final payment of principal due on this Note. (ii) If under any circumstances the aggregate amounts paid on the loan evidenced by this Note prior to and incident to the final payment hereof include amounts that by law are deemed interest and which would exceed the Maximum Non-Usurious Rate of interest that could lawfully have been charged or collected on this Note, as above mentioned, Maker stipulates that such payment and collection will have been and will be deemed to have been the result of a mathematical error on the part of both Maker and the holder to this Note, and the party receiving such excess payment shall promptly refund the amount of such excess (TO THE EXTENT ONLY OF THE EXCESS OF SUCH INTEREST PAYMENTS ABOVE THE MAXIMUM AMOUNT WHICH COULD LAWFULLY HAVE BEEN COLLECTED AND RETAINED) upon the discovery of such error by the party receiving such payment. Time shall be of the essence in performing all actions. This Note has been executed and delivered and shall be construed in accordance with and governed by the laws of the State of Texas and of the United States of America. In connection with Article 5069-1.04, Vernon's Annotated Civil Statutes, as amended, Maker hereby agrees that the "Maximum Non-Usurious Rate of interest" which may be charged as herein contemplated shall be the "indicated weekly ceiling rate" as defined by said Article, as amended, provided that Payee may also rely on any alternative Maximum Non-Usurious Rate of interest provided by other applicable laws if such other rates are higher than that allowed by said Article, as amended. It is agreed that if the Maximum Non-Usurious Rate is, subsequent to the date hereof, increased or decreased by statute or other official action, then Maker agrees that the new Maximum Non-Usurious Rate will be applicable to this Note and this Loan shall be evidenced hereby from the effective date of the new Maximum Non-Usurious Rate forward, unless such application is precluded by the relevant statute or official action, or by the general law of the applicable jurisdiction. The Maker of this Note agrees that this Note shall be freely assignable to any assignee of Payee, subject to compliance with applicable securities laws. ------------------------------- PAGE -2- OF 3 INDUSTRIAL DATA SYSTEMS CORPORATION 12% PROMISSORY NOTE PLUS RESTRICTED COMMON STOCK This Note may be prepaid in whole or in part at any time provided that all accrued and unpaid interest is concurrently paid and in the event that interest has not accrued and been paid for a period of at least 60 days, the Company shall, in addition to all accrued and unpaid interest on the entire outstanding balance of the Note, be required to pay an additional amount equal to the difference between 60 days of interest on the prepaid amount, determined at the aforestated interest rate and the actual amount of interest accrued on such prepaid amount. Any partial prepayment shall be applied first to accrued interest and then to the principal hereof. INDUSTRIAL DATA SYSTEMS CORPORATION By: /s/ JOE F. MOORE, JR. Joe F. Moore, Jr., Director Dated this 23rd day of July, 1994. ------------------------------- PAGE -3- OF 3 INDUSTRIAL DATA SYSTEMS CORPORATION 12% PROMISSORY NOTE PLUS RESTRICTED COMMON STOCK EX-4.4 22 PROMISSORY NOTE $200,000 July 15, 1996 FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the amounts stipulated, the undersigned, WORLD GLORY COMPANY LIMITED PROMISES TO PAY TO THE ORDER OF INDUSTRIAL DATA SYSTEMS CORPORATION the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United States of America, and to pay interest on the unpaid sum from the date of the Note until maturity at the rate of 0.0% per annum, payable as stipulated. This Note is payable as follows: Principal is due on or before February 15, 1997 It is agreed that time is of the essence of this agreement, and that in the event of default in the payment when due, the holder of this Note may declare the entirety of the Note immediately due and payable without notice, and failure to exercise this option shall not constitute a waiver on the part of the holder of the right to exercise it at any other time. This Note was made in consideration for the sale of shares in connection with that certain Subscription Agreement dated July 10, 1996, between Maker and Industrial Data Systems Corporation. If Maker defaults in payment, then the Shares purchased shall be returned. The undersigned hereby agrees to pay all expenses incurred, including an additional 10% on the amount of principal and interest due as attorney's fees, all of which shall become a part of the principal, if this Note is placed in the hands of an attorney for collection, or if collected by suit or through any probate, bankruptcy or any other legal proceedings. Each maker, surety and endorser waives demand, grace, notice, presentment for payment, and protest and agrees and consents that this Note and the liens securing its payment, may be renewed, and the time of payment extended without notice, and without releasing any of the parties. WORLD GLORY COMPANY LIMITED By EX-4.5 23 PROMISSORY NOTE $200,000 July 15, 1996 FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the amounts stipulated, the undersigned, ASIAN HARVEST DEVELOPMENTS LIMITED PROMISES TO PAY TO THE ORDER OF INDUSTRIAL DATA SYSTEMS CORPORATION the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United States of America, and to pay interest on the unpaid sum from the date of the Note until maturity at the rate of 0.0% per annum, payable as stipulated. This Note is payable as follows: Principal is due on or before February 15, 1997. It is agreed that time is of the essence of this agreement, and that in the event of default in the payment when due, the holder of this Note may declare the entirety of the Note immediately due and payable without notice, and failure to exercise this option shall not constitute a waiver on the part of the holder of the right to exercise it at any other time. This Note was made in consideration for the sale of shares in connection with that certain Subscription Agreement dated July 10, 1996, between Maker and Industrial Data Systems Corporation. If Maker defaults in payment, then the Shares purchased shall be returned. The undersigned hereby agrees to pay all expenses incurred, including an additional 10% on the amount of principal and interest due as attorney's fees, all of which shall become a part of the principal, if this Note is placed in the hands of an attorney for collection, or if collected by suit or through any probate, bankruptcy or any other legal proceedings. Each maker, surety and endorser waives demand, grace, notice, presentment for payment, and protest and agrees and consents that this Note and the liens securing its Page 1 of 2 Pages payment, may be renewed, and the time of payment extended without notice, and without releasing any of the parties. ASIAN HARVEST DEVELOPMENTS LIMITED By EX-4.6 24 PROMISSORY NOTE $200,000 July 15, 1996 FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the amounts stipulated, the undersigned, SILVER COURSE CORPORATION PROMISES TO PAY TO THE ORDER OF INDUSTRIAL DATA SYSTEMS CORPORATION the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United States of America, and to pay interest on the unpaid sum from the date of the Note until maturity at the rate of 0.0% per annum, payable as stipulated. This Note is payable as follows: Principal is due on or before February 15, 1997. It is agreed that time is of the essence of this agreement, and that in the event of default in the payment when due, the holder of this Note may declare the entirety of the Note immediately due and payable without notice, and failure to exercise this option shall not constitute a waiver on the part of the holder of the right to exercise it at any other time. This Note was made in consideration for the sale of shares in connection with that certain Subscription Agreement dated July 10, 1996, between Maker and Industrial Data Systems Corporation. If Maker defaults in payment, then the Shares purchased shall be returned. The undersigned hereby agrees to pay all expenses incurred, including an additional 10% on the amount of principal and interest due as attorney's fees, all of which shall become a part of the principal, if this Note is placed in the hands of an attorney for collection, or if collected by suit or through any probate, bankruptcy or any other legal proceedings. Each maker, surety and endorser waives demand, grace, notice, presentment for payment, and protest and agrees and consents that this Note and the liens securing its payment, may be renewed, and the time of payment extended without notice, and without releasing any of the parties. SILVER COURSE CORPORATION By EX-4.7 25 PROMISSORY NOTE $200,000 July 15, 1996 FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the amounts stipulated, the undersigned, PINES INTERVEST CORPORATION PROMISES TO PAY TO THE ORDER OF INDUSTRIAL DATA SYSTEMS CORPORATION the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) in lawful money of the United States of America, and to pay interest on the unpaid sum from the date of the Note until maturity at the rate of 0.0% per annum, payable as stipulated. This Note is payable as follows: Principal is due on or before February 15, 1997 It is agreed that time is of the essence of this agreement, and that in the event of default in the payment when due, the holder of this Note may declare the entirety of the Note immediately due and payable without notice, and failure to exercise this option shall not constitute a waiver on the part of the holder of the right to exercise it at any other time. This Note was made in consideration for the sale of shares in connection with that certain Subscription Agreement dated July 10, 1996, between Maker and Industrial Data Systems Corporation. If Maker defaults in payment, then the Shares purchased shall be returned. The undersigned hereby agrees to pay all expenses incurred, including an additional 10% on the amount of principal and interest due as attorney's fees, all of which shall become a part of the principal, if this Note is placed in the hands of an attorney for collection, or if collected by suit or through any probate, bankruptcy or any other legal proceedings. Each maker, surety and endorser waives demand, grace, notice, presentment for payment, and protest and agrees and consents that this Note and the liens securing its payment, may be renewed, and the time of payment extended without notice, and without releasing any of the parties. PINES INTERVEST CORPORATION By EX-4.8 26 PROMISSORY NOTE $199,999 July 15, 1996 FOR VALUE RECEIVED, without grace, in the manner, on the dates, and in the amounts stipulated, the undersigned, WILTON ASSETS CORP PROMISES TO PAY TO THE ORDER OF INDUSTRIAL DATA SYSTEMS CORPORATION the sum of ONE HUNDRED NINETY NINE THOUSAND NINE HUNDRED NINETY NINE ($199,999) in lawful money of the United States of America, and to pay interest on the unpaid sum from the date of the Note until maturity at the rate of 0.0% per annum, payable as stipulated. This Note is payable as follows: Principal is due on or before February 15, 1997 It is agreed that time is of the essence of this agreement, and that in the event of default in the payment when due, the holder of this Note may declare the entirety of the Note immediately due and payable without notice, and failure to exercise this option shall not constitute a waiver on the part of the holder of the right to exercise it at any other time. This Note was made in consideration for the sale of shares in connection with that certain Subscription Agreement dated July 10, 1996, between Maker and Industrial Data Systems Corporation. If Maker defaults in payment, then the Shares purchased shall be returned. The undersigned hereby agrees to pay all expenses incurred, including an additional 10% on the amount of principal and interest due as attorney's fees, all of which shall become a part of the principal, if this Note is placed in the hands of an attorney for collection, or if collected by suit or through any probate, bankruptcy or any other legal proceedings. Each maker, surety and endorser waives demand, grace, notice, presentment for payment, and protest and agrees and consents that this Note and the liens securing its payment, may be renewed, and the time of payment extended without notice, and without releasing any of the parties. WILTON ASSETS CORP By EX-10 27 5625 Square Feet 14900 Woodham Drive Suite #A170 Houston, Texas 77073 LEASE AGREEMENT This Lease Agreement is made and entered into by and between: AMERICAN GENERAL LIFE INSURANCE COMPANY HEREINAFTER REFERRED TO AS "LANDLORD", AND INDUSTRIAL DATA SYSTEMS HEREINAFTER REFERRED TO AS "TENANT". WITNESSETH: 1. PREMISES AND TERM. In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby takes from Landlord certain premises ("Premises") situated within the County of Harris, State of Texas, more particularly described on Exhibits "A" and "A-1" attached hereto and incorporated herein by reference, together with all rights, privileges, easements, appurtenances and immunities belonging to or in any way pertaining to the Premises. TO HAVE AND TO HOLD the same for a term commencing on February 1, 1991 ("Commencement Date") and ending January 31, 1994 thereafter; provided, however, that in the event the "Commencement Date" is a date other than the first day of a calendar month, said term shall extend for said number of months in addition to the remainder of the calendar month following the "Commencement Date". Tenant accepts the Premises on an "as-is" basis, except that the Premises will be cleaned and the lighting and air conditioning systems will be operational. Tenant acknowledges that no representations as to the condition of the Premises have been made by Landlord, unless such are expressly set forth in this Lease. After such Commencement Date Tenant shall, upon demand, execute and deliver to Landlord a letter of acceptance of delivery of the Premises. Landlord will furnish miniblinds in all front offices with windows. 2. RENT AND SECURITY DEPOSIT. A. As part of the consideration for the execution of this Lease, and for the Lease and use of the Premises, Tenant covenants and agrees and promises to pay as rental to Landlord or Landlord's assignees, a total sum of Seventy Three Thousand Five Hundred Seventy Five Dollars and 00/100 DOLLARS ($73,575.00), payable in the amount of One Thousand Eight Hundred Dollars and 00/100 DOLLARS ($1,800.00) per month for months one through twelve, One Thousand Nine Hundred Twelve Dollars and 50/100 DOLLARS ($1,912.50) per month for months thirteen (13) through twenty-four (24) and Two Thousand Four Hundred Eighteen Dollars and 75/100 DOLLARS ($2,418.75) per month for months twenty-five (25) through thirty-six (36). The first such monthly installment shall be due and payable on the date hereof and the appropriate monthly installment shall be due and payable in advance without demand, deduction or set off, on or before the first day of each calendar month succeeding the Commencement Date during the hereby demised term, except that the rental payment for any fractional calendar month at the commencement or end of the Lease period shall be prorated. Failure by Tenant to pay any monthly installment of rent by the fifth (5th) day from the date such payment was due shall be considered an event of default in accordance with the provisions of Paragraph 18(a) of this lease Agreement. B. Tenant agrees to pay Landlord, as additional rental, all charges for any service, goods, or materials furnished by Landlord at Tenant's request which are not required to be furnished by Landlord under this Lease, (as well as all other sums payable by Tenant hereunder), within ten (10) days after Landlord renders a statement therefor to Tenant. All past due additional rental amounts shall bear interest from the date due until paid at the maximum rate allowed by law. 1 C. In addition, Tenant agrees to deposit with Landlord on the date hereof the sum of One Thousand Eight Hundred Dollars and 00/100 DOLLARS ($1,800.00), which sum shall be held by Landlord, without obligation for interest, as security for the performance of Tenant's covenants and obligations under this Lease, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such fund to the extent necessary to make good any arrears of rent or other payments due Landlord hereunder, and any other damage, injury, expense or liability caused by such event of default; and Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the security deposit to its original amount. Although the security deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time after termination of this Lease providing that all of Tenant's obligations under this Lease have been fulfilled. 3. USE. The Premises shall be used only for the purposes of receiving, storing, shipping, and selling (other than retail) products, materials and merchandise made and/or distributed by Tenant and for such other lawful purposes as may be incidental thereto. Tenant shall conduct such activities in such a manner as to not constitute a violation of the covenants and deed restrictions of Century Plaza. Outside storage, including, without limitation, trucks and other vehicles, is prohibited without Landlord's prior written consent. Tenant shall obtain, at its own cost and expense, any and all licenses and permits necessary for any such use. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the Premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisances in, upon, or in connection with the Premises, all at Tenant's sole expense. Tenant shall not permit any objectional or unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the Premises, nor take any other action which would constitute a nuisance or would disturb or endanger any other Tenants of the building situated on the Premises or unreasonably interfere with their use of their respective Premises. Without Landlord's prior written consent, Tenant shall not receive, store or otherwise handle any product, material or merchandise which is explosive or highly inflammable. Tenant will not permit the Premises to be used for any purpose or in any manner, (including, without limitation, any method of storage) which would render the insurance thereon void or the insurance risk more hazardous or cause the State Board of Insurance or other insurance authority to disallow any sprinkler credits. 4. TAXES. A. Landlord agrees to pay, before they become delinquent, all taxes, assessments, and governmental charges of any kind and nature whatsoever (hereinafter collectively referred to as "taxes") lawfully levied or assessed against the Premises. If the Tenant's proportionate share of Taxes on the Premises, during a real estate tax year, occurring within the term hereof or during any renewal or extension of this term, shall exceed an amount equal to $1991 EXPENSE/sq. ft. of net rental area in the Premises/year, Tenant shall pay to Landlord as additional rent, upon demand, the amount of such excess. In the event any such amount is not paid within ten (10) days after the date of Landlord's invoice to Tenant, the unpaid amount shall bear interest from the date due until paid at the maximum interest rate allowed by law. B. Tenant's "proportionate share", as used in this Lease, shall mean a fraction, the numerator of which is the net rentable square footage of the space contained in the Premises and the denominator of which is the net rentable square footage of the entire space contained in the building of which the Premises is a part, as further defined in Subparagraph 27.0. C. If at any time during the term of this Lease the present method of taxation shall be changed so that in lieu of the whole or any part of any taxes, assessments or governmental charges levied, assessed or imposed on real estate and the improvements thereon, there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents from the Premises, then all such taxes, assessments, levies or charges or the part thereof so measured or based, shall be deemed to be included within the term "taxes" for the purposes hereof. 2 D. The Landlord shall have the right to employ a tax consulting firm to attempt to assure a fair tax burden on the building and grounds of which the Premises is a part within the applicable taxing jurisdictions. Tenant shall pay to Landlord the amount of Tenant's "proportionate share" (as defined in Subparagraph 4B above) of the cost of such service. E. Any payment to be made pursuant to this Paragraph 4 with respect to the real estate tax year in which this Lease commences or terminates shall be prorated. F. Tenant shall pay all ad valorem and similar taxes or assessments levied upon or applicable to all equipment, fixtures, furniture, and other property placed by Tenant in the Premises and all license and other fees or charges imposed on the business conducted by Tenant on the Premises. It is agreed that Tenant will also be responsible for ad valorem taxes on the value of Leasehold improvements to the extent that such leasehold improvements exceed standard building allowances. 5. LANDLORD'S REPAIRS. Landlord shall, at his expense, maintain only the roof, foundation, and the structural soundness of the exterior walls of the building in good repair, reasonable wear and tear excepted. Tenant shall repair and pay for any damage caused by the negligence of Tenant, or Tenant's employees, agents or invitees, or caused by Tenant's default hereunder. The term "walls" as used herein shall not include windows, glass or plate glass, doors, special store fronts or office entries. Tenant shall immediately give Landlord written notice of defect or need for repairs, after which Landlord shall have reasonable opportunity to repair same or cure such defect. Landlord's liability with respect to any defects, repairs or maintenance for which Landlord is responsible under any of the provisions of this Lease shall be limited to cost of such repairs or maintenance or the curing of such defect. 6. TENANT'S REPAIRS. A. Tenant shall, at his own cost and expense, keep and maintain all parts of the Premises (except those for which Landlord is expressly responsible under the terms of this Lease) in good condition, promptly making all necessary repairs and replacements, including, but not limited to, windows, glass and plate glass doors, special store fronts or office entries, interior walls and finish work, floors and floor covering, downspouts, gutters, heating and air conditioning systems, truck doors, dock bumpers, paving, plumbing work and fixtures, termite and pest extermination, regular removal of trash and debris, keeping the parking areas, driveways, alleys, and the whole of the Premises in a clean and sanitary condition. Tenant shall not be obligated to repair any damage caused by fire, tornado or other casualty covered by the insurance to be maintained by Landlord pursuant to Subparagraph 13A below, except that Tenant shall be obligated to repair all wind damage to glass, except with respect to tornado or hurricane damage. B. Tenant shall not damage any demising wall or disturb the integrity and support provided by any demising wall and shall, at its sole cost and expense, promptly repair any damage or injury to any demising wall caused by Tenant or its employees, agents or invitees. C. Tenant and its employees, customers and licensees shall have the right to use the parking areas, if any, as may be designated by Landlord in writing, subject to such reasonable rules and regulations as Landlord may from time to time prescribe and subject to rights of ingress and egress of other Tenant's. Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties. Landlord reserves the right to perform the paving and landscape maintenance, exterior painting, common sewage line plumbing, and care for the grounds around the building of which the Premises is a part, and Tenant shall be liable for its proportionate share (as defined in Subparagraph 4B above) of the cost and expense. If Tenant or any other particular Tenant of the building of which the Premises is a part can be clearly identified as being responsible for obstructions or stoppage of the common sanitary sewage line, then Tenant, if Tenant is responsible, or such other responsible Tenant, shall pay the entire cost thereof, upon demand, as additional rent. Tenant shall pay, when due, its share, determined as aforesaid, of such costs and expenses along with the other Tenants of the building to Landlord, upon demand, as additional rent, for the amount of 3 its share as aforesaid of such costs and expenses in the event Landlord elects to perform or cause to be performed such work. In the event any such amount is not paid within ten (10) days after the date of Landlord's invoice to Tenant, the unpaid amount shall bear interest from the date due until paid at the maximum interest rate allowed by law. D. Tenant shall, at its own cost and expense maintain and service all hot water, heating and air conditioning systems and equipment within the Premises. This maintenance should include regular filter changes and lubrication of equipment, as well as other prudent preventive maintenance procedures. Landlord's representatives will inspect and service the heating and air conditioning equipment prior to the Commencement Date and will certify the equipment to be operational on the Commencement Date. 7. COMMON AREA MAINTENANCE. A. Tenant agrees to pay Landlord as additional rent $.04 PER SQUARE FOOT of net rentable area in the Premises per month as its estimated share of the common area services which are provided by Landlord for mutual benefit of all Tenants. These services may include but are limited to general landscaping, mowing of grass, care of shrubs (including replacement of dead or diseased plants); operation and maintenance of lawn sprinkler system; operation and maintenance of exterior security lighting; water service and sewer charges; repainting of exterior surfaces of truck doors, handrails, downspouts, and other parts of the building which require periodic preventative maintenance; and the prorata share of Century Plaza common area maintenance and security service charges. B. The actual cost of these services shall be prorated among Tenants on a basis of net rentable square footage occupied in the same manner as provided in Subparagraph 4B above. Landlord shall send Tenant an annual statement of actual common area service costs along with either an invoice or a rebate for the amount that Tenant's actual proportionate share exceeded, or was less than, Tenant's $.04/SQ. FT. of net rentable area in the Premises per month common area service payment for the year then ended. Tenant agrees to reimburse Landlord within ten (10) days after receipt of such invoice from Landlord. Subject to Landlord's reasonable discretion, this monthly common area service charge may be renegotiated periodically based upon increases in Landlord's annual cost of providing these services. 8. ALTERATIONS. Tenant shall not make any alterations, additions or improvements to the Premises (including, but not limited to, roof and wall penetrations) without the prior written consent of Landlord. If Landlord consents to Tenant's contractors doing the work, Landlord may require, at Landlord's sole option, that Tenant provide, at Tenant's expense, a lien and completion bond in an amount equal to one and one half (1-1/2) times any and all estimated costs of improvements, additions or alterations in the Premises to insure Landlord against any liability or mechanic's and materialmen's liens which may arise in accordance with Paragraph 23 of this Lease Agreement and to insure completion of the work. Tenant may, without the consent of Landlord, but at its own cost and expense and in a good workmanlike manner, erect such shelves, bins, machinery and trade fixtures as it may deem advisable, without altering the basic character of the building or improvements and without overloading or damaging the building or improvements, and in each case complying with all applicable governmental laws, ordinances, regulations and other requirements. All alterations, additions, improvements and partitions erected by Tenant shall be and remain the property of Tenant during the term of this Lease and Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove all alterations, additions, improvements, and partitions erected by Tenant and restore the Premises to their original condition by the date of termination of this Lease or upon earlier vacating of the Premises; provided, however, that if Landlord so elects prior to termination of this Lease or upon earlier vacating of the Premises, such alterations, additions, improvements, and partitions shall become the property of Landlord as of the date of termination of this Lease or upon earlier vacating of the Premises and shall be delivered up to the Landlord with the Premises. All shelves, bins, machinery and trade fixtures installed by Tenant may be removed by Tenant prior to the termination of this Lease if Tenant so elects, and shall be removed by the date of termination of this Lease or upon earlier vacating of the Premises if required by Landlord. Upon any such removal, Tenant shall restore the Premises to their original condition. All such 4 removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the primary structure or structural qualities of the building and other improvements situated on the Premises. 9. SIGNS. Tenant shall have the right to install signs upon the Premises only when first approved in writing by Landlord and subject to any applicable governmental laws, ordinances, regulations, Landlord's standard sign criteria and other requirements. At Landlord's direction, Tenant shall be responsible for the removal of all such signs by the termination of this Lease. Such installations and removals shall be made in such a manner as to avoid injury or defacement, including, without limitation, discoloration caused by such installation and/or removal. 10. INSPECTION. Landlord and Landlord's agents and representatives shall have the right to enter and inspect the Premises at any reasonable time during business hours, for the purpose of ascertaining the condition of the Premises or in order to make such repairs as may be required or permitted to be made by Landlord under the terms of this Lease. During the period that is six (6) months prior to the end of the term hereof, Landlord and Landlord's agents and representatives shall have the right to enter the Premises at any reasonable time during business hours for the purpose of showing the Premises and shall have the right to erect on the Premises a suitable sign indicating the Premises are available. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating the Premises and shall arrange to meet with Landlord for a joint inspection of the Premises prior to vacating. In the event of Tenant's failure to give such notice or arrange such joint inspection, Landlord's inspection at or after Tenant's vacating the Premises shall be conclusively deemed corrected for purposes of determining Tenant's responsibility for repairs and restoration. 11. UTILITIES. Landlord agrees to provide, at its cost, water, electricity and telephone service connections into the Premises; but Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler charges and other utilities and services used on or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto and any maintenance charges for utilities and shall furnish all electric light bulbs and tubes. If any such services are not separately metered to Tenant, Tenant shall pay it's proportionate share as determined by Landlord of all charges jointly metered with other premises. Landlord shall in no event be liable for any interruption or failure of utility services on the Premises. 12. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to assign this Lease or to sublet the whole or any part of the Premises without the prior written consent of Landlord. Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease. Upon the occurrence of an "event of default" as hereinafter defined, if the Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided, or provided by law, may, at its option, collect directly from such assignee or subtenant all rents becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant's obligations hereunder. Notwithstanding the terms above, Landlord reserves the right to either: 1) enter into a new Lease Agreement with the proposed assignee or subtenant and terminate the Lease coincident with occupancy by the new Tenant and commencement of the new Lease; or, 2) Landlord and Tenant may mutually agree to terminate this Lease. 13. INSURANCE; FIRE AND CASUALTY DAMAGE. A. Landlord agrees to maintain standard fire and extended coverage insurance covering the building, of which the Premises are a part, in any amount not less than ninety (90) percent (or such greater percentage as may be necessary to comply with the provisions of any co-insurance clauses of the policy) of the 5 "replacement cost" thereof, as such term is defined in the Replacement Cost Endorsement to be attached thereto insuring against the perils of Fire, Lightning and Extended Coverage, such coverages and endorsements to be defined, provided and limited in the standard bureau forms prescribed by the insurance regulatory authority for the State of Texas for use by insurance companies admitted in the State of Texas for the writing of such insurance on risks located with the State of Texas. Subject to the provisions of Subparagraphs 13C, 13D, and 13E below, such insurance shall be for the sole benefit of Landlord and under its sole control. In addition Landlord agrees to maintain general liability coverage insurance in an amount deemed prudent and necessary by landlord or required by mortgagee presently (or in the future) holding a mortgage and/or deed(s) of trust constituting a lien against the building of which the Premises are a part. If the annual premiums charged Landlord for insurance exceed the standard premium rates because the nature of the Tenant's operation results in extra hazardous exposure, and if Landlord permits such operations, then Tenant, upon receipt of appropriate premium notices, shall reimburse landlord for such increase in such premiums as additional rent hereunder. Tenant shall maintain, at its own expense, fire and extended coverage insurance on all of its personal property, including removable trade fixtures located in the Premises and on all additions and improvements made by Tenant and not required to be insured by Landlord. In addition, Tenant shall reimburse Landlord annually, as additional rent and upon receipt of notice from Landlord, for Tenant's proportionate share of all amounts paid by landlord for insurance premiums which exceed an amount equal to 1991 EXPENSE/SQ. FT. of net rentable area in the Premises/year. In the event the Premises constitute a portion of a multiple occupancy building, Tenant shall be responsible for reimbursing Landlord for Tenant's full proportionate share of such excess, as such share is defined in Subparagraph 4B above. Said payments shall be made to Landlord within ten (10) days after presentation to Tenant of Landlord's statement setting forth the amount due. Any payment to be made pursuant to this Subparagraph A with respect to the year in which this Lease commences or terminates shall bear the same ratio to the payment which would be required to be made for the full year as the part of such year covered by the term of this Lease bears to a full year. In the event any such additional rental amount is not paid within ten (10) days after the date of Landlord's invoice to Tenant, the unpaid amount shall bear interest from the date due until paid at the maximum interest rate allowed by law. B. If the Premises should be damaged or destroyed by fire, tornado or other casualty, Tenant shall give immediate written notice thereof to Landlord. C. If the Premises should be totally destroyed by fire, tornado, or other casualty, or if they should be so damaged thereby that rebuilding or repairs cannot, in Landlord's estimation, be completed within two hundred (200) days after the date upon which Landlord is notified by Tenant of such damage, this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease, effective upon the date of the occurrence of such damage. D. If the Premises should be damaged by any peril covered by the insurance to be provided by Landlord under Subparagraph 13A above, but only to such extent that rebuilding or repairs can, in Landlord's estimation, be completed within two hundred (200) days after the date upon which Landlord is notified by Tenant of such damage, this lease shall not terminate, and Landlord shall, at its sole cost and expense, thereupon proceed with reasonable diligence to rebuild and repair such building to substantially the condition in which it existed prior to such damage, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in, on or about the Premises by Tenant. if the Premises are untenantable in whole or in part following such damage, the rent payable hereunder during the period in which they are untenantable shall be reduced to such extent as may be fair and reasonable under all of the circumstances. In the event that Landlord should fail to complete such repairs and rebuilding within two hundred (200) days after the date upon which Landlord is notified by Tenant of such damage, Tenant may, at its option, terminate this lease by delivering written notice of termination to Landlord as Tenant's exclusive remedy, whereupon all rights and obligations hereunder shall cease and terminate. E. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the building of which the Premises are a part requires that 6 the insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination of Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon all rights and obligations hereunder shall cease and terminate. F. Landlord and Tenant each hereby release the other from any loss or damage to the property caused by fire or any other perils insured through or under them by way of subrogation, or otherwise for any loss or damage to property caused by fire or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault of negligence of the other party or anyone for whom such party may be responsible; provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such times in which the releasers policies contain a clause or endorsement stating that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Both Landlord and Tenant agree that they will request their insurance carriers to include such a clause or endorsement in their policies. If extra cost shall be charged therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall not be obligated to do so. G. If the Premises should be damaged or destroyed by a casualty other than a peril covered by the insurance to be provided under Subparagraph 13A above, and the casualty or loss was the result of an action or failure to act by Tenant or Tenant's employees, agents, guests, customers, representatives or invitees, Tenant shall at its sole cost and expense thereupon proceed with reasonable diligence to rebuild and repair the Premises to substantially the condition in which they existed prior to such damage or destruction, subject to Landlord's approval of the plans and specifications for such rebuilding and repairing. 14. LIABILITY. Landlord shall not be liable to Tenant or Tenant's employees, agents, patrons or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the Premises, resulting from and/or caused in part or whole by the negligence or misconduct of Tenant, its agents, servants, employees, or of any other person entering upon the Premises, or caused by the buildings and improvements located on the Premises becoming out of repair, or caused by leakage of gas, oil, water or steam or by electricity emanating from the Premises, or due to any cause whatsoever, and Tenant hereby covenants and agrees that it will at all times indemnify and hold safe and harmless the property, the Landlord (including, without limitation, the trustee and beneficiaries if Landlord is a trust), Landlord's agents and employees from any loss, liability, claims, suits, costs, expenses, including, without limitation, attorney's fees and damages, both real and alleged, arising out of any such damage or injury; except injury to persons or damage to property the sole cause of which is negligence of Landlord or the failure of Landlord to repair any part of the Premises which Landlord is obligated to repair and maintain hereunder within a reasonable time after the receipt of written notice from Tenant of needed repairs. Tenant shall procure and maintain throughout the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring both the Landlord and Tenant against all claims, demands or actions arising out of or in connection with (i) the Premises; (ii) the condition of the Premises; (iii) Tenant's operations in maintenance and use of the Premises; and (iv) Tenant's liability assumed under this Lease, the limits of such policy or policies to be the amount of not less than One Million and 00/100 Dollars ($1,000,000.00) for bodily injury or death of one person, Three Hundred Thousand and 00/100 Dollars ($300,000.00) for any one occurrence, and not less than Fifty Thousand and 00/100 Dollars ($50,000.00) for property damage or destruction, including loss of use thereof. All such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. Certified copies of such policies, together with receipt evidencing payment of premiums therefor, shall be delivered to Landlord prior to the Commencement Date of this Lease. Not less than fifteen (15) days prior to the expiration date of any such policies, certified copies of the renewals thereof (bearing notations evidencing the payment of renewal premiums) shall be delivered to Landlord. Such policies shall further provide that not less than thirty (30) days written notice shall be given to Landlord before such policy may be canceled or changed to reduce insurance provided thereby. 15. CONDEMNATION. 7 A. If the whole or any substantial part of the Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof and the taking would prevent or materially interfere with the use of the Premises for the purpose for which they are being used, this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said premises shall occur. B. If part of the Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking does not prevent or materially interfere with the use of the Premises, and this Lease is not terminated as provided in the subparagraph above, this Lease shall not terminate but the rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent as may be fair and reasonable under all of the circumstances. C. In the event of any such taking or private purchase in lieu thereof, Landlord shall be entitled to receive and retain all compensation awarded in any condemnation proceedings. 16. HOLDING OVER. Tenant will, at the termination of this Lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Landlord agrees in writing that Tenant may hold over after the expiration or termination of this Lease, unless the parties hereto otherwise agree in writing on the terms of such holding over, the hold over Tenancy shall be subject to termination by Landlord at any time upon not less than five (5) days advance written notice, or by Tenant at any time upon not less than thirty (30) days advanced written notice, and all of the other terms and provisions of this Lease shall be applicable during that period, except that Tenant shall pay Landlord from time to time upon demand, as rental for the period of any hold over, an amount equal to two (2) times the rent, including any additional rents defined in the Lease, in effect on the termination date, computed on a daily basis for each day of the hold over period. No holding over by the Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided. The preceding provisions of this paragraph 16 shall not be construed as Landlord's consent for Tenant to hold over. 17. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire before Tenant takes possession of the Premises, good title to the Premises, free and clear of all liens and encumbrances, excepting only the lien for current taxes not yet due, such mortgage or mortgages as are permitted by the terms of this Lease, zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of such property, and easements, restrictions and other conditions of record. In the event this Lease is a sublease, then Tenant agrees to take the Premises subject to the provisions of the prior Leases. Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, upon paying the rental herein set forth and performing its other covenants and agreements herein set forth, shall peaceably and quietly have, hold and enjoy the Premises for the term hereof without hindrance or molestation from Landlord, subject to the terms and provisions of this Lease. 18. EVENTS OF DEFAULT. The following events shall be deemed to be events of default by Tenant under this Lease: (a) Tenant shall fail to pay any installment of the rent herein reserved when due, or any payment with respect to taxes hereunder when due, or any other payment or reimbursement to Landlord required herein when due, and such failure shall continue for a period of five (5) days from the date such payment was due. (b) Tenant shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors. (c) Tenant shall file a petition under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any state thereof; or Tenant shall be adjudged bankrupt or insolvent in procedings filed against Tenant thereunder. 8 (d) A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant. (e) Tenant shall desert or vacate any substantial portion of the Premises. (f) Tenant shall fail to comply with any term, provision or covenant of this Lease (other than the foregoing in this Paragraph 18), and shall not cure such failure within ten (10) days after written notice thereof to Tenant. 19. REMEDIES. Upon the occurrence of any of such events of default described in Paragraph 18 hereof, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever. (a) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying such Premises or any part thereof, by force if necessary, without being liable for prosecution or any claim of damages therefor; and Tenant agrees to pay Landlord, on demand, the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise. TENANT HEREBY WAIVES ITS RIGHT TO THREE DAYS NOTICE OF LANDLORD'S INTENT TO FILE A FORCIBLE DETAINER OR FORCIBLE ENTRY AND DETAINER ACTION AS PROVIDED IN V.T.C.A., PROPERTY CODE, SECTION 24.005. (b) Enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying such Premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefor, and relet the Premises and receive the rent therefor, and Tenant agrees to pay the Landlord, or demand, any deficiency that may arise by reason of such reletting. In the event Landlord is successful in reletting the Premises at a rental in excess of that agreed to the paid by Tenant pursuant to the terms of this Lease, Landlord and Tenant each mutually agree that Tenant shall not be entitled, under any circumstances, to such excess rental, and Tenant does hereby specifically waive any claim to such excess rental. (c) Terminate this Lease and treat the event of default as an entire breach of the Lease and Tenant immediately shall become liable to Landlord for damages for the entire breach in the amount equal to the amount by which the total rent now due and payable as adjusted by the amount of additional rent which would be payable by Tenant during the unexpired balance of the term of this Lease and all other p;ayments due for the balance of the term is in excess of the fair market rent value of the Premises for the balance of the term as of the time of default, both discounted at the rate of six (6) percent per annum to the then present value. Such amount shall be due and payable upon Lessor's notice to Lessee of termination of the Lease and shall bear interest until paid at the maximum annual rate permitted by law. (d) Enter upon the Premises, by force if necessary, without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord, on demand, for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action, whether caused by the negligence of Landlord or otherwise. (e) Alter locks and other security devices at the Premises, without being liable for prosecution or any claim of damages therefor, and such alteration of locks and security devices shall not be deemed or unauthorized or constitute a conversion. (f) Receive payment from Tenant, in addition to any sum provided to be paid above, for any and all of the following expenses for which Tenant shall be considered liable: 1. Broker's fees incurred by Landlord in connection with reletting the whole or any part of the Premises; 9 2. The cost of removing and storing Tenant's or other occupant's property; 3. The cost of repairing, altering, remodeling or otherwise putting Premises into condition acceptable to a new Tenant or Tenants, plus a reasonable charge to cover overhead; and 4. All reasonable expenses incurred by Landlord in enforcing Landlord's remedies. In the event Tenant fails to pay any installment of rent hereunder as and when such installment is due, to help defray the additional cost to Landlord for processing such late payments Tenant shall pay to Landlord on demand a late charge in the amount equal to five (5) percent of such installment; and the failure to pay such amount within ten (10) days after demand therefor shall be an event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or another remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by the Landlord or its agents during the term hereby granted shall be deemed a termination of this Lease or any acceptance of the surrender of the Premises, and no agreement to terminate this Lease or accept a surrender of said Premises shall be valid unless it is in writing and signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the other terms, provisions and covenants herein contained. Landlord's acceptance of the payment of rental or other payments hereunder after the occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default of any subsequent default. If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this Lease, it shall become necessary or appropriate of Landlord to employ or consult with an attorney concerning any of Landlord's rights or remedies hereunder or to enforce or defend any of the Landlord's rights or remedies hereunder, Tenant agrees to pay any reasonable attorney's fees so incurred. 20. LANDLORD'S LIEN. IN ADDITION TO ANY STATUTORY LIEN FOR RENT IN LANDLORD'S FAVOR, LANDLORD SHALL HAVE, AND TENANT HEREBY GRANTS TO LANDLORD, A CONTINUING SECURITY INTEREST FOR ALL RENTALS AND OTHER SUMS OF MONEY BECOMING DUE HEREUNDER FROM TENANT, UPON ALL GOODS, WARES, EQUIPMENT, FIXTURES, FURNITURE, INVENTORY, ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER ANOTHER PERSONAL PROPERTY OF TENANT SITUATED ON THE PREMISES, AND SUCH PROPERTY SHALL NOT BE REMOVED THEREFROM WITHOUT THE CONSENT OF LANDLORD UNTIL ALL ARREARAGES IN RENT AS WELL AS ANY AND ALL OTHER SUMS OF MONEY THEN DUE TO LANDLORD HEREUNDER SHALL FIRST HAVE BEEN PAID AND DISCHARGED. IN THE EVENT OF A DEFAULT UNDER THIS LEASE, LANDLORD SHALL HAVE, IN ADDITION TO ANY OTHER REMEDIES PROVIDED HEREIN OR BY LAW, ALL RIGHTS AND REMEDIES UNDER THE UNIFORM COMMERCIAL CODE, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO SELL THE PROPERTY DESCRIBED IN THIS PARAGRAPH 20 AT PUBLIC OR PRIVATE SALE UPON FIVE (5) DAYS NOTICE TO TENANT. TENANT HEREBY AGREES TO EXECUTE SUCH FINANCING STATEMENTS AND OTHER INSTRUMENTS NECESSARY OR DESIRABLE IN LANDLORD'S DISCRETION TO PERFECT THE SECURITY INTEREST HEREBY CREATED. ANY STATUTORY LIEN FOR RENT IS NOT HEREBY WAIVED, THE EXPRESS CONTRACTUAL LIEN HEREIN GRANTED BEING IN ADDITION AND SUPPLEMENTARY THERETO. 10 21. MORTGAGES. Tenant accepts this lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a lien or charge upon the Premises or the improvements situated thereon; provided, however, that if the mortgagee, trustee or holder of any such mortgage or deed of trust elects to have Tenant's interest in this lease superior to any such instrument, then by notice to Tenant from such mortgagee, trustee, or holder, this Lease shall be deemed superior to such lien, whether this Lease was executed before or after said mortgage or deed of trust. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage. 22. LANDLORD'S DEFAULT. A. In the event Landlord should default in any of its obligations hereunder, Tenant shall simultaneously give Landlord and Landlord's mortgagee written notice specifying such default and Landlord shall thereupon have thirty (30) days (plus an additional reasonable period as may be required in the exercise by Landlord of due diligence) in which to cure any such default. In addition, Landlord's mortgagee shall have the right (but not the obligation) to cure or remedy such default during the period that is permitted to Landlord hereunder, and Tenant will accept such curative or remedial action taken by Landlord's mortgagee with the same effect as if such action had been taken by the Landlord. B. Upon the failure of Landlord or Landlord's mortgagee to cure such default in accordance with the provisions of Paragraph 22A hereof, Tenant shall be authorized and empowered to pay any such items for and on behalf of Landlord, and the amount of any item so paid by Tenant for and on behalf of Landlord, together with any interest or penalty required to be paid in connection therewith, shall be payable on demand by Landlord to Tenant; provided, however, that Tenant shall not be authorized and empowered to make any payment under the terms of this Paragraph 22 unless the item paid shall be superior to Tenant's interest hereunder. Tenant's exclusive remedy shall by an action for damages against Landlord, and Tenant hereby waives the benefit of any laws granting it a lien upon the property of Landlord and/or upon rent due Landlord. In the event Tenant pays any mortgage debt in full, in accordance with this paragraph, it shall, at its election, be entitled to the mortgage security by assignment or subrogation. 23. MECHANIC'S LIENS. Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this instrument. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the premises or the improvements thereon, and that it will save and hold Landlord harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of the Landlord in the Premises or under the terms of this Lease. 24. ASSIGNMENT BY LANDLORD. Landlord shall have the right to assign or transfer, in whole or in part, every feature of its rights and obligations hereunder and in the building or real property of which the Premises is a part. Such assignments or transfers may be made to a corporation, trust, trust company, individual or group of individuals, and howsoever made shall be in all things respected and recognized by Tenant. 25. DISCLAIMER. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on the part of the Tenant to be performed shall not be affected, impaired or executed because Landlord is unable to fulfill any of its covenants and obligations under this Lease, 11 expressly or impliedly to be performed by Landlord, if Landlord is prevented or delayed from doing so by reason of strikes, labor troubles, accident, power outages, adjustment of insurance, or by any reason or cause whatsoever reasonable beyond Landlord's control. Reasons beyond Landlord's control shall include, but not be limited to, laws, governmental preemption in connection with a National Emergency or by any reason of any rule, order or regulation of any governmental agency, federal, state, county or municipal authority or any department or subdivision thereof, or by reason of the conditions of supply and demand which have been or are affected by war or other emergency. 26. NOTICES. Each provision of this instrument or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice or the making of any payment by Landlord to Tenant or with reference to the sending, mailing or delivery of any notice or the making of any payment by Tenant to Landlord shall be deemed to be complied with when and if the following steps are taken: (a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at the address hereinbelow set forth or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant's obligation to pay rent and any other amounts to Landlord under the terms of this Lease shall not be deemed satisfied until such rent and other amounts have been actually received by Landlord. (b) All payments required to be made by Landlord to Tenant hereunder shall be payable to Tenant at the address hereinbelow set forth, or at such other address within the continental United States as Tenant may specify from time to time by written notice delivered in accordance herewith. All such payments shall be sent by Certified U.S. Mail, return receipt requested. (c) Any notice or document required or permitted to be delivered hereunder shall be deemed to be delivered, whether actually received or not, when deposited in the United States Mail, postage prepaid, Certified or Registered Mail, addressed to the parties hereto at the respective addresses set out below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith. Landlord: Tenant: AMERICAN GENERAL INVESTMENT CORP. INDUSTRIAL DATA SYSTEMS c/o MAXICORP, INC. 14900 Woodham Drive #A170 1726 Augusta, Suite 128 Houston, Texas 7702? Houston, Texas 77057 If and when included within the term "Landlord", as used in this instrument, there is more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Landlord; if and when included within the term "Tenant", as used in this instrument, there is more than one person, firm or corporation, all such jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address within the continental United States for the receipt of notices and payments to Tenant. All parties included within the terms "Landlord" and "Tenant", respectively, shall be bound by notices given in accordance with the provisions to this Paragraph to the same effect as if each had received such notice. 27. MISCELLANEOUS. A. Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. B. The terms, provisions and covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors and permitted assigns, except as otherwise herein expressly provided. 12 C. Whenever a clause or provision of this Lease requires Landlord's consent or approval, Landlord agrees not to withhold or delay its consent or approval unreasonably. D. The captions inserted in this Lease are for the convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease. E. Tenant agrees, if requested in writing by Landlord, to furnish financial statements, bank references, credit references, or any other financial data to Landlord as may be required to establish Tenant's financial stability and credit worthiness. Such information will be furnished within ten (10) days of request. F. This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto. G. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this Lease shall survive the expiration or earlier termination of the term hereof, including, without limitation, all payment obligations with respect to taxes and insurance and all obligations concerning the condition of the Premises. Upon the expiration of earlier termination of the term hereof, and prior to Tenant vacating the Premises, Tenant shall pay to Landlord any amount reasonably estimated by Landlord as necessary to put the Premises, including, without limitation, all heating and air conditioning systems and equipment therein, in good condition and repair. Tenant shall also, prior to vacating the Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's obligation hereunder for real estate taxes and insurance premiums for the year in which the Lease expires or terminates. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant hereunder, with Tenant being liable for any additional costs therefor upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied, as the case may be. Any security deposit held by Landlord shall be credited against the amount payable by Tenant under this Paragraph 27G. H. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws effective during the term of this Lease, then and in that event, it is the intention of the parties hereto that the remainder of this lease shall not be affected thereby, and it is also the intention of the parties to this Lease that, in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added as a part of this Lease contract a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. I. Because the Premises are on the open market and are presently being shown, this Lease shall be treated as an offer with the Premises being subject to prior Lease and such offer subject to withdraw or non-acceptance by Landlord or to other use of the Premises without notice, and this Lease shall not be valid or binding unless and until accepted by Landlord in writing and a fully executed copy delivered to both parties hereto. J. All references in this Lease to "the date hereof" or similar references shall be deemed to refer to the last date, in point of time, on which all parties hereto have executed this Lease. K. Tenant agrees, from time to time within ten (10) days after request of Landlord, to deliver an estoppel certificate to Landlord or Landlord's designee. Such estoppel certificate shall state that this Lease is in full force and effect, the date to which rent has been paid, the unexpired term of this Lease and such other matters pertaining to this Lease as may be requested by Landlord. L. Landlord and Tenant acknowledge and agree that this Lease shall be interpreted and enforced in accordance with the laws of the State of Texas and all obligations and duties are performable exclusively in Houston, Harris County, Texas. M. Each party agrees to furnish to the other, promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of such party to enter into this Lease. N. This Lease may be signed in any number of counterparts, each of which shall be an original for all purposes, but all of which taken together shall constitute only one agreement. The production of any 13 executed counterpart of this Lease shall be sufficient for all purposes without producing or accounting for the other counterparts hereof. O. Any reference to a building on the demised Premises, means the plural "buildings" in a multiple building complex. All expenses, for example, but not limited to taxes, property insurance, and common area maintenance, are prorated for the total net rentable area in all buildings. Executed by the parties this 16th day of January, 1991. AMERICAN GENERAL LIFE INSURANCE CO. INDUSTRIAL DATA SYSTEMS (Name of Landlord) (Name of Tenant) /s/ RISHER RANDALL /s/ WILLIAM COSKEY BY: Mr. Risher Randall BY: Mr. William Coskey TITLE: R.E. Investment Officer TITLE: President Landlord Tenant 14 EXHIBIT "A-1" [FLOORPLAN GRAPHIC OMITTED] BUILDING A 14900 WOODHAM DRIVE SUITE A170 5625 GRA EXHIBIT "A" MAXICORP, INC. 713-229-0060 [CENTURY CENTER GRAPHIC OMITTED] SITE PLAN LAND AREA 9,068 ACRES 132310 S.F. GROSS LEASEABLE AREA BLDG. A 34250 S.F. BLDG. B 39880 S.F. (14000 Woodhaven Drive) (14000 Woodhaven Drive) BLDG. C 30730 S.F. BLDG. D 27450 S.F. (800 Century Plaza Drive) (800 Century Plaza Drive) PARKING 398 CARS (33/1000 S.F.) CENTURY CENTER MAP ADDENDUM TO LEASE OPTION TO RENEW: Landlord hereby grants Tenant the option to renew and extend this Lease for an additional three (3) year term at the then prevailing market rental rates. Said option is granted only if Tenant is in full compliance of the terms and conditions of this Lease. Additionally, within ninety (90) days of the expiration of the initial term of this Lease, Tenant is required to notify Landlord in writing of tenants intent to exercise said renewal option. AMERICAN GENERAL LIFE INS. CO. INDUSTRIAL DATA SYSTEMS Landlord Tenant /s/ RISHER RANDALL /s/ WILLIAM COSKEY By: Mr. Risher Randall By: Mr. William Coskey Title: R.E. Invest. Officer Title: President EX-10.1 28 FIRST AMENDMENT TO LEASE AGREEMENT This First Amendment to Lease Agreement ("Amendment") is entered into as of the 7th day of December, 1993 by and between 600 C.C. Business Park Ltd. ("Landlord") and Industrial Data Systems ("Tenant"). RECITALS WHEREAS, Landlord who has succeeded the rights, title, and interests of American General Life Insurance Company, as "Landlord", and Industrial Data Systems, as "Tenant", entered into a Lease Agreement dated January 16, 1991 (the "Lease") for certain premises known as 14900 Woodham Drive, Suite A-170, Houston, Texas 77073 consisting of approximately 5,625 square feet and; WHEREAS, Landlord and Tenant desire to modify the Lease so as to extend the term of the Lease and to modify certain terms and provisions outlined in the original lease; All defined terms used in this Amendment shall have the same meaning assigned to them in the original Lease, unless the context herein expressly provides otherwise. NOW, THEREFORE, for one dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency which are hereby acknowledged, Landlord and Tenant hereby agree that the Lease shall be Amended as follows: AGREEMENTS: 1) Section One (1) Paragraph Two (2) shall be amended to read: "To have and to hold the same for a term commencing on February 1, 1991 ("Commencement Date") and ending January 31, 1997 thereafter". 2) Section 2 Paragraph A shall be amended to allow for the following base rent schedule which shall apply to months thirty seven through seventy-two of the lease term. Base Rental shall remain as scheduled in the original lease until February 1, 1994 at which time the following base rent shall apply: February 1, 1994 - January 31, 1995 = $2,081.25 per month February 1, 1995 - January 31, 1996 = $2,193.75 per month February 1, 1996 - January 31, 1997 = $2,306.25 per month 3) Taxes and Insurance Charges as specified in Section 4 and Section 13 of the Lease shall be modified to allow that the Tenant shall be responsible for any additional taxes and insurance costs which exceed an amount equal to the 1994 expense for these items per square foot of net rentable area in the premises per year. All other defining terms and calculations of assessments and charges pursuant to these paragraphs shall remain as specified in the original lease. 4) Common Area Maintenance -- Tenant shall be required to pay its estimated prorata share of Common Area Maintenance expenses of the property. On a monthly basis, Tenant shall pay an amount equal to $.07 per square foot per month as Tenant's estimated prorata share of the common area expenses as outlined in Section 7 of the Lease. Therefore, beginning February 1, 1994, Tenant shall pay an amount of $393.75 per month in addition to the base rental scheduled above as its estimated monthly share of these common area maintenance costs. Landlord agrees that Tenant's payment of its prorata of Common Area Maintenance costs will not exceed $.07 per square foot per month during the term of the Lease. PAGE 1 OF 2 5) Therefore, as an example of rental and expense obligations as modified in this Amendment and as ratified in the original agreement, the following is an outline of Tenant's charges: For example, total charges for the month of February 1994 shall be as follows: Base Rent: $ 2,081.25 Common Area Maintenance: $ 393.75 ----------- TOTAL PAYMENT FOR FEBRUARY 1994: $ 2,475.00 Rent and expense charges will remain as scheduled in the original Agreement and as are currently be paid by Tenant until January 31, 1994. 6) Option to Renew -- Provided that Tenant is not in default on any of the terms and conditions set forth in the lease in this Amendment, Landlord hereby grants Tenant one option to renew the Lease for an additional thirty-six (36) month term at rental rates to be negotiated prior to Tenant exercising said renewal option. In order for Tenant to exercise said option, Tenant must notify Landlord of its intention to renew the Lease at least ninety (90) days prior to the expiration of the lease term. 7) Lease Space Condition -- Tenant accepts the premises in its current condition ("as is"); however, Landlord agrees to make certain that the air conditioning units are fully operational and to provide any necessary repairs recommended by a reputable air conditioning contractor. EXCEPT as expressly provided herein, all other terms, covenants, and conditions of the Lease shall remain the same in full force and effect, and are hereby ratified by both parties. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. LANDLORD: TENANT: 600 C.C. Business Park Ltd. Industrial Data Systems BY: /s/ JOHN W. COSTELLO BY: /s/ WILLIAM COSKEY NAME: John W. Costello NAME: William Coskey TITLE: General Partner TITLE: President DATE: December 7/1993 DATE: 11/23/93 PAGE 2 OF 2 EX-10.2 29 SECOND AMENDMENT TO LEASE STATE OF TEXAS COUNTY OF HARRIS This Second Amendment to Lease ("Amendment") is made and entered into as of December 29, 1994 by and between 600 C.C. Business Park, Ltd. ("Landlord") and Industrial Data Systems ("Tenant"). RECITALS A. Whereas, Landlord who has succeeded the rights, title, and interest of American General Life Insurance Company as "Landlord" and Industrial Data Systems, as "Tenant", entered into a Lease Agreement dated January 16, 1991, (the "Lease") which lease was amended by the First Amendment to Lease Agreement dated December 7, 1993 for certain premises known as 14900 Woodham Drive, Suite A-170, Houston, Texas 77073 consisting of approximately 5,625 square feet and; B. Whereas, Landlord and Tenant desire to modify the Lease so as to modify certain terms and provisions outlined in the original Lease and the First Amendment to Lease to allow for the relocation of Tenant's lease space within Century Center Business Park, the extension of the lease term and to increase the square footage of the premises that the tenant will occupy under the terms and conditions of the original Lease, the First Amendment to Lease, and this Second Amendment to Lease agreement and; C. Tenant and Landlord hereby agree that no other document has been executed or exchanged between the parties hereto other than the original Lease Agreement and the First Amendment to Lease specified above and that there are no side letters or any oral agreements between the parties and; D. Landlord and Tenant agree that all defined terms used in this Amendment shall have the same meaning assigned to them in the Lease and First Amendment to Lease, unless the context herein expressly provides otherwise. NOW, THEREFORE, for one dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: AGREEMENTS 1. Effective January 1, 1995, Landlord and Tenant mutually agree to expand the "Leased Premises" to a total leasable area of 12,230 square feet and to "relocate" the lease premises to 600 Century Plaza Drive, Suite C-140 ("New Lease Premises") which is located within the development known as Century Center Business Park (see attached Exhibit "A" and Exhibit "A-1"). 2. Landlord and Tenant agree to extend the expiration date of the existing lease term to January 31, 1999. 3. It is agreed and understood by both parties that as of the date of this Amendment, the existing Lease and First Amendment to Lease shall govern the "New Lease Premises" as outlined in Item 1 above. PAGE 1 OF 3 SECOND AMENDMENT TO LEASE (CONTINUED) 4. The monthly base rental shall remain as scheduled in the original Lease and First Amendment to Lease until the earlier of February 1, 1995, or when Tenant occupies the "New Lease Premises", at which time the base rental shall be modified and scheduled as follows: February 1, 1995 - January 31, 1996: $4,769.70 ($.39 psf per month) February 1, 1996 - January 31, 1997: $5,014.30 ($.41 psf per month) February 1, 1997 - January 31, 1999: $5,258.90 ($.43 psf per month) 5. Taxes and Insurance charges as specified in Section 4 and Section 13 of the Lease, shall remain as modified in the First Amendment to Lease Agreement allowing that Tenant shall be responsible for any additional taxes and insurance costs which exceed an amount equal to the 1994 expense for these items per square foot of net rentable area in the total lease premises. All other defining terms and calculations of assessments and charges pursuant to these paragraphs shall remain as specified in the original Lease. 6. Common Area Maintenance -- Tenant shall be required to pay its prorata share of common area maintenance expenses of the property. On a monthly basis, tenant shall pay an amount equal to $.07 per square foot per month as Tenant's prorata share of common area expenses as outlined in Section 7 of the Lease. THEREFORE, BEGINNING FEBRUARY 1, 1995, TENANT SHALL PAY $856.10 PER MONTH AS ITS ESTIMATED PRORATA SHARE OF THESE EXPENSES. LANDLORD AGREES THAT TENANT'S PAYMENT OF ITS PRORATA OF COMMON AREA MAINTENANCE COSTS WILL NOT EXCEED $.07 PER SQUARE FOOT PER MONTH DURING THE TERM OF THE LEASE. 7. As an example of rental and expense obligations as modified in this Second Amendment to Lease and as ratified in the original Lease Agreement and the First Amendment to Lease Agreement, the following is an outline of Tenant's charges for February, 1995, rent and other charges: Base Rent: $ 4,769,70 Common Area Maintenance: $ 856.10 ----------- TOTAL PAYMENT FOR FEBRUARY 1995: $ 5,625.80 Rent and expense charges will remain as scheduled in the original Lease Agreement and First Amendment to Lease Agreement and as are currently being paid by Tenant until February 1, 1995. 8. Whereas, Tenant agrees to accept the "New Lease Premises" in an "As Is", "Where Is" condition subject to Landlord making minor modifications to the lease premises which will include and be limited to re-carpeting of the carpeted areas ($10.00 per yard allowance), re-painting of the interior walls, removal of up to seventy-five feet (75') of interior walls, relocation of up to three (3) interior doors, the addition of up to eighteen (18) light fixtures, four (4) duplex plugs, and four (4) additional light switches, and Landlord shall make certain that the existing HVAC, electrical, and plumbing systems are in good operational order prior to Tenant's occupancy. Any costs of additional modifications above those stated herein, shall be the responsibility of Tenant. Tenant shall be allowed occupancy of the premises immediately upon completion of Landlord's described work and Tenant's acceptance of said work. 9. Except as otherwise stated herein, all other terms and conditions of the Original Lease Agreement dated January 16, 1991, and the First Amendment to Lease Agreement dated December 7, 1993, by and between 600 C.C. Business Park, as Landlord and Industrial Data Systems, as Tenant shall remain in full force and effect and shall apply to the ("New Lease Premises") located at 600 Century Plaza Drive, Suite 140, Houston, Texas 77073. PAGE 2 OF 3 SECOND AMENDMENT TO LEASE (CONTINUED) 10. Landlord agrees to pay for Tenant's cost of relocating the existing lease premises into the "New Lease Premises", which costs shall include moving of furniture fixtures and equipment, installation of telephone system (labor only), and wiring of existing computer network and other reasonable moving costs. Landlord's allowance for these moving costs shall not exceed $5,000. 11. TENANT RIGHT TO ASSIGN OR SUB-LET -- Tenant shall have the right to assign this Lease or to sub-let the whole or any part of the premises with Landlord's prior written consent. Landlord's consent shall not be unreasonably withheld. Should Tenant desire to assign or sub-let the premises, Tenant shall supply Landlord with required information regarding the assignee and/or sub-lessee, and shall await written authorization from Landlord to proceed with said sub-lease or assignment. All other terms outlined in the original lease which are not in conflict with the terms stated herein shall remain in full force and effect. 12. FIRST NOTICE -- So long as Tenant is not in default of any of the terms and conditions of the Lease, if during the term of the Lease, any adjacent/contiguous space should become available for lease. Landlord shall use its best efforts to notify Tenant of such available space. Additionally, should Landlord obtain a prospective tenant which is interested in leasing such available space, Landlord shall provide Tenant notice of such. After Landlord has provided Tenant said notice, Tenant shall have five (5) working days to notify Landlord if Tenant wishes to lease additional space. Should Tenant notify Landlord of its intention to lease such space, Tenant shall then have five (5) working days after receipt of a formal agreement from the Landlord to execute said agreement regarding the leasing of this additional space. This Amendment shall be binding upon and insure to the benefit of Landlord and Tenant and their successors and assigns; however, this provision shall not permit any additional transfer or assignment of the Lease by Tenant which is otherwise limited by the terms of the Lease and this amendment required by Landlord's consent. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Lease as of this 29th day of December, 1994. Exhibit List: Exhibit "A" -- Site Plan Exhibit "A-1" -- Lease Premises TENANT: LANDLORD: INDUSTRIAL DATA SYSTEMS 600 C.C. BUSINESS PARK, LTD. BY: /s/ WILLIAM COSKEY BY: /s/ JOHN W. COSTELLO NAME: William Coskey NAME: John W. Costello TITLE: President TITLE: General Partner DATE: December 28, 1994 DATE: December 29, 1994 PAGE 3 OF 3 EXHIBIT "A" SITE PLAN [CENTURY CENTER BUSINESS PARK GRAPHIC OMITTED] "Current Lease Premises" "Temporary Premises" Approximately 2,370 s.f. "New Lease Premises" Approximately 12,230 s.f. EXHIBIT "A-1" [LEASE PREMISES GRAPHIC OMITTED] "LEASE PREMISES" "Temporary Premises" To be occupied by Tenant until January 31, 1995, only "New Lease Premises" Approximately 12,230 GRA FLOOR PLAN EX-10.3 30 THIRD AMENDMENT TO LEASE STATE OF TEXAS COUNTY OF HARRIS This Third Amendment to Lease ("Amendment") is made and entered into as of 8/8/95 by and between 600 C.C. Business Park, Ltd. ("Landlord") and Industrial Data Systems ("Tenant"). RECITALS A. Whereas, Landlord who has succeeded the rights, title, and interest of American General Life Insurance Company as "Landlord" and Industrial Data Systems, as "Tenant", entered into a Lease Agreement dated January 16, 1991, (the "Lease") which lease was amended by the First Amendment to Lease Agreement dated December 7, 1993, and the Second Amendment to Lease dated December 29, 1994, for certain premises known as 600 Century Plaza Drive, Suite 140, Houston, Texas 77073 consisting of approximately 12,230 square feet and; B. Whereas, Landlord and Tenant desire to modify the Lease so as to modify certain terms and provisions outlined in the original Lease, the First Amendment to Lease and the Second Amendment to Lease to allow for the extension of the lease term and to increase the square footage of the premises that the tenant will occupy under the terms and conditions of the original Lease, the First Amendment to Lease, the Second Amendment to Lease, and this Third Amendment to Lease; and C. Whereas, Tenant and Landlord hereby agree that no other document has been executed or exchanged between the parties hereto other than the original Lease Agreement and the First Amendment to Lease specified above and that there are no side letters or any oral agreements between the parties; and D. Whereas, Landlord and Tenant agree that all defined terms used in this Amendment shall have the same meaning assigned to them in the Lease and First Amendment to Lease, unless the context herein expressly provides otherwise. NOW, THEREFORE, for one dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: AGREEMENTS 1. Effective September 1, 1995, Landlord and Tenant mutually agree to expand the "Leased Premises" to a total leasable area of 18,155 square feet (see attached Exhibit "A"-Site Plan and Exhibit "A-1"-Expansion Premises). 2. Landlord and Tenant agree to extend the expiration date of the existing lease term to August 31, 2000. 3. It is agreed and understood by both parties that as of the date of this Amendment, the existing Lease, First Amendment to Lease, and Second Amendment to Lease shall govern the "Expansion Premises" as outlined in Item 1 above with the exception of the provisions contained herein to the contrary. PAGE 1 OF 3 THIRD AMENDMENT TO LEASE (CONTINUED) 4. The monthly base rental shall remain as scheduled in the Second Amendment to Lease until August 31, 1995, at which time the base rental shall be modified and scheduled as follows: September 1, 1995 - February 28, 1996: $6,378.23 per month March 1, 1996 - January 31, 1997: $7,443.55 per month February 1, 1997 - August 31, 2000: $7,806.65 per month 5. Taxes and Insurance charges as specified in Section 4 and Section 13 of the Lease, shall remain as modified in the First Amendment to Lease Agreement and the Second Amendment to Lease allowing that Tenant shall be responsible for any additional taxes and insurance costs which exceed an amount equal to the 1994 expense for these items per square foot of net rentable area in the total lease premises. All other defining terms and calculations of assessments and charges pursuant to these paragraphs shall remain as specified in the original Lease. 6. Common Area Maintenance -- Tenant shall be required to pay its prorata share of common area maintenance expenses of the property. On a monthly basis, tenant shall pay an amount equal to $.07 per square foot per month as Tenant's prorata share of common area expenses as outlined in Section 7 of the Lease. THEREFORE, BEGINNING SEPTEMBER 1, 1995, TENANT SHALL PAY $1,270.85 PER MONTH AS ITS ESTIMATED PRORATA SHARE OF THESE EXPENSES. LANDLORD AGREES THAT TENANT'S PAYMENT OF ITS PRORATA OF COMMON AREA MAINTENANCE COSTS WILL NOT EXCEED $.07 PER SQUARE FOOT PER MONTH DURING THE TERM OF THE LEASE. 7. As an example of rental and expense obligations as modified in this Second Amendment to Lease and as ratified in the original Lease Agreement and the First Amendment to Lease Agreement, the following is an outline of Tenant's charges for September, 1995, rent and other charges: Base Rent: $ 6,387.23 Common Area Maintenance: $ 1,270.85 ----------- TOTAL PAYMENT FOR SEPTEMBER, 1995: $ 7,658.08 =========== Rent and expense charges will remain as scheduled in the Second Amendment to Lease Agreement and as are currently being paid by Tenant until August 31, 1995. 8. Landlord agrees to perform miscellaneous interior improvements to the expansion premises which shall include patch and repair of the acoustical ceiling, demolition of some existing interior walls, relocation of existing doors and hardware, installation of new interior walls where indicated on the construction drawings, miscellaneous electrical additions including outlets, switches and other requirements, replacement of existing flooring with carpet or tile and new cove base pursuant to Tenant's desires, servicing the existing HVAC systems and relocating ductwork as needed, repainting of the interior of the leased premises, and minor plumbing work which will include capping off existing service to one/two restrooms. LANDLORD SHALL PROVIDE TENANT AN ALLOWANCE EQUAL TO $20,000 FOR THE ABOVE REFERENCED IMPROVEMENTS. SHOULD THE COST OF THE SPACE IMPROVEMENTS EXCEED $20,000, TENANT SHALL BE REQUIRED TO PAY ANY OF THESE ADDITIONAL EXPENSES. THIS ALLOWANCE DOES NOT INCLUDE CONSTRUCTION MANAGEMENT FEE AND ARCHITECTURAL FEES WHICH WILL BE PAID BY LANDLORD. LANDLORD WILL HIRE AN ARCHITECT TO COMPILE A SIMPLE CONSTRUCTION DRAWING DEPICTING THE SPECIFIC ITEMS REQUESTED BY TENANT FOR THE SPACE IMPROVEMENTS REFERRED TO HEREIN. 9. Except as otherwise stated herein, all other terms and conditions of the Original Lease Agreement dated January 16, 1991, the First Amendment to Lease Agreement dated December 7, 1993, and the Second Amendment to Lease dated December 29, 1994, by and between 600 C.C. Business Park, as Landlord and Industrial Data Systems, as Tenant shall remain in full force and effect and shall apply to the "Expansion Premises" located at 600 Century Plaza Drive, Suite 140, Houston, Texas 77073. PAGE 2 OF 3 THIRD AMENDMENT TO LEASE (CONTINUED) This Amendment shall be binding upon and inure to the benefit of Landlord and Tenant and their successors and assigns; however, this provision shall not permit any additional transfer or assignment of the Lease by Tenant which is otherwise limited by the terms of the Lease and this amendment required by Landlord's consent. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Lease as of this 8th day of August, 1995. Exhibit List: Exhibit "A" -- Site Plan Exhibit "A-1" -- Expansion Premises TENANT: LANDLORD: INDUSTRIAL DATA SYSTEMS 600 C.C. BUSINESS PARK, LTD. BY: WILLIAM COSKEY BY: JOHN W. COSTELLO NAME: William Coskey NAME: John W. Costello TITLE: President TITLE: General Partner DATE: 8/4/95 DATE: 8/8/95 PAGE 3 OF 3 EXHIBIT "A" [SITE PLAN GRAPHIC OMITTED] CENTURY CENTER MAP MAXICORP, INC. 713 228-0060 SITE PLAN LAND AREA 9.058 ACRES GROSS LEASABLE AREA 132310 S.F. BLDG. A 34260 S.F. BLDG. B 39880 S.F. (94900 Woodham Drive) (14250 Woodham Drive) BLDG. C 30730 S.F. BLDG. D 27450 S.F. (609 Century Plaza Drive) (609 Century Plaza Drive) PARKING 398 CARS (3.1/1000 S.F.) EXPANSION PREMISES CURRENT LEASED PREMISES EXHIBIT "A-1" [EXPANSION PREMISES GRAPHIC OMITTED] CURRENT LEASE PREMISES APPROXIMATELY 12,230 SQ. FT. EXPANSION PREMISES APPROXIMATELY 5,925 SQ. FT. EX-10.4 31 Made and entered into this 1st day of June, 1995, by and between CLARKSBURG MASONIC BUILDING, a West Virginia corporation, of 427 West Pike Street, Clarksburg, West Virginia (Lessor), and INDUSTRIAL DATA SYSTEMS, INC., 600 Century Plaza Drive, Building 140, Houston, Texas 77073-6016, (Lessee). WITNESSETH: That the Lessor and Lessee agree to the following: 1. The Lessor leases to Lessee and Lessee takes and hires from the Lessor, office space being approximately 180 square feet, situate on the fifth floor of the Masonic Temple Building located at 427 West Pike Street, Clarksburg, West Virginia, together with the right to ingress and egress through the front door and lobby and through the back door. 2. The term of the Lease shall commence June 1, 1995 at 12:01 a.m. and shall extend for a period of one year expiring at midnight May 31, 1996, and shall be automatically renewed for two additional consecutive one-year extended terms unless Lessee shall notify Lessor in writing of its election not to renew the Lease at least three calendar months prior to the end of the original term or any extended one-year term. 3. Lessee shall pay the Lessor, at the latters previously mentioned address, rent in the amount of One Hundred Forty Four Dollars ($144.00) monthly on or before the first day of the month for which payment is made during the original term and any extended term provided for in Paragraph Two. 4. Lessee shall use the leased premises for office space and related functions and for no other purpose unless written approval of Lessor is first obtained. 5. The Lessor shall maintain the leased premises in good, safe, usable, tenable condition (except of Lessee's obligations, hereinafter specified), including the heating system, plumbing system, toilet facilities, air conditioning system, electrical system, entry ways and common facilities of the entire building as they include or affect the leased premises. 7. Lessee, may at its cost, paint and repair the leased premises, change and add lighting fixtures and facilities, install additional electric wiring and outlets, repair and replace floor coverings, and remove, rearrange or install new partitions between rooms in the leased premises. All leasehold improvements of the nature described in this paragraph shall become the property of the Lessor when this tenancy terminates. 8. Lessee may install such trade fixtures, equipment and appliances in the lease premises as it deems necessary or convenient at the beginning of the term or any extended term and from time to time during its tenancy, and may remove or replace them at will. These trade fixtures, equipment, and appliances shall remain the property of Lessee or the persons from which it may have leased them. Lessee shall refrain from permanent damage or substantial alteration of the building in such installation, use or removal. 9. If, during the term or any extended term of this Lease, the building is so injured by fire or other casualty not occurring through the Lessee's negligence that the leased premises are rendered wholly unfit for occupancy and said leased premises cannot be repaired within sixty (60) days of the happening of such injury, then this lease may be terminated by either party giving written notice of such intentions. In the event of a partial destruction by fire or other casualty that does not result in the leased premises becoming wholly untenable, Lessor agrees to proceed diligently with the necessary repairs of the damage and this Lease shall continue in force except that rentals shall be equitably prorated during the period of such damage, based upon the degree of interference sustained by Lessee resulting from said fire and casualty. 10. The Lessor shall supply keys for all access doors to the leased premises and shall provide access to the leased premises at least between the hours of 7:00 a.m. and 11:00 p.m., seven days a week. Lessee may duplicate keys for use of its employees working in the leased premises and shall return all keys to Lessor at the end of the tenancy. 11. This Lease constitutes the entire agreement between the parties and shall not be modified or amended except in writing signed by both parties. 12. Any waiver or a provision of or a right given in the Lease shall be deemed a waiver for that occasion only and shall not be construed as a waiver of the provisions or right on any other occasion. 13. The provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. CLARKSBURG MASONIC BUILDING COMPANY By: INDUSTRIAL DATA SYSTEMS, INC. By: /s/ WILLIAM A. COSKEY William A. Coskey EX-10.5 32 ADOPTION AGREEMENT #004 NONSTANDARDIZED CODE SECTION 401(K) PROFIT SHARING PLAN The undersigned, INDUSTRIAL DATA SYSTEMS, INC. ("Employer"), by executing this Adoption Agreement, elects to become a participating Employer in the Powell, Townsend & Associates, Inc. Defined Contribution Prototype Plan (basic plan, document #01) by adopting the accompanying Plan and Trust in full as if the Employer were a signatory to that Agreement. The Employer makes the following elections granted under the provisions of the Prototype Plan. ARTICLE I DEFINITIONS 1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (CHOOSE (a) OR (b)) [X] (a) A discretionary Trustee. See Section 10.03[A] of the Plan. [ ] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [NOTE: THE EMPLOYER MAY NOT ELECT OPTION (B) IF A CUSTODIAN EXECUTES THE ADOPTION AGREEMENT.] 1.03 PLAN. The name of the Plan as adopted by the Employer is INDUSTRIAL DATA SYSTEMS, INC. 401(K) PROFIT SHARING PLAN. 1.07 EMPLOYEE. The following Employees are not eligible to participate in the Plan: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (g)) [ ] (a) No exclusions. [X] (b) Collective bargaining employees (as defined in Section 1.07 of the Plan). [NOTE: IF THE EMPLOYER EXCLUDES UNION EMPLOYEES FROM THE PLAN, THE EMPLOYER MUST BE ABLE TO PROVIDE EVIDENCE THAT RETIREMENT BENEFITS WERE THE SUBJECT OF GOOD FAITH BARGAINING.] [ ] (c) Nonresident aliens who do not receive any earned income (as defined in Code Section 911(d)(2)) from the Employer which constitutes United States source income (as defined in Code Section 861(a)(3)). [ ] (d) Commission Salesmen. [ ] (e) Any Employee compensated on a salaried basis. [ ] (f) Any Employee compensated on an hourly basis. [ ] (g) (SPECIFY) _________________________________________________________. LEASED EMPLOYEES. Any Leased Employee treated as an Employee under Section 1.31 of the Plan, is: (CHOOSE (h) OR (i)) [X] (h) Not eligible to participate in the Plan. [ ] (i) Eligible to participate in the Plan, unless excluded by reason of an exclusion classification elected under this Adoption Agreement Section 1.07. 1 RELATED EMPLOYERS. If any of the Employer's related group (as defined in Section 1.30 of the Plan) executes a Participation Agreement, such member's Employees are eligible to participate in this Plan, unless excluded by reason of an exclusion classification elected under this Adoption Agreement Section 1.07. In addition: (CHOOSE (j) OR (k)) [X] (j) No other related group member's Employees are eligible to participate in the Plan. [ ] (k) The following nonparticipating related group member's Employees are eligible to participate in the Plan unless excluded by reason of an exclusion classification elected under this Adoption Agreement Section 1.07: _____________________________________________________________________ 1.12 COMPENSATION TREATMENT OF ELECTIVE CONTRIBUTIONS. (CHOOSE (a) OR (b)) [X] (a) "Compensation" includes elective contributions made by the Employer on the Employee's behalf. [ ] (b) "Compensation" does not include elective contributions. MODIFICATIONS TO COMPENSATION DEFINITION. (CHOOSE (c) OR AT LEAST ONE OF (d) THROUGH (j)) [X] (c) No modifications other than as elected under Options (a) or (b). [ ] (d) The Plan excludes Compensation in excess of $___________ . [ ] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation means any earnings reportable as W-2 wages for Federal income tax withholding purposes, subject to any other election under this Adoption Agreement Section 1.12. [ ] (f) The Plan excludes bonuses. [ ] (g) The Plan excludes overtime. [ ] (h) The Plan excludes Commissions. [ ] (i) Compensation will not include Compensation from a related employer (as defined in Section 1.30 of the Plan) that has not executed a Participation Agreement in this Plan unless, pursuant to Adoption Agreement Section 1. 07, the Employees of that related employer are eligible to participate in this Plan. [ ] (j) (SPECIFY) _________________________________________________________ . If, for any Plan Year, the Plan uses permitted disparity in the contribution or allocation formula elected under Article III, any election of Options (f), (g), (h) or (j) is ineffective for such Plan Year with respect to any Nonhighly Compensated Employee. SPECIAL DEFINITION FOR MATCHING CONTRIBUTIONS. "Compensation" for purposes of any matching contribution formula under Article III means: (CHOOSE (k) OR (l) ONLY IF APPLICABLE) [X] (k) Compensation as defined in this Adoption Agreement Section 1.12. [ ] (l) (SPECIFY) ____________________________________________________________ 2 SPECIAL DEFINITION FOR SALARY REDUCTION CONTRIBUTIONS. An Employee's salary reduction agreement applies to his Compensation determined prior to the reduction authorized by that salary reduction agreement, with the following exceptions: (CHOOSE (m) OR AT LEAST ONE OF (n) OR (o), IF APPLICABLE) [X] (m) No exceptions. [ ] (n) If the Employee makes elective contributions to another plan maintained by the Employer, the Advisory Committee will determine the amount of the Employee's salary reduction contribution for the withholding period: (CHOOSE (1) OR (2)) [ ] (1) After the reduction for such period of elective contributions to the other plan(s). [ ] (2) Prior to the reduction for such period of elective contributions to the other plan(s). [ ] (o) (SPECIFY) __________________________________________________________ . 1.17 PLAN YEAR/LIMITATION YEAR. PLAN YEAR. Plan Year means: (CHOOSE (a) OR (b)) [X] (a) The 12 consecutive month period ending every DECEMBER 31. [ ] (b) (SPECIFY) __________________________________________________________ . LIMITATION YEAR. The Limitation Year is: (CHOOSE (c) OR (d)) [X] (c) The Plan Year. 2 [ ] (d) The 12 consecutive month period ending every _________ . 1.18 EFFECTIVE DATE. NEW PLAN. The "Effective Date" of the Plan is ____________________ . RESTATED PLAN. The restated Effective Date is JANUARY 1, 1996. This Plan is a substitution and amendment of an existing retirement plan(s) originally established JANUARY 1, 1993. [NOTE: SEE THE EFFECTIVE DATE ADDENDUM.] 1.27 HOUR OF SERVICE. The crediting method for Hours of Service is: (CHOOSE (a) OR (b)) [X] (a) The actual method. [ ] (b) The _____ equivalency method, except: [ ] (1) No exceptions. [ ] (2) The actual method applies for purposes of: (CHOOSE AT LEAST ONE) [ ] (i) Participation under Article II. [ ] (ii) Vesting under Article V. [ ] (iii) Accrual of benefits under Section 3.06. 3 [NOTE: ON THE BLANK LINE, INSERT "DAILY," "WEEKLY," "SEMI-MONTHLY PAYROLL PERIODS" OR "MONTHLY."] 1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor service the Plan must credit by reason of Section 1.29 of the Plan, the Plan credits Service with the following predecessor employer(s): N/A. Service with the designated predecessor employers(s) applies: (CHOOSE AT LEAST ONE OF (a) OR (b); (c) IS AVAILABLE ONLY IN ADDITION TO (a) OR (b)) [ ] (a) For purposes of participation under Article II. [ ] (b) For purposes of vesting under Article V. [ ] (c) Except the following Service: ________________________________________ [NOTE: IF THE PLAN DOES NOT CREDIT ANY PREDECESSOR SERVICE UNDER THIS PROVISION, INSERT "N/A" IN THE FIRST BLANK LINE. THE EMPLOYER MAY ATTACH A SCHEDULE TO THIS ADOPTION AGREEMENT, IN THE SAME FORMAT AS THIS SECTION 1.29, DESIGNATING ADDITIONAL PREDECESSOR EMPLOYERS AND THE APPLICABLE SERVICE CREDITING ELECTIONS.] 1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan and also participates in a plan maintained by the leasing organization: (CHOOSE (a) OR (b)) [ ] (a) The Advisory Committee will determine the Leased Employee's allocation of Employer contributions under Article III without taking into account the Leased Employee's allocation, if any, under the leasing organization's plan. [X] (b) The Advisory Committee will reduce a Leased Employee's allocation of Employer nonelective contributions (other than designated qualified nonelective contributions) under this Plan by the Leased Employee's allocation under the leasing organization's plan, but only to the extent that allocation is attributable to the Leased Employee's service provided to the Employer. The leasing organization's plan: [X] (1) Must be a money purchase plan which would satisfy the definition under Section 1.31 of a safe harbor plan, irrespective of whether the safe harbor exception applies. [ ] (2) Must satisfy the features and, if a defined benefit plan, the method of reduction described in an addendum to this Adoption Agreement, numbered 1.31. ARTICLE II EMPLOYEE PARTICIPANTS 2.01 ELIGIBILITY. ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee must satisfy the following eligibility conditions: (CHOOSE (A) OR (B) OR BOTH; (C) IS OPTIONAL AS AN ADDITIONAL ELECTION) [X] (a) Attainment of age 21 (SPECIFY AGE, NOT EXCEEDING 21). [X] (b) Service requirement. (CHOOSE ONE OF (1) THROUGH (3)) [ ] (1) One Year of Service. [X] (2) 3 months (not exceeding 12) following the Employee's Employment Commencement Date. 4 [ ] (3) One Hour of Service. [ ] (c) Special requirements for non-401(k) portion of plan. (MAKE ELECTIONS UNDER (1) AND UNDER (2)) (1) The requirements of this Option (c) apply to participation in: (CHOOSE AT LEAST ONE OF (i) THROUGH (iii)) [ ] (i) The allocation of Employer nonelective contributions and Participant forfeitures. [ ] (ii) The allocation of Employer matching contributions (including forfeitures allocated as matching contributions). [ ] (iii) The allocation of Employer qualified nonelective contributions. (2) For participation in the allocations described in (1), the eligibility conditions are: (CHOOSE AT LEAST ONE OF (I) THROUGH (IV)) [ ] (i) _ (one or two) Year(s) of Service, without an intervening Break in Service (as described in Section 2.03(A) of the Plan) if the requirement is two Years of Service. [ ] (ii) _ months (not exceeding 24) following the Employee's Employment Commencement Date. [ ] (iii) One Hour of Service. [ ] (iv) Attainment of age _ (SPECIFY AGE, NOT EXCEEDING 21). PLAN ENTRY DATE. "Plan Entry Date" and: (CHOOSE (d), (e) OR (f)) [ ] (d) Semi-annual Entry Dates. The first day of the Plan Year and the first day of the seventh month of the Plan Year. [ ] (e) The first day of the Plan Year. [X] (f) (SPECIFY ENTRY DATES) January 1, April 1, July 1 or October 1. TIME OF PARTICIPATION. An employee will become a Participant (and, if applicable, will participate in the allocations described in Option (c)(1)), unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on that date): (CHOOSE (g), (h) OR (i)) [X] (g) immediately following [ ] (h) immediately preceding [ ] (i) nearest the date the Employee completes the eligibility conditions described in Options (a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement Section 2.01 [NOTE: THE EMPLOYER MUST COORDINATE THE SELECTION OF (G), (H) OR (I) WITH THE "PLAN ENTRY DATE" SELECTION IN (D), (E) OR (F). UNLESS OTHERWISE EXCLUDED UNDER SECTION 1.07, THE EMPLOYEE MUST BECOME A PARTICIPANT BY THE EARLIER OF: (1) THE FIRST DAY OF THE PLAN YEAR BEGINNING AFTER THE DATE THE EMPLOYEE COMPLETES THE AGE AND SERVICE REQUIREMENTS OF CODE SECTION 410(A); OR (2) 6 MONTHS AFTER THE DATE THE EMPLOYEE COMPLETES THOSE REQUIREMENTS.] 5 DUAL ELIGIBILITY. The eligibility conditions of this Section 2.01 apply to: (CHOOSE (j) OR (k)) [X] (j) All Employees of the Employer, except: (CHOOSE (1) OR (2)) [X] (1) No exceptions. [ ] (2) Employees who are Participants in the Plan as of the Effective Date. [ ] (k) Solely to an Employee employed by the Employer after __________________. If the Employee was employed by the Employer on or before the specified date, the Employee will become a Participant: (CHOOSE (1), (2) OR (3)) [ ] (1) On the latest of the Effective Date, his Employment Commencement Date or the date he attains age _____ (not to exceed 21). [ ] (2) Under the eligibility conditions in effect under the Plan prior to the restated Effective Date. If the restated Plan required more than one Year of Service to participate, the eligibility condition under this Option (2) for participation in the Code (Section) 401(k) arrangement under this Plan is one Year of Service for Plan Years beginning after December 31, 1988. [FOR RESTATED PLANS ONLY] [ ] (3) (SPECIFY) ____________________________________________. 2.02 YEAR OF SERVICE -- PARTICIPATION. HOURS OF SERVICE. An Employee must complete: (CHOOSE (A) OR (B)) [ ] (a) 1,000 Hours of Service [ ] (b) ___ Hours of Service during an eligibility computation period to receive credit for a Year of Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY NOT EXCEED 1,000.] ELIGIBILITY COMPUTATION PERIOD. After the initial eligibility computation period described in Section 2.02 of the Plan, the Plan measures the eligibility computation period as: (CHOOSE (C) OR (D)) [ ] (c) The 12 consecutive month period beginning with each anniversary of an Employee's Employment Commencement Date. [X] (d) The Plan Year, beginning with the Plan Year which includes the first anniversary of the Employee's Employment Commencement Date. 2.03 BREAK IN SERVICE -- PARTICIPATION. The Break in Service rule described in Section 2.02(B) of the Plan: (CHOOSE (A) OR (B)) [ ] (a) Does not apply to the Employer's Plan. [X] (b) Applies to the Employer's Plan. 2.06 ELECTION NOT TO PARTICIPATE: The Plan: (CHOOSE (A) OR (B)) [X] (a) Does not permit an eligible Employee or a Participant to elect not to participate. 6 [ ] (b) Does permit an eligible Employee or a Participant to elect not to participate in accordance with Section 2.06 and with the following rules: (COMPLETE (1), (2), (3) AND (4)) (1) An election is effective for a Plan Year if filed no later than _____________________. (2) An election not to participate must be effective for at least Plan Year(s). (3) Following a re-election to participate, the Employee or Participant: [ ] (i) May not again elect not to participate for any subsequent Plan Year. [ ] (ii) May again elect not to participate, but not earlier than the ____ Plan Year following the Plan Year in which the re-election first was effective. (4) (SPECIFY) __________________________________________________________ [INSERT "N/A" IF NO OTHER RULES APPLY]. ARTICLE III EMPLOYER CONTRIBUTIONS AND FORFEITURES 3.01 AMOUNT. PART I. [OPTIONS (a) THROUGH (g)] AMOUNT OF EMPLOYER'S CONTRIBUTION. The Employer's annual contribution to the Trust will equal the total amount of deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions, as determined under this Section 3.01. (CHOOSE ANY COMBINATION OF (a), (b), (c) AND (d), OR CHOOSE (e)) [X] (a) DEFERRED CONTRIBUTIONS (CODE (SECTION) 401(K) ARRANGEMENT). (CHOOSE (1) OR (2) OR BOTH) [X] (1) Salary reduction arrangement. The Employer must contribute the amount by which the Participants have reduced their Compensation for the Plan Year, pursuant to their salary reduction agreements on file with the Advisory Committee. A reference in the Plan to salary reduction contributions is a reference to these amounts. [ ] (2) Cash or deferred arrangement. The Employer will contribute on behalf of each Participant the portion of the Participant's proportionate share of the cash or deferred contribution which he has not elected to receive in cash. See Section 14.02 of the Plan. The Employer's cash or deferred contribution is the amount the Employer may from time to time deem advisable which the Employer designates as a cash or deferred contribution prior to making that contribution to the Trust. [X] (b) MATCHING CONTRIBUTIONS. The Employer will make matching contributions in accordance with the formula(s) elected in Part II of this Adoption Agreement Section 3.01. [X] (c) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS. The Employer, in its sole discretion, may contribute an amount which it designates as a qualified nonelective contribution. [X] (d) NONELECTIVE CONTRIBUTIONS. (CHOOSE ANY COMBINATION OF (1) THROUGH (4)) [X] (1) Discretionary contribution. The amount (or additional amount) the Employer may from time to time deem advisable. 7 [ ] (2) The amount (or additional amount) the Employer may from time to time deem advisable, separately determined for each of the following classifications of Participants: (CHOOSE (I) OR (II)) [ ] (i) Nonhighly Compensated Employees and Highly Compensated Employees. [ ] (ii) (SPECIFY CLASSIFICATIONS) ______________________. Under this Option (2), the Advisory Committee will allocate the amount contributed for each Participant classification in accordance with Part II of Adoption Agreement 3.04, as if the Participants in that classification were the only Participants in the Plan. [ ] (3) __% of the Compensation of all Participants under the Plan, determined for the Employer's taxable year for which it makes the contribution [NOTE: THE PERCENTAGE SELECTED MAY NOT EXCEED 15%.] [ ] (4) __% of Net Profits but not more than $ . [ ] (e) FROZEN PLAN. This Plan is a frozen Plan effective _______. The Employer will not contribute to the Plan with respect to any period following the stated date. NET PROFITS. The Employer: (CHOOSE (f) OR (g)) [X] (f) Need not have Net Profits to make its annual contribution under this Plan. [ ] (g) Must have current or accumulated Net Profits exceeding $ _______ to make the following contributions: (CHOOSE AT LEAST ONE) [ ] (1) Cash or deferred contributions described in Option (a)(2). [ ] (2) Matching contributions described in Option (b), except: __________. [ ] (3) Qualified nonelective contributions described in Option (c). [ ] (4) Nonelective contributions described in Option (d). The term "Net Profits" means the Employer's net income or profits for any taxable year determined by the Employer upon the basis of its books of account in accordance with generally accepted accounting practices consistently applied without any deductions for Federal and state taxes upon income or for contributions made by the Employer under this Plan or under any other employee benefit plan the Employer maintains. The term "Net Profits" specifically excludes ____________________________________________________________. [NOTE: ENTER "N/A" IF NO EXCLUSIONS APPLY.] If the Employer requires Net Profits for matching contributions and the Employer does not have sufficient Net Profits under Option (g), it will reduce the matching contribution under a fixed formula on a prorata basis for all Participants. A Participant's share of the reduced contribution will bear the same ratio as the matching contribution the Participant would have received if Net Profits were sufficient bears to the total matching contribution all Participants would have received if Net Profits were sufficient. If more than one member of a related group (as defined in Section 1.30) execute this Adoption Agreement, each participating member will determine Net Profits separately but will not apply this reduction unless, after combining the separately determined Net Profits, the aggregate Net Profits are insufficient to satisfy the matching contribution liability. "Net Profits" includes both current and accumulated Net Profits. 8 PART II. [OPTIONS (H) THROUGH (J)] MATCHING CONTRIBUTION FORMULA. [NOTE: IF THE EMPLOYER ELECTED OPTION (B), COMPLETE OPTIONS (H), (I) AND (J).] [X] (h) AMOUNT OF MATCHING CONTRIBUTIONS. For each Plan Year, the Employer's matching contribution is: (CHOOSE ANY COMBINATION OF (1), (2), (3), (4) AND (5)) [X] (1) An amount equal to 50% of each Participant's eligible contributions for the Plan Year. [ ] (2) An amount equal to __% of each Participant's first tier of eligible contributions for the Plan Year, plus the following matching percentage(s) for the following subsequent tiers of eligible contributions for the Plan ______________________________. [X] (3) Discretionary formula. [X] (i) An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of the Participant's eligible contributions for the Plan Year. [ ] (ii) An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of each tier of the Participant's eligible contributions for the Plan Year. [ ] (4) An amount equal to the following percentage of each Participant's eligible contributions for the Plan Year, based on the Participant's Years of Service: NUMBER OF YEARS OF SERVICE MATCHING PERCENTAGE -------------------------- ------------------- -- -- -- -- -- -- -- -- The Advisory Committee will apply this formula by determining Years of Service as follows:__________________________________________________. [ ] (5) A Participant's matching contribution may not: (CHOOSE (i) OR (ii)) [ ] (i) Exceed _____________________________________________. [ ] (ii) Be less than ______________________________________. RELATED EMPLOYERS. If two or more related employers (as defined in Section 1.30) contribute to this Plan, the related employers may elect different matching contribution formulas by attaching to the Adoption Agreement a separately completed copy of this Part II. NOTE: SEPARATE MATCHING CONTRIBUTION FORMULAS CREATE SEPARATE CURRENT BENEFIT STRUCTURES THAT MUST SATISFY THE MINIMUM PARTICIPATION TEST OF CODE SECTION 401(A)(26).] [X] (i) DEFINITION OF ELIGIBLE CONTRIBUTIONS. Subject to the requirements of Option (j), the term "eligible contributions" means: (CHOOSE ANY COMBINATION OF (1) THROUGH (3)) [X] (1) salary reduction contributions 9 [ ] (2) Cash or deferred contributions (including any part of the Participant's proportionate share of the cash or deferred contribution which the Employer defers without the Participant's election). [ ] (3) Participant mandatory contributions, as designated in Adoption Agreement Section 4.01. See Section 14.04 of the Plan. [X] (j) AMOUNT OF ELIGIBLE CONTRIBUTIONS TAKEN INTO ACCOUNT. When determining a Participant's eligible contributions taken into account under the matching contributions formula(s), the following rules apply: (CHOOSE ANY COMBINATION OF (1) THROUGH (4)) [ ] (1) The Advisory Committee will take into account all eligible contributions credited for the Plan Year. [X] (2) The Advisory Committee will disregard eligible contributions exceeding 6% of compensation. [ ] (3) The Advisory Committee will treat as the first tier of eligible contributions, an amount not exceeding:_____________________________ . The subsequent tiers of eligible contributions are: ___ . [ ] (4) (SPECIFY)_______________________________________________________ . PART III. [OPTIONS (K) AND (L)]. SPECIAL RULES FOR CODE SECTION 401(K) ARRANGEMENT. (CHOOSE (K) OR (L), OR BOTH, AS APPLICABLE) [X] (k) SALARY REDUCTION AGREEMENTS. The following rules and restrictions apply to an Employee's salary reduction agreement: (MAKE A SELECTION UNDER (1), (2), (3) AND (4)) (1) Limitation on amount. The Employee's salary reduction contributions: (CHOOSE (i) OR AT LEAST ONE OF (ii) OR (iii)) [ ] (i) No maximum limitation other than as provided in the Plan. [X] (ii) May not exceed 15% of Compensation for the Plan Year, subject to the annual additions limitation described in Part 2 of Article III and the 402(g) limitation described in Section 14.07 of the Plan. [ ] (iii) Based on percentages of Compensation must equal at least ___________________________________________ . (2) An Employee may revoke, on a prospective basis, a salary reduction agreement: (CHOOSE (I), (II), (III) OR (IV)) [ ] (i) Once during any Plan Year but not later than ____________________ of the Plan Year. [ ] (ii) As of any Plan Entry Date. [ ] (iii) As of the first day of any month. [X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR) any day of the plan year. 10 (3) An Employee who revokes his salary reduction agreement may file a new salary reduction agreement with an effective (CHOOSE (I), (II), (III) OR (IV) [ ] (i) No earlier than the first day of the next Plan Year. [X] (ii) As of any subsequent Plan Entry Date. [ ] (iii) As of the first day of any month subsequent to the month in which he revoked an Agreement. [X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR FOLLOWING THE PLAN YEAR OF REVOCATION) _____________________________________ (4) A Participant may increase or may decrease, on a prospective basis, his salary reduction percentage or dollar amount: (CHOOSE (I), (II), (III) OR (IV)) [ ] (i) As of the beginning of each payroll period. [ ] (ii) As of the first day of each month. [X] (iii) As of any Plan Entry Date. [ ] (iv) (SPECIFY, BUT MUST PERMIT AN INCREASE OR A DECREASE AT LEAST ONCE PER PLAN YEAR)_______________________________________________ [ ] (1) CASH OR DEFERRED CONTRIBUTIONS. For each Plan Year for which the Employer makes a designated cash or deferred contribution, a Participant may elect to receive directly in cash not more than the following portion (or, if less the 402(g) limitation described in Section 14.07 of the Plan) of his proportionate share of that cash or deferred contribution: (CHOOSE (1) OR (2)) [ ] All or any portion. [ ] (2) ______________________________%. 3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions in accordance with Section 14.06 and the elections under this Adoption Agreement Section 3.04. PART I. [OPTIONS (a) THROUGH (d)]. SPECIAL ACCOUNTING ELECTIONS. (CHOOSE WHICHEVER ELECTIONS ARE APPLICABLE TO THE EMPLOYER'S PLAN) [X] (a) MATCHING CONTRIBUTIONS ACCOUNT. The Advisory Committee will allocate matching contributions to a Participant's: (CHOOSE (1) OR (2); (3) IS AVAILABLE ONLY IN ADDITION TO (1)) [X] (1) Regular Matching Contributions Account. [ ] (2) Qualified Matching Contributions Account. [ ] (3) Except, matching contributions under Options(s) ___ of Adoption Agreement Section 3.01 are allocable to the Qualified Matching Contributions Account. [X] (b) SPECIAL ALLOCATION DATES FOR SALARY REDUCTION CONTRIBUTIONS. The Advisory Committee will allocate reduction contributions as of the Accounting Date and as of the following additional allocation dates: EACH PAYROLL DATE. 11 [X] (c) SPECIAL ALLOCATION DATES FOR MATCHING CONTRIBUTIONS. The Advisory Committee will allocate matching contributions as of the Accounting Date and as of the following additional allocation dates: EACH PAYROLL DATE. [X] (d) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS -- DEFINITION OF PARTICIPANT. For purposes of allocating the designated qualified nonelective contribution, "Participant" means: (CHOOSE (1), (2) OR (3)) [ ] (1) All Participants. [X] (2) Participants who are Nonhighly Compensated Employees for the Plan Year. [ ] (3) (SPECIFY) __________________________________. PART II. METHOD OF ALLOCATION -- NONELECTIVE CONTRIBUTION. Subject to any restoration allocation required under Section 5.04, the Advisory Committee will allocate and credit each annual nonelective contribution (and Participant forfeitures treated as nonelective contributions) to the Employer Contributions Account of each Participant who satisfied the conditions of Section 3.06, in accordance with the allocation method selected under this Section 3.04. If the Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of Compensation allocated to all Participants, "Compensation" does not include any exclusions elected under Adoption Agreement Section 1.12 (other than the exclusion of elective contributions), and the Advisory Committee must take into account the Participant's Compensation for the entire Plan Year. (CHOOSE AN ALLOCATION METHOD UNDER (E), (F), (G) OR (H); (I) IS MANDATORY IF THE EMPLOYER ELECTS (F), (G) OR (H); (J) IS OPTIONAL IN ADDITION TO ANY OTHER ELECTION.) [X] (e) NONINTEGRATED ALLOCATION FORMULA. (CHOOSE (1) OR (2)) [X] (1) The Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [ ] (2) The Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. For purposes of this Option (2), "Participant" means, in addition to a Participant who satisfied the requirements of Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation will not exceed 3% of his Compensation for the Plan Year. [ ] (f) TWO-TIERED INTEGRATED ALLOCATION FORMULA -- MAXIMUM DISPARITY. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). The Advisory Committee then will allocate any remaining contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. 12 [ ] (g) THREE-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation may not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). Solely for purposes of the allocation in this first paragraph, "Participant" means, in addition to a Participant who satisfies the requirements of Section 3.06 for the Plan Year: (CHOOSE (1) OR (2)) [ ] (1) No other Participant. [ ] (2) Any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation under this Option (g) will not exceed 3% of his Compensation for the Plan Year. As a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Excess Compensation, may not exceed the allocation percentage in the first paragraph. Finally, the Advisory Committee will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [ ] (h) FOUR-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Compensation. Solely for purposes of this first tier allocation, a "Participant" means, in addition to any Participant who satisfies the requirements of Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B) of the Plan. As a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Excess Compensation. As a third tier allocation, the Advisory Committee will allocate the annual Employer contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum Disparity Table following Option (i). The Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. 13 [ ] (i) EXCESS COMPENSATION. For purposes of Option (f), (g) or (h), "Excess Compensation" means Compensation in excess of the following Integration Level: (CHOOSE (1) OR (2)) [ ] (1) __% (not exceeding 100%) of the taxable wage base, as determined under Section 230 of the Social Security Act, in effect on the first day of the Plan Year: (CHOOSE ANY COMBINATION OF (i) AND (ii) OR CHOOSE (iii)) [ ] (i) Rounded to _____________________________________________ (but not exceeding the taxable wage base). [ ] (ii) But not greater than $_____. [ ] (iii) Without any further adjustment or limitation. [ ] (2) $_________ [NOTE: NOT EXCEEDING THE TAXABLE WAGE BASE FOR THE PLAN YEAR IN WHICH THIS ADOPTION AGREEMENT FIRST IS EFFECTIVE.] MAXIMUM DISPARITY TABLE. For purposes of Options (f), (g) and (h), the applicable percentage is:
INTEGRATION LEVEL (AS APPLICABLE PERCENTAGES FOR APPLICABLE PERCENTAGES PERCENTAGE OF TAXABLE WAGE BASE) OPTION (F) OR OPTION (G) FOR OPTION (H) - ------------------------------------ -------------------------- ------------------------ 100% 5.7% 2.7% More than 80% but less than 100% 5.4% 2.4% More than 20% (but not less than $10,001) and not more than 80% 4.3% 1.3% 20% (or $10,000, if greater) or less 5.7% 2.7%
[ ] (j) ALLOCATION OFFSET. The Advisory Committee will reduce a Participant's allocation otherwise made under Part II of this Section 3.04 by the Participant's allocation under the following qualified plan(s) maintained by the Employer: _______________________________ . The Advisory Committee will determine this allocation reduction: (CHOOSE (1) OR (2)) 11 [ ] (1) By treating the term "nonelective contribution" as including all amounts paid or accrued by the Employer during the Plan Year to the qualified plan(s) referenced under this Option (j). If a Participant under this Plan also participates in that other plan, the Advisory Committee will treat the amount the Employer contributes for or during a Plan Year on behalf of a particular Participant under such other plan as an amount allocated under this Plan to that Participant's Account for that Plan Year. The Advisory Committee will make the computation of allocation required under the immediately preceding sentence before making any allocation of nonelective contributions under this Section 3.04. [ ] (2) In accordance with the formula provided in an addendum to this Adoption Agreement, numbered 3.04(j). 14 TOP HEAVY MINIMUM ALLOCATION -- METHOD OF COMPLIANCE. If a Participant's allocation under this Section 3.04 is less than the top heavy minimum allocation to which he is entitled under Section 3.04(B): CHOOSE (K) OR (L)) [X] (k) The Employer will make any necessary additional contribution to the Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan. [ ] (l) The Employer will satisfy the top heavy minimum allocation under the following plan(s) it maintains:__________________________________________ . However, the Employer will make any necessary additional contribution to satisfy the top heavy minimum allocation for an Employee covered only under this Plan and not under the other plan(s) designated in this Option (l). See Section 3.04(B)(7)(b) of the Plan. If the Employer maintains another plan, the Employer may provide in an addendum to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan necessary to satisfy the top heavy requirements under Code Section 416. RELATED EMPLOYERS. If two or more related employers (as defined in Section 1.30) contribute to this Plan, the Advisory Committee must allocate all Employer nonelective contributions (and forfeitures treated as nonelective contributions) to each Participant in the Plan, in accordance with the elections in this Adoption Agreement Section 3.04: (CHOOSE (M) OR (N)) [X] (m) Without regard to which contributing related group member employs the Participant. [ ] (n) Only to the Participants directly employed by the contributing Employer. If a Participant receives Compensation from more than one contributing Employer, the Advisory Committee will determine the allocations under this Adoption Agreement Section 3.04 by prorating among the participating Employers the Participant's Compensation and, if applicable, the Participant's Integration Level under Option (i). 3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant forfeiture in accordance with Section 3.04: (CHOOSE (a) OR (b); (c) AND (d) ARE OPTIONAL IN ADDITION TO (a) OR (b)) [X] (a) As an Employer nonelective contribution for the Plan Year in which the forfeiture occurs, as if the Participant forfeiture were an additional nonelective contribution for that Plan Year. [ ] (b) To reduce the Employer matching contributions and nonelective contributions for the Plan Year: (CHOOSE (1) OR (2)) [ ] (1) in which the forfeiture occurs. [ ] (2) immediately following the Plan Year in which the forfeiture occurs. [X] (c) To the extent attributable to matching contributions: (CHOOSE (1), (2) OR (3)) [ ] (1) In the manner elected under Options (a) or (b). [X] (2) First to reduce Employer matching contributions for the Plan Year: (CHOOSE (i) OR (ii)) [X] (i) in which the forfeiture occurs, 15 [ ] (ii) immediately following the Plan Year in which the forfeiture occurs, then as elected in Options (a) or (b). [ ] (3) As a discretionary matching contribution for the Plan Year in which the forfeiture occurs, in lieu of the manner elected under Options (a) or (b). [ ] (d) First to reduce the Plan's ordinary and necessary administrative expenses for the Plan Year and then will advocate any remaining forfeitures in the manner described in Options (a), (b) or (c), whichever applies. If the Employer elects Option (c), the forfeitures used to reduce Plan expenses: (CHOOSE (1) OR (2)) [ ] (1) relate proportionately to forfeitures described in Option (c) and to forfeitures described in Options (a) or (b). [ ] (2) relate first to forfeitures described in Options ____. ALLOCATION OF FORFEITED EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee will allocate any forfeited excess aggregate contributions (as described in Section 14.09): (CHOOSE (E), (F) OR (G)) [ ] (e) To reduce Employer matching contributions for the Plan Year: (CHOOSE (1) OR (2)) [ ] (1) in which the forfeiture occurs. [ ] (2) immediately following the Plan Year in which the forfeitures occurs. [ ] (f) As Employer discretionary matching contributions for the Plan Year in which forfeited, except the Advisory Committee will not allocate these forfeitures to the Highly Compensated Employees who incurred the forfeitures. [X] (g) In accordance with Options (a) through (d), whichever applies, except the Advisory Committee will not allocate these forfeitures under Option (a) or under Option (c)(3) to the Highly Compensated Employees who incurred the forfeitures. 3.06 ACCRUAL OF BENEFIT. COMPENSATION TAKEN INTO ACCOUNT. For the Plan Year in which the Employee first becomes a Participant, the Advisory Committee will determine the allocation of any cash or deferred contribution, designated qualified nonelective contribution or nonelective contribution by taking into account: (CHOOSE (A) OR (B)) [X] (a) The Employee's Compensation for the entire Plan Year. [ ] (b) The Employee's Compensation for the portion of the Plan Year in which the Employee actually is a Participant in the Plan. 16 ACCRUAL REQUIREMENTS. Subject to the suspension of accrual requirements of Section 3.06(E) of the Plan, to receive an allocation of cash or deferred contributions, matching contributions, designated qualified nonelective contributions, nonelective contributions and Participant forefeitures, if any, for the Plan Year, a Participant must satisfy the conditions described in the following elections: (CHOOSE (C) OR AT LEAST ONE OF (D) THROUGH (F)) [ ] (c) SAFE HARBOR RULE. If the Participant is employed by the Employer on the last day of the Plan Year, the Participant must complete at least one Hour of Service for that Plan Year. If the Participant is not employed by the Employer on the last day of the Plan Year, the Participant must complete at least 501 Hours of Service during the Plan Year. [X] (d) HOURS OF SERVICE CONDITIONS. The Participant must complete the following minimum number of Hours of Service during the Plan Year: (CHOOSE AT LEAST ONE OF (1) THROUGH (5)) [X] (1) 1,000 Hours of Service. [ ] (2) (SPECIFY, BUT THE NUMBER OF HOURS OF SERVICE THAT MAY NOT EXCEED 1,000) ___________________________________________________________________. [X] (3) No Hour of Service requirement if the Participant terminates employment during the Plan Year on account of: (CHOOSE (I), (II) OR (III)) [X] (i) Death. [X] (ii) Disability. [X] (iii) Attainment of Normal Retirement Age in the current Plan Year or in a prior Plan Year. [ ] (4) _ Hours of Service (not exceeding 1,000) if the Participant terminates employment with the Employer during the Plan Year, subject to any election in Option (3). [ ] (5) No Hour of Service requirement for an allocation of the following contributions:_____________________________________________ [X] (e) EMPLOYMENT CONDITIONS. The Participant must be employed by the Employer on the last day of the Plan Year, irrespective of whether he satisfies any Hours of Service condition under Option (d), with the following exceptions: (CHOOSE (1) OR AT LEAST ONE OF (2) THROUGH (5)) [ ] (1) No exceptions. [ ] (2) Termination of employment because of death. [ ] (3) Termination of employment because of disability. [ ] (4) Termination of employment following attainment of Normal Retirement Age. [ ] (5) No employment condition for the following contributions:_________ ___________________________________________________________________. [ ] (f) (SPECIFY OTHER CONDITIONS, IF APPLICABLE, IF APPLICABLE): ___________. 17 SUSPENSION OF ACCRUAL REQUIREMENTS. The suspension of accrual requirements of Section 3.06(E) of the Plan: (CHOOSE (g), (h) OR (i)) [X] (g) Applies to the Employer's Plan. [ ] (h) Does not apply to the Employer's Plan. [ ] (i) Applies in modified form to the Employer's Plan, as described in an addendum to this Adoption Agreement, numbered Section 3.06(E). SPECIAL ACCRUAL REQUIREMENTS FOR MATCHING CONTRIBUTIONS. If the Plan allocates matching contributions on two or more allocation dates for a Plan Year, the Advisory Committee, unless otherwise specified in Option (l), will apply any Hours of Service condition by dividing the required Hours of Service on a prorata basis to the allocation periods included in that Plan Year. Furthermore, a Participant who satisfies the conditions described in this Adoption Agreement Section 3.06 will receive an allocation of matching contributions (and forfeitures treated as matching contributions) only if the Participant satisfies the following additional condition(s): (CHOOSE (j) OR AT LEAST ONE OF (k) OR (l)) [ ] (j) No additional conditions. [ ] (k) The Participant is not a Highly Compensated Employee for the Plan Year. This Option (k) applies to: (CHOOSE (1) OR (2)) [ ] (1) All matching contributions. [ ] (2) Matching contributions described in Option(s) __________________ of Adoption Agreement Section 3.01. [X] (l) (SPECIFY) ACCRUAL CONDITIONS UNDER 3.06(D) AND 3.06(E) DO NOT APPLY. 3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply, the Excess Amount attributed to this Plan equals: (CHOOSE (A), (B) OR (C)) [ ] (a) The product of: (i) the total Excess Amount allocated as of such date (including any amount which the Advisory Committee would have allocated but for the limitations of Code Section 415), times (ii) the ratio of (1) the amount allocated to the Participant as of such date under this Plan divided by (2) the total amount allocated as of such date under all qualified defined contribution plans (determined without regard to the limitations of Code Section 415). [ ] (b) The total Excess Amount. [X] (c) None of the Excess Amount. 3.18 DEFINED BENEFIT PLAN LIMITATION. APPLICATION OF LIMITATION. The limitation under Section 3.18 of the Plan: (CHOOSE (a) OR (b)) [X] (a) Does not apply to the Employer's Plan because the Employer does not maintain and never has maintained a defined benefit plan covering any Participant in this Plan. 18 [ ] (b) Applies to the Employer's Plan. To the extent necessary to satisfy the limitation under Section 3.18, the Employer will reduce: (CHOOSE (1) OR (2)) [ ] (1) The Participant's projected annual benefit under the defined benefit plan under which the Participant participates. [ ] (2) Its contribution or allocation on behalf of the Participant to the defined contribution plan under which the Participant participates and then, if necessary, the Participant's projected annual benefit under the defined benefit plan under which the Participant particpates. [NOTE: IF THE EMPLOYER SELECTS (a), THE REMAINING OPTIONS IN THIS SECTION 3.18 DO NOT APPLY TO THE EMPLOYER'S PLAN.] COORDINATION WITH TOP HEAVY MINIMUM ALLOCATION. The Advisory Committee will apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan with the following modifications: (CHOOSE (c) OR AT LEAST ONE OF (d) OR (e)) [ ] (c) No modifications. [ ] (d) For Non-Key Employees participating only in this Plan, the top heavy minimum allocation is the minimum allocation described in Section 3.04(B) determined by substituting __% (not less than 4%) for "3%," except: (CHOOSE (i) OR (ii)) [ ] (i) No exceptions. [ ] (ii) Plan Years in which the top heavy ratio exceeds 90%. [ ] (e) For Non-Key Employees also participating in the defined benefit plan, the top heavy minimum is: (CHOOSE (1) OR (2)) [ ] (1) 5% of Compensation (as determined under Section 3.04(B) or the Plan) irrespective of the contribution rate of any Key Employee, except: (CHOOSE (i) OR (ii)) [ ] (i) No exceptions. [ ] (ii) Substituting "7 1/2%" for "5%" if the top heavy ratio does not exceed 90%. [ ] (2) 0%. [NOTE: THE EMPLOYER MAY NOT SELECT THIS OPTION (2) UNLESS THE DEFINED BENEFIT PLAN SATISFIES THE TOP HEAVY MINIMUM BENEFIT REQUIREMENTS OF CODE SECTION 416 FOR THESE NON-KEY EMPLOYEES.] ACTUARIAL ASSUMPTIONS FOR TOP HEAVY CALCULATION. To determine the top heavy ratio, the Advisory Committee will use the following interest rate and mortality assumptions to value accrued benefits under a defined benefit plan:_____________ _____________________________________________ If the elections under this Section 3.18 are not appropriate to satisfy the limitations of Section 3.18, or the top heavy requirements under Code Section 416, the Employer must provide the appropriate provisions in an addendum to this Adoption Agreement. 19 ARTICLE IV PARTICIPANT CONTRIBUTIONS 4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (CHOOSE (a) OR (b); (c) IS AVAILABLE ONLY WITH (b)) [X] (a) Does not permit Participant nondeductible contributions. [ ] (b) Permits Participant nondeductible contributions, pursuant to Section 14.04 of the Plan. [ ] (c) The following portion of the Participant's nondeductible contributions for the Plan Year are mandatory contributions under Option (i)(3) of Adoption Agreement Section 3.01: (CHOOSE (1) OR (2)) [ ] (1) The amount which is not less than:_______________________________. [ ] (2) The amount which is not greater than:____________________________. ALLOCATION DATES. The Advisory Committee will allocate nondeductible contributions for each Plan Year as of the Accounting Date and the following additional allocation dates: (CHOOSE (D) OR (E)) [ ] (d) No other allocation dates. [ ] (e) (SPECIFY) _________________________________________________________ As of an allocation date, the Advisory Committee will credit all nondeductible contributions made for the relevant allocation period. Unless otherwise specified in (e), a nondeductible contribution relates to an allocation period only if actually made to the Trust no later than 30 days after that allocation period ends. 4.05 PARTICIPANT CONTRIBUTION -- WITHDRAWAL/DISTRIBUTION. Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Mandatory Contributions Account, if any, prior to his Separation from Service: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (d)) [ ] (a) No distribution options prior to Separation from Service. [ ] (b) The same distribution options applicable to the Deferral Contributions Account prior to the Participant's Separation from Service, as elected in Adoption Agreement Section 6.03. [ ] (c) Until he retires, the Participant has continuing election to receive all or any portion of his Mandatory Contributions Account if: (CHOOSE (1) OR AT LEAST ONE OF (2) THROUGH (4)) [ ] (1) No conditions. [ ] (2) The mandatory contributions have accumulated for at least Plan Years since the Plan Year for which contributed. [ ] (3) The Participant suspends making nondeductible contributions for a period of months. [ ] (4) (SPECIFY)_______________________________________________________. [ ] (d) (SPECIFY)___________________________________________________________. 20 ARTICLE V TERMINATION OF SERVICE -- PARTICIPANT VESTING 5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (CHOOSE (a) OR (b)) [ ] (a) _____ [STATE AGE, BUT MAY NOT EXCEED AGE 65]. [X] (b) The later of the date the Participant attains 65 years of age or the 5TH anniversary of the first day of the Plan Year in which the Participant commenced participation in the Plan. [THE AGE SELECTED MAY NOT EXCEED AGE 65 AND THE ANNIVERSARY SELECTED MAY NOT EXCEED THE 5TH.] 5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section 5.02 of the Plan: (CHOOSE (A) OR CHOOSE ONE OR BOTH OF (B) AND (C)) [ ] (a) Does not apply. [X] (b) Applies to death. [X] (c) Applies to disability. 5.03 VESTING SCHEDULE. DEFERRAL CONTRIBUTIONS ACCOUNT/QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT/ QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT/MANDATORY CONTRIBUTIONS ACCOUNT. A Participant has a 100% Nonforfeitable interest at all times in his Deferral Contributions Account, his Qualified Matching Contributions Account, his Qualified Nonelective Contributions Account and in his Mandatory Contributions Account. REGULAR MATCHING CONTRIBUTIONS ACCOUNT/EMPLOYER CONTRIBUTIONS ACCOUNT. With respect to a Participant's Regular Matching Contributions Account and Employer Contributions Account, the Employer elects the following vesting schedule: CHOOSE (a) OR (b); (c) AND (d) ARE AVAILABLE ONLY AS ADDITIONAL OPTIONS) [ ] (a) Immediate vesting. 100% Nonforfeitable at all times. [NOTE: THE EMPLOYER MUST ELECT OPTION (a) IF THE ELIGIBILITY CONDITIONS UNDER ADOPTION AGREEMENT SECTION 2.01(C) REQUIRE 2 YEARS OF SERVICE OR MORE THAN 12 MONTHS OF EMPLOYMENT.] [X] (b) Graduated Vesting Schedules. TOP HEAVY SCHEDULE (MANDATORY) YEARS OF NONFORFEITABLE SERVICE PERCENTAGE - ------------------------------------- -------------- Less than 1.......................... 0% 1............................... 25% 2............................... 50% 3............................... 75% 4............................... 100% 5............................... 100% 6 or more....................... 100% NON TOP HEAVY SCHEDULE (OPTIONAL) YEARS OF NONFORFEITABLE SERVICE PERCENTAGE - ------------------------------------- -------------- Less than 1.......................... 0% 1............................... 25% 2............................... 50% 3............................... 75% 4............................... 100% 5............................... 100% 6............................... 100% 7 or more....................... 100% 21 [ ] (c) Special vesting election for Regular Matching Contributions Account. In lieu of the election under Options (a) or (b), the Employer elects the following vesting schedule for a Participant's Regular Matching Contributions Account: (CHOOSE (1) OR (2)) [ ] (1) 100% Nonforfeitable at all times. [ ] (2) In accordance with the vesting schedule described in the addendum to this Adoption Agreement, numbered 5.03(c). [NOTE: IF THE EMPLOYER ELECTS THIS OPTION (c)(2), THE ADDENDUM MUST DESIGNATE THE APPLICABLE VESTING SCHEDULE(S) USING THE SAME FORMAT AS USED IN OPTION (b).] [NOTE: UNDER OPTIONS (b) AND (c)(2), THE EMPLOYER MUST COMPLETE A TOP HEAVY SCHEDULE WHICH SATISFIES CODE SECTION 416. THE EMPLOYER, AT ITS OPTION, MAY COMPLETE A NON TOP HEAVY SCHEDULE. THE NON TOP HEAVY SCHEDULE MUST SATISFY CODE SECTION 411(A)(2). ALSO SEE SECTION 7.05 OF THE PLAN.] [X] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under Option (c)(2)) applies: (CHOOSE (1) OR (2)) [ ] (1) Only in a Plan Year for which the Plan is top heavy. [X] (2) In the Plan Year for which the Plan first is top heavy and then in all subsequent Plan Years. [NOTE: THE EMPLOYER MAY NOT ELECT OPTION (d) UNLESS IT HAS COMPLETED A NON TOP HEAVY SCHEDULE.] MINIMUM VESTING. (CHOOSE (E) OR (F)) [X] (e) The Plan does not apply a minimum vesting rule. [ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be less than the lesser of $___ or his entire Accrued Benefit, even if the application of a graduated vesting schedule under Options (b) or (c) would result in a smaller Nonforfeitable Accrued Benefit. LIFE INSURANCE INVESTMENTS. The Participant's Accrued Benefit attributable to insurance contracts purchased on his behalf under Article XI is: (CHOOSE (g) OR (h)) [X] (g) Subject to the vesting election under Options (a), (b) or (c). [ ] (h) 100% Nonforfeitable at all times, irrespective of the vesting election under Options (b) or (c)(2). 5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C) of the Plan: (CHOOSE (a) OR (b)) [ ] (a) Does not apply. [X] (b) Will apply to determine the timing of forfeitures for 0% vested Participants. A Participant is not a 0% vested Participant if he has a Deferral Contributions Account. 22 5.06 YEAR OF SERVICE -- VESTING. VESTING COMPUTATION PERIOD. The Plan measures a Year of Service on the basis of the following 12 consecutive month periods: (CHOOSE (A) OR (B)) [X] (a) Plan Years. [ ] (b) Employment Years. An Employment Year is the 12 consecutive month period measured from the Employee's Employment Commencement Date and each successive 12 consecutive month period measured from each anniversary of that Employment Commencement Date. HOURS OF SERVICE. The minimum number of Hours of Service an Employee must complete during a vesting computation period to receive credit for a Year of Service is: (CHOOSE (c) OR (d)) [X] (c) 1,000 Hours of Service. [ ] (d) _____ Hours of Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY NOT EXCEED 1,000.] 5.08 INCLUDED YEARS OF SERVICE -- VESTING. The Employer specifically excludes the following Years of Service: (CHOOSE (a) OR AT LEAST ONE OF (b) THROUGH (e)) [ ] (a) None other than as specified in Section 5.08(a) of the Plan. [ ] (b) Any Year of Service before the Participant attained the age of __. Note: The age selected may not exceed age 18.] [X] (c) Any Year of Service during the period the Employer did not maintain this Plan or a predecessor plan. [ ] (d) Any Year of Service before a Break in Service if the number of consecutive Breaks in Service equals or exceeds the greater of 5 or the aggregate number of the Years of Service prior to the Break. This exception applies only if the Participant is 0% vested in his Accrued Benefit derived from Employer contributions at the time he has a Break in Service. Furthermore, the aggregate number of Years of Service before a Break in Service do not include any Years of Service not required to be taken into account under this exception by reason of any prior Break in Service. [ ] (e) Any Year of Service earned prior to the effective date of ERISA if the Plan would have disregarded that Year of Service on account of an Employee's Separation from Service under a Plan provision in effect and adopted before January 1, 1974. ARTICLE VI TIME AND METHOD OF PAYMENTS OF BENEFITS CODE SECTION 411(d)(6) PROTECTED BENEFITS. The elections under this Article VI may not eliminate Code Section 411(d)(6) protected benefits. To the extent the elections would eliminate a Code Section 411(d)(6) protected benefit, see Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional forms of benefit under the Plan, the more liberal options apply on the later of the adoption date or the Effective Date of this Adoption Agreement. 23 6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. DISTRIBUTION DATE. A distribution date under the Plan means any day of the Plan Year. [NOTE: THE EMPLOYER MUST SPECIFY THE APPROPRIATE DATE(S). THE SPECIFIED DISTRIBUTION DATES PRIMARILY ESTABLISH ANNUITY STARTING DATES AND THE NOTICE AND CONSENT PERIODS PRESCRIBED BY THE PLAN. THE PLAN ALLOWS THE TRUSTEE AN ADMINISTRATIVELY PRACTICABLE PERIOD OF TIME TO MAKE THE ACTUAL DISTRIBUTION RELATING TO A PARTICULAR DISTRIBUTION DATE.] NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to the limitations of Section 6.01(A)(1), the distribution date for distribution of a Nonforfeitable Accrued Benefit not exceeding $3,500 is: (CHOOSE (a), (b), (c), (d) OR (e)) [ ] (a)______________________________________________________________________ of the ________________________ Plan Year beginning after the Participant's Separation from Service. [X] (b) As soon as administratively feasible following the Participant's Separation from Service. [ ] (c)______________________________________________________________________ of the Plan Year after the Participant incurs ___ Break(s) in Service (as defined in Article V). [ ] (d) __________________________________________________ following the Participant's attainment of Normal Retirement Age, but not earlier than _________________ days following his Separation from Service. [ ] (e) (SPECIFY) ____________________________________________________________ __________________. NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections under Section 6.03. DISABILITY. The distribution date, subject to Section 6.01(A)(3), is (CHOOSE (f), (g) OR (h)) [ ] (f) ______________________________________________________________________ after the Participant terminates employment because of disability. [X] (g) The same as if the Participant had terminated employment without disability. [ ] (h) (SPECIFY) ____________________________________________________________ __________________. HARDSHIP. (CHOOSE (I) OR (J)) [X] (i) The Plan does not permit a hardship distribution to a Participant who has separated from Service. [ ] (j) The Plan permits a hardship distribution to a Participant who has separated from Service in accordance with the hardship distribution policy stated in: (CHOOSE (1), (2) OR (3)) [ ] (1) Section 6.01(A)(4) of the Plan. [ ] (2) Section 14.11 of the Plan. [ ] (3) The addendum to this Adoption Agreement, numbered Section 6.01. 24 DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a loan made pursuant to a loan policy adopted by the Advisory Committee pursuant to Section 9.04, the Plan: (CHOOSE (k), (l) OR (m)) [ ] (k) Treats the default as a distributable event. The Trustee, at the time of the default, will reduce the Participant's Nonforfeitable Accrued Benefit by the lesser of the amount in default (plus accrued interest) or the Plan's security interest in that Nonforfeitable Accrued Benefit. To the extent the loan is attributable to the Participant's Deferral Contributions Account, Qualified Matching Contributions Account or Qualified Nonelective Contributions Account, the Trustee will not reduce the Participant's Nonforfeitable Accrued Benefit unless the Participant has separated from Service or unless the Participant has attained age 59 1/2. [X] (l) Does not treat the default as a distributable event. When an otherwise distributable event first occurs pursuant to section 6.01 or Section 6.03 of the Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit by the lesser of the amount in default (plus accrued interest) or the Plan's security interest in that Nonforfeitable Accrued Benefit. [ ] (m) (SPECIFY)______________________________________________________________ _______________. 6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will apply Section 6.02 of the Plan with the following modifications: (CHOOSE (A) OR AT LEAST ONE OF (B), (C), (D) AND (E)) [ ] (a) No modifications. [ ] (b) Except as required under Section 6.01 of the Plan, a lump sum distribution is not available: ___________________________________________________________________________ ____________________________________________________________ [X] (c) An installment distribution: (CHOOSE (1) OR AT LEAST ONE OF (2) OR (3)) [ ] (1) Is not available under the Plan. [X] (2) May not exceed the lesser of 20 years or the maximum period permitted under Section 6.02. [ ] (3) (SPECIFY) __________________________________________________ __________. [ ] (d) The Plan permits the following annuity options: _______________________ ________________________________________________________________________. Any Participant who elects a life annuity option is subject to the requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section 6.04(E). [NOTE: THE EMPLOYER MAY SPECIFY ADDITIONAL ANNUITY OPTIONS IN AN ADDENDUM TO THIS ADOPTION AGREEMENT, NUMBERED 6.02(d).] [ ] (e) If the Plan invests in qualifying Employer securities, as described in Section 10.03(F), a Participant eligible to elect distribution under Section 6.03 may elect to receive that distribution in Employer securities only in accordance with the provisions of the addendum to this Adoption Agreement, numbered 6.02(e). 25 6.03 BENEFIT PAYMENT ELECTIONS. PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. A Participant who is eligible to make distribution elections under Section 6.03 of the Plan may elect to commence distribution of his Nonforfeitable Accrued Benefit: (CHOOSE AT LEAST ONE OF (a) THROUGH (c)) [ ] (a) As of any distribution date, but not earlier than ________________________________ of the ___________ Plan Year beginning after the Participant's Separation from Service. [X] (b) As of the following date(s): (CHOOSE AT LEAST ONE OF OPTIONS (1) THROUGH (6)) [ ] (1) Any distribution date after the close of the Plan Year in which the Participant attains Normal Retirement Age. [X] (2) Any distribution date following his Separation from Service with the Employee. [ ] (3) Any distribution date in the ______________ Plan Year(s) beginning after his Separation from Service. [ ] (4) Any distribution date in the Plan Year after the Participant incurs _________________ Break(s) in Service (as defined in Article V). [ ] (5) Any distribution date following attainment of age ________ and completion of at least ______ Years of Service (as defined in Article V). ____________. [ ] (6) (SPECIFY) ______________________________ [ ] (c) (SPECIFY) ____________________________________________________________ ___________________________________________________________________________ __________________. The distribution events described in the election(s) made under Options (a), (b) or (c) apply equally to all Accounts maintained for the Participant unless otherwise specified in Option (c). PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE -- REGULAR MATCHING CONTRIBUTIONS ACCOUNT AND EMPLOYER CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Regular Matching Contributions Account and Employer Contributions Account prior to his Separation from Service: (CHOOSE (d) OR AT LEAST ONE OF (E) THROUGH (h)) [X] (d) No distribution options prior to Separation from Service. [ ] (e) Attainment of Specified Age. Until he retires, the Participant has a continuing election to receive all or any portion of this Nonforfeitable interest in these Accounts after he attains: (CHOOSE (1) OR (2)) [ ] (1) Normal Retirement Age. [X] (2) ______________ years of age and is at least _______________% vested in these Accounts. [NOTE: IF THE PERCENTAGE IS LESS THAN 100%, SEE THE SPECIAL VESTING FORMULA IN SECTION 5.03.] 26 [ ] (f) After a Participant has participated in the Plan for a period of not less than _ years and he is 100% vested in these Accounts, until he retires, the Participant has a continuing election to receive all or any portion of the Accounts. [NOTE: THE NUMBER IN THE BLANK SPACE MAY NOT BE LESS THAN 5.] [ ] (g) Hardship. A Participant may elect a hardship distribution prior to his Separation from Service in accordance with the hardship distribution policy: (CHOOSE (1), (2) OR (3); (4) IS AVAILABLE ONLY AS AN ADDITIONAL OPTION) [ ] (1) Under Section 6.01(A)(4) of the Plan. [ ] (2) Under Section 14.11 of the Plan. [ ] (3) Provided in the addendum to this Adoption Agreement, numbered Section 6.03. [ ] (4) In no event may a Participant receive a hardship distribution before he is at least ___% vested in these Accounts. [NOTE: IF THE PERCENTAGE IN THE BLANK IS LESS THAN 100%, SEE THE SPECIAL VESTING FORMULA IN SECTION 5.03.] [ ] (h) (SPECIFY) __________________________________________________________ [NOTE: THE EMPLOYER MAY USE AN ADDENDUM, NUMBERED 6.03, TO PROVIDE ADDITIONAL LANGUAGE AUTHORIZED BY OPTIONS (B)(6), (C), (G)(3) OR (H) OF THIS ADOPTION AGREEMENT SECTION 6.03.] PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE -- DEFERRAL CONTRIBUTIONS ACCOUNT, QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT AND QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Deferral Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account prior to his Separation from Service: (CHOOSE (i) OR AT LEAST ONE OF (j) THROUGH (l)) [ ] (i) No distribution options prior to Separation from Service. [ ] (j) Until he retires, the Participant has a continuing election to receive all or any portion of these Accounts after he attains: (CHOOSE (1) OR (2)) [ ] (1) The later of Normal Retirement Age or age 59 1/2. [ ] (2) Age __ (at least 59 1/2). [X] (k) Hardship. A Participant, prior to his Separation from Service, may elect a hardship distribution from his Deferral Contributions Account in accordance with the hardship distribution policy under Section 14.11 of the Plan. [ ] (l) (SPECIFY) ________________________________________________________ _________________ . [NOTE: OPTION (L) MAY NOT PERMIT IN SERVICE DISTRIBUTIONS PRIOR TO AGE 59 1/2 (OTHER THAN HARDSHIP) AND MAY NOT MODIFY THE HARDSHIP POLICY DESCRIBED IN SECTION 14.11.] 27 SALE OF TRADE OR BUSINESS/SUBSIDIARY. If the Employer sells substantially all of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or business or sells a subsidiary (within the meaning of Code Section 409(d)(3)), a Participant who continues employment with the acquiring corporation is eligible for distribution from his Deferral Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account: (CHOOSE (m) OR (n)) [ ] (m) Only as described in this Adoption Agreement Section 6.03 for distributions prior to Separation from Service. [X] (n) As if he has a Separation from Service. After March 31, 1988, a distribution authorized solely by reason of this Option (n) must constitute a lump sum distribution, determined in a manner consistent with Code Section 401(k)(10) and the applicable Treasury regulations. 6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The annuity distribution requirements of Section 6.04: (CHOOSE (a) OR (b)) [X] (a) Apply only to a Participant described in Section 6.04(E) of the Plan (relating to the profit sharing exception to the joint and survivor requirements). [ ] (b) Apply to all Participants. ARTICLE IX ADVISORY COMMITTEE -- DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS 9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a distribution from a segregated Account and other than a corrective distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan) occurs more than 90 days after the most recent valuation date, the distribution will include interest at: (CHOOSE (A), (B) OR (C)) [X] (a) 0% per annum [NOTE: THE PERCENTAGE MAY EQUAL 0%.] [ ] (b) The 90 day Treasury bill rate in effect at the beginning of the current valuation period. [ ] (c) (SPECIFY) ____________________________________________________________ 9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to Section 14.12, to determine the allocation of net income, gain or loss: (COMPLETE ONLY THOSE ITEMS, IF ANY, WHICH ARE APPLICABLE TO THE EMPLOYER'S PLAN) [X] (a) For salary reduction contributions, the Advisory Committee will: (CHOOSE (1), (2), (3), (4) OR (5)) [X] (1) Apply Section 9.11 without modification. [ ] (2) Use the segregated account approach described in Section 14.12. [ ] (3) Use the weighted average method described in Section 14.12, based on a _______________________ weighting period. [ ] (4) Treat as part of the relevant Account at the beginning of the valuation period __% of the salary reduction contributions. (CHOOSE (i) OR (ii)) [ ] (i) made during that valuation period. 28 [ ] (ii) made by the following specified time: ___________________ . [ ] (5) Apply the allocation method described in the addendum to this Adoption Agreement numbered 9.11(a). [X] (b) For matching contributions, the Advisory Committee will: (CHOOSE (1), (2), (3) OR (4)) [X] (1) Apply Section 9.11 without modification. [ ] (2) Use the weighted average method described in Section 14.12, based on a _________________ weighting period. [ ] (3) Treat as part of the relevant Account at the beginning of the valuation period ___% of the matching contributions allocated during the valuation period. [ ] (4) Apply the allocation method described in the addendum to this Adoption Agreement numbered 9.11(b). [ ] (c) For Participant nondeductible contributions, the Advisory Committee will: (CHOOSE (1), (2), (3), (4) OR (5)) [ ] (1) Apply Section 9.11 without modification. [ ] (2) Use the segregated account approach described in Section 14.12. [ ] (3) Use the weighted average method described in Section 14.12, based on a _________________ weighting period. [ ] (4) Treat as part of the relevant Account at the beginning of the valuation period ___% of the Participant nondeductible contributions: (CHOOSE (i) OR (ii)) [ ] (i) made during that valuation period. [ ] (ii) made by the following specified time: _____________ . [ ] (5) Apply the allocation method described in the addendum to this Adoption Agreement numbered 9.11(c). ARTICLE X TRUSTEE AND CUSTODIAN, POWERS AND DUTIES 10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the aggregate investments in qualifying Employer securities and in qualifying Employer real property: (CHOOSE (A) OR (B)) [X] (a) May not exceed 10% of Plan assets. [ ] (b) May not exceed ___% of Plan assets. [NOTE: THE PERCENTAGE MAY NOT EXCEED 100%.] 10.14 VALUATION OF TRUST. In addition to each Account Date, the Trustee must value the Trust Fund on the following valuation date(s): (CHOOSE (a) OR (b)) [X] (a) No other mandatory valuation dates. 29 [ ] (b) (SPECIFY) ________________________________________________________ . 30 EFFECTIVE DATE ADDENDUM (RESTATED PLANS ONLY) The Employer must complete this addendum only if the restated Effective Date specified in Adoption Agreement Section 1.18 is different than the restated effective date for at least one of the provisions listed in this addendum. In lieu of the restated Effective Date in Adoption Agreement Section 1.18, the following special effective dates apply: (CHOOSE WHICHEVER ELECTIONS APPLY) [ ] (A) COMPENSATION DEFINITION. The Compensation definition of Section 1.12 (other than the $200,000 limitation) is effective for Plan Years beginning after __________________. [NOTE: MAY NOT BE EFFECTIVE LATER THAN THE FIRST DAY OF THE FIRST PLAN YEAR BEGINNING AFTER THE EMPLOYER EXECUTES THIS ADOPTION AGREEMENT TO RESTATE THE PLAN FOR THE TAX REFORM ACT OF 1986, IF APPLICABLE.] [ ] (b) ELIGIBILITY CONDITIONS. The eligibility conditions specified in Adoption Agreement Section 2.01 are effective for Plan Years beginning after __________________. [ ] (c) SUSPENSION OF YEARS OF SERVICE. The suspension of Years of Service rule elected under Adoption Agreement Section 2.03 is effective for Plan Years beginning after __________________. [ ] (d) Contribution/Allocation Formula. The contribution formula elected under Adoption Agreement Section 3.01 and the method of allocation elected under Adoption Agreement Section 3.04 is effective for Plan Years beginning after __________________. [ ] (e) ACCRUAL REQUIREMENTS. The accrual requirements of section 3.06 are effective for Plan Years beginning after __________________. [ ] (f) EMPLOYMENT CONDITION. The employment condition of Section 3.06 is effective for Plan Years beginning after __________________ [ ] (g) ELIMINATION OF NET PROFITS. The requirement for the Employer not to have net profits to contribute to this Plan is effective for Plan Years beginning after _________________ [NOTE: THE DATE SPECIFIED MAY NOT BE EARLIER THAN DECEMBER 31, 1985.] [X] (h) VESTING SCHEDULE. The vesting schedule elected under Adoption Agreement Section 5.03 is effective for Plan Years beginning after DECEMBER 31, 1995. [ ] (i) ALLOCATION OF EARNINGS. The special allocation provisions elected under Adoption Agreement Section 9.11 are effective for Plan Years beginning after __________________. [ ] (j) (SPECIFY) ___________________________________________________________ __________________________________________________________________. For Plan Years prior to the special Effective Date, the terms of the Plan prior to its restatement under this Adoption Agreement will control for purposes of the designated provisions. A special Effective Date may not result in the delay of a Plan provision beyond the permissible Effective Date under any applicable law requirements. 31 EXECUTION PAGE The Trustee (and Custodian, if applicable), by executing this Adoption Agreement, accepts its position and agrees to all of the obligations, responsibilities and duties imposed upon the Trustee (or Custodian) under the Prototype Plan and Trust. The Employer hereby agrees to the provisions of this Plan and Trust, and in witness of its agreement, the Employer by its duly authorized officers, has executed this Adoption Agreement, and the Trustee (and Custodian, if applicable) signified its acceptance, on this __________________________ day of ___________________________, 19______. Name and EIN of Employer: INDUSTRIAL DATA SYSTEMS, INC. 76-0157248 Signed: /s/ WILLIAM A. COSKEY William A. Coskey Name(s) of Trustee: HULDA L. COSKEY, WILLIAM A. COSKEY Signed: /s/ WILLIAM A. COSKEY William A. Coskey /s/ HULDA L. COSKEY Hulda L. Coskey Name of Custodian: _____________________________________________________________ Signed: ________________________________________________________________________ [NOTE: A TRUSTEE IS MANDATORY, BUT A CUSTODIAN IS OPTIONAL. SEE SECTION 10.03 OF THE PLAN.] PLAN NUMBER. The 3-digit plan number the Employer assigns to this Plan for ERISA reporting purposes (Form 5500 Series) is: 001. USE OF ADOPTION AGREEMENT. Failure to complete properly the elections in this Adoption Agreement may result in disqualification of the Employer's Plan. The 3-digit number assigned to this Adoption Agreement (see page 1) is solely for the Regional Prototype Plan Sponsor's recordkeeping purposes and does not necessarily correspond to the plan number the Employer designated in the prior paragraph. RELIANCE ON NOTIFICATION LETTER. The Employer may not rely on the Regional Prototype Plan Sponsor's notification letter covering this Adoption Agreement. For reliance on the Plan's qualification, the Employer must obtain a determination letter from the applicable IRS Key District office. 32 PARTICIPATION AGREEMENT FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Prototype Plan as made by INDUSTRIAL DATA SYSTEMS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the Plan is: _________________________________________________________________________ . 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as _________, and having an original effective date of ______________________________ Dated this __________________________ day of ____________, 19___ Name of Participating Employer: Signed: Participating Employer's EIN ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE ADOPTION AGREEMENT AND BY THE TRUSTEE. Name of Signatory Employer: INDUSTRIAL DATA SYSTEMS, INC. Accepted: Signed: Name(s) of Trustee: Accepted: [Date] Signed: [NOTE: EACH PARTICIPATING EMPLOYER MUST EXECUTE A SEPARATE PARTICIPATION AGREEMENT. SEE THE EXECUTION PAGE OF THE ADOPTION AGREEMENT FOR IMPORTANT PROTOTYPE PLAN INFORMATION.] 33 EX-21 33 EXHIBIT 21 SUBSIDIARY OF REGISTRANT 1. Industrial Data Systems, Inc., a Texas Corporation doing business as IDS Technical Services. EX-24 34 INDUSTRIAL DATA SYSTEMS CORPORATION POWER OF ATTORNEY (Form 10-SB) WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1993, as amended (the "Act"), a Registration Statement on Form 10-SB, with such amendments (including pre-effective and post-effective amendments) to said Registration Statement and any supplement or supplements to the Form 10-SB as may be necessary or appropriate, together with any and all exhibits and documents related to said Registration Statement, in connection with the registration of 75,000,000 shares of common stock, $.001 par value, pursuant to Section 12(g) of the Act; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint William A. Coskey and Hulda Coskey, and each of them severally, his true and lawful attorney or attorneys-in-fact, with power to act with or without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in his capacity as a director or officer or both, as the case may be, of the Company, each such Registration Statement referred to above, and any and all amendments (including pre-effective and post-effective amendments) thereto, and any supplements to the Registration Statement as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, to file the same or cause the same to be filed with the Commission, and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys-in-fact and each of them may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this instrument this 23rd day of January, 1997. /S/ WILLIAM A. COSKEY William A. Coskey, Director INDUSTRIAL DATA SYSTEMS CORPORATION POWER OF ATTORNEY (Form 10-SB) WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1993, as amended (the "Act"), a Registration Statement on Form 10-SB, with such amendments (including pre-effective and post-effective amendments) to said Registration Statement and any supplement or supplements to the Form 10-SB as may be necessary or appropriate, together with any and all exhibits and documents related to said Registration Statement, in connection with the registration of 75,000,000 shares of common stock, $.001 par value, pursuant to Section 12(g) of the Act; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint William A. Coskey and Hulda Coskey, and each of them severally, his true and lawful attorney or attorneys-in-fact, with power to act with or without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in his capacity as a director or officer or both, as the case may be, of the Company, each such Registration Statement referred to above, and any and all amendments (including pre-effective and post-effective amendments) thereto, and any supplements to the Registration Statement as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, to file the same or cause the same to be filed with the Commission, and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys-in-fact and each of them may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this instrument this 23rd day of January, 1997. /S/ HULDA L. COSKEY Hulda L. Coskey, Director INDUSTRIAL DATA SYSTEMS CORPORATION POWER OF ATTORNEY (Form 10-SB) WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1993, as amended (the "Act"), a Registration Statement on Form 10-SB, with such amendments (including pre-effective and post-effective amendments) to said Registration Statement and any supplement or supplements to the Form 10-SB as may be necessary or appropriate, together with any and all exhibits and documents related to said Registration Statement, in connection with the registration of 75,000,000 shares of common stock, $.001 par value, pursuant to Section 12(g) of the Act; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint William A. Coskey and Hulda Coskey, and each of them severally, his true and lawful attorney or attorneys-in-fact, with power to act with or without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in his capacity as a director or officer or both, as the case may be, of the Company, each such Registration Statement referred to above, and any and all amendments (including pre-effective and post-effective amendments) thereto, and any supplements to the Registration Statement as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, to file the same or cause the same to be filed with the Commission, and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys-in-fact and each of them may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this instrument this 23rd day of January, 1997. /S/ REX S. ZERGER Rex S. Zerger, Director INDUSTRIAL DATA SYSTEMS CORPORATION POWER OF ATTORNEY (Form 10-SB) WHEREAS, INDUSTRIAL DATA SYSTEMS CORPORATION, a Nevada corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1993, as amended (the "Act"), a Registration Statement on Form 10-SB, with such amendments (including pre-effective and post-effective amendments) to said Registration Statement and any supplement or supplements to the Form 10-SB as may be necessary or appropriate, together with any and all exhibits and documents related to said Registration Statement, in connection with the registration of 75,000,000 shares of common stock, $.001 par value, pursuant to Section 12(g) of the Act; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint William A. Coskey and Hulda Coskey, and each of them severally, his true and lawful attorney or attorneys-in-fact, with power to act with or without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in his capacity as a director or officer or both, as the case may be, of the Company, each such Registration Statement referred to above, and any and all amendments (including pre-effective and post-effective amendments) thereto, and any supplements to the Registration Statement as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, to file the same or cause the same to be filed with the Commission, and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys-in-fact and each of them may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this instrument this 23rd day of January, 1997. /S/ DAVID W. GENT David W. Gent, Director -----END PRIVACY-ENHANCED MESSAGE-----