EXCHANGE AGREEMENT
Between
PERMA-TUNE ELECTRONICS, INC.
and
TRANS MAX TECHNOLOGIES, INC.
Dated July 21, 2003
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is
entered into as of this 21st day of July, 2003, by and between PERMA-TUNE
ELECTRONICS, INC., a Texas corporation (hereinafter referred to as the
"Company"), TRANS MAX TECHNOLOGIES, INC., a Florida corporation (hereinafter
referred to as "Trans Max"), and the persons executing this Agreement listed on
the signature page hereto (referred to collectively as "Trans Max Shareholders")
who own one hundred percent (100%) of the outstanding shares of Trans Max, upon
the following premises:
Premises
--------
WHEREAS, the Trans Max Shareholders own one hundred percent (100%) of the
issued and outstanding shares of the capital stock of Trans Max;
WHEREAS, the Company is a publicly held corporation whose common stock is
quoted on the OTC Bulletin Board under the symbol "PTUN";
WHEREAS, Trans Max is a privately held corporation organized under the laws
of the State of Florida;
WHEREAS, the Company desires to acquire 100% of the issued and outstanding
shares of Common Stock of Trans Max in exchange for unissued shares of its
Common Stock (the "Common Stock") (the "Exchange Offer"), so that Trans Max will
become a wholly owned subsidiary of the Company;
WHEREAS, Trans Max Shareholders desire to exchange all of their shares of
capital stock of Trans Max solely in exchange for the shares of authorized but
unissued Common Stock, no par value, of the Company; and
WHEREAS, the Company, Trans Max and the Trans Max Shareholders desire to
set forth the terms of the Exchange Offer, which is intended to constitute a
tax-free reorganization pursuant to the provisions of the Internal Revenue Code
of 1986.
Agreement
---------
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF TRANS MAX
AND THE TRANS MAX SHAREHOLDERS
As an inducement to and to obtain the reliance of the Company, except as
set forth on the Trans Max Schedules (as hereinafter defined), Trans Max and the
Trans Max Shareholders represent and warrant as follows:
Section 1.01 Organization. Trans Max is a corporation duly organized,
------------
validly existing, and in good standing under the laws of the State of Florida
and has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states or countries
in which the character and location of the assets owned by it or the nature of
the business transacted by it requires qualification, except where failure to be
so qualified would not have a material adverse effect on its business. Included
in the Trans Max Schedules are complete and correct copies of the Articles of
Incorporation and Bylaws of Trans Max as in effect on the date hereof. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of Trans Max's
Articles of Incorporation or Bylaws. Trans Max has taken all actions required
by law, its Articles of Incorporation, or otherwise to authorize the execution
and delivery of this Agreement. Trans Max has full power, authority, and legal
right and has taken all action required by law, its Articles of Incorporation,
and otherwise to consummate the transactions herein contemplated.
Section 1.02 Capitalization. The authorized capitalization of Trans
--------------
Max consists of 500,000,000 shares of common stock, of which ten thousand
(10,000) shares are currently issued and outstanding, and 500,000,000 shares of
preferred stock, of which no shares are currently issued and outstanding. All
issued and outstanding shares are legally issued, fully paid, and non-assessable
and not issued in violation of the preemptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. Trans Max does
-----------------------------------------
not have any predecessor corporation(s) or subsidiary(ies), and does not own,
beneficially or of record, any shares of any other corporation.
Section 1.04 Other Information.
-----------------
(a) Trans Max has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and payable.
(b) Trans Max has filed all state, federal or local income and/or
franchise tax returns required to be filed by it from inception to the date
hereof. Each of such income tax returns reflects the taxes due for the period
covered thereby, except for amounts which, in the aggregate, are immaterial.
(c) The books and records of Trans Max are in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(d) Trans Max has no material liabilities, direct or indirect, matured
or unmatured, contingent or otherwise in excess of Twenty-Five Thousand Dollars
($25,000), except for three employment agreements which are attached as Schedule
1.04d.
Section 1.05 Information. The information concerning Trans Max set
-----------
forth in this Agreement and in the Trans Max Schedules is complete and accurate
in all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading. In
addition, Trans Max has fully disclosed in writing to the Company (through this
Agreement or the Trans Max Schedules) all information relating to matters
involving Trans Max or its assets or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than Twenty-Five Thousand Dollars ($25,000) liability or diminution
in value, (ii) have led or may lead to a competitive disadvantage on the part of
Trans Max, or (iii) either alone or in aggregation with other information
covered by this Section, otherwise have led or may lead to a material adverse
effect on the transactions contemplated herein or on Trans Max, its assets, or
its operations or activities as presently conducted or as contemplated to be
conducted after the Closing Date, including, but not limited to, information
relating to governmental, employee, environmental, litigation and securities
matters and transactions with affiliates.
Section 1.06 Options or Warrants. There are no existing options,
---------------------
warrants, calls, or commitments of Trans Max of any character relating to the
authorized and unissued Trans Max common stock, except options, warrants, calls
or commitments, if any, to which Trans Max is not a party and by which it is not
bound.
Section 1.07 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in this Agreement or the Trans Max Schedules, since June 30, 2003:
(a) there has not been (i) any material adverse change in the proposed
business, operations, properties, assets, or condition of Trans Max or (ii) any
damage, destruction, or loss to Trans Max (whether or not covered by insurance)
materially and adversely affecting the business or financial condition of Trans
Max;
(b) Trans Max has not (i) amended its Articles of Incorporation or
Bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are outside of
the ordinary course of business or material considering the business of Trans
Max; (iv) made any material change in its method of management, operation or
accounting; (v) entered into any other material transaction other than sales in
the ordinary course of its business; (vi) made any accrual or arrangement for
payment of bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii) increased
the rate of compensation payable or to become payable by it to any of its
officers or directors or any of its salaried employees whose monthly
compensation exceeds Ten Thousand Dollars ($10,000); or (viii) made any increase
in any profit sharing, bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or arrangement made to,
for, or with its officers, directors, or employees;
(c) Trans Max has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) in excess of $25,000 except as disclosed herein and except
liabilities incurred in the ordinary course of business; (ii) paid or agreed to
pay any material obligations or liability (absolute or contingent) other than
current liabilities, and current liabilities incurred in the ordinary course of
business and professional and other fees and expenses in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated hereby; (iii) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets, properties, or rights
not used or useful in its business which, in the aggregate have a value of less
than Twenty-Five Thousand Dollars [$25,000]), or canceled, or agreed to cancel,
any debts or claims (except debts or claims which in the aggregate are of a
value of less than Twenty-Five Thousand Dollars [$25,000]); or (iv) made or
permitted any amendment or termination of any contract, agreement, or license to
which it is a party if such amendment or termination is material, considering
the business of Trans Max; and
(d) To the best knowledge of Trans Max, Trans Max has not become
subject to any law or regulation which materially and adversely affects, or in
the future may adversely affect, the business, operations, properties, assets,
or condition of Trans Max.
Section 1.08 Title and Related Matters. No third party has any right
--------------------------
to, and Trans Max has not received any notice of infringement of or conflict
with asserted rights of others with respect to, any product, technology, data,
trade secrets, know-how, proprietary techniques, trademarks, service marks,
trade names, or copyrights which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse effect on the proposed business, operations, financial condition,
income, or business prospects of Trans Max or any material portion of its
properties, assets, or rights.
Section 1.09 Litigation and Proceedings. There are no actions, suits,
--------------------------
or proceedings pending or, to the knowledge of Trans Max after reasonable
investigation, threatened by or against Trans Max or affecting Trans Max or its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
Trans Max does not have any knowledge of any material default on its part with
respect to any judgment, order, injunction, decree, award, rule, or regulation
of any court, arbitrator, or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result in the
discovery of such a default.
Section 1.10 Contracts.
---------
(a) There are no material contracts, agreements, franchises, license
agreements, debt instruments or other commitments to which Trans Max is a party
or by which it or any of its assets, products, technology, or properties are
bound other than those incurred in the ordinary course of business (as used in
this Agreement, a "material" contract, agreement, franchise, license agreement,
debt instrument or commitment is one which (i) will remain in effect for more
than six (6) months after the date of this Agreement and (ii) involves aggregate
obligations of at least Twenty-Five Thousand Dollars ($25,000);
(b) All contracts, agreements, franchises, license agreements, and
other commitments, if any, to which Trans Max is a party and which are material
to the operations of Trans Max taken as a whole are valid and enforceable by
Trans Max in all respects, except as limited by bankruptcy and insolvency laws
and by other laws affecting the rights of creditors generally;
(c) Trans Max is not a party to or bound by, and the properties of
Trans Max are not subject to, any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any judgment, order,
writ, injunction, decree, or award which materially and adversely affects, the
business operations, properties, assets, or condition of Trans Max; and
(d) Except as included or described in the Trans Max Schedules, Trans
Max is not a party to any oral or written (i) contract for the employment of any
officer or employee which is not terminable on thirty (30) days, or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan; (iii) agreement, contract, or indenture
relating to the borrowing of money; (iv) guaranty of any obligation, other than
one on which Trans Max is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and other guaranties of
obligations which, in the aggregate do not exceed more than one (1) year or
providing for payments in excess of Twenty-Five Thousand Dollars ($25,000) in
the aggregate; (v) collective bargaining agreement; or (vi) agreement with any
present or former officer or director of Trans Max.
Section 1.11 Material Contract Defaults. Trans Max is not in default
---------------------------
in any material respect under the terms of any outstanding material contract,
agreement, lease, or other commitment which is material to the business,
operations, properties, assets or condition of Trans Max and there is no event
of default in any material respect under any such contract, agreement, lease, or
other commitment in respect of which Trans Max has not taken adequate steps to
prevent such a default from occurring.
Section 1.12 No Conflict With Other Instruments. The execution of this
----------------------------------
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
an event of default under, or terminate, accelerate or modify the terms of any
material indenture, mortgage, deed of trust, or other material contract,
agreement, or instrument to which Trans Max is a party or to which any of its
properties or operations are subject.
Section 1.13 Governmental Authorizations. Except as set forth in the
----------------------------
Trans Max Schedules, Trans Max has all licenses, franchises, permits, and other
governmental authorizations that are legally required to enable it to conduct
its business in all material respects as conducted on the date hereof. Except
for compliance with federal and state securities and corporation laws, as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by Trans Max of this
Agreement and the consummation by Trans Max of the transactions contemplated
hereby.
Section 1.14 Compliance With Laws and Regulations. Except as set forth
------------------------------------
in the Trans Max Schedules, to the best of its knowledge Trans Max has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Trans Max or except to the extent that noncompliance
would not result in the occurrence of any material liability for Trans Max.
Section 1.15 Approval of Agreement. The Board of Directors of Trans
-----------------------
Max has authorized the execution and delivery of this Agreement by Trans Max and
has approved this Agreement and the transactions contemplated hereby, and will
recommend to the Trans Max Shareholders that the Exchange Offer be accepted by
them.
Section 1.16 Material Transactions or Affiliations. Set forth in the
--------------------------------------
Trans Max Schedules is a description, if applicable, of every contract,
agreement, or arrangement between Trans Max and any predecessor and any person
who was at the time of such contract, agreement, or arrangement an officer,
director, or person owning of record, or known by Trans Max to own beneficially,
five percent (5%) or more of the issued and outstanding common stock of Trans
Max and which is to be performed in whole or in part after the date hereof or
which was entered into not more than three (3) years prior to the date hereof.
Except as disclosed in the Trans Max Schedules or otherwise disclosed herein, no
officer, director, or five percent (5%) shareholder of Trans Max has, or has had
since inception of Trans Max, any known interest, direct or indirect, in any
transaction with Trans Max which was material to the business of Trans Max.
There are no commitments by Trans Max, whether written or oral, to lend any
funds, or to borrow any money from, or enter into any other transaction with,
any such affiliated person.
Section 1.17 Trans Max Schedules. Trans Max will deliver to the
---------------------
Company the following schedules, if such schedules are applicable to the
business of Trans Max, which are collectively referred to as the " Trans Max
Schedules" and which consist of separate schedules dated as of the date of
execution of this Agreement, all certified by the chief executive officer of
Trans Max as complete, true, and correct as of the date of this Agreement in all
material respects:
(a) a schedule containing complete and correct copies of the Articles of
Incorporation in effect as of the date of this Agreement;
(b) a schedule containing complete and correct copies of the Bylaws of
Trans Max in effect as of the date of this Agreement;
(c) a schedule containing any Corporate Resolutions of the Shareholders of
Trans Max;
(d) a schedule containing Minutes of meetings of the Board of Directors of
Trans Max;
(e) a schedule containing a list indicating the name and address of each
shareholder of Trans Max together with the number of shares owned by him, her or
it; and
(f) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed by Trans Max.
Trans Max shall cause the Trans Max Schedules and the instruments and data
delivered to the Company hereunder to be promptly updated after the date hereof
up to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to above
have been completed or are available to be furnished by Trans Max. Trans Max
shall have until July 31, 2003 to provide such schedules. If Trans Max cannot
or fails to do so, or if the Company acting reasonably finds any such schedules
or updates provided after the date hereof to be unacceptable according to the
criteria set forth herein, the Company may terminate this Agreement by giving
written notice to Trans Max within five (5) days after the schedules or updates
were due to be produced or were provided. For purposes of the foregoing, the
Company may consider a disclosure in the Trans Max Schedules to be
"unacceptable" only if that item would have a material adverse impact on the
financial condition of Trans Max, taken as a whole.
Section 1.18 Valid Obligation. This Agreement and all agreements and
-----------------
other documents executed by Trans Max in connection herewith constitute the
valid and binding obligation of Trans Max, enforceable in accordance with its or
their terms, except as may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought. The Exchange of the Trans Max shares by the Trans Max Shareholders
is not contingent upon any other agreement, conditions or understandings.
Section 1.19 Acquisition of the Shares by the Trans Max Shareholders.
--------------------------------------------------------
The Trans Max Shareholders are acquiring the Shares for their own account
without the participation of any other person and with the intent of holding the
Shares for investment and without the intent of participating, directly or
indirectly, in a distribution of the Shares, or any portion thereof, and not
with a view to, or for resale in connection with, any distribution of the
Shares, or any portion thereof. The Trans Max Shareholders have read,
understand and consulted with their legal counsel regarding the limitations and
requirements of Section 5 of the 1933 Act. The Trans Max Shareholders will
offer, sell, pledge, convey or otherwise transfer the Shares, or any portion
thereof, only if: (i) pursuant to an effective registration statement under the
1933 Act and any and all applicable state securities or Blue Sky laws or in a
transaction which is otherwise in compliance with the 1933 Act and such laws; or
(ii) pursuant to a valid exemption from registration.
Section 1.20 Accredited Investor Status. Each Trans Max Shareholder is
---------------------------
an accredited investor as that term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY
As an inducement to, and to obtain the reliance of Trans Max and the Trans
Max Shareholders, except as set forth in the Company Schedules (as hereinafter
defined), the Company represents and warrants as follows:
Section 2.01 Organization. The Company is a corporation duly
------------
organized, validly existing, and in good standing under the laws of the State of
Texas and has the corporate power and is duly authorized, qualified, franchised,
and licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets, to carry on its
business in all material respects as it is now being conducted, and except where
failure to be so qualified would not have a material adverse effect on its
business, there is no jurisdiction in which it is not qualified in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Company Schedules are
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company as in effect on the date hereof. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of the Company's Articles of Incorporation or
Bylaws. The Company has taken all action required by law, its Articles of
Incorporation, its Bylaws, or otherwise to authorize the execution and delivery
of this Agreement, and the Company has full power, authority, and legal right
and has taken all action required by law, its Articles of Incorporation, Bylaws,
or otherwise to consummate the transactions herein contemplated.
Section 2.02 Capitalization. The Company is authorized to issue
--------------
50,000,000 shares of Common Stock, no par value per share, of which 2,322,700
shares will be issued and outstanding on the closing date prior to the issuance
of the shares to the Trans Max shareholders as set forth in Section 3.01(ii), as
defined herein. All issued and outstanding shares are legally issued, fully
paid, and non-assessable and not issued in violation of the preemptive or other
rights of any person.
Section 2.03 Subsidiaries and Predecessor Corporations. The Company does
------------------------------------------
not have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except that the
Company was previously Perma-Tune Inc., a privately held California corporation.
Section 2.04 Financial Statements.
---------------------
(a) Included in the Company Schedules are (i) the audited balance
sheets of the Company and the related statements of operations and cash flows as
of and for the twelve (12) months ended December 31, 2002 and (ii) the unaudited
balance sheets of the Company and the related statements of operations and cash
flows for the three (3) months ended March 31, 2003.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved. The Company balance sheets present fairly as of their
respective dates the financial condition of the Company. As of the date of such
balance sheets, except as and to the extent reflected or reserved against
therein, the Company had no liabilities or obligations (absolute or contingent)
which should be reflected in the balance sheets or the notes thereto prepared in
accordance with generally accepted accounting principles, and all assets
reflected therein are properly reported and present fairly the value of the
assets of the Company, in accordance with generally accepted accounting
principles. The statements of operations, stockholders' equity and cash flows
reflect fairly the information required to be set forth therein by generally
accepted accounting principles.
(c) The Company has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and payable.
(d) The books and records, financial and otherwise, of the Company are
in all material aspects complete and correct and have been maintained in
accordance with good business and accounting practices.
(e) All of the Company's assets are reflected on its financial
statements, and, except as set forth in the Company Schedules or the financial
statements of the Company or the notes thereto, the Company has no material
liabilities, direct or indirect, matured or unmatured, contingent or otherwise.
Section 2.05 Information. The information concerning the Company set
-----------
forth in this Agreement and the Company Schedules is complete and accurate in
all material respects and does not contain any untrue statements of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading. In
addition, the Company has fully disclosed in writing to Trans Max (through this
Agreement or the Company Schedules) all information relating to matters
involving the Company or its assets or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than One Thousand Dollars ($1,000) liability or diminution in
value, (ii) have led or may lead to a competitive disadvantage on the part of
the Company or (iii) either alone or in aggregation with other information
covered by this Section, otherwise have led or may lead to a material adverse
effect on the transactions contemplated herein or on the Company, its assets, or
its operations or activities as presently conducted or as contemplated to be
conducted after the Closing Date, including, but not limited to, information
relating to governmental, employee, environmental, litigation and securities
matters and transactions with affiliates.
Section 2.06 Options or Warrants. There are no existing options,
---------------------
warrants, calls, or commitments of any character relating to the authorized and
unissued stock of the Company, except as provided in Schedule 2.06.
Section 2.07 Absence of Certain Changes or Events. Except as disclosed
------------------------------------
in Schedule 2.07, or permitted in writing by Trans Max, since the date of the
most recent Company balance sheet:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets or condition of the Company or (ii) any damage,
destruction or loss to the Company (whether or not covered by insurance)
materially and adversely affecting the business, operations, properties, assets
or condition of the Company;
(b) The Company has not and will not (i) amend its Articles of
Incorporation or Bylaws except to complete the performance of the Company as set
forth herein; (ii) declare or make, or agree to declare or make any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchase or redeem, or agree to purchase or redeem, any of its capital stock;
(iii) waive any rights of value which in the aggregate are outside of the
ordinary course of business or material considering the business of the Company;
(iv) make any material change in its method of management, operation, or
accounting; (v) enter into any transaction or agreement other than in the
ordinary course of business; (vi) make any accrual or arrangement for or payment
of bonuses or special compensation of any kind or any severance or termination
pay to any present or former officer or employee; (vii) increase the rate of
compensation payable or to become payable by it to any of its officers or
directors or any of its salaried employees whose monthly compensation exceed One
Thousand Dollars ($1,000); or (viii) make any increase in any profit sharing,
bonus, deferred compensation, insurance, pension, retirement, or other employee
benefit plan, payment, or arrangement, made to, for or with its officers,
directors, or employees;
(c) The Company has not (i) granted or agreed to grant any options or
warrants; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid or agreed to
pay any material obligations or liabilities (absolute or contingent) other than
current liabilities reflected in or shown on the most recent the Company balance
sheet and current liabilities incurred since that date in the ordinary course of
business and professional and other fees and expenses in connection with the
preparation of this Agreement and the consummation of the transaction
contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets, properties, or rights
not used or useful in its business which, in the aggregate have a value of less
than One Thousand Dollars [$1,000]), or canceled, or agreed to cancel, any debts
or claims (except debts or claims which in the aggregate are of a value less
than One Thousand Dollars [$1,000]); and (v) made or permitted any amendment or
termination of any contract, agreement, or license to which it is a party if
such amendment or termination is material, considering the business of the
Company; and
(d) The Company has not become subject to any law or regulation which
materially and adversely affects, or in the future, may adversely affect, the
business, operations, properties, assets or condition of the Company.
Section 2.08 Title and Related Matters. The Company has good and
----------------------------
marketable title to all of its properties, inventory, interest in properties,
and assets, real and personal, which are reflected in the most recent Company
balance sheet or acquired after that date (except properties, inventory,
interest in properties, and assets sold or otherwise disposed of since such date
in the ordinary course of business), free and clear of all liens, pledges,
charges, or encumbrances except (a) statutory liens or claims not yet
delinquent; (b) such imperfections of title and easements as do not and will not
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially impair
present business operations on such properties; and (c) as described in the
Company Schedules. Except as set forth in the Company Schedules, the Company
owns, free and clear of any liens, claims, encumbrances, royalty interests, or
other restrictions or limitations of any nature whatsoever, any and all products
it is currently manufacturing, including the underlying technology and data, and
all procedures, techniques, marketing plans, business plans, methods of
management, or other information utilized in connection with the Company's
business. Except as set forth in the Company Schedules, no third party has any
right to, and the Company has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, proprietary techniques, trademarks, service
marks, trade names, or copyrights which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
materially adverse effect on the business, operations, financial condition,
income, or business prospects of the Company or any material portion of its
properties, assets, or rights.
Section 2.09 Litigation and Proceedings. There are no actions, suits,
--------------------------
proceedings or investigations pending or, to the knowledge of the Company after
reasonable investigation, threatened by or against the Company or affecting the
Company or its properties, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind. The Company has no knowledge of any default on its part
with respect to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator, or governmental agency or instrumentality,
or any circumstance which after reasonable investigation would result in the
discovery of such default.
Section 2.10 Contracts.
---------
(a) The Company is not a party to, and its assets, products, technology
and properties are not bound by, any material contract, franchise, license
agreement, agreement, debt instrument or other commitments whether such
agreement is in writing or oral.
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which the Company is a party or by which its properties are
bound and which are material to the operations of the Company taken as a whole
are valid and enforceable by the Company in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally;
(c) The Company is not a party to or bound by, and the properties of
the Company are not subject to any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any judgment, order,
writ, injunction, decree, or award which materially and adversely affects, the
business operations, properties, assets, or condition of the Company; and
(d) Except as included or described in the Company Schedules or
reflected in the most recent Company balance sheet, the Company is not a party
to any oral or written (i) contract for the employment of any officer or
employee which is not terminable on thirty (30) days, or less notice; (ii)
profit sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, (iii) agreement, contract, or indenture
relating to the borrowing of money, (iv) guaranty of any obligation, other than
one on which the Company is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and other guaranties of
obligations which, in the aggregate do not exceed more than one year or
providing for payments in excess of Twenty-Five Thousand Dollars ($25,000) in
the aggregate; (v) collective bargaining agreement; or (vi) agreement with any
present or former officer or director of the Company.
Section 2.11 Material Contract Defaults. The Company is not in default
--------------------------
in any respect under the terms of any outstanding contract, agreement, lease, or
other commitment which is material to the business, operations, properties,
assets or condition of the Company and there is no event of default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which the Company has not taken adequate steps to prevent such a
default from occurring.
Section 2.12 No Conflict With Other Instruments. The execution of this
----------------------------------
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
a default under, or terminate, accelerate or modify the terms of, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or to which any of its assets or operations are subject.
Section 2.13 Governmental Authorizations. The Company has all
----------------------------
licenses, franchises, permits, and other governmental authorizations, that are
legally required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal
and state securities or corporation laws, as hereinafter provided, no
authorization, approval, consent or order of, of registration, declaration or
filing with, any court or other governmental body is required in connection with
the execution and delivery by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. To the best of its
------------------------------------
knowledge, the Company has complied with all applicable statutes and regulations
of any federal, state, or other applicable governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
the Company or except to the extent that noncompliance would not result in the
occurrence of any material liability. This compliance includes, but is not
limited to, the filing of all reports, filings and schedules to date with
federal and state securities authorities.
Section 2.15 Approval of Agreement. The Board of Directors of the
-----------------------
Company has authorized the execution and delivery of this Agreement by the
Company and has approved this Agreement and the transactions contemplated
hereby.
Section 2.16 Material Transactions or Affiliations. Except as
----------------------------------------
disclosed herein and in the Company Schedules, there exists no contract,
agreement or arrangement between the Company and any predecessor and any person
who was at the time of such contract, agreement or arrangement an officer,
director, or person owning of record or known by the Company to own
beneficially, five percent (5%) or more of the issued and outstanding Common
Stock of the Company and which is to be performed in whole or in part after the
date hereof or was entered into not more than three years prior to the date
hereof. Neither any officer, director, nor five percent (5%) shareholder of the
Company has, or has had since inception of the Company, any known interest,
direct or indirect, in any such transaction with the Company which was material
to the business of the Company. The Company has no commitment, whether written
or oral, to lend any funds to, borrow any money from, or enter into any other
transaction with, any such affiliated person.
Section 2.17 The Company Schedules. Within ten (10) days prior to
-----------------------
Closing, the Company will deliver to Trans Max the following schedules, which
are collectively referred to as the "Company Schedules" and which consist of
separate schedules, which are dated the date of this Agreement, all certified by
the chief executive officer of the Company to be complete, true, and accurate in
all material respects as of the date of this Agreement:
(a) a schedule containing complete and accurate copies of the Articles
of Incorporation and Bylaws of the Company as in effect as of the date of this
Agreement;
(b) a schedule containing the financial statements of the Company
identified herein;
(c) a certified list from the Company's Transfer Agent setting forth
the name and address of each shareholder of the Company together with the number
of shares owned by him, her or it;
(d) a schedule containing a description of all real property owned by
the Company, together with a description of every mortgage, deed of trust,
pledge, lien, agreement, encumbrance, claim, or equity interest of any nature
whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which the
Company carries on or proposes to carry on its business (except those which, in
the aggregate, are immaterial to the present or proposed business of the
Company);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of the Company as of March 31, 2003, or thereafter other
than in the ordinary course of business of the Company, indicating the debtor
and amount, and classifying the accounts to show in reasonable detail the length
of time, if any, overdue, and stating the nature and amount of any refunds, set
offs, reimbursements, discounts, or other adjustments which are in the aggregate
material and due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and other
obligations payable of the Company as of March 31, 2003, or that arose
thereafter other than in the ordinary course of the business of the Company,
indicating the creditor and amount, classifying the accounts to show in
reasonable detail the length of time, if any, overdue, and stating the nature
and amount of any refunds, set offs, reimbursements, discounts, or other
adjustments, which in the aggregate are material and due to or claimed by the
Company respecting such obligations;
(h) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition of
the Company since March 31, 2003; and
(i) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Company Schedules
by Sections 2.01 through 2.18.
The Company shall cause the Company Schedules and the instruments and data
delivered to Trans Max hereunder to be promptly updated after the date hereof up
to and including the Closing Date.
If the Company cannot or fails to provide the schedules required by this
Section, or if Trans Max or the Trans Max Shareholders find any such schedules
or updates provided after the date hereof to be unacceptable, Trans Max or the
Trans Max Shareholders may terminate this Agreement by giving written notice to
the Company within five (5) days after the schedules or updates were due to be
produced or were provided.
Section 2.18 Valid Obligation. This Agreement and all agreements and
-----------------
other documents executed by the Company in connection herewith constitute the
valid and binding obligation of the Company, enforceable in accordance with its
or their terms, except as may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
Section 2.19 Liabilities. The Company acknowledges that it will
-----------
have those liabilities outstanding on the Closing Date (as defined in Section
3.02) as set forth on Schedule 2.19.
Section 2.20 Reporting Requirements of the Company. The Company is
----------------------------------------
subject to the reporting and filing requirements of the Securities Exchange Act
of 1934 ("the Exchange Act') including (1) the periodic reporting requirements
and (2) the Proxy Rules set forth thereunder. The Company and its officers,
directors, and beneficial owners are subject to the provisions of the Exchange
Act Section 16 relating to short-swing profit recapture, reports of beneficial
ownership and short sale prohibitions.
Section 2.21 Quotation on the OTC Bulletin Board. The Company's Common
-----------------------------------
Stock is quoted on the OTC Bulletin Board under the symbol "PTUN" and the
Company will retain such quotation on the OTC Bulletin Board until the Closing
of the transactions contemplated herein.
Section 2.22 Approval of the Exchange by the Company's Shareholders. The
-------------------------------------------------------
transactions contemplated by this Agreement do not require the approval of the
Company's shareholders and the Company is not required to file a Schedule 14A or
14C with the Securities and Exchange Commission as a result of the transactions
contemplated herein.
Section 2.23 The Directors of the Company shall have approved the
Exchange Offer and the related transactions described herein.
Section 2.24 Approval of the Exchange Offer and related transactions by
the Company's Shareholders is not required by Texas law or the Company's
Articles of Incorporation or Bylaws or any amendments thereto.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. (i) On the terms and subject to the
-------------
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3.02), each Trans Max Shareholder who shall elect to accept the Exchange
Offer described herein shall assign, transfer and deliver, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any kind,
nature, or description, the number of shares of common stock of Trans Max set
forth herein, in the aggregate constituting 100% of the issued and outstanding
shares of common stock of Trans Max. After the acquisition of 100% of the
outstanding shares of Trans Max, Trans Max shall become a wholly owned
subsidiary of the Company.
Section 3.01(ii) The Trans Max Shareholders will receive One Thousand
Five Hundred Seventeen and 73/100 (1,517.73) shares of the Company's common
stock for every share of Trans Max common stock held or an aggregate amount of
15,177,300 (Fifteen Million One Hundred Seventy-Seven Thousand and Three
Hundred) shares of the Company's Common Stock, representing approximately
Eighty-Seven Percent (87%) of the Company's then outstanding Common Stock.
Section 3.02 Closing. The closing ("Closing") of the transaction
-------
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date") but not later than July 31, 2003, subject to
the right of the Company or Trans Max to extend such Closing Date by up to an
additional ten (10) days. Such Closing shall take place at a mutually agreeable
time and place. At Closing, or immediately thereafter, the following will
occur:
a) The Trans Max Shareholders shall surrender the certificates evidencing
100% of the shares of Trans Max stock, duly endorsed with Medallion Guaranteed
stock powers so as to make the Company the sole owner thereof;
b) The Company will issue and deliver 15,177,300 newly issued treasury
shares of the Company's Common Stock in the name of Shareholders in accordance
with this Agreement;
c) At Closing, the existing Directors of the Company shall resign and Peter
Mergenthaler shall be appointed to the Board of Directors to fill the vacancy
created by such resignation.
d) The Closing shall be consummated by the execution and acknowledgment by
the Company and Trans Max of Articles of Share Exchange in accordance with
applicable Florida law. The Articles of Share Exchange executed and acknowledged
shall be delivered for filing to the Secretary of State of the State of Florida
as promptly as possible after the consummation of the Closing;
e) Trans Max will transfer US $75,000 to be split equally between L.L.
Capital Group, LLC and David M. Loev and will issue 75,000 shares of Trans Max
to be split equally between L.L. Capital Group, LLC and David M. Loev; and
f) At the Closing, the Company, Trans Max and each of the Trans Max
Shareholders shall execute, acknowledge, and deliver (or shall ensure to be
executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby. Among other things, the Company
shall provide an opinion of counsel acceptable to Trans Max as to such matters
as Trans Max may reasonably request, which shall include, but not be limited to,
a statement, to the effect that to such counsel's best knowledge, after
reasonable investigation, from inception until the Closing Date, the Company has
complied with all applicable statutes and regulations of any federal, state, or
other applicable governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect the business,
operations, properties, assets or condition of the Company or except to the
extent that noncompliance would not result in the occurrence of any material
liability (such compliance including, but not being limited to, the filing of
all reports to date with federal and state securities authorities).
Section 3.03 Name Change. Subsequent to the Closing, the Company
-----------
will change its name to Trans Max Technologies, Inc. In connection therewith
the Company will timely comply with Texas law in all respects including amending
its Articles of Incorporation.
Section 3.04 Tradability of Shares. The shares of the Common Stock of
----------------------
the Company to be issued to the Trans Max Shareholders have not been registered
under the 1933 Act, nor registered under any state securities law, and are
"restricted securities" as that term is defined in Rule 144 under the 1933 Act.
The securities may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the 1933 Act, or pursuant
to an exemption from registration under the 1933 Act. The shares to be issued to
the Trans Max Shareholders will bear the following restrictive legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED WITHOUT EITHER: i)
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, OR ii) SUBMISSION TO THE CORPORATION OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE CORPORATION THAT SAID SHARES AND THE TRANSFER THEREOF ARE
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS."
Section 3.05 Anti-Dilution. The number of shares of the Company's
-------------
Common Stock issuable upon the Exchange Offer shall be appropriately adjusted to
take into account any other stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the Company's Common Stock which may
occur (i) between the date of the execution of this Agreement and the Closing
Date.
Section 3.06 Termination.
-----------
(a) This Agreement may be terminated by the Board of Directors of
either the Company or Trans Max or by the Trans Max Shareholders at any time
prior to the Closing Date if:
(i) there shall be any actual or threatened action or proceeding before
any court or any governmental body which shall seek to restrain, prohibit, or
invalidate the transactions contemplated by this Agreement and which, in the
judgment of such Board of Directors, made in good faith and based upon the
advice of its legal counsel, makes it inadvisable to proceed with the Exchange;
(ii) any of the transactions contemplated hereby are disapproved by any
regulatory authority whose approval is required to consummate such transactions
(which does not include the Securities and Exchange Commission) or in the
judgment of such board of directors, made in good faith and based on the advice
of counsel, there is substantial likelihood that any such approval will not be
obtained or will be obtained only on a condition or conditions which would be
unduly burdensome, making it inadvisable to proceed with the Exchange; or
(iii) if less than one hundred percent (100%) of the Trans Max
Shareholders agree to the Exchange Offer.
In the event of termination pursuant to this paragraph, no obligation, right or
liability shall arise hereunder, and each party shall bear all of the expenses
incurred by it in connection with the negotiation, drafting, and execution of
this Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated by the Board of Directors of the
Company at any time prior to the Closing Date if:
(i) the Board of Directors of the Company determines in good faith
that one or more of the Company's conditions to Closing has not occurred,
through no fault of the Company.
(ii) The Company takes the termination action specified in Section
1.17 as a result of Trans Max Schedules or updates thereto which the
Company finds unacceptable; or
(iii) Trans Max shall fail to comply in any material respect with any
of its covenants or agreements contained in this Agreement or if any of the
representations or warranties of Trans Max contained herein shall be
inaccurate in any material respect, where such noncompliance or inaccuracy
has not been cured within ten (10) days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph, this Agreement shall
be of no further force or effect, and no obligation, right or liability shall
arise hereunder, except that Purchaser shall bear the costs in connection with
the negotiation, preparation, and execution of this Agreement and qualifying the
offer and sale of securities to be issued in the Exchange under the registration
requirements, or exemption from the registration requirements, of state and
federal securities laws.
(c) This Agreement may be terminated by the Board of Directors of Trans
Max or by the Trans Max Shareholders at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest
balance sheet of the Company in the assets, properties, business or
financial condition of the Company which could have a material adverse
effect on the financial statements of the Company listed in Section 2.04(a)
and 2.04(b) taken as a whole, except any changes disclosed in the Company
Schedules;
(ii) the Board of Directors of Trans Max determines in good faith that
one or more of Trans Max's conditions to Closing has not occurred, through
no fault of Trans Max;
(iii) Trans Max takes the termination action specified in Section 2.17
as a result of the Company Schedules or updates thereto which Trans Max
finds unacceptable;
(iv) on or before July 31, 2003, if Trans Max notifies the Company
that Trans Max's investigation pursuant to Section 4.01 below has uncovered
information which it finds unacceptable by the same criteria set forth
herein; or
(v) The Company shall fail to comply in any material respect with any
of its covenants or agreements contained in this Agreement or if any of the
representations or warranties of the Company contained herein shall be
inaccurate in any material respect, where such noncompliance or inaccuracy
has not been cured within ten (10) days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph, this Agreement shall
be of no further force or effect, and no obligation, right or liability shall
arise hereunder.
No revenue ruling or opinion of counsel will be sought as to the tax-free
nature of the subject Exchange and such tax treatment is not a condition to
Closing herein.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. The Company and Trans Max
---------------------------------
will each afford to the officers and authorized representatives of the other
full access to the properties, books and records of the Company or, as the case
may be, in order that each may have a full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of the Company or Trans Max,
as the case may be, as the other shall from time to time reasonably request. Any
such investigation and examination shall be conducted at reasonable times and
under reasonable circumstances, and each party hereto shall cooperate fully
therein. No investigation by a party hereto shall, however, diminish or waive in
any way any of the representations, warranties, covenants or agreements of the
other party under this Agreement. In order that each party may investigate as it
may wish the business affairs of the other, each party shall furnish the other
during such period with all such information and copies of such documents
concerning the affairs of it as the other party may reasonably request, and
cause its officer, employees, consultants, agents, accountants, and attorneys to
cooperate fully in connection with such review and examination, and to make full
disclosure to the other parties all material facts affecting its financial
condition, business operations, and the conduct of operations. Without limiting
the foregoing, as soon as practicable after the end of each fiscal quarter (and
in any event through the last fiscal quarter prior to the Closing Date), the
Company shall provide Trans Max with quarterly internally prepared and unaudited
financial statements for all periods up to the date of Closing.
Section 4.02 Delivery of Books and Records. At the Closing, Trans Max
-----------------------------
shall deliver to the Company copies of the corporate minute books, books of
account, contracts, records, and all other books or documents of Trans Max now
in the possession of Trans Max or its representatives.
Section 4.03 Third Party Consents and Certificates. The Company and
---------------------------------------
Trans Max agree to cooperate with each other in order to obtain any required
third party consents to this Agreement and the transactions herein contemplated.
Section 4.04 Consent of Trans Max Shareholders. Trans Max shall use its
--------------------------------
best efforts to obtain the consent of all Trans Max Shareholders to participate
in the Exchange.
Section 4.05 Exclusive Dealing Rights. Until 5:00 P.M. Eastern
--------------------------
Daylight Time on July 31, 2003.
(a) In recognition of the substantial time and effort which the Company
has spent and will continue to spend in investigating Trans Max and its business
and in addressing the matters related to the transactions contemplated herein,
each of which may preempt or delay other management activities, neither Trans
Max, nor any of its officers, employees, representatives or agents will directly
or indirectly solicit or initiate any discussions or negotiations with, or,
except where required by fiduciary obligations under applicable law as advised
by counsel, participate in any negotiations with or provide any information to
or otherwise cooperate in any other way with, or facilitate or encourage any
effort or attempt by, any corporation, partnership, person or other entity or
group (other than the Company and its directors, officers, employees,
representatives and agents) concerning any merger, sale of substantial assets,
sale of shares of capital stock, (including without limitation, any public or
private offering of the common stock of Trans Max) or similar transactions
involving Trans Max (all such transactions being referred to as " Trans Max
Acquisition Transactions"). If Trans Max receives any proposal with respect to
an Trans Max Acquisition Transaction, it will immediately communicate to the
Company the fact that it has received such proposal and the principal terms
thereof.
(b) In recognition of the substantial time and effort which Trans Max
has spent and will continue to spend in investigating the Company and its
business and in addressing the matters related to the transactions contemplated
herein, each of which may preempt or delay other management activities, neither
the Company, nor any of its officers, employees, representatives, shareholders
or agents will directly or indirectly solicit or initiate any discussions or
negotiations with, or, except where required by fiduciary obligations under
applicable law as advised by counsel, participate in any negotiations with or
provide any information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort or attempt by, any corporation, partnership,
person or other entity or group (other than Trans Max and its directors,
officers, employees, representatives and agents) concerning any merger, sale of
substantial assets, sale of shares of capital stock, (including without
limitation, any public or private offering of the Common Stock of the Company or
similar transactions involving the Company (all such transactions being referred
to as "Company Acquisition Transactions"). If the Company receives any proposal
with respect to a Company Acquisition Transaction, it will immediately
communicate to Trans Max the fact that it has received such proposal and the
principal terms thereof.
Section 4.06 Actions Prior to Closing.
---------------------------
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the Company Schedules or Trans Max Schedules or as
permitted or contemplated by this Agreement, the Company (subject to paragraph
(b) below) and Trans Max respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and
tear and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations under
material contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither the Company nor Trans Max will:
(i) make any changes in their Articles of Incorporation or Bylaws,
except as otherwise provided in this Agreement;
(ii) take any action described in Section 1.07 in the case of Trans
Max, or in Section 2.07, in the case of the Company (all except as
permitted therein or as disclosed in the applicable party's schedules);
(iii) enter into or amend any contract, agreement, or other instrument
of any of the types described in such party's schedules, except that a
party may enter into or amend any contract, agreement, or other instrument
in the ordinary course of business involving the sale of goods or services;
or
(iv) sell any assets or discontinue any operations (other than the
Divestiture), sell any shares of capital stock (other than as contemplated
in Section 4.06 hereof and the sale of securities underlying existing
warrants or options of the Company) or conduct any similar transactions
other than in the ordinary course of business.
Section 4.07 Indemnification.
---------------
(a) The Company hereby agrees to indemnify Trans Max and each of the
officers, agents, and directors of Trans Max and each of the Trans Max
Shareholders as of the date of execution of this Agreement against any loss,
liability, claim, damage, or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever), to
which it or they may become subject arising out of or based on any inaccuracy
appearing in or misrepresentation made by the Company under this Agreement. The
indemnification provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of this
Agreement.
Section 4.08 Indemnification of Subsequent Corporate Actions.
---------------------------------------------------
(1) No officer, director, controlling shareholder, agent or representative
of the Company, or any other person currently affiliated with the Company, has
offered or agreed to assist in the promotion, market making, development,
enhancement, or support of the Company's business, capital raising, or
securities market.
(2) Trans Max hereby represents and warrants that it will indemnify and
hold harmless any officer, director, controlling shareholder, agent or
representative of the Company, or any other person affiliated with the Company,
from any decisions, activities, or conduct of the Company contemporaneous with,
or subsequent to this Agreement.
Section 4.09 Audited Financial Statements. The Company shall file
------------------------------
audited financial statements of Trans Max as required by the Securities and
Exchange Commission within seventy-five (75) days from the date of Closing.
Section 4.10 Blue Sky Manual Exemption. The Company shall file with
----------------------------
Standard & Poors or Moody's within one hundred twenty (120) days from the date
of Closing.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations and Performance of Covenants.
--------------------------------------------------------
The representations and warranties made by Trans Max in this Agreement were true
when made and shall be true at the Closing Date with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement). Trans Max shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Trans Max prior to or at the
Closing. The Company shall be furnished with a certificate, signed by a duly
authorized executive officer of Trans Max and dated the Closing Date, to the
foregoing effect.
Section 5.02 Officer's Certificate. The Company shall have been
----------------------
furnished with a certificate dated the Closing Date and signed by a duly
authorized officer of Trans Max to the effect that no litigation, proceeding,
investigation, or inquiry is pending, or to the best knowledge of Trans Max
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement, or, to the
extent not disclosed in the Trans Max Schedules, by or against Trans Max, which
might result in any material adverse change in any of the assets, properties,
business, or operations of Trans Max.
Section 5.03 No Material Adverse Change. Prior to the Closing Date,
----------------------------
there shall not have occurred any material change in the financial condition,
business, or operations of Trans Max nor shall any event have occurred which,
with the lapse of time or the giving of notice, is determined to be unacceptable
using the criteria set forth in Section 1.06.
Section 5.04 Approval by Trans Max Shareholders. The Exchange shall
------------------------------------
have been approved, and shares delivered in accordance with Section 3.01, by the
holders of not less than one hundred percent (100%) of the outstanding common
stock of Trans Max.
Section 5.05 No Governmental Prohibition. No order, statute, rule,
-----------------------------
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 5.06 Consents. All consents, approvals, waivers or amendments
--------
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of the Company and Trans Max after the Closing Date on the basis as
presently operated shall have been obtained.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRANS MAX
AND THE TRANS MAX SHAREHOLDERS
The obligations of Trans Max and the Trans Max Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 6.01 Accuracy of Representations and Performance of Covenants.
--------------------------------------------------------
The representations and warranties made by the Company in this Agreement were
true when made and shall be true as of the Closing Date (except for changes
therein permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, the Company shall have performed and complied with all covenants
and conditions required by this Agreement to be performed or complied with by
the Company and shall have satisfied all conditions set forth herein prior to or
at the Closing. Trans Max shall have been furnished with certificates, signed
by duly authorized executive officers of the Company and dated the Closing Date,
to the foregoing effect.
Section 6.02 Officer's Certificate. Trans Max shall have been
----------------------
furnished with certificates dated the Closing Date and signed by the duly
authorized executive officer of the Company, to the effect that no litigation,
proceeding, investigation or inquiry is pending, or to the best knowledge of the
Company threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Company Schedules, by or against the Company, which
might result in any material adverse change in any of the assets, properties or
operations of the Company.
Section 6.03 No Material Adverse Change. Prior to the Closing Date,
----------------------------
there shall not have occurred any change in the financial condition, business or
operations of the Company nor shall any event have occurred which, with the
lapse of time or the giving of notice, is determined to be unacceptable using
the criteria set forth in Section 2.17.
Section 6.04 No Governmental Prohibition. No order, statute, rule,
-----------------------------
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 6.05 Consents. All consents, approvals, waivers or amendments
--------
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of the Company and Trans Max after the Closing Date on the basis as
presently operated shall have been obtained.
Section 6.06 Other Items. Trans Max shall have received further
------------
opinions, documents, certificates, or instruments relating to the transactions
contemplated hereby as Trans Max may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 No Bankruptcy and No Criminal Convictions.
----------------------------------------------
None of the Parties to the Agreement, nor their officers, directors or
affiliates, promoters, beneficial shareholders or control persons, nor any
predecessor thereof have been subject to the following:
(a) Any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer within the past
five (5) years;
(b) Any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(c) Being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and
(d) Being found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission (the "SEC") or the Commodity
Futures Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or vacated.
Section 7.02 Brokers and Finder's Fee. The Company and Trans Max agree
------------------------
that, except as set forth herein and on Schedule 7.02 attached hereto, there
were no brokers or finders involved in bringing the parties together or who were
instrumental in the negotiation, execution or consummation of this Agreement.
The Company and Trans Max each agree to indemnify the other against any claim by
any third person other than those described above for any commission, brokerage,
or finder's fee arising from the transactions contemplated hereby based on any
alleged agreement or understanding between the indemnifying party and such third
person, whether express or implied from the actions of the indemnifying party.
Section 7.03 Governing Law and Arbitration. This Agreement shall be
-------------------------------
governed by, enforced, and construed under and in accordance with the laws of
the United States of America and, with respect to the matters of state law, with
the laws of the State of New York without giving effect to principles of
conflicts of law thereunder. All controversies, disputes or claims arising out
of or relating to this Agreement shall be resolved by binding arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. All arbitrators shall possess
such experience in, and knowledge of, the subject area of the controversy or
claim so as to qualify as an "expert" with respect to such subject matter. The
governing law for the purposes of any arbitration arising hereunder shall be in
New York. The prevailing party shall be entitled to receive its reasonable
attorney's fees and all costs relating to the arbitration. Any award rendered
by arbitration shall be final and binding on the parties, and judgment thereon
may be entered in any court of competent jurisdiction.
Section 7.04 Notices. Any notice or other communications required or
-------
permitted hereunder shall be in writing and shall be sufficiently given if
personally delivered to it or sent by telecopy, overnight courier or registered
mail or certified mail, postage prepaid, addressed as follows:
If to the Company, to: Perma-Tune Electronics, Inc.
111 South Birmingham Street
Wylie, Texas 75098
If to TRANS MAX, to: Trans Max Technologies, Inc.
2 East Camino Real
Suite 202
Boca Raton, Florida 33432
With copies to: David M. Loev, Attorney at Law
2777 Allen Parkway
Suite 1000
Houston, Texas 77019
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given (i) upon receipt, if personally delivered, (ii) on
the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3)
days after mailing, if sent by registered or certified mail.
Section 7.05 Attorney's Fees. In the event that either party
----------------
institutes any action or suit to enforce this Agreement or to secure relief from
any default hereunder or breach hereof, the prevailing party shall be reimbursed
by the losing party for all costs, including reasonable attorney's fees,
incurred in connection therewith and in enforcing or collecting any judgment
rendered therein.
Section 7.06 Confidentiality. Each party hereto agrees with the other
---------------
that, unless and until the transactions contemplated by this Agreement have been
consummated, it and its representatives will hold in strict confidence all data
and information obtained with respect to another party or any subsidiary thereof
from any representative, officer, director or employee, or from any books or
records or from personal inspection, of such other party, and shall not use such
data or information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge, or is
required by law to be published; or (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. In the event of the termination of this
Agreement, each party shall return to the other party all documents and other
materials obtained by it or on its behalf and shall destroy all copies, digests,
work papers, abstracts or other materials relating thereto, and each party will
continue to comply with the confidentiality provisions set forth herein.
Section 7.07 Public Announcements and Filings. Unless required by
-----------------------------------
applicable law or regulatory authority, none of the parties will issue any
report, statement or press release to the general public, to the trade, to the
general trade or trade press, or to any third party (other than its advisors and
representatives in connection with the transactions contemplated hereby) or file
any document, relating to this Agreement and the transactions contemplated
hereby, except as may be mutually agreed by the parties. Copies of any such
filings, public announcements or disclosures, including any announcements or
disclosures mandated by law or regulatory authorities, shall be delivered to
each party at least one (1) business day prior to the release thereof.
Section 7.08 Schedules; Knowledge. Each party is presumed to have full
--------------------
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.09 Third Party Beneficiaries. This contract is strictly
---------------------------
between the Company and Trans Max and the Trans Max Shareholders, and, except as
specifically provided, no director, officer, stockholder (other than the Trans
Max Shareholders), employee, agent, independent contractor or any other person
or entity shall be deemed to be a third party beneficiary of this Agreement.
Section 7.10 Expenses. Trans Max hereto agrees to pay the costs and
---------
expenses incurred in negotiating this Agreement including legal, accounting and
professional fees, incurred in connection with the Exchange or any of the other
transactions contemplated hereby, and those costs and expenses incurred in
consummating the transactions described herein.
Section 7.11 Entire Agreement. This Agreement represents the entire
-----------------
agreement between the parties relating to the subject matter thereof and
supersedes all prior agreements, understandings and negotiations, written or
oral, with respect to such subject matter.
Section 7.12 Survival; Termination. The representations, warranties,
----------------------
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of two (2)
years.
Section 7.13 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.14 Amendment or Waiver. Every right and remedy provided
---------------------
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may by amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.
Section 7.15 Best Efforts. Subject to the terms and conditions herein
------------
provided, each party shall use its best efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by it under this
Agreement so that the transactions contemplated hereby shall be consummated as
soon as practicable. Each party also agrees that it shall use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
herein.
Section 7.16 Faxed Copies. For purposes of this Agreement, a
-------------
faxed signature will constitute an original signature.
Section 7.17 Severability. The invalidity or unenforceability of
------------
any term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision of this Agreement shall in no way affect the validity or enforcement
of any other provision or any part thereof.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, as of the
date first-above written.
PERMA-TUNE ELECTRONICS, INC.
BY: /s/ Linda Decker
------------------------------------------
Linda Decker, Chief Financial Officer
TRANS MAX TECHNOLOGIES, INC.
BY: /s/ Peter Mergenthaler
------------------------------------------
Peter Mergenthaler, Chief Executive Officer
TRANS MAX TECHNOLOGIES, INC. SHAREHOLDERS:
/s/ Murray H. Stark
- ---------------------------------
By: Murray H. Stark, individually
--------------
Number of Shares: 3,500
----------------
/s/ Colonel Robert E. Fyn
- ---------------------------------
By: Colonel Robert E. Fyn, individually
--------------
Number of Shares: 3,500
----------------
/s/ Peter Mergenthaler
- ---------------------------------
By: Peter Mergenthaler, individually
--------------
Number of Shares: 1,500
----------------
/s/ Garth S. Bailey
- ---------------------------------
By: Garth S. Bailey, individually
--------------
Number of Shares: 1,500
----------------