EXHIBIT 2.1
A G R E E M E N T
a n d
P L A N O F M E R G E R
By and Among
INTEGRATED PERFORMANCE SYSTEMS, INC.,
&
BEST CIRCUIT BOARDS, INC.
(dba: Lone Star Circuits)
October 22, 2004
RECITALS
ARTICLE I
1.1 THE MERGER
1.2 EFFECTIVE TIME OF THE MERGER
1.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS
OF SURVIVING CORPORATION
1.4 MERGER CONSIDERATION; PRELIMINARY MERGER CONSIDERATION
AND ADJUSTMENTS
1.5 EXCHANGE OF CERTIFICATES
1.6 CLOSING
1.7 RIGHT OF SET-OFF
ARTICLE II
2.1 CAPITALIZATION
2.2 NO LIENS ON SHARES
2.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK
2.4 DUE ORGANIZATION
2.5 SUBSIDIARIES
2.6 DUE AUTHORIZATION
2.7 FINANCIAL STATEMENTS
2.8 ABSENCE OF CHANGES OR EVENTS
2.9 PROPERTIES
2.10 LICENSES AND PERMITS
2.11 PATENTS; TRADEMARKS
2.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS
2.13 INSURANCE
2.14 EMPLOYEE BENEFITS
2.15 CONTRACTS AND AGREEMENTS
2.16 CLAIMS AND PROCEEDINGS
2.17 TAXES
2.18 PERSONNEL
2.19 BUSINESS RELATIONS
2.20 ACCOUNTS RECEIVABLE
2.21 BANK ACCOUNTS
2.22 AGENTS
2.23 WARRANTIES
2.24 BROKERS
2.25 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC.
2.26 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS,
AND EMPLOYEES
2.27 UNDISCLOSED LIABILITIES
2.28 ENVIRONMENTAL MATTERS
2.29 INFORMATION FURNISHED
ARTICLE III
3.1 CAPITALIZATION
3.2 NO LIENS ON SHARES
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK
3.4 DUE ORGANIZATION
3.5 SUBSIDIARIES
3.6 DUE AUTHORIZATION
3.7 FINANCIAL STATEMENTS
3.8 ABSENCE OF CHANGES OR EVENTS
3.9 PROPERTIES
3.10 LICENSES AND PERMITS
3.11 PATENTS; TRADEMARKS
3.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS
3.13 INSURANCE
3.14 EMPLOYEE BENEFITS
3.15 CONTRACTS AND AGREEMENTS
3.16 CLAIMS AND PROCEEDINGS
3.17 TAXES
3.18 PERSONNEL
3.19 BUSINESS RELATIONS
3.20 ACCOUNTS RECEIVABLE
3.21 BANK ACCOUNTS
3.22 AGENTS
3.23 WARRANTIES
3.24 CONSULTANT FEES
3.25 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC
3.26 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS,
AND EMPLOYEES
3.27 UNDISCLOSED LIABILITIES
3.28 ENVIRONMENTAL MATTERS
3.29 INFORMATION FURNISHED
3.30 INTEGRATED SHARES
3.31 SECTION 368(A)(1)(A) AND (A)(2)(E) REORGANIZATION
ARTICLE IV
4.1 EMPLOYMENT AGREEMENTS
4.2 HEALTH INSURANCE
4.3 FURTHER ASSURANCES
ARTICLE V
5.1 CONDUCT OF BUSINESS PENDING MERGER
5.2 NEGATIVE COVENANTS
5.3 NATURE OF BREACH
5.4 OTHER PARTIES
5.5 ACCESS TO INFORMATION
5.6 TRANSFER OR ACQUISITION RESTRICTIONS
5.7 POOLING TREATMENT
5.8 CONSENTS OF OTHERS
5.9 PARTIES' EFFORTS
5.10 POWERS OF ATTORNEY
ARTICLE VI
6.1 CONDITIONS TO BUYERS' OBLIGATIONS
6.2 CONDITIONS TO THE SHAREHOLDERS' AND THE COMPANY'S OBLIGATIONS
ARTICLE VII
7.1 INDEMNIFICATION OF INTEGRATED
7.2 INDEMNIFICATION OF COMPANY AND SHAREHOLDERS
7.2.1 Indemnifiable Costs
7.2.2 Cap on Amount of Indemnifiable Costs to be Paid
From Capital Raise
7.2.3 Indemnifiable Costs Outstanding at Closing
7.2.4 Stock Escrow and Security Agreement
7.2.5 Disbursements of ▇▇▇▇▇ Shares from Escrow
7.3 SATISFACTION OF SHAREHOLDER ADVANCES TO BUYERS
7.4 DEFENSE OF CLAIMS
7.5 TAX AUDITS, ETC
7.6 NOTICE OF CLAIM
ARTICLE VIII
8.1 TERMINATION
8.2 EFFECT OF TERMINATION
ARTICLE IX
9.1 SURVIVAL
ARTICLE X
10.1 SUPPLEMENTAL DOCUMENTATION
10.2 MODIFICATIONS
10.3 NOTICES
10.4 COUNTERPARTS
10.5 EXPENSES
10.6 BINDING EFFECT; ASSIGNMENT
10.7 ENTIRE AND SOLE AGREEMENT
10.8 GOVERNING LAW
10.9 INVALID PROVISIONS
10.10 TRANSFER TAXES
10.11 PUBLIC ANNOUNCEMENTS
10.12 WAIVER
10.13 HEADINGS
10.14 NO STRICT CONSTRUCTION
EXHIBITS AND SCHEDULES
Exhibits
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Exhibit A - Articles of Incorporation for Surviving Company
Exhibit B - Promissory Note One ("Note One Consideration")
Exhibit C - Promissory Note Two ("Note Two Consideration")
Exhibit ▇ - ▇▇▇▇▇ Escrow Agreement
Exhibit E - Capitalization of Company
Exhibit F - Finder and Consultant Fee Agreement
Exhibit G - Form of Shareholder and Company Employment Agreements
Exhibit H - Certificate of Company and Shareholders
Exhibit I - Form of Non-Compete Agreement
Exhibit J - Form of Opinion of Company's and Shareholders' Counsel
Exhibit K - Form of Buyers Legal Opinion
Exhibit L - ▇▇▇▇▇ Stock Escrow and Security Agreement
Schedules
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1.4 Merger Consideration
2.1 Shareholders of Best Circuit Boards ("BCB")
2.3 Other Rights to Acquire Stock (BCB)
2.4A Articles and By-Laws (BCB)
2.4B Jurisdictions Qualified to do Business (BCB)
2.5 Subsidiaries of BCB
2.7A GAAP Exceptions _ BCB
2.7B Changes in Methods of Accounting (BCB)
2.9 Real and Personal Property Interests (BCB)
2.10 Licenses and Permits (BCB)
2.11A Limitations on Use of Intellectual Property (BCB)
2.11B Infringements of Intellectual Property Rights (BCB)
2.11C Additional Representations Regarding Intellectual Property (BCB)
2.11D Additional Representations Regarding Intellectual Property (BCB)
2.13 Insurance Policies (BCB)
2.14 Employee Plans (BCB)
2.15 Breaches of Contractual Obligations (BCB)
2.16 Litigation (BCB)
2.18 Confidentiality Agreements (BCB)
2.20 Security Interests on Accounts Receivable (BCB)
2.21 Bank Accounts (BCB)
2.22 Powers of Attorney (BCB)
2.23 Breaches of Warranties (BCB)
2.25 Interests in Competitors (BCB)
2.26 Shareholder Debt (BCB)
2.27 Undisclosed Liabilities (BCB)
2.28 Environmental Matters (BCB)
2.29 Information Furnished (BCB)
3.1 Shareholders of Integrated Performance Systems, Inc. (IPS)
3.3 Other Rights to Acquire Stock (IPS)
3.4A Articles and By-Laws (IPS)
3.4B Jurisdictions Qualified to do Business (IPS)
3.5 Subsidiaries of IPS
3.7A GAAP Exceptions _ IPS
3.7B Changes in Methods of Accounting (IPS)
3.9 Real and Personal Property Interests (IPS)
3.10 Licenses and Permits (IPS)
3.11A Limitations on Use of Intellectual Property (IPS)
3.11B Infringements of Intellectual Property Rights (IPS)
3.11C Additional Representations Regarding Intellectual Property (IPS)
3.11D Additional Representations Regarding Intellectual Property (IPS)
3.13 Insurance Policies (IPS)
3.14 Employee Plans (IPS)
3.15 Breaches of Contractual Obligations (IPS)
3.16 Litigation (IPS)
3.18 Confidentiality Agreements (IPS)
3.20 Security Interests on Accounts Receivable (IPS)
3.21 Bank Accounts (IPS)
3.22 Powers of Attorney (IPS)
3.23 Breaches of Warranties (IPS)
3.25 Interests in Competitors (IPS)
3.26 Shareholder Debt (IPS)
3.27 Undisclosed Liabilities (IPS)
3.28 Environmental Matters (IPS)
3.29 Information Furnished (IPS)
4.1 Listing of Key Employees
7.2 Listing of Debts Assumed
7.3 Listing of Advances made to Integrated
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into
this the 19th day of October, 2004, to be effective as of October 19, 2004,
by and among BEST CIRCUIT BOARDS, INC., a TEXAS corporation (the "Company"),
represented by ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (together, the "Shareholders"),
and Integrated Performance Systems, Inc. ("Integrated"), and its wholly-
owned subsidiary, the LSC MERGER CORPORATION ("LSCMC"), a TEXAS corporation,
and D. ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"). LSCMC and Integrated are hereinafter
collectively referred to as "Buyers." Collectively, the Company and its
Shareholders, along with Integrated, its subsidiary, LSCMC, and ▇▇▇▇▇ may be
referred to as "the parties."
Recitals
--------
A. The Shareholders are the majority owners of the issued and outstanding
shares of common stock, $0.01 par value per share, of the Company (the
"Company Shares").
B. Integrated owns all of the issued and outstanding shares of common
stock, $0.01 par value per share, of the LSC MERGER CORPORATION (the "LSCMC
Shares").
C. The LSC MERGER CORPORATION desires to acquire the Company from the
Shareholders in a merger transaction pursuant to which LSCMC will merge with
and into COMPANY with the COMPANY remaining as the surviving corporation and
a wholly-owned subsidiary of Integrated.
D. In consideration for the agreement of cash, notes payable, and stock to
effectuate the Merger (as defined herein), the Shareholders have agreed to,
along with Company, make certain representations and warranties to BUYERS
as set forth herein. BUYERS in turn have agreed to make certain
representations and warranties to Shareholders.
E. It is intended that the Merger contemplated by this Agreement shall
qualify as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
Agreement
---------
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto covenant
and agree as follows:
ARTICLE I
MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below) in accordance with the
laws of the State of Texas, LSCMC shall be merged with and into COMPANY
(the "Merger"), and the separate existence of LSCMC shall thereupon cease.
COMPANY shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "Surviving Corporation").
1.2. Effective Time of the Merger. The Merger shall become effective at
such time (the "Effective Time") as a certificate of merger, in a form
mutually acceptable to BUYERS and Company, is filed with the Secretary of
State for the State of Texas (the "Merger Filings"). The Merger Filings
shall be made simultaneously with or as soon as practicable after the
execution of this Agreement and the closing of the transactions contemplated
by this Agreement in accordance with Section 1.6.
1.3. Articles of Incorporation, By-laws and Board of Directors of Surviving
Corporation. As a result of the Merger and at the Effective Time,
(i) All the properties, rights, privileges, powers and franchises of
the Company and LSCMC shall rest in the Surviving Corporation.
(ii) The Articles of Incorporation of COMPANY in effect immediately
prior to the Effective Time shall become the Articles of Incorporation
of the Surviving Corporation, and thereafter may be amended in
accordance with their terms and as provided under Texas law (see
Exhibit A).
(iii) The By-laws of the Company in effect immediately prior to the
Effective Time shall become the By-laws of the Surviving Corporation,
and thereafter may be amended in accordance with their terms and as
provided by the Articles of Incorporation of the Surviving Corporation
and Texas Law; and
(iv) The Board of Directors of the Company as constituted immediately
prior to the Effective Time shall be the Board of Directors of the
Surviving Corporation.
1.4. Merger Consideration; Preliminary Merger Consideration and
Adjustments.
(a) (i) Subject to any adjustments as may be contemplated herein, the
consideration to be paid and delivered by the Buyer to the Shareholders
shall be in an amount as set forth in Schedule _1.4(b) and hereinafter
referred to as the Merger Consideration.
(ii) Subject to any adjustments as may be required hereunder, a
portion of the Merger Consideration shall be payable in cash, a
portion shall be payable under two notes payable (as defined
below), and a portion shall be payable in shares of Integrated
Performance Systems, Inc. common stock, par value $.01 per share
(the "Integrated Shares").
(b) (i) The Merger Consideration agreed to by all parties involved
is $3,000,000.00 cash, a $1,000,000 note payable, a second note payable
in an amount to be determined under Section 7.3 below with respect to
advances made by Company and Shareholders on behalf of Buyers, and
Integrated common stock equal to 67.25% of the total issued and
outstanding at the time of closing.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of capital stock of the Company,
Shareholders of Company collectively shall receive a number of shares
of Integrated equal to 67.25% of the total issued and outstanding at
the time of closing (the "Preliminary Stock Consideration"); (B) cash
in the amount of three million dollars ($3,000,000.00) (the
"Preliminary Cash Consideration"); (C) a note payable in the amount of
$1,000,000 (the "Note One Consideration") _ see Exhibit B for
Promissory Note One; and (D) a note payable in an amount to be
determined under Section 7.3 below (the "Note Two Consideration") _ see
Exhibit C for the Promissory Note Two).
(d) At Closing, BUYERS shall pay and deliver to the Escrow Agent up to
$4,000,000 (the "Escrow Amount"), which amount shall be held, paid and
disbursed pursuant to the terms of the Escrow Agreement.
(e) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all Company Shares shall be
transferred to Integrated, and each holder of Company Shares shall
thereafter cease to have any rights with respect to such Company
Shares, except the right to receive, without interest, the Merger
Consideration in accordance with this Section 1.4 hereof upon the
surrender of a certificate (a "Certificate") representing such Company
Shares.
(f) Each Company Share issued and held in the Company's treasury at the
Effective Time shall, by virtue of the Merger, be transferred to
Integrated.
(g) At Closing, the BUYERS shall pay and deliver to the Company
Shareholders the Cash, Notes One and Two, and stock consideration as
described herein.
(i) Exclusive of Company's right of future set-offs as provided
in Section 1.7 below, the agreed upon Merger Consideration shall
not be subject to any adjustments.
(ii) The Stock Consideration shall be represented by the BUYER
Integrated's Shares, which have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and are
subject to sale restrictions thereunder. Such restrictions shall
be made in the form of a restrictive legend placed on the Buyers
Common Stock.
1.5. Exchange of Certificates. As soon as practicable after the Effective
Time and upon completion of the Merger contemplated by herein, the Surviving
Corporation shall mail or make delivery to each Selling Shareholder a (i)
form letter of transmittal setting forth the instructions for the delivery
of the Certificates representing the Company Shares. Upon surrender of the
Certificates representing all of the Company Shares held by each Shareholder
together with such letter of transmittal, duly executed, and such other
customary documentation as may be required pursuant to such instructions,
the holder of the Company Shares shall be entitled to receive shares of
Integrated in a manner and amount as described herein.
Until surrendered in accordance with the provisions of this Section 1.5,
each Certificate shall represent for all purposes only the right to receive
the Merger Consideration contemplated hereunder. In the event that any
Certificate shall have been lost, stolen or destroyed, the Surviving
Corporation will pay in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect of the
Certificate pursuant to this Agreement upon the delivery of a duly executed
affidavit of that fact by the holder claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation,
reasonable indemnification against any claim that may be made against the
Surviving Corporation with respect to such Certificate.
1.6. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall occur as soon as practicable, but in no event later than
December 23, 2004, at the offices of Best Circuit Boards, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇.,
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or by facsimile and wire transfer should the parties
otherwise agree.
1.7. Right of Set-Off. Pursuant to the provisions of Articles 7.2 and 7.3
below, if any future payments are made by Shareholders, the Company, the
Surviving Company or Integrated on behalf of Buyers or arising as a result
of any claim by 3rd parties against Buyers for any Indemnifiable Cost (as
defined in Section 7.2 of this Agreement) for a period not to exceed two
(2) years after the effective closing date, the Surviving Company may at its
option offset such amounts against the ▇▇▇▇▇ shares which are held in escrow
pursuant to Exhibit D, as supplemented or revised in accordance with Article
VII below.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND THE SHAREHOLDERS
Company and the Shareholders represent and warrant as follows:
2.1 Capitalization. The authorized capital stock of the Company consists of
10,000 shares of common stock, $1 par value per share, of which shares
10,000 are issued and outstanding Pursuant to Exhibit E . All of Company's
Shares are duly authorized, validly issued, fully paid, and nonassessable.
All of Company's Shares are owned of record and beneficially in the amounts
and percentages set forth in Schedule 2.1. None of the shares of Company
were issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any person or entity.
2.2 No Liens on Shares. The Company Shares are owned free and clear of any
liens, restrictions, security interests, claims, rights of another, or
encumbrances other than the rights and obligations arising under this
Agreement, and none of the Company Shares is subject to any outstanding
option, warrant, call, or similar right of any other person to acquire the
same, and none of the Company Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and
state securities laws, exemptions from which are available for the Merger.
The Shareholders have full power and authority to convey good and marketable
title to the Company Shares, free and clear of any mortgages, liens,
restrictions, security interests, claims, rights of another or encumbrances.
2.3 Other Rights to Acquire Capital Stock. Except as set forth on Schedule
2.3, there are no authorized or outstanding warrants, options, or rights of
any kind to acquire from Company any equity or debt securities of Company or
securities convertible into or exchangeable for equity or debt securities of
Company and there are no shares of capital stock of Company reserved for
issuance for any purpose nor any contracts, commitments, understandings or
arrangements which require Company to issue, sell or deliver any additional
shares of its capital stock.
2.4 Due Organization. Company is duly organized, validly existing, and in
good standing under the laws of the State of Texas and has full corporate
power and authority to carry on business as now conducted and as proposed to
be conducted through the Merger. Complete and correct copies of the
Articles of Incorporation and Bylaws of Company, and all amendments thereto,
have been heretofore delivered to the Buyer and are attached hereto as
Schedule 2.4A. Set forth in Schedule 2.4B hereto is a list of each
jurisdiction in which Company is qualified to do business. Company is
qualified to do business in each jurisdiction in which the nature of its
business or the ownership of its properties requires such qualification
except where the failure to be so qualified does not, and would not be
reasonably expected to, have a Material Adverse Effect, as defined in
Section 2.8 hereinafter, on the business, business prospects, properties or
assets of Company.
2.5 Subsidiaries. Except as provided in Schedule 2.5, the Company has no
subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, association, joint venture, trust, or
other entity.
2.6 Due Authorization. Company has full power and authority to execute,
deliver and perform this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action of Company. This
Agreement has been duly and validly executed and delivered by Company and
constitutes the valid and binding obligations of Company, enforceable
against Company in accordance with its terms. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates, or other documents contemplated hereby) by Company do not
(a) violate any federal, state, county, or local law, rule, or regulation or
any decree or judgment of any court or governmental authority applicable to
Company or its property, (b) violate or conflict with, or permit the
cancellation of, or constitute a default under, any agreement to which
Company is a party, or by which Company or any its property is bound,
(c) permit the acceleration of the maturity of any indebtedness of, or
indebtedness secured by the property of, Company, or (d) violate or conflict
with any provision of the charter or bylaws (or equivalent constitutive
documents) of Company.
2.7 Financial Statements. The following Financial Statements (as
hereinafter defined) of Company have been or will be delivered to
Integrated:
(a) The most recently audited balance sheets of Company, and the
reviewed balance sheet as of October 31, 2004 (the "Balance
Sheets");
(b) The most recently audited income statements of Company, and the
reviewed income statement for the three-month period ending October
31, 2004 (the "Income Statements");
Together, the Balance Sheets and Income Statements and the notes thereto
shall be referred to herein as the "Financial Statements." The Financial
Statements are materially true and complete, have been prepared from the
books and records of Company in accordance with GAAP consistently applied,
and maintained throughout the periods indicated except as set forth on
Schedule 2.7A, and fairly present the financial condition of Company as at
its respective dates and the results of operations for the periods covered
thereby, including but not limited to, reflecting all reserves necessary to
correctly present the appropriate value of assets and all accruals necessary
to record all contingent and accrued liabilities.
Such statements of income do not contain any items of special or non-
recurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and such Financial
Statements include all adjustments (including all normal recurring accruals
for unusual or non-recurring items) considered necessary for a fair
presentation, and no adjustments or restatements are or will be necessary in
respect of any items of an unusual or non-recurring nature, except as
expressly specified therein. Except as noted on Schedule 2.7B, there has
been no change in Company's method of accounting or keeping of its books of
account or accounting practices for the two-year period ended on the
Effective Time.
2.8 Absence of Changes or Events. Since July 31, 2004 (i) Company has
conducted its business only in the ordinary course and consistent with the
requirements of Article V, (ii) Company has not suffered any change, event
or condition which has had or may reasonably be expected to have a Material
Adverse Effect, as defined in this Section below, on Company and (iii)
Company has not acquired or disposed of any material assets or engaged in
any material transaction other than in the ordinary course of business or as
expressly contemplated by the terms of this Agreement.
As used in this Agreement, "Material Adverse Effect" means any material
adverse change in or effect on condition (financial or otherwise), operating
results, Business, properties, assets, liabilities, operations or prospects,
or any material adverse change in revenues, costs, backlog or relations with
employees, agents, customers or suppliers, whether attributable to a single
circumstance or event or an aggregation of circumstances or events.
2.9 Properties. Attached hereto as Schedule 2.9 is a list containing a
description of all interests in real property (including, without
limitation, leasehold interests) and personal property utilized by Company
in the conduct of its business. Except as expressly set forth on
Schedule 2.9, such real and personal properties are free and clear of liens,
security interests, claims, rights of another, and encumbrances ("Liens").
The physical properties of Company, including the real properties leased by
Company, are in good operating condition and repair, normal wear and tear
excepted, and are free from any defects of a material nature. Except as
otherwise set forth on Schedule 2.9, Company has full and unrestricted legal
and equitable title to all such properties and assets. The operation of the
properties and business of Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other rules, regulations, or laws, except for any such
violations which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the business or property of
Company. Except as set forth on Schedule 2.9, no covenants, easements,
rights-of-way, or regulations of record impair the uses of the properties of
Company for the purposes for which they are now operated.
2.10 Licenses and Permits. Attached hereto as Schedule 2.10 is a list of
all federal, state, county, and local governmental licenses, certificates,
registrations, authorizations and permits (collectively, "Authorizations")
held or applied for by Company. Company has complied in all material
respects with the terms and conditions of all such Authorizations, and no
violation of any such Authorization or the laws or rules governing the
issuance or continued validity thereof has occurred other than violations
(if any) which would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on the Business or properties of
Company. No additional Authorization is required from any federal, state,
county, or local government agency or body thereof in connection with the
conduct of the Business of Company which Authorization, if not obtained,
would reasonably be expected to have a Material Adverse Effect on the
business or properties of Company.
2.11 Patents; Trademarks.
(a) Except as set forth on Schedule 2.11A: (i) Company owns or
has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property (as defined herein) necessary for the
operation of the Business of Company as presently conducted; (ii) each item
of Intellectual Property owned or used by Company and necessary for the
operation of the Business of Company immediately prior to the Effective Time
hereunder will be owned or available for use by Company on identical terms
and conditions immediately subsequent to the Effective Time hereunder.
"Intellectual Property" shall mean all (a) patents and patent rights, (b)
trademarks, trademark rights, trade names, trade name rights, service marks,
service ▇▇▇▇ rights, trade dress, logos, and corporate names and
registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) trade secrets
and confidential information, including formulas, compositions, inventions
(whether or not patentable), know-how, processes, techniques, research,
designs, drawings, specifications, plans, technical data, and financial,
marketing, and business information (including pricing information, business
and marketing plans and customer and supplier lists and information), (e)
other proprietary intellectual property rights and (f) computer programs,
software, documentation, data, training manuals and related materials.
(b) Except as set forth on Schedule 2.11B: (i) Company has not
knowingly infringed upon or otherwise violated any Intellectual Property
rights of third parties; (ii) Company has not received any charge,
complaint, claims, demand, or notice alleging any such infringement or
violation (including any claim that Company must license or refrain from
using any Intellectual Property rights of any third party); and (iii) to
Company's knowledge, no third party has infringed upon or otherwise violated
any Intellectual Property rights of Company.
(c) Except as set forth in Schedule 2.11C, with respect to each
item of Intellectual Property required to be identified in Schedule 2.11C
and with respect to each material item of copyrightable Intellectual
Property (whether or not identified in Schedule 2.11C):
(i) Company possesses all right, title, and interest in and to the
item, free and clear of any lien, license, or other restriction;
(ii) The item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of
Company, threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) Company has never agreed or been required to indemnify
any person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) Except as set forth on Schedule 2.11D, with respect to each
item of Intellectual Property:
(i) The license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect;
(ii) The license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the Effective Time;
(iii) Company is not, and to Company's and Shareholders'
knowledge, no other party is, in breach or default of the license,
sublicense, agreement, or permission and no event has occurred
which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iv) No party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) With respect to each sublicense, to Company's and
Shareholders' knowledge, the representations and warranties set
forth in subsections (i) through (iv) above are true and correct
with respect to the underlying license;
(vi) To Company's and Shareholders' knowledge, the underlying
item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(vii) To Company's and Shareholders' knowledge, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or is threatened which challenges the legality,
validity, or enforceability of the underlying item of Intellectual
Property;
(viii) Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission;
and
(ix) No such licenses, agreements or permissions commit Company
to continued maintenance, support, improvement, upgrade or similar
obligation with respect to any of Company's Intellectual Property
which obligation cannot be terminated by Company upon notice of
ninety (90) days or less.
2.12 Compliance with Laws and Other Instruments. (i) Company is in
substantial compliance with the provisions of all laws, rules, regulations,
ordinances, orders, judgments and decrees (collectively, "Laws") in
connection with its business and all Authorizations are in full force and
effect, (ii) the Company has substantially complied with all Laws now
applicable to its business, properties or operations as presently conducted
and (iii) the Company have not been issued any citations, notices or orders
of non-compliance under any Law within the three-year period immediately
preceding the Effective Time. Neither the ownership nor use of Company's
properties nor the conduct of its business conflicts with the rights of any
other person, firm or corporation, violates or, with or without the giving
of notice or the passage of time, or both, will violate, conflict with or
result in a default, right to accelerate or loss of rights under, any terms
or provisions of its Articles of Incorporation or Bylaws, or equivalent
constitutive documents, as presently in effect, or any lien, encumbrance,
mortgage, deed of trust, lease, license, agreement, understanding, law,
ordinance, rule or regulation, or any order, judgment or decree to which
Company is a party or by which it may be bound or affected. Company is not
aware of any proposed Law, governmental taking, condemnation or other
proceeding which would be applicable to Company's Business, operations or
properties and which might reasonably be expected to have a Material Adverse
Effect on Company either before or after the Effective Time. No consent,
qualification, order, approval or authorization of, or filing with, any
governmental authority is required in connection with Company's execution,
delivery and performance of this Agreement and the consummation of any
transaction contemplated hereby.
2.13 Insurance. Attached hereto as Schedule 2.13 is a list of all
policies of fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to Company, which Schedule sets forth in respect
of each such policy the policy name, policy number, carrier, term, type of
coverage, deductible amount of self-insured retention amount, limits of
coverage and annual premium. Except for standard worker's compensation
audits concerning the number of personnel employed during the fiscal period
covered by Company's worker's compensation insurance policy, no event
relating to Company has occurred which will result in a retroactive material
upward adjustment of premiums under any such insurance policies, or which is
likely to result in any material prospective upward adjustment in such
premiums. All of such insurance policies will remain in full force and
effect following the Merger.
2.14 Employee Benefits.
(a) Schedule 2.14 lists all Employee Plans covering persons
currently or formerly employed by Company ("Company Employees"). The term
"Company Employee Plan" includes any pension, retirement, savings,
disability, medical, dental, health, life (including, without limitation,
any individual life insurance policy under which any Company Employee is the
named insured and as to which Company makes premium payments, whether or not
Company is the owner, beneficiary or both of such policy), death benefit,
group insurance, profit-sharing, deferred compensation, stock option, bonus,
incentive, vacation pay, severance pay, or other employee benefit plan,
trust, arrangement, agreement, policy or commitment (including, without
limitation, any employee pension benefit plan as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("Company Pension Plan"), and any employee welfare benefit plan as defined
in Section 3(1) of ERISA ("Company Welfare Plan")), whether or not any of
the foregoing is funded or insured and whether written or oral, which is
intended to provide or does in fact provide benefits to any or all current
Company Employees, and (i) to which Company is party or by which Company (or
any of the rights, properties or assets of Company) is bound, (ii) with
respect to which Company has made any payments, contributions or
commitments, or may otherwise have any liability (whether or not the Company
still maintains such plan, trust, arrangement, contract, agreement, policy
or commitment) or (iii) under which any current director, Employee or agent
of Company is a beneficiary as a result of his employment or affiliation
with Company. Company has delivered to Buyers a true, complete and correct
copies of (1) each Employee Plan, Pension Plan and Welfare Plan, (2) the
most recent annual report on Form 5500 filed with the Internal Revenue
Service with respect to each Company Employee Plan, Company Pension Plan and
Company Welfare Plan (if any such report was required by applicable law),
(3) the most recent summary plan description (or similar document) for each
Company Employee Plan, Company Pension Plan and Company Welfare Plan for
which such a summary plan description is required by applicable law or was
otherwise provided to plan participants or beneficiaries and (4) each trust
agreement and insurance or annuity contract relating to any Company Employee
Plan, Company Pension Plan and Company Welfare Plan. Each such Form 5500
and each such summary plan description (or similar document) was and is as
of the date hereof true, complete and correct in all material respects,
except for those forms and descriptions that would not reasonably be
expected to have a Material Adverse Effect on the Business or properties of
Company.
(b) Except as disclosed on Schedule 2.14, with respect to any
Company Employee, Company has no obligation to contribute to (or any other
liability with respect to) any funded or unfunded Company Welfare Plan,
whether or not terminated, which provides medical, health, life insurance or
other welfare-type benefits for current or future retirees or current,
future or former Employees (including their dependents and spouses) except
for limited continued medical benefit coverage for former Company Employees,
their spouses and their other dependents as required to be provided under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), and Company is in compliance in all material respects with the
continued medical and other welfare benefit coverage requirements of COBRA
and all other applicable laws.
(c) Except as disclosed on Schedule 2.14, with respect to any
Company Employee, Company does not maintain, contribute to or have any
material liability under (or with respect to) any Pension Plan which is a
tax qualified "defined benefit plan" (as defined in Section 3(35) of ERISA)
or, except as disclosed in Schedule 2.14, a tax-qualified "defined
contribution plan" (as defined in Section 3(34) of ERISA), or, except as
disclosed in Schedule 2.14, a non-qualified deferred compensation plan for
certain highly compensated or management employees whether or not
terminated. All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each Company Employee Plan or are reflected as a liability on the books of
Company and all contributions for any period ending on or before the
Effective Date which are not yet due have been paid to each such Company
Employee Plan or accrued in accordance with the past custom and practice of
Company. All premiums or other payments for all periods ending on or before
the Effective Time have been paid with respect to each such Company Employee
Plan which is a Company Welfare Plan.
(d) Except as disclosed on Schedule 2.14, Company has, with
respect to all current and former Company Employee Plans (and all related
trusts, insurance contracts and funds), at all times complied in all
material respects with the applicable requirements of ERISA, the Internal
Revenue Code of 1986, as amended (the "Code") and all other applicable
statutes, common law, regulations and regulatory pronouncements, or has, in
the exercise of its reasonable judgment, determined that such statutes
(including ERISA), common law, regulations and regulatory pronouncements
were and are not applicable to Company. Except as disclosed on
Schedule 2.14, Company has not engaged in nor is it bound to enter into, any
transaction with respect to any Company Employee Plan which would subject
Company to any material liability due to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code. No actions, suits or
claims with respect to the assets of any Company Employee Plan (and all
related trusts, insurance contracts and funds), other than routine claims
for benefits, are pending or threatened which could result in a Material
Adverse Effect. Except as disclosed on Schedule 2.14, there are not now,
nor have there been, any tax-qualified retirement plans sponsored or
maintained by Company for Company Employees since January 1, 1975, nor are
there any unfunded obligations with respect thereto. Except as disclosed on
Schedule 2.14, with respect to any Company Employee, Company has no
obligation to contribute to (or any other liability with respect to) any
"multi-employer plan," as defined in the Multi-employer Pension Plan
Amendments Act of 1980, and Company has not incurred any current or
potential withdrawal or termination liability as a result of a complete or
partial withdrawal from any multi-employer plan or the sale of the Purchased
Assets. Except as disclosed on Schedule 2.14, each Company Employee Plan
intended to qualify under Section 401(a) of the Code has been determined by
the Internal Revenue Service to be qualified under the requirements of
Section 401(a) of the Code, the Internal Revenue Service has issued a
determination letter to that effect, and such letter remains effective and
has not been revoked. No unfulfilled obligation to contribute with respect
to a Company Employee Plan exists with respect to any Company Employee Plan
year ending on or before April 30, 2000, except as shown in the Effective
Date Balance Sheet. Except as disclosed on Schedule 2.14, there is no
agreement or promise, written or oral, of Company to the effect that any
Company Employee Plan may not be terminated at Company's discretion at any
time, subject to applicable law. Schedule 2.14 sets forth a list of all
collective bargaining agreements, employment and consulting agreements,
executive compensation plans, bonus plans, deferred compensation agreements,
employee pension plans and retirement plans, employee stock options or stock
purchase plans and group life, health and accident insurance and other
employee benefit plans, agreements, arrangements or commitments, whether or
not legally binding, including without limitation, holiday, vacation,
Christmas and other bonus practices to which Company is a party or are bound
or which relate to the operation of the Business with respect to Company
Employees. The Balance Sheets reflects all accrued vacation and other
benefits for Company Employees as of the date thereof.
(e) Any amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any Employee of Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or
Company Employee Plan currently in effect would not be characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b)(l) of
the Code). Schedule 2.14 sets forth (i) the maximum amount that could be
paid to each executive officer of Company as a result of the transactions
contemplated by this Agreement under all employment, severance and
termination agreements, other compensation arrangements and Company Employee
Plans currently in effect and (ii) the "base amount" (as such term is
defined in Section 280G(b)(3) of the Code) for each such executive officer
calculated as of the date of this Agreement.
2.15 Contracts and Agreements. Except as disclosed in Schedule 2.15,
Company is not and, to the best knowledge of Company and the Shareholders,
no other party thereto is in breach or default (and no event has occurred
which, with the passage of time or the giving of notice, or both, would
constitute a breach or default) under any of the Contracts, no party has
repudiated any such Contract and has not waived any right under any of the
Contracts. Except as set forth in Schedule 2.15, Company has not guaranteed
any obligations of any other person or entity. Except as noted on
Schedule 2.15, Company has no unfulfilled obligations or commitments
(written or oral) under the contracts with its customers for which payment
has already been received, except returns in the normal course of business.
2.16 Claims and Proceedings. Except as set forth in Schedule 2.16, there
are no actions, suits, legal or administrative proceedings or investigations
pending or, to the knowledge of Company and the Shareholders, threatened,
against or relating to Company, its officers, directors or employees, its
properties, assets or business or the transactions contemplated by this
Agreement, and neither Company nor the Shareholders knows of, nor has any
reason to be aware of, any basis for the same.
2.17 Taxes. Company has duly and timely filed with the appropriate United
States, state and local government agencies, and with the appropriate
political subdivisions thereof, all Tax Returns (as hereinafter defined)
required to be filed in respect of any Taxes (as hereinafter defined); such
Tax Returns are materially true, accurate and complete; and Company has
timely paid all Taxes which are due and payable. Company has made all
withholding of Taxes required to be made under all applicable statutes and
regulations and such withholdings have either been paid to the appropriate
governmental agencies or set aside in accounts for such purposes or been
accrued, reserved against and entered upon the appropriate books of Company.
Company has not executed any presently effective waiver or extension of any
statute of limitations against assessments and collection of Taxes. For
purposes of this Agreement, the term "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, income,
gross receipts, excise, property, sales, use, transfer, license, payroll,
franchise, social security and unemployment taxes imposed or required to be
withheld by the United States, any state or local government, any foreign
government or any subdivision or agency; and such term shall include any
interest, penalties and additions to tax. For purposes of this Agreement,
the term "Tax Return" shall mean any report, return, information return or
other information required to be supplied to a taxing authority in
connection with taxes. Company has made available to Buyers true and
complete copies of all Tax Returns for all periods open under the applicable
statute of limitations. Company is not required to make any adjustments
under Section 481(a) of the Code by reason of a change of accounting method
or otherwise. No consent under Section 341(f) of the Code has been filed
with respect to Company. Company (i) has never been a member of an
affiliated group filing a consolidated federal income tax return and (ii)
have never been a member of any consolidated, combined or unitary group for
state, local or foreign tax purposes. There is no material dispute or claim
concerning any liability for Taxes of Company either raised or expected to
be raised by any taxing authority.
2.18 Personnel. Except as set forth on Schedule 2.18, all current and
former (terminated within twelve (12) months of the date hereof) members of
management, key personnel and consultants of Company have executed and
delivered to Company a confidential information agreement restricting such
person's right to disclose confidential information of Company. The
employee relations of Company are good and there is no pending or, to the
best knowledge of Company and the Shareholders, threatened labor dispute or
union organization campaign. As of the Effective Time, none of the
employees of Company is represented by any labor union or organization.
Company is in compliance in all material respects with all federal and state
laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair labor
practices.
2.19 Business Relations. Based solely on the historical operation of the
business and the facts which exist immediately prior to the Effective Time,
including but not limited to the ownership of all of the capital stock of
Company, neither Company nor the Shareholders knows or has any reason to
believe any customer or supplier of Company has any intention as of the
Effective Time to cease doing business with Company in the same manner and
at the same level as previously conducted with Company.
2.20 Accounts Receivable. All of the accounts, notes, and loans receivable
that have been recorded on the books of Company are bona fide and represent
amounts validly due for goods sold or services rendered. Except as
disclosed on Schedule 2.20 hereto (a) all of such accounts, notes, and loans
receivable are free and clear of any security interest, lien, encumbrance,
or other charge; (b) none of such accounts, notes, or loans receivable is
subject to any offsets or claims of offset; and (c) none of the obligors of
such accounts, notes, or loans receivable has given notice that it will or
may refuse to pay the full amount or any portion thereof. Except for
Company's allowance for bad debts or anticipated credits due customers as
noted in its Financial Statements, all of such accounts, notes and loans
receivable are collectible within 90 days of their respective due date.
2.21 Bank Accounts. Attached hereto as Schedule 2.21 is a list of all
banks or other financial institutions with which Company has an account or
maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
2.22 Agents. Except as set forth on Schedule 2.22 hereto, Company has not
designated or appointed any person or other entity to act for it or on its
behalf pursuant to any power of attorney or agency which is presently in
effect.
2.23 Warranties. Except as set forth on Schedule 2.23 and except for
warranty claims that are typical and in the ordinary course of Company's
business, there is no outstanding claim against Company for breach of
product or service warranty to any customer. To the best knowledge of
Company and the Shareholders, no state of facts exists, and no event has
occurred, which may form the basis of any present claim against Company for
liability on account of any express or implied warranty to any third party
in connection with products sold or services rendered by Company.
2.24 Brokers. Neither Company nor the Shareholders have engaged, or caused
to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance
of this Agreement or the transactions contemplated hereby.
2.25 Interest in Competitors, Suppliers, Customers, Etc. Except as
disclosed in Schedule 2.25 hereto, no officer, director, or shareholder of
Company or any affiliate of any such officer, director, or shareholder, has
any ownership interest in any competitor, supplier, or customer of Company
(other than ownership of securities of a publicly-held corporation of which
such person owns, or has real or contingent rights to own, less than one
percent of any class of outstanding securities) or any property used in the
operation of the business of Company other than the personal property assets
owned by Company to be contributed as of the Closing.
2.26 Indebtedness To and From Officers, Directors, Shareholders, and
Employees. Attached hereto as Schedule 2.26 is a list and brief description
of the payment terms of all indebtedness of Company to officers, directors,
shareholders, and employees of Company and all indebtedness of officers,
directors, shareholders, and employees of Company to Company, excluding
commissions reflected on the Effective Date Balance Sheet and indebtedness
for travel advances or similar advances for expenses incurred on behalf of
and in the ordinary course of the Business of Company and consistent with
its past practices.
2.27 Undisclosed Liabilities. Except as indicated in Schedule 2.27 and the
other Schedules hereto, Company has no material liabilities (whether
absolute, accrued, contingent or otherwise), of a nature required by GAAP
applied on a consistent basis to be reflected on a corporate balance sheet
or disclosed in the notes thereto, except such liabilities which are accrued
or reserved against in the Balance Sheets or disclosed in any notes thereto.
2.28 Environmental Matters. Except as indicated in Schedule 2.28, Company
has conducted its Business and is in compliance in all material respects
with all federal, state and local energy, public utility, health, safety and
environmental laws, regulations, orders, permits, licenses, approvals,
ordinances and directives including the Clean Air Act, the Clean Water Act,
the Resources Conservation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Occupational Health and Safety
Act, the Toxic Substances Control Act and any similar state or local law
(collectively, "Environmental Obligations") and all other federal, state or
local regulations, except where failure to comply would not reasonably be
expected to have a Material Adverse Effect on the Business or Properties of
Company. No claim has been made by any governmental authority (and to the
best of the knowledge of Company and the Shareholders, no such claim is
anticipated) to the effect that the Business conducted by Company fails to
comply with any Environmental Obligation.
2.29. Information Furnished. Company has made available to Integrated true
and correct copies of all corporate records of Company and all agreements,
documents, and other items listed on the Schedules to this Agreement or
referred to in Article II of this Agreement and except as disclosed in
Schedule 2.29 hereto, neither this Agreement, the Schedules hereto, nor any
information, instrument, or document delivered to Integrated pursuant to
this Agreement contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein, as the
case may be, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF INTEGRATED AND ▇▇▇▇▇
Integrated and ▇▇▇▇▇ represent and warrant as follows:
3.1 Capitalization. The authorized capital stock of Integrated consists of
100,000,000 shares of common stock, $0.01 par value per share, of which
shares approximately 30,000,000 are issued and outstanding as of October 15,
2004 and 10,000,000 shares of preferred stock of which 14,253 are issued
and outstanding as of October 15, 2004. All of Integrated's Shares are
duly authorized, validly issued, fully paid, and nonassessable. All of
Integrated's Shares are owned of record and beneficially in the amounts and
percentages set forth in Schedule 3.1. None of the shares of Integrated
were issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any person or entity.
All of the outstanding preferred stock referred to above will be converted
to common stock (and proof made thereof) prior to the closing.
3.2 No Liens on Shares. The new Integrated Shares to be issued are owned
free and clear of any liens, restrictions, security interests, claims,
rights of another, or encumbrances other than the rights and obligations
arising under this Agreement, and none of the Integrated Shares is subject
to any outstanding option, warrant, call, or similar right of any other
person to acquire the same, and none of the Integrated Shares is subject to
any restriction on transfer thereof except for restrictions imposed by
applicable federal and state securities laws, exemptions from which are
available for the Merger. Integrated and ▇▇▇▇▇ have full power and
authority to convey good and marketable title to the Integrated Shares, free
and clear of any mortgages, liens, restrictions, security interests, claims,
rights of another or encumbrances.
3.3 Other Rights to Acquire Capital Stock. Except as set forth on Schedule
3.3, there are no authorized or outstanding warrants, options, or rights of
any kind to acquire from Integrated any equity or debt securities of
Integrated or securities convertible into or exchangeable for equity or debt
securities of Integrated, and there are no shares of capital stock of
Integrated reserved for issuance for any purpose nor any contracts,
commitments, understandings or arrangements which require Integrated to
issue, sell or deliver any additional shares of its capital stock.
3.4 Due Organization. Integrated is duly organized, validly existing, and
in good standing under the laws of the State of New York and has full
corporate power and authority to carry on business as now conducted and as
proposed to be conducted through the Merger. Complete and correct copies of
the Articles of Incorporation and Bylaws of Integrated, and all amendments
thereto, have been heretofore delivered to the Company and are attached
hereto as Schedule 3.4A. Set forth in Schedule 3.4B hereto is a list of
each jurisdiction in which Integrated is qualified to do business.
Integrated is qualified to do business in each jurisdiction in which the
nature of its business or the ownership of its properties requires such
qualification except where the failure to be so qualified does not, and
would not be reasonably expected to, have a Material Adverse Effect, as
defined in Section 3.8 hereinafter, on the business, business prospects,
properties or assets of Integrated.
3.5 Subsidiaries. Except as provided in Schedule 3.5, Integrated has no
subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, association, joint venture, trust, or
other entity.
3.6 Due Authorization. Integrated and ▇▇▇▇▇ have full power and authority
to execute, deliver and perform this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery, and performance
of this Agreement and the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action of Integrated.
This Agreement has been duly and validly executed and delivered by
Integrated and constitutes the valid and binding obligations of Integrated,
enforceable against Integrated in accordance with its terms. The execution,
delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates, or other documents contemplated
hereby) by Integrated do not (a) violate any federal, state, county, or
local law, rule, or regulation or any decree or judgment of any court or
governmental authority applicable to Integrated or its property, (b) violate
or conflict with, or permit the cancellation of, or constitute a default
under, any agreement to which Integrated is a party, or by which Integrated
or any its property is bound, (c) permit the acceleration of the maturity of
any indebtedness of, or indebtedness secured by the property of, Integrated,
or (d) violate or conflict with any provision of the charter or bylaws (or
equivalent constitutive documents) of Integrated.
3.7 Financial Statements. The following Financial Statements (as
hereinafter defined) of Integrated have been or will be delivered to
Company:
(a) The most recently audited balance sheets of Integrated, and the
reviewed balance sheet as of August 31, 2004 (the "Balance Sheets");
(b) The most recently audited income statements of Integrated, and the
reviewed income statement for the three-month period ending August 31,
2004 (the "Income Statements");
Together, the Balance Sheets and Income Statements and the notes thereto
shall be referred to herein as the "Financial Statements." The Financial
Statements are materially true and complete, have been prepared from the
books and records of Integrated in accordance with GAAP consistently
applied, and maintained throughout the periods indicated except as set forth
on Schedule 3.7A, and fairly present the financial condition of Integrated
as at its respective dates and the results of operations for the periods
covered thereby, including but not limited to, reflecting all reserves
necessary to correctly present the appropriate value of assets and all
accruals necessary to record all contingent and accrued liabilities.
Such statements of income do not contain any items of special or non-
recurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and such Financial
Statements include all adjustments (including all normal recurring accruals
for unusual or non-recurring items) considered necessary for a fair
presentation, and no adjustments or restatements are or will be necessary in
respect of any items of an unusual or non-recurring nature, except as
expressly specified therein. Except as noted on Schedule 3.7B, there has
been no change in Integrated's method of accounting or keeping of its books
of account or accounting practices for the two-year period ended on the
Effective Time.
3.8 Absence of Changes or Events. Since August 31, 2004 (i) Integrated has
conducted its business only in the ordinary course and consistent with the
requirements of Article V, (ii) Integrated has not suffered any change,
event or condition which has had or may reasonably be expected to have a
Material Adverse Effect, as defined in this Section below, on Integrated and
(iii) Integrated has not acquired or disposed of any material assets or
engaged in any material transaction other than in the ordinary course of
business or as expressly contemplated by the terms of this Agreement.
As used in this Agreement, "Material Adverse Effect" means any material
adverse change in or effect on condition (financial or otherwise), operating
results, Business, properties, assets, liabilities, operations or prospects,
or any material adverse change in revenues, costs, backlog or relations with
employees, agents, customers or suppliers, whether attributable to a single
circumstance or event or an aggregation of circumstances or events.
3.9 Properties. Attached hereto as Schedule 3.9 is a list containing a
description of all interests in real property (including, without
limitation, leasehold interests) and personal property utilized by
Integrated in the conduct of its business. Except as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of liens,
security interests, claims, rights of another, and encumbrances ("Liens").
The physical properties of Integrated, including the real properties leased
by Integrated, are in good operating condition and repair, normal wear and
tear excepted, and are free from any defects of a material nature. Except
as otherwise set forth on Schedule 3.9, Integrated has full and unrestricted
legal and equitable title to all such properties and assets. The operation
of the properties and business of Integrated in the manner in which they are
now and have been operated does not violate any zoning ordinances, municipal
regulations, or other rules, regulations, or laws, except for any such
violations which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the business or property of
Integrated. Except as set forth on Schedule 3.9, no covenants, easements,
rights-of-way, or regulations of record impair the uses of the properties of
Integrated for the purposes for which they are now operated.
3.10 Licenses and Permits. Attached hereto as Schedule 3.10 is a list of
all federal, state, county, and local governmental licenses, certificates,
registrations, authorizations and permits (collectively, "Authorizations")
held or applied for by Integrated. Integrated has complied in all material
respects with the terms and conditions of all such Authorizations, and no
violation of any such Authorization or the laws or rules governing the
issuance or continued validity thereof has occurred other than violations
(if any) which would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on the Business or properties of
Integrated. No additional Authorization is required from any federal,
state, county, or local government agency or body thereof in connection with
the conduct of the Business of Integrated which Authorization, if not
obtained, would reasonably be expected to have a Material Adverse Effect on
the business or properties of Integrated.
3.11 Patents; Trademarks.
(a) Except as set forth on Schedule 3.11A: (i) Integrated owns or has the
right to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property (as defined herein) necessary for the operation of the
Business of Integrated as presently conducted; (ii) each item of
Intellectual Property owned or used by Integrated and necessary for the
operation of the Business of Integrated immediately prior to the Effective
Time hereunder will be owned or available for use by Integrated on identical
terms and conditions immediately subsequent to the Effective Time hereunder.
"Intellectual Property" shall mean all (a) patents and patent rights, (b)
trademarks, trademark rights, trade names, trade name rights, service marks,
service ▇▇▇▇ rights, trade dress, logos, and corporate names and
registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) trade secrets
and confidential information, including formulas, compositions, inventions
(whether or not patentable), know-how, processes, techniques, research,
designs , drawings, specifications, plans, technical data, and financial,
marketing, and business information (including pricing information, business
and marketing plans and customer and supplier lists and information), (e)
other proprietary intellectual property rights and (f) computer programs,
software, documentation, data, training manuals and related materials.
(b) Except as set forth on Schedule 3.11B: (i) Integrated has not knowingly
infringed upon or otherwise violated any Intellectual Property rights of
third parties; (ii) Integrated has not received any charge, complaint,
claims, demand, or notice alleging any such infringement or violation
(including any claim that Integrated must license or refrain from using any
Intellectual Property rights of any third party); and (iii) to Integrated's
knowledge, no third party has infringed upon or otherwise violated any
Intellectual Property rights of Integrated.
(c) Except as set forth in Schedule 3.11C, with respect to each item of
Intellectual Property required to be identified in Schedule 3.11C and with
respect to each material item of copyrightable Intellectual Property
(whether or not identified in Schedule 3.11C):
(i) Integrated possesses all right, title, and interest in and to
the item, free and clear of any lien, license, or other
restriction;
(ii) The item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of
Integrated, threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) Integrated has never agreed or been required to indemnify
any person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) Except as set forth on Schedule 3.11D, with respect to each item of
Intellectual Property:
(i) The license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and
effect;
(ii) The license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the Effective Time;
(iii) Integrated is not, and to Integrated's and ▇▇▇▇▇'▇
knowledge, no other party is, in breach or default of the license,
sublicense, agreement, or permission and no event has occurred
which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iv) No party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) With respect to each sublicense, to Integrated's and ▇▇▇▇▇'▇
knowledge, the representations and warranties set forth in
subsections (i) through (iv) above are true and correct with
respect to the underlying license;
(vi) To Integrated's and ▇▇▇▇▇'▇ knowledge, the underlying item
of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(vii) To Integrated's and ▇▇▇▇▇'▇ knowledge, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or is threatened which challenges the legality,
validity, or enforceability of the underlying item of Intellectual
Property;
(viii) Integrated has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission;
and
(ix) No such licenses, agreements or permissions commit
Integrated to continued maintenance, support, improvement, upgrade
or similar obligation with respect to any of Integrated's
Intellectual Property which obligation cannot be terminated by
Integrated upon notice of ninety (90) days or less.
3.12 Compliance with Laws and Other Instruments. (i) Integrated is in
substantial compliance with the provisions of all laws, rules, regulations,
ordinances, orders, judgments and decrees (collectively, "Laws") in
connection with its business and all Authorizations are in full force and
effect, (ii) Integrated has substantially complied with all Laws now
applicable to its business, properties or operations as presently conducted
and (iii) Integrated has not been issued any citations, notices or orders of
non-compliance under any Law within the three-year period immediately
preceding the Effective Time. Neither the ownership nor use of Integrated's
properties nor the conduct of its business conflicts with the rights of any
other person, firm or corporation, violates or, with or without the giving
of notice or the passage of time, or both, will violate, conflict with or
result in a default, right to accelerate or loss of rights under, any terms
or provisions of its Articles of Incorporation or Bylaws, or equivalent
constitutive documents, as presently in effect, or any lien, encumbrance,
mortgage, deed of trust, lease, license, agreement, understanding, law,
ordinance, rule or regulation, or any order, judgment or decree to which
Integrated is a party or by which it may be bound or affected. Integrated
is not aware of any proposed Law, governmental taking, condemnation or other
proceeding which would be applicable to Integrated's Business, operations or
properties and which might reasonably be expected to have a Material Adverse
Effect on Integrated either before or after the Effective Time. No consent,
qualification, order, approval or authorization of, or filing with, any
governmental authority is required in connection with Integrated's
execution, delivery and performance of this Agreement and the consummation
of any transaction contemplated hereby.
3.13 Insurance. Attached hereto as Schedule 3.13 is a list of all
policies of fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to Integrated, which Schedule sets forth in
respect of each such policy the policy name, policy number, carrier, term,
type of coverage, deductible amount of self-insured retention amount, limits
of coverage and annual premium. Except for standard worker's compensation
audits concerning the number of personnel employed during the fiscal period
covered by Integrated's worker's compensation insurance policy, no event
relating to Integrated has occurred which will result in a retroactive
material upward adjustment of premiums under any such insurance policies, or
which is likely to result in any material prospective upward adjustment in
such premiums. All of such insurance policies will remain in full force and
effect following the Merger.
3.14 Employee Benefits.
(a) Schedule 3.14 lists all Employee Plans covering persons
currently or formerly employed by Integrated ("Integrated Employees"). The
term "Integrated Employee Plan" includes any pension, retirement, savings,
disability, medical, dental, health, life (including, without limitation,
any individual life insurance policy under which any Integrated Employee is
the named insured and as to which Integrated makes premium payments, whether
or not Integrated is the owner, beneficiary or both of such policy), death
benefit, group insurance, profit-sharing, deferred compensation, stock
option, bonus, incentive, vacation pay, severance pay, or other employee
benefit plan, trust, arrangement, agreement, policy or commitment
(including, without limitation, any employee pension benefit plan as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("Integrated Pension Plan"), and any employee welfare
benefit plan as defined in Section 3(1) of ERISA ("Integrated Welfare
Plan")), whether or not any of the foregoing is funded or insured and
whether written or oral, which is intended to provide or does in fact
provide benefits to any or all current Integrated Employees, and (i) to
which Integrated is party or by which Integrated (or any of the rights,
properties or assets of Integrated) is bound, (ii) with respect to which
Integrated has made any payments, contributions or commitments, or may
otherwise have any liability (whether or not Integrated still maintains such
plan, trust, arrangement, contract, agreement, policy or commitment) or
(iii) under which any current director, Employee or agent of Integrated is a
beneficiary as a result of his employment or affiliation with Integrated.
Integrated has delivered to Buyers a true, complete and correct copy of (1)
each Integrated Employee Plan, Integrated Pension Plan and Integrated
Welfare Plan, (2) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Integrated Employee Plan,
Integrated Pension Plan and Integrated Welfare Plan (if any such report was
required by applicable law), (3) the most recent summary plan description
(or similar document) for each Integrated Employee Plan, Integrated Pension
Plan and Integrated Welfare Plan for which such a summary plan description
is required by applicable law or was otherwise provided to plan participants
or beneficiaries and (4) each trust agreement and insurance or annuity
contract relating to any Integrated Employee Plan, Integrated Pension Plan
and Integrated Welfare Plan. Each such Form 5500 and each such summary plan
description (or similar document) was and is as of the date hereof true,
complete and correct in all material respects, except for those forms and
descriptions that would not reasonably be expected to have a Material
Adverse Effect on the Business or properties of Integrated.
(b) Except as disclosed on Schedule 3.14, with respect to any
Integrated Employee, Integrated has no obligation to contribute to (or any
other liability with respect to) any funded or unfunded Integrated Welfare
Plan, whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retirees or
current, future or former Integrated Employees (including their dependents
and spouses) except for limited continued medical benefit coverage for
former Integrated Employees, their spouses and their other dependents as
required to be provided under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), and Integrated is in compliance in all
material respects with the continued medical and other welfare benefit
coverage requirements of COBRA and all other applicable laws.
(c) Except as disclosed on Schedule 3.14, with respect to any
Integrated Employee, Integrated does not maintain, contribute to or have any
material liability under (or with respect to) any Integrated Pension Plan
which is a tax qualified "defined benefit plan" (as defined in Section 3(35)
of ERISA) or, except as disclosed in Schedule 3.14, a tax-qualified "defined
contribution plan" (as defined in Section 3(34) of ERISA), or, except as
disclosed in Schedule 3.14, a non-qualified deferred compensation plan for
certain highly compensated or management employees whether or not
terminated. All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each Integrated Employee Plan or are reflected as a liability on the books
of Integrated and all contributions for any period ending on or before the
Effective Date which are not yet due have been paid to each such Integrated
Employee Plan or accrued in accordance with the past custom and practice of
Integrated. All premiums or other payments for all periods ending on or
before the Effective Time have been paid with respect to each such
Integrated Employee Plan which is a Integrated Welfare Plan.
(d) Except as disclosed on Schedule 3.14, Integrated has, with
respect to all current and former Integrated Employee Plans (and all related
trusts, insurance contracts and funds), at all times complied in all
material respects with the applicable requirements of ERISA, the Internal
Revenue Code of 1986, as amended (the "Code") and all other applicable
statutes, common law, regulations and regulatory pronouncements, or has, in
the exercise of its reasonable judgment, determined that such statutes
(including ERISA), common law, regulations and regulatory pronouncements
were and are not applicable to Integrated. Except as disclosed on
Schedule 3.14, Integrated has not engaged in nor is it bound to enter into,
any transaction with respect to any Integrated Employee Plan which would
subject Integrated to any material liability due to either a civil penalty
assessed pursuant to Section 502(i) of ERISA or the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code. No actions,
suits or claims with respect to the assets of any Integrated Employee Plan
(and all related trusts, insurance contracts and funds), other than routine
claims for benefits, are pending or threatened which could result in a
Material Adverse Effect. Except as disclosed on Schedule 3.14, there are
not now, nor have there been, any tax-qualified retirement plans sponsored
or maintained by Integrated for Integrated Employees since January 1, 1975,
nor are there any unfunded obligations with respect thereto. Except as
disclosed on Schedule 3.14, with respect to any Integrated Employee,
Integrated has no obligation to contribute to (or any other liability with
respect to) any "multi-employer plan," as defined in the Multi-employer
Pension Plan Amendments Act of 1980, and Integrated has not incurred any
current or potential withdrawal or termination liability as a result of a
complete or partial withdrawal from any multi-employer plan or the sale of
the Purchased Assets. Except as disclosed on Schedule 3.14, each Integrated
Employee Plan intended to qualify under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be qualified under the
requirements of Section 401(a) of the Code, the Internal Revenue Service has
issued a determination letter to that effect, and such letter remains
effective and has not been revoked. No unfulfilled obligation to contribute
with respect to a Integrated Employee Plan exists with respect to any
Integrated Employee Plan year ending on or before April 30, 2000, except as
shown in the Effective Date Balance Sheet. Except as disclosed on
Schedule 3.14, there is no agreement or promise, written or oral, of
Integrated to the effect that any Integrated Employee Plan may not be
terminated at Integrated's discretion at any time, subject to applicable
law. Schedule 3.14 sets forth a list of all collective bargaining
agreements, employment and consulting agreements, executive compensation
plans, bonus plans, deferred compensation agreements, employee pension plans
and retirement plans, employee stock options or stock purchase plans and
group life, health and accident insurance and other employee benefit plans,
agreements, arrangements or commitments, whether or not legally binding,
including without limitation, holiday, vacation, Christmas and other bonus
practices to which Company is a party or are bound or which relate to the
operation of the Business with respect to Integrated Employees. The Balance
Sheets reflects all accrued vacation and other benefits for Integrated
Employees as of the date thereof.
(e) Any amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any Employee of Integrated or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or
Integrated Employee Plan currently in effect would not be characterized as
an "excess parachute payment" (as such term is defined in Section 280G(b)(l)
of the Code). Schedule 3.14 sets forth (i) the maximum amount that could be
paid to each executive officer of Integrated as a result of the transactions
contemplated by this Agreement under all employment, severance and
termination agreements, other compensation arrangements and Integrated
Employee Plans currently in effect and (ii) the "base amount" (as such term
is defined in Section 280G(b)(3) of the Code) for each such executive
officer calculated as of the date of this Agreement.
3.15 Contracts and Agreements. Except as disclosed in Schedule 3.15,
Integrated is not and, to the best knowledge of Integrated and ▇▇▇▇▇, no
other party thereto is in breach or default (and no event has occurred
which, with the passage of time or the giving of notice, or both, would
constitute a breach or default) under any of the Contracts, no party has
repudiated any such Contract and has not waived any right under any of the
Contracts. Except as set forth in Schedule 3.15, Integrated has not
guaranteed any obligations of any other person or entity. Except as noted
on Schedule 3.15, Integrated has no unfulfilled obligations or commitments
(written or oral) under the contracts with its customers for which payment
has already been received, except in the normal course of business.
3.16 Claims and Proceedings. Except as set forth in Schedule 3.16, there
are no actions, suits, legal or administrative proceedings or investigations
pending or, to the knowledge of Integrated and ▇▇▇▇▇, threatened, against or
relating to Integrated, its officers, directors or employees, its
properties, assets or business or the transactions contemplated by this
Agreement, and neither Integrated nor ▇▇▇▇▇ knows of, nor has any reason to
be aware of, any basis for the same.
3.17 Taxes. Integrated has duly and timely filed with the appropriate
United States, state and local government agencies, and with the appropriate
political subdivisions thereof, all Tax Returns (as hereinafter defined)
required to be filed in respect of any Taxes (as hereinafter defined); such
Tax Returns are materially true, accurate and complete; and Integrated has
timely paid all Taxes which are due and payable. Integrated has made all
withholding of Taxes required to be made under all applicable statutes and
regulations and such withholdings have either been paid to the appropriate
governmental agencies or set aside in accounts for such purposes or been
accrued, reserved against and entered upon the appropriate books of
Integrated. Integrated has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection
of Taxes. For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, use, transfer,
license, payroll, franchise, social security and unemployment taxes imposed
or required to be withheld by the United States, any state or local
government, any foreign government or any subdivision or agency; and such
term shall include any interest, penalties and additions to tax. For
purposes of this Agreement, the term "Tax Return" shall mean any report,
return, information return or other information required to be supplied to a
taxing authority in connection with taxes. Integrated has made available to
Buyers true and complete copies of all Tax Returns for all periods open
under the applicable statute of limitations. Integrated is not required to
make any adjustments under Section 481(a) of the Code by reason of a change
of accounting method or otherwise. No consent under Section 341(f) of the
Code has been filed with respect to Integrated. Integrated (i) has never
been a member of an affiliated group filing a consolidated federal income
tax return and (ii) have never been a member of any consolidated, combined
or unitary group for state, local or foreign tax purposes. There is no
material dispute or claim concerning any liability for Taxes of Integrated
either raised or expected to be raised by any taxing authority.
3.18 Personnel. Except as set forth on Schedule 3.18, all current and
former (terminated within twelve (12) months of the date hereof) members of
management, key personnel and consultants of Integrated have executed and
delivered to Integrated a confidential information agreement restricting
such person's right to disclose confidential information of Integrated. The
employee relations of Integrated are good and there is no pending or, to the
best knowledge of Integrated and ▇▇▇▇▇, threatened labor dispute or union
organization campaign. As of the Effective Time, none of the employees of
Integrated is represented by any labor union or organization. Integrated is
in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair labor
practices.
3.19 Business Relations. Based solely on the historical operation of the
business and the facts which exist immediately prior to the Effective Time,
including but not limited to the ownership of all of the capital stock of
Integrated, neither Integrated nor ▇▇▇▇▇ knows or has any reason to believe
any customer or supplier of Integrated has any intention as of the Effective
Time to cease doing business with Integrated in the same manner and at the
same level as previously conducted with Integrated.
3.20 Accounts Receivable. All of the accounts, notes, and loans receivable
that have been recorded on the books of Integrated are bona fide and
represent amounts validly due for goods sold or services rendered. Except
as disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and
loans receivable are free and clear of any security interest, lien,
encumbrance, or other charge; (b) none of such accounts, notes, or loans
receivable is subject to any offsets or claims of offset; and (c) none of
the obligors of such accounts, notes, or loans receivable has given notice
that it will or may refuse to pay the full amount or any portion thereof.
Except for Integrated's allowance for bad debts or anticipated credits due
customers as noted in its Financial Statements, all of such accounts, notes
and loans receivable are collectible within 90 days of their respective due
date.
3.21 Bank Accounts. Attached hereto as Schedule 3.21 is a list of all
banks or other financial institutions with which Integrated has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 Agents. Except as set forth on Schedule 3.22 hereto, Integrated has
not designated or appointed any person or other entity to act for it or on
its behalf pursuant to any power of attorney or agency which is presently in
effect.
3.23 Warranties. Except as set forth on Schedule 3.23 and except for
warranty claims that are typical and in the ordinary course of Integrated's
business, there is no outstanding claim against Integrated for breach of
product or service warranty to any customer. To the best knowledge of
Integrated and ▇▇▇▇▇, no state of facts exists, and no event has occurred,
which may form the basis of any present claim against Integrated for
liability on account of any express or implied warranty to any third party
in connection with products sold or services rendered by Integrated.
3.24 Consultant Fees. The Buyer has engaged, and has incurred a liability
to a finder, consultant in connection with the origin, negotiation,
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby. Buyer believes they have an agreement, which satisfies
this obligation as evidenced in Exhibit F attached hereto.
3.25 Interest in Competitors, Suppliers, Customers, Etc. Except as
disclosed in Schedule 3.25 hereto, no officer, director, or shareholder of
Integrated or any affiliate of any such officer, director, or shareholder,
has any ownership interest in any competitor, supplier, or customer of
Integrated (other than ownership of securities of a publicly-held
corporation of which such person owns, or has real or contingent rights to
own, less than one percent of any class of outstanding securities) or any
property used in the operation of the business of Integrated other than the
personal property assets owned by Integrated to be contributed as of the
Closing.
3.26 Indebtedness To and From Officers, Directors, Shareholders, and
Employees. Attached hereto as Schedule 3.26 is a list and brief description
of the payment terms of all indebtedness of Integrated to officers,
directors, shareholders, and employees of Integrated and all indebtedness of
officers, directors, shareholders, and employees of Integrated to
Integrated, excluding commissions reflected on the Effective Date Balance
Sheet and indebtedness for travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of the Business of
Integrated and consistent with its past practices.
3.27 Undisclosed Liabilities. Except as indicated in Schedule 3.27 and the
other Schedules hereto, Integrated has no material liabilities (whether
absolute, accrued, contingent or otherwise), of a nature required by GAAP
applied on a consistent basis to be reflected on a corporate balance sheet
or disclosed in the notes thereto, except such liabilities which are accrued
or reserved against in the Balance Sheets or disclosed in any notes thereto.
3.28 Environmental Matters. Except as indicated in Schedule 3.28,
Integrated has conducted its Business and is in compliance in all material
respects with all federal, state and local energy, public utility, health,
safety and environmental laws, regulations, orders, permits, licenses,
approvals, ordinances and directives including the Clean Air Act, the Clean
Water Act, the Resources Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Occupational
Health and Safety Act, the Toxic Substances Control Act and any similar
state or local law (collectively, "Environmental Obligations") and all other
federal, state or local regulations, except where failure to comply would
not reasonably be expected to have a Material Adverse Effect on the Business
or Properties of Integrated. No claim has been made by any governmental
authority (and to the best of the knowledge of Integrated and ▇▇▇▇▇, no such
claim is anticipated) to the effect that the Business conducted by
Integrated fails to comply with any Environmental Obligation.
3.29 Information Furnished. Integrated has made available to Company true
and correct copies of all corporate records of Integrated and all
agreements, documents, and other items listed on the Schedules to this
Agreement or referred to in Article II of this Agreement and except as
disclosed in Schedule 3.29 hereto, neither this Agreement, the Schedules
hereto, nor any information, instrument, or document delivered to Integrated
pursuant to this Agreement contains any untrue statement of a material fact
or omits any material fact necessary to make the statements herein or
therein, as the case may be, not misleading.
3.30 Integrated Shares. The Integrated Shares to be issued to the
Shareholders pursuant to the Merger, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable. The issuance of the Integrated Shares pursuant to the
Merger will transfer to the Shareholders valid title to such restricted
Shares, free and clear of all liens, encumbrances and claims of every kind
except for any created by the Shareholders. The Integrated Shares will not
be registered under the Act and are not eligible for resale under the Act
unless an exemption to the Act is available.
3.31 Section 368(a)(1)(A) and (a)(2)(E) Reorganization.
(a) Immediately after the Effective Time, Integrated shall own
substantially all of the assets owned by the Company immediately
prior to the Effective Time, within the meaning of Section
368(a)(1)(A) of the Code.
(b) From and after the Effective Time, Integrated shall cause the
Company to continue at least one significant business line of the
Company, or to use at least one significant portion of the
Company's historical business assets in a business, in each case
to the extent necessary to comply with the continuity of business
enterprise requirement set forth in Treasury Regulations Section
1.368-1(d).
ARTICLE IV
OTHER AGREEMENTS
4.1. Employment Agreements. At the Closing, Shareholder ▇▇▇▇ ▇▇▇▇▇▇ and
certain key employees specified in Schedule 4.1 shall execute and deliver to
Integrated an employment agreement in the form of the Employment Agreement
attached hereto as Exhibit G.
4.2. Health Insurance. At the Closing, ▇▇▇▇ ▇▇▇▇▇▇ will execute an
Agreement with ▇▇▇▇▇ to provide him health insurance for a period of Two
years.
4.3. Further Assurances. From time to time after the Merger, at the
request of the Shareholders or Buyers (as may be appropriate), without
further consideration, each will execute and deliver to Buyers or the
Shareholders such other instruments of conveyance, assignment, transfer and
delivery and take such other action as Buyers or the Shareholders may
reasonably request in order to consummate the transactions contemplated
hereby.
ARTICLE V
MUTUAL COVENANTS OF THE COMPANY AND THE SHAREHOLDERS AND OF BUYERS
5.1. Conduct of Business Pending Merger. From the date of this Agreement
to the Effective Time, both parties shall use their best efforts to cause
each party to preserve substantially intact its business organization and
present relationships with its customers, suppliers and employees and to
maintain all of its insurance currently in effect. Neither party will take
any action that could reasonably be expected to have a Material Adverse
Effect on the financial condition, Business or Business prospects of the
party or the Merger or the transactions contemplated by this Agreement.
5.2. Negative Covenants. Except as otherwise contemplated by this
Agreement, or as the parties may otherwise consent to in writing, the
Company and the Shareholders, as well as the BUYERS, shall cause the Company
and Integrated, respectively, not to engage in any material activity or
enter into any material transaction outside of the ordinary and usual course
of its business. Without limiting the generality of the foregoing, except as
contemplated by this Agreement, neither party shall: (i) declare, set
aside, or pay any dividend or other distribution (other than for regular
compensation and commissions) in respect of their capital stock, or make any
redemption, purchase or other acquisition of any shares of their capital
stock, other than as contemplated by the Definitive Agreement signed on
April 7, 2004, and subsequently amended; (ii) issue or sell any shares of
their capital stock or any options, warrants or other rights to purchase any
such shares or any securities convertible into or exchangeable for such
shares or any other securities, or take any action to reclassify or
recapitalize or split up their capital stock (except for shares issued in
connection with the exercise of stock options granted to the Shareholders,
which options were not granted in contemplation of or in connection with the
Merger), other than as contemplated by the Definitive Agreement signed on
April 7, 2004, and subsequently amended; (iii) merge with any other company,
consolidate or sell or consent to the sale of any of the material assets of
the respective party; (iv) outside of the ordinary course of the business
(A) change or increase compensation payable, or to become payable by a party
Company to its officers or employees; (B) increase benefits or benefit plan
costs; (C) change any bonus, insurance, pension, compensation or other
benefit plan or arrangement made for or with or covering any officers or
employees of the party; or (D) incur any liability in excess of $20,000
without the prior written consent of Shareholders (v) waive any rights of
substantial value which, singly or in the aggregate, are material to the
Business of the party; (vi) change the Articles of Incorporation or Bylaws,
or equivalent constitutive documents, of the party; (vii) borrow or agree to
borrow any funds other than through existing credit relationships;
(viii) pledge or mortgage or agree to pledge or mortgage any of the
properties or assets of the party; (ix) guarantee or agree to guarantee the
obligations of any person; (x) make or commit to make any capital
expenditures in excess of $5,000 individually, and $20,000 in the aggregate
without the prior written consent of Shareholders; (xi) make any advances to
any of the party's officers, directors and shareholders (except for ordinary
course of business advances for out-of-pocket expenses incurred in the
performance of the party's Business); (xii) dispose of or acquire any
material assets outside of the ordinary course of the party's Business,
(xiii) knowingly take any action that would jeopardize the treatment of the
Merger as a pooling transaction for financial accounting purposes, or
(xiv) agree to do any of the foregoing.
5.3. Nature of Breach. Each party shall give prompt notice to the other
party of any notice of material default received by the party subsequent to
the date of this Agreement under any material instrument or agreement, or
any actual or potential Material Adverse Effect occurring prior to the
Effective Time in the operation of the party's Business.
5.4. Other Parties. Prior to the Merger, no party, nor any of their
respective representatives, advisors or affiliates shall solicit, encourage
or discuss any Acquisition Proposal (as defined below) or supply any non-
public information concerning a party or the Business to anyone who may be
contemplating an Acquisition Proposal other than Buyer and its affiliates
and representatives, or disclose to anyone (other than representatives and
legal or accounting advisors on a "need-to-know" basis, and then only if
they first agree in writing to be bound by the requirements of this
subsection) the existence or terms of this Agreement. For purposes of this
Agreement, an "Acquisition Proposal" is any proposal other than the
transactions contemplated by this Agreement, for (i) any merger or other
business combination involving any or all of the parties, or (ii) the
acquisition of all or a material equity interest in or a material portion of
the assets of either party, or (iii) the dissolution or liquidation of the
either party.
5.5. Access to Information. Each party shall cause the other party and its
representatives full and unrestricted access, during normal business hours
and upon reasonable notice, to all of the assets, properties, operations,
books, records, contracts, documents and agreements of the respective party
(including financial, tax basis, budget projections, auditors' work papers
and other information as either party may request), and to the personnel,
customers, suppliers and independent auditors of each party , and each party
shall be entitled to make copies of all such materials, except for customer
lists and records. Information and materials made available to a party and
its representatives pursuant to this subsection shall be used to conduct a
due diligence examination of the Business and the respective party for the
purpose of determining whether the transactions contemplated herein should
be consummated. If the Merger does not occur, all documents, materials,
copies and computer information provided by the either party to the other
shall be returned forthwith. Prior to the Merger, both parties and their
representatives shall maintain all information and materials made available
to the other party and its representatives pursuant to this subsection in
confidence.
5.6. Transfer or Acquisition Restrictions. Neither party shall sell,
transfer, pledge or grant a security interest in, or otherwise dispose of or
encumber, any of the respective party's Shares or any ownership interest in
the party without the prior written consent of other party, except as
contemplated by the Definitive Agreement originally executed on April 7,
2004, and subsequently amended, or as provided in the Stock Escrow and
Security Agreement executed on September 16, 2004. The Shareholders and the
Company and its subsidiaries and their affiliates will not purchase or
otherwise acquire directly or indirectly Buyer Shares, other than as
provided in this Agreement. The Shareholders shall not sell, transfer,
pledge or grant a security interest in, or otherwise dispose of or encumber,
any of the Company Shares or any ownership interest in the Company.
5.7. Pooling Treatment. Neither party will or will permit any of their
affiliates to knowingly take any action that would jeopardize the Merger
receiving pooling of interest treatment for tax purposes.
5.8. Consents of Others. Prior to the Merger, both parties shall use their
best efforts to obtain and to cause their respective party to obtain all
authorizations, consents and permits required of the respective party to
permit them to consummate the transactions contemplated by this Agreement.
5.9. Parties' Efforts. Both parties shall use all reasonable efforts to
cause all conditions for the Merger to be met.
5.10. Powers of Attorney. Each party shall cause its respective party to
terminate at or prior to Merger all powers of attorney granted by the party,
other than those relating to service of process, qualification or pursuant
to governmental regulatory or licensing agreements.
ARTICLE VI
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE MERGER
6.1. Conditions to Buyers' Obligations. The obligations of Buyer and ▇▇▇▇▇
under this Agreement to consummate the Merger are subject to the conditions
that:
(a) Covenants, Representations and Warranties. The Company and the
Shareholders shall have performed in all material respects all obligations
and agreements and complied in all material respects with all covenants
contained in this Agreement to be performed and complied with by each of
them prior to or at the Effective Time. The representations and warranties
of the Company and the Shareholders set forth in this Agreement shall be
accurate in all material respects at and as of the Effective Time with the
same force and effect as though made on and as of the Effective Time except
for any changes resulting from activities or transactions which may have
taken place after the date hereof and which are permitted or contemplated by
the Agreement or which have been entered into in the ordinary course of
business and except to the extent that any such representation and warranty
is expressly made as of another specified date and, as to such
representation or warranty, the same shall be true as of such specified
date.
(b) Consents. All statutory requirements for the valid consummation by the
Company and the Shareholders of the transactions contemplated by this
Agreement and the Merger shall have been fulfilled and all authorizations,
consents and approvals, including those of all federal, state, local and
foreign governmental agencies and regulatory authorities required to be
obtained in order to permit the consummation of the Merger shall have been
obtained in form and substance reasonably satisfactory to Buyer. All
approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement, the Merger and the
transactions contemplated hereby shall have been obtained.
(c) Financial Condition. Each of the following shall be materially true
and complete as of the Effective Time (the "Financial Assumptions"):
(i) The Company's cash position shall be positive (or, if negative,
the negative balance shall be added to the amount of total debt for the
purpose of item (ii) below).
(ii) The Company shall have no past due taxes and no liability for any
taxes other than current taxes not yet due or payable which shall be
properly accrued on the Company's Balance Sheets.
(iii) The Company's accrued liabilities shall not be greater than
historical levels and any accrued liabilities calculation shall include
actual liabilities and a provision for contingent liabilities as
required by GAAP.
(iv) The Company has accrued and recorded all employee benefit costs
including, but not limited to, retirement benefits and vacation
accruals.
(v) The Company shall not have any obligation after the Effective Date
to make 401(k) benefit plan contributions.
For purposes of this Section 6.1(c), "historical levels" means the average
of the twelve (12) months ending July 31, 2004.
(d) Material Adverse Effect. Since October 6, 2004 there has been no
Material Adverse Effect in the condition (financial or other) of the
business, results of operation, assets, liabilities, customer or employee
relations, financing arrangements or business prospects of the Company.
(e) Due Diligence Completed. Buyer shall have completed, and in its sole
discretion be satisfied with the results of, its due diligence investigation
of the Company, and Buyer's Board of Directors shall have given final
approval to the merger following such due diligence investigation.
(f) Documents to be Delivered by Shareholders and the Company. The
following documents shall be delivered at the Merger by the Shareholders and
the Company, respectively:
(i) Certificate. Integrated shall have received an officer's certificate
executed by the Company and the Shareholders, dated the Effective
Time, in substantially the same form as the form of certificate
that is Exhibit H hereto.
(ii) Employment and Non-Compete Agreement. Each of the Shareholders shall
have duly executed and delivered Employment Agreements. Specified
personnel of the Parties shall also deliver Non-Compete
Agreements in substantially the same form attached as Exhibit I
hereto, which may be incorporated into the employment agreement if
appropriate.
(iii) Share Certificates. Shareholders shall have delivered the Company
Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes
required to be paid thereon.
(iv) Third Party and Government Consents. The Company and the Shareholders
shall have delivered to Buyer (in form and substance reasonably
acceptable to Buyer any third party or government consents,
approvals or waivers required or necessary to consummate the
Merger.
(v) Opinion of Shareholders' and Company's Counsel. Buyer shall have
received an opinion of ▇▇▇▇ ▇▇▇▇▇▇▇▇, counsel to Shareholders and
the Company, dated the Effective Time, in substantially the same
form as the form of opinion that is Exhibit J hereto.
(vi) Merger Agreements. The Shareholders and the Company shall each have
executed and delivered this Agreement, and the Company and the
Shareholders, as required, shall each have executed and delivered
all related merger agreements and Merger Filings, in form and
substance satisfactory to Buyer.
6.2. Conditions to the Shareholders' and the Company's Obligations. The
obligation of the Shareholders and the Company under this Agreement to
consummate the Merger is subject to the conditions that:
(a) Covenants, Representations and Warranties. BUYERS and ▇▇▇▇▇ shall have
performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this
Agreement to be performed and complied with prior to the Effective Time.
The representations and warranties of BUYERS and ▇▇▇▇▇ set forth in this
Agreement shall be accurate in all material respects, at and as of the
Effective Time, with the same force and effect as though made on and as of
the Effective Time except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into
in the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified
date and, as to such representations, the same shall be true as of such
specified date.
(b) Consents. All statutory requirements for the valid consummation by
BUYERS of the Merger and the transactions contemplated by this Agreement
shall have been fulfilled and all authorizations, consents and approvals,
including those of all federal, state, local and foreign governmental
agencies and regulatory authorities required to be obtained in order to
permit the consummation of the Merger and the transactions contemplated
hereby shall have been obtained. All approvals of the Board of Directors
and shareholders of Integrated necessary for the consummation of this
Agreement, the Merger and the transactions contemplated hereby shall been
obtained.
(c) Consideration. BUYERS shall have delivered the Merger Consideration
in the manner set forth in Section 1.4 above.
(d) Deposits in Escrow. ▇▇▇▇▇ shall have deposited 75% of all his common
stock in Integrated, as determined immediately prior to Closing, whether
owned directly, indirectly, or beneficially, into escrow pursuant to
Section 7.2 below.
(e) Tax Treatment. The Company and the Shareholders shall be reasonably
satisfied that the Merger will constitute a tax-free reorganization within
the meaning of Internal Revenue Code Section 368(a).
(f) Documents to be Delivered by BUYERS. The following documents shall be
delivered at the Merger by BUYERS:
(i) Stock Certificates to be Placed in Escrow. ▇▇▇▇▇ shall
deposit the stock certificates representing 75% of his interest in
IPS into escrow as described in Section 7.2 below.
(ii) Merger Consideration. Buyers shall deliver any
documentation required to evidence the merger consideration,
including the cash compensation, Notes Payable One and Two, and
the stock certificates representing 67.25% of the outstanding
stock of Integrated at the time of closing (to the satisfaction of
the Company and shareholders).
(iii) Legal Opinion. Counsel to BUYERS shall have prepared and
delivered to Integrated its opinion, in substantially the form of
Exhibit K attached hereto.
(g) Material Adverse Effect. Since October 6, 2004, there has been no
Material Adverse Effect in the condition (financial or other) of the
business, results of operations, assets, liabilities, customer or employee
relations, financing arrangements or business prospects of Integrated.
(h) Due Diligence Completed. Company and Shareholders shall have
completed, and in its sole discretion be satisfied with the results of, its
due diligence investigation of Integrated, and Company's Board of Directors
shall have given final approval to the merger following such due diligence
investigation.
(i) Prohibitions. BUYERS and ▇▇▇▇▇ shall not have made any sales of stock
pursuant to Regulation S of the Federal Securities Act of 1933 at any time
on or after September 27, 2004, except for delivery of shares previously
contracted for.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification of Integrated . The Shareholders and the Company,
jointly and severally, agree to indemnify and hold harmless Buyer and each
officer, director, and affiliate of Buyer, including without limitation any
successor of LSCMC or Integrated (collectively, the "Indemnified Parties")
from and against any and all damages, losses, claims, liabilities, demands,
charges, suits, penalties, costs and expenses including court costs and
reasonable attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding (collectively, the "Indemnifiable
Costs"), which any of the Indemnified Parties may sustain, or to which any
of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by the Shareholders or the Company of
or under any of the covenants, agreements or other provisions of this
Agreement or any agreement or document executed in connection herewith;
(B) the assertion and final determination of any claim or liability against
the Company or any of the Indemnified Parties by any person or entity based
upon the facts which form the alleged basis for any litigation to the extent
it should have been, but was not, reserved for on the audited July 31, 2004,
Balance Sheet in accordance with generally accepted accounting principles;
(C) the Company's tortious acts or omissions to act prior to the Merger for
which the Company did not carry liability insurance for itself as the
insured party, whether or not such acts or omissions to act result in a
breach or violation of any representation or warranty. To the extent the
Indemnifiable Cost arises prior to the distribution of the Merger
Consideration, Buyer shall be entitled to continue holding such funds until
the parties have resolved all issues relating to such Indemnifiable Costs,
at which point Buyer shall be entitled to set off its claim for
Indemnifiable Costs against the Escrow Funds to the extent such Escrow Funds
are either not available or insufficient to satisfy the entire claim or
demand, Buyer may proceed directly against the Shareholders jointly and
severally. To the extent the total amount found to arise under this Section
7.1 is less than fifty thousand ($50,000) dollars, it shall be treated as de
minimis, and shall not constitute indemnifiable costs as described in this
section.
7.2. Indemnification of Company and Shareholders. BUYERS and ▇▇▇▇▇,
jointly and severally, agree to indemnify and hold harmless the Company and
each officer, director, and affiliate of the Company, (collectively, the
"Indemnified Parties") from and against any and all "Indemnifiable Costs,"
as defined in 7.2.1 below. Any "Indemnifiable Costs" outstanding at the
Closing shall be satisfied by the transfer, directly to Shareholders, of an
amount of ▇▇▇▇▇ shares equal to the amount of such outstanding
"Indemnifiable Costs". For purposes of the satisfaction of such
"Indemnifiable Costs," ▇▇▇▇▇ shares shall be valued at a price per share
equivalent to that obtained by investors pursuant to the capital raise
referenced in Section 7.2.2.
7.2.1. Indemnifiable Costs
For purposes of this section, "Indemnifiable Costs" shall include any and
all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses including court costs and reasonable
attorneys' fees and expenses incurred in investigating and preparing for any
litigation or proceeding, which any of the Indemnified Parties may sustain,
or to which any of the Indemnified Parties may be subjected, arising out of:
(A) Any misrepresentation, breach or default by Integrated or ▇▇▇▇▇ of
or under any of the covenants, agreements or other provisions of this
Agreement or any agreement or document executed in connection herewith;
(B) The assertion and final determination of any claim or liability
against Integrated or any of the Indemnified Parties by any person or
entity based upon the facts which form the alleged basis for any
litigation to the extent it was not expressly assumed by COMPANY and
listed in Schedule 7.2. For purposes of this subsection (B),
Shareholders shall exclusively determine the validity of any asserted
claim or liability against Integrated or any of the Indemnified
Parties.
(C) BUYERS' tortious acts or omissions to act prior to the Merger for
which the Buyers did not carry liability insurance for itself as the
insured party, whether or not such acts or omissions to act result in a
breach or violation of any representation or warranty.
(D) De Minimis Exception: To the extent the total amount found to
arise under this Section 7.2 is less than fifty thousand ($50,000)
dollars, it shall be treated as de minimis, and shall not constitute
Indemnifiable Costs as described in this section.
7.2.2. Cap on Amount of Indemnifiable Costs to be Paid From Capital
Raise
Contemporaneous with the negotiation of this Agreement, BUYERS have
attempted to raise capital to meet the funding obligations of this Agreement
as well as to clean up the Integrated balance sheet by eliminating
liabilities (the "Capital Raise"). The first three million dollars
($3,000,000.00) raised from the capital raise shall be used to fund the
Preliminary Cash Consideration component described in Section 1.4 above.
Any amount raised in excess of $3,000,000.00, but less than or equal to
$4,000,000.00, may be used to satisfy Indemnifiable Costs outstanding
immediately prior to Closing. IN NO EVENT SHALL THE AMOUNT OF FUNDS FROM
THE CAPITAL RAISE BE USED TO SATISFY INDEMNIFIABLE COSTS EXCEEDING ONE
MILLION DOLLARS ($1,000,000.00).
7.2.3. Indemnifiable Costs Outstanding at Closing
Any and all Indemnifiable Costs outstanding at Closing shall be satisfied by
the transfer, directly to Shareholders, of an amount of ▇▇▇▇▇ shares equal
to the amount of such outstanding "Indemnifiable Costs". For purposes of
the satisfaction of such "Indemnifiable Costs," ▇▇▇▇▇ shares shall be valued
at a price equal to that paid by institutional investors pursuant to the
Capital Raise.
▇▇▇▇▇ may be given the opportunity prior to transfer of his shares to
satisfy such outstanding Indemnifiable Costs by the payment of cash.
However, it shall be the responsibility of ▇▇▇▇▇ to provide sufficient
notice of such intent to prevent the transfer of shares.
7.2.4. Stock Escrow and Security Agreement
Attached to this Agreement as Exhibit L and incorporated herein is a Stock
Escrow and Security Agreement between ▇▇▇▇▇ and Integrated as Transferors
and ▇▇▇▇ ▇▇▇▇▇▇ and Best Circuit Boards, Inc., as Transferees. That
agreement, dated September 16, 2004, provides for the deposit of all of the
common stock of ▇▇▇▇▇ (determined as of the date of execution of that
agreement) into an escrow account as collateral against all advances made by
Transferees in favor of Transferors prior to the closing of this Agreement.
After the execution of this Agreement and before Closing, ▇▇▇▇▇ agrees to
make an additional deposit of common stock held in Integrated as a result of
the conversion of Preferred Stock to common stock (which must occur prior to
closing). As a result of such additional deposit, 75% OF ALL OF ▇▇▇▇▇'▇
HOLDINGS IN INTEGRATED WILL BE ESCROWED AT THE TIME OF AND SUBSEQUENT TO THE
CLOSING OF THIS AGREEMENT UNTIL SUCH TIME AS ALL ADVANCES MADE ON BEHALF OF
INTEGRATED HAVE BEEN SATISFIED, AS WELL AS ALL INDEMNIFIABLE COSTS, AS
DEFINED HEREIN, HAVE BEEN SATISFIED. Such holdings to be held in escrow
include any stock held in the name of ▇▇▇▇▇ individually or held in the
name of any entity of which ▇▇▇▇▇ is a shareholder, partner, member, or
other equity stakeholder. These entities include, but are not limited to:
(1) Associates Funding Group, Inc.; (2) Winterstone Management, Inc.; (3)
B.C. & Q. Corp.; (4) CMLP Group, Ltd. Such escrowed amounts shall remain
in escrow for a period of two years from the date of the closing of this
Agreement.
It is understood that failure to make additional deposits as required under
this subsection shall be grounds for immediate termination of this
Agreement.
Note that it may be necessary to revise the Stock Escrow and Security
Agreement as noted above to reflect the agreements specified herein. The
parties agree to cooperate in the execution of such a revised agreement to
reflect the agreement described herein.
7.2.5. Disbursements of ▇▇▇▇▇ Shares from Escrow
Disbursements shall be made to ▇▇▇▇▇ in accordance with the following
schedule, assuming amounts remain after satisfaction of amounts described
herein:
- 25% of the holdings in escrow (as determined at the Effective Time),
less any distributions in satisfaction of Indemnifiable costs or advances
as described in this Article, shall be disbursed 6 months after the
Effective Time;
- 25% of the holdings in escrow (as determined at the Effective Time),
less any distributions in satisfaction of Indemnifiable costs or advances
as described in this Article, shall be disbursed one (1) year after the
Effective Time;
- 25% of the holdings in escrow (as determined at the Effective Time),
less any distributions in satisfaction of Indemnifiable costs or advances
as described in this Article, shall be disbursed 18 months after the
Effective Time; and
-25% of the holdings in escrow (as determined at the Effective Time), less
any distributions in satisfaction of Indemnifiable costs or advances as
described in this Article , shall be disbursed two (2) years after the
Effective Time.
To the extent such escrowed shares are insufficient to satisfy all claims or
demands, Company and Shareholders may proceed directly against ▇▇▇▇▇
individually for satisfaction of such deficiency.
7.3 Satisfaction of Shareholder Advances to Buyers. In the months leading
up to the close of this Agreement, Company and Shareholders made advances on
behalf of Buyers and ▇▇▇▇▇. Such amounts are detailed in Schedule 7.3
attached herein. In satisfaction of such advances, Buyer and ▇▇▇▇▇ shall
execute prior to the time of closing a note payable (referred to in Section
1.4 and hereinafter as Note Two Consideration) in an amount determined in
accordance with Schedule 7.3. The Note Two Consideration shall be
convertible into common stock of Integrated at a conversion rate of $0.20
per share. In the alternative, and at the option of Shareholders,
satisfaction of advances made to Buyers may be had in the same manner as
provided in Section 7.2.3 above.
7.4 Defense of Claims. If any legal proceeding shall be instituted, or any
claim or demand made, against any Indemnified Party in respect of which
another party to this transaction (the "Liable Party") may be liable
hereunder, such Indemnified Party shall give prompt written notice thereof
to the Liable Party and, except as otherwise provided in this Section 7.4,
the Liable Party shall have the right to defend, or cause its successor to
defend, any litigation, action, suit, demand, or claim for which
indemnification is being sought and such Indemnified Party shall extend
reasonable cooperation in connection with such defense, which shall be
entirely the Liable Party's expense. In the event Liable Party shall fail
to defend the same within a reasonable length of time and upon written
notice by Indemnified Parties to Liable Party , the Indemnified Parties
shall be entitled to assume the defense thereof, and Liable Party shall
repay the Indemnified Parties for all expenses reasonably incurred in
connection with said defense (including reasonable attorneys' fees and
settlement payments) if it is determined that such request for
indemnification was proper up to and not in excess of the limits provided
above in Sections 7.1, 7.2, or 7.3 above. If Liable Party does not or
cannot assume the defense of any litigation, action, suit, demand, or claim
in accordance with either of the two preceding sentences, the Indemnified
Parties shall have the absolute right to control the defense of and to
settle, in their sole discretion and without the consent of Liable Party,
such litigation, action, suit, demand, or claim, but Liable Party shall be
entitled, at their own expense, to participate in such litigation, action,
suit, demand, or claim.
7.5 Tax Audits, Etc. In the event of an audit of a return of either party
with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VII, Liable Party shall have the
right to control any and all such audits which may result in the assessment
of additional Taxes against Liable Party and any and all subsequent
proceedings in connection therewith, including appeals. Liable Party and
Indemnified Party shall cooperate fully in all matters relating to any such
audit or other Tax proceeding (including according access to all records
pertaining thereto), and will execute and file any and all consents, powers
of attorney, and other documents as shall be reasonably necessary in
connection therewith. If additional Taxes are payable by Indemnified Party
as a result of any such audit or other proceeding, Liable Party shall
promptly pay all Taxes, interest, and penalties (which become due as a
result of any such audit) for Taxes accrued as of the Effective Date.
Notwithstanding the foregoing, the Liable Party shall have the right to
settle any suit, demand or claim for additional Taxes, provided that the
Liable Party shall have shown, to the Indemnified Parties' reasonable
satisfaction, the Liable Party's ability and commitment to pay the proposed
settlement amount pursuant to and in compliance with such proposed
settlement.
7.6 Notice of Claim. Before any party may claim against any of the other
parties under the indemnity provided in this Article VII, the party claiming
that it is entitled to indemnification (the "Indemnitee") shall first serve
written notice of any alleged breach, nonperformance, misrepresentation,
omission or the like giving rise to the claim for indemnification, along
with supporting documentation, and no action shall commence to enforce the
indemnity if the other party cures the breach and compensates the Indemnitee
for all such damages or other amounts due within 30 days after delivery of
the written notice and supporting documentation. Prior to the arbitration
of any such claims, the parties shall make a good faith effort to meet and
resolve the dispute.
ARTICLE VIII
TERMINATION
8.1. Termination. This Agreement may be terminated at any time prior to
the Merger only upon the following conditions:
(a) Mutual Consent. Upon the mutual written consent of all
parties hereto;
(b) Litigation. By either party if an injunction or other order
shall have been issued by a court or regulatory or administrative
body of competent jurisdiction, or litigation or a governmental,
regulatory or administrative proceeding shall be pending or
threatened, which restrains or seeks to restrain or otherwise
would make unlawful the consummation of the transactions
contemplated by this Agreement;
(c) Conditions to Integrated and LSCMC's Obligations. By
Integrated or LSCMC if any of the conditions provided in this
Agreement shall not have been satisfied, complied with or
performed in any material respect on or before the Effective Time
and Integrated shall not have waived in writing such failure of
satisfaction, non-compliance or non-performance;
(d) Conditions to the Shareholders' and the Company's
Obligations. By the Shareholders and the Company if any of the
conditions provided in this Agreement shall not have been
satisfied, complied with or performed in any material respect on
or before the Effective Time and the Shareholders and the Company
shall not have waived in writing such failure of satisfaction,
non-compliance or non-performance; or
(e) Consummation of Merger. By the Shareholders or Integrated if
the Merger shall not have been consummated on or before December
31, 2004.
8.2. Effect of Termination. Termination of this Agreement by a party
pursuant to this Article VIII shall not of itself result in any liability on
such party or its respective representatives, directors, officers,
shareholders or agents other than those costs directly associated with the
proposed merger. In the event of termination of this Agreement, the
proposed transactions contemplated hereunder shall terminate and each party
hereto shall have no further obligation or liability hereunder, except as
provided in the stock escrow agreement noted above executed as collateral
for advances made on behalf of Integrated or any other agreement represented
by a separate writing.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1. Survival. Each statement, representation, warranty, indemnity,
covenant and agreement made by either party in this Agreement and in any
document, schedule, certificate or other instrument delivered by or on
behalf of either party pursuant to this Agreement or in connection herewith
shall be deemed the joint and several statement, representation, warranty,
indemnity, covenant and agreement of that party. All statements,
representations, warranties, indemnities, covenants and agreements made by
the either party hereto shall survive the Merger for a period of three
years; provided, however, that the representations and warranties made in
Sections 2.14 and 3.14 hereof regarding Employee Benefits and Sections 2.17
and 3.17 hereof regarding Taxes shall survive until the expiration of the
applicable statutes of limitations, and that the representations and
warranties made in Sections 2.28 and 3.28 hereof regarding Environmental
Matters shall survive for a period of four years following the Closing Date;
provided, further, that the representations and warranties made in
Sections 2.1 and 3.1 (Capitalization), Sections 2.2 and 3.2 (No Liens on
Shares), Sections 2.4 and 3.4 (Due Organization) and Sections 2.6 and 3.6
(Due Authorization) shall survive indefinitely and claims relating thereto
may be brought at any time following the Effective Time.
ARTICLE X
MISCELLANEOUS
10.1. Supplemental Documentation. As part of this Agreement, numerous
Exhibits and Schedules are to be completed. At the time of execution of
this Agreement, several such Exhibits and Schedules remain to be completed.
The Parties endeavor to cooperate in the execution and completion of all
necessary documentation prior to Closing. The Parties recognize that the
failure to cooperate in the completion of such documentation could lead to
termination of this Agreement on the part of the cooperating party.
10.2. Modifications. Any amendment, change or modification of this
Agreement shall be void unless in writing and signed by all parties hereto.
No failure or delay by any party hereto in exercising any right, power or
privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power or privilege.
No waiver of any default on any one occasion shall constitute a waiver of
any subsequent or other default. No single or partial exercise of any such
right, power or privilege shall preclude the further or full exercise
thereof.
10.3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally
delivered, mailed by certified mail, return receipt requested, or via
Federal Express or similar overnight courier service. Such notices or other
communications shall be sent to the following addresses, unless other
addresses are subsequently specified in writing:
If to Company and/or Shareholders:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Attorney at Law
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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Fax: (▇▇▇)▇▇▇-▇▇▇▇
If to Integrated or ▇▇▇▇▇:
D. ▇▇▇▇▇▇ ▇▇▇▇▇
Integrated Performance Systems, Inc.
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10.4. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument. Signatures may
be exchanged by telecopy, with original signatures to follow. Each party
hereto agrees that it will be bound by its own telecopied signature and that
it accepts the telecopied signature of the other parties hereto.
10.5. Expenses.
Except as otherwise provided herein, each of the parties hereto will bear
all costs, charges and expenses incurred by such party in connection with
this Agreement and the consummation of the transactions contemplated herein
10.6. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of Integrated, LSCMC, the Company and the Shareholders,
their heirs, representatives, successors, and permitted assigns, in
accordance with the terms hereof. This Agreement shall not be assignable by
either party without the prior written consent of the other party.
10.7. Entire and Sole Agreement. This Agreement and the other schedules
and agreements referred to herein, constitute the entire agreement between
the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to
the subject matter hereof, unless not in conflict with such other agreement.
10.8. Governing Law. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the substantive laws of
the State of Texas.
10.9. Invalid Provisions. If any provision of this Agreement is deemed or
held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it
is deemed to be illegal, invalid or unenforceable, and in all other respects
this Agreement shall remain in full force and effect; provided, however,
that if any provision of this Agreement is deemed or held to be illegal,
invalid or unenforceable there shall be added hereto automatically a
provision as similar as possible to such illegal, invalid or unenforceable
provision and be legal, valid and enforceable. Further, should any
provision contained in this Agreement ever be reformed or rewritten by any
judicial body of competent jurisdiction, such provision as so reformed or
rewritten shall be binding upon all parties hereto.
10.10. Transfer Taxes. The Shareholders shall be responsible for and shall
have paid or set aside sufficient funds to pay all stock transfer or gains
taxes incurred in connection with the consummation of the transactions
contemplated by this Agreement. Risk with respect to the Shareholders'
interests shall remain with the Shareholders until completion of the Merger.
10.11. Public Announcements. No party hereto shall make any public
announcement of the transactions contemplated hereby without the prior
written consent of the other parties, which consent shall not be
unreasonably withheld.
10.12. Waiver. No failure or delay on the part of any party in exercising
any right, power, or privilege hereunder or under any of the documents
delivered in connection with this Agreement shall operate as a waiver of
such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
10.13. Headings. The descriptive section headings are for convenience of
reference only and shall not control or affect the meaning or construction
of any provision of this Agreement.
10.14. No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any
person.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
/s/ D. ▇▇▇▇▇▇ ▇▇▇▇▇
Integrated Performance Systems, Inc.
By: D. ▇▇▇▇▇▇ ▇▇▇▇▇
Its: Chief Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇
Best Circuit Boards, Inc.
By: ▇▇▇▇ ▇▇▇▇▇▇
Its: Chief Executive Officer