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EXHIBIT 10.1
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STOCK PURCHASE AGREEMENT
among
EPiC ENERGY RESOURCES, INC.
AND
PEARL INVESTMENT COMPANY
AND
THE SHAREHOLDERS OF PEARL INVESTMENT COMPANY
Dated as of August 31, 2007
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STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as
of
August 31, 2007 (the "Execution Date"), by EPiC ENERGY
RESOURCES, INC., a
corporation organized under the laws of Colorado ("Purchaser" or
"EPIC") and
PEARL INVESTMENT COMPANY, a Colorado corporation, ("PEARL"), and
R. BRET
RHINESMITH ("Rhinesmith"), CURTIS L. GOOD ("Good") and PATRICK
A. REDALEN
("Redalen") and, together PEARL, Rhinesmith, Good and Redalen
shall be
collectively known as the "PEARL Parties" or "Seller". Each of
EPIC, PEARL,
Rhinesmith, Good and Redalen also referred to individually as a
"Party" or
collectively as the "Parties". Rhinesmith, Good and Redalen are
sometimes
collectively referred to herein as the "Shareholders".
WITNESSETH
WHEREAS, the PEARL Parties desire to sell and assign to
Purchaser and
Purchaser desires to purchase, and acquire from the PEARL
Parties (as provided
herein), all of the PEARL Parties' right, title, and interest in
and to one
hundred percent (100%) of the outstanding shares of PEARL (the
"PEARL Common
Stock") on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and
covenants
hereinafter set forth, and for good and valuable consideration,
the receipt,
sufficiency and adequacy of which are hereby acknowledged, the
Parties hereby
agree as follows:
ARTICLE 1
SECTION 1.1 Certain Defined Terms. As used in this Agreement,
the following
terms shall have the following meanings:
"Accounts Receivable" means (a) all trade accounts receivable
and other
rights to payment from customers of any PEARL Group Member (as
well as any
receivables due to PEARL from Rhinesmith, Redalen and Good) and
the full benefit
of all security for such accounts or rights to payment,
including all trade
accounts receivable representing amounts receivable in respect
of goods shipped
or products sold or services rendered to customers of any PEARL
Group Member,
(b) all other accounts or notes receivable of any PEARL Group
Member and the
full benefit of all security for such accounts or notes and (c)
any claim,
remedy or other right related to any of the foregoing.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations
promulgated under the Exchange Act. It also means, with respect
to a specified
Person, any other Person that directly or indirectly controls,
is controlled by,
or is under common control with, such specified Person.
"Agreement" means this stock purchase agreement along with
any
attachments, schedules and exhibits which are attached hereto
and incorporated
herein. In the case of any conflict between the Agreement and
any schedules,
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exhibits or attachments, the provisions of the Agreement shall
take precedence
over any attachment or exhibit.
"Ancillary Agreements" have the meaning given in Section
4.2(c).
"Breach" means any breach of, or any inaccuracy in, any
representation or
warranty or any breach of, or failure to perform or comply with,
any covenant or
obligation, in or of this Agreement or any other Contract, or
any event which
with the passing of time or the giving of notice, or both, would
constitute such
a breach, inaccuracy or failure.
"Closing" has the meaning given in Section 2.6.
"Closing Date" has the meaning given in Section 2.5.
"Confidential Information" means any information concerning
the
businesses and affairs of any PEARL Group Member that is
proprietary in nature
and considered confidential by the Parties and not already
generally available
to the public.
"Contracts" means any legally binding agreement, contract,
lease,
consensual obligation, promise or undertaking (whether written
or oral) of any
PEARL Group Member as of the Closing Date, including, but not
limited, to those
Contracts listed on Schedule 4.12(a).
"Current Liabilities" means, as determined in accordance with
GAAP (as
defined below):
(i) accounts payable and accrued Liabilities of all PEARL Group
Members ;
(ii) Taxes payable by any PEARL Group Member relating to any
period prior
to the Closing Date; and
(iii) all other Current Liabilities of any PEARL Group Member
not described
above.
"Dollars" or "$" means U.S. dollars.
"Employee Plans" has the meaning set forth in Section
4.14(a).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA
ss.3(1).
"Employment Agreements" has the meaning given in Section 2.6
(a).
"Encumbrance" means any pledge, lien (including without
limitation Tax
lien), collateral assignment, security interest, mortgage, deed
of trust, title
retention, conditional sale or other security arrangement, or
any license, order
or charge, or any adverse claim of title, ownership or use, or
agreement of any
kind restricting transfer.
"Environment" means soil, land surface or subsurface strata,
surface
waters (including navigable waters, ocean waters, streams,
ponds, drainage
basins, and wetlands), groundwaters, drinking water supply,
stream sediments,
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ambient air (including indoor air), plant and animal life, and
any other
environmental medium or natural resource.
"Environmental, Health, and Safety Requirements" means all
federal, state,
local, and foreign statutes, regulations, and ordinances
concerning public
health and safety, worker health and safety, and pollution or
protection of the
environment, including all those relating to the presence, use,
production,
generation, handling, transportation, treatment, storage,
disposal,
distribution, labeling, testing, processing, discharge, release,
threatened
release, control, or cleanup of any hazardous materials,
substances, or wastes,
as such requirements are enacted and in effect on or prior to
the Closing Date.
"Environmental Law" means any Legal Requirement that requires or
relates
to:
(i) advising appropriate authorities, employees or the public of
intended
or actual releases of pollutants or hazardous substances or
materials,
violations of discharge limits or other prohibitions and the
commencement of activities, such as resource extraction or
construction, that could have significant impact on the
Environment;
(ii) preventing or reducing to acceptable levels the release of
pollutants
or hazardous substances or materials into the Environment;
(iii) reducing the quantities, preventing the release or
minimizing the
hazardous characteristics of wastes that are generated;
(iv) assuring that products are designed, formulated, packaged
and used so
that they do not present unreasonable risks to human health or
the
Environment when used or disposed of;
(v) protecting resources, species or ecological amenities;
(vi) reducing to acceptable levels the risks inherent in the
transportation
of hazardous substances, pollutants, oil or other potentially
harmful
substances;
(vii) cleaning up pollutants that have been released, preventing
the threat
of release or paying the costs of such cleanup or prevention;
or
(viii) making responsible parties pay private parties, or groups
of them, for
damages done to their health or the Environment or
permitting
self-appointed representatives of the public interest to recover
for
injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of
1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single
employer
with PEARL or any PEARL Group Member for purposes of Code ss.
414.
"Exchange Act" means the Securities Act of 1934, as amended.
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"Facility" or "Facilities" means any real property, leasehold or
other
interest in real property currently owned or leased by a PEARL
Group Member,
including the Tangible Personal Property used or operated by a
PEARL Group
Member at the respective locations of the real property
specified in Schedule
4.7
"Financial Statements" has the meaning given in Section 4.5.
"GAAP" means United States' generally accepted accounting
principles as in
effect from time to time, consistently applied.
"Governing Documents" means with respect to any particular
entity, (a) if
a corporation, the articles or certificate of incorporation and
the bylaws; (b)
if a general partnership, the partnership agreement and any
statement of
partnership; (c) if a limited partnership, the limited
partnership agreement and
the certificate of limited partnership; (d) if a limited
liability company, the
articles of organization and operating agreement; (e) if another
type of Person,
any other charter or similar document adopted or filed in
connection with the
creation, formation or organization of the Person; (f) all
equity holders'
agreements, voting agreements, voting trust agreements, joint
venture
agreements, registration rights agreements or other agreements
or documents
relating to the organization, management or operation of any
Person or relating
to the rights, duties and obligations of the equity holders of
any Person; and
(g) any amendment or supplement to any of the foregoing.
"Governmental Body" means any state, municipal, local, national
or
international body with jurisdiction over the Parties or the
subject matter of
this Agreement.
"Governmental Authorization" means any consent, license,
registration or
permit issued, granted, given or otherwise made available by or
under the
authority of any Governmental Body or pursuant to any Legal
Requirement.
"Indemnified Party" has the meaning given in Section 11.4.
"Indemnifying Party" has the meaning given in Section 11.4.
"Intellectual Property" means (a) all inventions (whether
patentable or
unpatentable and whether or not reduced to practice), all
improvements thereto,
and all patents, patent applications, and patent disclosures,
together with all
reissuances, continuations, continuations-in-part, revisions,
extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos,
trade names, and corporate names, together with all
translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated
therewith, and all applications, registrations, and renewals in
connection
therewith, (c) all copyrightable works, all copyrights, and all
applications,
registrations, and renewals in connection therewith, (d) all
mask works and all
applications, registrations, and renewals in connection
therewith, (e) all trade
secrets and confidential business information (including ideas,
research and
development, know-how, formulas, compositions, manufacturing and
production
processes and techniques, technical data, designs, drawings,
specifications,
customer and supplier lists, pricing and cost information, and
business and
marketing plans and proposals), (f) all computer software
(including data and
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related documentation), (g) all other proprietary rights, and
(h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Interim Balance Sheet" has the meaning set forth in Section
4.5(a).
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as
amended, and the rulings and regulations promulgated
thereunder.
"IRS" has the meaning set forth in Section 4.14(b).
"Knowledge" means, when referring to the knowledge of Seller, or
any
similar phrase or qualification based on knowledge, (i) the
actual knowledge of
any of the PEARL Parties, and (ii) the knowledge that any such
person referenced
in clause (i) above, as a prudent business person, would have
obtained in the
conduct of his or her business (as an employee of Seller) after
making
reasonable inquiry and reasonable diligence with respect to the
particular
matter in question.
"Legal Requirement" means any federal, state, provincial,
territorial,
local, municipal, foreign, international, multinational or other
constitution,
law, ordinance, code, regulation, statute or treaty.
"Liabilities" (or when used with reference to a single item
described
below, "Liability") means debts, commissions, duties, fees,
salaries,
performance or delivery penalties, liabilities, warranty
liabilities (whether
implicit or explicit or whether granted orally or in writing)
and obligations
(whether pecuniary or not, including without limitation
obligations to perform
or forebear from performing acts or services), fines or
penalties, whether
accrued or fixed, absolute or contingent, matured or un-matured,
determined or
determinable, known or unknown, arising or existing anywhere in
the world,
including without limitation those arising under any law, action
or governmental
order, liabilities for Taxes and those arising under any
contract, agreement,
arrangement, commitment or undertaking of any kind whatsoever
(whether written
or oral, express or implied), including those arising under any
contractual
obligation of a Party or any predecessor thereof.
"Material Change" means any effect or change that, taken as a
whole, would
change the business prospects, operations, financial condition
or assets of any
PEARL Group Member or the PEARL Parties, either positively or
negatively. The
taking of any action contemplated by this Agreement and the
Ancillary Agreements
contemplated hereby shall not be deemed to constitute a Material
Change.
"Multiemployer Plan" has the meaning given in Section
4.14(a).
"Order" means any order, injunction, judgment, decree, ruling,
assessment
or arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business" means the ordinary course of
business
consistent with past custom and practice (including with respect
to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
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"PEARL Group Members" means, collectively, each of Pearl
Investment
Company, Pearl Development Company, LLC, Pearl Field Services,
LLC, Pearl
Construction Company, LLC, Pearl Group Management, LLC, Pearl
Process Systems,
LLC, Pearl Property Management, LLC., Pearl Aviation, LLC, and
Pearl Development
Company (Australia) PTY LTD (or when used with reference to a
single entity
described above, "PEARL Group Member").
"PBGC" has the meaning given in Section 4.14(b).
"Permitted Encumbrance" has the meaning given in Section
6.9.
"Person" means any natural person or legal entity, including
without
limitation a joint venture, trust, association, joint stock
company,
unincorporated organization, corporation, limited liability
company, partnership
or a governmental entity (or any department, agency, or
political subdivision
thereof).
"Pre-Closing Tax Period" has the meaning set forth in Section
8.3(a).
"Proceeding" means any action, arbitration, audit, hearing,
investigation,
litigation or suit (whether civil, criminal, administrative,
judicial or
investigative, whether formal or informal, whether public or
private) commenced,
brought, conducted or heard by or before, or otherwise
involving, any
Governmental Body or arbitrator.
"Property" means any interest in any kind of property or asset,
whether
real, personal or mixed, or tangible or intangible.
"Purchase Price" has the meaning set forth in Section 2.4.
"Purchaser Group" has the meaning given in Section 7.8.
"Purchaser Indemnity" has the meaning given in Section 11.1.
"Related Person" means any individual related by blood, marriage
or
adoption to any officer, director, or shareholder of Seller
(each, a "Related
Person") in which any such Person owns any beneficial interest
or is currently a
party to (and, during the three years preceding the date hereof,
has been a
party to) any agreement, contract, commitment or transaction
with Seller or has
any interest in any property, real or personal or mixed,
tangible or intangible,
used in or in connection with the Seller's business.
"Seller Indemnity" has the meaning given in Section 11.1.
"Straddle Period" has the meaning given in Section 8.3(b).
"Subsidiaries" has the meaning given in Section 4.2(b).
"Tangible Personal Property" means all machinery, equipment,
tools,
furniture, office equipment, computer hardware, supplies,
materials, vehicles
and other items of tangible personal property of every kind
owned or leased by
any PEARL Group Member (wherever located), together with any
express or implied
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warranty by the manufacturers or sellers or lessors of any item
or component
part thereof and all maintenance records and other documents
relating thereto.
"Tax" (or "Taxes") means all taxes of any kind whatsoever
(whether payable
directly or by withholding) assessed or imposed by any
government or political
subdivision thereof (foreign or domestic), including without
limitation
franchise, income, gross receipts, personal property, real
property, ad valorem,
value added, sales, use, documentary, stamp, intangible personal
property,
withholding or other taxes, together with any interest and
penalties, additions
to tax or additional amounts with respect thereto imposed by any
taxing
authority, duties, temporary or other import taxes, or penalties
on unpaid or
non-declared taxes.
"Tax Return" means any return, declaration, report, claim for
refund, or
information return or statement relating to Taxes, including any
schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning given in Section 11.4.
Definitions Appearing Elsewhere in this Agreement. The terms
used in this
Agreement which are defined in (a) the preface of this
Agreement, (b) the
Witnesseth Section of this Agreement and (c) the further
Sections of this
Agreement shall have the respective definitions therein ascribed
to them.
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1 Shares to Be Sold and Purchased. Subject to the
terms and
conditions of this Agreement, the PEARL Parties shall, on the
Closing Date,
sell, assign, transfer, convey and deliver to Purchaser and on
the Closing Date
Purchaser shall purchase, acquire and receive from Seller, all
outstanding
shares of the PEARL Common Stock, subject to the terms in this
Agreement.
SECTION 2.2 Due Diligence. Purchaser has had ample opportunity
to conduct a
complete review of all the PEARL Group Member's books and
records. The scope and
conduct of this review shall be performed in accordance with the
protocol
attached as Exhibit A.
SECTION 2.3 Pre-Purchase Notifications. Purchaser shall be
responsible for
the Fees and all costs and submission of all regulatory filings
related to any
required governmental or regulatory approvals. Seller shall
cooperate with
Purchaser to complete such filings or applications at the
reasonable request of
the Purchaser.
SECTION 2.4 Purchase Price. The purchase price (the "Purchase
Price") for
the PEARL Common Stock will be made on the Closing Date as
follows:
(a) Cash. The delivery by wire transfer of the amount of
Eighteen Million
and No/100 Dollars ($18,000,000.00) to the trust account of
McGloin,
Davenport, Severson & Snow, P.C. pursuant to the wiring
instructions
set forth on said Exhibit B, attached hereto. Such proceeds
shall be
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allocated among the Shareholders as set forth on Exhibit B.
(b) Purchase Stock. The delivery through the transfer agent of
One Million
One Hundred Eighty Six Thousand Two Hundred Forty (1,186,240)
shares
of stock in EPIC Energy Resources, Inc. Such Purchase Stock
shall be
allocated as follows:
(i) 1,000,000 shares to Rhinesmith;
(ii) 126,928 shares to Redalen; and
(iii) 59,312 shares to Good.
SECTION 2.5 Closing. Subject to the terms and conditions of this
Agreement,
all documents relating to the sale and purchase of the PEARL
Common Stock and
all of the other closing deliveries required by Section 2.4 and
Section 2.6
(other than delivery of the Cash portion of the Purchase Price)
shall take place
at a closing at the offices of the Seller (the "Closing"). The
date of the
closing shall be August 31, 2007 (the "Closing Date").
SECTION 2.6 Closing Deliveries. At the Closing, each of the
following
parties shall deliver or cause to be delivered to the designated
party or
parties all of the following, and in the case of executed
agreements, documents
or instruments, in each case executed by the Party or a duly
authorized
representative of the Party on such Party's behalf;
(a) The PEARL Parties shall deliver to Purchaser:
(i) endorsed share certificates or stock powers for 100% of
the
outstanding shares of the PEARL Common Stock held by the
PEARL
Parties;
(ii) resolutions of the board of directors of PEARL approving
and
authorizing the execution, delivery and performance by it of
this
Agreement and the Ancillary Agreements to which it is a party
and
the consummation by it of the transactions described in this
Agreement and the Ancillary Agreements attached hereto as
Exhibit
E;
(iii) Executed counterparts of Employment Agreements with each
of the
key employees of the PEARL Group Members which Purchaser may
designate prior to Closing in substantially the form
attached
hereto as Exhibit C (the "Employment Agreements").
(iv) Consents from third parties, including any governmental
entity,
landlord or other person material to the business of any
PEARL
Group Member and necessary, in the reasonable opinion of
Purchaser, for the consummation by Purchaser of the
transactions
contemplated hereby; and
(v) all other items required to be delivered pursuant to the
provisions of this Agreement;
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(b) Purchaser shall deliver to Seller:
(i) all items required to be delivered pursuant to the
provisions of
this Agreement;
(ii) resolutions of the board of directors of EPIC approving
and
authorizing the execution, delivery and performance by it of
this
Agreement and the Ancillary Agreements to which it is a party
and
the consummation by it of the transactions described in this
Agreement and the Ancillary Agreements attached hereto as
Exhibit
F; and
(iii) indemnification agreement substantially in the form
attached
hereto as Exhibit G wherein EPIC agrees to indemnify, defend
and
hold the Shareholders harmless from any claims or liabilities
of
any type relating to any personal guaranties made by and of
the
Shareholders for or on behalf of any PEARL Group Member.
SECTION 2.7 Trade Names. The PEARL Parties expressly represent
and warrant
that the purchase of the PEARL Common Stock shall entitle
Purchaser to have any
and all rights in and to the trade or brand names "Pearl" and
all variations
thereof as currently used by any PEARL Group Member.
SECTION 2.8 Effective Date. The effective date of this
transaction shall be
September 1, 2007 ("Effective Date").
ARTICLE 3
[FOR NOW LEFT BLANK INTENTIONALLY]
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PEARL PARTIES
As an inducement to Purchaser to enter into this Agreement, each
of the
PEARL Parties represent and warrant to Purchaser that the
statements contained
in Section 4.1 through Section 4.27 are correct and complete as
of the Closing
Date:
SECTION 4.1 Existence and Good Standing.
(a) PEARL is a corporation duly organized, validly existing and
in
good standing under the laws of the State of Colorado. PEARL has
all
requisite power and authority to own, lease and operate its
assets and to
conduct its business as it is currently conducted, and is duly
qualified to
transact business as a foreign corporation and is in good
standing in each
jurisdiction in which its assets are owned, leased or operated
by it or the
nature of the operation of its business requires it to qualify
to transact
business as a foreign corporation. The jurisdictions in which
PEARL is so
qualified are set forth on Schedule 4.1 hereto.
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(b) Pearl Development Company, LLC ("PDC") is a limited
liability
company duly organized, validly existing and in good standing
under the
laws of the State of Colorado. PDC has all requisite power and
authority to
own, lease and operate its assets and to conduct its business as
it is
currently conducted, and is duly qualified to transact business
as a
foreign limited liability company and is in good standing in
each
jurisdiction in which its assets are owned, leased or operated
by it or the
nature of the operation of its business requires it to qualify
to transact
business as a foreign limited liability company. The
jurisdictions in which
PDC is so qualified are set forth on Schedule 4.1 hereto.
(c) Pearl Field Services, LLC ("PFS") is a limited liability
company
duly organized, validly existing and in good standing under the
laws of the
State of Colorado. PFS has all requisite power and authority to
own, lease
and operate its assets and to conduct its business as it is
currently
conducted, and is duly qualified to transact business as a
foreign limited
liability company and is in good standing in each jurisdiction
in which its
assets are owned, leased or operated by it or the nature of the
operation
of its business requires it to qualify to transact business as a
foreign
limited liability company. The jurisdictions in which PFS is so
qualified
are set forth on Schedule 4.1 hereto.
(d) Pearl Construction Company, LLC ("PCC") is a limited
liability
company duly organized, validly existing and in good standing
under the
laws of the State of Colorado. PCC has all requisite power and
authority to
own, lease and operate its assets and to conduct its business as
it is
currently conducted, and is duly qualified to transact business
as a
foreign limited liability company and is in good standing in
each
jurisdiction in which its assets are owned, leased or operated
by it or the
nature of the operation of its business requires it to qualify
to transact
business as a foreign limited liability company. The
jurisdictions in which
PCC is so qualified are set forth on Schedule 4.1 hereto.
(e) Pearl Process Systems, LLC ("PPS") is a limited liability
company
duly organized, validly existing and in good standing under the
laws of the
State of Colorado. PPS has all requisite power and authority to
own, lease
and operate its assets and to conduct its business as it is
currently
conducted, and is duly qualified to transact business as a
foreign limited
liability company and is in good standing in each jurisdiction
in which its
assets are owned, leased or operated by it or the nature of the
operation
of its business requires it to qualify to transact business as a
foreign
limited liability company. The jurisdictions in which PPS is so
qualified
are set forth on Schedule 4.1 hereto.
(f) Pearl Property Management, LLC ("PPM") is a limited
liability
company duly organized, validly existing and in good standing
under the
laws of the State of Colorado. PPM has all requisite power and
authority to
own, lease and operate its assets and to conduct its business as
it is
currently conducted, and is duly qualified to transact business
as a
foreign limited liability company and is in good standing in
each
jurisdiction in which its assets are owned, leased or operated
by it or the
nature of the operation of its business requires it to qualify
to transact
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business as a foreign limited liability company. The
jurisdictions in which
PPM is so qualified are set forth on Schedule 4.1 hereto.
(g) Pearl Group Management, LLC ("PGM") is a limited liability
company
duly organized, validly existing and in good standing under the
laws of the
State of Colorado. PGM has all requisite power and authority to
own, lease
and operate its assets and to conduct its business as it is
currently
conducted, and is duly qualified to transact business as a
foreign limited
liability company and is in good standing in each jurisdiction
in which its
assets are owned, leased or operated by it or the nature of the
operation
of its business requires it to qualify to transact business as a
foreign
limited liability company. The jurisdictions in which PGM is so
qualified
are set forth on Schedule 4.1 hereto.
(h) Pearl Aviation, LLC ("PA") is a limited liability company
duly
organized, validly existing and in good standing under the laws
of the
State of Colorado. PA has all requisite power and authority to
own, lease
and operate its assets and to conduct its business as it is
currently
conducted, and is duly qualified to transact business as a
foreign limited
liability company and is in good standing in each jurisdiction
in which its
assets are owned, leased or operated by it or the nature of the
operation
of its business requires it to qualify to transact business as a
foreign
limited liability company. The jurisdictions in which PA is so
qualified
are set forth on Schedule 4.1 hereto.
(i) Pearl Development Company (Australia) PTY LTD (" Pearl
Australia")
is a company duly organized, validly existing and in good
standing under
the laws of Australia. Pearl Australia has all requisite power
and
authority to own, lease and operate its assets and to conduct
its business
as it is currently conducted, and is duly qualified to transact
business as
a company and is in good standing in each jurisdiction in which
its assets
are owned, leased or operated by it or the nature of the
operation of its
business requires it to qualify to transact business as a
foreign company.
The jurisdictions in which Pearl Australia is so qualified are
set forth on
Schedule 4.1 hereto.
SECTION 4.2 Capitalization.
(a) The ownership of all of the stock in PEARL is accurately set
forth
in Schedule 4.2(a) hereto. The entire authorized capital stock
of PEARL
consists of one thousand (1,000) shares of stock, of which one
thousand
(1,000) shares of stock are issued and outstanding. All of the
stock listed
on Schedule 4.2(a) is duly authorized and has been issued in
accordance
with the terms of the Governing Documents of PEARL. The stock on
Schedule
4.2(a) represents the only issued stock PEARL. Except as set
forth in
Schedule 4.2(a), there are no (i) outstanding securities
convertible or
exchangeable into any stock or equity interests of PEARL; (ii)
options,
warrants, calls, subscriptions or other rights, agreements or
commitments
obligating PEARL to issue, transfer or sell any stock or equity
interests
of PEARL; or (iii) voting trusts or other agreements or
understandings to
which PEARL is a party or by which PEARL is bound with respect
to the
voting, transfer or other disposition of any stock of PEARL.
Except as set
forth on Schedule 4.2(a), PEARL is not a partner with, member
of, or holder
12
<PAGE>
of any equity interest in any other Person. All of the capital
stock of
Seller is held beneficially and of record by the Shareholders as
set forth
on Schedule 4.2(a), free and clear of all Liens.
(b) Ownership of Stock. PEARL owns all of the outstanding
capital
stock, membership or other ownership interests of PFS, PDC, PCC,
PPS, PPM,
PGM, PA and Pearl Australia (collectively, the "Subsidiaries").
Except as
set forth in Schedule 4.2(b), all of the capital stock,
membership or other
ownership interests of the Subsidiaries are duly authorized,
have been
issued in accordance with the terms of their respective
Governing Documents
and represent the only issued equity interests of the
Subsidiaries. There
are no (i) outstanding securities convertible or exchangeable
into any
equity interests of the Subsidiaries; (ii) options, warrants,
calls,
subscriptions or other rights, agreements or commitments
obligating any of
the Subsidiaries to issue, transfer or sell any equity interests
of any of
the Subsidiaries; or (iii) voting trusts or other agreements
or
understandings to which any of the Subsidiaries is a party or by
which any
of the Subsidiaries is bound with respect to the voting,
transfer or other
disposition of any equity interests of any of the Subsidiaries.
Except as
set forth on Schedule 4.2(b), PEARL or any of the Subsidiaries
are not a
partner with, member of, or holder of any equity interest in any
other
Person.
(c) Due Authorization. The PEARL Parties have all requisite
power and
authority to execute, deliver and perform this Agreement and all
of the
other documents to be delivered pursuant to the terms of this
Agreement
(the "Ancillary Agreements") to which it is a party and to
consummate the
transactions described in this Agreement and the Ancillary
Agreements. The
execution, delivery and performance by the PEARL Parties of this
Agreement
and the Ancillary Agreements to which it is a party and the
consummation by
the PEARL Parties of the transactions described in this
Agreement and the
Ancillary Agreements have been or will be, prior to the Closing
Date, duly
and validly authorized by all necessary corporate action on the
part of
PEARL (assuming due authorization, execution and delivery by
each other
party thereto), and no other company actions or proceedings on
the part of
any PEARL Group Member are necessary to authorize the execution,
delivery
and performance by the PEARL Parties of this Agreement and the
Ancillary
Agreements to which it is a party or the transactions described
in this
Agreement and the Ancillary Agreements. Each of Rhinesmith, Good
and
Redalen have all requisite legal capacity to execute, deliver
and perform
this Agreement and the Ancillary Agreements to which they are a
party and
to consummate the transactions described in this Agreement and
the
Ancillary Agreements. Each of the PEARL Parties has duly and
validly
executed and delivered this Agreement and has duly and validly
executed and
delivered the Ancillary Agreements to which it is a party. This
Agreement
constitutes, and upon execution and delivery of (assuming due
execution and
delivery thereof by all other Parties thereto) the Ancillary
Agreements to
which each of the PEARL Parties is a party shall constitute,
legal, valid
and binding obligations of each of the PEARL Parties,
enforceable against
each of them in accordance with their terms, except as may be
limited by
(a) applicable bankruptcy, insolvency, moratorium,
reorganization or
13
<PAGE>
similar Laws that affect creditors' rights generally; or (b)
principles of
equity, including legal or equitable limitations on the
availability of
specific remedies.
(d) No Conflicts. Except as set forth in Schedule 4.2(d), to
the
Knowledge of the PEARL Parties, neither the execution and
delivery of this
Agreement by any PEARL Party, nor the performance by any PEARL
Party of
his, or its obligations hereunder, will (i) violate any
statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or
other restriction of any government, governmental agency, or
court to which
such PEARL Group Member or PEARL Party is subject to (or, if
applicable,
any provision of his or its will, or other Governing Documents),
(ii)
conflict with, result in a breach of, constitute a default
under, result in
the acceleration of, create in any party the right to
accelerate,
terminate, modify, or cancel, or require any notice under any
agreement,
contract, lease, license, instrument, or other arrangement to
which such
PEARL Group Member or PEARL Party is a party or by which he,
she, or it is
bound or to which any of his, her, or its assets are subject, or
(iii)
result in the imposition or creation of a Lien upon or with
respect to the
assets of any PEARL Group Member or PEARL Party. No PEARL Group
Member or
PEARL Party is subject to, or a party to, any contract,
instrument or other
commitment that would prevent the execution, delivery and
performance by a
PEARL Group Member or PEARL Party of this Agreement, each
Ancillary
Agreement to which it is a party and the consummation of the
transactions
contemplated hereby. Except as set forth in Schedule 4.2(d),
neither the
execution and delivery of this Agreement, Ancillary
----------------
Agreements nor the consummation of the transactions contemplated
hereby
will, directly or indirectly (with or without notice or lapse of
time), (a)
Breach (i) any provision of any of the Governing Documents of
any PEARL
Group Member or (ii) any resolution adopted by the board of
directors or
the shareholders of any PEARL Group Member; (b) Breach or give
any
Governmental Body or other Person the right to challenge any of
the
transactions contemplated hereby or to exercise any remedy or
obtain any
relief under any Legal Requirement or any Order to which any
PEARL Group
Member or any of its assets, may be subject; (c) contravene,
conflict with
or result in a violation or breach of any of the terms or
requirements of,
or give any Governmental Body the right to revoke, withdraw,
suspend,
cancel, terminate or modify, any Governmental Authorization that
is held by
any PEARL Group Member or that otherwise relates to any PEARL
Group
Member's assets or to the business of any PEARL Group Member;
(d) cause the
Purchaser to become subject to, or to become liable for the
payment of, any
Tax not accrued for or reflected in the Financial Statements;
(e) Breach
any provision of, or give any Person the right to declare a
default or
exercise any remedy under, or to accelerate the maturity or
performance of,
or payment under, or to cancel, terminate or modify, any
contract to which
any PEARL Group Member is a party; or (f) result in the
imposition or
creation of any Encumbrance, other than a Permitted Encumbrance,
upon or
with respect to any PEARL Group Member's assets.
(e) Brokerage. Except as disclosed in Schedule 4.2(e), there are
no
claims for brokerage commissions, finders' fees or similar
compensation in
connection with the transactions contemplated by this Agreement
based on
any arrangement or agreement binding upon any PEARL Common Stock
for which
any Party or their Affiliates could become liable.
14
<PAGE>
(f) Securities Laws. The EPIC stock to be acquired by the
Shareholders
pursuant to this Agreement is not being acquired with a view to,
or
intention of, distribution in violation of the Securities Act of
1933, as
amended from time to time (the "Securities Act"), or any
applicable state
securities laws, and the EPIC stock shall not be disposed of
in
contravention of the Securities Act or any applicable state
securities
laws. Each of Rhinesmith, Good and Redalen is an executive
officer of
PEARL, is an "accredited investor" as that term is defined under
the
Securities Act, is sophisticated in financial matters and is
able to
evaluate the risks and benefits of the investment in the EPIC
stock. Each
of Rhinesmith, Good and Redalen understands that the EPIC stock
has not
been registered under the Securities Act and therefore cannot be
sold
unless subsequently registered under the Securities Act or
unless an
exemption from such registration is available. Each of
Rhinesmith, Good and
Redalen has had the opportunity to ask questions and receive
answers
concerning the terms and conditions of the EPIC stock and full
access to
such other information concerning Purchaser as he has requested.
Each of
Rhinesmith, Good and Redalen has had the opportunity to review
all
documents filed by EPIC with the Securities and Exchange
Commission.
SECTION 4.3 Consents. Except as set forth in Schedule 4.3, no
PEARL Group
Member or PEARL Party is required to give any notice to or
obtain any consent
from any Person in connection with the execution and delivery of
this Agreement,
the Ancillary Agreements, or the consummation or performance of
any of the
transactions contemplated hereby.
SECTION 4.4 Accounts Receivable. All Accounts Receivable that
are reflected
on the Interim Balance Sheet or on the accounting records of
each PEARL Group
Member as of the Closing Date represent or will represent valid
obligations
arising from sales actually made or services actually performed
by such PEARL
Group Member in the Ordinary Course of Business. Each PEARL
Group Member will
take reasonable steps to collect the Accounts Receivable in the
Ordinary Course
of Business. To the PEARL Parties' knowledge, except to the
extent paid prior to
the Closing Date, and except as set forth on Schedule 4.4, such
Accounts
Receivables are or will be as of the Closing Date current and
collectible net of
the respective reserves shown on the Interim Balance Sheet
(which reserves are
adequate and calculated consistent with past practice). There is
no contest,
claim, defense or right of setoff, other than returns in the
Ordinary Course of
Business of such PEARL Group Member, under any Contract with any
account debtor
of an Account Receivable relating to the amount or validity of
such Account
Receivable. Except as set forth on Schedule 4.4, PEARL has
previously provided
to Purchaser a complete and accurate list of all Accounts
Receivable for each
PEARL Group Member as of the date of the Interim Balance Sheet,
which list sets
forth the aging of each such Account Receivable. As of date of
Closing, PEARL
will provide current Account Receivables, account payables and
cash on hand
statements.
SECTION 4.5 Financial Statements. (a) Except as might be noted
on the
attached Schedule 4.5, PEARL has previously provided to
Purchaser a true and
correct copy of (i) an unaudited balance sheet for all PEARL
Group Members
(other than Pearl Australia) at July 31, 2007, and the related
statements of
income, shareholder's equity and cash flows for the period then
ended ("Interim
Balance Sheet") and (ii) audited Financial Statements for all
PEARL Group
Members (other than Pearl Australia) as of December 31st of each
of 2005 and
15
<PAGE>
2006 the (the financial statements described in clauses (i) and
(ii) above are
collectively referred to as the "Financial Statements"). Except
as noted on
Schedule 4.5 or in the Financial Statements and except for
normal year-end
adjustments, the Financial Statements are complete and correct
in all material
respects, were prepared in accordance with GAAP and present
fairly, in all
material respects, the financial condition of the PEARL Group
Members at the
respective dates thereof and the operating income of the PEARL
Group Members for
the respective periods then ended. The PEARL Parties agree to
send all
year-to-date financials through the Closing Date for each PEARL
Group Member to
Purchaser as soon as they have been prepared.
(a) Except as disclosed in Schedule 4.5(a), no PEARL Group
Member has
any Debt except as set forth in the Interim Balance Sheet.
(b) No PEARL Group Member has off-balance sheet arrangements,
as
determined in accordance with GAAP except as set forth on
Schedule 4.5.
SECTION 4.6 [Intentionally Left Blank]
SECTION 4.7 Real Property. Schedule 4.7 lists and describes
briefly all
real property leased or subleased to any PEARL Group Member. The
PEARL Parties
and the PEARL Group Members have delivered to the Purchaser
correct and complete
copies of the leases and subleases listed in Schedule 4.7, each
as amended to
date. With respect to each lease and sublease listed in Schedule
4.7, and any
amendment thereto:
(a) the lease or sublease, and any amendment thereto, is legal,
valid,
binding, enforceable, and in full force and effect;
(b) the lease or sublease will continue to be legal, valid,
binding,
enforceable, and in full force and effect on the same terms
following the
consummation of the transactions contemplated hereby, except to
the extent
that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
the
enforcement of creditors' rights in general and except that
the
availability of equitable remedies, including specific
performance, is
subject to the discretion of the court before which any
proceeding therefor
may be brought;
(c) no party to the lease or sublease is in material Breach
or
default, and no event has occurred which, with notice or lapse
of time,
would constitute a materialBreach or default or permit
termination,
modification, or acceleration thereunder;
(d) no party to the lease or sublease has repudiated any
provision
thereof;
(e) there are no material disputes, oral agreements, or
forbearance
programs in effect as to the lease or sublease;
(f) with respect to each sublease, no PEARL Party or PEARL
Group
Member has taken any action that would cause the representations
and
warranties set forth in this Agreement to be untrue or incorrect
with
respect to the underlying lease;
16
<PAGE>
(g) No PEARL Group Member has assigned, transferred,
conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or
subleasehold;
(h) to the best of PEARL Parties' Knowledge, to the extent
approval of
any Governmental Body has been required in connection with any
PEARL Group
Member's operation of a property it leases or subleases, such
PEARL Group
Member has received all required approvals and has operated and
maintained,
and conducted its operations on, the leased or subleased
properties in
accordance with applicable laws, rules, and regulations; and
(i) all facilities leased or subleased thereunder are supplied
with
utilities and other services necessary for the operation of
said
facilities.
SECTION 4.8 Absence of Certain Changes. Except as and to the
extent set
forth in Schedule 4.8, since December 31, 2006, each PEARL Group
Member has
conducted its business only in the Ordinary Course of Business
and there has not
been any:
(a) change in any PEARL Group Member's authorized or issued
capital
stock/membership interests, grant of any stock option or right
to purchase
shares of capital stock of any PEARL Group Member or issuance of
any
security convertible into such capital stock;
(b) amendment to the Governing Documents of any PEARL Group
Member;
(c) payment (except in the Ordinary Course of Business) or
increase by
any PEARL Group Member of any bonuses, salaries or other
compensation to
any shareholder, director, officer or employee or entry into
any
employment, severance or similar Contract with any director,
officer or
employee;
(d) adoption of, amendment to or increase in the payments to
or
benefits under, any Employee Plan;
(e) damage to or destruction or loss in excess of $50,000.00 to
any
asset of any PEARL Group Member, whether or not covered by
insurance;
(f) (other than any Agreement for Construction Services
(hereinafter,
"MSA"), Technical Services Agreement (hereinafter, "TSA"),
engineering and
accounting software, real estate leases and purchase orders
entered into in
the Ordinary Course of Business), entry into, termination of or
receipt of
notice of termination of (i) any license, distributorship,
dealer, sales
representative, joint venture, credit or similar Contract to
which any
PEARL Group Member is a party, or (ii) any Contract or
transaction
involving a total remaining commitment by any PEARL Group Member
of at
least $50,000.00;
(g) sale (other than sales in the Ordinary Course of Business),
lease
or other disposition of any asset or property of any PEARL Group
Member in
17
<PAGE>
excess of $50,000 (including the Intellectual Property assets)
or the
creation of any Encumbrance on any asset in excess of
$50,000;
(h) cancellation or waiver of any claims or rights with a value
to any
PEARL Group Member in excess of $25,000.00 outside the Ordinary
Course of
Business;
(i) notification by any customer or supplier of discontinuance
of or
material changes to the terms of its relationship with any PEARL
Group
Member outside the Ordinary Course of Business;
(j) Material Change in the accounting methods used by any PEARL
Group
Member;
(k) violation of any Environmental Law by any PEARL Group
Member.
SECTION 4.9 No Material Change. Except as set forth in Schedule
4.9, since
December 31, 2006, there has not been any Material Change in the
business,
assets, liabilities (contingent or otherwise), results of
operations or
financial condition, of any PEARL Group Member, and no event has
occurred or
circumstance exists that may result in such a Material
Change.
SECTION 4.10 Litigation. Except as set forth in Schedule 4.10,
there is no
pending or threatened Proceeding:
(a) by or against any PEARL Group Member or PEARL Party, or
that
otherwise relates to or may materially adversely affect the
business of, or
any of the assets owned or used by, any PEARL Group Member or
PEARL Party;
or
(b) that challenges, or that may have the effect of
preventing,
delaying, making illegal or otherwise interfering with, any of
the
transactions contemplated herein.
(c) To the PEARL Parties' Knowledge, no event has occurred
or
circumstance exists that is reasonably likely to give rise to or
serve as a
basis for the commencement of any such Proceeding. The PEARL
Parties have
delivered to the Purchaser copies of all pleadings,
correspondence and
other documents relating to each Proceeding listed in Schedule
4.10. Except
as set forth on Schedule 4.10, to the PEARL Parties' Knowledge,
there are
no other Proceedings listed or required to be listed in Schedule
4.10 that
could have an adverse effect on the business, operations,
assets, condition
or prospects of any PEARL Group Member.
(d) Except as set forth in Schedule 4.10:
(i) there is no Order to which any PEARL Group Member, its
businesses or any of its assets are subject; and
(ii) no officer, director, agent or employee of any PEARL
Group
Member is subject to any Order that prohibits such officer,
director,
18
<PAGE>
agent or employee from engaging in or continuing any conduct,
activity
or practice relating to the business of any PEARL Group
Member.
(e) Except as set forth in Schedule 4.10:
(i) Each PEARL Group Member is, and, at all times since
December
31, 2004, has been in compliance with all of the terms and
requirements of each Order to which it or any of a PEARL
Group
Member's assets is or has been subject;
(ii) No event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without
notice
or lapse of time) a violation of or failure to comply with any
term or
requirement of any Order to which any PEARL Group Member or any
PEARL
Group Member's assets are subject; and
(iii) No PEARL Group Member has received, at any time since
December 31, 2004, any notice or other communication (whether
oral or
written) from any Governmental Body or any other Person
regarding any
actual or alleged violation of, or failure to comply with, any
Order
to which any PEARL Group Member's assets is or has been
subject.
SECTION 4.11 Intellectual Property. Schedule 4.11 attached
hereto and made
a part hereof lists all patents, patent applications,
trademarks, trademark
registrations or applications, trade names, service marks,
copyrights, copyright
registrations or applications which are owned by PEARL Group
Members.
(a) Except as set forth in Schedule 4.11(a), no PEARL Group
Member has
granted any license under any of the Intellectual Property to
any other
Person.
(b) Except for computer software used by PEARL (including
specialized
software for accounting and engineering applications), and
except as set
forth in Schedule 4.11(b), no PEARL Group Member requires a
license or
right under or in respect of any intellectual property of any
other Person
to conduct its business as it is presently conducted and no
substantial
part of the business is carried on under the agreement or
consent of any
other Person nor is there any agreement with any other Person
which
significantly restricts the fields in which PEARL's business may
be carried
on.
(c) Except as discussed in Schedule 4.11(c), no disclosure has
been
made to any Person of the know-how or financial or trade secrets
of any
PEARL Group Member, except properly and in the Ordinary Course
of Business
or on condition that such disclosure is to be treated as being
of a
confidential nature.
(d) To the best of the PEARL Parties' Knowledge, except as set
forth
on Schedule 4.11(d):
19
<PAGE>
(i) none of the processes currently used by a PEARL Group
Member
or any of the properties, products or services currently sold by
a
PEARL Group Member or any Intellectual Property infringes
the
intellectual property rights of any other Person; and
(ii) neither the PEARL Group Members nor the PEARL Parties
have
received any notice of adverse claim or threat of adverse claim
by any
Person with respect thereto, and no basis exists for any such
claim.
SECTION 4.12 Contracts.
(a) Schedule 4.12(a) contains an accurate and complete list, and
the
PEARL Group Members have delivered to Purchaser or made
available to
Purchaser to review accurate and complete copies (to the extent
such are
memorialized in writing), of each of the following since
December 31, 2006:
(i) each Contract between a PEARL Group Member and a Related
Person;
(ii) Except for contracts, license or other agreements
relating
to computer software used by PEARL Group Members (including
specialized software for accounting and engineering
applications), and
except for contracts or other agreements (including TSAs and
MSAs)
entered into in the Ordinary Course of Business, each Contract
that
involves performance of services or delivery of goods or
materials by
a PEARL Group Member or to a PEARL Group Member, as the case may
be,
(A) of an amount or value in excess of $75,000.00 and (B) that
is not
cancelable with no more than 90 days notice;
(iii) each Contract (other than contracts for the acquisition
of
motor vehicles by any PEARL Group Member) that was not entered
into in
the Ordinary Course of Business and that involves expenditures
or
receipts of a PEARL Group Member in excess of $20,000.00;
(iv) each Contract affecting the ownership of, leasing of,
title
to, use of or any leasehold or other interest in any real or
personal
property (except personal property leases and installment
and
conditional sales agreements having a value per item or
aggregate
payments of less than $20,000.00 and with a term of less than
one
year);
(v) each Contract with any labor union or other employee
representative of a group of employees relating to wages, hours
and
other conditions of employment;
(vi) each Contract (however named) involving a sharing of
profits, losses, costs or liabilities by a PEARL Group Member
with any
other Person;
20
<PAGE>
(vii) each Contract containing covenants that in any way
purport
to restrict a PEARL Group Member's current business activity or
limit
the freedom of a PEARL Group Member to engage in any line of
business
or to compete with any Person;
(viii) each Contract providing for payments to or by any
Person
based on sales, purchases or profits, other than direct payments
for
goods or services;
(ix) each power of attorney of a PEARL Group Member that is
currently effective and outstanding;
(x) each Contract entered into other than in the Ordinary
Course
of Business that contains or provides for an express undertaking
by a
PEARL Group Member to be responsible for consequential
damages;
(xi) each Contract for capital expenditures in excess of
$50,000.00;
(xii) each Contract not denominated in U.S. dollars; and
(xiii) each written warranty, guaranty or other similar
undertaking with respect to contractual performance extended by
a
PEARL Group Member other than in the Ordinary Course of
Business;
(b) Except as set forth in Schedule 4.12(b), Seller and its
Affiliates
do not have or currently may not acquire any rights under any
Contract of a
PEARL Group Member or any of a PEARL Group Member's assets.
(c) Except as set forth in Schedule 4.12(c):
(i) unless completed in the Ordinary Course of Business or
discharged due to the bankruptcy of a party thereto, each
Contract
identified or required to be identified in Schedule 4.12(a) is
in full
force and effect and is valid and enforceable in accordance with
its
terms;
(ii) no Contract identified or required to be identified in
Schedule 4.12(a) is subject to cancellation or termination as a
result
of the transactions contemplated herein; and
(iii) no Contract identified or required to be identified in
Schedule 4.12(a) will (to the best of PEARL's Knowledge)
upon
completion or performance thereof have an adverse effect on a
PEARL
Group Member.
(d) Except as set forth in Schedule 4.12(d):
(i) Each PEARL Group Member has, and at all times since
December
31, 2004, has been, in compliance in all material respects with
all
21
<PAGE>
applicable terms and requirements of each Contract to which a
PEARL
Group Member is a party;
(ii) each other Person that has or had any obligation or
liability under any Contract to which a PEARL Group Member is a
party
is, and at all times since December 31, 2004, has been, in
full
compliance with all applicable terms and requirements of such
Contract
in all material respects;
(iii) to the best of the PEARL Parties' Knowledge, no event
has
occurred or circumstance exists that (with or without notice or
lapse
of time) may contravene, conflict with or result in a Breach of,
or
give a PEARL Group Member or other Person the right to declare
a
default or exercise any remedy under, or to accelerate the
maturity or
performance of, or payment under, or to cancel, terminate or
modify,
any Contract to which a PEARL Group Member is a Party;
(iv) no event has occurred or circumstance exists under or
by
virtue of any Contract that (with or without notice or lapse of
time)
would cause the creation of any Encumbrance affecting any of a
PEARL
Group Member's assets; and
(v) no PEARL Group Member has given to or received from any
other
Person, at any time since December 31, 2004, any notice or
other
communication (whether oral or written) regarding any actual,
alleged,
possible or potential material violation or material Breach of,
or
material default under, any Contract to which a PEARL Group
Member is
a Party.
(e) There are no renegotiations of, attempts to renegotiate
or
outstanding rights to renegotiate any amounts paid or payable to
a PEARL
Group Member under current or completed Contracts with any
Person having
the contractual or statutory right to demand or require such
renegotiation
and no such Person has made written demand for such
renegotiation.
(f) Each Contract relating to the sale, design, manufacture
or
provision of products or services by a PEARL Group Member has
been entered
into in the Ordinary Course of Business of such PEARL Group
Member and has
been entered into without the commission of any act alone or in
concert
with any other Person, or any consideration having been paid or
promised,
that is or would be in violation of any Legal Requirement.
SECTION 4.13 Customers and Suppliers. Except as set forth in
Schedule 4.13,
since December 31, 2006, no major supplier or major customer has
canceled or
otherwise terminated, or given notice of intent to cancel or
otherwise
terminate, for any reason, its relationship with any PEARL Group
Member.
22
<PAGE>
SECTION 4.14 Employee Benefit Plans.SECTION 4.19
(a) Except as otherwise disclosed to Purchaser or previously
provided
to Purchaser, set forth in Schedule 4.14(a) is a complete and
correct list
of all "employee benefit plans" (foreign or domestic) as defined
by Section
3(3) of ERISA or otherwise, all specified fringe benefit plans
as defined
in Section 6039D of the Code, and all other bonus,
incentive-compensation,
deferred-compensation, profit-sharing, stock-option,
stock-appreciation-right, stock-bonus, stock-purchase,
employee-stock-ownership, savings, savings plans (registered
or
non-registered) severance, change-in-control,
supplemental-unemployment,
layoff, salary-continuation, retirement, pension, health,
life-insurance,
disability, accident, group-insurance, vacation, holiday,
sick-leave,
fringe-benefit or welfare plan, and any other employee
compensation or
benefit plan, agreement, policy, practice, commitment, contract
or
understanding (whether qualified or nonqualified, currently
effective or
terminated, written or unwritten) and any trust, escrow or other
agreement
related thereto that (i) is maintained or contributed to by
PEARL or any
other corporation or trade or business controlled by,
controlling or under
common control with PEARL (within the meaning of Section 414 of
the Code or
Section 4001(a)(14) or 4001(b) of ERISA) ("ERISA Affiliate") or
has been
maintained or contributed to in the last four (4) years by PEARL
or any
ERISA Affiliate, or with respect to which PEARL or any ERISA
Affiliate has
or may have any liability, and (ii) provides benefits, or
describes
policies or procedures applicable to any current or former
director,
officer, employee or service provider of PEARL or any ERISA
Affiliate, or
the dependents of any thereof, regardless of how (or whether)
liabilities
for the provision of benefits are accrued or assets are acquired
or
dedicated with respect to the funding thereof (collectively the
"Employee
Plans"). Also set forth on Schedule 4.14(a) is a complete and
correct list
of all ERISA Affiliates of PEARL during the last four (4)
years.
(b) PEARL has delivered to the Purchaser true, accurate and
complete
copies of (i) the documents comprising each Employee Plan (or,
with respect
to any Employee Plan which is unwritten, a detailed written
description of
eligibility, participation, benefits, funding arrangements,
assets and any
other matters which relate to the obligations of each of PEARL
or any ERISA
Affiliate); (ii) all trust agreements, insurance contracts or
any other
funding instruments related to the Employee Plans; (iii) all
rulings,
determination letters, no-action letters or advisory opinions
from the U.S.
Internal Revenue Service ("IRS"), the U.S. Department of Labor,
the Pension
Benefit Guaranty Corporation ("PBGC") or any other Governmental
Body that
pertain to each Employee Plan and any open requests therefor;
(iv) if
applicable, the most recent actuarial and financial reports
(audited and/or
unaudited) and the annual reports filed with any Government Body
with
respect to the Employee Plans during the current year and each
of the three
preceding years; (v) if applicable, all collective bargaining
agreements
pursuant to which contributions to any Employee Plan(s) have
been made or
obligations incurred (including both pension and welfare
benefits) by each
of PEARL or any ERISA Affiliate, and all collective bargaining
agreements
pursuant to which contributions are being made or obligations
are owed by
such entities; (vi) if applicable, all securities registration
statements
filed with respect to any Employee Plan; (vii) if applicable,
all contracts
23
<PAGE>
with third-party administrators, actuaries, investment
managers,
consultants and other independent contractors that relate to any
Employee
Plan; and (viii) all summary plan descriptions, summaries of
material
modifications and memoranda, employee handbooks and other
written
communications regarding the Employee Plans.
(c) Except as disclosed in Schedule 4.14(c), full payment has
been
made of all amounts that are required under the terms of each
Employee Plan
to be paid as contributions with respect to all periods prior to
and
including the last day of the most recent fiscal year of such
Employee Plan
ended on or before the date of this Agreement and all periods
thereafter
prior to the Closing Date.
(d) Neither PEARL nor any ERISA Affiliate has ever
sponsored,
maintained or been required to contribute to a plan subject to
Title IV of
ERISA, including a Multiemployer Plan.
(e) PEARL has, at all times, complied, and currently complies,
in all
material respects with the applicable continuation requirements
for its
welfare benefit plans, including (1) Section 4980B of the Code
(as well as
its predecessor provision, Section 162(k) of the Code) and
Sections 601
through 608, inclusive, of ERISA, which provisions are
hereinafter referred
to collectively as "COBRA" and (2) any applicable state statutes
mandating
health insurance continuation coverage for employees.
(f) The form of all Employee Plans is in compliance with the
applicable terms of ERISA, the Code, and any other applicable
laws,
including the Americans with Disabilities Act of 1990, the
Family Medical
Leave Act of 1993 and the Health Insurance Portability and
Accountability
Act of 1996, and such plans have been operated in compliance
with such laws
and the written Employee Plan documents. Neither PEARL nor any
Fiduciary of
an Employee Plan has violated the requirements of Section 404 of
ERISA. All
required reports and descriptions of the Employee Plans
(including Internal
Revenue Service Form 5500 Annual Reports, Summary Annual Reports
and
Summary Plan Descriptions and Summaries of Material
Modifications) have
been (when required) timely filed with the IRS, the U.S.
Department of
Labor or other Governmental Body and distributed as required,
and all
notices required by ERISA or the Code or any other Legal
Requirement with
respect to the Employee Plans have been appropriately given.
(g) Each Employee Plan that is intended to be qualified under
Section
401(a) of the Code has received a favorable determination letter
from the
IRS, and there are no circumstances that will or could result in
revocation
of any such favorable determination letter. Each trust created
under any
Employee Plan has been determined to be exempt from taxation
under Section
501(a) of the Code, PEARL is not aware of any circumstance that
will or
could result in a revocation of such exemption. Each Employee
Welfare
Benefit Plan (as defined in Section 3(1) of ERISA) that utilizes
a funding
vehicle described in Section 501(c)(9) of the Code or is subject
to the
provisions of Section 505 of the Code has been the subject of
a
notification by the IRS that such funding vehicle qualifies for
tax-exempt
status under Section 501(c)(9) of the Code or that the plan
complies with
Section 505 of the Code, unless the IRS does not, as a matter of
policy,
24
<PAGE>
issue such notification with respect to the particular type of
plan. With
respect to each Employee Plan, no event has occurred or
condition exists
that will or could give rise to a loss of any intended tax
consequence or
to any Tax under Section 511 of the Code.
(h) There is no material pending or threatened Proceeding
relating to
any Employee Plan, nor is there any basis for any such
Proceeding. Neither
PEARL nor any Fiduciary of an Employee Plan has engaged in a
transaction
with respect to any Employee Plan that, assuming the taxable
period of such
transaction expired as of the date hereof, could subject PEARL
or Purchaser
to a Tax or penalty imposed by either Section 4975 of the Code
or Section
502(l) of ERISA or a violation of Section 406 of ERISA. The
transactions
contemplated hereby will not result in the potential assessment
of a Tax or
penalty under Section 4975 of the Code or Section 502(l) of
ERISA nor
result in a violation of Section 406 of ERISA.
(i) PEARL has maintained workers' compensation coverage as
required by
applicable state, provincial, or territorial law through
purchase of
insurance and not by self-insurance or otherwise except as
disclosed to
Purchaser on Schedule 4.14(i).
(j) Except as required by Legal Requirements, the consummation
of the
transactions contemplated hereby will not accelerate the time of
vesting or
the time of payment, or increase the amount, of compensation due
to any
director, employee, officer, former employee or former officer
of PEARL.
There are no contracts or arrangements providing for payments
that could
subject any person to liability for tax under Section 4999 of
the Code.
(k) Except for the continuation coverage requirements of COBRA,
PEARL
has no obligations or potential liability for benefits to
employees, former
employees or their respective dependents following termination
of
employment or retirement under any of the Employee Plans that
are Employee
Welfare Benefit Plans.
(l) None of the transactions contemplated hereby will result in
an
amendment, modification or termination of any of the Employee
Plans. No
written or oral representations have been made to any employee
or former
employee of PEARL promising or guaranteeing any employer payment
or funding
for the continuation of medical, dental, life or disability
coverage for
any period of time beyond the end of the current plan year
(except to the
extent of coverage required under COBRA). No written or oral
representations have been made by PEARL to any employee or
former employee
of PEARL concerning the employee benefits of the Purchaser.
SECTION 4.15 Compliance with Law.
(a) To the PEARL Parties' Knowledge, except as set forth in
Schedule
4.15(a),
(i) the PEARL Group Members are, and at all times since
December
31, 2004, have been, in compliance with each Legal Requirement
that is
or was applicable to them or to the conduct or operation of
its
25
<PAGE>
business or the ownership or use of any of its assets in all
material
respects;
(ii) no event has occurred or circumstance exists that (with
or
without notice or lapse of time) (A) may constitute or result in
a
violation by a PEARL Group Member of, or a failure on the part
of a
PEARL Group Member to comply with, any Legal Requirement or (B)
may
give rise to any obligation on the part of a PEARL Group Member
to
undertake, or to bear all or any portion of the cost of, any
remedial
action of any nature; and
(iii) the PEARL Group Members have not received, at any time
since December 31, 2004, any notice or other communication
(whether
oral or written) from any Governmental Body or any other
Person
regarding (A) any actual, alleged, possible or potential
violation of,
or failure to comply with, any Legal Requirement or (B) any
actual,
alleged, possible or potential obligation on the part of a PEARL
Group
Member to undertake, or to bear all or any portion of the cost
of, any
remedial action of any nature.
(b) Except for business licenses, sales and use tax
licenses,
licensing or registrations to do business in foreign states,
professional
registrations or licensing, and building permits, Schedule
4.15(b) contains
a complete and accurate list of each Governmental Authorization
that is
held by a PEARL Group Member or that otherwise relate to a PEARL
Group
Member's business or its assets. Each Governmental Authorization
needed by
a PEARL Group Member for the conduct of its business is valid
and in full
force and effect. Except as set forth in Schedule 4.15(b), to
the Knowledge
of the PEARL Parties and PEARL Group Members:
(i) the PEARL Group Members are , and at all times since
December
31, 2004, have been, in full compliance with all of the terms
and
requirements of each Governmental Authorization identified or
required
to be identified in Schedule 4.15(b);
(ii) no event has occurred or circumstance exists that may
(A)
constitute or result directly or indirectly in a violation of or
a
failure to comply with any term or requirement of any
Governmental
Authorization or (B) result directly or indirectly in the
revocation,
withdrawal, suspension, cancellation or termination of, or
any
modification to, any Governmental Authorization needed by a
PEARL
Group Member for the conduct of its business;
(iii) the PEARL Group Members have not received, at any time
since December 31, 2004, any notice or other communication
(whether
oral or written) from any Governmental Body or any other
Person
regarding (A) any actual, alleged, possible or potential
violation of
or failure to comply with any term or requirement of any
Governmental
Authorization or (B) any actual, proposed, possible or
potential
revocation, withdrawal, suspension, cancellation, termination of
or
modification to any Governmental Authorization; and
26
<PAGE>
(iv) all applications required to have been filed for the
renewal
of the Governmental Authorizations necessary of the conduct of a
PEARL
Group Member's business have been duly filed on a timely basis
with
the appropriate Governmental Bodies, and all other filings
required to
have been made with respect to such Governmental Authorizations
have
been duly made on a timely basis with the appropriate
Governmental
Bodies.
(c) To the PEARL Parties' Knowledge, the Governmental
Authorizations
described in Section 4.15(b) and/or listed in Schedule 4.15(b)
collectively
constitute all of the Governmental Authorizations necessary to
permit the
PEARL Group Members to lawfully conduct and operate its business
in the
manner in which it currently conducts and operates such business
and to
permit the PEARL Group Members to own and use its assets in the
manner in
which they currently own and use such assets.
SECTION 4.16 Taxes.
(a) Tax Returns Filed and Taxes Paid. The PEARL Group Members
have
filed or caused to be filed on a timely basis all Tax Returns
and all
reports with respect to Taxes that are or were required to be
filed
pursuant to applicable Legal Requirements. All Tax Returns and
reports
filed by the PEARL Group Members are true, correct and complete.
To the
Knowledge of the PEARL Parties and the PEARL Group Members, the
Seller and
PEARL, as the case may be, has paid, or made provision for the
payment of,
all Taxes for which they are responsible that have or may have
become due
for all periods covered by the Tax Returns or otherwise, or
pursuant to any
assessment received by a PEARL Group Member, except such Taxes,
if any, as
are listed in Schedule 4.16(a) and are being contested in good
faith and as
to which adequate reserves (determined in accordance with GAAP)
have been
provided in the Interim Balance Sheet and the Financial
Statements. Except
as provided in Schedule 4.16(a), none of the PEARL Parties or
PEARL Group
Members are currently the beneficiary of any extension of time
within which
to file any Tax Return. No claim has ever been made or is
expected to be
made by any Governmental Body in a jurisdiction where a PEARL
Group Member
does not file Tax Returns that it is or may be subject to
taxation by that
jurisdiction. There are no Encumbrance on any of the assets that
arose in
connection with any failure to pay any Tax, and no claims
attributable to
Taxes which, if adversely determined, would result in any such
Encumbrance.
(b) Delivery of Tax Returns and Information Regarding Audits
and
Potential Audits. The Seller has delivered or made available to
Purchaser
copies of, and Schedule 4.16(b) contains a complete and accurate
copy of,
all federal, state, provincial, territorial, local, and foreign
income Tax
Returns for the PEARL Group Members (other than Tax Returns for
sales and
use taxes) filed since December 31, 2004. Schedule 4.16(b)
contains a
complete and accurate list of all audits and pending Tax
disputes. Neither
PEARL nor Seller expects any undisclosed deficiencies to be
asserted with
respect to any such audit. All deficiencies proposed as a result
of such
audits have been paid, reserved against, settled or are being
contested in
good faith. The Seller has delivered, or made available to
Purchaser,
copies of any examination reports, statements or deficiencies or
similar
27
<PAGE>
items with respect to such audits. Except as provided in
Schedule 4.16(b),
no Governmental Body is likely to assess any additional taxes
for any
period for which Tax Returns have been filed. Except as provided
in
Schedule 4.16(b), there is no dispute or claim concerning any
Taxes of a
PEARL Group Member claimed or raised by any Governmental Body.
Except as
described in Schedule 4.16(b), no PEARL Group Member has been
given or been
requested to give waivers or extensions (or is or would be
subject to a
waiver or extension given by any other Person) of any statute
of
limitations relating to the payment of Taxes of a PEARL Group
Member or for
which a PEARL Group Member may be liable.
(c) Post-Closing Tax Liabilities. To the PEARL Parties'
Knowledge,
other than tax distributions described in Section 6.1, the
unpaid Taxes of
a PEARL Group Member (i) will not, as of the Closing Date,
exceed the
reserve for Tax Liability (rather than any reserve for deferred
Taxes
established to reflect timing differences between book and Tax
income) set
forth on the face of the Interim Balance Sheet and (ii) will not
exceed
that reserve as adjusted for passage of time through the Closing
Date in
accordance with the past custom and practice of PEARL in filing
its past
Tax Returns. Except as disclosed in Schedule 4.16(c), there
exists no
proposed tax assessment or deficiency against a PEARL Group
Member. Since
the date of the Interim Balance Sheet, PEARL has not incurred
any liability
for Taxes arising from extraordinary gains or losses, as that
term is used
in GAAP, outside the Ordinary Course of Business consistent with
past
custom and practice. The Parties acknowledge that, as a Sub-S
corporati
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