Exhibit 2.1
SHARE EXCHANGE AGREEMENT
AMONG
PCS EDVENTURES!.COM, INC.,
511092 NB LTD.
AND ITS SHAREHOLDERS
Effective November 30, 2005
The Buyer Stock has not been registered under the Securities Act
of 1933 and may not be offered or sold in the United States or to
U.S. persons unless the securities are registered under the Act,
or an exemption from the registration requirements of the Act is
available. Hedging transactions involving Buyer Stock may not be
conducted unless in compliance with the Act.
TABLE OF CONTENTS
Page
Article 1 PARTIES. . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Buyer. . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 LabMentors . . . . . . . . . . . . . . . . . . . . . .1
1.3 Shareholders . . . . . . . . . . . . . . . . . . . . .1
1.4 Sellers. . . . . . . . . . . . . . . . . . . . . . . .1
1.5 Successors and Assigns . . . . . . . . . . . . . . . .1
Article 2 PURCHASE AND SALE. . . . . . . . . . . . . . . . . . .1
2.1 Transfer and Assumption. . . . . . . . . . . . . . . .1
2.2 Mechanics of Share Exchange. . . . . . . . . . . . . .2
2.2.1 Exchange of LabMentors Stock for Buyer's Stock.2
2.2.2 Payment of Fee 2
2.2.3 Issuance of Buyer Stock. 2
2.3 Purchase Price . . . . . . . . . . . . . . . . . . . .2
2.4 Form of Payment. . . . . . . . . . . . . . . . . . . .2
2.4.1 Buyer Stock 2
2.4.2 Earnout 3
2.4.3 Shareholders' Access to Business Records. 4
2.5 Risk of Loss . . . . . . . . . . . . . . . . . . . . .4
Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LABMENTORS AND
SHAREHOLDERS.. . . . . . . . . . . . . . . . . . . . . . . . .4
3.1 Financial Statements . . . . . . . . . . . . . . . . .4
3.2 Absence of Undisclosed Liabilities . . . . . . . . . .5
3.3 No Default . . . . . . . . . . . . . . . . . . . . . .5
3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . .5
3.4.1 Timely Filing of Tax Returns 5
3.4.2 Preparation of Tax Returns and Payment of Taxes5
3.4.3 Tax Lien 5
3.4.4 Withholding Taxes 5
3.4.5 Waivers and Extensions of Time 6
3.4.6 Audit, Administrative and Court Proceedings 6
3.4.7 Powers of Attorney 6
3.4.8 Tax Rulings 6
3.4.9 Availability of Tax Returns 6
3.4.10 Tax Sharing Agreements 6
3.4.11 Liability for Others 6
3.4.12 Accounting Adjustments 6
3.4.13 Partnerships or Joint Ventures 6
3.4.14 Indemnities 6
3.5 Assets . . . . . . . . . . . . . . . . . . . . . . . .7
3.5.1 Cash 7
3.5.2 Motor Vehicles 7
3.5.3 Equipment, Furniture and Fixtures 7
3.5.4 Real Property 7
3.5.5 Personal Property Leases 7
3.5.6 Material Contracts 8
3.5.7 Prepaid Expenses 8
3.5.8 Accounts Receivables 8
3.5.9 Business Records 8
3.5.10 Inventory 8
3.5.11 Licenses and Permits 8
3.5.12 Intellectual Property 8
3.5.13 Communication Addresses 9
3.5.14 Computer Software and Databases 9
3.5.15 Proprietary Information 9
3.5.16 Goodwill 9
3.5.17 Tangible And Intangible Personal Property 9
3.6 Liabilities. . . . . . . . . . . . . . . . . . . . . 10
3.6.1 Trade Payables 10
3.6.2 Purchase Orders 10
3.6.3 Personal Property Leases and Contracts 10
3.6.4 Prepaid Income 10
3.6.5 Obligations Arising From Transferred Assets 10
3.6.6 Scheduled Liabilities 10
3.7 Clear Title to Assets. . . . . . . . . . . . . . . . 10
3.8 Insurance. . . . . . . . . . . . . . . . . . . . . . 10
3.9 Financial Accounts . . . . . . . . . . . . . . . . . 10
3.10 Leased Property Information. . . . . . . . . . . . . 11
3.11 Leased Property Vendors. . . . . . . . . . . . . . . 11
3.12 Utilities. . . . . . . . . . . . . . . . . . . . . . 11
3.13 Prior Construction and Renovation. . . . . . . . . . 11
3.14 Hazardous Material . . . . . . . . . . . . . . . . . 11
3.14.1 No Hazardous Material Use 11
3.14.2 No Claims or Notices 11
3.14.3 No Investigations 11
3.14.4 No Asbestos 11
3.14.5 No USTs 12
3.14.6 Full Compliance With Environmental Laws 12
3.14.7 Hazardous Material Definition 12
3.14.8 Environmental Laws Definition 12
3.15 Access to Property . . . . . . . . . . . . . . . . . 12
3.16 Employees. . . . . . . . . . . . . . . . . . . . . . 12
3.17 Employment Obligations and Benefits. . . . . . . . . 12
3.18 Employee Agreements. . . . . . . . . . . . . . . . . 13
3.19 Labor Unions . . . . . . . . . . . . . . . . . . . . 13
3.20 Joe Khoury Employment Contract . . . . . . . . . . . 13
3.21 No Employee Benefit Plans Unless Disclosed . . . . . 13
3.22 Employee Benefit Plan Obligations. . . . . . . . . . 13
3.22.1 Employer 13
3.22.2 Delivery of Plan Documents 13
3.22.3 Plan Compliance 14
3.22.4 No Guarantee Fund Liability 14
3.22.5 No Tax or Other Liability 14
3.22.6 No Prohibited Transactions 14
3.22.7 All Plans Funded and Currently In Compliance 14
3.22.8 Benefits Are As Represented 15
3.22.9 Covenant of Precaution 15
3.22.10 COBRA and Health Care Responsibility 15
3.22.11 Transaction Will Not Trigger Benefits 15
3.23 Business Records Compliance. . . . . . . . . . . . . 15
3.24 Operation Of Business. . . . . . . . . . . . . . . . 15
3.25 Access to Business . . . . . . . . . . . . . . . . . 16
3.26 Confidential Information . . . . . . . . . . . . . . 17
3.27 Compliance with Law. . . . . . . . . . . . . . . . . 17
3.28 Litigation Or Claims . . . . . . . . . . . . . . . . 17
3.29 Product Liability. . . . . . . . . . . . . . . . . . 17
3.30 Restricted Buyer Stock.. . . . . . . . . . . . . . . 17
3.31 Certification of Residence . . . . . . . . . . . . . 18
3.32 Accredited or Sophisticated Investor . . . . . . . . 18
3.33 Shareholder's Reliance on Advisors . . . . . . . . . 18
3.34 Stock Dilution . . . . . . . . . . . . . . . . . . . 18
3.35 Sufficient Information . . . . . . . . . . . . . . . 18
3.36 Response to Inquiries. . . . . . . . . . . . . . . . 18
3.37 Ability to Withstand Loss. . . . . . . . . . . . . . 19
3.38 No Agency Endorsement. . . . . . . . . . . . . . . . 19
3.39 Shareholder's Counsel. . . . . . . . . . . . . . . . 19
3.40 Investment Purpose . . . . . . . . . . . . . . . . . 19
3.41 Workers Investment Fund, Inc.. . . . . . . . . . . . 19
3.42 Transfer Restrictions; Legends . . . . . . . . . . . 19
3.43 Regulation S Compliance. . . . . . . . . . . . . . . 20
3.44 Organization, Good Standing and Qualification. . . . 20
3.45 Capitalization . . . . . . . . . . . . . . . . . . . 20
3.46 Authority To Contract. . . . . . . . . . . . . . . . 21
3.47 No Limit On Authority. . . . . . . . . . . . . . . . 21
3.48 Brokers or Finders . . . . . . . . . . . . . . . . . 21
3.49 Material Misstatement or Omissions . . . . . . . . . 22
Article 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.. 22
4.1 Organization, Good Standing and Qualification. . . . 22
4.2 Authority To Contract. . . . . . . . . . . . . . . . 22
4.3 No Limit On Authority. . . . . . . . . . . . . . . . 22
4.4 Restricted Buyer Stock . . . . . . . . . . . . . . . 22
4.5 LabMentors Headquarters. . . . . . . . . . . . . . . 23
4.6 LabMentors' Employees. . . . . . . . . . . . . . . . 23
4.7 Continued Operation of Company's Business. . . . . . 23
4.8 Brokers or Finders . . . . . . . . . . . . . . . . . 23
4.9 Material Misstatement or Omissions . . . . . . . . . 23
Article 5 CONDITIONS OF CLOSING. . . . . . . . . . . . . . . . 23
5.1 Conditions Precedent To Obligations Of Buyer . . . . 23
5.1.1 Completion Of Buyer's Due Diligence 23
5.1.2 Completion of Buyer's Audit of LabMentors. 24
5.1.3 Representations and Warranties True 24
5.1.4 Covenants Performed 24
5.1.5 Third Party Consents 24
5.1.6 Governmental Approvals 24
5.1.7 No Litigation 24
5.1.8 No Material Adverse Change. 24
5.1.9 Execution and Certification of Resolution of
Board of Directors 24
5.1.10 Public Record Searcs 24
5.1.11 Additional Equity. 25
5.1.12 Convertible Securities. 25
5.1.13 Estoppel Certificate. 25
5.1.14 Shareholder Approval 25
5.1.15 Removal of Encumbrances and Liens 25
5.1.16 Joe Khoury Employment Agreement 25
5.1.17 Financial and Operating Performance 25
5.1.18 Approval By Board Of Directors 25
5.1.19 Legal Opinions 25
5.1.20 Shareholder Agreement 25
5.1.21 Key Employees 25
5.1.22 Updated Financial Statements 25
5.1.23 Estoppel Certificates. 26
5.2 Conditions Precedent to Obligations of Sellers . . . 26
5.2.1 Representations and Warranties True 26
5.2.2 Covenants Performed 26
5.3 Waiver of Conditions . . . . . . . . . . . . . . . . 26
Article 6 CLOSING. . . . . . . . . . . . . . . . . . . . . . . 26
6.1 Time, Date and Place of Closing. . . . . . . . . . . 26
6.2 Further Assurances . . . . . . . . . . . . . . . . . 27
6.3 Assignment of WIF Buyer Stock. Buyer consents to the
transfer of Buyer Stock received by WIF (subject to
compliance with the applicable United States federal
securities laws and the transfer restrictions set forth in
this Agreement) and the earn-out rights associated therewith
pursuant to Section 2.4.2 to Growthworks Atlantic Venture
Fund Ltd.. . . . . . . . . . . . . . . . . . . . . . 27
Article 7 NONCOMPETITION AND CONFIDENTIAL INFORMATION. . . . . 27
7.1 Purpose Of Noncompetition And Confidential Information
Agreements . . . . . . . . . . . . . . . . . . . . . 27
7.2 Noncompetition Agreement . . . . . . . . . . . . . . 27
7.3 Confidentiality Agreement. . . . . . . . . . . . . . 28
7.4 Inducement of Buyer. . . . . . . . . . . . . . . . . 28
7.5 Acknowledgement by Shareholders. . . . . . . . . . . 28
Article 8 EXCLUSIVITY AND BREAKUP FEE. . . . . . . . . . . . . 28
8.1 Exclusivity. . . . . . . . . . . . . . . . . . . . . 28
8.2 Breakup Fee. . . . . . . . . . . . . . . . . . . . . 28
Article 9 REMEDIES.. . . . . . . . . . . . . . . . . . . . . . 29
9.1 Survival of Representations, Warranties and Covenants29
9.2 Claim. . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Claim Notice and Cure Period . . . . . . . . . . . . 29
9.4 Claim Resolution Procedure . . . . . . . . . . . . . 29
9.5 Special Remedies for Noncompetition and Confidentiality
Violations . . . . . . . . . . . . . . . . . . . . . 29
9.6 Indemnity. . . . . . . . . . . . . . . . . . . . . . 30
9.7 Purchase Price Offset. . . . . . . . . . . . . . . . 30
9.8 Indemnification of LabMentors Directors. . . . . . . 30
9.9 Attorney Fees and Costs. . . . . . . . . . . . . . . 30
9.10 Rights Cumulative. . . . . . . . . . . . . . . . . . 30
9.11 Nonwaiver of Remedies. . . . . . . . . . . . . . . . 31
9.12 Governing Law, Jurisdiction, and Venue . . . . . . . 31
Article 10 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . 31
10.1 Public Disclosure. . . . . . . . . . . . . . . . . . 31
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Sellers' Information Disclosed In Negotiations . . . 32
10.4 Payment of Expenses. . . . . . . . . . . . . . . . . 32
10.5 Time of the Essence. . . . . . . . . . . . . . . . . 33
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . 33
10.7 Disclosures. . . . . . . . . . . . . . . . . . . . . 33
10.8 Buyer's Assistance In Preparing Disclosures. . . . . 33
10.9 Severability . . . . . . . . . . . . . . . . . . . . 33
10.10 Counterparts 33
Article 11 SIGNATURES. . . . . . . . . . . . . . . . . . . . . 34
SHARE EXCHANGE AGREEMENT
Effective November 30, 2005 (the "Effective Date"), PCS Edventures!.com,
Inc., an Idaho corporation, 511092 NB Ltd., a New Brunswick corporation, and
the Shareholders listed on Schedule 1.3, agree as follows:
Article 1
PARTIES.
1.1 Buyer. PCS Edventures!.com, Inc., is an Idaho corporation
("Buyer"), with its general offices located at 345 Bobwhite Court, Suite 200,
Boise, Idaho, USA 83706.
1.2 LabMentors. 511092 NB Ltd. is a New Brunswick corporation doing
business as LabMentors, with its general offices located at 412 Queen St,
Suite 300, Fredericton, NB, Canada ("LabMentors"). LabMentors provides guided
on-line labs for web-based training (the "Business").
1.3 Shareholders. The shareholders of LabMentors are listed on
Schedule 1.3 (collectively, the "Shareholders", and each individually a
"Shareholder").
1.4 Sellers. LabMentors and the Shareholders are jointly referenced
as the "Sellers."
1.5 Successors and Assigns. Subject to any express provisions in this
Agreement regarding restrictions on transfers or assignments, this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs, and personal representatives. Buyer
has the right, in Buyer's sole discretion, to assign all or part of Buyer's
rights and obligations set forth in this Agreement.
Article 2
PURCHASE AND SALE.
2.1 Transfer and Assumption. At the Closing described in Article 6,
and subject to the terms and conditions of this Agreement, Shareholders agree
to sell, transfer and deliver to Buyer, and Buyer agrees to purchase and take
delivery from Shareholders, all of the outstanding equity securities of
LabMentors, including all stock, stock options, warrants, convertible
debentures and other convertible securities of LabMentors (collectively, the
"LabMentors Stock"), free and clear of all charges, claims, marital or
community property interests, conditions, equitable interests, liens, options,
pledges, security interests, rights of first refusal, or restrictions of any
kind, including any restrictions on use, voting, transfer, receipt of income,
or exercise of any other attribute of ownership, in exchange for unregistered
restricted common stock of the Buyer ("Buyer Stock"). Upon completion of the
exchange of Buyer Stock for LabMentors Stock (the "Share Exchange"),
LabMentors will be a wholly-owned subsidiary of Buyer.
2.2 Mechanics of Share Exchange. At Closing, Buyer shall exchange
Buyer Stock for all of the outstanding shares of LabMentors Stock as follows:
2.2.1 Exchange of LabMentors Stock for Buyer's Stock. Upon the
surrender to Buyer of certificates representing 100% of the LabMentors Stock,
duly endorsed for transfer, the Shareholders shall be entitled to receive from
Buyer the number of shares of Buyer Stock determined as follows: The number
of shares of Buyer Stock to be issued to each Shareholder shall equal ninety
percent (90%) of the number of shares of Exchangeable Stock, as defined in
Section 2.4.1(a), multiplied by a fraction equal to (i) the number of shares
of LabMentors Stock, on a fully diluted basis, held by the Shareholder,
divided by (ii) the number of issued and outstanding shares of LabMentors
Stock, on a fully diluted basis, immediately prior to Closing, and rounded up
to the next whole number of shares.
2.2.2 Payment of Fee. The Shareholders hereby authorize and
direct Buyer to issue to Frank Maresca, at Closing, ten percent (10%) of the
number of shares of Exchangeable Stock (rounded up to the next whole number of
shares) in full payment and discharge of LabMentors' obligation to pay
Saratoga Equity Ltd. ("Saratoga") pursuant to an Agreement between LabMentors
and Saratoga dated the 2nd day of January 2005.
2.2.3 Issuance of Buyer Stock. At Closing, the number of shares
of Buyer Stock to be issued to each of the Shareholders shall be calculated in
accordance with Section 2.2.1. At Closing, an agreed Schedule 2.2.3 shall be
attached to this Agreement reflecting the number of shares of Buyer Stock to
be issued to each of the Shareholders and to Saratoga. Buyer shall instruct
its transfer agent to issue and deliver certificates for such Buyer Stock to
each of the Shareholders and Saratoga. Upon the Closing, the Shareholders and
Saratoga shall be deemed to be the record and beneficial owners of such Buyer
Stock.
2.3 Purchase Price. The purchase price ("Purchase Price") to be paid
by Buyer to Shareholders pursuant to this Agreement is (i) $420,000 (the "Base
Price") payable at Closing plus (ii) an earnout amount, payable as set forth
in Section 2.4.2.
2.4 Form of Payment. The Purchase Price shall be paid in the form of
Buyer Stock as follows:
2.4.1 Buyer Stock. At Closing, Buyer shall pay the Base Price
to the Shareholders in the form of Buyer Stock, as follows:
(a) Exchangeable Stock. The number of shares of Buyer
Stock to be exchanged ("Exchangeable Stock") for LabMentors Stock at Closing
shall equal the Base Price divided by the average of the last sale price per
share of the Buyer Stock as reported on the National Association of Securities
Dealers Over-the-Counter Bulletin Board ("OTCBB") over the immediately
preceding period which includes ten (10) days on which Buyer Stock traded on
the OTCBB ("10 day trailing average price per share"); however, the 10 day
trailing average price per share shall be no lower than $0.50 and no higher
than $0.60 per share.
(b) Illustrative Example. For clarification purposes, the
following example illustrates the effects of the Share Exchange on a holder of
1,000 shares of LabMentors Stock ("Holder A"), assuming there are 100,000
shares of LabMentors Stock issued and outstanding at Closing on a fully
diluted basis. For purposes of this example, the 10 day trailing average
price per share of Buyer Stock is assumed to be $0.50. At Closing, the
number of shares of Exchangeable Stock equals the Base Price ($420,000)
divided by the ten day trailing average price of Buyer's stock ($0.50), or
840,000 shares. At Closing, Holder A's LabMentors Stock shall be exchanged
for 8,400 shares of Buyer Stock calculated as follows: (1,000 / 100,000
x 840,000 = 8,400 shares).
2.4.2 Earnout. For the purposes of this Section 2.4.2,
LabMentors' earnings before income tax, depreciation and amortization for the
twelve month period preceding the specified date ("EBITDA") shall not include
earnings, income taxes, depreciation or amortization attributable to (i)
research and development activities conducted for Buyer, (ii) royalties paid
by Buyer to LabMentors for its use of LabMentors' intellectual property, or
(iii) sales of Buyer's products by LabMentors. In addition to the exchange of
LabMentors Stock for Buyer Stock at Closing, the Shareholders shall receive
additional shares of Buyer Stock upon the occurrence of certain performance
thresholds, as follows.
(a) Year One. If LabMentors' EBITDA on March 31, 2006 is
$100,000 as calculated in accordance with United States generally accepted
accounting principles ("GAAP"), Buyer shall issue additional shares of Buyer
Stock to the Shareholders, on a pro-rata basis, in a total amount equal to
$100,000 divided by the previous 10 day trailing average price per share of
the Buyer Stock determined as of the first business day after March 31, 2006.
(b) Year Two. If on March 31, 2007:
(i) LabMentors' EBITDA is $950,000 or higher, as
calculated in accordance with GAAP, Buyer shall issue additional shares of
Buyer Stock to the Shareholders, on a pro-rata basis, in an amount equal to
fifty percent (50%) of LabMentors' EBITDA as of March 31, 2007 divided by the
previous 10 day trailing average price per share of the Buyer Stock determined
as of the first business day after March 31, 2007, or
(ii) LabMentors' EBITDA is less than $950,000, but greater
than $250,000, as calculated in accordance with GAAP, Buyer shall issue
additional shares of Buyer Stock to the Shareholders, on a pro-rata basis, in
an amount equal to twenty-five percent (25%) of LabMentors' EBITDA as of March
31, 2007 divided by the previous 10 day trailing average price per share of
the Buyer Stock determined as of the first business day after March 31, 2007.
(c) Year Three. If on March 31, 2008:
(i) LabMentors' EBITDA is $2,000,000 or higher, as
calculated as calculated in accordance with GAAP, Buyer shall issue additional
shares of Buyer Stock to the Shareholders, on a pro-rata basis, in an amount
equal to fifty percent (50%) of LabMentors' EBITDA as of March 31, 2008
divided by the previous 10 day trailing average price per share of the Buyer
Stock determined as of the first business day after March 31, 2008, or
(ii) LabMentors' EBITDA is less than $2,000,000 but greater
than $500,000 as calculated in accordance with GAAP, Buyer shall issue
additional shares of Buyer Stock to the Shareholders, on a pro-rata basis, in
an amount equal to twenty-five percent (25%) of LabMentors' EBITDA as of March
31, 2008 divided by the previous 10 day trailing average per share price of
the Buyer Stock determined as of the first business day after March 31, 2008.
2.4.3 Shareholders' Access to Business Records. During the
period of the Earnout and for the sole purpose of verification and
confirmation of performance of LabMentors, the Shareholders shall have
reasonable access to and the right to discuss with executive management of
Buyer, the financial records maintained by Buyer relating to the revenues and
expenditures attributable to the operation of LabMentors. For the sole
purpose of verifying and confirming the Earnout calculation due and payable to
Shareholders, the Shareholders may select an "Authorized Representative" to
review and audit the records of LabMentors' post-Closing operations. In the
event there is no material change, as a result of such review or audit, in the
determination of EBITDA for purposes of the Earnout calculation, the
Authorized Representative shall reimburse Buyer for any out-of-pocket costs
incurred in relation to the review and audit.
2.5 Risk of Loss. Until Closing, Sellers shall assume all risk of
loss or damage with respect to the assets and liabilities of the Business. In
the event of any loss or damage to all or any part of the assets or
liabilities, Buyer shall have the right to (i) terminate this Agreement, in
which event each party shall be fully released and discharged from any further
obligations under this Agreement, (ii) close the purchase and reduce the
Purchase Price by an equitable amount equal to the loss or damage, the
reduction to reduce the Base Price at Closing, or (iii) close the purchase and
elect to receive all insurance proceeds paid or payable by reason of the loss
or damage.
Article 3
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF LABMENTORS AND SHAREHOLDERS.
Except for Section 3.30 through Section 3.48, whereby each Shareholder
represents, warrants and covenants to Buyer in their individual capacity and
not as to any other Shareholder, or as otherwise indicated, the Sellers each
represent, warrant and covenant to Buyer as set forth below. With respect to
Sections 3.1 through 3.25, 3.27, 3.28, 3.29, 3.44, 3.45, and 3.46, the
representations and warranties by Workers Investment Fund, Inc. ("WIF") are
made solely to the best of its knowledge and belief, which phrase means the
actual knowledge of its President, R. Laurence Simpson, without having made
any independent inquiries or investigation. Nothwithstanding any other
provision of this Agreement WIF shall not be liable for any breach of a
representation, warranty or covenant by any other Seller or by LabMentors.
FINANCIAL REPRESENTATIONS AND WARRANTIES
3.1 Financial Statements. Attached as Schedule 3.1 are
(i) LabMentors' balance sheets as of the close of the fiscal years ending May
31, 2002 through May 31, 2005; (ii) LabMentors' Income Statements for the
twelve month periods ending May 31, 2002 through May 31, 2005; and
(iii) LabMentors' interim balance sheets and related statements of income and
earnings for the period from June 1, 2005 to November 18, 2005 (collectively
"LabMentors' Financial Statements"). LabMentors' Financial Statements
(i) have been prepared in accordance with GAAP, (ii) are complete and correct
in all material respects, and (iii) present fairly, in all material respects,
the financial position of LabMentors as of the date indicated.
3.2 Absence of Undisclosed Liabilities. Except as (i) disclosed on
Schedule 3.2 or LabMentors' Financial Statements, or (ii) incurred by
LabMentors in the ordinary course of operating the Business since the date of
LabMentors' Financial Statements, there has not been any material adverse
change in the business, condition (financial or otherwise), Assets,
Liabilities, properties or operations of LabMentors, and there are no
liabilities, whether absolute, accrued, prepaid revenue, contingent or
otherwise, arising through the ownership or operation of the Business which
materially affect the Assets, Liabilities or the operation of the Business.
3.3 No Default. Except as set forth in Schedule 3.3, (i) no Seller is
in default under the terms of any contract, agreement, lease, license or
understanding to which such Seller is a party ("Contract"), and which default
will result in any loss or damage to LabMentors or any Encumbrance on its
Assets, nor has any condition or event occurred which, after notice, the
passage of time, or otherwise, would constitute a default under or breach of
the terms of any such Contract, and (ii) Sellers are not aware of any
condition that will result in a default under the terms of any such Contract.
3.4 Taxes. Except as disclosed on Schedule 3.4:
3.4.1 Timely Filing of Tax Returns. LabMentors has filed all
applicable federal, provincial, local and foreign returns and reports for all
income tax, payroll tax, harmonized sales tax, excise or use tax, or any
property, service, social security, trust fund, unemployment, withholding,
franchise, insurance premium or other tax (collectively "Taxes" or "Tax")
required to be filed in connection with LabMentors' ownership or operation of
the Business. All Tax returns and reports were and are in all material
respects true, complete, and correct and filed on a timely basis. No claim
has ever been made by any authority in any jurisdiction in which LabMentors
does not file federal, provincial, local and foreign Tax returns and reports
that the Business is or may be subject to taxation by the respective
jurisdiction.
3.4.2 Preparation of Tax Returns and Payment of Taxes.
LabMentors has, within the time and in the manner prescribed by law, (i)
prepared all Tax returns and (ii) paid all Taxes shown by the returns to be
due and payable, except for those Taxes contested in good faith and for which
adequate reserves have been provided.
3.4.3 Tax Lien. There are no Tax liens or security interests on
any of the Assets.
3.4.4 Withholding Taxes. LabMentors has withheld from each
payment made to any of its present or former officers, directors and employees
and to any non-resident of Canada the amount of all taxes, including but not
limited to income tax, and other deductions required to be withheld therefrom
and has paid the same to the proper tax or other receiving officers within the
time required under any applicable tax legislation.
LabMentors has remitted to the appropriate tax authority when
required by law to do so all amounts collected or payable by it or required to
be collected or paid by it on account of applicable sales tax, goods and
service tax, harmonized sales tax or any other taxes.
3.4.5 Waivers and Extensions of Time. There are no agreements,
waivers or other arrangements providing for an extension of time with respect
to the filing of any tax return by, or payment of any tax, governmental charge
or deficiency against LabMentors.
3.4.6 Audit, Administrative and Court Proceedings. There are no
actions, suits, proceedings, investigations or claims now pending, or to the
best of the knowledge of either the Shareholders or LabMentors threatened,
against LabMentors in respect to taxes, governmental charges or assessments,
or any matters under discussion with any government authority relating to
taxes, governmental charges or assessments asserted by any such authority.
3.4.7 Powers of Attorney. No power of attorney currently in
force has been granted by the Sellers concerning any federal, provincial,
local and foreign Tax.
3.4.8 Tax Rulings. LabMentors has not received a Tax ruling or
entered into any agreement with any federal, provincial, local or foreign
taxing authority that would reasonably be expected to have an adverse effect
on the Business or the Assets.
3.4.9 Availability of Tax Returns. Attached to Schedule 3.4.9
are true and complete copies of (i) the Tax returns of LabMentors for all tax
years ending between January 1, 2001 to Closing, as filed with any Canadian
federal, provincial or local Tax authority, (ii) all audit reports received
from any Tax authority relating to any Tax return filed by LabMentors, and
(iii) any agreements entered into by LabMentors with any Tax authority.
3.4.10 Tax Sharing Agreements. LabMentors is not a party to any
agreement relating to allocating or sharing of Taxes.
3.4.11 Liability for Others. LabMentors (i) has not been a
member of an affiliated group filing a consolidated Tax return, and (ii) has
no liability for any Tax of any other person (a) under applicable provisions
of federal, provincial, local or foreign law or regulation, (b) under any
applicable law as a transferee or successor, or (c) by contract.
3.4.12 Accounting Adjustments. LabMentors has not agreed to
make, is not required to make, or is not contemplating making, any material
adjustments under applicable Tax law by reason of a change in accounting
method or otherwise.
3.4.13 Partnerships or Joint Ventures. LabMentors is not and has
never been a member of a limited liability company or a party to any joint
venture, partnership, or other arrangement or contract that is reported as a
partnership for income tax purposes.
3.4.14 Indemnities. LabMentors is not a party to any indemnity
agreement for the benefit of any third party in connection with any Tax that
would be reasonably expected to result in an adverse effect on the Business or
the Assets.
ASSETS AND PROPERTY REPRESENTATIONS AND WARRANTIES
3.5 Assets. The assets of LabMentors (the "Assets") expressly include
all the assets, properties and rights of LabMentors relating to the Business
as currently conducted, of every type and condition, real, personal and mixed,
tangible and intangible, fixed and unfixed, choate or inchoate, accrued,
absolute, contingent or otherwise, where ever located and whether or not
reflected on the books and records of LabMentors, as follows:
3.5.1 Cash. Cash or cash equivalents, including checking,
savings and other accounts related to the Business.
3.5.2 Motor Vehicles. Motor vehicles, if any.
3.5.3 Equipment, Furniture and Fixtures. All tangible personal
property owned by or leased to Sellers located in or used in connection with
the Business, including without limitation, furniture, fixtures, trade
fixtures, equipment, office equipment, computer equipment, computer systems,
furnishings, machinery, tenant improvements, blinds, curtains, drapes, floor
coverings, security equipment, communications equipment, equipment operation
manuals, and manufacturer's warranties and guarantees, if any ("Equipment").
The Equipment, including (i) the cost of the Equipment and (ii) the warranties
for the Equipment, are identified on Schedule 3.5.3. Except as set forth on
Schedule 3.5.3, all of the tangible Assets identified on Schedule 3.5.3 are in
good operating condition and repair, ordinary wear and tear excepted, and are
located at LabMentors. The tangible Assets are suitable for the purposes
used, and have been maintained in accordance with good business and
maintenance practices. Sellers do not know of any material latent defects in
the tangible Assets.
3.5.4 Real Property. LabMentors' interest as lessee under the
lease of its premises ("Leased Property"), a copy of which is attached hereto
as Schedule 3.5.4 (the "Real Property Lease"). LabMentors does not own or
have any interest in, nor is LabMentors a party to or bound by or subject to
any agreement or option to purchase, any real property and LabMentors is not a
party to or bound by or subject to any lease or any agreement in the nature of
a lease of any real property other than the Real Property Lease. LabMentors
is exclusively entitled to all rights and benefits as lessee of the Leased
Property and LabMentors has not sublet, assigned, licensed or otherwise
conveyed any rights in the Leased Property to any other person. All rental
payments and other obligations required to be paid and performed by LabMentors
pursuant to its lease obligations have been duly paid and performed;
LabMentors is not in default of any of its obligations under the Real Property
Lease of the Leased Property; and the landlord of the Leased Property is not
in default of any of his obligations under the Real Property Lease. The use
by LabMentors of the Leased Property is not in breach of any building, zoning
or other statute, by-law, ordinance, regulation, covenant, restriction or
official plan. LabMentors has adequate rights of ingress to and egress from
the Leased Property for the operation of the Business in the ordinary course.
3.5.5 Personal Property Leases. All equipment and other
personal property leases for tangible personal property identified in and
attached to Schedule 3.5.5 ("Personal Property Leases"). The Personal Property
Leases constitute all of the material Personal Property Leases of LabMentors.
All Personal Property Leases are in full force and effect and there are no
existing defaults, or events or conditions which but for the passage of time
would constitute defaults pursuant to such documents.
3.5.6 Material Contracts. All rights related to material
contracts, agreements, options and commitments (other than Personal Property
Leases) related to the Business ("Contracts"). The Contracts are identified
on Schedule 3.5.6. The Contracts constitute all of the material Contracts of
LabMentors. All Contracts are in full force and effect and there are no
existing defaults, or events or conditions which but for the passage of time
would constitute defaults pursuant to such documents.
3.5.7 Prepaid Expenses. Deposits with LabMentors' vendors,
prepaid insurance covering LabMentors, prepaid items, prepaid expenses, and
similar amounts paid by LabMentors to other vendors of services or goods for
which LabMentors have not received services or goods in return. The Prepaid
Expenses are set forth on Schedule 3.5.7.
3.5.8 Accounts Receivables. All accounts receivable, work-in-
progress (unbilled services rendered prior to Closing), promissory notes, and
other amounts owed to LabMentors and arising in the ordinary course of
business ("Receivables"). The Receivables are described on Schedule 3.5.8.
The amounts charged for services have been determined and statements rendered
in accordance with applicable laws, regulations and contracts binding upon
LabMentors. The Receivables will be collectible in the ordinary course of
business within 60 days of the creation of each Receivable, subject only to
contractual allowances and bad debt adjustments consistent with industry
standards.
3.5.9 Business Records. All accounting records, financial
records, operations records, customer records, customer lists, vendor lists,
price lists, operations manuals, personnel records, employee manuals, and all
other records, files, memoranda, sketches, bids, contracts, and other
documents relating to the Business of LabMentors ("Business Records"). The
books of accounts and records, including Business Records, of the Business are
complete and correct in all material respects, and there have been no
transactions involving the Business which properly should have been set forth
in the Business Records and which have not been accurately so set forth.
3.5.10 Inventory. All items included as "inventory" on the
Business Records of the Business, all janitorial and office supplies, and all
other operating supplies, including but not limited to those items described
on Schedule 3.5.10 ("Inventory"). All items of Inventory to be acquired by
Buyer pursuant to this Agreement were acquired by LabMentors in the ordinary
course of LabMentors' Business, may be used for items' intended purposes, and
were purchased, handled, stored and sold in accordance with all federal,
provincial, local and foreign governmental laws and regulations, including all
Environmental Laws.
3.5.11 Licenses and Permits. All licenses, permits, and
accreditations used in operation of the Business, including without limitation
the items described on Schedule 3.5.11.
3.5.12 Intellectual Property. All patents, patent applications,
trade marks, service marks, copyrights, any applications therefor, all rights
held by any of the Sellers to the name "LabMentors," logos, symbols, business
manuals or policies created by any of the Sellers, and tangible or intangible
material created by any of the Sellers and that are used by LabMentors
("Intellectual Property"). Schedule 3.5.12 lists: (i) all of LabMentors'
copyrights, trademarks, and any applications therefore, (ii) all LabMentors'
logos and graphics that identify the Business, and (iii) all licenses,
sublicenses, and other agreements (other than license agreements for
prepackaged, commercially available computer software) to which LabMentors is
a party and pursuant to which LabMentors or any other person is authorized to
use any of the Intellectual Property or trade secrets of LabMentors.
LabMentors owns or has the right to exercise and to transfer to Buyer all
rights in the Intellectual Property necessary to carry out LabMentors' current
and anticipated Business activities. LabMentors is not in violation of any
license, sublicense, or agreement to which LabMentors is a party or bound
pertaining to the Intellectual Property. No claim with respect to the
Intellectual Property has been asserted against LabMentors, or is threatened
by any person against LabMentors; nor, to Sellers' knowledge, are there any
valid grounds for any bona fide claims. LabMentors has clear title to all
Intellectual Property. Consummation of the Share Exchange will not impair
LabMentors' ownership or rights to the Intellectual Property or require the
consent or approval of any third party.
3.5.13 Communication Addresses. All telephone numbers, facsimile
numbers, internet addresses, internet domain names, internet domain name
registrations, log-in identifications, user identifications, screen names and
on-line service identifications relating to the Business ("Communication
Addresses"). The Communication Addresses are disclosed on Schedule 3.5.13.
3.5.14 Computer Software and Databases. All computer software,
applications, and databases owned, licensed, leased, internally developed or
otherwise used by any of the Sellers in connection with the Business
("Computer Software and Databases"). The Computer Software and Databases are
identified in Schedule 3.5.14. LabMentors has all Computer Software and
Databases that are necessary to conduct the Business as presently conducted
and all documentation relating to all the Computer Software and Databases.
The Computer Software and Databases perform in accordance with the
documentation therefor and are free of defects in programming and operation.
3.5.15 Proprietary Information. All rights of Sellers in the
LabMentors' Proprietary Information. "Proprietary Information" means all
information, data, software and materials (whether contained in documents,
electronic media or other forms) relating to or used by LabMentors, including
(without limitation) information about LabMentors' products, services,
materials, procedures, inventions, expertise, customer lists, potential
customer lists, customer data, financial data, vendors, marketing plans, and
trade secrets.
3.5.16 Goodwill. All rights of Sellers in the favorable
consideration which LabMentors has in the minds of the public, the reasonable
expectation that LabMentors will be preferred by existing and potential
customers and clients, and the advantage and benefit that existing and
potential customers and clients will patronize LabMentors ("Goodwill").
3.5.17 Tangible And Intangible Personal Property. All other
tangible and intangible personal property owned by Sellers and used in the
Business.
3.6 Liabilities. The liabilities of LabMentors (the "Liabilities")
include all obligations reflected on LabMentors' May 31, 2005 Financial
Statements or incurred thereafter in the ordinary course of Business prior to
the Closing Date, as follows:
3.6.1 Trade Payables. All liabilities related to amounts owed
by LabMentors to vendors of supplies and inventory ("Trade Payables"). The
Trade Payables as of the most recent practicable date are listed in
Schedule 3.6.1(a), and copies of all invoices or other documents supporting
the list are attached to Schedule 3.6.1(b).
3.6.2 Purchase Orders. All liabilities related to purchase
orders and commitments of LabMentors made in the ordinary course of business
for goods, services, supplies and Inventory to be delivered to LabMentors or
performed by LabMentors subsequent to Closing. The purchase orders as of the
most recent practicable date are set forth in Schedule 3.6.2.
3.6.3 Personal Property Leases and Contracts. All liabilities
related to Personal Property Leases and Contracts identified in
Schedules 3.5.5 and 3.5.6, respectively. The payments, installment payments,
monthly payments and other liabilities related to Personal Property Leases and
Contracts shall be paid current by LabMentors up to and including Closing.
3.6.4 Prepaid Income. Amounts that customers have deposited
with LabMentors, deferred revenue, prepaid income, amounts paid by customers
pursuant to any plans or programs in which customers paid an amount to receive
goods or services in the future, and similar amounts paid by customers to
LabMentors in advance of the LabMentors rendering the services or providing
the goods. The prepaid income is listed on Schedule 3.6.4.
3.6.5 Obligations Arising From Transferred Assets. All
obligations of LabMentors arising under or relating to the Assets pursuant to
Section 3.5.
3.6.6 Scheduled Liabilities. The items listed on Schedule
3.6.6. Sellers have disclosed on Schedule 3.6.6 all other Liabilities, not
otherwise herein set forth, including (without limitation) all obligations
which are or may be assessed or become a charge against the Assets.
3.7 Clear Title to Assets. Except as set forth on Schedule 3.7,
LabMentors has good and marketable title to the Assets, free and clear of all
mortgages, pledges, security interests, liens and encumbrances, with the
exception of taxes not due and payable which constitute a lien. The Assets
and Liabilities constitute all of the tangible or intangible assets and
liabilities necessary for the conduct of the Business as presently conducted.
3.8 Insurance. Schedule 3.8 lists and briefly describes (i) all
policies of fire, extended coverage, liability (including, without limitation,
professional liability) and all other kinds of insurance held by LabMentors
and covering the Assets or the Business, and (ii) any claims made against any
insurance policy that are unresolved as of Closing. The policies are in full
force and effect and will be in full force and effect until Closing.
3.9 Financial Accounts. Schedule 3.9 lists the names and locations of
all banks and financial institutions in which LabMentors has cash, checking,
savings and other accounts of the Business ("Financial Accounts"), the
designation of the name and type of the account, the names of all persons
authorized to draw upon or have access to each account, and the existence and
type of equipment used by LabMentors to validate and process credit cards.
REAL PROPERTY REPRESENTATIONS AND WARRANTIES
3.10 Leased Property Information. Attached as Schedule 3.10 is the
information necessary to describe and insure the Leased Property.
3.11 Leased Property Vendors. Schedule 3.11 lists the preferred
vendors of supplies and services to repair and maintain the Leased Property.
3.12 Utilities. Exclusive of any applicable name transfer fees,
(i) the utilities and services set forth on Schedule 3.12 are currently
available to the Leased Property, and (ii) all physical improvements
(including, without limitation, pipes and lines) required for utilities and
services are in place, usable and in good operating condition, and constructed
in accordance with any applicable regulations and specifications.
3.13 Prior Construction and Renovation. Except as disclosed on
Schedule 3.13, all construction and renovation of the Leased Property was
performed pursuant to building permits issued by the relevant jurisdiction and
a final certificate of occupancy was issued.
3.14 Hazardous Material. Except as disclosed on Schedule 3.14:
3.14.1 No Hazardous Material Use. No one has caused or permitted
any Hazardous Material to be generated upon, transported to, stored, disposed,
released or used in or about the Leased Property except as incidental to
LabMentors' permitted use of the Leased Property and only in quantities that
are less than the quantities that are required to be reported to governmental
or other authorities under applicable law or regulations. LabMentors has
complied with all Environmental Laws regulating the use, reporting, storage,
and disposal of Hazardous Material.
3.14.2 No Claims or Notices. LabMentors has not received from
any governmental authority or third party any request for information, notice
of claim, demand letter or other notification, notice or information that
LabMentors is or may be: (i) potentially subject to or responsible for any
investigation or clean-up or other remediation of Hazardous Material;
(ii) potentially liable for damage to persons, property, or natural resources
in connection with any Hazardous Material; or (iii) in violation of any
Environmental Laws.
3.14.3 No Investigations. There have been no environmental
investigations, studies, audits, samples, tests, reviews or other analyses,
the purpose of which was to discover, identify or otherwise characterize the
condition of the soil, groundwater, air, or presence of asbestos or PCBs at
the Leased Property site.
3.14.4 No Asbestos. There is no asbestos present in any real
property presently owned, leased or operated by LabMentors, and no asbestos
has been removed from any real property while the real property was owned,
leased or operated by LabMentors, except according to the requirements of the
Clean Air Act and the Occupational Safety and Health Act and as disclosed on
Schedule 3.14.
3.14.5 No USTs. There are no underground storage tanks on, in,
or under the Leased Property and no underground storage tanks have been closed
or removed from the Leased Property.
3.14.6 Full Compliance With Environmental Laws. LabMentors has
operated its Business on the Leased Property full in compliance with all
Environmental Laws.
3.14.7 Hazardous Material Definition. The phrase "Hazardous
Material" means any substance, material or waste of which the generation,
manufacture, use, storage or disposal is or becomes regulated by any federal,
state, provincial, local or foreign governmental authority or political
subdivision for the purpose of protecting human health or the environment.
The phrase "Hazardous Material" includes, without limitation, any material or
substance that is (i) defined as a hazardous substance, waste or material
under applicable Environmental Laws, (ii) petroleum products, (iii) asbestos,
or (iv) polychlorinated biphenyl ("PCB").
3.14.8 Environmental Laws Definition. The phrase "Environmental
Laws" means any federal, provincial, local or foreign law, statute, ordinance,
regulation, permit or order pertaining to health, industrial hygiene,
environmental conditions or Hazardous Materials, and including any statutes
identified in Section 3.14.7.
3.15 Access to Property. Buyer and Buyer's authorized representatives
shall have reasonable access to the Leased Property and to LabMentors' books
and records relating to the Leased Property.
EMPLOYMENT REPRESENTATIONS AND WARRANTIES
3.16 Employees. A complete and accurate list of the employees employed
in the Business, which accurately sets forth the employees' (i) name,
(ii) date of birth, (iii) social security number, (iv) the existence and terms
of all written and oral employment agreements, if any, (v) position, (vi) date
of hire, (vii) date of last compensation increase, (viii) hours of employment
and rate of compensation, (ix) amount of accrued benefits (including vacation
and sick leave pay, if any), and (x) the hours each employee has worked this
calendar year to date is set forth on Schedule 3.16 ("Employees").
3.17 Employment Obligations and Benefits. As of Closing, all salaries,
wages, vacation pay, holiday pay, short or long-term disability, pension,
reimbursement of expenses, compensation for paid leave, bonuses of any kind,
payroll taxes, payroll tax reporting compliance, workers compensation, and
benefits of any kind payable to any Employee or independent contractor
employed or hired by LabMentors shall have been paid in full, and all
obligations to comply with all reporting requirements shall have been
performed in full. LabMentors is in substantial compliance with all federal,
provincial, local, foreign and other applicable laws respecting employment,
employment practices, terms, conditions of employment, employment benefits,
and wages and hours. A summary of the employee benefits is set forth in
Schedule 3.17.
3.18 Employee Agreements. Photocopies of all written employment
agreements (other than the agreement with Joe Khoury) are attached to
Schedule 3.18. Except as described on Schedules 3.18 or 3.21, LabMentors is
not a party to any of the following described agreements, plans, or
arrangements: (i) employment, collective bargaining, or consulting
agreements, (ii) agreements that contain any severance or termination pay
obligation, (iii) bonus, deferred compensation, profit-sharing, pension or
retirement arrangements, or (iv) stock purchase or stock option plans. The
Business Consultation Agreement dated as of the 1st day of January 2005 by and
among LabMentors, Frank Maresca and Frank Maresca & Associates, Inc. has been
terminated; and all obligations of LabMentors thereunder have been fully paid
and discharged.
3.19 Labor Unions. No Employee is represented by any labor union or
organization and there has not been any labor union organizing activity at
LabMentors. There is no present or threatened labor disturbance or pending
arbitration, unfair labor practice, grievance or other proceedings or
litigation of any kind with respect to any Employees or former employees of
LabMentors.
3.20 Joe Khoury Employment Contract. Joe Khoury has executed and has
performed according to its terms, the employment agreement in the form
attached as Schedule 3.20 ("Khoury Agreement").
3.21 No Employee Benefit Plans Unless Disclosed. LabMentors does not
maintain and never has maintained any group health insurance, group life
insurance, medical, Section 401(k), profit sharing, defined benefit, pension,
cafeteria, or other employee benefit plan except for each health, life or
medical plan set forth in Schedule 3.21.
3.22 Employee Benefit Plan Obligations.
3.22.1 Employer. For purposes of this Section 3.22, the term
"Employer" shall include all employers (whether or not incorporated) which by
reason of common control or otherwise are treated together with LabMentors as
a single employer. Included and specifically identified in Schedule 3.21 is a
complete list of all Employee Benefit Plans of any employer other than
LabMentors which are treated together with LabMentors as a single employer
pursuant to this Section 3.22.1.
3.22.2 Delivery of Plan Documents. LabMentors have delivered the
following to PCS Edventures!.com:
(a) Plan Documents. All documents, signed, dated, and complete,
that set forth the terms of each Employee Benefit Plan and any related trust,
including without limitation (i) all adoption agreements and underlying master
plan documents, (ii) plan description and summary plan descriptions including
both those summaries that are required under the law and those summaries that
were prepared but are not required, (iii) amendments and addenda to the plan
documents, and (iv) trust documents.
(b) Insurance. All insurance policies and certificates
purchased by or to provide benefits under any Employee Benefit Plan.
(c) Administration. All contracts and agreements to which
Employers are a party with third party administrators, actuaries, investment
managers, consultants and other independent contractors that relate to any
Employee Benefit Plan.
(d) Reports. All reports (including without limitation
actuarial, financial, testing, valuation and accounting) prepared within the
three (3) year period preceding the date of this Agreement, by Employers,
third party administrators, recordkeepers, actuaries, investment managers,
consultants or other independent contractors with respect to any Employee
Benefit Plan.
(e) Determination Letters. The most recent determination,
opinion and notification letter for each Employee Benefit Plan that is or was
intended to be a qualified plan for Tax purposes.
(f) Letter Rulings. Every private letter ruling, prohibited
transaction exemption, or other ruling or determination from any governmental
authority with respect to each Employee Benefit Plan.
3.22.3 Plan Compliance. For every Employee Benefit Plan subject
to ERISA, (i) the Plan is in compliance with applicable law, (ii) no
accumulated funding deficiency has been incurred, and (iii) neither Employer
nor any other party has applied for or obtained a waiver from any governmental
authority of any minimum funding requirement. Each Employee Benefit Plan
intended to be qualified under applicable law for Tax purposes has been
determined to be qualified and nothing has occurred since the date of the last
determination which resulted or is likely to result in the revocation of the
determination.
3.22.4 No Guarantee Fund Liability. Employers have not
(i) incurred any liability to any guarantee fund, trust fund or governmental
authority in connection with any Employee Benefit Plan covering any employees
of Employer, (ii) ceased operations at any facility, or (iii) withdrawn from
any Plan, in a manner which could give rise to liability under applicable law.
3.22.5 No Tax or Other Liability. Employer has no liability for
any Employee Benefit Plan for any lien, tax, penalty or excise tax under
applicable law. Other than claims for benefits submitted by participants or
beneficiaries, no claim, lawsuit or cause of action against or proceeding
involving any Employee Benefit Plan is pending or, to Sellers' knowledge,
threatened by any party.
3.22.6 No Prohibited Transactions. No transaction relating to
any Employee Benefit Plan proscribed by applicable law has occurred for which
an exemption is not expressly available and applicable under applicable law.
3.22.7 All Plans Funded and Currently In Compliance. Employer
has performed all of Employer's obligations under all Employee Benefit Plans.
Full and timely payment has been made of all amounts which Employer is
required, under applicable law or under any Employee Benefit Plan or any other
agreement to which Employer is a party, to have paid for each Employee Benefit
Plan. Employer has made adequate provision for reserves and have made the
appropriate entry in LabMentors' Financial Statements attached as Schedule 3.1
for all obligations and liabilities under each Employee Benefit Plan that have
accrued but are not yet due under the terms of any Employee Benefit Plan or
related agreements.
3.22.8 Benefits Are As Represented. Benefits under all Employee
Benefit Plans and all liabilities and obligations under all Employee Benefit
Plans are as represented and set forth in the documents delivered to Buyer
pursuant to Section 3.22.2, and have not been increased or modified in any
respect.
3.22.9 Covenant of Precaution. Employer will make reasonable
efforts to avoid any action that might have an adverse effect on the tax
status of Employer's Employee Benefit Plans.
3.22.10 COBRA and Health Care Responsibility. LabMentors shall
provide Buyer with a list of all former employees and any spouse, former
spouse, dependent child, or former dependent child or any other party of any
employee to whom health care continuation coverage has been extended during
the three (3) years immediately preceding the Closing, and a list of all
persons to whom health care continuation coverage is being provided as of the
Closing.
3.22.11 Transaction Will Not Trigger Benefits. The execution and
delivery of this Agreement, and the consummation of the transactions
contemplated by this Agreement, will not (i) result in any payment by
LabMentors (including, without limitation, severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee, or independent contractor of LabMentors under any Employee
Benefit Plan, agreement or otherwise, or (ii) increase any benefits otherwise
payable under any Employee Benefit Plan or agreement.
BUSINESS OPERATION REPRESENTATIONS AND WARRANTIES
3.23 Business Records Compliance. To Sellers' knowledge, throughout
the time prior to Closing LabMentors complied with (i) all applicable federal,
state, provincial, local, foreign and other statutes and regulations, (ii) all
rules and regulations of any regulatory agency governing LabMentors, and
(iii) the duty to exercise the requisite care, skill and knowledge in
performing LabMentors' duties relating to the preparation, retention, storage,
duplication, preservation and other obligations relating to Business Records.
3.24 Operation Of Business. Except as disclosed on Schedule 3.24,
during the period beginning June 1, 2005 and continuing to Closing, Sellers:
(a) Ordinary Course. Conducted, and shall continue until
Closing to conduct, the business of the Business only in the usual, regular
and ordinary course.
(b) Maintain Assets. Except for the wholesale or retail sales
of inventory in the ordinary course of business, maintained and shall continue
until Closing to maintain, the Assets in their current condition, reasonable
wear and tear excepted, including but not limited to all life insurance
policies and the cash value of such life insurance policies.
(c) Equipment. Retained, and shall continue to retain, at the
Business location all Equipment and other Assets used in the operation of the
Business, and have not, and will not remove from the Business location any
Equipment and other Assets.
(d) Goodwill. Preserved and protected, and shall continue until
Closing to preserve and protect, the goodwill and advantageous relationships
of LabMentors with customers, suppliers, referral sources and all other
persons having business dealings with LabMentors with respect to the Business.
(e) Contracts. Preserved and maintained, and shall continue
until Closing to preserve and maintain, in force all Contract, Real Property
Lease rights, Personal Property Lease rights and all Licenses of LabMentors.
(f) Liens. Have not, and will not, mortgage, pledge, create a
security interest in or otherwise encumber any of LabMentors' Assets, incur
expenses other than in the ordinary course of business, and incur any secured
or unsecured borrowings.
(g) Expenses. Have not, and will not, incur any new or
additional long-term or short-term indebtedness except trade debt incurred in
the ordinary course of business and will not make or incur any capital
commitment or capital expenditure in excess of $10,000, without express
authorization from Buyer.
(h) Compensation. Except as accrued or reflected on LabMentors'
Financial Statements, have not and will not increase the compensation payable
or to become payable by LabMentors to any officer or employee of LabMentors,
and have not and will not make any bonus payments or arrangements with any
officer or employee or the LabMentors.
(i) Compliance. Complied, and shall continue to comply, with
all federal, state, provincial, local and foreign laws, rules, and regulations
that are applicable to the operation of the Business.
(j) Dividends. Except as accrued or reflected on LabMentors'
Financial Statements and approved by the Board of Directors of LabMentors',
have not and shall not make any dividend distribution or other distributions
to the Shareholders of LabMentors Stock.
(k) Working Capital. Shall maintain LabMentors' working
capital, defined as current assets minus current liabilities (as determined in
accordance with GAAP), at the Closing equal to $32,780 (Canadian Dollars) or
higher.
3.25 Access to Business. Prior to Closing, Buyer and Buyer's authorized
representatives shall have reasonable access to LabMentors, the Business,
Assets and Liabilities, and to LabMentors' books and records relating to the
Business. The date and time for all site inspections and examinations shall
be mutually agreed by the parties.
3.26 Confidential Information. Sellers agree that Sellers will keep
confidential any and all Business Records (identified in Section 3.5.9), and
Proprietary Information (identified in Section 3.5.15) of LabMentors. Sellers
agree that the Business Records and Proprietary Information have value,
contain proprietary information of LabMentors, contain trade secrets of
LabMentors, and are being acquired by Buyer for value under this Agreement.
CLAIMS AND LIABILITY REPRESENTATIONS AND WARRANTIES
3.27 Compliance with Law. Except as identified on Schedule 3.27,
Sellers have not received any notices of violation of any law, regulation,
condition of permit or license, order, ordinance, or any requirement noted in
or issued by any federal, provincial, local or foreign department having
jurisdiction over or affecting LabMentors, the Assets, Liabilities or the
Business which has not been corrected, resolved or withdrawn, and the Business
is and has been conducted in compliance with all applicable federal,
provincial, and local laws and regulations in all material respects. The
Leased Property and the uses conducted on the Leased Property are in
compliance with all applicable building, fire, life safety, subdivision and
zoning laws and regulations.
3.28 Litigation Or Claims. Except as identified on Schedule 3.28, there
are no claims, actions, suits, arbitrations, governmental investigations,
inquiries, or proceedings pending or, to the knowledge of Sellers, threatened
against or involving LabMentors, the Assets, the Liabilities or the Business
before any court, governmental or administrative body or agency, or private
arbitration tribunal. Except as identified on Schedule 3.28, to the Sellers'
knowledge, there are no facts upon which material claims may be made against
LabMentors, Assets, Liabilities or the Business, nor are there any outstanding
orders, writs, injunctions, or decrees of any court, arbitrator or
governmental agency which adversely affect or could adversely affect the
Assets, Liabilities or the Business.
3.29 Product Liability. Except as identified on Schedule 3.29, Sellers
have no knowledge, and after diligent investigation are unaware, of any
liability (or any basis for any present or future claim or demand against any
of them giving rise to any liability) arising out of any injury to individuals
or property as a result of any Inventory, supplies, goods or other products or
services used or sold by LabMentors.
INVESTMENT REPRESENTATIONS
3.30 Restricted Buyer Stock. Each Shareholder acknowledges and agrees
that the Buyer Stock constitutes "restricted securities" as defined in
Rule 144 under the Securities Act of 1933 ("1933 Act") and that the Buyer
Stock cannot be offered or sold in the United States or to any U.S. person
unless the Buyer Stock is registered under United States federal and
applicable state securities laws or an exemption from registration (such as
Rule 144) is available, and that the Shareholders may not engage in hedging
transactions involving Buyer Stock unless such transactions are in compliance
with the 1933 Act. Buyer shall have no obligation to register the Buyer Stock
or to register any transfer of Buyer Stock not made in accordance with
Regulation S under the 1933 Act, unless the Buyer Stock is registered under
United States federal and applicable state securities laws or an exemption
from registration is available.
3.31 Certification of Residence. Schedule 1.3 sets forth the current
address of each of the Shareholders, including the state or province of
residence and domicile of each of the Shareholders.
3.32 Accredited or Sophisticated Investor. Each Shareholder whose
residence address (as shown on Schedule 1.3) is in the United States is
acquiring Buyer Stock in a transaction that does not require registration
under the 1933 Act. Each Shareholder, regardless of residence, (i) is an
"Accredited Investor" as defined in Regulation D under the 1933 Act, or (ii)
alone, or together with Shareholder's Representative(s) (as defined below),
has the ability to evaluate the merits and risks of an investment in the Buyer
Stock based upon Shareholder's knowledge and experience in financial and
business matters.
3.33 Shareholder's Reliance on Advisors. No Shareholder is relying on
Buyer or its managers, members, employees, directors, or agents or
representatives with respect to the legal, tax, economic and related
considerations of an investment in the Buyer Stock; and each Shareholder has
relied on the advice of, or has consulted with, only Shareholder's own
attorneys, accountants, or other financial advisors ("Shareholder's
Representative").
3.34 Stock Dilution. Shareholders acknowledge and agree that Buyer is
not agreeing to maintain any Shareholder's percentage ownership in Buyer that
is created by such Shareholder's purchase of the Buyer Stock, and that Buyer
may issue additional equity and other securities to provide compensation and
reimbursement to Buyer's officers and others, which issuance of securities may
reduce the Shareholders' percentage ownership interests in Buyer.
3.35 Sufficient Information. Each Shareholder recognizes that an
investment in the Buyer Stock involves significant risks. Each Shareholder
and such Shareholder's Representative(s), if any, have been furnished
materials relating to Buyer, including all of Buyer's reports and registration
statements that have been filed with the United States Securities and Exchange
Commission (the "SEC") at any time prior to the Closing date and which are
contained in the Edgar Archives located at www.sec.gov, and all materials
relating to Buyer, its business and financial condition, and any other matters
which such Shareholder or Shareholder's Representative have requested. Each
Shareholder and such Shareholder's Representative(s), if any, have received
and carefully read unaudited quarterly reports and other information supplied
by Buyer or otherwise publicly available to such Shareholder. Each
Shareholder and such Shareholder's Representative(s), if any, have been
afforded the opportunity to ask questions and receive answers concerning the
terms and conditions of the Share Exchange and to obtain any additional
information which Buyer or its management possesses or can acquire without
unreasonable effort or expense, which is necessary to verify the accuracy of
the information provided.
3.36 Response to Inquiries. Buyer has answered all inquiries that each
Shareholder and such Shareholder's Representative(s), if any, have made of it
concerning Buyer, its business and financial condition, or any other matter
relating to the operation of Buyer, Buyer Stock, and the Share Exchange.
3.37 Ability to Withstand Loss. Each Shareholder (i) has adequate means
of providing for such Shareholder's current needs and possible personal
contingencies, (ii) has no need for liquidity in Shareholder's investment in
the Buyer Stock, (iii) is able to bear the economic risks of Shareholder's
investment in the Buyer Stock, and (iv) at the present time, can afford a
complete loss of such investment.
3.38 No Agency Endorsement. Each Shareholder understands that no
federal, or state or provincial agency has passed upon the Buyer Stock, or
made any finding or determination as to the fairness of the investment or any
recommendation or endorsement of the Buyer Stock.
3.39 Shareholder's Counsel. Buyer has advised each Shareholder to
obtain independent legal counsel to review this Agreement. Each Shareholder
acknowledges that the Shareholder has had the opportunity and has been
encouraged to review this Agreement with the Shareholder's legal counsel.
3.40 Investment Purpose. Each Shareholder, except for WIF, is
purchasing the Buyer Stock for Shareholder's own account, for investment, and
not for distribution, assignment or resale to others in whole or in part; and
no other person has any direct or indirect beneficial interest in such Buyer
Stock. No Shareholder, except for WIF, has any agreement or arrangement,
formal or informal, with any person to sell or transfer all or any part of the
Buyer Stock; and no Shareholder has any plans to enter into any such agreement
or arrangement.
3.41 Workers Investment Fund, Inc. WIF has completed negotiations to
merge with another fund (the "Successor Fund"), provided that such other fund
shall not be the legal successor of WIF. The shareholders of WIF and the
Successor Fund have approved the merger which is scheduled to close on
December 16, 2005. WIF is acquiring the Buyer Stock for WIF's own account,
for investment, and not for distribution, assignment or resale to others in
whole or in part, except for the transfer of the Buyer Stock to Successor Fund
in connection with such merger; and no person other than WIF and such
Successor Fund shall have any direct or indirect beneficial interest in such
Buyer Stock. WIF has no agreement or arrangement, formal or informal, with
any person other than the Successor Fund to sell or transfer all or any part
of the Buyer Stock. WIF represents, warrants and covenants to Buyer, that WIF
will comply with Sections 3.32 through 3.40.
3.42 Transfer Restrictions; Legends. Shareholders acknowledge that each
certificate representing Buyer Stock shall be stamped or otherwise imprinted
with a legend substantially similar to the following (in addition to any
legend required under applicable state or provincial securities laws) unless,
in the opinion of counsel for the Buyer, such legend is not required:
THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN
THE UNITED STATES OR TO ANY U.S.
PERSON IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT AN
EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE
IF SUCH OPINION IS REASONABLY
REQUESTED BY THE COMPANY.
Each certificate representing Buyer Stock issued to a Shareholder who is
not a U.S. Person (as defined in Regulation S under the 1933 Act) shall also
be stamped or otherwise imprinted with a legend substantially similar to the
following:
TRANSFER OF THE SECURITIES
REPRESENTED HEREBY IS PROHIBITED
EXCEPT IN ACCORDANCE WITH REGULATION
S OR PURSUANT TO REGISTRATION UNDER
THE ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION.
HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED HEREBY MAY
NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
Each Shareholder who is not a U.S. Person acknowledges and agrees that
Buyer is required to refuse to register any transfer of Buyer Stock by such
Shareholder if not made in accordance with the provisions of Regulation S,
pursuant to registration under the 1933 Act or pursuant to an available
exemption from registration.
3.43 Regulation S Compliance. Each Shareholder whose residence address
(as shown on Schedule 1.3) is outside the United States certifies that he or
it is not a U.S. person (as defined in Rule 902 of Registration S under the
Act) and is not acquiring Buyer Stock for the account or benefit of anyone who
is a U.S. person. Each such Shareholder agrees to resell Buyer Stock in
accordance with Regulation S, pursuant to registration under the 1933 Act or
pursuant to an available exemption from registration, and further agrees not
to engage in hedging transactions with regard to such securities unless in
compliance with the 1933 Act.
STATUS REPRESENTATIONS AND WARRANTIES
3.44 Organization, Good Standing and Qualification. LabMentors is a
corporation duly organized, validly existing and in good standing under the
laws of the province of New Brunswick, Canada. LabMentors has full corporate
power and authority to carry on its business as and where now conducted and to
own or lease and operate its properties at and where now owned, leased or
operated. LabMentors is duly qualified to do business and is in good standing
in every jurisdiction in which the property owned, leased or operated by
LabMentors or the business conducted by LabMentors make such qualification
necessary.
3.45 Capitalization. The authorized LabMentors Stock (immediately prior
to the Closing) consists of an unlimited number of voting, redeemable,
retractable, cumulative Class A preferred shares without nominal or par value
and an unlimited number of common shares without nominal or par value of which
32,073,961 shares of common stock are issued and outstanding. All of the
issued and outstanding shares of LabMentors Stock have been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth
in Schedule 3.45 or provided in this Agreement, (a) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of LabMentors is authorized or
outstanding, (b) there is no commitment of LabMentors to issue any
subscription, warrant, option, convertible security or other such right to
purchase any shares of the capital stock of LabMentors, or to issue or
distribute to holders of any shares of its capital stock any evidences of
indebtedness or assets of LabMentors, and (c) LabMentors has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any shares
of its capital stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof. Except as set forth in Schedule
3.45 or as provided in this Agreement, no person or entity is entitled to (a)
any preemptive right, right of first refusal or similar right with respect to
the issuance of any capital stock of LabMentors, or (b) any rights with
respect to the registration of any capital stock of LabMentors under any
federal, state, provincial, local or foreign securities laws. All of the
issued and outstanding shares of LabMentors Stock have been offered, issued
and sold by LabMentors in compliance with applicable federal, state,
provincial, local and foreign securities laws.
3.46 Authority To Contract. Sellers have the full right, power and
authority to execute, deliver and perform the terms of this Agreement and all
documents and agreements necessary to give effect to the provisions of this
Agreement. The execution, delivery, and consummation of this Agreement by
LabMentors was duly approved by the Board of Directors of LabMentors according
to applicable law and the Articles of Incorporation and Bylaws of LabMentors.
Upon the execution and delivery of this Agreement by Sellers, (i) no further
action will be necessary to make this Agreement valid and binding upon Sellers
according to its terms, and (ii) Sellers shall deliver to Buyer copies of
resolutions duly authorized by the Shareholders and directors of LabMentors
authorizing the execution and performance of this Agreement and designating
those officers of LabMentors with authority to execute documents in connection
with this transaction.
3.47 No Limit On Authority. The execution, delivery, and consummation
of this Agreement by Sellers will not, with the passage of time, the giving of
notice, or otherwise, (i) cause any of the Sellers to be in violation or
breach of any law, regulation, judgment, administrative order, contract,
agreement, or other restriction to or by which such Seller is subject or
bound, or (ii) result in the acceleration or termination of any loan or
security agreement to which such Seller is a party. There are no restrictions
in the Articles of Incorporation, amendments to the Articles, Bylaws, minutes,
or share certificates of LabMentors, shareholder agreements, indenture, credit
agreements, or other agreement limiting the right or power of any of the
Sellers to consummate the Share Exchange. No approval or consent of any
person, firm, or other entity is required to be obtained by Sellers for the
execution or delivery of this Agreement or the consummation of the Share
Exchange by the Shareholders.
3.48 Brokers or Finders. Sellers have not employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finder's fees
in connection with the transactions contemplated by this Agreement.
DISCLOSURE REPRESENTATION AND WARRANTY
3.49 Material Misstatement or Omissions. To the best of Sellers'
knowledge, no representation or warranty made by Sellers in this Agreement or
in any document or agreement furnished in connection with this Agreement
contains or will contain any untrue statement of material fact, or omits or
will omit to state a material fact necessary to make the statements not
misleading. Sellers know and expect that Buyer will to rely upon Sellers'
representations, warranties and covenants.
Article 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
Buyer represents, warrants and covenants to Sellers as follows:
4.1 Organization, Good Standing and Qualification. Buyer is an Idaho
corporation duly organized, validly existing and in good standing under the
laws of the state of Idaho. Buyer has full corporate power and authority to
carry on its business as and where now conducted and to own or lease and
operate its properties at and where now owned, leased or operated. Buyer is
duly qualified to do business and is in good standing in every jurisdiction in
which the property owned, leased or operated by LabMentors or the business
conducted by Buyer make such qualification necessary.
4.2 Authority To Contract. Buyer has the full right, power and
authority to execute, deliver and perform the terms of this Agreement and all
documents and agreements necessary to give effect to the provisions of this
Agreement. The execution, delivery, and consummation of this Agreement by the
Buyer was duly approved by the Board of Directors of Buyer according to
applicable law and the Articles of Incorporation and Bylaws of Buyer. Upon
the execution and delivery of this Agreement by Buyer, no further action will
be necessary to make this Agreement valid and binding upon Buyer according to
its terms.
4.3 No Limit On Authority. The execution, delivery, and consummation of
this Agreement by Buyer will not, with the passage of time, the giving of
notice, or otherwise, (i) cause Buyer to be in violation or breach of any law,
regulation, judgment, administrative order, contract, agreement, or other
restriction to or by which Buyer is subject or bound, or (ii) result in the
acceleration or termination of any loan or security agreement to which Buyer
is a party. There are no restrictions in the Articles of Incorporation,
amendments to the Articles, Bylaws, minutes, or share certificates of Buyer,
shareholder agreements, indenture, credit agreements, or other agreement
limiting the right or power of Buyer to buy the Assets and Liabilities. No
approval or consent of any person, firm, or other entity is required to be
obtained by Buyer for the execution, delivery, and consummation of this
Agreement by Buyer.
4.4 Restricted Buyer Stock. At the time of closing, the Buyer Stock
will not be registered under the United States Securities Act of 1933 ("1933
Act") and will constitute "restricted securities" within the meaning of
Regulation S and Rule 144 promulgated by the United States Securities and
Exchange Commission under the 1933 Act. If at any time in the future the
Buyer applies to register some of its stock under the 1933 Act, it will also
apply to register the Buyer Stock under that Act, subject to the right of the
Buyer or its underwriters, in view of market conditions and/or the
requirements of any future third party investor who may require registration
of Buyer's stock as a condition to its investment, to reduce or eliminate the
number of shares of Buyer Stock proposed to be registered.
4.5 LabMentors Headquarters. For so long as the Canadian or New
Brunswick tax incentives, set forth in Schedule 4.5, are available with
respect to LabMentors' operations in Fredericton, New Brunswick and such tax
incentives are, in the sole business judgment of Buyer's Board of Directors,
beneficial to Buyer, Buyer will continue to operate LabMentors in Fredericton,
New Brunswick.
4.6 LabMentors' Employees. All employees of LabMentors employed in
connection with LabMentors' operations in Canada will continue to be employees
of Buyer after the Closing.
4.7 Continued Operation of Company's Business. Following the Closing of
the Share Exchange and subject to the business judgment of Buyer's Board of
Directors, Buyer shall continue to conduct the Business, as currently
conducted and consistent with past practice (including technological and new
product development and product sales to existing and new customers) in good
faith in an effort to maximize Business' EBITDA.
4.8 Brokers or Finders. Buyer has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement, except for
contractual obligations to Colebrook Capital. Buyer shall be solely
responsible for payment of any and all such obligations.
4.9 Material Misstatement or Omissions. No representation or warranty
made by Buyer in this Agreement or in any document or agreement furnished in
connection with this Agreement contains or will contain any untrue statement
of material facts, or omits or will omit to state a material fact necessary to
make the statements therein not misleading.
Article 5
CONDITIONS OF CLOSING.
5.1 Conditions Precedent To Obligations Of Buyer. The obligations of
Buyer under this Agreement, including Buyer's obligation to close, are, at
Buyer's option, subject to the satisfaction of the following conditions:
5.1.1 Completion Of Buyer's Due Diligence. At or before
Closing, Buyer shall have completed, to Buyer's sole satisfaction, Buyer's due
diligence investigation, including but not limited to Buyer's satisfaction of
LabMentors' financial condition at Closing. Buyer's due diligence
investigation shall include, but not be limited to, verification of all facts
and representations of Sellers, and verification of all facts and schedules
relating to the Assets and Liabilities.
5.1.2 Completion of Buyer's Audit of LabMentors. At or before
Closing, Buyer and Buyer's auditors shall have completed, to Buyer's sole
satisfaction, Buyer's audit of LabMentors.
5.1.3 Representations and Warranties True. The representations
and warranties of LabMentors and Shareholders are true, complete, and accurate
as of the date of this Agreement and as of the date of Closing as if made as
of such date.
5.1.4 Covenants Performed. Sellers have performed all
obligations, covenants and agreements to be performed prior to Closing as set
forth in this Agreement.
5.1.5 Third Party Consents. Buyer has received written consents
and releases, in the form and content acceptable to Buyer, from all necessary
or desired persons. In particular, but without limitation, Sellers shall have
obtained all consents and approvals necessary for the assignment to Buyer of
all Contracts and Personal Property Leases, and provided all bills of sale,
assignments, and other instruments of transfer in the form as Buyer shall
reasonably request.
5.1.6 Governmental Approvals. Sellers shall have made all
filings and received and obtained all federal, state, provincial, local and
foreign governmental approvals necessary to consummate the Share Exchange.
5.1.7 No Litigation. No actions, suits or proceedings of any
kind shall be threatened or pending that relate to LabMentors, the Business,
the Assets or the Share Exchange. No injunctions, orders, decrees or rulings
shall be in effect that seek to restrain or prohibit, or to obtain damages or
other relief in connection with, the execution or delivery of this Agreement
or the consummation of the transactions contemplated by this Agreement.
5.1.8 No Material Adverse Change. No material adverse change in
any laws, regulations, permits, licenses or other governmental or regulatory
requirements affecting Buyer or LabMentors' or LabMentors' business operations
generally shall have occurred.
5.1.9 Execution and Certification of Resolution of Board of
Directors. LabMentors and WIF shall have executed and delivered to Buyer duly
adopted and certified copies of Resolutions of their respective Board of
Directors authorizing the execution and delivery of this Agreement, and all
other documents contemplated by this Agreement.
5.1.10 Public Record Searches. LabMentors shall have furnished
to Buyer (i) results of public records searches acceptable to Buyer evidencing
that there are no registrations made by creditors against LabMentors or any of
the Assets, and (ii) tax lien and litigation searches, fictitious business
statement filings, notices, or other similar documents that Buyer may require
in order to reflect, perfect, or protect the interests of Buyer in the Assets
and Liabilities of LabMentors and to fully consummate all of the transactions
contemplated under this Agreement.
5.1.11 Additional Equity. LabMentors shall have obtained
additional capital in the amount of $100,000 (Canadian dollars); and that
capital shall have been converted to LabMentors Stock at or before Closing.
5.1.12 Convertible Securities. All options, warrants, rights,
convertible debentures and other convertible securities issued by LabMentors
shall have been converted to LabMentors Stock.
5.1.13 Estoppel Certificate. Buyer shall have received from WIF
an executed estoppel certificate or similar certification stating that as of
the Effective Date (i) no obligations are owed or exist by and between
LabMentors and WIF; (ii) WIF will have no claim against LabMentors as a
creditor, shareholder or otherwise; (iii) WIF has not taken any pre-Closing
action which may bind LabMentors or result in the creation of a lien or
encumbrance against any of LabMentors' assets.
5.1.14 Shareholder Approval. If required by New Brunswick law,
this Agreement and the Share Exchange transaction shall have been approved by
the requisite number of Shareholders, without any Shareholder asserting
appraisal or dissenter's rights under the applicable law.
5.1.15 Removal of Encumbrances and Liens. Unless permitted by
this Agreement, the Assets shall be free and clear of all encumbrances and
liens.
5.1.16 Joe Khoury Employment Agreement. Joe Khoury's Employment
Agreement in the form attached as Schedule 3.20 shall be in full force and
effect.
5.1.17 Financial and Operating Performance. As of Closing, the
business organization and operation, the services of LabMentors' officers and
employees, and the relations between LabMentors and its customers and
suppliers have been preserved.
5.1.18 Approval By Board Of Directors. The Board of Directors of
Buyer shall, in its discretion, have approved this Agreement and the
transactions contemplated by this Agreement.
5.1.19 Legal Opinions. Sellers shall have delivered to Buyer
opinions of LabMentors' and WIF's counsel in the forms attached as
Schedule 5.1.19.
5.1.20 Shareholder Agreement. The Shareholder Agreement among
the Shareholders shall have been terminated and each of the Shareholders shall
have waived all rights thereunder.
5.1.21 Key Employees. Joe Khoury, Albert Chen, Richard Chen,
Mark Veinot and Mike Law shall have agreed to continue their employment by
LabMentors following Closing on the same terms and conditions of their
employment prior to Closing.
5.1.22 Updated Financial Statements. LabMentors shall have
delivered to Buyer its unaudited interim balance sheet and income statement as
of a date and for the period ended not later than thirty (30) days prior to
the Closing date, prepared in accordance with GAAP, applied consistently with
LabMentors' audited financial statements as of May 31, 2005. Such interim
financial statements shall be complete and correct in all material respects,
and present fairly, in all material respects, the financial position of
LabMentors as of the date indicated.
5.1.23 Estoppel Certificates.
(a) Frank Maresca and Frank Maresca & Associates Inc., a
New York corporation, shall have executed and delivered to Buyer an estoppel
certificate, in form and substance satisfactory to Buyer, certifying that the
Business Consultant Agreement dated the 1st day of January 2005 among Frank
Maresca, Frank Maresca & Associates Inc. and LabMentors has been terminated
and is of no further force or effect and further certifying that all
obligations owed by LabMentors thereunder have been fully paid and discharged.
(b) Frank Maresca and Saratoga Equity Ltd, a New York
corporation, shall have executed and delivered to Buyer an estoppel
certificate, in form and substance satisfactory to Buyer, certifying that all
obligations owed by Labmentors under the Agreement dated the 2nd day of
January 2005 between Saratoga and LabMentors shall have been fully paid and
discharged; and the Agreement shall thereupon be deemed to have been
terminated by mutual agreement and of no further force or effect on or after
the Closing.
5.2 Conditions Precedent to Obligations of Sellers. The obligations of
Sellers under this Agreement, including the obligation to close, are, at the
option of Sellers, subject to the satisfaction of the following conditions:
5.2.1 Representations and Warranties True. The representations
and warranties of Buyer are true, complete, and accurate as of the date of
this Agreement and as of the date of Closing as if made as of such date.
5.2.2 Covenants Performed. Buyer has performed all obligations,
covenants and agreements to be performed prior to Closing as set forth in this
Agreement.
5.3 Waiver of Conditions. Buyer may waive, as a condition precedent to
Closing, compliance with the conditions set forth in Section 5.1 above.
Sellers may waive, as a condition precedent to Closing, compliance with the
conditions set forth in Section 5.2. Waiver of compliance for purposes of
Closing shall not waive or diminish any right of the waiving party to recover
damages or enforce other available rights by reason of noncompliance by the
other party or parties with any representation, warranties, or covenants of
other party or parties set forth in this Agreement.
Article 6
CLOSING.
6.1 Time, Date and Place of Closing. The closing of the Share Exchange
will take place at the corporate offices of the Buyer in Boise, Idaho or at a
mutually agreed location, commencing at 9:00 a.m., Boise, Idaho time, one week
following the satisfaction or waiver of all conditions to the obligations of
the parties to this Agreement (other than conditions with respect to actions
the respective parties will satisfy at the Closing itself), or such other date
as the Parties may mutually determine (the "Closing"). At the Closing, Buyer
shall pay the Purchase Price as provided in this Agreement and Sellers shall
take or shall cause to be taken all the actions as may be required to put
Buyer into full possession or control of all the Assets and Liabilities.
6.2 Further Assurances. Buyer and Sellers shall deliver all documents
as may be required to effect the transactions contemplated by this Agreement.
At any time after Closing, Buyer and Sellers shall each execute, acknowledge,
and deliver any further assignments, conveyances and other assurances,
documents and instruments of transfer reasonably requested by the other, and
shall take any other action consistent with the terms of this Agreement that
may reasonably be requested by the other for the purpose of effecting the
transactions contemplated by this Agreement.
6.3 Assignment of WIF Buyer Stock. Buyer consents to the transfer of
Buyer Stock received by WIF (subject to compliance with the applicable United
States federal securities laws and the transfer restrictions set forth in this
Agreement) and the earn-out rights associated therewith pursuant to Section
2.4.2 to Growthworks Atlantic Venture Fund Ltd.
Article 7
NONCOMPETITION AND CONFIDENTIAL INFORMATION
7.1 Purpose Of Noncompetition And Confidential Information Agreements.
LabMentors and Shareholders acknowledge that Buyer is purchasing the
LabMentors Stock with the expectation of continuing the Business at the
Business location and providing services to LabMentors' existing and expected
future customers and clients. Shareholders agree that Buyer is entitled to a
period of time to benefit from the purchase, and that Shareholders should be
restricted from competing with LabMentors' Business or Buyer's business or
benefiting from the Business and the Proprietary Information and Goodwill
purchased by Buyer.
7.2 Noncompetition Agreement. Each of the Shareholders agrees not to
compete with Buyer or LabMentors for a period of two (2) years following
Closing in the design, development, marketing, sale or delivery of educational
products or services, including engineering or science-based enrichment
curricula or project-based learning labs for children in grades K-12, as well
as pre-kindergarten and after-school programs, and computerized and/or
web-based interactive technology-based software delivery systems for
curricula, communication, support and assessment. The term "compete" shall
include, by way of illustration, (i) directly or indirectly selling or
rendering any service or product provided or sold by LabMentors prior to
Closing, (ii) being an owner, partner, agent, consultant, stockholder,
director or officer of any person, firm, or entity that directly or indirectly
sells or renders any service or product provided or sold by LabMentors prior
to Closing, (iii) contacting or soliciting any of Buyer's or LabMentors'
customers, clients or employees for the purpose of establishing relationships
for sale of any service or product that directly or indirectly competes with
Buyer's business or LabMentors' Business, (iv) causing any client, customer or
employee to terminate any relationship with Buyer or LabMentors, and
(v) making any public or private statements to third parties that would be
injurious to or in any way interfere, directly or indirectly, with the
Goodwill or LabMentors' Business or Buyer's business or the reputation of
LabMentors or Buyer. Notwithstanding the foregoing, WIF is not prohibited
from investing in any entity, regardless of their business.
7.3 Confidentiality Agreement. Upon entering this Agreement and at all
times after Closing, each Shareholder shall keep confidential and shall not
use for the Shareholder's own benefit or the benefit of any other person and
shall not disclose to any other person any Proprietary Information of
LabMentors or Buyer.
7.4 Inducement of Buyer. Shareholders understand and agree that strict
observance of the agreements set forth in Article 7 is a substantial
inducement to the execution and performance of this Agreement by Buyer.
7.5 Acknowledgement by Shareholders. Shareholders (i) carefully
considered the nature and extent of the restrictions upon Shareholders and the
rights and remedies conferred upon Buyer under this Article 7, (ii) agree that
the restrictions, rights and remedies are reasonable in time, application,
amount, and effect, (iii) agree that the restrictions are supported by
sufficient consideration and are not disproportionate to the respective
benefits conferred upon Shareholders by this Agreement, and (iv) acknowledge
that the restrictions will not prevent Shareholders from earning a living.
Shareholders acknowledge that Shareholders were advised by Buyer that
Shareholders should have this Agreement reviewed by counsel; and each
Shareholder has either done so or elected to forego such right.
Article 8
EXCLUSIVITY AND BREAKUP FEE
8.1 Exclusivity. Prior to Closing, Sellers (a) shall not initiate or
continue any discussions or negotiations, if any, with any third party with
respect to, or any that could reasonably be expected to lead to, a sale of all
or substantially all of LabMentors assets and (b) shall not, directly or
indirectly: (i) initiate, solicit, or encourage any inquiry, proposal, offer
or discussion with any party concerning any merger, reorganization,
consolidation, recapitalization, business combination, liquidation,
dissolution, share exchange, sale of stock, sale of material assets or similar
business transaction involving LabMentors, or (ii) furnish any non public
information concerning the business, properties or assets of LabMentors to any
party.
8.2 Breakup Fee. If Sellers fail to consummate the Share Exchange,
pursuant to the terms and conditions of this Agreement, for any reason other
than Buyer's breach of this Agreement, LabMentors shall pay all of Buyer's
legal, accounting and other advisors' fees, and all other related expenses
incurred by Buyer in connection with the Share Exchange transaction, up to an
amount not to exceed $35,000.00. If Buyer fails to consummate the Share
Exchange and such failure constitutes a breach of this Agreement, LabMentors
is not obligated to pay the break-up fee.
Article 9
REMEDIES.
9.1 Survival of Representations, Warranties and Covenants. The
representations, warranties, and covenants by LabMentors and Shareholders set
forth in this Agreement, including (without limitation) any representations,
warranties, or covenants set forth in any Schedule or other writing delivered
pursuant to this Agreement, shall survive the Closing and shall be deemed to
be material and to have been relied upon by Buyer. In addition, all
provisions of Article 7 are independent of, and shall survive termination for
any reason of, Buyer's employment of any of the Shareholders, or their
affiliates, regardless of whether termination of employment is voluntary,
involuntary, by reason of retirement, or for any other reason.
9.2 Claim. A "Claim" shall be broadly construed to include any
(i) actual or alleged breach of any representation, warranty, covenant or
obligation of a party, (ii) any loss, harm or damage incurred by a party
arising from or related to this Agreement or the transaction contemplated by
this Agreement, (iii) any punitive and treble damages, interest, penalties or
attorney fees, and (iv) anything relating to any LabMentors' Employee Benefit
Plan. A Claim includes, but is not limited to, Claims by third parties,
employees and former employees.
9.3 Claim Notice and Cure Period. In the event of a Claim, then the
aggrieved party shall provide reasonable written notice to defaulting party of
the breach. From the date of notice the defaulting party shall have 30 days
to cure the Claim. If the Claim continues after the 30 day cure period, then
the aggrieved party shall have all remedies provided by this Agreement and by
law.
9.4 Claim Resolution Procedure. If a Claim arises, the parties shall
first attempt to settle the Claim by direct discussions. If the Claim cannot
be settled by the parties by direct discussions, then the parties agree to
endeavor to settle the Claim in an amicable manner by mediation administered
by the American Arbitration Association under its Commercial Mediation Rules.
Thereafter, any unresolved controversy or Claim arising from or relating to
this Agreement or a breach of this Agreement shall be resolved as provided by
law.
9.5 Special Remedies for Noncompetition and Confidentiality Violations.
Breach of the noncompetition agreement or the confidentiality agreement set
forth in Article 7 will result in irreparable harm to Buyer which cannot be
reasonably or adequately compensated by damages. Therefore, in addition to
any other remedy or right Buyer may have (including rights and remedies at law
or in equity, including recovery of damages), Buyer shall have the following
rights: (i) right to an immediate injunction or other equitable relief
enjoining any threatened or actual breach, and (ii) the right to recover
liquidated damages from each person or entity in breach of the noncompetition
agreement or the confidentiality agreement in an amount of $500.00 per day for
each day of breach. The amount of liquidated damages is based on the
reasonable and informed estimate by Buyer and Sellers of the anticipated
actual damages that the Buyer would suffer for a violation by each person or
entity. In the event of Sellers' breach or anticipated breach of the
noncompetition and confidentiality provisions of this Agreement, Buyer is not
required to comply with Claim Notice and Cure Period provision (set forth in
Section 9.3) and the Claim Resolution Procedure provision (set forth in
Section 9.4).
9.6 Indemnity. Notwithstanding any investigation of the Business,
Assets or Liabilities of LabMentors made by or on behalf of Buyer prior to
closing, Shareholders (other than WIF), for a period of one year from Closing,
jointly and severally agree to defend, indemnify and hold Buyer harmless from
any and all Claims sustained directly or indirectly by Buyer (including,
without limitation, any breach of the representations, warranties or
covenants of LabMentors or Shareholders in this Agreement, uninsured tort
liabilities of LabMentors, unfunded pension liabilities, any taxes that
LabMentors or the Shareholders become obligated to pay as a result of the
Share Exchange, any liabilities resulting from pending or threatened
litigation, any obligations pursuant to either of the Agreements referenced in
Section 3.48, and any undisclosed liabilities not disclosed in the Financial
Statements or schedules to this Agreement). This obligation to indemnify,
defend and hold Buyer harmless is not limited in any manner by the cash or
other consideration received by Shareholders under this Agreement.
9.7 Purchase Price Offset. Without limiting the availability of other
remedies, Buyer shall have the right, exercisable upon notice to a Shareholder
specifying in reasonable detail the basis for such setoff, to reduce the
number of Earnout shares of Buyer Stock otherwise deliverable to that
Shareholder pursuant to Section 2.4.2 by the number of shares, valued in
accordance with Section 2.4.2, equivalent in value to the amount which that
Shareholder is obligated to indemnify Buyer under Section 9.6. The reduction
shall occur on or after the following: (i) the Shareholders' failure to cure
the Claim and (ii) the earlier of completion of the mediation required by
Section 9.4 of this Agreement or 30 days after the end of the cure period set
forth in Section 9.3. The exercise of this set off right by Buyer in good
faith, whether or not ultimately determined to be justified, will not
constitute a breach or event of default this Agreement. If Shareholders shall
dispute the reduction of Earnout shares by delivering notice to Buyer on or
before date the deduction shall occur, Buyer shall withhold delivery of the
disputed number of shares of Buyer Stock pending resolution of the dispute
pursuant to this Agreement.
9.8 Indemnification of LabMentors Directors. The Buyer shall indemnify
any LabMentors' officer or director who, post-Closing, continues to serve as
an officer or director of Buyer or its subsidiaries, for any and all statutory
liabilities of LabMentors incurred in the post-Closing conduct of LabMentors'
business for which the officer or director may be personally liable under
applicable Canadian federal or provincial laws; provided, however, that this
indemnity shall not apply in the event that such statutory personal liability
is incurred pursuant to such officer or director's gross negligence or willful
misconduct. The indemnity provided herein shall remain in full force and
effect for a period of three (3) years following the date such officer or
director ceases to be an officer or director of Buyer or its subsidiaries.
9.9 Attorney Fees and Costs. If a dispute shall arise as to whether
either party is in default under this Agreement, the prevailing party shall be
awarded reasonable attorney fees and costs in any suit, action or proceeding,
including trial, arbitration, mediation, or appeal, as awarded by the court,
arbiter or mediator.
9.10 Rights Cumulative. Except as expressly provided in this Agreement,
and to the extent permitted by law, any remedies described in this Agreement
are cumulative and not alternative to any other remedies available at law or
in equity, provided that any recourse of the Buyer against WIF is limited to
the Buyer Stock held by WIF.
9.11 Nonwaiver of Remedies. The failure or neglect of a party to
enforce any remedy available by reason of the failure of the other party to
observe or perform a term or condition set forth in this Agreement shall not
constitute a waiver of the term or condition. A waiver by a party (i) shall
not affect any term or condition other than the one specified in the waiver,
and (ii) shall waive a specified term or condition only for the time and in a
manner specifically stated in the waiver.
9.12 Governing Law, Jurisdiction, and Venue. This Agreement shall be
governed by Idaho law. The state and federal courts of Idaho have
jurisdiction, and venue for mediation, litigation and all other proceedings
shall be located in Ada County, Idaho.
Article 10
GENERAL PROVISIONS.
10.1 Public Disclosure. Pending the Closing, neither LabMentors nor
Shareholders shall, without the express written consent of Buyer, make any
announcement concerning the Share Exchange, this Agreement or any related
agreements to the public, to the customers or employees of LabMentors, or to
any other person or entity, except that the parties may disclose such
information to their Representatives. As a public company subject to
disclosure obligations under U.S. federal and state securities laws, Buyer
shall control the timing and content of all public announcements concerning
the Share Exchange including (without limitation) such disclosure by
LabMentors or the Shareholders or other reporting functions as may be required
pursuant to the laws of the Province of New Brunswick, and specifically with
respect to the New Brunswick Business Corporations Act, and the New Brunswick
Securities Act, all as amended, and the regulations thereunder.
10.2 Notices. All notices and other communications ("Notices") shall be
in writing and may be delivered (i) in person, with the date of notice being
the date of personal delivery, (ii) by United States Mail, postage prepaid for
certified or registered mail, return receipt requested, with the date of
notice being the date of the postmark on the return receipt, (iii) by fax,
with confirmation of the transmittal of the fax and a copy of the fax
deposited on the same day in the United States Mail, with the date of notice
being the date of the fax, (iv) by e-mail, with confirmation of sending of the
e-mail and a copy of the e-mail deposited on the same day in the United States
Mail, with the date of notice being the date of the e-mail, (v) by nationally
recognized delivery service such as Federal Express, with the date of notice
being the date of delivery as shown on the confirmation provided by the
delivery service. Notices shall be addressed to the following addresses, or
such other address as one party shall provide the other parties:
If to Buyer: Anthony Maher
President
PCS Edventures!.com, Inc.
345 Bobwhite Court, Suite 200
Boise, Idaho 83706
with copy to: Richard Riley
Hawley Troxell Ennis & Hawley LLP
877 West Main Street, Suite 1000
P.O. Box 1617
Boise, Idaho 83702
If to Sellers: Joe Khoury, President
527 Beaverbrook Ct, Suite 423
Fredericton, NB, Canada
E3B 1X6
with copy to: J. E. Britt Dysart
Stewart McKelvey Stirling Scales [with respect
to LabMentors only]
Suite 600, Frederick Square
77 Westmorland Street
P.O. Box 730
Fredericton, NB, Canada
E3B 5B4
with copy to: Workers Investment Fund Inc.
Larry Simpson, President
1133 Regent Street, Suite 202
Fredericton, NB, Canada
E3B 3Z2
with copy to: Allen Dixon Smith Townsend
Charles Sargeant, Q.C.
77 Westmorland, Suite 340
Fredericton, NB, Canada
E3B 6Z3
10.3 Sellers' Information Disclosed In Negotiations. Prior to Closing,
Buyer and its affiliates, shareholders, officers, directors, counsel,
accountants and other representatives shall keep confidential and shall not
disclose or use in any way whatsoever, any information regarding Sellers
disclosed or learned during the course of discussions, negotiations, or
investigations relating to Sellers, whether prior to the date of this
Agreement, on the date of this Agreement or subsequent to the date of this
Agreement, and whether the information was disclosed or learned pursuant to
this Section 10.3 or otherwise. Subsequent to Closing, or if this transaction
fails to Close, Buyer may use the information. If this transaction shall fail
to close, then Buyer shall return to Sellers all documents and copies of
documents provided to Buyer by Sellers.
10.4 Payment of Expenses. Buyer and Sellers shall each pay their own
fees and expenses, including fees and expenses of their respective attorneys,
accountants, financial advisors, brokers, agents and other representatives,
incidental to the transactions contemplated by this Agreement. In particular,
but without limitation, Buyer shall pay all compensation due to Colebrooke
Capital, Inc. for its services rendered to Buyer in securing and assisting in
the acquisition of LabMentors. Sellers acknowledge that this compensation
will be paid to Colebrooke Capital in the form of 100,000 shares of Buyer's
restricted common stock. The Shareholders have also agreed to compensate
Frank Maresca, individually, in the form of 70,000 shares of Buyer's
restricted common, for services rendered by Frank Maresca in assisting in the
acquisition of Labmentors by Buyer. The Shareholders acknowledge that they
are solely responsible for the payment of any an all of obligations due to
Frank Maresca, or any entity affiliated with Frank Maresca.
10.5 Time of the Essence. Time is of the essence with respect to the
obligations to be performed under this Agreement.
10.6 Entire Agreement. All Schedules to this Agreement constitute a
part of this Agreement. This Agreement, together with the accompanying
Schedules, constitutes the entire, completely integrated agreement among the
parties and supersedes all prior memoranda, correspondence, conversations and
negotiations.
10.7 Disclosures. The parties shall make various disclosures in this
Agreement and in various schedules to this Agreement. The schedules are bound
in a separate volume entitled "Disclosure Schedules for Share Exchange
Agreement Among PCS Edventures!.com, Inc., 511092 NB Ltd. and Its
Shareholders," ("Disclosure Schedules") and are incorporated into this
Agreement. A qualification or exception to any representation, warranty, or
covenant contained in this Agreement shall not be construed as a qualification
or exception to any other representation, warranty, or covenant contained in
this Agreement unless the qualification or exception expressly refers to the
other representation, warranty, or covenant.
10.8 Buyer's Assistance In Preparing Disclosures. Sellers are solely
responsible for fully and fairly disclosing all information that is required
to be disclosed in the Disclosure Schedules, and Sellers are in full control
of the process of preparing the Disclosure Schedules and the final form and
substance of the Disclosure Schedules. From time to time, representatives of
Buyer may assist Sellers in researching, compiling, listing or otherwise
completing the Disclosure Schedules. Buyer's assistance provided to Sellers
is a courtesy and does not (i) terminate, reduce, mitigate or otherwise
diminish Sellers' responsibility to fully and fairly disclose all required
information in the Disclosure Schedules, and (ii) does not impute or attribute
to Buyer by implication or otherwise information which Buyer's representatives
did or should have discovered while assisting Sellers that was not disclosed
on the Disclosure Schedules.
10.9 Severability. The invalidity of any portion of this Agreement
shall not affect the validity of any other portion of this Agreement. If the
invalidity or unenforceability is due to the unreasonableness of time or
geographical restrictions, the restrictions shall be effective for the period
of time and area as a court may determine to be reasonable.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
Article 11
SIGNATURES
511092 NB LTD. doing business as
LabMentors
Dated: _________________________ /s/Joe Khoury
By: Joe Khoury
Its: President
PCS EDVENTURES!.COM, INC.
Dated: _________________________ /s/Anthony Maher
By: Anthony Maher
Its: President
SHAREHOLDERS
Dated: _________________________ /s/Joseph Khoury
Joseph Khoury
Dated: _________________________ /s/Bogdan Itoafa
Bogdan Itoafa
Dated: _________________________ /s/Frank Maresca
Frank Maresca
Dated: _________________________ /s/Dale Harris
Dale Harris
Dated: _________________________ /s/Chris Grady
Chris Grady
Dated: _________________________ /s/Mark Veinot
Mark Veinot
Dated: _________________________ /s/Jae Wan Joen
Jae Wan Jeon
WORKERS INVESTMENT FUND, INC.
Dated: _________________________ /s/R. Laurence Simpson
By: R. Laurence Simpson, President
Its: President
SPOUSAL CONSENT
The undersigned represents and agrees that (i) she/he is a spouse of one
of the Shareholders of record of LabMentors Stock, (ii) (iii) any interest
the spouse may have in the Business or in LabMentors or in the LabMentors
Stock is bound by this Agreement, (iv) the spouse shall execute any and all
documents necessary or desirable to permit the Shareholder to transfer the
interest of the spouse in the LabMentors Stock owned of record by the
Shareholder or otherwise in accordance with this Agreement, (iv) this
Agreement shall not be affected by the subsequent divorce of a spouse and a
Shareholder or any property settlement or decree affecting the spouse or the
Shareholder (v) THE SPOUSE IS NOT A SHAREHOLDER IN LABMENTORS AND HEREBY
RELEASES AND DISCHARGES ANY AND ALL RIGHTS OF A SHAREHOLDER OR OTHER INTEREST
IN THE LABMENTORS' STOCK.
Date: __________________________
Print Name:
SPOUSAL CONSENT
The undersigned represents and agrees that (i) she/he is a spouse of one
of the Shareholders of record of LabMentors Stock, (ii) (iii) any interest
the spouse may have in the Business or in LabMentors or in the LabMentors
Stock is bound by this Agreement, (iv) the spouse shall execute any and all
documents necessary or desirable to permit the Shareholder to transfer the
interest of the spouse in the LabMentors Stock owned of record by the
Shareholder or otherwise in accordance with this Agreement, (iv) this
Agreement shall not be affected by the subsequent divorce of a spouse and a
Shareholder or any property settlement or decree affecting the spouse or the
Shareholder (v) THE SPOUSE IS NOT A SHAREHOLDER IN LABMENTORS AND HEREBY
RELEASES AND DISCHARGES ANY AND ALL RIGHTS OF A SHAREHOLDER OR OTHER INTEREST
IN THE LABMENTORS' STOCK.
Date: __________________________
Print Name:
SPOUSAL CONSENT
The undersigned represents and agrees that (i) she/he is a spouse of one
of the Shareholders of record of LabMentors Stock, (ii) (iii) any interest
the spouse may have in the Business or in LabMentors or in the LabMentors
Stock is bound by this Agreement, (iv) the spouse shall execute any and all
documents necessary or desirable to permit the Shareholder to transfer the
interest of the spouse in the LabMentors Stock owned of record by the
Shareholder or otherwise in accordance with this Agreement, (iv) this
Agreement shall not be affected by the subsequent divorce of a spouse and a
Shareholder or any property settlement or decree affecting the spouse or the
Shareholder (v) THE SPOUSE IS NOT A SHAREHOLDER IN LABMENTORS AND HEREBY
RELEASES AND DISCHARGES ANY AND ALL RIGHTS OF A SHAREHOLDER OR OTHER INTEREST
IN THE LABMENTORS' STOCK.
Date: __________________________
Print Name:
SPOUSAL CONSENT
The undersigned represents and agrees that (i) she/he is a spouse of one
of the Shareholders of record of LabMentors Stock, (ii) (iii) any interest
the spouse may have in the Business or in LabMentors or in the LabMentors
Stock is bound by this Agreement, (iv) the spouse shall execute any and all
documents necessary or desirable to permit the Shareholder to transfer the
interest of the spouse in the LabMentors Stock owned of record by the
Shareholder or otherwise in accordance with this Agreement, (iv) this
Agreement shall not be affected by the subsequent divorce of a spouse and a
Shareholder or any property settlement or decree affecting the spouse or the
Shareholder (v) THE SPOUSE IS NOT A SHAREHOLDER IN LABMENTORS AND HEREBY
RELEASES AND DISCHARGES ANY AND ALL RIGHTS OF A SHAREHOLDER OR OTHER INTEREST
IN THE LABMENTORS' STOCK.
Date: __________________________
Print Name:
SPOUSAL CONSENT
The undersigned represents and agrees that (i) she/he is a spouse of one
of the Shareholders of record of LabMentors Stock, (ii) (iii) any interest
the spouse may have in the Business or in LabMentors or in the LabMentors
Stock is bound by this Agreement, (iv) the spouse shall execute any and all
documents necessary or desirable to permit the Shareholder to transfer the
interest of the spouse in the LabMentors Stock owned of record by the
Shareholder or otherwise in accordance with this Agreement, (iv) this
Agreement shall not be affected by the subsequent divorce of a spouse and a
Shareholder or any property settlement or decree affecting the spouse or the
Shareholder (v) THE SPOUSE IS NOT A SHAREHOLDER IN LABMENTORS AND HEREBY
RELEASES AND DISCHARGES ANY AND ALL RIGHTS OF A SHAREHOLDER OR OTHER INTEREST
IN THE LABMENTORS' STOCK.
Date: __________________________
Print Name:
SPOUSAL CONSENT
The undersigned represents and agrees that (i) she/he is a spouse of one
of the Shareholders of record of LabMentors Stock, (ii) (iii) any interest
the spouse may have in the Business or in LabMentors or in the LabMentors
Stock is bound by this Agreement, (iv) the spouse shall execute any and all
documents necessary or desirable to permit the Shareholder to transfer the
interest of the spouse in the LabMentors Stock owned of record by the
Shareholder or otherwise in accordance with this Agreement, (iv) this
Agreement shall not be affected by the subsequent divorce of a spouse and a
Shareholder or any property settlement or decree affecting the spouse or the
Shareholder (v) THE SPOUSE IS NOT A SHAREHOLDER IN LABMENTORS AND HEREBY
RELEASES AND DISCHARGES ANY AND ALL RIGHTS OF A SHAREHOLDER OR OTHER INTEREST
IN THE LABMENTORS' STOCK.
Date: __________________________
Print Name:
DISCLOSURE SCHEDULES
FOR THE
SHARE EXCHANGE AGREEMENT
AMONG
PCS EDVENTURES!.COM, INC.,
511092 NB LTD.,
AND ITS SHAREHOLDERS
Effective November 30, 2005
DISCLOSURE SCHEDULES FOR THE SHARE EXCHANGE AGREEMENT
AMONG
PCS EDVENTURES!.COM, INC., 511092 NB LTD., AND ITS SHAREHOLDERS
Effective November 30, 2005
Unless otherwise defined in the Disclosure Schedules, all capitalized
terms used the Disclosure Schedules shall have the meanings ascribed to them
in the "Share Exchange Agreement between PCS Edventures!.com, Inc., 511092 NB
Ltd., and Its Shareholders" effective November 30, 2005 ("Agreement"). The
Disclosure Schedules shall be deemed to be part of, and incorporated into, the
Agreement.
Disclosure on any matter pursuant to one provision, subprovision,
section or subsection, or in any financial statements provided by the Sellers
to Buyer, is not and shall not be considered as disclosure pursuant to any
other provision, subprovision, section or subsection of these Disclosure
Schedules to the extent the Agreement requires the disclosure.
The Disclosure Schedules supersede and replace any other disclosure
schedules or related information previously provided to the Buyer. The
earlier disclosures and disclosure schedules have no force or effect.
Number Title
1.3 LabMentors Shareholders
2.2.3 Distribution of Exchangeable Stock
3.1 LabMentors' Financial Statements
3.2 Absence of Undisclosed Liabilities
3.3 No Default
3.4 Taxes
3.5.3 Equipment, Furniture and Fixtures
3.5.4 Real Property Lease
3.5.5 Personal Property Leases
3.5.6 Contracts
3.5.7 Prepaid Expenses
3.5.8 Receivables
3.5.10 Inventory
3.5.11 Licenses and Permits
3.5.12 Intellectual Property
3.5.13 Communication Addresses
3.5.14 Computer Software and Databases
3.6.1(a) Trade Payables (List)
3.6.1(b) Trade Payables (Supporting Documents)
3.6.2 Purchase Orders
3.6.4 Prepaid Income
3.6.6 Scheduled Liabilities
3.7 Exceptions to Title to Assets
3.8 Insurance
3.9 Financial Accounts
3.10 Leased Property Information
3.11 Real Property Repair and Maintenance
3.12 Utilities
3.13 Prior Construction and Renovation
3.14 Hazardous Material
3.16 Employees
3.17 Employee Benefits
3.18 Employment Agreements
3.20 Joe Khoury's Employment Agreement
3.21 Employee Benefit Plans
3.24 Operation of Business
3.27 Compliance with Law
3.28 Litigation or Claims
3.29 Product Liability
3.45 Options, Warrants and Other Rights
4.5 Tax Incentives
5.1.19 Legal Opinions
Delivered by 511092 NB Ltd., and Shareholders on December___, 2005.
511092 NB LTD. doing business as
LabMentors
Dated: _________________________ /s/Joe Khoury
By: Joe Khoury
Its: President
SHAREHOLDERS
Dated: _________________________ /s/Joseph Khoury
Joseph Khoury
Dated: _________________________ /s/Bogdan Itoafa
Bogdan Itoafa
Dated: _________________________ /s/Frank Maresca
Frank Maresca
Dated: _________________________ /s/Dale Harris
Dale Harris
Dated: _________________________ /s/Chris Grady
Chris Grady
Dated: _________________________ /s/Mark Veinot
Mark Veinot
Dated: _________________________ /s/Jae Wan Jeon
Jae Wan Jeon
WORKERS INVESTMENT FUND, INC.
Dated: _________________________ /s/R. Laurence Simpson, President
By: R. Laurence Simpson, President
Its: President
Accepted by PCS Edventures!.com, Inc. on December ___, 2005.
PCS EDVENTURES!.COM, INC.
Dated: _________________________ /s/Anthony Maher
By: Anthony Maher
Its: President
Schedule 1.3
LABMENTORS SHAREHOLDERS
Name Residence Shares Shares % Owner- % of
Address Currently Owned (at ship at Buyer's
Owned Closing) Closing) Stock
Distrib
at clos
ing (6)
Joseph Khoury (1) 422 Glengarry Place 6,475,000 6,875,000 21.43% 19.29%
Fredericton, NB
Canada E3B5Z9
Bogdan Itoafa 528 Squires St. 4,975,000 4,975,000 15.51% 13.96%
Fredericton, NB
Canada E3B 3V4
Dale Harris 4538 Cormorant Drive 650,000 650,000 2.03% 1.82%
Layfayette, IN
USA 47909
Mark Veinot 1222A Regent St. Apt.1 238,000 238,000 0.74% 0.67%
Fredericton, NB
Canada E3B 3Z4
Chris Grady 45 Country Lane 69,000 69,000 0.22% 0.19%
Islandview NB
Canada E3E 1A2
Workers Investment 1133 Regent Street 5,004,200 12,524,881 39.05% 35.14%
Fund, Inc. (2) Suite #202
Fredericton, NB
Canada E3B 3Z2
Frank Maresca (3) 186 N. Manhattan Ave. 0 6,642,080 20.71% 28.64%
(4), (5) Massapequa, NY
USA 11758
Jae Wan Jeon 630 Millidge Ave. 100,000 100,000 0.31% 0.28%
Saint John, NB
Canada E2K 5S5
Totals 17,511,200 32,073,961 100.00% 100.00%
(1) 2,400,000 shares issuable prior to Closing pursuant to Section 5b of Mr.
Khoury's employment contract (bonus equal to 40% of base salary payable in
LabMentors stock at $0.025 per share).
(2) Includes 354,440 shares of LabMentors' stock issuable to WIF upon
conversion of $8,861 CDN of convertible notes and accrued interest at
$0.025 per share.
(3) 2,400,000 shares issued as inducement to loan $100,000 per terms of
convertible note.
(4) Frank Maresca, pursuant to agreement between Labmentors and Saratoga
Equity Ltd., dated January 2, 2005, is entitled to receive 10% of the shares
of Buyer Stock to be distributed at Closing.
(5) Includes 242,080 shares of LabMentors' stock issuable to Frank Maresca
upon conversion of $6,052 CDN liability of Bill Holt, paid by Frank Maresca
at $0.025 per share
(6) Percentage ownership adjusted for 10% due to Frank Maresca, pursuant to
agreement between Labmentors and Saratoga Equity Ltd., dated January 2,
2005.
Schedule 2.2.3
Distribution of Exchangeable Stock
Name Number of Shares of Buyer Stock*
Joseph Khoury 135,039
Bogdan Itoafa 97,719
Dale Harris 12,767
Mark Veinot 4,675
Chris Grady 1,355
Workers Investment Fund, Inc. (1) 263,589
Frank Maresca (1) 182,892
Jae Wan Jeon 1,964
Total Shares of Exchangeable Stock 700,000
* Based on purchase price of $420,000 converted at $0.60 per share
(1) Frank Maresca to issue 17,574 shares of Buyer restricted common stock to
WIF to compensate for loss of $30,000 USD
Schedule 3.1
BUSINESS' FINANCIAL STATEMENTS
The financial statements are attached.
Schedule 3.2
ABSENCE OF UNDISCLOSED LIABILITIES
Nothing to disclose.
Schedule 3.3
NO DEFAULT
Nothing to disclose.
Schedule 3.4
TAXES
Attached are copies of Canadian federal and provincial income, property
and excise tax returns for the tax periods ended May 31, 2001, May 31, 2002,
and May 31, 2003.
Exception to Sections 3.4.1, 3.4.5 and 3.4.10: Canadian federal and
provincial income tax returns for LabMentors' tax years ended May 31, 2004 and
May 31, 2005 have not yet been filed. LabMentors has requested and obtained
an extension of time within which to file those returns. its Canadian
LabMentors anticipates that the Canadian federal and provincial income tax
returns for its tax year ended May 31, 2004 will be filed on or before
November 30, 2005. R&D tax returns for both 2004 and 2005 have yet to be
filed and are expected to be filed shortly after each income tax return.
No expected tax liability is created; however possible recovery of R&D credits
may arise.
Schedule 3.5.3
EQUIPMENT, FURNITURE AND FIXTURES
Equipment Quantity Cost Warranty Date of Purchase
Common Chair 19 570 none 2001
Acer TM2300 Laptop 1 1200 6 months 2005
Epson CX5400 inkjet printer 1 200 none 2004
AMD K-6 Workstation Computer 1 1500 none 2002
Dell GX 200 Workstation
Computer 1 1500 none 2001
Touch pc-clone Workstation
Computer 1 1000 none 2000
Dell L700CXE Workstation
Computer 1 1200 none 2001
e-Machines T3990 Workstation
Computer 1 500 6 months 2005
e-Machines H3624 Workstation
Computer 1 400 6 months 2005
Dell Dimesion 2300 Workstation
Computer 1 900 none 2003
Compaq DPEND-P350 Workstation
Computer 1 400 none 2002
Cicero CQ133A Workstation
Computer 1 500 none 2004
Clone Dual CPU server w/ 1GB
ram 1 3500 none 2001
Clone Dual CPU Server w/ 2GB
ram 1 4000 none 2002
Clone Dual CPU Server w/ 3GB
ram 1 4500 none 2003
HP NetServer E45 Server 1 2000 none 2000
Samsung 17" Monitor 4 1200 none 2002
Dell 19" Monitor 1 400 none 2003
Benq T705 17" LCD Monitor 1 400 30 months 2005
LG L1915S 19" LCD Monitor 1 400 33 months 2005
HP Laserjet 1100A printer 1 650 none 2001
Samsung ML1740 printer 1 250 6 months 2005
SmartUPS 700 UPS 1 400 none 2002
Panasonic KX-FP81 Fax Machine 1 120 none 2001
Panasonic KX-FP200 Fax Machine 1 100 9 months 2005
Bester Small Computer Desk 4 300 none 2002
Bester Large Corner Desk 1 150 none 2004
DSI Ind. 4' Round Meeting
table 1 300 none 2002
DSI Ind. 6' Boardroom table 1 400 none 2002
Whiteboard 1 50 none 2003
Paintings 2 300 none 2005
DSI End Table 1 100 none 2002
BookShelf 2 150 none 2002
Legal Filing Cabinet 2 200 none 2003
Lounge Chair and matching
Love Seat 1 200 none 2002
Schedule 3.5.4
REAL PROPERTY LEASE
A true, correct and complete photocopy of the real property lease is
attached.
Schedule 3.5.5
PERSONAL PROPERTY LEASES
A true, correct and complete photocopy of each of the personal property
leases is attached.
Lessor
Name/Address/ Monthly Termination
Telephone # Property Leased payment date of Lease
National Leasing
1558 Willson Place
Winnipeg, Manitoba R6T 0Y4
CANADA
1-888-599-1966
1-800-882-0560 fax
customerservice@nationalleasing.com Computer Equipment $202.25 CDN monthly
Dell Financial Services Canada
155 Gordon Baker Road, Suite 501
North York, Ontario
CANADA M2H 3N5 Dell Dimension October
1-416-773-5371 Computers $151.28 CDN 2006
Racklogic Technologies
23 Robinter Drive
Willowdale, Ontario
CANADA M2M 3R3
1-510-376-6584 12 Servers $4,175.00 USD
Schedule 3.5.6
CONTRACTS
The list of all material contracts follows; and a photocopy of all such
contracts is attached.
Contracting Parties Description
Course Technology Development and Services Agreement
605263 NB LTD Landlord Agreement
DeVry Development and Services Agreement
Schedule 3.5.7
PREPAID EXPENSES
The list of all prepaid expenses in which LabMentors have paid amounts to
other vendors and shall receive services or goods after Closing is as follows:
VENDOR NAME AMOUNT PAID DATE PAID FUTURE SERVICES FUTURE GOODS
TO BE PROVIDED TO BE PROVIDED
605263 NB LTD $2,070.00 11/1/105 Rent of offices None
London Life $170.17 11/1/105 Life insurance coverage None
605263 NB LTD $2,070.00 11/30/05 Rent of offices None
London Life $170.17 11/30/05 Life insurance coverage None
Schedule 3.5.8
RECEIVABLES
A list of Receivables (including amounts due on account, amounts due on
promissory notes, and other amounts due to LabMentors) as of Closing is as
follows:
NAME OF PERSON ORIGINAL AMOUNT DATE DEBT UNPAID AMOUNT AGING
OWING MONEY TO OF DEBT TO INCURRED REMAINING
LABMENTORS LABMENTORS
Course Technology 11,778.59 September 30, 2005 11,778.59 1-30
DeVry 6920.00 July 31, 2005 6,920.00 60-90
DeVry 6920.00 September 30, 2005 6,920.00 1-30
Schedule 3.5.10
INVENTORY
There is no physical inventory. Inventory consists of labs stored on
servers and is considered proprietary intellectual property.
Schedule 3.5.11
LICENSES AND PERMITS
A list of all licenses and permits is set forth below, and copies of the
licenses and permits are attached. (These are all required to do business in
Canada.)
Articles of Incorporation Certificate Dated February 2, 2000
Certificate of Business Name Dated September 6, 2001 (Expires September
5, 2006)
New Brunswick Annual Return (Filed yearly)
Schedule 3.5.12
INTELLECTUAL PROPERTY
A list or reproduction of all of LabMentors' copyrights, trademarks,
applications for copyrights and trademarks, logos, graphics that identify the
Business, and all licenses, sublicenses and agreements relating to
Intellectual Property is as follows:
1. Virtual Machine Network Services Copyright registered in Canada on
November 26, 2004 with Registration No. 1025146 and having a first date
of publication of October 28, 2002. (Copy of Registration Certificate
Attached.)
2. Pending trademark application for WEB LAB (words only) in the Canadian
Intellectual Property Office. Serial No. 1238620.
Schedule 3.5.13
COMMUNICATION ADDRESSES
A list of all of LabMentors' telephone numbers, facsimile numbers,
internet addresses, internet domain names, internet domain name registrations,
log-in identifications, user identifications, screen names and on-line service
identifications relating to the practice are as follows:
Table 1: Phone Numbers
Description Number
Main Line 506-451-6467
Fax Line 506-472-6468
Cell Phone 506-260-2258
Cell Phone 506-260-2317
Cell Phone 506-260-3281
Table 2: IP Addresses
Description IP Address 'Root' Login
www.labmentors.com web server 64.72.91.233 graz0630x
mail.labmentors.com mail server 64.72.91.233 graz0630x
devry.labmentors.com devry CIS labs 205.209.166.130 graz0630x
devry2.labmentors.com Devry IT320 labs 205.209.166.131 graz0630x
course.labmentors.com Course Tech labs 205.209.166.132 graz0630x
ns1.labmentors.com primary name server 64.72.91.233 graz0630x
Ns2.labmentors.com secondary name server 205.209.166.131 graz0630x
Table 3: Domain Names
Description Registration Detail
Labmentors.com Expires January 21, 2006
Ecomdrive.com Expires February 6, 2006
Schedule 3.5.14
COMPUTER SOFTWARE AND DATABASES
A list of all of LabMentors' Computer Software and Databases is as
follows:
Schedule 3.6.1(a)
TRADE PAYABLES (LIST)
All trade payables as of Closing are identified below. All trade
payables as of Closing are identified below.
VENDOR INVOICE INVOICE MEMO OR DUE DATE AMOUNT OF AMOUNT TO
DATE NUMBER NOTE INVOICE BE PAID
A C N 9/15/05 Unknown Current Usage 10/10/05 $15.49 $15.49
Charges
A C N 10/14/05 Unknown Current Usage 11/9/05 $32.37 $32.37
liant 10/6/05 Unknown Monthly Charges 11/6/05 $142.45 $142.45
Aliant 9/30/05 Unknown Monthly Charges 10/30/05 $237.61 $237.61
Covey
Basics 5/11/05 3184706 Office Supplies 6/11/05 $54.99 $54.99
Genesys 7/14/05 I-279369 Video Conferencing 8/13/05 $57.75 $57.75
Genesys 8/14/05 I-287549 Video Conferencing 9/13/05 $23.76 $23.76
Genesys 9/14/05 I-295814 Video Conferencing 10/14/05 $76.89 $76.89
KPMG 3/25/05 41996613 Accounting Services 4/24/05 $5,393.50 $4,393.50
KPMG 8/26/05 42177377 Accounting Services 9/26/05 $4,082.50 $4,082.50
Pitney
Bowes 11/3/05 895325 Mailing Services 12/3/05 $86.18 $86.18
Roger's
Cable 10/4/05 Unknown Cable Internet 10/4/05 $75.02 $75.02
Stewart
McElvey 5/31/05 81407491 Legal Services 6/30/05 $4,041.10 $3,041.10
Stewart
McElvey 8/31/05 81421482 Legal Services 9/30/05 $10,173.66 $10,173.66
Stewart
McElvey 9/30/05 81426204 Legal Services 10/30/05 $690.00 $690.00
Telus 8/31/05 Unknown Monthly charges 9/30/05 $324.92 $324.92
Telus 9/30/05 Unknown Monthly charges 10/31/05 $308.42 $308.42
Stewart
McElvey 12/3/04 81375837 Legal Services 1/3/05 $9,422.70 $9,422.70
Stewart
McElvey 12/20/04 81378378 Legal Services 1/20/05 $230.00 $230.00
Stewart
McElvey 12/31/04 81382911 Legal Services 1/31/05 $924.54 $924.54
Stewart
McElvey 4/30/05 81402754 Legal Services 5/30/05 $2,018.25 $2,018.25
Stewart
McElvey 8/31/05 81421426 Legal Services 9/30/05 $460.00 $460.00
Stewart
McElvey 9/30/05 81426202 Legal Services 10/30/05 $519.92 $519.92
Schedule 3.6.1(b)
TRADE PAYABLES (SUPPORTING DOCUMENTS)
Attached are copies of all invoices and other documents supporting the
list set forth in Schedule 3.6.1(a) and providing sufficient information for
Buyer to audit and pay the trade payables.
Schedule 3.6.2
PURCHASE ORDERS
Nothing to disclose.
Schedule 3.6.4
PREPAID INCOME
The list of all prepaid income received by LabMentors prior to rendering
the service or providing the goods and for which LabMentors should provide
services or goods after Closing is as follows:
CUSTOMER NAME AMOUNT PAID DATE PAID FUTURE SERVICES FUTURE GOODS TO
TO BE PROVIDED BE PROVIDED
DeVry $6,920 USD October 2005 Access to computer None
databases for
November and
December 2005
Schedule 3.6.6
SCHEDULED LIABILITIES
Nothing to disclose.
Schedule 3.7
EXCEPTIONS TO TITLE TO ASSETS
Nothing to disclose.
Schedule 3.8
INSURANCE
The schedule of insurance is as follows:
Insurer Policy Number Type of
Insurance
London Life Insurance Co. 1597965-8 Key Business Person Life
Insurance
Schedule 3.9
FINANCIAL ACCOUNTS
The schedule of the Financial Accounts is as follows:
NAME OF BANK TYPE OF ACCOUNT ACCOUNT NUMBER AUTHORIZED PERSONS
Royal Bank Checking Account 008844 100-237 7 Joe Khoury
of Canada
The schedule of revolving credit is as follows:
Name/Description Account Number Authorized Party Authorized Amount
Covey Basics / LABCOR Joe Khoury $1,500
Office Supplies
Schedule 3.10
LEASED PROPERTY INFORMATION
The following information describes the Leased Property for insurance and
other purposes:
Name of Lessee LabMentors
Address of Lessee 412 Queen Street, Suite 300
Fredericton, NB F3B 1B6
CANADA
Date facility constructed 1925
Square footage of facility 1900 sq ft. (our office space)
Insurance value of facility $2 million
Type of construction (frame,
masonry, etc.) Wood/brick
Name of landlord KingsBridge Capital Corporation
Value of contents $12,000
Value of computer hardware and
software $10,000
Number of full and part time
employees 5
Annual revenue $250,000
Date coverage to be effective "Closing"
Schedule 3.11
LEASED PROPERTY REPAIR AND MAINTENANCE VENDORS
All maintenance on the facility is performed by Landlord. The
information for contacting the Landlord is as follows:
KingsBridge CapitalCorp
200-1661 West 8th Avenue
Vancouver, BC
CANADA V6J 1T8
Emergency:
Tracy Pugh
(506) 443-0799
tpugh@lansbridge.com
Maintenance records are not kept by LabMentors as they are the leasing
party and all maintenance is performed by the Lessor.
Schedule 3.12
UTILITIES
UTILITY OR SERVIC PROVIDER NAME PROVIDER ADDRESS
Water Landlord
Electricity Landlord
Gas Landlord
Wet Line Sewer Landlord
Septic Sewer Landlord
Garbage and Trash Landlord
Telephone Aliant PO Box/CP 5555
Saint John, NB
Canada E2L 4V6
Telephone Aliant PO Box/CP 5555
Saint John, NB
Canada E2L 4V6
Telephone Telus Mobilitity 200 Consilium Place Suite 1600
Scarborough, ON
Canada M1H 3J3
Long Distance A C N Long Distance PO Box 4627 Toronto Station "A"
Telephone Toronto ON
Canada M5W 5B5
Schedule 3.13
PRIOR CONSTRUCTION AND RENOVATION
The permitted land use for the Real Property is as follows:
1. Unless stated otherwise, the applicable zoning permits a commercial
property.
Schedule 3.14
HAZARDOUS MATERIALS
Nothing to disclose.
Schedule 3.16
EMPLOYEES
DATE OF
HIRE/DATE SALARY
DATE OF EMPLOYMENT OF LAST PER
NAME BIRTH CONTRACT POSITION INCREASE YEAR
Joseph Khoury 1/18/1964 Yes President Feb. 2000/ $60,000
July 2004 plus stock
Mark Venoit 1/5/1978 No Developer Sept. 2001/ $35,000
July 2004
Mike Law 2/3/1983 No Developer/ July 2004 $30,000
Support Tech
Jeon Jae Wan 5/14/1965 No Market Dec 2004 $35,000
Director-
Asia
Jiepin
"Richard" Chen 1/18/1968 Yes Senior June 2005/ $33,000
Developer
Albert Chen 1/30/1970 Yes Developer Aug. 2005 $30,000
AVERAGE HOURS
HOURS WORKED
WORKED CALENDAR
PER VACATION SICK LEAVE YEAR TO
NAME WEEK USED/AVAIL USED/AVAIL DATE
Joseph Ekoury 40+ 0/14 0/6 2400
Mark Venoit 32+ 14/0 0/6 1680
Mike Law 32+ 14/0 0/6 1680
Jeon Jae Wan 32+ 14/0 0/6 1680
Jiepin "Richard" Chen 20+ 0/14 0/6 960
Albert Chen 20+ 0/14 0/6 360
Schedule 3.17
EMPLOYEE BENEFITS
There are no employee benefits as of Closing. Note: The government
regulates vacation and sick days, as well as provides medical care for all
citizens.
Schedule 3.18
EMPLOYMENT AGREEMENTS
True, accurate and complete photocopies of all written employment
agreements (other than the agreement with Joe Khoury) are attached.
Schedule 3.20
FORM OF JOE KHOURY'S EMPLOYMENT AGREEMENT
EMPLOYMENT CONTRACT
THIS EMPLOYMENT CONTRACT ("Agreement") made effective as of the 23rd day
of November, 2005, by and among:
PCS Edventures!.com, Inc., an Idaho corporation domiciled
in the US ("PCS"),
511092 NB Ltd., a New Brunswick corporation carrying on
business as LabMentors ("LabMentors" or "Employer"),
- and
Joseph A. Khoury PEng., of 422 Glengarry Place,
Fredericton, NB, President, (herein called the
"Employee")
WHEREAS:
Pursuant to an Employment Contract dated the 1st day of May, 2005
("Superceded Agreement"), Employee has previously been serving as the
President of LabMentors at an annual salary of $75,000 since September 1,
2004; and
PCS is acquiring LabMentors as a wholly owned subsidiary pursuant to
that certain Share Exchange Agreement effective November 30, 2005 by and among
PCS, LabMentors and the shareholders of LabMentors; and LabMentors and PCS
wish to assure Employee's continued employment with LabMentors following the
acquisition; and
All parties wish to amend and formalize the arrangements under which
Employee is employed by LabMentors following the acquisition.
IT IS AGREED:
1. This Agreement replaces and supercedes the Superceded Agreement in
its entirety. The Superceded Agreement is terminated and of no further force
or effect. Insofar as this Agreement imposes obligations on PCS, it is
effective and enforceable against PCS only upon closing of PCS' acquisition of
LabMentors pursuant to the Share Exchange Agreement.
2. The term of this Agreement shall be six (6) months, commencing
December 1, 2005. This Agreement is automatically renewed for subsequent
periods of twelve (12) months each unless Employer gives Employee or Employee
gives Employer ninety (90) days written notice prior to the expiration of the
then current term, which notice may be waived if both Employer and Employee
agree.
3. The Employee's job title shall be President and Chief Operating
Officer of LabMentors.
4. The Employee will be expected to:
(a) Provide overall management of Employer under the direction
of the Employer's Board of Directors and Anthony A. Maher, Chairman, President
& CEO of PCS;
(b) Manage and supervise LabMentors' other employees.
5. The Employer shall pay the Employee as follows:
(a) A base salary at the annual rate of $60,000 payable in
monthly installments of $5,000 during the initial 6 month term of employment.
(b) Each calendar quarter beginning with the first quarter of
2006, a bonus equal to 40% of Employee's base salary for that quarter, to be
paid in restricted Rule 144 common shares of PCS, provided that Employee
remains employed by Employer at the end of the quarter and LabMentors has met
the financial targets established by the Board for the quarter. This bonus
shall be paid promptly following PCS' filing of its quarterly or annual SEC
reports on Form 10 Q or Form 10 k.
(c) No later than 90 days prior to the expiration of the then
current term of this Agreement, LabMentors' Board of Directors shall review
Employee's performance to determine whether to renew this Agreement and to
consider Employee's annual base salary if the Agreement is to be renewed. If
the Board is satisfied that the Employee is performing his duties in a
satisfactory manner, his base salary shall be increased by an amount that is
not less that the annual inflation rate as established by US Dept of Commerce.
6. The Employer will pay all reasonable, pre-approved business
expenses and memberships related to the business, incurred by the Employee.
Any business related expense over $1000 and all memberships must be approved,
in advance, by the CEO or CFO of PCS. 7. The Employee shall not, during
the initial term or any renewal term of this Agreement, or at any time after
termination of Employee's employment for any reason, disclose to any person,
firm or corporation any information concerning the business or affairs of the
Employer or PCS which the Employee may have acquired in the course of, or
incidental to, his employment by LabMentors, or otherwise, whether for his own
benefit or for the benefit of any other person or entity, or to the detriment,
or intended or probable detriment, of the Employer or PCS.
8. Any and all inventions pertaining or relating to the delivery of
online learning labs in the manner presently employed by the Employer, which
the Employee has invented or created or may conceive of or invent or create,
during the period of Employee's employment by LabMentors (whether prior to or
after the date of this Agreement), relating or in any way pertaining to or
connected with any of the matters which have been, are, or may become, the
subject of the Employer's activities, or in which the Employer has been or is
interested, shall be the sole and exclusive property of the Employer; and the
Employee will, whenever so requested by the Employer in its sole and exclusive
discretion, execute any and all applications, assignments and other
instruments which the Employer may deem necessary in order to apply for and
obtain patents, trademarks or copyright in the US or foreign countries for
said inventions, trademarks and copyrights and in order to assign and convey
to the Employer the sole and exclusive right, title and interest in and to the
said inventions, trademarks and copyrights, all expenses in connection
therewith to be borne by the Employer. Employee agrees that it will not,
without Employer's express written permission, apply for any state or federal
trademark or other intellectual property protection with respect to said
patents, trademarks or copyrights.
9. The Employee's obligation to execute the papers referred to in the
foregoing paragraph shall continue beyond the termination of his employment
with respect to any and all inventions conceived or made by the Employee
during the period of the said employment, and such obligations shall be
binding on the assigns, executors administrators or other legal
representatives of the Employee.
10. The Employee shall not, for a period of one year following
termination for any reason of Employee's employment hereunder, compete with
LabMentors or PCS, either on Employee's own behalf or on behalf of any other
person, firm, or corporation, in the business of designing, developing,
marketing, selling or delivering educational products or services, including
engineering or science based enrichment curricula or project based learning
labs for children in grades K 12, as well as pre kindergarten and after school
programs, and computerized and/or web based interactive technology based
software delivery systems for curricula, communication, support and assessment
("Business"). The term "compete" shall include, by way of illustration, (i)
directly or indirectly selling or rendering any service or product provided or
sold by LabMentors prior to termination of Employee's employment by Employer,
(ii) being an owner, partner, agent, consultant, stockholder, director or
officer of any person, firm, or entity that directly or indirectly sells or
renders any service or product provided or sold by LabMentors prior to
termination of Employee's employment by Employer, (iii) contacting or
soliciting any of PCS' or LabMentors' customers, clients or employees for the
purpose of establishing relationships for sale of any service or product that
directly or indirectly competes with PCS' business or LabMentors' Business,
(iv) causing any client, customer or employee to terminate any relationship
with PCS or LabMentors, and (v) making any public or private statements to
third parties that would be injurious to or in any way interfere, directly or
indirectly, with LabMentors' Business or PCS' business or the reputation of
LabMentors or PCS.
11. In the event of the death or total incapacity of the Employee, or
if the Employer ceases to carry on its business or becomes bankrupt, this
Agreement shall forthwith terminate. In the event of the sickness of the
Employee, or other cause incapacitating the Employee such that the Employee
cannot perform the duties prescribed or referred to herein, or from attending
to his or her duties as President for six (6) consecutive weeks either with or
without reasonable accommodation, the Employer may terminate this Agreement
without notice, provided that Employer shall pay Employee his base salary for
the balance of the current term of this Agreement as defined in section 1 of
this Agreement.
12. Employer may terminate this Agreement and Employee's employment
hereunder for "cause" upon written notice to Employee. For purposes of this
section, "cause" shall include (without limitation):
(i) Conviction of a crime involving moral turpitude or
financial misconduct;
(ii) Commission of fraud, theft, dishonesty, embezzlement
or other similar conduct in the course of Employee's employment
regardless of when the conduct is discovered;
(iii) Conduct constituting gross negligence or willful
malfeasance in the performance of Employee's duties;
(iv) Willful violation of or failure to comply with any
policy of Employer or express direction of Employer's Board of
Directors that is reasonable and consistent with Employee's duties and
responsibilities;
(v) Engagement in willful misconduct in the course of
Employee's employment;
(vi) Failure to adequately perform Employee's duties
provided that Employee has failed to cure such deficiencies within 30
days of receipt of written notice thereof from Employer;
(vii) Material breach or this Agreement by Employee; or
(viii) Any other conduct which, in the exercise of the
reasonable judgment of Employer, discredits Employer or is injurious to
Employer's reputation.
In the event that Employer terminates Employee's employment for cause,
Employer's obligation to pay salary, other compensation and benefits shall
terminate as of the effective date of the termination of employment.
13. The Employer may terminate this Agreement without cause and
without notice; provided that Employer shall pay Employee his base salary for
the balance of the current term of this Agreement as defined in section 1 of
this Agreement.
14. The Employee shall accrue vacation time as required by Canadian
law or, if greater, two (2) weeks paid vacation during the initial 6 month
term of this contract and five (5) weeks for each renewal term thereafter.
Unless otherwise required by Canadian law, vacation time shall accrue pro rata
over the course of the current term of employment.
15. The Employee and his dependants shall be entitled to participate
in any group medical or other benefit or insurance plans established by
LabMentors Board of Directors for the employees of LabMentors, at the same
cost as other employees.
16. The Employer shall undertakes to set up a Stock Option Plan for
LabMentors employees and to designate the Employee as a participant, or
Eligible Person, such that the Employee will have the right to acquire options
to purchase PCS stock on mutually agreeable terms.
17. The Employer will pay the cost of a parking spot in a location
near the Employer's office, which spot shall be for the use of the Employee.
18. This Agreement constitutes and expresses the entire agreement of
the parties with reference to the employment of the Employee by the Employer,
and with reference to any of the matters or things herein provided for, or
hereinbefore discussed or mentioned with reference to the employment of the
Employee. All promises, representations and understandings related to that
employment have been merged in this agreement.
19. This Agreement shall be binding upon the Employer and PCS and
their respective successors and assigns, and on the Employee, his heirs,
personal and legal representatives and assigns.
EMPLOYEE:
Joseph A. Khoury
EMPLOYER:
511092 NB Ltd., a New Brunswick
corporation carrying on business as
LabMentors
By:
Joseph A. Khoury
President
PCS Edventures!.com, Inc.
By:
Anthony A. Maher
Chairman, President & CEO
Schedule 3.21
EMPLOYEE BENEFIT PLANS
Nothing to disclose.
Schedule 3.24
OPERATION OF BUSINESS
On February 2, 2000, LabMentors was incorporated under the laws of the
Province of New Brunswick, Canada as 511092 N.B. LTD. to engage in web-based
educational products. LabMentors currently sells products to Course
Technology and DeVry in the United States. These programs offer a unique
atmosphere highly conducive to individual styles of learning and a system that
utilizes computer technology to increase areas of inquiry and application. In
addition, the labs allow certifications for several platforms and software
applications at the collegiate level. The Company intends to continue to
develop products for this market, as well as expand its reach into secondary
education in the U.S. and internationally. Our products and technologies are
targeted to the public and private school classrooms. Our products and
technologies are delivered to the classroom through software and Internet
access. Our technologies allow students to explore the basic foundations of
computers from programming to database technologies to server integration.
Effective November 30, 2005, LabMentors will be acquired by PCS
Edventures!.com, Inc., an Idaho Corporation ("PCS"). At that time, LabMentors
will become a wholly owned subsidiary of PCS. All accounting will be
undertaken by PCS, while sales and research and development will continue to
take place in Fredericton, New Brunswick Canada. No employee will be
terminated as a result of the acquisition if in place on the date the Letter
of Intent was signed (July 27, 2005). There are currently three major
shareholders of the Company stock, including Joseph Khoury (President), Bogdan
Itoafa (Co-Founder), and Workers Investment Fund.
Schedule 3.27
COMPLIANCE WITH LAW
Nothing to disclose.
Schedule 3.28
LITIGATION OR CLAIMS
Nothing to disclose.
Schedule 3.29
PRODUCT LIABILITY
Nothing to disclose.
Schedule 3.45
OPTIONS, WARRANTS AND OTHER RIGHTS
See attached.
Schedule 4.5
TAX INCENTIVES
See attached.
Schedule 5.1.19
LEGAL OPINIONS
See attached.