EXCHANGE AGREEMENT
THIS
EXCHANGE AGREEMENT
(hereinafter referred to as this "Agreement")
is
entered into as of this 31st day of August 2006, by and between STERLING
EQUITY HOLDINGS, INC.,
a
Nevada corporation (hereinafter referred to as "Sterling"),
and
ITI
CAPITAL, INC.,
a
Nevada corporation (hereinafter referred to as "ITI"),
upon
the following premises:
Premises
WHEREAS,
Sterling is a publicly held corporation organized under the laws of the State
of
Nevada and engaged in the ownership, management and operation of commercial
real
estate;
WHEREAS,
ITI is
a privately held corporation organized under the laws of the State of Nevada
and
engaged in international investment banking, financial advisory services and
investment holdings;
WHEREAS,
management of the constituent corporations entered into discussions pursuant
to
which Sterling has agreed in principal to acquire 100% of the issued and
outstanding stock of ITI in exchange for the issuance to the shareholders of
ITI
of certain shares of Sterling (the "Exchange")
and ITI
has agreed to use its best efforts to cause the holders of ITI Common Stock
(the
“ITI
Common Shareholders”)
to
exchange their securities of ITI on the terms described herein; and
WHEREAS,
Sterling and ITI desire to set forth the terms of the Exchange.
Agreement
NOW
THEREFORE,
on the
stated premises and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefits to the parties to
be
derived herefrom, it is hereby agreed as follows:
ARTICLE
I
REPRESENTATIONS,
COVENANTS, AND WARRANTIES OF ITI
As
an
inducement to, and to obtain the reliance of Sterling, except as set forth
on
the ITI Schedules (as hereinafter defined), ITI represents and warrants as
follows:
Section
1.01 Organization.
ITI is
a corporation duly organized, validly existing, and in good standing under
the
laws of the State of Nevada and has the corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign corporation
in
the states or countries in which the character and location of the assets owned
by it or the nature of the business transacted by it requires qualification,
except where failure to be so qualified would not have a material adverse effect
on its business. Included in the ITI Schedules are complete and correct copies
of the articles of incorporation, and bylaws of ITI as in effect on the date
hereof. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of ITI's articles of incorporation or bylaws. ITI has taken all
actions required by law, its articles of incorporation, or otherwise to
authorize the execution and delivery of this Agreement. ITI has full power,
authority, and legal right and has taken all action required by law, its
articles of incorporation, and otherwise to consummate the transactions herein
contemplated.
Section
1.02 Capitalization.
The
authorized capitalization, and securities outstanding, of ITI, as of June 30,
2006, is as set forth on Schedule
1.02
attached
hereto. All issued and outstanding shares are legally issued, fully paid, and
non-assessable and not issued in violation of the preemptive or other rights
of
any person.
Section
1.03 Subsidiaries
and Predecessor Corporations.
ITI
does not have any predecessor corporation(s) or subsidiaries, and does not
own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule
1.03.
For
purposes hereinafter, the term "ITI" also includes those subsidiaries, if any,
set forth on Schedule
1.03.
1
Section
1.04 Financial
Statements.
(a) Included
in the ITI Schedules are (i) the unaudited balance sheet and the related
statements of operations of ITI as of and for the quarter ended June 30, 2006,
and (ii) the unaudited balance sheet of ITI as of December 31, 2005, and the
related unaudited statements of operations, stockholders' equity and cash flows
for the fiscal year ended December 31, 2005 (collectively, the "ITI
Financial Statements").
(b) The
ITI
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP").
The
ITI balance sheets present a true and fair view as of the dates of such balance
sheets of the financial condition of ITI. ITI did not have, as of the dates
of
such balance sheets, except as and to the extent reflected or reserved against
therein, any liabilities or obligations (absolute or contingent) which should
be
reflected in the balance sheets or the notes thereto, prepared in accordance
with generally accepted accounting principles, and all assets reflected therein
are properly reported and present fairly the value of the assets of ITI in
accordance with generally accepted accounting principles.
(c) ITI
has
no liabilities with respect to the payment of any federal, state, county, local
or other taxes (including any deficiencies, interest or penalties), except
for
taxes accrued but not yet due and payable.
(d) ITI
has
filed all state, federal or local income and/or franchise tax returns required
to be filed by it from inception to the date hereof. Each of such income tax
returns reflects the taxes due for the period covered thereby, except for
amounts which, in the aggregate, are immaterial.
(e) The
books
and records, financial and otherwise, of ITI are in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(f) All
of
ITI's assets are reflected on the ITI Financial Statements, and, except as
set
forth in the ITI Schedules or the ITI Financial Statements or the notes thereto,
ITI has no material liabilities, direct or indirect, matured or unmatured,
contingent or otherwise.
(g) ITI
maintains internal controls and disclosure controls in connection with the
preparation of the ITI Financial Statements which controls are consistent,
and
in compliance, with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
("SOX").
Section
1.05 Information.
The
information concerning ITI set forth in this Agreement and in the ITI Schedules
is complete and accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact required
to
make the statements made, in light of the circumstances under which they were
made, not misleading. In addition, ITI has fully disclosed in writing to
Sterling (through this Agreement or the ITI Schedules) all information relating
to matters involving ITI or its assets or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than $5,000 liability or diminution in value, (ii) have led or
may
lead to a competitive disadvantage on the part of ITI or (iii) either alone
or
in aggregation with other information covered by this Section, otherwise have
led or may lead to a material adverse effect on the transactions contemplated
herein or on ITI, its assets, or its operations or activities as presently
conducted or as contemplated to be conducted after the Closing Date, including,
but not limited to, information relating to governmental, employee,
environmental, litigation and securities matters and transactions with
affiliates.
Section
1.06 Options
or Warrants.
Except
as set forth in Schedule
1.06,
there
are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued ITI common stock, except options,
warrants, calls or commitments, if any, to which ITI is not a party and by
which
it is not bound.
2
Section
1.07 Absence
of Certain Changes or Events.
Except
as set forth in this Agreement or the ITI Schedules, since June 30,
2006:
(a) there
has
not been (i) any material adverse change in the business, operations,
properties, assets, or condition of ITI or (ii) any damage, destruction, or
loss
to ITI (whether or not covered by insurance) materially and adversely affecting
the business, operations, properties, assets, or condition of ITI;
(b) ITI
has
not (i) amended its articles of incorporation or bylaws; (ii) declared or made,
or agreed to declare or make, any payment of dividends or distributions of
any
assets of any kind whatsoever to stockholders or purchased or redeemed, or
agreed to purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are outside of the ordinary course of business
or material considering the business of ITI; (iv) made any material change
in
its method of management, operation or accounting; (v) entered into any other
material transaction other than sales in the ordinary course of its business;
(vi) made any accrual or arrangement for payment of bonuses or special
compensation of any kind or any severance or termination pay to any present
or
former officer or employee; (vii) increased the rate of compensation payable
or
to become payable by it to any of its officers or directors or any of its
salaried employees whose monthly compensation exceeds $1,000; or (viii) made
any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees;
(c) ITI
has
not (i) borrowed or agreed to borrow any funds or incurred, or become subject
to, any material obligation or liability (absolute or contingent) except as
disclosed herein and except liabilities incurred in the ordinary course of
business; (ii) paid or agreed to pay any material obligations or liability
(absolute or contingent) other than current liabilities reflected in or shown
on
the most recent ITI balance sheet, and current liabilities incurred since that
date in the ordinary course of business and professional and other fees and
expenses in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby; (iii) sold or transferred,
or agreed to sell or transfer, any of its assets, properties, or rights (except
assets, properties, or rights not used or useful in its business which, in
the
aggregate have a value of less than $1,000), or canceled, or agreed to cancel,
any debts or claims (except debts or claims which in the aggregate are of a
value of less than $1,000); (iv) made or permitted any amendment or termination
of any contract, agreement, or license to which it is a party if such amendment
or termination is material, considering the business of ITI; or (v) issued,
delivered, or agreed to issue or deliver any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock); and
(d)
to the
best knowledge of ITI, ITI has not become subject to any law or regulation
which
materially and adversely affects, or in the future may adversely affect the
business, operations, properties, assets, or condition of ITI.
Section
1.08 Title
and Related Matters.
ITI has
good and marketable title to all of its properties, inventory, interests in
properties, and assets, real and personal, which are reflected in the most
recent ITI balance sheet or acquired after that date (except properties,
inventory, interests in properties, and assets sold or otherwise disposed of
since such date in the ordinary course of business) free and clear of all liens,
pledges, charges, or encumbrances except (a) statutory liens or claims not
yet
delinquent; (b) such imperfections of title and easements as do not and will
not
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially impair
present business operations on such properties; and (c) as described in the
ITI
Schedules. Except as set forth in the ITI Schedules, ITI owns, free and clear
of
any liens, claims, encumbrances, royalty interests, or other restrictions or
limitations of any nature whatsoever, any and all products it is currently
manufacturing, including the underlying technology and data, and all procedures,
techniques, marketing plans, business plans, methods of management, or other
information utilized in connection with ITI's business. Except as set forth
in
the ITI Schedules, no third party has any right to, and ITI has not received
any
notice of infringement of or conflict with asserted rights of others with
respect to any product, technology, data, trade secrets, know-how, propriety
techniques, trademarks, service marks, trade names, or copyrights which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a materially adverse effect on the business,
operations, financial condition, income, or business prospects of ITI or any
material portion of its properties, assets, or rights.
Section
1.09 Litigation
and Proceedings.
Except
as set forth in the ITI Schedules, there are no actions, suits, proceedings,
or
investigations pending or, to the knowledge of ITI after reasonable
investigation, threatened by or against ITI or affecting ITI or its properties,
at law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind.
ITI
does not have any knowledge of any material default on its part with respect
to
any judgment, order, injunction, decree, award, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result in the
discovery of such a default.
3
Section
1.10 Contracts.
(a) Except
as
included or described in the ITI Schedules, there are no "material" contracts,
agreements, franchises, license agreements, debt instruments or other
commitments to which ITI is a party or by which it or any of its assets,
products, technology, or properties are bound other than those incurred in
the
ordinary course of business (as used in this Agreement, a "material" contract,
agreement, franchise, license agreement, debt instrument or commitment is one
which (i) will remain in effect for more than six (6) months after the date
of
this Agreement or (ii) involves aggregate obligations of at least fifty thousand
dollars ($50,000));
(b) All
contracts, agreements, franchises, license agreements, and other commitments
to
which ITI is a party or by which its properties are bound and which are material
to the operations of ITI taken as a whole are valid and enforceable by ITI
in
all respects, except as limited by bankruptcy and insolvency laws and by other
laws affecting the rights of creditors generally;
(c) ITI
is
not a party to or bound by, and the properties of ITI are not subject to any
contract, agreement, other commitment or instrument; any charter or other
corporate restriction; or any judgment, order, writ, injunction, decree, or
award which materially and adversely affects, the business operations,
properties, assets, or condition of ITI; and
(d) Except
as
included or described in the ITI Schedules or reflected in the most recent
ITI
balance sheet, ITI is not a party to any oral or written (i) contract for the
employment of any officer or employee which is not terminable on 30 days, or
less notice; (ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, (iii) agreement, contract,
or
indenture relating to the borrowing of money, (iv) guaranty of any obligation,
other than one on which ITI is a primary obligor, for the borrowing of money
or
otherwise, excluding endorsements made for collection and other guaranties
of
obligations which, in the aggregate do not exceed more than one year or
providing for payments in excess of $25,000 in the aggregate; (vi) collective
bargaining agreement; or (vii) agreement with any present or former officer
or
director of ITI.
Section
1.11 Material
Contract Defaults.
ITI is
not in default in any material respect under the terms of any outstanding
contract, agreement, lease, or other commitment which is material to the
business, operations, properties, assets or condition of ITI and there is no
event of default in any material respect under any such contract, agreement,
lease, or other commitment in respect of which ITI has not taken adequate steps
to prevent such a default from occurring.
Section
1.12 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute an event of default under, or terminate, accelerate
or
modify the terms of any material indenture, mortgage, deed of trust, or other
material contract, agreement, or instrument to which ITI is a party or to which
any of its properties or operations are subject.
Section
1.13 Governmental
Authorizations.
Except
as set forth in the ITI Schedules, ITI has all licenses, franchises, permits,
and other governmental authorizations that are legally required to enable it
to
conduct its business in all material respects as conducted on the date hereof.
Except for compliance with federal and state securities and corporation laws,
as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental
body
is required in connection with the execution and delivery by ITI of this
Agreement and the consummation by ITI of the transactions contemplated
hereby.
Section
1.14 Compliance
With Laws and Regulations.
Except
as set forth in the ITI Schedules, to the best of its knowledge ITI has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of ITI or except to the extent that noncompliance would
not
result in the occurrence of any material liability for ITI.
4
Section
1.15 Insurance.
All of
the properties of ITI are fully insured for their full replacement
cost.
Section
1.16 Approval
of Agreement.
The
board of directors of ITI has authorized the execution and delivery of this
Agreement by ITI and has approved this Agreement and the transactions
contemplated hereby, and will recommend to the ITI Shareholders that the
Exchange be accepted by them.
Section
1.17 Material
Transactions or Affiliations.
Set
forth in the ITI Schedules is a description of every contract, agreement, or
arrangement between ITI and any predecessor and any person who was at the time
of such contract, agreement, or arrangement an officer, director, or person
owning of record, or known by ITI to own beneficially, 5% or more of the issued
and outstanding common stock of ITI and which is to be performed in whole or
in
part after the date hereof or which was entered into not more than three years
prior to the date hereof. Except as disclosed in the ITI Schedules or otherwise
disclosed herein, no officer, director, or 5% shareholder of ITI has, or has
had
since inception of ITI, any known interest, direct or indirect, in any
transaction with ITI which was material to the business of ITI. There are no
commitments by ITI, whether written or oral, to lend any funds, or to borrow
any
money from, or enter into any other transaction with, any such affiliated
person.
Section
1.18 Labor
Relations.
ITI has
not had work stoppage resulting from labor problems. To the knowledge of ITI,
no
union or other collective bargaining organization is organizing or attempting
to
organize any employee of ITI.
Section
1.19 Businesses
Owned.
ITI
presently owns and will own at the Closing Date, or will have acquired and
will
own at the Closing Date, each of the businesses and/or projects or interests
therein described (the “ITI
Businesses”),
in
general, on Schedule
1.19.
Section
1.20 Post-Closing
Related Party Debt.
ITI’s
indebtedness ("ITI
Related Party Debt")
to its
shareholders, officers and directors, or affiliates of its shareholders,
officers and directors, at the Closing Date, will be as set forth on
Schedule
1.20,
which
schedule will detail the amount and terms of ITI Related Party Debt owing at
the
Closing Date, the terms on which any ITI Related Party Debt is, or is to be,
converted to equity, the amount of ITI Related Party Debt, if any, to be repaid
prior to the Closing Date and such other terms and information as may be
reasonably necessary to understand the obligations of Sterling and ITI with
respect to the ITI Related Party Debt as of the Closing Date.
Section
1.21 ITI
Schedules.
ITI has
delivered to Sterling the following schedules, which are collectively referred
to as the "ITI
Schedules"
and
which consist of separate schedules dated as of the date of execution of this
Agreement, all certified by the chief executive officer of ITI as complete,
true, and correct as of the date of this Agreement in all material
respects:
(a) a
schedule containing complete and correct copies of the articles of
incorporation, and bylaws of ITI in effect as of the date of this
Agreement;
(b) a
schedule containing the financial statements of ITI identified in paragraph
1.04(a);
(c) a
Schedule 1.21(c) containing a list indicating the name and address of each
shareholder of ITI together with the number of shares owned by him, her or
it;
(d) a
schedule containing a description of all real property owned by ITI, together
with a description of every mortgage, deed of trust, pledge, lien, agreement,
encumbrance, claim, or equity interest of any nature whatsoever in such real
property;
(e) copies
of
all contracts, licenses, permits, and other governmental authorizations (or
requests or applications therefore) pursuant to which ITI carries on or proposes
to carry on its business (except those which, in the aggregate, are immaterial
to the present or proposed business of ITI);
(f) a
schedule listing the accounts receivable and notes and other obligations
receivable of ITI as of June 30, 2006, or thereafter other than in the ordinary
course of business of ITI, indicating the debtor and amount, and classifying
the
accounts to show in reasonable detail the length of time, if any, overdue,
and
stating the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments, which are in the aggregate material and due
to
or claimed by such debtor;
5
(g) a
schedule listing the accounts payable and notes and other obligations payable
of
ITI as of June 30, 2006, or that arose thereafter other than in the ordinary
course of the business of ITI, indicating the creditor and amount, classifying
the accounts to show in reasonable detail the length of time, if any, overdue,
and stating the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments, which in the aggregate are material and due
to
or claimed by ITI respecting such obligations;
(h) a
schedule setting forth a description of any material adverse change in the
business, operations, property, inventory, assets, or condition of ITI since
June 30, 2006, required to be provided pursuant to section 1.07 hereof;
and
(i) a
schedule setting forth any other information, together with any required copies
of documents, required to be disclosed in the ITI Schedules by Sections 1.01
through 1.20.
ITI
shall
cause the ITI Schedules and the instruments and data delivered to Sterling
hereunder to be promptly updated after the date hereof up to and including
the
Closing Date.
It
is
understood and agreed that not all of the schedules referred to above have
been
completed or are available to be furnished by ITI. ITI shall have until
September 29, 2006 to provide such schedules. If ITI cannot or fails to do
so,
or if Sterling acting reasonably finds any such schedules or updates provided
after the date hereof to be unacceptable according to the criteria set forth
below, Sterling may terminate this Agreement by giving written notice to ITI
within five (5) days after the schedules or updates were due to be produced
or
were provided. For purposes of the foregoing, Sterling may consider a disclosure
in the ITI Schedules to be "unacceptable" if, (x) with respect to Schedule
1.19,
Sterling determines, in its sole discretion, that the ITI Businesses reflected
on the schedule are not consistent with Sterling’s understanding of the existing
and proposed businesses of ITI, (y) with respect to Schedule 1.20, Sterling
determines, in its sole discretion, that the repayment and/or conversion or
other terms of the ITI Related Party Debt are unacceptable, and (z) with respect
to other schedules, only if that item would have a material adverse impact
on
the financial statements listed in Section 1.04(a), taken as a
whole.
Section
1.22 Valid
Obligation.
This
Agreement and all agreements and other documents executed by ITI in connection
herewith constitute the valid and binding obligation of ITI, enforceable in
accordance with its or their terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and subject to the qualification that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefore may be brought.
ARTICLE
II
REPRESENTATIONS,
COVENANTS, AND WARRANTIES OF STERLING
As
an
inducement to, and to obtain the reliance of ITI and the ITI Shareholders,
except as set forth in the Sterling Schedules (as hereinafter defined), Sterling
represents and warrants as follows:
Section
2.01 Organization.
Sterling is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada and has the corporate power and is duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of its
properties and assets, to carry on its business in all material respects as
it
is now being conducted, and except where failure to be so qualified would not
have a material adverse effect on its business, there is no jurisdiction in
which it is not qualified in which the character and location of the assets
owned by it or the nature of the business transacted by it requires
qualification. Included in the Sterling Schedules are complete and correct
copies of the certificate of incorporation and bylaws of Sterling as in effect
on the date hereof. The execution and delivery of this Agreement does not,
and
the consummation of the transactions contemplated hereby will not, violate
any
provision of Sterling's certificate of incorporation or bylaws. Sterling has
taken all action required by law, its certificate of incorporation, its bylaws,
or otherwise to authorize the execution and delivery of this Agreement, and
Sterling has full power, authority, and legal right and has taken all action
required by law, its certificate of incorporation, bylaws, or otherwise to
consummate the transactions herein contemplated.
Section
2.02 Capitalization.
Sterling's authorized capitalization, as of June 30, 2006, consists of (a)
70,000,000 shares of common stock, par value $0.001, of which 28,335,061 shares
are issued and outstanding (the "Original
Sterling Shares")
and (b)
5,000,000 shares of preferred stock, par value $0.001 per share, of which no
shares are issued and outstanding. All issued and outstanding shares are, and
all securities to be issued pursuant to the Exchange will be, legally issued,
fully paid, and non-assessable and not issued in violation of the preemptive
or
other rights of any person.
6
Section
2.03 Subsidiaries
and Predecessor Corporations.
Sterling does not have any predecessor corporation(s) or subsidiaries, and
does
not own, beneficially or of record, any shares of any other corporation, except
as disclosed in Schedule
2.03.
For
purposes hereinafter, the term "Sterling" also includes those subsidiaries,
if
any, set forth on Schedule
2.03.
Section
2.04 Securities
Filings; Financial Statements.
(a) Sterling
is subject to the reporting requirements of the Securities Exchange of 1934
(the
"Exchange
Act"),
files
reports (the "SEC
Reports")
with
the Securities and Exchange Commission (the "SEC"),
and
has heretofore delivered to ITI, in the form filed with the Commission, (i)
all
quarterly and annual reports on Forms 10-QSB and 10-KSB filed since September
30, 2004, (iii) all other reports filed by Sterling with the SEC since September
30, 2004, and (iv) all comment letters (the "SEC
Comment Letters")
from
the SEC with respect to the SEC Reports. Except as otherwise noted in the SEC
Comment Letters, the SEC Reports (i) were prepared in accordance with the
requirements of the Exchange Act or the Securities Act of 1933 (the
"Securities
Act"),
as
appropriate, and (ii) did not contain any untrue statement of a material fact
or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Included
in the Sterling Schedules are (i) the unaudited balance sheet of Sterling and
the related statements of operations and cash flows as of and for the three
months and nine months ended September 30, 2005 and (ii) the audited balance
sheet of Sterling as of December 31, 2004, and the related audited statement
of
operations, stockholders' equity and cash flows for the year ended December
31,
2004, together with the notes to such statements (collectively, the
"Sterling
Financial Statements")
and
the opinion of Xxxxxx Xxxxx & Company, L.L.P., independent certified public
accountants, with respect thereto, all as set forth in the SEC
Reports.
(c) Subject
to such revisions as may be necessary to comply with the SEC Comment Letters,
(i) the Sterling Financial Statements have been prepared in accordance with
GAAP
consistently applied throughout the periods involved, (ii) the Sterling balance
sheets present fairly as of their respective dates the financial condition
of
Sterling, (iii) as of the date of such balance sheets, except as and to the
extent reflected or reserved against therein, Sterling had no liabilities or
obligations (absolute or contingent) which should be reflected in the balance
sheets or the notes thereto prepared in accordance with GAAP, and all assets
reflected therein are properly reported and present fairly the value of the
assets of Sterling, in accordance with generally accepted accounting principles,
and (iv) the statements of operations, stockholders' equity and cash flows
reflect fairly the information required to be set forth therein by
GAAP.
(d) Except
as
set forth on Schedule
2.04(d),
Sterling has no liabilities with respect to the payment of any federal, state,
county, local or other taxes (including any deficiencies, interest or
penalties), except for taxes accrued but not yet due and payable.
(e) Except
as
set forth on Schedule
2.04(e),
Sterling has timely filed all state, federal or local income and/or franchise
tax returns required to be filed by it from inception to the date hereof. Each
of such income tax returns reflects the taxes due for the period covered
thereby, except for amounts which, in the aggregate, are
immaterial.
(f) The
books
and records, financial and otherwise, of Sterling are in all material aspects
complete and, subject to such adjustments as may be necessary to comply with
the
SEC Comment Letters, correct and have been maintained in accordance with good
business and accounting practices.
7
(g) All
of
Sterling's assets are reflected on its financial statements, and, except as
set
forth in the Sterling Schedules or the financial statements of Sterling or
the
notes thereto, Sterling has no material liabilities, direct or indirect, matured
or unmatured, contingent or otherwise.
Section
2.05 Information.
The
information concerning Sterling set forth in this Agreement and the Sterling
Schedules is complete and accurate in all material respects and does not contain
any untrue statements of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading. In addition, Sterling has fully disclosed in
writing to ITI (through this Agreement or the Sterling Schedules) all
information relating to matters involving Sterling or its assets or its present
or past operations or activities which (i) indicated or may indicate, in the
aggregate, the existence of a greater than $5,000 liability or diminution in
value, (ii) have led or may lead to a competitive disadvantage on the part
of
Sterling or (iii) either alone or in aggregation with other information covered
by this Section, otherwise have led or may lead to a material adverse effect
on
the transactions contemplated herein or on Sterling, its assets, or its
operations or activities as presently conducted or as contemplated to be
conducted after the Closing Date, including, but not limited to, information
relating to governmental, employee, environmental, litigation and securities
matters and transactions with affiliates.
Section
2.06 Options
or Warrants.
There
are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued stock of Sterling, except options,
warrants, calls or commitments, if any, to which Sterling is not a party and
by
which it is not bound.
Section
2.07 Absence
of Certain Changes or Events.
Except
as set forth herein or permitted in writing by ITI, since September 30,
2005:
(a) there
has
not been (i) any material adverse change in the business, operations,
properties, assets or condition of Sterling or (ii) any damage, destruction
or
loss to Sterling (whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets or condition of
Sterling;
(b) Sterling
has not (i) amended its certificate of incorporation or bylaws; (ii) declared
or
made, or agreed to declare or make any payment of dividends or distributions
of
any assets of any kind whatsoever to stockholders or purchased or redeemed,
or
agreed to purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are outside of the ordinary course of business
or material considering the business of Sterling; (iv) made any material change
in its method of management, operation, or accounting; (v) entered into any
transactions or agreements other than in the ordinary course of business; (vi)
made any accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination pay to any present
or
former officer or employee; (vii) increased the rate of compensation payable
or
to become payable by it to any of its officers or directors or any of its
salaried employees whose monthly compensation exceed $1,000; or (viii) made
any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or arrangement,
made to, for or with its officers, directors, or employees;
(c) Sterling
has not (i) granted or agreed to grant any options, warrants, or other rights
for its stock, bonds, or other corporate securities calling for the issuance
thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid or agreed
to
pay any material obligations or liabilities (absolute or contingent) other
than
current liabilities reflected in or shown on the most recent Sterling balance
sheet and current liabilities incurred since that date in the ordinary course
of
business and professional and other fees and expenses in connection with the
preparation of this Agreement and the consummation of the transaction
contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets, properties, or rights
not used or useful in its business which, in the aggregate have a value of
less
than $1000), or canceled, or agreed to cancel, any debts or claims (except
debts
or claims which in the aggregate are of a value less than $1000); (v) made
or
permitted any amendment or termination of any contract, agreement, or license
to
which it is a party if such amendment or termination is material, considering
the business of Sterling; or (vi) issued, delivered or agreed to issue or
deliver, any stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock), except in
connection with this Agreement; and
(d) to
the
best knowledge of Sterling, it has not become subject to any law or regulation
which materially and adversely affects, or in the future, may adversely affect,
the business, operations, properties, assets or condition of
Sterling.
8
Section
2.08 Title
and Related Matters.
Sterling
has good and marketable title to all of its properties, inventory, interest
in
properties, and assets, real and personal, which are reflected in the most
recent Sterling balance sheet or acquired after that date (except properties,
inventory, interest in properties, and assets sold or otherwise disposed of
since such date in the ordinary course of business), free and clear of all
liens, pledges, charges, or encumbrances except (a) statutory liens or claims
not yet delinquent; (b) such imperfections of title and easements as do not
and
will not materially detract from or interfere with the present or proposed
use
of the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and (c) as described
in
the Sterling Schedules. Except as set forth in the Sterling Schedules, Sterling
owns, free and clear of any liens, claims, encumbrances, royalty interests,
or
other restrictions or limitations of any nature whatsoever, any and all products
it is currently manufacturing, including the underlying technology and data,
and
all procedures, techniques, marketing plans, business plans, methods of
management, or other information utilized in connection with Sterling's
business. Except as set forth in the Sterling Schedules, no third party has
any
right to, and Sterling has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, propriety techniques, trademarks, service marks,
trade names, or copyrights which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse effect on the business, operations, financial condition, income, or
business prospects of Sterling or any material portion of its properties,
assets, or rights.
Section
2.09 Litigation
and Proceedings.
There
are no actions, suits, proceedings or investigations pending or, to the
knowledge of Sterling after reasonable investigation, threatened by or against
Sterling or affecting Sterling or its properties, at law or in equity, before
any court or other governmental agency or instrumentality, domestic or foreign,
or before any arbitrator of any kind except as disclosed in Schedule
2.09.
Sterling has no knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator, or governmental agency or instrumentality or any circumstance
that after reasonable investigation would result in the discovery of such
default.
Section
2.10 Contracts.
(a)
Sterling
is not a party to, and its assets, products, technology and properties are
not
bound by, any material contract, franchise, license agreement, agreement, debt
instrument or other commitments whether such agreement is in writing or oral,
except as disclosed in Schedule
2.10.
(b) All
contracts, agreements, franchises, license agreements, and other commitments
to
which Sterling is a party or by which its properties are bound and which are
material to the operations of Sterling taken as a whole are valid and
enforceable by Sterling in all respects, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors
generally;
(c) Sterling
is not a party to or bound by, and the properties of Sterling are not subject
to
any contract, agreement, other commitment or instrument; any charter or other
corporate restriction; or any judgment, order, writ, injunction, decree, or
award which materially and adversely affects, the business operations,
properties, assets, or condition of Sterling; and
(d) Except
as
included or described in the Sterling Schedules or reflected in the most recent
Sterling balance sheet, Sterling is not a party to any oral or written (i)
contract for the employment of any officer or employee which is not terminable
on 30 days, or less notice; (ii) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension benefit or retirement plan, (iii)
agreement, contract, or indenture relating to the borrowing of money, (iv)
guaranty of any obligation, other than one on which Sterling is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements made
for collection and other guaranties of obligations which, in the aggregate
do
not exceed more than one year or providing for payments in excess of $5,000
in
the aggregate; (vi) collective bargaining agreement; or (vii) agreement with
any
present or former officer or director of Sterling.
9
Section
2.11 Material
Contract Defaults.
Sterling is not in default in any material respect under the terms of any
outstanding contract, agreement, lease, or other commitment which is material
to
the business, operations, properties, assets or condition of Sterling and there
is no event of default in any material respect under any such contract,
agreement, lease, or other commitment in respect of which Sterling has not
taken
adequate steps to prevent such a default from occurring.
Section
2.12 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute a default under, or terminate, accelerate or modify
the
terms of, any indenture, mortgage, deed of trust, or other material agreement
or
instrument to which Sterling is a party or to which any of its assets or
operations are subject.
Section
2.13 Governmental
Authorizations.
Sterling
has all licenses, franchises, permits, and other governmental authorizations,
that are legally required to enable it to conduct its business operations in
all
material respects as conducted on the date hereof. Except for compliance with
federal and state securities or corporation laws, as hereinafter provided,
no
authorization, approval, consent or order of, or registration, declaration
or
filing with, any court or other governmental body is required in connection
with
the execution and delivery by Sterling of this Agreement and the consummation
by
Sterling of the transactions contemplated hereby.
Section
2.14 Compliance
With Laws and Regulations.
To the
best of its knowledge, Sterling has complied with all applicable statutes and
regulations of any federal, state, or other applicable governmental entity
or
agency thereof, except to the extent that noncompliance would not materially
and
adversely affect the business, operations, properties, assets or condition
of
Sterling or except to the extent that noncompliance would not result in the
occurrence of any material liability. This compliance includes, but is not
limited to, the filing of all reports to date with federal and state securities
authorities.
Section
2.15 Insurance.
All of
the properties of Sterling are fully insured for their full replacement cost.
Section
2.16 Approval
of Agreement.
The
board of directors of Sterling has authorized the execution and delivery of
this
Agreement by Sterling. No approval of the shareholders of Sterling is required
to carry out the transactions contemplated by this Agreement.
Section
2.17 Continuity
of Business Enterprises.
Sterling
has no commitment or present intention to liquidate ITI or sell or otherwise
dispose of a material portion of ITI's business or assets following the
consummation of the transactions contemplated hereby.
Section
2.18 Material
Transactions or Affiliations.
Except
as disclosed herein and in the Sterling Schedules, there exists no contract,
agreement or arrangement between Sterling and any predecessor and any person
who
was at the time of such contract, agreement or arrangement an officer, director,
or person owning of record or known by Sterling to own beneficially, 5% or
more
of the issued and outstanding common stock of Sterling and which is to be
performed in whole or in part after the date hereof or was entered into not
more
than three years prior to the date hereof. Neither any officer, director, nor
5%
shareholder of Sterling has, or has had since inception of Sterling, any known
interest, direct or indirect, in any such transaction with Sterling which was
material to the business of Sterling. Sterling has no commitment, whether
written or oral, to lend any funds to, borrow any money from, or enter into
any
other transaction with, any such affiliated person.
Section
2.19 Labor
Relations.
Sterling
has not had work stoppage resulting from labor problems. To the knowledge of
Sterling, no union or other collective bargaining organization is organizing
or
attempting to organize any employee of Sterling.
10
Section
2.20 Sterling
Schedules.
Sterling
has delivered to ITI the following schedules, which are collectively referred
to
as the "Sterling
Schedules"
and
which consist of separate schedules, which are dated the date of this Agreement,
all certified by the chief executive officer of Sterling to be complete, true,
and accurate in all material respects as of the date of this Agreement:
(a) a
schedule containing complete and accurate copies of the certificate of
incorporation and bylaws of Sterling as in effect as of the date of this
Agreement;
(b) a
schedule containing the financial statements of Sterling identified in paragraph
2.04(b);
(c) a
schedule containing a description of all real property owned by Sterling,
together with a description of every mortgage, deed of trust, pledge, lien,
agreement, encumbrance, claim, or equity interest of any nature whatsoever
in
such real property;
(d) a
schedule listing the accounts receivable and notes and other obligations
receivable of Sterling as of June 30, 2006, or thereafter other than in the
ordinary course of business of Sterling, indicating the debtor and amount,
and
classifying the accounts to show in reasonable detail the length of time, if
any, overdue, and stating the nature and amount of any refunds, set offs,
reimbursements, discounts, or other adjustments which are in the aggregate
material and due to or claimed by such debtor;
(e) a
schedule listing the accounts payable and notes and other obligations payable
of
Sterling as of June 30, 2006, or that arose thereafter other than in the
ordinary course of the business of Sterling, indicating the creditor and amount,
classifying the accounts to show in reasonable detail the length of time, if
any, overdue, and stating the nature and amount of any refunds, set offs,
reimbursements, discounts, or other adjustments, which in the aggregate are
material and due to or claimed by Sterling respecting such
obligations;
(f) a
schedule setting forth a description of any material adverse change in the
business, operations, property, inventory, assets, or condition of Sterling
since September 30, 2005, required to be provided pursuant to section 2.07
hereof; and
(g) a
schedule setting forth any other information, together with any required copies
of documents, required to be disclosed in the Sterling Schedules by Sections
2.01 through 2.19.
Sterling
shall cause the Sterling Schedules and the instruments and data delivered to
ITI
hereunder to be promptly updated after the date hereof up to and including
the
Closing Date.
It
is
understood and agreed that not all of the schedules referred to above have
been
completed or are available to be furnished by Sterling. Sterling shall have
until September 29, 2006 to provide such schedules. If Sterling cannot or fails
to do so, or if ITI acting reasonably finds any such schedules or updates
provided after the date hereof to be unacceptable according to the criteria
set
forth below, ITI may terminate this Agreement by giving written notice to
Sterling within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, ITI may consider
a
disclosure in the Sterling Schedules to be "unacceptable" only if that item
would have a material adverse impact on the financial statements listed in
Section 2.04(b), taken as a whole.
Section
2.21 Bank
Accounts; Power of Attorney.
Set
forth in Schedule 2.21 is a true and complete list of (a) all accounts with
banks, money market mutual funds or securities or other financial institutions
maintained by Sterling within the past twelve (12) months, the account numbers
thereof, and all persons authorized to sign or act on behalf of Sterling, (b)
all safe deposit boxes and other similar custodial arrangements maintained
by
Sterling within the past twelve (12) months, and (c) the names of all persons
holding powers of attorney from Sterling or who are otherwise authorized to
act
on behalf of Sterling with respect to any matter, other than its officers and
directors, and a summary of the terms of such powers or
authorizations.
Section
2.22 Valid
Obligation.
This
Agreement and all agreements and other documents executed by Sterling in
connection herewith constitute the valid and binding obligation of Sterling,
enforceable in accordance with its or their terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefor may be brought.
11
ARTICLE
III
PLAN
OF EXCHANGE
Section
3.01 The
Exchange.
On the
terms and subject to the conditions set forth in this Agreement, on the Closing
Date (as defined in Section 3.04), each ITI Common Shareholder who shall elect
to accept the exchange offer described herein (the "Accepting
Common Shareholders"),
shall
assign, transfer and deliver, free and clear of all liens, pledges,
encumbrances, charges, restrictions or known claims of any kind, nature, or
description, 100% of the issued and outstanding shares of common stock of ITI
held by each of such shareholders; the objective of such Exchange being the
acquisition by Sterling of 100% of the issued and outstanding common stock
of
ITI. In exchange for the transfer of such securities by the ITI Shareholders,
Sterling shall issue to the ITI Shareholders an aggregate of 28,335,061 shares
of common stock of Sterling (the "Common
Exchange Shares").
In the
event the Exchange is consummated, as provided in Section 5.05, but less than
100% of the common stock of ITI is delivered to Sterling, the number of Common
Exchange Shares issuable by Sterling to the Accepting Common Shareholders as
described above shall be reduced proportionately. At the Closing, each Accepting
Common Shareholder shall, on surrender of his certificate or certificates
representing such ITI shares to Sterling or its registrar or transfer agent,
be
entitled to receive a certificate or certificates evidencing his proportionate
interest in the Common Exchange Shares. Upon consummation of the transaction
contemplated herein, assuming participation by all of the ITI Shareholders,
all
of the shares of common stock of ITI shall be held by Sterling and the ITI
Shareholders shall hold fifty percent of the common stock of Sterling
immediately following the Exchange.
Section
3.02 Preferred
Exchange Shares.
In
addition to the Common Exchange Shares, Sterling shall issue to the Accepting
Common Shareholders at the Closing Date up to 28,335 shares of Series A
Preferred Stock of Sterling (the "Preferred
Exchange Shares"),
the
terms of the Preferred Exchange Shares being as set forth in the Certificate
of
Designation attached hereto as Exhibit A. The actual number of Preferred
Exchange Shares to be issued to the ITI Shareholders shall be determined by
multiplying (i) 28,335 by (ii) the quotient derived by dividing (x) the ITI
Appraised Value (as defined in Section 4.12) minus the Sterling Appraised Value
(as defined in Section 4.12), by (y) the Sterling Appraised Value; provided
that
the total Preferred Exchange Shares shall in no event exceed 28,335. In the
event the Exchange is consummated, as provided in Section 5.05, but less than
100% of the common stock of ITI is delivered to Sterling, the number of
Preferred Exchange Shares issuable by Sterling to the Accepting Common
Shareholders shall be reduced proportionally. At the Closing, each Accepting
Common Shareholder shall, on surrender of his certificate or certificates
representing such ITI shares to Sterling or its registrar or transfer agent,
be
entitled to receive a certificate or certificates evidencing his proportionate
interest in the Preferred Exchange Shares.
Section
3.03 Contingent
Consideration.
In
addition to the Common Exchange Shares and Preferred Exchange Shares issuable
pursuant to Sections 3.01 and 3.02, Sterling shall issue to the Accepting Common
Shareholders up to 85,005 shares of Series A Preferred Stock (the "Earnout
Shares")
in
five separate issuances of up to 17,001 Earnout Shares per issuance, each
issuance being contingent upon ITI’s satisfaction of the criteria (the
"Earnout
Criteria")
set
forth in this Section 3.03. For purposes of determining whether the Earnout
Criteria has been satisfied and the number of Earnout Shares issuable, the
following shall apply:
(a) For
each
calendar year beginning in 2007 and ending in 2011 (the "Earnout
Period"),
a
minimum level of earnings before interest, taxes, depreciation and amortization
(the "Minimum
EBITDA")
and a
target level of earnings before interest, taxes, depreciation and amortization
(the "Target
EBITDA")
for
ITI is established as follows:
Year
|
Minimum
EBITDA
|
Target
EBITDA
|
|||||
2007
|
$
|
200,000
|
$
|
450,000
|
|||
2008
|
400,000
|
700,000
|
|||||
2009
|
600,000
|
950,000
|
|||||
2010
|
800,000
|
1,200,000
|
|||||
2011
|
1,200,000
|
1,450,000
|
(b) Earnings
before interest, taxes, depreciation and amortization ("EBITDA")
of ITI
will be computed for each calendar year during the Earnout Period based on
the
financial performance of the ITI Businesses, on a stand-alone basis, in
accordance with GAAP applied consistently throughout the Earnout Period and
consistent with the fiscal period immediately prior to the Earnout Period.
For
purposes of determining satisfaction of the Earnout Criteria, (1) EBITDA shall
be computed on a calendar year basis, (2) Net Excess EBITDA shall be carried
forward in computing EBITDA for the following year, and (3) EBITDA of the ITI
Businesses will include EBITDA attributable to each of the ITI Businesses and
natural extensions of the ITI Businesses to new geographic markets and
customers, subject to the limitations, if any, described on Schedule 1.19,
but
will exclude (a) EBITDA attributable to entry, on or after the Closing Date,
into new product or services markets and acquisitions, on or after the Closing
Date, of businesses or projects and (b) EBITDA attributable to the proposed
sale
of ITI’s Xxxx Xxxxx operations. For purposes of computing EBITDA for any
calendar year "Net
Excess EBITDA"
shall
consist of the excess, if any, of (x) the aggregate EBITDA for each preceding
calendar year during the Earnout Period over (y) the aggregate Target EBITDA
for
each preceding calendar year during the Earnout Period.
12
(c) Within
fifteen calendar days following the release of earnings by Sterling, but not
later than 120 days after the end of each calendar year during the Earnout
Period, Sterling will determine EBITDA and the number of Earnout Shares for
the
applicable year. The calculation of EBITDA and the number of Earnout Shares
to
be issued shall be set out in writing and approved by Xxxxxx Xxxxxx, on behalf
of Sterling, and Xxx Xxxxxxx, on behalf of ITI. In the event Xx. Xxxxxx and
Xx.
Xxxxxxx are unable to agree on the calculation of EBITDA and the Earnout Shares
to be issued, the calculation shall be submitted to Sterling’s independent
public accounting firm and any determination by that firm will be binding.
Not
later than fifteen days after a final determination of EBITDA and the Earnout
Shares to be issued for each calendar year during the Earnout Period, Sterling
will issue Earnout Shares, as follows:
(i) if
EBITDA
for the applicable year is less than the Minimum EBITDA for the year, no Earnout
Shares will be issued;
(ii) if
EBITDA
for the applicable year equals or exceed the Target EBITDA for the year, 17,001
Earnout Shares will be issued; and
(iii) if
EBITDA
for the applicable year is more than the Minimum EBITDA but less than the Target
EBITDA for the year, a number of Earnout Shares will be issued equal to (x)
17,001 shares, multiplied by (y) the percentage determining by dividing EBITDA
by Target EBITDA.
(d) In
the
event the Exchange is consummated but less than 100% of the common stock of
ITI
is delivered to Sterling, the number of Earnout Shares, in the aggregate and
in
yearly installments, shall be reduced proportionately.
(e) Each
Accepting Common Shareholder having complied with Section 3.01 shall be entitled
to receive a certificate or certificates evidencing his proportionate interest
in the Earnout Shares.
Section
3.04 Anti-Dilution.
The
number of Common Exchange Shares and Preferred Exchange Shares issuable upon
Exchange pursuant to Section 3.01 and Section 3.02, and the number of Earnout
Shares issuable pursuant to Section 3.03, shall be appropriately adjusted to
take into account any other stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the Sterling common stock which may
occur
between the date of the execution of this Agreement and the Closing
Date.
Section
3.05 Closing.
The
closing ("Closing")
of the
transactions contemplated by this Agreement shall be on a date and at such
time
as the parties may agree ("Closing
Date")
but not
later than October 31, 2006, subject to the right of Sterling or ITI to extend
such Closing Date by up to an additional sixty (60) days. Such Closing shall
take place at a mutually agreeable time and place.
Section
3.06 Closing
Events.
At the
Closing, Sterling, ITI and each of the ITI Accepting Common Shareholders shall
execute, acknowledge, and deliver (or shall ensure to be executed, acknowledged,
and delivered) any and all certificates, opinions, financial statements,
schedules, agreements, resolutions, rulings or other instruments required by
this Agreement to be so delivered at or prior to the Closing, together with
such
other items as may be reasonably requested by the parties hereto and their
respective legal counsel in order to effectuate or evidence the transactions
contemplated hereby.
13
Section
3.07 Termination.
(a) This
Agreement may be terminated by the board of directors of either Sterling or
ITI
at any time prior to the Closing Date if:
(i) there
shall be any actual or threatened action or proceeding before any court or
any
governmental body which shall seek to restrain, prohibit, or invalidate the
transactions contemplated by this Agreement and which, in the judgment of such
board of directors, made in good faith and based upon the advice of its legal
counsel, makes it inadvisable to proceed with the Exchange; or
(ii) any
of
the transactions contemplated hereby are disapproved by any regulatory authority
whose approval is required to consummate such transactions (which does not
include the SEC) or in the judgment of such board of directors, made in good
faith and based on the advice of counsel, there is substantial likelihood that
any such approval will not be obtained or will be obtained only on a condition
or conditions which would be unduly burdensome, making it inadvisable to proceed
with the Exchange.
In
the
event of termination pursuant to this paragraph (a) of Section 3.07, no
obligation, right or liability shall arise hereunder, and each party shall
bear
all of the expenses incurred by it in connection with the negotiation, drafting,
and execution of this Agreement and the transactions herein
contemplated.
(b) This
Agreement may be terminated by the board of directors of Sterling at any time
prior to the Closing Date if:
(i) there
shall have been any change after the date of the latest balance sheet of ITI
in
the assets, properties, business, or financial condition of ITI, which could
have a materially adverse effect on the financial statements of ITI listed
in
Section 1.04(a) taken as a whole, except any changes disclosed in the ITI
Schedules;
(ii) the
board
of directors of Sterling determines in good faith that one or more of Sterling's
conditions to Closing has not occurred, through no fault of
Sterling.
(iii) Sterling
takes the termination action specified in Section 1.20 as a result of ITI
Schedules or updates thereto which Sterling finds unacceptable;
(iv) on
or
before October 31, 2006, Sterling notifies ITI that Sterling's investigation
pursuant to Section 4.01 below has uncovered information which it finds
unacceptable by the same criteria set forth in Section 1.21; or
(v) ITI
shall
fail to comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or warranties
of
ITI contained herein shall be inaccurate in any material respect, where such
noncompliance or inaccuracy has not been cured within ten (10) days after
written notice thereof.
If
this
Agreement is terminated pursuant to this paragraph (b) of Section 3.07, this
Agreement shall be of no further force or effect, and no obligation, right
or
liability shall arise hereunder, except that ITI shall bear its own costs as
well as the reasonable costs of Sterling in connection with the negotiation,
preparation, and execution of this Agreement and qualifying the offer and sale
of securities to be issued in the Exchange under the registration requirements,
or exemption from the registration requirements, of state and federal securities
laws.
14
(c) This
Agreement may be terminated by the board of directors of ITI at any time prior
to the Closing Date if:
(i) there
shall have been any change after the date of the latest balance sheet of
Sterling in the assets, properties, business or financial condition of Sterling,
which could have a material adverse effect on the financial statements of
Sterling listed in Section 2.04(b) taken as a whole, except any changes
disclosed in the Sterling Schedules;
(ii) the
board
of directors of ITI determines in good faith that one or more of ITI's
conditions to Closing has not occurred, through no fault of ITI;
(iii) ITI
takes
the termination action specified in Section 2.20 as a result of Sterling
Schedules or updates thereto which ITI finds unacceptable;
(iv) on
or
before October 31, 2006, ITI notifies Sterling that ITI's investigation pursuant
to Section 4.01 below has uncovered information which it finds unacceptable
by
the same criteria set forth in Section 2.20; or
(v) Sterling
shall fail to comply in any material respect with any of its covenants or
agreements contained in this Agreement or if any of the representations or
warranties of Sterling contained herein shall be inaccurate in any material
respect, where such noncompliance or inaccuracy has not been cured within ten
(10) days after written notice thereof.
If
this
Agreement is terminated pursuant to this paragraph (c) of Section 3.07, this
Agreement shall be of no further force or effect, and no obligation, right
or
liability shall arise hereunder, except that Sterling shall bear its own costs
as well as the reasonable costs of ITI and its principal shareholders incurred
in connection with the negotiation, preparation and execution of this
Agreement.
ARTICLE
IV
SPECIAL
COVENANTS
Section
4.01 Access
to Properties and Records.
Sterling
and ITI will each afford to the officers and authorized representatives of
the
other full access to the properties, books and records of Sterling or ITI,
as
the case may be, in order that each may have a full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of the other,
and each will furnish the other with such additional financial and operating
data and other information as to the business and properties of Sterling or
ITI,
as the case may be, as the other shall from time to time reasonably request.
Without limiting the foregoing, as soon as practicable after the end of each
fiscal quarter (and in any event through the last fiscal quarter prior to the
Closing Date), each party shall provide the other with quarterly internally
prepared and unaudited financial statements.
Section
4.02 Delivery
of Books and Records.
At the
Closing, ITI shall deliver to Sterling the originals of the corporate minute
books, books of account, contracts, records, and all other books or documents
of
ITI now in the possession of ITI or its representatives.
Section
4.03 Third
Party Consents and Certificates.
Sterling
and ITI agree to cooperate with each other in order to obtain any required
third
party consents to this Agreement and the transactions herein
contemplated.
Section
4.04 Conversion
of Loans.
At
Closing, all amounts advanced by ITI to Sterling pursuant to that Loan
Agreement, dated October 2005, shall be converted to capital of Sterling and
deemed paid in full without the issuance of shares.
Section
4.05 Designation
of Directors and Officers.
On or
before the Closing Date, Sterling shall secure the resignations of all current
officers and directors of Sterling and shall appoint as directors Xxx X.
Xxxxxxx, Xxxxxx Xxxxxx, X. Xxx Xxxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxx, with
Xxx
X. Xxxxxxx appointed as Chairman of the Board and X. Xxx Xxxxxxx appointed
as
Vice Chairman of the Board, and shall appoint Xxx X. Xxxxxxx as President and
Chief Executive Officer, Xxxxxx Xxxxxx as Executive Vice President and as
President of Sterling FBO Holdings, X. Xxx Xxxxxxx as Executive Vice President
and as Vice President and Chief Operating Officer of ITI.
15
Section
4.06 Employment
Agreements.
On or
before the Closing Date, Sterling shall enter into employment agreements (the
"Employment
Agreements"),
substantially in the form attached hereto as Exhibit B, with each of Xxx X.
Xxxxxxx, X. Xxx Xxxxxxx and Xxxxxx Xxxxxx which Employment Agreements will
provide minimum terms of employment of one year, a minimum base salary of
$12,500 per month, reasonable expense allowances for travel and entertainment,
reasonable office, staffing and auto expense allowances as well as performance
based bonuses, determined by the board of directors in accordance with
investment banking industry standards and payable in cash or securities,
including standard non-compete and non-disclosure provisions and reflecting,
generally, the understanding and agreement that each of Xx. Xxxxxxx, Xx. Xxxxxxx
and Xx. Xxxxxx will be located in, and operate from, diverse locations,
consistent with their activities on behalf of Sterling and ITI, respectively,
prior to the Closing Date, that their expenses reimbursable by Sterling will
vary based on their locations and that their positions entail substantial
international travel.
Section
4.07 Exclusive
Dealing Rights.
Until
5:00 P.M. Houston Time on October 31, 2006:
(a) In
recognition of the substantial time and effort which Sterling has spent and
will
continue to spend in investigating ITI and its business and in addressing the
matters related to the transactions contemplated herein, each of which may
preempt or delay other management activities, neither ITI, nor any of its
officers, employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with, or, except where
required by fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any corporation, partnership, person or other entity or group (other
than Sterling and its directors, officers, employees, representatives and
agents) concerning any merger, sale of substantial assets, sale of shares of
capital stock, (including without limitation, any public or private offering
of
the common stock of ITI) or similar transactions involving ITI (all such
transactions being referred to as "ITI
Acquisition Transactions").
If ITI
receives any proposal with respect to an ITI Acquisition Transaction, it will
immediately communicate to Sterling the fact that it has received such proposal
and the principal terms thereof.
(b) In
recognition of the substantial time and effort which ITI has spent and will
continue to spend in investigating Sterling and its business and in addressing
the matters related to the transactions contemplated herein, each of which
may
preempt or delay other management activities, neither Sterling, nor any of
its
officers, employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with, or, except where
required by fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any corporation, partnership, person or other entity or group (other
than ITI and its directors, officers, employees, representatives and agents)
concerning any merger, sale of substantial assets, sale of shares of capital
stock, (including without limitation, any public or private offering of the
common stock of Sterling) or similar transactions involving Sterling (all such
transactions being referred to as "Sterling
Acquisition Transactions").
If
Sterling receives any proposal with respect to a Sterling Acquisition
Transaction, it will immediately communicate to ITI the fact that it has
received such proposal and the principal terms thereof.
Section
4.08 Actions
Prior to Closing.
(a) From
and
after the date of this Agreement until the Closing Date and except as set forth
in the Sterling Schedules or ITI Schedules or as permitted or contemplated
by
this Agreement, Sterling (subject to paragraph (d) below) and ITI respectively,
will each:
(i) carry
on
its business in substantially the same manner as it has heretofore;
(ii) maintain
and keep its properties in states of good repair and condition as at present,
except for depreciation due to ordinary wear and tear and damage due to
casualty;
(iii) maintain
in full force and effect insurance comparable in amount and in scope of coverage
to that now maintained by it;
(iv) perform
in all material respects all of its obligations under material contracts,
leases, and instruments relating to or affecting its assets, properties, and
business;
(v) use
its
best efforts to maintain and preserve its business organization intact, to
retain its key employees, and to maintain its relationship with its material
suppliers and customers; and
(vi) fully
comply with and perform in all material respects all obligations and duties
imposed on it by all federal and state laws and all rules, regulations, and
orders imposed by federal or state governmental authorities.
16
(b) From
and
after the date of this Agreement until the Closing Date and except as permitted
or contemplated by this Agreement, neither Sterling nor ITI will:
(i) make
any
changes in their articles or certificate of incorporation or
bylaws;
(ii) take
any
action described in Section 1.07 in the case of ITI, or in Section 2.07, in
the
case of Sterling (all except as permitted therein or as disclosed in the
applicable party's schedules);
(iii) enter
into or amend any contract, agreement, or other instrument of any of the types
described in such party's schedules, except that a party may enter into or
amend
any contract, agreement, or other instrument in the ordinary course of business
involving the sale of goods or services; or
(iv) sell
any
assets or discontinue any operations, sell any shares of capital stock (other
than as contemplated herein) or conduct any similar transactions other than
in
the ordinary course of business.
(c) Any
other
provision of this Agreement notwithstanding, on or prior to the Closing Date,
(i) Sterling may sell its Commodore Plaza property, (ii) ITI may sell its
interest in its Papa John’s franchise provided that the sales price is not less
than $1,300,000, and (iii) ITI shall take all steps reasonably necessary to
assure ownership by ITI, at the Closing Date, of each of the ITI
Businesses.
(d) In
light
of the fact that ITI's shareholders will control Sterling as a result of the
Exchange, from and after the date of this Agreement until the Closing Date,
Sterling shall take no action which is material to, and outside of the ordinary
course of, its business without the prior written approval of ITI, which ITI
may
give or withhold in its sole discretion after consultation with
Sterling.
Section
4.09 Sales
Under Rule 144 or 145,If Applicable.
(a) Sterling
will use its best efforts to at all times comply with the reporting requirements
of the Exchange Act, including timely filing of all periodic reports required
under the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
(b) Upon
being informed in writing by any such person holding restricted stock of
Sterling that such person intends to sell any shares under Rule 144, Rule 145
or
Regulation S promulgated under the Securities Act (including any rule adopted
in
substitution or replacement thereof), Sterling will certify in writing to such
person that it has filed all of the reports required to be filed by it under
the
Exchange Act to enable such person to sell such person's restricted stock under
Rule 144, 145 or Regulation S, as may be applicable in the circumstances, or
will inform such person in writing that it has not filed any such report or
reports.
(c) If
any
certificate representing any such restricted stock is presented to Sterling's
transfer agent for registration of transfer in connection with any sale
theretofore made under Rule 144, 145 or Regulation S, provided such certificate
is duly endorsed for transfer by the appropriate person(s) or accompanied by
a
separate stock power duly executed by the appropriate person(s) in each case
with reasonable assurances that such endorsements are genuine and effective,
and
is accompanied by an opinion of counsel satisfactory to Sterling and its counsel
that the stock transfer has complied with the requirements of Rule 144, 145
or
Regulation S, as the case may be, Sterling will promptly instruct its transfer
agent to register such shares and to issue one or more new certificates
representing such shares to the transferee and, if appropriate under the
provisions of Rule 144, 145 or Regulation S, as the case may be, free of any
stop transfer order or restrictive legend. The provisions of this Section 4.08
shall survive the Closing and the consummation of the transactions contemplated
by this Agreement.
17
Section
4.10 Indemnification.
(a) ITI
hereby agrees to indemnify Sterling and each of the officers, agents and
directors of Sterling as of the date of execution of this Agreement against
any
loss, liability, claim, damage, or expense (including, but not limited to,
any
and all expense whatsoever reasonably incurred in investigating, preparing,
or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or based
on
any inaccuracy appearing in or misrepresentations made under Article I of this
Agreement. The indemnification provided for in this paragraph shall survive
the
Closing and consummation of the transactions contemplated hereby and termination
of this Agreement.
(b) Sterling
hereby agrees to indemnify ITI and each of the officers, agents, and directors
of ITI and each of the ITI Shareholders as of the date of execution of this
Agreement against any loss, liability, claim, damage, or expense (including,
but
not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or misrepresentation
made
under Article II of this Agreement. The indemnification provided for in this
paragraph shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement.
Section
4.11 Post-Closing
Covenants.
As soon
as practical following Closing, and subject to the discretion of the
post-Closing Board of Directors, Sterling will consider (a) amendment of its
Articles of Incorporation to change the name of Sterling to "ITI Capital, Inc."
or such other name as the Board of Directors may deem appropriate and take
all
steps reasonably necessary to effect any such name change and (b) reverse
splitting the common stock of Sterling.
Section
4.12 Valuation.
From
and after the date of this Agreement until the Closing Date, each of Sterling
and ITI shall cooperate in engaging qualified appraisers or valuation experts
acceptable to both Sterling and ITI to conduct valuations of Sterling and ITI,
respectively, and shall cooperate fully with such valuation experts in
conducting such valuations. Sterling and ITI shall each be responsible for
costs
incurred with respect to the valuation of its own business. The valuation
experts retained shall be charged with determining the fair market value of
each
of Sterling (the "Sterling
Appraised Value")
and
ITI (the "ITI
Appraised Value").
In
determining the Sterling Appraised Value, the valuation expert shall take into
account all amounts owed by Sterling, including amounts owed to ITI that will
be
converted to equity at the Closing Date. In determining the ITI Appraised Value,
the valuation expert shall first determine a value of ITI as a whole, including
all of the ITI Businesses (the “ITI
Enterprise Value”),
and
will then subtract from the ITI Enterprise Value any value attributable to
projected future earnings of ITI that may be includable in EBITDA for purposes
of measuring satisfaction of the Earnout Criteria.
ARTICLE
V
CONDITIONS
PRECEDENT TO OBLIGATIONS OF STERLING
The
obligations of Sterling under this Agreement are subject to the satisfaction,
at
or before the Closing Date, of the following conditions:
Section
5.01 Accuracy
of Representations and Performance of Covenants.
The
representations and warranties made by ITI in this Agreement were true when
made
and shall be true at the Closing Date with the same force and effect as if
such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement). ITI shall have performed
or
complied with all covenants and conditions required by this Agreement to be
performed or complied with by ITI prior to or at the Closing. Sterling shall
be
furnished with a certificate, signed by a duly authorized executive officer
of
ITI and dated the Closing Date, to the foregoing effect.
18
Section
5.02 Officer's
Certificate.
Sterling
shall have been furnished with a certificate dated the Closing Date and signed
by a duly authorized officer of ITI to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge
of
ITI threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement, or, to the
extent not disclosed in the ITI Schedules, by or against ITI, which might result
in any material adverse change in any of the assets, properties, business,
or
operations of ITI.
Section
5.03 No
Material Adverse Change.
Prior to
the Closing Date, there shall not have occurred any change in the financial
condition, business, or operations of ITI nor shall any event have occurred
which, with the lapse of time or the giving of notice, is determined to be
unacceptable using the criteria set forth in Section 1.19.
Section
5.04 Good
Standing.
Sterling
shall have received a certificate of good standing from the State of Nevada,
dated as of a date within ten days prior to the Closing Date certifying that
ITI
is in good standing as a corporation in the State of Nevada.
Section
5.05 Approval
by ITI Shareholders.
The
Exchange shall have been approved, and shares delivered in accordance with
Section 3.01, by the holders of not less than eighty percent (80%) of the
outstanding common stock of ITI, unless a lesser number is agreed to by
Sterling.
Section
5.06 No
Governmental Prohibition.
No
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order shall have been enacted, entered, promulgated
or
enforced by any court or governmental or regulatory authority or instrumentality
which prohibits the consummation of the transactions contemplated
hereby.
Section
5.07 Consents.
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Sterling and ITI after
the Closing Date on the basis as presently operated shall have been
obtained.
Section
5.08 Other
Items.
(a) Sterling
shall have received a list of ITI's shareholders containing the name, address,
and number of shares held by each ITI shareholder as of the date of Closing,
certified by an executive officer of ITI as being true, complete and accurate;
and
(b) Sterling
shall have received such further opinions, documents, certificates or
instruments relating to the transactions contemplated hereby as Sterling may
reasonably request.
(c) Sterling
shall have received financial statements (the "Closing
Financial Statements")
of ITI
in form complying with the financial statement requirements of acquired
businesses under applicable SEC accounting rules, which financial statements
shall (i) include an audited balance sheet at December 31, 2005 and audited
statements of operations, cash flows and stockholders’ equity for each of the
two years ended December 31, 2005 and an unaudited balance sheet, statement
of
operations and statement of cash flows at, and for the quarter and year to
date
period ending with the 2006 fiscal quarter most recently completed as of the
Closing Date and for the same period in 2005, all prepared in accordance with
SEC Regulation S-X, and (ii) not vary materially from the ITI Financial
Statements. For purposes hereof, the Closing Financial Statements shall be
considered to vary materially from the ITI Financial Statements if, among other
things, (A) the total liabilities reflected on the Closing Financial Statements
exceed the total liabilities reflected on the ITI Financial Statements by more
than $5,000 or (B) the total assets reflected on the ITI Financial Statements
exceed the total assets reflected on the Closing Financial Statements by more
than $5,000.
19
(d) Sterling
shall have received a report of valuation experts, as called for by Section
4.12, indicating an ITI Appraised Value of not less than the Sterling Appraised
Value.
(e) ITI
shall
have sold, or entered into a definitive agreement to sell, its Xxxx Xxxxx
franchise rights in China for not less than $1.3 million and shall have made
arrangements, satisfactory to Sterling, to assure that all proceeds of such
sale
are deposited in accounts under the exclusive control of authorized officers
of
ITI.
(f) ITI
shall
own each of the ITI Businesses in the manner and to the extent reflected on
Schedule 1.19.
ARTICLE
VI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF ITI
AND
THE ITI SHAREHOLDERS
The
obligations of ITI and the ITI Shareholders under this Agreement are subject
to
the satisfaction, at or before the Closing Date, of the following
conditions:
Section
6.01 Accuracy
of Representations and Performance of Covenants.
The
representations and warranties made by Sterling in this Agreement were true
when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Sterling shall have performed and complied with all covenants
and
conditions required by this Agreement to be performed or complied with by
Sterling and shall have satisfied the conditions described below prior to or
at
the Closing:
(a) Immediately
prior to the Closing, Sterling shall have no more than an aggregate of
28,335,061 shares of common stock issued and outstanding or issuable pursuant
to
outstanding warrants and options.
(b) All
required applications and filings with governmental and regulatory agencies
shall have been made and all necessary governmental and regulatory approvals
shall have been obtained.
ITI
shall
have been furnished with certificates, signed by duly authorized executive
officers of Sterling and dated the Closing Date, to the foregoing
effect.
Section
6.02 Officer's
Certificate.
ITI
shall have been furnished with certificates dated the Closing Date and signed
by
duly authorized executive officers of Sterling, to the effect that no
litigation, proceeding, investigation or inquiry is pending, or to the best
knowledge of Sterling threatened, which might result in an action to enjoin
or
prevent the consummation of the transactions contemplated by this Agreement
or,
to the extent not disclosed in the Sterling Schedules, by or against Sterling,
which might result in any material adverse change in any of the assets,
properties or operations of Sterling.
Section
6.03 No
Material Adverse Change.
Prior to
the Closing Date, there shall not have occurred any change in the financial
condition, business or operations of Sterling nor shall any event have occurred
which, with the lapse of time or the giving of notice, is determined to be
unacceptable using the criteria set forth in Section 2.20.
Section
6.04 Good
Standing.
ITI
shall have received a certificate of good standing from the Secretary of State
of the State of Nevada or other appropriate office, dated as of a date within
ten days prior to the Closing Date certifying that Sterling is in good standing
as a corporation in the State of Nevada.
Section
6.05 No
Governmental Prohibition.
No
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order shall have been enacted, entered, promulgated
or
enforced by any court or governmental or regulatory authority or instrumentality
which prohibits the consummation of the transactions contemplated
hereby.
20
Section
6.06 Consents.
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Sterling and ITI after
the Closing Date on the basis as presently operated shall have been
obtained.
Section
6.07 Other
Items.
ITI
shall have received further opinions, documents, certificates, or instruments
relating to the transactions contemplated hereby as ITI may reasonably
request.
ARTICLE
VII
MISCELLANEOUS
Section
7.01 Brokers.
Sterling
and ITI agree that there were no finders or brokers involved in bringing the
parties together or who were instrumental in the negotiation, execution or
consummation of this Agreement. Sterling and ITI each agree to indemnify the
other against any claim by any third person for any commission, brokerage,
or
finder's fee arising from the transactions contemplated hereby based on any
alleged agreement or understanding between the indemnifying party and such
third
person, whether express or implied from the actions of the indemnifying
party.
Section
7.02 Governing
Law.
This
Agreement shall be governed by, enforced, and construed under and in accordance
with the laws of the United States of America and, with respect to the matters
of state law, with the laws of the State of Texas, without giving effect to
principles of conflicts of law thereunder. Each of the parties (a) irrevocably
consents and agrees that any legal or equitable action or proceedings arising
under or in connection with this Agreement shall be brought exclusively in
the
federal courts of the United States, and (b) by execution and delivery of this
Agreement, irrevocably submits to and accepts, with respect to any such action
or proceeding, generally and unconditionally, the jurisdiction of the United
States District Court in Houston, Texas, and irrevocably waives any and all
rights such party may now or hereafter have to object to such
jurisdiction.
Section
7.03 Notices.
Any
notice or other communications required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered to it or sent
by
telecopy, overnight courier or registered mail or certified mail, postage
prepaid, addressed as follows:
If
to Sterling, to:
|
Sterling
Equity Holdings, Inc.
|
0000
Xxxxxxx Xxxxxxx,
Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attn:
Xxxxxx Xxxxxx
If
to
ITI, to: ITI
Capital, Inc.
0000
Xxxxxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxx X. Xxxxxxx
or
such
other addresses as shall be furnished in writing by any party in the manner
for
giving notices hereunder, and any such notice or communication shall be deemed
to have been given (i) upon receipt, if personally delivered, (ii) on the day
after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three
(3)
days after mailing, if sent by registered or certified mail.
Section
7.04 Attorney's
Fees.
In the
event that either party institutes any action or suit to enforce this Agreement
or to secure relief from any default hereunder or breach hereof, the prevailing
party shall be reimbursed by the losing party for all costs, including
reasonable attorney's fees, incurred in connection therewith and in enforcing
or
collecting any judgment rendered therein.
Section
7.05 Confidentiality.
Each
party hereto agrees with the other that, unless and until the transactions
contemplated by this Agreement have been consummated, it and its representatives
will hold in strict confidence all data and information obtained with respect
to
another party or any subsidiary thereof from any representative, officer,
director or employee, or from any books or records or from personal inspection,
of such other party, and shall not use such data or information or disclose
the
same to others, except (i) to the extent such data or information is published,
is a matter of public knowledge, or is required by law to be published; or
(ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement. In the event
of
the termination of this Agreement, each party shall return to the other party
all documents and other materials obtained by it or on its behalf and shall
destroy all copies, digests, work papers, abstracts or other materials relating
thereto, and each party will continue to comply with the confidentiality
provisions set forth herein.
21
Section
7.06 Public
Announcements and Filings.
Unless
required by applicable law or regulatory authority, none of the parties will
issue any report, statement or press release to the general public, to the
trade, to the general trade or trade press, or to any third party (other than
its advisors and representatives in connection with the transactions
contemplated hereby) or file any document, relating to this Agreement and the
transactions contemplated hereby, except as may be mutually agreed by the
parties. Copies of any such filings, public announcements or disclosures,
including any announcements or disclosures mandated by law or regulatory
authorities, shall be delivered to each party at least one (1) business day
prior to the release thereof.
Section
7.07 Schedules;
Knowledge.
Each
party is presumed to have full knowledge of all information set forth in the
other party's schedules delivered pursuant to this Agreement.
Section
7.08 Third
Party Beneficiaries.
This
contract is strictly between Sterling and ITI, and, except as specifically
provided, no director, officer, stockholder (other than the ITI Shareholders),
employee, agent, independent contractor or any other person or entity shall
be
deemed to be a third party beneficiary of this Agreement.
Section
7.09 Expenses.
Subject
to Sections 3.06 and 7.04 above, whether or not the Exchange is consummated,
each of Sterling and ITI will bear their own respective expenses, including
legal, accounting and professional fees, incurred in connection with the
Exchange or any of the other transactions contemplated hereby.
Section
7.10 Entire
Agreement.
This
Agreement represents the entire agreement between the parties relating to the
subject matter thereof and supersedes all prior agreements, understandings
and
negotiations, written or oral, with respect to such subject matter.
Section
7.11 Survival;
Termination.
The
representations, warranties, and covenants of the respective parties shall
survive the Closing Date and the consummation of the transactions herein
contemplated for a period of two years.
Section
7.12 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original and all of which taken together shall be but a single
instrument.
Section
7.13 Amendment
or Waiver.
Every
right and remedy provided herein shall be cumulative with every other right
and
remedy, whether conferred herein, at law, or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the same or any other
default then, theretofore, or thereafter occurring or existing. At any time
prior to the Closing Date, this Agreement may by amended by a writing signed
by
all parties hereto, with respect to any of the terms contained herein, and
any
term or condition of this Agreement may be waived or the time for performance
may be extended by a writing signed by the party or parties for whose benefit
the provision is intended.
Section
7.14 Best
Efforts.
Subject
to the terms and conditions herein provided, each party shall use its best
efforts to perform or fulfill all conditions and obligations to be performed
or
fulfilled by it under this Agreement so that the transactions contemplated
hereby shall be consummated as soon as practicable. Each party also agrees
that
it shall use its best efforts to take, or cause to be taken, all actions and
to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective this Agreement
and the transactions contemplated herein.
22
IN
WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
be
executed by their respective officers, hereunto duly authorized, as of the
date
first above written.
STERLING
EQUITY HOLDINGS, INC.
By: _/s/
Xxxxxx Matthew_______
Xxxxxx
Xxxxxx
President
ITI
CAPITAL, INC.
By: _/s/
Xxx X. Bearden__________
Xxx
X.
Xxxxxxx
President