Exhibit 10.1
AGREEMENT
AGREEMENT, dated as of November 4, 2004 (this "Agreement"), by and
between HQ Sustainable Maritime Industries, Inc., a corporation organized and
existing under the laws of the State of Delaware, U.S.A. ("HQSM"), and Sino-▇▇▇▇
Canada (S.S.C.) Limited, a limited liability corporation organized and existing
under the laws of the country of Canada ("Sino-▇▇▇▇").
RECITALS
A. Pursuant to that certain Purchase Agreement, dated as of August 17,
2004 (the "Purchase Agreement"), by and among HQSM, Sino-▇▇▇▇ and Sealink Wealth
Limited, a limited liability corporation organized and existing under the laws
of the British Virgin Islands, HQSM made in favor of Sino-▇▇▇▇ a Convertible
Promissory Note, dated August 17, 2004 (the "Note"), in the original principal
amount of U.S. $11,111,345. In accordance with the terms thereof, the Note
matured in October of 2004.
B. Pursuant to a letter dated November 4, 2004 (the "Demand Letter"),
Sino-▇▇▇▇ has demanded of HQSM payment in full of the principal amount and
accrued interest due and outstanding under the Note or, in lieu of such payment
and in full and complete satisfaction of the Note, has offered to accept (1)
15,730,493 shares (the "Common Shares") of common stock, $0.001 par value per
share, of HQSM, (2) 100,000 shares (the "Preferred Shares") of preferred stock,
$0.001 par value per share, of HQSM, issuable pursuant to a certificate of
designation, substantially in the form attached hereto as Annex 1; provided that
HQSM shall make a cash payment to Sino-▇▇▇▇ of the accrued and unpaid interest
on the Note (the "Cash Payment"), all upon the terms set forth herein.
C. HQSM has agreed to accept such offer from Sino-▇▇▇▇, upon the terms
set forth herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth below, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
AGREEMENT REGARDING THE NOTE
Section 1.01. Issuance of HQSM Securities in Satisfaction of the Note.
In lieu of payment of the outstanding principal balance of the Note, together
with accrued and unpaid interest thereon, and in full and complete satisfaction
of the Note, the parties agree that HQSM shall issue to Sino-▇▇▇▇ the Common
Shares and the Preferred Shares, and shall make the Cash Payment with respect to
accrued interest on the Note.
(a) Common Shares. As promptly as feasible following the
execution and delivery of this Agreement by the parties hereto, but in any event
no later than ten (10) calendar days thereafter, HQSM shall issue and deliver to
Sino-▇▇▇▇ one or more certificates representing the Common Shares, which Common
Shares will be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. HQSM shall pay all expenses, and any and all United States
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federal, state and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section 1.01(a) in the name of Sino-▇▇▇▇, or as may be otherwise
directed by Sino-▇▇▇▇.
(b) Preferred Shares. As promptly as feasible, but in any
event no later than the earliest of (x) ten (10) calendar days following receipt
by HQSM of all requisite approvals (including without limitation, shareholder
approvals) for such issuance, and (y) the six (6) month anniversary of the date
of the Demand Letter, HQSM shall issue and deliver to Sino-▇▇▇▇ one or more
certificates representing the Preferred Shares, which Preferred Shares will be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever. HQSM shall pay all expenses, and any and all United States federal,
state and local taxes and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
1.01(b) in the name of Sino-▇▇▇▇, or as may be otherwise directed by Sino-▇▇▇▇.
(c) As promptly as feasible, but in any event no later than
ten (10) calendar days following the execution and delivery of this Agreement by
the parties hereto, HQSM shall make the Cash Payment to Sino-▇▇▇▇ of all of the
accrued and unpaid interest on the Note from the date of issuance thereof
through and including the date of payment thereof, which amount shall be payable
in immediately available Unites States dollars.
Section 1.02 Default by HQSM.
(a) General Default. In the event that HQSM shall default in
the performance of any of its obligations hereunder, Sino-▇▇▇▇ shall have all
rights and remedies as shall be available thereto under law or at equity, all of
which shall be cumulative.
(b) Preferred Shares Default. In the event that HQSM defaults
in the performance of its obligation under the Note and hereunder to issue the
Preferred Shares, the principal amount of $100,000, together with interest
thereon at the rate set forth in the Note, as accrued from August 17, 2004
through such date of payment, shall immediately become due and payable at the
option and upon demand of Sino-▇▇▇▇.
ARTICLE II
MISCELLANEOUS
Section 2.01 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 New York, without regard to its conflicts of law principles.
Section 2.02 Resolution of Disputes.
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall first be resolved through friendly consultation, if
possible. Such consultation shall begin immediately after one party hereto has
delivered to the other party a written request for such consultation (the
"Consultation Date"). If the dispute cannot be resolved within 30 days following
the Consultation Date, the dispute shall be submitted to arbitration upon the
request of either Party, with written notice to the other Party.
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(b) Arbitration. The arbitration shall be conducted in New
York, New York under the auspices of the American Arbitration Association
("AAA") in accordance with the commercial arbitration rules and supplementary
procedures for international commercial arbitration of the AAA. There shall be
three arbitrators: one arbitrator shall be chosen by each party to the dispute
and those two arbitrators shall choose the third arbitrator. All arbitration
proceedings shall be conducted in English. Each party to the dispute shall
cooperate with the other in making full disclosure of and providing complete
access to all information and documents requested by the other party to the
dispute in connection with the arbitration proceedings. Arbitration shall be the
sole, binding, exclusive and final remedy for resolving any dispute between the
parties thereto; either party thereto may apply to any court of competent
jurisdiction in the State of New York for enforcement of any award granted by
the arbitrators.
(c) During the period when a dispute is being resolved, except
for the matter being disputed, the Parties shall in all other respects continue
to abide by the terms of this Agreement.
Section 2.03 Attorney's Fees. In the event that any party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party shall reimburse the
non-breaching party for all costs, including reasonable attorney's fees,
incurred in connection therewith and in enforcing or collecting any judgment
rendered therein.
Section 2.04 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 2.05 Entire Agreement. This Agreement and any agreements,
documents and instruments to be executed and delivered pursuant hereto are
intended to embody the final, complete and exclusive agreement among the parties
with respect to the subject matter of this Agreement, and are intended to
supersede all prior agreements, understandings and representations written or
oral, with respect thereto.
Section 2.06 Agreement Binding on Successors and Assigns. All rights
and obligations under this entire Agreement shall be binding upon and inure to
the benefit of the heirs, executors, administrators, successors and assigns of
the parties hereto.
Section 2.07 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. For purposes of this Agreement,
facsimile signatures may be deemed originals.
Section 2.08 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 of any other default then, theretofore, or
thereafter occurring or existing. This Agreement may be amended only by a
writing signed by both 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 for
whose benefit the provision is intended.
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Section 2.09 Third Party Consents and Certificates. The parties agree
to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein contemplated.
Section 2.10 Notice. Any notice or other communication given hereunder
shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, addressed to HQSM, at its principal office, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 20th Floor, New York, New York 10005, Attention:
President, and to Sino-▇▇▇▇ at the following address: ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ J4W 1A6, Attention: President. Notices shall be
deemed to have been given on the date of mailing, except notices of change of
address, which shall be deemed to have been given when received.
Section 2.11 Severability. In the event that any provision or any part
of any provision of this Agreement shall be void or unenforceable for any reason
whatsoever, then such provision shall be stricken and of no force and effect.
However, unless such stricken provision goes to the essence of the consideration
bargained for by a party, the remaining provisions of this Agreement shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.
Section 2.12 No Third Party Rights. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and the
respective successors and assigns of the foregoing, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party, nor shall any provision hereof give any third
persons any right of subrogation or action over or against any party.
Section 2.13 Construction. The language in all parts of this Agreement
shall in all cases be construed simply, according to its fair meaning, and not
strictly for or against any of the parties hereto. Without limitation, there
shall be no presumption against any party on the ground that such party was
responsible for drafting this Agreement or any part thereof.
Section 2.14 Section Headings. The section headings of this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ Sporns
----------------------
Name: ▇▇▇▇▇▇▇ Sporns
Title: CEO and President
SINO-▇▇▇▇ CANADA (S.S.C.) LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇ Li
----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇ Li
Title: Director
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ANNEX 1
CERTIFICATE OF DESIGNATION
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
CERTIFICATE OF DESIGNATION
OF SERIES A PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
HQ Sustainable Maritime Industries, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, does hereby certify:
FIRST: Pursuant to authority conferred upon the Board of Directors by
its Certificate of Incorporation, and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of Directors
is authorized to issue Preferred Stock of the Company in one or more series and
has adopted the resolution set forth below on August 17, 2004:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation of the Corporation, as amended, out of the
authorized but unissued shares of Preferred Stock of the Corporation this Board
of Directors hereby creates a series of the Preferred Stock, par value $.001 per
share (the "Preferred Stock"), of the Corporation, and this Board of Directors
hereby fixes the powers, designations, preferences and relative, participating,
optional or other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof (in addition to the powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, set forth
in the Certificate of Incorporation of the Corporation which are applicable to
Preferred Stock of all series) as follows:
1. Designation. The designation of the series shall be "Series A Preferred
Stock" (the "Series A Preferred Stock").
2. Number. The number of shares constituting the Series A Preferred Stock
shall be 100,000.
3. Voting Rights.
a. General Voting Rights. The holder of each share of Series A
Preferred Stock shall have the right to the voting power equal to that
of one thousand shares of the Corporation's common stock, par value
$.001 per share (the "Common Stock") and with respect to such vote,
each such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the by-laws of the
Corporation, and shall be entitled to vote, together with holders of
Common Stock, with respect to any question upon which holders of Common
Stock have the right to vote.
b. Consent Needed for Authorization. Without the vote or consent of the
holders of at least a majority of the shares of Series A Preferred
Stock then outstanding, the Corporation may not (i) authorize, create
or issue, or increase the authorized number of shares of, any class or
series of capital stock ranking prior to or on a parity with the Series
A Preferred Stock either as to dividends or liquidation, (ii)
authorize, create or issue any class or series of common stock of the
Corporation other than the Common Stock, (iii) authorize any
reclassification of the Series A Preferred Stock, (iv) authorize,
create or issue any securities convertible into or exercisable for
capital stock prohibited by Section 3(b)(i) or (ii), (v) amend this
Certificate or (vi) enter into any disposal, merger or reorganization
involving 20% of the total capitalization of the Corporation.
4. Liquidation.
a. Preference. Subject to the rights of the holders of any other series
of Preferred Stock ranking senior to or on a parity with the Series A
Preferred Stock with respect to liquidation and any other class or
series of capital stock of the Corporation ranking senior to or on a
parity with the Series A Preferred Stock with respect to liquidation,
in the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the
holders of record of the issued and outstanding shares of Series A
Preferred Stock shall be entitled to receive, out of the assets of the
Corporation available for distribution to the holders of shares of
Series A Preferred Stock, prior and in preference to any distribution
of any of the assets of the Corporation to the holders of Common Stock
and any other series of Preferred Stock ranking junior to the Series A
Preferred Stock with respect to liquidation and any other class or
series of capital stock of the Corporation ranking junior to the Series
A Preferred Stock with respect to liquidation, an amount in cash per
share equal to $1.00, plus an amount equal to all dividends accrued and
unpaid on each such share (whether or not declared) up to the date
fixed for distribution. If, upon such liquidation, dissolution or
winding up of the affairs of the Corporation, the assets of the
Corporation distributable among the holders of Series A Preferred Stock
and any other series of Preferred Stock ranking on a parity therewith
in respect thereto or any class or series of capital stock of the
Corporation ranking on a parity therewith in respect thereto shall be
insufficient to permit the payment in full to all such holders of
shares of the preferential amounts payable to them, then the entire
assets of the Corporation available for distribution to such holders of
shares shall be distributed ratably among such holders in proportion to
the respective amounts that would be payable per share if such assets
were sufficient to permit payment in full. After payment of the full
amount to which they are entitled upon liquidation pursuant to this
Section 4(a), the holders of shares of Series A Preferred Stock will
not be entitled to any further participation in any distribution of
assets by the Corporation. Neither a consolidation or merger of the
Corporation with another corporation or other entity nor a sale,
transfer, lease or exchange of all or part of the Corporation's assets
will be considered a liquidation, dissolution or winding up of the
affairs of the Corporation for purposes of this Section 4(a).
b. Adjustments. The liquidation preference provided for herein with
respect to the Series A Preferred Stock shall be equitably adjusted to
reflect any stock dividend, stock distribution, stock split or reverse
stock split, combination of shares, subdivision of shares or
reclassification of shares with respect to the Series A Preferred
Stock.
5. Optional Conversion Rights. The Series A Preferred Stock shall be
convertible as follows:
a. Optional Conversion. Subject to and upon compliance with the
provisions of this Section 5, the holder of any shares of Series A
Preferred Stock shall have the right at such holder's option (an
"Optional Conversion"), at any time or from time to time, and without
the payment of any additional consideration therefor, to convert any of
such shares of Series A Preferred Stock into fully paid and
nonassessable shares of Common Stock at the ratio of one share of
Series A Preferred Stock for two shares of the Common Stock of the
Corporation ("Optional Conversion Price"). In case the Corporation
shall (i) declare a dividend or make a distribution on its outstanding
shares of Common Stock or (ii) subdivide or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Optional
Conversion Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying such conversion price by a
fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. The number and kind of
securities shall also be proportionately adjusted. Such adjustment
shall be made successively whenever any event listed above shall occur.
b. Costs. The Corporation shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of
shares of Common Stock upon conversion of any shares of Series A
Preferred Stock; provided that the Corporation shall not be required to
pay any taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the shares of Series A Preferred
Stock in respect of which such shares are being issued.
c. Dividends Upon Conversion. In connection with any conversion of
shares of Series A Preferred Stock, the Corporation shall pay accrued
and unpaid dividends thereon in accordance with the provisions of
Section 6.
6. Dividends.
a. Dividends.
(i) Subject to the rights of the holders of any other series
of Preferred Stock ranking senior to or on a parity with the
Series A Preferred Stock with respect to dividends and any
other class or series of capital stock of the Corporation
ranking senior to or on a parity with the Series A Preferred
Stock with respect to dividends, other than the Common Stock,
the holders of the Series A Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors,
cumulative dividends per share of Series A Preferred Stock at
a rate per annum as determined by the Board of Directors
during the period commencing after the date of original
issuance of any shares of Series A Preferred Stock until
converted pursuant to Section 5 above; provided, however, in
the event of an Optional Conversion, all accumulated dividends
will automatically be eliminated and no such dividends will be
due or payable to holders of Series A Preferred Stock.
(ii) Dividends on the Series A Preferred Stock will accrue on
each December 15, March 15, June 15, and September 15,
occurring after the date of original issuance, provided that
the Corporation shall have the option to pay dividends when
and as declared by the Board of Directors of the Corporation.
The party that holds the Preferred Stock on an applicable
record date for any dividend payment will be entitled to
receive such dividend payment and any other accrued and unpaid
dividends which accrued prior to such dividend payment date,
without regard to any sale or disposition of such shares of
Series A Preferred Stock subsequent to the applicable record
date but prior to the applicable dividend payment date.
(iii) The Corporation shall pay the dividends on the Series A
Preferred Stock described in Section 6(a)(i), at the
Corporation's option and in its sole discretion, out of funds
legally available therefor (A) in cash, (B) in shares of
Common Stock, such that the number of shares of Common Stock
to be distributed as a dividend to each holder of Series A
Preferred Stock shall be equal to the cash amount of such
dividend payable to such holder on such dividend payment date
divided by the average quote per share of Common Stock
reported by OTC Bulletin Board or any other stock exchange on
which the Common Stock is traded, as determined by the Company
(the "Per Share Market Value") for the fifteen (15) trading
days immediately preceding such dividend payment date, or (C)
in any combination of cash and shares of Common Stock that the
Corporation may determine in its sole discretion, with the
number of shares of Common Stock to be distributed in
connection therewith to be calculated on the basis set forth
in Section 6(a)(iii)(B).
(iv) No fractional shares of Common Stock or scrip shall be
issued upon payment of any dividends in shares of Common
Stock. If more than one share of Series A Preferred Stock
shall be held by the same holder at the time of any dividend
payment date, the number of full shares of Common Stock
issuable upon payment of such dividends shall be computed on
the basis of the aggregate dividend amount that the
Corporation has determined to pay in Common Stock shares.
Instead of any fractional shares of Common Stock which would
otherwise be issuable upon payment of such dividends, the
Corporation shall pay out of funds legally available therefor
a cash adjustment in respect of such fractional interest,
rounded to the nearest one hundredth (1/100th) of a share, in
an amount equal to that fractional interest of the average Per
Share Market Value for the fifteen (15) trading days
immediately preceding such dividend payment date, rounded to
the nearest cent ($.01).
b. Allocation of Dividends. Dividends on the Series A Preferred Stock,
if paid, or if declared and set apart for payment, must be paid or
declared and set apart for payment on all outstanding shares of Series
A Preferred Stock contemporaneously. In the event dividends on the
Series A Preferred Stock and any other series of Preferred Stock
ranking on a parity therewith in respect thereto or any other class or
series of capital stock of the Corporation ranking on a parity
therewith in respect thereto are declared and paid in an amount less
than all accumulated and current dividends on all of such shares, the
total amount declared and paid shall be allocated among all of such
shares so that the per share dividend to be declared and paid on each
share is the same percentage of the sum of the accumulated dividends
for each such share. In the event dividends are declared and paid on
the Series A Preferred Stock in a combination of cash and shares of
Common Stock, the percentage of the dividend paid in cash and the
percentage of the dividend paid in stock must be the same for each
share of Series A Preferred Stock.
c. Dividend Priorities. The Corporation shall not declare or pay any
distributions to the holders of the Common Stock or any other class or
series of capital stock ranking junior to the Series A Preferred Stock
in respect of dividends during any period of time in which any shares
of Series A Preferred Stock are outstanding or in which any dividends
payable on any shares of Series A Preferred Stock have not been
declared and paid in full. In this Section 6(c), "distribution" means
the transfer of cash or property without consideration, whether by way
of dividend or otherwise (except a dividend solely in shares of Common
Stock), or the purchase or redemption by the Corporation of shares of
Common Stock or any other shares of capital stock of the Corporation
ranking junior to the Series A Preferred Stock in respect of dividends
for cash or property, but does not include the repurchase by the
Corporation of shares from an officer, director, employee or consultant
of the Corporation.
7. Reacquired Shares. Any shares of Series A Preferred Stock purchased,
converted or otherwise acquired by the Corporation in any manner
whatsoever shall not be reissued as part of such series and shall be
retired promptly after the acquisition thereof. All such shares shall
upon their retirement become authorized but unissued shares of
Preferred Stock.
SECOND: That said determination of the powers, designation, preferences
and the relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, relating to said series of
Preferred Stock, was duly made by the Board of Directors of the Corporation
pursuant to the provisions of the Certificate of Incorporation of the
Corporation, as amended, and in accordance with the provisions of Section 151 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by ▇▇▇▇▇▇▇ Sporns, its President, on the ___ day of ____________, _____.
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
By: ____________________________________
Name: ▇▇▇▇▇▇▇ Sporns
Title: President