STOCK PURCHASE AGREEMENT by and among MKI REYAZ, and HTL LOGISTICS LIMITED (a Cayman Island Corporation) and PACIFIC CMA INC. As of April 20, 2006
by
and among
A.
▇▇▇▇▇ ▇▇▇▇▇▇,
MKI
▇▇▇▇▇,
and
HTL
LOGISTICS LIMITED (a Cayman Island Corporation)
and
As
of April 20, 2006
STOCK
PURCHASE AGREEMENT, (the
“Agreement”)
dated
as of April 20, 2006, by and among, A. ▇▇▇▇▇ ▇▇▇▇▇▇ AND MKI ▇▇▇▇▇ (each a
“Seller,”
and
collectively, the “Sellers”),
HTL
Logistics Limited, a Cayman Island corporation (the “Company”) and
Pacific CMA, Inc., a Delaware corporation (the “Purchaser”).
W
I T N E S S E T H:
WHEREAS,
the
Company, which owns the capital stock of certain non-United States entities
in
the amounts set forth on Schedule
1 annexed
hereto (collectively, the “Subsidiaries”),
provides cargo services including the shipment of general cargo, perishables,
pharmaceuticals, garments, and information technology products (collectively,
the “Subsidiaries”);
and
WHEREAS,
Purchaser is
a
global, non-asset based logistics/freight forwarder providing supply chain
logistics services; and
WHEREAS,
Company
is authorized to issue a total of five hundred thousand (500,000) shares of
capital stock (the “Company
Shares”),
three
hundred thirty thousand (330,000) of which authorized Company Shares are issued
and outstanding, all of which are owned by the Sellers in the amounts set forth
on Schedule
2
annexed
hereto; and
WHEREAS,
Purchaser
and Sellers agree that Purchaser shall acquire (the “Acquisition”)
from
the Sellers (i) 231,000 Company Shares which Company Shares constitute seventy
(70%) percent of the issued and outstanding Company Shares (the “Acquisition
Shares”),
and
(ii) a three (3) year option, the form of which is annexed hereto as
Exhibit
A
(the
“Option”)
to
acquire the remaining 99,000 Company Shares (the “Option
Shares”),
all
on the terms set forth herein; and
WHEREAS,
Purchaser is a corporation subject to the reporting requirements of
Section 12(b) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”);
WHEREAS,
Purchaser’s shares of common stock (the “Common
Stock”)
are
listed for trading on the American Stock Exchange (the “AMEX”)
under
the symbol “▇▇▇;” and
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants, representations and
warranties contained herein, the parties hereto do hereby agree as
follows:
1. SALE
OF SECURITIES, ETC.
1.1 Certain
Definitions.
Certain
terms that are not otherwise defined in other sections of this Agreement are
defined in Section
12.1 hereafter.
1.2 Acquisition
Shares.
Subject
to the terms and conditions of this Agreement, at the Closing (as defined in
Section 2.1
below)
to be held pursuant to Section 2
below,
Sellers shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser shall purchase and acquire from Sellers, good and marketable title
to
the 231,000 Acquisition Shares, all free and clear of Liens of every kind and
character.
1.3 Purchase
Price.
In
consideration for Sellers’ sale of the 231,000 Acquisition Shares and issuance
of the Option to the Purchaser, the Purchaser shall, at the Closing, (i) pay
to
the Sellers an aggregate purchase price of One Million Three Hundred Thirty
Thousand Dollars (US$1,330,000), less all funds paid prior to such date (the
“Cash
Portion”),
and
(ii) issue to Sellers Two Million Eight Hundred Thousand (2,800,000) shares
of
restricted Common Stock (the “▇▇▇
Shares”).
The
amount of ▇▇▇ Shares and Cash Portion of the Purchase Price to be provided
to
each Seller shall be as set forth on Schedule
1.3
annexed
hereto.
1.4 Option.
At
Closing, the Sellers shall issue to the Purchaser the Option, pursuant to which
the Purchaser shall have the right for a period of three (3) years from the
Closing to purchase the 99,000 Option Shares (which 99,000 Option Shares shall
constitute all of issued and outstanding shares of Company Stock owned by the
Sellers following the Closing). The Option may be exercised at any time by
the
Purchaser by the Purchaser purchasing all of the Option Shares as provided
below. The exercise price of the Option Shares shall be (i) $570,000, and (ii)
such number of shares of Common Stock, as follows (collectively, the
“Exercise
Price”):
|
Time
following Closing when
|
||||
|
the
Option Exercised
|
Number
of Shares
|
|||
|
1.
|
0-12
months
|
1,320,000
shares of restricted Common Stock
|
||
|
2.
|
12
months - 24 months
|
1,440,000
shares of restricted Common Stock
|
||
|
3.
|
24
months - 36 months
|
(i)
1,800,000 shares of restricted Common Stock if the Net Profit is
between
$1,200,000 and $2,200,000; (ii) 2,000,000 shares of restricted Common
Stock if the Net Profit is between $2,200,000 and $2,400,000; or
(iii)
2,200,000 shares of restricted Common Stock if the Net Profit is
$2,400,000 or above.
|
||
1.5 Escrow
of Option Shares.
At
Closing, the Seller shall deliver to Gusrae, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ PLLC
(the “Escrow
Agent”),
the
99,000 Option Shares, which Option Shares shall be held in escrow by the Escrow
Agent pursuant to and on the terms and conditions set forth in an escrow
agreement, the form of which is annexed hereto as Exhibit
B
(the
“Escrow
Agreement”),
pending exercise of the Option and payment of the Exercise Price.
1.6 Incentive
Shares.
As
further consideration for the Sellers entering into this Agreement, for the
fiscal years ended December 31, 2006, 2007 and 2008, in the event the Net Profit
in any such year is greater than the $500,000 (if Net Profit is less than
$500,000, no Incentive Shares will be issued), then the Sellers shall be
entitled to receive restricted shares of Common Stock (the “Incentive
Shares”)
proportionate to their ownership of the Company (as set forth on Schedule
2
hereto),
the number of which Incentive Shares to be issued for such year shall equal
the
product obtained by multiplying (i) the Net Profit for such year by (ii) 0.45;
provided,
however,
that
notwithstanding anything to the contrary provided herein or elsewhere, in no
event shall the Sellers be entitled to receive in any year more than 750,000
Incentive Shares. Prior
to
any issuance of any Incentive Shares, if ever, the Sellers shall have no
beneficial or other right to any Incentive Shares including, but not limited
to,
no right to vote, encumber, sell, hypothecate and/or other transfer or claim
any
ownership rights to any Incentive Shares.
2
1.7 Employment
Agreement.
At the
Closing, ▇▇. ▇▇▇▇▇▇ shall enter into a three (3) year employment contract (the
“Farook
Agreement”)
in the
form annexed hereto as Exhibit
C,
pursuant to which he shall be a Director of the Purchaser and the Chief
Executive officer of the Company and receive a salary of US$8,195.00 per month
(subject to annualized 20% raises as provided therein).
1.8 Return
of Funds.
In the
event for any reason or no reason, the Acquisition does not occur by July 1,
2006 or earlier if a condition to closing set forth in Section
6
of this
Agreement does not occur, then the Sellers and/or the Company shall wire to
the
Purchaser all funds previously paid by the Purchaser to the Sellers and/or
the
Company no later than the date five (5) days following the date of written
notice by the Purchaser to the Sellers and/or the Company requesting such
repayment.
2. THE
CLOSING
2.1 Place
and Time.
The
closing of the Acquisition (the “Closing”)
shall
take place at the offices of Gusrae, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLLC, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m. on such date as the parties hereto
have satisfied all closing conditions as set forth in Section 7 and
Section
8
but in
no event later than July 1, 2006 (unless otherwise agreed to by the parties)
or
at such other place, date and time as the parties may agree in writing (the
“Closing
Date”).
2.2 Deliveries
by Sellers and Company.
At the
Closing, Sellers and Company shall deliver to Purchaser the
following:
(a) A
stock
certificate(s) with appropriately executed transfer documents for the transfer
of all of the Acquisition Shares by Seller to Purchaser;
(b) The
Option, executed by each of the Sellers;
(c) A
certificate issued by an authorized government official (an “Authorized
Official”)
of
each jurisdiction in which the Company and each Subsidiary is incorporated
as to
the good standing of Company and each Subsidiary in the appropriate
jurisdiction, as of a then recent date;
(d) The
Executed Escrow Agreement;
3
(e) A
legal
opinion by legal counsel opining to, among other items, the Company and each
Subsidiary is in good standing and all of its issued and outstanding capital
stock is owned, as set forth on Schedule
2.2
hereto;
(f) Consolidated
financial statements including footnotes thereto of the Company and each of
its
Subsidiaries that comply in all respects with U.S. GAAP and SEC Rule
S-X;
(g) Stock
certificates for the 99,000 Option Shares to be held by the Escrow Agent
pursuant to the Escrow Agreement pending exercise of the Option by the
Purchaser;
(h) A
true
and complete copy of the charter documents (as amended) of the Company and
each
Subsidiary, certified as of a then recent date, by an authorized
official;
(i) A
true
and correct copy of the By-Laws (as amended), as in effect as of the Closing
Date, certified by the Secretary of Company;
(j) Certificates
of an officer of the Company attesting to the compliance by each of the terms
and conditions of this Agreement to be complied with by the Sellers and Company,
respectively, and the accuracy of the Company’s representations and warranties
made in this Agreement;
(k) Resolutions
of the shareholders of the Company’s Board of Directors (or similar governing
authority) authorizing all transactions contemplated by this
Agreement;
(l) Resolutions
of the shareholders of the Company, to the extent that the approval of the
shareholders is required in order to consummate the transactions contemplated
by
this Agreement; and
(m) The
Stock
Certificates representing the Company ownership of the
Subsidiaries;
(n) The
resignations of all officers and directors of the Company and each Subsidiary,
(except ▇▇▇▇▇ ▇▇▇▇▇▇ who shall remain in his current position) and resolutions
of the Company and each Subsidiary appointing such officers and directors as
the
Purchaser shall so request; and
(o) All
other
documents, instruments and writings required (or reasonably requested by
Purchaser and/or its counsel).
4
2.3 Deliveries
by Purchaser.
At the
Closing, Purchaser shall deliver the following to Seller:
(a) Bank,
certified or cashier’s checks in the full amount of the Cash Portion of the
Purchase Price payable to the order of Seller, or a wire transfer of funds
to
Seller’s account, in the full amount of the Purchase Price, pursuant to wire
transfer instructions provided by Seller;
(b) A
certificate executed by an officer of Purchaser, attesting to the compliance
by
Purchaser of the terms and conditions of this Agreement to be complied with
by
Purchaser and the accuracy of the representations and warranties of Purchaser
made in this Agreement;
(c) A
restricted stock certificate for the 2,800,000 ▇▇▇ Shares;
(d) An
executed copy of the Escrow Agreement;
(e) An
executed copy of the Farook Agreement;
(f) Resolutions
of the Purchaser’s Board of Directors authorizing all transactions contemplated
by this Agreement; and
(g) All
other
documents, instruments and writings required (or reasonably requested by Sellers
and/or their counsel) by this Agreement to be delivered by Purchaser at the
Closing.
3.
REPRESENTATIONS
AND WARRANTIES OF SELLER AND COMPANY
The
Sellers and Company (which for purposes solely of this Section
3,
the
definition “Company”
shall
include the Company and all of its Subsidiaries, unless otherwise expressly
stated otherwise herein) jointly and severally represent, warrant and covenant
to and with Purchaser, both as of the date of this Agreement and as of the
Closing Date, as an inducement to Purchaser to enter into this Agreement and
to
consummate the transactions contemplated hereby as follows:
3.1 Authorization
of Agreement.
The
Sellers and Company are each fully able, authorized and empowered to execute
and
deliver this Agreement and each other agreement, document, instrument and
certificate to be executed by the Sellers and/or Company in connection with
the
consummation of the transactions contemplated by this Agreement, including,
but
not limited to, the Option and the Escrow Agreements (collectively, the
“Transaction
Documents”),
and
to perform each of their covenants and agreements hereunder and thereunder.
This
Agreement and the other Transaction Documents, upon execution and delivery
by
the Sellers and the Company (and assuming due execution and delivery hereof
and
thereof by the other parties hereto and thereto), will constitute valid and
legally binding obligations of each of Sellers and Company, enforceable against
each of them in accordance with their terms, except as such enforceability
may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or
similar laws from time to time in effect which affect creditors’ rights
generally and by legal and equitable limitations on the availability of specific
performance and other equitable remedies against Seller or Company under or
by
virtue of this Agreement and the other Transaction Documents. Upon delivery
of
the Option and the Acquisition Shares (and the Option Shares upon due exercise),
Purchaser will acquire good and marketable title to the Acquisition Shares,
the
Option and the Option Shares, free and clear of any Liens, claims or rights
of
another.
5
3.2 No
Breach.
Neither
the execution and delivery of this Agreement nor compliance by Sellers and
Company with any of the provisions hereof nor the consummation of the
transactions and actions contemplated hereby will:
(a) violate
or conflict with any provision of the Sellers’, the Company’s or any
Subsidiaries’ charter documents;
(b) violate
or, alone or with notice of the passage of time, result in the material breach
or termination of, or otherwise give any contracting party the right to
terminate, or declare a material default under, the terms of any material
agreement or other document or undertaking, oral or written to which the
Sellers, the Company and/or any Subsidiary is a party or by which any of their
properties or assets may be bound;
(c) result
in
the creation of any Lien upon any of the properties or assets of the Sellers,
the Company and/or any Subsidiary pursuant to the terms of any such material
agreement or instrument;
(d) violate
any statute, ordinance, regulation judgment, order, injunction, decree or award
of any court or Governmental Body against, or binding upon the Sellers, any
Subsidiaries or the Company or upon any of their properties or assets;
or
(e) violate
any law or regulation of any jurisdiction relating to Sellers, the Company
or
any of their securities, assets or properties.
3.3 Obligations;
Authorizations.
Neither
the Sellers, any Subsidiary nor the Company is (i) in violation of any
judgment, order, injunction, award or decree which is binding on it or any
of
its assets, properties, operations or business which violation, by itself or
in
conjunction with any other such violation, would materially and adversely affect
the consummation of the transactions contemplated hereby; or (ii) in
violation of any law or regulation or any other requirement of any Governmental
Body, court or arbitrator relating to it, or to its assets, operations or
businesses which violation, by itself or in conjunction with other violations
of
any other Law, would materially adversely affect the consummation of the
transactions contemplated hereby.
3.4 Consents.
All
requisite consents of third parties, including, but not limited to, governmental
or other regulatory agencies, federal, state or municipal, required to be
received by or on the part of Sellers, any Subsidiaries and/or the Company
for
the execution and delivery of this Agreement and the performance of their
obligations hereunder have been obtained and are in full force and effect.
Each
of Seller, the Subsidiaries and the Company has fully complied with all
conditions of any such consents.
6
3.5 Organization.
The
Company and each Subsidiary is a corporation duly organized, validly existing
and in good standing as set forth on Schedule
3.5
hereto
and each has full power and authority to own, lease and operate its properties
and to carry on its business as now being and as heretofore conducted. The
Company is duly qualified as a foreign corporation in the other jurisdictions
listed on Schedule
3.5.
Neither
the Company nor any Subsidiary is qualified or licensed to do business as a
foreign corporation in any other jurisdiction and neither the location of its
assets nor the nature of its business requires it to be so
qualified.
3.6 Capitalization.
As of
the date of this Agreement, the Company has 500,000 Company Shares authorized,
of which 330,000 are issued and outstanding, and all of which are owned by
Sellers as provided in Schedule
2
hereto,
and have been duly authorized, and are validly issued, fully paid and
non-assessable. The Company has no other securities issued and outstanding
other
than the Option Shares subject to the Option. In addition, (i) there is no
option, warrant, call, right, commitment or other agreement of any character
to
which the Company and the Sellers are a party; (ii) there are no securities
of Company outstanding which upon conversion or exchange would result in the
issuance of Company Shares; and (iii) there are no appreciation rights, or
other similar rights based on securities of Company which, in the case of
clauses (i), (ii) or (iii), would require the issuance, sale or
transfer of Company Stock or any other securities of Company, or other
securities convertible into, exchangeable for or evidencing the right to
subscribe for or purchase Company Shares or other equity securities of the
Company. Neither Seller nor Company is a party to, nor is either of them aware
of, any voting trust or other voting agreement with respect to any of the
securities of Company or of any agreement relating to the issuance, sale,
redemption, transfer or other disposition of the Company Stock on other
securities of Company.
3.7 Charter
Documents and By-Laws.
Annexed
hereto as Exhibit
D
is a
true and complete copy of the charter documents and By-Laws of Company as in
effect on the date hereof, certified by the Secretary of Company in the case
of
the By-Laws and by an Authorized Official in the case of the charter
documents.
3.8 Subsidiaries,
Joint Ventures, Partnerships, etc.
Other
than as set forth on Schedule
3.5,
the
Company does not have any subsidiaries. In addition, except as set forth on
Schedule 3.8,
the
Company is not a party to any joint venture, partnership or similar arrangement
in which Company participates.
3.9 Financial
Statements.
The
Sellers, the Company and the Subsidiaries have provided Purchaser with audited
financial statements of the Company and the Subsidiaries, annexed hereto as
Exhibit
E,
for the
years ended December 31, 2005, 2004, 2003, including all notes related thereto
(the “Financial
Statements”),
which
Financial Statements (i) are in accordance with the books and records of
Company, (ii) are correct and complete in all material respects,
(iii) present fairly the financial position and results of operations of
Company as of the respective dates indicated; (iv) have been prepared in
accordance with U.S GAAP and comply with SEC Rule S-X in all
respects.
3.10 No
Undisclosed Liabilities.
Except
as set forth on Schedule 3.10,
Company
does not have any liabilities (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or unasserted), except
(i) obligations under Contract described in Schedule 3.10,
(ii) liabilities provided for in the Financial Statements (other than
liabilities which, in accordance with U.S. GAAP, need not be disclosed), and
(iii) liabilities (other than accounts payable) incurred since December 31,
2005, in the ordinary course of business consistent with past practices, the
sum
of which is, in the aggregate, not greater than US$10,000.
7
3.11 Absence
of Certain Developments.
Except
as set forth on Schedule 3.11
and
since December 31, 2005:
(a) there
has
not been any Material Adverse Change nor has any event occurred which could
reasonably be expected to result in any Material Adverse Change;
(b) there
has
not been any declaration, setting a record date, setting aside or authorizing
the payment of, any distribution in respect of the Company Stock or any other
securities of Company, or any repurchase, redemption or other acquisition by
Company of any of the outstanding securities of, or other ownership interest
in,
Company;
(c) there
has
not been any transfer, issue, sale or other disposition by the Company of
Company Stock or other securities of Company or any grant of options, warrants,
calls or other rights to purchase or otherwise acquire Company Stock or such
other securities;
(d) Company
has not (i) awarded or paid any bonuses to Employees or Representatives of
Company; (ii) entered into any employment, deferred compensation, severance
or similar agreements (nor amended any such agreement); (iii) agreed to
increase the compensation payable or to become payable by Company to any of
Company’s Employees or Representatives; or (iv) agreed to increase the
coverage or benefits available under any severance pay, deferred compensation,
bonus or other incentive compensation, pension or other employee benefit plan,
payment or arrangement made to, for or with such Employees or Representatives,
other than in the ordinary course of business consistent with past practice
which increases in the aggregate do not exceed US$10,000 in annual cost to
Company and consistent with the operating expense budget of Company, and other
than as may have been required by law or insurers;
(e) Company
has not made any loans, advances (other than advances to officers and employees
of Company, which advances are made in the ordinary course of business and
do
not exceed per individual the reasonable anticipated expenses for legitimate
business purposes), or capital contributions to, or investments in, any Person
or paid any fees or expenses to any Affiliate of the Company;
(f) Company
has not transferred or granted any rights under any Contracts, leases, licenses,
agreements or Intellectual Property (defined hereafter) used by Company in
its
business;
(g) there
has
not been any damage, destruction or loss, whether or not covered by insurance,
with respect to the property or assets of Company;
(h) Company
has not mortgaged, pledged or subjected to any Lien any of its assets, or
acquired any assets or sold, assigned, transferred, conveyed, leased or
otherwise disposed of any assets of Company except for assets acquired or sold,
assigned, transferred, conveyed, leased or otherwise disposed of in the ordinary
course of business;
8
(i) Company
has not canceled or compromised any debt or claim, or amended, canceled,
terminated, relinquished, waived or released any Contract or right, except
in
the ordinary course of business consistent with past practice and which,
individually or in the aggregate, would not be material to Company;
(j) Company
has not made any binding commitment to make any capital expenditures or capital
additions or betterments;
(k) Company
has not incurred any debts, obligations or liabilities, whether due or to become
due, except current liabilities incurred in the ordinary course of business,
none of which current liabilities (individually or in the aggregate) could
result in a Material Adverse Change;
(l) Company
has not entered into any transaction other than in the ordinary course of
business except for this Agreement;
(m) Company
has not encountered any labor difficulties or labor union organizing
activities;
(n) Company
has not made any change in the accounting principles, methods or practices
followed by it or depreciation or amortization policies or rates theretofore
adopted;
(o) Company
has not disclosed to any Person any material trade secrets except for
disclosures made to Persons subject to valid and enforceable confidentiality
agreements;
(p) Company
has not suffered or experienced any material change in the relationship or
course of dealings between the Company and any of its suppliers or customers
which supply goods or services to Company or purchase goods or services from
Company; and
(q) Company
has not made any payment to, or received any payment from, or made or received
any investment in, or entered into any transaction or series of related
transactions (including without limitation, the purchase, sale, exchange or
lease of assets, property or services, or the making of a loan or guarantee)
with any Affiliate (each, an “Affiliate
Transaction”).
3.12 Taxes.
Except
as set forth on Schedule
3.12,
Company
has filed all Tax returns (including statements of estimated Taxes owed) and
reports required to be filed within the applicable periods (subject to
extensions) for such filings and has paid all Taxes required to be paid. Such
Tax returns and reports are true and correct in all material respects. No
deficiencies for any Tax are currently assessed against Company, and, no Tax
returns of Company have ever been audited by a Governmental Body, and, to the
knowledge of Seller and Company, there is no such audit pending or contemplated.
There is no Tax Lien, whether imposed by any international, national, state
or
local taxing authority, outstanding against the assets, properties or business
of Company other than Liens for Taxes which are not yet due. Company has not
executed any waiver of the statute of limitations on the assessment or
collection of any Tax or governmental charge. Company has properly charged,
collected and paid all applicable stamp, sales, use and other similar Taxes
on
or before the Closing Date.
9
3.13 Real
Property.
(a) Schedule 3.13
sets
forth a complete list of all real property and interests in real property leased
by Company (each, a “Real
Property Lease,”
and
collectively, the “Real
Property Leases”)
as
lessee or lessor. Company has good, legal and marketable title to the leasehold
estates in all Real Property Leases in each case free and clear of all Liens.
Company does not have any reason to believe that such title would not be
insurable subject to customary exceptions.
(b) Each
of
the Real Property Leases is valid and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Real Property Lease by Company or, to the knowledge of the
Seller and/or Company, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute
a
default thereunder.
(c) No
previous or current party to any Real Property Lease has given notice of or
made
a claim with respect to any breach or default thereunder. With respect to those
Real Property Leases that were assigned or subleased to Company by a third
party, all necessary consents to such assignments or subleases have been
obtained.
3.14 Tangible
Personal Property; Assets.
Except
as set forth on Schedule 3.14,
Company
has good, legal and marketable title to or valid leasehold interests in, all
of
its personal property and assets. The personal property owned by Company are
held in each case free and clear of all Liens, other than Permitted Liens.
With
respect to the personal property and assets that Company leases, the lessee
thereunder is in compliance with such leases except for such noncompliance
as
would not have a Material Adverse Effect and the lessee holds a valid leasehold
interest free and clear of any Liens, other than Permitted Liens. All material
items of personal property and assets owned or leased by Company are in good
operating condition, normal wear and tear excepted.
3.15 Intellectual
Property.
Except
as set forth in the on Schedule 3.15,
Company
owns or possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, trade names, copyrights, manufacturing processes, software,
formulae, trade secrets and know how (collectively, the “Intellectual
Property”)
necessary to the conduct of its business as conducted. Schedule 3.15
sets
forth a correct and complete list of all of the registered Intellectual Property
of Company. No claim is pending or, to the knowledge of Seller and/or Company,
threatened to the effect that the operations of Company infringe upon or
conflict with the asserted rights of any other Person under any Intellectual
Property, and neither Seller nor Company knows of any basis for any such claim
(whether or not pending or threatened). No claim is pending or, to the knowledge
of Seller and/or Company, threatened to the effect that any such Intellectual
Property owned or licensed by Company, or which Company otherwise has the right
to use, is invalid or unenforceable by Company, and neither Seller nor Company
knows of any basis for any such claim (whether or not pending or threatened).
Company has not granted or assigned to any other Person any right to provide
the
services or proposed services of Company.
10
3.16 Material
Contracts.
(a) Except
as
set forth on Schedule 3.16,
neither
Company nor any of its properties or assets is a party to or bound by any
(i) Contract not made in the ordinary course of business, or involving a
commitment or payment by Company in excess of US$25,000 or, in Sellers’ and/or
Company’s belief, otherwise material to the business of Company;
(ii) Contract among members or granting a right of first refusal or for a
partnership or a joint venture or for the acquisition, sale or lease of any
assets or share capital of Company or any other Person or involving a sharing
of
profits; (iii) mortgage, pledge, conditional sales contract, security
agreement, factoring agreement or other similar Contract with respect to any
real or tangible personal property of Company; (iv) loan agreement, credit
agreement, promissory note, guarantee, subordination agreement, letter of credit
or any other similar type of Contract, (v) Contract with any Governmental
Body outside the ordinary course of business, (vi) Contract with respect to
the discharge, storage or removal of hazardous materials or (vii) binding
commitment or agreement to enter into any of the foregoing.
(b) (i) Each
of
the Contracts described on Schedule 3.16
is valid
and enforceable against Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any such Contract by Company or, to the knowledge of Seller and/or
Company, by any other party thereto, which is likely to have a Material Adverse
Effect, and no event has occurred that with the lapse of time or the giving
of
notice or both would constitute a default by Company thereunder which is likely
to have a Material Adverse Effect.
(ii) No
previous or current party to any Contract has given written notice to Company
or
Seller, or made a claim with respect to any breach or default thereunder and
neither Seller nor Company has any knowledge of any notice of or claim with
respect to any such breach or default.
(c) With
respect to the Contracts described on Schedule 3.16
that
were assigned to Company by a third party, all necessary consents to such
assignment have been obtained.
3.17 Employee
Benefits.
Except
as set forth on Schedule 3.17,
Company
does not have in effect any employment agreements, consulting agreements,
deferred compensation, pension or retirement agreements or arrangements, bonus,
incentive or profit-sharing plans or arrangements, or labor or collective
bargaining agreements, written or oral. Company is in compliance in all material
respects with all applicable Laws relating to labor, employment, fair employment
practices, terms and conditions of employment, and wages and hours.
11
3.18 Employees.
(a) To
the
knowledge of Seller, the Company, and/or any Subsidiary, no Key Employee and
no
group of Employees or independent contractors of Company has any plans to
terminate his, her or its employment or relationship as an Employee or
independent contractor with Company, except for those Employees requested to
resign by the Purchaser.
(b) Schedule 3.18
sets
forth a true and complete list of (i) each Employee of the Company and/or
any Subsidiary whose current annual compensation is US$25,000 or more, together
with such person’s job title and amounts and forms of compensation and fringe
and severance benefits and (ii) each consultant, contractor or
subcontractor equivalent of Company and/or any Subsidiary whose annual
compensation payable by Company and/or any Subsidiary is US$10,000 or more,
together with such person’s amounts and forms of compensation.
(c) To
the
best of Seller’s and Company’s knowledge, no Key Employee or any other Employee
of Company is a party to or is otherwise bound by any agreement or arrangement
(including, without limitation, confidentiality agreements, non-competition
agreements, licenses, covenants, or commitments of any nature), or subject
to
any judgment, decree, or Order of any court or Governmental Body, (i) that
would conflict with such Employee’s obligation diligently to promote and further
the interest of Company or (ii) that would conflict with Company’s business
as now conducted or as proposed to be conducted.
(d) Schedule 3.18
sets
forth a list of each of the Key Employees of Company who have entered into
a
confidentiality agreement with Company.
3.19 Litigation.
There
are no Legal Proceedings pending or, to the knowledge of Seller and/or Company,
threatened that question the validity of this Agreement or any of the other
Transaction Documents or any action taken or to be taken by Company in
connection with the consummation of the transactions contemplated hereby or
thereby. Except as set forth on Schedule 3.19,
there
are no Legal Proceedings pending or, to the knowledge of Seller and/or Company,
threatened against or affecting Company or any of its properties or assets,
and
there is no reasonable basis for any such Legal Proceeding. There is no
outstanding or, to the knowledge of Seller and/or Company, threatened Order
of
any Governmental Body against, in respect of, or naming Company, or in respect
of any of its properties or assets or against Company.
3.20 Compliance
with Laws; Permits.
(a) Company
is and at all times has been in compliance in all material respects with all
material Laws and material Orders promulgated by any Governmental Body
applicable to Company, or to the conduct of the business or operations of
Company, or the use of any of its properties (including any leased properties)
and assets. Company has not received any notices of violation or alleged
violation of any such Law or Order by any Governmental Body.
(b) Company
has all Permits necessary for the conduct of its business where the failure
to
have such Permits could have a Material Adverse Effect. In addition, (i) Company
has complied in all material respects with all conditions of such Permits
applicable to it; (ii) no default or violation, or event that with the lapse
of
time or giving of notice or both would become a default or violation which
could
have a Material Adverse Effect, has occurred in the due observance of any such
Permit; (iii) all such Permits are in full force and effect without further
consent or approval of any Person; and (iv) none of Seller or Company has
received any notice from any source to the effect that there is lacking any
such
material Permit required in connection with the current operations of
Company.
12
3.21 Environmental
and Safety Laws.
Company
is not in violation of any applicable Laws relating to the environment or
occupational health and safety where the failure to so comply could have a
Material Adverse Effect and no material expenditures are or will be required
in
order to comply with any such existing Laws.
3.22 Investment
Company Act.
Company
is not, nor is it directly or indirectly controlled by or acting on behalf
of,
any Person that is an investment company within the meaning of the Investment
Company Act of 1940, as amended.
3.23 Affiliate
Transactions.
Schedule 3.23
sets
forth each Affiliate Transaction of Company, including the parties, material
terms (including amounts due from Company or owed to the Company), restrictions
and obligations of Company in connection with each such Affiliate Transaction.
Each such Affiliate Transaction is on an arm’s-length basis and on terms no less
favorable to Company than could be obtained from non-related
parties.
3.24 Insurance.
There
is in full force and effect one or more policies of insurance issued by insurers
of recognized responsibility, insuring Company and its properties, business
and
projects against such losses and risks, and in such amounts, as are customary
in
the case of businesses of established reputation engaged in the same or similar
business and similarly situated. Company has not been refused any insurance
coverage sought or applied for, and Company has no reason to believe that it
will be unable to renew its existing insurance coverage as and when the same
shall expire upon terms at least as favorable as those presently in effect,
other than possible increases in premiums that do not result from any act or
omission of Company. There are no claims currently pending by Company under
any
insurance policy. Except as disclosed on Schedule 3.24,
Company
is not in default in any material respect with respect to any provision
contained in any insurance policy maintained by Company, and has not failed
to
give any notice or present any presently existing claims under any insurance
policy in due and timely fashion.
3.25 Customers
and Suppliers.
Schedule 3.25
sets
forth a list of the ten (10) largest customers and the ten (10) largest
suppliers of Company and the U.S. dollar amount of gross profit of sales for
each such customer and total billing of purchases for each such supplier for
the
year ended December 31, 2005. There exists no actual or, to the knowledge of
Seller and/or Company, threatened termination or cancellation of the business
conducted by Company with any customer, supplier or group of customers or group
of suppliers set forth on Schedule 3.25.
3.26 No
Broker, etc.
Except
as set forth in Schedule 3.26,
no
agent, broker, investment banker, finder, financial advisor or other Person
is
or will be entitled to any broker’s or finder’s fee or any other commission or
similar fee from Seller or Company, directly or indirectly, in connection with
the transactions contemplated by this Agreement or any other Transaction
Document and no Person is entitled to any fee or commission or like payment
from
Seller or Company in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of the Seller or
Company.
13
3.27 Investment
Intent.
The
Sellers and the Company each are aware that the ▇▇▇ Shares are not (and the
Incentive Shares when issued will not be) registered under the United States
Securities Act of 1933, as amended (the “Securities
Act”),
or
under the Laws of any state or other jurisdiction. The
▇▇▇
Shares are (and the Incentive Shares will be upon issuance) subject
to restrictions on transferability and resale and may not be transferred or
resold except as permitted under said Securities Act and such laws pursuant
to
registration or exemption therefrom.
The
Sellers and the Company are acquiring the ▇▇▇ Shares (and the Incentive Shares)
for their own accounts and not with a view to their distribution within the
meaning of the Securities Act.
3.28 Accredited
Investor.
The
Sellers
and the Company
each are
an “accredited investor” as that term is defined in Regulation D under the
Securities Act.
3.29 Accurate
Information.
The
Sellers
and the Company
represents to the Purchaser that any information which the Sellers
and/or the Company
has
heretofore furnished or are furnishing herewith to the Purchaser is complete
and
accurate and may be relied upon by the Purchaser. The Sellers
and the Company
further
represent and warrant that they will notify and supply corrective information
to
the Purchaser immediately upon the occurrence of any change
therein.
3.30 Requested
Documents.
The
Sellers
and the Company, their
attorneys, accountants, representatives and tax advisors (collectively,
“Advisors”),
have
reviewed all Transaction Documents in detail, as well as all filings made by
the
Purchaser with the Securities and Exchange Commission (the “SEC
Filings”).
The
Sellers, the Company
and
their Advisors have carefully reviewed all such documents and understand
completely the information contained therein. In effectuating the Acquisition,
the Sellers, the Company and the Advisors have relied upon the Transaction
Documents and the SEC Filings.
3.31 Questions
of Purchaser.
The
Sellers,
the Company
and/or
its Advisors, if any, have had a reasonable opportunity to ask questions of
and
receive answers from a person or persons acting on behalf of the Purchaser
concerning the Agreement and the business, financial condition, results of
operations and prospects of the Purchaser, and all such questions have been
answered by the Purchaser to the full satisfaction of the Sellers,
the Company
and its
Advisors, if any.
3.32 Knowledge.
The
Sellers
and the Company,
either
alone or together with its Advisors, if any, have such knowledge and experience
in financial, tax, and business matters, and, in particular, investments in
securities, so as to enable them to utilize the information made available
to
them in connection with this Agreement to evaluate the merits and risks of
such
an investment and to make an informed investment decision with respect
thereto.
3.33 Satisfaction
of Information.
The
Sellers
and the Company
are
satisfied that they has received adequate information with respect to all
matters which it or its Advisors, if any, consider material to its decision
to
entering into this Agreement.
14
3.34 Condition
of Properties.
All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by Company (i) are in good operating condition and repair
(reasonable wear and tear excepted): (ii) are reasonably fit and usable for
the
purposes for which they are being used; (iii) are adequate and sufficient for
the Company’s business; and (iv) conform in all material respects with all
applicable Laws.
3.35 Pending
Changes.
To the
knowledge of Seller and/or Company, there is no pending or threatened change
in
any Law which materially affects or could materially affect Company or the
business, assets, liabilities, prospects, properties, results of operations
or
condition (financial or otherwise) of Company.
3.36 Books
and Records.
The
books of account, ledgers, order books, records and documents of Company
accurately and completely reflect all material information relating to the
business of Company, the location and collection of its assets, and the nature
of all transactions giving rise to the obligations or accounts receivable of
Company.
3.37 Disclosure;
Survival.
All
representations and warranties of Sellers and Company set forth in this
Agreement or in any of the other Transaction Documents or in any writing or
certificate delivered in connection with this Agreement, or any of the other
Transaction Documents, shall survive the execution and delivery of this
Agreement or the applicable other Transaction Document, as the case may be,
and
the consummation of the transactions contemplated hereby or thereby, for a
period commencing on the date hereof and reviewing two (2) years from the later
of the date the Option is exercised or expires, unless otherwise specifically
provided in this Agreement or such other Transaction Document (the “Survival
Period”),
and
shall not be affected by any examination made for or on behalf of Purchaser,
the
knowledge of Purchaser, or the acceptance by Purchaser of any certificate or
opinion.
4. REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to Company, both as of the date of this Agreement and
as
of the Closing Date as an inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, as follows:
4.1 Authorization
of Agreement.
Purchaser is fully able, authorized and empowered to execute and deliver this
Agreement and the other Transaction Documents, and to perform its obligations
hereunder and thereunder. This Agreement and the other Transaction Documents,
upon execution and delivery by Purchaser (and assuming due execution and
delivery hereof and thereof by the other parties hereto and thereto), will
constitute the legal, valid and binding obligations of Purchaser, enforceable
against it in accordance with their terms, except as such enforceability may
be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect which affect creditors’ rights
generally and by legal and equitable limitations on the availability of specific
performance and other equitable remedies against Purchaser under or by virtue
of
this Agreement and the other Transaction Documents.
4.2 Organization
and Good Standing.
Purchaser is duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to
own,
lease and operate its properties and assets and to carry on its business as
now
conducted.
15
4.3 Available
Funds.
Purchaser has readily available to it committed funds sufficient to pay
the
Purchase Price, as provided
in Section
1.3
hereof,
on
a
timely basis.
4.4 Investment
Intent.
Purchaser is aware that the Option, the Acquisition Shares and the Option Shares
are not registered under the United States Securities Act of 1933, as amended
(the “Securities
Act”),
or
under the Laws of any state or other jurisdiction. Purchaser is acquiring the
Acquisition Shares for its own account and not with a view to their distribution
within the meaning of the Securities Act.
4.5 Disclosure;
Survival.
All
representations and warranties of Purchaser set forth in this Agreement or
in
any of the other Transaction Documents or in any writing or certificate
delivered in connection with this Agreement, or any of the other Transaction
Documents, shall survive the execution and delivery of this Agreement or the
applicable other Transaction Document, as the case may be, and the consummation
of the transactions contemplated hereby or thereby, for one (1) year from the
date hereof and shall not be affected by any examination made for or on behalf
of Seller, the knowledge of Seller, or the acceptance by Seller of any
certificate or opinion.
5. PRE-CLOSING
COVENANTS AND AGREEMENTS OF THE PARTIES
The
Sellers and the Company, on the one hand, and Purchaser, on the other hand,
hereby covenant and agree that, from the date hereof and until the Closing
Date:
5.1 Access.
Company
shall afford to the officers, attorneys, accountants and other authorized
representatives of Purchaser free and full access, during regular business
hours
and upon reasonable notice, to the Company’s and the Subsidiaries’ books,
records, personnel and properties (including, without limitation, the work
papers prepared by its auditors) so that Purchaser may have full opportunity
to
make such review, examination and investigation as it may desire of Company’s
and the Subsidiaries’ business and affairs. The Company and its Subsidiaries
will cause its employees, accountants and attorneys to cooperate fully with
said
review, examination and investigation and to make full disclosure to Purchaser
of all material facts affecting Company’s and the Subsidiaries’ financial
conditions and business operations.
5.2 Conduct
of Business.
The
Company and the Subsidiaries shall conduct their business only in the ordinary
and usual course.
5.3 Liabilities.
Neither
the Company nor any Subsidiary shall not incur any obligation or liability,
absolute and continent, except only in the ordinary and usual course of its
business.
5.4 SEC
Filings Relating to this Agreement.
Purchaser shall file with the United States Securities and Exchange Commission
(“SEC”)
all
required forms and disclosure items in a timely manner including, without
limitation a Current Report on Form 8-K, in the form of Exhibit
F
annexed
hereto (the “Form
8-K”),
disclosing Purchaser’s entering into this Agreement and the other Transaction
Documents, and which forms and disclosure items shall be approved by legal
counsel to the Purchaser prior to filing and/or disclosure.
16
5.5 Public
Announcements.
No
party hereunder shall, without the express prior written consent of the other
parties hereto make any announcement or otherwise disclose any information
regarding this Agreement and/or the transactions contemplated hereby other
than
as required by law or otherwise deemed advisable in counsel’s opinion to ensure
compliance with public disclosure requirements under the federal securities
laws; provided,
however,
that
the parties hereto agree that the Form 8-K shall be filed with the SEC by
Purchaser no later than four (4) business days following execution of this
Agreement.
5.6 Expenses.
Each of
the parties hereto agrees to bear its own expenses in connection with the
negotiation, preparation, execution and delivery of this Agreement, the other
Transaction Documents, and the consummation of the transactions contemplated
hereby.
5.7 Further
Assurances.
Each of
the parties shall execute such documents or other papers and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated in this Agreement.
5.8 Certain
Property.
Sellers
shall, in a manner mutually agreeable to the Sellers and the Purchaser prior
to
and/or after the Closing, transfer to Sellers the assets set forth on
Schedule
5.8
hereto
(the “Assets”).
5.9 Financial
Statements.
The
Sellers and the Company shall use their best efforts to complete the Financial
Statements and keep the Purchaser appraised of the status thereof.
6. CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF PURCHASER TO CLOSE
The
obligations of Purchaser to effectuate the Closing is subject to the
fulfillment, prior to the Closing Date, of each of the following conditions
(any
one or more of which may be waived by Purchaser unless such condition is a
requirement of law):
6.1 Representations
and Warranties.
All
representations and warranties of Sellers and Company contained in this
Agreement and in the other Transaction Documents shall be true and correct
in
all material respects as of the date hereof. Any changes in information set
forth in the exhibits and schedules hereto shall be set forth on amended
exhibits and schedules which shall be delivered to Purchaser at the Closing.
Except as set forth in such amended exhibits and schedules, all representations
and warranties of Sellers and Company contained in this Agreement and in any
other Transaction Document delivered pursuant hereto or in connection with
the
transactions contemplated hereby shall be true and correct in all material
respects as of the Closing Date.
6.2 Covenants.
Sellers
and Company shall have performed and complied in all material respects with
all
covenants and other agreements required by (or contained in) this Agreement
to
be performed or complied with or by each of them prior to or on the Closing
Date.
17
6.3 No
Actions.
No
action, suit, proceeding or investigation shall have been instituted against
Company, the Subsidiaries and/or the Sellers and be continuing before a court
or
before or by a Governmental Body, and be unresolved, to restrain or to prevent
or to obtain damages in respect of, the carrying out of the transactions
contemplated hereby or which might materially and adversely affect the rights
of
Purchaser to consummate the transactions contemplated hereby.
6.4 Approvals.
Sellers, the Subsidiaries and the Company shall have obtained all approvals
and
consents to consummate this Agreement and the transactions to be consummated
at
or immediately following the Closing, in accordance with all applicable
Laws.
6.5 Due
Diligence.
Purchaser and its legal counsel shall have completed to their sole satisfaction
their due diligence of the Company, the Subsidiaries and all other items it
deems necessary and/or advisable, and shall be satisfied with the results
thereof.
6.6 Closing
Documents.
Purchaser shall receive all of the documents (executed where applicable) set
forth in Section
2.2
of this
Agreement, which documents shall be in form and substance reasonably
satisfactory to the parties and their respective legal counsel.
6.7 Financing.
The
Purchaser shall have closed on its equity financing.
6.8 AMEX.
Legal
counsel for the Purchaser has determined that the Acquisition and the proposed
financing shall comply with, and shall not directly and/or indirectly violate
any AMEX rules.
6.9 Officers
and Directors.
All
officers and directors of the Company and each Subsidiary, except for ▇▇. ▇▇▇▇▇▇
who shall remain a director and officer of such entities, shall have resigned
and certain other persons, as selected by the Purchaser, shall be appointed
officers and directors of the Company and the Subsidiaries.
7. CONDITIONS
PRECEDENT TO THE OBLIGATION OF
SELLER CLOSE
The
obligations of Sellers and the Company to effectuate the Closing to the
Purchaser, is subject to the fulfillment, prior to the Closing Date, of each
of
the following conditions (any one or more of which may be waived by the Sellers
and the Company, unless such condition is a requirement of law).
7.1 Representations
and Warranties.
All
representations and warranties of Purchaser contained in this Agreement and
in
any of the other Transaction Documents shall be true and correct in all material
respects as of the date hereof. Any changes in information set forth in the
exhibits and schedules hereto shall be set forth on amended exhibits and
schedules which shall be delivered to Seller at the Closing. Except as set
forth
in such amended exhibits and schedules, all representations and warranties
of
Purchaser contained in this Agreement and in any other Transaction Document
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be true and correct in all material respects as of the Closing
Date.
18
7.2 Covenants.
Purchaser shall have performed and complied in all material respects with all
covenants and other agreements required by (or contained in) this Agreement
to
be performed or complied with by it prior to or on the Closing
Date.
7.3 No
Actions.
No
action, suit, proceeding or investigation shall have been instituted against
Purchaser, and be continuing before a court or before or by a Governmental
Body,
and be unresolved, to restrain or to prevent or to obtain damages in respect
of,
the carrying out of the transactions contemplated hereby, or which might
materially and adversely affect the rights of Seller to consummate the
transactions contemplated hereby.
7.4 Approvals.
Purchaser shall have obtained all required consents and approvals to this
Agreement and the transactions to be consummated at or immediately following
the
Closing, in accordance with all applicable Laws.
7.5 Guarantee/Liens.
▇▇.
▇▇▇▇▇▇ shall be released from all guarantees and/or liens on his assets
undertaken in connection with loans made to the Company and/or any Subsidiary
by
a commercial bank.
7.6 Closing
Documents.
The
Sellers shall receive the Purchase Price and all of the documents set forth
in
Section
2.3 of
this
Agreement, which documents shall be in form and substance reasonably
satisfactory to the parties and their respective legal counsel.
8. POST-CLOSING
COVENANTS
8.1 Certain
Assets.
Sellers
and Purchasers shall work together in good faith to transfer to the Sellers
the
Assets.
8.2 Registration
Rights.
If, on
the date twelve (12) months following the date of Closing, the Sellers shall
unanimously request in writing that the Purchaser register for resale the ▇▇▇
Shares, the Incentive Shares, the Purchaser shall register for resale under
the
Securities Act all such shares.
8.3 Financial
Statements.
The
Sellers and the Company shall use its best efforts to cause the Financial
Statements to be delivered to the Purchaser no later than sixty (60) days from
the Closing Date, if not delivered at the closing.
9. INDEMNIFICATION
BY SELLER
Seller
shall indemnify and hold Purchaser and its officers, directors, employees and
agents harmless from and against any loss, damage or expense (including
reasonable attorneys’ fees) caused by or arising out of any claim made against
the Purchaser:
(a) for
any
breach, in any material respect, or default in the performance by Company or
Seller of any covenant or agreement of either of them contained in this
Agreement or in any of the other Transaction Documents;
(b) for
any
breach, in any material respect, by Company and/or Seller of any of the
representations or warranties made by either of them in this Agreement, in
any
of the other Transaction Documents, or in any schedule, certificate or other
instrument delivered by or on behalf of the Company and/or Seller pursuant
hereto or thereto;
19
(c) for
any
broker’s or finder’s fee or any similar fee, charge or commission incurred by
Company and/or the Seller prior to or in connection with this Agreement, or
any
of the transactions contemplated hereby; and
(d) for
any
and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal and accounting fees) incident to any of
the
foregoing.
10. INDEMNIFICATION
BY PURCHASER
Purchaser
shall indemnify and hold Sellers and their officers, directors, employees and
agents harmless from and against any loss, damage or expense (including
reasonable attorneys’ fees) caused by or arising out of any claim made against
Purchaser:
(a) for
any
breach, in any material respect, or default in the performance by Purchaser
of
any covenant or agreement contained in this Agreement or in any of the other
Transaction Documents;
(b) for
any
breach, in any material respect, by Purchaser of any of the representations
or
warranties made it in this Agreement, in any of the other Transaction Documents,
or in any schedule, certificate or other instrument delivered by or on behalf
of
the Purchaser pursuant hereto or thereto;
(c) for
any
broker’s or finder’s fee or any similar fee, charge or commission incurred by
Purchaser prior to or in connection with this Agreement, or any of the
transactions contemplated hereby; and
(d) for
any
and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal and accounting fees) incident to any of
the
foregoing.
11. NOTICE
AND OPPORTUNITY TO DEFEND
Promptly
after the receipt by Purchaser or Sellers of notice of any action, proceeding,
claim or potential claim (any of which is hereinafter individually referred
to
as a “Circumstance”)
which
could give rise to a right to indemnification under this Agreement, such party
(the “Indemnified
Party”)
shall
give prompt written notice to the party or parties who may become obligated
to
provide indemnification hereunder (the “Indemnifying
Party”).
Such
notice shall specify in reasonable detail the basis and amount, if
ascertainable, of any claim that would be based upon the Circumstance. The
failure to give such notice promptly shall relieve the Indemnifying Party of
its
indemnification obligations under this Agreement, unless the Indemnified Party
establishes that the Indemnifying Party either had knowledge of the Circumstance
or was not prejudiced by the failure to give notice of the Circumstance. The
Indemnifying Party shall have the right, at its option, to compromise or defend
the claim, at its own expense and by its own counsel, and otherwise control
any
such matter involving the asserted liability of the Indemnified Party, provided
that any such compromise or control shall be subject to obtaining the prior
written consent of the Indemnified Party which shall not be unreasonably
withheld. An Indemnifying Party shall not be liable for any costs of settlement
incurred without the written consent of the Indemnifying Party. If any
Indemnifying Party undertakes to compromise or defend any asserted liability,
it
shall promptly notify the Indemnified Party of its intention to do so, and
the
Indemnified Party agrees to cooperate fully with the Indemnifying Party and
its
counsel in the compromise of or defense against any such asserted liability.
All
costs and expenses incurred in connection with such cooperation shall be borne
by the Indemnifying Party, provided such costs and expenses have been previously
approved by the Indemnifying Party. In any event, the Indemnified Party shall
have the right at its own expense to participate in the defense of an asserted
liability.
20
12.
MISCELLANEOUS
12.1 Certain
Definitions.
“Affiliate”
of
any
Person means any Person that directly or indirectly controls, or is under
control with, or is controlled by, such Person. As used in this definition,
“control” (including with its correlative meanings, “controlled by” and “under
control with”) shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
“Contract”
means
any contract, agreement, indenture, note, bond, loan, instrument, lease,
conditional sales contract, mortgage, license, franchise, insurance policy,
commitment or other arrangement or agreement, whether written or
oral.
“Employee”
means
any current employee, officer or director of Company.
“GAAP”
means
generally accepted accounting principles, as in effect in the United
States.
“Governmental
Body”
means
any government or governmental or regulatory body thereof, or political
subdivision thereof, whether federal, state, local or foreign, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or
private).
“Law”
means
any federal, state, local or foreign law (including law), statute, code,
ordinance, rule, regulation or other requirement or guideline.
“Legal
Proceeding”
means
any judicial, administrative or arbitral actions, suits, proceedings (public
or
private), claims or governmental proceedings.
“Lien”
means
any mortgage, pledge, security interest, encumbrance, lien or charge of any
kind, including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or
similar laws) of any jurisdiction and including any lien or charge arising
by
statute or other law.
21
“Material
Adverse Change”
means
any material adverse change in the business, assets, liabilities, prospects,
properties, results of operations or condition (financial or otherwise) of
Company, taken as a whole, but will not be deemed to include (i) any changes
resulting from general economic, regulatory or political conditions, (ii) acts
attributable to any omission or action by Purchaser or its Affiliates, or (iii)
circumstances that affect generally the industry in which Company
operates.
“Material
Adverse Effect”
means
any event, circumstance, condition, fact, effect, or other matter which has
had
or could reasonably be expected to have a material adverse effect (a) on
the business, assets, liabilities, properties, results of operations or
condition (financial or otherwise) of Company taken as a whole or (b) on
the ability of Company to perform on a timely basis any material obligation
under this Agreement or to consummate the transactions contemplated hereby,
but
will not be deemed to include (i) any effects resulting from general economic,
regulatory or political conditions, (ii) acts attributable to any omission
or
action by Purchaser or its Affiliates, or (iii) circumstances that affect
generally the industry in which Company operates.
“Net
Profit”
means
for any year, the audited, consolidated net profit, after taxes, of the Company
and the Subsidiaries for such year prepared in accordance with US GAAP and
Rule
S-X of the Securities Act.
“Order”
means
any order, injunction, judgment, decree, ruling, writ, assessment or arbitration
award.
“Permits”
means
any approvals, authorizations, consents, licenses, permits or certificates
by or
of any Governmental Body.
“Permitted
Liens”
shall
mean (i) Liens for ad valorem real or personal property taxes or
assessments not yet due and payable or being contested in good faith
(ii) Liens in respect of pledges or deposits under workers’ compensation
laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’,
and materialmen’s and similar liens, if the obligations secured by such Liens
are not then delinquent, (iii) Liens arising or resulting from any action taken
by Purchaser or its Affiliates (iv) easements, rights of way, restrictions
and
other similar Liens, which cannot be released by Seller without unreasonable
effort and expense, and that do not materially interfere with the ordinary
conduct of operations, any (v) any other Liens set forth on Schedule
12.1
annexed
hereto.
“Person”
means
any individual, corporation, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Body
or
other entity.
“Representatives”
of
a
Person means its officers, Employees, agents, legal advisors and
accountants.
22
“Taxes”
means
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs
duties, share capital, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value-added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
12.2 Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns. No
assignment of this Agreement or of any rights hereunder shall relieve the
assigning party of any of its obligations or liabilities hereunder
12.3 Notices.
All
notices or other communications required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given if delivered
by
hand, overnight courier, facsimile transmission or prepaid cable or telegram
and
confirmed in writing, or mailed first class, postage prepaid, by registered
or
certified mail, return receipt requested (mailed notices and notices sent by
facsimile transmission, cable or telegram shall be deemed to have been given
on
the date sent) as follows:
If
to
Sellers, as follows:
A.
▇▇▇▇▇
▇▇▇▇▇▇
c/o
HTL
Logistics Limited
95
Anada
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇, ▇▇▇ ▇▇▇▇▇
Fax
No.
▇▇▇▇-▇▇-▇▇▇▇▇▇▇
If
to
Company, as follows:
[TO
COME]
If
to the
Purchaser, as follows:
Pacific
CMA, Inc.
▇▇▇▇
▇
▇▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇.
▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇
Fax.
No.
▇▇▇-▇-▇▇▇-▇▇▇▇
With
a
copy to:
Gusrae,
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLLC
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax
No.
(▇▇▇) ▇▇▇-▇▇▇▇
23
or
in any
case to such other address or addresses as hereafter shall be furnished as
provided in this Section 12.3
by a
party hereto to the other parties hereto.
12.4 Waiver;
Remedies.
No
delay on the part of Sellers, Company, the Subsidiaries or the Purchaser in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either of Seller, Company, the
Subsidiaries or the Purchaser of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise of any other right, power or privilege hereunder.
The rights and remedies herein provided are cumulative and are not exclusive
of
any rights or remedies which the parties hereto may otherwise have at law or
in
equity.
12.5 Entire
Agreement.
This
Agreement, along with the other Transaction Documents, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings (in writing, oral or
otherwise) of the parties relating thereto.
12.6 Amendment.
No
party may assign its rights under this Agreement without the express prior
written consent of the other parties; provided, however, Purchaser may, upon
providing written notice to Seller and Company, assign its rights and
obligations hereunder to any Affiliate including, without limitation, any of
its
subsidiaries.
12.7 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original but all of which together shall constitute a single
instrument.
12.8 Governing
Law.
This
Agreement shall be governed by and construed exclusively in accordance with
the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby expressly and irrevocably agree
that any suit or proceeding arising directly and/or indirectly pursuant to,
arising out of or under this Agreement, shall be brought solely and exclusively
in a federal or state court located in the City, County and State of New York.
By its execution hereof, the parties hereby expressly covenant and irrevocably
submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect
as
if personally served upon them in New York City. The parties hereto expressly
and irrevocably waive any claim that any such jurisdiction is not a convenient
forum for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from
the
other party hereto of its reasonable counsel fees and disbursements in an amount
judicially determined.
12.9 Captions.
All
Section titles or captions contained in this Agreement, in any
schedule referred to herein or in any exhibit annexed hereto are for
convenience only, shall not be deemed a part of this Agreement and shall not
affect the meaning or interpretation of this Agreement.
24
12.10 Confidential
Information.
Each
party agrees that such party and its representatives will hold in strict
confidence all information and documents received from the other party and,
if
the transactions herein contemplated shall not be consummated, each party will
continue to hold such information and documents in strict confidence and will
return to such other party all such documents (including the documents annexed
to this Agreement) then in such receiving party’s possession without retaining
copies thereof, provided,
however,
that
each party’s obligations under this Section 12.10
to
maintain such confidentiality shall not apply to any information or documents
that are in the public domain at the time furnished by the other or that become
in the public domain thereafter through any means other than as a result of
any
act of the receiving party or of its agents, officers, directors or stockholders
which constitutes a breach of this Agreement, or that are required by applicable
law to be disclosed.
13. TERMINATION
AND WAIVER
13.1 Termination.
Notwithstanding anything herein or elsewhere to the contrary, this Agreement
may
be terminated and the transactions provided for herein abandoned at any time
prior to the Closing Date as follows:
(a) By
mutual
written consent of Sellers and Purchaser;
(b) By
Purchaser, upon five (5) days prior written notice to Sellers and Company,
if
Purchaser is not reasonably satisfied with its due diligence review of Company,
as provided in Section
6.5
hereof
or the proposed financing does not occur.
(c) By
Seller
or Purchaser on July 1, 2006, if the Closing does not occur on or prior to
that
date (unless extended by the parties or unless the failure to close is the
result of the actions of Seller or Purchaser).
13.2 Waiver.
Any
condition to the performance of any party hereto which legally may be waived
on
or prior to the Closing Date may be waived at any time by the party entitled
to
the benefit thereof by action taken or authorized by an instrument in writing
executed by the relevant party or parties. The failure of any party at any
time
or times to require performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce the same. No waiver
by
any party of the breach of any term, covenant, representation or warranty
contained in this Agreement as a condition to such party’s obligations hereunder
shall release or affect any liability resulting from such breach, and no waiver
of any nature, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any
such
condition or of any breach of any other term, covenant, representation or
warranty of this Agreement.
Remainder
of Page Intentionally Left Blank
25
IN
WITNESS WHEREOF,
the
parties have caused this Agreement to be duly executed and delivered on the
day
and year first above written.
|
HTL
LOGISTICS LIMITED
(a
Cayman Islands Corporation)
By: /s/
A. ▇▇▇▇▇
▇▇▇▇▇▇
Name:
A. ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
President/CEO
/s/
A. ▇▇▇▇▇
▇▇▇▇▇▇
A.
▇▇▇▇▇ ▇▇▇▇▇▇
/s/
MKI
▇▇▇▇▇
MKI
▇▇▇▇▇
PACIFIC
CMA, INC.
By: /s/
▇▇▇▇▇▇
▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇
Title:
Chairman/CEO
|
26
LIST
OF EXHIBITS
Exhibits
|
Exhibit
A
|
The
Option
|
|
Exhibit
B
|
Escrow
Agreement
|
|
Exhibit
C
|
Farook
Agreement
|
|
Exhibit
D
|
Charter
Documents and By-Laws
|
|
Exhibit
E
|
Audited
Financial Statements (with accompanying Notes)
|
|
Exhibit
F
|
SEC
Filings
|
LIST
OF SCHEDULES
|
1
|
Subsidiaries
of the Company
|
|
1.3
|
Acquisition
Consideration to be Received by Each Seller
|
|
2.
|
Stock
Ownership of the Company
|
|
2.2.
|
Legal
Opinion
|
|
3.5
|
Organization
Chart
|
|
3.10
|
Undisclosed
Liabilities
|
|
3.11
|
Certain
Developments
|
|
3.12
|
Taxes
|
|
3.13
|
Real
Property
|
|
3.14
|
Tangible
Personal Property; Assets
|
|
3.15
|
Intellectual
Property
|
|
3.16
|
Material
Contracts
|
|
3.17
|
Employee
Benefits
|
|
3.18
|
Confidentiality
Agreements for Key Employees
|
|
3.19
|
Litigation
|
|
3.23
|
Affiliate
Transactions
|
|
3.24
|
Insurance
|
|
3.25
|
Customers
and Suppliers
|
|
3.26
|
Broker’s
/ Finder’s / Commissions or other Fees
|
|
5.8
|
Certain
Property
|
EXHIBIT
A
The
Option
EXHIBIT
B
Escrow
Agreement
EXHIBIT
C
Farook
Agreement
EXHIBIT
D
Charter
Documents and By-Laws
EXHIBIT
E
Audited
Financial Statements (with accompanying Notes)
EXHIBIT
F
SEC
Filings