AGREEMENT AMONG For the Acquisition of 100% Shares of Octavian International Limited

 

1.	PacificNet Games International Corporation Limited

2.	Octavian International Limited

3.	Emperor Holdings Limited

4.	Ziria Enterprises Limited

5.	PacificNet Inc.

 

1.

Pacificnet Games International Corporation, a company existing under the laws of the British Virgin Islands whose principal executive office is situated at Floor 23rd, Tower A, TimeCourt, ▇▇.▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ (hereinafter referred to as the “Purchaser”), a wholly owned subsidiary of PacificNet Inc.

2.

Octavian International Limited (“Octavian”), a company incorporated in the United Kingdom, whose principal place of business is Octavian Europe (Head Office), Bury House, 1 –▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Tel: ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇ , Fax: ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇ , Web: ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (hereinafter referred to as the “Company”);

3.	Emperor Holdings Limited, a company incorporated in Cyprus, of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (hereinafter referred to as the “Holding Company”);

4.	Ziria Enterprises Limited a company incorporated in Cyprus whose office is at ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (hereinafter referred to as the “Seller” or “Warrantor”);

5.

PacificNet Inc. (“PACT”), a company incorporated under the laws of the State of Delaware in the United States of America whose principal executive office is situate at Floor 23rd, Tower A, TimeCourt, ▇▇.▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, the shares of which are listed on the NASDAQ stock exchange in the United States of America under the trading symbol of “PACT”.

 

1)	The Company is incorporated under the laws of United Kingdom and having Company No. 04185988, of 10 – ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Southend Road, Woodford Green, Essex AG8 8HD, United Kingdom.

2)	The Company has a paid-in capital of 2 shares representing the entire capital of the Company (the “Shares”), and is 100% owned by the Holding Company.

3)

The Company is engaged in the business of providing networked gaming solutions, serving casino, AWP (Amusements With Prizes), lotteries and emerging gaming markets worldwide including Europe, Latin America, UK, Italy, Germany, Russia, Ukraine, India, Columbia, Argentina, Brazil, (hereinafter referred to as the "Business");

4)	The Holding Company owns 100% of the Company. Seller owns 100% of the Holding Company. (set out in Schedule 1.)

5)

The Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, the existing 10,000ordinary shares of Holding Company (the “Sale Shares”); which in total represent 100% of the issued and outstanding shares of the Holding Company , all upon the terms and subject to the conditions set forth herein.

6)	The Purchaser requires the Warrantor to give such representations, warranties, covenants and undertakings as are set out herein as a condition to the Purchaser's entry into this Agreement.

1.	INTERPRETATION

1.1.

The Recitals and Schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement and any reference to this Agreement shall include the Recitals and Schedules.

1.2.

In this Agreement except where the context otherwise requires the following words and expressions shall have the following meanings:

1.3.

Words and phrases not otherwise defined in this Agreement, the definitions of which are contained or referred to in the Companies Ordinance of Hong Kong (Cap. 32), shall be construed as having the meanings thereby attributed to them.

1.4.

References in this Agreement to ordinances and to statutory provisions shall be construed as references to those ordinances or statutory provisions, respectively, as modified (on or before the date hereof) or re-enacted (whether before or after the date hereof) from time to time and to any orders, regulations, instruments or subordinate legislation made under the relevant ordinances or provisions thereof and shall include references to any repealed ordinance or provisions thereof which has been so re-enacted (with or without modifications).

1.5.

The headings are for convenience only and shall not affect the construction of this Agreement.

1.6.

All representations, undertakings, warranties, indemnities, covenants, agreements and obligations given or entered into by more than one person are given or entered into jointly and severally unless stated to be severally only.

1.7.

Except where the context otherwise requires words denoting the singular include the plural and vice versa; words denoting any one gender include all genders; words denoting persons include incorporations and firms and vice versa.

1.8.

Reference to clauses, sub-clauses, paragraphs and schedules are (unless the context requires otherwise) to clauses, sub-clauses, paragraphs and schedules of this Agreement.

1.9.

The expressions the “Holding Company”, the “Company”, the “Seller” and the “Purchaser” unless the context requires otherwise shall include their successors, personal representatives and permitted assigns.

1.10.

The schedules and appendices form part of this Agreement.

2.	SALE OF SHARES

2.1.

Subject to the terms of this Agreement, the Seller shall sell as registered owner of record and the Purchaser (relying on the representations, warranties, agreements, covenants, undertakings and indemnities hereinafter referred to) shall purchase the Sale Shares free from all options, liens, charges, pledges, claims, agreements, encumbrances, equities and other third party rights of any nature whatsoever and together with all rights of any nature whatsoever now attaching or accruing to it including all rights to any dividends or other distribution declared paid or made in respect of them after the date of this Agreement.

3.	CONSIDERATION

(a)

Within 30 days of the signing of this agreement, Purchaser shall deliver to the Escrow Agent (designated by the Purchaser) the Escrow Shares, to be held under the terms of an escrow agreement to be entered into with the Escrow Agent. The Share Release schedule for Stock Payment is illustrated in Table 1 in Clause 3.4 below.

(b)

In exchange, Seller will transfer to the Purchaser the Sale Shares at the Completion Date.

(a)

The Purchaser fails to receive any required regulatory approvals by the US SEC, NASDAQ, or fails to receive the approval of the Shareholders of PACT (if required) by the Completion Date or such other date as the parties hereto may agree in writing;

 

(b)

The conditions set out in Clause 4 shall not have been fulfilled or waived by the relevant party by the Completion Date or such other date as the parties hereto may agree in writing (provided that unless the Purchaser has notified the Seller in writing that it is not satisfied by 1 January 2008 condition 4.1(a) shall be deemed to have been fulfilled and unless the Seller has notified the Purchaser in writing that it is not satisfied by 1 January 2008 condition 4.4(a) shall be deemed to have been fulfilled); or

 

(c)

The transaction is not completed for any reason by June 30, 2008, the Escrow Agreement shall provide that the Escrow Shares shall be returned to Purchaser and this Agreement shall cease to have effect immediately after that time (but without prejudice to the parties accrued rights and liabilities under this Agreement at the time it ceases to have effect).

 

3.3.2

In the event that the VWAP of the PACT Shares is greater than $6.50 then the price of the stock from $6.50 and upwards will be offset by lowering the Earn-Out Amounts in 3.5.2 by the amount over $6.50 multiplied by the number of Escrow Shares issued pursuant to 3.4.1 Any such amounts shall be offset against the last Earn-Out Year first with any excess against the third Earn-Out Year, then against the second Earn-Out Year and lastly against the first Earn-Out Year.

3.3.3

In the event that the volume weighted average price of the PACT Shares daily in the period of seven days up to (but not including) the Completion Date falls below $5, the Seller shall have the option not to complete this Agreement in which event he shall notify the Purchaser in writing upon which the Escrow Shares shall be returned to Purchaser and this Agreement shall cease to have effect immediately (but without prejudice to the parties accrued rights and liabilities under this Agreement at the time it ceases to have effect).

(a)

Seller hereby agrees to allow the Purchaser to appoint the Escrow Agent upon the terms of an escrow agreement in the agreed terms to hold all the Escrow Shares to be issued in accordance with the Escrow Agreement and this Agreement on the Completion Date and Seller undertakes that it shall not either sell, transfer, charge, encumber, grant options over or otherwise dispose of any legal or beneficial interest in any of the Escrow Shares until such part of the Escrow Shares are released by the Escrow Agent to Seller in accordance with the following schedule.

 

(b)

Release of the Escrow Shares as provided below, assumes receipt by PACT of certification from its auditors that the auditor’s review relating to the Holding Company, the Company, and its business is acceptable and can be consolidated into PACT’s audited accounts, balance sheet and financial statements, in accordance with US GAAP. The Purchaser and PACT shall use their best endeavours to obtain such certification on or before the Completion Date, subject to the Seller and the Group providing assistance reasonably requested by the Purchaser and PACT for such purpose. In the event that the auditors do not give their certification, the Seller shall be entitled to appoint an independent auditor that is approved by the Purchaser (such approval not to be unreasonably withheld or delayed) to consider the position of the Purchaser's auditors and the decision of the independent auditor shall, save in the case of a manifest error, be binding on both parties and shall supercede the decision of the Purchaser's auditors.

 

 

3.4.3

If the Seller notifies the Purchaser that it disagrees with the auditor’s certification within 20 days of receipt, the Seller and the Purchaser shall use all reasonable endeavours to resolve the dispute within 20 days from notification. If the dispute is not resolved within that 20 day period, either the Seller or the Purchaser is entitled to appoint an independent accountant to review the Company Net Profit Calculation and the decision of the independent accountant shall, save in the case of manifest error, be binding on all parties.

 

(a)

In addition to payments in accordance with Clause 3.2., the Purchaser must pay to the Seller the Earn-Out Amount in respect of each of the Earn-Out Year determined in accordance with this Clause 3.5.

(b)

Subject to Clause 3.5.5, the amount payable in respect of each Earn-Out Year will be a proportion of the Earn-Out Amount in respect of the relevant Earn-Out Year.

(c)

The proportion of each Earn-Out Amount that is payable in respect of each Earn-Out will be determined in accordance with Clause 3.5.3.

(d)

Any amounts payable in accordance with this Clause 3.5 must be paid in accordance with Clause 3.5.6.

 

(a)

in respect of the first Earn-Out Year (2009) US$3,150,000;

(b)

in respect of the second Earn-Out Year (2010) US$4,200,000 plus any part of the Earn-Out Amount for the first Earn-Out Year that has not become payable in accordance with Clause 3.5.3(a)

(c)

in respect of the third Earn-Out Year (2011) US$5,250,000 plus any part of the Earn-Out Amount for the second Earn-Out Year that has not become payable in accordance with Clause 3.5.3(b) (including any amounts previously rolled over); and

(d)

in respect of the last Earn-Out Year (2012) US$6,300,000 plus any part of the Earn-Out Amount for the third Earn-Out Year that has not become payable in accordance with Clause 3.5.3(c) (including any amounts previously rolled over).

 

(a)

In respect of the first Earn-Out Year:

(i)

the performance target for the Company is Net Profit of US$3,150,000 ("Target 1");

(ii)

where the Company achieves 100% of Target 1, 100% of the Earn-Out Amount in clause 3.5.2(a) shall be due and payable to the Seller; and

(iii)

where the Company achieves less than 100% of Target 1, the percentage of the Earn-Out Amount payable shall be determined by dividing the Net Profit of the Company attributable to the first Earn-Out Year by Target 1 and multiplying by 100.

(b)

In respect of the second Earn-Out Year

(i)

the performance target for the Company is Net Profit of US$4,200,000 plus any part of Target 1 not achieved in the first Earn-Out year ("Target 2");

(ii)

where the Company achieves 100% of Target 2, 100% of the Earn-Out Amount in clause 3.5.2(b) shall be due and payable to the Seller; and

(iii)

where the Company achieves less than 100% of Target 2, the percentage of the Earn-Out Amount payable shall be determined by dividing the Net Profit of the Company attributable to the second Earn-Out Year (plus any part of the Net Profit of the Company attributable to the first Earn-Out Year over 100% of Target 1) by Target 2 and multiplying by 100 (provided always that the Seller shall in no circumstances be entitled to any payment over and above the Earn-Out Amount set out in clause 3.5.2(b)

 

(c)

In respect of the third Earn-Out Year:

(i)

the performance target for the Company is Net Profit of US$5,250,000 plus any part of Target 2 not achieved in the second Earn-Out Year ("Target 3");

(ii)

where the Company achieves 100% of Target 3, 100% of the Earn-Out Amount in clause 3.5.2(c) shall be due and payable to the Seller; and

(iii)

where the Company achieves less than 100% of Target 3, the percentage of the Earn-Out Amount payable shall be determined by dividing the Net Profit of the Company attributable to the third Earn-Out Year (plus any part of the Net Profit of the Company attributable to the first and second Earn-Out years over 100% of Target 2) by Target 3 and multiplying by 100 (provided always that the Seller shall, in no circumstances be entitled to any payment over and above the Earn-Out Amount set out in clause 3.5.2(c)

(d)

In respect of the fourth Earn-Out Year:

(i)

the performance target for the Company is Net Profit of US$6,300,000 plus any part of Target 3 not achieved in the third Earn-Out Year ("Target 4");

(ii)

where the Company achieves 100% of Target 4, 100% of the Earn-Out Amount in 3.5.2(d) shall be due and payable to the Seller; and

(ii)

where the Company achieves less than 100% of Target 4, the percentage of the Earn-Out Amount payable shall be determined by dividing the Net Profit of the Company attributable to the fourth Earn-Out Year (plus any part of the Net Profit of the Company attributable to the first, second and third Earn-Out Years over 100% of Target 3) by Target 4 and multiplying by 100 (provided always that the Seller shall, in no circumstances be entitled to any payment over and above the Earn-Out Amount set out in clause 3.5.2(d).

(a)

For the purpose of Clause 3.5.3

(i)

the Net Profit of the Company in respect of any Earn-Out Year is the consolidated Net Profit of the Company during the relevant Earn-Out Year as disclosed in the audited accounts of the Company for that Earn-Out Year to be prepared on the basis of the Company Net Profit Calculation and which the Purchaser must cause to be prepared by no later than 30 September in the year following the relevant Earn-Out Year as disclosed in the relevant audited financial statements (to be prepared in accordance with US GAAP); and in each case including Net Profit attributable to associates and joint ventures on the same basis as above but deducting all written off bad debts attributable to associates and joint ventures on the same basis as above.

(b)

If the Seller notifies the Purchaser that it disagrees with the Company Net Profit Calculation provided to it by the Seller within 20 days of receipt, the Seller and the Purchaser shall use all reasonable endeavours to resolve the dispute within 20 days of notification. If the dispute is not resolved within such 20 days, either the Seller or the Purchaser is entitled to appoint an independent accountant to review the Company Net Profit Calculation and the decision of the independent accountant shall, save in the case of manifest error, be binding on all parties.

 

(a)

The Purchaser must pay:

(i)

any Earn-Out Amount payable in respect of the first Earn-Out Year by the issue of cash consideration;

(ii)

any Earn-Out Amount payable in respect of the second Earn-Out Year by the issue of cash consideration;

(iii)

any Earn-Out Amount payable in respect of the third Earn-Out Year by the issue of cash consideration; and

(iv)

any Earn-Out Amount payable in respect of the last Earn-Out Year by the issue of cash consideration.

(b)

Subject only to Clause 3.5.6 (d), payments under this Clause 3.5.6 must be made no later than 30 September in the year following the relevant Earn-Out Year.

(c)

The Purchase Price is deemed to be reduced by any Earn-Out Amount which is not payable under this Agreement.

(d)

When an Earn-Out Amount is due and payable to the Seller:

(i)

the Purchaser shall procure that, to the extent lawful, the Company shall declare a dividend to the Purchaser each financial year provided always that the Seller has first consented to the payment of such dividend (such consent not to be unreasonably withheld or delayed);

(ii)

where an Earn-Out Amount is due and payable to the Seller, the Purchaser shall use any such dividend to make payment to the Seller of any amounts of the Earn-Out Amounts earned by the Seller, such payment being made by the payment date set out in clause 3.5.6 (b);

(iii)

in the event that:

1.

a dividend is not paid (due to it either being unlawful or the Seller withholding his consent to the payment); or

2.

a dividend is paid but is not sufficient to meet the full amount of the Earn-Out Amount, the Purchaser shall, subject only to the remainder of this sub clause (d) (iii), use its available cash (if any) to pay the Earn-Out Amount (or any shortfall). If the Purchaser does not, in the reasonable opinion of a majority of its board of directors, have any available cash, the payment of the Earn-Out Amount (or outstanding part thereof) shall be deferred until such time as:

 

3.

a dividend can be lawfully paid by the Company and/or the Seller consents to payment of the dividend; or

4.

the board of the Purchaser determines that it has available cash, at which time the Earn-Out Amount (or outstanding part thereof) shall be immediately paid to the Seller. The decision of the board of the Purchaser referred to in this paragraph must be reached on the basis of reasonable relevant considerations, such considerations to include the advice of ▇▇▇▇▇▇ (or any replacement auditors for the Purchaser and its group from time to time) and reasonable evidence of the same must be given to the Seller;

 

(iv)

payment of an Earn-Out Amount (an any part thereof) cannot be deferred for a period of more than 3 years from the date on which it is first due and payable to the Seller under clause 3.5.6 (b) (or would have been but for the application of this sub clause (d)) and at the expiry of such maximum period, the Earn-Out Amount (or any outstanding part thereof) shall become immediately due and payable.

(v)

in the event that payment of an Earn-Out Amount (or part thereof) is deferred for any reason, beyond the date on which it was payable under clause 3.5.6 (b), interest shall be paid by the Purchaser on that Earn-Out Amount (or the outstanding part thereof) at 3 Month LIBOR Rate at the time of deferral, such interest to be paid annually, or, if earlier, with payment of the Earn-Out Amount (or outstanding part thereof).

(a)

Any Claim against the Seller arising out of or in respect of this Agreement to which this Clause 3.5.7 applies, upon final adjudication or as agreed (Determination), will be satisfied as follows:

(i)

firstly, by reducing any prospective Earn-Out Amounts (which have not yet been earned) as follows:

(A)

by reducing the prospective Earn-Out Amount for the last Earn-Out Year (if any) by the lesser of the value of that prospective Earn-Out Amount and the amount of the Claim outstanding;

(B)

then by reducing the prospective Earn-Out Amount for the third Earn-Out Year (if any) by the lesser of the value of that prospective Earn-Out Amount and the amount of the Claim outstanding after reduction of the prospective Earn-Out Amount for the last Earn-Out Year in accordance with Clause 3.5.7(a)(i)(A);

(C)

then by reducing the prospective Earn-Out Amount for the second Earn-Out Year (if any) by the lesser of the value of that prospective Earn-Out Amount and the amount of the Claim outstanding after reduction of the prospective Earn-Out Amount for the third Earn-Out Year in accordance with Clause 3.5.7(a)(i)(B);

(D)

then by reducing the prospective Earn-Out Amount for the first Earn-Out Year (if any) by the lesser of the value of that prospective Earn-Out Amount and the amount of the Claim outstanding after reduction of the prospective Earn-Out Amount for the second Earn-Out Year in accordance with Clause 3.5.7(a)(i)(C) ;

 

(b)

In the event that the Claim has not been fully satisfied in accordance with Clause 3.5.7(a) the Seller must satisfy the balance of the Claim in Immediately Available Funds.

(a)

From the Completion Date until the end of the last Earn-Out Year, the Purchaser and PACT undertake to the Seller that they shall not, without the prior written consent of the Seller, make any changes to the business of the Company where such change is reasonably likely have a detrimentable impact on the ability of the Company to meet the targets set out in Clause 3.5.3 or do anything which is reasonably likely to prejudice the goodwill of the Company or its subsidiaries including but not limited to:

 

(i)

using or disclosing or divulging to any person other than to officers or employees of the Group and/or PACT and companies within the PACT group, companies whose province it is to know the same for the purposes of the Company carrying on the Business, any information relating to the Companies or the subsidiaries other than any information properly available to the public or disclosed or divulged pursuant to an order of a court of competent jurisdiction or as required pursuant to any applicable law or regulation and the Purchaser undertakes further that it shall not use any advantages derivable from such confidential information for business or affairs other than the Business or affairs of the Company and its subsidiaries;

(ii)

in relation to any trade, business or company use a name, or internet domain name including the word or symbol, or logo design Octavian or any similar word and symbol other than for the Company, its Business and the subsidiaries of the Company and shall use all reasonable endeavors to procure that no such name shall be used by any person, firm or company with which it is/they are connected;

(iii)

solicit or entice or endeavor to solicit or entice away from the Company or its subsidiaries, any employee, officer, manager or consultant of the Company or its subsidiaries; or

(iv)

deal with, canvass, solicit or approach or cause to be dealt with, canvassed, solicited or approached for business, any person who is or was in the previous 12 months, a customer, supplier or client of the Company or its subsidiaries where the purpose of such dealing, canvassing, soliciting or approach is to entice or encourage such customer, supplier or client to cease or reduce its trading with the Company or its subsidiaries.

(b)

For the avoidance of doubt, this clause shall not prevent the transfer into the Company of any other business or company within the PACT group at anytime during this period.

(c)

Any action by the Purchaser or any member of the PACT Group which has a negative effect on the Net Profit of the Company shall be disregarded when calculating the Net Profit for the purposes of the Earn-Out Amount due under this clause 3 and the Net Profit shall be calculated as if such action had not occurred. Where the action taken by the Purchaser or the PACT is an action prohibited by clauses 3.5.8(a)(ii) to (iv) (inclusive), the Seller agrees that he shall not make any claim in relation to the breach of such clauses provided that the negative effect of any such prohibited action on the Net Profit of the Company is disregarded in accordance with this clause.

4	CONDITIONS

(a)

the Purchaser being satisfied in its sole and absolute discretion with the results of a legal and financial due diligence review to be conducted by it on the Holding Company and the Company (the “Companies”), all such due diligence to be completed by 1 January 2008;

 

(b)

the Purchaser being satisfied (acting reasonably) that either of the Seller or Harmen Breninnkmeijer has either (i) completed or will on the Completion Date complete a capital raising for $5,000,000 or (ii) has obtained irrevocable commitments from parties to subscribe for $5,000,000 on a capital raising to occur within 6 months of the Completion Date provided always that the Purchaser agrees that in the event that the Seller waives the condition at clause 4.4(b), the Purchaser is deemed to have waived this condition;

 

(c)

if required, the relevant stock exchange, government and securities authority and regulator in the United States granting listing of the PACT Shares to be issued herein;

 

(d)

a resolution at a meeting or unanimous written consent of the Directors of PACT approving this Agreement, the purchase of the Sale Shares, the issuance of the Escrow Shares, the implementation of the transactions contemplated hereunder and all other matters incidental hereto in accordance with the provisions of PACT’s certificate of incorporation and Bylaws and such rules, regulations and laws in force from time to time in the United States and which apply to PACT;

 

(e)

if required, the shareholders of PACT at a meeting of shareholders approving this Agreement, the purchase of the Sale Shares, the issuance of the Escrow Shares, the implementation of the transactions contemplated hereunder and all other matters incidental hereto in accordance with the provisions of PACT’s certificate of incorporation and Bylaws and such rules, regulations and laws in force from time to time in the United States and which apply to PACT;

(f)

all amounts outstanding to either the Seller or Harmen Breninnkmeijer by the Companies have been either repaid by the Companies or otherwise waived by the Seller or Harmen Breninnkmeijer; and

 

(g)

the auditor of the Purchaser and PACT, ▇▇▇▇▇▇ & Company, Inc. (“▇▇▇▇▇▇”) being satisfied at its sole and absolute discretion that the accounts of the Companies can be consolidated into PACT’s audited financial statement, including balance sheet and income statements in accordance with the US GAAP.

 

4.2

The Seller and the Companies undertake to disclose in writing to the Purchaser anything which will or is reasonably likely to prevent any of the conditions from being satisfied at or prior to the Completion Date, as applicable, immediately upon the Seller and/or the Companies becoming aware of such a situation.

4.3.1

From the date of this Agreement until the Completion Date, except for the transactions described herein or otherwise with the prior written consent of the Purchaser:

(i)

The Warrantor warrants and undertakes that it will cause the Companies to:

(a)

conduct its Business in the ordinary course and consistent with past practices;

(b)

use its best efforts to maintain in full force and effect the existence of the Companies;

(c)

promptly and timely prepare and file any financial reports and franchise tax returns and pay all taxes and assessments, if any, required to maintain the existence of the Companies;

(d)

keep records in which true and correct entries will be made of all material transactions by and with the Companies;

(e)

duly observe all material requirements of governmental authorities unless contested in good faith by appropriate proceedings with the consent of the Purchaser;

(f)

promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Companies unless contested in good faith by appropriate proceedings with the consent of the Purchaser;

(g)

at all times comply with the provisions of all contracts, agreements and leases to which the Companies are a party, unless contested in good faith by appropriate proceedings with the consent of the Purchaser; and

(h)

to use reasonable endeavors to procure that the key employees of the Companies at the date of this Agreement remain and continue as employees after completion except in the event of a breach of contract by such employee(s);

(ii)

The Warrantor warrants and undertakes to cause the Companies not to:

(a)

modify their Memorandum or Articles of Incorporation or Bylaws;

(b)

cause or permit their liquidation or dissolution;

(c)

institute, or permit to be instituted against them, any proceeding, which remains un-dismissed for a period of 30 days after the filing thereof, seeking to adjudicate either as bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of them or their debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order or relief or the appointment of receiver, trustee or other similar official for them or for any substantial part of their property;

(d)

make a general assignment for the benefit of their creditors;

(e)

except as agreed in this Agreement, declare or pay any dividend or make any distribution to any of their shareholders;

(f)

issue, redeem, sell or dispose of, or create any obligation to issue, redeem, sell or dispose of, any shares of their capital stock (whether authorized but unissued or held in treasury);

(g)

effect any stock split, reclassification or combination;

(h)

modify their agreements and other obligations with respect to their long-term indebtedness, including but not limited to their loan agreements, indentures, mortgages, debentures, notes and security agreements provided that the Company shall be permitted to enter into bridging loan agreements in a maximum aggregate amount of $5,000,000

(i)

negotiate or enter into an agreement with another party related to the sale of the Companies or provide or agree to provide any information to another party for the purpose of evaluating the possibility of the sale of the Shares, the Companies or any part of their respective businesses to such other party.

(iii)

the Warrantor and the Companies shall procure that the Purchaser, its agents and representatives are given reasonable access to such documents relating to the Companies, as the Purchaser shall request. The Companies will assist the Purchaser’s auditor to complete the audit report of the Companies in accordance with the US GAAP.

(iv)

there shall have been no material adverse change in the assets or the business, prospects, financial condition or results of operations of the Companies.

4.3.2

The Purchaser shall be entitled to rescind this Agreement by notice in writing to the Seller, the Companies if prior to the Completion Date it appears that any of the Warranties is not or was not true and accurate in any material respects or if there is any material non fulfillment of any of the Warranties which (being capable of remedy) is not remedied prior to the Completion Date.

4.4

Any of the obligations of Seller hereunder is conditional upon:

 

(a)

the Seller being satisfied in its sole and absolute discretion with the results of a legal and financial due diligence review to be conducted by it on the Purchaser and PACT all such due diligence to be completed by 1 January 2008;

 

(b)

the Seller being satisfied (acting reasonably) that either of it or Harmen Breninnkmeijer has either (i) completed or will on the Completion Date complete a capital raising for $5,000,000 or (ii) obtained irrevocable commitments from parties to subscribe for $5,000,000 on a capital raising to occur within 6 months of the Completion Date;

 

(c)

the Seller is satisfied with evidence provided by the Purchaser that PACT has met the Hearing Review Councils requirements to cancel/remove the NASDAQ Listing Qualifications Panel (NLQP) de-listing order.

 

(d)

the Purchaser would enter into the ESA with Harmen Breninnkmeijer upon mutually agreed terms and conditions;

 

(e)

PACT shall have taken all necessary steps under its by-laws, and shall have received the approval of its Nominating Committee, if necessary, to provide for Seller to nominate the Seller and one reputable independent director to the PACT board of directors;

 

4.5

The Purchaser undertakes to disclose in writing to the Seller anything which will or is reasonably likely to prevent any of the conditions from being satisfied at or prior to the Completion Date, as applicable, as soon as practicable upon becoming aware of such a situation.

 

4.6

Until the Completion Date, the Purchaser shall procure that the Warrantor and the Companies, its agents and representatives are given reasonable access to such documents relating to the Companies, as the Seller shall request. The Purchaser will assist the Seller’s auditor to complete the audit report of the Companies in accordance with US GAAP.

4.7

The Seller shall be entitled to rescind this Agreement by notice in writing to the Purchaser if prior to Completion it appears that any of the Warranties is not or was not true and accurate in any material respect or if there is any material non-fulfillment of any of the Warranties which (being capable of remedy) is not remedied prior to Completion.

5	COMPLETION

5.1

Subject to the terms of this Agreement and subject to the approval of the board of directors of the Purchaser, the Completion of the transactions contemplated by this Agreement, shall take place pursuant to this clause at the offices of the Purchaser's Legal Counsel on the Completion Date.

5.2

Upon Completion the Seller, the Company, and the Holding Company shall deliver to the Purchaser:

(a)

duly completed and signed transfers of the Sale Shares by the Seller in favor of the Purchaser or as it may direct together with the relative bought/sold notes and share certificates;

 

(b)

duly completed, executed and validly issued share certificates of the Sale Shares in favor of the Purchaser or as it may direct;

 

(c)

certified true copies of the minutes of meetings of the Company and the Holding Company’s board of directors and shareholders approving the transfer, assignment and allotment of the Sale Shares to the Purchaser;

 

(d)

certified true copies of the minutes of meetings of the Company and the Holding Company’s board of directors and shareholders approving this Agreement and all matters herein contemplated and the transfer and assignment of its Sale Shares to the Purchaser; and

 

(e)

the executed ESA;

 

5.3

Upon Completion the Purchaser shall deliver to the Seller and the Holding Company a copy of resolutions of the board of directors of the Purchaser approving this Agreement, the ESA and other documents necessary for the purpose of effecting this transaction and authorizing a person or persons to execute the same (with seal, where appropriate) for and on its behalf. The Purchaser shall issue to the Purchaser the share certificates for the Escrow Shares issued pursuant to clause 3.4.1 as soon as possible but in any event, within 20 working days of the Completion Date.

6	REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS

(a)

each of the representations and warranties are true and accurate in all respects and not misleading at the date of this Agreement and will continue to be true and accurate in all respects and not misleading up to and including the Completion Date;

(b)

the Companies and the Seller have and will have full power and authority to enter into and perform this Agreement which constitute or when executed will constitute binding obligations on them in accordance with their respective terms;

(c)

the Sale Shares constitute 100 percent of the entire issued and allotted capital of the Holding Company, , on a fully diluted basis,