STOCK
PURCHASE AGREEMENT
STOCK
PURCHASE AGREEMENT, dated as of August 11, 2006 (this “Agreement”),
by
and among SMI Products, Inc., a Nevada Corporation (the “Company”),
the
persons listed on Schedule
A
to this
Agreement (each a “Seller”
and
collectively, the “Sellers”)
and
the persons listed on Schedule
B
to this
Agreement (each a “Purchaser”
and
collectively, the “Purchasers”).
The
Company, each Seller and each Purchaser are referred to herein as a
“Party”
and
collectively, as the “Parties”.
BACKGROUND
The
Sellers are the owners of 5,551,000 shares of common stock of the Company
and
collectively desire to sell the number of shares of said stock set forth
opposite their names on Schedule
A
(the
“Seller
Shares”).
The
Seller Shares represent approximately 73.5% of the issued and outstanding
capital stock of the Company as of the date hereof calculated on a fully-diluted
basis. Certain Sellers are also the holders of notes payable by the Company
in
the principal amount of $89,316.32 which, prior to the Closing, shall be
exchanged by the Sellers for notes convertible by their terms into the Company’s
common stock (the “Seller
Notes”).
The
Purchasers desire to purchase all of the Seller Shares and all of the Seller
Notes by purchasing the number of Seller Shares and the principal amount
of
Seller Notes set forth opposite their names on Schedule
B.
NOW,
THEREFORE, in consideration of the foregoing and the mutual promises and
covenants herein contained, the Company, the Sellers and the Purchasers hereby
agree as follows:
1. Purchase
and Sale.
Each
Seller shall sell, transfer, convey and deliver unto the Purchasers the number
of Seller Shares and the principal amount of Seller Notes set forth opposite
each such Seller’s name on Schedule
A
to this
Agreement, and each Purchaser shall acquire and purchase from the Sellers
the
Seller Shares and the principal amount of the Seller Notes set forth opposite
each such Purchaser’s name on Schedule
B
to this
Agreement.
2. Purchase
Price.
(a) General.
The
purchase price (the “Purchase
Price”)
for
the Seller Shares and the Seller Notes, in the aggregate, is Six Hundred
Thirty-Seven Thousand Five Hundred Dollars ($637,500) payable as specified
in
this Section
2,
subject
to the other terms and conditions of this Agreement.
(b) Deposit.
Concurrent with the execution of this Agreement, Purchasers shall deposit
the
Purchase Price into
escrow.
(c) Payment
at Closing.
At the
Closing, the Purchasers shall pay to the Sellers Six Hundred Thirty-Seven
Thousand Five Hundred Dollars ($637,500), which shall be payable in the amounts
set forth in Schedule
A
and
allocated among the Sellers, as set forth in a funds flow memorandum to be
delivered by the Sellers to the Escrow Agent at the Closing. The
total
monies payable to Sellers are subject to certain adjustments, as set forth
in
sub-paragraph (d) below.
(d) Adjustment
for Outstanding Assets and Liabilities.
The
aggregate Purchase Price shall be increased by the amount
of
any cash or cash equivalents on the Company’s balance sheet as of the Closing
Date and reduced by the amount of any outstanding liabilities on the Company’s
balance sheet (other than the Seller Notes) as of the Closing Date.
(e) Finder’s
Fee.
At the
Closing, the Purchasers and Sellers shall each pay their respective portion
(50%) of the Finder’s Fee referenced in Section
9
below.
The $12,500 payable by Sellers shall be deducted from the $637,500 and paid
out
of the escrow by the Escrow Agent.
3. The
Closing.
(a) General.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place by exchange of documents among the Parties by fax or courier,
as
appropriate, following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will
take
at the Closing itself) not later than August 31, 2006 or such other date
as the
Purchasers and the Sellers may mutually determine in
writing (the
“Closing
Date”),
which
date shall be not later than fifteen days following Purchaser’s satisfactory
completion of due diligence pursuant to Section
8,
below.
(b) Delivery
of Certificates in Escrow.
Concurrent with the execution of this Agreement, each Seller shall deliver
(i)
certificates (the “Certificates”)
evidencing all of the Seller Shares held by such Seller and (ii) the Seller
Notes to the Washington, DC offices of Thelen Reid & Priest, LLP
(“Law
Firm”)
on the
date hereof. The Law Firm shall hold such certificates in escrow pursuant
to the
Escrow Agreement (the “Escrow
Agreement”)
in the
form of Exhibit
A
being
entered into on the date hereof by the Law Firm, the Seller Representative
(as
defined below) and the Purchaser Representative. Pursuant to the Escrow
Agreement, the Certificates will be held in escrow until the Closing at which
time the Law Firm shall deliver the Certificates to the Purchasers against
delivery to the Sellers of the portion of the Purchase Price that is due
at
Closing.
(c) Deliveries
at the Closing.
At the
Closing: (i) the Sellers shall deliver to the Purchasers the various
certificates, instruments, and documents referred to in Section
12(a)
below,
(ii) the Purchasers shall deliver to the Sellers the various certificates,
instruments, and documents referred to in Section
12(b)
below,
(iii) the Sellers shall deliver to the Purchasers (A) the Certificates, endorsed
in blank or accompanied by duly executed assignment documents and including
a
Medallion Guarantee, including delivery by releasing the Certificates from
escrow, and (B) the Seller Notes along with a note power transferring the
Seller
Notes to the Purchasers, including delivery by releasing the Seller Notes
from
Escrow and (iv) the Purchasers shall deliver to the Sellers the Purchase
Price.
4. Appointment
of Seller and Purchaser Representatives.
(a) Appointment
of Seller Representatives.
The
Sellers hereby irrevocably constitute and appoint, effective as of the date
hereof, James Charuk and Rocky McNabb (together
with their permitted successors, the “Seller
Representative”),
as
their true and lawful agent and attorney-in-fact to enter into any agreement
in
connection with the transactions contemplated by this Agreement and any
transactions contemplated by the Escrow Agreement, to perform on behalf of
the
Sellers any obligations or undertakings thereunder, to exercise all or any
of
the powers, authority and discretion conferred on him under any such agreement,
to waive any terms and conditions of any such agreement, to give and receive
notices on their behalf and to be their exclusive representative with respect
to
any matter, suit, claim, action or proceeding arising with respect to any
transaction contemplated by any such agreement and the Seller Representative
agrees to act as, and to undertake the duties and responsibilities of, such
agent and attorney-in-fact. This power of attorney is coupled with an interest
and irrevocable. The Seller Representative shall not be liable for any action
taken or not taken by him in connection with his obligations under this
Agreement as long as such actions are taken or omitted in good faith and
in the
absence of willful misconduct or gross negligence. If the Seller Representative
shall be unable or unwilling to serve in such capacity, his successor shall
be
named by those persons holding more than fifty percent (50%) in interest
of the
Seller Shares.
(b) Appointment
of the Purchaser Representative.
The
Purchasers hereby irrevocably constitute and appoint, effective as of the
date
hereof, Fountainhead Capital Partners Limited (together
with its permitted successors, the “Purchaser
Representative”),
as
their true and lawful agent and attorney-in-fact to enter into any agreement
in
connection with the transactions contemplated by this Agreement and any
transactions contemplated by the Escrow Agreement, to perform on behalf of
the
Sellers any obligations or undertakings thereunder, to exercise all or any
of
the powers, authority and discretion conferred on him under any such agreement,
to waive any terms and conditions of any such agreement (other than the amount
of the Purchase Price), to give and receive notices on their behalf and to
be
their exclusive representative with respect to any matter, suit, claim, action
or proceeding arising with respect to any transaction contemplated by any
such
agreement and the Purchaser Representative agrees to act as, and to undertake
the duties and responsibilities of, such agent and attorney-in-fact. This
power
of attorney is coupled with an interest and irrevocable. The Purchaser
Representative shall not be liable for any action taken or not taken by it
in
connection with his obligations under this Agreement as long as such actions
are
taken or omitted in good faith and in the absence of willful misconduct or
gross
negligence. If the Purchaser Representative shall be unable or unwilling
to
serve in such capacity, its successor shall be named by those persons agreeing
to acquire more than fifty percent (50%) in interest of the Seller Shares
pursuant to this Agreement.
5. Representations
and Warranties of the Sellers.
Each
Seller jointly and severally represents and warrants to the Purchasers that
the
statements contained in this Section
5
are
correct and complete as of the date of this Agreement and will be correct
and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
Section
5).
(a) Each
Seller has the power and authority to execute, deliver and perform such Seller’s
obligations under this Agreement and to sell, assign, transfer and deliver
to
the Purchasers the Seller Shares as contemplated hereby. No permit, consent,
approval or authorization of, or declaration, filing or registration with
any
governmental or regulatory authority or consent of any third party is required
in connection with the execution and delivery any Seller of this Agreement
and
the consummation of the transactions contemplated hereby.
(b) Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby or compliance with the terms and conditions
hereof by the Sellers will violate or result in a breach of any term or
provision of any agreement to which any Seller is bound or is a party, or
be in
conflict with or constitute a default under, or cause the acceleration of
the
maturity of any obligation of any Seller under any existing agreement or
violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to
any Seller or any properties or assets of any Seller.
(c) This
Agreement has been duly and validly executed by each Seller, and constitutes
the
valid and binding obligation of each Seller and the Company, enforceable
against
each Seller and the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
creditors' rights generally or by limitations, on the availability of equitable
remedies. The Seller Representative has been duly appointed herein by the
Sellers and has complete authority to act on behalf of the Sellers in matters
relating to this Agreement and the transactions contemplated hereby
(d) The
Seller Shares are owned beneficially and of record by each Seller in the
amounts
specified on Schedule
A
and are
validly issued and outstanding, fully paid for and non-assessable with no
personal liability attaching to the ownership thereof. The Seller Notes
specified on Schedule
A
represent amounts due by the Company to the holders thereof. Each Seller
owns
the number of Seller Shares and the principal amount of Seller Notes set
forth
opposite such Seller’s name on Schedule
A
free and
clear of all liens, charges, security interests, encumbrances, claims of
others,
options,
warrants, purchase rights, contracts, commitments, equities or other claims
or
demands of any kind
(collectively, “Liens”),
and
upon delivery of the Seller Shares and Seller Notes to the Purchasers, the
Purchasers will acquire good, valid and marketable title thereto free and
clear
of all Liens. No Seller
is
a party to any option, warrant, purchase right, or other contract or commitment
that could require the Seller to sell, transfer, or otherwise dispose of
any
capital stock of the Company (other than pursuant to this Agreement). No
Seller
is a party to any voting trust, proxy, or other agreement or understanding
with
respect to the voting of any capital stock of the Company.
(e) At
least
526,000 shares of the Seller Shares have been held by non-affiliates of the
Company for at least two years and are eligible for sale under Rule
144(k).
6. Representations
and Warranties of the Company.
(a) The
Company is a corporation in good standing duly incorporated in the State
of
Nevada. The
Company is duly authorized to conduct business and is in good standing under
the
laws of each jurisdiction where such qualification is required. The Company
has
full corporate power and authority and all licenses, permits, and authorizations
necessary to carry on its business. The Company has no subsidiaries and does
not
control any other subsidiaries, directly or indirectly, or have any direct
or
indirect equity participation in any other entity.
(b) Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby or compliance with the terms and conditions
hereof by the Company will violate or result in a breach of any term or
provision of any agreement to which the Company is bound or is a party, or
the
Company’s Certificate of Incorporation or By-Laws, or be in conflict with or
constitute a default under, or cause the acceleration of the maturity of
any
obligation of the Company under any existing agreement or violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets.
(c) This
Agreement has been duly and validly executed by the Company and constitutes
the
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting creditors' rights generally
or by
limitations, on the availability of equitable remedies.
(d) The
Company’s authorized capital stock, as of the date of this Agreement and as of
the Closing, consists of 100,000,000 shares of Common Stock, $0.001 par value
per share, of which 7,551,000
shares are issued and outstanding. The Company has not reserved any shares
of
its Common Stock for issuance upon the exercise of options, warrants or any
other securities that are exercisable or exchangeable for, or convertible
into,
Common Stock. All of the issued and outstanding shares of Common Stock are
validly issued, fully paid and non-assessable and have been issued in compliance
with applicable laws, including, without limitation, applicable federal and
state securities laws. There are no outstanding options, warrants or other
rights of any kind to acquire any additional shares of capital stock of the
Company or securities exercisable or exchangeable for, or convertible into,
capital stock of the Company, nor is the Company committed to issue any such
option, warrant, right or security. There are no agreements relating to the
voting, purchase or sale of capital stock (i) between or among the Company
and
any of its stockholders, (ii) between or among any Seller and any third party,
or (iii) to the best knowledge of the Sellers between or among any of the
Company’s stockholders. The Company is not a party to any agreement granting any
stockholder of the Company the right to cause the Company to register shares
of
the capital stock of the Company held by such stockholder under the Securities
Act. The stockholder list provided to the Purchasers is a current shareholder
list generated by its transfer agent, and such list accurately reflects all
of
the issued and outstanding shares of the Company’s Common Stock.
(e) The
Company does not have any restrictions in place relative to its ability to
implement any reverse split of its common stock
(f) As
of the
date hereof the Company has total Liabilities of no more than $15,000,
not
including the Seller Notes, which Liabilities will be paid off at or prior
to
the Closing and shall in no event become the Liability of the Purchasers
or
remain the Liabilities of the Company following the Closing.
(g) There
is
no legal, administrative, investigatory, regulatory or similar action, suit,
claim or proceeding which is pending or, to any Seller’s knowledge, threatened
against the Company.
(h) The
Company has,
to the
best of its information and belief, 4 market
makers for its common shares and such market makers have obtained all permits
and made all filings necessary in order for such market makers to continue
as
market makers of the Company.
(i) During
the period from its inception through March 31, 2006, the Company has filed
or
furnished (i) all reports, schedules, forms, statements, prospectuses and
other documents required to be filed with, or furnished to, the Securities
and
Exchange Commission (the “SEC”)
by the
Company (all such documents, as amended or supplemented, are referred to
collectively as, the “Company
SEC Documents”)
and
(ii) all certifications and statements required by (x) Rule 13a-14 or
15d-14 under the Exchange Act, or (y) 18 U.S.C. Sec.1350 (Section 906 of
the Sarbanes-Oxley act of 2002) with respect to any applicable Company SEC
Document (collectively, the “SOX
Certifications”).
The
Company has made available to the Purchasers all SOX Certifications and comment
letters received by the Company from the staff of the SEC and all responses
to
such comment letters by or on behalf of the Company. Through September 30,
2003,
the Company complied in all respects with its SEC filing obligations under
the
Exchange Act and the Securities Act. Each of the audited financial
statements and related schedules and notes thereto and unaudited interim
financial statements of the Company (collectively, the “Company
Financial Statements”)
contained in the Company SEC Documents (or incorporated therein by reference)
were prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (“GAAP”)
(except in the case of interim unaudited financial statements) except as
noted
therein, and fairly present in all respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof
and the
consolidated results of their operations, cash flows and changes in
stockholders’ equity for the periods then ended, subject (in the case of interim
unaudited financial statements) to normal year-end audit adjustments (the
effect
of which will not, individually or in the aggregate, be adverse) and, such
financial statements complied as to form as of their respective dates in
all
respects with applicable rules and regulations of the SEC. The financial
statements referred to herein reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed
in
the notes to such financial statements. No financial statements of any Person
not already included in such financial statements are required by GAAP to
be
included in the consolidated financial statements of the Company. As of
their respective dates, each the Company SEC Document was prepared in accordance
with and complied with the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations thereunder, and the Company
SEC Documents (including all financial statements included therein and all
exhibits and schedules thereto and all documents incorporated by reference
therein) did not, as of the date of effectiveness in the case of a registration
statement, the date of mailing in the case of a proxy or information statement
and the date of filing in the case of other the Company SEC Documents, contain
any untrue statement of a fact or omit to state a fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Neither the Company
nor, to the Company’s knowledge, any of its officers has received notice from
the SEC or any other governmental authority questioning or challenging the
accuracy, completeness, content, form or manner of filing or furnishing of
the
SOX Certifications.
(j) The
Company has properly filed all federal, state and local tax returns and has
paid
all taxes, assessments and penalties due and payable. All such tax returns
were
complete and correct in all respects as filed, and no claims have been assessed
with respect to such returns. There are no present, pending, or threatened
audit, investigations, assessments or disputes as to taxes of any nature
payable
by the Company or any of its subsidiaries, nor any tax liens whether existing
or
inchoate on any of the assets of the Company or any of its subsidiaries,
except
for current year taxes not presently due and payable. No IRS or foreign,
state,
county or local tax audit is currently in progress. Neither the Company nor
any
of its subsidiaries has waived the expiration of the statute of limitations
with
respect to any taxes. There are no outstanding requests by the Company or
any of
its Subsidiaries for any extension of time within which to file any tax return
or to pay taxes shown to be due on any tax return.
(k) The
Company does not have any ongoing operations and does not employ any employees
and does not maintain any employee benefit or stock option plans.
(l) Since
March 31, 2006, there has not been any event or condition of any character
which
has adversely affected, or may be expected to adversely affect, the Company’s
business or prospects, including, but not limited to any adverse change in
the
condition, assets, liabilities (existing or contingent) or business of the
Company from that shown in the financial statements of the Company included in
its quarterly report on Form 10-QSB filed for the quarter ended March 31,
2006.
(m) The
Company has complied in all material respects with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of all governmental authorities,
and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against the Company alleging
any
failure so to comply. To the knowledge of any Seller, neither the Company,
nor
any officer, director, employee, consultant or agent of the Company has made,
directly or indirectly, any payment or promise to pay, or gift or promise
to
give or authorized such a promise or gift, of any money or anything of value,
directly or indirectly, to any governmental official, customer or supplier
for
the purpose of influencing any official act or decision of such official,
customer or supplier or inducing him, her or it to use his, her or its influence
to affect any act or decision of a governmental authority or customer, under
circumstances which could subject the Company or any officers, directors,
employees or consultants of the Company to administrative or criminal penalties
or sanctions.
(n) No
representation or warranty by the Company in this Agreement, nor in any
certificate, schedule or exhibit delivered or to be delivered pursuant to
this
Agreement contains or will contain any untrue statement of material fact,
or
omits or will omit to state a material fact necessary to make the statements
herein or therein, in light of the circumstances under which they were made,
not
misleading.
(o) All
the
capital stock of the Company that was registered pursuant to the registration
on
Form SB-2 filed by the Company with the SEC on July 31, 2001 were sold and
there
are no unsold shares remaining from that registration.
7. Representations
and Warranties of the Purchasers.
Each
Purchaser represents and warrants to the Sellers as follows:
(a) Each
Purchaser has full power and authority to enter into this Agreement and to
carry
out the transactions contemplated hereby. This Agreement constitutes a valid
and
binding obligation of each Purchaser enforceable in accordance with its terms,
except as (i) the enforceability hereof may be limited by bankruptcy, insolvency
or similar laws affecting the enforceability of creditor's rights generally
and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
(b) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, nor compliance by any Purchaser with any
of
the provisions hereof will: violate, or conflict with, or result in a breach
of
any provision of, or constitute a default (or an event which, with notice
or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any Lien upon any of the properties or assets of Purchaser under
any
of the terms, conditions or provisions of any material note, bond, indenture,
mortgage, deed or trust, license, lease, agreement or other instrument or
obligation to which he is a party or by which he or any of his properties
or
assets may be bound or affected, except for such violations, conflicts, breaches
or defaults as do not have, in the aggregate, any material adverse effect;
or
violate any material order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser or any of its properties or assets, except
for such violations which do not have, in the aggregate, any material adverse
effect.
(c) Each
Purchaser is acquiring the Seller Shares and Seller Notes for its own account
for investment and not for the account of any other person and not with a
view
to or for distribution, assignment or resale in connection with any distribution
within the meaning of the Securities Act. Each Purchaser agrees not to sell
or
otherwise transfer the Seller Shares unless they are registered under the
Securities Act and any applicable state securities laws, or an exemption
or
exemptions from such registration are available. Each Purchaser has knowledge
and experience in financial and business matters such that it is capable
of
evaluating the merits and risks of acquiring the Seller Shares and Seller
Notes.
(d) No
permit, consent, approval or authorization of, or declaration, filing or
registration with any governmental or regulatory authority or the consent
of any
third party is required in connection with the execution and delivery by
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby.
8. Due
Diligence.
Prior
to
the Closing, the Purchasers will conduct a due diligence investigation relative
to the Company and the representations, warranties and covenants of the Sellers
and the Company. Sellers and the Company agree to provide the Purchasers
and its
agents and representatives with any and all due diligence documents reasonably
requested, including but not limited to financial statements and evidence
of the
Company’s good standing in all jurisdictions where it is authorized to do
business. Purchaser shall have the right, in its sole discretion, to terminate
this Purchase Agreement at any time prior to the Closing, without any liability
therefor, should it determine that any representation, warranty or covenant
of
any Seller or the Company is untrue, misleading or cannot be verified through
the due diligence process or if the Purchasers determine, in their sole
discretion that the Company is unsuitable for use as a vehicle for a reverse
acquisition transaction.
9. Brokers
and Finders.
Other
than Jeff
Nunez,
who is
entitled to payment of $25,000.00 upon Closing, payable equally ($12,500.00
each) by Purchaser Representative and Seller Representative, there
are
no other finders and no parties shall be responsible for the payment of any
finders’ fees other than as specifically set forth herein. Other than the
foregoing, neither
any Seller nor the Company, nor any of their respective directors, officers
or
agents on their behalf, have incurred any obligation or liability, contingent
or
otherwise, for brokerage or finders’ fees or agents’ commissions or financial
advisory services or other similar payment in connection with this
Agreement.
10. Pre-Closing
Covenants.
The
Parties agree as follows with respect to the period between the execution
of
this Agreement and the Closing.
(a) General.
Each of
the Parties will use his or its best efforts to take all action and to do
all
things necessary, proper, or advisable in order to consummate and make effective
the transactions contemplated by this Agreement (including satisfaction,
but not
waiver, of the closing conditions set forth in Section
12
below).
(b) Form
8-K Filing; Notices and Consents.
Concurrent with the Closing of this Agreement, the Company shall cause a
Form
8-K to be filed with the U.S. Securities and Exchange Commission with respect
to
its having entered into a material definitive agreement. The Seller
Representative will cause the Company to give any notices to third parties,
and
will cause the Company to use its best efforts to obtain any third party
consents, that the Purchaser Representative may reasonably request. Each
of the
Parties will (and the Sellers will cause the Company to) give any notices
to,
make any filings with, and use its best efforts to obtain any authorizations,
consents, and approvals of governmental authorities necessary in order to
consummate the transactions contemplated hereby. The parties acknowledge
that
SEC Rule 14f-1 under the Securities Exchange Act requires that an information
statement containing certain specified disclosures be filed with the Securities
and Exchange Commission and mailed to the Company’s shareholders at least 10
days before any person designated by the Purchasers can become a director
of the
Company. The Purchasers and the Sellers agree to cooperate fully with the
Company in the preparation and filing of such information statement and to
provide all information therefor respectively needed from them in a timely
manner, so as not to cause undue delay in the filing of the information
statement or any amendment thereto. Otherwise, neither the Company nor any
Seller is aware of any third party consent nor other filing or notice to
third
parties that is necessary in respect of this Agreement.
(c) Operation
of Business.
The
Seller will not cause or permit the Company to engage in any practice, take
any
action, or enter into any transaction except for ministerial matters necessary
to maintain the Company in good standing and to arrange for the filing of
all
necessary reports required under the Securities Exchange Act to make the
Company
a reporting company. Without limiting the generality of the foregoing, the
Sellers will not cause or permit the Company to (i) declare, set aside, or
pay
any dividend or make any distribution with respect to its capital stock or
redeem, purchase, or otherwise acquire any of its capital stock except as
otherwise expressly specified herein, (ii) issue, sell, or otherwise dispose
of
any of its capital stock, or grant any options, warrants, preemptive or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock, (iii) make any capital expenditures, loans, or
incur
any other obligations or liabilities, (iv) enter into any agreements involving
expenditures individually, or in the aggregate, of more than $1,000 (other
than
agreements for professional services which will be paid in full at or prior
to
the Closing), (v) enter into any agreement or incur any other commitment
or (vi)
otherwise engage in any practice, take any action, or enter into any transaction
that is inconsistent with the transactions contemplated hereby.
(d) Preservation
of Business.
The
Sellers will cause the Company to keep its business and properties substantially
intact.
(e) Notice
of Developments.
The
Sellers will give prompt written notice to the Purchaser Representative of
any
material adverse development causing a breach of any of the representations
and
warranties in Section
5
above.
No disclosure by any Party pursuant to this Section
10,
however, shall be deemed to amend or supplement the disclosures contained
in the
Schedules hereto or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(f) Exclusivity.
During
the pendency of this Agreement, none
of
the Sellers or the Company shall, directly or indirectly, (i) solicit, initiate,
or encourage the submission of any proposal or offer from any person relating
to
the acquisition of the Seller Shares, Seller Notes or any capital stock or
other
voting securities, or any assets (including any acquisition structured as
a
merger, consolidation, or share exchange) of the Company or (ii) participate
in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort
or
attempt by any person to do or seek any of the foregoing. None of the Sellers
will vote the shares of the Company’s Common Stock held by them in favor of any
such acquisition structured as a merger, consolidation, or share exchange.
The
Sellers shall notify the Purchaser immediately if any person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
11. Post-Closing
Covenants. The
Parties agree as follows with respect to the period following the Closing.
(a) General.
In case
at any time after the Closing any further action is necessary or desirable
to
carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole
cost
and expense of the requesting Party (unless the requesting Party is entitled
to
indemnification therefor under Section
13
below).
The Sellers acknowledge and agree that from and after the Closing the Purchasers
will be entitled to possession of all documents, books, records (including
tax
records), agreements, and financial data of any sort relating to the
Company.
(b) Litigation
Support.
In the
event and for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint,
claim,
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to
act,
or transaction on or prior to the Closing Date involving the Company, the
other
Party will cooperate with him or it and his or its counsel in the contest
or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section
13
below).
(c) Reverse
Merger Transaction.
The
Purchasers shall not vote for or otherwise cause the Company to enter into
any
“reverse merger” transaction with a target private company unless the same is
done concurrent with a the target company completing a capital raise of at
least
$5.0 million at not less than a valuation of $2.00
per
share.
12. Conditions
to Obligation to Close.
(a) Conditions
to Obligation of the Purchaser.
The
obligation of the Purchasers to consummate the transactions to be performed
by
the Purchasers in connection with the Closing are subject to satisfaction
of the
following conditions:
(i) the
representations and warranties set forth in Sections
5
and
6
above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) the
Sellers shall have performed and complied with all of their covenants hereunder
in all material respects through the Closing;
(iii) the
Company shall have procured all of the third party consents required in order
to
effect the Closing;
(iv) no
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or
foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation
of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Purchasers to own the
Seller
Shares, Seller Notes and to control the Company, or (D) affect adversely
the
right of the Company to own its assets and to operate its businesses (and
no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the
Sellers shall have delivered to the Purchasers a certificate to the effect
that
(A) each of the conditions specified above in Section
12(a)(i)-(iv)
is
satisfied in all respects, and (B) as of the Closing, the Company has no
Liabilities;
(vi) The
Purchasers shall have received an opinion of counsel customary for transactions
of this type that covers, among other things, that the Seller Shares were
validly issued, are fully paid and non-assessable and were issued in compliance
with all laws, including, without limitation, applicable federal and state
securities law, that the Seller Notes are duly enforceable obligations of
the
Company and will continue to be so enforceable after being transferred to
the
Purchasers at the Closing, and that the transactions contemplated hereby
are
being effected in compliance with state and federal securities
laws;
(vii) the
Purchasers shall have received the resignations, effective as of the
tenth
(10th)
day
following the filing by the Company of a Schedule 14f-1 information statement
with the Securities and Exchange Commission, of each director of the Company
and
the Purchasers shall have received the resignations, effective as of the
Closing,
of each officer
of the Company.
The
designees specified by the
Purchasers shall have been appointed as officers
of the
Company and any designees of the Purchasers who may be lawfully appointed
to the
Board of Directors of the Company as of the Company shall have been appointed;
(viii) there
shall not have been any occurrence, event, incident, action, failure to act,
or
transaction since March 31, 2006 which has had or is reasonably likely to
cause
a material adverse effect on the business, assets, properties, financial
condition, results of operations or prospects of the Company;
(ix) the
Purchasers shall have completed their business, accounting and legal due
diligence review of the Company, and the results thereof shall be satisfactory
to the Purchasers;
(x) the
Purchasers shall have received such pay-off letters and releases relating
to
Liabilities as they shall have requested and such pay-off letters shall be
in
form and substance satisfactory to the Purchasers;
(xi) the
Purchasers shall have conducted UCC, judgment lien and tax lien searches
with
respect to the Company, the results of which indicate no liens on the assets
of
the Company;
(xii) the
Company shall have delivered its Certificate of Incorporation and bylaws,
both
as amended to the Closing Date, certified by the Secretary of the Company,
resolutions adopted by the Board of Directors of the Company authorizing
this
Agreement and the transactions contemplated hereby and the Company shall
have
delivered to the Purchasers the Company’s original minute book and corporate
seal and all other original corporate documents and agreements;
(xiii) the
Company shall deliver to the Purchasers a Certificate of Good Standing in
respect of the Company issued by the Nevada Secretary of State dated no earlier
than 5 days prior to the closing.
(xiv) the
Company shall have maintained at and immediately after the Closing its status
as
a company whose Common Stock is quoted on the OTB Bulletin Board;
and
(xv) all
actions to be taken by the Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be satisfactory in form and substance to the Purchasers.
(xvi) At
the
Closing, there shall be no more than 200,000 shares of the Company issued
and
outstanding other than the Seller Shares on a pro-forma basis following the
effective date of the reverse split described in Section
12(a)(xviii),
below.
(xvii) Prior
to
the Closing, the Company shall cause to be prepared the Company’s unaudited
financial statements for the period ended June 30, 2006 and shall have filed
with the U.S. Securities and Exchange Commission prior to the Closing the
Company’s Form 10-QSB for the period ended June 30, 2006. The costs of such
audit and preparation and filing of the Form 10-QSB shall be at the sole
expense
of the Company. James Charuk shall remain an officer of the Company until
the
Form 10-QSB has been completed and filed with the U.S. Securities and Exchange
Commission. James Charuk agrees to execute the Form 10-QSB on behalf of the
Company, together with all SOX certifications required to be submitted therewith
and any management representation letters required in connection with the
review
thereof by the Company’s auditors.
(xviii) A
majority of the shareholders of the Company shall have approved a reverse
split
of the Company’s common shares such that the total number of the Company’s
common shares outstanding other than the Seller Shares (on a pro-forma basis)
does not exceed 200,000 shares and the Company shall have filed with the
U.S.
Securities and Exchange Commission a Preliminary Information Statement with
respect to such action. At the sole option of the Purchasers, they may elect
to
permit the purchase of the Seller Shares and Seller Notes to close prior
to the
filing by the Company of a Definitive Information Statement with respect
to such
action, the mailing of the Definitive Information Statement to the Company’s
shareholders and the passage of the required time before such action is
effective.
The
Purchasers may waive any condition specified in this Section
12(a)
at or
prior to the Closing in writing executed by the Purchasers.
(b) Conditions
to Obligation of the Seller.
The
obligations of the Sellers to consummate the transactions to be performed
by it
in connection with the Closing are subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section
7
above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) the
Purchasers shall have performed and complied with all of its covenants hereunder
in all material respects through the Closing;
(iii) no
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or
foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation
of any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or
charge
shall be in effect);
(iv) the
Purchasers shall have delivered to the Sellers a certificate to the effect
that
each of the conditions specified above in Section
12(b)(i)-(iii)
is
satisfied in all respects;
(v) The
holders of the Seller Notes shall have converted the loans they have made
to the
Company in the approximate amount of $89,316.32 into convertible notes which
by
their terms may be converted into a number of shares of the Company’s common
stock, to be designated by the Purchasers.
(vi) all
actions to be taken by the Purchasers in connection with consummation of
the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be satisfactory in form and substance to the Sellers.
The
Sellers may waive any condition specified in this Section
12(b)
at or
prior to the Closing in writing executed by the Seller.
13. Remedies
for Breaches of This Agreement.
(a) Survival
of Representations and Warranties.
All of
the representations and warranties of the Parties shall survive the Closing
hereunder (even if a Party knew or had reason to know of any misrepresentation
or breach of warranty by another Party at the time of Closing) and continue
in
full force and effect for a period of twenty four (24) months
thereafter.
(b) Indemnification
Provisions for Benefit of the Purchasers.
(i) In
the
event any Seller breaches (or in the event any third party alleges facts
that,
if true, would mean any Seller has breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section
13(a)
above,
provided that the Purchasers make a written claim for indemnification against
the Sellers within such survival period, then the Sellers shall jointly and
severally indemnify the Purchasers from and against the entirety of any Adverse
Consequences the Purchasers may suffer through and after the date of the
claim
for indemnification (including any Adverse Consequences the Purchasers may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach). For purposes of this Agreement, “Adverse
Consequences”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, taxes, Liens, losses, lost value, expenses, and fees, including
court costs and attorneys' fees and expenses.
(ii) The
Sellers shall indemnify the Purchasers from and against the entirety of any
Adverse Consequences the Purchasers may suffer resulting from, arising out
of,
relating to, in the nature of, or caused by any Liability of the Company
(whether or not accrued or otherwise disclosed) (x) for any taxes of the
Company
with respect to any tax year or portion thereof ending on or before the Closing
Date (or for any Tax year beginning before and ending after the Closing Date
to
the extent allocable to the portion of such period beginning before and ending
on the Closing Date) and (y) for the unpaid taxes of any Person (other than
the
Company) under Section 1.1502-6 of the Regulations adopted under the Code
(or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(iii) The
Seller shall indemnify the Purchasers from and against the entirety of any
Liabilities arising out of the ownership of the Shares or operation of the
Company prior to the Closing.
(iv) The
Seller shall indemnify the Purchasers from and against the entirety of any
Adverse Consequences the Purchasers may suffer resulting from, arising out
of,
relating to, in the nature of, or caused by any indebtedness or other
Liabilities of the Company existing as of the Closing Date.
(c) Indemnification
Provisions for Benefit of the Seller.
In the
event the Purchasers breach (or in the event any third party alleges facts
that,
if true, would mean the Purchasers has breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section
13(a)
above,
provided that the Seller makes a written claim for indemnification against
the
Purchasers within such survival period, then the Purchasers shall indemnify
the
Seller from and against the entirety of any Adverse Consequences the Seller
may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of,
or caused by the breach (or the alleged breach).
(d) Matters
Involving Third Parties.
(i) If
any
third party shall notify any Party (the “Indemnified
Party”)
with
respect to any matter (a “Third
Party Claim”)
which
may give rise to a claim for indemnification against any other Party (the
“Indemnifying
Party”)
under
this Section
13,
then
the Indemnified Party shall promptly notify each Indemnifying Party thereof
in
writing; provided, however, that no delay on the part of the Indemnified
Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party
from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(ii) Any
Indemnifying Party will have the right to defend the Indemnified Party against
the Third Party Claim with counsel of its choice reasonably satisfactory
to the
Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing within 10 days after the Indemnified Party has given notice
of
the Third Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature
of,
or caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder,
(C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good faith judgment
of the
Indemnified Party, likely to establish a precedential custom or practice
adverse
to the continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and
diligently.
(iii) So
long
as the Indemnifying Party is conducting the defense of the Third Party Claim
in
accordance with Section
13(d)(ii)
above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost
and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and
(C) the
Indemnifying Party will not consent to the entry of any judgment or enter
into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(iv) In
the
event any of the conditions in Section
13(d)(ii)
above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused
by the
Third Party Claim to the fullest extent provided in this Section
13.
(v) Other
Indemnification Provisions.
The
Seller hereby indemnifies the Company against any and all claims that may
be
filed by a current or former officer, director or employee of the Seller
by
reason of the fact that such person was a director, officer, employee, or
agent
of the Company or was serving the Company at the request of the Seller or
the
Company as a partner, trustee, director, officer, employee, or agent of another
entity, whether such claim is for accrued salary, compensation, indemnification,
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought against the Company
(whether such action, suit, proceeding, complaint, claim, or demand is pursuant
to an agreement, applicable law, or otherwise).
14. Termination.
(a) Termination
of Agreement.
The
Parties may terminate this Agreement as provided below:
(b) the
Purchasers and the Seller may terminate this Agreement by mutual written
agreement at any time prior to the Closing;
(c) the
Purchasers may terminate this Agreement by giving written notice to the Seller
at any time prior to the Closing if (A) the aggregate of the Company’s
Liabilities (other than the Seller Notes) is equal to, or exceeds $1,000;
(B)
in
the
event the Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect and the Purchasers has
notified the Seller of the breach, and the breach has continued without cure
for
a period of 2 days after the notice of breach; (C)
if the
Closing shall not have occurred on or before August
31, 2006
by
reason of the failure of any condition precedent under Section
12(a)
hereof
(unless the failure results primarily from the Purchasers themselves breaching
any representation, warranty, or covenant contained in this Agreement) or
(D)
the Purchasers determine, in their sole discretion, that the Company is
unsuitable for use as a vehicle for a reverse acquisition transaction;
and
(d) the
Sellers may terminate this Agreement by giving written notice to the Purchasers
at any time prior to the Closing (A) in the event the Purchasers has breached
any material representation, warranty, or covenant contained in this Agreement
in any material respect, the Sellers have notified the Purchasers of the
breach,
and the breach has continued without cure for a period of 2 days after the
notice of breach or (B) if the Closing shall not have occurred on or before
August
31,
2006, by
reason of the failure of any condition precedent under Section
12(b)
hereof
(unless the failure results primarily from the Sellers themselves breaching
any
representation, warranty, or covenant contained in this Agreement).
(e) Effect
of Termination.
The
Seller shall in no event be permitted to terminate this Agreement unless
prior
to or accompanying any notice of termination delivered hereunder the Sellers
(i)
have delivered to the Purchasers the Cash Deposit and any portion of the
Purchase Price theretofore paid by the Purchasers and (ii) have notified
the Law
Firm in writing that any amounts held in escrow by it may released to the
Purchasers. If the Purchasers terminate this Agreement pursuant to this
Section
14,
then
the Sellers shall immediately pay to the Purchasers any portion of the Purchase
Price theretofore paid by the Purchasers and the Sellers shall immediately
notify the Law Firm in writing that any amounts held in escrow by it may
released to the Purchasers. Except as aforesaid, if this Agreement terminates
pursuant to this Section
14,
all
rights and obligations of the Parties hereunder shall terminate without
any Liability of any Party to any other Party, except for any Liability of
a
Party that is then in breach.
(f) Limitation
on Damages.
In the
event that the transaction would have closed but for the breach
of
this Agreement by
the
other party or
the
other party’s refusal to close for any reason except those set forth herein,
then
the
party that
breaches this Agreement or refuses to close
shall
reimburse the not at fault party for its documented reasonable legal fees
and
related out-of-pocket expenses it has incurred in connection with the
transaction not to exceed a maximum of $15,000.00. The parties agree that
any
damages payable on account of any breach of this Agreement shall be expressly
limited to such amount.
15. Miscellaneous.
(a) Facsimile
Execution and Delivery.
Facsimile execution and delivery of this Agreement is legal, valid and binding
execution and delivery for all purposes.
(b) Confidentiality;
Press Releases and Public Announcements.
Except
as and to the extent required by law, no Party will disclose or use and will
direct its representatives not to disclose or use any information with respect
to the transaction which is the subject ot this Agreement, without the consent
of the other Parties. Neither the Sellers nor the Company shall issue any
press
release or make any public announcement relating to the subject matter of
this
Agreement without the prior written approval of the Purchasers; provided,
however, that the Company may make any public disclosure it believes in good
faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the Sellers and
the
Company will use their best efforts to advise the other Parties prior to
making
the disclosure).
(c) No
Third-Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any person other than
the
Parties and their respective successors and permitted assigns.
(d) Entire
Agreement.
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent
they
related in any way to the subject matter hereof.
(e) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the Purchasers
and
the Sellers; provided, however, that the Purchasers may (i) assign any or
all of
its rights and interests hereunder to one or more of its Affiliates, and
(ii)
designate one or more of its Affiliates to perform its obligations hereunder,
but no such assignment shall operate to release Purchasers or a successor
from
any obligation hereunder unless and only to the extent that Seller agrees
in
writing.
(f) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the
same
instrument.
(g) Headings.
The
Section headings contained in this Agreement are inserted for convenience
only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(h) Notices.
All
notices, requests, demands, claims, and other communications hereunder will
be
in writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given if (and then two business days after) it is sent
by
registered or certified mail, return receipt requested, postage prepaid,
and
addressed to the intended recipient as set forth below:
If
to the
Seller (or the Company prior to the Closing):
Rocky
McNabb
10684
East Fanfol Lane
Scottsdale,
AZ 85258
(480)
314-5651
Fax
(480)
314-9037
If
to the
Purchasers:
Fountainhead
Capital Partners Limited
c/o
Robert L. B. Diener
122
Ocean
Park Blvd.
Suite
307
Santa
Monica, CA 90405
(310)
396-1691
Fax
(310)
362-8887
Any
Party
may send any notice, request, demand, claim, or other communication hereunder
to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless
and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties
notice
in the manner herein set forth.
(i) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New
York
without
giving effect to any choice or conflict of law provision or rule (whether
of the
State of New
York
or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New
York.
(j) Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Purchasers and the Sellers or their
respective representatives. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such
occurrence.
(k) Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction.
(l) Expenses.
Each of
the Parties and the Company will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Sellers agree that the Company
has
not borne or will not bear any of the Sellers’ costs and expenses (including any
of their legal fees and expenses) in connection with this Agreement or any
of
the transactions contemplated hereby.
However,
Purchaser shall be solely responsible, and shall pay, all legal fees in
connection with the Escrow and Escrow Agent, but the Purchaser Representative
and Seller Representative shall each pay 50% of the costs and expenses of
the
escrow, as provided in the Escrow Agreement.
(m) Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring
any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state or local statute or law shall be deemed
also
to refer to all rules and regulations promulgated thereunder, unless the
context
requires otherwise. The word “including” shall mean including without
limitation. The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has breached
any representation, warranty, or covenant contained herein in any respect,
the
fact that there exists another representation, warranty, or covenant relating
to
the same subject matter (regardless of the relative levels of specificity)
which
the Party has not breached shall not detract from or mitigate the fact that
the
Party is in breach of the first representation, warranty, or covenant. Nothing
in the disclosure Schedules attached hereto shall be deemed adequate to disclose
an exception to a representation or warranty made herein, however, unless
the
disclosure Schedules identifies the exception with particularity and describes
the relevant facts in detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item in
the
disclosure Schedules or supplied in connection with the Purchasers’ due
diligence review, shall not be deemed adequate to disclose an exception to
a
representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
(n) Incorporation
of Exhibits and Schedules.
The
Exhibits and Schedules identified in this Agreement are incorporated herein
by
reference and made a part hereof.
(o) Specific
Performance.
Each of
the Parties acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of
this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States
or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section
15(p)
below),
in addition to any other remedy to which they may be entitled, at law or
in
equity.
(p) Submission
to Jurisdiction.
Each of
the Parties submits to the jurisdiction of any state or federal court sitting
in
New York County, New York, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action
or proceeding may be heard and determined in any such court. Each of the
Parties
waives any defense of inconvenient forum to the maintenance of any action
or
proceeding so brought and waives any bond, surety, or other security that
might
be required of any other Party with respect thereto. Any Party may make service
on any other Party by sending or delivering a copy of the process to the
Party
to be served at the address and in the manner provided for the giving of
notices
in Section
15(h)
above.
Nothing in this Section
15(p),
however, shall affect the right of any Party to bring any action or proceeding
arising out of or relating to this Agreement in any other court or to serve
legal process in any other manner permitted by law or at equity. Each Party
agrees that a final judgment in any action or proceeding so brought shall
be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
(q) Seller
Acknowledgements.
Each of
the Sellers acknowledges that he, she or it: (i) has read the Transaction
Agreements; (ii) has been represented in the preparation, negotiation, and
execution of the Transaction Documents by legal counsel of his own choice;
(iii) understands the terms and consequences of the Transaction Documents;
(iv) is fully aware of the legal and binding effect of the Transaction
Documents; and (v) understands that the Law Firm of Michael J.
Morrison is acting as counsel to the Company in connection with the transactions
contemplated by the Transaction Documents and that the law firm of Thelen
Reid
& Priest LLP is acting as counsel to the Purchasers in connection with the
transactions contemplated by the Transaction Documents, and that neither
firm is
acting as counsel for any
of
the Sellers.
[signature
pages follow]
[Seller
Signature Page]
IN
WITNESS WHEREOF, each of the undersigned Sellers
has
duly
executed this Agreement the date first above written.
| |
JAMES
CHARUK
/s/
James M.
Charuk
James
M. Charuk
TODD
D. MCNABB
/s/
Todd D.
McNabb
Todd
D. McNabb
GORDON
F. MCNABB
/s/
Gordon F.
McNabb
Gordon
F. McNabb
LIESSA
M. MCNABB
/s/
Liessa M.
McNabb
Liessa
M. McNabb
HOPE
MCNABB
/s/
Hope
McNabb
Hope
McNabb
|
| |
DARWIN
FORER
/s/
Darwin
Forer
Darwin
Forer
ROBERT
E. JEFFERY
/s/
Robert E.
Jeffery
Robert
E. Jeffery
LYONS
HAMILTON (in trust)
By:
/s/Donald
A.
Lyons
Donald
A. Lyons
Partner
ARMOR
CAPITAL FUND
By:
/s/
Tibor
Gajdics
Tibor
Gajdics
President
|
[Purchaser
Signature Page]
IN
WITNESS WHEREOF, each of the undersigned Purchasers
has
duly
executed this Agreement the date first above written.
| |
FOUNTAINHEAD
CAPITAL PARTNERS LIMITED
By:
/s/
Gisele Le
Miere
Gisele
Le Miere
Director
By:
/s/
Eileen
O’Shea
Eileen
O’Shea
Director
|
[Company
Signature Page]
IN
WITNESS WHEREOF, the Company
has duly
executed this Agreement the date first above written.
| |
SMI
PRODUCTS, INC.
By:
/s/
James
Charuk
Name:
James Charuk
Title:
President
|
[Signature
Page for Seller Representative and Purchaser
Representative]
IN
WITNESS WHEREOF, each of the undersigned representatives
has duly
executed this Agreement with
respect to the obligations set forth in Section
4
of this Agreement only
as of
the date first above written.
| |
SELLER
REPRESENTATIVE:
/s/
James
Charuk
James
Charuk
/s/
Rocky
McNabb
Rocky
McNabb
PURCHASER
REPRESENTATIVE:
FOUNTAINHEAD
CAPITAL PARTNERS LIMITED
By:
/s/
Gisele Le
Miere
Gisele
Le Miere
Director
By:
/s/
Eileen
O’Shea
Eileen
O’Shea
Director
|
[Signature
Page for Principal Executive Officer of the Company]
IN
WITNESS WHEREOF, the undersigned being the Principal
Executive Officer of the Company
has duly executed this Agreement as of the date first above written.
| |
PRINCIPAL
EXECUTIVE OFFICER:
/s/
James
Charuk
James
Charuk
Executing
this Agreement in his individual capacity
in
order to induce the Purchasers to enter into
this
Agreement
|
SCHEDULE
A
SELLERS
|
NAME
OF SELLER
|
|
NUMBER
OF
SELLER SHARES
|
|
PRINCIPAL
AMOUNT
OF SELLER NOTES
|
| |
|
|
|
|
|
James
M. Charuk
|
|
5,000,000
|
|
$15,422.73
|
|
Gordon
F. McNabb
|
|
151,000
|
|
--
|
|
Todd
D. McNabb
|
|
248,000
|
|
--
|
|
Lyons
Hamilton In Trust
|
|
152,000
|
|
--
|
|
Liessa
M. McNabb
|
|
--
|
|
$17,300
|
|
Robert
E. Jeffery
|
|
--
|
|
$11,000
|
|
Armor
Capital Partners Inc.
|
|
--
|
|
$30,593.59
|
|
Hope
McNabb
|
|
--
|
|
$5,000
|
|
Darwin
Forer
|
|
--
|
|
$10,000
|
SCHEDULE
B
PURCHASERS
|
NAME
AND ADDRESS OF PURCHASER
|
|
NUMBER
OF SELLER
SHARES
|
|
PRINCIPAL
AMOUNT OF
SELLER
NOTES
|
| |
|
|
|
|
|
Fountainhead
Capital Partners Limited
c/o
Robert L. B. Diener
122
Ocean Park Blvd.
Suite
307
Santa
Monica, CA 90405
|
|
5,551,000
|
|
$89,316.32
|