SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT, dated as of March 25, 2002 (the
"Agreement"), among Pawnbrokers Exchange Inc. ("PEI"), a Utah corporation
("PEI"), and Michael Vardakis (the "PEI Shareholder") on the one hand, and
Export Erez USA, Inc., a Delaware corporation (the "Company") and the
stockholders of the Company set forth on the signature pages to this Agreement
(the "Sellers") on the other hand. PEI, the PEI Shareholder, the Sellers and the
Company are collectively referred to herein as the "Parties." PEI and the PEI
Shareholder are sometimes referred to herein collectively as the "PEI Parties."
RECITALS:
WHEREAS, the Sellers own 100% of the shares of the capital stock of the
Company, in the denominations as set forth opposite their respective names on
Schedule I to this Agreement which shares constitute all of the issued and
outstanding shares of capital stock of the Company (the "Company Shares").
WHEREAS, PEI desires to acquire from the Sellers, and the Sellers desire to
sell to PEI, all of the Company Shares in exchange (the "Exchange") for the
issuance by PEI of an aggregate of 21,000,000 shares (the "PEI Shares") of PEI's
common stock, no par value per share (the "PEI Common Stock") to be issued to
the Sellers and their designees, on the terms and conditions set forth below,
which, after giving effect to (a) the Exchange, (b) the payment of a dividend of
eight (8) shares of common stock for each share of common stock issued and
outstanding prior to the Closing (the "Dividend"), and (c) the cancellation of
1,649,000 shares (the "Cancellation") will represent 84% of the issued and
outstanding shares of the capital stock of PEI on a fully diluted basis.
WHEREAS, the PEI Shareholder is the principal shareholder of PEI and will
benefit from the transactions contemplated herein;
WHEREAS, in exchange for providing the indemnification set forth in Section
9.2 hereof, after the Closing, PEI will transfer to the PEI Shareholder all of
the shares of Pawnbrokers Exchange No. One, Inc., a Utah corporation and wholly
owned subsidiary of PEI (the "PEI Subsidiary").
WHEREAS, it is intended that, for federal income tax purposes, the Exchange
shall qualify as a reorganization under the provisions of Section 351 of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, the Company, the Sellers and the PEI Parties desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement; and
WHEREAS, PEI currently has 2,149,000 shares of Common Stock issued and
outstanding. After giving effect to the Exchange, the Dividend and the
Cancellation, PEI shall have 25,000,000 shares of Common Stock outstanding.
NOW, THEREFORE, in consideration of the premises and mutual promises herein
made, and in consideration of the representations, warranties, covenants and
agreements herein contained, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions.
-------------------
The following terms shall, when used in this Agreement, have the following
meanings:
"Affiliate" means, with respect to any Person: (i) any Person directly or
indirectly owning, controlling, or holding with power to vote 10% or more of the
outstanding voting securities of such other Person (other than passive or
institutional investors); (ii) any Person 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held with
power to vote, by such other Person; (iii) any Person directly or indirectly
controlling, controlled by, or under common control with such other Person; and
(iv) any officer, director or partner of such other Person. "Control" for the
foregoing purposes shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Los Angeles, Delaware, are required or authorized to be
closed.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Collateral Documents" mean the Exhibits, Schedules and any other
documents, instruments and certificates to be executed and delivered by the
Parties hereunder or thereunder.
"Commission" means the Securities and Exchange Commission or any Regulatory
Authority that succeeds to its functions.
"Company Assets" mean all properties, assets, privileges, powers, rights,
interests and claims of every type and description that are owned, leased, held,
used or useful in the Company Business and in which the Company has any right,
title or interest or in which the Company acquires any right, title or interest
on or before the Closing Date, wherever located, whether known or unknown, and
whether or not now or on the Closing Date on the books and records of the
Company, but excluding any of the foregoing, if any, transferred prior to the
Closing pursuant to this Agreement or any Collateral Documents.
"Company Business" means production and marketing of textile products
designed to provide personal protection, such as bulletproof vests, and
associated heavy fabric products, such as tents and other camping equipment.
"Company Common Stock" means the common shares of the Company.
"Company Shareholders" means, as of any particular date, the holders of
Company Common Stock on that date.
"Encumbrance" means any material mortgage, pledge, lien, encumbrance,
charge, security interest, security agreement, conditional sale or other title
retention agreement, limitation, option, assessment, restrictive agreement,
restriction, adverse interest, restriction on transfer or exception to or
material defect in title or other ownership interest (including restrictive
covenants, leases and licenses).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"PEI Assets" mean all properties, assets, privileges, powers, rights,
interests and claims of every type and description that are owned, leased, held,
used or useful in the PEI Business and in which PEI or any of its Subsidiaries
has any right, title or interest or in which PEI or any of its Subsidiaries
acquires any right, title or interest on or before the Closing Date, wherever
located, whether known or unknown, and whether or not now or on the Closing Date
on the books and records of PEI or any of its Subsidiaries.
"PEI Business" means the business conducted by PEI and its Subsidiaries.
"PEI Common Stock" means the common shares of PEI, no par value.
"PEI Securities Filings" means PEI's annual report on Form 10-KSB for the
year ended December 31, 2000, its quarterly reports on Form 10-QSB, and all
other reports filed and to be filed with the Commission prior to the Effective
Time.
"Legal Requirement" means any statute, ordinance, law, rule, regulation,
code, injunction, judgment, order, decree, ruling, or other requirement enacted,
adopted or applied by any Regulatory Authority, including judicial decisions
applying common law or interpreting any other Legal Requirement.
"Losses" shall mean all damages, awards, judgments, assessments, fines,
sanctions, penalties, charges, costs, expenses, payments, diminutions in value
and other losses, however suffered or characterized, all interest thereon, all
costs and expenses of investigating any claim, lawsuit or arbitration and any
appeal therefrom, all actual attorneys', accountants' investment bankers' and
expert witness' fees incurred in connection therewith, whether or not such
claim, lawsuit or arbitration is ultimately defeated and, subject to Section
9.4, all amounts paid incident to any compromise or settlement of any such
claim, lawsuit or arbitration.
"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on (i) the
assets, Liabilities, properties or business of the Parties, (ii) the validity,
binding effect or enforceability of this Agreement or the Collateral Documents
or (iii) the ability of any Party to perform its obligations under this
Agreement and the Collateral Documents; provided, however, that none of the
following shall constitute a Material Adverse Effect on the Company: (i) the
filing, initiation and subsequent prosecution, by or on behalf of shareholders
of any Party, of litigation that challenges or otherwise seeks damages with
respect to the Exchange, this Agreement and/or transactions contemplated thereby
or hereby, (ii) occurrences due to a disruption of a Party's business as a
result of the announcement of the execution of this Agreement or changes caused
by the taking of action required by this Agreement, (iii) general economic
conditions, or (iv) any changes generally affecting the industries in which a
Party operates.
"Exchange Shares" means the shares of PEI Common Stock deliverable by PEI
in exchange for Company Common Stock pursuant to Section 2.1.
"Person" means any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company, Regulatory
Authority or other entity.
"Regulatory Authority" means: (i) the United States of America; (ii) any
state, commonwealth, territory or possession of the United States of America and
any political subdivision thereof (including counties, municipalities and the
like); (iii) any foreign (as to the United States of America) sovereign entity
and any political subdivision thereof; or (iv) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"Representative" means any director, officer, employee, agent, consultant,
advisor or other representative of a Person, including legal counsel,
accountants and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary" of a specified Person means (a) any Person if securities
having ordinary voting power (at the time in question and without regard to the
happening of any contingency) to elect a majority of the directors, trustees,
managers or other governing body of such Person are held or controlled by the
specified Person or a Subsidiary of the specified Person; (b) any Person in
which the specified Person and its subsidiaries collectively hold a 50% or
greater equity interest; (c) any partnership or similar organization in which
the specified Person or subsidiary of the specified Person is a general partner;
or (d) any Person the management of which is directly or indirectly controlled
by the specified Person and its Subsidiaries through the exercise of voting
power, by contract or otherwise.
"Tax" means any U.S. or non U.S. federal, state, provincial, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, intangible property,
recording, occupancy, sales, use, transfer, registration, value added minimum,
estimated or other tax of any kind whatsoever, including any interest, additions
to tax, penalties, fees, deficiencies, assessments, additions or other charges
of any nature with respect thereto, whether disputed or not.
1.2 Other Definitions.
-----------------
The following terms shall, when used in this Agreement, have the meanings
assigned to such terms in the Sections indicated.
Term
Schedule
"Agreement"...........................................................Preamble
"Closing"............................................................. 2.1
"Closing Date"........................................................ 2.1
"Company Certificates"................................................ 2.7(a)
"Company Financial Statements"........................................ 3.8
"Company Intellectual Property Rights"................................ 3.6
"Company Shares"......................................................Recitals
"Exchange"............................................................Recitals
"PEI Parties".........................................................Preamble
"Material Company Contract"........................................... 3.4
"Material PEI Contract"............................................... 4.4
"Options"............................................................. 3.2(b)
"Parties".............................................................Preamble
"PEI Common Stock"....................................................Recitals
"Preferred Stock"..................................................... 3.2(a)
"Sellers".............................................................Recitals
ARTICLE II
EXCHANGE OF SHARES
2.1 Exchange of Shares.
--------------------
Subject to the terms and conditions of this Agreement, on the Closing Date
(as hereinafter defined):
(a) PEI shall issue and deliver to each of the Sellers and their
designees the number of authorized but unissued shares of PEI Common Stock set
forth opposite such Seller's and designee's names set forth on Schedule I
hereto, and (b) each Seller agrees to deliver to the Company, the number of
issued shares of the Company set forth opposite such Seller's name on Schedule I
hereto along with an appropriately executed stock power endorsed in favor of the
Company.
2.2 Restrictive Legend.
-------------------
All certificates representing the Exchange Shares shall contain the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE,
INCLUDING CERTAIN VOTING AND TRANSFER RIGHTS WITH
RESPECT THERETO, ARE SUBJECT TO THE TERMS OF THE
SHARE EXCHANGE AGREEMENT, BY AND BETWEEN PAWNBROKERS
EXCHANGE INC., MICHAEL VARDAKIS, EXPORT EREZ USA,
INC., AND THE STOCKHOLDERS OF EXPORT EREZ USA, INC.,
A COPY OF WHICH IS ON FILE IN THE PRINCIPAL OFFICE OF
THE ISSUER."
2.3 Closing.
-------
The closing of the transactions contemplated by this Agreement and the
Collateral Documents ("Closing") shall take place at the offices of Loeb & Loeb
LLP, 10100 Santa Monica Boulevard, Suite 2200, Los Angeles, California 90067, or
at such other location as the parties may agree, at 11:00 a.m., Pacific Time, it
being understood and agreed that the Closing shall be deemed to occur
simultaneously with the execution of this Agreement. The date on which the
Closing actually occurs is referred to herein as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
-------------------------------------------------------------
The Company and each of the Sellers (as to Sections 3.1-3.13, to the best
knowledge of such Seller) represent and warrant to PEI that the statements
contained in this ARTICLE III are correct and complete as of the date of this
Agreement and, except as provided in Section 7.1, 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 ARTICLE III, except
in the case of representations and warranties stated to be made as of the date
of this Agreement or as of another date and except for changes contemplated or
permitted by this Agreement).
3.1 Organization and Qualification.
------------------------------
The Company and each of its Subsidiaries, collectively referred to herein
as the Company, is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization. The
Company has all requisite power and authority to own, lease and use its assets
as they are currently owned, leased and used and to conduct its business as it
is currently conducted. The Company is duly qualified or licensed to do business
in and is in good standing in each jurisdiction in which the character of the
properties owned, leased or used by it or the nature of the activities conducted
by it make such qualification necessary, except any such jurisdiction where the
failure to be so qualified or licensed would not have a Material Adverse Effect
on the Company or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents or the ability of
the Company to perform its obligations under this Agreement or any of the
Collateral Documents.
3.2 Capitalization.
--------------
(a) As of the date hereof, the authorized, issued and outstanding capital
stock and other ownership interests of the Company consists of 100,000,000
shares of common stock, $.0001 par value of which 13,157,900 shares are
outstanding and 20,000,000 shares of Preferred Stock, $.0001 par value per share
(the "Preferred Stock"), of which none are outstanding. All of the outstanding
Company Common Stock and Preferred Stock have been duly authorized and are
validly issued, fully paid and nonassessable.
(b) Schedule 3.2(b)(i) lists all outstanding or authorized options,
warrants, purchase rights, preemptive rights or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock or other ownership interests (collectively
"Options").
(c) All of the issued and outstanding capital stock of Company has been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable and have been issued in compliance with applicable securities laws
and other applicable Legal Requirements or transfer restrictions under
applicable securities laws.
3.3 Authority and Validity.
----------------------
The Company and each of the Sellers have all requisite power to execute and
deliver, to perform such Party's obligations under, and to consummate the
transactions contemplated by, this Agreement (subject to receipt of any
consents, approvals, authorizations or other matters). The execution and
delivery by the Company and each of the Sellers of, the performance by the
Company and each of the Sellers of such Party's obligations under, and the
consummation by the Company and each of the Sellers of the transactions
contemplated by, this Agreement have been duly authorized by all requisite
action of the Company and each of the Sellers. This Agreement has been duly
executed and delivered by the Company and each of the Sellers and (assuming due
execution and delivery by the PEI Parties) is the legal, valid, and binding
obligation of the Company and each of the Sellers, enforceable against such
Party in accordance with its terms. Upon the execution and delivery of the
Collateral Documents by each Person (other than the PEI Parties) that is
required by this Agreement to execute, or that does execute, this Agreement or
any of the Collateral Documents, and assuming due execution and delivery thereof
by the PEI Parties, the Collateral Documents will be the legal, valid and
binding obligations of the Company and each of the Sellers, enforceable against
such Party in accordance with their respective terms.
3.4 No Breach or Violation.
----------------------
Subject to obtaining the consents, approvals, authorizations, and orders of
and making the registrations or filings with or giving notices to Regulatory
Authorities and Persons identified herein, the execution, delivery and
performance by the Company and each of the Sellers of this Agreement and the
Collateral Documents to which such Party is a party, and the consummation of the
transactions contemplated hereby and thereby in accordance with the terms and
conditions hereof and thereof, do not and will not conflict with, constitute a
violation or breach of, constitute a default or give rise to any right of
termination or acceleration of any right or obligation of the Company or any of
the Sellers under, or result in the creation or imposition of any Encumbrance
upon the Company, the Company Assets, the Company Business or the Company Common
Stock.
3.5 Consents and Approvals.
----------------------
No consent, approval, authorization or order of, registration or filing
with, or notice to, any Regulatory Authority or any other Person is necessary to
be obtained, made or given by the Company or any Seller in connection with the
execution, delivery and performance by the Company or any Seller of this
Agreement or any Collateral Document or for the consummation by the Company of
the transactions contemplated hereby or thereby, except to the extent the
failure to obtain any such consent, approval, authorization or order or to make
any such registration or filing would not have a Material Adverse Effect on the
Company or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents or the ability of
the Company to perform its obligations under this Agreement or any of the
Collateral Documents.
3.6 Intellectual Property.
----------------------
To the knowledge of the Company, the Company has good title to or the right
to use all material company intellectual property rights and all material
inventions, processes, designs, formulae, trade secrets and know-how necessary
for the operation of the Company Business without the payment of any royalty or
similar payment.
3.7 Compliance with Legal Requirements.
----------------------------------
The Company has operated the Company Business in compliance with all Legal
Requirements applicable to the Company except to the extent the failure to
operate in compliance with all material Legal Requirements would not have a
Material Adverse Effect on the Company or Material Adverse Effect on the
validity, binding effect or enforceability of this Agreement or the Collateral
Documents.
3.8 Financial Statements.
---------------------
The Company's financial statements (including the notes thereto) ("Company
Financial Statements") have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated in the notes thereto) and present fairly in all material respects the
financial condition of the Company and its results of operations as of the dates
and for the periods indicated (except as may be indicated in the notes thereto),
subject in the case of the interim unaudited financial statements only to normal
year-end adjustments (none of which will be material in amount) and the omission
of footnotes.
3.9 Ordinary Course.
---------------
The Company conducted its business, marketed its real property and
equipment and kept its books of accounts, records and files, substantially in
the same manner as previously conducted.
3.10 Litigation.
----------
Except as set forth on Schedule 3.10, as of the date of this Agreement (i)
there are no outstanding judgments or orders against or otherwise affecting or
related to the Company, the Company Business or the Company Assets; (ii) there
is no action, suit, complaint, proceeding or investigation, judicial,
administrative or otherwise, that is pending or, to the Company's knowledge,
threatened that, if adversely determined, would have a Material Adverse Effect
on the Company or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents.
3.11 Taxes.
-----
The Company has duly and timely filed in proper form all Tax Returns for
all Taxes required to be filed with the appropriate Regulatory Authority, except
where such failure would not have a Material Adverse Effect on the Company.
3.12 Books and Records.
------------------
The books and records of the Company accurately and fairly represent the
Company Business and its results of operations in all material respects. All
accounts receivable and inventory of the Company Business are reflected properly
on such books and records in all material respects.
3.13 Brokers or Finders.
------------------
No broker or finder has acted directly or indirectly for the Company, the
Company or any of its Affiliates in connection with the transactions
contemplated by this Agreement, and neither the Company, nor any of its
Affiliates has incurred any obligation to pay any brokerage or finder's fee or
other commission in connection with the transaction contemplated by this
Agreement.
3.14 Purchase for Investment.
-----------------------
(a) Each Seller is acquiring the PEI Shares for investment for such
Seller's own account and not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and such Seller has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Each Seller further represents that such Seller does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Company Shares.
(b) Each Seller understands that the PEI Shares are not registered under
the Securities Act on the ground that the sale and the issuance of securities
hereunder is exempt from registration under the Securities Act pursuant to
Section 4(2) thereof, and that the Company's reliance on such exemption is
predicated on such Seller's representations set forth herein. Such Seller is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the Act.
3.15 Investment Experience.
----------------------
Each Seller acknowledges that such Seller can bear the economic risk of its
investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the PEI Shares.
3.16 Information.
-----------
The Sellers have carefully reviewed such information as each Seller deemed
necessary to evaluate an investment in the PEI Shares. To the full satisfaction
of each Seller, such Seller has been furnished all materials that such Seller
has requested relating to the Company and the issuance of the PEI Shares
hereunder, and each Seller has been afforded the opportunity to ask questions of
representatives of the Company to obtain any information necessary to verify the
accuracy of any representations or information made or given to the Sellers.
Notwithstanding the foregoing, nothing herein shall derogate from or otherwise
modify the representations and warranties of the Company set forth in this
Agreement, on which each of the Sellers has relied in making the Exchange of the
Company Shares for the PEI Shares.
3.17 Restricted Securities.
----------------------
Each Seller understands that the PEI Shares may not be sold, transferred,
or otherwise disposed of without registration under the Act or an exemption
there from, and that in the absence of an effective registration statement
covering the PEI Shares or any available exemption from registration under the
Act, the PEI Shares must be held indefinitely. Each Seller is aware that the PEI
Shares may not be sold pursuant to Rule 144 promulgated under the Act unless all
of the conditions of that Rule are met. Among the conditions for use of Rule 144
may be the availability of current information to the public about the Company.
3.18 Disclosure.
----------
No representation or warranty of the Company in this Agreement or in the
Collateral Documents and no statement in any certificate furnished or to be
furnished by the Company pursuant to this Agreement contained, contains or will
contain on the date such agreement or certificate was or is delivered, or on the
Closing Date, any untrue statement of a material fact, or omitted, omits or will
omit on such date to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PEI PARTIES
Each of the PEI Parties, jointly and severally, represent and warrant to
the Company that the statements contained in this ARTICLE IV are correct and
complete as of the date of this Agreement and, except as provided in Section
8.1, 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 ARTICLE IV, except in the case of representations and warranties
stated to be made as of the date of this Agreement or as of another date and
except for changes contemplated or permitted by the Agreement).
4.1 Organization and Qualification.
------------------------------
PEI is a corporation duly organized, validly existing and in good standing
under the laws of Utah and each Subsidiary of PEI is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation. PEI has, and each Subsidiary of PEI has all
requisite power and authority to own, lease and use its assets as they are
currently owned, leased and used and to conduct its business as it is currently
conducted. PEI is, and each of its Subsidiaries is, duly qualified or licensed
to do business in and is in good standing in each jurisdiction in which the
character of the properties owned, leased or used by it or the nature of the
activities conducted by it makes such qualification necessary, except any such
jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a Material Adverse Effect on PEI or a Material Adverse
Effect on the validity, binding effect or enforceability of this Agreement or
the Collateral Documents or the ability of the Company or any of the PEI Parties
to perform their obligations under this Agreement or any of the Collateral
Documents.
4.2 Capitalization.
--------------
(a) As of the date hereof, PEI's authorized capital stock of 300,000,000
shares of common stock, no par value, of which there are 2,149,000 shares
outstanding. The PEI Shares, when issued in accordance with this Agreement, will
have been duly authorized, validly issued and outstanding and will be fully paid
and nonassessable.
(b) Schedule 4.2(b) lists all outstanding or authorized options, warrants,
purchase rights, preemptive rights or other contracts or commitments that could
require PEI or any of its Subsidiaries to issue, sell, or otherwise cause to
become outstanding any of its capital stock or other ownership interests.
(c) All of the issued and outstanding shares of PEI Common Stock, and all
outstanding ownership interests of each of PEI's Subsidiaries have been duly
authorized and are validly issued and outstanding, fully paid and nonassessable
(with respect to Subsidiaries that are corporations) and have been issued in
compliance with applicable securities laws and other applicable Legal
Requirements.
4.3 Authority and Validity.
----------------------
Each PEI Party has all requisite power to execute and deliver, to perform
such party's obligations under, and to consummate the transactions contemplated
by, this Agreement and the Collateral Documents. The execution and delivery by
each PEI Party of, the performance by each PEI Party of such party's respective
obligations under, and the consummation by the PEI Parties of the transactions
contemplated by, this Agreement and the Collateral Documents have been duly
authorized by all requisite action of each PEI Party. This Agreement has been
duly executed and delivered by each of the PEI Parties and (assuming due
execution and delivery by the Company and the Sellers) is the legal, valid and
binding obligation of each PEI Party, enforceable against each of them in
accordance with its terms. Upon the execution and delivery by each of the PEI
Parties of the Collateral Documents to which each of them is a party, and
assuming due execution and delivery thereof by the other parties thereto, the
Collateral Documents will be the legal, valid and binding obligations of each
such Person, as the case may be, enforceable against each of them in accordance
with their respective terms.
4.4 No Breach or Violation.
-----------------------
Subject to obtaining the consents, approvals, authorizations, and orders of
and making the registrations or filings with or giving notices to Regulatory
Authorities and Persons identified herein, the execution, delivery and
performance by the PEI Parties of this Agreement and the Collateral Documents to
which each is a party and the consummation of the transactions contemplated
hereby and thereby in accordance with the terms and conditions hereof and
thereof, do not and will not conflict with, constitute a violation or breach of,
constitute a default or give rise to any right of termination or acceleration of
any right or obligation of any PEI Party under, or result in the creation or
imposition of any Encumbrance upon the property of PEI.
4.5 Consents and Approvals.
----------------------
Except for requirements under applicable United States or state securities
laws, no consent, approval, authorization or order of, registration or filing
with, or notice to, any Regulatory Authority or any other Person is necessary to
be obtained, made or given by any PEI Party in connection with the execution,
delivery and performance by them of this Agreement or any Collateral Documents
or for the consummation by them of the transactions contemplated hereby or
thereby, except to the extent the failure to obtain such consent, approval,
authorization or order or to make such registration or filings or to give such
notice would not have a Material Adverse Effect on PEI or a material adverse
effect on the validity, binding effect or enforceability of this Agreement or
the Collateral Documents or the ability of the Company or any of the PEI Parties
to perform its obligations under this Agreement or any of the Collateral
Documents.
4.6 Compliance with Legal Requirements.
----------------------------------
PEI and its Subsidiaries have operated the PEI Business in compliance with
all material Legal Requirements applicable to PEI and its Subsidiaries, except
to the extent the failure to operate in compliance with all material Legal
Requirements would not have a Material Adverse Effect on PEI or a Material
Adverse Effect on the validity, binding effect or enforceability of this
Agreement or the Collateral Documents.
4.7 Litigation.
----------
Except as set forth on Schedule 4.7 or in the PEI Securities Filings filed
through the date hereof, (i) there are no outstanding judgments or orders
against or otherwise affecting or related to PEI, any of its Subsidiaries, or
their business or assets; and (ii) there is no action, suit, complaint,
proceeding or investigation, judicial, administrative or otherwise, that is
pending or, to the best knowledge of any PEI Party, threatened that, if
adversely determined, would have a Material Adverse Effect on PEI or a material
adverse effect on the validity, binding effect or enforceability of this
Agreement or the Collateral Documents.
4.8 Ordinary Course.
---------------
Since the date of the balance sheet included in the most recent PEI
Securities Filings filed through the date hereof, there has not been any
occurrence, event, incident, action, failure to act or transaction involving PEI
or any of its Subsidiaries which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on PEI.
4.9 Assets and Liabilities.
----------------------
As of the date of this Agreement, neither PEI nor any of its Subsidiaries
has any Assets or Liability, except for the (i) the Assets and Liabilities
disclosed on Schedule 4.9 and (ii) Liabilities incurred in connection with the
consummation of the transaction contemplated by this Agreement.
4.10 Taxes.
-----
PEI has, and each of its Subsidiaries has, duly and timely filed in proper
form all Tax Returns for all Taxes required to be filed with the appropriate
Governmental Authority, except where such failure to file would not have a
Material Adverse Effect on PEI.
4.11 Books and Records.
-----------------
The books and records of PEI and its Subsidiaries accurately and fairly
represent the PEI Business and its results of operations in all material
respects. All accounts receivable and inventory of the PEI Business are
reflected properly on such books and records in all material respects.
4.12 Environmental Matters.
---------------------
Neither PEI nor any of the PEI Subsidiaries has violated any Environmental
Laws, lacks any permits, licenses or other approvals required of them under
applicable Environmental Laws or is violating any term or condition of any such
permit, license or approval, except in each case as would not, individually or
in the aggregate, result in a Material Adverse Effect on PEI.
4.13 Financial and Other Information.
-------------------------------
(a) The historical financial statements (including the notes thereto)
contained (or incorporated by reference) in the PEI Securities Filings have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated in the notes thereto), and
present fairly the financial condition of PEI and its results of operations as
of the dates and for the periods indicated, subject in the case of the unaudited
financial statements only to normal year-end adjustments (none of which will be
material in amount) and the omission of footnotes.
(b) PEI Securities Filings did not, as of their filing dates, contain
(directly or by incorporation by reference) any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein (or incorporated therein by reference), in light
of the circumstances under which they were or will be made, not misleading.
4.14 Trading.
-------
No order suspending the sale or ceasing the trading or quotation of the PEI
Common Stock on the Over-The-Counter Bulletin Board has been issued by any
court, securities commission or regulatory authority in the United States, and
no proceedings for such purpose are pending or, to the knowledge of PEI, after
reasonable inquiry, threatened.
4.15 Brokers or Finders.
------------------
No broker or finder has acted directly or indirectly for PEI, any PEI Party
or any of their Affiliates in connection with the transactions contemplated by
this Agreement, and neither PEI, any PEI Party nor any of their Affiliates has
incurred any obligation to pay any brokerage or finder's fee or other commission
in connection with the transaction contemplated by this Agreement.
4.16 Disclosure.
----------
No representation or warranty of PEI in this Agreement or in the Collateral
Documents and no statement in any certificate furnished or to be furnished by
PEI pursuant to this Agreement contained, contains or will contain on the date
such agreement or certificate was or is delivered, or on the Closing Date, any
untrue statement of a material fact, or omitted, omits or will omit on such date
to state any material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
4.17 Filings.
-------
PEI has made all of the filings required by the Securities Act of 1933, as
amended, and the Exchange Act of 1934, as amended, required to be made and no
such filing contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements made, not misleading.
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
Between the date of this Agreement and the Closing Date:
5.1 Additional Information.
----------------------
The Company shall provide to PEI and its Representatives such financial,
operating and other documents, data and information relating to the Company, the
Company Business and the Company Assets and Liabilities of the Company, as PEI
or its Representatives may reasonably request.
5.2 Continuity and Maintenance of Operations.
----------------------------------------
The Company shall, and shall cause each of its Subsidiaries to use its
commercially reasonable efforts to promote the financial success of the Company
Business and promptly notify PEI of any material adverse change in the condition
(financial or otherwise) of the Company Business and use its commercially
reasonable efforts to promote, develop and preserve its relationships with its
present employees as well as the goodwill of its customers and promptly notify
PEI of any material adverse change in such relationships.
5.3 Consents and Approvals.
----------------------
As soon as practicable after execution of this Agreement, the Company shall
use commercially reasonable efforts to obtain any necessary consent, approval,
authorization or order of, make any registration or filing with or give any
notice to, any Regulatory Authority or Person as is required to be obtained,
made or given by the Company to consummate the transactions contemplated by this
Agreement and the Collateral Documents.
5.4 Notification of Certain Matters.
-------------------------------
The Company shall promptly notify PEI of any fact, event, circumstance or
action known to it that is reasonably likely to cause the Company to be unable
to perform any of its covenants contained herein or any condition precedent in
ARTICLE VII not to be satisfied, or that, if known on the date of this
Agreement, would have been required to be disclosed to PEI pursuant to this
Agreement or the existence or occurrence of which would cause any of the
Company's representations or warranties under this Agreement not to be correct
and/or complete. The Company shall give prompt written notice to PEI of any
adverse development causing a breach of any of the representations and
warranties in ARTICLE III as of the date made.
5.5 Company Schedules.
-----------------
The Company shall, from time to time prior to Closing, supplement its
Schedules with additional information that, if existing or known to it on the
date of delivery to the PEI Parties, would have been required to be included
therein.
5.6 Transfer PEI Shareholder.
------------------------
As soon practicable after the Closing, the Company shall transfer, to the
PEI Shareholder, all of the shares of the PEI Subsidiary. ARTICLE VI COVENANTS
OF THE PEI PARTIES
Between the date of this Agreement and the Closing Date,
6.1 Additional Information.
----------------------
PEI shall provide to the Company and its Representatives such financial,
operating and other documents, data and information relating to PEI and its
Subsidiaries, the PEI Business and the PEI Assets and the Liabilities of PEI and
its Subsidiaries, as the Company or its Representatives may reasonably request.
6.2 No Solicitations.
----------------
From and after the date of this Agreement until the Closing or termination
of this Agreement pursuant to ARTICLE X, PEI will not nor will it authorize or
permit any of its officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by it, directly or
indirectly, (i) solicit or initiate the making, submission or announcement of
any other acquisition proposal, (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to any other acquisition proposal, (iii) engage in discussions with any
Person with respect to any other acquisition proposal, except as to the
existence of these provisions, (iv) approve, endorse or recommend any other
acquisition proposal or (v) enter into any letter of intent or similar document
or any contract agreement or commitment contemplating or otherwise relating to
any other acquisition proposal.
6.3 Continuity and Maintenance of Operations.
----------------------------------------
PEI shall, and shall cause each of its Subsidiaries to operate the PEI
Business in a commercially reasonable manner and promptly notify the Company of
any material adverse change in the condition (financial or otherwise) of the PEI
Business.
6.4 Consents and Approvals.
----------------------
As soon as practicable after execution of this Agreement, the PEI Parties
shall use their commercially reasonable efforts to obtain any necessary consent,
approval, authorization or order of, make any registration or filing with or
give notice to, any Regulatory Authority or Person as is required to be
obtained, made or given by any of the PEI Parties to consummate the transactions
contemplated by this Agreement and the Collateral Documents.
6.5 Notification of Certain Matters.
-------------------------------
PEI shall promptly notify the Company of any fact, event, circumstance or
action known to it that is reasonably likely to cause any PEI Party to be unable
to perform any of its covenants contained herein or any condition precedent in
ARTICLE VIII not to be satisfied, or that, if known on the date of this
Agreement, would have been required to be disclosed to the Company pursuant to
this Agreement or the existence or occurrence of which would cause any of the
PEI Parties' representations or warranties under this Agreement not to be
correct and/or complete. The PEI Parties shall give prompt written notice to the
Company of any adverse development causing a breach of any of the
representations and warranties in ARTICLE IV.
6.6 PEI Schedules.
-------------
The PEI Parties shall, from time to time prior to Closing, supplement the
PEI Schedules with additional information that, if existing or known to it on
the date of this Agreement, would have been required to be included therein.
6.7 Securities Filings.
------------------
PEI will timely file all reports and other documents required to be filed
with the Securities and Exchange Commission, which reports and other documents
do not and will not contain any misstatement of a material fact, and do not and
will not omit any material fact necessary to make the statements therein not
misleading.
6.8 Election to PEI's Board of Directors.
------------------------------------
At the Closing, PEI shall promptly secure the resignation of the present
directors in order to cause the nominees of the Company to be appointed to PEI's
board of directors subject to fiduciary obligations under applicable law.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PEI PARTIES
All obligations of the PEI Parties under this Agreement shall be subject to
the fulfillment at or prior to Closing of each of the following conditions, it
being understood that the PEI Parties may, in their sole discretion, to the
extent permitted by applicable Legal Requirements, waive any or all of such
conditions in whole or in part.
7.1 Accuracy of Representations.
---------------------------
All representations and warranties of the Company contained in this
Agreement, the Collateral Documents and any certificate delivered by any of the
Company at or prior to Closing shall be, if specifically qualified by
materiality, true in all respects and, if not so qualified, shall be true in all
material respects, in each case on and as of the Closing Date with the same
effect as if made on and as of the Closing Date, except for representations and
warranties expressly stated to be made as of the date of this Agreement or as of
another date other than the Closing Date and except for changes contemplated or
permitted by this Agreement. The Company shall have delivered to PEI a
certificate dated as of the Closing Date to the foregoing effect.
7.2 Covenants.
---------
The Company shall, in all material respects, have performed and complied
with each of the covenants, obligations and agreements contained in this
Agreement and the Collateral Documents that are to be performed or complied with
by them at or prior to Closing. The Company shall have delivered to a
certificate dated the Closing Date to the foregoing effect.
7.3 Consents and Approvals.
----------------------
All consents, approvals, permits, authorizations and orders required to be
obtained from, and all registrations, filings and notices required to be made
with or given to, any Regulatory Authority or Person as provided herein shall
have been obtained.
7.4 Delivery of Documents.
---------------------
The Company shall have delivered, or caused to be delivered, to PEI the
following documents:
(i) Certified copies of the Company's articles of incorporation and
by-laws and certified resolutions of the board of directors of the Company
authorizing the execution of this Agreement and the Collateral Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby.
(ii) Such other documents and instruments as PEI may reasonably
request: (A) to evidence the accuracy of the Company's representations and
warranties under this Agreement, the Collateral Documents and any documents,
instruments or certificates required to be delivered thereunder; (B) to evidence
the performance by the Company of, or the compliance by the Company with, any
covenant, obligation, condition and agreement to be performed or complied with
by the Company under this Agreement and the Collateral Documents; or (C) to
otherwise facilitate the consummation or performance of any of the transactions
contemplated by this Agreement and the Collateral Documents.
7.5 No Material Adverse Change.
--------------------------
Since the date hereof, there shall have been no material adverse change in
the Company Assets, the Company Business or the financial condition or
operations of the Company, taken as a whole.
7.6 Lock-Up Agreements.
------------------
The Company will have obtained signed Lock-Up Agreements, a form of which
is attached hereto as Exhibit A, from the Company's stockholders set forth on
Schedule 7.6.
7.7 Delivery of Company Shares.
--------------------------
The Sellers shall have delivered certificates representing 100% of the
Company Shares together with appropriate stock powers therefor.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS
------------------------------------------------------------------
All obligations of the Company and the Sellers under this Agreement shall
be subject to the fulfillment at or prior to Closing of the following
conditions, it being understood that the Company and the Sellers may, in their
sole discretion, to the extent permitted by applicable Legal Requirements, waive
any or all of such conditions in whole or in part.
8.1 Accuracy of Representations.
---------------------------
All representations and warranties of the PEI Parties contained in this
Agreement and the Collateral Documents and any other document, instrument or
certificate delivered by any of the PEI Parties at or prior to the Closing shall
be, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, shall be true and correct in all material respects, in
each case on and as of the Closing Date with the same effect as if made on and
as of the Closing Date, except for representations and warranties expressly
stated to be made as of the date of this Agreement or as of another date other
than the Closing Date and except for changes contemplated or permitted by this
Agreement. The PEI Parties shall have delivered to the Company a certificate
dated as of the Closing Date to the foregoing effect.
8.2 Covenants.
---------
The PEI Parties shall, in all material respects, have performed and
complied with each obligation, agreement, covenant and condition contained in
this Agreement and the Collateral Documents and required by this Agreement and
the Collateral Documents to be performed or complied with by the PEI Parties at
or prior to Closing. The PEI Parties shall have delivered to the Company a
certificate dated the Closing Date to the foregoing effect.
8.3 Consents and Approvals.
----------------------
All consents; approvals, authorizations and orders required to be obtained
from, and all registrations, filings and notices required to be made with or
given to, any Regulatory Authority or Person as provided herein shall have been
obtained.
8.4 Delivery of Documents.
---------------------
The PEI Parties, as applicable, shall have executed and delivered, or
caused to be executed and delivered, to the Company the following documents: (i)
Certified copies of the articles of incorporation and by-laws of PEI and
certified resolutions by the board of directors authorizing the execution of
this Agreement and the Collateral Documents and the consummation of the
transactions contemplated hereby. (ii) Such other documents and instruments as
the Company may reasonably request: (A) to evidence the accuracy of the
representations and warranties of the PEI Parties under this Agreement and the
Collateral Documents and any documents, instruments or certificates required to
be delivered thereunder; (B) to evidence the performance by the PEI Parties of,
or the compliance by the PEI Parties with, any covenant, obligation, condition
and agreement to be performed or complied with by the PEI Parties under this
Agreement and the Collateral Documents; or (C) to otherwise facilitate the
consummation or performance of any of the transactions contemplated by this
Agreement and the Collateral Documents. (iii) Letters of resignation from PEI's
current officers and directors to be effective upon the Closing. (iv) Board
resolutions from PEI's current directors appointing only designees of the
Company to PEI's board of directors. (v) All other corporate books and records
of PEI.
8.5 No Material Adverse Change.
--------------------------
There shall have been no material adverse change in the business, financial
condition or operations of PEI and its Subsidiaries taken as a whole.
8.6 No Assets & Liabilities.
-----------------------
Assuming compliance with Section 5.6, PEI and its Subsidiaries shall have
no assets or liabilities.
8.7 Payment of Costs.
----------------
The PEI Shareholder shall have paid all of the costs and expenses of PEI
and himself associated with the transactions contemplated herein.
8.8 Dividend and Cancellation of Shares.
-----------------------------------
The Company shall have caused the cancellation of 1,649,0000 shares of PEI
Common Stock and then shall have paid the Dividend of eight (8) shares of common
stock for each share of common stock issued and outstanding prior to the
Closing.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Sellers.
------------------------------
Each of the Sellers (pro rata based on each Seller's percentage interest in
the Company) shall indemnify, defend and hold harmless (i) PEI, (ii) each of
PEI's assigns and successors in interest to the Company Shares, and (iii) each
of their respective shareholders, members, partners, directors, officers,
managers, employees, agents, attorneys and representatives, from and against any
and all Losses which may be incurred or suffered by any such party and which may
arise out of or result from any breach of any representation, warranty, covenant
or agreement of the Company or the Sellers contained in this Agreement.
Notwithstanding the foregoing, (a) no claim under this Section 9.1 may be made
unless notice is given pursuant to Section 9.3 within one year from the Closing
Date, and (b) as to Sections 3.14-3.17, no Seller shall be responsible for the
representations and warranties of any other Seller.
9.2 Indemnification by the PEI Parties.
----------------------------------
The PEI Parties shall indemnify, defend and hold harmless the Company and
each of the Sellers from and against any and all Losses which may be incurred or
suffered by any such party hereto and which may arise out of or result from any
breach of any representation, warranty, covenant or agreement of the PEI Parties
contained in this Agreement made as of the Closing. Notwithstanding the
foregoing, no claim under this Section 9.2 may be made unless notice is given
pursuant to Section 9.3 within one year from the Closing Date.
9.3 Notice to Indemnifying Party.
----------------------------
If any party (the "Indemnified Party") receives notice of any claim or
other commencement of any action or proceeding with respect to which any other
party (or parties) (the "Indemnifying Party") is obligated to provide
indemnification pursuant to Sections 9.1 or 9.2, the Indemnified Party shall
promptly give the Indemnifying Party written notice thereof, which notice shall
specify in reasonable detail, if known, the amount or an estimate of the amount
of the liability arising therefrom and the basis of the claim. Such notice shall
be a condition precedent to any liability of the Indemnifying Party for
indemnification hereunder, but the failure of the Indemnified Party to give
prompt notice of a claim shall not adversely affect the Indemnified Party's
right to indemnification hereunder unless the defense of that claim is
materially prejudiced by such failure. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party (which shall not be unreasonably withheld or delayed) unless suit shall
have been instituted against it and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 9.4.
9.4 Defense by Indemnifying Party.
-----------------------------
In connection with any claim giving rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding by a Person who is not a
party to this Agreement, the Indemnifying Party at its sole cost and expense
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding (i) if it acknowledges to the Indemnified Party
in writing its obligations to indemnify the Indemnified Party with respect to
all elements of such claim (subject to any limitations on such liability
contained in this Agreement) and (ii) if it provides assurances, reasonably
satisfactory to the Indemnified Party, that it will be financially able to
satisfy such claims in full if the same are decided adversely. If the
Indemnifying Party assumes the defense of any such claim or legal proceeding, it
may use counsel of its choice to prosecute such defense, subject to the approval
of such counsel by the Indemnified Party, which approval shall not be
unreasonably withheld or delayed. In this regard, Loeb & Loeb LLP is hereby
approved by PEI as counsel to the Company and the Sellers (in such party's
capacity as the Indemnifying Party). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its
counsel and at its own expense; provided, however, that if the Indemnified
Party, in its sole discretion, determines that there exists a conflict of
interest between the Indemnifying Party (or any constituent party thereof) and
the Indemnified Party, the Indemnified Party (or any constituent party thereof)
shall have the right to engage separate counsel, the reasonable costs and
expenses of which shall be paid by the Indemnified Party. If the Indemnifying
Party assumes the defense of any such claim or legal proceeding, the
Indemnifying Party shall take all steps necessary to pursue the resolution
thereof in a prompt and diligent manner. The Indemnifying Party shall be
entitled to consent to a settlement of, or the stipulation of any judgment
arising from, any such claim or legal proceeding, with the consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed;
provided, however, that no such consent shall be required from the Indemnified
Party if (i) the Indemnifying Party pays or causes to be paid all Losses arising
out of such settlement or judgment concurrently with the effectiveness thereof
(as well as all other Losses theretofore incurred by the Indemnified Party which
then remain unpaid or unreimbursed), (ii) in the case of a settlement, the
settlement is conditioned upon a complete release by the claimant of the
Indemnified Party and (iii) such settlement or judgment does not require the
Encumbrance of any asset of the Indemnified Party or impose any restriction upon
its conduct of business.
ARTICLE X
TERMINATION
10.1 Termination.
-----------
This Agreement may be terminated, and the transactions contemplated hereby
may be abandoned, at any time prior to the Effective Time.
(a) by mutual written agreement of Parties; or
(b) by either the Company or PEI upon notification to the
non-terminating party by the terminating party:
(i) if the terminating party is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement such that the conditions in
Sections 7.1, 7.2, 8.1 or 8.2 will not be satisfied;
(ii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making illegal
or otherwise permanently restricting, preventing or otherwise prohibiting the
Exchange and such order shall have become final and nonappealable.
10.2 Effect of Termination.
---------------------
If this Agreement is validly terminated by either the Company or PEI
pursuant to Section 10.1, this Agreement will forthwith become null and void and
there will be no liability or obligation on the part of the parties hereto,
except that nothing contained herein shall relieve any party hereto from
liability for willful breach of its representations, warranties, covenants or
agreements contained in this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Parties Obligated and Benefited.
-------------------------------
This Agreement shall be binding upon the Parties and their respective
successors by operation of law and shall inure solely to the benefit of the
Parties and their respective successors by operation of law, and no other Person
shall be entitled to any of the benefits conferred by this Agreement, except
that the Company Shareholders shall be third party beneficiaries of this
Agreement. Without the prior written consent of the other Party, no Party may
assign this Agreement or the Collateral Documents or any of its rights or
interests or delegate any of its duties under this Agreement or the Collateral
Documents.
11.2 Publicity.
---------
The initial press release shall be a joint press release and thereafter the
Company and PEI each shall consult with each other prior to issuing any press
releases or otherwise making public announcements with respect to the Exchange
and the other transactions contemplated by this Agreement and prior to making
any filings with any third party and/or any Regulatory Authorities (including
any national securities interdealer quotation service) with respect thereto,
except as may be required by law or by obligations pursuant to any listing
agreement with or rules of any national securities interdealer quotation
service.
11.3 Notices.
-------
Any notices and other communications required or permitted hereunder shall
be in writing and shall be effective upon delivery by hand or upon receipt if
sent by certified or registered mail (postage prepaid and return receipt
requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section as promptly as practicable thereafter). Notices shall be addressed
as follows:
(a) If to the PEI Parties, to:
Pawnbrokers Exchange Inc.
158 South State Street
Salt Lake City, Utah 84111
With a copy to:
Leonard Burningham, Esq.
455 East 5th Street South
Salt Lake City, Utah 84111
Telecopy No.: 801-355-7126
If to the Company and the Sellers to:
Industrial Zone Erez
P.O. Box 779
Ashkelton, Israel 78101
Attention: Yoseph Postbinder
Telecopy No.: 011-972-8-6899287
With a copy to:
Loeb & Loeb LLP
10100 Santa Monica Blvd., Suite 2200
Los Angeles, California 90067-4164
Attention: David L. Ficksman, Esq.
Telecopy No.: 310-202-2192
Any Party may change the address to which notices are required to be sent
by giving notice of such change in the manner provided in this Section.
11.4 Attorneys' Fees.
---------------
In the event of any action or suit based upon or arising out of any alleged
breach by any Party of any representation, warranty, covenant or agreement
contained in this Agreement or the Collateral Documents, the prevailing Party
shall be entitled to recover reasonable attorneys' fees and other costs of such
action or suit from the other Party. Notwithstanding the foregoing, the
prevailing Party shall only be entitled to recover reasonable attorneys' fees
from the PEI Shareholder in connection with an enforcement of his indemnity
obligations set forth in Section 9.2 hereof.
11.5 Headings.
--------
The Article and Section headings of this Agreement are for convenience only
and shall not constitute a part of this Agreement or in any way affect the
meaning or interpretation thereof.
11.6 Choice of Law.
-------------
This Agreement and the rights of the Parties under it shall be governed by
and construed in all respects in accordance with the laws of the State of
Delaware, without giving effect to any choice of law provision or rule (whether
of the State of Delaware or any other jurisdiction that would cause the
application of the laws of any jurisdiction other than the State of Delaware).
11.7 Rights Cumulative.
-----------------
All rights and remedies of each of the Parties under this Agreement shall
be cumulative, and the exercise of one or more rights or remedies shall not
preclude the exercise of any other right or remedy available under this
Agreement or applicable law.
11.8 Further Actions.
---------------
The Parties shall execute and deliver to each other, from time to time at
or after Closing, for no additional consideration and at no additional cost to
the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably necessary
to give full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
11.9 Time of the Essence.
-------------------
Time is of the essence under this Agreement. If the last day permitted for
the giving of any notice or the performance of any act required or permitted
under this Agreement falls on a day which is not a Business Day, the time for
the giving of such notice or the performance of such act shall be extended to
the next succeeding Business Day.
11.10 Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
11.11 Entire Agreement.
----------------
This Agreement (including the Exhibits, the Company Schedules, the PEI
Schedules and any other documents, instruments and certificates referred to
herein, which are incorporated in and constitute a part of this Agreement)
contains the entire agreement of the Parties. Without limiting the generality of
the foregoing, this Agreement is intended to supercede the Letter of Intent
dated February __, 2002.
11.12 Expenses.
--------
Each party will be responsible for payment of its expenses in connection
with the transactions contemplated by this Agreement.
11.13 Survival of Representations and Covenants.
-----------------------------------------
Notwithstanding any right of any Party fully to investigate the affairs of
the Company or PEI, as the case may be, and notwithstanding any knowledge of
facts determined or determinable by any Party pursuant to such investigation or
right of investigation, each Party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of other Parties contained
in this Agreement. Each representation, warranty, covenant and agreement of the
Parties contained herein shall survive the execution and delivery of this
Agreement and the Closing and shall thereafter terminate and expire on the first
anniversary of the Closing Date unless, prior to such date, a Party has
delivered to the other Parties a written notice of a claim with respect to such
representation, warranty, covenant or agreement.
11.14 Appointment of Agent for Sellers.
--------------------------------
By executing this document, the Sellers, and each of them, hereby appoint
Joseph Postbinder their agent to take all action for their benefit and to
receive all notices hereunder. Mr. Postbinder's appointment hereunder shall
continue until his resignation or inability to act due to disability or death.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as
of the day and year first above written.
PAWNBROKERS EXCHANGE, INC., a Utah corporation
By:
-------------------------------------
Name:
-------------------------------------
Title: President
EXPORT EREZ USA, INC., a Delaware corporation
By:
-------------------------------------
Name: Yoseph Postbinder
Title: President
PEI SHAREHOLDER:
-------------------------------------------
Michael Vardakis
Number of Company Shares SELLERS:
- ------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
EXHIBIT A
[Form of Lock-Up]
_____________, 2002
Pawnbrokers Exchange Inc.
430 Fourth Street
Ogden, Utah 84404
Re: Lock-Up Agreement
Dear Sir or Madam:
Reference is made to that certain Share Exchange Agreement (the
"Agreement"), dated as of March __, 2002, among Pawnbrokers Exchange Inc., a
Utah corporation, (the "Company"), Michael Vardakis, Export Erez USA, Inc., a
Delaware corporation ("Export") and the stockholders of Export (the
"Stockholders"), pursuant to which the Stockholders will transfer to the
Company (the "Exchange") all of the shares of capital stock of Export in
exchange for shares of the Common Stock of the Company.
The Company has determined that the prospect of sales of the Company's
common stock, no par value ("Common Stock"), held by the undersigned within
one year after the Exchange could be detrimental to the Company. The Company
has requested that the undersigned agree not to sell any shares of Common
Stock until the expiration of a period ending one year after the date hereof.
The undersigned recognizes that it is in the best financial interests
of the undersigned, as a holder of stock, options, warrants or other
securities of the Company, that the Company complete the Exchange.
The undersigned further recognizes that the undersigned's Common Stock
is, or may be, subject to certain restrictions on its transferability,
including those imposed by the federal securities laws. Notwithstanding
these restrictions, the undersigned has agreed to enter into this letter
agreement to further assure the Company's Common Stock, now held by the
undersigned, will not enter the public market.
The undersigned, therefore, hereby acknowledges and agrees that the
undersigned will not, directly or indirectly, without the prior written
consent of the Company, sell, offer, contract to sell, pledge, grant any
option to purchase or otherwise dispose (collectively, a "Disposition") of
any shares of Common Stock or any securities convertible into or exchangeable
for, or any rights to purchase or acquire, Common Stock held by the
undersigned, acquired by the undersigned after the date hereof or which may
be deemed to be beneficially owned by the undersigned pursuant to the Rules
and Regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "Lock-Up Shares"), for a period of one year from the date hereof
(the "Lock-Up Period"). The foregoing restriction is expressly agreed to
preclude, among other Dispositions, the holder of Lock-Up Shares from
engaging in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition of Lock-Up Shares
during the Lock-Up Period, even if such Lock-Up Shares would be disposed of
by someone other than such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or
not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Lock-Up
Shares or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Lock-Up Shares.
Notwithstanding the foregoing, the undersigned may transfer any or all
of the Lock-Up Shares (i) as a bona fide gift or gifts or (ii) as a
distribution to limited partners or shareholders of such person; provided,
however, that in any such case it shall be a condition to the transfer that
the transferee execute an agreement stating that the transferee is receiving
and holding the Lock-Up Shares subject to the provisions of this letter
agreement. The transferor shall notify the Company in writing prior to the
transfer and there shall be no further transfer of such Lock-Up Shares except
in accordance with this letter agreement. Moreover, notwithstanding any
other provision of this letter agreement, the undersigned may exercise any
option to purchase shares of Common Stock, provided, however, that any shares
so acquired shall constitute Lock-Up Shares for the purposes of this letter
agreement.
The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of any
Lock-Up Shares.
Executed as an instrument under seal this ___ day of ________________,
2002.
Very truly yours,
Securityholder
By:
-------------------------------------
Signature of Securityholder
------------------------------------------
Name of Co-Securityholder, if applicable
(please print)
By:
-------------------------------------
Signature of Co-Securityholder, if
applicable
Schedule 3.2(b)(i)
Derivative Securities
The Company has granted an option to James Cassidy to purchase 125,000
shares. The Company plans to contest this option.
Schedule 3.10
Litigation
A lawsuit has been brought in Israel by an ex employee for
compensation/commissions. The claim is for 2,000,000 New Shekels. The
Company is defending the lawsuit.
Schedule 4.2(b)
None.
Schedule 4.7
None.
Schedule 4.9
[Mr. Burningham, please provide a number from the accountants for the Company
of the Assets and Liabilities of PEI as of the date of the Closing, March 25,
2002].
Schedule 7.6
Shareholders Subject to Lock-Up
None.
SHARE EXCHANGE AGREEMENT
by and between
Pawnbrokers Exchange, Inc., Michael Vardakis,
Export Erez USA, Inc. and the stockholders of Export Erez USA, Inc.
Dated as of March 25, 2002