EXHIBIT 99.1
PLAN OF REORGANIZATION AND STOCK PURCHASE AGREEMENT
This Plan of Reorganization and Stock Purchase Agreement (the
"Agreement") is made and entered into as of the 1st day of July 2006 by and
between Glas-Aire Industries Group, Ltd., a Nevada corporation ("GLAR"), Xxxxx
Xxxxxxxx, an individual and current Chief Executive Officer of GLAR ("CG" or the
"Consultant"), and Pacific Environmental Sampling, Inc., dba Environmental
Service Professionals (the "Buyer" or "Company"), a California corporation, with
respect to the following facts:
R E C I T A L S
A. GLAR is a publicly traded company with insignificant assets
and liabilities, and no active business.
B. The Buyer is a federally registered and regulated franchisor
of environmental sampling companies which operate throughout
North America, and is engaged in the business of providing
limited mold and allergen survey services for single family
and multi-tenant residential and commercial buildings (the
"Business").
C. The Buyer recently entered into two Letters of Intent (the
"XXXx") to effect a reverse merger with GLAR. At the closing
(the "Closing") of the transaction contemplated by this
Agreement (the "Transaction"), the Company will become a
wholly-owned subsidiary of GLAR, the shareholders of the
Company will thereafter become the majority shareholders of
GLAR, and CG will commence a one year consulting agreement
with the Company. After the closing, GLAR will change its name
to Environmental Sampling Professionals, Inc., and will apply
for a new trading symbol and CUSIP number.
D. The Buyer or its designees desire to acquire from GLAR and
GLAR desires to sell to the Company or its designees
14,625,000 shares of common stock ("Common Stock") of GLAR in
exchange for the Company's assumption of certain liabilities
of GLAR, 100% of the outstanding capital stock of the Company,
and certain covenants of the parties, in accordance with the
terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged by the parties to this Agreement,
and in light of the above recitals to this Agreement, the parties to this
Agreement hereby agree as follows:
1. SALE AND PURCHASE
1.1 SALE AND PURCHASE OF STOCK. In consideration for the Purchase Price
(as defined in Section 1.3 of this Agreement) and the other covenants of the
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Buyer in this Agreement, GLAR hereby agrees to convey to the Buyer or its
designees 14,625,000 shares of its capital stock (the "GLAR Stock") on the
Closing Date (as defined in Section 4.1 of this Agreement).
1.2 PRE-CLOSING COVENANTS. Prior to the Closing of the Transaction,
GLAR covenants with shareholder approval to effect a one for 3.75 reverse split
of its outstanding Common Stock, so that at the Closing, GLAR will have
1,568,463 shares of its Common Stock outstanding. These shares will include
106,700 shares in the name of Xxxxx Xxxxxxxxx, Esq. and 25,000 shares in the
name of Xxxx X. Xxxxxxxxxx, Esq. From the date of this Agreement first above
written until the Closing, GLAR will not issue any common or preferred stock
(except as contemplated in Section 1.3 of this Agreement) or any other of its
securities without the express prior written consent of the Buyer. Furthermore,
GLAR and CG covenant to (i) cancel or cause to be cancelled all outstanding
stock options and warrants to purchase any securities of GLAR so that by the
Closing, no such stock options or warrants are outstanding, (ii) cause to have
vacated and completely discharged the Order Appointing Xxxxx X. Xxxxxxx As
Custodian of Glas-Aire Industries Group, Ltd., pursuant to NRS 78.347, dated
July 17, 2006, and to pay all costs in connection therewith, so that CG
reasserts complete control of GLAR, and (iii) to have all debts of GLAR
discharged or settled in full, other than the debt specifically being assumed by
the Company under Section 1.3(2) of this Agreement and those costs referenced in
Section 1.3(4) of this Agreement. To the extent that any liabilities of GLAR or
any of its subsidiaries are owed to CG or CG owns any outstanding options or
warrants of GLAR or any of its subsidiaries immediately prior to the Closing, CG
hereby agrees that on the Closing, all such liabilities are immediately
automatically fully and forever discharged and cancelled, and all such warrants
and options are automatically cancelled and terminated. Each party will bear its
own expenses in connection with the Transaction contemplated hereby, including
without limitation, legal and accounting fees.
1.3 PURCHASE PRICE. In consideration for the GLAR stock conveyed to the
Buyer or its designees on the Closing Date (as defined in Section 4.1 of this
Agreement), the Buyer will provide to GLAR the following consideration (the
"Purchase Price") on or before the Closing: (1) the Company will cause 100% of
the shares of the Company's Common Stock (the "ESP Stock") to be conveyed to
GLAR, so that the Company becomes a wholly-owned subsidiary of GLAR on the
Closing, (2) assumption of the debt owed by GLAR to HSBC bank in the outstanding
amount of approximately CND $85,000 (Canadian dollars) as of May 1, 2006, (3)
enter into the consulting agreement with CG referenced in Section 2 of this
Agreement, and (4) pay the costs of bringing GLAR current on its reporting
obligations to the United States Securities and Exchange Commission after the
Closing. In the event the Buyer elects to make payments to HSBC prior to the
Closing, GLAR will issue a secured promissory note to the Company in the
principal amount of the payments by the Company to HSBC, secured by a perfected
security interest in 100 shares (the "Shares") of newly issued Series A
Preferred Stock of GLAR having voting power over, and convertible into, 90% of
the total issued and outstanding capital stock of GLAR at the time of its
issuance and at the time of a foreclosure on the Series A Preferred Stock, if a
foreclosure occurs. The certificates evidencing the shares of Series A Preferred
Stock will be issued in the name of the Company with executed stock powers to
accommodate a return of those shares to GLAR's treasury when and if the
promissory note is paid in full or the Transaction Closes, as contemplated by
this Agreement, provided one of those events occurs before a default under the
promissory note occurs. The certificates will be held in trust (the "Trust
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Account") by Xxxx X. Xxxxxxxxxx, Esq. The Series A Preferred Stock will not have
voting rights, nor will the Trust Account holder or any other party have any
dispositive or economic rights with respect to the Series A Preferred Stock
while it is held in the Trust Account. The promissory note will be noninterest
bearing and will have a maturity date of December 31, 2006, at which time it
will be deemed to be in default unless it has either been repaid in full or the
Transaction Closes as contemplated by the parties. In the event of a foreclosure
because of a default on the promissory note, the 100 shares of Series A
Preferred Stock will be released from the Trust Account to the Company, at which
time the Company will have full ownership, voting, economic and dispositive
rights with respect to the stock. Notwithstanding anything else herein to the
contrary, the Company is not obligated to Close the Transaction if it has other
rights hereunder to terminate for any reason or to seek remedies for any other
breach of this Agreement by GLAR or CG, which rights and remedies will not be
affected or modified by a default on the promissory note by GLAR. Unless
registered under the Securities Act of 1933, as amended, prior to issuance, the
GLAR Stock, the ESP Stock, and the Shares will bear the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. CONSULTING AGREEMENT.
On the Closing Date, the Company and CG will enter into a consulting
agreement (the "Consulting Agreement") pursuant to which the Company will hire
CG as a consultant for a twelve month term for an annual total consulting fee of
$72,000. The Consulting Agreement will provide that CG's responsibilities will
include the following: CG will utilize his best efforts during the consulting
period to (a) establish and supervise the operation of the Company's branch
offices in the State of Washington, and (b) refer purchasers of the Company's
franchises to the Company for the sale of franchises in all territories where
the Company is legally permitted to sell franchises. The Buyer agrees to: (1)
cause GLAR to issue to CG 500,000 warrants to purchase 500,000 shares of GLAR's
Common Stock, exercisable for a period of five years at an exercise price of
$0.75 per share, subject to customary adjustments for stock splits, stock
dividends and similar transactions after Closing; (2) pay CG a consulting fee of
$6,000 per month for a period of 12 months (the "Consulting Period") after the
Closing for the consulting services provided; (3) provide health insurance to CG
during the Consulting Period that is comparable to the health insurance policy
made available to officers of the Company; (d) pay CG a referral fee equal to 8%
of all initial franchise fees paid to the Company in cash that XX xxxxx during
the Consulting Period, provided CG complies with standard procedures outlined by
management of the Company for all marketing officers; and (e) give to CG an
option to purchase the branch offices established by CG during the Consulting
Period in one county of his choice in the State of Washington as selected by him
anytime within the term of the Consulting Agreement or within 30 days after the
end of the Consulting Period at the price in effect when the Consulting
Agreement commenced. Further details of this arrangement will be specified in
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the final Consulting Agreement. The branch will operate in accordance with the
Buyer's standard branch agreement.
3. CG COVENANTS RELATING TO STOCK.
CG agrees for his own account and covenants to cause ALC Holdings, LLC
and Xxxxx Xxxx (collectively with CG, the "GLAR Insiders") to agree not to sell
or otherwise transfer, convey, assign or hypothecate any of their stock in GLAR
for a period of 90 days after the Closing, and thereafter, for an additional
eight months after the end of the initial 90 day lock-up period, to give the
Buyer a right of first refusal, exercisable for one full business day after the
Buyer receives written notice from the GLAR Insider of its proposal to sell
stock, to purchase all or any portion of the stock that the GLAR Insiders
propose to sell. If within said one business day the Buyer indicates in writing
to the GLAR Insider that it has elected to purchase the stock offered for sale,
then the Buyer will have seven business days thereafter to close the purchase by
paying cash consideration equal to the closing bid price quoted for GLAR stock
on the public trading exchange on which it is then trading, as quoted on the
date of the delivery of written notice by the Buyer to the selling GLAR Insider
of its election to purchase the stock. Finally, CG agrees for his own account
and covenants to cause the other GLAR Insiders to agree that during the above
referenced eight month right of first refusal period, the GLAR Insiders will not
offer to sell more than 4% of their stock holdings in GLAR an any one calendar
month.
4. CLOSING AND FURTHER ACTS.
4.1 TIME AND PLACE OF CLOSING. Upon satisfaction or waiver of the
conditions set forth in Section 7 of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
0000 X. Xxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxxxx, Xxxxxxxxxx 00000 at 11:00
a.m. (local time) on the date that the parties may mutually agree in writing
(the "Closing Date").
4.2 ACTIONS AT CLOSING. At the Closing, the following actions will take
place:
(a) Buyer will pay to GLAR the Purchase Price as described in
Section 1.3 of this Agreement by delivery of (i) stock certificates
evidencing the ESP Stock, and (ii) the Consulting Agreement referenced
in Section 2 of this Agreement, executed by the Buyer.
(b) GLAR will deliver to Buyer copies of necessary resolutions
of the Board of Directors of GLAR authorizing the execution, delivery,
and performance of this Agreement and the other agreements contemplated
by this Agreement for GLAR's execution, and consummation of the
transactions contemplated by this Agreement, which resolutions have
been certified by an officer of GLAR as being valid and in full force
and effect.
(c) Buyer will deliver to GLAR copies of corporate resolutions
of the Board of Directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the other agreements contemplated
by this Agreement for Buyer's execution, if any, and consummation of
the transactions contemplated by this Agreement, which resolutions have
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been certified by an officer of Buyer as being valid and in full force
and effect.
(d) GLAR and the Company will each deliver to the other party
true and complete copies of each party's Certificate of Incorporation
and a Certificate of Good Standing from the appropriate official of
each party's jurisdiction of incorporation, which certificates and
certificates of good standing are dated not more than 30 days prior to
the Closing Date.
(e) Each party to the Consulting Agreement shall have executed
it and delivered the signed copy to the other party to the Consulting
Agreement.
(f) The Board of Directors and executive officers of GLAR will
appoint new members of the Board of Directors and new executive
officers to replace them, as designated in writing by the Buyer, and
will resign simultaneously.
(g) Immediately prior to their resignation, the then directors
and executive officers of GLAR will immediately execute all documents
and take all action which is necessary or appropriate in order to cause
the designees of the Buyer to be the signatories on all GLAR bank
accounts.
(h) Any additional documents or instruments as a party may
reasonably request or as may be necessary to evidence and effect the
sale, assignment, transfer and delivery of the GLAR Stock to the Buyer.
4.3 CONDUCT OF BUSINESS PRIOR TO CLOSING. After the execution of this
Agreement by the Buyer and until the Closing, GLAR will:
(a) Maintain the books, accounts and records of GLAR using
GLAR's normal business practices consistently applied, including
recognition of revenues and expenses, continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and
without discontinuing or accelerating payment of such accounts and
comply with all contractual and other obligations applicable to the
GLAR.
(b) Not make any change to, or otherwise amend in any way, the
contracts with, salaries, wages or other compensation of, any officer,
director, agent or other similar representative of GLAR (including any
increase in any benefits or benefit plan costs or any change in any
bonus, insurance, pension, compensation or other benefit plan).
(c) Not hire any officer, director, employee, agent or other
similar representative of GLAR.
(d) Not incur any indebtedness for borrowed money or accounts
payable.
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(e) Not distribute any assets of GLAR (if any) to any of its
shareholders or other affiliates of GLAR, or to any other party.
(f) Execute, along with CG, all documents and take all action
which is necessary or appropriate in order to convey from CG or his
designees 25,000 shares of common stock of GLAR to Xxxx X. Xxxxxxxxxx,
Esq. for his legal services performed for GLAR prior to the Closing.
(g) Provide the Buyer and its designated representatives with
access to all GLAR information that the Buyer requests, and also make
payments of payables to transfer agent as they relate to the proper
operation and maintenance of GLAR's stock ledger, books and records.
4.4 THE BUYER'S COVENANTS PRIOR TO CLOSING. After the execution of this
Agreement by GLAR and until the Closing, the Buyer will execute all documents
and take all action which is necessary or appropriate in order to convey to Xxxx
X. Xxxxxxxxxx, Esq. and/or his designees 475,000 shares of the common stock of
GLAR owned by the Company immediately after the Closing:
4.5 NO SOLICITATION AND DUE DILIGENCE. GLAR will not, nor will GLAR
encourage, facilitate, solicit, or authorize any of its shareholders, directors,
officers, employees, agents or representatives to solicit or enter into any
discussion (or continue any discussion) with any third party (including the
provision of any information to a third party), or enter into any agreement or
understanding of any kind regarding the purchase, sale, lease, assignment,
conveyance or other disposition or acquisition of all or any portion of its
assets, the business or any capital stock of GLAR, for the period commencing on
the date first above written and extending until December 31, 2006. During this
period and until the Closing or termination of this Agreement, GLAR will fully
cooperate with the Buyer and its representatives to enable them to conduct
complete due diligence of GLAR, the Business, and the books, records and
documents relating to GLAR and the Business.
4.6 DUE DILIGENCE BY BUYER. Until the Closing, GLAR and CG will fully
cooperate with reasonable requests made by Buyer and its representatives to
enable them to conduct due diligence of GLAR.
4.7 DUE DILIGENCE BY GLAR. Until the Closing, Buyer will fully
cooperate with reasonable requests made by GLAR and its representatives to
enable them to conduct due diligence of Buyer.
5. REPRESENTATIONS AND WARRANTIES OF GLAR AND CG.
GLAR and CG represent and warrant to Buyer as follows, provided, that
CG's representations and warranties will be limited in scope for a period
commencing 36 months prior to the date of this Agreement and extending from the
date of this Agreement until a date 12 months after the Closing Date.
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5.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. GLAR and CG have
full power and authority to enter into this Agreement and to perform their
obligations hereunder, subject to the approval of GLAR shareholders where
required by applicable law and the filing of any applicable schedule, forms or
reports required under federal or state securities laws. The execution,
delivery, and performance of this Agreement by GLAR has been duly authorized by
all necessary action on its part. Assuming that this Agreement is a valid and
binding obligation of each of the other parties hereto, this Agreement is a
valid and binding obligation of GLAR and CG.
5.2 SUBSIDIARIES. There is no corporation, general partnership, limited
partnership, joint venture, association, trust or other entity or organization
that GLAR directly or indirectly controls or in which GLAR directly or
indirectly owns any equity or other interest, except as otherwise disclosed to
the Buyer.
5.3 GOOD STANDING. GLAR (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
(ii) has all necessary power and authority to own its assets and to conduct its
business as it is currently being conducted, and (iii) is duly qualified or
licensed to do business and is in good standing in every jurisdiction (both
domestic and foreign) where such qualification or licensing is required.
5.4 CHARTER DOCUMENTS AND CORPORATE RECORDS. GLAR has delivered to
Buyer complete and correct copies or provided Buyer with the right to inspect
true and complete copies of all (i) the articles of incorporation, bylaws and
other charter or organizational documents of GLAR, including all amendments
thereto, (ii) the stock records of GLAR, and (iii) the minutes and other records
of the meetings and other proceedings of the shareholders and directors of GLAR.
GLAR to the best of its knowledge is not in violation or breach of (i) any of
the provisions of its articles of incorporation, bylaws or other charter or
organizational documents, or (ii) any resolution adopted by its shareholders or
directors. There have been no meetings or other proceedings of the shareholders
or directors of GLAR that are not fully reflected in the appropriate minute
books or other written records of GLAR.
5.5 FINANCIAL STATEMENTS. GLAR has delivered to Buyer the following
financial statements relating to GLAR prior to the Closing (the "GLAR Financial
Statements"): (i) the audited balance sheet, statements of operations,
statements of cash flows and statements of stockholder's equity of GLAR as of
and for the twelve month periods ending, December 31, 2003, 2004 and 2005, and
(ii) the unaudited balance sheet and statements of operations for the three
months ended March 31, 2006. Except as stated therein or in the notes thereto,
the GLAR Financial Statements: (a) present fairly the financial position of GLAR
as of the respective dates thereof and the results of operations and changes in
financial position of GLAR for the respective periods covered thereby; and (b)
have been prepared in accordance with GLAR's normal business practices applied
on a consistent basis throughout the periods covered.
5.6 CAPITALIZATION. On or before the Closing, the authorized capital
stock of GLAR consists of 30,000,000 shares of common stock, par value $0.01 per
share, of which no more than 1,568,463 shares are issued and outstanding, and
1,000,000 shares of preferred stock, par value $0.01 per share, none of which
are issued or outstanding. All of the outstanding shares of the capital stock of
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GLAR are validly issued, fully paid and nonassessable, and have been issued in
full compliance with all applicable federal, state, local and foreign securities
laws and other laws. Immediately prior to the Closing, GLAR will have no
outstanding options, warrants or other securities convertible into any
securities of GLAR
5.7 ABSENCE OF CHANGES. Except as otherwise set forth on Schedule 5.7
hereto, since December 31, 2005:
(a) There has not been any material adverse change in the
business, condition, assets, operations or prospects of GLAR and no
event has occurred or, to GLAR's knowledge, is expected to occur after
the Closing that might have a material adverse effect on the business,
condition, assets, operations or prospects of GLAR.
(b) GLAR has not (i) declared, set aside or paid any dividend
or made any other contribution in respect of any shares of capital
stock, nor (ii) repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities.
(c) GLAR has not sold or otherwise issued any shares of
capital stock or any other securities, or securities convertible into
other securities of GLAR, except for securities expressly permitted in
this Agreement or for which Buyer has given prior written consent.
(d) GLAR has not amended its articles of incorporation, bylaws
or other charter or organizational documents, nor has it effected or
been a party to any merger, recapitalization, reclassification of
shares, stock split, reverse stock split, reorganization or similar
transaction, except as permitted in Section 1.2 of this Agreement.
(e) GLAR has not formed any subsidiary or contributed any
funds or other assets to any subsidiary.
(f) GLAR has not purchased or otherwise acquired any assets,
nor has it leased any assets from any other person.
(g) GLAR has not made any capital expenditure without Buyer's
prior written consent.
(h) GLAR has not sold or otherwise transferred any assets to
any other person.
(i) GLAR has not leased any assets to any other person.
(j) GLAR has not mortgaged, pledged, hypothecated or otherwise
encumbered any assets.
(k) GLAR has not entered into any contract, or incurred any
debt, liability or other obligation (whether absolute, accrued,
contingent or otherwise).
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(l) GLAR has not made any loan or advance to any other person.
(m) GLAR has not paid any salary or bonus to or conferred any
fringe benefits or other compensation or remuneration to any of the
directors, officers or employees of GLAR, except as otherwise disclosed
in GLAR's filings with the Untied States Securities and Exchange
Commission.
(n) GLAR has not forgiven any debt or otherwise released or
waived any right or claim.
(o) GLAR has not changed its methods of accounting or its
accounting practices in any respect.
(p) GLAR has not agreed or committed (orally or in writing) to
do any of the things described in clauses (b) through (o) of this
Section 5.7.
5.8 ABSENCE OF UNDISCLOSED LIABILITIES. GLAR has no debt, liability or
other obligation of any nature (whether due or to become due and whether
absolute, accrued, contingent or otherwise) that is not reflected or reserved
against in the GLAR Financial Statements as of December 31, 2005, or as
specifically disclosed in public reports filed by GLAR with the Securities and
Exchange Commission, except for obligations incurred since December 31, 2005
which have been specifically disclosed to Buyer in writing. All such debts and
liabilities will be completely discharged or settled by GLAR prior to the
Closing except those referenced in Sections 1.3(2) and 1.3(4) of this Agreement.
5.9 CONTRACTS.
(a) In Schedule 5.9 hereto, GLAR has delivered to Buyer a
complete and accurate list and provided Buyer with true and complete
copies of all contracts or agreements to which GLAR is a party
(collectively, "Material Contracts").
(b) To the best of CG's and GLAR's knowledge, each Material
Contract is in full force and effect and is valid and enforceable in
accordance with its terms.
(c) To GLAR's knowledge, no event has occurred or circumstance
exists that may contravene, conflict with or result in a violation or
breach of, or give any party to a Material Contract the right to
declare a default or exercise any remedy thereunder, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify any
Material Contract.
(d) Neither GLAR nor any of its affiliates have received any
written notice regarding any actual, alleged or potential violation or
breach of, or default under, any Material Contract which has not been
entirely cured.
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5.10 ACCOUNTS RECEIVABLE. GLAR has no accounts receivable except as
otherwise specifically disclosed to Buyer in writing.
5.11 GLAR ASSETS. GLAR has provided to Buyer in writing an accurate
description of all of the assets of GLAR, if any. To the best of GLAR's
knowledge, GLAR has provided to Buyer in writing a list of all contracts,
agreements, licenses, leases, arrangements, commitments and other undertakings
to which GLAR is a party or by which it or its property is bound.
5.12 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. To the knowledge of
GLAR and GC except for its failure to timely file reports, schedules and forms
with United States Securities and Exchange Commission as required under
applicable securities laws, GLAR is not in violation of, nor has it failed to
conduct its business in full compliance with, any applicable federal, state,
local or foreign laws, regulations, rules, treaties, rulings, orders, directives
or decrees. GLAR has delivered to Buyer a complete and accurate list and
provided Buyer with the right to inspect true and complete copies of all of the
licenses, permits, authorizations and franchises to which GLAR is subject and
all said licenses, permits, authorizations and franchises are valid and in full
force and effect. Said licenses, permits, authorizations and franchises
constitute all of the licenses, permits, authorizations and franchises necessary
to permit GLAR to conduct its business in the manner in which it is now being
conducted, and GLAR is not in violation or breach of any of the terms,
requirements or conditions of any of said licenses, permits, authorizations or
franchises.
5.13 TAXES. To the knowledge of GLAR and GC except as disclosed to
Buyer in writing, GLAR has accurately and completely filed with the appropriate
United States state, local and foreign governmental agencies all tax returns and
reports required to be filed (subject to permitted extensions applicable to such
filings), and has paid or accrued in full all taxes, duties, charges,
withholding obligations and other governmental liabilities as well as any
interest, penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any governmental authority (including taxes on properties, income,
franchises, licenses, sales and payrolls). (All such items are collectively
referred to herein as "Taxes"). The GLAR Financial Statements fully accrue or
reserve all current and deferred taxes. GLAR is not a party to any pending
action or proceeding, nor is any such action or proceeding threatened by any
governmental authority for the assessment or collection of Taxes. No liability
for taxes has been incurred other than in the ordinary course of business. There
are no liens for Taxes except for liens for property taxes not yet delinquent.
GLAR is not a party to any Tax sharing, Tax allocation, Tax indemnity or statute
of limitations extension or waiver agreement and in the past year has not been
included on any consolidated combined or unitary return with any entity other
than GLAR. GLAR has duly withheld from each payment made to each person from
whom such withholding is required by law the amount of all Taxes or other sums
(including but not limited to United States federal income taxes, any applicable
state or municipal income tax, disability tax, unemployment insurance
contribution and Federal Insurance Contribution Act taxes) required to be
withheld therefrom and has paid the same to the proper tax authorities prior to
the due date thereof. To the extent any Taxes withheld by GLAR have not been
paid as of the Closing Date because such Taxes were not yet due, such Taxes will
be paid to the proper tax authorities in a timely manner. All Tax returns filed
by the GLAR are accurate and comply with and were prepared in accordance with
applicable statutes and regulations. (See Schedule
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5.14 ENVIRONMENTAL COMPLIANCE MATTERS. To the best of the knowledge of
GLAR, without conducting any study or independent investigation, GLAR has at all
relevant times been in material compliance with all environmental laws, and has
received no potentially responsible party notices or similar notices from any
governmental agencies or private parties concerning releases or threatened
releases of any "hazardous substance" as that term is defined under 42 U.S.C.
960(1)(14).
5.15 COMPENSATION. To the knowledge of GLAR and GC since April 1, 2006,
GLAR has not paid or committed to pay to or for the benefit of any of its
officers or directors any compensation, nor has it effected or agreed to effect
any employee profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement. GLAR does not
have any bonus plan or obligations with respect to any bonus plan. GLAR has
provided Buyer with a full and complete list of all officers, directors,
employees and consultants of GLAR as of the date hereof, specifying their names
and job designations.
5.16 CONFLICT OF INTEREST TRANSACTIONS. To the knowledge of GLAR and GC
no past or present shareholder, director, officer or employee of GLAR or any of
its affiliates (i) is indebted to, or has any financial, business or contractual
relationship or arrangement with GLAR, or (ii) has any direct or indirect
interest in any property, asset or right which is owned or used by GLAR or
pertains to the business of GLAR.
5.17 LITIGATION. To the knowledge of GLAR and GC except as disclosed in
Schedule 5.7 hereto, there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to GLAR's knowledge,
threatened against or with respect to GLAR which (i) if adversely determined
would have an adverse effect on the business, condition, assets, operations or
prospects of GLAR, or (ii) challenges or would challenge any of the actions
required to be taken by GLAR under this Agreement. There exists no basis for any
such action, suit, proceeding, dispute, litigation, claim, complaint or
investigation.
5.18 NON-CONTRAVENTION. To the knowledge of GLAR and GC neither (a) the
execution and delivery of this Agreement, nor (b) the performance of this
Agreement will: (i) contravene or result in a violation of any of the provisions
of the organizational documents of GLAR; (ii) contravene or result in a
violation of any resolution adopted by the shareholders or directors of GLAR;
(iii) result in a violation or breach of, or give any person the right to
declare (whether with or without notice or lapse of time) a default under or to
terminate, any agreement or other instrument to which GLAR is a party or by
which GLAR or any of its assets are bound; (iv) give any person the right to
accelerate the maturity of any indebtedness or other obligation of GLAR; (v)
result in the loss of any license or other contractual right of GLAR; (vi)
result in the loss of, or in a violation of any of the terms, provisions or
conditions of, any governmental license, permit, authorization or franchise of
GLAR; (vii) result in the creation or imposition of any lien, charge,
encumbrance or restriction on any of the assets of GLAR; (viii) result in the
reassessment or revaluation of any property of GLAR; by any taxing authority or
other governmental authority; (ix) result in the imposition of, or subject GLAR;
11
to any liability for, any conveyance or transfer tax or any similar tax; or (x)
result in a violation of any law, rule, regulation, treaty, ruling, directive,
order, arbitration award, judgment or decree to which GLAR or any of its assets
or any limited liability interests are subject.
5.19 APPROVALS. To the knowledge of GLAR and GC GLAR has provided Buyer
with a complete and accurate list of all jurisdictions in which GLAR is
authorized to do business. To GLAR's knowledge, no authorization, consent or
approval of, or registration or filing with, any governmental authority is
required to be obtained or made by GLAR in connection with the execution,
delivery or performance of this Agreement.
5.20 BROKERS. GLAR has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to GLAR's knowledge, no person is entitled, or intends
to claim that it is entitled, to receive any such fees or commissions in
connection with such transaction.
5.21 FULL DISCLOSURE. Neither this Agreement (including the exhibits
hereto) nor any statement, certificate or other document delivered to Buyer by
or on behalf of GLAR or CG contains any untrue statement of a material fact or
omits to state a material fact necessary to make the representations and other
statements contained herein and therein not misleading.
5.22 NON-DISTRIBUTIVE INTENT. The ESP Stock being acquired by GLAR as
part of the Purchase Price and the 500,000 GLAR warrants being acquired by CG
pursuant to Section 2 of this Agreement are not being acquired by GLAR and CG,
respectively, with a view to the public distribution of them.
5.23 REPRESENTATIONS TRUE ON CLOSING DATE. The representations and
warranties of GLAR set forth in this Agreement are materially true and correct
on the date hereof, and will be materially true and correct on the Closing Date
as though such representations and warranties were made as of the Closing Date.
Buyer's knowledge will not act as a waiver of any breach of the representations
and warranties contained herein by GLAR, CG, or any other shareholders of GLAR.
5.24 TAX ADVICE. GLAR and CG hereby represent and warrant that they
have sought their own independent tax advice regarding the transactions
contemplated by this Agreement and neither GLAR nor CG have relied on any
representation or statement made by Buyer, the Company, or their representatives
regarding the tax implications of such transactions.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer and Xxxxxx Xxxxxx represent and warrant to GLAR as follows,
provided that Xx. Xxxxxx' representations and warranties will be limited in
scope to a period commencing 12 months prior to the date of this Agreement and
extending from the date of this Agreement until a date 12 months after the
Closing Date:
6.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. Buyer has full
power and authority to enter into this Agreement and to perform its obligations
12
hereunder. The execution, delivery and performance of this Agreement by Buyer
have been duly authorized by all necessary action on its part. Assuming that
this Agreement is a valid and binding obligation of the other party hereto, this
Agreement is a valid and binding obligation of Buyer.
6.2 SUBSIDIARIES. There is no corporation, general partnership, limited
partnership, joint venture, association, trust or other entity or organization
that the Company directly or indirectly controls or in which the Company
directly or indirectly owns any equity or other interest, except as otherwise
disclosed to GLAR.
6.3 GOOD STANDING OF BUYER. Buyer (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, (ii) has all necessary power and authority to own its assets and
to conduct its business as it is currently being conducted, and (iii) is duly
qualified or licensed to do business and is in good standing in every
jurisdiction (both domestic and foreign) where such qualification or licensing
is required.
6.4 CHARTER DOCUMENTS AND CORPORATE RECORDS OF BUYER. Buyer has made
available to GLAR to review complete and correct copies of (i) the articles of
incorporation, bylaws and other charter or organizational documents of Buyer,
including all amendments thereto, (ii) the stock records of Buyer, and (iii) the
minutes and other records of the meetings and other proceedings of the
shareholders and directors of Buyer. Buyer is not in violation or breach of (i)
any of the provisions of its articles of incorporation, bylaws or other charter
or organizational documents, or (ii) any resolution adopted by its shareholders
or directors. There have been no meetings or other proceedings of the
shareholders or directors of Buyer that are not fully reflected in the
appropriate minute books or other written records of Buyer.
6.5 CAPITALIZATION OF BUYER. The authorized capital stock of Buyer
consists of 100,000,000 shares of common stock, no par value per share,
14,625,000 shares of which are issued and outstanding, and 5,000,000 shares of
preferred stock, no par value, none of which are issued or outstanding. All of
the outstanding shares of the capital stock of Buyer are validly issued, fully
paid and nonassessable, and have been issued in full compliance with all
applicable federal, state, local and foreign securities laws and other laws.
Buyer either has sufficient authorized capital stock to meet its obligations
under this Agreement or has the ability to authorize the issuance of additional
capital stock.
6.6 FINANCIAL STATEMENTS. The Company has delivered to GLAR the
following financial statements (the "Company Financial Statements"): the audited
balance sheet and statement of operations of the Company for the fiscal years
ended December 31, 2004 and 2005, the unaudited balance sheet of the Company as
of March 31, 2006, and the unaudited statement of operations of the Company for
the three months ended March 31, 2006. Except as stated therein or in the notes
thereto, the Company Financial Statements: (a) present fairly the financial
position of the Company as of the respective dates thereof and the results of
operations and changes in financial position of the Company for the respective
periods covered thereby; and (b) have been prepared in accordance with the
Company's normal business practices applied on a consistent basis throughout the
periods covered.
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6.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no material
debt, liability or other obligation of any nature (whether due or to become due
and whether absolute, accrued, contingent or otherwise) that is not reflected or
reserved against in the Company Financial Statements as of December 31, 2005,
except for obligations incurred since December 31, 2005 in the ordinary course
of business or as otherwise disclosed to GLAR.
6.8 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. To its knowledge the
Company is not in violation of, nor has it failed to conduct its business in
full compliance with, any applicable federal, state, local or foreign laws,
regulations, rules, treaties, rulings, orders, directives or decrees. The
Company has provided GLAR with the right to inspect true and complete copies of
all of the licenses, permits, authorizations and franchises to which the Company
is subject and to the Company's knowledge all said licenses, permits,
authorizations and franchises are valid and in full force and effect. To the
Company's knowledge, said licenses, permits, authorizations and franchises
constitute all of the licenses, permits, authorizations and franchises necessary
to permit the Company to conduct its business in the manner in which it is now
being conducted, and the Company is not in material violation or breach of any
of the terms, requirements or conditions of any of said licenses, permits,
authorizations or franchises.
6.9 TAXES. Except as disclosed to GLAR in writing, to its knowledge the
Company has accurately and completely filed with the appropriate United States
state, local and foreign governmental agencies all tax returns and reports
required to be filed (subject to permitted extensions applicable to such
filings), and has paid or accrued in full all taxes, duties, charges,
withholding obligations and other governmental liabilities as well as any
interest, penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any governmental authority (including taxes on properties, income,
franchises, licenses, sales and payrolls). (All such items are collectively
referred to herein as "Company Taxes"). The Company Financial Statements fully
accrue or reserve all current and deferred taxes. The Company is not a party to
any pending action or proceeding, nor is any such action or proceeding
threatened by any governmental authority for the assessment or collection of
Company Taxes. There are no liens for Taxes except for liens for property taxes
not yet delinquent. The Company is not a party to any Tax sharing, Tax
allocation, Tax indemnity or statute of limitations extension or waiver
agreement and in the past year has not been included on any consolidated
combined or unitary return with any entity other than the Company and its
subsidiaries. To its knowledge, the Company has duly withheld from each payment
made to each person from whom such withholding is required by law the amount of
all Company Taxes or other sums (including but not limited to United States
federal income taxes, any applicable state or municipal income tax, disability
tax, unemployment insurance contribution and Federal Insurance Contribution Act
taxes) required to be withheld therefrom and has paid the same to the proper tax
authorities prior to the due date thereof. To the extent any Company Taxes
withheld by the Company have not been paid as of the Closing Date because such
Company Taxes were not yet due, such Company Taxes will be paid to the proper
tax authorities in a timely manner. To the Company's knowledge, all Company Tax
returns filed by the Company are accurate and comply with and were prepared in
accordance with applicable statutes and regulations.
6.10 ENVIRONMENTAL COMPLIANCE MATTERS. To the knowledge of the Company,
without conducting any study or independent investigation, the Company has at
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all relevant times been in material compliance with all environmental laws, and
has received no potentially responsible party notices or similar notices from
any governmental agencies or private parties concerning releases or threatened
releases of any "hazardous substance" as that term is defined under 42 U.S.C.
960(1)(14).
6.11 CONFLICT OF INTEREST TRANSACTIONS. To the Company's knowledge, no
past or present shareholder, director, officer or employee of the Company or any
of its affiliates (i) is indebted to, or has any undisclosed financial, business
or contractual relationship or arrangement with the Company, or (ii) has any
direct or indirect interest in any property, asset or right which is owned or
used by the Company or pertains to the business of the Company.
6.12 LITIGATION. To the Company's knowledge, there is no action, suit,
proceeding, dispute, litigation, claim, complaint or investigation by or before
any court, tribunal, governmental body, governmental agency or arbitrator
pending or threatened against or with respect to the Company which (i) if
adversely determined would have an adverse effect on the business, condition,
assets, operations or prospects of the Company, or (ii) challenges or would
challenge any of the actions required to be taken by the Company under this
Agreement. To the Company's knowledge, there exists no basis for any such
action, suit, proceeding, dispute, litigation, claim, complaint or
investigation.
6.13 NON-CONTRAVENTION. To the Company's knowledge, neither (a) the
execution and delivery of this Agreement, nor (b) the performance of this
Agreement will: (i) contravene or result in a violation of any of the provisions
of the organizational documents of the Company; (ii) contravene or result in a
violation of any resolution adopted by the shareholders or directors of the
Company; (iii) result in a violation or breach of, or give any person the right
to declare (whether with or without notice or lapse of time) a default under or
to terminate, any agreement or other instrument to which the Company is a party
or by which the Company or any of its assets are bound; (iv) give any person the
right to accelerate the maturity of any indebtedness or other obligation of the
Company; (v) result in the loss of any license or other contractual right of the
Company; (vi) result in the loss of, or in a violation of any of the terms,
provisions or conditions of, any governmental license, permit, authorization or
franchise of the Company; (vii) result in the creation or imposition of any
lien, charge, encumbrance or restriction on any of the assets of the Company;
(viii) result in the reassessment or revaluation of any property of the Company;
by any taxing authority or other governmental authority; (ix) result in the
imposition of, or subject the Company; to any liability for, any conveyance or
transfer tax or any similar tax; or (x) result in a violation of any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which the Company or any of its assets or any limited liability
interests are subject.
6.14 APPROVALS. To Buyer's knowledge, no authorization, consent or
approval of, or registration or filing with, any governmental authority or any
other person is required to be obtained or made by Buyer in connection with the
execution, delivery or performance of this Agreement or the Employment
Agreement.
6.15 BROKERS. Buyer has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to Buyer's knowledge, no person is entitled, or intends
15
to claim that it is entitled, to receive any such fees or commissions in
connection with such transaction.
6.16 FULL DISCLOSURE. Neither this Agreement (including the exhibits
hereto) nor any statement, certificate or other document delivered to Buyer by
or on behalf of GLAR or CG contains any untrue statement of a material fact or
omits to state a material fact necessary to make the representations and other
statements contained herein and therein not misleading.
6.17 REPRESENTATIONS TRUE ON CLOSING DATE. To the best of the Buyer's
knowledge, the representations and warranties of Buyer set forth in this
Agreement are materially true and correct on the date hereof, and will be
materially true and correct on the Closing Date as though such representations
and warranties were made as of the Closing Date.
6.18 NON-DISTRIBUTIVE INTENT. The shares of GLAR Stock being purchased
by the Company pursuant to this Agreement are not being acquired by the Company
with a view to the public distribution of them.
6.19 REPRESENTATIONS TRUE ON CLOSING DATE. The representations and
warranties of the Company set forth in this Agreement are materially true and
correct on the date hereof, and will be materially true and correct on the
Closing Date as though such representations and warranties were made as of the
Closing Date. GLAR's knowledge will not act as a waiver of any breach of the
representations and warranties contained herein by the Company.
6.20 TAX ADVICE. The Company hereby represents and warrants that it has
sought its own independent tax advice regarding the transactions contemplated by
this Agreement and the Company has not relied on any representation or statement
made by GLAR, CG or their representatives regarding the tax implications of such
transactions.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Buyer of the following:
(a) The Buyer must in the exercise of reasonable discretion be
satisfied with its full and complete due diligence of GLAR and all
other aspects of the transactions contemplated by this Agreement,
including but not limited to financial, legal and business affairs of
GLAR. The Buyer must confirm its satisfaction in a writing delivered to
GLAR.
(b) Such directors of GLAR as the Company shall have specified
in writing shall have submitted their resignations (to be effective as
of the Closing) from the Board of Directors of the Company. The
directors of GLAR shall have duly appointed (effective as of the
Closing) such other persons as the Company shall have designated to
fill the vacancies on the Company's Board of Directors.
16
(c) All representations and warranties of GLAR and CG made in
this Agreement or in any exhibit or schedule hereto delivered by GLAR
or CG must be materially true and correct as of the Closing Date with
the same force and effect as if made on and as of that date.
(d) GLAR and CG must have performed and complied with all
agreements, covenants and conditions required by this Agreement to be
performed or complied with by GLAR and CG prior to or at the Closing
Date.
7.2 CONDITIONS PRECEDENT TO GLAR'S OBLIGATION TO CLOSE. GLAR's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by GLAR of the following:
(a) GLAR must in the exercise of reasonable discretion be
satisfied with its full and complete due diligence of Buyer and all
other aspects of the transactions contemplated by this Agreement,
including but not limited to financial, legal and business affairs of
Buyer. GLAR must confirm its satisfaction in a writing delivered to
Buyer.
(b) All representations and warranties of Buyer made in this
Agreement or in any exhibit hereto delivered by Buyer must be
materially true and correct on and as of the Closing Date with the same
force and effect as if made on and as of that date.
(c) Buyer must have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied
with by Buyer prior to or at the Closing Date.
8. FURTHER ASSURANCES AND POST CLOSING COVENANTS AND OBLIGATIONS.
8.1 BOOKS AND RECORDS. Following the Closing, CG shall, whenever
reasonably requested by Buyer (including reasonable prior notice to CG) and
during normal business hours, permit Buyer or its representatives to have access
to such business records (including without limitation computer files) regarding
GLAR as may be in CG's possession or reasonably accessible to him after the
Closing. CG shall use commercially reasonable efforts to preserve and maintain
GLAR's records for at least five years after the Closing Date.
8.2 GOVERNMENT APPROVALS. CG will (a) assist and fully cooperate with
Buyer to obtain, as soon as practicable after the Closing, all state, local, and
other governmental approvals and all other consents or approvals of any third
parties necessary for GLAR to conduct the Business as the Business was conducted
prior to Closing and (b) use his best efforts to permit GLAR to conduct the
Business in the same manner as the Business was conducted prior to Closing until
such approvals are obtained.
8.3 INTERNAL REVENUE CODE SECTION 368. GLAR and the Company intend that
this transaction qualify for tax treatment under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. While no representation regarding the
tax treatment of any party is made by any other party to this Agreement or
17
otherwise, all parties agree to reasonably cooperate with the other parties in
furnishing documents to the other parties relating to the transaction covered by
this Agreement that are (a) requested in writing by such party, (b) specifically
necessary for such parties to make their submissions to relevant tax
authorities, and (c) the disclosure of which would not violate any applicable
law, rule, regulation or court order, nor cause any party any hardship or to be
in breach of any contract or other document applicable to it.
8.4 CONFIDENTIALITY AND PROPERTY. Any information, including but not
limited to data, business information (including customer lists and prospects),
technical information, computer programs and documentation, programs, files,
specifications, drawings, sketches, models, samples, tools or other data, oral
written or otherwise, (hereinafter called "Information"), furnished or disclosed
by one party to the other for the purpose of the contemplated transaction
herein, will remain the disclosing party's property until the closing of the
Transaction, at which time all such Information will become the property of the
Buyer. All copies of such Information in written, graphic or other tangible form
must be returned to the disclosing party immediately upon written request if the
transaction contemplated herein is not consummated. Unless such Information was
previously known to receiving party free of any obligation to keep it
confidential, or has been or is subsequently made public by the disclosing party
or a third party, it must be kept confidential by the receiving party, will be
used only in performing due diligence for the Transaction, and may not be used
for other purposes except upon such terms as may be agreed upon between GLAR and
the Buyer in writing.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by each of the parties hereto
will survive the Closing for a period of two years after the Closing Date.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY GLAR AND CG. GLAR and CG agree to indemnify,
defend and hold harmless Buyer and its affiliates against any and all claims,
demands, losses, costs, expenses, obligations, liabilities and damages,
including interest, penalties and attorney's fees and costs, incurred by Buyer
or any of its affiliates arising, resulting from, or relating to any and all
liabilities of GLAR accrued prior to the Closing or relating to the GLAR Stock,
any misrepresentation of a material fact or omission to disclose a material fact
made by GLAR in this Agreement, in any exhibits to this Agreement or in any
other document furnished or to be furnished by GLAR under this Agreement, or any
breach of, or failure by GLAR or CG to perform, any of their representations,
warranties, covenants or agreements in this Agreement or in any exhibit or other
document furnished or to be furnished by GLAR or CG under this Agreement.
10.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify, defend and
hold harmless GLAR against any and all claims, demands, losses, costs, expenses,
obligations, liabilities and damages, including interest, penalties and
attorneys' fees and costs incurred by GLAR arising, resulting from or relating
to any misrepresentation of a material fact or omission to disclose a material
fact made by the Company in this Agreement, in any exhibit to this Agreement, or
18
in any other document furnished or to be furnished by the Company under this
Agreement, or any breach of or failure by Buyer to perform any of its
representations, warranties, covenants or agreements in this Agreement or in any
exhibit or other document furnished or to be furnished by Buyer under this
Agreement.
10.3 LIMITATIONS ON INDEMNIFICATION BY GLAR.
(a) GLAR's indemnification obligation shall be limited to the
maximum Purchase Price payable under this Agreement.
(b) The indemnification obligations of GLAR are solely for the
benefit of Buyer, GLAR itself, and their successors in
interest and are not intended to, nor shall they, constitute
an agreement for the benefit of, or be enforceable by, any
other person or entity.
(c) GLAR shall have no liability with respect to any
representation or warranty, unless, within three (3) years
from the Closing Date, the Buyer has notified GLAR of a claim
as provided for in this Section 10.
10.4 LIMITATIONS ON INDEMNIFICATION BY BUYER. Buyer shall have no
liability with respect to any representation, warranty, or covenant, unless,
within three (3) years from the Closing Date, GLAR has notified Buyer of a claim
as provided for in this Section 10.
10.5 PROCEDURE FOR INDEMNIFICATION CLAIMS.
(a) Whenever any parties become aware that a claim (an
"Underlying Claim") has arisen entitling them to seek indemnification
under this Section 10 of the Agreement, such parties (the "Indemnified
Parties") shall promptly send a notice ("Notice") to the parties liable
for such indemnification (the "Indemnifying Parties") of the right to
indemnification (the "Indemnity Claim"); provided, however, that the
failure to so notify the Indemnifying Parties will relieve the
Indemnifying Parties from liability under this Agreement with respect
to such Indemnity Claim only if, and only to the extent that, such
failure to notify the Indemnifying Parties results in the forfeiture by
the Indemnifying Parties of rights and defenses otherwise available to
the Indemnifying Parties with respect to the Underlying Claim. Any
Notice pursuant to this Section 10.3(a) shall set forth in reasonable
detail, to the extent then available, the basis for such Indemnity
Claim and an estimate of the amount of damages arising therefrom.
(b) If an Indemnity Claim does NOT result from or arise in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties will have thirty (30) calendar days
following receipt of the Notice to issue a written response to the
Indemnified Parties, indicating the Indemnifying Parties' intention to
either (i) contest the Indemnity Claim or (ii) accept the Indemnity
Claim as valid. The Indemnifying Parties' failure to provide such a
written response within such thirty (30) day period shall be deemed to
be an acceptance of the Indemnity Claim as valid. In the event that an
Indemnity Claim is accepted as valid, the Indemnifying Parties shall,
19
within fifteen (15) business days thereafter, pay the damages incurred
by the Indemnified Parties in respect of the Underlying Claim in cash
by wire transfer of immediately available funds to the account or
accounts specified by the Indemnified Parties. To the extent
appropriate, payments for indemnifiable damages made pursuant to
Section 10 of the Agreement will be treated as adjustments to the
Purchase Price.
(c) In the event an Indemnity Claim results from or arises in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties shall have fifteen (15) calendar days
following receipt of the Notice to send a Notice to the Indemnified
Parties of their election to, at their sole cost and expense, assume
the defense of any such Underlying Claim or legal proceeding; provided
that such Notice of election shall contain a confirmation by the
Indemnifying Parties of their obligation to hold harmless the
Indemnified Parties with respect to damages arising from such
Underlying Claim. The failure by the Indemnifying Parties to elect to
assume the defense of any such Underlying Claim within such fifteen
(15) day period shall entitle the Indemnified Parties to undertake
control of the defense of the Underlying Claim on behalf of and for the
account and risk of the Indemnifying Parties in such manner as the
Indemnified Parties may deem appropriate, including, but not limited
to, settling the Underlying Claim. However, the parties controlling the
defense of the Underlying Claim shall not settle or compromise such
Underlying Claim without the prior written consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
The non-controlling parties shall be entitled to participate in (but
not control) the defense of any such action, with their own counsel and
at their own expense.
(d) The Indemnifying Parties and the Indemnified Parties will
cooperate reasonably, fully and in good faith with each other, at the
sole expense of the Indemnifying Parties, in connection with the
defense, compromise or settlement of any Underlying Claim including,
without limitation, by making available to the other parties all
pertinent information and witnesses within their reasonable control.
10.6 RIGHT OF OFFSET. Buyer will have a right to offset any damages it
incurs as a result of any breach of any covenant, representation or warranty by
GLAR or CG under this Agreement against any of Buyer's obligations to GLAR or
CG.
11. INJUNCTIVE RELIEF.
11.1 DAMAGES INADEQUATE. Each party acknowledges that it would be
impossible to measure in money the damages to the other party if there is a
failure to comply with any covenants and provisions of this Agreement, and
agrees that in the event of any breach of any covenant or provision, the other
party to this Agreement will not have an adequate remedy at law.
11.2 INJUNCTIVE RELIEF. It is therefore agreed that the other party to
this Agreement who is entitled to the benefit of the covenants and provisions of
this Agreement which have been breached, in addition to any other rights or
remedies which they may have, will be entitled to immediate injunctive relief to
20
enforce such covenants and provisions, and that in the event that any such
action or proceeding is brought in equity to enforce them, the defaulting or
breaching party will not urge a defense that there is an adequate remedy at law.
12. FURTHER ASSURANCES.
Following the Closing, CG shall furnish to Buyer such instruments and
other documents as Buyer may reasonably request for the purpose of carrying out
or evidencing the transactions contemplated hereby.
13. WAIVERS.
If any party at any time waives any rights hereunder resulting from any
breach by the other party of any of the provisions of this Agreement, such
waiver is not to be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement. Resort to any remedies referred to
herein will not be construed as a waiver of any other rights and remedies to
which such party is entitled under this Agreement or otherwise.
14. SUCCESSORS AND ASSIGNS.
Each covenant and representation of this Agreement will inure to the
benefit of and be binding upon each of the parties, their personal
representatives, assigns and other successors in interest.
15. ENTIRE AND SOLE AGREEMENT.
This Agreement constitutes the entire agreement between the parties and
supersedes all other agreements, representations, warranties, statements,
promises and undertakings, whether oral or written, with respect to the subject
matter of this Agreement. This Agreement may be modified or amended only by a
written agreement signed by the parties against whom the amendment is sought to
be enforced. The parties acknowledge that as of the execution of this Agreement,
those certain Letters of Intent among the parties dated May 1, 2006 will be
terminated and be of no further force or effect.
16. GOVERNING LAW.
This Agreement will be governed by the laws of California without
giving effect to applicable conflict of laws provisions. With respect to any
litigation arising out of or relating to this Agreement, each party agrees that
it will be filed in and heard by the state or federal courts with jurisdiction
to hear such suits located in Los Angeles County, California.
17. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts will be deemed to be an original, and
such counterparts will constitute but one and the same instrument.
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18. ASSIGNMENT.
Except in the case of the Buyer, this Agreement may not be assignable
by any party without prior written consent of the other parties.
19. REMEDIES.
Except as otherwise expressly provided herein, none of the remedies set
forth in this Agreement are intended to be exclusive, and each party will have
all other remedies now or hereafter existing at law, in equity, by statute or
otherwise. The election of any one or more remedies will not constitute a waiver
of the right to pursue other available remedies.
20. SECTION HEADINGS.
The section headings in this Agreement are included for convenience
only, are not a part of this Agreement and will not be used in construing it.
21. SEVERABILITY.
In the event that any provision or any part of this Agreement is held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability will not affect the validity or enforceability of any other
provision or part of this Agreement.
22. NOTICES.
Each notice or other communication hereunder must be in writing and
will be deemed to have been duly given on the earlier of (i) the date on which
such notice or other communication is actually received by the intended
recipient thereof, or (ii) the date five (5) days after the date such notice or
other communication is mailed by registered or certified mail (postage prepaid)
to the intended recipient at the following address (or at such other address as
the intended recipient will have specified in a written notice given to the
other parties hereto):
IF TO GLAR:
Glas-Aire Industries Group, Ltd.
000 Xxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxx.xxx
IF TO BUYER:
Pacific Environmental Sampling, Inc.
0000 X. Xxxxxxxx Xxxxxx Xxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxx@xxxxxx.xxx
22
23. PUBLICITY.
Except as may be required in order for a party to comply with
applicable laws, rules, or regulations or to enable a party to comply with this
Agreement, or necessary for the Buyer to prepare and disseminate any private or
public placements of its securities or to communicate with its shareholders, no
press release, notice to any third party or other publicity concerning the
transactions contemplated by this Agreement will be issued, given or otherwise
disseminated without the prior approval of each of the parties hereto; provided,
however, that such approval will not be unreasonably withheld.
IN WITNESS WHEREOF, this Agreement has been entered into as of the date
first above written.
GLAR: GLAS-AIRE INDUSTRIES GROUP, LTD.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxxx, Chief Executive Officer
CG:
/s/ Xxxxx Xxxxxxxx
-----------------------------------------------------
Xxxxx Xxxxxxxx, Individually
COMPANY/BUYER: PACIFIC ENVIRONMENTAL SAMPLING, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxx, Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxx
23
SCHEDULE 5.2 TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
Subsidiaries
Glas Aire Industries, Ltd. is a wholly owned Canadian subsidiary of GLAR. This
subsidiary filed for bankruptcy on March 24, 2004 under a receivership. The
subsidiary has not filed any further annual reports and is anticipated to be
terminiated under the laws of British Columbia.
SCHEDULE 5.3 TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
Good Standing
Upon settlement with Xxxxx Xxxxxxx, Esq. and the reappointment of the previous
officers and directors (Xxxxx Xxxxxxxx) of GLAR, GLAR will be in good standing
in the State of Nevada.
SCHEDULE 5.13 TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
Glas Aire Industries Group, Ltd. is not current on and has not filed tax returns
for any year after 2002.
SCHEDULE 5.7 TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
Shares issued to:
Xxxxx Xxxxxxxxx, 400,000 shares of GLAR Common Stock on April 24, 2006 for the
settlement of legal fees.
Xxxxx Xxxx, 1,220,000 shares of GLAR Common Stock on April 24, 2006 as a
management fee.
Xxxxx Xxxxxxxx, 1,220,000 shares of GLAR Common Stock on April 24, 2006 as a
management fee.
Xxxxx Xxxxxxxx, 44,800 shares of GLAR Common Stock on April 24, 2006 as a
reimbursement of legal fees paid for GLAR.
Xxxxx Xxxx, 191,972 shares of GLAR Common Stock on April 24, 2006 as a
reimbursement of legal fees paid for GLAR.
Xxxx Xxxxxxxxxx, 93,750 shares of GLAR Common Stock on April 24, 2006 as fees
related to this transaction, per Agreement.
SCHEDULE 5.6 TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
Warrants and Options
1. Stock Options
During the year ended January 31, 1997, the Company's Board of
Directors approved an Incentive Stock Option Plan and a Non-Qualified Stock
Option Plan. Each plan provides for granting options to purchase not more than
160,000 shares of the Company's common stock. The Incentive Stock Option Plan is
to be available to management and employees of the Company. The Non-Qualified
Stock Option Plan is to be available to certain key employees, independent
contractors, technical advisors and directors of the Company. Vesting for both
plans will be determined at the date of grant. Upon granting, the options will
have a five year life.
At December 31, 2003 and 2002 no options had been granted under either plan.
DIRECTOR COMPENSATION
In previous periods the Company had granted options to directors in
accordance with the director's compensation program approved by the
stockholders. A summary of the status of the Company's stock options outstanding
as of December 31, 2003 is as follows:
Number of Exercise
Options Price
---------------------
Granted - November 4, 1999; Expiring - November 3, 2004 60,000 $ 4.50
Granted - November 4, 2000; Expiring - November 3, 2005 60,000 $ 2.75
Granted - November 4, 2001; Expiring - November 3, 2006 60,000 $ 1.00
(Post Split 16,000 Shares @ $3.75)
Granted - April 1, 2003; Expiring - March 31, 2008 50,000 $ .75
(Post Split 13,333 Shares @ $2.81) ---------------------
230,000
On April 1, 2003 the Company granted 50,000 common stock options at the
exercise price of $0.75 to the directors in accordance with the director's
compensation program approved by the stockholders. The options vested on April
1, 2003 and are exercisable to March 31, 2008.
(NOTE: Warrants for 85,000 to be received by Xxxxx Xxxxxxxx on the 2nd
anniversary date of his employment contract where never issued and are not
required to be issued. The employment contract cancelled prior to its 2nd
anniversary date on September 3, 2003)
SCHEDULE 5.7D TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
With the exception of the actions of taken by Xxxxx Xxxxxxx, Esq.
SCHEDULE 5.8 TO PLAN OF REORGANIZATION
AND
STOCK PURCHASE AGREEMENT
BETWEEN PACIFIC ENVIRONMENTAL SAMPLING, INC., XXXXX XXXXXXXX
AND
GLAS-AIRE INDUSTRIES GROUP, LTD.
Dragon Capital, LLC and Xxxx Xxxxxxxx.
