Exhibit 10.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (herein, together with all
Exhibits, ("Agreement") is entered in to as of October 2, 2003 by and between
Pacific Realm, Inc., a Delaware corporation ("PRI") and AeroTelesis, Ltd., a
British Virgin Island company ("ATL"), concerning the acquisition by PRI of
AeroTelesis Philippines Inc., a British Virgin Islands company ("ATP") wholly
owned by ATL.
This Agreement sets forth the terms and conditions upon which ATP will
merge with and into PRI (the "Merger"), pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") in substantially the form attached hereto as
Exhibit A, which provides, among other things, for the conversion and exchange
of all outstanding shares of ATP ("ATP Shares") into 75,000,000 shares of voting
$.001 par value common stock of PRI ("PRI Common Stock").
In consideration of the mutual promises and covenants contained herein,
ATP and PRI agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms (whether used in
singular or plural forms) shall have the following meanings:
"ATP Shareholder" shall mean ATL, the sole shareholder of ATP as of the
date of closing.
"ATP Shares" shall mean the shares of ATP common stock, par value
$1.00, to be exchanged tax free for shares of PRI common stock to be issued to
the ATP Shareholder.
"Closing Date" shall mean the date upon which the reorganization shall
have occurred in accordance with the terms and conditions set forth herein.
"Contract" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right,
or other instrument, document or agreement, and any oral obligation, right or
agreement.
"Controlled Group" means all trades or businesses (whether or not
incorporated) under common control that, together with ATP, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section 4001 of
ERISA.
"GAAP" means generally accepted accounting principles, as the term is
defined by the American Institute of Certified Public Accountants under the
first standard of reporting under its generally accepted accounting standards.
"Knowledge" of ATP of or with respect to any matter means that any of
the managers of ATP has, or after due inquiry and investigation would have,
actual awareness or knowledge of such matter, and "Knowledge" of PRI of or with
respect to any matter means that any of the executive officers, directors, or
senior managers of PRI has, or after due inquiry and investigation would have,
actual awareness or knowledge of such matter.
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"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule regulation, order, technical or other
standard requirement, judgment or procedure enacted, adopted, promulgated,
applied or followed by any governmental authority, including judgments.
"Lien" means any security agreement, financing statement filed with any
governmental authority, conditional sale statement filed with any governmental
authority, conditional sale or other title retention agreement, any lease
consignment or bailment given for purposes of security, any lien, mortgage,
indenture, pledge, option, encumbrance, adverse interest, constructive trust or
other trust, claim, attachment, exception to or defect in title or other
ownership interest (including but not limited to reservations, rights of entry,
possibilities of reverter, encroachments, casement, rights of way, restrictive
covenants leases and licenses) of any kind, which otherwise constitutes an
interest in or claim against property, whether arising pursuant to any Legal
Requirement, Contract or otherwise.
"Reorganization" shall mean the acquisition by PRI of the ATP Shares in
exchange for the PRI Shares as further defined herein.
"PRI Shares" shall mean the Shares of the Common Stock of PRI to be
issued to the ATP Shareholder.
ARTICLE 2
MERGER
Section 2.1 PLAN AND AGREEMENT OF REORGANIZATION. A plan of reorganization
is hereby adopted to as follows:
A. Subject to the terms and conditions hereinafter set forth,
on the Closing Date, and in the manner hereinafter proved, (i) the ATP
Shareholder shall exchange tax free the ATP Shares for the PRI Shares in the
amounts set forth herein; ATP shall become a wholly-owned subsidiary of PRI and
PRI shall be the sole shareholder of ATP.
B. PRI, ATL and ATP, respectively, shall take, or cause to be
taken, such action as may be necessary or appropriate in order to effectuate the
transactions contemplated hereby. Such action shall include, but not be limited
to, the filing of Articles of Merger with the Delaware Secretary of State and
British Virgin Islands Secretary of State. In the event that after the Closing
Date, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest PRI or the ATP Shareholder with full title to the
securities to be exchanged hereby, the officers and directors of PRI or the ATP
Shareholder, as the case may be, shall take all such necessary action.
Section 2.2 EFFECTIVE DATE OF THE REORGANIZATION FOR ACCOUNTING
PURPOSES. The transactions contemplated by this Agreement shall be effective for
accounting purposes and for all other purposes as mutually agreed by the parties
hereto and to the extent permissible by law.
Section 2.3 CONSIDERATION AND BASIS OF EXCHANGE OF SHARES. The manner
and basis of exchanging the ATP Shares for the Common Shares of PRI shall be as
follows:
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A. On the Closing Date, the ATP Shareholder shall deliver to
PRI certificates aggregating all ATP Shares, or 100% of the issued and
outstanding ATP Shares, duly endorsed in favor of PRI with signatures
guaranteed; the ATP Shareholder, in exchange for the ATP Shares held of record
on the Closing Date, an aggregate of 75,000,000 PRI Shares. The ATP Shareholder
and PRI agree that the ATP Shares and the PRI Shares exchanged hereby shall be
"restricted securities" as that term is defined in Rule 144 under the Securities
Act of 1933, as amended (the "1933 Act") and all certificates issued under this
Agreement shall bear an appropriate legend to such effect. ATP will have
received the necessary approval of the ATP Shareholder to this transaction. All
parties will have received the approval of their respective boards of directors
to enter into this transaction.
B. As additional consideration for the PRI Shares to be issued
to ATL, the parties hereto agree that PRI shall have the right of first refusal
for the period of ten years to acquire such other wholly-owned subsidiaries,
representing additional country accounts, as ATL shall in the future desire to
sell, on such terms and conditions as PRI and ATL shall mutually agree. PRI
shall change its name at Closing to AeroTelesis Inc. ("AIC"). ATL shall assign
the right to use the name "AeroTelesis" to PRI. ATL shall also assign the right
to utilize its website and other promotional materials (such as company
profiles, company fliers, and so on) since PRI will become known as
"AeroTelesis". If appropriate, ATL may change it's company name so that there is
clear distinction between the newly named AIC and ATL.
C. At Closing, The PRI Board of Directors will appoint members
of ATL and/or ATP to serve as additional directors of PRI. The names of these
individuals will be provided by ATL upon the Closing or shortly thereafter.
Section 2.4 CLOSING. Closing of this Agreement shall be held
on or before October 2, 2003 (the "Closing Date") at the offices of ATL, or such
other place as the parties may mutually agree. The parties shall exchange such
other documents and take such other actions as may be necessary or appropriate
for completing the transactions contemplated by the Agreement.
Section 2.5 MECHANICS FOR CLOSING MERGER. Upon the approval of
the ATP Shareholder, the executed Articles of Merger shall be filed with the
Delaware Secretary of State and the designated authority in the British Virgin
Islands. Furthermore, ATP will notify the designated authority in the British
Virgin Islands that its sole shareholder is PRI and not ATL.
Section 2.6 FURTHER ASSURANCES. At or after Closing, ATP, at
the request of PRI, shall promptly execute and deliver, or cause to be
delivered, to PRI all such documents and instruments, in form and substance
satisfactory to PRI, as PRI reasonably may request in order to carry out or
evidence the terms of this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ATP
ATP represents and warrants to PRI, as of the date of this Agreement
and as of the Closing, as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION OF ATP. ATP is a corporation
duly organized, validly existing and in good standing under the laws of the
British Virgin Islands. ATP has full corporate power and authority to conduct
its business as now conducted and to own or lease and operate the assets and
property now owned or leased or operated by it. ATP is qualified to transact
business in those jurisdictions wherein its business requires such action.
Section 3.2 AUTHORITY. ATP has all requisite corporate power and
authority to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by ATP has been duly and validly
executed and delivered by ATP, and is a valid and binding obligation of ATP,
enforceable against ATP in accordance with its terms.
Section 3.3 OWNERSHIP AND SHAREHOLDERS OF ATP. The ATP Shareholder is
the sole shareholder of ATP, and owns all of the issued and outstanding shares
of ATP common stock, beneficially and of record, free and clear of all liens.
The ATP Shares are not subject to, or bound or affected by, any proxies, voting
agreements, or other restrictions on the incidents or ownership hereof. There
are not, and will not at Closing, be more than one shareholder of ATP.
Section 3.4 SUBSIDIARIES. ATP has one subsidiary: AeroTelesis
Philippines, Inc., a Nevada corporation. At Closing, ATP will assign its
ownership in its subsidiary to PRI.
Section 3.5 NO CONFLICTS; REQUIRED CONSENT. The execution, delivery,
and performance by ATP of this Agreement will not: (i) conflict with or violate
any provision of the articles or certificate of incorporation of ATP; (ii)
violate any Legal Requirements; (iii) result in the creation or imposition of
any Lien against or upon the ATP Interests or any of the assets or properties
owned or leased by ATP; or (iv) require any consent, approval, or authorization
of, or filing of any certificate, notice, application, report or other document
with, any governmental authority or other person.
Section 3.6 LITIGATION. There is no litigation pending or, to ATP's
knowledge, threatened, by or before any governmental authority or private
arbitration tribunal, against ATP or its operations, except as described in
Exhibit 3.6 attached hereto and incorporated herein by this reference, nor, to
ATP's knowledge, is there any basis for any such litigation.
Section 3.7 COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS. Conduct by
ATP of its activities as currently conducted does not violate or infringe any
Legal Requirements currently in effect, or, to the knowledge of ATP, proposed to
become effective; and ATP has received no notice of any violation by ATP,
proposed to become effective; and ATP has received no notice of any violation by
ATP of any Legal Requirements applicable to ATP or its activities as currently
conducted; and ATP knows of no basis for the allegation of any such violation.
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Section 3.8 FINANCIAL STATEMENTS. ATP will deliver to PRI the audited
balance sheet and statements of operations of ATP as of September 30, 2003 as
well as any other interim periods as determined by PRI's auditors. The financial
statements will be prepared in accordance with United States GAAP and present
fairly the financial position of ATP as of the date indicated and the results of
operations of ATP for the period ended September 30, 2003. The cost of said
audits and interim reviewed statements shall be borne by ATP. The parties hereto
agree that as part of this transaction, PRI must file a Form 8-K with the
Securities and Exchange Commission that contains audited and pro forma financial
statements of ATP and that failure to file this report on a timely basis could
result in the de-listing of PRI's stock as well as the Securities and Exchange
Commission taking action against PRI for its failure. Therefore, in the
preparation of the audits and any interim financial statements, time is of the
essence. Failure to have these reports ready for timely filing is ground for
rescission of this Agreement.
Section 3.9 LIABILITIES. ATP has no liabilities or obligations, whether
absolute, accrued, contingent, or otherwise, that are not reflected in the
Balance Sheet or non-delinquent obligations for ordinary and recurring expenses,
including expenses occurring in the ordinary course of business of ATP since the
date of the Balance Sheet. Attached as Exhibit 3.9 is a list of all accounts
payable of ATP.
Section 3.10 TAX RETURNS AND PAYMENTS. ATP has timely paid all taxes,
including all federal and state payroll taxes that have become due and payable,
whether or not shown on such tax returns. ATP has filed all federal, state and
local tax returns as the same became due. ATP has not received any notice of,
nor does ATP have any knowledge of, any deficiency or assessment of proposed
knowledge of, any deficiency or assessment of proposed deficiency or assessment
from any taxing governmental authority. There are no tax audits pending with
respect to ATP, and there are no outstanding agreements or waivers by or with
respect to ATP, that extend the statutory period of limitations applicable to
any federal, state, local or foreign tax returns for any period.
Section 3.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
Balance Sheet there has not occurred:
(a) any material and adverse change in the financial condition or
operations of ATP;
(b) any damage, destruction or loss to or of any of the material assets
of properties owned or leased by ATP;
(c) the creation or attachment of any Lien against the ATP Interests;
(d) any waiver, release, discharge, transfer, or cancellation by ATP of
any rights or claims of material value;
(e) any issuance by ATP of any securities, or any merger or
consolidation of ATP with any other Person, or any acquisition by ATP of the
business of any other Person;
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(f) any incurrence, assumption or guarantee by ATP of any indebtedness
or liability;
(g) any declaration, setting aside or payment by ATP of any dividends
on, or any other distribution with respect to, any capital stock of ATP or any
repurchase, redemption, or other acquisition of any capital stock of ATP;
(h) (A) any payment of any bonus, profit sharing, pension or similar
payment or arrangement or special compensation to any employee of ATP, except in
the ordinary course of the administration of ATP, or (B) any increase in the
compensation payable to any employee of ATP; or
(i) the entry by ATP into any Contract to do any of the foregoing.
Section 3.12 MATERIAL ATP CONTRACTS. As of the date of this Plan of
Reorganization, ATP does not have, except as discussed in Exhibit 3.12, (i)
contracts evidence or evidencing or relating to any liabilities or obligations
of ATP, whether absolute, accrued, contingent or otherwise, or granting any
Person a Lien or against any properties or assets owned or leased by ATP; (ii)
joint venture or partnership Contracts between ATP and any other person; (iii)
Contracts limiting the freedom of ATP to engage in or to complete in any
activity, or to use or disclose any information in its possession; (iv) any
guarantees of indebtedness for any other entity; and (v) any other Contracts to
which ATP is a party or by which it or the assets or properties owned or leased
by it are bound or affected that are not set forth on other Exhibits hereto,
which in aggregate contemplate payments to or by ATP exceeding $50,000 in any
twelve-month period (collectively herein as the "Material ATP Contract"). ATP
has delivered to PRI true and complete copies of each of the Material ATP
Contracts, including any amendments thereto (or, in the case or oral Material
ATP Contracts, a memorandum of such contract) and all Material ATP Contracts are
valid, in full force and effect and enforceable in accordance with its terms
against the parties thereto other than ATP, and ATP has fulfilled when due, or
has taken all action necessary to enable it to fulfill when due all of its
obligations thereunder; (ii) there has not occurred any default (without regard
to lapse of time, the giving notice, or the election of any person other then
ATP, or any combination thereof) by ATP, nor, to the knowledge of ATP, has there
occurred any default (without regard to lapse of time, the giving of notice, or
the election of ATP, or any combination thereof) by any other person, under any
of the Material ATP Contracts; and (iii) neither ATP nor, to the knowledge of
ATP, any other person is in arrears in the performance or satisfaction of its
obligation under any of the Material ATP Contracts, and no waiver has been
granted by any of the parties thereto.
Section 3.13 REAL PROPERTY. As of the date of this Plan of
Reorganization, ATP does not own any real property.
Section 3.14 EMPLOYEES. As of the date of this Plan of Reorganization,
ATP has no employees. ATL and PRI shall enter into a separate management
agreement wherein PRI shall have access to ATL's and ATP's staff and personnel
in order to operate the business of ATP.
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Section 3.15 BOOKS AND RECORDS. All of the books, records and accounts
of ATP are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements,
accurately present and reflect in all material respects all of the transactions
therein described, and are reflected accurately in the Financial Statements. ATP
has previously delivered to PRI true and complete copies of all the minutes and
meetings and all other corporate actions of the officers, directors and
shareholders of ATP since the date of its incorporation.
Section 3.16 BANK ACCOUNTS. Exhibit 3.16 sets forth all bank accounts,
brokerage accounts, and safe deposit boxes of any kind maintained by ATP and, in
each case, identifies the persons that are authorized signatories for, or which
are authorized to have access to, each of them.
Section 3.17 CHANGES IN CIRCUMSTANCES. ATP has no knowledge of (i) any
current or future condition or state of facts of circumstances which could
reasonably be expected to result in a material and adverse change in the
financial condition of operations of ATP, or (ii) any Legal Requirements
currently in effect from which ATP currently is, or any currently proposed Legal
Requirements from which ATP would be, except by reason of any "grandfather"
clauses of provisions contained therein, but which would be applicable to PRI
following closing.
Section 3.18 ACCURACY OF INFORMATION. None of the written information
and documents which have been or will be furnished by ATP or any representatives
of ATP to PRI or any of the representatives of PRI in connection with the
transactions contemplated by this Agreement contains or will contain, as the
case may be, any untrue statement of a material fact, or omits or will omit to
state a material fact necessary in order to make the statements therein not
misleading in light of the circumstances in which made. To the knowledge of ATP,
ATP has disclosed to PRI as the purchaser of ATP Interests all material
information relating to ATP and its activities as currently conducted.
Section 3.19 INVESTMENT. The ATP Shareholder is acquiring PRI Common
Stock for investment purposes, and not with a view to distribution or resale
thereof in violation of applicable securities Legal Requirements.
Section 3.20 COMPLIANCE WITH ERISA. ATP does not maintain or contribute
to any Plan other than as set forth in Schedule 3.20. ATP and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any liability to the PBGC or a Plan under Title IV of
ERISA; and no "prohibited transaction" or "reportable event" (as such terms are
defined in ERISA) has occurred with respect to any Plan.
Section 3.21 ENVIRONMENTAL MATTERS.
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(a) ATP has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws, except to the
extent failure to have any such permit, license or authorization would not have
a material adverse effect on the business, financial condition or operations of
ATP. ATP is in compliance with the terms and conditions of all such permits,
licenses and authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not have a material adverse effect
on the business, financial condition or operations of ATP.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by ATP or any of its Subsidiaries to have any permit, license or
authorization required in connection with the conduct of its business or with
respect to any Environmental Laws, including, without limitation, Environmental
Laws relating to the generation, treatment storage, recycling, transportation,
disposal or release of any Hazardous Materials.
(c) To the best of ATP's knowledge, no material oral or
written notification of a release of a Hazardous Material has been filed by or
on behalf of ATP and no property now or previously owned, leased or used by ATP
is listed or proposed for listing on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any similar state list of sites requiring investigation or
clean-up.
(d) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the real property or properties
owned, leased or used by ATP and no governmental actions have been taken or are
in process which could subject any of such properties to such liens or
encumbrances or, as a result of which ATP would be required to place any notice
or restriction relating to the presence of Hazardous Materials at any property
owned by it in any deed to such property.
(e) Neither ATP nor, to the best knowledge of ATP, any
previous owner, tenant, occupant or user of any property owned, leased or used
by ATP has (i) engaged in or permitted any operations or activities upon or any
use or occupancy of such property, or any portion thereof, for the purpose of or
in any way involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal (whether legal or
illegal, accidental or intentional) of any Hazardous Materials on, under, in or
about such property, except in compliance with all Environmental Laws, or (ii)
transported any Hazardous Materials to, from or across such property except in
compliance with all Environmental Laws; nor to the best knowledge of ATP have
any Hazardous Materials migrated from other properties upon, about or beneath
such property, nor, to the best knowledge of ATP, are any Hazardous Materials
presently constructed, deposited, stored or otherwise located on, under, in or
about such property except in compliance with all Environmental Laws.
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Section 3.22 FRANCHISES, PATENTS, COPYRIGHTS, ETC. Schedule 3.22 sets
forth an accurate and complete list of all franchises, patents, copyrights,
trademarks, trade names, trademark registrations, service names, service marks,
licenses, formulas and applications therefor owned by ATP or used or required by
ATP in the operation of its business, title to each of which is, except as set
forth in Schedule 3.22 hereto, held by ATP free and clear of all adverse claims,
liens, security agreements, restrictions or other encumbrances. Except as set
forth in Schedule 3.22, ATP owns or possesses adequate (and will use its best
efforts to obtain as expediently as possible any additional) licenses or other
rights to use all patents, trademarks, trade names, service marks, trade secrets
or other intangible property rights and know-how necessary to entitle ATP to
conduct its business as presently being conducted. There is no infringement
action, lawsuit, claim or complaint which asserts that ATP's operations violate
or infringe the rights or the trade names, trademarks, trademark registrations,
service names, service marks or copyrights of others with respect to any
apparatus or method of ATP or any adversely held trademarks, trade names,
trademark registrations, service names, service marks or copyrights, and ATP is
not in any way making use of any confidential information or trade secrets of
any person, except with the consent of such person. Except as set forth in
Schedule 3.22, ATP has taken reasonable steps to protect its proprietary
information (except disclosure of source codes pursuant to licensing agreements)
and is the lawful owner of the proprietary information free and clear of any
claim of any third party. ATP's proprietary rights are adequate for the conduct
of its business substantially as now conducted without known conflict with any
rights of others.
Section 3.23 NO MATERIALLY ADVERSE CONTRACTS, ETC. ATP is not subject
to any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation that has or is expected in the future to have a
materially adverse effect on the business, assets or financial condition of ATP.
ATP is not a party to any contract or agreement that has or is expected, in the
judgment of ATP's officers, to have any materially adverse effect on the
business of ATP.
Section 3.24 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. ATP is not
in violation of any provision of its certificate of incorporation, by-laws, or
any agreement or instrument to which it may be subject or by which it or any of
its properties may be bound, or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could result
in the imposition of substantial penalties or materially and adversely affect
the financial condition, properties or business of ATP.
Section 3.25 ABSENCE OF UCC FINANCING STATEMENTS, ETC. There is no
financing statement, security agreement, chattel mortgage, real estate mortgage
or other document filed or recorded with any filing records, registry, or other
public office, that purports to cover, affect or give notice of any present or
possible future lien on, or security interest in, any Collateral or rights
thereunder.
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Section 3.26 CERTAIN TRANSACTIONS. Except as set forth in Schedule
3.26, none of the officers, trustees, directors, or employees of ATP is
presently a party to any transaction with ATP, including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, trustee, director or such employee
or, to the knowledge of ATP, any corporation, partnership, trust or other entity
in which any officer, trustee, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
Section 3.27 FEES/COMMISSIONS. Except as set forth in Schedule 3.27
hereto, ATP has not agreed to pay any finder's fee, commission, origination fee
or other fee or charge to any Person with respect to the transactions
contemplated hereunder.
Section 3.28 OTHER REPRESENTATIONS AND WARRANTIES. All representations,
warranties, and covenants made by ATP and ATL in connection with this
transaction are true and correct in all material respects, and do not omit to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PRI
PRI represents and warrants to ATP, as of the date of this Agreement
and as of Closing, as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION OF PRI. PRI is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to own
and lease the properties and assets it currently owns and leases and to conduct
its activities as currently conducted. PRI is duly qualified to do business as a
foreign corporation in all jurisdictions in which the ownership or leasing of
the properties and assets owned or leased by it or the nature of its activities
makes such qualification necessary.
Section 4.2 AUTHORITY. PRI has all requisite corporation and authority
to execute, deliver and perform this Agreement. The execution, delivery, and
performance of this Agreement by PRI have been duly and validly authorized by
all necessary action on the part of PRI. This Agreement has been duly and
validly executed and delivered by PRI and is the valid and binding obligation of
PRI, enforceable against PRI in accordance with its terms.
Section 4.3 NO CONFLICTS; REQUIRED CONSENTS. The execution, delivery
and performance by PRI of this Agreement does not and will not: (i) conflict
with or violate any provisions of the articles of certificate of incorporation
or bylaws of PRI; (ii) violate any provisions of any Legal Requirements; or
(iii) conflict with, violate result in a breach of, constitute a default under
(without regard to requirements of notice, lapse of time, or elections of other
persons, or any combination thereof) or accelerate or permit the acceleration of
the performance required by, and Contract or Lien to which PRI is a party or by
which PRI or the assets or properties owned or leased by it are bound or
affected; or (iv) require any consent, approval or authorization, report or
other document with, any Governmental Authority or other person.
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Section 4.4 VALIDITY AND OWNERSHIP OF PRI COMMON STOCK. The PRI Common
Stock received by the ATP Shareholder at Closing will be validly issued and
outstanding, duly paid and nonassessable. The PRI Common Stock will not be
subject to, nor bound or affected by, any proxies, voting agreements, or other
restrictions on the ownership thereof.
Section 4.5 OWNERSHIP AND NUMBER OF SHARES OF PRI COMMON STOCK. The
shareholders' list attached hereto as Exhibit 4.5 accurately reflects the
currently issued and outstanding shares of PRI Common Stock currently
outstanding. There are not, and will not at Closing, be more than 5,474,826
outstanding shares of PRI Common Stock.
Section 4.6 SUBSIDIARIES. PRI does not control or hold direct or
indirect equity interest in, or hold rights to control or acquire direct or
indirect equity interests in, any corporation.
Section 4.7 CAPITALIZATION OF PRI. The authorized capital stock of PRI
consists of 200,000,000 duly authorized shares of common stock $.00008 per share
par value, of which 5,474,826 are validly issued and outstanding, fully paid and
nonassessable and a total of 2,000,000 shares of preferred stock authorized, par
value $.001, with no shares of preferred stock issued and outstanding. There are
no other authorized or outstanding subscriptions, options, convertible
securities, warrants, calls or other rights or any kind issued or granted by, or
binding upon, PRI to purchase or otherwise acquire any securities of or equity
interest in PRI.
Section 4.8 LITIGATION. There is no litigation pending or, to PRI's
knowledge, threatened, by or before any governmental authority or private
arbitration tribunal, against PRI or its operations, nor, to PRI's knowledge, is
there any basis for any such litigation.
Section 4.9 LIABILITIES. Except as disclosed in Exhibit 4.9, PRI has no
liabilities or obligations, whether absolute, accrued, contingent, or otherwise
that have not been disclosed to ATP.
Section 4.10 TAX RETURNS AND PAYMENTS. Except as disclosed in Schedule
4.10, PRI has filed all federal, state, local and foreign tax returns required
to be filed, and has timely paid all taxes that have become due and payable,
whether or not so shown on any such tax returns. PRI has not received any notice
of, nor does PRI have any knowledge of, any deficiency or assessment of proposed
knowledge of, any deficiency or assessment of proposed deficiency or assessment
from any taxing governmental authority. There are no tax audits pending with
respect to PRI, and there are no outstanding agreements or waivers by or with
respect to PRI, that extend the statutory period of limitations applicable to
any federal, state, local or foreign tax returns for any period. PRI makes no
representation or warranty concerning whether or not its net operating loss
carryforwards will be available for use by ATP following this transaction.
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Section 4.11 BOOKS AND RECORDS. All of the books, records and accounts
of PRI are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements,
accurately present and reflect in all material respects all of the transactions
therein described, and are reflected accurately in the Financial Statements. PRI
has previously delivered to ATP the complete stock record book of PRI and true
and complete copies of all the minutes and meetings and all other corporate
actions of the stockholders, Board of Directors and committees of the Board of
Directors of PRI since the date of its incorporation.
Section 4.12 ACCURACY OF INFORMATION. None of the written information
and documents which have been or will be furnished by PRI or any representatives
of PRI to ATP or any of the representatives of ATP in connection with the
transactions contemplated by this Agreement contains or will contain, as the
case may be, any untrue statement of a material fact, or omits or will omit to
state a material fact necessary in order to make the statements therein not
misleading in light of the circumstances in which made. To the knowledge of PRI,
PRI has disclosed to ATP as the purchaser of PRI common stock all material
information relating to PRI and its activities.
Section 4.13 REPORTING COMPANY. PRI is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and has a class of securities registered under the 1934 Act. PRI
agrees to continue to prepare and file its periodic reports under the 1934 Act.
ARTICLE 5
COVENANTS OF ATP AND PRI
Section 5.1 AFFIRMATIVE COVENANTS OF ATP. Except as PRI may otherwise
consent in writing, between the date of this Agreement and Closing, ATP shall:
(a) conduct its business only in the usual, regular and ordinary course
and in accordance with past practices;
(b) (1) duly comply with all applicable Legal Requirements; (2) perform
all of its obligations under all ATP Contacts without default; and (3) maintain
its books, records, and accounts on a basis consistent with past practices;
(c) (1) give to PRI its counsel, accountants and other representatives
reasonable access during normal business hours to the premises of ATP, all of
the assets and properties owned or leased by ATP, ATP's books and records, and
ATP's personnel; (2) furnish to PRI and such representatives all such additional
documents (certified by an officer of ATP, if requested), financial information
and other information as ATP may from time to time reasonably request and (3)
cause ATP's accountants to permit PRI and its accountants to examine the records
and working papers pertaining to ATP's financial statements' provided that no
investigation by PRI of its representatives will affect or limit the scope of
any of the representations and warranties of ATP herein or in any other related
document;
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(d) use of best efforts to obtain in writing as promptly as possible
all approvals and consents required to be obtained by ATP in order to consummate
the transactions contemplated hereby and deliver to PRI copies, satisfactory in
form and substance to PRI, of such approvals and consents;
(e) promptly deliver to PRI true and complete copies of all monthly and
quarterly financial statements of ATP and any reports with respect to the
activities of ATP which are prepared by or for ATP at any time from the date
hereof until Closing; and
(f) promptly notify PRI of any circumstances, event or action, by ATP
or otherwise, (A) which, if known at the date of this Agreement, would have been
required to be disclosed in or pursuant to this Agreement, or (B) the existence,
occurrence or taking of which would result in any of the representations and
warranties of ATP in this Agreement or in any Transaction Documents not being
true and correct in all material respects.
Section 5.2 NEGATIVE COVENANTS OF ATP. Except as PRI may otherwise
consent in writing, between the date of this Agreement and Closing, ATP shall
not:
(a) change the character of its business;
(b) incur any liability or obligation or enter into any Contract
except, in each case, in the ordinary course of business consistent with prior
practices and not prohibited by any other provision hereof;
(c) incur, assume or guarantee any indebtedness or liability in respect
of borrowed money;
(d) make any capital expenditure or commitment for capital expenditure
exceeding $5,000 for a single project or $10,000 for all projects, whether or
not in the ordinary course of business, or waive, lease, discharge, transfer or
cancel any rights or claims of material value;
(e) modify, terminate, or abrogate any Material ATP Contact other than
in the ordinary course of business, or waive, lease, discharge, transfer or
cancel any rights or claims of material value;
(f) create or permit the creation or attachment of any Lien against any
of the assets or properties owned or leased by it;
(g) except as otherwise required by this Agreement, prepay any material
liabilities or obligations;
(h) issue any securities, or merge or consolidate with any other person
or acquire any of the securities, partnership or joint venture interests, or
business of any other person;
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(i) declare, set aside or pay any dividends on, or make any other
distribution with respect to, any of its capital stock, or repurchase, redeem,
or otherwise acquire any of its capital stock; and
(j) enter into any transaction or permit the taking of any action that
would result in any of the representations and warranties in this Agreement not
being true and correct in all material respects at Closing.
Section 5.3 COVENANTS OF PRI. Except as ATP may otherwise agree in
writing, between the date of this Agreement and Closing, PRI shall:
(a) use it best efforts to obtain in writing as promptly as possible
all approvals and consents required to be obtained by PRI in order to consummate
the transaction contemplated hereby and deliver to ATP copies, satisfactory in
form and substance to ATP, of such approvals and consents;
(b) promptly notify ATP of any circumstance, event or action, by PRI or
otherwise, (i) which, if known at the date of this Agreement, would have been
required to be disclosed in or pursuant to this Agreement, or (ii) the
existence, occurrence or taking of which would result in any of the
representations and warranties of ATP in this Agreement or in any Transaction
Document not being true and correct in all material respects;
(c) undertake all other actions necessary to put into force and effect
this Agreement.
Section 5.4 JOINT UNDERTAKINGS. Each of PRI and ATP shall cooperate and
exercise commercially reasonable efforts to facilitate the consummation of the
transactions contemplated by this Agreement so as to permit Closing to take
place on the date provided herein and to raise the satisfaction of conditions to
Closing set forth in Article 6. Both parties hereto agree that they will use
their best efforts to cause a Form 8-K to be filed with the Securities and
Exchange Commission concerning this transaction which Form 8-K will require
audited financial statements for ATP and pro forma financial information for the
companies as merger.
Section 5.5 CONFIDENTIALITY.
(a) Any non-public information that PRI may obtain from ATP in
connection with this Agreement, including but not limited to information
concerning trade secrets, licenses, research projects, costs, profits, markets,
sales, customer lists, strategies, plans for future development and any other
information of a similar nature, shall be deemed confidential and, unless and
until Closing shall occur, PRI shall not disclose any such information to any
third party (other than its directors, officers and employees and persons whose
knowledge thereof is necessary to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
ATP; provided that (i) PRI may use and disclose any such information once it has
been publicly disclosed (other than by PRI in breach of its obligations under
this Section) or which rightfully has come into the possession of PRI (other
than from ATP) and (ii) to the extent that PRI may become complied by Legal
Requirements to disclose any of such information, PRI may disclose such
information if it shall have used all reasonable efforts, and shall have
afforded ATP the opportunity to obtain an appropriate protective order, or other
satisfactory assurance of confidential treatment for the protective order, or
other satisfactory assurance of confidential treatment, for the information
compelling to be disclosed. In the event of termination of this Agreement, PRI
shall use all reasonable efforts to cause to be delivered to ATP, and retain no
copies of, any documents, work papers and other materials obtained by PRI or on
its behalf from ATP, whether so obtained before or after the execution hereof.
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(b) Any non-public information that ATP may obtain from PRI in
connection with this Agreement, including but not limited to information
concerning trade secrets, licenses, research projects, costs, profits, markets,
sales, customer lists, strategies, plans for future development and any other
information of a similar nature, shall be deemed confidential and, unless and
until Closing shall occur, ATP shall not disclose any such information to any
third party (other than its directors, officers and employees, and persons whose
knowledge thereof is necessary to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
PRI; provided that (i) ATP may use and disclose any such information once it has
been publicly disclosed (other than by ATP in breach of obligations under this
Section) or which rightfully has come into the possession of ATP (other than
from PRI) and (ii) to the extent that ATP may become complied by Legal
Requirements to disclose any of such information, ATP may disclose such
information if it shall have used all reasonable efforts, and shall have
afforded PRI the opportunity, to obtain an appropriate protective order, or
other satisfactory assurance of confidential treatment, for the information
compelled to be disclosed. In the event of termination of this Agreement, ATP
shall use all reasonable efforts to cause to be delivered to PRI, and retain no
copies of, any documents, work papers and other materials obtained by ATP or on
its behalf from PRI, whether so obtained before or after the execution hereof.
Section 5.6 PUBLICITY. PRI and ATP shall each consult with and obtain
the consent of the other before issuing any press release or making any other
public disclosure concerning this Agreement or the transactions contemplated
hereby unless, in the reasonable judgment of the disclosing party, a release or
disclosure is required to discharge its disclosure obligations under applicable
legal requirements, in which case it shall in good faith consult with the other
party about the form, content and timing of such release or disclosure prior to
its release of disclosure.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.1 CONDITIONS TO ATP'S OBLIGATIONS. The obligations of ATP to
consummate the transactions contemplated by this Agreement are subject to the
following conditions:
(a) Accuracy of Representations. The representations of PRI in this
Agreement or in any Transaction Document shall be true and accurate in all
material respects at and as of Closing with the same effect as if made at and as
of Closing, except as affected by the transactions contemplated hereby.
15
(b) Performance of Agreements. PRI shall have performed all obligations
and agreements and complied with all covenants in this Agreement to be performed
and complied with by it at or before Closing.
(c) Officers' Certificate. ATP shall have received a certificate
executed by an executive officer of PRI, dated as of Closing, reasonably
satisfactory in form and substance to ATP certifying that the conditions stated
in subparagraphs (a) and (b) of this Section have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
judgment shall have been entered and not vacated by any governmental authority
of competent jurisdiction and no litigation shall be pending which restrains,
makes illegal or prohibits consummation of the transactions contemplated hereby.
(e) Consents. ATP shall have obtained evidence, in form and substance
satisfactory to it, that there have been obtained all consents, approvals and
authorizations required by this Agreement.
(f) Legal Matters Satisfactory to ATP's Counsel. All actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all related matters
shall be reasonably satisfactory to and approved by ATP's counsel, and such
counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as it shall have reasonably
requested.
Section 6.2 CONDITIONS TO PRI'S OBLIGATIONS. The obligations of PRI to
consummate the transactions contemplated by this Agreement are subject to the
following conditions:
(a) Accuracy of Representations. The representations of ATP in this
Agreement or in any Transaction Document shall be true and accurate (in all
material respects) at and as of Closing with the same effect as if they were
made at and as of Closing, except as afforded by the transactions contemplated
hereby.
(b) Performance of Agreements. ATP shall have performed all obligations
and agreements and complied with all covenants in this Agreement or in any
Transaction Document to which it is a party to be performed and complied with by
it at or before closing.
(c) Officers' Certificate. PRI shall have received a certificate
executed by an executive officer of ATP, dated as of Closing, reasonably
satisfactory in form and substance to PRI, certifying that the conditions stated
in subparagraphs (a) and (b) of this Section have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
judgment shall have been entered and not created by any governmental authority
of competent jurisdiction and no litigation shall be pending which restrains,
makes illegal or prohibits consummation of the transactions contemplated hereby.
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(e) Consents. PRI shall have obtained evidence, in form and substance
satisfactory to it, that there have been obtained all consents, approvals and
authorizations required by this Agreement.
(f) Legal Matters Satisfactory to PRI's Counsel. All actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all related legal
matters shall be reasonably satisfactory to and approved by PRI's counsel, and
such counsel shall have been furnished with such copies of actions and
proceedings and such other instruments and documents as it shall have reasonably
requested.
ARTICLE 7
INDEMNIFICATION
Section 7.1 INDEMNIFICATION BY ATP SHAREHOLDERS. From and after
Closing, the ATP Shareholder set forth in Exhibit 7, who together with their
subsidiaries, other corporate affiliates, and immediate families, are all the
shareholders of the ATP Shares, all jointly and severally indemnify and hold
harmless PRI, its officers, directors, employees, agents and representatives and
any person claiming by or through any of them, from and against any and all
losses and related expenses arising out of or resulting from:
(a) any representations and warranties of ATP in this Agreement not
being true and accurate when made or when required by this Agreement to be true
and accurate; or
(b) any failure by ATP to perform any of its covenants, agreements or
obligations in this Agreement.
Section 7.2 INDEMNIFICATION BY PRI. From and after the Closing, PRI
shall indemnify and hold harmless ATP, its officers, directors, agents and
representatives, and any person claiming by or through any of them as the case
my be, from and against any and all losses and related expenses arising out of
or resulting from:
(a) any representations and warranties of PRI in this Agreement not
being true and accurate when made or when required by this Agreement to be true
and accurate; or
(b) any failure by PRI to perform any of its covenants, agreements or
obligations in this Agreement.
(c) all undisclosed abilities and obligations relating to, or arising
out of activities of PRI during periods prior to Closing.
Section 7.3 INDEMNIFICATION AGAINST THIRD PARTY CLAIMS. Promptly after
receipt entitled to indemnification hereunder (the "Indemnitee") of written
notice of the assertion of any claim or the commencement of any Litigation with
respect to any matter referred to Sections 7.1 or 7.2, the Indemnitee shall give
written notice thereof to the party from whom indemnification is sought pursuant
hereto (the "Indemnitor") and thereafter shall keep the Indemnitor reasonably
informed with respect thereto, may provided that failure of the Indemnitee to
give the Indemnitor notice as provided herein shall not relieve the Indemnitor
of its obligations hereunder. In case any litigation is brought against any
Indemnitee, the Indemnitor shall be entitled to participate in (and at the
request of the Indemnitee shall assume) the defense thereof with counsel
satisfactory to Indemnitee at the Indemnitor's expense. If the Indemnitor, at
the Indemnitee's request, shall assume the defense of any settlement shall
include as an unconditional term thereof the giving by the claimant or the
plaintiff of a release of the Indemnitee, satisfactory to the Indemnitee, from
all liability with respect to such litigation.
17
Section 7.4 TIME AND MANNER OF CERTAIN CLAIMS. The representations and
warranties of PRI and the ATP Shareholder in this Agreement shall survive
Closing; provided, however, that neither PRI nor the ATP Shareholder shall have
any liability under Section 7.1 or 7.2, respectively, unless a claim is asserted
by the party seeking indemnification thereunder by written notice to the party
from whom indemnification is sought within three years after Closing, and such
party commences litigation seeking such indemnification within 180 days
following the date of such notice.
Section 7.5 EFFECT OF DE MINIMUS DAMAGE ON INDEMNITY BY PRINCIPAL
SHAREHOLDERS. The ATP Shareholder shall have no indemnity obligations under this
Article 7 unless aggregate amount payable by it under this Article 7 is in
excess of $10,000.
Section 7.6 TAX EFFECT. In calculating amount payable to an Indemnitee
hereunder (i) the amount of the indemnified losses shall be reduced by the
amount of any reduction in the Indemnitee's liability for taxes resulting from
the facts or occurrence giving rise to the indemnified losses; and (ii) the
amount of the indemnified losses shall be grossed up by the amount of any
increase in liability for taxes resulting from indemnification with respect
thereto.
ARTICLE 8
TERMINATION
Section 8.1 TERMINATION EVENTS. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of PRI and ATP.
(b) by either PRI and ATP, if the other is in material breach or
default of its respective covenants, agreements or other obligations hereunder
or if any of its representations and warranties herein are not true and accurate
in all material respects when made or when otherwise required by this Agreement
to be true and accurate.
(c) by either PRI or ATP upon written notice to the other, if the
transactions contemplated by this Agreement are not consummated on or prior to
October 31, 2003, for any reason other than material breach or default by such
party of its respective representations, warranties, covenants, agreements or
other obligations hereunder.
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(d) in the event of any Cease & Desist orders or other regulatory
impediments placed upon PRI by government authorities such as the Securities and
Exchange Commission or others.
Section 8.2 EFFECT OF TERMINATION. If this Agreement shall be
terminated, all obligations of the parties hereunder shall terminate, except for
the obligations set forth in section 5.5, 5.6 and 9.3.
ARTICLE 9
MISCELLANEOUS
Section 9.1 EXPENSES. Each party shall pay its own expenses incurred as
a result of this transaction.
Section 9.2 WAIVER AND MODIFICATIONS. Any of the provisions of this
Agreement may be waived at any time by the party entitled to the benefit
thereof, upon the authority of the Board of Directors of such party. Any of the
provisions of this Agreement (including the exhibits and the Agreement of
Merger) may be modified at any time prior to and after the vote of the ATP
Shareholders by agreement in writing approved by the Board of Directors of each
party and executed in the same manner (but necessarily by the same persons) as
this Agreement, provided that such modification, after the last vote of the ATP
Shareholders shall not be allowed, if in the judgment of the Board of Directors
of ATP, it affects materially and adversely the benefits of ATP's Shareholders
under this Agreement of Merger. To the extent permitted by law, the powers of
the Board of Directors may be delegated by the Board of the Executive Committee
of such Board or by such Board (or by the Executive Committee to the extent any
matter has been delegated to such Committee by the Board) to any officer or
officers of such party, and any notices, consents or other action referred to in
this Agreement may be given or taken by any officer so authorized.
Section 9.3 FINDER COMMISSIONS. PRI and ATP each represents and
warrants that no broker or finder is entitled to any brokerage or finder's fee
or other commission based on agreements, arrangements or understandings made by
it with respect to the transactions contemplated by this Agreement or by the
Agreement of Merger, other than set forth in Exhibit 9.3.
Section 9.4 NOTICES. Any notice request, instruction or other documents
to be given hereunder or under the Agreement of Merger by any part to another
shall be in writing and delivered personally or sent by registered or certified
mail, postage prepaid,
If to PRI, addressed to:
Pacific Realm, Inc.
Attn: Xxxxxx Xxxxxxxxx, President
00000 Xxxxxxx Xxxxxx #000
Xxxxxx xxx Xxx XX 00000
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if to ATP, addressed to:
AeroTelesis Philippines
Attn: Xxxx Xxxx, President
Xxxxx 00 XXX Xxxxx 0
00 Xxxxxxx Xxxxx
Xxxxxxxxx 000000
Section 9.5 ABANDONMENT. At any time before the effective Date, this
Merger Agreement may be terminated and the merger may be abandoned by the Board
of Directors of PRI or the Board of Directors of ATP or both, notwithstanding
approval of this Agreement by the ATP Shareholder or the PRI Shareholders or
both.
Section 9.6 ENTIRE AGREEMENT. This Agreement and Plan of Merger
represents the entire agreement between the parties. Any and all oral or written
agreements concerning this merger shall be deemed null and void.
Section 9.6 GOVERNING LAW. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Delaware.
Section 9.7 COUNTERPARTS. In order to facilitate the filing and
recording of this Merger Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original.
(remainder of page left blank intentionally)
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IN WITNESS WHEREOF, PRI and ATP, by their duly authorized officers,
have executed and delivered this Agreement effective as of the date first above
written.
PACIFIC REALM, INC.
By:/S/ Xxxxxx Xxxxxxxxx
----------------------------
Xxxxxx Xxxxxxxxx, President
Aero-Telesis Philippines Inc.
By: /S/ Xxxx Xxxx
----------------------------
Xxxx Xxxx, President
CONSENT OF ATP SHAREHOLDER:
AeroTelesis Ltd.
By: /s/ Xxxxxxx Xxxx
----------------------------
Xxxxxxx Xxxx, President
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