Exhibit 10.6

 

AGREEMENT AND PLAN OF REORGANIZATION

 

This Agreement and Plan of Reorganization (the “Agreement”), dated as of the
27th day of October, 2005, by and between HAPS USA, Inc., a Utah corporation
(“HAPS”), and PGMI, Inc., a Delaware corporation (“PGMI”), and the shareholders
of PGMI (“Shareholders”), with reference to the following:

 

A.                                   HAPS is a Utah corporation organized on
March 9, 1972.  HAPS has authorized capital stock of 900,000,000 shares, no par
value per share, 750,000,000 of which are authorized for the issuance of common
stock (“HAPS Common Stock”) and 150,000,000 of which are authorized for the
issuance of preferred stock (“HAPS Preferred Stock”). Of the HAPS Preferred
Stock, 6,000,000 shares have been designated as Class A convertible preferred
stock (“HAPS Class A Stock”), 5,000,000 shares have been designated as Class B
convertible preferred stock (“HAPS Class B Stock”), 116,595,760 shares have been
designated as Class E convertible preferred stock (HAPS Class E Stock) and
1,200,000 shares have been designated as Class C convertible preferred stock
(HAPS Class C Stock). Of such shares, 19,381,060 shares of HAPS Common Stock and
3,018,760 shares of HAPS Class A Stock are issued and outstanding.

 

B.                                     PGMI is a privately held corporation
organized under the laws of the State of Delaware on June 10, 2003. PGMI is
authorized to issue only one class of stock. PGMI has authorized capital stock
of 100,000 shares of common stock, $ 0.0001 par value (“PGMI Common Stock”). Of
such shares, 10,000 shares of PGMI Common Stock are issued and outstanding.

 

C.                                     The respective Boards of Directors of
HAPS and PGMI have deemed it advisable and in the best interests of HAPS and
PGMI and their respective shareholders that PGMI be acquired by HAPS, pursuant
to the terms and conditions set forth in this Agreement.

 

D.                                    HAPS and PGMI propose to enter into this
Agreement which provides among other things that all of the outstanding shares
of PGMI Common Stock be acquired by HAPS, in exchange for 81,255,990 shares of
HAPS Class E convertible preferred stock (the “HAPS Class E Stock”) and such
additional items as more fully described in the Agreement.

 

E.                                      The parties desire the transaction to
qualify as a tax-free reorganization under Section 368 (a) (1) (B) of the
Internal Revenue Code of 1986, as amended.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1
THE ACQUISITION

 

1.01                           AT THE EFFECTIVE TIME (AS DEFINED IN
SECTION 2.01), SUBJECT TO THE TERMS AND CONDITIONS HEREIN, EACH SHARE OF PGMI
COMMON STOCK ISSUED AND OUTSTANDING IMMEDIATELY PRIOR TO THE EFFECTIVE TIME
SHALL BE ACQUIRED BY HAPS IN EXCHANGE FOR 97,059,998 FULLY PAID AND
NONASSESSABLE SHARES OF HAPS CLASS E STOCK (THE EXCHANGE OF ALL SHARES OF PGMI
COMMON STOCK FOR HAPS SHARES SHALL CONSTITUTE THE “EXCHANGE”). THE HAPS CLASS E
STOCK SHALL BE ISSUED TO THE SHAREHOLDERS IN THE AMOUNTS SET FORTH OPPOSITE
THEIR RESPECTIVE NAMES ON EXHIBIT A TO THIS AGREEMENT. IN ACCORDANCE WITH THE
CERTIFICATE OF DESIGNATION FOR THE HAPS CLASS E STOCK, THE FORM OF WHICH IS
ATTACHED HERETO AS EXHIBIT B TO THIS AGREEMENT, EACH SHARE OF HAPS CLASS E STOCK
SHALL BE (I) CONVERTIBLE INTO FIVE (5) SHARES OF RESTRICTED COMMON STOCK TWO
YEARS AFTER ITS ISSUANCE AND (II) BE ENTITLED TO FIVE VOTES PER SHARE ON ALL
MATTERS PRESENTED TO THE SHAREHOLDERS OF HAPS FOR THEIR VOTE OR CONSENT.

 

1

--------------------------------------------------------------------------------

 

1.02                           AS OF THE EFFECTIVE TIME, EACH OUTSTANDING STOCK
CERTIFICATE THAT IMMEDIATELY PRIOR TO THE EFFECTIVE TIME REPRESENTING SHARES OF
PGMI COMMON STOCK SHALL BE DEEMED FOR ALL PURPOSES TO EVIDENCE OWNERSHIP AND TO
REPRESENT THE NUMBER OF SHARES OF HAPS CLASS E STOCK FOR WHICH SUCH SHARES OF
PGMI COMMON STOCK HAVE BEEN EXCHANGED PURSUANT TO SECTION 1.01. THE RECORD
HOLDER OF EACH OUTSTANDING CERTIFICATE REPRESENTING SHARES OF PGMI COMMON STOCK
SHALL, AFTER THE EFFECTIVE TIME, BE ENTITLED TO VOTE THE HAPS CLASS E STOCK FOR
WHICH SUCH SHARES OF PGMI COMMON STOCK HAVE BEEN EXCHANGED ON ANY MATTERS ON
WHICH THE HOLDERS OF THE HAPS SHARES ARE ENTITLED TO VOTE. AFTER THE EFFECTIVE
TIME, THE HOLDERS OF CERTIFICATES EVIDENCING OUTSTANDING SHARES OF PGMI COMMON
STOCK IMMEDIATELY PRIOR TO THE EFFECTIVE TIME SHALL DELIVER SUCH CERTIFICATES OF
PGMI COMMON STOCK, DULY ENDORSED SO AS TO MAKE HAPS THE SOLE HOLDER THEREOF,
FREE AND CLEAR OF ALL CLAIMS, AND ENCUMBRANCES AND HAPS SHALL DELIVER A
TRANSMITTAL LETTER TO THE TRANSFER AGENT OF HAPS DIRECTING THE ISSUANCE OF THE
HAPS CLASS E STOCK TO THE SHAREHOLDERS OF PGMI AS SET FORTH ON EXHIBIT A OF THIS
AGREEMENT.  ANY SHARES OF HAPS CLASS E STOCK ISSUED PURSUANT TO THIS AGREEMENT,
AND THE SHARES OF HAPS COMMON STOCK INTO WHICH THEY MAY BE CONVERTED, WILL NOT
BE TRANSFERABLE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR (B) UPON RECEIPT BY HAPS OF A WRITTEN OPINION OF COUNSEL
FOR THE HOLDER REASONABLY SATISFACTORY TO HAPS TO THE EFFECT THAT THE PROPOSED
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, AND RELEVANT STATE SECURITIES LAWS.  RESTRICTIVE LEGENDS SHALL
BE PLACED ON ALL CERTIFICATES REPRESENTING HAPS CLASS E STOCK ISSUED PURSUANT TO
THIS AGREEMENT, AND THE SHARES OF HAPS COMMON STOCK INTO WHICH THEY MAY BE
CONVERTED, AS SET FORTH IN SECTION 11.02.

 

In the event any certificate for PGMI Common Stock has been lost, stolen or
destroyed, HAPS shall issue and pay in exchange for such lost, stolen or
destroyed certificate, promptly following its receipt of an affidavit of that
fact by the holder thereof, such shares of HAPS Class E Stock as may be required
pursuant to this Agreement.

 

1.03                           FOLLOWING THE EFFECTIVE TIME, THERE WILL BE A
TOTAL OF 19,381,060 SHARES OF HAPS COMMON STOCK, 5,140,290 SHARES OF HAPS
CLASS A PREFERRED STOCK, AND 97,059,998 SHARES OF HAPS CLASS E STOCK ISSUED AND
OUTSTANDING. ALL OF HAPS COMMON STOCK SHALL BE HELD BY SHAREHOLDERS OF HAPS. OF
THE HAPS CLASS A PREFERRED STOCK, 3,018,760 SHARES WILL HAVE BEEN ISSUED TO THE
SHAREHOLDERS OF HAPS, AND 1,591,148, AND 530,382 SHARES WILL HAVE BEEN ISSUED TO
ANTAEUS CAPITAL, LLC, AND CCC INTERESTS LIMITED, RESPECTIVELY, PURSUANT TO
SECTION 3.14 OF THIS AGREEMENT. ALL OF HAPS CLASS E STOCK SHARES WILL HAVE BEEN
ISSUED TO THE SHAREHOLDERS AS SET FORTH IN EXHIBIT A TO THIS AGREEMENT.

 

1.04                           FOLLOWING THE EFFECTIVE TIME, PGMI WILL BE A
WHOLLY OWNED SUBSIDIARY OF HAPS.

 

ARTICLE 2
THE CLOSING

 

2.01                           SUBJECT TO THE TERMS AND CONDITIONS HEREIN, THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (THE “CLOSING”)
SHALL TAKE PLACE AT SNELL & WILMER LLP, 600 ANTON BLVD. SUITE 1400, COSTA MESA,
CA 92626-7689 ON OR BEFORE NOVEMBER 15, 2005 (THE “CLOSING DATE”) OR AT SUCH
OTHER PLACE OR DATE AND TIME AS MAY BE AGREED TO IN WRITING BY THE PARTIES
HERETO AT THE EARLIEST PRACTICABLE TIME AFTER SATISFACTION OR WAIVER OF THE
CONDITIONS HEREOF, BUT IN NO EVENT LATER THAN FIFTEEN (15) DAYS AFTER SUCH
CONDITIONS HAVE BEEN SATISFIED OR WAIVED.  ON THE CLOSING DATE, OR AS SOON
THEREAFTER AS PRACTICABLE, TO EFFECT THE EXCHANGE, HAPS WILL CAUSE THE ARTICLES
OF EXCHANGE TO BE FILED WITH THE UTAH SECRETARY OF STATE IN ACCORDANCE WITH THE
LAWS OF UTAH. THE EXCHANGE SHALL BE EFFECTIVE AT SUCH TIME THAT THE ARTICLES OF
EXCHANGE IS FILED WITH THE UTAH SECRETARY OF STATE, OR SUCH LATER TIME THAT THE
PARTIES SPECIFY IN SUCH DOCUMENTS ON FILE WITH SUCH STATE (THE “EFFECTIVE TIME”
OR “EFFECTIVE DATE”).

 

2

--------------------------------------------------------------------------------

 

2.02                           THE FOLLOWING CONDITIONS ARE A PART OF THIS
AGREEMENT AND MUST BE COMPLETED ON OR AS OF THE CLOSING DATE, OR SUCH OTHER DATE
SPECIFIED BY THE PARTIES:

 

(A)                                  IMMEDIATELY AFTER CLOSING, THE BOARD OF
DIRECTORS OF HAPS SHALL APPOINT THE FOLLOWING INDIVIDUALS AS MEMBERS OF THE
BOARD OF DIRECTORS:

 

Eiichi Kanemoto

 

Shinichi Kanemoto

 

Gakushin Kanemoto

 

(B)                                 IMMEDIATELY FOLLOWING THE APPOINTMENT OF THE
INDIVIDUALS LISTED IN SECTION 2.02(A) ABOVE TO THE BOARD OF DIRECTORS, ANTOINE
GIDEON SHALL RESIGN AS A MEMBER OF THE BOARD OF DIRECTORS OF HAPS.

 

(C)                                  NOTWITHSTANDING THE RESIGNATION OF THE
OTHER DIRECTOR, ANTOINE GIDEON, PURSUANT TO SECTION 2.02(B), MARK BUCK SHALL
CONTINUE TO SERVE AS A MEMBER OF THE BOARD OF DIRECTOR OF HAPS AFTER CLOSING.

 

(D)                                 IMMEDIATELY PRIOR TO CLOSING, ALL OF THE
CURRENT OFFICERS OF HAPS INCLUDING MARK BUCK, ITS PRESIDENT, SHALL RESIGN AS
OFFICERS OF HAPS. AFTER THE CLOSING DATE, THE NEWLY CONSTITUTED BOARD OF
DIRECTORS OF HAPS CONSISTING OF THE INDIVIDUALS APPOINTED PURSUANT TO
SECTION 2.2(A) AND MARK BUCK SHALL APPOINT SHINICHI KANEMOTO AS PRESIDENT, AND
APPOINT SUCH OTHER OFFICERS AS IT DEEMS IS NECESSARY AND IN THE BEST INTERESTS
OF HAPS.

 

(E)                                  PRIOR TO CLOSING, HAPS SHALL OBTAIN THE
NECESSARY BOARD AND SHAREHOLDER APPROVAL TO (I) CONSUMMATE THE SHARE EXCHANGE
CONTEMPLATED BY THIS AGREEMENT, AND (II) SELL, SPIN OFF OR OTHERWISE DISPOSE OF
ITS OPERATIONS, INCLUDING MANAGEMENT, ASSETS AND LIABILITIES, EXCEPT AS
OTHERWISE SET FORTH HEREIN, AND SHALL COMPLETE SUCH SALE, SPIN-OFF OR OTHER
DISPOSITION IN A MANNER SATISFACTORY TO PGMI IN ITS SOLE DISCRETION.

 

(F)                                    PRIOR TO CLOSING, HAPS SHALL OBTAIN
NECESSARY BOARD AND SHAREHOLDER APPROVAL TO (I) CHANGE THE NAME OF THE
CORPORATION TO PGMI USA, INC. OR SUCH OTHER SIMILAR NAME AS IS AVAILABLE IN THE
STATE OF UTAH, AND (II) DESIGNATE THE HAPS PREFERRED STOCK SUCH THAT SUFFICIENT
HAPS CLASS E STOCK IS AVAILABLE TO BE TO ISSUED TO THE SHAREHOLDERS AND TO
ANTAEUS CAPITAL PARTNERS LLC FOLLOWING THE EFFECTIVE TIME IN THE AMOUNTS
DESCRIBED IN SECTION 1.03 OF THIS AGREEMENT.

 

(G)                                 THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ENGAGED BY PGMI SHALL HAVE COMPLETED ITS AUDIT OF PGMI’S FINANCIAL
STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2004, AND SHALL HAVE
DELIVERED TO THE BOARD OF DIRECTORS OF PGMI ITS REPORT THEREON.

 

3

--------------------------------------------------------------------------------

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HAPS

 

HAPS hereby represents and warrants to PGMI as follows:

 

3.01                           ATTACHED HERETO IS EACH OF THE FOLLOWING:

 

(A)                                  FINANCIAL STATEMENTS.  AUDITED FINANCIAL
STATEMENTS OF HAPS INCLUDING, BUT NOT LIMITED TO, BALANCE SHEETS AND PROFIT AND
LOSS STATEMENTS FROM THE FISCAL YEARS ENDED DECEMBER 31, 2003 AND 2004, AND
QUARTERLY REVIEWED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIODS ENDED
MARCH 31, 2005, AND JUNE 30, 2005, EACH PREPARED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND WHICH FAIRLY PRESENT THE FINANCIAL CONDITION
OF HAPS AT THE DATES THEREOF. (SCHEDULE A)

 

(B)                                 PROPERTY.  AN ACCURATE LIST AND DESCRIPTION
OF ALL PROPERTY, REAL OR PERSONAL, OWNED BY HAPS OF A VALUE EQUAL TO OR GREATER
THAN $1,000.00. (SCHEDULE B)

 

(C)                                  LIENS AND LIABILITIES. A COMPLETE AND
ACCURATE LIST OF ALL LIENS, ENCUMBRANCES, EASEMENTS, SECURITY INTERESTS OR
SIMILAR INTERESTS IN OR ON ANY OF THE ASSETS LISTED ON SCHEDULE A. (SCHEDULE C)
A COMPLETE AND ACCURATE LIST OF ALL DEBTS, LIABILITIES AND OBLIGATIONS OF HAPS
INCURRED OR OWING AS OF THE DATE OF THIS AGREEMENT. (SCHEDULE C.1)

 

(D)                                 LEASES AND CONTRACTS.  A COMPLETE AND
ACCURATE LIST DESCRIBING ALL MATERIAL TERMS OF EACH LEASE (WHETHER OF REAL OR
PERSONAL PROPERTY) AND EACH CONTRACT, PROMISSORY NOTE, MORTGAGE, LICENSE,
FRANCHISE, OR OTHER WRITTEN AGREEMENT TO WHICH HAPS IS A PARTY WHICH INVOLVES OR
CAN REASONABLY BE EXPECTED TO INVOLVE AGGREGATE FUTURE PAYMENTS OR RECEIPTS BY
HAPS (WHETHER BY THE TERMS OF SUCH LEASE, CONTRACT, PROMISSORY NOTE, LICENSE,
FRANCHISE OR OTHER WRITTEN AGREEMENT OR AS A RESULT OF A GUARANTEE OF THE
PAYMENT OF OR INDEMNITY AGAINST THE FAILURE TO PAY SAME) OF $1,000.00 OR MORE
ANNUALLY DURING THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2004 OR ANY
CONSECUTIVE TWELVE-MONTH PERIOD THEREAFTER, EXCEPT ANY OF SAID INSTRUMENTS WHICH
TERMINATE OR ARE CANCELABLE WITHOUT PENALTY DURING SUCH TWELVE-MONTH PERIOD.
(SCHEDULE D)

 

(E)                                  LOAN AGREEMENTS.  COMPLETE AND ACCURATE
COPIES OF ALL LOAN AGREEMENTS AND OTHER DOCUMENTS WITH RESPECT TO OBLIGATIONS OF
HAPS FOR THE REPAYMENT OF BORROWED MONEY. (SCHEDULE E)

 

(F)                                    CONSENTS REQUIRED.  A COMPLETE LIST OF
ALL AGREEMENTS WHEREIN CONSENT TO THE TRANSACTION HEREIN CONTEMPLATED IS
REQUIRED TO AVOID A DEFAULT THEREUNDER; OR WHERE NOTICE OF SUCH TRANSACTION IS
REQUIRED AT OR SUBSEQUENT TO CLOSING, OR WHERE CONSENT TO AN ACQUISITION,
CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS IS REQUIRED TO
AVOID A DEFAULT THEREUNDER. (SCHEDULE F)

 

(G)                                 CORPORATE RECORDS.  COMPLETE AND ACCURATE
COPIES OF (I) THE ARTICLES OF INCORPORATION, AS AMENDED, (II) BYLAWS, AS AMENDED
AND (III) ALL MINUTE BOOKS, STOCK RECORD BOOKS AND OTHER RECORDS OF HAPS
TOGETHER WITH ALL AMENDMENTS THERETO TO THE DATE HEREOF. (SCHEDULE G)

 

(H)                                 SHAREHOLDERS.  A COMPLETE LIST OF ALL
PERSONS OR ENTITIES OWNING BENEFICIALLY GREATER THAN 5% OF A CLASS OF CAPITAL
STOCK OF HAPS PRIOR TO THE CLOSING DATE (AS CERTIFIED BY HAPS’S TRANSFER AGENT)
OR ANY RIGHTS TO SUBSCRIBE FOR, ACQUIRE, OR RECEIVE SHARES OF THE CAPITAL STOCK
OF HAPS (WHETHER WARRANTS, CALLS, OPTIONS, OR CONVERSION RIGHTS), INCLUDING
COPIES OF ALL STOCK OPTION PLANS WHETHER QUALIFIED OR NONQUALIFIED, AND OTHER
SIMILAR AGREEMENTS. (SCHEDULE H)

 

4

--------------------------------------------------------------------------------

 

(I)                                     OFFICERS AND DIRECTORS.  A COMPLETE AND
CURRENT LIST OF ALL OFFICERS AND DIRECTORS OF HAPS, EACH OF WHOM SHALL RESIGN
EFFECTIVE AS OF THE EFFECTIVE DATE. (SCHEDULE I)

 

(J)                                     EMPLOYEES.  A COMPLETE AND ACCURATE LIST
OF ALL EMPLOYEES OF HAPS AND THEIR CURRENT RATE OF COMPENSATION AS OF THE DATE
OF THIS AGREEMENT. (SCHEDULE J)

 

(K)                                  LITIGATION.  A COMPLETE AND ACCURATE LIST
(IN ALL MATERIAL RESPECTS) OF ALL MATERIAL CIVIL, CRIMINAL, ADMINISTRATIVE,
ARBITRATION OR OTHER SUCH PROCEEDINGS OR INVESTIGATIONS (INCLUDING WITHOUT
LIMITATIONS UNFAIR LABOR PRACTICE MATTERS, LABOR ORGANIZATION ACTIVITIES,
ENVIRONMENTAL MATTERS AND CIVIL RIGHTS VIOLATIONS) PENDING OR, TO THE KNOWLEDGE
OF HAPS THREATENED, WHICH MAY MATERIALLY AND ADVERSELY AFFECT HAPS, INCLUDING
WITHOUT LIMITATION, ANY CLAIM BY ANY MEMBER OF THE KANEMITSU FAMILY, OR ANYONE
CLAIMING RIGHTS THROUGH ANY MEMBERS OF SUCH FAMILY. (SCHEDULE K)

 

(L)                                     TAX RETURNS.  ACCURATE COPIES OF ALL
FEDERAL, STATE AND LOCAL TAX RETURNS FOR HAPS FOR THE FISCAL YEARS ENDING
DECEMBER 31, 2003 AND 2004. (SCHEDULE L)

 

(M)                               AGENCY REPORTS. COPIES OF ALL MATERIAL REPORTS
OR FILINGS (AND A LIST OF THE CATEGORIES OF REPORTS OR FILINGS MADE ON A REGULAR
BASIS) MADE BY HAPS UNDER ERISA, EEOC, FDA AND ALL OTHER GOVERNMENTAL AGENCIES
(FEDERAL, STATE OR LOCAL) DURING THE LAST FISCAL YEAR. (SCHEDULE M)

 

(N)                                 BANKS.  A TRUE AND COMPLETE LIST (IN ALL
MATERIAL RESPECTS), AS OF THE DATE OF THIS AGREEMENT, SHOWING (1) THE NAME OF
EACH BANK IN WHICH HAPS HAS AN ACCOUNT OR SAFE DEPOSIT BOX, AND (2) THE NAMES
AND ADDRESSES OF ALL SIGNATORIES. (SCHEDULE N)

 

(O)                                 JURISDICTIONS WHERE QUALIFIED.  A LIST OF
ALL JURISDICTIONS WHEREIN HAPS IS QUALIFIED TO DO BUSINESS AND IS IN GOOD
STANDING. (SCHEDULE O)

 

(P)                                 EMPLOYEE AND CONSULTANT CONTRACTS.  A
COMPLETE AND ACCURATE LIST OF ALL EMPLOYEE AND CONSULTANT CONTRACTS WHICH HAPS
MAY HAVE. (SCHEDULE P)

 

(Q)                                 EMPLOYEE BENEFIT PLANS.  COMPLETE AND
ACCURATE COPIES OF ALL STOCK OPTIONS, BONUS, INCENTIVE COMPENSATION, DEFERRED
COMPENSATION, PROFIT SHARING, RETIREMENT, PENSION, GROUP INSURANCE, DISABILITY,
DEATH BENEFIT OR OTHER BENEFIT PLANS, TRUST AGREEMENTS OR ARRANGEMENTS OF HAPS
IN EFFECT ON THE DATE HEREOF OR TO BECOME EFFECTIVE AFTER THE DATE THEREOF,
TOGETHER WITH COPIES OF ANY DETERMINATION LETTERS ISSUED BY THE INTERNAL REVENUE
SERVICE WITH RESPECT THERETO. (SCHEDULE Q)

 

(R)                                    INSURANCE POLICIES.  A COMPLETE AND
ACCURATE LIST (IN ALL MATERIAL RESPECTS) AND A DESCRIPTION OF ALL MATERIAL
INSURANCE POLICIES NAMING HAPS AS AN INSURED OR BENEFICIARY OR AS A LOSS PAYABLE
PAYEE OR FOR WHICH HAPS HAS PAID ALL OR PART OF THE PREMIUM IN FORCE ON THE DATE
HEREOF, SPECIFYING ANY NOTICE OR OTHER INFORMATION POSSESSED BY HAPS REGARDING
POSSIBLE CLAIMS THEREUNDER, CANCELLATION THEREOF OR PREMIUM INCREASES THEREON,
INCLUDING ANY POLICIES NOW IN EFFECT NAMING HAPS AS BENEFICIARY COVERING THE
BUSINESS ACTIVITIES OF HAPS. (SCHEDULE R)

 

(S)                                  LICENSES AND PERMITS.  A COMPLETE LIST OF
ALL LICENSES, PERMITS AND OTHER AUTHORIZATIONS OF HAPS. (SCHEDULE S)

 

3.02                           ORGANIZATION, STANDING AND POWER.   HAPS IS A
CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS
OF THE STATE OF UTAH WITH ALL REQUISITE CORPORATE POWER TO OWN OR LEASE ITS
PROPERTIES AND CARRY ON ITS BUSINESSES AS ARE NOW BEING CONDUCTED.

 

5

--------------------------------------------------------------------------------

 

3.03                           QUALIFICATION.  HAPS IS DULY QUALIFIED AND IS
LICENSED AS A FOREIGN CORPORATION AUTHORIZED TO DO BUSINESS IN EACH JURISDICTION
WHEREIN IT CONDUCTS BUSINESS OPERATIONS.  SUCH JURISDICTIONS, WHICH ARE THE ONLY
JURISDICTIONS IN WHICH HAPS IS DULY QUALIFIED AND LICENSED AS A FOREIGN
CORPORATION, ARE SHOWN IN SCHEDULE O.

 

3.04                           CAPITALIZATION OF HAPS.  THE AUTHORIZED CAPITAL
STOCK OF HAPS CONSISTS OF 900,000,000 SHARES OF STOCK, NO PAR VALUE, OF WHICH
THE ONLY SHARES ISSUED AND OUTSTANDING ARE 19,381,060 OF HAPS COMMON STOCK AND
3,018,760 SHARES OF HAPS CLASS A STOCK, WHICH SHARES WERE DULY AUTHORIZED,
VALIDLY ISSUED AND FULLY PAID AND NONASSESSABLE, AND WERE ISSUED IN ACCORDANCE
WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”) AND ANY RELEVANT STATE SECURITIES LAWS OR PURSUANT TO
VALID EXEMPTIONS THEREFROM. THERE ARE NO PREEMPTIVE RIGHTS WITH RESPECT TO THE
HAPS COMMON STOCK AND THE SHARES OF HAPS COMMON STOCK ARE FREE FROM RESTRICTIONS
ON TRANSFER (EXCEPT AS REQUIRED BY LAW) OR ANY OPTIONS, LIENS, PLEDGES, SECURITY
INTERESTS, ENCUMBRANCES OR CHARGES OF ANY KIND.  HAPS HAS NO OTHER EQUITY
SECURITIES OR SECURITIES CONTAINING EQUITY FEATURES AUTHORIZED, ISSUED OR
OUTSTANDING.  EXCEPT AS IDENTIFIED ON SCHEDULE H HERETO, THERE ARE NO AGREEMENTS
OR OTHER RIGHTS OR ARRANGEMENTS EXISTING WHICH PROVIDE FOR THE SALE OR ISSUANCE
OF CAPITAL STOCK BY HAPS, AND THERE ARE NO RIGHTS, SUBSCRIPTIONS, WARRANTS,
OPTIONS, CONVERSION RIGHTS OR OTHER AGREEMENTS OF ANY KIND OUTSTANDING TO
PURCHASE OR OTHERWISE ACQUIRE FROM HAPS ANY SHARES OF CAPITAL STOCK OR OTHER
SECURITIES OF HAPS.  THERE ARE NO AGREEMENTS OR OTHER OBLIGATIONS (CONTINGENT OR
OTHERWISE) WHICH MAY REQUIRE HAPS TO REPURCHASE OR OTHERWISE ACQUIRE ANY SHARES
OF ITS CAPITAL STOCK.  HAPS DOES NOT OWN, AND IS NOT A PARTY TO A CONTRACT TO
ACQUIRE, ANY EQUITY SECURITIES OR OTHER SECURITIES OF ANY ENTITY OR INDIRECT
EQUITY OR OWNERSHIP INTEREST IN ANY OTHER ENTITY.  HAPS IS NOT A PARTY TO, AND
THERE DO NOT EXIST ANY VOTING TRUSTS, PROXIES, OR OTHER CONTRACTS WITH RESPECT
TO THE VOTING OF SHARES OF CAPITAL STOCK OF HAPS.

 

3.05                           AUTHORITY.  THE EXECUTION AND DELIVERY OF THIS
AGREEMENT AND CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREIN HAVE BEEN
DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTIONS, INCLUDING BUT NOT LIMITED TO
DULY AND VALIDLY AUTHORIZED ACTION AND APPROVAL BY THE BOARD OF DIRECTORS AND
SHAREHOLDERS, ON THE PART OF HAPS.  THIS AGREEMENT CONSTITUTES THE VALID AND
BINDING OBLIGATION OF HAPS ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS,
SUBJECT TO THE PRINCIPLES OF EQUITY APPLICABLE TO THE AVAILABILITY OF THE REMEDY
OF SPECIFIC PERFORMANCE.  THIS AGREEMENT HAS BEEN DULY EXECUTED BY HAPS AND THE
EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL NOT RESULT IN ANY BREACH OF
ANY TERMS OR PROVISIONS OF HAPS’S ARTICLES OF INCORPORATION OR BYLAWS OR OF ANY
OTHER AGREEMENT, COURT ORDER OR INSTRUMENT TO WHICH HAPS IS A PARTY OR BOUND BY.

 

3.06                           ABSENCE OF UNDISCLOSED LIABILITIES.  HAPS HAS NO
LIABILITIES OF ANY NATURE, WHETHER FIXED, ABSOLUTE, CONTINGENT OR ACCRUED, WHICH
WERE NOT REFLECTED ON THE FINANCIAL STATEMENTS SET FORTH IN SCHEDULE A OR
OTHERWISE DISCLOSED IN THIS AGREEMENT OR ANY OF THE SCHEDULES OR EXHIBITS
ATTACHED HERETO.  AS OF THE EFFECTIVE TIME, HAPS SHALL HAVE NO ASSETS OR
LIABILITIES OTHER THAN THOSE RESULTING FROM THE ACQUISITION OF PGMI.

 

3.07                           ABSENCE OF CHANGES.  SINCE DECEMBER 31, 2004
THERE HAS NOT BEEN ANY MATERIAL ADVERSE CHANGE IN THE CONDITION (FINANCIAL OR
OTHERWISE), ASSETS, LIABILITIES, EARNINGS OR BUSINESS OF HAPS, EXCEPT FOR
CHANGES RESULTING FROM COMPLETION OF THOSE TRANSACTIONS DESCRIBED IN
SECTION 2.02(E) AND SECTION 5.01.

 

3.08                           TAX MATTERS.  ALL TAXES AND OTHER ASSESSMENTS AND
LEVIES WHICH HAPS IS REQUIRED BY LAW TO WITHHOLD OR TO COLLECT HAVE BEEN DULY
WITHHELD AND COLLECTED, AND HAVE BEEN PAID OVER TO THE PROPER GOVERNMENT
AUTHORITIES OR ARE HELD BY HAPS IN SEPARATE BANK ACCOUNTS FOR SUCH PAYMENT OR
ARE REPRESENTED BY DEPOSITORY RECEIPTS, AND ALL SUCH WITHHOLDINGS AND
COLLECTIONS AND ALL OTHER PAYMENTS DUE IN CONNECTION THEREWITH (INCLUDING,
WITHOUT LIMITATION, EMPLOYMENT TAXES, BOTH THE EMPLOYEE’S AND EMPLOYER’S SHARE)
HAVE BEEN PAID OVER TO THE GOVERNMENT OR PLACED IN A SEPARATE AND SEGREGATED
BANK ACCOUNT FOR SUCH PURPOSE.  THERE ARE NO KNOWN DEFICIENCIES IN INCOME TAXES
FOR ANY PERIODS AND ALL RETURNS, DECLARATIONS, REPORTS, ESTIMATES AND STATEMENTS
REQUIRED HAVE BEEN FILED.  THERE ARE NO LIENS OR TAXES UPON ANY ASSETS OF HAPS,
EXCEPT TAXES NOT YET DUE.  FURTHER, THE REPRESENTATIONS AND WARRANTIES AS TO
ABSENCE OF UNDISCLOSED LIABILITIES CONTAINED IN

 

6

--------------------------------------------------------------------------------

 

SECTION 3.06 INCLUDES ANY AND ALL TAX LIABILITIES OF WHATSOEVER KIND OR NATURE
(INCLUDING, WITHOUT LIMITATION, ALL FEDERAL, STATE, LOCAL AND FOREIGN INCOME,
PROFIT, FRANCHISE, SALES, USE AND PROPERTY TAXES) DUE OR TO BECOME DUE, INCURRED
IN RESPECT OF OR MEASURED BY HAPS INCOME OR BUSINESS PRIOR TO THE EFFECTIVE
DATE.

 

3.09                           TITLE TO ASSETS. HAPS IS THE SOLE UNCONDITIONAL
OWNER OF, WITH GOOD AND MARKETABLE TITLE TO, ALL ASSETS LISTED IN THE SCHEDULES
AS OWNED BY IT AND ALL OTHER PROPERTY AND ASSETS ARE FREE AND CLEAR OF ALL
MORTGAGES, LIENS, PLEDGES, CHARGES OR ENCUMBRANCES OF ANY NATURE WHATSOEVER.

 

3.10                           BOOKS AND RECORDS.  THE BOOKS OF ACCOUNT, MINUTE
BOOKS, STOCK RECORD BOOKS, AND OTHER RECORDS OF HAPS, COMPLETE COPIES OF WHICH
HAVE BEEN MADE AVAILABLE TO PGMI, HAVE BEEN PROPERLY KEPT AND CONTAIN NO
INACCURACIES EXCEPT FOR INACCURACIES THAT WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL EFFECT ON HAPS OR PGMI.

 

3.11                           AGREEMENTS IN FORCE AND EFFECT.  EXCEPT AS SET
FORTH IN SCHEDULES D AND E, ALL MATERIAL CONTRACTS, AGREEMENTS, PLANS,
PROMISSORY NOTES, MORTGAGES, LEASES, POLICIES, LICENSES, FRANCHISES OR SIMILAR
INSTRUMENTS TO WHICH HAPS IS A PARTY ARE VALID AND IN FULL FORCE AND EFFECT ON
THE DATE HEREOF, AND HAPS HAS NOT BREACHED ANY MATERIAL PROVISION OF, AND IS NOT
IN DEFAULT IN ANY MATERIAL RESPECT UNDER THE TERMS OF, ANY SUCH CONTRACT,
AGREEMENT, PLAN, PROMISSORY NOTE, MORTGAGE, LEASE, POLICY, LICENSE, FRANCHISE OR
SIMILAR INSTRUMENT WHICH BREACH OR DEFAULT WOULD HAVE A MATERIAL ADVERSE EFFECT
UPON THE BUSINESS, OPERATIONS OR FINANCIAL CONDITION OF HAPS.

 

3.12                           LEGAL PROCEEDINGS, ETC. EXCEPT AS SET FORTH IN
SCHEDULE K, THERE ARE NO CIVIL, CRIMINAL, ADMINISTRATIVE, ARBITRATION OR OTHER
SUCH PROCEEDINGS OR INVESTIGATIONS PENDING OR, TO THE KNOWLEDGE OF EITHER HAPS
OR THE SHAREHOLDERS THEREOF, THREATENED, IN WHICH, INDIVIDUALLY OR IN THE
AGGREGATE, AN ADVERSE DETERMINATION WOULD MATERIALLY AND ADVERSELY AFFECT THE
ASSETS, PROPERTIES, BUSINESS OR INCOME OF HAPS.  HAPS HAS SUBSTANTIALLY COMPLIED
WITH, AND IS NOT IN DEFAULT IN ANY MATERIAL RESPECT UNDER, ANY LAWS, ORDINANCES,
REQUIREMENTS, REGULATIONS OR ORDERS APPLICABLE TO ITS BUSINESSES.

 

3.13                           GOVERNMENTAL REGULATION.  TO THE KNOWLEDGE OF
HAPS AND EXCEPT AS SET FORTH IN SCHEDULE K, HAPS IS NOT IN VIOLATION OF OR IN
DEFAULT WITH RESPECT TO ANY APPLICABLE LAW OR ANY APPLICABLE RULE, REGULATION,
ORDER, WRIT OR DECREE OF ANY COURT OR ANY GOVERNMENTAL COMMISSION, BOARD,
BUREAU, AGENCY OR INSTRUMENTALITY, OR DELINQUENT WITH RESPECT TO ANY REPORT
REQUIRED TO BE FILED WITH ANY GOVERNMENTAL COMMISSION, BOARD, BUREAU, AGENCY OR
INSTRUMENTALITY WHICH VIOLATION OR DEFAULT COULD HAVE A MATERIAL ADVERSE EFFECT
UPON THE BUSINESS, OPERATIONS OR FINANCIAL CONDITION OF HAPS.

 

3.14                           BROKERS AND FINDERS.  HAPS SHALL BE SOLELY
RESPONSIBLE FOR PAYMENT TO ANY BROKER OR FINDER RETAINED BY HAPS FOR ANY
BROKERAGE FEES, COMMISSIONS OR FINDERS’ FEES IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREIN. HAPS HAS AGREED TO PAY EACH OF ANTAEUS CAPITAL PARTNERS,
LLC AND CCC INTERESTS LIMITED FINDERS’ FEES IN THE FORM OF 1,591,148 AND
530,382, RESPECTIVELY, FULLY PAID AND NONASSESSABLE SHARES OF HAPS CLASS A
STOCK.

 

3.15                           ACCURACY OF INFORMATION.  NO REPRESENTATION OR
WARRANTY BY HAPS CONTAINED IN THIS AGREEMENT AND NO STATEMENT CONTAINED IN ANY
CERTIFICATE OR OTHER INSTRUMENT DELIVERED OR TO BE DELIVERED TO PGMI PURSUANT
HERETO OR IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING
WITHOUT LIMITATION ALL SCHEDULES AND EXHIBITS HERETO) CONTAINS OR WILL CONTAIN
ANY UNTRUE STATEMENT OF MATERIAL FACT OR OMITS OR WILL OMIT TO STATE ANY
MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED HEREIN OR
THEREIN NOT MISLEADING.

 

3.16                           SUBSIDIARIES.  EXCEPT AS LISTED IN SCHEDULE P,
HAPS DOES NOT HAVE ANY OTHER SUBSIDIARIES OR OWN CAPITAL STOCK OF ANY OTHER
CORPORATION.

 

7

--------------------------------------------------------------------------------

 

3.17                           CONSENTS.  EXCEPT AS LISTED IN SCHEDULE F, NO
CONSENT OR APPROVAL OF, OR REGISTRATION, QUALIFICATION OR FILING WITH, ANY
GOVERNMENTAL AUTHORITY OR OTHER PERSON IS REQUIRED TO BE OBTAINED OR
ACCOMPLISHED BY HAPS OR ANY SHAREHOLDER THEREOF IN CONNECTION WITH THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

3.18                           EMPLOYEES.  EXCEPT AS LISTED IN SCHEDULE P, HAPS
HAS NO EMPLOYEES AND THERE ARE NO PERSONS WHO HAVE PROVIDED SERVICES TO HAPS
PRIOR TO THE CLOSING DATE WHO HAVE A CLAIM AGAINST HAPS FOR ANY UNPAID
COMPENSATION.

 

3.19                           ENVIRONMENTAL MATTERS.  NONE OF THE OPERATIONS OF
HAPS INVOLVES THE GENERATION, TRANSPORTATION, TREATMENT, STORAGE OR DISPOSAL OF
HAZARDOUS WASTE, AS DEFINED UNDER 40 C.F.R. PARTS 260-270 OR ANY STATE, LOCAL OR
FOREIGN EQUIVALENT.

 

3.20                           IMPROPER PAYMENTS.  NEITHER HAPS, NOR ANY PERSON
ACTING ON BEHALF OF HAPS HAS MADE ANY PAYMENT OR OTHERWISE TRANSMITTED ANYTHING
OF VALUE, DIRECTLY OR INDIRECTLY, TO (A) ANY OFFICIAL OR ANY GOVERNMENT OR
AGENCY OR POLITICAL SUBDIVISION THEREOF FOR THE PURPOSE OF INFLUENCING ANY
DECISION AFFECTING THE BUSINESS OF HAPS (B) ANY CUSTOMER, SUPPLIER OR COMPETITOR
OF HAPS OR EMPLOYEE OF SUCH CUSTOMER, SUPPLIER OR COMPETITOR, FOR THE PURPOSE OF
OBTAINING, RETAINING OR DIRECTING BUSINESS FOR HAPS OR (C) ANY POLITICAL PARTY
OR ANY CANDIDATE FOR ELECTIVE POLITICAL OFFICE NOR HAS ANY FUND OR OTHER ASSET
OF HAPS BEEN MAINTAINED THAT WAS NOT FULLY AND ACCURATELY RECORDED ON THE BOOKS
OF ACCOUNT OF HAPS.

 

3.21                           COPIES OF DOCUMENTS.  HAPS HAS MADE AVAILABLE FOR
INSPECTION AND COPYING BY PGMI AND ITS DULY AUTHORIZED REPRESENTATIVES, AND WILL
CONTINUE TO DO SO AT ALL TIMES, TRUE AND CORRECT COPIES OF ALL DOCUMENTS WHICH
IT HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND ALL OTHER
GOVERNMENTAL AGENCIES WHICH ARE MATERIAL TO THE TERMS AND CONDITIONS CONTAINED
IN THIS AGREEMENT.  FURTHERMORE, ALL FILINGS BY HAPS WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND ALL OTHER GOVERNMENTAL AGENCIES, INCLUDING BUT NOT
LIMITED TO THE INTERNAL REVENUE SERVICE, HAVE CONTAINED INFORMATION WHICH IS
TRUE AND CORRECT, TO THE BEST KNOWLEDGE OF THE BOARD OF DIRECTORS OF HAPS, IN
ALL MATERIAL RESPECTS AND DID NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL
FACT OR OMIT TO STATE ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE
THEREIN NOT MISLEADING OR WHICH COULD HAVE ANY MATERIAL ADVERSE EFFECT UPON THE
FINANCIAL CONDITION OR OPERATIONS OF HAPS OR ADVERSELY AFFECT THE OBJECTIVES OF
THIS AGREEMENT WITH RESPECT TO PGMI INCLUDING, BUT NOT LIMITED TO, THE ISSUANCE
AND SUBSEQUENT TRADING OF THE SHARES OF HAPS COMMON STOCK TO BE RECEIVED HEREBY,
SUBJECT TO COMPLIANCE BY THE SHAREHOLDERS OF PGMI WITH APPLICABLE LAW.  HAPS HAS
MADE ALL NECESSARY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION AND OTHER
GOVERNMENTAL AGENCIES.

 

3.22                           VALID ISSUANCE OF SECURITIES.  THE HAPS CLASS E
STOCK, WHEN ISSUED, SOLD AND DELIVERED IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT FOR THE CONSIDERATION EXPRESSED HEREIN, WILL BE DULY AND VALIDLY
ISSUED, FULLY PAID AND NON-ASSESSABLE, AND WILL BE FREE OF RESTRICTIONS ON
TRANSFER OTHER THAN RESTRICTIONS ON TRANSFER UNDER THIS AGREEMENT AND UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS.

 

3.23                           DIRECTORS, OFFICERS AND CONTROLLING
SHAREHOLDERS.  NO DIRECTOR, OFFICER OR CONTROLLING SHAREHOLDER OF HAPS HAS BEEN
SUBJECT TO A CRIMINAL PROCEEDING, BANKRUPTCY, SECURITIES AND EXCHANGE COMMISSION
OR NASD CENSURE IN THE LAST FIVE YEARS NOR IS ANY SUCH INDIVIDUAL UNDER
INVESTIGATION FOR ANY OF THE ABOVE.

 

3.24                           RELATED PARTY TRANSACTIONS.  EXCEPT AS OTHERWISE
DISCLOSED IN ITS PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, NO
EMPLOYEE, OFFICER OR DIRECTOR OF HAPS OR MEMBER OF HIS OR HER IMMEDIATE FAMILY
IS INDEBTED TO HAPS, NOR IS HAPS INDEBTED (OR COMMITTED TO MAKE LOANS OR EXTEND
OR GUARANTEE CREDIT) TO ANY OF THEM.  NO MEMBER OF THE IMMEDIATE FAMILY OF ANY
OFFICER OR DIRECTOR OF HAPS IS DIRECTLY OR INDIRECTLY INTERESTED IN ANY MATERIAL
CONTRACT WITH HAPS.  NO EMPLOYEE, OFFICER OR DIRECTOR OF HAPS,

 

8

--------------------------------------------------------------------------------

 

OR MEMBER OF THE IMMEDIATELY FAMILY OF ANY SUCH EMPLOYEE, OFFICER OR DIRECTOR,
HAS ANY DIRECT OR INDIRECT INTEREST IN A COMPETITOR, SUPPLIER OR CUSTOMER OF
HAPS OR OTHER PARTY WITH WHICH HAPS TRANSACTS BUSINESS.

 

3.25                           TAX-FREE REORGANIZATION.  NEITHER HAPS NOR ANY OF
ITS OFFICERS AND DIRECTORS HAS THROUGH THE DATE OF THIS AGREEMENT TAKEN OR
AGREED TO TAKE ANY ACTION THAT WOULD PREVENT THE EXCHANGE CONTEMPLATED BY THIS
AGREEMENT FROM QUALIFYING AS A REORGANIZATION UNDER SECTION 368(A) OF THE CODE.

 

3.26                           FULL DISCLOSURE.  THE REPRESENTATIONS AND
WARRANTIES OF HAPS CONTAINED IN THIS AGREEMENT (AND IN ANY SCHEDULE, EXHIBIT,
CERTIFICATE OR OTHER INSTRUMENT TO BE DELIVERED UNDER THIS AGREEMENT) ARE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS, AND SUCH REPRESENTATIONS AND WARRANTIES DO
NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS CONTAINED THEREIN,
IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. THERE
IS NO FACT OF WHICH HAPS HAS KNOWLEDGE THAT HAS NOT BEEN DISCLOSED TO PGMI
PURSUANT TO THIS AGREEMENT, INCLUDING THE SCHEDULES HERETO, ALL TAKEN TOGETHER
AS A WHOLE, WHICH HAS HAD OR COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON HAPS OR PGMI OR MATERIALLY ADVERSELY AFFECT THE ABILITY OF
HAPS TO CONSUMMATE IN A TIMELY MANNER THE TRANSACTIONS CONTEMPLATED HEREBY.

 

3.27                           ZERO NET VALUE.             AS OF THE CLOSING
DATE, HAPS’S FINANCIAL STATEMENT SHALL NOT HAVE ANY ASSETS OR LIABILITIES.

 

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
PGMI, INC.

 

PGMI hereby represents and warrants to HAPS as follows:

 

4.01                           PGMI SHALL DELIVER TO HAPS, ON OR BEFORE CLOSING,
THE FOLLOWING:

 

(A)                                  FINANCIAL STATEMENTS.  AUDITED CONSOLIDATED
FINANCIAL STATEMENTS OF PGMI INCLUDING, BUT NOT LIMITED TO, BALANCE SHEETS,
INCOME STATEMENTS, STATEMENTS OF STOCKHOLDERS’ EQUITY AND STATEMENTS OF CASH
FLOWS AS AT AND FOR THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2004, EACH PREPARED
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY
APPLIED, AND WHICH FAIRLY PRESENT THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PGMI AT THE DATES THEREOF AND FOR THE PERIODS PRESENTED.
(SCHEDULE AA)

 

(B)                                 CONSENTS REQUIRED.  A COMPLETE LIST OF ALL
AGREEMENTS WHEREIN CONSENT TO THE TRANSACTION HEREIN CONTEMPLATED IS REQUIRED TO
AVOID A DEFAULT THEREUNDER; OR WHERE NOTICE OF SUCH TRANSACTION IS REQUIRED AT
OR SUBSEQUENT TO CLOSING, OR WHERE CONSENT TO AN ACQUISITION, CONSOLIDATION, OR
SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS IS REQUIRED TO AVOID A DEFAULT
THEREUNDER. (SCHEDULE BB)

 

(C)                                  CERTIFICATE AND BYLAWS.  COMPLETE AND
ACCURATE COPIES OF THE CERTIFICATE OF INCORPORATION AND BYLAWS OF PGMI, TOGETHER
WITH ALL AMENDMENTS THERETO TO THE DATE HEREOF. (SCHEDULE CC)

 

(D)                                 SHAREHOLDERS.  A COMPLETE LIST OF ALL
PERSONS OR ENTITIES OF RECORD HOLDING CAPITAL STOCK OF PGMI OR ANY RIGHTS TO
SUBSCRIBE FOR, ACQUIRE, OR RECEIVE SHARES OF THE CAPITAL STOCK OF PGMI (WHETHER
WARRANTS, CALLS, OPTIONS, OR CONVERSION RIGHTS), INCLUDING COPIES OF ALL STOCK
OPTION PLANS WHETHER QUALIFIED OR NONQUALIFIED, AND OTHER SIMILAR AGREEMENTS.
(SCHEDULE DD)

 

(E)                                  OFFICERS AND DIRECTORS.  A COMPLETE AND
CURRENT LIST OF ALL OFFICERS AND DIRECTORS OF PGMI. (SCHEDULE EE)

 

9

--------------------------------------------------------------------------------

 

(F)                                    LITIGATION.  A COMPLETE AND ACCURATE LIST
(IN ALL MATERIAL RESPECTS) OF ALL MATERIAL CIVIL, CRIMINAL, ADMINISTRATIVE,
ARBITRATION OR OTHER SUCH PROCEEDINGS OR INVESTIGATIONS (INCLUDING WITHOUT
LIMITATIONS UNFAIR LABOR PRACTICE MATTERS, LABOR ORGANIZATION ACTIVITIES,
ENVIRONMENTAL MATTERS AND CIVIL RIGHTS VIOLATIONS) PENDING OR, TO THE KNOWLEDGE
OF PGMI THREATENED, WHICH MAY MATERIALLY AND ADVERSELY AFFECT PGMI.
(SCHEDULE FF)

 

(G)                                 JURISDICTIONS WHERE QUALIFIED. A LIST OF ALL
JURISDICTIONS WHEREIN PGMI IS QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING.
(SCHEDULE GG)

 

(H)                                 SUBSIDIARIES.  A COMPLETE LIST OF ALL
SUBSIDIARIES OF PGMI. (SCHEDULE HH) THE TERM “SUBSIDIARY” OR “SUBSIDIARIES”
SHALL INCLUDE CORPORATIONS, UNINCORPORATED ASSOCIATIONS, PARTNERSHIPS, JOINT
VENTURES, OR SIMILAR ENTITIES IN WHICH PGMI HAS AN INTEREST, DIRECT OR INDIRECT.

 

4.02                           ORGANIZATION, STANDING AND POWER.  PGMI IS A
CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS
OF THE STATE OF DELAWARE WITH ALL REQUISITE CORPORATE POWER TO OWN OR LEASE ITS
PROPERTIES AND CARRY ON ITS BUSINESS AS IS NOW BEING CONDUCTED.

 

4.03                           QUALIFICATION.  PGMI IS DULY QUALIFIED AND
LICENSED AS A FOREIGN CORPORATION AUTHORIZED TO DO BUSINESS IN EACH JURISDICTION
WHEREIN IT CONDUCTS BUSINESS OPERATIONS.  SUCH JURISDICTIONS, WHICH ARE THE ONLY
JURISDICTIONS IN WHICH PGMI IS DULY QUALIFIED AND LICENSED AS A FOREIGN
CORPORATION, IS SHOWN IN SCHEDULE OO.

 

4.04                           CAPITALIZATION OF PGMI.  THE AUTHORIZED CAPITAL
STOCK OF PGMI CONSISTS OF 100,000 SHARES OF COMMON STOCK, PAR VALUE $.0001 PER
SHARE, OF WHICH THE ONLY SHARES ISSUED AND OUTSTANDING ARE 10,000 SHARES ISSUED
TO THE SHAREHOLDERS LISTED ON SCHEDULE HH, WHICH SHARES WERE DULY AUTHORIZED,
VALIDLY ISSUED AND FULLY PAID AND NONASSESSABLE.  THERE ARE NO PREEMPTIVE RIGHTS
WITH RESPECT TO THE PGMI COMMON STOCK AND THE SHARES OF PGMI COMMON STOCK ARE
FREE FROM RESTRICTIONS ON TRANSFER OR ANY OPTIONS, LIENS, PLEDGES, SECURITY
INTERESTS, ENCUMBRANCES OR CHARGES OF ANY KIND. PGMI HAS NO OTHER EQUITY
SECURITIES OR SECURITIES CONTAINING EQUITY FEATURES AUTHORIZED, ISSUED OR
OUTSTANDING. THERE ARE NO AGREEMENTS OR OTHER RIGHTS OR ARRANGEMENTS EXISTING
WHICH PROVIDE FOR THE SALE OR ISSUANCE OF CAPITAL STOCK BY PGMI. THERE ARE NO
RIGHTS, SUBSCRIPTIONS, WARRANTS, OPTIONS, CONVERSION RIGHTS OR OTHER AGREEMENTS
OF ANY KIND OUTSTANDING TO PURCHASE OR OTHERWISE ACQUIRE FROM PGMI ANY SHARES OF
CAPITAL STOCK OR OTHER SECURITIES OF PGMI.  THERE ARE NO AGREEMENTS OR OTHER
OBLIGATIONS (CONTINGENT OR OTHERWISE) WHICH MAY REQUIRE PGMI TO REPURCHASE OR
OTHERWISE ACQUIRE ANY SHARES OF ITS CAPITAL STOCK.  PGMI DOES NOT OWN, AND IS
NOT A PARTY TO A CONTRACT TO ACQUIRE, ANY EQUITY SECURITIES OR OTHER SECURITIES
OF ANY ENTITY OR DIRECTOR OR INDIRECT EQUITY OR OWNERSHIP INTEREST IN ANY OTHER
ENTITY. PGMI IS NOT A PARTY TO, AND THERE DO NOT EXIST ANY VOTING TRUSTS,
PROXIES, OR OTHER CONTRACTS WITH RESPECT TO THE VOTING OF SHARES OF CAPITAL
STOCK OF PGMI.

 

4.05                           AUTHORITY. THE EXECUTION AND DELIVERY OF THIS
AGREEMENT AND CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREIN HAVE BEEN
DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION, INCLUDING BUT NOT LIMITED TO
DULY AND VALIDLY AUTHORIZED ACTION AND APPROVAL BY THE BOARD OF DIRECTORS, ON
THE PART OF PGMI.  THIS AGREEMENT CONSTITUTES THE VALID AND BINDING OBLIGATION
OF PGMI, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS, SUBJECT TO THE
PRINCIPLES OF EQUITY APPLICABLE TO THE AVAILABILITY OF THE REMEDY OF SPECIFIC
PERFORMANCE.  THIS AGREEMENT HAS BEEN DULY EXECUTED BY PGMI AND THE EXECUTION
AND DELIVERY OF THIS AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT SHALL NOT RESULT IN ANY BREACH OF ANY TERMS OR
PROVISIONS OF PGMI’S ARTICLES OF INCORPORATION OR BYLAWS OR OF ANY OTHER
AGREEMENT, COURT ORDER OR INSTRUMENT TO WHICH PGMI IS A PARTY OR BOUND.

 

4.06                           ABSENCE OF UNDISCLOSED LIABILITIES.  PGMI HAS NO
MATERIAL LIABILITIES OF ANY NATURE, WHETHER FIXED, ABSOLUTE, CONTINGENT OR
ACCRUED, WHICH WERE NOT REFLECTED ON THE FINANCIAL STATEMENTS SET FORTH IN
SCHEDULE AA OR OTHERWISE DISCLOSED IN THIS AGREEMENT OR ANY OF THE SCHEDULES OR
EXHIBITS ATTACHED HERETO.

 

10

--------------------------------------------------------------------------------

 

4.07                           ABSENCE OF CHANGES.  SINCE THE DATE OF THE MOST
RECENT FINANCIAL STATEMENTS, THERE HAS NOT BEEN ANY MATERIAL ADVERSE CHANGE IN
THE CONDITION (FINANCIAL OR OTHERWISE), ASSETS, LIABILITIES, EARNINGS OR
BUSINESS OF PGMI, EXCEPT FOR CHANGES RESULTING FROM COMPLETION OF THOSE
TRANSACTIONS DESCRIBED IN SECTION 5.02.

 

4.08                           BOOKS AND RECORDS.  THE BOOKS OF ACCOUNT, MINUTE
BOOKS, STOCK RECORD BOOKS, AND OTHER RECORDS OF PGMI, COMPLETE COPIES OF WHICH
HAVE BEEN MADE AVAILABLE TO HAPS, HAVE BEEN PROPERLY KEPT AND CONTAIN NO
INACCURACIES EXCEPT FOR INACCURACIES THAT WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL EFFECT ON HAPS OR PGMI.

 

4.09                           LEGAL PROCEEDINGS, ETC.  THERE ARE NO CIVIL,
CRIMINAL, ADMINISTRATIVE, ARBITRATION OR OTHER SUCH PROCEEDINGS OR
INVESTIGATIONS PENDING OR, TO THE KNOWLEDGE OF PGMI, THREATENED, IN WHICH,
INDIVIDUALLY OR IN THE AGGREGATE, AN ADVERSE DETERMINATION WOULD MATERIALLY AND
ADVERSELY AFFECT THE ASSETS, PROPERTIES, BUSINESS OR INCOME OF PGMI.  PGMI HAS
SUBSTANTIALLY COMPLIED WITH, AND IS NOT IN DEFAULT IN ANY MATERIAL RESPECT
UNDER, ANY LAWS, ORDINANCES, REQUIREMENTS, REGULATIONS OR ORDERS APPLICABLE TO
ITS BUSINESSES.

 

4.10                           GOVERNMENTAL REGULATION.  TO THE KNOWLEDGE OF
PGMI, PGMI IS NOT IN VIOLATION OF OR IN DEFAULT WITH RESPECT TO ANY APPLICABLE
LAW OR ANY APPLICABLE RULE, REGULATION, ORDER, WRIT OR DECREE OF ANY COURT OR
ANY GOVERNMENTAL COMMISSION, BOARD, BUREAU, AGENCY OR INSTRUMENTALITY, OR
DELINQUENT WITH RESPECT TO ANY REPORT REQUIRED TO BE FILED WITH ANY GOVERNMENTAL
COMMISSION, BOARD, BUREAU, AGENCY OR INSTRUMENTALITY WHICH VIOLATION OR DEFAULT
COULD HAVE A MATERIAL ADVERSE EFFECT UPON THE BUSINESS, OPERATIONS OR FINANCIAL
CONDITION OF PGMI.

 

4.11                           BROKER AND FINDERS.  PGMI SHALL BE SOLELY
RESPONSIBLE FOR PAYMENT TO ANY BROKER OR FINDER RETAINED BY PGMI FOR ANY
BROKERAGE FEES, COMMISSIONS OR FINDERS’ FEES IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREIN.

 

4.12                           ACCURACY OF INFORMATION.  NO REPRESENTATION OR
WARRANTY BY PGMI CONTAINED IN THIS AGREEMENT AND NO STATEMENT CONTAINED IN ANY
CERTIFICATE OR OTHER INSTRUMENT DELIVERED OR TO BE DELIVERED TO HAPS PURSUANT
HERETO OR IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING
WITHOUT LIMITATION ALL SCHEDULES AND EXHIBITS HERETO) CONTAINS OR WILL CONTAIN
ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS OR WILL OMIT TO STATE ANY
MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED HEREIN OR
THEREIN NOT MISLEADING.

 

4.13                           SUBSIDIARIES.  PGMI DOES NOT HAVE ANY OTHER
SUBSIDIARIES OR OWN CAPITAL STOCK REPRESENTING TEN PERCENT (10%) OR MORE OF THE
ISSUED AND OUTSTANDING STOCK OF ANY CORPORATION OTHER THAN AS SET FORTH IN
SCHEDULE HH TO THIS AGREEMENT.

 

4.14                           CONSENTS.  NO CONSENT OR APPROVAL OF, OR
REGISTRATION, QUALIFICATION OR FILING WITH, ANY OTHER GOVERNMENTAL AUTHORITY OR
OTHER PERSON IS REQUIRED TO BE OBTAINED OR ACCOMPLISHED BY PGMI OR ANY
SHAREHOLDER THEREOF, IN CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

4.15                           COPIES OF DOCUMENTS.  PGMI HAS MADE AVAILABLE FOR
INSPECTION AND COPYING BY HAPS AND ITS DULY AUTHORIZED REPRESENTATIVES, AND WILL
CONTINUE TO DO SO AT ALL TIMES, TRUE AND CORRECT COPIES OF ALL DOCUMENTS WHICH
IT HAS FILED WITH ANY GOVERNMENTAL AGENCIES WHICH ARE MATERIAL TO THE TERMS AND
CONDITIONS CONTAINED IN THIS AGREEMENT.  FURTHERMORE, ALL FILINGS BY PGMI WITH
GOVERNMENTAL AGENCIES, INCLUDING BUT NOT LIMITED TO THE INTERNAL REVENUE
SERVICE, HAVE CONTAINED INFORMATION WHICH IS TRUE AND CORRECT IN ALL MATERIAL
RESPECTS AND DID NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO
STATE ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE THEREIN NOT
MISLEADING OR WHICH COULD HAVE ANY MATERIAL ADVERSE EFFECT UPON THE FINANCIAL
CONDITION OR OPERATIONS OF PGMI OR ADVERSELY AFFECT THE OBJECTIVES OF THIS
AGREEMENT.

 

11

--------------------------------------------------------------------------------

 

4.16                           DIRECTORS, OFFICERS AND CONTROLLING
SHAREHOLDERS.  NO DIRECTOR, OFFICER AND CONTROLLING SHAREHOLDER OF PGMI HAS BEEN
SUBJECT TO A CRIMINAL PROCEEDING, BANKRUPTCY, SECURITIES AND EXCHANGE COMMISSION
OR NASD CENSURE IN THE LAST FIVE YEARS NOR IS ANY SUCH INDIVIDUAL UNDER
INVESTIGATION FOR ANY OF THE ABOVE.

 

4.17                           TAX-FREE REORGANIZATION.  NEITHER PGMI NOR ANY OF
ITS OFFICERS AND DIRECTORS HAS THROUGH THE DATE OF THIS AGREEMENT TAKEN OR
AGREED TO TAKE ANY ACTION THAT WOULD PREVENT THE EXCHANGE CONTEMPLATED HEREIN
FROM QUALIFYING AS A REORGANIZATION UNDER SECTION 368(A) OF THE CODE.

 

4.18                           FULL DISCLOSURE.  THE REPRESENTATIONS AND
WARRANTIES OF PGMI CONTAINED IN THIS AGREEMENT (AND IN ANY SCHEDULE, EXHIBIT,
CERTIFICATE OR OTHER INSTRUMENT TO BE DELIVERED UNDER THIS AGREEMENT) ARE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS, AND SUCH REPRESENTATIONS AND WARRANTIES DO
NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS CONTAINED THEREIN,
IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. THERE
IS NO FACT OF WHICH PGMI HAS KNOWLEDGE THAT HAS NOT BEEN DISCLOSED TO HAPS
PURSUANT TO THIS AGREEMENT, INCLUDING THE SCHEDULES HERETO, ALL TAKEN TOGETHER
AS A WHOLE, WHICH HAS HAD OR COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON HAPS OR PGMI OR MATERIALLY ADVERSELY AFFECT THE ABILITY OF
PGMI TO CONSUMMATE IN A TIMELY MANNER THE TRANSACTIONS CONTEMPLATED HEREBY.

 

ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO THE
EFFECTIVE TIME OF THE ACQUISITION

 

5.01         CONDUCT AND TRANSACTIONS OF HAPS.  DURING THE PERIOD FROM THE DATE
HEREOF TO THE EFFECTIVE DATE, HAPS SHALL:

 

(A)                                  EXCEPT AS SET FORTH IN SECTION 2.02(E),
CONDUCT ITS OPERATIONS IN THE ORDINARY COURSE OF BUSINESS, INCLUDING BUT NOT
LIMITED TO, PAYING ALL OBLIGATIONS AS THEY MATURE, COMPLYING WITH ALL APPLICABLE
TAX LAWS, FILING ALL TAX RETURNS REQUIRED TO BE FILED AND PAYING ALL TAXES DUE;
AND

 

(B)                                 MAINTAIN ITS RECORDS AND BOOKS OF ACCOUNT IN
A MANNER THAT FAIRLY AND CORRECTLY REFLECTS ITS INCOME, EXPENSES, ASSETS AND
LIABILITIES.

 

HAPS shall not during such period, except in the ordinary course of business,
without the prior written consent of PGMI:

 

(C)                                  EXCEPT AS OTHERWISE CONTEMPLATED OR
REQUIRED BY THIS AGREEMENT, SELL, DISPOSE OF OR ENCUMBER ANY OF ITS PROPERTIES
OR ASSETS;

 

(D)                                 EXCEPT AS SET FORTH IN PARAGRAPH
5.01(C) ABOVE, DECLARE OR PAY ANY DIVIDENDS ON SHARES OF ITS CAPITAL STOCK OR
MAKE ANY OTHER DISTRIBUTION OF ASSETS TO THE HOLDERS THEREOF;

 

(E)                                  EXCEPT AS SET FORTH IN PARAGRAPH
5.01(D) ABOVE, ISSUE, REISSUE OR SELL, OR ISSUE CAPITAL STOCK OF HAPS OR OPTIONS
OR RIGHTS TO SUBSCRIBE TO, OR ENTER INTO ANY CONTRACT OR COMMITMENT TO ISSUE,
REISSUE OR SELL, ANY SHARES OF ITS CAPITAL STOCK OR ACQUIRE OR AGREE TO ACQUIRE
ANY SHARES OF ITS CAPITAL STOCK;

 

(F)                                    EXCEPT AS OTHERWISE CONTEMPLATED AND
REQUIRED BY THIS AGREEMENT, AMEND ITS ARTICLES OF INCORPORATION OR MERGE OR
CONSOLIDATE WITH OR INTO ANY OTHER CORPORATION OR SELL ALL OR SUBSTANTIALLY ALL
OF ITS ASSETS OR CHANGE IN ANY MANNER THE RIGHTS OF ITS CAPITAL STOCK OR OTHER
SECURITIES;

 

12

--------------------------------------------------------------------------------

 

(G)                                 EXCEPT AS CONTEMPLATED OR REQUIRED BY THIS
AGREEMENT, PAY OR INCUR ANY OBLIGATION OR LIABILITY, DIRECT OR CONTINGENT, OF
MORE THAN $1,000;

 

(H)                                 INCUR ANY INDEBTEDNESS FOR BORROWED MONEY,
ASSUME, GUARANTEE, ENDORSE OR OTHERWISE BECOME RESPONSIBLE FOR OBLIGATIONS OF
ANY OTHER PARTY, OR MAKE LOANS OR ADVANCES TO ANY OTHER PARTY;

 

(I)                                     MAKE ANY MATERIAL CHANGE IN ITS
INSURANCE COVERAGE;

 

(J)                                     INCREASE IN ANY MANNER THE COMPENSATION,
DIRECT OR INDIRECT, OF ANY OF ITS OFFICERS OR EXECUTIVE EMPLOYEES; EXCEPT IN
ACCORDANCE WITH EXISTING EMPLOYMENT CONTRACTS;

 

(K)                                  ENTER INTO ANY AGREEMENT OR MAKE ANY
COMMITMENT TO ANY LABOR UNION OR ORGANIZATION; OR

 

(L)                                     MAKE ANY CAPITAL EXPENDITURES.

 

5.02         CONDUCT AND TRANSACTIONS OF PGMI.  DURING THE PERIOD FROM THE DATE
HEREOF TO EFFECTIVE DATE, PGMI SHALL:

 

(A)                                  OBTAIN AN INVESTMENT LETTER FROM EACH
SHAREHOLDER OF PGMI IN A FORM SUBSTANTIALLY LIKE THAT ATTACHED HERETO AS
EXHIBIT C; AND

 

(B)                                 CONDUCT THE OPERATIONS OF PGMI IN THE
ORDINARY COURSE OF BUSINESS.

 

PGMI shall not during such period, except in the ordinary course of business,
without the prior written consent of HAPS:

 

(C)                                  DECLARE OR PAY ANY DIVIDENDS ON SHARES OF
ITS CAPITAL STOCK OR MAKE ANY OTHER DISTRIBUTION OF ASSETS TO THE HOLDERS
THEREOF;

 

(D)                                 ISSUE, REISSUE OR SELL, OR ISSUE CAPITAL
STOCK OF PGMI OR OPTIONS OR RIGHTS TO SUBSCRIBE TO, OR ENTER INTO ANY CONTRACT
OR COMMITMENT TO ISSUE, REISSUE OR SELL, ANY SHARES OF ITS CAPITAL STOCK OR
ACQUIRE OR AGREE TO ACQUIRE ANY SHARES OF ITS CAPITAL STOCK; OR OTHER
SECURITIES; OR

 

(f)                                    Except as otherwise contemplated and
required by this Agreement, amend its Articles of Incorporation or merge or
consolidate with or into any other corporation or sell substantially all of its
assets or change in any manner the rights of its capital stock or other
securities.

 

13

--------------------------------------------------------------------------------

 

ARTICLE 6
RIGHTS OF INSPECTION

 

6.01         DUE DILIGENCE; ACCESS TO INFORMATION; CONFIDENTIALITY.

 

(A)                                  BETWEEN THE DATE HEREOF AND THE CLOSING
DATE, HAPS AND PGMI SHALL AFFORD TO THE OTHER PARTY AND THEIR AUTHORIZED
REPRESENTATIVES THE OPPORTUNITY TO CONDUCT AND COMPLETE A DUE DILIGENCE
INVESTIGATION OF THE OTHER PARTY AS DESCRIBED HEREIN. IN LIGHT OF THE FOREGOING,
EACH PARTY SHALL PERMIT THE OTHER PARTY FULL ACCESS ON REASONABLE NOTICE AND AT
REASONABLE HOURS TO ITS PROPERTIES AND SHALL DISCLOSE AND MAKE AVAILABLE
(TOGETHER WITH THE RIGHT TO COPY) TO THE OTHER PARTY AND ITS OFFICERS,
EMPLOYEES, ATTORNEYS, ACCOUNTANTS AND OTHER REPRESENTATIVES (HEREINAFTER
COLLECTIVELY REFERRED TO AS “REPRESENTATIVES”), ALL BOOKS, PAPERS, AND RECORDS
RELATING TO THE ASSETS, STOCK, PROPERTIES, OPERATIONS, OBLIGATIONS AND
LIABILITIES OF SUCH PARTY AND ITS SUBSIDIARIES, INCLUDING, WITHOUT LIMITATION,
ALL BOOKS OF ACCOUNT (INCLUDING, WITHOUT LIMITATION, THE GENERAL LEDGER), TAX
RECORDS, MINUTE BOOKS OF DIRECTORS’ AND STOCKHOLDERS’ MEETINGS, ORGANIZATIONAL
DOCUMENTS, BYLAWS, CONTRACTS AND AGREEMENTS, FILINGS WITH ANY REGULATORY
AUTHORITY, ACCOUNTANTS’ WORK PAPERS, LITIGATION FILES (INCLUDING, WITHOUT
LIMITATION, LEGAL RESEARCH MEMORANDA), ATTORNEY’S AUDIT RESPONSE LETTERS,
DOCUMENTS RELATING TO ASSETS AND TITLE THERETO (INCLUDING, WITHOUT LIMITATION,
ABSTRACTS, TITLE INSURANCE POLICIES, SURVEYS, ENVIRONMENTAL REPORTS, OPINIONS OF
TITLE AND OTHER INFORMATION RELATING TO THE REAL AND PERSONAL PROPERTY), PLANS
AFFECTING EMPLOYEES, SECURITIES TRANSFER RECORDS AND STOCKHOLDER LISTS, AND ANY
BOOKS, PAPERS AND RECORDS (COLLECTIVELY REFERRED TO HEREIN AS “EVALUATED
MATERIAL”) RELATING TO OTHER ASSETS OR BUSINESS ACTIVITIES IN WHICH SUCH PARTY
MAY HAVE A REASONABLE INTEREST, AND OTHERWISE PROVIDE SUCH ASSISTANCE AS IS
REASONABLY REQUESTED IN ORDER THAT EACH PARTY MAY HAVE A FULL OPPORTUNITY TO
MAKE SUCH INVESTIGATION AND EVALUATION AS IT SHALL REASONABLY DESIRE TO MAKE OF
THE BUSINESS AND AFFAIRS OF THE OTHER PARTY; PROVIDED, HOWEVER, THAT THE
FOREGOING RIGHTS GRANTED TO EACH PARTY SHALL, WHETHER OR NOT AND REGARDLESS OF
THE EXTENT TO WHICH THE SAME ARE EXERCISED, IN NO WAY AFFECT THE NATURE OR SCOPE
OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE RESPECTIVE PARTY SET
FORTH HEREIN. IN ADDITION, EACH PARTY AND ITS REPRESENTATIVES SHALL COOPERATE
FULLY (INCLUDING PROVIDING INTRODUCTIONS, WHERE NECESSARY) WITH SUCH OTHER PARTY
TO ENABLE THE PARTY TO CONTACT THIRD PARTIES, INCLUDING CUSTOMERS, PROSPECTIVE
CUSTOMERS, SPECIFIED AGENCIES OR OTHERS AS THE PARTY DEEMS REASONABLY NECESSARY
TO COMPLETE ITS DUE DILIGENCE; PROVIDED THAT SUCH PARTY AGREES NOT TO INITIATE
SUCH CONTACTS WITHOUT THE PRIOR APPROVAL OF THE OTHER PARTY, WHICH APPROVAL WILL
NOT BE UNREASONABLY WITHHELD.

 

(B)                                 HAPS AND PGMI AGREE THAT EACH SUCH PARTY
WILL NOT USE THE EVALUATION MATERIAL FOR ANY PURPOSE OTHER THAN IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER.  EACH AGREES NOT TO DISCLOSE OR
ALLOW DISCLOSURE TO OTHERS OF ANY EVALUATION MATERIAL, EXCEPT TO SUCH PARTY’S
AFFILIATES OR REPRESENTATIVES, IN EACH CASE, TO THE EXTENT NECESSARY TO PERMIT
SUCH AFFILIATE OR REPRESENTATIVE TO ASSIST SUCH PARTY IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREUNDER.  EACH AGREES THAT IT WILL, WITHIN TEN
(10) DAYS OF THE OTHER PARTY’S REQUEST, RE-DELIVER TO SUCH PARTY ALL COPIES OF
THAT PARTY’S EVALUATION MATERIAL IN ITS POSSESSION OR THAT OF ITS AFFILIATES OR
REPRESENTATIVES IF THE EXCHANGE CONTEMPLATED BY THIS AGREEMENT DOES NOT CLOSE AS
CONTEMPLATED HEREIN.

 

(C)                                  IN THE EVENT ANY PARTY OR ANYONE TO WHOM
EVALUATION MATERIAL HAS BEEN TRANSMITTED IN ACCORDANCE WITH THE TERMS HEREIN IS
REQUESTED IN CONNECTION WITH ANY PROCEEDING TO DISCLOSE ANY EVALUATION MATERIAL,
SUCH PARTY WILL GIVE THE OTHER PARTY PROMPT NOTICE OF SUCH REQUEST SO THAT THE
OTHER PARTY MAY SEEK AN APPROPRIATE PROTECTIVE ORDER OR OTHER REMEDY OR WAIVE
COMPLIANCE WITH THIS AGREEMENT, AND SUCH PARTY WILL COOPERATE WITH THE OTHER
PARTY TO OBTAIN SUCH PROTECTIVE ORDER.  IN THE EVENT SUCH PROTECTIVE ORDER IS
NOT OBTAINED, THE OTHER PARTY WAIVES COMPLIANCE WITH THE RELEVANT

 

14

--------------------------------------------------------------------------------

 

PROVISIONS OF THIS SECTION, SUCH PARTY (OR SUCH PERSON TO WHOM SUCH REQUEST IS
DIRECTED) WILL FURNISH ONLY THAT PORTION OF THE EVALUATION MATERIAL WHICH IS
REQUIRED TO BE DISCLOSED.

 

(D)                                 NOTWITHSTANDING ANY OF THE FOREGOING, IF
PRIOR TO CLOSING, FOR ANY REASON, THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT ARE NOT CONSUMMATED, NEITHER HAPS NOR PGMI NOR ANY OF THEIR
REPRESENTATIVES SHALL DISCLOSE TO THIRD PARTIES OR OTHERWISE USE ANY EVALUATION
MATERIAL OR OTHER CONFIDENTIAL INFORMATION RECEIVED FROM THE OTHER PARTY IN THE
COURSE OF INVESTIGATING, NEGOTIATING, AND PERFORMING THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT; PROVIDED, HOWEVER, THAT NOTHING SHALL BE DEEMED
TO BE CONFIDENTIAL INFORMATION WHICH:

 

(I)            IS OR BECOMES GENERALLY AVAILABLE TO THE PUBLIC OTHER THAN AS A
RESULT OF A DISCLOSURE BY SUCH PARTY, ITS AFFILIATES OR REPRESENTATIVES;

 

(II)           WAS AVAILABLE TO SUCH PARTY ON A NON-CONFIDENTIAL BASIS PRIOR TO
ITS DISCLOSURE;

 

(III)          BECOMES AVAILABLE TO SUCH PARTY ON A NON-CONFIDENTIAL BASIS FROM
A SOURCE OTHER THAN THE OTHER PARTY OR ITS AGENTS, ADVISORS OR REPRESENTATIVES;

 

(IV)          DEVELOPED BY SUCH PARTY INDEPENDENTLY OF ANY DISCLOSURE BY THE
OTHER PARTY; OR

 

(V)           IS DISCLOSED IN COMPLIANCE WITH SECTION 6.01(C).

 

This provision shall not prohibit the disclosure of information required to be
made under federal or state securities laws. If any disclosure is so required,
the party making such disclosure shall consult with the other party prior to
making such disclosure, and the parties shall use all reasonable efforts, acting
in good faith, to agree upon a text for such disclosure which is satisfactory to
both parties.

 

6.02                           HAPS AND PGMI EACH AGREE THAT MONEY DAMAGES WOULD
NOT BE SUFFICIENT TO REMEDY ANY BREACH BY THE OTHER PARTY OF THIS SECTION, AND
THAT, IN ADDITION TO ALL OTHER REMEDIES, EACH PARTY AGAINST WHICH A BREACH OF
THIS SECTION HAS BEEN COMMITTED SHALL BE ENTITLED TO SPECIFIC PERFORMANCE AND
INJUNCTIVE OR OTHER EQUITABLE RELIEF AS A REMEDY OF SUCH BREACH.

 

ARTICLE 7
CONDITIONS TO CLOSING

 

7.01         CONDITIONS TO OBLIGATIONS OF PGMI. THE OBLIGATION OF PGMI TO
PERFORM THIS AGREEMENT IS SUBJECT TO THE SATISFACTION OF THE FOLLOWING
CONDITIONS ON OR BEFORE THE CLOSING UNLESS WAIVED IN WRITING BY PGMI.

 

(A)                                  REPRESENTATIONS AND WARRANTIES.  THERE
SHALL BE NO INFORMATION DISCLOSED IN THE SCHEDULES DELIVERED BY HAPS, WHICH IN
THE OPINION OF PGMI, WOULD MATERIALLY ADVERSELY AFFECT THE PROPOSED TRANSACTION
AND INTENT OF THE PARTIES AS SET FORTH IN THIS AGREEMENT.  THE REPRESENTATIONS
AND WARRANTIES OF HAPS SET FORTH IN ARTICLE 3 HEREOF SHALL BE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS AGREEMENT AND AS OF THE CLOSING
AS THOUGH MADE ON AND AS OF THE CLOSING, EXCEPT AS OTHERWISE PERMITTED BY THIS
AGREEMENT.

 

(B)                                 PERFORMANCE OF OBLIGATIONS.  HAPS SHALL HAVE
IN ALL MATERIAL RESPECTS PERFORMED ALL AGREEMENTS REQUIRED TO BE PERFORMED BY IT
UNDER THIS AGREEMENT AND SHALL HAVE PERFORMED IN ALL MATERIAL RESPECTS ANY
ACTIONS CONTEMPLATED BY THIS AGREEMENT PRIOR TO OR ON THE CLOSING AND HAPS SHALL
HAVE COMPLIED IN ALL MATERIAL RESPECTS WITH THE COURSE OF CONDUCT REQUIRED BY
THIS AGREEMENT.

 

15

--------------------------------------------------------------------------------

 

(C)                                  CORPORATE ACTION.  HAPS SHALL HAVE
FURNISHED MINUTES, CERTIFIED COPIES OF CORPORATE RESOLUTIONS AND/OR OTHER
DOCUMENTARY EVIDENCE SATISFACTORY TO COUNSEL FOR PGMI THAT HAPS HAS SUBMITTED
WITH THIS AGREEMENT AND ANY OTHER DOCUMENTS REQUIRED HEREBY TO SUCH PARTIES FOR
APPROVAL AS PROVIDED BY APPLICABLE LAW.

 

(D)                                 CONSENTS.  EXECUTION OF THIS AGREEMENT BY
THE SHAREHOLDERS OF PGMI AND ANY CONSENTS NECESSARY FOR OR APPROVAL OF ANY PARTY
LISTED ON ANY SCHEDULE DELIVERED BY HAPS WHOSE CONSENT OR APPROVAL IS REQUIRED
PURSUANT THERETO SHALL HAVE BEEN OBTAINED.

 

(E)                                  STATUTORY REQUIREMENTS.  ALL STATUTORY
REQUIREMENTS FOR THE VALID CONSUMMATION BY HAPS OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT SHALL HAVE BEEN FULFILLED.

 

(F)                                    GOVERNMENTAL APPROVAL.  ALL
AUTHORIZATIONS, CONSENTS, APPROVALS, PERMITS AND ORDERS OF ALL FEDERAL AND STATE
GOVERNMENTAL AGENCIES REQUIRED TO BE OBTAINED BY HAPS FOR CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL HAVE BEEN OBTAINED.

 

(G)                                 MARKET CONDITION.  UP TO AND INCLUDING THE
CLOSING DATE, HAPS SHALL HAVE MAINTAINED ITS LISTING ON THE OTC BULLETIN BOARD,
WITHOUT ANY TRADING AND QUOTATION HALTS OR OTHER NOTICES OF DEFICIENCY RECEIVED
BY OR IMPOSED AGAINST HAPS.

 

(H)                                 CHANGES IN FINANCIAL CONDITION OF HAPS. 
THERE SHALL NOT HAVE OCCURRED ANY MATERIAL ADVERSE CHANGE IN THE FINANCIAL
CONDITION OR IN THE OPERATIONS OF THE BUSINESS OF HAPS, EXCEPT EXPENDITURES IN
FURTHERANCE OF THIS AGREEMENT.

 

(I)                                     ABSENCE OF PENDING LITIGATION.  HAPS IS
NOT ENGAGED IN OR THREATENED WITH ANY SUIT, ACTION, OR LEGAL, ADMINISTRATIVE OR
OTHER PROCEEDINGS OR GOVERNMENTAL INVESTIGATIONS PERTAINING TO THIS AGREEMENT OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

 

(J)                                     AUTHORIZATION FOR ISSUANCE OF STOCK. 
PGMI SHALL HAVE RECEIVED IN FORM AND SUBSTANCE SATISFACTORY TO COUNSEL FOR PGMI
A LETTER INSTRUCTING AND AUTHORIZING THE REGISTRAR AND TRANSFER AGENT FOR THE
SHARES OF COMMON STOCK OF HAPS TO ISSUE STOCK CERTIFICATES REPRESENTING
OWNERSHIP OF HAPS COMMON STOCK TO PGMI SHAREHOLDERS IN ACCORDANCE WITH THE TERMS
OF THIS AGREEMENT AND A LETTER FROM SAID REGISTRAR AND TRANSFER AGENT
ACKNOWLEDGING RECEIPT OF THE LETTER OF INSTRUCTION AND STATING TO THE EFFECT
THAT THE REGISTRAR AND TRANSFER AGENT HOLDS ADEQUATE SUPPLIES OF STOCK
CERTIFICATES NECESSARY TO COMPLY WITH THE LETTER OF INSTRUCTION AND THE TERMS
AND CONDITIONS OF THIS AGREEMENT.

 

(K)                                  BOOKS AND RECORDS.  HAPS SHALL DELIVER TO
PGMI ALL BOOKS AND RECORDS OF HAPS.

 

(L)                                     SHAREHOLDER APPROVAL.  THE HAPS
SHAREHOLDERS SHALL HAVE APPROVED THIS AGREEMENT AND PLAN OF REORGANIZATION.

 

7.02         CONDITIONS TO OBLIGATIONS OF HAPS.  THE OBLIGATION OF HAPS TO
PERFORM THIS AGREEMENT IS SUBJECT TO THE SATISFACTION OF THE FOLLOWING
CONDITIONS ON OR BEFORE THE CLOSING UNLESS WAIVED IN WRITING BY HAPS.

 

(A)                                  REPRESENTATIONS AND WARRANTIES.  THERE
SHALL BE NO INFORMATION DISCLOSED IN THE SCHEDULES DELIVERED BY PGMI, WHICH IN
THE OPINION OF HAPS, WOULD MATERIALLY ADVERSELY AFFECT THE PROPOSED TRANSACTION
AND INTENT OF THE PARTIES AS SET FORTH IN THIS AGREEMENT.  THE REPRESENTATIONS
AND WARRANTIES OF PGMI SET FORTH IN ARTICLE 4 HEREOF SHALL BE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS AGREEMENT AND AS OF THE CLOSING
AS THOUGH MADE ON AND AS OF THE CLOSING, EXCEPT AS OTHERWISE PERMITTED BY THIS
AGREEMENT.

 

16

--------------------------------------------------------------------------------

 

(B)                                 PERFORMANCE OF OBLIGATIONS.  PGMI SHALL HAVE
IN ALL MATERIAL RESPECTS PERFORMED ALL AGREEMENTS REQUIRED TO BE PERFORMED BY IT
UNDER THIS AGREEMENT AND SHALL HAVE PERFORMED IN ALL MATERIAL RESPECTS ANY
ACTIONS CONTEMPLATED BY THIS AGREEMENT PRIOR TO OR ON THE CLOSING AND PGMI SHALL
HAVE COMPLIED IN ALL RESPECTS WITH THE COURSE OF CONDUCT REQUIRED BY THIS
AGREEMENT.

 

(C)                                  CORPORATE ACTION.  PGMI SHALL HAVE
FURNISHED MINUTES, CERTIFIED COPIES OF CORPORATE RESOLUTIONS AND/OR OTHER
DOCUMENTARY EVIDENCE SATISFACTORY TO COUNSEL FOR HAPS THAT PGMI HAS SUBMITTED
WITH THIS AGREEMENT AND ANY OTHER DOCUMENTS REQUIRED HEREBY TO SUCH PARTIES FOR
APPROVAL AS PROVIDED BY APPLICABLE LAW.

 

(D)                                 CONSENTS.  ANY CONSENTS NECESSARY FOR OR
APPROVAL OF ANY PARTY LISTED ON ANY SCHEDULE DELIVERED BY PGMI, WHOSE CONSENT OR
APPROVAL IS REQUIRED PURSUANT THERETO, SHALL HAVE BEEN OBTAINED.

 

(E)                                  FINANCIAL STATEMENTS.  HAPS SHALL HAVE BEEN
FURNISHED WITH AUDITED FINANCIAL STATEMENTS OF PGMI INCLUDING, BUT NOT LIMITED
TO, BALANCE SHEETS, INCOME STATEMENTS, STATEMENTS OF STOCKHOLDERS’ EQUITY AND
STATEMENTS OF CASH FLOWS AS AT AND FOR THE FISCAL YEARS ENDED JUNE 30, 2005 AND
2004 EACH PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
CONSISTENTLY APPLIED, AND WHICH FAIRLY PRESENT THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF PGMI AT THE DATES THEREOF AND FOR THE PERIODS
PRESENTED.

 

(F)                                    STATUTORY REQUIREMENTS. ALL STATUTORY
REQUIREMENTS FOR THE VALID CONSUMMATION BY PGMI OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT SHALL HAVE BEEN FULFILLED.

 

(G)                                 GOVERNMENTAL APPROVAL.  ALL AUTHORIZATIONS,
CONSENTS, APPROVALS, PERMITS AND ORDERS OF ALL FEDERAL AND STATE GOVERNMENTAL
AGENCIES REQUIRED TO BE OBTAINED BY PGMI FOR CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT SHALL HAVE BEEN OBTAINED.

 

(H)                                 CHANGES IN FINANCIAL CONDITION OF PGMI. 
THERE SHALL NOT HAVE OCCURRED ANY MATERIAL ADVERSE CHANGE IN THE FINANCIAL
CONDITION OR IN THE OPERATIONS OF THE BUSINESS OF PGMI, EXCEPT EXPENDITURES IN
FURTHERANCE OF THIS AGREEMENT.

 

(I)                                     ABSENCE OF PENDING LITIGATION.  PGMI IS
NOT ENGAGED IN OR THREATENED WITH ANY SUIT, ACTION, OR LEGAL, ADMINISTRATIVE OR
OTHER PROCEEDINGS OR GOVERNMENTAL INVESTIGATIONS PERTAINING TO THIS AGREEMENT OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

 

(J)                                     SHAREHOLDER APPROVAL.  THE PGMI
SHAREHOLDERS SHALL HAVE APPROVED THIS AGREEMENT AND PLAN OF REORGANIZATION.

 

ARTICLE 8
MATTERS SUBSEQUENT TO CLOSING

 

8.01                           COVENANT OF FURTHER ASSURANCE.  THE PARTIES
COVENANT AND AGREE THAT THEY SHALL, FROM TIME TO TIME, EXECUTE AND DELIVER OR
CAUSE TO BE EXECUTED AND DELIVERED ALL SUCH FURTHER INSTRUMENTS OF CONVEYANCE,
TRANSFER, ASSIGNMENTS, RECEIPTS AND OTHER INSTRUMENTS, AND SHALL TAKE OR CAUSE
TO BE TAKEN SUCH FURTHER OR OTHER ACTIONS AS THE OTHER PARTY OR PARTIES TO THIS
AGREEMENT MAY REASONABLY DEEM NECESSARY IN ORDER TO CARRY OUT THE PURPOSES AND
INTENT OF THIS AGREEMENT.

 

17

--------------------------------------------------------------------------------

 

ARTICLE 9
NATURE OF REPRESENTATIONS

 

9.01                           ALL STATEMENTS CONTAINED IN ANY WRITTEN
CERTIFICATE, SCHEDULE, EXHIBIT OR OTHER WRITTEN INSTRUMENT DELIVERED BY HAPS OR
PGMI PURSUANT HERETO, OR OTHERWISE ADOPTED BY HAPS, BY ITS WRITTEN APPROVAL, OR
BY PGMI BY ITS WRITTEN APPROVAL, OR IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, SHALL BE DEEMED REPRESENTATIONS AND WARRANTIES BY HAPS OR
PGMI AS THE CASE MAY BE.  ALL REPRESENTATIONS, WARRANTIES AND AGREEMENTS MADE BY
EITHER PARTY SHALL SURVIVE FOR THE PERIOD OF THE APPLICABLE STATUTE OF
LIMITATIONS.

 

ARTICLE 10
TERMINATION OF AGREEMENT AND
ABANDONMENT OF REORGANIZATION

 

10.01       TERMINATION.  ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THIS
AGREEMENT AND ANY AGREEMENT EXECUTED AS REQUIRED HEREUNDER AND THE ACQUISITION
CONTEMPLATED HEREBY MAY BE TERMINATED AT ANY TIME BEFORE THE CLOSING AS FOLLOWS:

 

(A)                                  BY MUTUAL WRITTEN CONSENT OF THE BOARDS OF
DIRECTORS OF HAPS AND PGMI.

 

(B)                                 BY THE BOARD OF DIRECTORS OF HAPS IF ANY OF
THE CONDITIONS SET FORTH IN SECTION 7.02 SHALL NOT HAVE BEEN SATISFIED BY THE
CLOSING DATE.

 

(C)                                  BY THE BOARD OF DIRECTORS OF PGMI IF ANY OF
THE CONDITIONS SET FORTH IN SECTION 7.01 SHALL NOT HAVE BEEN SATISFIED BY THE
CLOSING DATE.

 

(D)                                 BY THE BOARD OF DIRECTORS OF PGMI IF THIS
AGREEMENT AND PLAN OF REORGANIZATION IS NOT DULY APPROVED BY THE STOCKHOLDERS OF
PGMI FOLLOWING A VOTE OF THE STOCKHOLDERS OF PGMI.

 

(E)                                  BY EITHER OF THE BOARDS OF DIRECTORS OF
HAPS OR PGMI IF THE CLOSING DATE IS NOT ON OR BEFORE NOVEMBER 30, 2005, OR SUCH
LATER DATE AS HAPS AND PGMI MAY MUTUALLY AGREE (EXCEPT THAT A PARTY SEEKING TO
TERMINATE THIS AGREEMENT PURSUANT TO THIS CLAUSE MAY NOT DO SO IF THE FAILURE TO
CONSUMMATE THE EXCHANGE CONTEMPLATED BY THIS AGREEMENT BY SUCH DATE SHALL BE DUE
TO THE ACTION OR FAILURE TO ACT OF THE PARTY SEEKING TO TERMINATE THE AGREEMENT
IN BREACH OF SUCH PARTY’S OBLIGATIONS UNDER THIS AGREEMENT).

 

10.02       TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS; PAYMENT OF
EXPENSES.  IN THE EVENT THIS AGREEMENT AND THE ACQUISITION ARE TERMINATED AND
ABANDONED PURSUANT TO THIS ARTICLE 10 HEREOF, THIS AGREEMENT SHALL BECOME VOID
AND OF NO FORCE AND EFFECT AND THERE SHALL BE NO LIABILITY ON THE PART OF ANY OF
THE PARTIES HERETO, OR THEIR RESPECTIVE DIRECTORS, OFFICERS, SHAREHOLDERS OR
CONTROLLING PERSONS TO EACH OTHER.  FOR THE COSTS AND EXPENSES INCIDENT TO ITS
NEGOTIATION AND PREPARATION OF THIS AGREEMENT AND ANY OF THE DOCUMENTS
EVIDENCING THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING FEES, EXPENSES AND
DISBURSEMENTS OF COUNSEL, HAPS SHAREHOLDERS SHALL BEAR THE EXPENSES INCURRED BY
HAPS, AND PGMI SHAREHOLDERS SHALL BEAR THE EXPENSES INCURRED BY PGMI.

 

ARTICLE 11
EXCHANGE OF SHARES

 

11.01       EXCHANGE OF SHARES.  AT THE EFFECTIVE TIME, HAPS SHALL ISSUE A
LETTER TO THE TRANSFER AGENT OF HAPS WITH A COPY OF THE RESOLUTION OF THE BOARD
OF DIRECTORS OF HAPS AUTHORIZING AND DIRECTING THE ISSUANCE OF HAPS SHARES AS
SET FORTH ON EXHIBIT A TO THIS AGREEMENT.

 

18

--------------------------------------------------------------------------------

 

11.02       HOLDING PERIOD AND INVESTMENT INTENT. THE SHAREHOLDERS AGREE NOT TO
SELL ANY SHARE OF HAPS CLASS E STOCK THEY ACQUIRE PURSUANT TO THIS AGREEMENT
UNTIL THE DATE OF CONVERSION OF SUCH PREFERRED STOCK INTO COMMON STOCK. THE
SHAREHOLDERS FURTHER REPRESENT AND WARRANT THAT SUCH SHARES BEING ACQUIRED
PURSUANT TO THIS AGREEMENT ARE BEING ACQUIRED FOR HIS OR ITS OWN ACCOUNT AS
APPLICABLE, AND NOT WITH A VIEW TO THE PUBLIC RESALE OR DISTRIBUTION OF SUCH
SHARES AND FURTHER ACKNOWLEDGE THAT THE SHARES BEING ISSUED HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT AND ARE “RESTRICTED SECURITIES” AS THAT TERM
IS DEFINED IN RULE 144 PROMULGATED UNDER THE SECURITIES ACT AND MUST BE HELD
INDEFINITELY UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OR
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

11.03       RESTRICTIONS ON SHARES ISSUED TO PGMI.  DUE TO THE FACT THAT THE
SHAREHOLDERS WILL RECEIVE SHARES OF HAPS CLASS E STOCK IN CONNECTION WITH THE
ACQUISITION WHICH HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT BY VIRTUE OF THE
EXEMPTION PROVIDED IN SECTION 4(2) OF SUCH ACT, THOSE SHARES OF HAPS WILL
CONTAIN THE FOLLOWING LEGEND:

 

The shares represented by this certificate have not been registered under the
Securities Act of 1933.  The shares have been acquired for investment and may
not be sold or offered for sale in the absence of an effective Registration
Statement for the shares under the Securities Act of 1933 or an opinion of
counsel to the Corporation that such registration is not required.

 

ARTICLE 12
MISCELLANEOUS

 

12.01       CONSTRUCTION.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE EXCLUDING THE CONFLICTS OF
LAWS.

 

12.02       EXPENSES.  EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, ALL COSTS
AND EXPENSES INCURRED IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE PAID BY THE PARTY INCURRING SUCH COSTS AND
EXPENSES.

 

19

--------------------------------------------------------------------------------

 

12.03                     NOTICES.  ALL NOTICES NECESSARY OR APPROPRIATE UNDER
THIS AGREEMENT SHALL BE EFFECTIVE WHEN PERSONALLY DELIVERED OR DEPOSITED IN THE
UNITED STATES MAIL, POSTAGE PREPAID, CERTIFIED OR REGISTERED, RETURN RECEIPT
REQUESTED, AND ADDRESSED TO THE PARTIES LAST KNOWN ADDRESS WHICH ADDRESSES ARE
CURRENTLY AS FOLLOWS:

 

If to “HAPS”
5231-A Kuaiwi Place
Honolulu, Hawaii 96821

 

If to “PGMI”
5192 Bolsa Avenue
Huntington Beach, California 92649-1005

 

 

 

With copies to:
Cletha A. Walstrand, Esq.
8 East Broadway, Suite 609
Salt Lake City, Utah 84111
Fax: 801 363 8512

 

With copies to:
William T. Gay
Snell & Wilmer LLP
600 Anton Boulevard, 14th Floor
Costa Mesa, California 92626-7689
Fax: 714 427 7799

 

12.04                     AMENDMENT AND WAIVER.  THE PARTIES HEREBY MAY, BY
MUTUAL AGREEMENT IN WRITING SIGNED BY OR ON BEHALF OF EACH PARTY, AMEND THIS
AGREEMENT IN ANY RESPECT.  ANY TERM OR PROVISION OF THIS AGREEMENT MAY BE WAIVED
IN WRITING SIGNED BY AN AUTHORIZED OFFICER AT ANY TIME BY THE PARTY AGAINST
WHICH SUCH WAIVER IS TO BE CHARGED, SUCH WAIVER RIGHT SHALL INCLUDE, BUT NOT BE
LIMITED TO, THE RIGHT OF EITHER PARTY TO:

 

(A)                                  EXTEND THE TIME FOR THE PERFORMANCE OF ANY
OF THE OBLIGATIONS OF THE OTHER;

 

(B)                                 WAIVE ANY INACCURACIES IN REPRESENTATIONS BY
THE OTHER CONTAINED IN THIS AGREEMENT OR IN ANY DOCUMENT DELIVERED PURSUANT
HERETO;

 

(C)                                  WAIVE COMPLIANCE BY THE OTHER WITH ANY OF
THE COVENANTS CONTAINED IN THIS AGREEMENT, AND PERFORMANCE OF ANY OBLIGATIONS BY
THE OTHER; AND

 

(D)                                 WAIVE THE FULFILLMENT OF ANY CONDITION THAT
IS PRECEDENT TO THE PERFORMANCE BY THE PARTY SO WAIVING OF ANY OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.

 

Any writing on the part of a party relating to such amendment, extension or
waiver as provided in this Section 12.04 shall be valid if authorized or
ratified by the Board of Directors of such party.

 

12.05                     REMEDIES NOT EXCLUSIVE.  NO REMEDY CONFERRED BY ANY OF
THE SPECIFIC PROVISIONS OF THIS AGREEMENT IS INTENDED TO BE EXCLUSIVE OF ANY
OTHER REMEDY, AND EACH AND EVERY REMEDY SHALL BE CUMULATIVE AND SHALL BE IN
ADDITION TO EVERY OTHER REMEDY GIVEN HEREUNDER OR NOW OR HEREAFTER EXISTING AT
LAW OR IN EQUITY OR BY STATUTE OR OTHERWISE.  THE ELECTION OF ANY ONE OR MORE
REMEDIES BY HAPS OR PGMI SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT TO PURSUE
OTHER AVAILABLE REMEDIES.

 

12.06                     COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE
OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF
WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

12.07                     BENEFIT.  THIS AGREEMENT SHALL BE BINDING UPON, AND
INURE TO THE BENEFIT OF, THE RESPECTIVE SUCCESSORS AND ASSIGNS OF HAPS AND PGMI
AND ITS SHAREHOLDERS.

 

12.08                     ENTIRE AGREEMENT.  THIS AGREEMENT AND THE SCHEDULES
AND EXHIBITS ATTACHED HERETO, REPRESENT THE ENTIRE AGREEMENT OF THE UNDERSIGNED
REGARDING THE SUBJECT MATTER HEREOF, AND SUPERSEDES ALL PRIOR WRITTEN OR ORAL
UNDERSTANDINGS OR AGREEMENTS BETWEEN THE PARTIES.

 

20

--------------------------------------------------------------------------------

 

12.09                     CAPTIONS AND SECTION HEADINGS.  CAPTIONS AND
SECTION HEADINGS USED HEREIN ARE FOR CONVENIENCE ONLY AND SHALL NOT CONTROL OR
AFFECT THE MEANING OR CONSTRUCTION OF ANY PROVISION OF THIS AGREEMENT.

 

Executed as of the date first written above.

 

HAPS USA, Inc.

 

PGMI, Inc.

 

 

 

 

 

 

By:

/s/ MARK BUCK

 

By:

/s/ SHINICHI KANEMOTO

 

Mark Buck, President

 

 

Shinichi Kanemoto, Chief Executive Officer

 

 

 

 

 

SHAREHOLDERS

 

 

 

 

 

/s/ EIICHI KANEMOTO

 

 

 

Eiichi Kanemoto

 

 

 

 

 

/s/ GAKUSHIN KANEMOTO

 

 

 

Gakushin Kanemoto

 

 

 

 

 

/s/ KOUSEI KANEMOTO

 

 

 

Kousei Kanemoto

 

 

 

 

 

/s/ SHINICHI KANEMOTO

 

 

 

Shinichi Kanemoto

 

 

 

 

 

/s/ TAIKI KANEMOTO

 

 

 

Taiki Kanemoto

 

 

 

 

 

/s/ TOMIKO HAYAKAWA

 

 

 

Tomiko Hayakawa

 

21

--------------------------------------------------------------------------------

 

EXHIBIT A

 

Name of Shareholder

 

Number of HAPS Class E Shares

Eiichi Kanemoto

 

 

38,823,999 - 40%

 

 

 

 

Gakushin Kanemoto

 

 

1,455,900 - 1.5%

 

 

 

 

Kousei Kanemoto

 

 

8,250,100 - 8.5%

 

 

 

 

Shinichi Kanemoto

 

 

38,823,999 - 40%

 

 

 

 

Taiki Kanemoto

 

 

8,250,100 - 8.5%

 

 

 

 

Tomiko Hayakawa

 

 

1,455,900 - 1.5%

 

A-1

--------------------------------------------------------------------------------

 

EXHIBIT B

 

HAPS USA, INC.

 

CERTIFICATE OF DESIGNATION OF CLASS E CONVERTIBLE PREFERRED STOCK

 

--------------------------------------------------------------------------------

 

EXHIBIT C

 

FORM OF INVESTMENT REPRESENTATION STATEMENT

 

PURCHASER:

 

 

 

 

 

ISSUER:

 

HAPS USA, Inc.

 

 

 

SECURITY:

 

Class E CONVERTIBLE PREFERRED STOCK which are convertible into Common Stock
(jointly referred to as “Security”)

 

 

 

QUANTITY:

 

Shares

 

In connection with the share exchange agreement dated            , 2005, and my
acquisition of the above-listed Securities of the Issuer, I, the Purchaser,
represent to the Issuer the following:

 

(1)                                  Investment.  I am aware of the Issuer’s
business affairs and financial condition.  I am acquiring the Securities for
investment for my own account only and not with a view to, or for resale in
connection with, any “distribution” thereof within the meaning of the Securities
Act of 1933 (as Amended).  These Securities have not been registered under the
Securities Act by reason of a specific exemption therefrom, which exemption
depends on, among other things, the bona fide nature of the investment intent as
expressed herein.  In this connection I understand that, in view of the
Securities and Exchange Commission (“SEC”), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for a fixed or determinable period in
the future, or for a market rise, or for sale if the market does not rise.  I
have no such intention.  I understand that I may not convert these Securities
into Shares of the Issuer’s Common Stock for a period of two (2) years following
my acquisition thereof.

 

(2)                                  Restrictions on Transfer Under Securities
Act.  I further acknowledge and understand that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
unless an exemption from such registration is available.  Moreover, I understand
that the Issuer is under no obligation to register the Securities.  In addition,
I understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or unless the Issuer receives an opinion of counsel reasonably
satisfactory to the Issuer that such registration is not required.

 

(3)                                  Sales Under Rule 144.  I am aware of the
adoption of Rule 144 by the SEC promulgated under the Securities Act, which in
substance permits limited public resale of securities acquired in a non- public
offering subject to the satisfaction of certain conditions, including: (i) the
availability of certain current public information about the Issuer, (ii) the
resale being made through a broker in an unsolicited “broker’s transaction” or
in transactions directly with a “ market maker,” and (iv) the amount of
securities sold during any three-month period not exceeding specified
limitations (generally 1% of the total shares outstanding).

 

(4)                                  Limitations on Rule 144.  I further
acknowledge and understand that the Issuer, at any time I wish to sell the
Securities, may not be satisfying the public information requirement of
Rule 144, and, in such case, I would be precluded from selling the Securities
under Rule 144 even if the minimum holding period had been satisfied.

 

--------------------------------------------------------------------------------

 

(5)                                  Sales Not Under Rule 144.  I further
acknowledge that, if all the requirements of Rule 144 are not met, then
Regulation A, or some other registration exemption will be required; and that,
although Rule 144 is not exclusive, the staff of the Commission has expressed
its opinion (i) that persons proposing to sell private placement securities
other than in a registered offering or pursuant to an exemption from
registration is available for such offers or sales, and (ii) that such persons
and the brokers who participate in the transactions do so at their own risk.

 

(6)                                  Stop Transfer Instructions.  I further
understand that stop transfer instructions will be in effect with respect to the
transfer of the Securities consistent with the above.

 

(7)                                  Additional Representations and Warranties. 
In addition, I represent and warrant:

 

(i)                                     That I have had the opportunity to ask
questions of, and receive answers from, the Issuer (or any person acting on its
behalf) concerning the Issuer and my proposed investment in the Securities;

 

(ii)                                  That I have concluded that I have
sufficient information upon which to base my decision to acquire the Securities;

 

(iii)                               That I have made my own determination of the
value of the Securities and have not relied upon any statements, representations
or warranties of the Issuer regarding the value of the Securities or the
business prospects of the Issuer;

 

(iv)                              That I understand that in acquiring the
Securities, I am making a highly speculative investment with the knowledge that
the Issuer is in the initial stages of development;

 

(v)                                 That I am capable of bearing the economic
risk and burdens of the investment, the possibility of complete loss of all of
the investment, and the possible inability to readily liquidate the investment
due to the lack of public market; and

 

(vi)                              That I understand that, in selling and
transferring the Securities, the Issuer had relied upon an exemption from the
registration requirements of the Securities Act and that, in an attempt to
effect compliance with all the conditions of such exemption, the Issuer is
relying in good faith upon all of my foregoing representations and warranties.

 

 

 

SIGNATURE OF PURCHASER

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C-2

--------------------------------------------------------------------------------