**Exhibit 10.5**

 

**AMENDMENTNO. 2 TOASSET PURCHASE AGREEMENT**

 

ThisAMENDMENT NO. 2 TO ASSET PURCHASEAGREEMENT (this “Amendment”), dated as of October 16, 2003, is madeand entered into by and between INTERNATIONALINTEGRATED INCORPORATED, a British Virgin Islands company (“Purchaser”),HUTCHISON INTERNATIONAL, INC., aLouisiana corporation (“Seller”) and INTERNATIONAL INTEGRATED DEVELOPMENTCOMPANY, a Delaware corporation (“Servicer”).

 

**RECITALS**

 

WHEREAS Purchaser and Seller are parties to thatcertain Asset Purchase Agreement, dated April 19, 2002 (as amendedpursuant to Amendment No. 1 to Asset Purchase Agreement dated as of November 20,2002, the “Agreement”), pursuant to which, Purchaser agreed to purchase certainassets and assume certain liabilities of Seller.  Capitalized terms used in this Amendment butnot defined herein shall have the same meanings given to such terms in theAgreement.

 

WHEREAS pursuant to the Agreement, Purchaser agreed tomake certain payments to be applied to the Purchase Price, including WeeklyPayments in the amount of US$50,000 beginning on Thursday April 25, 2002and on each Thursday thereafter until the first to occur of the Closing,termination of the Agreement, or January 1, 2004.

 

WHEREAS Seller and Purchaser have agreed to amend thePurchase Price to provide for a single additional lump sum cash payment and astock payment, each to be paid in accordance with this Agreement.

 

WHEREAS Seller is continuing the process of obtainingclearance from the United States Food and Drug Administration (“FDA”) tomarket, sell and distribute saline filled mammary implants (“Products”) in theUnited States through its application for Pre-Market Approval (“Seller’s PMAApplication”).

 

WHEREAS Seller and Purchaser have agreed that Sellerwill engage Servicer to assist Seller in obtaining approval of Seller’s PMAApplication in accordance with the terms of this Amendment.

 

WHEREAS Seller and Purchaser have agreed to terminateall Weekly Payments and have agreed that Purchser shall be responsible forfunding and paying any related costs associated with obtaining approval of thePMA Application, which have been previously the Seller’s responsibility.

 

WHEREAS Purchaser and Seller desire to amend theAgreement as hereinafter provided.

 

NOW, THEREFORE, in consideration of the foregoing and of thecovenants and agreements contained herein, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree hereby as follows:

 

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1.               Deposits.  Selleracknowledges and agrees that, as of October 16, 2003, the sum total of theInitial Deposit, the Execution Deposit and all Weekly Deposits equals $3,800,000(the sum of all such payments are referred to herein as the “Payments to Date”).

 

2.               Amendment to the Purchase Price; ClosingDate; Payment.

 

2.1                                 The Purchase Price is hereby amended toequal the sum of (a) the Payments to Date, (b) $500,000 in cash (the “CashPayment”), and (c) the Equity Shares (as defined in Section 2.3below).  Payment of the Purchase Price,as amended hereby shall be, full and timely performance of Purchaser’sobligations under the Agreement.

 

2.2                                 The Closing Date shall be a date notlater than 30 calendar days following the date on which both of the followingevents shall have occurred:  (a) Seller’sPMA Application shall have received clearance from the FDA (the date of Seller’sreceipt of such approval in writing, the “FDA Approval Date”) and (b) Sellershall have received approval from United States Customs to import Products intothe United States (the date of Seller’s receipt of such approval in writing,the “Customs Approval Date”).

 

2.3                                 At the Closing Purchaser shall (a) payto Seller the Cash Payment and (b) deliver to Seller certificatesrepresenting the Equity Shares, duly issued in Seller’s name or in the name ofSeller’s nominee, with such legends thereon as shall be appropriate underapplicable securities law.  For purposesof this Amendment, “Equity Shares” shall mean that number of shares of commonstock of Purchaser equal to the quotient obtained by dividing (a) $2,500,000by (b) the arithmetic mean of the last sale price of Purchaser’s commonstock as reported on the OTC Bulletin Board (or the principal exchange orinterdealer quotation system on which Purchaser’s common stock is then traded)over the consecutive trading days commencing on (and including) the dayfollowing the FDA Approval Date and ending on (and including) the CustomsApproval Date.

 

3.               Transition Services.

 

3.1                                 Seller hereby retains Servicer as itssole and exclusive supplier of management services for the purpose ofconducting all operations and managing all assets of Seller other than thePrincipal Obligations (collectively, the “Operations”) until the Closing.  The Operations shall specifically include alloperations, asset administration, expenditures, and other actions in connectionwith the prosecution of Seller’s PMA Application.

 

3.2                                 Servicer agrees to provide such personnelthat, in addition to Seller’s personnel, are in Servicer’s judgment reasonablynecessary or appropriate to manage the Operations until the Closing.  Servicer shall otherwise be entitled toexercise its reasonable business judgment in managing the Operations and shallbe under no other obligation to Seller or its officers, directors orshareholders.

 

3.3                                 Seller agrees to cooperate, and shall useits best efforts to cause all of its employees, consultants and other agentsand representatives to cooperate, with Servicer in conducting the Operations.  In addition, Seller shall remain responsible,in cooperation with Servicer, for the timely and efficient conduct of the PrincipalObligations and agrees to use its reasonable best efforts to keep available theservices of its current officers, key employees and

 

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consultants and to preserve the currentrelationships of Seller with such of the customers, suppliers, regulators andother persons and entities with which Seller has significant business relationsas is reasonably necessary to preserve substantially intact its businessorganization.  As used herein, the “PrincipalObligations” shall be the obligations of Seller under the Agreement, as amendedby this Amendment, and all actions deemed necessary or appropriate by Servicerto be taken by Seller in the prosecution of Seller’s PMA Application, includingsigning and delivering documents and instruments, making presentations andeffecting other submissions to the FDA, United States Customs and otherregulatory agencies.  Except for anyconduct necessary to discharge the Principal Obligations and which are approvedby Servicer and liabilities incurred or obligations created by Servicer onSeller’s behalf after the date hereof and which will be funded by Purchaser,Seller shall not incur any liability or create any obligation from or after thedate hereof until after the Closing.

 

3.4                                 Purchaser, at no risk, cost or liabilityto Seller, agrees to provide such funding to Seller as Servicer shallreasonably require to manage the Operations, including the payment of amountsdue to Seller’s employees, including taxes and related benefits, andconsultants from and after the date hereof, other than sums due to any employeeor consultant of Seller pursuant to an agreement who have provided services toSeller prior to the date hereof and payable in connection with or related to thesuccessful approval of Seller’s PMA Application (the “Success Fees”).  To accommodate the funding required hereunderand Servicer’s administration of the payment of Seller’s operating liabilitiesand the expenses of the Operations, Seller shall on or before November 1,2003 establish a mutually acceptable operating bank account with appropriatesignatories designated by Servicer. Seller shall maintain, without alteration, such account until theClosing and thereafter for such time as is mutually agreed to accommodate thetransition of the business and operations of Seller to Purchaser.

 

4.               Indemnification.  Inconsideration for the change in this Purchase Price and the elimination of theobligation to make Weekly Deposits, the provisions of Sections 1.4 and 5.6 arehereby modified and amended as follows:

 

4.1                                 The indemnification provided in Section 1.4is hereby amended and restated in its entirety to provide as follows:

 

Exceptwith respect to the Assumed Liabilities and the liabilities disclosed toPurchaser in Schedule 4.1 to this Amendment (collectively, the “SellerIndemnified Liabilities”) and provided that a Closing occurs, Seller agrees toindemnify and hold harmless Purchaser, its subsidiaries and its shareholdersfrom and against any loss, liability or expense arising from or related to (i) theAssets which arise prior to the date hereof or (ii) the Success Fees.  The foregoing indemnity shall include but notbe limited to any loss, liability or expense arising from or related to claimsof creditors of Seller or any of its subsidiaries.  The amount of any indemnification duepursuant to this Section shall be calculated after taking into account theamount of all insurance, cash or other direct financial benefits paid to anyindemnified person (including any such benefits paid by third parties) andafter taking into

 

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accountthe United States federal, state and local and foreign national, provincial andlocal tax benefits or detriments to such indemnified person, calculatedassuming such indemnified person was a taxpayer subject to tax at the highestmarginal rate in effect when the payment is made, of the payments made inrespect of such loss, claim, demand, cost or expense giving rise to theindemnification and the payments, including indemnification payments made inrespect thereto.

 

4.2                                 Except with respect to the SellerIndemnified Liabilities and provided that a Closing occurs, Purchaser agrees toindemnify and hold harmless Seller, its subsidiaries and its shareholders fromand against any loss, liability or expense arising from or related to theAssets which arise prior to or after the date hereof.  The foregoing indemnity shall include but notbe limited to any loss, liability or expense arising from or related to claimsof creditors of Seller or Purchaser or any of its subsidiaries that are notSeller Indemnified Liabilities.  Theamount of any indemnification due pursuant to this Section shall becalculated after taking into account the amount of all insurance, cash or otherdirect financial benefits paid to any indemnified person (including any suchbenefits paid by third parties) and after taking into account the United Statesfederal, state and local and foreign national, provincial and local taxbenefits or detriments to such indemnified person, calculated assuming suchindemnified person was a taxpayer subject to tax at the highest marginal rate ineffect when the payment is made, of the payments made in respect of such loss,claim, demand, cost or expense giving rise to the indemnification and thepayments, including indemnification payments made in respect thereto.

 

4.3                                 Section 5.6(a)(1)(C) of theAgreement is hereby amended and restated in its entirety to provide as follows:

 

(C)                                except with respect to the SellerIndemnified Liabilities, the business, operations or assets of Seller prior tothe date of this Amendment or the actions or omissions of Seller’s directors,officers, shareholders, employees or agents prior to the Closing Date (otherthan such actions or omissions taken at the direction of Servicer);

 

4.4                                 Purchaser hereby covenants and agrees toindemnify, defend, protect and hold harmless Seller and its officers,directors, employees, shareholders, assigns, successors and affiliates(individually, an “Indemnified Party” and collectively, “Indemnified Parties”)from, against and in respect of:

 

(a)                                  all liabilities, losses, claims, damages,punitive damages, causes of action, lawsuits, administrative proceedings(including informal proceedings), investigations, audits, demands, assessments,adjustments, judgments, settlement payments, deficiencies, penalties, fines,interest (including interest from the date of such damages) and costs andexpenses (including reasonable attorneys’ fees and disbursements of every kind,nature and description) (collectively, “Damages”) suffered, sustained, incurredor paid by the Indemnified Parties in connection with, resulting from orarising out of, directly or indirectly:

 

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(1)                                  any breach of any representation orwarranty of Purchaser set forth in this Agreement (as amended) or any Schedule orcertificate delivered by or on behalf of Purchaser in connection herewith;

 

(2)                                  any nonfulfillment of any covenant oragreement by Purchaser under the Agreement (as amended);

 

(3)                                  except as provided in Section 5.6(a)(1)(C) ofthe Agreement (as amended), the Seller Indemnified Liabilities and the business,operations or assets of Seller prior to the Closing Date or the actions oromissions of Purchaser’s or Servicer’s directors, officers, shareholders,employees or agents prior to or after the date hereof; and

 

(4)                                  any and all Damages incident to any ofthe foregoing or to the enforcement of this Section 4.4.

 

4.5                                 Notwithstanding anything to the contraryin Section 4.4 above:

 

(a)                                  there shall be no liability forindemnification under Section 4.4 unless and until, the aggregate amountof Damages exceeds $10,000 upon which Purchaser shall be liable for all Damagesincluding the $10,000 (the “Indemnification Threshold”).

 

(b)                                 the indemnification obligations under Section 4.4,or under any certificate or writing furnished in connection herewith, shallterminate at the date that is the later of clause (1) or (2) of this Section 4.4(b):

 

(1)                                  the third anniversary of the ClosingDate; or

 

(2)                                  the final resolution of Claims (asdefined in Section 4.6 below) pending as of the date described in clause (1) ofthis Section 4.5(b) (such Claims referred to as “Pending Claims”).

 

4.6                                 All claims or demands for indemnificationunder Section 4.4 (“Claims”) shall be asserted and resolved as follows:

 

(a)                                  In the event that any Indemnified Party hasa Claim against any party obligated to provide indemnification pursuant to Section 4.4hereof (the “Indemnifying Party”) which does not involve a Claim being assertedagainst or sought to be collected by a third party, the Indemnified Party shallwith reasonable promptness notify Purchaser of such Claim, specifying thenature of such Claim and the amount or the estimated amount thereof to theextent then feasible (the “Claim Notice”). If Purchaser does not notify the Indemnified Party within 30 days afterthe date of delivery of the Claim Notice that Purchaser disputes such Claim,with a detailed statement of the basis of such position, the amount of suchClaim shall be conclusively deemed a liability of Purchaser hereunder.  In case an objection is made in writing inaccordance with this Section 4.6(a), the Indemnified Party shall respondin a written statement to the objection

 

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within30 days and, for 60 days thereafter, attempt in good faith to agree upon therights of the respective parties with respect to each of such Claims (and, ifthe parties should so agree, a memorandum setting forth such agreement shall beprepared and signed by both parties).

 

(b)                                 (1) In the event that any Claim forwhich Purchaser would be liable to an Indemnified Party hereunder is assertedagainst an Indemnified Party by a third party (a “Third-Party Claim”), theIndemnified Party shall deliver a Claim Notice to Purchaser.  Purchaser shall have 30 days from the date ofdelivery of the Claim Notice to notify the Indemnified Party (i) whetherthe Indemnifying Party disputes liability to the Indemnified Party hereunderwith respect to the Third-Party Claim, and, if so, the basis for such adispute, and (ii) if such party does not dispute liability, whether or notPurchaser desires, at the sole cost and expense of Purchaser, to defend againstthe Third-Party Claim, provided that the Indemnified Party is hereby authorized(but not obligated) to file any motion, answer or other pleading and to takeany other action which the Indemnified Party shall deem necessary orappropriate to protect the Indemnified Party’s interests.

 

(c)                                  In the event that Purchaser timelynotifies the Indemnified Party that Purchaser, as the Indemnifying Party, doesnot dispute Purchaser’s obligation to indemnify with respect to the Third-PartyClaim, Purchaser shall defend the Indemnified Party against such Third-PartyClaim by appropriate proceedings, provided that, unless the Indemnified Partyotherwise agrees in writing, Purchaser may not settle any Third-Party Claim (inwhole or in part) if such settlement does not include a complete andunconditional release of the Indemnified Party. Purchaser shall have the right to control all aspects of any litigation,including, but not limited to, the final consent with respect to any settlementdiscussions (in accordance with the previous sentence) as well as the selectionof counsel.  If the Indemnified Partydesires to participate in, but not control, any such defense or settlement theIndemnified Party may do so at its sole cost and expense. If Purchaser electsnot to defend the Indemnified Party against a Third-Party Claim, whether byfailure of such party to give the Indemnified Party timely notice as providedherein or otherwise, then the Indemnified Party, without waiving any rightsagainst such party, may settle or defend against such Third-Party Claim in theIndemnified Party’s sole discretion and the Indemnified Party shall be entitledto recover from Purchaser the amount of any settlement or judgment and, on anongoing basis, all indemnifiable costs and expenses of the Indemnified Partywith respect thereto, including interest from the date such costs and expenseswere incurred.

 

(d)                                 If at any time, in the reasonable opinionof the Indemnified Party, notice of which shall be given in writing to Purchaser,any Third-Party Claim seeks material prospective relief which could have anadverse effect on any Indemnified Party or Seller or any affiliate, theIndemnified Party shall have the right but not the obligation to control orassume (as the case may be) the defense of any such Third-Party Claim and theamount of any judgment or settlement and the reasonable costs and expenses ofdefense shall be included as part of the

 

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indemnificationobligations of Purchaser hereunder. If the Indemnified Party elects to exercisesuch right, Purchaser shall have the right to participate in, but not control,the defense of such Third-Party Claim at the sole cost and expense of Seller.

 

(e)                                  Nothing herein shall be deemed to preventthe Indemnified Party from making a Claim, and an Indemnified Party may make aClaim hereunder, for potential or contingent Damages provided the Claim Noticesets forth the specific basis for any such potential or contingent claim ordemand to the extent then feasible and the Indemnified Party has reasonablegrounds to believe that such Claim may be made.

 

(f)                                    Subject to the provisions of Section 4.5,the Indemnified Party’s failure to give reasonably prompt notice as required bythis Section 4.6 of any actual, threatened or possible claim or demandwhich may give rise to a right of indemnification hereunder shall not relieve Purchaserof any liability which Purchaser may have to the Indemnified Party unless andto the extent the failure to give such notice prejudiced Purchaser.

 

(g)                                 The amount of any indemnification due toan Indemnified Party pursuant to Section 4.4 shall be calculated aftertaking into account the amount of all insurance, cash or other direct financialbenefits payable to such Indemnified Party (including any such benefits payableto third parties) and after taking into account the United States federal,state and local and foreign national, provincial and local tax benefits ordetriments to the Indemnified Party, as the case may be, calculated assumingthe Indemnified Party were a taxpayer subject to tax at the highest marginalrate in effect when the payment is made, of the payments made in respect ofsuch loss, claim, demand, cost or expense giving rise to the indemnificationand the payments, including indemnification payments made in respect thereto. Selleror its affiliates shall, in addition to the obligations of Purchaser pursuantto Section 4.4, have a right to set off the amount of any indemnificationdue to an Indemnified Party pursuant to Section 4.4, as the case may be,against any payment to Purchaser or its affiliates from Seller or itsaffiliates under the Agreement (as amended) or otherwise, if and when suchpayment obligation ever comes due at any time in the future.

 

5.               Effect.  Exceptas and to the extent amended by this Amendment, the Agreement shall remain infull force and effect in accordance with its terms.

 

6.               Miscellaneous.

 

6.1                                 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of theparties hereto and their respective successors and assigns.  No party hereto may assign this Amendment or anyrights or obligations hereunder without the prior written consent of the otherparty; provided, however, that Purchaser and Servicer may assign theirrespective rights and obligations hereunder to an affiliate without the consentof Seller.

 

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6.2                                 Entire Agreement. This Amendment and the Agreement, as amended, sets forth the entireunderstanding of the parties hereto with respect to the transactionscontemplated hereby and thereby.

 

6.3                                 Amendment; Waiver. This Amendment shall not be amended or modified except by a writteninstrument duly executed by each of the parties hereto.  Any extension or waiver by any party of anyprovision hereto shall be valid only if set forth in an instrument in writingsigned on behalf of such party.

 

6.4                                 Counterparts. This Amendment may be executed in any number of counterparts and anyparty hereto may execute any such counterpart, including by electronicfacsimile, each of which when executed and delivered shall be deemed to be anoriginal, and all of which counterparts taken together shall constitute but oneand the same instrument.

 

6.5                                 Governing Law. This Amendment and the rights and obligations of the parties hereundershall be governed by and construed and interpreted in accordance with the lawsof the State of California, without regard to the conflict of laws principlesthereof.

 

6.6                                 Severability. If one or more provisions of this Amendment are held to be unenforceableunder applicable law, such provision shall be excluded from this Amendment andthe balance of the Amendment shall be interpreted as if such provision were soexcluded and shall be enforceable in accordance with its terms.

 

[Signature page follows]

 

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In WITNESS WHEREOF, the parties hereto have executed thisAmendment No. 2 to Asset Purchase Agreement as of the date first abovewritten.

 

 
| ** ** | **INTERNATIONAL INTEGRATED**                        |
|------------|-----------------------------------------------------|
|       | **INCORPORATED**, a British Virgin  Islands company |
|       |                                                |   |
|       |                                                |   |
|       | By:                                                 |   |   |
|       |                                                |   Name: Donald K. McGhan |
|       |                                                |   Title: Chairman |

 

 
| ** ** | **INTERNATIONAL INTEGRATED** |
|------------|------------------------------|
|       | **DEVELOPMENT COMPANY**, a   |
|       | Delaware corporation         |
|       |                         |   |
|       |                         |   |
|       | By:                          |   |   |
|       |                         |   Name: Donald K. McGhan |
|       |                         |   Title: Chairman |

 

 
| ** ** | **HUTCHISON INTERNATIONAL,  INC.,** |
|------------|-------------------------------------|
|       | a Louisiana corporation             |
|       |                                |   |
|       |                                |   |
|       | By:                                 |   |   |
|       |                                |   Name: John C. Hutchison |
|       |                                |   Title: President |

 

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