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