Document:

THIS
NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED
UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”)
SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS
NOTE.

 

WAKO
LOGISTICS GROUP, INC.

 

6%
Convertible Promissory Note

 

April
1, 2005

 

FOR
VALUE RECEIVED,
Wako
Logistics Group, Inc.,
a Delaware corporation (the “Company”)
with its principal executive office at 3606-8, 36/F, Citibank Tower, Citibank
Plaza, 3 Garden Road Central, Hong Kong, promises to pay to the order of
Christopher
Wood (the
“Holder”
or “Payee”)
or registered assigns the principal amount of One
Million Dollars ($1,000,000)
(the “Principal
Amount”)
on March 31, 2008 (the “Maturity
Date”),
subject to earlier conversion as more specifically described herein. The
Principal Amount is payable in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. 

 

This
convertible promissory note (the “Note”)
is being issued to the Holder, pursuant to the terms and conditions of a
Subscription Agreement of even date herewith (the “Subscription
Agreement”).
Notwithstanding any provision to the contrary contained herein or elsewhere,
this Note is subject and entitled to certain terms, conditions, covenants and
agreements contained in the Subscription Agreement including, without limitation
certain registration rights with respect to the shares of common stock, par
value $.001 per share (the “Common
Stock”),
issuable to the Holder upon the conversion of this Note, as provided in
Paragraph
3
hereafter. Any transferee of this Note, by its acceptance hereof, assumes the
obligations of the Payee in the Subscription Agreement with respect to the
conditions and procedures for transfer of this Note. Reference to the
Subscription Agreement shall in no way impair the absolute and unconditional
obligation of the Company to pay both the Principal Amount and interest thereon
as provided herein. 

 

Interest
on this Note shall accrue on the Principal Amount outstanding from time to time
at a rate per annum computed in accordance with Paragraph 2
hereof and shall be payable in accordance with Paragraph 2
hereof. All payments by the Company hereunder shall be applied first to pay any
interest which is due, but unpaid, then to reduce the Principal
Amount.

 

 

The
Company (i) waives presentment, demand, protest or notice of any kind in
connection with this Note and (ii) agrees, in the event of an Event of
Default (as defined below), to pay to the Payee, on demand, all costs and
expenses (including reasonable legal fees) incurred in connection with the
enforcement and collection of this Note.

 

1.  Prepayment.
This Note may be prepaid prior to the Maturity Date, in whole or in part,
without any premium or penalty. All such payments shall be applied first to
accrued interest and then to the outstanding Principal Amount.

 

2.  Computation
of Interest.

 

(a)  Interest
Rate.
Subject to Paragraph 2(b)
below, the outstanding Principal Amount shall bear interest at the rate of six
percent (6%) per annum compounded on a quarterly basis.

 

(b)  Maximum
Rate.
In the event that it is determined that, under the applicable laws relating to
usury applicable to the Company or the indebtedness evidenced by this Note
(“Applicable
Usury Laws”),
the interest charges and fees payable by the Company in connection herewith or
in connection with any other document or instrument executed and delivered in
connection herewith (collectively, the “Effective
Interest Rate”)
cause the Effective Interest Rate applicable to the indebtedness evidenced by
this Note to exceed the maximum rate allowed by law (the “Maximum
Rate”),
then such interest shall be recalculated for the period in question and any
excess over the Maximum Rate paid with respect to such period shall be credited,
without further agreement or notice, to the Principal Amount outstanding
hereunder to reduce said balance by such amount with the same force and effect
as though the Company had specifically designated such extra sums to be so
applied to principal and the Payee had agreed to accept such extra payment(s) as
a premium-free prepayment. All such deemed prepayments shall be applied to the
principal balance payable at maturity. 

 

(c)  Payment
of Interest.
All accrued but unpaid interest on the Principal Amount shall be payable on the
Maturity Date; provided, however,
that in the event that the entire Principal Amount is converted into Common
Stock, pursuant to the provisions of Paragraph
3
hereafter, prior to the Maturity Date, then all interest accrued through the
date of the Final Conversion (as such term is defined in Paragraph
3)
shall be payable to the Holder upon such Final Conversion. All interest payable
under this Note shall be payable to the Holder in cash, Common Stock, or in both
cash and Common Stock, as elected, in writing, by the Holder. Interest payable
in Common Stock shall be based on the same value as determined for Conversion
(as such term is defined in Paragraph
3).

 

3.  Conversion.
At
any time prior to the Maturity Date, the Holder may, at his sole election,
convert all or a portion of the Principal Amount into shares of Common Stock, by
sending written notice to the Company, in the form of Exhibit 1 annexed hereto
(each a “Conversion”
and the conversion which results in the conversion of the entire outstanding
Principal Amount being referred to as the “Final
Conversion”).
Upon any Conversion of this Note, the Principal Amount to be converted shall be
converted into Common Stock at a price per share of Common Stock equal to the
lesser of (i) the Fair Market Value of the Common Stock (defined hereafter) and
(ii) $.50 per share. For the purposes of this Note, “Fair
Market Value”
shall mean, as of the date of the Company’s receipt of any such election notice:
(i) if shares of the Common Stock are listed on a national securities
exchange, the average of the closing prices as reported for composite
transactions during the three (3) consecutive trading days preceding the trading
day immediately prior to such date or, if no sale occurred on a trading day,
then the mean between the closing bid and asked prices on such exchange on such
trading day; (ii) if shares of the Common Stock are not so listed but are
traded on the Nasdaq SmallCap Market (“NSCM”),
the average of the closing prices as reported on the NSCM during the three (3)
consecutive trading days preceding the trading day immediately prior to such
date or, if no sale occurred on a trading day, then the mean between the highest
bid and lowest asked prices as of the close of business on such trading day, as
reported on the NSCM; or if applicable, the Nasdaq National Market
(“NNM”),
or if not then included for quotation on the NNM or NSCM, the average of the
highest reported bid and lowest reported asked prices as reported by the OTC
Bulletin Board or the National Quotations Bureau, as the case may be; or
(iii) if the shares of the Common Stock are not then publicly traded, the
fair market price of the Common Stock as determined in good faith by at least a
majority of the Board of Directors of the Company.

 

- 2
-

 

4.  Covenants
of Company.
The Company covenants and agrees that, so long as this Note shall be
outstanding, it will perform the obligations set forth in this Paragraph 4:

 

(a)  Taxes
and Levies.
The Company will promptly pay and discharge all material taxes, assessments, and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property including, before the same shall become
delinquent, as well as all claims for labor, materials and supplies which, if
unpaid, might become a lien or charge upon such properties or any part thereof;
provided,
however,
that the Company shall not be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company shall set
aside on its books adequate reserves in accordance with generally accepted
accounting principles (“GAAP”)
with respect to any such tax, assessment, charge, levy or claim so
contested;

 

(b)  Maintenance
of Existence.
The Company will do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its existence as a corporation, and
comply with all laws applicable to the Company, except where the failure to
comply would not have a material adverse effect on the Company;

 

(c)  Maintenance
of Property.
The Company will at all times maintain, preserve, protect and keep its property
used or useful in the conduct of its business in good repair, working order and
condition, and from time to time make all needful and proper repairs, renewals,
replacements and improvements thereto as shall be reasonably required in the
conduct of its business;

 

(d)   Insurance.
The Company will, to the extent necessary for the operation of its business,
keep adequately insured by financially sound reputable insurers, all property as
shall be reasonably required in the conduct of its business;

- 3
-

 

(e)  Books
and Records.
The Company will at all times keep true and correct books, records and accounts
reflecting all of its business affairs and transactions in accordance with GAAP.
Such books and records shall be open at reasonable times and upon reasonable
notice to the inspection of the Payee or its agents; 

 

(f)  Notice
of Certain Events.
The Company will give prompt written notice (with a description in reasonable
detail) to the Payee of:

 

(i)  the
occurrence of any Event of Default (defined hereafter) or any event which, with
the giving of notice or the lapse of time, would constitute an Event of Default;
and

 

(ii)  the
delivery of any notice to the Company effecting the acceleration of any
indebtedness of the Company in excess of $50,000; and

 

(iii)  
the occurrence of any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Payee in writing which
has been instituted against the Company or to which any of its properties,
assets or revenues is subject which, if adversely determined, would reasonably
be expected to have a material adverse effect on the Company; and

 

5.  Events
of Default.

 

(a)  The
term “Event
of Default”
shall mean any of the events set forth in this Section 5(a):

 

(i)  Non-Payment
of Obligations.
The Company shall default in the payment of the Principal Amount or accrued
interest on this Note as and when the same shall become due and payable, whether
by acceleration or otherwise.

 

(ii)  Non-Performance
of Covenants.
The Company shall default in the due observance or performance of any covenant
set forth in Paragraph 4,
which default shall continue uncured for five (5) business days.

 

(iii)  Bankruptcy,
Insolvency, etc.
The Company shall:

 

(A)  admit
in writing its inability to pay its debts as they become due;

 

(B)  apply
for, consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any of its property, or make
a general assignment for the benefit of creditors;

 

(C)  in
the absence of such application, consent or acquiesce in, permit or suffer to
exist the appointment of a trustee, receiver, sequestrator or other custodian
for the Company or for any part of its property;

 

- 4
-

 

(D)  permit
or suffer to exist the commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or insolvency law,
or any dissolution, winding up or liquidation proceeding, in respect of the
Company, and, if such case or proceeding is not commenced by the Company or
converted to a voluntary case, such case or proceeding shall be consented to or
acquiesced in by the Company or shall result in the entry of an order for
relief; or

 

(E)  take
any corporate or other action authorizing, or in furtherance of, any of the
foregoing.

 

(iv)  Termination
of Business; Dissolution.
The termination of the Company’s business and/or the dissolution of the Company.

 

(b)  Action
if Bankruptcy; or Termination of Business or Dissolution.
If any Event of Default described in clauses (iii)(A) through (E), or (iv)
of Paragraph 5(a)
shall occur, the outstanding Principal Amount, all accrued but unpaid interest
and all other obligations under this Note shall automatically be and become
immediately due and payable, without notice or demand.

 

(c)  Action
if Other Event of Default.
If any Event of Default (other than any Event of Default described in clause (b)
immediately preceding) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Payee may, upon notice to the Company,
declare all or any portion of the outstanding Principal Amount, together with
interest accrued on this Note, to be due and payable and any or all other
obligations hereunder to be due and payable, whereupon the full unpaid Principal
Amount hereof, such accrued interest and any and all other such obligations
which shall be so declared due and payable shall be and become immediately due
and payable, without further notice, demand, or presentment. 

 

6.  Amendments
and Waivers.

 

(a)  The
provisions of this Note may from time to time be amended, modified or waived, if
such amendment, modification or waiver is in writing and consented to in writing
by the Company and the Holder.

 

(b)  No
failure or delay on the part of the Payee in exercising any power or right under
this Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Company in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Payee shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.

 

- 5
-

 

(c)  To
the extent that the Company makes a payment or payments to the Payee, and such
payment or payments or any part thereof are subsequently for any reason
invalidated, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.

 

(d)  After
any waiver, amendment or supplement under this Paragraph 6
becomes effective, the Company shall mail to the Holder a copy
thereof.

 

7.  Miscellaneous.

 

(a)  Parties
in Interest.
All covenants, agreements and undertakings in this Note binding upon the Company
or the Payee shall bind and inure to the benefit of the successors and permitted
assigns of the Company and the Payee, respectively, whether so expressed or
not.

 

(b)  Governing
Law, Etc.
This Note shall be governed by and construed in accordance with the internal
laws of the State of New York without regard to the conflicts of laws principles
thereof. The parties hereto hereby agree that any suit or proceeding arising
directly and/or indirectly pursuant to or under this Note, shall be brought
solely in a federal or state court located in the City, County and State of New
York. By its execution hereof, the parties hereby covenant and irrevocably
submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect as
if personally served upon them in New York City. The parties hereto waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in
personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of its reasonable counsel fees and disbursements in an amount
judicially determined.

 

(c)  Waiver
of Jury Trial.
THE PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER
DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR
ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE PAYEE’S PURCHASING THIS NOTE.

- 6
-

 

IN
WITNESS WHEREOF,
this Note has been executed and delivered on the date specified above by the
duly authorized representative of the Company.

 

	 	 	 
	 	WAKO LOGISTICS
      GROUP, INC.
	 
 	 
 	 
 
		By:  	/s/ Christopher Wood
	 	
      

      Name: Christopher Wood
	 	Title: CEO

 

- 7
-

 

EXHIBIT
1 TO WAKO LOGISTICS GROUP, INC.

6%
CONVERTIBLE PROMISSORY NOTE

_________________,
200__

Wako
Logistics Group, Inc.

3606-8,
36/F, Citibank Tower

Citibank
Plaza, 3 Garden Road

Central,
Hong Kong

Re: Conversion
Election

Gentlemen:

In
connection with that certain 6% Convertible Promissory Note, dated April 1,
2005, in the principal amount of $1,000,000, issued by Wako Logistics Group,
Inc. (the “Note”),
I am hereby providing notice pursuant to the provisions of Paragraph 3 of the
Note, of my election to convert the principal amount into shares of the
Company’s common stock, par value $.001 per share (the “Common
Stock”),
as provided herein:

(Please
check next to the applicable statement)

 

______
 I
hereby elect to convert the entire remaining outstanding principal amount of the
Note into shares of Common Stock at the applicable conversion rate determined
under the provisions of the Note. Please pay all accrued interest to
me:

__________
In Cash  _________
By converting to Common Stock

______ I
hereby elect to convert $______________ of the outstanding principal amount of
the Note into shares of Common Stock at the applicable conversion rate
determined under the provisions of the Note.

Please
issue certificates for the shares of Common Stock, with applicable restrictive
legends, in the following name(s):

_____________________________________. 

 

	__________________    
      Date
	
      _________________________________

      Signature

      

      _________________________________

      Print
      Name

      

      _________________________________

      AddressKAY
O’NEILL (USA HOLDINGS) LIMITED

 

KAY
O’NEILL (USA) LLC

 

AND

 

WAKO
LOGISTICS GROUP, INC.

 

MEMBERSHIP
INTEREST PURCHASE AGREEMENT

 

As
of March 22, 2005

 

 

MEMBERSHIP
INTEREST PURCHASE AGREEMENT,
dated as of this 22nd day of March, 2005 (this “Agreement”),
among KAY O’NEILL (USA HOLDINGS) LIMITED, a corporation organized under the laws
of United Kingdom (the “Seller”),
KAY O’NEILL (USA) LLC, a limited liability company organized under the laws of
Illinois (the “Company”)
and WAKO LOGISTICS GROUP, INC., a corporation organized under the laws of
Delaware (the “Purchaser”).

 

W
I T N E S S E T H:

 

WHEREAS,
the Seller owns all of the outstanding equity interests (the “Membership
Interests”)
of the Company; and

 

WHEREAS,
the Seller desires to sell to the Purchaser, and the Purchaser desires to
purchase from the Seller, all of the Membership Interests of the Company owned
by the Seller, as more specifically described in this Agreement;
and

 

WHEREAS,
certain terms used in this Agreement are defined in Section 8.1
hereof.

 

NOW,
THEREFORE,
in consideration of the promises and mutual covenants and agreements hereinafter
contained, the parties hereto hereby agree as follows:

 

1.  Sale
and Purchase of Membership Interests.

 

Subject
to the terms and conditions of this Agreement, on the Closing Date (as defined
in Section 3.1
hereof), the Seller shall sell and deliver to the Purchaser, and the Purchaser
shall purchase from the Seller for the Purchase Price (as defined in
Section 2.1
hereof) an aggregate of all of the issued and outstanding Membership Interests
of the Company.

 

2.  Purchase
Price.

 

2.1  Purchase
Price.
The aggregate purchase price of the Membership Interests to be purchased
pursuant to Section 1
hereof shall be (a) One Million Dollars ($1,000,000) (the “Cash
Payment”);
and (b) the assumption by Purchaser of an outstanding intercompany debt, in the
aggregate amount of Six Hundred and Twenty Five Thousand Dollars ($625,000) that
is owed by Kay O’Neill Ltd., an Affiliate of Seller, to the Company (the
“Assumed
Debt”
and collectively, with the Cash Payment, the “Purchase
Price”).
The Cash Payment shall be payable as provided in Section 2.2
hereof.

 

2.2  Payment
of the Cash Payment.
At the Closing (as defined in Section 3.1
hereof), the Purchaser shall pay the Cash Payment by wire transfer of
immediately available funds to such account of the Seller as shall have been
designated in advance to the Purchaser by the Seller. In addition, Purchaser
shall enter into an instrument of assumption, in the form of Exhibit
A
annexed hereto, that provides for the assumption of the Assumed Debt (the
“Assumption
Instrument”).

 

 

3.  Closing.

 

3.1  Closing
Date.
The closing of the sale and purchase of the Membership Interests (the
“Closing”)
shall take place on or around April 1, 2005, or at such other time, date or
place as the parties hereto may mutually agree; provided, that all conditions to
the Closing set forth in this Agreement have been satisfied or waived by such
date. The date on which the Closing is held is referred to in this Agreement as
the “Closing
Date.”
At the Closing, (i) the Company shall deliver, or cause to be delivered,
certificates or other documentation representing the Membership Interests, and
(ii) the parties shall execute and deliver the documents referred to in
Section 6
hereof. The Closing shall be deemed effective as of the close of business on the
Closing Date.

 

4.  Representations
and Warranties of the Seller and the Company.

 

The
Seller and the Company hereby, jointly and severally, represent and warrant to
the Purchaser that:

 

4.1  Organization
and Good Standing; Capitalization.

 

(a)  The
Company is duly organized, validly existing and in good standing under the laws
of the state of Illinois and has the corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as now
conducted. The Company is duly qualified or authorized to do business as a
foreign limited liability company and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties or assets requires such qualification or authorization. The Company’s
Articles of Incorporation and Operating Agreement are attached to Schedule
4.1.

 

(b)  The
Seller is the owner of all of the Membership Interests of the Company, all of
which have been duly authorized, and are validly issued, fully paid and
non-assessable. The Company has no other securities issued and outstanding other
than the Membership Interests being purchased by the Purchaser. There is no
option, warrant, call, right, commitment or other agreement of any character to
which the Company is a party, (ii) there are no securities of the Company
outstanding which upon conversion or exchange would result in the issuance of
Membership Interests, and (iii) there are no appreciation rights, or other
similar rights based on securities of the Company which, in the case of
clauses (i), (ii) or (iii), would require the issuance, sale or
transfer of Membership Interests or any other securities of the Company, or
other securities convertible into, exchangeable for or evidencing the right to
subscribe for or purchase Membership Interests or other equity securities of the
Company. Neither the Seller nor the Company is a party to, nor is either of them
aware of, any voting trust or other voting agreement with respect to any of the
securities of the Company or of any agreement relating to the issuance, sale,
redemption, transfer or other disposition of the Membership Interests on other
securities of the Company.

 

4.2  Authorization
of Agreement; Enforceability.
The Seller and the Company each have all requisite corporate power and authority
to execute and deliver this Agreement and each other agreement, document,
instrument and certificate to be executed by the Seller and/or the Company in
connection with the consummation of the transactions contemplated by this
Agreement (collectively, the “Transaction
Documents”),
and to perform fully each of their obligations hereunder and thereunder. The
execution, delivery and performance by the Seller and the Company of this
Agreement and the Transaction Documents have been duly authorized by all
necessary corporate action on the part of the Seller, the Company and each of
their boards of directors, managers, stockholders and/or members, as applicable.
This Agreement and each of the Transaction Documents has been duly and validly
executed and delivered by the Seller and the Company and, assuming the due
authorization, execution and delivery thereof by the Purchaser, this Agreement
and each of the Transaction Documents constitutes the legal, valid and binding
obligations of the Seller and the Company, enforceable against each of them in
accordance with its respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).

 

2

 

4.3  Subsidiaries,
Joint Ventures, Partnerships, Etc. 

 

(a)  Schedule 4.3
hereof sets forth a true, complete and correct list of each corporation or other
entity in which the Company holds an interest of greater than fifty percent
(50%) (each such corporation or other entity is referred to herein as a
“Subsidiary”
and, collectively, the “Subsidiaries”)
as well as each entity in which the Company holds a minority interest. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation with corporate power and corporate
authority under such laws to own, lease and operate its properties and conduct
its business as currently conducted; and each Subsidiary is duly qualified to
transact business as a foreign entity and is in good standing (if applicable) in
each other jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification necessary. All
of the issued and outstanding equity interests of each Subsidiary which are
owned by the Company have been duly authorized and validly issued, and are fully
paid and non-assessable. The Company, directly or indirectly, owns the
percentage interests indicated on Schedule 4.3
next to each such Subsidiary, free and clear of any Liens, except as set forth
on Schedule 4.3.

 

(b)  Except
as set forth on Schedule 4.3,
the Company is not a party to any joint venture, partnership or similar
arrangement in which the Company or any of its Subsidiaries participates.

 

4.4  Consents
of Third Parties.
None of the execution and delivery by the Seller and the Company of this
Agreement and the Transaction Documents, the consummation of the transactions
contemplated hereby or thereby, or compliance by the Seller and the Company with
any of the provisions hereof or thereof will (a) conflict with, or result in the
breach of, any provision of the Certificate of Incorporation or Bylaws of the
Seller or the Articles of Organization and Operating Agreement of the Company,
(b) conflict with, violate, result in the breach or termination of, or
constitute a default or give rise to any right of termination or acceleration or
right to increase the obligations or otherwise modify the terms thereof under
any Permit or Order to which the Company is a party or any Contract to which the
Company or any of its Subsidiaries is bound or by which the Company or any of
its properties or assets is bound, (c) constitute a violation of any Law
applicable to the Company or (d) result in the creation of any Lien upon the
properties or assets of the Company. Except as set forth on Schedule 4.4
and other than those which have been obtained by the Company, no consent,
waiver, approval, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is required on the
part of the Seller or the Company in connection with the execution and delivery
of this Agreement or the Transaction Documents, or the compliance by the Seller
and the Company with any of the provisions hereof or thereof. Notwithstanding
the foregoing, the parties have agreed that the following consent will not be
obtained by the parties, and the failure to obtain such consent will not
constitute a breach of the representations and warranties of Seller, or result
in any liability to Seller: Industrial Lease by and between the Company and
Howard O’Hare Business Center, Inc. dated June 25, 2003(the “Excluded
Consent”).

 

3

 

4.5   No
Undisclosed Liabilities.
Except as set forth on Schedule 4.5,
neither the Company nor any of its Subsidiaries has any liabilities (whether
accrued, absolute, contingent or otherwise, and whether due or to become due or
asserted or unasserted), except (a) obligations under Contracts described
in Schedule 4.5,
(b) liabilities provided for in the Company’s financial statements through
December 31, 2004 (the “Financial
Statements”)
(other than liabilities which, in accordance with GAAP, need not be disclosed),
and (c) liabilities (other than accounts payable) incurred since December
31, 2004, in the ordinary course of business consistent with past practice, the
sum of which is, in the aggregate, not greater than $5,000.

 

4.6  Absence
of Certain Developments.
Except as set forth on Schedule 4.6
and since December 31, 2004:

 

(a)  there
has not been any Material Adverse Change nor has any event occurred which could
reasonably be expected to result in any Material Adverse Change; 

 

(b)  there
has not been any declaration, setting a record date, setting aside or
authorizing the payment of, any distribution in respect of the Membership
Interests of the Company or any securities of its Subsidiaries, or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries, of any of the outstanding securities of, or other ownership
interest in, the Company or any of its Subsidiaries;

 

(c)  there
has not been any transfer, issue, sale or other disposition by the Company of
any Membership Interests or other securities of the Company or any of its
Subsidiaries or any grant of options, warrants, calls or other rights to
purchase or otherwise acquire Membership Interests or such other
securities;

 

(d)  neither
the Company nor any of its Subsidiaries has (i) awarded or paid any bonuses
to Employees or Representatives of the Company, (ii) entered into any
employment, deferred compensation, severance or similar agreements (nor amended
any such agreement), (iii) agreed to increase the compensation payable or
to become payable by the Company or any of its Subsidiaries to any of the
Company’s Employees or Representatives, or (iv) agreed to increase the
coverage or benefits available under any severance pay, deferred compensation,
bonus or other incentive compensation, pension or other employee benefit plan,
payment or arrangement made to, for or with such Employees or Representatives,
other than in the ordinary course of business consistent with past practice
which increases in the aggregate do not exceed $25,000 in annual cost to the
Company or any of its Subsidiaries and consistent with the operating expense
budget of the Company or any of its Subsidiaries, and other than as may have
been required by law or insurers;

 

4

 

(e)  neither
the Company nor any of its Subsidiaries has made any loans, advances (other than
advances to officers and employees of the Company or its Subsidiaries which
advances are made in the ordinary course of business and do not exceed per
individual the reasonable anticipated expenses for legitimate business
purposes), or capital contributions to, or investments in, any Person or paid
any fees or expenses to any Affiliate of the Company other than a
Subsidiary;

 

(f)  neither
the Company nor any of its Subsidiaries has transferred or granted any rights
under any Contracts, leases, licenses, agreements or Intellectual Property
(defined hereafter) used by the Company in its business;

 

(g)  there
has not been any damage, destruction or loss, whether or not covered by
insurance, with respect to the property or assets of the Company or any of its
Subsidiaries having a replacement cost of more than $5,000 for any single loss
or $10,000 for all such losses;

 

(h)  neither
the Company nor any of its Subsidiaries has mortgaged, pledged or subjected to
any Lien any of its assets, or acquired any assets for a purchase price in
excess of $10,000 in the aggregate or sold, assigned, transferred, conveyed,
leased or otherwise disposed of any assets of the Company or any of its
Subsidiaries for a sale price in excess of $10,000 in the aggregate except for
assets acquired or sold, assigned, transferred, conveyed, leased or otherwise
disposed of in the ordinary course of business;

 

(i)  neither
the Company nor any of its Subsidiaries has canceled or compromised any debt or
claim, or amended, canceled, terminated, relinquished, waived or released any
Contract or right, except in the ordinary course of business consistent with
past practice and which, individually or in the aggregate, would not be material
to the Company or any of its Subsidiaries;

 

(j)  neither
the Company nor any of its Subsidiaries has made any binding commitment to make
any capital expenditures or capital additions or betterments in excess of
$10,000 individually or $25,000 in the aggregate;

 

(k)  neither
the Company nor any of its Subsidiaries has incurred any debts, obligations or
liabilities, whether due or to become due, except current liabilities incurred
in the ordinary course of business, none of which current liabilities
(individually or in the aggregate) could result in a Material Adverse
Change;

 

(l)  neither
the Company nor any of its Subsidiaries has entered into any transaction other
than in the ordinary course of business except for (in the case of the Company)
this Agreement;

 

(m)  neither
the Company nor any of its Subsidiaries has encountered any labor difficulties
or labor union organizing activities;

 

5

 

(n)  neither
the Company nor any of its Subsidiaries has made any change in the accounting
principles, methods or practices followed by it or depreciation or amortization
policies or rates theretofore adopted;

 

(o)  neither
the Company nor any of its Subsidiaries has disclosed to any Person any material
trade secrets except for disclosures made to Persons subject to valid and
enforceable confidentiality agreements;

 

(p)  neither
the Company nor any of its Subsidiaries has suffered or experienced any material
change in the relationship or course of dealings between the Company and/or any
of its Subsidiaries and any of their suppliers or customers which supply goods
or services to the Company or any of its Subsidiaries or purchase goods or
services from the Company and or any of its Subsidiaries; and

 

(q)  neither
the Company nor any of its Subsidiaries has made any payment to, or received any
payment from, or made or received any investment in, or entered into any
transaction or series of related transactions (including without
limitation, the purchase, sale, exchange or lease of assets, property or
services, or the making of a loan or guarantee) with any Affiliate in each case,
in excess of $10,000 or its equivalent (other than any transactions between or
among the Company and any of its Subsidiaries) (each, an “Affiliate
Transaction”).

 

4.7  Taxes.
Except as set forth on Schedule
4.7, the
Company and each of its Subsidiaries has filed all Tax returns (including
statements of estimated Taxes owed) and reports required to be filed within the
applicable periods (subject to extensions) for such filings and has paid all
Taxes required to be paid. Such Tax returns and reports are true and correct in
all material respects. No deficiencies for any Tax are currently assessed
against the Company or any Subsidiary, and, no Tax returns of the Company or any
Subsidiary have ever been audited by a Governmental Body, and, to the knowledge
of the Seller and the Company, there is no such audit pending or contemplated.
There is no Tax Lien, whether imposed by any federal, state or local taxing
authority, outstanding against the assets, properties or business of the Company
or any of its Subsidiaries other than Liens for Taxes which are not yet due.
Neither the Company nor any of its Subsidiaries has executed any waiver of the
statute of limitations on the assessment or collection of any Tax or
governmental charge. The Company and its Subsidiaries have properly charged,
collected and paid all applicable stamp, sales, use and other similar Taxes on
or before the Closing Date.

 

4.8  Real
Property.

 

(a)  Schedule 4.8
sets forth a complete list of all real property and interests in real property
leased by the Company or any of its Subsidiaries (each, a “Real
Property Lease,”
and collectively, the “Real
Property Leases”)
as lessee or lessor. The Company or the applicable Subsidiary has good, legal
and marketable title to the leasehold estates in all Real Property Leases in
each case free and clear of all Liens. Neither the Company nor any Subsidiary
has any reason to believe that such title would not be insurable subject to
customary exceptions.

 

6

 

(b)  Each
of the Real Property Leases is valid and enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Real Property Lease by the Company or the applicable
Subsidiary or, to the knowledge of the Seller and the Company, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder.

 

(c)  No
previous or current party to any Real Property Lease has given notice of or made
a claim with respect to any breach or default thereunder. With respect to those
Real Property Leases that were assigned or subleased to the Company or a
Subsidiary by a third party, all necessary consents to such assignments or
subleases have been obtained.

 

4.9  Tangible
Personal Property; Assets.
Except as set forth on Schedule 4.9,
each of the Company and its Subsidiaries has good, legal and marketable title to
or valid leasehold interests in, all of its personal property and assets. The
personal property owned by the Company or its Subsidiaries are held in each case
free and clear of all Liens, other than Permitted Liens. With respect to the
personal property and assets that the Company or any Subsidiary leases, the
lessee thereunder is in compliance with such leases except for such
noncompliance as would not have a Material Adverse Effect and the lessee holds a
valid leasehold interest free and clear of any Liens, other than Permitted
Liens. All material items of personal property and assets owned or leased by the
Company and its Subsidiaries are in good operating condition, normal wear and
tear excepted.

 

4.10  Intellectual
Property.
Except as set forth in the on Schedule 4.10,
each of the Company and its Subsidiaries owns or possesses adequate licenses or
other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, software, formulae, trade secrets and know how
(collectively, the “Intellectual
Property”)
necessary to the conduct of its business as conducted. Schedule 4.10
sets forth a correct and complete list of all of the registered Intellectual
Property of the Company and its Subsidiaries. No claim is pending or, to the
knowledge of the Company, threatened to the effect that the operations of the
Company or any Subsidiary infringe upon or conflict with the asserted rights of
any other Person under any Intellectual Property, and the Company does not know
of any basis for any such claim (whether or not pending or threatened). No claim
is pending or, to the knowledge of the Seller or the Company, threatened to the
effect that any such Intellectual Property owned or licensed by the Company or
any Subsidiary, or which the Company or a Subsidiary otherwise has the right to
use, is invalid or unenforceable by the Company or the applicable Subsidiary,
and the Company does not know of any basis for any such claim (whether or not
pending or threatened). Neither the Company nor any Subsidiary has granted or
assigned to any other Person any right to provide the services or proposed
services of the Company and its Subsidiaries.

 

4.11  Technology.
Except as set forth on Schedule 4.11
and other than off-the-shelf or shrinkwrap software, the proprietary technology
and other proprietary know-how owned or used or necessary to the conduct of its
business by the Company and its Subsidiaries were completely developed by the
Company’s full-time Employees only; the concepts, inventions and original works
of authorship owned or used by the Company or its Subsidiaries were developed or
conceived by Employees within the scope of their employment by the Company (or
the applicable Subsidiary) and are connected with the Company’s and its
Subsidiaries’ underlying products, processes and proprietary technology. Except
as set forth on Schedule 4.11,
no independent contractors or consultants were used or employed by the Company
or a Subsidiary in the development of the products, processes, proprietary
technology and other proprietary know-how owned or used by the Company and its
Subsidiaries.

 

7

 

4.12  Material
Contracts.

 

(a)  Except
as set forth on Schedule 4.12,
neither the Company, any Subsidiary nor any of their respective properties or
assets is a party to or bound by any (i) Contract not made in the ordinary
course of business, or involving a commitment or payment by the Company or any
Subsidiary in excess of $10,000 or, in the Seller’s or Company’s belief,
otherwise material to the business of the Company or any Subsidiary,
(ii) Contract among members or granting a right of first refusal or for a
partnership or a joint venture or for the acquisition, sale or lease of any
assets or share capital of the Company or any other Person or involving a
sharing of profits, (iii) mortgage, pledge, conditional sales contract,
security agreement, factoring agreement or other similar Contract with respect
to any real or tangible personal property of the Company or any Subsidiary,
(iv) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of Contract,
(v) Contract with any Governmental Body outside the ordinary course of
business, (vi) Contract with respect to the discharge, storage or removal
of hazardous materials or (vii) binding commitment or agreement to enter
into any of the foregoing. 

 

(b)  (i)Each
of the Contracts described on Schedule 4.12
is valid and enforceable against the Company or its Subsidiaries in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity), and there
is no default under any such Contract by the Company or any of its Subsidiaries
or, to the knowledge of the Seller or the Company, by any other party thereto,
which is likely to have a Material Adverse Effect, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default by the Company thereunder which is likely to have a Material Adverse
Effect.

 

(ii) No
previous or current party to any Contract has given written notice to the
Company, the Seller, or any Subsidiary, or made a claim with respect to any
breach or default thereunder and neither the Seller nor the Company has any
knowledge of any notice of or claim with respect to any such breach or
default.

 

(c)  With
respect to the Contracts described on Schedule 4.12
that were assigned to the Company or any Subsidiary by a third party, all
necessary consents to such assignment have been obtained.

 

4.13  Employee
Benefits.
Except as set forth on Schedule 4.13,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. The Company and its
Subsidiaries are in compliance in all material respects with all applicable Laws
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours.

 

8

 

4.14  Employees.

 

(a)  To
the knowledge of the Seller and the Company, no Key Executive Employee and no
group of Employees or independent contractors of the Company or any Subsidiary
has any plans to terminate his, her or its employment or relationship as an
Employee or independent contractor with the Company or such Subsidiary, except
for those Employees requested to resign by the Purchaser.

 

(b)  Schedule 4.14
sets forth a true and complete list of (i) each Employee of the Company or
any Subsidiary whose current annual compensation is $50,000 or more, together
with such person’s job title and amounts and forms of compensation and fringe
and severance benefits and (ii) each consultant, contractor or
subcontractor equivalent of the Company and its Subsidiaries whose annual
compensation by the Company or its Subsidiary is $50,000 or more, together with
such person’s amounts and forms of compensation.

 

(c)  To
the best of the Seller’s and the Company’s knowledge, no Key Executive Employee
or any other Employee of the Company or any Subsidiary is a party to or is
otherwise bound by any agreement or arrangement (including, without limitation,
confidentiality agreements, non-competition agreements, licenses, covenants, or
commitments of any nature), or subject to any judgment, decree, or Order of any
court or Governmental Body, (i) that would conflict with such Employee’s
obligation diligently to promote and further the interest of the Company or such
Subsidiary or (ii) that would conflict with the Company’s (or the
applicable Subsidiary’s) business as now conducted or as proposed to be
conducted.

 

(d)  Schedule 4.14
sets forth a list of each of the Key Executive Employees of the Company who have
entered into a confidentiality agreement with the Company, or any Subsidiary of
the Company. 

 

4.15  Litigation.
There are no Legal Proceedings pending or, to the knowledge of the Seller or the
Company, threatened that question the validity of this Agreement or any of the
Transaction Documents or any action taken or to be taken by the Company in
connection with the consummation of the transactions contemplated hereby or
thereby. Except as set forth on Schedule 4.15,
there are no Legal Proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company, any of its Subsidiaries or any of
their respective properties or assets, and there is no reasonable basis for any
such Legal Proceeding. There is no outstanding or, to the knowledge of the
Seller or the Company, threatened Order of any Governmental Body against, in
respect of or naming the Company or any of its Subsidiaries or in respect of any
of their respective properties or assets or against the Company or its
Subsidiaries.

 

9

 

4.16  Compliance
with Laws; Permits.

 

(a)  The
Company and each Subsidiary is and at all times has been in compliance in all
material respects with all material Laws and material Orders promulgated by any
Governmental Body applicable to the Company or such Subsidiary, or to the
conduct of the business or operations of the Company or such Subsidiary, or the
use of any of their respective properties (including any leased properties) and
assets. Neither the Company nor any Subsidiary has received any notices of
violation or alleged violation of any such Law or Order by any Governmental
Body.

 

(b)  The
Company and each Subsidiary has all Permits necessary for the conduct of its
business where the failure to have such Permits could have a Material Adverse
Effect. The Company and each Subsidiary has complied in all material respects
with all conditions of such Permits applicable to it; no default or violation,
or event that with the lapse of time or giving of notice or both would become a
default or violation which could have a Material Adverse Effect, has occurred in
the due observance of any such Permit; all such Permits are in full force and
effect without further consent or approval of any Person; and none of the
Seller, the Company or any Subsidiary has received any notice from any source to
the effect that there is lacking any such material Permit required in connection
with the current operations of the Company or such Subsidiary.

 

4.17  Environmental
and Safety Laws.
Neither the Company nor any Subsidiary is in violation of any applicable Laws
relating to the environment or occupational health and safety where the failure
to so comply could have a Material Adverse Effect and no material expenditures
are or will be required in order to comply with any such existing
Laws.

 

4.18  Investment
Company Act.
The Company is not, nor is it directly or indirectly controlled by or acting on
behalf of, any Person that is an investment company within the meaning of the
Investment Company Act of 1940, as amended.

 

4.19  Affiliate
Transactions.
Schedule 4.19
sets forth each Affiliate Transaction of the Company and its Subsidiaries,
including the parties, material terms (including amounts due from the Company
(or a Subsidiary) or owed to the Company (or a Subsidiary)), restrictions and
obligations of the Company and its Subsidiaries in connection with each such
Affiliate Transaction. Each such Affiliate Transaction is on an arm’s-length
basis and on terms no less favorable to the Company or a Subsidiary than could
be obtained from non-related parties. 

 

4.20  Insurance.
There is in full force and effect one or more policies of insurance issued by
insurers of recognized responsibility, insuring the Company, its Subsidiaries
and their respective properties, business and projects against such losses and
risks, and in such amounts, as are customary in the case of businesses of
established reputation engaged in the same or similar business and similarly
situated. Neither the Company nor any Subsidiary has been refused any insurance
coverage sought or applied for, and the Company has no reason to believe that
the Company and its Subsidiaries will be unable to renew its existing insurance
coverage as and when the same shall expire upon terms at least as favorable as
those presently in effect, other than possible increases in premiums that do not
result from any act or omission of the Company or the applicable Subsidiary.
There are no claims currently pending by the Company or any Subsidiary under any
insurance policy. Except as disclosed on Schedule 4.20,
neither the Company nor any Subsidiary is in default in any material respect
with respect to any provision contained in any insurance policy maintained by
the Company or any of its Subsidiaries, and neither the Company nor any
Subsidiary has failed to give any notice or present any presently existing
claims under any insurance policy in due and timely fashion.

 

10

 

4.21  Customers
and Suppliers.
Schedule 4.21
sets forth a list of the ten (10) largest customers and the ten (10) largest
suppliers of the Company and its Subsidiaries and the dollar amount of gross
profit of sales for each such customer and total billing of purchases for each
such supplier for the seven (7) month period ended October 31, 2004. There
exists no actual or, to the knowledge of the Company, threatened termination or
cancellation of the business conducted by the Company or any Subsidiary with any
customer, supplier or group of customers or group of suppliers set forth on
Schedule 4.21.

 

4.22  Financial
Advisors.
Except as set forth in Schedule 4.22,
no agent, broker, investment banker, finder, financial advisor or other Person
is or will be entitled to any broker’s or finder’s fee or any other commission
or similar fee from the Seller or the Company, directly or indirectly, in
connection with the transactions contemplated by this Agreement or any
Transaction Document and no Person is entitled to any fee or commission or like
payment from the Seller or the Company in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of the Seller or
the Company.

 

4.23  Condition
of Properties.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair (reasonable wear and tear excepted), are reasonably fit and
usable for the purposes for which they are being used, are adequate and
sufficient for the Company and its Subsidiaries’ respective businesses and
conform in all material respects with all applicable Laws.

 

4.24  Pending
Changes.
To the knowledge of the Seller and the Company, there is no pending or
threatened change in any Law which materially affects or could materially affect
the Company or the business, assets, liabilities, prospects, properties, results
of operations or condition (financial or otherwise) of the Company or its
Subsidiaries.

 

4.25  Securities
Laws.
The Company has complied with all applicable U.S. federal and state securities
laws in connection with all offers, issuances and sales of its securities prior
to the date hereof including, without limitation, the Membership Interests
purchased by the Purchaser. Except for those securities that have been properly
registered under the Securities Act and all applicable state securities laws,
neither the Company nor any Person acting on its behalf has offered any of the
Company’s securities to any Person by means of general or public solicitation or
general or public advertising, such as by newspaper or magazine advertisements,
by broadcast media, or at any seminar or meeting whose attendees were solicited
by such means. 

 

4.26  Registration
Rights.
Except as set forth on Schedule
4.26,
and the rights granted under the Transaction Documents, no Person has demand or
other rights to cause the Company to file any registration statement under the
Securities Act relating to any securities of the Company or any right to
participate in any such registration statement.

 

11

 

4.27   Environmental.
As used in this Agreement, the term “Hazardous
Materials”
shall mean any waste material which is regulated by any state or local
governmental authority in the states in which the Company conducts business, or
the United States Government, including, but not limited to, any material or
substance which is (i) defined as “hazardous waste,” “hazardous material,”
“hazardous substance,” “extremely hazardous waste” or “restricted hazardous
waste” under any provision of Illinois law, (ii) petroleum,
(iii) asbestos, (iv) designated as a “hazardous substance” pursuant to
Section 311 of the Clean Water Act, 33 U.S.C. 1251 et seq.
(33 U.S.C. 1321) or listed pursuant to Section 307 of the Clean Water Act
(33 U.S.C. 1317), (v) defined as a “hazardous waste” pursuant to
Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. 6901
et seq.
(42 U.S.C. 6901), or (vi) defined as a “hazardous substance” pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. 9601 et seq.
(42 U.S.C. 9601). The current operations of the Company and its current and, to
the best of its knowledge, its past use comply and then complied in all material
respects with all applicable laws and governmental regulations including all
applicable federal, state and local laws, ordinances, and regulations pertaining
to air and water quality, Hazardous Materials, waste, disposal or other
environmental matters, including the Clean Water Act, the Clean Air Act, the
Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Resource
Conservation Recovery Act, and the statutes, rules and regulations and
ordinances or the state, city and country in which the Company’s property is
located.

 

4.28  Books
and Records.
The books of account, ledgers, order books, records and documents of the Company
and its Subsidiaries accurately and completely reflect all material information
relating to the business of the Company or the applicable Subsidiary, the
location and collection of its assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of the Company or the applicable
Subsidiary.

 

4.29  Disclosure;
Survival.
All representations and warranties set forth in this Agreement or in any of the
Transaction Documents or in any writing or certificate delivered in connection
with this Agreement shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby for a period of two
years, unless otherwise specifically provided in this Agreement (the
“Survival
Period”),
and shall not be affected by any examination made for or on behalf of the
Purchaser, the knowledge of the Purchaser, or the acceptance by the Purchaser of
any certificate or opinion. Notwithstanding anything to the contrary contained
herein, the representations and warranties of the Seller and the Company in this
Agreement, relating to Taxes, shall survive the execution and delivery of this
Agreement for the applicable statute of limitation periods.

 

5.  Representations
and Warranties of the Purchaser.

 

The
Purchaser hereby represents and warrants to the Seller that:

 

5.1   Organization
and Good Standing.
The Purchaser is duly organized, validly existing and in good standing under the
laws of the state of Delaware and has the corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
conducted. 

 

12

 

5.2  Capacity;
Authorization.
The Purchaser has all legal capacity to enter into this Agreement and to carry
out its obligations hereunder. Assuming due execution and delivery by the Seller
and the Company of this Agreement, this Agreement will constitute a legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).

 

5.3  Financial
Advisors.
Except as set forth in Schedule 5.3,
no agent, broker, investment banker, finder, financial advisor or other Person
is or will be entitled to any broker’s or finder’s fee or any other commission
or similar fee from the Purchaser, directly or indirectly, in connection with
the transactions contemplated by this Agreement or any Transaction Document and
no Person is entitled to any fee or commission or like payment from the
Purchaser in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Purchaser.

 

5.4  Investment
Intent.
Purchaser is aware that the Membership Interests are not registered under the
Securities Act or under the Laws of any state. Purchaser is acquiring the
Membership Interests for its own account and not with a view to their
distribution within the meaning of the Securities Act.

 

5.5  Available
Funds.
Purchaser has readily available to it committed funds sufficient to allow it to
consummate
the transactions contemplated by
this Agreement on a timely basis.

 

6.  Conditions
to Closing.

 

6.1  Conditions
of Obligations of the Purchaser.
The obligation of the Purchaser to purchase and pay for the Membership Interests
is subject to the fulfillment prior to or on the Closing Date of the following
conditions, any of which may be waived in whole or in part by the
Purchaser:

 

(a)  Representations,
Warranties and Covenants.
The representations and warranties of the Seller and the Company under this
Agreement shall be deemed to have been made again on the Closing Date (other
than those representations and warranties made expressly as of a date prior to
the Closing Date) and shall then be true and correct in all material
respects.

 

(b)  Compliance
with Agreement.
The Seller and the Company each shall have performed and complied with, in all
material respects, all covenants, agreements and conditions required by this
Agreement to be performed or complied with by each of them on or before the
Closing Date.

 

(c)  Minimum
Net Assets.
On the Closing Date, the Seller’s Secretary shall certify, in writing, to the
Purchaser that on the Closing Date the Company’s Net Assets are equal to or
exceed $400,000.

 

13

 

(d)  Resignation
of Employees.
Those Employees identified on Schedule
6.1(d) shall
have resigned as employees and from all management positions held with the
Company and/or any of its Subsidiaries on or before the Closing
Date.

 

(e)  Approvals.
Except for the Excluded Consent, the Seller and the Company shall have obtained
any and all consents, waivers, approvals or authorizations, with or by any
Governmental Body or any other Person required for the valid execution of this
Agreement and the transactions contemplated hereby.

 

(f)  No
Injunction.
No Governmental Body or any other Person shall have issued an Order which shall
then be in effect restraining or prohibiting the completion of the transactions
contemplated hereby, nor shall any such Order be threatened or
pending.

 

(g)  No
Material Adverse Change.
Since December 31, 2004, there shall not have been a Material Adverse
Change.

 

(h)  Agency
Agreement.
The Seller shall execute and deliver to the Purchaser an exclusive agency
agreement, in the form of Exhibit
B
annexed hereto (the “Agency
Agreement”),
pursuant to which the Purchaser will be appointed as the exclusive agent, on
behalf of the Seller, with respect to all of the Seller’s logistics business in
the United States and Canada.

 

(i)  License
and Joint Marketing Agreement.
The Seller shall execute and deliver to the Purchaser a License and Joint
Marketing Agreement, in the form of Exhibit
C
annexed hereto (the “License
and Joint Marketing Agreement”),
which shall provide, during the period commencing on the Closing Date and for a
period of five (5) years thereafter, for (i) the license by the Seller to the
Purchaser of the right to use the Seller’s trademarks, logos and domain names
set forth on Schedule
6.1(i),
royalty free, (ii) the inclusion of all information relating to the Purchaser
and the Company in all marketing materials of the Seller and (iii) Purchaser’s
right to purchase all of such marketing materials at Seller’s cost.

 

(j)  Employment
Agreement.
Stewart Brown, the Executive Vice President of the Company shall enter into an
Employment Agreement with the Purchaser, in the form of Exhibit
D
annexed hereto.

 

(k)  Certificate
of Officer.
The Seller shall have delivered to the Purchaser a certificate dated the Closing
Date, executed by its President, in the form of Exhibit
E
annexed hereto, certifying the satisfaction of the conditions specified in
paragraphs
(a) through (g) of
this Section 6.1.

 

(l)  Supporting
Documents.
The Purchaser shall have received the following:

 

(i)  Copies
of resolutions of the Board and the stockholders of the Seller, if required,
authorizing and approving this Agreement and the Transaction Documents and the
sale of the Membership Interests, and all other documents and instruments to be
delivered pursuant hereto and thereto;

 

14

 

(ii)  Copies
of resolutions of the managers and the members of the Company, if required,
authorizing and approving this Agreement and the Transaction Documents, and all
other documents and instruments to be delivered pursuant hereto and
thereto;

 

(iii)  A
certificate executed by the Secretary of the Seller, in the form of Exhibit
F
annexed hereto, certifying (A) the names, titles and signatures of the officers
authorized to execute this Agreement and the Transaction Documents, on behalf of
the Seller; (B) the resolutions described in subparagraph (i) above; (C) the
Certificate of Incorporation and By-Laws of the Seller; and (D) the
certification required pursuant to the provisions of Section 6.01(c) hereof;
and

 

(iv)  A
certificate executed by the Secretary of the Company, in the form of
Exhibit
G
annexed hereto, (A) the names, titles and signatures of the officers authorized
to execute this Agreement and the Transaction Documents, on behalf of the
Company; (B) the resolutions described in subparagraph (ii) above; and (C) the
Articles of Organization and Operating Agreement of the Company.

 

6.2  Conditions
of Seller’s Obligations.
The Seller’s obligation to sell the Membership Interests to the Purchaser on the
Closing Date is subject to the fulfillment prior to or on the Closing Date of
the following conditions, any of which may be waived in whole or in part by the
Seller:

 

(a)  Representations
and Warranties.
The representations and warranties of the Purchaser under this Agreement shall
be deemed to have been made again on the Closing Date and shall then be true and
correct in all material respects.

 

(b)  Compliance
with Agreement.
The Purchaser shall have performed and complied with, in all material respects,
all agreements and conditions required by this Agreement to be performed or
complied with by the Purchaser on or before the Closing.

 

(c)  Approvals.
The Purchaser shall have obtained any and all consents, waivers, approvals,
Permits or authorizations, with or by any Governmental Body or any other Person
required for the valid execution of this Agreement and the transactions
contemplated hereby.

 

(d)  Payment
of Purchase Price.
The Purchaser shall have delivered the Cash Payment and the Assumption
Instrument specified in Section 2.1
hereof.

 

(e)  No
Injunction.
No Governmental Body or any other Person shall have issued an Order which shall
then be in effect restraining or prohibiting the completion of the transactions
contemplated hereby, nor shall any such Order be threatened or
pending.

 

(f)  Agency
Agreement.
The Purchaser shall execute and deliver to the Seller the Agency
Agreement.

 

(g)  Assignment
of Domain Name.
The Company shall execute and deliver to the Seller or its Affiliates an
assignment agreement pursuant to which the Company shall assign all of its
right, title and interest in and to the domain name “kayoneill.us” to the Seller
or one of its Affiliates. The Purchaser and the Company shall have the right to
use such domain name in accordance with the License and Joint Marketing
Agreement for a period of five (5) years after the Closing Date.

 

15

 

(h)  Certificate
of Officer.
The Purchaser shall have delivered to the Seller a certificate dated the Closing
Date, executed by its President, in the form of Exhibit
H
annexed hereto, certifying the satisfaction of the conditions specified in
paragraphs
(a) and (b)
of this Section
6.2.

 

(i)  Supporting
Documents.
The Seller shall have received the following:

 

(i)  Copies
of resolutions of the Board and the stockholders of the Purchaser, if required,
authorizing and approving this Agreement and the Transaction Documents and the
purchase of the Membership Interests, and all other documents and instruments to
be delivered pursuant hereto and thereto; and

 

(ii)  A
certificate executed by the Secretary of the Purchaser, in the form of
Exhibit
I
annexed hereto, certifying (A) the names, titles and signatures of the officers
authorized to execute this Agreement and the Transaction Documents, on behalf of
the Purchaser; (B) the resolutions described in subparagraph
(i)
above; and (iii) the Certificate of Incorporation and By-Laws of the Purchaser.

 

7.  Post-Closing
Covenants.

 

7.1   Costs
Relating to Termination of Computer Network.
Each of the Seller and the Purchaser shall be responsible for all of its own
costs incurred, after the Closing Date, in connection with the termination of
the computer network between the Seller and the Company.

 

7.2  Use
of Email Address.
The Purchaser may continue to use the email address kayoneill.com for company
e-mail addresses for a period of ninety (90) days after the Closing Date, and
after that date the Purchaser shall change its email address to
us.kayoneill.com, which it may continue to use for a period of five (5) years
after the Closing Date, at which time the Purchaser shall change its email
address unless otherwise agreed to by the Seller.

 

7.3  Intercompany
Balances.
The parties agree that the maximum amount of the Assumed Debt being assumed by
the Purchaser is Six Hundred Twenty-Five Thousand Dollars ($625,000). Any
amounts in addition to such Assumed Debt, whether incurred on or prior to the
Closing Date or incurred in the future by Kay O’Neill Ltd., or any of its
Affiliates, to the Company, shall be paid to the Company within sixty (60) days
after the incurrence of such amounts.

 

7.4  Compliance
with Seller’s Corporate Guidelines.
Purchaser and the Company covenant and agree that following the Closing, any use
of the Seller’s or its Affiliate’s trademarks and logos including, without
limitation, the name “Kay O’Neill” or any derivation thereof, will conform to
the published corporate guidelines (the current version of which is attached as
Exhibit
J
to this Agreement), as amended from time to time (provided that any such
amendments are given to the Purchaser and/or the Company, in writing, not less
than thirty (30) days prior to the date that any such amendment shall take
effect), for their use in terms of content, style and usage, except to the
extent such deviations from the corporate guidelines are specifically agreed in
advance by Seller’s Executive Chairman. Failure of the Purchaser or the Company
to cure any non-compliance within thirty (30) days of written notice of
non-compliance from Seller or its Affiliates shall give Seller the right to
terminate the Agency Agreement, and the License and Joint Marketing Agreement
immediately. 

 

16

 

8.  Indemnification;
Limitations on Remedies.

 

8.1  Indemnification
by Seller.
The Seller shall indemnify and hold the Purchaser and its officers, directors,
employees and agents harmless from and against any loss, damage or expense
(including reasonable attorneys’ fees) caused by or arising out of any claim
made against the Purchaser:

 

(a)  for
any breach, in any material respect, or default in the performance by the
Company or the Seller of any covenant or agreement of either of them contained
in this Agreement or in any of the Transaction Documents;

 

(b)  for
any breach, in any material respect, by the Company and/or the Seller of any of
the representations or warranties made by either of them in this Agreement, in
any of the Transaction Documents or in any schedule, certificate or other
instrument delivered by or on behalf of the Company and/or the Seller pursuant
hereto or thereto;

 

(c)  for
any broker’s or finder’s fee or any similar fee, charge or commission incurred
by the Company and/or the Seller prior to or in connection with this Agreement,
or any of the transactions contemplated hereby;

 

(d)  for
any and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal and accounting fees) incident to any of the
foregoing.

 

8.2  Indemnification
by Purchaser.
The Purchaser shall indemnify and hold the Seller and its officers, directors,
employees and agents harmless from and against any loss, damage or expense
(including reasonable attorneys’ fees) caused by or arising out of any claim
made against the Seller:

 

(a)  for
any breach, in any material respect, or default in the performance by the
Purchaser of any covenant or agreement of it contained in this Agreement or in
any of the Transaction Documents;

 

(b)  for
any breach, in any material respect, by the Purchaser of any of the
representations or warranties made by it in this Agreement, in any of the
Transaction Documents or in any schedule, certificate or other instrument
delivered by or on behalf of the Purchaser pursuant hereto or
thereto;

 

17

 

(c)  for
any broker’s or finder’s fee or any similar fee, charge or commission incurred
by the Purchaser prior to or in connection with this Agreement, or any of the
transactions contemplated hereby; and

 

(d)  for
any and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal and accounting fees) incident to any of the
foregoing.

 

8.3  Notice
and Opportunity to Defend.
Promptly after the receipt by the Seller or the Purchaser, as the case may be,
of notice of any action, proceeding, claim or potential claim (any of which is
hereinafter individually referred to as a “Claim”)
which could give rise to a right to indemnification under Section
8.1 or Section 8.2,
the party receiving such notice (an “Indemnified
Party”)
shall give prompt written notice to the party or parties who may become
obligated to provide indemnification hereunder (the “Indemnifying
Party”).
Such notice shall specify in reasonable detail the basis and amount, if
ascertainable, of any claim that would be based upon the Claim. The failure to
give such notice promptly shall relieve the Indemnifying Party of its
indemnification obligations under this Agreement, unless the Indemnified Party
establishes that the Indemnifying Party either had knowledge of the Claim or was
not prejudiced by the failure to give notice of the Claim. The Indemnifying
Party shall have the right, at its option, to compromise or defend the claim, at
its own expense and by its own counsel, and otherwise control any such matter
involving the asserted liability of the Indemnified Party, provided that any
such compromise or control shall be subject to obtaining the prior written
consent of the Indemnified Party which shall not be unreasonably withheld. If
any Indemnifying Party undertakes to compromise or defend any asserted
liability, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its counsel in the compromise of or defense against any such asserted
liability. All costs and expenses incurred in connection with such cooperation
shall be borne by the Indemnifying Party. In any event, the Indemnified Party
shall have the right at its own expense to participate in the defense of an
asserted liability. 

 

8.4  Limitation
on Remedies.

 

(a)  Neither
Seller nor Purchaser shall have
any liability for any of the indemnification obligations contained in this
Section
8
until the aggregate amount of all liabilities exceeds $30,000 (the “Threshold Amount”),
and then only for the amount by which such liabilities exceed the Threshold
Amount. Upon reaching the Threshold Amount, Seller or Purchaser, as the case may
be, will be liable to the other, as between them, for all liabilities that
result from its indemnification obligations hereunder in excess of the Threshold
Amount up to an aggregate amount of $1,500,000 (the “Maximum Amount”).
Under no circumstances will Seller or Purchaser be liable, with respect to the
indemnification obligation contained herein, or otherwise pursuant to the
provisions of this Agreement, for any amount in excess of the Maximum
Amount.

 

(b)  To
the extent that recovery from another Person is available to the Purchaser or
the Company, and the Purchaser seeks and obtains indemnification from the Seller
pursuant to the provisions of this Section
8,
then Purchaser agrees to assign to Seller, to the fullest extent allowable, its
rights and causes of action with respect to such claims against such other
Person.

 

18

 

(c)  
To the extent that recovery from another Person is available to the Seller, and
the Seller seeks and obtains indemnification from the Purchaser pursuant to the
provisions of this Section
8,
then Seller agrees to assign to Purchaser, to the fullest extent allowable, its
rights and causes of action with respect to such claims against such other
Person.

 

(d)  Neither
Purchaser nor Seller is entitled to any damages (i) on account of consequential,
incidental or indirect damages or losses including business interruption, loss
of profits, loss of use of facilities and loss of goodwill, and no “multiple of
profits” or other similar damage calculation methodology will be applied in
calculating any damage that may be claimed hereunder, or (ii) , with respect to
Purchaser’s right to damages, in respect of any claim to the extent that the
matter that is the subject of the claim is reflected on, accrued for or reserved
against in the Financial Statements of the Company. Additionally, neither Seller
nor Purchaser will have any liability with respect to any claim for
indemnification that relates to the passing of, or any change in, any Law or any
accounting policy, principle or practice after the Closing Date or any increase
in Tax rates in effect after the Closing Date, even if the change or increase
has retroactive effect or requires action at a future date

 

(e)  To
the extent that any breach of a representation, warranty or covenant made by
Seller or the Company, on the one hand, or Purchaser, on the other hand, is
capable of cure, Purchaser or Seller, as the case may be will, as a condition
precedent to asserting a claim concerning the breach, afford Seller or
Purchaser, as the case may be, a reasonable opportunity (which will not be less
than thirty (30) days) to cure the breach and will provide, and will cause its
Affiliates (including the Company) to provide, Seller or Purchaser, as the case
may be, all reasonable assistance (including access to buildings, offices,
records, files, properties and assets) in connection with such remedy or cure.
Purchaser will not be entitled to indemnification for any adverse consequences
caused by the operation of the Company following the Closing Date or caused by
acts or omissions by Purchaser or its Affiliates (including the Company)
following the Closing Date

 

(f)  Seller
will have no liability with respect to any claim that would not have arisen but
for any act of Purchaser or its Affiliates (including the disclosure to any
Person of facts giving rise to such claim or omission after Closing by Purchaser
or its Affiliates (including the Company)), other than any act or omission done
or arising pursuant to the provisions of this Agreement or required by
applicable Law

 

(g)  Purchaser
will have no liability with respect to any claim that would not have arisen but
for any act of Seller or its Affiliates (including the disclosure to any Person
of facts giving rise to such claim or omission after Closing by Seller or its
Affiliates), other than any act or omission done or arising pursuant to the
provisions of this Agreement or required by applicable Law.

 

(h)  In
the event that the Seller or the Purchaser (the “Indemnifying
Party”)
is obligated to indemnify the other (the “Indemnified
Party”)
with respect to any of the Indemnifying Party’s indemnification obligations
under this Section 8, and the Indemnified Party (including the Company) is
entitled to a Tax Benefit (defined hereafter) with respect to any of the amounts
payable by the Indemnified Party for which it is entitled to indemnification by
the Indemnifying Party, then any amounts payable to the Indemnified Party will
be net of any Tax Benefits to it. For purposes of this paragraph, “Tax Benefit”
will mean the present value of any refund, net operating loss, credit or
reduction in otherwise required Tax payments, including any interest payable
thereon, which present value will be computed as of the later of the Closing
Date or the first date on which the right to the refund, credit or other Tax
reduction arises or otherwise becomes available to be utilized (regardless of
the time that Indemnified Party actually utilizes the benefit), using (i) the
Tax rate applicable to the highest level of income with respect to such Tax
under applicable Law on such date, and (ii) the interest rate on such date
imposed on corporate deficiencies paid within thirty (30) days of the notice of
proposed deficiency under the Internal Revenue Code.

 

19

 

9.  Miscellaneous.

 

9.1  Certain
Definitions.

 

“Affiliate”
of any Person means any Person that directly or indirectly controls, or is under
control with, or is controlled by, such Person. As used in this definition,
“control” (including with its correlative meanings, “controlled by” and “under
control with”) shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). 

 

“Contract”
means any contract, agreement, indenture, note, bond, loan, instrument, lease,
conditional sales contract, mortgage, license, franchise, insurance policy,
commitment or other arrangement or agreement, whether written or
oral.

 

“Employee”
means any current employee, officer or director of the Company.

 

“GAAP”
means generally accepted accounting principles, as in effect in the United
States.

 

“Governmental
Body”
means any government or governmental or regulatory body thereof, or political
subdivision thereof, whether federal, state, local or foreign, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or
private).

 

“Law”
means any federal, state, local or foreign law (including law), statute, code,
ordinance, rule, regulation or other requirement or guideline.

 

“Legal
Proceeding”
means any judicial, administrative or arbitral actions, suits, proceedings
(public or private), claims or governmental proceedings.

 

“Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind, including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
similar laws) of any jurisdiction and including any lien or charge arising by
statute or other law.

 

20

 

“Material
Adverse Change”
means any material adverse change in the business, assets, liabilities,
prospects, properties, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, but will not
be deemed to include (a) any changes resulting from general economic, regulatory
or political conditions, (b) acts attributable to any omission or action by the
Purchaser or its Affiliates, or (c) circumstances that affect generally the
industries in which the Company operates.

 

“Material
Adverse Effect”
means any event, circumstance, condition, fact, effect, or other matter which
has had or could reasonably be expected to have a material adverse effect
(a) on the business, assets, liabilities, properties, results of operations
or condition (financial or otherwise) of the Company and its Subsidiaries taken
as a whole or (b) on the ability of the Company and such subsidiaries to
perform on a timely basis any material obligation under this Agreement or to
consummate the transactions contemplated hereby, but will not be deemed to
include (i) any effects resulting from general economic, regulatory or political
conditions, (ii) acts attributable to any omission or action by the Purchaser or
its Affiliates, or (iii) circumstances that affect generally the industries in
which the Company operates.

 

“Net
Assets”
means the assets of the Company less the liabilities of the Company as of the
Closing Date calculated in accordance with Exhibit
K
of this Agreement.

 

“Order”
means any order, injunction, judgment, decree, ruling, writ, assessment or
arbitration award.

 

“Permits”
means any approvals, authorizations, consents, licenses, permits or certificates
by or of any Governmental Body.

 

“Permitted
Liens”
shall mean (a) Liens for ad valorem real or personal property taxes or
assessments not yet due and payable or being contested in good faith
(b) Liens in respect of pledges or deposits under workers’ compensation
laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’,
and materialmen’s and similar liens, if the obligations secured by such Liens
are not then delinquent, (c) Liens arising or resulting from any action taken by
Purchaser or its Affiliates (d) easements, rights of way, restrictions and other
similar Liens, which cannot be released by Seller without unreasonable effort
and expense, and that do not materially interfere with the ordinary conduct of
operations, any (e) any other Liens set forth on Exhibit
L
annexed hereto.

 

“Person”
means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.

 

“Representatives”
of a Person means its officers, Employees, agents, legal advisors and
accountants.

 

“Securities
Act”
means the Securities Act of 1933, as amended, or any similar federal statute,
and the rules and regulations of the Securities and Exchange Commission
thereunder, all as the same shall be in effect at the time.

 

21

 

“Taxes”
means any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A of the Code),
customs duties, share capital, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value-added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.

 

9.2  Expenses.
Each of the Seller and the Purchaser shall be responsible for its own
out-of-pocket expenses including, without limitation, payment of its legal and
financial advisors, in connection with the transactions contemplated by this
Agreement, and the Seller shall be responsible for the payment of all stamp and
other Taxes which may be payable in respect of the execution and delivery of
this Agreement, the Transaction Documents, or the sale and delivery of the
Membership Interests.

 

9.3  Specific
Performance.
Each of the parties hereto acknowledges and agrees that Seller’s refusal to
consummate sale of the Membership Interests to the Purchaser, pursuant to the
provisions of this Agreement, unless Purchaser has failed to comply, in any
material respect, with its obligations under this Agreement, would be considered
a material breach of this Agreement by the Seller which would cause irreparable
damage to the Purchaser, for which it will not have an adequate remedy at law.
Therefore, such obligation of the Seller to sell the Membership Interests to the
Purchaser shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which the Purchaser may have under this Agreement or otherwise.

 

9.4  Further
Assurances.
The Company and the Purchaser agree to execute and deliver such other documents
or agreements as may be necessary or desirable for the implementation of this
Agreement and the consummation of the transactions contemplated
hereby.

 

9.5  Governing
Law; Jurisdiction.
This Agreement shall be governed by and construed solely in accordance with the
internal laws of the State of New York with respect to contracts made and to be
fully performed therein, without regard to the conflicts of laws principles
thereof. The parties hereto hereby expressly and irrevocably agree that any suit
or proceeding arising under this Agreement or the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the City, County and State of New York. By its execution
hereof, the parties hereby expressly and irrevocably submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agrees that any process in any such action may be served
upon either of them personally, or by certified mail or registered mail upon
such party or such agent, return receipt requested, with the same full force and
effect as if personally served upon such party in New York City. The parties
hereto each waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of its reasonable counsel fees and disbursements.

 

22

 

9.6  Entire
Agreement; Amendments and Waivers.
This Agreement (including the Transaction Documents and all schedules and
exhibits hereto and thereto) represents the entire understanding and agreement
among the parties hereto with respect to the subject matter hereof and can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement signed by the
parties hereto. No action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.

 

9.7  Headings;
Interpretive Matters.
The Section headings of this Agreement are for reference purposes only and
are to be given no effect in the construction or interpretation of this
Agreement. No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof. All references to dollar amounts in this Agreement are to United
States dollars, unless otherwise specifically provided.

 

9.8  Confidentiality.
Each
party hereto covenants and agrees to treat any non-public information provided
to it by the Company concerning the business and finances of the Company
(“Corporate
Information”)
as confidential and agrees further that it will not use, exploit, reproduce,
disclose or provide Corporate Information to any third-party (other than any
agents of the parties who are bound by substantially similar obligations of
confidentiality) on its own behalf or otherwise, except with the consent of the
Company or as required by law, legal process or any federal or state regulatory
body having jurisdiction over such party. The provisions of this Section 9.8
shall not apply to any information which:

 

(a)  was
within the public domain prior to the time of disclosure of Corporate
Information to the receiving party or which comes into the public domain other
than as a result of a breach by the party of this Section 9.8;

 

(b)  was
in the possession of the receiving party (or any of its officers, directors,
employees, agents, principals, or Affiliates) before the receiving party
received the Corporate Information;

 

(c)  was
rightfully acquired by the receiving party from a third party without, to the
knowledge of the receiving party, any restriction or any obligation of
confidentiality; or

 

23

 

(d)  was
independently developed by the receiving party without any use or reference to
the Corporate Information.

 

The
provisions of this Section 9.8
shall survive the Closing Date, either in whole or as to any party, for a period
of five (5) years.

 

9.9  Notices.
All notices and other communications under this Agreement shall be in writing
and shall be deemed given when delivered personally, sent by
nationally-recognized overnight courier service, telecopied or mailed by
certified mail, return receipt requested, to the parties at the address or
telecopier number indicated in the signature pages hereof. All notices are
effective upon receipt or upon refusal if properly delivered.

 

9.10  Severability.
If any provision of this Agreement is invalid or unenforceable, the balance of
this Agreement shall remain in effect.

 

9.11  Binding
Effect; Assignment.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any third-party beneficiary rights in any
Person not a party to this Agreement except as provided below. No assignment of
this Agreement or of any rights or obligations hereunder may be made by the
Seller or the Purchaser (by operation of law or otherwise) without the prior
written consent of the other parties hereto and any attempted assignment without
the required consents shall be void; provided, however, that the Purchaser may
assign this Agreement and any or all of its rights and obligations hereunder, in
whole or in part, to any of its Affiliates, but any such assignment shall not
relieve the Purchaser of its obligations hereunder. In addition, and whether or
not any express assignment has been made, the provisions of this Agreement which
are for the benefit of the Purchaser as purchaser or holder of the Membership
Interests are also for the benefit of and enforceable by, any subsequent holders
of such Membership Interests. Upon any assignment, the references in this
Agreement to the Purchaser shall also apply to any such assignee unless the
context otherwise requires.

 

9.12  Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

 

Remainder
of Page Intentionally Left Blank

 

24

 

IN
WITNESS WHEREOF,
the parties hereto have executed or have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.

 

	 	KAY
      O’NEILL (USA HOLDINGS) LIMITED
       

      By: /s/
      Charles Kay   

      Name:
      Charles Kay

      Title:
      Executive Chairman

       

      KAY
      O’NEILL (USA) LLC

       

      By: /s/
      Stewart Brown   

      Name:
      Stewart Brown

      Title:
      Executive Vice President

       

      WAKO
      LOGISTICS GROUP, INC.

      

      By:
      ___/s/
      Christopher Wood_____________
      

      Name:
      Christopher Wood

      Title:
      Chief Executive Officer

 

In
order to induce the Purchaser to enter into this Agreement, Kay O’Neill
(Holdings) Ltd. hereby agrees to guarantee the due performance of all of the
Seller’s obligations and the payment of any and all amounts owed by the Seller
to the Purchaser, pursuant to the terms and conditions of the within Membership
Interest Purchase Agreement.

 

	 	
      KAY
      O’NEILL (HOLDINGS), LTD.

       

      By:
      ___/s/
      Charles Kay___________________
      

      Name:
      Charles Kay

      Title: 
      Executive Chairman

25

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