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STOCK
ACQUISITION
AGREEMENT
This Stock Acquisition Agreement (the " Agreement
") dated effective as of the 29th day of September 2006, is made by
and among HARRELL HOSPITALITY GROUP, INC. , a Delaware
corporation (" HHG "), Square Rock, Ltd. and
Global Trek Property Holdings, L.P. ( together, the " Purchasers ") and
provides as follows:
R E C I T A L S
HHG desires to sell, and the Purchasers desire to purchase
certain shares (the " New Shares ") of the authorized
Class A $0.002 par value voting common capital stock of HHG (the "
Common Stock ");
In consideration of the mutual promises of the parties; in
reliance on the representations, warranties, covenants, and
conditions contained in this Agreement; and for other good and
valuable consideration, the parties agree as follows:
ARTICLE 1
PURCHASE OF STOCK
1.01. Purchase of Stock . HHG agrees to sell, convey,
transfer, assign, and deliver to Purchasers New Shares equal to ninety percent (90%) of the total number of
outstanding shares of Common Stock of HHG immediately after such
issuance . Purchasers have entered into the Subscription Agreement
and Representations and Warranties attached as Exhibit "A"
.
1.02. Purchase Price . The
purchase price for the New Shares (the " Purchase
Price ") shall be $250,000.00 cash at closing, plus
commitments from the Purchasers for not less than an additional
$250,000.00 of working capital should such additional working
capital be needed within two years from Closing. In addition, at
some future point after Closing, Purchasers' will use their best
efforts to assign to HHG Purchasers' existing revenue producing
contracts (the " Revenue Contracts ").
1.03 Closing . The closing of the purchase and sale of
the New Shares (the " Closing
") shall be held at the offices of Thomas, Cinclair &
Beuttenmuller, P.C., 5335 Spring Valley Road, Dallas, Texas 75254,
on October 20, 2006, or as soon as practicable thereafter following
satisfaction of the closing conditions set forth in Article 2
hereof (the " Closing Date "). In the event that the
Closing has not occurred by December 31, 2006 through no fault of
Purchasers, Purchasers shall have the right to terminate this
Agreement by written notice to HHG. At the Closing, HHG will
deliver or cause to be delivered by its transfer agent a
certificate evidencing the New Shares to the Purchasers, in the
name of the Purchasers (or any designee of the Purchasers) and such
other documents and instruments necessary to vest in the Purchasers
good record title to, and beneficial ownership of, the New Shares
free and clear of all liens, together with evidence of payment of
applicable transfer or issuance taxes, if any. At Closing,
Purchasers shall deliver the cash portion of the Purchase Price and
deliver the capital commitment in substance and form substantially
similar to Exhibit "B " attached hereto.
1.04 Compliance with Securities Laws . Purchasers and HHG
agree to comply with all securities laws applicable to each in the
performance of this Agreement, including U.S. federal securities
laws and the laws of any other jurisdiction to which each may be
subject. Purchasers acknowledges that within ten (10) days of the
Closing Date Purchasers will be required to file a Form 13D with
the Securities Exchange Commission (the " SEC ").
1.05 Restrictions on Transfer . Purchasers understand and
agree that, the Shares are not registered, and even if registered,
Purchasers will be deemed affiliates of HHG and the Shares deemed
"restricted securities" subject to the resale restrictions of the
Securities Act of 1933 (the " Securities Act ") and
Rule 144 promulgated thereunder.
ARTICLE 2
CONDITIONS TO CLOSING
As conditions to Closing, the following must have occurred and
be existing on the Closing Date:
2.01 Cancellation of Options . The
existing options to purchase Common Stock must have been exercised
or cancelled. This will be deemed satisfied if, immediately after
closing, the total aggregate options to purchase Common Stock does
not exceed 0.5% (one-half of one percent) of the number of
outstanding shares of Common Stock of HHG.
2.02 Number of Issued and Outstanding Shares . T
he total number of shares of Common Stock
outstanding immediately before the sale to Purchasers shall be not
more than 1,600,000.
2.03 Representations and Warranties . The representations
and warranties of HHG and Purchasers shall be true and correct in
all material respects.
2.04 Disposition of Hospitality Assets . HHG shall have
disposed of all management contracts, hotel agreements, hospitality
subsidiaries and other hospitality assets. HHG shall have no
material assets, other than cash, promissory notes or other assets
approved by Purchasers in writing. In any transactions to dispose
of hospitality assets, HHG shall receive blanket indemnification
from the purchasers of such assets against any liability, cost or
expense arising from hotel acquisition, operation, or management,
or otherwise relating to the hospitality industry, whether the
events giving rise to claims for liability occurred before or after
the sale.
2.05 No Liabilities . HHG shall have no material
liabilities, except as disclosed to Purchasers and approved by
Purchasers in writing.
2.06 Provision for Class A Preferred . HHG shall redeem
or cancel all outstanding shares of its Class A Preferred Stock. In
the alternative, HHG may also satisfy this condition by having
unrestricted (i) cash, or (ii) secured promissory notes (secured by
collateral reasonably acceptable to Purchaser as to type and
amount), or (iii) such other unencumbered assets as Purchaser in
its discretion may approve in writing, available in HHG to service
and redeem the Class A Preferred Stock.
ARTICLE 3
REGISTRATION RIGHTS
3.01 Demand Registration Rights .
If HHG shall receive from Purchaser, at any time beginning on first
(1st) anniversary date of the execution of this Agreement and
concluding on the fifth (5th) anniversary of the execution of this
Agreement, a written request that HHG effect any registration with
respect to all, but not less than all, of the New Shares in an
offering to be firmly underwritten by underwriter(s) selected by
the Purchaser (which underwriter(s) shall be reasonably acceptable
to HHG). HHG shall, as soon as practicable, use its best efforts to
file a registration statement covering the New Shares so requested
to be registered and to effect such registration (including,
without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities
laws, and appropriate compliance with the Securities Act and as
would permit or facilitate the sale and distribution of all of such
New Shares as are specified in such request). The registration
statement filed pursuant to the request of the Purchaser shall
include other securities of HHG, with respect to which registration
rights have been granted, and may include securities of HHG being
sold for the account of HHG.
3.02 Piggyback Registration .
If HHG proposes to register any of its Common Stock either for its
own account or the account of a security holder or holders
exercising their respective demand registration rights (other than
pursuant to Section 3.1 hereof), HHG shall use its best efforts to
include in such registration (and any related qualification under
blue sky laws or other compliance) all the New Shares specified in
a written request or requests, made by the Purchaser and received
by HHG within fifteen (15) days after the Purchaser's receipt of
written notice from HHG regarding the proposed registration, which
written request may specify the inclusion of all or a part of
Purchaser's New Shares .
3.03 Expenses of Registration . All registration expenses incurred in connection with
any registration, qualification or compliance pursuant to Sections
3.1 and 3.2 hereof, shall be borne by HHG; provided, however, that
the Purchaser shall bear the registration expenses for any
registration proceeding begun pursuant to Section 3.1 and
subsequently withdrawn by the Purchaser. All selling expenses
relating to securities registered pursuant to Sections 3.1 and 3.2
hereof, shall be borne by the holders of such securities pro rata
on the basis of the number of shares of securities so registered on
their behalf.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF HHG
In order to induce Purchaser to enter into this Agreement,
except as disclosed in writing to Purchaser, HHG represents,
warrants, and covenants to Purchaser, effective as of the date of
this Agreement and again as of the Closing Date, as follows:
4.01. Corporate Existence; Qualification . HHG is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware and is qualified or licensed and in good
standing in all jurisdictions in which the nature of its business
or the properties owned by it require it to be qualified or
licensed to do business.
4.02. Capitalization . HHG has 100,000,000 shares of
Class A, $.002 par value Common Stock authorized, of which, at the
date of this Agreement, 14,051,013 shares are issued and
outstanding. HHG expects to effect a 1 for 10 reverse split of the
Common Stock, such that, at the Closing Date and prior to the
issuance of the Shares, the number of issued and outstanding shares
of Common Stock will be reduced tenfold. HHG has 1,000,000 shares
of Class A Preferred Stock, $1.00 per share par value, authorized,
of which 243,331 preferred shares are issued and outstanding. The
outstanding preferred shares are nonvoting, noncumulative,
nonconvertible and provide for a 10% dividend (annually). Except as
specifically set forth on Exhibit "C" , hereto, there are no
outstanding subscriptions, options, contracts, commitments,
warrants, calls, agreements, understandings or other arrangements
or rights of any character affecting or relating in any manner to
the issuance of stock or other securities of HHG (whether by
subscription, option, exchange, right of conversion, right of
refusal or otherwise) or entitling anyone to acquire shares of
stock or other securities of any kind of HHG.
4.03. Authority . HHG has all requisite right, power and
authority to own, lease and operate its properties, and to carry on
its business as its business has previously been carried on. The
execution, delivery and performance by HHG of this Agreement and
any other agreements contemplated hereby, and the consummation of
the transactions contemplated hereby and thereby, have been duly
authorized by the board of directors of HHG. This Agreement and any
other agreement contemplated hereby has been or will be as of the
Closing Date, duly executed and delivered by HHG and constitutes or
will constitute a valid and legally binding obligation of HHG,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.04 Absence of New Commitments . Since June 30, 2006,
HHG has not entered into any contract, commitment, or transaction
which has not consummated prior to the Closing Date or which
obligates HHG to perform services or pay funds to any party
following Closing.
4.05 Voting Agreements . HHG is not party to any voting
or shareholder agreement still in effect. To the knowledge of HHG,
there are no shareholder or voting agreements among shareholders of
HHG that affect the existing shares of Common Stock.
4.06. Tax Returns . To the best of its knowledge and
belief, HHG has: (a) filed in accordance with applicable laws all
federal, state, and local tax returns required to be filed by it;
(b) paid all taxes, assessments, penalties, and interest charges
shown to be due and payable on each such return or otherwise due or
to become due or required to be paid; and (c) accrued or created
reserves for all taxes due or to become due by it for all periods
ending before, on or with the date of this Agreement and the
Closing Date. The income tax liabilities of HHG have been satisfied
or properly accrued and reflected on its financial statements for
all taxable years prior to and including the taxable year ended
September 30, 2006. HHG has not been delinquent in the payment of
any tax, assessment or governmental charge, nor has any tax
deficiency been proposed or assessed against it which has not been
satisfied. HHG has not executed any waiver of the statute of
limitations on the assessment or collection of any tax.
4.07 Litigation . There is no litigation pending or
threatened against HHG. HHG is not subject to or bound by any
court, regulatory commission, board or administrative judgment,
order or decree, and there are no actions,
proceedings or investigations pending or threatened against the
Company, that, either in any case or in the aggregate, would result
in any material adverse effect on HHG or would prevent, or
materially alter or delay any of the transactions contemplated by
this Agreement.
4.08 Rights and Authorizations . HHG owns or holds all
licenses, permits, approvals, and other authorizations
(collectively " Authorizations ") which are used in
or required in connection with HHG's business. HHG have no
knowledge and have not received any notice that any such
Authorization is not valid or sufficient or in full force and
effect. Neither the execution and delivery nor the consummation of
the transactions contemplated hereby will cause a termination of,
or interfere in any respect with, the operation under any such
Authorizations.
4.09. Disclosure . No representation or warranty made by
HHG in this Agreement or in any filings with the SEC as required
under the Act or the Securities Exchange Act of 1934 (the "
Exchange Act ") contains any untrue statement of a
material fact or omits to state any material fact necessary to make
the statements contained herein not misleading.
4.10. Compliance with Laws . HHG has conducted its
business and used its property in substantial compliance with all
applicable federal, state and local environmental, land use, and
zoning laws and regulations, except where the failure to comply
with such laws and regulations, in the aggregate, has not and will
not have a material adverse effect on HHG.
4.11 Documents Genuine . All originals and/or copies of
HHG's articles of incorporation and bylaws, each amended to date,
and all minutes of meetings and written consents in lieu of
meetings of shareholders, directors and committees of directors of
HHG, financial data and any and all other documents, material,
data, files or information which have been or upon request will be
furnished to Purchaser, are true, complete, correct and unmodified
originals and/or copies of such documents, information, data, files
or materials.
4.12 Consents/Approvals/Conflicts . Except for the
compliance with applicable federal and state securities laws, no
consent, approval, authorization or order of any court or
governmental agency or other body is required for HHG to consummate
the sale of the Shares. Neither the execution, delivery,
consummation or performance of this Agreement shall conflict with,
constitute a breach of HHG's articles of incorporation or bylaws,
as amended to date, or any note, mortgage, indenture, deed of trust
or other agreement or instrument to which HHG is a party or by
which it is bound nor, to the best of HHG's knowledge and belief,
any existing law, rule, regulation or any decree of any court or
governmental department, agency, commission, board or bureau,
domestic or foreign, having jurisdiction over HHG, nor result in
creation of any lien or other encumbrance upon the Shares.
4.13 Environmental Matters . HHG has received no written
notice of any investigation or inquiry by any governmental entity
under any applicable laws pertaining to the health or the
environment, including without limitation (i) the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments ans Reauthorization Act of
1986, as amended, and (ii) the Resource Conservation and recovery
Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984, as amended. To
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