AGREEMENT FOR SALE AND PURCHASE OF BUSINESS ASSETS

This AGREEMENT FOR SALE AND PURCHASE OF BUSINESS ASSETS (this “ Agreement ”), dated as of March 31, 2009, is between Middletown & New Jersey Railway Company, Inc., a New York corporation (the “ Seller ”), Chartwell International Inc., a Nevada corporation (the “ Selling Shareholder ”) and Middletown & New Jersey Railroad, LLC., a  Delaware limited liability company (the “ Buyer ”).

A.           The Seller operates a business primarily engaged in railroad freight services serving central Orange County in Middletown, New York south to the Slate Hill (the “ Business ”).  The Seller’s principal place of business is 140 East Main St., Middletown, NY 10940.  The Seller owns equipment, inventory, contract rights, leasehold interests, real property, and miscellaneous assets used in connection with the operation of its business.

B.           The Buyer desires to acquire substantially all the assets used or useful, or intended to be used, in the operation of the Seller’s business, and the Seller desires to sell such assets to the Buyer.

C.           The Selling Shareholder is the sole shareholder of the Seller.

The parties agree as follows:

1.1           Assets Purchased .   The Seller agrees to sell to the Buyer and the Buyer agrees to purchase from the Seller, on the terms and conditions set forth in this Agreement, the following assets (the “ Assets ”):

(a)           All equipment (including 3 locomotives), tools, furniture, and fixtures held by Seller and currently used for the conduct of the Business, including without limitation all such items listed on attached Schedule 1.1(a) , together with any replacements or additions to the equipment made before the Closing;

(b)           All inventories of supplies, raw materials, parts, and finished goods inventory owned by the Seller and currently used for the conduct of the Business, including without limitation all such items listed on attached Schedule 1.1(b) , together with any replacements or additions to the inventories made before the Closing, but excluding inventory disposed of in the ordinary course of the Seller’s business;

(c)           All the Seller’s rights under Contracts held by Seller and currently used for the conduct of the Business, including without limitation all such items listed on Schedule 9.6 ;

(d)           All the Seller’s rights under purchase orders held by Seller and currently used for the conduct of the Business, including those entered into in the ordinary course of business before the Closing, including such items listed on Schedule 1.1(d) ;

(e)           The Seller’s business and goodwill;

(f)           All patents, trademarks, trade names, copyrights, service marks, and domain names of the Seller held by the Seller and currently used for the conduct of the Business, including without limitation all such items listed on Schedule 9.12 , all registrations for them, all applications pending for them, and all other proprietary rights and intangible property of the Seller, including trade secrets, inventions, technology, software, operating systems, customer lists, customer relationships, customer agreements, customer understandings, drawings, blueprints, know-how, formulae, slogans, processes, and operating rights and all other similar items and all such items acquired by the Seller or coming into existence on or before the Closing Date;

(g)           To the extent transferable, all approvals, authorizations, consents, licenses, permits, franchises, tariffs, orders, and other registrations of any federal, state, or local court or other governmental department, commission, board, bureau, agency, or instrumentality held by the Seller and required or appropriate for the conduct of the Business , including without limitation all such items listed on Schedule 1.1(g) and all such items granted or received on or before the Closing Date;

(h)           All accounts receivable and other receivables of the Seller, including without limitation all receivables listed on Schedule 1.1(h) and all receivables arising on or before the Closing Date, other than to the extent that those receivables have been collected by the Seller in the ordinary course of business before the Closing Date;

(i)           All choses in action, causes of action, rights of recovery and setoff, warranty rights, and other similar rights of the Seller, including without limitation all such items listed on Schedule 1.1(i) and all such items arising or acquired on or before the Closing Date;

(j)           All prepaid and deferred items of the Seller, including without limitation prepaid insurance, taxes, rent and unbilled charges and deposits relating to the Business and all other such items reflected on the Financial Statements described in Section 9.3;

(k)           All correspondence, engineering, and plant records, and other similar documents and records relating to the Business;

(l)           All assignable rights, if any, to all telephone lines and numbers currently used in the conduct of the Business, including without limitation those listed on Schedule 1.1(l) ; and

(m)           All Real Property (as defined in Section 9.11.1 below) as listed on Schedule 9.11.1 , Tangible Personal Property (as defined in Section 9.12.1) listed on Schedule 9.11.2 , all Real Property Improvements (as defined in Section 9.11.3) and all Operating Assets (as defined in Section 9.11.4).

1.2           Liabilities Assumed .

1.2.1  The Buyer will accept the assignment and assume responsibility for all unfilled orders from customers of the Seller assigned to the Buyer listed on Schedule 1.1(d) .  The Buyer will assume and perform the Seller’s obligations arising on or after the Closing Date under the Contracts listed on Schedule 9.6 and the liabilities listed on Schedule 1.2.1 .  Liabilities and obligations to be assumed by the Buyer under this Section 1.2.1 shall be the “Assumed Liabilities”.

1.2.2  Except for the Assumed Liabilities, the Buyer will not assume and will not be liable for any liabilities of the Seller, known or unknown, contingent or absolute, accrued or other, and the Assets will be free of all liabilities, obligations, liens, and encumbrances.  Without limiting the generality of the foregoing and except as otherwise provided above, the Buyer will not be responsible for any of the following:

(a)           Liabilities, obligations, or debts of the Seller, whether fixed, contingent, or mixed and whether based on events occurring before or after the Closing, including without limitation those based on tort, contract, statutory, or other claims or involving fines or penalties payable to any governmental authority;

(b)           Liabilities, obligations, or debts of the Seller for any federal, state, or local tax, including without limitation federal income taxes, state income and excise taxes, state and local real and personal property taxes, and federal, state, and local withholding and payroll taxes;

(c)           Liabilities or obligations of the Seller to employees for salaries, bonuses, or health and welfare benefits or with respect to any profit-sharing, stock bonus, pension, retirement, stock purchase, option, bonus, or deferred compensation plan or for any other benefits or compensation (including without limitation accrued vacation);

(d)           Liabilities or obligations of the Seller for employee severance payments or arrangements resulting from termination of the Seller’s employees;

(e)           Liabilities or obligations of the Seller relating to issuances of securities;

(f)           Liabilities or obligations of the Seller incurred in connection with distributions to shareholders or any corporate dissolution; and

(g)           Liabilities or obligations of the Seller under any environmental law.

The following assets of Seller are excluded from this sale and purchase (“ Excluded Assets ”):

2.1           All cash and cash equivalents;

2.2           All bank, investment and other accounts, other than accounts receivable;

2.3           All corporate seals, minute books, stock records and tax returns, other than as provided in Section 22.5;

2.4           All insurance policies of Seller and all of Seller’s rights thereunder;

2.5           All Contracts, Real Property, Tangible Personal Property, and other assets of Seller listed on attached Schedule 2.5; and

2.6           All receivables collected by Seller on or before the Closing Date with the exception of any freight and/or fuel surcharge revenue that is received or invoiced for the movement of any rail cars that remain on the lines of the railroad on or after the Closing date.  Buyer shall be entitled to receive fifty percent (50%) of all applicable freight and/or fuel surcharge revenues for those rail cars remaining on the line on or after Closing. 

For tax purposes, including without limitation the filing of IRS Form 8594, the parties agree that they will report an allocation of the Purchase Price as provided in Schedule 3 .   For all tax purposes, Buyer and the Seller agree that the transactions contemplated by this Agreement shall be reported in a manner consistent with the terms of this Agreement, including the allocation, and that neither of them will take any position inconsistent therewith in any tax return, in any refund claim, in any litigation, or otherwise.

4.1            Purchase Price .   The purchase price for the Assets (the “ Purchase Price ”) will be:

(a)           $386,900; and

(b)           The assumption by the Buyer of the Assumed Liabilities.

The price for the Assets will be paid as follows:

5.1            Escrow .  At the Closing (or if not practical, within 1 business day after the Closing), the Buyer will pay by wire transfer the purchase price, in the amount of $386,900 (“ Escrowed Funds ”) into an escrow established with Weintraub Genshlea Chediak Law Corporation, 400 Capitol Mall, Suite 1100, Sacramento, California 95814, which funds shall be released pursuant to the terms of a separate agreement between Buyer and Seller (“ Escrow Agreement ”) concerning the resolution of i) title report and title insurance with respect to all Real Property and Real Property Improvements acquired pursuant to this Agreement and ii) a certain purchase and sale agreement entered into by Seller and Harold J. Rasmussen, dated May 2, 2007, relating to a portion of the Real Property (“ Rasmussen Property ”).

5.2            Title Insurance/Title Report/UCC Termination .  Within 75 days after the Closing Date, Seller shall have provided at its sole expense i)  a standard owner’s title insurance policy in the amount of $200,000, insuring title vested in the Buyer to the Real Property and Real Property Improvements, subject only to non-delinquent real property taxes and assessments and any other matter revealed by the final title report delivered to Buyer and not objected to by the Buyer (“ Title Policy ”) and ii) evidence of termination or release of UCC financing statements affecting the Assets.  During the 75 day timeframe, Seller will provide periodic updates with respect to the Title Policy.  If this Section 5.2 post-closing condition is satisfied within the 75 day timeframe, Buyer will direct the Escrow Agent to make a payment in the amount of the Escrowed Funds less $30,000 to the Seller.  If this Section 5.2 post-closing condition is not satisfied within the 75 day timeframe, Buyer may, in its sole discretion without any input or approval needed from Seller, direct the Escrow Agent to make payment of all Escrowed Funds (including the $30,000 relating to the Rasmussen Property) to Buyer and this Agreement will be rescinded.

5.3            Rasmussen Issue .  Subject first to the release of Escrow Funds to Seller pursuant to Section 5.2, the remaining $30,000 of Escrow Funds will be paid to Seller upon the earlier of Seller providing written evidence of:

(a) Harold J. Rasmussen legally subdividing a portion of the Real Property relating to the Rasmussen Property; or

(b) Seller entering into a definitive purchase agreement with Mr. Rasmussen to repurchase the Rasmussen Property for $30,000, Seller agreeing in writing to cause the Rasmussen Property to be quitclaimed to Buyer, and a general release and indemnification by Mr. Rasmussen and Seller of any of their rights to the Rasmussen Property for the benefit of Buyer.

If this Section 5.3 post-closing condition is not satisfied within 6 months after the Closing Date, Buyer may, in its sole discretion without any input or approval needed from Seller, direct the Escrow Agent to make payment of the Escrowed Funds to Buyer.

The operation of the Business and related income and expenses up to the close of business on the day before the Closing will be for the account of the Seller and from and after the day of the Closing for the account of the Buyer.  Expenses, including but not limited to utilities, personal property taxes, rents, wages, vacation pay, payroll taxes, and fringe benefits of employees of the Seller, will be prorated between the Seller and the Buyer as of the close of business on the Closing, the proration to be made and paid, insofar as reasonably possible, on the Closing, with settlement of any remaining items to be made within 30 days after the Closing.

At the Closing, the parties will execute the following additional agreements (the “ Related Agreements ”):

(a)           The Escrow Agreement between the Buyer and the Seller as it relates to the release of the Escrowed Funds, substantially in the form attached as Exhibit A ;

(b)           The Assignment and Assumption Agreement, substantially in the form attached as Exhibit B ;

(c)           The Bill of Sale, substantially in the form attached as Exhibit C; and

(d)           A Bargain and Sale Deed transferring title to Real Property from Seller to Buyer, substantially in the form attached as Exhibit D

(e)           Agreement terminating and/or revoking Tom Winnant power of attorney to negotiate certain transactions on Seller’s behalf .

9.1            Corporate Existence .   The Seller is a corporation duly incorporated and legally existing under the laws of the state of New York and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify except where the failure to so qualify would not have a Material Adverse Effect on the Business.  The Seller has all requisite corporate power and authority and all material licenses, permits, and authorizations necessary to own and operate the Assets and to carry on its business as now conducted.  The copies of the Seller’s charter documents and bylaws that have been furnished to the Buyer’s counsel reflect all amendments made thereto at any time before the Closing Date and are correct and complete.

9.2            Authorization .   The execution, delivery, and performance of this Agreement and the Related Agreements to which the Seller or the Selling Shareholder is a party have been duly authorized by the Seller or the Selling Shareholder, as the case may be.  This Agreement and the Related Agreements, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Seller or the Selling Shareholder, as the case may be, enforceable against the Seller or the Selling Shareholder, as the case may be, in accordance with their respective terms except as enforceability may be limited by bankruptcy, reorganization, insolvency, or similar laws affecting the enforcement of creditors’ rights or by the application of general principles of equity.  Except as set forth on Schedule 9.2 , the execution and delivery by the Seller and the Selling Shareholder of this Agreement and the Related Agreements to which the Seller or the Selling Shareholder is a party, and the fulfillment of and compliance with the respective terms hereof and thereof by the Seller or the Selling Shareholder, do not and will not (a) conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any Contract, (b) result in the creation of any lien, security interest, charge, or encumbrance on the Assets, (c) result in a violation of the charter or bylaws of the Seller or the Selling Shareholder or any law, statute, rule, or regulation to which the Seller or the selling Shareholder is subject, or any order, judgment, or decree to which the Seller or the Selling Shareholder is subject, or (d) require any authorization, consent, approval, exemption, or other action by or notice to any court or administrative or governmental body.

9.3            Financial Statements .   The unaudited balance sheet of the Seller at December 31, 2008, in the form attached to this Agreement as Schedule 9.3 (the “ 2008 Balance Sheet ”), fairly presents the financial position of the Seller at December 31, 2008, and the unaudited income statement of the Seller for the year ended December 31, 2008, in the form attached to this Agreement as Schedule 9.3 (the “ 2008 Income Statement ”), fairly present the results of operations of the Seller for the year ended December 31, 2008, and both have been prepared in a manner substantially consistent with prior financial statements of the Seller.  The 2008 Balance Sheet and the 2008 Income Statement are referred to collectively in this Agreement as the “ Unaudited Statements .” The unaudited balance sheet at February 28, 2009, in the form attached to this Agreement as Schedule 9.3 (the “ Current Balance Sheet ”) and the income statement of the Seller for the 2 months then ended, in the form attached to this Agreement as Schedule 9.3 (the “ Unaudited Financial Statements ”), fairly present the financial position of the Seller at February 28, 2009, and the results of operations for the 8 months then ended and have been prepared in accordance with generally accepted accounting principles (GAAP), consistently applied, and in a manner substantially consistent with the Unaudited Statements.  The Unaudited Statements and the Unaudited Financial Statements are collectively referred to as the “ Financial Statements .”

9.4            Brokers and Finders .   The Seller and/or the Selling Shareholder has employed Strategic Rail Finance as a broker or finder in connection with the transactions contemplated by this Agreement.   Seller and/or Selling Shareholder will assume responsibility for all brokerage commission, finder’s fee, or other like payment owed to Strategic Rail Finance and will indemnify Buyer against any claim for such payment.

9.5            Transfer Not Subject to Encumbrances or Third-Party Approval .   Except as set forth on Schedule 9.5 and to Seller’s Knowledge, the execution and delivery of this Agreement and the Related Agreements by the Seller and the Selling Shareholder, and the consummation of the contemplated transactions, will not result in the creation or imposition of any valid lien, charge, or encumbrance on any of the Assets, and will not require the authorization, consent, or approval of any third party, including any governmental subdivision or regulatory agency.

9.6            Contracts .   Schedule 9.6 contains a complete and accurate list of each contract, agreement, instrument, lease, purchase order, sales order, document and commitment (including license agreements) to which the Seller is a party (the “ Contracts ”).  The Seller has delivered a copy of each Contract to the Buyer.  Except as otherwise set forth on Schedule 9.6 :

(a)           The Seller is not in default under any Contract, nor, to the Seller’s Knowledge, does there exist any event that, with notice or the passage of time or both, would constitute a default or event of default by the Seller under any Contract.

(b)           No power of attorney or similar authorization given by the Seller is presently in effect or outstanding.  No Contract limits the freedom of the Seller to compete in any line of business or with any person.

(c)           Each of the Contracts is valid, binding, and enforceable by the Seller in accordance with its terms and is in full force and effect, except as enforceability may be limited by equitable principles or by bankruptcy, fraudulent conveyance or insolvency laws affecting the enforcement of creditor’s rights generally. There is no pending or, to Seller’s Knowledge, threatened proceeding that would interfere with the quiet enjoyment of any leasehold of which the Seller is the lessee or sublessee.  Except as set forth on Schedule 9.6(c) , all other parties to the Contracts have consented or, before the Closing, will have consented (when such consent is necessary) to the consummation of the transaction contemplated by this Agreement without requiring modification of the Seller’s rights or obligations under any Contract.

(d)           To Seller’s Knowledge there is no default by any other party to any Contract or of any event that (whether with or without notice, lapse of time, or both) would constitute a default by any other party with respect to obligations of that party under any Contract, and, to Seller’s Knowledge, there are no facts that exist indicating that any of the Contracts may be totally or partially terminated or suspended by the other parties.

(e)           To Seller’s Knowledge, no Contract will result in any loss to the Seller on the performance thereof (including any liability for penalties or damages, whether liquidated, direct, indirect, incidental, or consequential).

9.7            Compliance with Codes and Regulations .   To Seller’s Knowledge, no leasehold improvements violate any provisions of any applicable building codes, fire regulations, building restrictions, or other ordinances, orders, or regulations.

9.8            Litigation .   Except as set forth on Schedule 9.8 , there are no actions, suits, proceedings, orders, investigations, or claims pending or, to Seller’s Knowledge, threatened against the Seller or its property, at law or in equity, or before or by any governmental department, commission, board, bureau, agency, or instrumentality; the Seller is not subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to Seller’s Knowledge, any governmental investigations or inquiries; and to Seller’s Knowledge, there is no basis for any of the foregoing.

9.9            Compliance with Laws .   To Seller’s Knowledge, (a) the Seller has at all relevant times conducted its business in compliance with its articles of incorporation and bylaws, and is in compliance with all applicable laws and regulations, and (b) the Seller is not in violation of any applicable laws or regulations, other than violations that singly or in the aggregate do not have a Material Adverse Effect on the Business.  The Seller is not subject to any outstanding order, writ, injunction, or decree, and the Seller has not been charged with, or to Seller’s Knowledge threatened with a charge of, a violation of any provision of federal, state, or local law or regulation.

9.10.1   Labor Matters .

(a)           The Seller is not a party or otherwise subject to any collective bargaining or other agreement governing the wages, hours, or terms of employment of its employees.

(b)           There is no (i) unfair labor practice complaint against the Seller pending before the National Labor Relations Board or any other governmental authority, (ii) labor strike, slowdown, or work stoppage actually occurring or, to Seller’s Knowledge, threatened against the Seller, (iii) to Seller’s Knowledge, representation petition regarding the Seller’s employees pending before the National Labor Relations Board, or (iv) to Seller’s Knowledge, grievance or any arbitration proceeding pending arising out of or under collective bargaining agreements applicable to the Seller.

(c)           The Seller has not experienced any primary work stoppage or other organized work stoppage involving its employees in the past two years.

9.10.2   Employment Claims .   Except as disclosed on Schedule 9.10(2) , there are no pending claims and, to Seller’s Knowledge, no threatened claims by or on behalf of any of its employees under any federal, state, or local labor or employment laws or regulations.

9.10.3   Employee Benefits .   Schedule 9.10(3) lists all pension, retirement, profit-sharing, deferred compensation, bonus, commission, incentive, life insurance, health and disability insurance, hospitalization, and all other employee benefit plans or arrangements (including, without limitation, any contracts or agreements with trustees, insurance companies, or others relating to any such employee benefit plans or arrangements) established or maintained by the Seller (the “ Plans ”), and complete and accurate copies of all of the Plans have been provided to the Buyer.  None of the Plans is a defined benefit pension plan under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

9.10.4   Employment Agreements .   Except as disclosed on Schedule 9.10(4) , each of Seller’s employees is an “at-will” employee and there are no written employment, commission, or compensation agreements of any kind between the Seller and any of its employees.   Schedule 9.10.4 lists all the Seller’s employment or supervisory manuals, employment or supervisory policies, and written information generally provided to employees (such as applications or notices), and true and complete copies of those manuals, policies, and written information have been provided to the Buyer.  The Seller does not have any agreements or understandings with its employees except as reflected in the items listed on Schedules 9.10.3 and 9.10.4 .

9.10.5   Compensation .   Schedule 9.10.5 contains a complete and accurate list of employees, and consultants of the Seller, specifying their names and job designations, the total amount paid or payable as compensation to each of them, and the basis of such compensation, whether fixed or commission or a combination thereof, and accrued benefits for them as of the date of this Agreement.

9.10.6   Severance .   Except as set forth on Schedule 9.10.6 , the Seller has no severance pay plan, policy, practice, or agreement with any of its employees.

9.11         Tangible and Operating Assets .

9.11.1   Real Property .   Schedule 9.11.1 contains a complete and accurate list of all real property owned or leased by the Seller (the “ Real Property ”).

9.11.2   Personal Property .   Schedule 9.11.2 contains a complete and accurate list of all the tangible personal property owned by the Seller (the “ Tangible Personal Property ”).

9.11.3   Real Property Improvements .   All of the structures, buildings and other improvements on the Real Property are included in the Assets (“ Real Property Improvements ”).

9.11.4   All Operating Assets .  The Assets include all the assets, properties, and rights owned or used by the Seller in the Business, other than the Excluded Assets (“ Operating Assets ”).

9.12         Intellectual Property .   Schedule 9.12 contains a complete and accurate list of the Seller’s patents, trademarks, trade names, copyrights, technology, domain names, know-how, processes, related applications, and other intellectual property used in the Business (the “ Intellectual Property ”).  The Seller owns all its Intellectual Property free and clear of a