▇▇▇. ▇▇-▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ OPERATIONS AGREEMENT
AGREEMENT made this 24th day of January, 2006 among MAUI GENERAL
STORE, INC., a New York corporation ("MGS"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the majority
shareholder of MGS ("▇▇▇▇▇▇"), PALMERA HOLDINGS, INC., a Florida corporation
("Palmera"), the individuals identified on the signature page of this
Agreement as shareholders of Palmera (the "Palmera Stockholders"), and ▇▇▇▇▇▇
▇▇▇▇▇▇, counsel to Palmera (the "Escrow Agent").
WHEREAS, MGS, ▇▇▇▇▇▇ and Palmera are on this date entering into an
Agreement and Plan of Merger (the "Palmera Merger Agreement"), pursuant
to which Palmera will be merged into a wholly-owned subsidiary of MGS
(the "Palmera Merger"); and
WHEREAS, the parties intend that after the Palmera Merger, MGS
will solicit sufficient capital to enable it to implement the business
plan of Palmera; and
WHEREAS, the parties wish to institute procedures which will effect
a partial rescission of the merger and related transactions in the event
that MGS does not acquire the necessary funds.
NOW, THEREFORE, it is agreed:
1. Escrow.
a. Upon the Closing Date of the Palmera Merger, the parties will
cause the Merger Shares, the Palmera Shares, and the Surviving Entity
Shares (all as described in Section 1.01 of the Palmera Merger Agreement
and, collectively, the "Escrowed Securities") to be delivered to the
Escrow Agent, accompanied by one stock power endorsed in blank (with, as
to shares of MGS, a medallion guaranteed signature) for each certificate
for Merger Shares or Surviving Entity Shares included among the Escrowed
Securities. The Escrow Agent shall hold the Escrowed Securities and
related stock powers (the "Escrowed Documents") in safe-keeping subject
to the terms of this Agreement.
b. Upon the Closing Date of the Amended Stock Purchase Agreement
between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Palmera dated January 24, 2006 (the "Stock
Purchase Agreement"), Palmera will deliver the "Residual Cash Payment"
(defined in Section 2.2 of the Stock Purchase Agreement) to the Escrow
Agent. The Escrow Agent will cause the Residual Cash Payment to be
deposited into the account at Citibank, N.A. titled "▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Attorney Escrow Account ▇▇▇▇," which is Citibank account number ▇▇▇▇▇▇▇▇.
Said account does not pay interest.
2. Forward Delivery.
a. Promptly upon closing of the Palmera Merger, MGS will undertake
a private placement of its securities (the "Offering"). The funds
obtained in the Offering and related subscription agreements shall be
delivered to the Escrow Agent to hold pursuant to an escrow agreement to
be entered between MGS and the Escrow Agent. The escrow agreement will
require the Escrow Agent to hold the funds and subscription agreements
until at least Two Million Dollars ($2,000,000) in clear funds are in his
escrow account.
b. Promptly after the date on which the Escrow Agent receives at
least $2,000,000 in clear funds from subscriptions to the Offering (the
"Funding Date"), the Escrow Agent will destroy the stock powers included
in the Escrowed Documents and deliver the Escrowed Securities as follows:
Merger Shares to the Palmera Stockholders and Palmera Shares and
Surviving Entity Shares to MGS. At the same time, the Escrow Agent will
deliver the Residual Cash Payment to ▇▇▇▇▇▇. Upon such delivery (a
"Forward Delivery"), the obligations of the Escrow Agent under this
Agreement will terminate.
3. Reversion of the Escrowed Documents.
a. In the event that the Funding Date has not occurred prior to
the Futility Date, then promptly after the Futility Date the Escrow Agent
will deliver the Escrowed Documents thus: Merger Shares and related
stock powers to MGS for cancellation; Palmera Shares, Surviving Entity
Shares and related stock powers (endorsed to transfer the shares to the
Palmera Stockholders in proportion to the number of Palmera shares each
held on the Closing Date of the Palmera Merger) to ▇▇▇▇▇ ▇▇▇▇▇ for
distribution to the Palmera Stockholders. At the same time the Escrow
Agent will deliver the Residual Cash Payment to Palmera. Upon such
delivery (a "Reversion Delivery"), the obligations of the Escrow Agent
under this Agreement will terminate.
b. For purposes of this Section 3, the "Futility Date" will be the
date which is one hundred twenty (120) days after the date of closing of
the Palmera Merger. The Palmera Stockholders will cause the Futility
Date to become a date thirty days later if, prior to the Futility Date,
they deliver to the Escrow Agent (i) proof of payment to ▇▇▇▇▇▇ of Ten
Thousand Dollars ($10,000) with a written notice extending the Futility
Date by thirty days, (ii) proof that MGS has, after the Effective Time of
the Palmera Merger, filed with the SEC an information statement or proxy
statement in contemplation of obtaining shareholder approval of a
recapitalization (e.g. increase in authorized shares, reverse stock
split) and (iii) proof that MGS has an agreement with a broker-dealer in
securities that is in good standing with the SEC to undertake a Two
Million Dollar ($2,000,000) private offering on a best efforts basis.
Palmera may further extend the Futility Date by an additional thirty or
sixty days by delivering to the Escrow Agent proof of payment to ▇▇▇▇▇▇
of Ten Thousand Dollars ($10,000) and Fifteen Thouisand Dollars
($15,000), respectively for each additional thirty day extension.
4. Interim Operations.
a. The date on which the Escrow Agent effects either a Forward
Delivery or a Reversion Delivery is the "Termination Date." The parties
intend that between the Closing Date of the Palmera Merger and the
Termination Date (the "Interim Period"), that the Palmera Stockholders
and the management to whom they entrust MGS shall take no action which
would have a material adverse effect on MGS in the event of a Reversion
Delivery. Specifically, but without limiting the breadth of the
aforesaid mutual intention, the Palmera Stockholders shall cause the
directors and officers of MGS during the Interim Period to abide by the
following restrictions:
i. MGS shall not incur any liabilities during the Interim Period
that would not be extinguished as a result of a Reversion
Delivery, except that it may incur liabilities up to the amount
paid by MGS or Palmera pursuant to Section 5.03(h)(iii) of the
Palmera Merger Agreement. In the event that MGS requires
professional services, the Surviving Entity will contract with
the necessary professionals or will prepay the services.
ii. The shareholders of MGS shall take no action other than (i) the
election of members of the MGS Board of Directors and (ii) the
permitted actions specifically identified in Section 4(c) below.
iii. MGS shall not enter into any contract that would survive a
Reversion Delivery and could not be terminated by MGS at will.
iv. MGS shall timely file with the Securities and Exchange
Commission all reports required by the Commission's rules and
regulations. (▇▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby agrees to provide such
assistance as MGS requires to complete the preparation of audited
financial statements for the year ended December 31, 2005 and the
filing of an annual report on Form 10-KSB for said year.)
v. MGS shall not take any action or commit any failure to act
which results in the delisting of MGS common stock from the OTC
Bulletin Board.
vi. MGS shall not enter into any contract for the sale of MGS
securities that would not be terminated without liability on the
part of MGS if a Reversion Delivery were to occur.
b. Palmera and each of the Palmera Stockholders, jointly and
severally, hereby undertakes to reimburse MGS for any expense, loss or
liability it incurs as a result of a breach of the covenant in Section
4(a).
c. During the Interim Period, MGS may undertake and complete the
following shareholder actions:
i. a reverse split of the common stock at a ratio no greater than
one-for-thirty.
ii. an increase in the number of authorized shares of MGS
iii. a change in the name of the corporation.
5. Escrow Provisions.
5.1 The Escrow Agent may rely conclusively on, and shall be
protected in acting upon, any notice, request, consent, instruction,
affidavit or other instrument or document believed by him in good faith
to be genuine and containing what purports to be the signature of any of
the parties hereto or any investor in the Offering.
5.2 MGS and Palmera, jointly and severally, agree to save
harmless, defend and indemnify the Escrow Agent against all claims,
costs, damages, judgments, attorneys' fees, expenses, obligations, taxes,
assessments, liabilities, actions, suits or charges made against the
Escrow Agent by reason of any act or omission to act by him hereunder or
in connection with any of the transactions contemplated hereby and
against any loss he may sustain in carrying out the terms of this
Agreement, other than as a result of his gross negligence or willful
misconduct.
5.3 The Escrow Agent shall have no duties or obligations under
this Agreement except as expressly set forth herein, shall be responsible
only for the performance of such duties and obligations, shall not be
required to take any action other than in accordance with the terms
hereof and shall not be in any manner liable or responsible for any loss
or damage arising by reason of any act or omission to act by him
hereunder or in connection with any of the transactions contemplated
hereby, including, but not limited to, any loss that may occur by reason
of forgery, false representations, the exercise of his discretion in any
particular manner or for any other reason except for his gross negligence
or willful misconduct.
5.4 The Escrow Agent shall not be bound by any notice of, or
demand with respect to, any waiver, modification, amendment, termination,
cancellation, rescission or supersession of this Agreement, unless the
same shall be in writing and signed by the parties hereto. In the event
of any controversy or dispute arising hereunder or with respect to the
construction hereof or any action to be taken by the Escrow Agent
hereunder, the Escrow Agent shall incur no liability from any action or
omission to act by him in good faith. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do
hereunder as the Escrow Agent while acting in good faith, and any act
done or omitted by the Escrow Agent pursuant to the advice of the Escrow
Agent's attorneys-at-law shall be conclusive evidence of such good faith.
5.5 If the Escrow Agent receives a notice from any party that a
dispute exists with respect to the delivery and/or ownership or right of
possession of any Escrowed Document in his possession or of the Residual
Cash Payment, the Escrow Agent shall retain the Escrowed Document and/or
Residual Cash Payment in his possession and shall deliver such Escrowed
Document and/or Residual Cash Payment in accordance with the joint
written instructions of all parties to the dispute or a final order,
decree or judgment of a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected. The Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings with respect to any Escrowed Document. The Escrow Agent may
resign and be discharged of his duties hereunder at any time by giving
written notice to all of the parties hereto. Such resignation shall take
effect twenty (20) days after the giving of such notice or upon the
earlier receipt by the Escrow Agent of an instrument of acceptance
executed by a successor escrow agent and upon delivery by the Escrow
Agent of the Escrowed Documents and Residual Cash Payment to such
successor. The Escrow Agent shall also be discharged of his duties and
obligations hereunder upon deposit in a court of competent jurisdiction
of the Escrowed Documents and/or Residual Cash Payment then held by him
hereunder, and all parties hereto submit to the personal jurisdiction of
any such court and waive all rights to contest jurisdiction.
5.6 The Escrow Agent shall be entitled to employ such legal
counsel and other experts as the Escrow Agent may deem necessary to
advise the Escrow Agent in connection with the Escrow Agent's duties
hereunder, may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor.
5.7 MGS shall pay the Escrow Agent for all services rendered
pursuant to this Agreement at the hourly rate that the Escrow Agent
customarily charges for legal services. MGS shall also reimburse the
Escrow Agent for any out-of-pocket expenses incurred in fulfilling his
obligations hereunder.
6. Miscellaneous
a Applicable Law. This Agreement shall be governed by the laws
of the State of Florida, without giving effect to the principles of
conflicts of laws thereof, as applied to agreements entered into and to
be performed in such state.
b. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given
or made as follows:
(i) If sent by reputable overnight air courier (such as Federal
Express), 2 business days after being sent;
(ii) If sent by facsimile transmission, with a copy delivered in
the manner provided in clauses (i) or (iii) , when transmitted and
receipt is confirmed by the fax machine; or
(iii) If otherwise actually personally delivered, when delivered.
All notices and other communications under this Agreement shall be
sent or delivered as follows:
If to Palmera, to:
M. ▇▇▇▇▇ ▇▇▇▇▇, III
President
19321 US Highway ▇▇ ▇▇▇▇▇
▇▇▇▇. ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 727-535-9600
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to MGS and/or the Principal Stockholder, to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: 720 - ▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to a Palmera Stockholder, to the address of same as kept on the
stock records of MGS unless contrary written notice from the Palmera
Stockholder has been received by the party giving the notice.
With a copy to (which shall not constitute notice):
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(contact information above)
If to the Escrow Agent, to
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq,
(contact information above).
Each Party may change its address by written notice in accordance
with this Section.
c. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned
by any of the Parties (whether by operation of law or otherwise) without
the prior written consent of the other Parties. This Agreement will be
binding upon, inure to the benefit of and be enforceable by, the Parties
and their respective heirs, legal representatives, successors and
assigns.
d. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
MAUI GENERAL STORE, INC. PALMERA HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------- ----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Chairman
/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------- ----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
PALMERA STOCKHOLDERS: /s/
----------------------------
/s/
--------------------------
/s/
----------------------------
/s/
-------------------------- /s/
----------------------------
/s/
--------------------------
/s/
----------------------------
/s/
--------------------------
/s/
----------------------------
