Item 1.01. Entry into a Material Definitive Agreement
Magstone Acquisition. On January 8, 2007, Sequiam Corporation (“Sequiam” or the “Company”) acquired 80% of the outstanding shares (“the Purchase Shares”) of Magstone Innovation, Inc., a foreign owned Chinese corporation (“Magstone”), pursuant to an amended and restated stock purchase agreement dated January 8, 2007 by and among Sequiam, Magstone and Shixiong Chen (“the Sole Shareholder”) of Magstone (the “Magstone Acquisition”).
In exchange for the Purchase Shares owned by the Sole Shareholder, Sequiam will issue and deliver to the Sole Shareholder an Installment Note Payable in the amount of $150,000 bearing interest at eight percent per annum, payable in three quarterly installments of $50,000 beginning April 1, 2007. The note is secured by the Purchase Shares. Sequiam will also agree to repay Magstone’s debt to ETI Hong Kong for HKD 1,400,000 (approximately $180,000 USD). As additional consideration, Magstone will distribute to the Sole Shareholder prior to closing the following: all trademarks owned by Magstone and Magstone’s 30% ownership in the Chinese Joint Venture known as New Era Biometrics. The Sole Shareholder shall pay to Magstone 9% of any distributions paid to the Sole Shareholder by the Joint Venture until such time as the Sole Shareholder no longer serves as President of Magstone.
Immediately following the closing, Magstone will change its name to Sequiam East, Inc. (“SEI”)
In conjunction with the foregoing, SEI entered into an employment agreement with the Sole Shareholder to serve as its President and CEO. The term of the agreement is for eight years at a minimum annual salary of $120,000 plus an annual bonus equal to 1.25 percent of SEI’s gross sales. In addition the Company will grant Mr. Chen options to purchase one million five hundred thousand shares of Sequiam Corporation common stock at $0.20 per share in accordance with its 2003 Employee Stock Incentive Plan. The options will fully vest one year from the date of the agreement, or immediately in the event of any earlier termination of employment by SEI. If on December 31, 2008 the net value of the options after exercise is less than one million dollars, then the Company shall grant additional options as necessary to maintain such value.
The principal documents involved in the above referenced transactions, the Amended and Restated Stock Purchase Agreement, the Promissory Note, and the Employment Agreement for Shixiong Chen as President of Sequiam East, Inc. are attached hereto as exhibits to this current report.
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