Dated April 6, 2007 Stock Purchase Agreement Between AND CODA OCTOPUS (US) HOLDINGS INC.
Dated
Xxxxx
0, 0000
Xxxxx
Purchase Agreement
Between
(1)
THE SHAREHOLDERS IDENTIFIED ON SCHEDULE 1 HERETO
(2)
XXXXXX & XXXXXX D/B/A COLMEK SYSTEMS ENGINEERING
AND
CODA
OCTOPUS (US) HOLDINGS INC.
THIS
STOCK PURCHASE AGREEMENT is
made on
April 6 , 2007
BETWEEN:
Parties
| (1) |
Xxxxxx
& Hilton d/b/a Colmek Systems Engineering, a corporation incorporated
and registered in the State of Utah with Company Number 689323-0142
and
whose address is 0000 Xxxxx 0000 Xxxx, Xxxx Xxxx Xxxx, Xxxx 00000
(“Company”);
and
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|
(2)
|
The
shareholders identified on Schedule 9 of this Agreement (each a
“Seller”
and collectively the “Sellers”);
and
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|
(3)
|
Coda
Octopus (US) Holdings, Inc a Delaware corporation having its headquarters
at 000 Xxxx 00xx
Xxxxxx, 0xx
Xxxxx, Xxx Xxxx, XX00000 (“Buyer”)
|
RECITALS
WHEREAS:
|
(A)
|
The
Company is a corporation validly existing and in good standing under
the
laws of the State of Utah, USA; and
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(B)
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The
Sellers as of Closing Date (as is hereinafter defined) will own all
the
issued and outstanding capital stock of the Company;
and
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(C)
|
The
Sellers wish to sell all of the issued and outstanding capital stock
of
the Company (including, without limitation, all stock which was issued
pursuant to the 2004 Stock Option Plan) and, in reliance upon,
inter
alia,
the representations, warranties and undertakings set out in this
Agreement, the Buyer wishing to become the sole shareholder of the
Company
has agreed to purchase the entire issued and outstanding capital
stock of
the Company for the consideration set forth in this Agreement and
upon the
terms set forth in this Agreement.
|
NOW,
THEREFORE, for
and
in consideration of the mutual representations and warranties and agreements
hereinafter set forth and other good and valuable consideration, and upon the
terms and subject to the conditions hereinafter set forth, the parties agree
as
follows:
SECTION
1: INTERPRETATION
1.1. The
definitions and rules of interpretation in this Section apply in this
Agreement.
2
“Agreement”
means
this stock purchase Agreement including the Schedules and all Exhibits in the
agreed form and incorporated herein by reference.
“Business”
means
the
business activities of the Company at Closing and which encompass services
for
the design and manufacture, installation and other support services of
engineering solutions by utilising the application of electronic, software
and
mechanical expertise and skills entailing small-batch manufacture of primarily
electronic equipment and sub-assemblies and which is developed on a bespoke
basis and whose client base is mainly in the commercial and government sectors,
including defense
and security
“Business
Day”
means
a
day other than a Saturday or Sunday or a public holiday in the State of
Utah.
“Buyer’s
Disclosure Schedule”
means
the Schedules delivered to Seller containing exceptions to the Buyer
representations and warranties Schedule 7 and paragraph 7 of Schedule 2.
“Buyer’s
Warranties”
means
those warranties given by Buyer to the Sellers and set forth in Section 7 and
Schedule 7 and “Buyer
Warranty”
means
any of them.
“Cash
Consideration”
means
that part of the Purchase Price set out in 4.1(a) and which is allocated to
each
of the Sellers in accordance with Schedule 9 (Apportionment of Purchase Price).
“Closing”
means
Closing of the sale and purchase of the Shares in accordance with this
Agreement;
“Closing
Agenda”
means
the agenda set forth in Schedule 4.
“Closing
Date”
has
the
meaning set out in Section 6 hereof.
“Closing
Documents”
means
this
Agreement and all the other documents and instruments to be delivered pursuant
to this Agreement
“Code”
means
the Internal Revenue Code of 1986 as amended and the rules and regulations
promulgated thereunder.
“C.O.G.”
means
Coda Octopus Group Inc, a Delaware corporation which has its principal offices
at 000 Xxxx 00xx
Xxxxxx,
0xx
Xxxxx,
Xxx Xxxx, XX00000xxx the issuer of the Consideration Shares.
“Company
Accountants”
means
Xxxxxxx and Xxxxxxxxxxxx at 000 Xxxx 000 Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx,
Xxxx
00000.
“Company”
means
Xxxxxx and Hilton, Inc., d/b/a Colmek Systems Engineering and being a Utah
corporation of which certain particulars are set forth in Schedule
1.
“Consideration
Shares”
means
532,187 shares of common stock having a par value of $0.001 each in the capital
of the C.O.G (as is defined below in this Section 1) to be allotted by C.O.G
in
accordance with Section 4.1(c) and the provisions of Section 13 hereof and
which
are to be issued as part of the consideration for the Shares.
3
“Convertible
Promissory Note”
means
the convertible promissory notes issued by Buyer to each of the Unaccredited
Sellers in a form agreed to by the parties and secured by each such Unaccredited
Seller’s Shares pursuant to the terms of the Pledge Agreement.
“Deep
Sea Associates”
is a Limited Liability Partnership, (an affiliate of Xxxxx Xxxxxx), validly
existing and in good standing under the laws of Utah and which is the Landlord
of the Leasehold Property.
“Deferred
Cash Consideration”
means
that part of the Purchase Price to be paid to each of the Sellers in accordance
with the Apportionment of Purchase Price Schedule and pursuant to the provisions
set forth in Section 4.2(b).
“Disclosed”
means
disclosed in such manner and with sufficient detail to enable a reasonable
person entering into transactions of this type to identify the nature and scope
of the matter disclosed in the Buyer’s Disclosure Schedule and the Seller’s
Disclosure Schedule.
“Seller’s
Disclosure Schedule”
means
the schedules prepared by Sellers and delivered to Buyer containing certain
disclosures required pursuant to the terms of this agreement.
“Employment
Agreement”
means
the agreement for services to be entered into between the Company and (i) Mr.
Xxxxx Xxxxxx and (ii) Xx. Xxxxx XxXx.
“Encumbrance”
means any interest or equity of any person (including any right to acquire,
option or right of pre-emption) or any mortgage, charge, pledge, lien,
assignment, hypothecation, security, interest, title, retention or any other
security agreement or arrangement.
“Exhibits”
means
the Exhibits in the agreed form and so marked and attached to this Agreement
and
which are incorporated by reference herein and made a part hereof.
“Financial
Statement Date”
means
in relation to any Fiscal Year of the Company, the last day of that Fiscal
Year
of the Company.
“Financial
Statements”
means
the financial statements of the Company ended on the Financial Statement Date
(including balance sheet, income statement and statement of cash
flows).
“Fiscal
Year”
means
the financial period of the Company commencing on 1st
November
and ending on October 31st.
“Group”
means
in
relation to a company (wherever incorporated), that company, any company of
which it is a Subsidiary (its holding company) and any other Subsidiaries of
any
such holding company; and each company in a Group is a member of the Group.
Unless the context otherwise requires, the application of the definition of
Group to any company at any time will apply to the company as it is at that
time.
4
“Intellectual
Property Rights”
means
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, database rights, trade secrets, licenses,
internet domain names, information and proprietary rights and know-how and
processes as are necessary to the conduct of the Company’s business as now
conducted and as presently proposed to be conducted and the right to xxx for
past infringements of any of the foregoing rights.
“Key
Employees”
means
Xx. Xxxxx XxXx
“Knowledge”
means
the actual knowledge of the relevant party after reasonable inquiry.
“Lease
Agreement”
means
the agreement for the Leasehold Property between the Company and Deep Seas
Associates dated 2nd April 2006 and which is appended hereto and marked Exhibit
1.1.
“Leasehold
Property”
means
all the buildings and land (more precisely identified in the Lease Agreement)
and which is located in the County of Salt Lake City, in the State of Utah
and
commonly known as Building at 0000 Xxxxx 0000 Xxxx Xxxx Xxxx Xxxx, Xxxx (more
fully described in the Lease Agreement).
“Material
Adverse Change”
means
any circumstance, change in or effect on the business or assets of the Company
that individually or in the aggregate with any other circumstances, changes
in,
or effects on the business or assets of the Company, taken as a whole would
materially adversely affect the ability of the Buyer to operate or conduct
the
business in which it is currently operated or conducted by the
Company.
“New
Leasehold Agreement”
means
a
Lease agreement for the Leasehold Property between the Company and Deep Seas
Associates which is to be entered into as a condition of this Agreement in
substantially the form attached hereto as Exhibit 1.1(a).
“Parties”
means
the Sellers and the Buyer collectively; and “the Party” shall mean individually
any of these Parties as the context requires.
“Permitted
Encumbrances”
means
(a) liens for taxes or assessments not at the time due and (b) liens in respect
of pledges or deposits under workers’ compensation laws or similar legislation,
carriers’, warehousemen’s, mechanics’, laborers’ and material men’s and similar
liens, if the obligations secured by such liens are not then
delinquent.
“Pledge
Agreement”
means the agreement for the security interest to be granted in favor of the
Sellers and the Unaccredited Sellers (the terms of sale and purchase for the
latter being governed by the Unaccredited Stock Purchase Agreements) in respect
of the Deferred Cash Consideration and the Unccredited Sellers Convertible
Promissory Note as is defined in the Unaccredited Stock Purchase
Agreements.
“Principal
Sellers”
means Xxxxx Xxxxxx and Xxxxx XxXx.
“Proceeding”
means
any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, judicial or investigative, whether
formal or informal, whether public or private) commenced, brought, conducted
or
heard by or before, or otherwise involving, any governmental body or
arbitrator.
5
“Promissory
Notes”
means the
secured Promissory Notes issued by Buyer to each of the Sellers in the agreed
form constituted and subject to the terms of the Pledge Agreement.
“Properties”
means
all items of personal and mixed, tangible and intangible property (excluding
Intellectual Property Rights), rights and assets of the Company and
“Property”
means
any of them and includes every part of each of them and Schedule 10 shortly
describes all such properties having an original or replacement cost or value
of
greater than $2,500.
“Purchase
Price”
means
the Cash Consideration, the Deferred Cash Consideration and the Consideration
Shares payable as set forth in Section 4.1.
“Regulatory
Authorities”
means,
collectively, all federal and state regulatory agencies having jurisdiction
over
the Parties and their
respective affiliates.
“Shares”
means
all the issued and outstanding shares in the Company, including those issued
pursuant to the 2004 Stock Option Plan, and comprising those set forth in
Schedule 1 hereto.
“Share
Receiving Sellers”
means
Mr. Xxxxx Xxxxxx, Xx. Xxxxx Xxxxxxx, Mr. Xxxxx Xxxxxxx, Xx. Xxxxx XxXx and
who
shall each receive the number of Consideration Shares shown in the Apportionment
of Purchase Price Schedule.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Sellers
Accounts”
means
the account of each of the Sellers designated in Schedule 9 hereto and which
all
payments due to each of the Sellers shall be made into by the Buyer.
“Sellers’
Warranties”
means
the warranties given to the Buyer by the Principal Sellers and which are set
forth in Section 7 and Schedule 5 hereof and “Sellers’
Warranty”
means
any of them.
“Subsidiary”
in
relation to a company (the holding company), any other company in which the
holding company (or a person acting on its behalf) directly or indirectly holds
or controls either: (a) a majority of the voting rights exercisable at general
meetings of the company; or (b) the right to appoint or remove directors having
a majority of the voting rights exercisable at meetings of the board of
directors of the company; and any company which is a Subsidiary of another
company is also a Subsidiary of that company’s holding company. Unless the
context otherwise requires, the application of the definition of Subsidiary
to
any company at any time shall apply to the company as it is at that
time.
“Tax
Claim”:
means
any assessment (including self-assessment), notice, demand, letter or other
document issued or action taken by or on behalf of any Regulatory
Authority.
“Tax
Return”
means
any and all returns, reports, filings, declarations and statements relating
to
Taxes that are required to be filed, recorded,
or deposited with any Regulatory Authority, including any attachment thereto
or
amendment thereof.
6
“Taxes”
means
any federal, state, county, local, foreign or other tax, charge, imposition
or
other levy (including interest or penalties thereon)
including without limitation, income taxes, estimated taxes, excise taxes,
sales
taxes, use taxes, gross receipts taxes, franchise taxes, taxes on earnings
and
profits, employment and payroll related taxes, property taxes, real property
transfer taxes, Federal Insurance Contributions Act taxes, any taxes or fees
related to unclaimed property, taxes on value added and import duties, whether
or not measured in whole or in part by net income, imposed by the United States
or any political subdivision thereof or by any jurisdiction other than the
United States or any political subdivision thereof.
“Transaction”:
means
the transaction contemplated by this Agreement or any part of that
transaction.
“Unaccredited
Sellers”
means
Mr. Xxxxx Xxxxxx, Xx. Xxxx Xxxxxx, Mr. Xxxxxx Xxxxxx and Mr. Xxx Xxxxxx and
for
which the sale and purchase of each of their minority holdings in the Company
are governed by the Unaccredited Stock Purchase Agreement.
“Unaccredited
Stock Purchase Agreements”
shall
mean the stock purchase agreements entered into between Buyer and each of the
Unaccredited Sellers of even date for the purchase of such Unaccredited Seller’s
Shares.
| 1.2. |
Section
and Schedule headings do not affect the interpretation of this
Agreement.
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| 1.3. |
A
person
includes a corporate or unincorporated
body.
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| 1.4. |
Words
in the singular include the plural and in the plural include the
singular,
except where the context would indicate
otherwise.
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| 1.5. |
A
reference to one gender includes a reference to the other
gender.
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| 1.6. |
A
reference to a law is a reference to it as it is in force for the
time
being taking account of any amendment, extension, application or
re-enactment and includes any subordinate legislation for the time
being
in force made under it.
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| 1.7. |
Writing
or
written
includes faxes but not e-mail.
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| 1.8. |
Documents
in agreed
form
are documents in the form agreed by the Parties to this Agreement
and
initialed by them for
identification.
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Closing
of this Agreement is subject to the
Conditions in Schedule 2 being satisfied up to and including the
Closing
Date or waived by the date and time provided in Section 2.4; and
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2.2.
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If
any of the Conditions have not been satisfied or waived by the date
and
time provided in Section 2.1 and Section 2.4, this Agreement shall
cease
to have effect immediately after that time on that date except for
the
provisions mentioned in Section
2.3.
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7
| (a) |
Section
1 (Interpretation);
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| (b) |
Section
2 (Conditions);
|
| (c) |
Section
17 (Confidentiality and
announcements);
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| (d) |
Section
20 (Whole agreement);
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| (e) |
Section
21 (Variation and waiver);
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| (f) |
Section
22 (Costs);
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| (g) |
Section
23 (Notice); and
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| (h) |
Section
27 (Governing law and jurisdiction).
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| 2.4. |
The
Sellers and the Buyer shall use all commercially reasonable endeavors
so
far as lies within their respective powers to procure that the Conditions
are satisfied as soon as practicable and in any event no later than
Close
of Business:
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| (a) |
December
15, 2006; or
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| (b) |
such
later time and date as may be agreed in writing by the Seller and
Buyer.
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2.5
|
The
Buyer and the Sellers shall co-operate fully in all commercially
reasonable actions necessary to procure the satisfaction of the
Conditions, including, but not limited to, the provision by all Parties
of
all information reasonably necessary to make any notification or
filing
(that the Buyer reasonable deems to be necessary) or as requested
by any
relevant authority, and keeping all Parties informed of the progress
of
any notification or filing and providing such assistance as may reasonably
be required.
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3.1.
|
On
the terms of this Agreement the Sellers shall sell and the Buyer
shall buy
with effect from Closing the Shares.
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| 3.2. |
Each
Seller represents and warrants that he:
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(b)
|
shall
deliver full legal and beneficial title to the Shares;
and
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(c)
|
sells
the Shares free from all Encumbrances other than Permitted
Encumbrances.
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3.3.
|
Each
Seller waives any right of pre-emption or other restriction on transfer
in
respect of the Shares or any of them conferred on him under the articles
of incorporation (including any articles of amendment) of the Company
or
otherwise and shall procure (and produce as part of the Closing Documents)
the irrevocable waiver of any such right or restriction conferred
on any
other person who is not a party to this
Agreement.
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8
|
3.4.
|
The
Principal Sellers represent and warrant that (i) there is no right
to
require the Company to issue any share capital and no Encumbrance
affecting any unissued shares or debentures or other unissued securities
of the Company, and (ii) there is no commitment which has been given
to
create an Encumbrance affecting any unissued shares or debentures
or other
unissued securities of the Company, and (iii) there is no commitment
of
the Company to issue ay share capital and no person has claimed any
rights
in connection with any of those
things.
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3.5.
|
Each
Seller represents and warrants that no commitment has been given
to create
an Encumbrance affecting his
Shares.
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3.6.
|
Each
of the Seller’s representations and warranties under this Section 3 are
made severally and not jointly.
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3.7.
|
The
Shares are sold with all rights that attach, or may in the future
attach,
to them (including, in particular, the right to receive all dividends
and
distributions declared, made or paid on or after the date of this
agreement).
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3.8.
|
The
Buyer is not obliged to complete the purchase of any of the Shares
unless
the purchase of all the Shares is completed
simultaneously.
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SECTION
4: CONSIDERATION
| 4.1. |
The
Purchase Price for the Shares:
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(a)
|
Seven
Hundred and Forty Thousand (740,000) United States Dollars at Closing
Date
in cleared funds in each of the Sellers’ Accounts and payment made in
accordance with this Section shall constitute a valid discharge of
the
Buyer’s obligations under this Section
4.2;
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(b)
|
Six
Hundred and Forty Seven Thousand Five Hundred (647,500) United States
Dollars which shall be payable in full 12 months from the Closing
Date
pursuant to the terms of the Promissory Note and secured against
the
Shares pursuant to the terms of a Pledge Agreement in substantially
the
same form as is set forth in Exhibit 4.1(b) (Pledge
Agreement);
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(c)
|
The
allotment and issue the Consideration Shares to the Share Receiving
Sellers at Closing Date in such amounts set forth on the Apportionment
of
Purchase Price Schedule; and
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| 4.2. |
Until
the Deferred Cash Consideration is satisfied in full, the Buyer shall
issue to each Seller a Promissory Note for the Deferred Cash Consideration
and grant a security interest in or over the Shares in favor of the
Sellers to secure the Deferred Cash Consideration on terms and conditions
substantially similar to those set out in the Pledge Agreement.
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4.3.
|
The
Buyer shall procure or cause that the Consideration Shares to be
allotted
and issued to the Share Receiving Sellers or their nominees on Closing
Date. The Share Receiving Sellers agree and acknowledge that Consideration
Shares to be allotted and issued pursuant to Section 4.1 (c) shall
be
subject to the restrictions on transfer set forth in Section 13.
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9
SECTION
5: CASH CONSIDERATION CONDITIONS
| 5.1. |
The
assumption on which the Cash Consideration is based is that at Closing
Date the Company shall have Cash equal or greater than US$200,000
(“Closing Cash Consideration
Condition”).
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5.2.
|
The
Closing Cash Consideration Condition shall be ascertained from the
Company’s Bank Account at Closing Date and the Sellers shall at Closing
Date produce a bank statement showing the closing cash
balance.
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5.3.
|
In
the event that the Closing Cash Consideration Condition is not satisfied
at Closing, the Cash Consideration shall be adjusted on a
dollar-for-dollar basis.
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6.1.
|
Closing
shall take place on the Closing
Date:
|
| (a) |
at
the offices of Seller’s lawyers; or
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| (b) |
at
any other place agreed in writing by the Seller and the
Buyer.
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| 6.2. |
Closing
Date
means December 15, 2006 but, if the Conditions in Schedule 2 have
not been
satisfied or waived in accordance with Section 2 on or before that
date,
then (a) the
second Business Day after they are all satisfied or waived;
or
(b) any other date agreed in writing by the Sellers and the
Buyer.
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6.3.
|
The
Sellers undertake to the Buyer that the business of the Company shall
be
conducted in the manner provided for in Schedule 3 from the date
of this
Agreement until Closing and gives the Buyer the undertakings set
out in
that Schedule.
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At
Closing the Sellers shall:
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|
transfer
the Shares in such form as is necessary for the Buyer to establish
legal
ownership in accordance with the applicable laws of the United States
including federal and state law;
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(b)
|
deliver
a certified copy of the resolution adopted by the Board of the Company
authorizing the Transaction and the execution and delivery by the
officers
specified in the resolution of this Agreement, any documents necessary
to
transfer the Shares in accordance with Section 6.4(a) and any other
documents referred to in this
Agreement;
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(c)
|
deliver
all other documents and instruments (in their proper form) identified
in
the Closing Agenda as
documents to be delivered by the Seller at Closing;
and
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(d)
|
procure
that a Board meeting and a Shareholder meeting of the Company is
held at
which the business identified for that meeting in the Closing Agenda
is
conducted.
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|
6.5.
|
At
Closing the Buyer shall:
|
|
(a)
|
pay
the Cash Consideration in clear funds into each of Sellers Account
by wire
transfer or other immediately available funds. Payment made in accordance
with this Section shall constitute a valid discharge of the Buyer’s
obligations with respect to the Cash
Consideration;
|
10
|
(b)
|
deliver
a certified copy of the resolution adopted by the board of directors
of
the Buyer authorizing the Transaction and the execution and delivery
by
the officers specified in the resolution of this Agreement, and any
other
documents referred to in this Agreement as being required to be delivered
by it;
|
|
(c)
|
cause
the allotment and issue of the Consideration Shares to each of the
Share
Receiving Sellers;
|
|
(d)
|
deliver
each Promissory Note to each of the Sellers;
and
|
|
(e)
|
deliver
all other documents and instruments (in their proper form) identified
in
the Closing Agenda as documents to be delivered by the Buyer at
Closing.
|
|
(b)
|
defer
Closing to a date no more than 28 days after the date on which Closing
would otherwise have taken place;
or
|
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(c)
|
rescind
this Agreement.
|
| 6.7. |
The
Parties may defer Closing under Section 6.6 only once, but otherwise
Section 6.6 applies to a Closing deferred under that Section as it
applies
to a Closing that has not been deferred. Notwithstanding anything
to the
contrary contained in this Agreement, if the Closing has not occurred
on
or before January 12, 2007, then either party may terminate this
Agreement
and all obligations of the parties hereunder shall terminate and
be of no
further force and effect; provided, however, the failure to close
on or
before such date is no a direct result of the intentional misconduct
of
the terminating party.
|
| 6.8. |
As
soon as practicable after Closing, the Seller shall send to the Buyer
(at
the Buyer’s registered office for the time being) all records,
correspondence, documents, files, memoranda and other papers relating
to
the Company, not otherwise required to be delivered at Closing under
this
Agreement, which are not kept at the Leasehold
Property.
|
SECTION
7: REPRESENTATIONS AND WARRANTIES
| 7.1. |
The
Buyer enters into this Agreement on the basis of, and in reliance
on, the
Sellers Warranties set out in this Agreement and Schedule
5.
|
|
7.2.
|
The
Sellers enter into this Agreement on the basis of, and in reliance
on, the
Buyer’s Warranties set out in this Agreement.
|
11
| 7.3. |
Each
Seller warrants and represents to the Buyer that each Seller Warranty
made
by such Seller is true and not misleading on the date of this Agreement
except as Disclosed in the Seller Disclosure Schedules and the Buyer
warrants and represents to the Sellers that each Buyer Warranty is
true
and not misleading on the date of this Agreement except as
Disclosed.
|
|
7.4.
|
The
Sellers Warranties and the Buyer Warranties are deemed to be repeated
at
Closing and any reference made to the date of this Agreement (whether
express or implied) in relation to any Seller Warranty or Buyer Warranty
shall be construed, in relation to any such repetition, as a reference
to
Closing.
|
|
7.5.
|
The
Sellers shall ensure that the they and the Company, do not do or
omit to
do anything which would, at any time before or at Closing, be materially
inconsistent with any of the Sellers Warranties, breach any Sellers’
Warranty or make any Sellers’ Warranty untrue or misleading.
|
|
7.6.
|
The
Buyer shall ensure that the Buyer does not do or omit to do anything
which
would, at any time before or at Closing, be materially inconsistent
with
any of the Buyer Warranties, breach any Buyer Warranty or make any
Buyer
Warranty untrue or misleading.
|
|
7.7.
|
Buyer
and Seller are entitled to amend and revise the Buyer Disclosure
Schedules
and Seller Disclosure Schedules, respectively, prior to
Closing.
|
|
7.8.
|
If
at any time before or at Closing the Buyer or Seller becomes aware
that a
Sellers’ Warranty or a Buyer’s Warranty, respectively, has been breached,
is untrue or is misleading, or has a reasonable expectation that
any of
those things might occur, it must
immediately:
|
|
(a)
|
notify
the other party in sufficient detail to enable the such party to
make an
accurate assessment of the situation;
and
|
|
(b)
|
if
requested by such other party, use its best endeavors to prevent
or remedy
the notified occurrence.
|
|
7.9.
|
If
at any time before or at Closing it becomes apparent that (i) a Sellers’
Warranty has been breached, is untrue or misleading (ii) Buyer is
dissatisfied with the final form of Sellers Disclosure Schedules,
or (iii)
that the Sellers have breached any term of this Agreement that in
any case
is, in Buyer’s discretion, material to the sale of the Shares, the Buyer
may:
|
|
(a)
|
rescind
this Agreement by notice to the Sellers;
or
|
|
(b)
|
waive
such breached, untruthful or misleading Sellers’ Warranty and proceed to
Closing.
|
|
7.10
|
If
at any time before or at Closing it becomes apparent that (i) a Buyer
Warranty has been breached, is untrue or misleading, (ii) Seller
is
dissatisfied with the final form of Buyer’s Disclosure Schedules, or (iii)
that the Buyer has breached any term of this Agreement that in any
case
is, in Sellers’ discretion, material to the repayment of the Promissory
Note or value of the Consideration Shares, the Sellers
may:
|
| (a) |
rescind
this Agreement by notice to the Buyer;
or
|
| (b) |
waive
such breached, untruthful or misleading Buyer Warranty and proceed
to
Closing.
|
12
|
7.11
|
Each
of the Seller’s Warranties and Buyers Warranties is separate and, unless
specifically provided, is not limited by reference to any other Seller’s
Warranty or Buyer Warranty or anything in this
Agreement.
|
| 8.1. |
From
and after the Closing, the Buyer and the Sellers (in such capacity,
an
“Indemnitor”)
shall, subject to the limitations hereof, reimburse, indemnify and
hold
harmless each other party (in such capacity, an “Indemnitee”)
and their respective officers, directors, employees, agents,
representatives, and successors and assigns from and against and
in
respect of any and all reasonably incurred out-of-pocket damages,
losses,
deficiencies, liabilities, claims, demands, charges, costs and expenses
of
every nature and character whatsoever, including, without limitation,
reasonable attorneys’ fees and costs (collectively, the “Losses”)
that result from, relate to or arise out
of:
|
|
(a)
|
any
misrepresentation or breach of Warranty (Sellers or Buyers Warranty)
of
the Indemnitor in this Agreement; and
|
|
(b)
|
unless
otherwise unconditionally waived by the Indemnitee in accordance
with the
provisions set forth in this Agreement, the failure of the Indemnitor
to
perform any agreement or covenant on its part required to be performed
on
or after the Closing Date.
|
| 8.2. |
Subject
always to the provisions of Section 8.4, the sum of all Losses (except
where such Losses arise from indemnification arising under Section
17.3
(Taxes) of Schedule 5) incurred by the Indemnitee in the aggregate
must
exceed $10,000 before such Party shall be entitled to indemnification
hereunder; provided, however, once such Losses exceed $10,000, such
party
shall be entitled to indemnification for all Losses provided further
that,
except as provided in Section 19.3, the
total liability of Indemnitor for such losses shall not exceed an
amount
equal to the sum of the Cash Consideration, Deferred Consideration,
and
the Consideration Shares; provided, however, that in no event shall
the
total liability of any individual Seller Indemnitor for such losses
exceed
that portion of the Purchase Price actually received by such Seller
in
cash or shares of C.O.G. (whether received from the Cash Consideration,
Deferred Consideration or the Consideration Share). Seller Indemnitors’
liability for any Losses shall be recovered first by cancellation
of the
Consideration Shares, second by a Set-Off if such Set-Off is permitted
under Section 8.5, and last from the Indemnitors. For purposes of
this
Section 8.2, only, the Consideration Shares shall be deemed to have
a
value of the greater of (i) $1.00 and (ii) the average trading price
over
the ten-day period immediately preceding the date that the indemnification
payment obligation becomes due and payable to Indemnitee as reported
by
the Pink Sheets or other exchange on which shares of C.O.G. common
stock
are trading.
|
|
8.3.
|
All
of the representations and warranties of the Parties contained herein
shall expire 12 months after the Closing Date, except for the
representations and warranties set out in Sections 3.2 through to
3.6,
inclusive, (Sale and Purchase of Shares) and paragraph 5 of Schedule
5
(“Capitalization Warranties), which shall survive indefinitely and
Section
12 (Tax Undertakings) and paragraph 17 of Schedule 5 (Taxes), which
shall
survive until the applicable statute of limitations has expired.
Accordingly, no Indemnitor shall have any liability or indemnification
pursuant to this Agreement in respect of claims asserted against
it after
the foregoing indemnification periods have expired.
|
13
|
8.4.
|
The
Indemnitee shall notify the Indemnitor promptly after becoming aware
of,
and shall provide to the Indemnitor as soon as practicable thereafter
all
information and documentation reasonably necessary to support and
verify
any Losses that the Indemnitee shall have determined to have suffered
or
incurred or may suffer or incur under a claim for indemnification
hereunder. Indemnitor shall either accept or reject Indemnitee’s assertion
of Losses in writing within 30 business days of receipt of Indemnitee’s
notice. In the event Indemnitor does not accept or reject the assertion
of
Losses within such 30-business day period then Indemnitor shall be
deemed
to have accepted Indemnitee’s assertion of Losses. Notwithstanding the
foregoing, the failure to so notify the Indemnitor shall not relieve
the
Indemnitor of any Liability that it may have to any Indemnified Party,
except to the extent that the Indemnitor demonstrates that it is
prejudiced by the Indemnitee’s failure to give such notice. The
obligations of an Indemnitor will not apply to any claim for
indemnification by an Indemnitee of which the Indemnitor does not
receive
notice prior to the end of the applicable survival period as described
in
Section 8.3.
|
|
8.5
|
Set-Off
Rights.
In addition to such other rights, powers and remedies that Buyer
may have
under law or at equity, Buyer shall be entitled to set-off any amounts
owed by Buyer to Sellers under this Agreement or any other agreements
entered into between Buyer and Sellers including the Promissory Notes,,
against any amounts owed by Sellers to a Buyer as an Indemnitee,
provided
Buyer has (i) provided notice to Sellers of the Losses in accordance
with
Section 8.4 above and Seller has acknowledged and accepted the Losses
in
writing (or failed to respond in writing in the designated time period),
or (ii) Buyer has been awarded such Losses by a court of competent
jurisdiction. Buyer shall not otherwise be entitled to set off any
amounts
under the Promissory Notes for any
reason.
|
| 8.6 |
Procedure
for Indemnification - Third Party Claims.
|
(a)
Upon
receipt by an Indemnitee of notice of the commencement of any Proceeding by
a
third party that is not an affiliate or a member of Indemnitee’s Group (a “Third
Party Claim”) against it or a written threat, such Indemnitee shall, if a claim
is to be made against an Indemnitor under this Section 8, give notice to the
Indemnitor of the commencement of such Third Party Claim as soon as practicable,
but in no event later than ten (10) days after the Indemnitee shall have been
served or received such written threat, but the failure to so notify the
Indemnitor shall not relieve the Indemnitor of any Liability that it may have
to
any Indemnitee, except to the extent that the Indemnitor demonstrates that
the
defense of such Third Party Claim is prejudiced by the Indemnitee’s failure to
give such notice.
(b)
If
a
Third Party Claim is brought or threatened against an Indemnitee and it gives
proper notice to the Indemnitor of the commencement of such Third Party Claim,
the Indemnitor will be entitled to control the defense and settlement of such
Third Party Claim (unless the Indemnitor fails to provide reasonable assurance
to the Indemnitee of the Indemnitor’s financial capacity to defend such Third
Party Claim and provide indemnification in accordance with this Section 7 with
respect to such Third Party Claim) and, to the extent that it elects to assume
the control of the defense and settlement of such Third Party Claim with counsel
satisfactory to the Indemnitee (who shall not unreasonably withhold or delay
confirmation that it is satisfied with such counsel) and provides notice to
the
Indemnitor of its election to assume the defense and control of such Third
Party
Claim, the Indemnitor shall not, as long as it legitimately conducts such
defense or settlement, be liable to the Indemnitee under this Section 8 for
any
fees of other counsel or any other expenses with respect to the defense or
settlement of such Third Party Claim, in each case subsequently incurred by
the
Indemnitee in connection with the defense or settlement of such Third Party
Claim, other than reasonable costs of investigation.
14
If
the
Indemnitor assumes control of the defense and settlement of a Third Party Claim,
(i) it shall be conclusively established for purposes of this Agreement that
the
claims made in such Third Party Claim are within the scope of and subject to
indemnification; (ii) no compromise, discharge or settlement of, or admission
of
Liability in connection with, any claims and binding on the Indemnitee may
be
effected by the Indemnitor without the Indemnified Party’s written consent
unless (A) there is no finding or admission of any violation of Law or any
violation of the rights of any Person and no effect on any other claims that
may
be made against the Indemnitee, and (B) the sole relief or settlement provided
is monetary damages or payments that are paid in full by the Indemnitor, (iii)
the Indemnitee shall have no Liability with respect to any compromise or
settlement of such claims effected without its written consent, and (iv) the
Indemnitee shall cooperate in all reasonable respects with the Indemnitor in
connection with such defense, and shall have the right to participate, at the
Indemnitee’s sole expense, in such defense and settlement, with counsel selected
by it. If proper notice is given to an Indemnitor of the commencement of any
Third Party Claim and the Indemnitor does not, within ten (10) days after the
Indemnitee’s notice is given, give notice to the Indemnitee of its election to
assume control of the defense and settlement of such Third Party Claim, the
Indemnitor shall be bound by any determination made in such Third Party Claim
or
any compromise or settlement effected by the Indemnitee, provided that the
Indemnitor acts reasonably and in good faith. The Indemnitee must mitigate
damages and liability with respect to Third Party Claims. The Indemnitor does
not guarantee settlement and has no obligation to settle.
|
8.7.1.
|
No
liability shall arise to the extent that it relates to matters Disclosed
by either of the Parties in the Disclosure Schedule or any matter
specifically and fully provided for in the Financial Statements (including
the notes thereto) or matters disclosed by the Buyer in the Buyer’s
Disclosure Schedule.
|
| 8.8 |
EXCEPT
IN THE CASE OF WILLFUL MISCONDUCT OR FRAUD, NOTWITHSTANDING ANY OTHER
PROVISION OF THIS AGREEMENT, IN NO EVENT SHALL ANY PARTY BE LIABLE
FOR ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL, INDIRECT OR PUNITIVE
DAMAGES.
|
| 8.9 |
Except
in the case of willful misconduct or fraud, notwithstanding anything
to
the contrary herein, indemnification pursuant to this Section 8 shall
constitute the sole and exclusive remedy of Buyer, Sellers and C.O.G.
under this Agreement and the certificates, documents and instruments
delivered in connection herewith. Except in the case of fraud, except
for
the remedies referred to in the foregoing sentence, each party hereby
waives, to the fullest extent permitted under applicable law, any
and all
remedies it may have against the others or any affiliates relating
to the
subject matter of this Agreement, whether arising under or based
upon any
foreign, Federal, state, regional or local statute, ordinance, judgment,
ruling or regulations, or arising under or based upon common law
or
otherwise. Except for any set-off rights that may exist pursuant
to
Section 8.5, this section does not excuse full and timely payment
of the
Purchase Price
|
SECTION
9: TAX CHARACTERIZATION
|
9.1.
|
Any
payment made pursuant to the indemnification provisions (Section
8) or the
Tax Undertakings provisions (Section 12) shall be treated by each
of the
parties hereto as an adjustment to the Purchase Price paid by the
Buyer
for the Shares for all Tax and financial accounting purposes. The
Parties
hereto agree to account for the transactions contemplated herein
in a
manner consistent with all the provisions of this Agreement when
filing
their respective Tax Returns and the Tax Return of the
Company.
|
15
SECTION
10: LEASEHOLD PROPERTY
| 10.1. |
The
Parties agree that the sale and purchase of the Shares is conditional
upon
the Buyer and the Company at Closing Date being entitled to use the
Leasehold Property and the Sellers shall cause or procure that a
New Lease
is entered into between the Company and Deep Seas Associates and
appropriate waivers (in a form and substance satisfactory to the
Buyer) of
all past breaches of the existing Lease Agreement be given as a Closing
Condition.
|
| 10.2. |
The
Parties agree that in the event that the Stock Purchase Agreement
cannot
be consummated for whatever reason, the Buyer assumes no liability
to the
Sellers or the Deep Seas Associates under the New Lease.
|
SECTION
11: EMPLOYMENT AGREEMENTS
| 11.1. |
On
Closing Mr. Xxxxx Xxxxxx shall enter into the Employment Agreement
with
the Company in a substantially the form attached hereto as Exhibit
11.1.
|
| 11.2. |
In
consideration for the grant of the option in the C.O.G. shares specified
in the Option Agreements set out in Schedule
11.2(a) on Closing Xx. Xxxxx XxXx shall enter into the Employment
Agreement with the Company in substantially in the form attached
hereto as
Exhibit 11.2(b).
|
| 11.3. |
The
Parties agree that in the event that the Stock Purchase Agreement
cannot
be consummated for whatever reason, the Buyer assumes no liability
to Mr.
Xxxxx Xxxxxx or the Key Employee in connection with any of the agreements
contemplated in this Section.
|
SECTION
12:
TAX UNDERTAKINGS
| 12.1. |
Transfer
Taxes
|
| (a) |
Any
transfer taxes incurred by Sellers in connection with the sale of
the
capital stock of the Company to the Buyer pursuant to this Agreement
shall
be borne by Sellers.
|
| (b) |
The
Sellers shall prepare and file, at their own expense, all necessary
tax
returns and other documentation with respect to all such transfer
taxes.
|
|
(a)
|
The
Sellers covenant with the Buyer to repay to the Buyer any Taxes which
are
due but are unpaid at Closing and for which no provision is made
in the
Financial Statements of the Company. Except for taxes referenced
in
Section 12.1, The Sellers shall not be responsible for any taxes
due after
Closing.
|
|
(b)
|
To
the extent that any corporation tax returns of the Company have not
been
filed when due prior to the Closing (“Pre-Closing
Tax Returns”),
the Sellers shall have caused such tax returns and any assessments
due to
be filed and paid to the Regulatory Authorities before
Closing.
If
the Pre-Closing Tax Returns have not been filed prior to the Closing,
the
Buyer shall procure that the Company, at the Sellers’ cost and expense,
afford such access to its books, accounts and records as is necessary
and
reasonable to enable the Sellers or their duly authorized agent to
prepare
the Pre-Closing Tax Returns of the Company and conduct matters relating
to
them in accordance with this Section 12. Sellers shall be responsible
for
any late filing penalties incurred as a result of filing Pre-Closing
Tax
Returns after the Closing.
|
16
SECTION
13: RESTRICTIONS ON TRANSFER
| 13.1. |
Each
of the Consideration Shares shall rank pari passu with the existing
common
stock of $0.001 par value each in the capital of C.O.G including
the right
to receive all dividends declared made or paid after Closing (save
that
they shall not rank for any dividend or other distribution of C.O.G
declared made or paid by reference to a record date before Closing
Date).
|
| 13.2 |
Each
of the acknowledgements, agreements, representations and warranties
made
by Shares Receiving Sellers under this Section 13 are made severally
and
not jointly.
|
| 13.3 |
Each
of the Shares Receiving Sellers (i) understands and acknowledges
that the
Consideration Shares have not been registered under the Securities
Act, or
under any state securities laws, and are being exchanged in reliance
upon
federal and state exemptions for transactions not involving a public
offering, (ii) is acquiring the Consideration Shares solely for his
own
account for investment purposes, and not with a view towards the
resale or
distribution thereof or with any present intention of offering or
selling
any of the Consideration Shares in a transaction that would violate
the
Securities Act or the securities laws of Utah or any other state
of the
United States or any other applicable jurisdiction, (iii) is an
“accredited investor”, as such term is defined under Rule 501(a) of the
Securities Act or is a sophisticated investor with such knowledge
and
experience in business and financial matters to evaluate the merits
and
risks inherent in holding the Consideration Shares, (iv) has received
certain information concerning the Buyer (specifically those subject
to
the confidentiality agreement between the Parties dated October 24,
2006
and has had the opportunity to obtain such financial and additional
information and ask such questions of representatives of the Buyer
as
desired in order to evaluate the merits and the risks inherent in holding
the Consideration Shares bearing in mind that the Issuer’s shares are
traded on the Pink Sheets, and to verify the accuracy of any information
that is provided to the Sellers pursuant to this Section 13, and
(v) is
able to bear the economic risk and lack of liquidity inherent in
holding
the Consideration Shares which have not been registered under the
Securities Act.
|
| 13.4. |
Each
of the Shares Receiving Sellers acknowledges and agrees that they
will
not, upon receipt of the Consideration Shares to be received by him
in
exchange for the Shares held by him, offer, sell, pledge or otherwise
transfer or dispose of any of the Consideration Shares except (i)
as
permitted by, and in accordance with, an exemption from the registration
requirements of the Securities Act (and based upon an opinion of
counsel
if the Buyer so requests) or (ii) pursuant to an effective registration
statement under the Securities Act, and, in each case, in accordance
with
any applicable securities laws of any state of the United States
or any
other applicable jurisdiction. The Seller understands that the registrar
and transfer agent will not be required to accept for registration
of
transfer any of the Consideration Shares except upon presentation
of
evidence reasonably satisfactory to the Buyer that the foregoing
restrictions on transfer have been complied with.
|
17
| 13.5. |
Each
of the Shares Receiving Sellers acknowledges and agrees that the
Buyer may
issue stop transfer instructions to its registrar and transfer agent
with
respect to the Consideration Shares to be received by him in exchange
for
the Shares in the event that he attempts to transfer such shares
in
violation of this Agreement and that a restrictive legend will be
placed
on the certificates delivered to him evidencing the Consideration
Shares
in substantially the following
form:
|
“This
certificate and the shares represented hereby have been issued pursuant to
a
transaction exempt from registration under the Securities Act of 1933, as
amended and may not be sold or otherwise disposed of unless registered under
the
Securities Act pursuant to a registration statement in effect at the time or
unless the proposed sale or disposition can be made without registration in
reliance upon an exemption from the registration requirements promulgated under
the Securities Act.”
| 13.6. |
Each
of the Shares Receiving Sellers acknowledges that, except as otherwise
provided in Section 14 of this Agreement, the Buyer is under no obligation
to register the sale, transfer, pledge or other disposition of the
Consideration Shares to be received by him or to take any exemption
from
registration available.
|
| 13.7. |
Each
of the Shares Receiving Sellers hereby severally and not jointly
covenants
to the Buyer that he will not transfer, sell, assign, pledge, hypothecate
or otherwise dispose of or encumber any of the Consideration Shares
in
violation of U.S securities laws.
|
SECTION
14: REGISTRATION
RIGHTS FOR THE CONSIDERATION SHARES
|
14.1.
|
The
Buyer shall procure that C.O.G shall file a registration statement
with
the Commission on Form SB-2 or on such other form as is available
on or
around, but no later than, one hundred and thirty-five (135) days
after
the Closing Date. The Buyer shall cause the C.O.G to use its commercially
reasonable best efforts to promptly respond to any Commission comments
or
questions regarding the Registration Statement and cause such Registration
Statement to go effective as soon thereafter as reasonably practicable,
but in any event on or before June 21, 2007 (the “Registration Deadline”).
In the event C.O.G. does not meet the Registration Deadline, Buyer
shall
cause C.O.G to pay to Sellers $7,500 for each thirty (30) day period
that
elapses (each a “Penalty Payment”). The first three Penalty Payments shall
be payable in the form of 7,500 shares of C.O.G.’s common stock. All
subsequent Penalty Payment shall be payable cash or other immediately
available funds. . A Penalty Payment shall be due and payable on
or before
the fifth business day following each such thirty-day period. In
no event
shall C.O.G. be required to make more than eighteen (18) penalty
payments.
|
SECTION
15: LOAN
ACCOUNTS AND GUARANTEES
| 15.1. |
Except
as Disclosed on the Seller Disclosure Schedules, the Sellers shall
procure
that on Closing Date:
|
|
(a)
|
all
indebtedness due from the Sellers to the Company is satisfied in
full;
|
|
(b)
|
all
indebtedness due from any officer of the Company is satisfied in
full;
|
18
|
(c)
|
all
indebtedness due from the Company to any officer of the Company is
satisfied in full.
|
|
(d)
|
all
indebtedness due from any of the Company to the Sellers is satisfied
in
full.
|
| 15.2. |
All
guarantees (with the exception of guarantees given by the Company
in
connection with the sale of its products and in the ordinary course
of
their businesses) are Disclosed in the Seller Disclosure
Schedules.
|
| 15.3. |
Except
as is provided in the Disclosure Schedules and with the exception
of
guarantees given by the Company in connection with the sale of its
products and in the ordinary course of its business, the Seller shall
procure that on Closing the Company is released from all guarantees
and
indemnities given by it.
|
| 15.4. |
The
Buyer shall use reasonable endeavors to procure that as from the
Closing
Date the Sellers are released from any guarantees and indemnities
given by
him in respect of the lawful obligations of the Company and of which
full
particulars are contained in the Sellers Disclosure Letter and pending
its
release the Buyer shall indemnify the Sellers against all liabilities
under those guarantees and
indemnities.
|
SECTION
16: PENSIONS
| 16.1. |
The
pension arrangements relating to the Company are Disclosed in the
Disclosure Schedule.
|
|
16.2.
|
Except
as is Disclosed in the Disclosure Schedule, the Company does not
operate
or has not agreed to operate any other pension scheme for any present
or
past directors, employees or their dependants or other officers of
the
Company and the Company is not liable for any payments or benefits
under
any such scheme(s).
|
| 16.3. |
The
Sellers Disclosure Schedule contains details of the basis upon which
the
Company has undertaken to contribute to the Disclosed pension
scheme/arrangement and no amount due by a Company under such a scheme
remains unpaid at Closing Date.
|
|
16.4.
|
All
employers’ contributions under the pension schemes are on Closing Date up
to date and no amounts are due or outstanding at Closing except such
amounts that are due for the month in which Closing
occurs.
|
|
16.5.
|
Except
for the retirement annuity obligation of the Company to employee
Xxxx X.
Xxxxxxx, the terms of such obligations are set forth in the Seller
Disclosure Schedule, there is no other retirement annuity obligations
owed
or committed to by the Company.
|
19
|
17.2
|
The
Buyer undertakes to the Sellers to keep confidential the terms of
this
Agreement and all information that it has acquired about the Sellers
and
to use the information only for the purposes contemplated by this
Agreement to the extent such terms have not been publicly
disclosed.
|
| 17.3. |
Neither
party is required to keep confidential or to restrict its use
of:
|
| (a) |
knowledge
of the existence of this Agreement after Closing;
or
|
|
(b)
|
information
that is or becomes public knowledge other than as a direct or indirect
result of the information being disclosed in breach of this Agreement;
or
|
|
(c)
|
information
that the Parties agree in writing is not confidential;
or
|
|
(d)
|
information
about the other party’s Group or the Company that it finds out from a
source not connected with that Group or the Company and that it has
acquired free from any obligation of confidence to any other
person.
|
| 17.4. |
The
Buyer does not have to keep confidential or restrict its use
of:
|
|
(a)
|
information
about the Company after Closing; or
|
|
(b)
|
information
that is known to the Buyer before the date of this Agreement and
that it
has acquired free from any obligation of confidence to any other
person.
|
|
17.5.
|
The
Sellers do not have to keep information about the Company confidential
or
restrict its use of that information if the Conditions have not been
satisfied or waived by the date and time provided in Section 2.
|
|
17.6.
|
Either
Party may disclose any information that it is otherwise required
to keep
confidential under this Section:
|
|
(a)
|
to
such employees, professional advisers, consultants, or officers of
its
Group as are reasonably necessary to advise on this Agreement, or
to
facilitate the Transaction, if the disclosing party procures that
the
people to whom the information is disclosed keep it confidential
as if
they were that party; or
|
|
(b)
|
with
the other party’s written consent;
or
|
| (c) |
to
confirm that the sale has taken place and the date of the sale (but
without otherwise revealing any other terms of sale or making any
other
announcement); or
|
|
(d)
|
to
the extent that the disclosure is
required:
|
20
| (v) |
to
protect the disclosing party’s interest in any legal
proceedings,
but at all times shall use reasonable endeavors to consult the other
party
and to take into account any reasonable requests it may have in relation
to the disclosure before making it.
|
|
17.7.
|
Each
Party shall supply the other with any information about itself, its
Group
or this Agreement as the other may reasonably require for the purposes
of
satisfying the requirements of a law, regulatory body or securities
exchange to which the requiring party is
subject.
|
| 17.8. |
This
Section shall continue to have effect for the period of 2 years from
the
Closing Date.
|
SECTION
18: RESTRICTIONS
ON SELLERS
| 18.1. |
Each
Seller severally covenants with the Buyer that he shall
not:
|
|
(a)
|
at
any time during the period of 4 years for Xx. Xxxxxx and 18 months
for the
Key Employees beginning with the Closing Date, carry on or be employed
or
engaged in any business which would be in competition with any part
of the
Business as the Business was carried on at the Closing Date in any
geographic areas in which any business of the Company was carried
on at
the Closing Date; or
|
|
(b)
|
at
any time during the period of 4 years for Xx. Xxxxxx and 18 months
for the
Key Employees beginning with the Closing Date, except for the benefit
of
the Company, deal in competition with the Company with any person
who is
or has agreed to become at the Closing Date, or who has been at any
time
during the period of 12 months immediately preceding that date, a
client
or customer of the Company; or
|
|
(c)
|
at
any time during the period of 4 years for Xx. Xxxxxx and 18 months
for the
Key Employees beginning with the Closing Date, except for the benefit
of
the Company canvass, solicit or otherwise seek to deal (in competition
with the Company) with any person who is a customer of the Company
at the
Closing Date or who was at any time during the period of 12 months
immediately preceding that date, a client or customer of the Company;
or
|
|
(d)
|
at
any time during the period of 4 years for Xx. Xxxxxx and 18 months
for the
Key Employees beginning with the Closing
Date:
|
|
offer
employment to, enter into a contract for the services of, or attempt
to
entice away from the Company any individual who is at the time of
the
offer or attempt, and was at the Closing Date, employed in an executive
or
managerial position with the Company;
or
|
|
procure
or facilitate the making of any such offer or attempt by any other
person;
or
|
|
(e)
|
at
any time during the period of three years beginning with the Closing
Date,
use in the course of any business:
|
21
|
any
trade or service xxxx, business or domain name, design or logo which,
at
Closing, was or had been used by the Company;
or
|
|
anything
which is, in the reasonable opinion of the Buyer, capable of confusion
with such words, xxxx, name, design or logo;
or
|
|
(f)
|
at
any time during a period of four years for Xx. Xxxxxx and one year
for Key
Employees beginning with the Closing Date, except for the benefit
of the
Company, solicit or entice away from the Company any supplier to
the
Company who had supplied goods and/or services to the Company during
the
12 months immediately preceding the Closing Date, if that solicitation
or
enticement causes or would cause such supplier to cease supplying,
or
materially reduce its supply of, those goods and/or services to the
Company.
|
|
(g)
|
The
covenants in Section 18 are intended for the benefit of the Buyer
and the
Company and apply to actions carried out by the Sellers in any capacity
except for such actions taken by the Sellers which are taken solely
for
the benefit of the Buyer and the Company pursuant to the terms of
the
service agreements entered into pursuant to Section
18.
|
|
(h)
|
Each
of the covenants in this Section 18 is a separate undertaking by
each
Seller in relation to himself and his interests and shall be enforceable
by the Buyer separately and independently of its right to enforce
any one
or more of the other covenants contained in Section 18. The Sellers
each
acknowledge the adequacy of the consideration provided by the Buyer
for
each of the covenants contained in this Section 18 and each of the
covenants in Section 18 is considered fair and reasonable by the
parties,
but if any restriction is found to be unenforceable, such Section
would be
valid if any part of it were deleted or the period or area of application
reduced, the restriction shall apply with such modifications as may
be
necessary to make it valid and
enforceable.
|
|
19.1.
|
Except
as provided otherwise, no person shall assign, or grant any Encumbrance
or
security interest over, any of its rights under this Agreement or
any
document referred to in it.
|
| 19.2. |
Each
person that has rights under this Agreement is acting on its own
behalf.
|
|
19.3.
|
The
Buyer may assign its rights under this Agreement (or any document
referred
to in the Agreement) to a member of its Group or to any person to
whom it
transfers the Shares.
|
| 19.4 |
If
there is an assignment:
|
|
(a)
|
the
Sellers shall discharge its obligations under this Agreement to the
assignor until it receives notice of the
assignment;
|
|
(b)
|
the
assignee may enforce this Agreement as if it were a party to it,
but the
Buyer shall remain liable for any obligations under the
Agreement;
|
|
(c)
|
the
liability of the Sellers to any assignee cannot be greater than its
liability to the Buyer; and
|
22
|
(d)
|
the
Buyer shall remain the primary responsible party for all its obligations
under this Agreement unless Sellers otherwise
agree.
|
|
20.1.
|
This
Agreement, and any documents referred to in it, constitute the whole
Agreement between the Parties and supersede any arrangements,
understanding or previous Agreement between them relating to the
subject
matter they cover including but not limited to the two Letters of
Intent
signed between the Company and the Seller on the one hand and the
C.O.G on
the other and dated November 18, 2004 and February 27, 2006 except
for the
Confidentiality Undertaking signed by each of the Sellers regarding
the
use of the Buyer’s disclosed information pursuant to paragraph 7 of
Schedule 2.
|
|
20.2.
|
Each
party acknowledges that in entering into this Agreement, and any
documents
referred to in it, it does not rely on, and shall have no remedy
in
respect of, any statement, representation, assurance or warranty
of any
person other than as expressly set out in this Agreement or those
documents.
|
| 20.3. |
Nothing
in this Section operates to limit or exclude any liability for
fraud.
|
| 21.1. |
Any
variation of this Agreement shall be in writing and signed by or
on behalf
of all Parties.
|
|
21.2.
|
Any
waiver of any right under this Agreement is only effective if it
is in
writing, and it applies only to the person to whom the waiver is
addressed
and the circumstances for which it is given and shall not prevent
the
party who has given the waiver from subsequently relying on the provision
it has waived.
|
|
21.3.
|
A
person that waives a right in relation to one party, or takes or
fails to
take any action against that person does not affect its rights against
any
other party.
|
|
21.4.
|
No
failure to exercise or delay in exercising any right or remedy provided
under this Agreement or by law constitutes a waiver of such right
or
remedy or will prevent any future exercise in whole or in part
thereof.
|
|
21.5.
|
No
single or partial exercise of any right or remedy under this Agreement
shall preclude or restrict the further exercise of any such right
or
remedy.
|
|
21.6.
|
Unless
specifically provided otherwise, rights arising under this Agreement
are
cumulative and do not exclude rights provided by
law.
|
|
22.1.
|
Unless
otherwise provided, all costs in connection with the negotiation,
preparation, execution and performance of this Agreement, and any
documents referred to in it, shall be borne by Buyer to the extent
incurred by Buyer and the Company to the extent incurred by Company
and
Sellers.
|
23
| 23.1. |
A
notice given under this Agreement:
|
|
(a)
|
shall
be in writing in and be sent for the attention of the person, and
to the
address, or fax number, given in this Section (or such other address,
fax
number or person as the party may notify to the others in accordance
with
the provisions of this Section);
and
|
| (b) |
shall
be:
|
| 23.2. |
The
addresses for service of notice
are:
|
|
(a)
|
SELLERS
|
| (i) |
0000
Xxxxxxx Xxxx Xxxxx,
Xxxxx,
XX
00000
|
| (iii) |
fax
number: 000
000 0000
|
| (iv) |
with
copy to: Xxxx
Xxxxxxx, Esq.
Fabian
& Xxxxxxxxx
X.X.
Xxx 000000
Xxxx
Xxxx Xxxx, Xxxx 00000
|
|
(b)
|
BUYER
CodaOctopus
(US) Holdings Inc.
000
Xxxx 00xx
Xxxxxx, 0xx
Xxxxx, Xxx Xxxx, XX00000
Attention:
Xxxxx Xxxx and Xxxxxxxx Xxxxx (or anyone who succeeds her or is
holding
the position of SVP Legal Division at that
time)
|
| (a) |
if
delivered personally, at the time of delivery;
or
|
| (b) |
in
the case of a fax, at the time of transmission;
or
|
|
(c)
|
in
the case of pre-paid post, recorded delivery or registered post,
five
business days from the date of posting;
or
|
24
|
23.4.
|
To
prove service it is sufficient to prove that the notice was transmitted
by
fax to the fax number of the party or, in the case of post, that
the
envelope containing the notice was properly addressed and
posted.
|
|
24.1.
|
This
Agreement may be executed in any number of counterparts, each of
which is
an original and which together have the same effect as if each party
had
signed the same document.
|
SECTION
25:
SEVERANCE
|
25.1.
|
If
any provision of this Agreement (or part of a provision) is found
by any
court or administrative body of competent jurisdiction to be invalid,
unenforceable or illegal, the other provisions shall remain in
force.
|
|
25.2.
|
If
any invalid, unenforceable or illegal provision would be valid,
enforceable or legal if some part of it were deleted, the provision
shall
apply with whatever modification is necessary to give effect to the
commercial intention of the
parties.
|
|
26.1.
|
This
Agreement (other than obligations that have already been fully performed)
remains in full force after
Closing.
|
SECTION
27:
GOVERNING LAW AND JURISDICTION
|
27.1.
|
This
Agreement shall be governed by and construed in accordance with the
Laws
of the State of Utah.
|
|
27.2.
|
The
Parties irrevocably agree that the courts of Utah have exclusive
jurisdiction to settle any dispute or claim that arises out of or
in
connection with this Agreement.
|
25
IN
WITNESS WHEREOF, the undersigned have executed, or have caused to be executed,
this Stock Purchase Agreement on the date first written above.
| CODA OCTOPUS HOLDINGS, INC. | ||
| |
|
|
| By: | ||
|
Name:
Xxxxx Xxxx
Title:
President
|
||
|
XXXXXX
AND HILTON
INC, D/BA COLMEK ENGINEERING SYSTEMS
|
||
| |
|
|
| By: | ||
|
Name:
Xxxxx XxXx
Title:
President
|
||
| Xxxxx Xxxxxx | ||
| Xxxxx XxXx | ||
| Xxxxx Xxxxxxx | ||
| Xxxxx Xxxxxxx | ||
| |
|
|
26
C.O.G.
acknowledges that Buyer was formed for, amongst other purposes, purchasing
the
Shares, and as an inducement to Seller to enter in to this Agreement, C.O.G.
hereby agrees to guarantee the payment and performance of all of Buyer’s
obligations under this Agreement and any documents, instruments, agreements
and
understandings related hereto. In the event of any dispute arising out of or
in
connection with this guaranty, the non-prevailing party shall pay the reasonable
legal fees incurred by the prevailing party in connection with such
suit.
| CODAOCTOPUS GROUP, INC. | ||
| |
|
|
| By: | ||
|
Name:
Xxxxx Xxxx
Title:
President
|
||
27
|
Name:
|
Xxxxxx
& Xxxxxx Inc
|
|
Trade
name
|
Colmek
Systems Engineering
|
|
Company’s
registration number:
|
689323-0142
|
|
Address
|
0000
Xxxxx 0000 Xxxx, Xxxx Xxxx Xxxx, Xxxx 00000
|
|
Authorized
share capital
Amount:
1000
Divided
into:
|
1000
1000
shares of common stock having a par value of $1.00
|
|
Issued
Share Capital immediately before Closing
|
402
shares of common stock having a par value of $1.00
|
|
Options
in or over Company’s Capital Stock immediately before
Closing
|
None
|
|
Registered
shareholders:
|
Mr.
Xxxxx Xxxxxx
Xx.
Xxxxx Xxxxxxx
Mr.
Xxxxx Xxxxxxx
Xx.
Xxxxx XxXx
Mr.
Xxx Xxxxxx
Xx.
Xxxx Xxxxxx
Mr.
Xxxxxx Xxxxxx
Mr.
Xxxxx Xxxxxx
|
|
Beneficial
owner of Sale Shares (if different):
|
|
|
Directors:
|
Mr.
Xxxxx Xxxxxx, Xx. Xxxxx XxXx, Xx. Xxxxx Xxxxxxx
|
|
Secretary:
|
Xx.
Xxxxx Xxxxxxx, 000 X Xxxx Xxxxxx Xxxxxx 0000, Xxxx Xxxx Xxxx, Xxxx
00000
|
28
Schedule
2: Conditions
The
Conditions to which the Agreement is subject are as follows:
|
The
Sellers have procured or caused the Company to pass a resolution
at a
shareholders’ meeting approving the sale of the Shares to Buyer.
|
|
2.
|
The
Buyer has caused a resolution at a board meeting approving the allotment
and issue of the Consideration Shares.
|
|
3.
|
The
Buyer
is satisfied that:
|
|
(a)
|
no
objection concerning the proposed Transaction has been raised by
the
relevant contracting officer of the Government (responsible for
administering the Federal Acquisition Regulations (“FAR”)), as amended
from time to time;
|
|
(b)
|
the
transfer of the Shares of the Company to the Buyer will not prevent
the
Company from conducting its business in its current form after Closing
including without limitation the ability to continue as a government
contractor or government sub-contractor within the meaning of the
FAR as
are amended from time to time and to conduct restricted or classified
government work within the meaning of National Industrial Security
Program.
|
|
(c)
|
There
are no further outstanding capital stock in the Company (including
pre-emption rights or option rights) and all the Shares are the subject
matter of the Agreement.
|
|
(d)
|
The
pending litigation between Thimakis on the one hand and the Company
and
Xx. Xxxxx XxXx on the other (“Parties
to the Litigation”)
is either (i) fully and finally settled and there are no more claims
arising out of or in connection with the said litigation and a legally
binding settlement agreement between the Parties to the Litigation
(in
terms that are to the reasonable satisfaction of the Buyer) is in
place,
or (ii) continued with the understanding the Xx. Xxxxxx will indemnify
and
hold Buyer harmless from any damages that exceed $10,000 in connection
with such litigation.
|
|
(e)
|
The
security interest granted in respect of the shares evidenced by share
certificate numbers 107, 108, 109, and 112 in favor of The Estate
of
Xxxxxx “J” Hilton has been terminated and the collateral released and no
further claims (actual or contingent) and whether arising out of
or in
connection with the Stock Redemption Agreement dated 9 July 2002
subsist
in favor of The Estate of Xxxxxx “J”
Hilton.
|
|
(f)
|
The
Company’s inventory (including its book inventory and perpetual records of
inventory) be properly reconciled from the financial records, evaluated
for obsolete and slow moving items and adjustments proposed and
authorized.
|
4. No
person:
|
(a)
|
has
commenced, or threatened to commence, any proceedings or investigation
for
the purpose of prohibiting or otherwise challenging or interfering
with
the Transaction; or
|
29
|
(b)
|
has
taken or threatened to take any action as a result of or in anticipation
of the Transaction that would be materially inconsistent with any
of the
Sellers’ Warranties; or
|
|
(c)
|
has
enacted or proposed any legislation (including any subordinate
legislation) which would prohibit, materially restrict or materially
delay
the implementation of the Transaction or the operations of the Company
or
any other member of its Group.
|
| 7. |
For
the purposes of assessing the merits and risks of holding the
Consideration Shares, the Sellers have received a draft Form 10-SB
which
the Sellers acknowledge is subject to change and have been given
the
opportunity to ask questions of Buyer’s management regarding the
operations and financial conditions of
Buyer.
|
| 8. |
Buyer
and Sellers shall have performed and complied with all covenants
and
agreements required by this Agreement to be performed and complied
with by
them prior to or as of the Closing
Date.
|
| 9. |
No
court or governmental authority of competent jurisdiction shall have
issued an order, not subsequently vacated, restraining, enjoining
or
otherwise prohibiting the consummation of the transactions contemplated
by
this Agreement, and no person shall have instituted an action or
proceeding which shall not have been previously dismissed seeking
to
restrain, enjoin or prohibit the consummation of the transactions
contemplated by this Agreement or seeking damages with respect
thereto.
|
| 10. |
Both
Buyer and Sellers are satisfied with the contents of the Sellers
Disclosure Schedules and the Buyer Disclosure Schedules, respectively,
as
modified after signing and prior to
Closing.
|
30
Schedule
3: Conduct of Company between signing and closing
|
1.
|
The
Seller undertakes that the business of the Company shall be conducted
in
the manner provided in this Schedule from the date of this Agreement
to
Closing.
|
|
2.
|
The
Company shall carry on business in the usual, regular and ordinary
course
of business consistent with past
practices;
|
| 3. |
The
Company and its officers shall use its reasonable commercial efforts
to
preserve intact its business organization, licenses, permits, security
clearances and classification obtained pursuant to its Security Agreement
on DD-Form 441 (or its equivalent).
|
|
4.
|
The
Company shall not, except to the extent necessary to meet the Closing
Conditions, without Buyer’s consent, which shall not be unreasonably
withheld:
|
|
(a)
|
dispose
of any material assets used or required for the operation of its
business;
or
|
|
(b)
|
incur
any capital expenditure on any individual item in excess of $10,000;
or
|
|
(c)
|
make,
or agree to make, material alterations to the terms and conditions
of
employment (including benefits) of any of its directors, officers
or
employees; or
|
|
(d)
|
create
any Encumbrance over any of its assets or its undertaking; or
|
|
(e)
|
institute,
settle or agree to settle any legal proceedings relating to its business,
except debt collection in the normal course of business; or
|
|
(f)
|
grant,
modify, agree to terminate or permit the lapse of any Intellectual
Property Rights or enter into any agreement relating to any such
rights
other than in the ordinary course of business; or
|
|
(g)
|
incur
any liabilities to any of the Sellers, other than trading liabilities
incurred in the normal course of business or debt incurred pursuant
to
paragraph (k) below; or
|
|
(h)
|
enter
into any (or modify any subsisting) agreement with any trade union
or any
agreement that relates to any works council; or
|
|
(i)
|
allot
or agree to allot any shares or other securities, repurchase, redeem
or
agree to repurchase or redeem any of the shares (other than shares
reflected on Schedule 9 that have not yet been transferred or issued
to a
Seller); or
|
|
(j)
|
borrow
any sum in excess of $10,000; or
|
|
(k)
|
enter
into any lease, lease hire or hire purchase agreement or agreement
for
payment on deferred terms except the lease of the new hire car for
Xx.
Xxxx XxXx for which the terms of the lease shall be approved by the
Buyer
prior to entering into same; or
|
|
(m)
|
employ
or dismiss any employees;
|
31
|
(o)
|
assume
or undertake any obligations to perform services or provide goods
which
exceed a contract value of US$75,000 and are outside the ordinary
course
of business;
|
|
(p)
|
The
Company may do anything falling within paragraphs (a) through (o)
above if
the Buyer has given written consent.
|
| 7. |
The
Sellers shall give to the Buyer as soon as possible full details
of any
Material Adverse Change in
the Company.
|
| 8. |
The
Sellers shall not:
|
| i. |
induce,
or attempt to induce, any of the employees of the Company, whether
directly or indirectly, to terminate their employment before the
Closing
Date; or
|
| ii. |
incur
any liabilities to the Company other than liabilities within the
thresholds established in Section 4 of their Schedule 3, other than
trading liabilities incurred in the normal course of
business.
|
| 9. |
| 10. |
No
amendment, other than one made solely to comply with legislative
requirements, shall be made to any agreements or arrangements for
the
payment of pensions or other benefits on
retirement:
|
| (a) |
to
present or former directors, officers or employees of the Company;
or
|
| (b) |
to
the dependants of any of those
people.
|
32
Schedule
4: Closing Agenda
Part
1: What the Sellers and Buyer shall deliver at Closing
|
1.
|
At
or prior to the Closing the
Sellers shall deliver or procure the delivery to the Buyer of the
following documents and evidence:
|
| (i) |
duly
executed stock transfers in favor of the Buyer or its nominee(s)
of all
the Shares;
|
|
(ii)
|
the
share certificate(s) representing the Shares (or an express indemnity
in a
form satisfactory to the Buyer in the case of any found to be
missing);
|
|
(iii)
|
waivers
and consents and other documents required to enable the Buyer and/or
its
nominees to be registered as holders of the
Shares;
|
|
(iv)
|
confirmation
in writing that the Stock Option Plan 2004 of the Company is terminated
and as of Closing there is no capital stock of the Company subject
to the
Stock Option Plan;
|
|
(v)
|
the
certificate of incorporation, common seal (if any), minute books,
statutory registers, share certificate books of the Company and books
of
accounts, contracts and agreements;
|
|
(vi)
|
certified
copy of the Articles of Incorporation and all amendments
thereto;
|
|
(vii)
|
A
copy of the bylaws and all amendments thereto of the Company certified
as
true and in full force and effect as of Closing Date by the Secretary
of
the Company;
|
|
(viii)
|
release
in a form that is satisfactory to the Buyer from all persons holding
option in or over the Company’s capital stock (“option holders”) to the
effect that no rights (actual or contingent) in or over the granted
options exist at Closing Date;
|
|
(ix)
|
an
executed power of attorney in favor of the Buyer or the Buyer’s nominee(s)
in respect of the Shares;
|
|
(x)
|
evidence
that any amounts drawn down against the overdraft facility with Xxxxx
Fargo have
been cleared in full;
|
|
(xi)
|
evidence
that the Pledge in favor of the Estate of Xxxxxx “J” Hilton and in whose
favor a security interest was created in or over a part of the Shares
which is the subject of this Agreement is no longer valid and subsisting
and release in a form satisfactory to the Buyer is provided and the
entry
in the Utah Department of Commerce (file number 19242222900231) has
been
removed;
|
|
(xii)
|
bank
statements showing the balance of the Company account on the last
Business
Day prior to completion and directions amending the mandates in respect
of
those accounts;
|
|
(xiii)
|
A
copy of properly prepared Financial Statements for each financial
quarter
since November 1, 2005 and up to Closing
Date;
|
|
(xiv)
|
A
copy of all customer contracts which are current as of the
Closing;
|
33
|
(xv)
|
A
copy of the current accounts payable schedule for the Company showing
all
outstanding debts to any supplier and which shall not be older than
30
days from the date of the supplier’s
invoice;
|
|
(xvi)
|
Certificate
of existence of the Company certified and issued by the relevant
public
official within 20 days of Closing;
|
|
(xvii)
|
Certificate
dated as of Closing Date signed by each of the Sellers and the duly
authorized officers of the Company that the business of the Company
has
been conducted in accordance with the provisions set forth in Schedule
3;
|
|
(xviii)
|
the
Employment Agreements duly executed by Xxxxx Xxxxxx and Xxxxx
XxXx;
|
|
(xix)
|
Pledge
Agreement duly executed by the
Seller;
|
|
(xx)
|
New
Lease for the Leasehold Property signed between the Company and the
Landlord along with waiver in a satisfactory form of any or all past
breaches under the Lease Agreement;
|
|
(xxi)
|
resignation
letters in the agreed form by each director and the secretary of
the
Company, in each case acknowledging under seal that she/he has no
claim
(actual or contingent) against the Company in respect of breach of
contract, compensation for loss of office, redundancy or unfair dismissal
or on any other grounds
whatsoever;;
|
|
(xxii)
|
evidence
that all indebtedness referred to in Section 15.1 has been fully
satisfied; and
|
|
(xxiii)
|
Board
resolutions appointing new directors and officers of Company nominated
by
the Buyer.
|
2. At
Closing the Buyer shall deliver or procure the delivery to the Sellers of the
following:
|
(i)
|
each
Promissory Note duly executed by
Buyer;
|
|
(ii)
|
Pledge
Agreement duly executed by Buyer;
|
|
(iii)
|
Validly
issued Consideration Shares;
|
|
(iv)
|
Certificate
of Good Standing issued no more than twenty (20) days prior to the
Closing
Date certified by the relevant public
official;
|
34
Part
2: Matters for the Board Meeting at Closing
|
1.
|
The
Seller shall cause or procure that a properly convened board meeting
of
the Company be held at Closing at which the matters set out in this
Part 2
shall take place.
|
|
(i)
|
such
person(s) as the Buyer nominates are appointed as directors and the
secretary of that Company;
|
|
(ii)
|
the
resignation of Xx. Xxxxx Xxxxxxx as director and the secretary of
the
Company;
|
|
(iii)
|
the
transfers referred to in Part 1 paragraph 1 (i) above are approved
for
registration in the Companies’ books;
and
|
|
(iv)
|
the
bank mandates relating to each of the Company are revised in such
manner
as the Buyer requires; and
|
35
Schedule
5: Sellers’ Warranties
Unless
stated otherwise, only each of the Principal Sellers make the following
representations and warranties and, except as specifically provided in Section
14 of this Schedule 5, none of the following representations or warranties
apply
to Intellectual Property:
| 1. |
Organization,
Authority and Capacity
|
|
1.1.
|
The
Company is a corporation duly organized, validly existing and in
good
standing under the laws of Utah and has the full power and authority
necessary to (i) execute, deliver and perform its obligations under
the
Closing Documents and (ii) to carry on its business as it has been
and is
now being conducted and to own and lease the properties and assets
which
it owns and leases. The Company is duly qualified to do business
and is in
good standing in every jurisdiction in which the failure to be so
qualified or in good standing would have a material adverse effect
on (i)
its ability to perform its obligations under the Closing Documents;
or
(ii) the assets, financial position, or results of operations of
the
Company. Set forth in the Seller Disclosure Schedule is a list of
all
jurisdictions in which the Company is required to be qualified as
a
foreign corporation.
|
|
1.2.
|
Each
of the Sellers represents and warrants that he has the power and
the
authority to own the Shares and to execute, deliver and perform the
Closing Documents to which he is a party and to consummate the
Transaction.
|
|
1.3.
|
The
Company does not own any shares in any corporation or other equity
interest, either of record, beneficially or equitably, in any association,
partnership, limited liability company, joint venture or other legal
entity, or have any commitment to acquire any such interest or make
any
loans or capital contributions to any such entity.
|
| 2. |
Authorization
and Validity
|
|
2.1.
|
The
execution, delivery and performance of the Closing Documents or its
terms
by the Sellers and the Company have been duly authorized by all necessary
corporate shareholders. The Closing Documents to be executed and
delivered
by the Sellers or the Company have been or will be at Closing duly
executed and delivered by the Sellers and the Company and constitute
or
will constitute at Closing the legal, valid and binding obligations
on the
Sellers and the Company, enforceable in accordance with their respective
terms except as such enforceability may be subject to the effect
of
bankruptcy, insolvency, reorganization, moratorium and other laws
relating
to or affecting the rights of creditors and of general principles
of
equity (the “Enforceability
Exceptions”).
|
| 3. |
Absence
of conflicting agreements or required consents
|
|
3.1.
|
Except
as is set forth in the Seller Disclosure Schedule, the execution,
delivery
and performance by the Sellers and the Company of the Closing Documents
to
be executed and delivered by the Sellers and/or the Company (i) do
not
require the consent of or notice to any governmental or regulatory
authority or any other third party; (ii) will not conflict with any
provision of organizational documents (including certificate or articles
of incorporation and bylaws) of the Company; (iii) will not conflict
with
or result in a violation of any law, ordinance, regulation, ruling,
judgment, order or injunction of any court or governmental or
quasi-governmental body to which the Sellers or the company is subject
or
which the Sellers or the Company or any of their assets or properties
are
bound; (iv) will not conflict with, constitute grounds for termination
of,
result in a breach of, constitute a default under, require any notice
under, or accelerate or permit the acceleration of any performance
required by the terms of any agreement, instrument, license, or permit
to
which the Sellers or the Company is a party or by which the Sellers
or the
Company or any of their respective properties are bound; (v) will
not
create any Encumbrances upon the assets or properties of the Sellers
or
the Company.
|
36
| 4. |
Constitutional
and Corporate Documents
|
|
4.1.
|
True
and correct copies of the articles of incorporation and all amendments
thereto and bylaws of the Company are annexed to the Seller Disclosure
Schedule.
|
|
4.2.
|
The
Company has delivered true and correct copies of all books and records
and
minutes of the Company to the extent minutes of such meetings were
maintained, and such minutes accurately reflect in all material respects
the proceedings at such meetings of the board of directors (and all
committees thereof) and shareholders of the
Company.
|
| 5. |
Capitalization
and Ownership of Capital
Stock
|
|
5.1.
|
As
of Closing Date, the authorized capital stock of the Company consists
of
1000 shares of common stock having par value of $1.00 each of which
402
shares of stock have been duly and validly issued and are all fully
paid
and non-assessable at Closing Date. As of Closing Date these constitute
the entire issued and outstanding share of capital stock in the
Company.
|
|
5.2.
|
The
Shares are owned by the Sellers in the proportion specified in Schedule
9
and are free from all Encumbrances.
|
|
5.3.
|
At
the Closing Date there is no right to require the Company to issue
any
share capital.
|
|
5.4.
|
The
Stock Redemption Agreement between the Company and the Estate of
Xxxxxx
“J” Hilton dated 9th
July 2002 will, as of the Closing date, have been terminated and
there
will be no further obligations or liabilities (contingent or otherwise)
arising therefrom or in connection therewith (“Stock
Redemption Agreement”)
and the 68 shares evidenced by share certificate numbers 108, 109,
110,
111, and 112, have been released from the security interest granted
by way
of Pledge Agreement dated 9th
July 2002 and the Estate of Xxxxxx “J” Hilton has no further claims
(contingent or otherwise) in or over the capital stock of the Company
or
its property.
|
|
5.5.
|
The
Stock Redemption Agreement between the Company and Xxxxx Xxxxxx dated
1st
November 2003 will, as of the Closing Date, have been terminated
and there
will be no further obligations or liabilities (contingent or otherwise)
arising therefrom or in connection thereto.
|
|
5.6.
|
In
redeeming the Shares pursuant to the Stock Redemption Agreements
referenced in Sections 5.4 and 5.5 of this Schedule 5, the Company
has
fully complied with all legal and formal requirements including all
necessary consents and approvals.
|
|
5.7.
|
Except
as is disclosed in the Seller Disclosure Schedule, the Company does
not
have any obligation (contingent or otherwise) to purchase, redeem
or
otherwise acquire any shares of its capital stock or any interest
therein
or to pay any dividend or make any other distribution in respect
thereof.
|
37
|
5.8
|
All
dividends or distributions declared, made or paid by the Company
have been
declared, made or paid in accordance with its articles of incorporation
and bylaws, applicable legislation and any agreements or arrangements
made
with any third party regulating the payment of dividends and
distributions.
|
| 6. |
Financial
Statements
|
|
6.1.
|
The
Financial Statements of the Company for the Fiscal Years ended 31
October
2004 and 2005 and the Fiscal Year ended 31 October 2006 will, at
Closing
Date, be prepared in good faith and present fairly in all material
respects the financial conditions and operating results of the Company
as
of the dates and for the periods indicated therein and have been
provided
to Buyer prior to the Closing. Except as set forth in the Financial
Statements or the Sellers Disclosure Schedules, the Company has no
material liabilities or obligations, contingent or otherwise, other
than
(i) liabilities incurred in the ordinary course of business
subsequent to 1st
November 2005 (ii) obligations under contracts and commitments
incurred in the ordinary course of business and (iii) liabilities
and
obligations of a type or nature not required under U.S. generally
accepted
accounting principles to be reflected in the Financial Statements,
which,
in all such cases, individually and in the aggregate would not have
a
material adverse effect.
|
| 7. |
Absence
of certain changes or events
|
|
7.1.
|
Except
as is disclosed in the Seller Disclosure Schedule, since 1 November
2006
the Company has not
|
|
(a)
|
suffered
any Material Adverse Change in working capital, condition (financial
or
otherwise) assets, liabilities, reserves, business or
operations;
|
|
(b)
|
paid,
discharged or satisfied any material liability except in the ordinary
course of business;
|
|
(c)
|
written
off as uncollectible any account receivable other than in the ordinary
course of business;
|
|
(d)
|
compromised
any debts, claims or rights or disposed of any of its properties
or assets
other than in the ordinary course of
business;
|
|
(e)
|
entered
into any commitments or transactions not in the ordinary course of
business involving aggregate value in excess of $10,000 or made aggregate
capital expenditures or commitments in excess of
$10,000;
|
|
(f)
|
made
any material change in any method of accounting or accounting
practice;
|
|
(g)
|
sold,
assigned or transferred any tangible asset other than in the ordinary
course of business or any Intellectual Property
Rights;
|
|
(h)
|
subjected
any of its assets, tangible or intangible to any lien, encumbrance
or
restriction of any nature, whatsoever, except for Permitted
Liens;
|
38
|
(i)
|
increased
any salaries, wages or employee benefits or made any arrangement
for
payment of any bonus or special compensation for any employee other
than
in the ordinary course of business;
|
|
(j)
|
hired,
committed to hire or terminated any employee other than in the ordinary
course of business;
|
|
(k)
|
terminated
or amended any material contract, license or other instrument or
suffered
any loss or termination or threatened loss or termination of any
existing
material business arrangement or supplier, the termination or loss
of
which, in the aggregate could reasonably be expected to materially
and
adversely affect the Company or the
Properties;
|
|
(l)
|
agreed,
whether in writing or otherwise, to take any action described in
this
paragraph 7.
|
| 8. |
No
undisclosed liabilities
|
|
8.1.
|
Except
as is disclosed in the Seller Disclosure Schedule or reflected in
the
Financial Statements, the Company has no liabilities or obligations,
whether accrued, absolute, contingent or otherwise, that are greater
than
$10,000 in the aggregate.
|
| 9. |
Litigation
|
|
9.1.
|
Except
as is disclosed in the Seller Disclosure Schedule there are no claims,
lawsuits, actions, arbitrations administrative or other proceedings,
including, without limitation, claims involving prior employment
of any of
the Company’s employees or any information techniques allegedly
proprietary to any of their former employers, instituted or pending
against the Company or any person for whom it is vicariously
liable.
|
|
9.2.
|
To
the knowledge of Principal Sellers (i) no such matter described in
the
preceding paragraph 9.1 is threatened and there is no basis for any
such
action, and (ii) there are no governmental or administrative
investigations or inquiries pending that involve the Company or any
person
for whom it is vicariously liable.
|
|
9.3.
|
There
are no judgments against or consent decree binding on the Company
or any
person for whom it is vicariously liable.
|
|
10.
|
No
violation of the law
|
|
10.1.
|
Neither
the Company nor any of the Sellers (to the extent affecting ownership
or
value of the Shares) is currently in material violation of any applicable
local, state or federal law, order, decree or other requirement of
any
governmental body, agency or Regulatory Authority or court binding
on it,
or relating to its property or
business.
|
|
10.2.
|
Neither
the Company nor any of the Sellers (to the extent affecting ownership
or
value of the Shares) has received notice of any material fine, penalty,
liability or disability as a result of a failure to comply with any
requirement of federal, state or local
law.
|
39
|
11.
|
Real
and Personal property
|
|
11.1.
|
The
Company (i) has good and valid title to all Properties which it purports
to own, and (ii) owns such Properties free and clear of all Liens
(except
for current year ad valorem taxes and Permitted Liens). All of the
Properties, whether owned or leased, are in the possession and control
of
the Company. Except as disclosed in the Seller Disclosure Schedule,
no
affiliate of the Company, has any claim or interest in any of the
Properties that are used or useful in the business conducted by Company
in
any operations that are similar to or competitive with that business,
even
if geographically distant.
|
|
11.2.
|
The
Company does not own any real property.
|
|
11.3.
|
The
Seller Disclosure Schedule contains a true and correct description
of the
Leasehold Property, including all improvements located thereon. The
Leasehold Property constitutes the only leased real property of the
Company. The Company has a valid and binding lease for such property,
copies of which are attached to the Seller Disclosure Schedule.
|
|
11.4.
|
The
Company is current with respect to all payments due under such lease
and
it has complied in all material respects with its obligations under
such
lease, and there are no material defaults on the part of the Company,
and
to the knowledge of Principal Sellers on the part of any other party
under
such lease that remain uncured and no condition exists which, with
the
lapse of time or giving of notice, or both, would give rise to a
material
default under such lease. The Buyer has been furnished with true,
correct
and complete copies of the lease concerning the Leasehold Property.
No
condemnation or similar actions are currently in effect or pending
or, to
the knowledge of the Principal Sellers, threatened against any part
of any
real property leased by the Company. To the knowledge of the Principal
Sellers, there are no encroachments, leases, easements, covenants,
restrictions, reservations or other burdens of any nature which might
impair in any material respect the use of such leased real property
in a
manner consistent with past practices nor does any part of any building
structure or any other improvement thereon encroach on any other
property.
|
|
11.5.
|
The
present zoning, subdivision, building and other ordinances and regulations
applicable to the Leasehold Property permit the continued operation,
use,
occupancy and enjoyment of such real property consistent with past
practices, and, with respect to such leased real
property.
|
|
11.6.
|
The
Company is in compliance in all material respects with, and has received
no notices of violations of, any applicable zoning, subdivision or
building regulation, ordinance or other similar law, regulation,
or
requirement. The Company has all rights and easements necessary for
public
ingress thereto and egress therefrom and for the provision of all
utility
services thereto, including any required curb cut or street opening
permits or licenses for vehicular access over presently existing
roads and
driveways.
|
|
11.7.
|
The
Properties are in good operating condition and repair, ordinary wear
and
tear excepted, and the Properties include all rights, interests in
properties, and assets necessary to permit the Company to continue
its
business after the Closing Date as presently conducted. The Company
has
only conducted the Business under such names and at such locations
as are
identified in the Sellers Disclosure Schedule and all of the Properties
are currently located at those locations identified on the Sellers
Disclosure Schedule.
|
|
11.8.
|
The
Leasehold Property complies with any requirements including security
standards specified in the Facility Security Clearance that are applicable
to the Company in its capacity of a government contractor or
sub-contractor making it eligible for access to classified information
and
which are set forth in the National Industrial Security Program (NISP)
and
the National Industrial Security Program Operating Manual
(NISPOM).
|
40
|
12.
|
Contracts
and Commitments
|
|
12.1.
|
The
Seller Disclosure Schedule contains a complete and accurate list
of all
contracts, agreements, commitments and instruments (whether written
or
oral, contingent or otherwise) of the Company concerning the following
matters (the “Seller Agreements”):
|
|
(a)
|
the
lease, as lessee or lessor, or license, as licensee or licensor,
of any
real or personal property under the terms of which the Company is
likely
to pay or otherwise give consideration of more than
$5,000;
|
|
(b)
|
the
employment or engagement of any officer, director, employee, consultant
or
agent, other than those terminable at will without severance obligation,
and any covenant not to compete with any former employees;
|
|
(c)
|
any
arrangement limiting the freedom of the Principal Sellers or the
Company
to compete in any manner in any line of business or requiring the
Principal Sellers or the Company to share profits other than commissions
payable to sales
persons;
|
|
(d)
|
any
arrangement that could reasonably be anticipated to have a material
adverse effect on the Company, financial or otherwise;
|
|
(e)
|
any
material arrangement not in the ordinary course of business;
|
|
(f)
|
any
power of attorney, whether limited or general, granted by the Company;
|
|
(g)
|
any
single arrangement that under the terms of which the Company is likely
to
pay consideration of more than $10,000 in the aggregate during the
calendar year ending December 31, 2006, and which is not terminable
by the
Company without penalty upon notice of 30 days or less;
and
|
|
(h)
|
any
relationship of the Company with any person or entity affiliated
with or
related to the Company or any officer or director
thereof.
|
|
12.2.
|
Except
as is Disclosed in the Seller Disclosure Schedule, the
Company has not made any representations regarding equity incentives
to
any officer, employees, director or consultant.
|
|
12.3.
|
The
Sellers have delivered to Buyer true and complete copies of all of
the
Seller Agreements. Except as indicated in the Seller Disclosure Schedule,
the Seller Agreements are valid and effective in accordance with
their
terms (except for the Enforceability Exceptions), and there is not
under
any of such Seller Agreements (i) any existing or claimed material
default
by the Company or event which, with the notice or lapse of time,
or both,
would constitute a material default by the Company; or (ii) to the
knowledge of the Principal Sellers, any existing or claimed material
default by any other party or event which with notice or lapse of
time, or
both, would constitute a material default by any such party. Except
as
indicated in the Seller Disclosure Schedule, the entering into this
Agreement or any other Closing Documents will not result in a breach
of or
default under, or require the consent of any other party to, or give
rise
to a right of termination by any other party to, any of the Seller
Agreements. There is no actual or, to the knowledge of the Principal
Sellers, threatened termination, cancellation or limitation of any
Seller
Agreements that would have a material adverse
effect on the Company, its business, finances or otherwise. To the
knowledge of each of the Principal Sellers, there is no pending or
threatened bankruptcy, insolvency or similar proceeding with respect
to
any other party to the Seller
Agreements.
|
41
|
13.
|
Employment
and Labor Matters
|
|
13.1.
|
The
Seller Disclosure Schedule sets forth a list of all current and former
(within the last 12 months) full-time and part-time employees or
consultants of the Company, broken down by location and which includes
the
name, title or position, years in service of the Company, wages,
salaries,
commissions, bonuses and benefits (“Remuneration”)
information for each such person (the “Company
Employees”).
|
|
13.2.
|
The
Company is not delinquent in payments to any of its Company Employees
any
Remuneration for any service performed for it to the date hereof
or
amounts required to be reimbursed to such employees, consultants,
or
independent contractors. The Company has complied in all material
respects
with all applicable state and federal equal employment opportunity
laws
and with other laws related to employment, including those related
to
wages, hours, worker classification, and collective bargaining. The
Company has withheld and paid to the appropriate governmental entity
or is
holding for payment not yet due to such governmental entity all amounts
required to be withheld from employees of the Company and is not
liable
for any arrears of wages, taxes, penalties, or other sums for failure
to
comply with any of the foregoing.
|
|
13.3.
|
Except
as set forth on the Seller Disclosure Schedule to the Principal Sellers’
knowledge, no Company Employee intends to terminate employment with
the
Company or is otherwise likely to become unavailable to continue
as a
Company Employee, nor does the Company have a present intention to
terminate the employment of any Company Employee. Except as disclosed
in
the Disclosure Schedules, the employment of each Company Employee
is
terminable at the will of the Company. Except as set forth in the
Disclosure Schedule or as required by law, upon termination of the
employment of any such employees, no severance or other payments
will
become due. Except as set forth in the Seller Disclosure Schedule,
the
Company has no policy, practice, plan, or program of paying severance
pay
or any form of severance compensation in connection with the termination
of employment services.
|
|
13.4.
|
The
acquisition of the Shares by the Buyer or compliance with the terms
of
this Agreement will not, so far as the Principal Sellers are aware,
cause
any directors, officers or senior employees or Key Employees of the
Company to terminate their
employment.
|
|
13.5.
|
The Seller Disclosure
Schedule sets forth each employee benefit plan maintained, established
or
sponsored by the Company, or which the Company participates in or
contributes to, which is subject to the Employee Retirement Income
Security Act of 1974, as amended. The Company has made all required
contributions and has no liability to any such employee benefit plan,
other than liability for health plan continuation coverage, and has
complied in all material respects with all applicable laws for any
such
employee benefit plan.
|
|
13.6.
|
The
Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express
or
implied, contract, commitment or arrangement with any labor union,
and no
labor union has requested or, to the knowledge of the Company, has
sought
to represent any of the employees, representatives or agents of the
Company. There is neither a strike or other labor dispute involving
the
Company pending, or to the Principal Sellers’ knowledge, threatened, which
could have a material adverse effect, nor is the Company aware of
any
labor organization activity involving its employees.
|
42
|
13.7.
|
The
Company will not incur any liability or obligation to any of Company
Employees or violate any applicable laws respecting employment and
employment practices as a result of the any of the Transactions
contemplated herein.
|
|
13.8.
|
All
Company Employees engaged in classified projects where the Company
is
engaged as government contractor or subcontractor (within the meaning
of
FAR) have, where required, the appropriate security clearances and
to the
Seller’s knowledge none of the employees who are currently security
cleared for the performance of their duties run the risk of or is
likely
to lose such security clearance
|
| 14. |
Intellectual
Property Rights
|
| 14.1. |
An
accurate summary is set out in Schedule 14.1 of the Sellers Disclosure
Schedules of all registered Intellectual Property Rights (including
applications for such rights) and material unregistered Intellectual
Property Rights owned by the
Company.
|
| 14.2. |
A
list is set out in the Seller Disclosure Schedules of all material
licenses, agreements, authorizations and permissions, excluding
off-the-shelf software (in whatever form and whether express or implied)
under which:
|
| (a) |
the
Company uses or exploits Intellectual Property Rights owned by any
third
party; or
|
|
(b)
|
the
Company has licensed or agreed to license Intellectual Property Rights
to,
or otherwise permitted the use of any Intellectual Property Rights
by, any
third party.
|
| 14.3. |
Except
as set out in the Seller Disclosure Schedules, the Company is the
sole
legal and beneficial owner of (or applicant for) the Intellectual
Property
Rights set out in Schedule 14.1 of the Seller Disclosure Schedules,
free
from all Encumbrances.
|
| 14.4. |
The
Company, to its knowledge, does not require any Intellectual Property
Rights other than those set out in Schedule 14.1 and 14.2 of the
Seller
Disclosure Schedules in order to carry on its activities as currently
conducted.
|
| 14.5. |
The
Intellectual Property Rights set out in Schedule 14.1 of the Seller
Disclosure Schedules are to the Company’s knowledge, valid, subsisting and
enforceable and nothing has been done or not been done as a result
of
which any of them has ceased or might cease to be valid, subsisting
or
enforceable. In particular, except as disclosed in the Disclosure
Schedules:
|
|
(a)
|
all
application and renewal fees and other steps required for the maintenance
or protection of such rights have been paid on time or taken except
where
the failure to pay such fees or take such other steps would not have
a
material adverse effect on the
Company;
|
43
|
(b)
|
Except
as set forth in the Seller Disclosure Schedules, to the knowledge
of the
Company, all material confidential information (including know-how
and
trade secrets) owned or used by the Company has been kept confidential
and
has not been disclosed to third parties (other than parties who have
signed written confidentiality undertakings in respect of such
information, details of which are set out in the Seller Disclosure
Schedules);
|
|
(c)
|
to
the knowledge of the Company, no xxxx, trade name or domain name
identical
or similar to any such rights has been registered, or is being used
by any
person in the same or a similar business to that of the Company,
in any
country in which the Company has registered or is using that xxxx,
trade
name or domain name; and
|
|
(d)
|
there
are and have been no claims, challenges disputes or proceedings,
pending
or, to the knowledge of the Company, threatened, in relation to the
ownership, validity or use of such
rights.
|
|
14.6.
|
Nothing
is due to be done within 30 days of Closing the omission of which
would
jeopardize the maintenance or prosecution of any of the Intellectual
Property Rights owned or used by the Company which are registered
or the
subject of an application for registration.
|
|
14.7.
|
To
the knowledge of the Company and except as set forth in the Seller
Disclosure Schedules, there has been no infringement by any third
party of
any of the Intellectual Property Rights identified in Schedule 14.1
of the
Seller Disclosure Schedules, nor any third party breach of confidence,
passing off or actionable act of unfair competition in relation to
the
business and assets of the Company.
|
|
14.8.
|
Except
as disclosed in the Seller Disclosure Schedules, a change of control
of
the Company will not result in the termination of or materially affect
any
of the Intellectual Property Rights set out in Schedule 14.2(a) of
the
Seller Disclosure Schedules.
|
|
14.9.
|
The
activities of the Company and any licensee of any Intellectual Property
Rights granted by the Company, to the Company’s knowledge, have not
infringed and do not infringe the Intellectual Property Rights of
any
third party.
|
| 15. |
Insurance
Policies
|
|
15.1.
|
All
of the Properties and the operations of the Company of an insurable
nature
and of a character usually insured by companies of similar size and
in
similar businesses are insured by the Company in such amounts and
against
such losses, casualties or risks as is (i) required by any Law applicable
to Company, or (ii) required by any contract or agreement entered
into by
the Company.
|
|
15.2.
|
The
Seller Disclosure Schedule contains a complete and accurate list
of all
insurance policies held or owned by the Company and now in force
and such
Schedule indicates the name of the insurer, the type of policy, the
risks
covered thereby, the amount of the premiums, the term of each policy,
the
policy number, the amounts of coverage, the deductible in each case
and
all outstanding claims thereunder. Correct and complete copies of
certificates of insurance for all such policies have been delivered
to
Buyer by the Seller on the date of this Agreement. All such policies
are
in full force and effect and enforceable in accordance with their
terms
(except for the Enforceability Exceptions). The Company is not now
in
default regarding the provisions of any such policy, including, without
limitation, failure to make timely payment of all premiums due thereon,
and none of them has failed to file any notice or present any claim
thereunder in due and timely fashion. The Company has not been refused,
or
denied renewal of, any insurance coverage by insurance companies
offering
such insurance. The Seller Disclosure Schedule contains copies of
all
insurance audit reports, loss prevention reports, all claims made
and loss
history reports generated since November 1, 2001 in respect of any
insurance maintained by the
Company.
|
44
|
15.3.
|
For
the last 5 years the Company has continuously maintained workers
compensation and employer liability, commercial property, general
liability, commercial auto, commercial excess liability and umbrella
liability and general professional liability (including completed
operations hazard endorsement), product liability insurance
coverage.
|
| 16. |
Environmental
Matters
|
| 16.1. |
The
Company has materially complied and is in material compliance with
(i) all applicable environmental, health and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder
of all
governmental agencies and (ii) the terms and conditions of all
applicable permits, licenses, certificates and approvals of all such
governmental agencies now or hereafter granted or obtained with respect
to
the properties owned or operated by the Company.
|
| 16.2. |
There
are no present or past Environmental Conditions relating to or which
could
in any way materially and adversely affect the Company or the Properties.
For the purposes of this Agreement, In this context “Environmental
Condition”
means (a) the introduction into the environment of any pollution,
including without limitation any contaminant, irritant or pollutant
or
other toxic or hazardous substance, in violation of any federal,
state or
local law, ordinance or governmental rule or regulations, as a result
of
any spill, discharge, leak, emission, escape, injection, dumping
or
release of any kind whatsoever of any substance or exposure of any
type in
any work places or to any medium, including without limitation air,
land,
surface waters or ground waters, or from any generation, transportation,
treatment, discharge, storage or disposal of waste materials, raw
materials, hazardous materials, toxic materials or products of any
kind or
from the storage, use or handling of any hazardous or toxic materials
or
other substances, and (b) any non-compliance with any federal, state
or
local environmental Law or order as a result of or in connection
with any
of the foregoing.
|
| 16.3 |
The
Principal Sellers hereby agree to indemnify and hold the Buyer harmless
from and against any and all claims, losses, liability, damages and
injuries of any kind whatsoever asserted against the Buyer with respect
to
or as a direct result of the presence, escape, seepage,
spillage, release, leaking, discharge or migration of any hazardous
material from the properties during the period such properties were
owned
or operated by the Company prior to Closing, including without limitation,
any claims asserted or arising under any applicable environmental,
health
and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder of all governmental
agencies.
|
| 17. |
Taxes
|
|
17.1.
|
Except
as listed in the Seller Disclosure Schedule, or as reflected in the
Financial Statements there does not exist any liability for Taxes
which
may be asserted by any Regulatory Authority with responsibility for
Taxes
against, and no Lien or other encumbrance for Taxes will attach to,
the
Company or any of the Properties other than Taxes due in respect
of
periods for which Tax Returns are not yet due and for which adequate
accruals have been made in the Financial
Statements.
|
45
|
17.2.
|
All
Tax Returns required to be filed by the Company in the past 6 years
have
been filed (other than Tax Returns for which extensions to file have
been
granted) with the appropriate governmental agencies in all jurisdictions
in which such Tax Returns are required to be filed, all of which
are true,
correct and complete in all material respects, and all amounts shown
as
owing thereon have been paid.
|
|
17.3.
|
Except
as listed on the Sellers Disclosure Schedule, neither Sellers nor
Company
has received notice of any Tax Claims being asserted or any proposed
assessment by any taxing authority and no Tax Returns of the Company
has
been audited by the Internal Revenue Service (the “IRS”) or the
appropriate state agencies for any fiscal year or period between
November
1, 2001 and the date hereof, and the Company is not presently under,
nor
have they received notice of any, contemplated investigation or audit
by
the IRS or any state agency concerning any fiscal year or period
ended
prior to the date hereof. Except as listed on the Seller Disclosure
Schedule, and the Company has not executed any extension or waivers
of any
statute of limitations on the assessment or collection of any Tax
due that
is currently in effect.
|
|
17.4.
|
The
Company has withheld or collected from each payment made to each
of its
employees the amount of Taxes required to be withheld or collected
therefrom and the Company has paid the same to the proper tax depositories
or collecting authorities.
|
| 18. |
Licenses
and Authorizations
|
|
18.1.
|
The
Company holds all valid licenses and other rights, accreditations,
permits
and authorizations required by law, ordinance, regulation or ruling
of any
Regulatory Authorities necessary to operate its business as now conducted
to the extent failure to obtain such licenses, rights, accreditations,
permits and/or authorizations would not have a material adverse effect
on
the Company.
|
|
19.
|
Changes
in Laws
|
| 19.1. |
To
Principal Sellers’ knowledge there are no pending changes in applicable
law or regulations that would prevent the Company from conducting
its
business in substantially the same manner as its business is currently
conducted prior to the Closing
Date.
|
| 20. |
Inventory
|
| 20.1. |
Except
as disclosed on the Seller Disclosure Schedules, all
items of inventory of the Company consist, and will consist of items
of a
quality and quantity usable and saleable (and not obsolete) in the
ordinary course of business. All items of inventory have been in
the
Company’s possession for six months or less. Except as set forth on the
Seller Disclosure Schedule, since 1 November 2006, no item of inventory
has been sold or disposed of, except through sales in the ordinary
course
of business, and in no event at prices less than book value of such
stock
items as of 1 November 2006.
|
46
| 21. |
Business
Relationships
|
|
21.1.
|
Except
as disclosed on the Seller Disclosure Schedule, to the Principal
Sellers’
knowledge, the relationships between the Company and all customers,
clients, Employees and vendors who receive goods and services from
or
provide goods and services to the Company are satisfactory, and the
Seller
has no knowledge of (i) any facts or circumstances which would reasonably
be expected to materially alter, negate, impair or in any way adversely
affect the continuity of any such relationships or (ii) any complaints,
claims, threats, plans or intentions to discontinue or curtail relations
under any such relationships.
|
|
21.2
|
Except
as disclosed in the Seller Disclosure Schedule, the Seller has no
knowledge of any present or future condition or state of facts or
circumstances which would prevent the Company from carrying on its
business after the Closing Date in the same manner as it is presently
being carried on.
|
| 22. |
Accounts
Receivable
|
|
22.1.
|
Except
as set forth in the Seller Disclosure Schedule, the accounts receivable
reflected in the most recent balance sheet of the Company, separately
included in the Financial Statements referred to in paragraph 6 hereof,
and all accounts receivable arising between 1 November 2006 and the
date
hereof, arose from bona fide transactions in the ordinary course
of
business. Except as set forth in the Seller Disclosure Schedule,
the
accounts receivable reflected on such balance sheet, have been properly
recorded and reserved against consistent with past practice. No such
account receivable has been assigned or pledged to any other person,
firm
or corporation. Reasonable provision has been made in the Financial
Statements for collection losses, contractual discounts and other
adjustments from third party
payers.
|
| 23. |
Connected
Party Transactions
|
| 23.1. |
Except
as set forth in the Seller Disclosure Schedule hereto, there are
no
existing arrangements or proposed transactions between the Company,
and
(i) any officer or director of the Company or any member of the immediate
family of any of the foregoing persons (such officers, directors
and
family members being hereinafter individually referred to as a “Connected
Party”), (ii) any business (corporate or otherwise) which a Connected
Party owns, or controls directly or indirectly, or in which a Connected
Party has an ownership interest or (iii) between any Connected Party
and
any business (corporate or otherwise) with which the Company regularly
does business.
|
| 24. |
Working
capital
|
Having
regard to the existing bank and other facilities available to it the Company
has
an amount of working capital (which, for purposes of this Section 24, includes
accounts receivable and anticipated milestone payments) that is consistent
with
past practices for the purposes of (i) continuing to carry on its business
in
its present form and at its present level of turnover for the foreseeable future
and (ii) executing, carrying out and fulfilling in accordance with their terms
all orders, projects and contractual obligations which have been placed with
or
undertaken by it.
47
Schedule
6: Covenants of Buyer
1. Affirmative
Covenants.
Buyer
covenants and agrees with Sellers that Buyer shall, from the date hereof and
so
long as any amount is outstanding under any Promissory Note or Convertible
Promissory Note, unless both of the Sellers’ Directors (as that term is defined
in Section 1.9 below) agree otherwise:
|
1.1.
|
Maintenance
of Corporate Existence.
Preserve and maintain (a) the legal existence and good standing of
Buyer and the Company under the laws of the jurisdiction of their
respective incorporation or organization and (b) the rights (charter
and statutory), privileges, franchises, authorizations, clearances
and
permits necessary or desirable in the conduct of each of Buyer’s and the
Company’s business, except, in the case of this clause, where the failure
to do so would not, in the aggregate, have a material adverse effect
on
Buyer or the Company.
|
|
1.2.
|
Compliance
with Laws, Etc.
Comply with and cause the Company to comply with all applicable laws,
contractual obligations and permits, except for such failures to
comply
that could not reasonably be expected, individually or in the aggregate,
to have a material adverse effect.
|
|
1.3.
|
Payment
of Obligations.
Pay, discharge or otherwise satisfy at or before maturity or before
they
become delinquent, as the case may be, all of the charges and other
obligations of Buyer and the Company of whatever nature due and payable
after the Closing, except (a) where the amount or validity thereof
is
currently being contested in good faith by appropriate proceedings
and
reserves in conformity with and in accordance with the generally
accepted
accounting principals in the United States in effect from time to
time
(“US GAAP”) with respect thereto have been provided on the books of the
Buyer and/or the Company, as applicable, and (b) none of the assets
of the
Company or the Shares is or could reasonably be expected to become
subject
to any encumbrance or forfeiture or loss as a result of such
contest.
|
|
1.4
|
Maintenance
of Property.
Maintain and preserve (a) in all material respects in good working
order and condition the assets of the Company and all other of its
property reasonably necessary in the conduct of its business in each
case,
ordinary wear and tear excepted, and (b) all material rights,
permits, licenses, approvals and privileges (including all permits)
necessary, used or useful, whether because of its ownership, lease,
sublease or other operation or occupation of property or other conduct
of
its business, and shall make all necessary or appropriate filings
with,
and give all required notices to, government
authorities.
|
|
1.5
|
Maintenance
of Insurance.
Maintain the Company’s insurance at the level maintained by the Company at
Closing Date.
|
|
1.6.
|
Keeping
of Books.
Keep proper books and records, in which full, true and correct entries
of
all financial transactions and the assets and business of the Company
shall be made as is necessary and in accordance with applicable
requirements of the law.
|
|
1.7.
|
Environmental
Compliance.
Cause the Company to materially comply with and will use its best
efforts
to cause its agents, contractors and sub-contractors (while such
Persons
are acting within the scope of their contractual relationship with
the
Company to so materially comply with (i) all applicable
environmental, health and safety laws, codes and ordinances, and
all rules
and regulations promulgated thereunder of all governmental agencies
and
(ii) the terms and conditions of all applicable permits, licenses,
certificates and approvals of all governmental agencies now or hereafter
granted or obtained with respect to the properties owned or operated
by
the Company. The Buyer will use its best efforts and safety practices
to
prevent the unauthorized release, discharge, disposal, escape or
spill of
hazardous materials on or about the properties owned or operated
by the
Company.
|
48
|
1.8.
|
Environmental
Indemnification.
Buyer hereby agrees to indemnify and hold the Sellers harmless from
and
against any and all claims, losses, liability, damages and injuries
(“Losses”) of any kind whatsoever asserted against any Sellers with
respect to or as a direct result of the presence, escape, seepage,
spillage, release, leaking, discharge or migration from the properties
owned or operated by the Company of any hazardous material after
the
Closing, including without limitation, any claims asserted or arising
under any applicable environmental, health and safety laws, codes
and
ordinances, and all rules and regulations promulgated thereunder
of all
governmental agencies but only to the extent that Losses arise out
of acts
or omissions of Company after
Closing.
|
|
1.9
|
Board
of Directors.
Cause two directors designated by the Sellers holding a majority
in
interest in the Shares immediately prior to the Closing (“Sellers’
Directors”) to be appointed to and remain on the Company’s Board of
Directors. The initial Sellers’ Directors shall be Xxxxx Xxxxxx and Xxxxx
XxXx.
|
|
1.10
|
Year-End
Bonuses.
Buyer shall honor the year-end-bonuses approved by the Company’s Board of
Directors prior to the Closing Date as are Disclosed in the Seller’s
Disclosure Schedule prior to Closing and which are in accordance
with the
Company’s obligations assumed and in line with Year End Bonuses approved
and paid by the Company in
the last five fiscal years prior to Closing. Notwithstanding, the
Buyer
shall only be obliged to honor these to the extent that the Company
is not
cash deficient at Closing.
|
|
1.11
|
Note
Payments.
Buyer shall make all payments under the Promissory Notes and the
Convertible Promissory Notes on a pro rata basis based upon the relation
that the principal amount of the such Promissory Note or Convertible
Promissory Note bears in relation to the aggregate principal amounts
of
all Promissory Notes and Convertible Promissory Notes. Any failure
to do
so shall constitute a breach and material default under all of the
Promissory Notes, the Convertible Promissory Notes, this Agreement
and the
Unaccredited Stock Purchase Agreements. The shareholders of the Company
that are not a party to this Agreement are intended third party
beneficiaries of the terms of this Section
1.11.
|
|
1.12
|
Further
Assurances.
Subject to the requirements of reasonableness, at any time and from
time
to time, upon the written request of Sellers and at the sole expense
of
Buyer, promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as Sellers
may
reasonably deem necessary or advisable (a) to obtain the full benefits
of
the Promissory Note and the Stock Pledge Agreement, (b) to protect,
preserve, maintain and enforce Sellers’ rights in the Company, or (c) to
enable Sellers to exercise all or any of the rights, remedies and
powers
granted herein or in the Pledge Agreement.
|
|
2.
|
Negative
Covenants.
Buyer covenants and agrees with Sellers that Buyer shall not,
from the date hereof and so long as any amount is outstanding under
the
Promissory Note, unless both of the Sellers’ Directors agree
otherwise:
|
49
| 2.1 |
Indebtedness.
Permit the Company to cancel any debt owing to it or create, incur,
assume
or permit to exist any indebtedness, except accounts payable and
accrued
liabilities or other liabilities or other indebtedness incurred in
the
ordinary course of business;
provided, however, (i) the Company may raise working capital to be
used in
the ordinary course of the Company’s business in an aggregate amount not
to exceed $500,000, and (ii) Buyer and C.O.G. hereby indemnify the
Company
and Sellers against aggregate indebtedness in excess of
$500,000.
|
|
2.2
|
Liens.
Incur, maintain or otherwise suffer to exist any lien upon or with
respect
to the assets of the Company or the Shares, whether now owned or
hereafter
acquired, or assign any right to receive income or profits, except
for
Permitted Liens. Nothing in this provision shall prevent the Company
to
raise working capital finance to be used in the ordinary course of
the
Company’s business; provided, however, (i) the aggregate amount of any
such financings does not exceed $500,000, and (ii) Buyer and C.O.G.
hereby
indemnify the Company and Sellers against any payments necessary
to cause
the release of liens incurred or maintain as a result of aggregate
financings in excess of $500,000.
|
|
2.3
|
Investments;
Fundamental Changes.
Permit the Company to merge with, consolidate with, acquire all or
substantially all of the assets or stock of, or otherwise combine
with or
make any investment in or, loan or advance to, any person or entity.
|
|
2.4
|
Asset
Transfers.
Permit the Company to transfer, sell or otherwise dispose of any
of its
assets or properties, including its any shares of its capital stock
or
engage in any sale leaseback, synthetic lease or similar transaction
except in the ordinary course of its
business.
|
|
2.5
|
Changes
in Nature of Business.
Permit the Company to make any changes in any of its business objectives,
purposes, or operations that could reasonably be expected to have
a
material adverse effect on the Company, its assets or its business,
or
engage in any business other than that presently engaged in or currently
proposed to be engaged.
|
|
2.6
|
Transactions
with Affiliates.
Permit the Company into any lending, borrowing or other commercial
transaction, with any of its employees, directors,
affiliates.
|
|
2.7
|
Modification
of Certain Documents.
Permit the Company to amend, waive, or otherwise modify its charter
or
by-laws or other organizational documents.
|
|
2.8
|
Accounting
Changes; Fiscal Year.
Permit the Company to change its (a) accounting treatment or
reporting practices, except as allowed by US GAAP or required by
law, or
(b) its fiscal year or its method for determining fiscal quarters or
fiscal months except that nothing in this Section shall prevent the
Buyer
from changing its fiscal year where necessary to comply with its
regulatory obligations.
|
|
2.9
|
Changes
to Name, Locations, Etc.
Permit the Company to change (i) its name or corporate office, (ii)
location of its records concerning the assets of the Company from
its
corporate office, (iii) the type of legal entity that it is,
(iv) its organization identification number, if any, issued by its
state of incorporation or organization, or (v) its state of
incorporation or organization.
|
50
|
2.10
|
Hazardous
Materials.
Permit the Company to cause or suffer to exist any release of any
hazardous material at, to or from any real property owned, leased,
subleased or otherwise operated or occupied by the Company to the
extent
that the same was not caused or existed prior to Closing, that would
violate any environmental law, other than such releases that would
not, in
the aggregate, have a material adverse effect on the Company.
|
|
2.11
|
Capital
Expenditures.
Permit the Company to make any capital expenditures other equipment
in the
ordinary course of the Company’s
business.
|
|
2.12
|
Board
of Directors.
Permit the number of members of the Company’s board of directors to exceed
four.
|
|
2.13
|
Diversion
of Business.
Divert existing business (or prospective business) away from the
Company.
|
|
2.14
|
Devalue
the Company.
Take any action that could reasonably be expected to devalue the
Company
or its assets.
|
51
Schedule
7: Buyer’s Warranties
The
Buyer hereby represents and warrants to the Seller as follows:
| 1. |
Organization,
Authority and Capacity
|
| 1.1. |
The
Buyer is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Buyer has the
full
power and authority necessary to (i) execute, deliver and perform
its
obligations under the Closing Documents to be executed and delivered
by
it, and (ii) carry on its business as it has been and is now being
conducted and to own and lease the properties and assets which it
now owns
or leases. Buyer is duly qualified to do business and is in good
standing
in each jurisdiction in which a failure to be so qualified or in
good
standing would have a material adverse effect on its ability to perform
its obligations under the Closing
Documents.
|
| 2. |
Authorization
and Validity
|
| 2.1. |
The
execution, delivery and performance of the Closing Documents to be
executed and delivered by Buyer and C.O.G. have been duly authorized
by
all necessary action by Buyer and C.O.G. The Closing Documents to
be
executed and delivered by Buyer and C.O.G. have been or will be,
as the
case may be, duly executed and delivered by Buyer and C.O.G. and
constitute or will constitute the legal, valid and binding obligations
of
Buyer and C.O.G., enforceable in accordance with their respective
terms
except for the Enforceability
Exceptions.
|
| 3. |
Absence
of Conflicting Agreements or Required Consents
|
| 3.1. |
The
execution, delivery and performance by each of Buyer and C.O.G.
of
the Closing Documents to be executed and delivered by it: (i) do
not
require the consent of or notice to any governmental or regulatory
authority or any other third party; (ii) will not conflict with any
provision of its
charter
or bylaws; (iii) will not conflict with or result in a violation
of any
law, ordinance, regulation, ruling, judgment, order or injunction
of any
court or governmental instrumentality to which it
is
a party or by which it
or
any of its respective properties is bound; (iv) will not conflict
with,
constitute grounds for termination of, result in a breach of, constitute
a
default under, require any notice under, or accelerate or permit
the
acceleration of any performance required by the terms of any agreement,
instrument, license or permit to which it
is
a party or by which any of its
properties
are bound, and (v) will not create any Encumbrances upon any of its
assets
or properties.
|
| 4. |
Statements
True and Correct
|
| 4.1. |
No
representation or warranty made herein by the Buyer or C.O.G.,
nor in any statement, certificate or instrument executed and delivered
to
the Seller by Buyer or C.O.G.
pursuant
to any Closing Document contains or will contain any untrue statement
of
material fact or omits or will omit to state a material fact necessary
to
make these statements contained therein not misleading in light of
the
circumstances in which they were
made.
|
52
| 5. |
Litigation,
Etc.
|
| 5.1 |
Except
as listed on Buyer Disclosure Schedule hereto, there are no claims,
lawsuits, actions, arbitrations, administrative or other proceedings
pending against C.O.G.
relating
to or which in any way could affect the C.O.G.’s
ability
to conduct its business after the Closing in substantially the same
manner
as heretofore conducted. Except as listed on Buyer Disclosure Schedule,
to
the knowledge of the Buyer,
no such matter described in the previous sentence is threatened and
there
is no basis for any such action, and (ii) there are no governmental
or
administrative investigations or inquiries pending that involve
C.O.G.
or
any of its affiliates. Except as listed in Buyer Disclosure Schedule,
there are no judgments against or consent decrees binding on C.O.G.
or
any of its affiliates.
|
| 6. |
No
Violation of the Law
|
| 6.1. |
Neither
Buyer C.O.G.
is
not currently in material violation of any applicable local, state
or
federal law, order, injunction or decree, or any other requirement
of any
governmental body, agency or Regulatory Authority or court binding
on it,
or relating to its property or business.
|
| 6.2. |
Neither
Buyer nor C.O.G.
is
not currently subject to any material fine, penalty, liability or
disability as the result of a failure to comply with any requirement
of
federal, state or local law nor has Buyer or C.O.G.
received
any notice of such non-compliance.
|
| 7. |
Constitutional
and Corporate Documents
|
| 7.1. |
True
and correct copies of the certificate or articles of incorporation
and all
amendments thereto and bylaws of C.O.G. are annexed to the Buyer’s
Disclosure Schedule.
|
|
8.
|
Capitalization
and Ownership of Capital Stock.
|
|
8.1
|
As
of Closing Date,
the authorized capital stock of C.O.G. consists of 70,000,000
shares
of authorized common stock having par value of $.001
each, 5,000,000
shares
of Preferred Stock having par value of $.001
each,
of which 24,420,230 shares of common stock, 4,915,000 shares of Preferred
Stock have been duly and validly issued and are all fully paid and
non-assessable at Closing Date. As of Closing Date the Consideration
Shares will represent ___
percent of the issued and outstanding shares of C.O.G. on a fully
diluted
basis.
|
|
8.2.
|
Except
as is disclosed in the Buyer’s Disclosure Schedule, C.O.G. does not have
any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or
to pay
any dividend or make any other distribution in respect
thereof.
|
| 8.3 |
All
dividends or distributions declared, made or paid by C.O.G. have
been
declared, made or paid in accordance with its articles of incorporation
and bylaws, applicable legislation and any agreements or arrangements
made
with any third party regulating the payment of dividends and
distributions.
|
| 9. |
Financial
Statements
|
|
9.1.
|
The
audited financial statements of the C.O.G. for the year ended 31
December
2005 and the interim period ended 30 September 2006 (“Buyer Financial
Statements”) have been prepared in good faith in accordance with all
applicable laws (including state and federal laws) and present fairly
in
all material respects the financial conditions and operating results
of
C.O.G. as of the dates and for the periods indicated therein. Except
as
set forth in the such financial statements, Buyer has no material
liabilities or obligations, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business
subsequent to September 30, 2006, (ii) obligations under contracts
and commitments incurred in the ordinary course of business and (iii)
liabilities and obligations of a type or nature not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in all such cases, individually and in the aggregate
would not have a material adverse effect on Buyer.
|
53
| 10. |
Taxes
|
|
10.1.
|
Except
as listed in the Buyer’s Disclosure Schedule, or as reflected in the
Buyer’s Financial Statements there does not exist any liability for Taxes
which may be asserted by any Regulatory Authority with responsibility
for
Taxes against, and no Lien or other encumbrance for Taxes will attach
to,
Buyer, C.O.G. or any of their properties other than Taxes due in
respect
of periods for which Tax Returns are not yet due and for which adequate
accruals have been made in the Buyer’s Financial
Statements.
|
|
10.2.
|
All
Tax Returns required to be filed by Buyer and C.O.G. in the past
6 years
have been filed (other than Tax Returns for which extensions to file
have
been granted) with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed,
all of
which are true, correct and complete in all material respects, and
all
amounts shown as owing thereon have been
paid.
|
|
10.3.
|
Except
as listed on the Buyer’s Disclosure Schedule, neither Buyer nor C.O.G. has
received notice of any Tax Claims being asserted or any proposed
assessment by any taxing authority and no Tax Returns of Buyer or
C.O.G.
has been audited by the Internal Revenue Service (the “IRS”) or the
appropriate state agencies for any fiscal year or period ended prior
to
the date hereof, and neither Buyer nor C.O.G. is presently under,
nor have
they received notice of any, contemplated investigation or audit
by the
IRS or any state agency concerning any fiscal year or period ended
prior
to the date hereof. Except as listed on the Buyer’s Disclosure Schedule,
neither Buyer nor C.O.G. has executed any extension or waivers of
any
statute of limitations on the assessment or collection of any Tax
due that
is currently in effect.
|
|
10.4.
|
Each
of Buyer and C.O.G. has withheld or collected from each payment made
to
each of its employees the amount of Taxes required to be withheld
or
collected therefrom and Buyer and C.O.G. have paid the same to the
proper
tax depositories or collecting
authorities.
|
| 11. |
Licenses
and Authorizations
|
|
11.1
|
Each
of Buyer and C.O.G. holds all valid licenses and other rights,
accreditations, permits and authorizations required by law, ordinance,
regulation or ruling of any Regulatory Authorities necessary to operate
its business as now conducted to the extent failure to obtain such
licenses, rights, accreditations, permits and/or authorizations would
not
have a material adverse effect on Buyer or
C.O.G.
|
|
12.
|
Connected
Party Transactions
|
| 12.1 |
Except
as set forth in the Buyer’s Disclosure Schedules, there are no existing
arrangements or proposed transactions between C.O.G, and (i) any
officer
or director of C.O.G., shareholder holding ten percent (10%) or more
of
the beneficial ownership of the capital stock of C.O.G. or any member
of
the immediate family of any of the foregoing persons (such officers,
directors, shareholders and family members being hereinafter individually
referred to as a “Buyer
Connected Party”),
(ii) any business (corporate or otherwise) which a Buyer Connected
Party
owns, or controls directly or indirectly, or in which a Buyer Connected
Party has an ownership interest or (iii) between any Buyer Connected
Party
and any business (corporate or otherwise) with which C.O.G. regularly
does
business.
|
54
Schedule
8: Pledge Agreement
STOCK
PLEDGE AGREEMENT
THIS
PLEDGE AGREEMENT dated [..] (“Agreement”)
between Coda Octopus (U.S) Holdings, Inc (the “Pledgor”),
and
the persons shown in Schedule A hereto along with the Unaccredited Sellers
(the
“Pledgees”).
RECITALS
WHEREAS
the
Pledgor is obligated and indebted to the Pledgees in the principal amount of
US$700,000 pursuant to and as provided in a Stock Purchase Agreement
(“SPA”)
and
the Unaccredited Stock Purchase Agreements
(“Indebtedness
Agreements”)
between
the Pledgor and the Pledgees dated and a certain Promissory Note dated […] and
Convertible Promissory Notes in favour of the Unaccredited Sellers dated […]
made and delivered by the Pledgor to the Pledgees in such principal (the
“Note”);
and
WHEREAS
the
Pledgor is the owner of the entire issued and outstanding capital stock of
Xxxxxx & Xxxxxx, Inc a Utah corporation (the “Company”)and
which comprise the shares of common stock shown in Annex 2 hereto; and
WHEREAS
in order
to induce the Pledgees to enter into Indebtedness Agreement Pledgor is entering
into this Pledge Agreement to provide collateral security for certain of its
obligations under the Indebtedness Agreements (specifically the Deferred Cash
Consideration as is defined in the SPA and the Deferred Cash Consideration
and
each Convertible Note as defined in the Unaccredited Stock Purchase
Agreements);
NOW,
THEREFORE,
in
consideration of the premises and the mutual promises contained herein, the
parties hereto agree as follows:
Section
1. Defined Terms
“Company”
shall
mean Xxxxxx and Hilton, Inc a Utah corporation having its address at 0000 Xxxxx
0000 Xxxx, Xxxx Xxxx Xxxx, Xxxx 00000 and in whose shares the Security Interest
(as is defined in Section 2, the subject matter of this Agreement, is
granted.
“Collateral”
shall
mean the Pledged Securities and all proceeds of the Pledged
Securities.
“Code”
shall
mean the Uniform Commercial Code as in effect from time to time in
Utah.
“Default”
shall
mean any of the following events described in Section 11 hereof.
“Obligations”
shall
mean (a) all principal of, and interest on, each Note including the Convertible
Notes and any extension, renewal or replacement thereof, (b) liabilities of
the
Pledgor under this Agreement, and (c) all of the foregoing cases whether due
or
to become due, and whether now existing or hereafter arising or
incurred.
55
“Pledged
Securities”
shall
mean the shares of common stock in the capital of the Company evidenced by
share
certificate numbers […] and details of which are set forth in Annex [..] hereto
and which is owned by the Pledgor.
Section
2. Pledge
To
secure
the due and punctual payment and performance of all the Obligations, the Pledgor
hereby pledges to the Pledgees and grants to the Pledgees a security interest
(the “Security
Interest”)
in the
Collateral;
TO
HAVE AND TO HOLD the
Collateral, together with all rights, titles, interests, privileges and
preferences appertaining or thereto, unto the Pledgees, its successors and
assigns, forever, subject, however, to the terms, covenants and conditions
hereafter set forth.
Section
3. Representations and Warranties.
(a) The
Pledgor represents and warrants as follows:
(i)
The
Pledgor owns all of the Pledged Securities, free and clear of any liens,
encumbrance, charge or security interest of any nature whatsoever, other than
the Security Interest granted herein.
(ii) All
shares of stock included in the Pledged Securities are duly authorized and
validly issued, fully paid, non-assessable and subject to no options to purchase
or similar rights of any person or entity.
(iii) This
Pledge Agreement has been duly authorized, executed and delivered by the Pledgor
and constitutes a valid and binding obligation of the Pledgor. Upon delivery
of
the Pledged Securities to the Pledgees hereunder, the Pledgees will have valid
and perfected security interests in the Collateral subject to no prior lien.
No
registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of this Pledge
Agreement, or necessary for the validity or enforceability hereof or for the
perfection of the security interests granted herein. The execution, delivery,
performance and enforcement of this Pledge Agreement do not and will not
contravene, or constitute a default under, any provision of applicable law
or
regulation or of the certificate of incorporation or by-laws of the Pledgor
or
the Company or any person controlling the Company or the Pledgor or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon
the Pledgor or the Company or any person controlling the Pledgor or result
in
the creation or imposition of any lien (other than the security interests
granted herein) upon any asset of the Pledgor or the Company.
(b) Each
Pledgee, severally and not jointly, represents and warrants as
follows:
(i)
Such
Pledgee has the power and authority and the legal right to execute and deliver
and perform its obligations under this Agreement and has taken all necessary
action appropriate to its form of organization to authorize such execution,
delivery and performance.
56
(ii) This
Agreement constitutes a legal, valid and binding obligation of such Pledgee.
(iii) The
execution, delivery, performance and enforcement of this Pledge Agreement do
not
and will not contravene, or constitute a default under, any provision of
applicable law or regulation or any provision of its organizational documents,
judgment, injunction, order, decree or other instrument binding upon such
Pledgee. No order, consent, approval, license, authorization or validation
of,
or filing, recording or registration with, or exemption by, any governmental
or
public body or authority is required on the part of such Pledgee to authorize,
or is required in connection with the execution, delivery and performance of,
or
the legality, validity, binding effect or enforceability of, this Agreement.
There are no actions, suits or proceedings pending or, to its knowledge,
threatened against or affecting it or any of its properties before any court
or
arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to it, would have a material
adverse effect on its business, operations, property or condition (financial
or
otherwise) or on its ability to perform its obligations hereunder.
Section
4. Delivery of Pledged Securities.
Upon
execution of this Agreement, the certificates evidencing all of the Pledged
Securities shall be delivered to the Pledgees by the Pledgor pursuant hereto
shall be in suitable form for transfer by delivery, or shall be accompanied
by
duly executed instruments of transfer or assignment in blank, with signatures
appropriately guaranteed, and accompanied in each case by any required transfer
tax stamps, all in form and substance reasonably satisfactory to the
Pledgees.
Section
5. Further Assurances.
The
Pledgor will, at its expense and in such manner and form as the Pledgees may
reasonably require or may deem advisable, execute, deliver all further
instruments and documents and take all further action that may be necessary,
advisable or that the Pledgees may reasonably request for the purpose of
perfecting and protecting the Security Interest or to enable the Pledgees to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral including, but not limited to, the filing of financing statements
with the Utah Department of Commerce, Division of Corporations and Commercial
Code.
Section
8. Right to Receive Distributions on Collateral.
Unless
a
Default shall have occurred and be continuing, the Pledgor shall have the right
to receive and to retain all dividends, interest and other payments and
distributions made upon or with respect to the Collateral.
Section
9. Right to Vote Pledged Securities.
Unless
a
Default shall have occurred and be continuing, the Pledgor shall have the right
to vote and to give consents, ratifications and waivers with respect to the
Collateral.
57
If
a
Default shall have occurred and be continuing, the Pledgees shall have the
right
to the extent permitted by law, and the Pledgor shall take all such action
as
may be necessary or appropriate to give effect to such right, to vote and to
give consents, ratifications and waivers, and take any other action with respect
to all the Pledged Securities with the same force and effect as if the Pledgees
were the absolute and sole owner thereof
Section
10. General Authority
The
Pledgor hereby irrevocably appoints the Pledgees its true and lawful attorney,
with full power of substitution, for the sole use and benefit of the Pledgees,
to the extent permitted by law to exercise, at any time and from time to time
while Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral:
(a) to
demand, xxx for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof,
(b) to
settle, compromise, compound, prosecute or defend any action or proceeding
with
respect thereto, and
(c) to
sell,
transfer, assign or otherwise deal in or with the same or the proceeds or avails
thereof, as fully and effectually as if the Pledgees were the absolute owner
thereof;
provided
that the Pledgees shall give the Pledgor not less than thirty (30) days’ prior
written notice of the time and place of a sale or other intended disposition
of
any of the Collateral.
Section
11. Default.
(a) The
occurrence of any of the following shall constitute a Default hereunder: (i)
the
failure of the Pledgor to pay when due of any of the Obligations after taking
into consideration any applicable cure periods; (ii) any representation or
warranty of the Pledgor contained herein or given pursuant hereto shall be
untrue in any material respect; (iii) the Pledgor shall fail to perform any
material agreement of the Pledgor contained herein; (iv) or the Company becomes
insolvent or it is unable to pay its debts as they fall due; (v) make an
assignment for benefit of creditors, institute any insolvency or bankruptcy
proceeding, or any involuntary proceeding shall be instituted against the
Company in insolvency or bankruptcy and such involuntary proceeding shall be
consented to or acquiesced in by the Pledgor or shall not have been dismissed
within thirty (30) days after the same shall have been instituted, or a receiver
shall be appointed for any part of the Company’s property and said receivership
shall be consented to or acquiesced in by the Pledgor or shall continue for
a
period of thirty (30) consecutive days.
(b) Upon
the
occurrence of a Default and following the Pledgees giving written notice of
the
Default to the Pledgor and after, in the case of clauses (a)(ii) and (a)(iii)
only, the expiry of a 30 day cure period the Pledgor has failed to remedy the
Default, the Pledgees may exercise in respect of the Collateral, in addition
to
other rights and remedies provided for herein or otherwise available to it,
all
the rights and remedies of a secured party on default under the Code(whether
or
not the Code applies to the affected Collateral) and may, without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker’s board or any of the
Pledgees’s offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Creditor may reasonably believe are commercially
reasonable. The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days’ prior notice to the Pledgor of the time and
place of any public sale or the time after which ay private sale is to be made
shall constitute reasonable notification.
58
(c) The
Pledgor agrees that in any sale of any of the Collateral whenever a Default
hereunder shall have occurred and be continuing, the Pledgees is hereby
authorized to comply with any limitation or restriction in connection with
such
sale as it may be advised by counsel is necessary in order to avoid any
violation of applicable law (including, without limitation, compliance with
such
procedures as may restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account
for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of
the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Pledgees be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
Section
12. Termination of the Security Interest and Release of
Collateral.
Upon
the
repayment in full of the Obligations, the Security Interest shall terminate
and
all rights to the Collateral shall revert to the Pledgor. Upon any such
termination, the Pledgees will, execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such termination
or the release of such Collateral.
Section
13. Notices.
All
notices, communications and distributions hereunder shall be given or made
as to
the Pledgor or the Pledgees, to it at its address or telefax number set forth
on
the signature pages hereof, or at such other address as the addressee may
hereafter specify. All notices, requests and other communications shall be
in
writing when delivered at the address specified in this Section.
Section
14. Waivers, Non-Exclusive Remedies.
This
Agreement can be waived, modified, amended, terminated or discharged, and the
Security Interest can be released, only expressly in writing signed by the
parties hereto. A waiver so signed shall be effective only in the specific
instance and for the specific purpose given. Mere delay or failure to act shall
not preclude the exercise or enforcement of any rights and remedies available
to
either of the parties. All rights and remedies of either of the parties hereto
shall be cumulative and may be exercised singly in any order or sequence, or
concurrently, at the Pledgees’ or Pledgor’s option, as the case may be, and the
exercise or enforcement of any such right or remedy shall neither be a condition
to nor bar the exercise or enforcement of any other.
Section
15. Changes in Writing.
Neither
this Pledge Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by a statement in writing signed
by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
59
Section
16. Utah Law.
This
Pledge Agreement shall be construed in accordance with and governed by the
internal laws of the State of Utah, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws
of
any jurisdiction other than Utah are governed by the laws of such
jurisdiction.
Section
17. Severability.
If
any
provision hereof is invalid and unenforceable in any jurisdiction, then, to
the
fullest extent permitted by law, (i) the other provisions hereof shall remain
in
full force and effect in such jurisdiction and shall be liberally construed
in
favor of the Pledgor in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (ii) the invalidity or unenforceability of
any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
[SIGNATURE
PAGE FOLLOWS]
60
C.O.G.
acknowledges that Pledgor was formed for, amongst other purposes, the purchasing
the Shares, and as an inducement to Pledgee to enter in to this Agreement,
C.O.G. hereby agrees to guarantee the performance of all of Pledgor’s
obligations under this Agreement and any documents, instruments, agreements
and
understandings related hereto. In the event of any dispute arising out of or
in
connection with this guaranty, the non-prevailing party shall pay the reasonable
legal fees incurred by the prevailing party in connection with such
suit.
| CODAOCTOPUS GROUP, INC. | ||
| |
|
|
| By: | ||
|
Name:
Xxxxx Xxxx
Title:
President
|
||
61
ANNEX
TO STOCK PLEDGE AGREEMENT
Identification
of the Pledged Securities
|
Name
of Issuer
|
Class
|
Certificate
Number
|
Number
of Shares
|
62
Schedule
9 Apportionment of Purchase Price
|
Seller´s
name, address and fax number
|
No.
of Sale Shares
|
1.
Cash Consideration
2.
Deferred Cash Consideration
|
Number
of Coda Consideration Shares
|
|
Mr.
Xxxxx Xxxxxx
|
316
|
1. $628,855.70
2. $550,248.80
|
451,990
|
|
Xx.
Xxxxx Xxxxxxx
|
11
|
1. $21,890.55
2. 19,154.23
|
15,733.83
|
|
Mr.
Xxxxx Xxxxxxx
|
5
|
1. $9,950.24
2. $8,706.46
|
7,151.74
|
|
Xx
Xxxxx XxXx
|
40
|
1. $79,601.99
2. $69,651.74
|
57,213.93
|
63
Schedule
10 Property
64
