Exhibit 10.60
 
[ex10-60_logo.jpg]
 
Share sale agreement
 
The parties set out in Schedule 1
Sellers
 
Acorn Energy, Inc.
Buyer

Clayton Utz
Lawyers
Levels 19-35  No. 1 O'Connell Street  Sydney  NSW  2000  Australia
PO Box H3  Australia Square  Sydney  NSW  1215
T +61 2 9353 4000  F +61 2 8220 6700
 
www.claytonutz.com
 
Our reference 179/15242/80101658
 
 
 

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Contents
 
1.
 
Definitions and interpretation
 
1
                 
1.1
 
Definitions
 
1
   
1.2
 
Reasonable endeavours
 
8
   
1.3
 
Knowledge and awareness of the Sellers
 
8
   
1.4
 
Business days
 
9
   
1.5
 
General rules of interpretation
 
9
             
2.
 
Conditions precedent
 
10
                 
2.1
 
Conditions
 
10
   
2.2
 
Reasonable endeavours to satisfy Conditions
 
11
   
2.3
 
Notice in relation to satisfaction of Conditions
 
12
   
2.4
 
Waiver of Conditions
 
12
   
2.5
 
Failure of Conditions
 
12
             
3.
 
Sale and purchase of Shares and SCRN Notes
 
12
                 
3.1
 
Sale and purchase
 
12
   
3.2
 
Nominee shareholdings
 
12
             
4.
 
Purchase Price
 
13
                 
4.1
 
Purchase Price
 
13
   
4.2
 
Initial Purchase Price
 
13
   
4.3
 
Payment of Initial Purchase Price
 
13
   
4.4
 
Adjustment for certain payments
 
13
             
5.
 
Period before Completion
 
14
                 
5.1
 
Buyer access
 
14
   
5.2
 
Conduct of Business
 
14
   
5.3
 
Restricted conduct
 
14
   
5.4
 
Consents to change in control
 
16
   
5.5
 
Other discussions
 
16
   
5.6
 
Notification of breach
 
17
   
5.7
 
Termination by Buyer
 
17
             
6.
 
Completion
 
17
                 
6.1
 
Time and place for Completion
 
17
   
6.2
 
Provision of information before Completion
 
17
   
6.3
 
Sellers delivery obligations
 
18
   
6.4
 
Delivery method
 
18
   
6.5
 
Board meetings
 
19
   
6.6
 
Buyer payment and delivery obligations
 
19
   
6.7
 
Interdependence of obligations at Completion
 
19
   
6.8
 
Notice to complete
 
19
   
6.9
 
Remedies for failure to comply with notice
 
20
   
6.10
 
Title and risk
 
20
             
7.
 
Shareholders Agreement
 
20
                 
7.1
 
Waiver of pre-emptive rights
 
20
   
7.2
 
Termination and release of rights under the Shareholders Agreement
 
20
   
7.3
 
Bar to proceedings
 
20
             
8.
 
Earn out
 
21
                 
8.1
 
Additional definitions
 
21

 
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8.2
 
Earn Out Amount
 
21
   
8.3
 
Earn out protections
 
22
   
8.4
 
Inconsistent steps
 
22
             
9.
 
Escrow Account
 
23
                 
9.1
 
Establishment of Escrow Account
 
23
   
9.2
 
Operation of Escrow Account
 
23
   
9.3
 
Payments in respect of Resolved Claims before Escrow Termination Date
 
23
   
9.4
 
No Unresolved Claims on Escrow Termination Date
 
23
   
9.5
 
Unresolved Claims on Escrow Termination Date
 
23
   
9.6
 
Interest
 
24
   
9.7
 
No limitation on rights to recover
 
24
   
9.8
 
Legends on Buyer Shares
 
24
             
10.
 
Repayment of indebtedness
 
24
                 
10.1
 
Indebtedness owed to the Group Companies
 
24
   
10.2
 
Indebtedness owed to any Seller
 
25
             
11.
 
Restraint
 
25
                 
11.1
 
Non-competition
 
25
   
11.2
 
Non-solicitation
 
25
   
11.3
 
Restraint period
 
25
   
11.4
 
Restraint area
 
25
   
11.5
 
Separate restrictions
 
26
   
11.6
 
Exceptions
 
26
   
11.7
 
Assignment
 
26
   
11.8
 
Acknowledgement
 
26
   
11.9
 
Proceedings
 
26
             
12.
 
Other obligations following Completion
 
27
                 
12.1
 
Power of attorney
 
27
   
12.2
 
Access to Records
 
27
   
12.3
 
Access to records of the Sellers
 
28
   
12.4
 
Extension of claims reporting period
 
28
   
12.5
 
Consents to change in control
 
28
   
12.6
 
Additional Investment by Buyer
 
28
   
12.7
 
Section 338 Election
 
29
             
13.
 
Warranties
 
29
                 
13.1
 
Warranties
 
29
   
13.2
 
Warranties separate
 
29
   
13.3
 
Survival
 
29
   
13.4
 
Reliance
 
29
   
13.5
 
Warranties not limited by inquiries or knowledge
 
29
   
13.6
 
Indemnity for breach of Warranty
 
30
   
13.7
 
Seller to notify of potential breaches
 
30
   
13.8
 
Notification of Warranty Claims
 
30
   
13.9
 
Termination for breach of Warranty
 
30
   
13.10
 
No action against Buyer Group Member or officers and employees
 
30
   
13.11
 
Buyer Warranties
 
31
             
14.
 
Limitations of liability
 
31
                 
14.1
 
Disclosure
 
31
   
14.2
 
Fair disclosure
 
31

 
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14.3
 
Time limits for Warranty Claims
 
31
   
14.4
 
Withdrawal of Warranty Claim
 
31
   
14.5
 
Minimum amount for Warranty Claims
 
32
   
14.6
 
Threshold for Warranty Claims
 
32
   
14.7
 
Other limitations of liability
 
32
   
14.8
 
Maximum recovery
 
32
   
14.9
 
Reimbursement of payments subsequently received
 
32
   
14.10
 
Circumstances where limitations not to apply
 
33
             
15.
 
Third Party Claims
 
33
                 
15.1
 
Notice
 
33
   
15.2
 
Obligations after notice given
 
33
             
16.
 
Tax
 
34
                 
16.1
 
Tax indemnity
 
34
   
16.2
 
Limitations
 
34
   
16.3
 
Time for payment
 
35
   
16.4
 
Late payments
 
35
   
16.5
 
Refunds
 
35
             
17.
 
Tax Assessments
 
35
                 
17.1
 
Notice
 
35
   
17.2
 
Obligations after notice given
 
35
   
17.3
 
Sellers' response to notice
 
36
   
17.4
 
Effect of Sellers' notice
 
36
   
17.5
 
Buyer's rights to settle
 
36
   
17.6
 
Costs and expenses
 
37
             
18.
 
Tax returns and tax audits
 
37
                 
18.1
 
Tax returns relating to periods ending before Completion
 
37
   
18.2
 
Tax returns relating to periods ending after Completion
 
37
   
18.3
 
Assistance from Sellers
 
37
   
18.4
 
Tax audits
 
37
             
19.
 
Confidentiality
 
37
                 
19.1
 
No announcement or other disclosure of transaction
 
37
   
19.2
 
Permitted disclosure
 
38
   
19.3
 
No use or disclosure of Confidential Information
 
39
             
20.
 
Termination
 
39
                 
20.1
 
Termination by Buyer
 
39
   
20.2
 
Termination by Sellers
 
39
   
20.3
 
Effect of termination
 
39
             
21.
 
Payments
 
39
                 
21.1
 
Direction
 
39
   
21.2
 
Method of payment
 
39
   
21.3
 
No deduction
 
40
   
21.4
 
Default interest
 
40
             
22.
 
GST
 
40
                 
22.1
 
Interpretation
 
40
   
22.2
 
Reimbursements and similar payments
 
40
   
22.3
 
GST payable
 
40
   
22.4
 
Variation to GST payable
 
41

 
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23.
 
Notices
 
41
                 
23.1
 
Service agent for all Sellers and the SCRN Notes Sellers
 
41
   
23.2
 
How notice to be given
 
41
   
23.3
 
When notice taken to be received
 
42
             
24.
 
Entire agreement
 
43
             
25.
 
Proportionate liability
 
43
                 
25.1
 
Exclusion of proportionate liability provisions
 
43
   
25.2
 
Sellers not to apply Proportionate Liability Provisions
 
43
             
26.
 
General
 
44
                 
26.1
 
Amendments
 
44
   
26.2
 
Assignment
 
44
   
26.3
 
Consents
 
44
   
26.4
 
Costs
 
44
   
26.5
 
Counterparts
 
44
   
26.6
 
Further acts and documents
 
44
   
26.7
 
No merger
 
44
   
26.8
 
Severance
 
44
   
26.9
 
Stamp duties
 
44
   
26.10
 
Waivers
 
45
   
26.11
 
Signatures by fax or other electronic means
 
45
             
27.
 
Governing law and jurisdiction
 
45
                 
27.1
 
Governing law
 
45
   
27.2
 
Jurisdiction
 
45

 
Schedule 1 Sellers, SCRN Notes Sellers, Shares and SCRN Notes
52
   
Schedule 1A Currency Conversion
53
   
Schedule 2 Details of the Company
54
   
Schedule 3 Details of the Subsidiaries
55
   
Schedule 4 Real Property
56
   
Schedule 5 Intellectual Property, Business Names and Domain Names
57
   
Schedule 6 Encumbrances and Guarantees
59
   
Schedule 7 Key Contracts
60
   
Schedule 8 Warranties
63
   
Schedule 9 Buyer Warranties
88
   
Attachment 1 Last Accounts and Base Balance Sheet
89
   
Attachment 2 Disclosure Letter
90
   
Attachment 3 Index of Due Diligence Materials
91
   
Attachment 4 Due diligence questions and answers
92
   
Attachment 5 Form of resignation letter
93
   
Attachment 6 Escrow Agreement
94

 
iv

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Share sale agreement dated 28 April 2010
 
Parties
The parties set out in Schedule 1 (Sellers and SCRN Notes Sellers)

 
Acorn Energy, Inc. of 4 West Rockland Road, Montchanin, Delaware 19710 or its
designated affiliate (Buyer)
 
Background
 
A.
The Sellers own the Shares, being 69.86% of the issued shares of the Company, in
the amounts and percentages set out in Schedule 1.  The SCRN Notes Sellers own
the SCRN Notes in the principal amounts set out in Schedule 1.

 
B.
The Sellers wish to sell the Shares and the Buyer wishes to buy the Shares on
the terms and conditions of this agreement.  The SCRN Notes Sellers wish to sell
the SCRN Notes and the Buyer wishes to buy the SCRN Notes on the terms and
conditions of this agreement.

 
Operative provisions
 

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1.
Definitions and interpretation

 
1.1
Definitions

 
In this agreement:
 
Accounting Standards means, at any time:
 
 
(a)
the requirements of the Corporations Act about the preparation and contents of
financial reports;

 
 
(b)
the accounting standards approved under the Corporations Act; and

 
 
(c)
generally accepted accounting principles, policies, practices and procedures in
Australia or Canada, as applicable, to the extent not inconsistent with the
accounting standards described in paragraph (b).

 
ASIC means the Australian Securities and Investments Commission.
 
Asset means each asset owned or held by the Group Companies or used in the
Business, including any assets held under any financing or operating lease.
 
Auditor means HLB Mann Judd as the auditor of the Group Companies.
 
Authorisation means any licence, consent, approval, permit, registration,
accreditation, certification or other authorisation given or issued by any
Regulatory Authority or any other person.
 
Base Balance Sheet means the audited consolidated balance sheet of the Company
and its controlled entities attached to this agreement as Attachment 1.
 
Bridge Loan means the loan made by Buyer to the Company of $550,000 on October
20, 2009.
 
Business means the business of developing, manufacturing, marketing and selling
monitoring devices and solutions for use by electric utilities to improve
network performance as conducted by the Group Companies.
 
 
1

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Business Day means a day that is not a Saturday, Sunday or public holiday and on
which banks are open for business generally in New South Wales.
 
Business Names means each of the business names specified in part 2 of
Schedule 5.
 
Buyer Accountants means Friedman LLP of New York, New York.
 
Buyer Group Member means the Buyer and each Related Entity of the Buyer and
after Completion includes each Group Company.
 
Buyer Shares means the shares of common stock of the Buyer as traded on the
Nasdaq Global Market under the symbol ACFN.
 
Buyer Warranties means the warranties set out in Schedule 9.
 
Claim means any claim, demand or cause of action whether arising in contract,
tort, under statute or otherwise in relation to:
 
 
(a)
any provision of a Transaction Document;

 
 
(b)
the Shares or their sale; or

 

 
(c) 
any other matter connected with any Group Company,

 
other than a Tax Claim.
 
Company means Gridsense Pty Ltd ACN 130 672 767.
 
Company Sales means sales of the Group Companies as reported in accordance with
US GAAP in each Group Company’s financial statements.
 
Completion means the completion of the sale and purchase of the Shares and the
SCRN Notes in accordance with clause 6.
 
Completion Date means the date on which Completion occurs.
 
Completion Payment means the dollar amount set forth in clause 4.3(a).
 
Condition means each condition specified in clause 2.1.
 
Confidential Information means:
 
 
(a)
all information relating to the operations or affairs of any Group Company
including all financial or accounting information, all customer names and lists,
terms and conditions of supply, sales records, marketing analysis and research
and reports and other marketing information and all trade secrets, know how,
operating procedures and technical information; and

 
 
(b)
all other information treated by any Group Company as confidential or capable of
being protected at law or equity as confidential information or the disclosure
of which might cause loss or damage to or otherwise adversely affect any Group
Company,

 
in whatever form and in each case including information that has been disclosed
by the Sellers or any Group Company or their respective Representatives under
the terms of a confidentiality agreement.
 
 
2

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Corporations Act means the Corporations Act 2001 (Cth).
 
Defaulting Party has the meaning given in clause 6.8.
 
Disclosure Letter means the letter from the Sellers to the Buyer dated the same
date as this agreement in the form of the letter attached as Attachment 2.
 
Domain Names means each of the domain names specified in part 3 of Schedule 5.
 
Due Diligence Materials means:
 
 
(a)
the written information and documents provided to the Buyer by the Sellers, the
Group Companies and their respective Representatives before the date of this
agreement, an index of which is attached as Attachment 3;

 
 
(b)
the written questions raised by the Buyer in the due diligence process and the
written responses given to those questions by the Sellers, the Group Companies
and their respective Representatives before the date of this agreement, copies
of which are attached as Attachment 4; and

 
 
(c)
the Disclosure Letter.

 
Earn Out Amount means the amount calculated in accordance with clause 8.
 
Encumbrance means a mortgage, charge, pledge, lien, encumbrance, security
interest, title retention, preferential right, trust arrangement, contractual
right of set-off, or any other security agreement or arrangement in favour of
any person, whether registered or unregistered.
 
End Date means 30 April 2010 or such other date agreed in writing between the
Sellers and the Buyer.
 
Enterprise Agreement has the meaning given in section 12 of the Fair Work Act
2009 (Cth).
 
Environment means the physical, biological and social aspects and conditions of
a particular area, including:
 
 
(a)
land, water, air, atmosphere, climate, living organisms and other matter, things
made or altered by humans, ecosystems and social groupings;

 
 
(b)
the social, economic and cultural aspects of a thing specified in paragraph (a);
and

 
 
(c)
the interaction of any 2 or more things specified in paragraphs (a) and (b).

 
Escrow Account means an account opened in the name of the Escrow Agent as
trustee for the Sellers and the Buyer.
 
Escrow Agent means American Stock Transfer & Trust Company, LLC, New York, New
York.
 
Escrow Agreement means an agreement in the form attached as Attachment 6.
 
Escrow Amount means the amount of the Purchase Price described in clause 4.3(b)
or such other amount as remains in the Escrow Account from time to time.
 
Escrow Termination Date means the date of release and payment by the Escrow
Agent of all Buyer Shares and other property held in the Escrow Account per the
terms of the Escrow Agreement.
 
Financial Year means a period of 12 months ending on 30 June in any year.
 
 
3

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Freehold Properties means each of the Properties described in part 1 of
Schedule 4.
 
Fund means each superannuation fund or equivalent arrangement to which any Group
Company contributes, or is required to contribute, in respect of any employee or
any consultant engaged by that Group Company.
 
GAAP means United States generally accepted accounting principles, consistently
applied.
 
GPL Debt means the aggregate principal amount of indebtedness of US $1,128,345
together with accrued and unpaid interest owed by the Company to the SCRN Notes
Sellers together with accrued and unpaid interest thereon.
 
Group Company means each of the Company and each Subsidiary.
 
Group Company Encumbrance means any Encumbrance granted by any Group Company
over any of its assets or undertakings, including each Encumbrance specified in
part 1 of Schedule 6.
 
Group Company Guarantee means any Guarantee provided by any Group Company in
relation to the obligations of any Sellers, including each Guarantee specified
in part 2 of Schedule 6.
 
Group Liability has the meaning given in section 721-10 of the Tax Act.
 
GST has the meaning given in the GST Act.
 
GST Act means the A New Tax System (Goods and Services Tax) Act 1999 (Cth).
 
Guarantee means any guarantee, bond, security deposit, letter of credit or
suretyship or any other obligation to pay, purchase or provide funds (whether by
the advance of money, the purchase of or subscription for shares or other
securities, the purchase of assets or services, or otherwise) for the payment or
discharge of, to indemnify against the consequences of default in the payment
of, or otherwise be responsible for, any indebtedness of, obligation of,
liability of or the insolvency of any other person.
 
Incremental Sales Increase means the amount, if any, of Company Sales for the
2010 calendar year which are in excess of US $4,383,720.
 
Indemnified Losses means, in relation to any fact, matter or circumstance, all
losses, costs, damages, expenses and other liabilities arising out of or in
connection with that fact, matter or circumstance including all legal and other
professional expenses on a solicitor-client basis incurred in connection with
investigating, disputing, defending or settling any claim, action, demand or
proceeding relating to that fact, matter or circumstance (including any claim,
action, demand or proceeding based on the terms of this agreement).
 
Initial Purchase Price means the dollar amount set forth in clause 4.2.
 
Intellectual Property Licences means all agreements and arrangements under which
a Group Company has the right to use any Intellectual Property Rights owned by a
person (other than another Group Company) or any trade secrets, know-how,
operating procedure, technical information or other confidential information of
a person (other than another Group Company).
 
Intellectual Property Rights means:
 
 
(a)
patents, designs, trademarks and service marks (whether registered or
unregistered) and any applications for, or rights to apply for, registration of
any patent, design, trade mark or service mark;

 
 
4

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(b)
copyright (including copyright in software, websites, databases and advertising
and other promotional materials);

 
 
(c)
all rights to have information (including trade secrets, know-how, operating
procedures and technical information) kept confidential; and

 
 
(d)
all other rights or protections having similar effect anywhere in the world.

 
Key Contract means each contract specified in Schedule 7.
 
Last Accounts means the audited consolidated balance sheet and income statement,
cash flow statement and statement of changes in equity of each Group Company for
the financial year ended on 31 December 2008 together with such financial
statements for the period of 1 January 2009 through to 30 June 2009 and the
notes to those financial statements copies of which are attached to this
agreement as Attachment 1.
 
Last Balance Date means 30 June 2009.
 
Leases means the property leases and licences specified in part 2 of Schedule 4.
 
Leasehold Properties means each of the Properties described in part 2 of
Schedule 4.
 
Material Adverse Change means an event, occurrence or change after the Last
Balance Date which individually or when aggregated with all such events,
occurrences or changes has had or is reasonably likely to have a material
adverse effect on the financial condition, assets, liabilities, results of
operations, profitability or prospects of the Group Companies taken as a whole
or has diminished or is reasonably likely to diminish the annual revenues,
earnings before interest and tax, or net profit after tax of the Group Companies
taken as a whole by $50,000 or more or the net  assets of the Group Companies
taken as a whole by $50,000 or more.
 
Material Contract means any agreement or arrangement to which a Group Company is
party that:
 
 
(a)
requires or may require payments to or by that Group Company in excess of
$10,000 in aggregate;

 
 
(b)
cannot be performed in full within 12 months from the date it was entered into
or terminated by that Group Company on 3 months notice or less; or

 
 
(c)
might otherwise reasonably be expected to be material to the operation or
profitability of that Group Company.

 
Modern Award has the meaning given in section 12 of the Fair Work Act 2009
(Cth).
 
Non-Defaulting Party has the meaning given in clause 6.8.
 
Ownership Fraction means a fraction, the numerator of which is the number of
Shares owned by the Sellers on the Completion Date and the denominator of which
is the total number of Shares on the Completion Date.
 
Properties means the property and premises described in Schedule 4.
 
Purchase Price means the Initial Purchase Price plus the Earn Out Amount as
adjusted in accordance with this agreement.
 
 
5

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Records means all originals and copies of all books, records, reports,
correspondence, files, manuals and other documents and information created by,
owned by, or relating to any Group Company, whether in printed, electronic or
any other form and including all:
 
 
(a)
statutory books and registers, minute books, books of account, trading and
financial records, employee records, tax returns and related correspondence;

 
 
(b)
customer lists, supplier lists, price lists, pricing models and sales and
marketing materials;

 
 
(c)
title deeds and other documents of title; and

 
 
(d)
originals and copies of all contracts and Authorisations.

 
Regulatory Authority means:
 
 
(a)
any government or local authority and any department, minister or agency of any
government; and

 
 
(b)
any other authority, agency, commission or similar entity having powers or
jurisdiction under any law or regulation or the listing rules of any recognised
stock or securities exchange.

 
Related Entity of a corporation means:
 
 
(a)
a related body corporate of that corporation within the meaning of section 50 of
the Corporations Act; and

 
 
(b)
a trustee of any unit trust in relation to which that corporation, or any
corporation referred to in paragraph (a), directly or indirectly:

 
 
(i)
controls the right to appoint the trustee; or

 
 
(ii)
is in a position to control the casting of, more than one half of the maximum
number of votes that might be cast at a meeting of holders of units in the
trust; or

 
 
(iii)
holds or is in a position to control the disposal of more than one half of the
issued units of the trust.

 
Representatives means, in relation to a party, all officers, employees,
professional advisers, agents and attorneys of the party or of its Related
Entities.
 
Resolved Claim means any Claim or Tax Claim in respect of which notice has been
given by the Buyer to the Sellers before the Escrow Termination Date and which
has been resolved by:
 
 
(a)
the Buyer withdrawing the Claim or Tax Claim;

 
 
(b)
the Sellers and the Buyer agreeing in writing the amount to be paid in
settlement of the Claim or Tax Claim; or

 
 
(c)
a court of competent jurisdiction making a final award of damages, or a
determination that no damages are payable, in respect of the Claim or Tax Claim.

 
Restricted Business means any business which is the same or substantially
similar to, or competitive with or likely to be competitive with, any material
part of the Business as carried on at the Completion Date.
 
 
6

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Restricted Persons means Lindon Shiao, Adam Goldsmith, Simon McCauley, Vaughan
Wesson, Doug McKay and Kevin Anderson and each entity that is controlled by any
of such persons from time to time.
 
SCRN Notes Sellers means those persons listed in Schedule 1 who hold the SCRN
Notes in the principal amount set forth opposite their respective names in
Schedule 1.
 
SCRN Notes means the promissory notes given by Gridsense Systems, Inc. to the
SCRN Notes Sellers, as assumed by the Company, to evidence the GPL Debt.
 
Secured Promissory Note means the Promissory Note given by Gridsense Systems,
Inc. to Acorn Energy, Inc., as assumed by the Company, dated July 2, 2008, in
the principal amount of CAN $750,000.
 
Shares means the shares in the capital of the Company specified in Schedule 1.
 
Shareholders Agreement means the Shareholders Agreement dated 16 June 2009
between the Buyer, Campbell Keenan, Hans Wick, Ulrich Rued, Doston Bradley,
Lindon Shiao, Mark Pasquale and Prime Energy Partners as shareholders of
Company.
 
Shareholders Agreement Parties means the parties to the Shareholders Agreement,
being Buyer, Campbell Keenan, Hans Wick, Ulrich Rued, Doston Bradley, Lindon
Shiao, Mark Pasquale and Prime Energy Partners.
 
Standard Rate in relation to interest payable on any payment due under this
agreement means the rate which is the 90 day Bank Bill Swap Reference Rate
(Average Bid) as published in the Australian Financial Review on the first date
on which interest accrues on that payment (or if that rate or publication is not
published, the rate determined by the Buyer, acting reasonably, to be the
nearest equivalent rate having regard to prevailing market conditions) plus (in
either case) a margin of 2% per annum.
 
Subsidiaries means each of the companies specified in Schedule 3.
 
Systems means all information technology and communications systems used by any
Group Company in the conduct of the Business including all hardware, software,
networks, mobile communications devices and peripherals.
 
Tax means any tax, levy, excise, duty, charge, surcharge, contribution,
withholding tax, impost or withholding obligation of whatever nature, whether
direct or indirect, by whatever method collected or recovered, together with any
fees, penalties, fines, interest or statutory charges.
 
Tax Act means the Income Tax Assessment Act 1936 (Cth) and the Income Tax
Assessment Act 1997 (Cth) or either of them.
 
Tax Assessment means any notice, demand, assessment, amended assessment,
determination, return or other document issued by a Tax Authority or lodged with
a Tax Authority under a system of self-assessment as a result of which any Group
Company may be required to make a payment of Tax or may be deprived of any
credit, rebate, relief, right of set off or right to repayment of Tax or any
allowance, deduction, tax loss or other benefit.
 
Tax Authority means any Regulatory Authority responsible for the assessment,
collection, withholding or administration of Tax in any country or jurisdiction.
 
Tax Claim means any claim against the Sellers under clause 16.1.
 
Tax Warranties means the Warranties set out in paragraph 16 of Schedule 8.
 
 
7

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Third Party Claim means any claim or potential claim by any person other than
any Buyer Group Member or any Seller or related entity of any Seller against any
Group Company.
 
Transaction Documents means:
 
 
(a)
this agreement;

 
 
(b)
the Escrow Agreement;

 
 
(c)
the Deed Poll of Restraint executed by each of the Restricted Persons;

 
 
(d)
the Share Transfer Forms and transfers of the SCRN Notes executed by each Seller
in favour of the Buyer; and

 
 
(e)
any other document agreed by the parties to be a Transaction Document for the
purposes of this agreement.

 
Transitional Instrument has the meaning given in the Fair Work (Transitional
Provisions and Consequential Amendments) Act 2009 (Cth).
 
Unresolved Claim means any Claim or Tax Claim in respect of which notice has
been given by the Buyer to the Sellers before the Escrow Termination Date which
is not a Resolved Claim.
 
Warranties means the warranties set out in Schedule 8.
 
Warranty Claim means any Claim by the Buyer arising out of a breach of a
Warranty, including a Claim under clause 13.6.
 
1.2
Reasonable endeavours

 
Any provision of this agreement which requires a party to use reasonable
endeavours or all reasonable endeavours to procure that something is performed
or occurs or does not occur does not include any obligation:
 
 
(a)
to pay any money or to provide any financial compensation, valuable
consideration or any other incentive to or for the benefit of any person except
for payment of any applicable fee for the lodgement or filing of any relevant
application with any Regulatory Authority; or

 
 
(b)
to commence any legal action or proceeding against any person,

 
except where that provision expressly specifies otherwise.
 
1.3
Knowledge and awareness of the Sellers

 
If any Warranty is qualified by the Sellers' awareness or knowledge, the facts
of which the Seller is aware or that are within the Sellers' awareness or
knowledge are taken to be:
 
 
(a)
all facts of which the Sellers or any director, officer or senior manager of the
Sellers is actually aware at the relevant time; and

 
 
(b)
all facts of which the Sellers or any director, officer or senior manager of the
Sellers would have been aware at the relevant time had that person made due and
careful enquiries of all people who might reasonably be expected to have
knowledge or awareness of relevant facts.

 
 
8

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1.4
Business days

 
If the day on which any act to be done under this agreement is a day other than
a Business Day, that act must be done on the immediately preceding Business Day
except where this agreement expressly specifies otherwise.
 
1.5
General rules of interpretation

 
In this agreement headings are for convenience only and do not affect
interpretation and, unless the contrary intention appears:
 
 
(a)
an obligation or a liability assumed by 2 or more persons binds them jointly and
severally and a right conferred on 2 or more persons benefits them jointly and
severally;

 
 
(b)
a word importing the singular includes the plural and vice versa, and a word of
any gender includes the corresponding words of any other gender;

 
 
(c)
the word including or any other form of that word is not a word of limitation;

 
 
(d)
if a word or phrase is given a defined meaning, any other part of speech or
grammatical form of that word or phrase has a corresponding meaning;

 
 
(e)
a reference to a person includes an individual, the estate of an individual, a
corporation, an authority, an association or parties in a joint venture, a
partnership and a trust;

 
 
(f)
a reference to a party includes that party's executors, administrators,
successors and permitted assigns, including persons taking by way of novation
and, in the case of a trustee, includes any substituted or additional trustee;

 
 
(g)
a reference to a document (including this agreement) is to that document as
varied, novated, ratified or replaced from time to time;

 
 
(h)
a reference to a party, clause, schedule, exhibit, attachment or annexure is a
reference to a party, clause, schedule, exhibit, attachment or annexure to or of
this agreement, and a reference to this agreement includes all schedules,
exhibits, attachments and annexures to it;

 
 
(i)
a reference to an agency or body if that agency or body ceases to exist or is
reconstituted, renamed or replaced or has its powers or function removed
(obsolete body), means the agency or body which performs most closely the
functions of the obsolete body;

 
 
(j)
a reference to a statute includes any regulations or other instruments made
under it (delegated legislation) and a reference to a statute or delegated
legislation or a provision of either includes consolidations, amendments,
re-enactments and replacements;

 
 
(k)
a reference to $ or dollar is to United States Dollars and any conversion of
United States Dollars to or from Australian Dollars or Canadian Dollars will use
the conversion rate then in effect on 16 October 2009, as set out in
Schedule 1A;and

 
 
(l)
this agreement must not be construed adversely to a party just because that
party prepared it or caused it to be prepared.

 
 
9

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2.
Conditions precedent

 

2.1
Conditions

 
Clauses 3, 4 and 6 do not become binding on the parties and have no force or
effect, and Completion cannot take place, unless each of the conditions listed
in the first column of the following table has been either satisfied or waived
in accordance with clause 2.4:
 
Condition
 
Right to waive
          (a)   
satisfactory completion of the Buyer's due diligence as determined by the Buyer
in its sole discretion;
 
Buyer
          (b)   
all approvals of any Regulatory Authority which the Sellers and the Buyer agree
are necessary or desirable to implement the transactions contemplated by this
agreement have been obtained either unconditionally or on conditions
satisfactory to the Buyer acting reasonably and have not been withdrawn or
revoked;
 
Buyer
          (c)   
no temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction, no preliminary or final
decision, determination, or order issued by any Regulatory Authority and no
other legal restraint preventing any of the transactions contemplated by this
agreement is in effect;
 
Buyer
          (d)   
no Material Adverse Change has occurred;
 
Buyer
          (e)   
a resolution of the shareholders of any Seller that is not a natural person has
been passed at a duly convened general meeting of that Seller to approve the
transactions contemplated by this agreement and entry into and performance of
each of the Transaction Documents by the relevant Seller;
 
Buyer
          (f)   
the Buyer has received a certified copy of each consent required under each
Lease and each Key Contract to the acquisition of the Shares by the Buyer and
the change of control of the Company resulting from that acquisition of the
Shares each of which is unconditional or subject only to conditions reasonably
acceptable to the Buyer; and
 
Buyer
          (g)   
the Company and the relevant counterparties have executed binding agreements to
reflect the following:
 
(i) the royalty payment percentage payable by the Company to Kevin Anderson and
Doug McKay will be reduced from 12.5% to 6% and the Company will issue to Kevin
Anderson and Doug McKay or their designee 400,000 Shares, and
 
(ii) the debt (inclusive of principal and accrued and unpaid interest) of AUD
$1,400,000 (US $1,287,076) owed by the Company to Keenan Campbell will be
reduced to AUD $700,000 (US $643,538) of which amount AUD $645,613 (US $593,538)
will be payable by the Company to Keenan Campbell on the Completion Date (such
debt having been paid down with the payment of AUD $54,387 (US $50,000) earlier
paid by the Company to Keenan Campbell.
 
Buyer

 
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2.2
Reasonable endeavours to satisfy Conditions

 
Each party must use all reasonable endeavours to ensure that each Condition is
satisfied as soon as practicable after the date of this agreement and in any
event before the End Date and in particular:
 
 
(a)
the Buyer must as soon as practicable:

 
 
(i)
prepare and lodge each notice or application required to be given or made to the
relevant Regulatory Authority for the purposes of procuring the satisfaction of
the Conditions set out in clause 2.1(b);

 
 
(ii)
provide to the Sellers all information reasonably required by the Sellers to
enable the Sellers to prepare any document referred to in clauses 2.2(b)(i) and
2.2(b)(iii) or otherwise for the purposes of procuring the satisfaction of any
Condition;

 
 
(b)
the Sellers must as soon as practicable:

 
 
(i)
prepare any notice of meeting and related documentation for the purposes of
procuring the satisfaction of the Condition set out in clause 2.1(e) and allow
the Buyer a reasonable opportunity to review and comment on the documents prior
to distribution to members;

 
 
(ii)
amend any factual inaccuracy, and consider in good faith any other comments
notified to it by the Buyer following review of the documents by the Buyer and
must as soon as practicable finalise and dispatch those documents to the
Sellers' shareholders;

 
 
(iii)
prepare and dispatch notices and requests for consent to each party from whom
consent is required under each Lease and each Key Contract for the purposes of
procuring the satisfaction of the Condition set out in clause 2.1(f); and

 
 
(iv)
provide to the Buyer all information reasonably required by the Buyer to enable
the Buyer to prepare any document for the purposes of procuring the satisfaction
of any Condition;

 
 
(c)
each party must otherwise co-operate with, and comply with all reasonable
requests of the other party for the purposes of procuring the satisfaction of
any Condition and must not take any action that will or is likely to hinder or
prevent the satisfaction of any Condition; and

 
 
(d)
each party must keep the other party informed of any fact, matter or
circumstance of which it becomes aware that may result in a Condition not being
satisfied in accordance with its terms.

 
 
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2.3
Notice in relation to satisfaction of Conditions

 
Each party must within 1 Business Day after becoming aware of the satisfaction
of any Condition notify the other party of the satisfaction of that Condition
and provide reasonable evidence that the Condition has been satisfied.
 
2.4
Waiver of Conditions

 
A Condition may be waived and may only be waived:
 
 
(a)
if one party is specified in the second column of the table in clause 2.1
opposite that  Condition, by that party by notice to the other party; or

 
 
(b)
if more than one party is specified in the second column of the table in
clause 2.1 opposite that Condition, by written agreement between all of those
parties.

 
A party entitled to waive or to agree to waive a Condition under this clause 2.4
may do so in its absolute discretion.  A party that waives or agrees to waive a
Condition is not prevented from bringing a Claim against any other party in
respect of any breach of this agreement that caused that Condition not to be
satisfied.
 
2.5
Failure of Conditions

 
A party is entitled to terminate this agreement by notice to the other party at
any time before Completion:
 
 
(a)
if any Condition has become incapable of satisfaction and that Condition has not
been waived in accordance with clause 2.4 within 5 Business Days after the
occurrence of the fact, matter or circumstance which caused that Condition to
become incapable of satisfaction;

 
 
(b)
if any Condition has not been satisfied or waived in accordance with clause 2.4
before the End Date; or

 
 
(c)
if any Condition, having been satisfied on or before the End Date, ceases to be
satisfied before Completion,

 
except where the relevant Condition has become incapable of satisfaction, has
not been satisfied, or ceases to be satisfied, as a direct result of a failure
by the party seeking to terminate to comply with its obligations under
clause 2.2.
 

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3.
Sale and purchase of Shares and SCRN Notes

 
3.1
Sale and purchase

 
On Completion the Sellers and the SCRN Notes Sellers must sell and the Buyer
must buy the Shares and the SCRN Notes for the Purchase Price free from all
Encumbrances and together with all rights attaching or accruing to the Shares
and the SCRN Notes after the date of this agreement.
 
3.2
Nominee shareholdings

 
If legal title to any of the Shares or the SCRN Notes is held by any third party
as nominee of the Sellers or the SCRN Notes Sellers, as the case may be, the
Sellers and the SCRN Notes Sellers must procure that third party to transfer the
legal right, title and interest in such Shares or SCRN Notes to the Buyer.
 
 
12

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4.
Purchase Price

 
4.1
Purchase Price

 
The Purchase Price payable for the Shares and the SCRN Notes is the aggregate of
the Initial Purchase Price set forth in clause 4.2 and the Earn Out Amount
calculated in accordance with clause 8.
 
4.2
Initial Purchase Price

 
 
(a)
The initial purchase price (Initial Purchase Price) payable for the Shares and
SCRN Notes is the sum of (i) the dollar amount of the principal and unpaid
accrued interest owed by the Company to the SCRN Notes Sellers as of March 11,
2010, the “SCRN Debt” ($1,763,555.44) and (ii) $4,383,720 less the dollar amount
of the principal and unpaid accrued interest owed by the Company as of March 11,
2010 to the Buyer ($868,977.41) and the SCRN Debt multiplied by the Ownership
Fraction, with the Initial Purchase Price being $2,986,900.09.

 
 
(b)
The Initial Purchase Price ($2,986,900.09) is to be allocated between the Shares
and the SCRN Notes as follows:

 
 
(i)
$1,763,555.44 is payable for the SCRN Notes; and

 
 
(ii)
$1,223,344.65 is payable for the Shares.

 
4.3
Payment of Initial Purchase Price

 
The Initial Purchase Price must be paid as follows on Completion:
 
 
(a)
the Buyer must pay the Completion Payment as to one-half of the amount of the
Initial Purchase Price for the SCRN Notes ($881,777.72) to the relevant SCRN
Notes Sellers in accordance with clause 6.6(a) and clause 21; and

 
 
(b)
the Buyer must apply the Initial Purchase Price for the Shares ($1,223,344.65)
and the remaining one-half of the Initial Purchase Price for the SCRN Notes
($881,777.72) to the delivery of Buyer Shares, and the number of Buyer Shares to
be so delivered will be determined and based on a per share price of $5.91
(being the volume weighted average price of the Buyer’s common stock on the
Nasdaq Global Market during the 20 trading sessions that ended on October 16,
2009).  The Buyer Shares constituting payment for the Shares held by the Sellers
who are not SCRN Notes Sellers must be delivered in accordance with clause
6.6(c).  The Buyer Shares constituting payment for one-half the SCRN Notes and
the Shares held by SCRN Notes Sellers must be delivered into the Escrow Account,
to be held by the Escrow Agent on behalf of the relevant Sellers and SCRN Notes
Sellers in accordance with the Escrow Agreement, and to be dealt with in
accordance with clause 9.

 
4.4
Adjustment for certain payments

 
Any payment made:
 
 
(a)
by the Sellers to a Buyer Group Member for a Warranty Claim or under clause 16,
will be treated as a pro-rata reduction in the purchase price of each Share and
SCRN Note; or

 
 
(b)
by the Buyer to the Sellers under clause 14.9 or clause 16.5, will be treated as
a pro-rata increase in the purchase price of each Share and SCRN Note.

 
 
13

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5.
Period before Completion

 
5.1
Buyer access

 
For the purposes of assisting the Buyer and its Representatives to understand
the Business and to prepare for the transition to the Buyer's normal working
procedures, the Sellers must procure that from the date of this agreement until
Completion the Buyer and its Representatives are given full access to:
 
 
(a)
the Assets, Properties and Records; and

 
 
(b)
all officers and employees of any Group Company and the Auditor during business
hours.

 
5.2
Conduct of Business

 
The Sellers must procure that until Completion, except with the prior written
consent of the Buyer, each Group Company:
 
 
(a)
conducts the Business in the ordinary and usual course consistent with its usual
business practices and does not make any significant change to the nature or
scale of any activity comprised in the Business;

 
 
(b)
conducts the Business in accordance with all applicable laws and regulations
including, but not limited to, making all necessary income tax, payroll tax,
goods and services tax and other tax payments and tax filings in a timely manner
in all jurisdictions in which the Company or its subsidiaries operate;

 
 
(c)
maintains and complies with the terms of all Authorisations necessary to own and
operate the Assets, occupy the Properties and conduct the Business;

 
 
(d)
keeps and maintains proper records of all its dealings and transactions relating
to the Business;

 
 
(e)
pays all amounts owing to trade or other creditors of each Group Company in
accordance with applicable payment terms;

 
 
(f)
protects and maintains each of its physical assets and intellectual property and
must maintain appropriate and adequate insurance in respect of each of those
assets which are insurable;

 
 
(g)
maintains all Authorisations required to carry on the Business; and

 
 
(h)
consults with the Buyer in relation to the preparation and approval of any
budget or business plan relating to the Business.

 
5.3
Restricted conduct

 
The Sellers must procure that until Completion, except with the prior written
consent of the Buyer, each Group Company does not:
 
 
(a)
issue or allot any share capital or options, securities or other rights
convertible into share capital;

 
 
(b)
buy back or redeem any shares or otherwise reduce its share capital or provide
financial assistance for the acquisition of its own shares or shares in its
holding company;

 
 
14

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(c)
declare or pay any dividends or other distributions;

 
 
(d)
alter the provisions of its constitution;

 
 
(e)
dispose of or create any Encumbrance over, or declare itself the trustee of, any
asset except in the ordinary course of business;

 
 
(f)
incur or enter into commitments to incur capital expenditure in excess of $5,000
for any individual item or $10,000 in aggregate;

 
 
(g)
enter into any Material Contract;

 
 
(h)
terminate or vary the terms of, or do or omit to do anything which might result
in the termination or variation of, any Material Contract or Key Contract;

 
 
(i)
do or omit to do anything which might result in the variation, termination,
suspension, revocation or non-renewal of any Authorisation held by that Group
Company which is material to the operation of the Business;

 
 
(j)
incur any indebtedness except for borrowing under its existing bank facilities
not exceeding $5,000 or indebtedness to trade creditors incurred in the ordinary
course of business;

 
 
(k)
exceed any limitation on indebtedness imposed by, or breach any other covenant
given in favour of, any lender or other financier to that Group Company;

 
 
(l)
enter into any new bank facilities or other financial accommodation;

 

 
(m)
enter into any Guarantee or indemnity on behalf of any person or provide
security for the obligations of any person except in the ordinary course of
business;

 
 
(n)
except in the ordinary course of business or as required by law or by the terms
of any Transitional Instrument, or Enterprise Agreement or Modern Award or other
existing terms of employment:

 
 
(i)
engage any person for employment whose annual remuneration (inclusive of
superannuation) exceeds $50,000;

 
 
(ii)
terminate the employment of any employee whose annual remuneration (inclusive of
superannuation) exceeds $50,000;

 
 
(iii)
increase or make any representation about an increase in the annual remuneration
of any employee or create or increase any entitlement for any employee to
receive a bonus or other payment in addition to annual remuneration; or

 
 
(iv)
otherwise vary the terms of employment or engagement of any employee;

 
 
(o)
pay any retirement allowance or superannuation benefit to any director or
employee, except for any payment required by law or by the terms of any
Transitional Instrument, or Enterprise Agreement or Modern Award, service
contract or retirement or redundancy policy disclosed to the Buyer in the Due
Diligence Materials;

 
 
(p)
enter into any profit sharing or profit or equity participation arrangement with
any employee, agent, distributor, representative, director or other person;

 
 
15

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(q)
revalue any of its assets;

 
 
(r)
change any accounting policies or practices unless such change is required by
law;

 
 
(s)
make any material Tax election or settle or compromise any material liability
relating to Tax;

 
 
(t)
commence any litigation, mediation or arbitration or any other form of dispute
resolution the costs of which are likely to exceed $5,000 other than as claimant
for the collection of debts not exceeding $20,000 in the ordinary course of
business;

 
 
(u)
settle or compromise any claims, demands or proceedings for an amount in excess
of $5,000 or take steps to do so;

 
 
(v)
terminate or permit the termination or amendment of, or fail to renew on its
expiry, any insurance policy held by that Group Company as at the date of this
agreement;

 
 
(w)
destroy or otherwise dispose of any Records; or

 
 
(x)
authorise, or agree conditionally or otherwise to do, any of the things referred
to in this clause 5.3.

 
5.4
Consents to change in control

 
Without limiting the provisions of clause 2.2, The Buyer and the Sellers must
from the date of this agreement until Completion use all reasonable endeavours
to obtain on or before Completion all consents that are required under the terms
of any Lease or Material Contract to the change in control of the Company that
will occur on Completion on terms reasonably acceptable to both the Sellers and
the Buyer and in particular must:
 
 
(a)
in relation to each Lease and Material Contract under which a consent is
required jointly approach the relevant landlord or counterparty to request that
consent; and

 
 
(b)
provide all information reasonably required by the relevant landlord or
counterparty or any mortgagee of the relevant landlord in connection with the
request for consent.

 
5.5
Other discussions

 
The Sellers must immediately after this agreement is executed terminate all
discussions with any person other than the Buyer in relation to the sale of the
Shares or the SCRN Notes with any person other than the Buyer and:
 
 
(a)
must not and must ensure that its Representatives do not without the prior
written consent of the Buyer solicit or respond to any other proposal in
relation to the Shares, the SCRN Notes or the assets of the Business; and

 
 
(b)
must as soon as practicable after the date of this agreement exercise all rights
available to it to ensure that any Confidential Information that has been
provided to any other party in relation to the potential sale of the Shares or
the assets of the Business is returned to the Sellers or destroyed by the person
holding such Confidential Information.

 
 
16

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5.6
Notification of breach

 
If at any time before Completion any of the Sellers is in breach of its
obligations under clause 5.2 or clause 5.3 the Sellers must promptly provide
notice to the Buyer describing the fact, matter or circumstance giving rise to
the breach in reasonable detail.
 
5.7
Termination by Buyer

 
If any time before Completion:
 
 
(a)
any of the Sellers is in breach of clause 5.2 or clause 5.3 and such breach has
or is reasonably likely to give rise to a Material Adverse Change;

 
 
(b)
a Material Adverse Change occurs,

 
then the Buyer may:
 
 
(c)
by notice to the Sellers at any time before Completion terminate this agreement;
or

 
 
(d)
proceed to Completion in which case the Buyer will be entitled to make a Claim
in respect of any breach referred to in clause 5.7(a) or any other breach of
this agreement (including a breach of the Warranties) that contributed to the
Material Adverse Change.

 
If Completion does not occur by 15 February 2010 the Sellers will cause the
Company to provide the Buyer by 15 February 2010 with audited financial
statements of the Group Companies which are in compliance with U.S. Securities
and Exchange Commission reporting requirements for the year ended 31 December
2009.
 

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6.
Completion

 
6.1
Time and place for Completion

 
Completion must take place at the offices of Clayton Utz, 1 O'Connell Street,
Sydney, NSW, Australia at 8.00am on the later of:
 
 
(a)
the date which is 5 Business Days after all of the Conditions have been
satisfied or waived in accordance with clause 2.4; and

 
 
(b)
approval of all terms and conditions of this agreement by the shareholders and
the directors of the Company and the directors of the Buyer,

 
or at such other place, date or time as the Sellers and the Buyer agree in
writing.
 
6.2
Provision of information before Completion

 
The Buyer must provide to the Sellers no later than 3 Business Days before
Completion:
 
 
(a)
the names of any director, secretary and public officer of each Group Company
that the Buyer does not require to resign on Completion;

 
 
(b)
the names of each person that the Buyer requires to be appointed as a director,
secretary or public officer of any Group Company together with a signed consent
to act in that capacity; and

 
 
(c)
the address of any new registered office that the Buyer requires any Group
Company to adopt.

 
 
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6.3
Sellers delivery obligations

 
At Completion, the Sellers and the SCRN Notes Sellers, as may be relevant, must
deliver to the Buyer:
 
 
(a)
completed transfers of the Shares in favour of the Buyer as transferee duly
executed by the registered holder as transferor and share certificates, or duly
executed indemnities for lost share certificates, in respect of all Shares;

 
 
(b)
completed transfers of the SCRN Notes in favour of the Buyer as transferee duly
executed and endorsed by the respective SCRN Notes Sellers and delivery of the
original SCRN Notes, or duly executed indemnities for lost SCRN Notes, in
respect of all SCRN Notes;

 
 
(c)
all statutory registers, minute books and other record books, financial records,
including asset registers, management accounts, budgets, ledgers, journals,
books of account and other Records of each Group Company and the common seal, if
any, of each Group Company;

 
 
(d)
possession of each Property, all keys to each Property and all title documents
and other documents held by each Group Company in connection with the ownership
of each Property;

 
 
(e)
all insurance policies and certificates of currency in relation to all
insurances held by each Group Company;

 
 
(f)
the written resignation in the form attached as Attachment 5 of each director,
secretary and public officer of each Group Company except for any director,
secretary or public officer notified by the Buyer under clause 6.2(a) and who
has agreed to remain in office;

 
 
(g)
documentation evidencing to the satisfaction of the Buyer the repayment of all
indebtedness owing from any Seller or any person connected with or associated
with any Seller to any Group Company procured in accordance with clause 10.1.

 
 
(h)
the written consent and waiver of any person holding any pre-emptive right or
similar right in relation to the sale or transfer of the Shares under this
agreement;

 
 
(i)
duly signed minutes of each meeting convened under clause 6.5;

 
 
(j)
an original counterpart of each other Transaction Document duly executed by each
of the Sellers;

 
 
(k)
an original counterpart of the Tax Release Deed duly executed by the Sellers and
each Group Company and documentation evidencing to the satisfaction of the Buyer
the payment by each Group Company by Completion of any Tax that is due and
payable by a Group Company to the relevant Tax Authority; and

 
 
(l)
copies of the executed legal documents used to satisfy the conditions set forth
in clauses 2.1(e), and 2.1(g).

 
6.4
Delivery method

 
Any document or other item specified in clause 6.3(c), 6.3(d) or 6.3(e) may be
delivered to the Buyer by leaving that document or other item in a safe and
appropriate place at the Property at which it is located on the Completion Date.
 
 
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6.5
Board meetings

 
The Sellers must procure that on or before Completion a meeting of the directors
of each Group Company is duly convened and held at which the directors resolve,
subject to Completion occurring:
 
 
(a)
in the case of the Company to approve the registration of the Buyer as the
holder of the Shares;

 
 
(b)
to record the resignation of each director, secretary and public officer of each
Group Company whose resignation effective from Completion is to be delivered
under clause 6.3(f);

 
 
(c)
to appoint as directors, secretaries and public officers of each Group Company
each person notified under clause 6.2(b);

 
 
(d)
to change the registered office of each Group Company to the address notified
under clause 6.2(c);

 
 
(e)
to revoke each existing authority to operate any bank account of each Group
Company and approve such new authority as may be provided by the Buyer to the
Sellers before the relevant board meeting; and

 
 
(f)
to revoke any existing powers of attorney granted by each Group Company.

 
6.6
Buyer payment and delivery obligations

 
At Completion the Buyer must:
 
 
(a)
pay the Completion Payment to the Sellers;

 
 
(b)
deliver the Buyer Shares constituting the Escrow Amount into the Escrow Account;

 
 
(c)
deliver the Buyer Shares constituting payment for the Shares held by those
Sellers who are not SCRN Notes Sellers; and

 
 
(d)
deliver to the Sellers an original counterpart of each other Transaction
Document duly executed by the Buyer and deliver to SCRN Notes Sellers an
original counterpart of each other Transaction document relating to the SCRN
Notes duly executed by Buyer.

 
6.7
Interdependence of obligations at Completion

 
The obligations of the parties under clauses 6.3, 6.5, and 6.6 are
interdependent and must be performed, as nearly as possible, simultaneously.  If
any obligation specified in clauses 6.3, 6.5 or 6.6 is not performed on or
before Completion then, without limiting any other rights of the parties,
Completion is taken not to have occurred and any document delivered, or payment
made, under clause 6.3 or clause 6.6 must be returned to the party that
delivered it or paid it.
 
6.8
Notice to complete

 
If Completion does not occur in accordance with this clause 6 because of the
failure of any party (the Defaulting Party) to satisfy any of its obligations
under this clause 6 then:
 
 
(a)
the Buyer (where the Defaulting Party is any of the Sellers); or

 
 
(b)
the Sellers (where the Defaulting Party is the Buyer),

 
 
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(in either case the Non-Defaulting Party) may give the Defaulting Party a notice
requiring the Defaulting Party to satisfy those obligations within a period of
5 Business Days after the date of the notice and specifying that time is of the
essence in relation to that notice.
 
6.9
Remedies for failure to comply with notice

 
If the Defaulting Party fails to comply with a notice given under clause 6.8,
the Non-Defaulting Party may without limiting its other rights or remedies
available under this agreement or at law:
 
 
(a)
immediately terminate this agreement, in which case the Non-Defaulting Party may
seek damages for breach of this agreement; or

 
 
(b)
seek specific performance of this agreement, in which case:

 
 
(i)
if specific performance is obtained the Non-Defaulting Party may also seek
damages for breach of this agreement; and

 
 
(ii)
if specific performance is not obtained the Non-Defaulting Party may then
terminate this agreement and may seek damages for breach of this agreement.

 
6.10
Title and risk

 
Beneficial ownership of and risk in the Shares and the SCRN Notes will pass from
the Sellers and the SCRN Note Sellers to the Buyer on Completion.
 

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7.
Shareholders Agreement

 
7.1
Waiver of pre-emptive rights

 
Each Shareholders Agreement Party irrevocably waives any and all rights under
clauses 14.1 and 15.1 of the Shareholders Agreement.
 
7.2
Termination and release of rights under the Shareholders Agreement

 
Each Shareholders Agreement Party acknowledges that:
 
 
(a)
the Shareholders Agreement is terminated with effect immediately prior to
Completion; and

 
 
(b)
it has no claim against any Shareholders Agreement Party and will not bring any
claim against any other Shareholders Agreement Party that the party may have or
claim to have or but for this agreement might have had against each other
Shareholders Agreement Party (including any claim of which the party is not
aware, or could not have been aware, at the date of this agreement) arising from
or in connection with the Shareholders Agreement.

 
7.3
Bar to proceedings

 
The Buyer may plead the clause 7.2(b) as a complete defence to any proceedings
arising from or in connection with the matters the subject of clause 7.2(b).
 
 
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8.
Earn out

 
8.1
Additional definitions

 
Earn Out Amount has the meaning given in clause 8.2.
 
8.2
Earn Out Amount

 
The Earn Out Amount is the amount determined in accordance with the following
calculations:
 
 
(a)
The Incremental Sales Increase amount is to be multiplied by 50% and further
multiplied by the Ownership Fraction, but in no event will such amount exceed an
amount equal to $2,435,400 multiplied by the Ownership Fraction.

 
 
(b)
The Earn Out Amount will be payable as soon as the Incremental Sales Increase
can be reasonably determined by the Buyer’s Auditor as set forth below but in no
event prior to the date of Buyer’s Auditor’s report related to the consolidated
financial statements of the Buyer for the year ending December 31, 2010 that are
included in Buyer’s Form 10-K and filed with the U.S. Securities and Exchange
Commission for such year.

 
 
(c)
For illustrative purposes only, the calculation of the Earn Out Amount is
illustrated as follows (all figures are in US Dollars):

 
 
(i)
2010 Company Sales - $9,000,000

 
 
·
$9,000,000

 -4,383,720
 
$4,616,280
 
 
·
$4,616,280 x 50% x 35,202,812/50,917,097 = $1,595,790

     
 
·
Maximum amount of earn out is:

 
$2,435,400 x 35,202,812/50,917,097 = $1,683,836
 
 
·
Earn Out Amount is $1,595,790

 
 
(ii)
2010 Company Sales - $10,000,000

 
 
·
$10,000,000

-4,383,720
 
$ 5,616,280
 
 
·
$5,616,280 x 50% x 35,202,812/50,917,097 = $1,941,548

 
 
·
Maximum amount of earn out is:

 
$2,435,400 x 35,202,812/50,917,097 = $1,683,836
 
 
·
Earn Out Amount is $1,683,836

 
 
(d)
In the event the consent by the Commonwealth of Australia acting through the
Department of Innovation, Industry, Science and Research (the DIISR) is not
received with respect to the financial grant to the Company by DIISR and any
portion of the DIISR grant must be repaid by the Company to DIISR, then the Earn
Out Amount will be reduced by an amount equal to the amount of the DIISR grant
repaid or required to be repaid.

 
 
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(e)
The Earn Out Amount will be provided in cash or Buyer Shares or any combination
thereof at the Buyer’s discretion (provided, however, the Buyer will give good
faith consideration to the combination of cash and/or Buyer Shares to be
provided in payment of the Earn Out Amount as requested by the Sellers), and the
number of Buyer Shares, if any, to be furnished in payment of the Earn Out
Amount will be determined and based on the volume weighted average price of the
Buyer’s common stock on the Nasdaq Global Market during the 20 trading sessions
that end on the day of the date of the Buyer’s auditor’s report related to the
consolidated financial statements of Buyer for the year ending December 31, 2010
that are included in Buyer’s Form 10-K and filed with the U.S. Securities and
Exchange Commission for such year.

 
 
(f)
The Buyer Shares issued as payment for the Earn Out Amount will be delivered and
paid into the Escrow Account, and any cash portion of the Earn Out Amount will
be paid to the Sellers.

 
8.3
Earn out protections

 
During the period commencing on the Completion Date and ending on 31 December
2010, the Buyer must procure that the Company:
 
 
(a)
carries on the Business in a normal, proper and efficient manner and in the
ordinary course and does not materially change the nature or scale of the
Business or the manner in which the Business and its affairs are conducted;

 
 
(b)
conducts the Business for the purpose of developing and enhancing the Business
and ensuring that maximum profitability of the Company is achieved, consistent
with prudent financial and business management;

 
 
(c)
is treated as a separate business unit for accounting purposes a;

 
 
(d)
does not enter into any contract or commitment outside of its ordinary course of
business or which is not on arm's length terms;

 
 
(e)
does not dispose of any material part of its Business or assets (other than a
disposal to an affiliate of Buyer provided that such assets will continue to be
included in the accounting results of the business unit for the purposes of (c)
above);

 
 
(f)
does not sub-contract or otherwise transfer any revenue-generating activity of
the Business to another entity;

 
 
(g)
does not pass a resolution to wind up the Company or to cause the Company to
stop carrying on any part of the Business, except as necessary to comply with
any applicable law; and

 
 
(h)
does not do, consent to, approve or permit to be done any act or thing or enter
into any transaction, agreement or arrangement with any person which is likely
to frustrate or impede the objectives referred to in sub paragraphs (a) to (g)
above.

 
8.4
Inconsistent steps

 
In the event that the Buyer wishes to take any steps in relation to the Company
which are inconsistent with clause 8.1 above the Buyer and the Sellers must
negotiate in good faith an appropriate adjustment to the calculation of the
Incremental Sales Increase so that the Earn Out Amount is not adversely affected
by those steps being taken and the Buyer may take those steps if, but only if,
an appropriate adjustment has been agreed in writing between the Buyer and the
Sellers.
 
 
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9.
Escrow Account

 
9.1
Establishment of Escrow Account

 
On or before Completion:
 
 
(a)
the Buyer must deliver to each of the SCRN Notes Sellers and the Escrow Agent a
counterpart of the Escrow Agreement duly executed by the Buyer;

 
 
(b)
the SCRN Notes Sellers must deliver to each of the Buyer and the Escrow Agent a
counterpart of the Escrow Agreement duly executed by the SCRN Notes Sellers; and

 
 
(c)
the Buyer and the SCRN Notes Sellers must procure that the Escrow Agent delivers
to each of the Buyer and the SCRN Notes Sellers a counterpart of the Escrow
Agreement duly executed by the Escrow Agent and must take all other steps
necessary to procure that the Escrow Account is opened.

 
9.2
Operation of Escrow Account

 
The Buyer and the SCRN Notes Sellers must promptly give or join in giving all
instructions and take all other steps as may be necessary to procure that the
Escrow Account is operated, and the Escrow Amount (including interest accruing
on it, if any) is applied, in accordance with this clause 9.
 
9.3
Payments in respect of Resolved Claims before Escrow Termination Date

 
If before the Escrow Termination Date a payment becomes due to the Buyer in
respect of any Resolved Claim then within 5 Business Days after such payment
becomes due an amount equal to the lower of that amount and the Escrow Amount
must be paid out of the Escrow Account to the Buyer.
 
9.4
No Unresolved Claims on Escrow Termination Date

 
If there are no Unresolved Claims outstanding on the Escrow Termination Date,
the Escrow Amount must be paid to the SCRN Notes Sellers on the date that is
5 Business Days after the Escrow Termination Date.
 
9.5
Unresolved Claims on Escrow Termination Date

 
If any Unresolved Claim is outstanding on the Escrow Termination Date:
 
 
(a)
an amount equal to the lower of:

 
 
(i)
the amount of all Unresolved Claims then outstanding; and

 
 
(ii)
the Escrow Amount,

 
must be retained in the Escrow Account and dealt with in accordance with
clause 9.5(c);
 
 
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(b)
the balance, if any, of the Escrow Amount must be released to the SCRN Notes
Sellers on the date that is 5 Business Days after the Escrow Termination Date;

 
 
(c)
if that Unresolved Claim subsequently becomes a Resolved Claim and a payment
becomes due to the Buyer in respect of that Resolved Claim, then:

 
 
(i)
within 5 Business Days after such payment becomes due an amount equal to the
lower of that amount and the Escrow Amount must be paid out of the Escrow
Account to the Buyer; and

 
 
(ii)
after such payment has been made the provisions of clauses 9.5(a) and 9.5(b)
will be applied as if references to the Escrow Termination Date were to the date
on which that payment was made; and

 
 
(d)
if that Unresolved Claim subsequently becomes a Resolved Claim and no payment is
due to the Buyer in respect of that Resolved Claim then the provisions of
clauses 9.5(a) and 9.5(b) will immediately be applied as if references to the
Escrow Termination Date were to the date on which that Unresolved Claim became a
Resolved Claim.

 
9.6
Interest

 
The SCRN Notes Sellers and the Buyer are each entitled to one half of all
interest earned on the Escrow Amount and one half of all interest credited to
the Escrow Account during each Financial Year in which the Escrow Account
remains open must be paid out of the Escrow Account to each of the SCRN Notes
Sellers and the Buyer within 10 Business Days after the earlier of the end of
that Financial Year and the Escrow Termination Date.
 
9.7
No limitation on rights to recover

 
Nothing in this clause 9 limits any rights or remedies of the Buyer under this
agreement or otherwise to recover any amount due to it in respect of any
adjustment to the Purchase Price or any Claim or Tax Claim and to the extent
that the Escrow Amount is insufficient to satisfy any such amount due to the
Buyer, any excess must be paid to the Buyer by the SCRN Notes Sellers.
 
9.8
Legends on Buyer Shares

 
Buyer Shares shall bear the legend set forth in clause 18.1(j).  In addition to
the restrictions set forth in such legend, with respect to the Buyer Shares
issued to each Seller hereunder, one-half of such Buyer Shares shall not be able
to be transferred for a period of six months after the Completion Date, and the
remaining one-half of such Buyer Shares shall not be able to be transferred for
a period of one year after the Completion Date; provided, however,
notwithstanding anything in this agreement to the contrary, so long as there is
an Unresolved Claim such Buyer Shares may not be transferred in any manner until
such time as such Unresolved Claim becomes a Resolved Claim.

--------------------------------------------------------------------------------

10.
Repayment of indebtedness

 
10.1
Indebtedness owed to the Group Companies

 
The Sellers must procure that on or before Completion all indebtedness owed from
any Seller or any person connected with or associated with any Seller to each
Group Company other than amounts owing in the normal course of trading on arm's
length terms is repaid in full together with all interest accrued up to
Completion.
 
 
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10.2
Indebtedness owed to any Seller

 
The Sellers must procure that on or before Completion all indebtedness owed from
any Group Company to any person connected with or associated with any Seller
other than amounts owing in the normal course of trading on arm's length terms
is repaid in full together with all interest accrued up to Completion.
 

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11.
Restraint

 
11.1
Non-competition

 
The Restricted Persons must not, and the Sellers must procure that each other
Restricted Person does not:
 
 
(a)
carry on any Restricted Business as principal or on its own account or as agent
for any other person;

 
 
(b)
have any direct or indirect financial interest in any Restricted Business
including as shareholder, member, unitholder, beneficiary, partner, guarantor,
lender or financier; or

 
 
(c)
provide services in relation to any Restricted Business including as director,
partner, or employee of, or adviser or consultant to, any person referred to in
clauses 11.1(a) or 11.1(b).

 
11.2
Non-solicitation

 
The Restricted Persons must not, and the Sellers must procure that each other
Restricted Person does not:
 
 
(a)
approach any person who is at Completion or was at any time during the 2 year
period before Completion a customer of any Group Company for the purpose of
obtaining that person as a customer for goods or services of the type provided
by any Group Company at Completion;

 
 
(b)
induce or encourage any person who was at any time during the 12 month period
before Completion an employee of any Group Company to leave the employment of
any Group Company; or

 
 
(c)
interfere with the relationship between any Group Company and any of its
customers, employees or suppliers.

 
11.3
Restraint period

 
The undertakings in clauses 11.1 and 11.2 are given for each of the periods
starting on the Completion Date and ending:
 
 
(a)
on the date that is 3 years after the Completion Date;

 
 
(b)
on the date that is 2 years after the Completion Date;

 
 
(c)
on the date that is one year after the Completion Date.

 
11.4
Restraint area

 
The undertakings in clause 11.1 apply only if the Restricted Business in
relation to which the activity prohibited by clause 11.1 occurs is within:
 
 
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(a)
United States, Australia, Canada, Philippines, Papua New Guinea, New Zealand,
China, Fiji and South Africa;

 
 
(b)
United States, Australia, Canada, New Zealand and South Africa;

 
 
(c)
United States, Australia and Canada.

 
11.5
Separate restrictions

 
The parties agree that:
 
 
(a)
clauses 11.1, 11.3 and 11.4 have effect together as if they consisted of
separate restrictions, each resulting from combining an undertaking in
clause 11.1 with a period in clause 11.3 and an area in clause 11.4, and each
being severable from each other restriction;

 
 
(b)
clauses 11.2 and 11.3 have effect together as if they consisted of separate
restrictions, each resulting from combining an undertaking in clause 11.2 with a
period in clause 11.3 and each being severable from each other restriction; and

 
 
(c)
if any of those restrictions is invalid or otherwise unenforceable for any
reason, the invalidity or unenforceability does not affect the validity or
enforceability of any of the other restrictions.

 
11.6
Exceptions

 
Clauses 11.1 and 11.2 do not prevent any Restricted Person from:
 
 
(a)
holding securities in any listed corporation or unit trust which in aggregate
carry not more than 5% of the votes which could be cast at a general meeting of
that corporation or a meeting of holders of units in that unit trust; or

 
 
(b)
advertising employment vacancies in any newspaper, website or other publication
or through a recruitment agency (except where the recruitment agency targets
employees of any Group Company) and interviewing and negotiating with any person
responding to such advertisement.

 
11.7
Assignment

 
Notwithstanding any other provision of this agreement, the Buyer is entitled to
assign the benefit of this clause 11 to any purchaser of the Shares or the
shares of any Group Company or the Business.
 
11.8
Acknowledgement

 
The Sellers acknowledges that all the prohibitions and restrictions in this
clause 11 are reasonable in the circumstances and necessary to protect the
goodwill of the Business.
 
11.9
Proceedings

 
The Restricted Persons acknowledge that damages alone would not be adequate to
compensate the Buyer for any breach by the Restricted Persons of this clause 11
and agree that:
 
 
(a)
without limiting the relief that the Buyer is entitled to seek, the Buyer may
seek an injunction if any of the Restricted Persons is in breach or threatens to
breach, or if the Buyer reasonably believes that any of the Restricted Persons
will breach the provisions of this clause 11; and

 
 
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(b)
the Restricted Persons will not make any submission or contention in any
proceeding at which the Buyer seeks an injunction in relation to any breach, or
any alleged, threatened or apprehended breach, of this clause 11 to the effect
that granting an injunction is not appropriate because the payment of damages
alone would be adequate to compensate the Buyer.

 

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12.
Other obligations following Completion

 
12.1
Power of attorney

 
In consideration of the Buyer entering into this agreement and for other
valuable consideration, the Sellers and the SCRN Note Sellers (each an
Appointor) irrevocably appoint the Buyer as its attorney from Completion until
the Buyer becomes registered as the holder of the Appointor's Shares and any
SCRN Notes with authority to exercise all powers of a registered holder of the
Shares and SCRN Notes (as the case may be) and during the term of that
appointment:
 
 
(a)
the Buyer may do in the name of the Appointor and on its behalf everything
necessary or expedient in the Buyer's sole discretion to:

 
 
(i)
exercise any rights attaching to the Shares and SCRN Notes (as the case may be),
including rights to appoint a proxy or representative and voting rights; and

 
 
(ii)
receive any dividend or other entitlement paid or credited to the Appointor in
respect of the Shares and SCRN Notes (as the case may be); and

 
 
(b)
unless requested by the Buyer, the Appointor must not, whether by corporate
representative, proxy or otherwise, attempt to attend or vote at any general
meeting of the Company (or of the holders of the SCRN Notes) or take any other
action as the registered holder of the Shares or the SCRN Notes (as the case may
be); and

 
 
(c)
the Appointors declare that all acts and things done by the Buyer in exercising
powers under this power of attorney will be as good and valid as if they had
been done by the Appointors and agree to ratify and confirm whatever the Buyer
does in exercising powers under this power of attorney.

 
12.2
Access to Records

 
In addition to any other rights of access under this agreement, the Buyer must
procure that for a period of two years after Completion (or for any longer
period required by law) each Group Company retains all Records and makes
available to the Sellers and their Representatives on reasonable advance notice
and at the expense of the Sellers any Records which are reasonably required by
the Sellers:
 
 
(a)
to enable any Seller to prepare accounts, tax returns and other statutory
returns or fulfil any other obligation relating wholly or partly to any period
before Completion; or

 
 
(b)
in connection with the prosecution or defence of any claim by or against any
Seller (other than claims by or against any Buyer Group Member),

 
provided that the Buyer is not required to comply with any request under this
clause 12.2 to the extent that doing so may in the reasonable opinion of the
Buyer result in a waiver of privilege in relation to any document or breach any
obligation of confidentiality owed by any Group Company.
 
 
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12.3
Access to records of the Sellers

 
In addition to any other rights of access under this agreement, the Sellers must
for a period of two years after Completion (or for any longer period required by
law) retain all documents and records relating to any Group Company remaining in
its possession following Completion and make available to the Buyer on
reasonable advance notice and at the expense of the Buyer any such documents or
records which are reasonably required by the Buyer or that Group Company:
 
 
(a)
to enable any Buyer Group Member to prepare accounts, tax returns and other
statutory returns or fulfil any other obligation relating wholly or partly to
any period before Completion; or

 
 
(b)
in connection with the prosecution or defence of any claim by or against any
Buyer Group Member,

 
provided that the Sellers are not required to comply with any request under this
clause 12.3 to the extent that doing so may, in the reasonable opinion of the
Sellers result in a waiver of privilege in relation to any document or breach
any obligation of confidentiality owed by the Sellers.
 
12.4
Extension of claims reporting period

 
The Sellers must procure that in respect of any contract of insurance:
 
 
(a)
that is held by any Seller or a Group Company and written on a claims made
basis; and

 
 
(b)
under which any Group Company or any director or officer of any Group Company is
insured,

 
an extended reporting period of at least 7 years applies to the reporting of
claims and circumstances arising out of or in connection with any fact, matter
or circumstance occurring in relation to any Group Company before Completion.
 
12.5
Consents to change in control

 
The Sellers must after Completion provide such assistance as the Buyer
reasonably requires to obtain consents that are required under the terms of  any
Lease or Material Contract to the change in control of the Company that occurred
on Completion and which have not been obtained on or before Completion.
 
12.6
Additional Investment by Buyer

 
After Completion Buyer will procure to provide the Company with additional
working capital up to $1,800,000 in the form of equity or debt in the sole
discretion of Buyer. Further, Buyer will provide the Company with the working
capital necessary for the Company to satisfy its obligation to Keenan Campbell
as described in clause 2.1(g)(ii).
 
 
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12.7
Section 338 Election

 
 
(a)
At Buyer’s option, Sellers and Buyer shall jointly make an election under
Section 338(h)(10) of the US Internal Revenue Code of 1986, as amended (the
“Code”) and any corresponding or similar elections under state, local and
foreign tax laws, as appropriate (collectively the “Section 338(h)(10)
Election”) with respect to the purchase and sale of the Company. Buyer shall
prepare and file (or provide to Sellers for filing) all forms and documents
required in connection with the Section 338(h)(10) Election. Sellers shall
timely execute (or cause to be executed) and deliver to Buyer such documents or
forms as are reasonably requested to complete the Section 338(h)(10) Election.

 
 
(b)
Sellers and Buyer agree that, for purposes of the Section 338(h)(10) Election,
(i) the “aggregate deemed sales price” (the “ADSP”) of the assets of the Company
shall be allocated among the assets of Company for purposes of Section 338 of
the Code and the applicable Treasury Regulations promulgated thereunder (and any
similar provision of state, local and foreign Tax laws, as appropriate) (the
“Asset Allocation”) in accordance with the procedures provided herein, which
allocation shall be binding upon Sellers, Company and Buyer. Within sixty (60)
days after the Completion Date, Buyer shall provide to Sellers a proposed Asset
Allocation.

 

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13.
Warranties

 

13.1
Warranties

 
The Sellers and the SCRN Notes Sellers jointly and severally warrant (except for
warranty in paragraph 18 of Schedule 8 which the Sellers warrant on a several
and not joint basis) to the Buyer that each Warranty is true, correct and not
misleading or deceptive as at:
 
 
(a)
the date of execution of this agreement; and

 
 
(b)
the time immediately prior to Completion,

 
unless the Warranty is expressed to be given only at a particular time in which
case it is given as at that time.
 
13.2
Warranties separate

 
Each Warranty is to be treated as a separate warranty and is not limited by
reference to any other warranty or any other provision of any Transaction
Document.
 
13.3
Survival

 
Each Warranty will remain in full force and effect after Completion and a
Warranty Claim is not limited to breaches identified prior to Completion.
 
13.4
Reliance

 
The parties acknowledge that the Buyer has entered into each Transaction
Document in reliance on the Warranties.
 
13.5
Warranties not limited by inquiries or knowledge

 
Except as expressly set out in this agreement, no Warranty is excluded or
limited by:
 
 
(a)
any inquiry or investigation made by or on behalf of the Buyer or any of its
Representatives;

 
 
(b)
any actual or constructive knowledge of the Buyer or any of its Representatives
that any Warranty is or may be incorrect; or

 
 
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(c)
any other act, matter or thing.

 
13.6
Indemnity for breach of Warranty

 
Without limiting any other remedy available to the Buyer, the Sellers must pay
to the Buyer on demand:
 
 
(a)
the amount of any Indemnified Loss suffered or incurred by the Buyer or any
Group Company arising out of or in connection with the breach of any Warranty;
and

 
 
(b)
an amount equal to any additional Tax assessable on any Buyer Group Member
arising out of or in connection with the receipt by the Buyer of a payment under
this clause 13.6 or otherwise in respect of the breach of Warranty.

 
13.7
Seller to notify of potential breaches

 
If before Completion the Sellers become aware of any fact, matter or
circumstance which results in or is reasonably likely to result in a breach of
any Warranty before Completion the Sellers must promptly provide to the Buyer
notice describing that fact, matter or circumstance in reasonable detail .
 
13.8
Notification of Warranty Claims

 
If the Buyer becomes aware of any fact, matter or circumstance which the Buyer
is aware is reasonably likely to result in a Warranty Claim the Buyer must after
becoming aware of that fact, matter or circumstance give the Sellers notice
describing that fact, matter or circumstance in reasonable detail and stating
the basis on which such fact, matter or circumstance may give rise to a Warranty
Claim.
 
13.9
Termination for breach of Warranty

 
Without limiting any other rights of the Buyer under this agreement, if before
Completion the Buyer becomes aware of any fact, matter or circumstance which
results in or is reasonably likely to result in a breach of a Warranty that
would give rise to a Warranty Claim of not less than $25,000 if Completion were
to occur, then the Buyer may give notice of the relevant fact, matter or
circumstance in accordance with clause 13.8 and require the Sellers to procure
that the specified fact, matter or circumstance is remedied by the earlier of
10 Business Days after the date of the notice and 8.00 am on the Completion
Date.  If the specified fact, matter or circumstance is not remedied to the
reasonable satisfaction of the Buyer by that time, then the Buyer may:
 
 
(a)
by notice to the Sellers at any time before Completion terminate this agreement;
or

 
 
(b)
proceed to Completion in which case the Buyer will be entitled to make a
Warranty Claim following Completion in respect of that fact, matter or
circumstance.

 
13.10
No action against Buyer Group Member or officers and employees

 
The Sellers and the SCRN Note Sellers waive all rights and claims that they may
have against the respective current or former officers or employees of each
Buyer Group Member in relation to any matter arising directly or indirectly in
connection with a Transaction Document or the sale of the Shares and the SCRN
Notes except to the extent that such rights or claims arise out of the fraud,
wilful misconduct or wilful default of such person.  The parties acknowledge and
agree that:
 
 
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(a)
the Buyer has sought and obtained this waiver as agent for and on behalf of each
Buyer Group Member and their respective current and former officers and
employees and holds the benefit of this clause 13.10 as trustee for them; and

 
 
(b)
the provisions of this clause 13.10 may be enforced by the Buyer on behalf of
and for the benefit of any Buyer Group Member and their respective current and
former officers and employees and those persons may plead this clause 13.10 in
answer to any claim made by any Seller against them.

 
13.11
Buyer Warranties

 
The Buyer warrants to the Sellers that each Buyer Warranty is true, correct and
not misleading or deceptive as at the date of execution of this agreement and as
at the time immediately prior to Completion.
 

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14.
Limitations of liability

 
14.1
Disclosure

 
The Sellers are not liable in respect of a Warranty Claim if the fact, matter or
circumstance giving rise to the Warranty Claim:
 
 
(a)
is disclosed or described in this agreement;

 
 
(b)
is fairly disclosed in the Disclosure Letter; or

 
 
(c)
would have been disclosed to the Buyer had the Buyer conducted searches
2 Business Days before the date of this agreement of the public records
maintained by ASIC in respect of the Group Companies .

 
14.2
Fair disclosure

 
For the purposes of clause 14.1(b), a fact, matter or circumstance is fairly
disclosed if sufficient information has been disclosed that the fact, matter or
circumstance which might constitute a breach of Warranty, and the nature and
extent of the breach of Warranty, would be immediately obvious to a purchaser
reasonably experienced in transactions of the nature of the sale of the Shares.
 
14.3
Time limits for Warranty Claims

 
The Sellers are not liable in respect of a Warranty Claim unless the Buyer gives
the Sellers notice containing the information specified in clause 13.8 by no
later than:
 
 
(a)
4 years after Completion in respect of a Warranty Claim arising out of a breach
of a Tax Warranty; or

 
 
(b)
2 years after Completion in respect of any other Warranty Claim.

 
14.4
Withdrawal of Warranty Claim

 
The Sellers are not liable in respect of a Warranty Claim and the Warranty Claim
will be taken to be withdrawn unless either:
 
 
(a)
the Warranty Claim has been satisfied or settled within 12 months after notice
of the Warranty Claim is given in accordance with clause 14.3; or

 
 
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(b)
the Buyer has served legal proceedings against the Sellers in respect of the
Warranty Claim within 12 months after the later of:

 
 
(i)
the date on which notice of the Warranty Claim is given in accordance with
clause 14.3; and

 
 
(ii)
the date on which sufficient Warranty Claims have arisen which, in aggregate,
exceed the relevant threshold referred to in clause 14.5.

 
14.5
Minimum amount for Warranty Claims

 
The Sellers are not liable in respect of a Warranty Claim unless the aggregate
amount that the Buyer would be entitled to recover in relation to that Warranty
Claim and all other Warranty Claims arising from the same or similar facts,
matters or circumstances is at least $1,000.
 
14.6
Threshold for Warranty Claims

 
The Sellers are not liable in respect of a Warranty Claim unless the aggregate
amount that the Buyer would be entitled to recover, but for this clause 14.6, in
relation to all Warranty Claims is at least $10,000, in which event the Sellers
are liable for the whole of that amount and not merely the excess.
 
14.7
Other limitations of liability

 
The Sellers are not liable in respect of any Warranty Claim to the extent that:
 
 
(a)
the fact, matter or circumstance giving rise to the Warranty Claim is
specifically provided for in the Company’s financial statements dated 30 June
2009;

 
 
(b)
the loss or damage giving rise to the Warranty Claim is recovered by any Buyer
Group Member under another Warranty Claim or a Tax Claim or is made good or
otherwise compensated for without cost to any Buyer Group Member;

 
 
(c)
the loss or damage giving rise to the Warranty Claim is recovered by any Buyer
Group Member under any contract of insurance;

 
 
(d)
the amount of the Warranty Claim is increased as a result of the failure of the
Buyer to give notice of any fact matter or circumstance relating to the Warranty
Claim within the time period referred to in clause 13.8 and such failure
prejudices the rights of the Sellers.

 
14.8
Maximum recovery

 
The maximum aggregate amount recoverable by the Buyer from the Sellers in
relation to all Warranty Claims is the aggregate of the Purchase Price and any
amount paid to the Sellers under clause 14.9.
 
14.9
Reimbursement of payments subsequently received

 
If the Buyer receives payment from the Sellers in respect of a Claim (Claim
Amount) and within 12 months after such payment is received] any Buyer Group
Member receives any payment by reason of the fact, matter or circumstance to
which the Claim relates (Recovery Amount), then the Buyer will within
20 Business Days after that payment is received repay to the Sellers an amount
equal to the lesser of the Claim Amount and the Recovery Amount less:
 
 
(a)
all costs incurred by any Buyer Group Member in recovering the Recovery Amount
(including any increase in insurance premiums in respect of future periods); and

 
 
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(b)
any Tax payable by any Buyer Group Member as a result of receiving the Recovery
Amount.

 
14.10
Circumstances where limitations not to apply

 
None of the limitations in this clause 14 apply to any Claim to the extent that
it arises out of, or is increased as a result of:
 
 
(a)
a breach of any of the Warranties set out in paragraphs 1, 2 and 3.4 of
Schedule 8; or

 
 
(b)
any fraud, wilful default or wilful concealment by the Sellers or any of its
Representatives.

 

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15.
Third Party Claims

 
15.1
Notice

 
Without limiting any other rights of the Buyer under this agreement, if after
Completion the Buyer becomes aware of any Third Party Claim which may give rise
to a Warranty Claim the Buyer must within 40 Business Days after becoming aware
of the Third Party Claim give the Sellers notice of the Third Party Claim .
 
15.2
Obligations after notice given

 
If the Buyer gives notice under clause 15.1 then until the Third Party Claim has
been finally resolved:
 
 
(a)
the Buyer must act and must procure that each relevant Group Company acts with
due diligence in conducting the defence of the Third Party Claim;

 
 
(b)
the Buyer must give to the Sellers such information as the Sellers may
reasonably require in relation to the progress of the Third Party Claim and must
consult with the Sellers in relation to the conduct of any proceedings or
negotiations in relation to the Third Party Claim; and

 
 
(c)
the Sellers must provide the Buyer and each relevant Group Company and their
professional advisers such information and assistance as the Buyer and each
relevant Group Company reasonably require to enable them to avoid, dispute,
resist, defend, appeal, compromise or mitigate the Third Party Claim and in
particular must:

 
 
(i)
provide the Buyer and each relevant Group Company and their professional
advisers with reasonable access to such employees and records of the Sellers as
the Buyer reasonably requires in connection with the Third Party Claim and
permit the Buyer to take copies of such records; and

 
 
(ii)
use all reasonable endeavours (including the reimbursement of all reasonable out
of pocket expenses) to procure that employees and officers of the Sellers
provide such witness statements and other evidence that the Buyer and each
relevant Group Company reasonably require to enable them to avoid, dispute,
resist, defend, appeal, compromise or mitigate the Third Party Claim.

 
 
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16.
Tax

 
16.1
Tax indemnity

 
The Sellers must pay to the Buyer in accordance with this clause 16:
 
 
(a)
the amount of any Tax that any Group Company is liable to pay in respect of or
by reference to any matter or event occurring or which is taken to have occurred
on or before the Completion Date ;

 
 
(b)
the amount of any credit, relief, rebate, right of set off, offset or right to
repayment of Tax to which the Company was entitled at the Completion Date which
is lost by or denied to any Group Company;

 
 
(c)
the amount of Tax payable or that would be payable as a result of any allowance,
deduction or tax loss to which a Group Company was entitled at the Completion
Date being lost by or denied to that Group Company calculated at the general
rate of corporate tax applicable in the tax year to which the Tax Assessment
relates and on the assumption that the liability of that Group Company to Tax in
that tax year is not less than the aggregate amount of all such allowances,
deductions or carry forward losses lost or denied;

 
 
(d)
the amount of Tax that any Buyer Group Member is liable to pay as a result of
the Buyer receiving any payment under this clause 16; and

 
 
(e)
the amount of any reasonable legal and other professional expense on a full
indemnity basis incurred by the Buyer or any Group Company in connection with
investigating, disputing, defending or settling any Tax Claim or taking any
action under this clause 16.

 
16.2
Limitations

 
The Sellers are not liable in respect of any Tax Claim to the extent that:
 
 
(a)
in the case of a Tax Claim in respect of a liability to pay Tax, a provision for
that Tax has been included in the Last Accounts;

 
 
(b)
the amount otherwise payable in respect of the Tax Claim has been recovered by
the Buyer under a Warranty Claim;

 
 
(c)
the Tax Claim arises from the failure of any Buyer Group Member after Completion
to make any valid claim or election in relation to Tax the making of which was
assumed in preparing the Last Accounts or to lodge in a timely manner any
return, notice or other document relating to Tax;

 
 
(d)
the Tax Claim arises from a change by any Buyer Group Member after Completion in
any claim or election in relation to Tax made before the Last Balance Date  or
the amendment after Completion of any Tax return of any Buyer Group Member
relating to a period ending on or before the Last Balance Date (except where
that amendment is required by law or is approved by the Sellers in writing
before it is made); or

 
 
(e)
the amount of the Tax Claim is increased as a result of the failure of the Buyer
to comply with the provisions of clause 17.

 
 
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16.3
Time for payment

 
The Sellers must make any payment due under clause 16.1 no later than
10 Business Days after the Sellers receive from the Buyer notice providing
details of the amount due and the basis on which the Buyer claims payment under
this clause except if payment is in respect of Tax actually payable in which
case the Sellers are not required to make payment until the day that is
5 Business Days before the last date on which payment of that Tax may lawfully
be made without incurring penalties or interest for late payment.
 
16.4
Late payments

 
If the Sellers fail to make a payment under this clause 16 on or before the due
date for payment then, without limiting any other remedy of the Buyer, the
Sellers must pay to the Buyer upon demand the greater of:
 
 
(a)
the amount of any interest, penalties and fines incurred by any Group Company or
the Buyer  as a result of the Sellers' failure to make payment; and

 
 
(b)
the interest payable in accordance with clause 21.4.

 
16.5
Refunds

 
If the Buyer has received payment from the Sellers under this clause 16 (Tax
Payment Amount) and within 12 months after such payment is received any Buyer
Group Member receives any refund in respect of the facts, matters or
circumstances in respect of which that payment was made (Tax Refund Amount) then
the Buyer must within 20 Business Days after that refund is received repay to
the Sellers an amount equal to the lesser of the Tax Payment Amount and the Tax
Refund Amount less:
 
 
(a)
all costs incurred by any Buyer Group Member in obtaining such refund; and

 
 
(b)
if a refund includes interest on overpaid Tax, the amount of Tax payable on that
interest by the recipient of the refund.

 

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17.
Tax Assessments

 
17.1
Notice

 
If after Completion the Buyer or any Group Company receives or proposes to lodge
any Tax Assessment which is reasonably likely to give rise to a Tax Claim the
Buyer must as soon as reasonably practicable give the Sellers notice of the Tax
Assessment (including a copy of each document received or lodged in connection
with the Tax Assessment).
 
17.2
Obligations after notice given

 
If the Buyer gives notice under clause 17.1 then until the Tax Assessment has
been finalised:
 
 
(a)
the Buyer must give and must procure that each relevant Group Company gives to
the Sellers such information as the Sellers may reasonably require in relation
to the progress of the Tax Assessment;

 
 
(b)
the Buyer must not and must procure that each relevant Group Company does not
for a period of 20 Business Days after such notice is given under clause 17.1:

 
 
(i)
in the case of a Tax Assessment received from a Tax Authority, engage in any
discussion or negotiation with or confer with any Tax Authority concerning the
Tax Assessment or make any admission of liability, agreement, settlement or
compromise with any Tax Authority in respect of the Tax Assessment; or

 
 
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(ii)
in the case of a Tax Assessment proposed to be lodged with any Tax Authority,
lodge that Tax Assessment,

 
without the prior written consent of the Sellers which consent is deemed to be
given if such action is required by law and in any other case must not be
unreasonably withheld or delayed; and
 
 
(c)
the Sellers must not confer with any Tax Authority in relation to the Tax
Assessment, except with the prior written consent of the Buyer or otherwise as
required by law.

 
17.3
Sellers' response to notice

 
The Sellers may within 20 Business Days after notice is given under clause 17.1
in relation to a Tax Assessment give notice to the Buyer:
 
 
(a)
acknowledging to the Buyer in a form reasonably satisfactory to the Buyer that
the Sellers are liable to make payment to the Buyer under clause 16.1 in
relation to the Tax Assessment; and

 
 
(b)
requiring the Buyer to comply with the terms of clause 17.4 in relation to the
Tax Assessment.

 
17.4
Effect of Sellers' notice

 
If the Sellers gives notice under clause 17.3 in relation to a Tax Assessment
then:
 
 
(a)
provided that the Sellers and their professional advisers have given any
undertaking as to confidentiality that the Buyer may reasonably require, the
Buyer must procure that each relevant Group Company provides the Sellers and
their professional advisers with such access to the employees and records of
each relevant Group Company as the Sellers may reasonably require in connection
with the Tax Assessment and permit the Sellers to take copies of such records;
and

 
 
(b)
the Buyer must procure that each relevant Group Company:

 
 
(i)
responds to the Tax Assessment in such manner as the Sellers may reasonably
request including by giving notice of objection to the Tax Assessment; and

 
 
(ii)
takes such other action as the Sellers may reasonably request to avoid, dispute,
settle or compromise the Tax Assessment,

 
provided that the Buyer is only obliged to take any action under this
clause 17.4(b) if the Sellers have obtained, at its expense, an opinion from a
Queen's Counsel or Senior Counsel (with at least 15 years experience in tax
matters) that the proposed action has a reasonable prospect of reducing the
amount that would otherwise be payable by the Sellers in respect of the Tax
Claim to which the relevant Tax Assessment relates.
 
17.5
Buyer's rights to settle

 
If the Sellers do not give notice under clause 17.3 or if the Sellers do not
within 40 Business Days after giving notice under clause 17.3 request the Buyer
to take actions that are reasonable in all the circumstances then without
limiting the Buyer's other rights under this agreement, the Buyer and each
relevant Group Company are entitled to settle, compromise or pay the Tax
Assessment on any terms.
 
 
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17.6
Costs and expenses

 
The Sellers must pay to the Buyer on demand the amount of any reasonable cost or
expense incurred by the Buyer or any Group Company arising out of or in
connection with any action taken by the Buyer or that Group Company under this
clause 17.
 

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18.
Tax returns and tax audits

 
18.1
Tax returns relating to periods ending before Completion

 
The Sellers are responsible for assisting the Buyer and the Company in preparing
and lodging with the appropriate Tax Authority all returns required to be lodged
in relation to the Tax affairs of any Group Company in relation to any period
ending on or before Completion that have not been prepared and lodged on or
before Completion and in particular the Sellers must:
 
 
(a)
give to the Buyer drafts of all such returns and any other documents to be
provided to any Tax Authority in relation to such returns before submission to
the relevant Tax Authority; and

 
 
(b)
provide the Buyer with copies of all correspondence with any Tax Authority in
relation to such returns after lodgement.

 
18.2
Tax returns relating to periods ending after Completion

 
The Buyer is responsible for preparing and lodging with the appropriate Tax
Authority all returns required to be lodged in relation to the Tax affairs of
any Group Company in relation to any period ending after Completion.
 
18.3
Assistance from Sellers

 
The Sellers must at their own cost provide to the Buyer all information and
assistance reasonably required by the Buyer in connection with the preparation
of any returns referred to in clauses 18.1 and 18.2 where any part of the period
in relation to which the return is required is before Completion.
 
18.4
Tax audits

 
If after Completion any audit in relation to the Tax affairs of any Group
Company is commenced that relates in whole or in part to the period before
Completion then the Buyer and the Sellers must give each other all reasonable
assistance in relation to that audit.
 

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19.
Confidentiality

 
19.1
No announcement or other disclosure of transaction

 
Except as permitted by clause 19.2:
 
 
(a)
the Sellers must keep confidential, and must:

 
 
(i)
procure that each of their respective Representatives, keeps confidential; and

 
 
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(ii)
until Completion procure that each Group Company and each of their respective
Representatives, keeps confidential,

 
the existence of and the terms of this agreement and all negotiations between
the parties in relation to the subject matter of this agreement; and
 
 
(b)
the Buyer must keep confidential, and must procure that each Buyer Group Member
and each of their respective Representatives keeps confidential, the existence
of and the terms of this agreement, all negotiations between the parties in
relation to the subject matter of this agreement and all other information given
to it under this agreement.

 
19.2
Permitted disclosure

 
Nothing in this agreement prevents a person from disclosing matters referred to
in clause 19.1:
 
 
(a)
if disclosure is required to be made by law or the rules of a recognised stock
or securities exchange and the party whose obligation it is to keep matters
confidential or procure that those matters are kept confidential:

 
 
(i)
has not through any voluntary act or omission (other than the execution of this
agreement) caused the disclosure obligation to arise; and

 
 
(ii)
has before disclosure is made notified each other party of the requirement to
disclose and, where the relevant law or rules permit and where practicable to do
so, given each other party a reasonable opportunity to comment on the
requirement for and proposed contents of the proposed disclosure;

 
 
(b)
if disclosure is made by way of a written announcement the terms of which have
been agreed in writing by the parties prior to the making of the announcement;

 
 
(c)
if disclosure is reasonably required to enable a party to perform its
obligations under this agreement;

 
 
(d)
to any professional adviser of a party who has been retained to advise in
relation to the transactions contemplated by the Transaction Documents or to the
auditor of a party;

 
 
(e)
to any financier who has made a bona fide proposal to provide finance to a party
in relation to the transactions contemplated by any Transaction Document;

 
 
(f)
with the prior written approval of each party other than the party whose
obligation it is to keep those matters confidential or procure that those
matters are kept confidential; or

 
 
(g)
where the matter has come into the public domain otherwise than as a result of a
breach by any party of this agreement,

 
and nothing in this agreement prevents the Buyer from disclosing matters
referred to in clause 19.1 to a potential acquirer of the Shares or the Business
or any part of it but only if that person has entered into a written agreement
in favour of the Buyer or the relevant Group Companies undertaking to keep such
information confidential.
 
 
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19.3
No use or disclosure of Confidential Information

 
The Sellers must not at any time whether before or after Completion use or
disclose to any person other than the Buyer and its Representatives any
Confidential Information except if disclosure is required to be made by law or
with the prior written approval of the Buyer.
 

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20.
Termination

 
20.1
Termination by Buyer

 
The Buyer may terminate this agreement at any time before Completion:
 
 
(a)
in accordance with clause 2.5, clause 5.6, clause 6.9 or clause 13.9; or

 
 
(b)
by notice to the Sellers if there is a breach of the Warranty set out in
paragraphs 1.4 or 1.5 of Schedule 8 or the Warranty set out in paragraph 3.4 of
Schedule 8,

 
but is not entitled to terminate or rescind this agreement for any other reason.
 
20.2
Termination by Sellers

 
The Sellers may terminate this agreement at any time before Completion:
 
 
(a)
in accordance with clause 2.5 or clause 6.9; or

 
 
(b)
by notice to the Buyer if there is a breach by the Buyer of the Buyer Warranty
set out in paragraph 1.4 of Schedule 9,

 
but is not entitled to terminate or rescind this agreement for any other reason
(including if there is a breach of any other Buyer Warranty before Completion).
 
20.3
Effect of termination

 
If this agreement is terminated then:
 
 
(a)
the provisions of this agreement shall cease to have effect except for the
provisions of clauses 1 and 19, this clause 20 and clauses 22 to 27 which will
survive termination; and

 
 
(b)
each party retains the rights it has against the others in respect of any breach
of this agreement occurring before termination.

 

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21.
Payments

 
21.1
Direction

 
Any reference in this agreement to a payment to any party includes payment to
another person at the direction of that party.
 
21.2
Method of payment

 
Except as otherwise provided in this agreement, payment of any amount due under
this agreement by any party must be made by the paying party to the recipient
party by:
 
 
(a)
electronic funds transfer to an account with a bank specified by the recipient
party to the paying party at least 1 Business Day before the due date for
payment and confirmed by the paying party to the recipient party by notice; or

 
 
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(b)
otherwise, unendorsed bank cheque drawn on an internationally recognized bank or
other immediately available funds.

 
21.3
No deduction

 
Any payment to be made under this agreement must be made free and clear of any
deduction or withholding, except where that deduction or withholding is required
or compelled by law and except for Buyer’s offset of the Escrow Account and the
Earn Out Amount as permitted in this agreement.
 
21.4
Default interest

 
If any party (the Payor) fails to make a payment to any other party (the Payee)
under this agreement on or before the due date for payment, then, without
limiting any other remedy of the Payee, the Payor must pay to the Payee upon
demand interest on the due amount calculated at the rate which is 2% above the
Standard Rate, with interest to accrue from the due date to the day immediately
before the actual date of payment, calculated daily on the basis of a 365 day
year and capitalised monthly.
 

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22.
GST

 
22.1
Interpretation

 
The parties agree that:
 
 
(a)
except where the context suggests otherwise, terms used in this clause 22 have
the meanings given to those terms by the GST Act (as amended from time to time);

 
 
(b)
any part of a supply that is treated as a separate supply for GST purposes
(including attributing GST payable to tax periods) will be treated as a separate
supply for the purposes of this clause 22; and

 
 
(c)
any consideration that is specified to be inclusive of GST must not be taken
into account in calculating the GST payable in relation to a supply for the
purpose of this clause.

 
22.2
Reimbursements and similar payments

 
Any payment or reimbursement required to be made under this agreement or any
other Transaction Document that is calculated by reference to a cost, expense,
or other amount paid or incurred will be limited to the total cost, expense or
amount less the amount of any input tax credit to which an entity is entitled
for the acquisition to which the cost, expense or amount relates.
 
22.3
GST payable

 
If GST is payable in relation to a supply made under or in connection with this
agreement or any other Transaction Document then any party (Recipient) that is
required to provide consideration to another party (Supplier) for that supply
must pay an additional amount to the Supplier equal to the amount of that GST at
the same time as other consideration is to be provided for that supply or, if
later, within 5 Business Days of the Supplier providing a valid tax invoice to
the Recipient.
 
 
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22.4
Variation to GST payable

 
If the GST payable in relation to a supply made under or in connection with this
agreement or any other Transaction Document varies from the additional amount
paid by the Recipient under clause 22.3 then the Supplier will provide a
corresponding refund or credit to, or will be entitled to receive the amount of
that variation from, the Recipient.  Any ruling, advice, document or other
information received by the Recipient from the Australian Taxation Office in
relation to any supply made under this agreement or any other Transaction
Document will be conclusive as to the GST payable in relation to that
supply.  Any payment, credit or refund under this paragraph is deemed to be a
payment, credit or refund of the additional amount payable under clause 22.3.
 

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23.
Notices

 
23.1
Service agent for all Sellers and the SCRN Notes Sellers

 
The Sellers and the SCRN Notes Sellers appoint Mark Pasquale as the
representative of the Sellers and the SCRN Notes Sellers (Sellers Agent) to
receive and transmit on their behalf all notices under this clause 23.1.  In the
event Mark Pasquale is unable to serve as the Sellers Agent for any reason or
withdraws from serving as the Sellers Agent, then the Sellers and the SCRN Notes
Sellers must promptly and without delay select another person to serve as the
Sellers Agent and promptly notify the Buyer and Escrow Agent of the name and
contact information of the replacement Sellers Agent.  The Sellers and the SCRN
Notes Sellers must cause the Sellers Agent to promptly provide to all Sellers
and the SCRN Notes Sellers copies of any notices received in connection with any
Transaction Document.
 
23.2
How notice to be given

 
Each communication (including each notice, consent, approval, request and
demand) under or in connection with this agreement:
 
 
(a)
may be given by personal service, post, facsimile or email;

 
 
(b)
must be in writing and in English (or accompanied by a certified translation
into English);

 
 
(c)
must be addressed as follows (or as otherwise notified by that party to each
other party from time to time):

 
 
(i)
if to the Sellers and the SCRN Notes Sellers:

 
Attention:        Mark Pasquale (the Sellers Agent)
 
Address:         c/o GFI Advisory China
Zhongrong Hengrui International Plaza  Room 902A
560 Zhangyang Road
  Shanghai China 200122
 
Fax number:   86 21 5836 6968
 
Email:             mpjulie2004@yahoo.com
  mark.pasquale@gfigroup.co.uk
 
 
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(ii)
if to the Buyer:

 
Attention:          John A. Moore, CEO
 
Address:            4 W. Rockland Road
   Montchanin, DE 19710
 
Fax number:      (302) 656-1703
 
Email:                jmoore@acornenergy.com
 
With a copy to:
 
Attention:          Joe B. Cogdell, Jr., General Counsel
 
Address:            11701 Mt. Holly Road
                          Charlotte, NC 28214
 
Fax number:      (704) 827-8935
 
Email:                jcogdell@acornenergy.com
 
 
(d)
(in the case of personal service, post or facsimile) must be signed by the party
making it or (on that party's behalf) by the solicitor for, or any attorney,
director, secretary or authorised agent of, that party;

 
 
(e)
(in the case of email) must be in pdf or other format that is a scanned image of
the original of the communication, including a handwritten signature, and be
attached to an email that states that the attachment is a communication under
this agreement; and

 
 
(f)
must be delivered by hand or posted by prepaid post to the address, sent by fax
to the number, or sent by email to the email address, of the addressee, in
accordance with clause 23.2(c).

 
23.3
When notice taken to be received

 
Each communication (including each notice, consent, approval, request and
demand) under or in connection with this agreement is taken to be received by
the addressee:
 
 
(a)
(in the case of prepaid post sent to an address in the same country) on the
third day after the date of posting;

 
 
(b)
(in the case of prepaid post sent to an address in another country) on the fifth
day after the date of posting by airmail;

 
 
(c)
(in the case of fax) at the time in the place to which it is sent equivalent to
the time shown on the transmission confirmation report produced by the fax
machine from which it was sent;

 
 
(d)
(in the case of delivery by hand) on delivery; and

 
 
(e)
(in the case of email) unless the party sending the email knows or reasonably
ought to suspect that the email and the attached communication were not
delivered to the addressee's domain specified in the email address notified for
the purposes of this clause 23, 24 hours after the email was sent, but if the
communication would otherwise be taken to be received on a day that is not a
working day or after 5.00 pm, it is taken to be received at 9.00 am on the next
working day ("working day" meaning a day that is not a Saturday, Sunday or
public holiday and on which banks are open for business generally, in the place
to which the communication is posted, sent or delivered).

 
 
42

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--------------------------------------------------------------------------------

24.
Entire agreement

 
The Transaction Documents constitute the entire agreement between the parties in
relation to their subject matter including the sale and purchase of the Shares
and supersede all previous agreements and understandings between the parties in
relation to their subject matter.
 

--------------------------------------------------------------------------------

25.
Proportionate liability

 
25.1
Exclusion of proportionate liability provisions

 
The parties agree:
 
 
(a)
that to the extent permitted by law:

 
 
(i)
part 4 of the Civil Liability Act 2002 (NSW) (and any equivalent statutory
provision in any other state or territory);

 
 
(ii)
part VIA of the Trade Practices Act 1974; and

 
 
(iii)
part 7.10, Division 2A of the Corporations Act,

 
(together the Proportionate Liability Provisions) are excluded in relation to
all and any rights, obligations or liabilities of either party under this
agreement or in relation to any Claim or Tax Claim whether such rights,
obligations or liabilities are sought to be enforced in contract, tort or
otherwise; and
 
 
(b)
without limiting clause 25.1(a), the rights, obligations and liabilities of the
parties under this agreement or in relation to any Claim or Tax Claim with
respect to proportionate liability are as specified in this agreement and not
otherwise, whether such rights, obligations or liabilities are sought to be
enforced by a claim in contract, in tort or otherwise.

 
25.2
Sellers not to apply Proportionate Liability Provisions

 
To the extent permitted by law:
 
 
(a)
the Sellers must not seek to apply any of the Proportionate Liability Provisions
in relation to any Claim or Tax Claim by the Buyer against the Sellers (whether
in contract, tort or otherwise); and

 
 
(b)
if any of the provisions of the Proportionate Liability Provisions are applied
to any Claim or Tax Claim by the Buyer against the Sellers (whether in contract,
tort or otherwise), the Sellers must pay to the Buyer on demand an amount equal
to any loss, damage, cost or expense that forms part of that claim by the Buyer
against the Sellers which the Buyer is not able to recover from the Sellers
because of the operation of any of the Proportionate Liability Provisions.

 
 
43

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--------------------------------------------------------------------------------

26.
General

 
26.1
Amendments

 
This agreement may only be varied by a document signed by or on behalf of each
party.
 
26.2
Assignment

 
Except as provided in clause 11.7, a party cannot assign or otherwise transfer
any of its rights under this agreement without the prior consent of each other
party.
 
26.3
Consents

 
Unless this agreement expressly provides otherwise, a consent under this
agreement may be given or withheld in the absolute discretion of the party
entitled to give the consent and to be effective must be given in writing.
 
26.4
Costs

 
Except as otherwise provided in this agreement, each party must pay its own
costs and expenses and the Sellers must pay any costs and expenses of each Group
Company in connection with negotiating, preparing, executing and performing each
Transaction Document.
 
26.5
Counterparts

 
This agreement may be executed in any number of counterparts and by the parties
on separate counterparts.  Each counterpart constitutes an original of this
agreement, and all together constitute one agreement.
 
26.6
Further acts and documents

 
Each party must promptly do all further acts and execute and deliver all further
documents (in form and content reasonably satisfactory to that party) required
by law or reasonably requested by another party to give effect to this
agreement.
 
26.7
No merger

 
A party's rights and obligations do not merge on completion of any transaction
under this agreement.
 
26.8
Severance

 
If any provision or part of a provision of this agreement is held or found to be
void, invalid or otherwise unenforceable (whether in respect of a particular
party or generally), it will be deemed to be severed to the extent that it is
void or to the extent of voidability, invalidity or unenforceability, but the
remainder of that provision will remain in full force and effect.
 
26.9
Stamp duties

 
The Buyer:
 
 
(a)
must pay all stamp duties and any related fines and penalties in respect of this
agreement, the performance of this agreement and each transaction effected by or
made under this agreement;

 
 
44

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(b)
must pay to the Sellers on demand the amount of any Indemnified Loss suffered or
incurred by the Sellers arising out of or in connection with any failure to
comply with clause 26.9(a); and

 
 
(c)
is authorised to apply for and retain the proceeds of any refund due in respect
of stamp duty paid under this clause.

 
26.10
Waivers

 
Without limiting any other provision of this agreement, the parties agree that:
 
 
(a)
failure to exercise or enforce, or a delay in exercising or enforcing, or the
partial exercise or enforcement of, a right, power or remedy provided by law or
under this agreement by a party does not preclude, or operate as a waiver of,
the exercise or enforcement, or further exercise or enforcement, of that or any
other right, power or remedy provided by law or under this agreement;

 
 
(b)
a waiver given by a party under this agreement is only effective and binding on
that party if it is given or confirmed in writing by that party; and

 
 
(c)
no waiver of a breach of a term of this agreement operates as a waiver of
another breach of that term or of a breach of any other term of this agreement.

 
26.11
Signatures by fax or other electronic means

 
The parties agree that any party to this agreement may execute this agreement by
facsimile or email with pdf or other readable format and such executed signature
page will constitute an original signature page to this agreement.
 

--------------------------------------------------------------------------------

27.
Governing law and jurisdiction

 
27.1
Governing law

 
This agreement is governed by the law applying in New South Wales, Australia.
 
27.2
Jurisdiction

 
Each party irrevocably:
 
 
(a)
submits to the non-exclusive jurisdiction of the courts of New South Wales,
Commonwealth courts having jurisdiction in that state and the courts competent
to determine appeals from those courts, with respect to any proceedings that may
be brought at any time relating to this agreement; and

 
 
(b)
waives any objection it may have now or in the future to the venue of any
proceedings, and any claim it may have now or in the future that any proceedings
have been brought in an inconvenient forum, if that venue falls within
clause 27.2(a).

 
[remainder of page intentionally left blank]
 
 
45

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Executed as an agreement.
 
Executed by Gridsense Pty Limited in accordance with section 127 of the
Corporations Act 2001 (Cth):
                     
Signature of director
   
Signature of company secretary/director
               
Full name of director
   
Full name of company secretary/director

 
Executed by Acorn Energy, Inc. in accordance with its constitution and in the
presence of:
                     
Signature of officer
   
Signature of officer
             
John A. Moore, President & CEO
Full name of officer and office held
   
Full name of officer and office held

 
Signed by Campbell Keenan in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Hans Wick in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
 
46

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Signed by Ulrich W. Rued in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Doston Bradley in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Carl Dou in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Mark Pasquale in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
 
47

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Signed by Lindon Shiao in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Vitali Lipanov in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Vadim Lipanov in the presence of:
             
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Jason Chisholm in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Steve Hodges in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
 
48

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Signed by Paul Dunkley in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by David Sweeting in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Eniko Sweeting in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Joe Shein in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Sarah Smart in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
 
49

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Signed by Ken Shein in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Adam Goldsmith in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Kevin Anderson in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by Doug McKay in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
 
50

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Signed by Karen Craft in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed by David Wick in the presence of:
                     
Signature of witness
   
Signature
               
Full name of witness
     

 
Signed for and on behalf of Prime Energy Partners Limited by its attorney under
a power of attorney dated on or about the date of this agreement in the presence
of:
                     
Signature of witness
   
Signature of attorney who declares that the attorney has not received any notice
of the revocation of the power of attorney
               
Full name of witness
   
Full name of attorney

 
 
51

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Schedule 1 Sellers, SCRN Notes Sellers, Shares and SCRN Notes
 
Name of Seller or
SCRN Notes Sellers
(*indicates an SCRN Notes
Seller)
 
Number of Shares
   
% ownership
   
SCRN Notes Principal
Outstanding
 
Keenan, Campbell
    9,127,820       17.51        
Wick, Hans*
    6,742,696       12.93       97,416  
Rued, Ulrich W.
    3,333,333       6.39          
Bradley, Doston
    3,161,905       6.06          
Prime Energy Partners*
    1,987,180       3.81       441,562  
Dou, Carl
    1,600,000       3.07          
Pasquale, Mark*
    2,946,111       5.65       150,995  
Shiao, Lindon
    1,000,000       1.92          
Lipanov, Vitali
    610,439       1.17          
Lipanov, Vadim
    400,000       0.77          
Chisholm, Jason
    500,000       0.96          
Hodges, Steve
    192,566       0.37          
Dunkley, Paul*
    188,797       0.36       146,124  
Sweeting, David
    339,690       0.65          
Sweeting, Eniko
    150,000       0.29          
Shein, Joe
    100,275       0.19          
Smart, Sarah
    100,000       0.19          
Shein, Ken
    97,000       0.19          
Goldsmith, Adam
    25,000       0.05          
Anderson, Kevin & McKay, Doug
    306,000       0.59          
Anderson, Kevin
    2,194,000       4.21          
McKay, Doug
    900,000       1.73          
Craft, Karen
    417,117       .80          
Wick, David*
    0       0.00       292,248  
TOTAL
    36,419,929       69.86       1,128,345  

 
 
52

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Schedule 1A Currency Conversion

Currency Conversion Rates at October 16, 2009

(Source - http://www.oanda.com/convert/classic?lang=en)
 
1 Canadian Dollar = 0.97416 US Dollar
 
1 US Dollar (USD) = 1.02653 Canadian Dollar (CAD)
 
1 Australian Dollar = 0.91934 US Dollar
 
1 US Dollar (USD) = 1.08774 Australian Dollar (AUD) 
 
1 Australian Dollar = 0.94403 Canadian Dollar
 
1 Canadian Dollar (CAD) = 1.05928 Australian Dollar (AUD)

 
53

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Schedule 2 Details of the Company
 
Name
 
Gridsense Pty Ltd
     
Registration No.
 
130 672 767
     
Issued capital
 
60,595,310 Ordinary Shares
     
Registered shareholders
 
Lindon Shiao, Doston Bradley, Ulrich W Rued, Prime Energy Partners Limited,
Acorn Energy Inc, Kevin Anderson and Doug McKay, Kevin Anderson, Doug McKay,
Campbell Houston Keenan, Hans Wick, Mark Pasquale, Carl Dou, Vitali Lipanov,
Vadim Lipanov, Jason Chisholm, Steve Hodges, Paul Dunkley, Sarah Smart, David
Sweeting, Eniko Sweeting, Joe Shein, Ken Shein, Adam Goldsmith, Karen Craft
     
Place of registration
 
Victoria
     
Directors
 
Lindon Shiao, Campbell Houston Keenan, John Moore, Mark Pasquale
     
Secretary
 
Mark Pasquale
     
Auditor
 
HLB Mann Judd (NSW) Pty Ltd
     
Public Officer
 
Mark Pasquale
     
Registered Office
 
Ground Floor Unit 3, 20-36 Nancarrow Avenue, Meadowbank, NSW, 2114

 
 
54

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Schedule 3 Details of the Subsidiaries
  
Name
CHK Gridsense Pty Ltd
   
Registration No.
001 658 091
   
Issued capital
4,135 Ordinary Shares
   
Registered shareholders
Gridsense Pty Ltd
   
Place of registration
New South Wales
   
Directors
Campbell H Keenan
   
Secretary
Campbell H Keenan
   
Public officer
Campbell H Keenan
   
Auditor
HLB Mann Judd (NSW) Pty Ltd
   
Registered office
Unit 3 Ground Floor, 20-36 Nancarrow Avenue, Meadowbank, NSW, 2114

  
Name
Gridsense Inc
   
Registration No.
20-1049732
   
Issued capital
     
Registered shareholders
CHK Gridsense Pty Ltd
   
Place of registration
California
   
Directors
Lindon Shiao
   
Secretary
Abigail Vargas
   
Public officer
Lindon Shiao
   
Auditor
HLB Mann Judd
   
Registered office
2568  Industrial Blvd, Suite 100, West Sacramento, CA 95691

 
55

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Schedule 4 Real Property
 
Part 1 - Freehold property
 
Address
 
Registered proprietor
 
Title
identifier
 
Encumbrances
             
None
           

 
Part 2 - Leasehold property
 
Address
 
Lessee
 
Lessor
 
Title
identifier
 
Date of
lease
 
Rental
                     
Unit 3 Ground floor,
 
CHK Gridsense Pty Ltd
 
Sarkis Nassif as trustee of AIT Trust
 
AD764277N
 
26 July 07
 
AU$6,640 /month
20-36 Nancarrow Ave, Meadowbank  NSW 2114 Australia
                                         
2568 Industrial Blvd Suite1000 West Sacramento CA 95691USA
 
Gridsense Inc
 
Ethan Conrad
 
MTG -7-06/07E
 
10 Jan 08
 
US$2,538/ month

 
 
56

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Schedule 5 Intellectual Property, Business Names and Domain Names
 
Part 1 - Registered Intellectual Property Rights and applications for
registration
 
Patents
 
Description
 
Registered
proprietor
 
Registration
number &
Country
 
Status
 
Expiry date
                 
Linetracker
 
CHK Gridsense
 
766044 Australia
 
Current
 
12 Apr 2020
                 
Unisense
 
CHK Gridsense
 
766435 Australia
 
Current
 
12 Apr 2020
                 
Linetracker
 
CHK Gridsense
 
1198717 Great Britain
 
Current
 
12 Apr 2020
                 
Linetracker
 
CHK Gridsense
 
2366467 Canada
 
Current
 
12 Apr 2020
                 
Unisense
 
CHK Gridsense
 
2366531 Canada
 
Current
 
12 Apr 2020
                 
Linetracker
 
CHK Gridsense
 
2001/9293 South Africa
 
Current
 
12 Apr 2020
                 
Unisense
 
CHK Gridsense
 
2001/9294 South Africa
 
Current
 
12 Apr 2020
                 
OilFlowIQ
 
CHK Gridsense
 
2009200007 Australia
 
Current
 
2 Jan 2029
                 
OilFlowIQ
 
CHK Gridsense
 
2008900112 Australia
 
Application in progress
                     
Rascat
 
CHK Gridsense
 
2467054 Canada
 
Current
 
19 Nov 2022
 
             
 
OilFlowIQ
 
CHK Gridsense
 
2648816 Canada
 
New
 
8 Jan 2014
 
             
 
Unisense
 
CHK Gridsense
 
6828770    USA
 
Current
 
12 Apr 2020
 
             
 
Linetracker
 
CHK Gridsense
 
6771078    USA
       
 
     
7272520    USA
 
Current
 
12 Apr 2020
               
 
Rascat
 
CHK Gridsense
 
12/350842
 
Current
 
19 Nov 2022
               
 
OilFlowIQ
 
CHK Gridsense
     
Application in progress
   

 
57

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Trade marks
 
Mark
 
Registered
proprietor
 
Country
 
Registered
number&
Country
 
Class
 
Expiry
date
 
Renewal
date
                         
Gridsense
 
CHK Gridsense Pty Ltd
 
Australia
 
961532 Australia
 
9
 
14 Jul 2013
 
14 Jul 2013
                         
LineTracker
 
CHK GridSense Pty Limited
 
Australia
 
961531 Australia
 
9
 
14 Jul 2013
 
14 Jul 2013

 
Designs
 
Description
 
Registered
proprietor
 
Registration
number&
Country
 
Status
 
Expiry date
                 
N/A
               

 
Part 2 - Business Names
 
Business Name
 
Registered
proprietor
 
Registration
number&
Country
 
Status
 
Expiry date
                 
Gridsense Pty Ltd
 
Gridsense Pty Ltd
 
130672767
 
Current
 
N/A
                 
CHK Gridsense Pty Ltd
 
Gridsense Pty Ltd
 
001 658 091
 
Current
 
N/A
                 
Gridsense Inc
 
CHK Gridsense Pty Ltd
 
20-1049732
 
Current
 
N/A

 
Part 3 - Domain Names
 
Domain Name
 
Registrant
 
Registrar
 
Renewal date
             
gridsense.net
         
04 Dec 2011
             
gridsense.com
 
CHK Gridsense Pty Ltd
 
Planet Domain
 
20 Jul 2012
             
gridsenseusa.net
         
09 Jan 2011

 
 
58

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Schedule 6 Encumbrances and Guarantees
 
Part 1 - Group Company Encumbrances
 
None.
 
Part 2 - Group Company Guarantees
 
None.

 
59

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Part 3 - Seller Guarantees
 
None
 
Schedule 7 Key Contracts
 
CHK Gridsense Pty Ltd: Australia
 
 
·
Lease agreement of premises

 
 
o
Between CHK Gridsense Pty Ltd & Sarkis Nassif for Unit 3, Ground floor, 20-36
Nancarrow Avenue, Meadowbank, NSW,2114 Australia.

 
 
·
Grant agreement of Cable Tracker

 
 
o
Between CHK Gridsense Pty Ltd & Aus Industry (Department of Innovation Industry,
Science & Research Australia) for Project Cable Tracker.

 
 
·
Employment contracts between CHK Gridsense Pty Ltd & the following employees:

 
 
o
Vaughan Wesson

 
 
o
Simon McCauley

 
 
o
Adam Goldsmith

 
 
o
Francis Fisher

 
 
o
Shankar Balasubramaniam

 
 
o
David Edwards

 
 
o
Sean Durkin

 
 
o
Jamie Hodge

 
 
o
Ross Vumbaca

 
 
o
James William

 
 
o
Stamoulis Jim

 
 
o
Luke Lu

 
 
o
Quentin Yang

 
 
o
Jeannie Berger

 
 
o
Neda Matesic

 
 
o
Prasanth Sugala

 
 
o
Chivukula Ramakrishna

 
 
o
Godoy Filiberto

 
 
o
Michael Gerts

 
 
60

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o
Alastair Gilchrist

 
 
o
Mirko Klasnja

 
 
o
Patrick Lai

 
 
·
Vendor non disclosure contracts

 
 
o
Between CHK Gridsense Pty Ltd & Various Vendors

 
 
·
Distributor contract

 
 
o
Between CHK Gridsense Pty Ltd & Prosol Limited (New Zealand)

Gridsense Inc : USA
 
 
·
Lease agreement of the premises

 
 
o
Between Gridsense Inc & Ethan Conrad for 2568 Industrial Blvd, Suite 100, West
Sacramento, CA 95691, USA.

 
 
·
TIQ agreement

 
 
o
Between Gridsense Inc & Transformer Contracting Inc.

 
 
·
Employment contracts between Gridsense Inc  & the following employees

 
 
o
Kevin Anderson

 
 
o
Carl West

 
 
o
Mike Vermilye

 
 
o
Cameron Fitchener

 
 
o
Abigail Vargas

 
 
o
Dennis Bowie

 
 
·
Manufacturer Rep sales contract between Gridsense Inc & the following
manufacturer Reps

 
 
o
Arjay Automation Inc

 
 
o
Ben F Thomas Sales

 
 
o
Charles W Ashby Co.

 
 
o
David Ewart Representatives

 
 
o
Hasgo Power Equipment Sales

 
 
o
Innovelec Ltd

 
 
o
JSB Engineering

 
 
61

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o
Langford & Associates, Inc

 
 
o
Mid – Atlantic Power Equipment Sales LLC

 
 
o
RS Sales Inc

 
 
o
Sirkoch Associates

 
 
o
W.R Daniel & Associates Inc.

 
 
62

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Schedule 8 Warranties
 

--------------------------------------------------------------------------------

1.
The Sellers and the SCRN Notes Sellers

 
The warranties set forth in this schedule apply to the Sellers jointly and
severally. The warranties set forth in clauses 1.1, 1.2, 1.3, 1.4, 1.5, 2.5 and
2.6 of this schedule apply to the SCRN Notes Sellers jointly and severally.
 
1.1
Capacity and authorisation

 
The Sellers and the SCRN Notes Sellers have the legal right and full power and
capacity to execute, deliver and perform their obligations under this agreement
and have obtained all necessary authorisations and consents and taken all other
actions necessary to enable it to do so.
 
1.2
Valid obligations

 
Each Transaction Document constitutes (or will when executed constitute) valid
legal and binding obligations of the Sellers and the SCRN Notes Sellers and is
enforceable against the Sellers and the SCRN Notes Sellers in accordance with
its respective terms.
 
1.3
Breach or default

 
The execution, delivery and performance of this agreement by the Sellers and the
SCRN Notes Sellers does not and will not result in a breach of or constitute a
default under:
 
 
(a)
any agreement to which the Sellers are party;

 
 
(b)
any provision of the constitution of any of the Sellers who are corporations or
other legal entities; or

 
 
(c)
any law or regulation or any order, judgment or determination of any court or
Regulatory Authority by which the Sellers and the SCRN Notes Sellers are bound.

 
1.4
Solvency

 
None of the following events has occurred in relation to any Seller that is a
corporation or other legal entity:
 
 
(a)
a receiver, receiver and manager, liquidator, provisional liquidator,
administrator, trustee or similar officer is appointed in respect of the Sellers
or any of its assets or an event occurs that gives any person the right to seek
such an appointment;

 
 
(b)
an application is made to court or a resolution is passed or an order is made
for the winding up or dissolution of the Sellers or an event occurs that would
give any person the right to make such an application;

 
 
(c)
the Sellers propose or take any steps to implement a scheme of arrangement or
other compromise or arrangement with their creditors or any class of them;

 
 
(d)
the Sellers stop paying their debts when they become due or are declared or
taken under any applicable law to be insolvent or any of the Sellers' boards of
directors resolves that the Sellers are, or are likely to become at some future
time, insolvent; or

 
 
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(e)
any person in whose favour the Sellers have granted any Encumbrance becomes
entitled to enforce any security under that Encumbrance or any floating charge
under that Encumbrance crystallises.

 
1.5
Solvency

 
None of the following events has occurred in relation to any Seller or SCRN
Notes Seller that is an individual:
 
 
(a)
a trustee or similar officer is appointed in respect of the Seller or SCRN Notes
Seller or any of the Seller's or SCRN Notes Seller’s assets;

 
 
(b)
an order is made for the bankruptcy of the Seller or SCRN Notes Seller or his or
her estate or an event occurs that would give a court the right to make such an
order;

 
 
(c)
a moratorium of any debts of the Seller or SCRN Notes Seller, a personal
insolvency agreement or any other assignment, composition or arrangement with
the Seller's or SCRN Notes Seller’s creditors or any similar proceeding or
arrangement by which the assets of the Seller or SCRN Notes Seller are subjected
conditionally or unconditionally to the control of the Seller's or SCRN Notes
Seller’s creditors or a trustee is ordered or applied for;

 
 
(d)
the Seller or SCRN Notes Seller is declared or taken under any applicable law to
be insolvent or unable to pay his or her debts or the Seller or SCRN Notes
Seller admits in writing that he or she is insolvent or unable to pay his or her
debts; or

 
 
(e)
any writ of execution, garnishee order, mareva injunction or similar order,
attachment, distress or other process is made or issued against or in relation
to any asset of the Seller or SCRN Notes Seller.

 

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2.
Shares, share capital and SCRN Notes

 
2.1
Ownership of the Shares

 
Other than the Shares presently owned by Buyer the Sellers are the sole legal
and beneficial owners of the Shares and have complete and unrestricted power and
authority to sell the Shares to the Buyer.
 
2.2
Ownership of shares in the Subsidiaries

 
All of the shares in the Subsidiaries are legally and beneficially owned by a
Group Company.
 
2.3
Share capital

 
The Shares and the shares in each Subsidiary details of which are set out in
Schedule 3 constitute the whole of the issued share capital of each Group
Company and have been validly issued and fully paid up.
 
2.4
Issue of further securities

 
No person has any right to require the issue of any shares or other securities
in any Group Company and no Group Company has made any offer that may result in
any person having such a right.
 
 
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2.5
Third party rights

 
There is no Encumbrance, option, right of pre-emption, right of first or last
refusal or other third party right over any of the Shares, any of the shares in
the Subsidiaries or any of the SCRN Notes.
 
2.6
Ownership of the SCRN Notes

 
The SCRN Notes Sellers are the sole legal and beneficial owners of the SCRN
Notes and have complete and unrestricted power and authority to sell the SCRN
Notes to the Buyer.
 

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3.
Corporate matters

 
3.1
Incorporation

 
Each Group Company is a company properly incorporated and validly existing under
the laws of the country or jurisdiction of its incorporation and has the legal
right and full corporate power to own its assets and to carry on its business as
conducted at the date of this agreement.
 
3.2
Constitutions

 
A true and complete copy of the constitution of each Group Company has been
disclosed to the Buyer in the Due Diligence Materials.
 
3.3
Other interests

 
No Group Company:
 
 
(a)
has any legal or beneficial right in, or has agreed to acquire, subscribe for or
take up, any shares or other securities in any company, any units in any unit
trust or any other ownership interests in any other entity other than another
Group Company;

 
 
(b)
controls (within the meaning of section 50AA of the Corporations Act) any
company or other entity other than another Group Company;

 
 
(c)
is a member of or party to any joint venture, consortium, partnership or
unincorporated association, other than a recognised trade association; or

 
 
(d)
is party to any agreement for participation with any other person in any
business activity deriving profits, commissions or other income.

 
3.4
Solvency

 
None of the following events has occurred in relation to any Group Company:
 
 
(a)
a receiver, receiver and manager, liquidator, provisional liquidator,
administrator, trustee or similar officer is appointed in respect of that Group
Company or any of its Assets or an event occurs that gives any person the right
to seek such an appointment;

 
 
(b)
an application is made to court or a resolution is passed or an order is made
for the winding up or dissolution of that Group Company or an event occurs that
would give any person the right to make such an application;

 
 
(c)
that Group Company proposes or takes any steps to implement a scheme of
arrangement or other compromise or arrangement with its creditors or any class
of them;

 
 
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(d)
that Group Company stops paying its debts when they become due or is declared or
taken under any applicable law to be insolvent or the board of directors of that
Group Company resolves that it is, or is likely to become at some future time,
insolvent; or

 
 
(e)
any person in whose favour that Group Company has granted any Encumbrance
becomes entitled to enforce any security under that Encumbrance or any floating
charge under any such Encumbrance crystallises.

 
3.5
Books and records

 
All Records of each Group Company:
 
 
(a)
have been fully and properly maintained and contain complete and accurate
records of all matters required to be entered in them by any law or regulation
or by the Accounting Standards; and

 
 
(b)
are in the possession or control of the relevant Group Company,

 
and no Group Company has received any notice or allegation that any of them is
incorrect or should be rectified or amended.
 
3.6
Powers of attorney

 
No Group Company has granted any power of attorney or similar authority that is
still in force.

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4.
Conduct of business

 
4.1
Compliance

 
Each Group Company has at all times since incorporation conducted its business
and affairs in accordance with its constitution and in all material respects in
accordance with all applicable laws and regulations.  No Group Company is in
breach of any order, judgment or award of any court, tribunal or Regulatory
Authority in any jurisdiction.
 
4.2
Authorisations

 
Each Group Company has obtained and has complied with the terms of all
Authorisations necessary to enable the Group Companies to conduct the Business
in the locations and in the manner in which it is conducted at the date of this
agreement and true and complete copies of each of those Authorisations have been
disclosed to the Buyer in the Due Diligence Materials.
 
4.3
Compliance with Authorisations

 
Each Group Company has complied with the terms of all Authorisations referred to
in Warranty 4.2 and, as far as the Sellers are aware, no circumstance exists
which may:
 
 
(a)
result in an Authorisation being terminated, suspended or modified in any
material respect or not being renewed;

 
 
(b)
require material work or expenditure to maintain or secure the ability of any
Group Company to renew any Authorisation.

 
4.4
Agreements with Regulatory Authorities

 
True and complete copies of each agreement or arrangement between a Group
Company and any Regulatory Authority have been disclosed to the Buyer in the Due
Diligence Materials.
 
 
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4.5
Orders, directions and notices

 
No Group Company has received any order, direction or notice from any Regulatory
Authority or any other person requiring expenditure by any Group Company or
which might otherwise adversely affect the Business or the use of any Property
by any Group Company that has not been complied with in full.  As far as the
Sellers are aware no circumstance exists that may result in any such order being
made or direction or notice being given.
 
4.6
Product compliance

 
No Group Company has manufactured or sold any products that do not comply with
any warranty made by any Group Company in respect of those products or any
warranty standard or specification for those products required or implied by
law.
 
4.7
No product claims

 
No circumstance exists that is likely to give any purchaser of any product
manufactured or sold by any Group Company an entitlement to seek compensation or
damages in respect of any injury or loss caused by that product.
 
4.8
Place of business

 
Except for Gridsense Inc., a Colorado corporation with operations in Sacramento,
California, no Group Company is registered to carry on business outside of
Australia or owns material property or material assets, or conducts business to
any material extent, in any place other than Australia.
 

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5.
Accounts

 
5.1
The Last Accounts

 
The Last Accounts:
 
 
(a)
give a true and fair view of:

 
 
(i)
the financial position and the assets and liabilities of the Company and its
controlled entities as at the Last Balance Date; and

 
 
(ii)
the income, expenses and operational results of the Company and its controlled
entities for the financial period ended on the Last Balance Date;

 
 
(b)
have been prepared:

 
 
(i)
in compliance with the Corporations Act, the Accounting Standards and all other
applicable laws and regulations;

 
 
(ii)
applying the same principles, policies, practices and procedures as were applied
in preparing the audited accounts of the Company and its controlled entities for
the each of the 3 immediately preceding financial years;

 
 
(iii)
applying a rate of depreciation to each fixed Asset which is adequate to write
down the value of each fixed Asset to its net realisable value at the end of its
useful working life; and

 
 
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(iv)
applying the same rate of depreciation to each fixed Asset as was applied in
preparing the audited accounts of the Company and its controlled entities for
each of the 3 immediately preceding financial years;

 
 
(c)
are not affected by any extraordinary, unusual or non-recurring item or any
other factor that might make the financial position or operational results of
the Company and its controlled entities disclosed in the Last Accounts
misleading or deceptive; and

 
 
(d)
contain specific provisions adequate to cover, or full particulars in notes of,
all liabilities of the Company and its controlled entities as at the Last
Balance Date including all Tax Funding Liabilities and other liabilities in
respect of Tax and all contingent liabilities.

 
5.2
Base Balance Sheet

 
The Base Balance Sheet:
 
 
(a)
fairly presents the financial position and the assets and liabilities of the
Group Companies on an aggregated basis as at the date of the Base Balance Sheet
and is not misleading or deceptive;

 
 
(b)
has been prepared in accordance with the Accounting Standards and applying the
same principles, policies, practices and procedures as were applied in preparing
the Last Accounts of each Group Company for the financial year ended on December
31, 2008 and the period of January 1, 2009 through June 30, 2009; and

 
 
(c)
contains specific provisions adequate to cover all liabilities of the Group
Companies on an aggregated basis as at the date of the Base Balance Sheet
including all Tax Funding Liabilities and other liabilities in respect of Tax
and all other contingent liabilities.

 
5.3
Position since Last Balance Date

 
Since the Last Balance Date:
 
 
(a)
there has been no Material Adverse Change;

 
 
(b)
each Group Company has carried on the Business in the ordinary and usual course
consistent with its usual business practices and has not made any significant
change to the nature or scale of any activity comprised in the Business;

 
 
(c)
no Group Company has issued or allotted any shares or other securities, bought
back or redeemed any shares or other securities or otherwise reduced its share
capital, declared or paid any dividends or other distributions or authorised, or
agreed conditionally or otherwise to do, any of those things;

 
 
(d)
no Group Company has disposed of or created any Encumbrance over any asset
except in the ordinary course of business;

 
 
(e)
no Group Company has incurred or entered into commitments to incur capital
expenditure in excess of $2,000 for any individual item or $10,000 in aggregate;
and

 
 
(f)
there has been no material increase or decrease in the levels of debtors,
creditors or inventory or in the average collection or payment periods for
debtors and creditors of any Group Company and:

 
 
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(i)
no Group Company has defaulted in paying any creditor by the due date for
payment; and

 
 
(ii)
no debt owing to any Group Company has been released or settled for an amount
less than its full amount.

  

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6.
Assets, liabilities and financing arrangements

 
6.1
Ownership of assets

 
Each of the assets disclosed in or included in the Last Accounts and in any
asset register disclosed to the Buyer in the Due Diligence Materials is legally
and beneficially owned by a Group Company free of any Encumbrance or other third
party rights.
 
6.2
Control of assets

 
All assets owned by the Group Companies or used by the Group Companies under any
equipment lease, finance lease, hire purchase agreement or similar arrangement
disclosed to the Buyer in the Due Diligence Materials are under the possession
or control of a Group Company.
 
6.3
Adequacy of assets

 
The assets owned by the Group Companies and the assets used by the Group
Companies under any equipment lease, finance lease, hire purchase agreement or
similar arrangement disclosed to the Buyer in the Due Diligence Materials
comprise all the assets necessary to enable the Group Companies to conduct the
Business in the manner in which it is conducted at the date of this agreement.
 
6.4
Plant, equipment and vehicles

 
Each item of plant and equipment and each vehicle owned or used by any Group
Company is in good repair and condition relative to its age, is in satisfactory
working order and can be efficiently and properly used for the purpose for which
it was acquired.
 
6.5
Inventory

 
Each item of Inventory is of merchantable quality and fit for the purpose for
which it is intended to be used, is not redundant, obsolete or past its best
before date and conforms with all relevant conditions, warranties, guarantees
and standards implied by law.
 
6.6
Debts owing to the Group Companies

 
No debt is owing to the Group Companies other than trade debts incurred in the
ordinary course of business and as far as the Sellers are aware:
 
 
(a)
all debts owing to the Group Companies disclosed in the Last Accounts have been
collected or will be collected in full except to the extent of any provision in
the Last Accounts for bad and doubtful debts; and

 
 
(b)
all other debts owing to the Group Companies as at the date of this agreement
will be collected in full.

 
6.7
Borrowings

 
No Group Company owes any borrowings or other indebtedness under any bank
facility, overdraft, bond, note, debenture, acceptance credit, sale and lease
back or other arrangement providing financial accommodation of any description
other than borrowings from third parties on arm's length terms full details of
which are set out in the Disclosure Letter and:
 
 
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(a)
no Group Company has received any notice requiring the repayment of any such
borrowings which are repayable on demand or requiring any such borrowings to be
repaid before their due date for any reason; and

 
 
(b)
as far as the Sellers are aware there is no event of default and no other
circumstance exists that may entitle any person to require early repayment of
any such borrowings or to enforce any security given by any Group Company in
respect of any such borrowings.

 
6.8
Other financial obligations

 
No Group Company has:
 
 
(a)
created or provided any Guarantee in relation to the obligations of any person;

 
 
(b)
created or provided any letter of comfort or made or given any representation,
warranty or material undertaking to any person in relation to any liability or
the solvency of any other person or in support of the provision of any material
loan, credit or other financial accommodation;

 
 
(c)
entered into any option, swap, exchange or other derivative or hedging
transaction which has not been fully closed out; or

 
 
(d)
entered into any agreement or arrangement for the purpose of obtaining any
financial accommodation of a type that is not required to be disclosed as a
liability under the Accounting Standards.

 

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7.
Contracts

 
7.1
Disclosure of certain contracts

 
True and complete copies of each of the following have been disclosed to the
Buyer in the Due Diligence Materials:
 
 
(a)
each Material Contract;

 
 
(b)
each equipment lease, finance lease, hire purchase agreement or similar
arrangement to which a Group Company is party;

 
 
(c)
each other agreement or arrangement to which a Group Company is party that
involves or is likely to involve obligations or liabilities of a nature or
magnitude that might reasonably be expected to be considered material by a
potential buyer of the Shares;

 
 
(d)
each contract between a Group Company and any Seller;

 
 
(e)
any offer or proposal that remains open for acceptance and if accepted would
result in any Group Company being party to any agreement or arrangement within
paragraphs (a) to (d) above; and

 
 
(f)
all documents varying or otherwise affecting the terms of any agreement,
arrangement, offer or proposal within paragraphs (a) to (e) above.

 
 
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7.2
Unusual, restrictive or onerous contracts

 
No Group Company is party to any agreement or arrangement that:
 
 
(a)
was entered into outside the ordinary course of business or is not on arm's
length terms;

 
 
(b)
establishes any agency, distributorship, marketing, purchasing, manufacturing or
licensing or other arrangement which restricts or limits the ability of that
Group Company to undertake any activity in any place in such manner as it
determines; or

 
 
(c)
cannot be performed by that Group Company without undue or unusual expenditure
or is expected to result in a loss to that Group Company on completion of
performance,

 
and no Group Company has made or received any offer or proposal that remains
open for acceptance and if accepted would result in that Group Company being
party to any agreement or arrangement within paragraphs (a) to (c) above.
 
7.3
Validity

 
As far as the Sellers are aware each agreement or arrangement to which any Group
Company is party is valid, binding and enforceable.
 
7.4
Breach or default

 
No Group Company is in breach of any agreement or arrangement to which it is
party and as far as the Sellers are aware no other party is in breach of such
agreement or arrangement.
 
7.5
Termination

 
No party to any agreement or arrangement to which any Group Company is party has
given any notice terminating or purporting to or advising of an intention to
terminate that agreement or arrangement and as far as the Sellers are aware no
circumstance exists that may entitle any person to do so.
 
7.6
Disclosure of terms of trade

 
Examples of the terms of trade and other customer contracts used in the Business
have been disclosed to the Buyer in the Due Diligence Materials and all examples
so provided are representative of the contracts actually used in the conduct of
the Business.
 
7.7
Trading relationships

 
No material customer of or supplier to any Group Company has at any time in the
12 months before the date of this agreement ceased to deal with that Group
Company or materially reduced the level of its custom from or supply to that
Group Company or indicated an intention to do so and as far as the Sellers are
aware no customer or supplier will take any such action as a result of the
transactions contemplated by this agreement.
 

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8.
Real property and environmental

 
8.1
General

 
The Properties comprise all of the real property owned, leased, occupied or used
by the Group Companies and no Group Company is party to any agreement or
arrangement to acquire, lease or occupy any real property other than the
Properties.
 
 
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8.2
Freehold properties

 
Each Group Company specified in the second column of part 1 of Schedule 4 as the
registered proprietor of a Freehold Property is the sole legal and beneficial
owner of that Property, has good and marketable title to that Property and has
in its possession all documents of title to that Property.
 
8.3
Leasehold properties

 
True and complete copies of each Lease, each other deed or agreement affecting
the terms of that Lease or the fitout of the Leasehold Property subject of that
Lease and each notice served under that Lease have been disclosed to the Buyer
in the Due Diligence Materials and except as disclosed there are no incentives,
rent-free periods, reduced-rent periods or other reductions or abatements of
rent or outgoings in relation to any of the Leasehold Properties.
 
8.4
Leases

 
In relation to each Lease:
 
 
(a)
as far as the Sellers are aware the Lease is valid, binding and enforceable and
registered where required;

 
 
(b)
the relevant Group Company has made all payments required by the Lease, has
otherwise complied with all terms of the Lease and all other covenants affecting
the property subject of the Lease and has not received any notice alleging that
any circumstance exists that may constitute a breach of the Lease; and

 
 
(c)
the lessor under the Lease has not given any notice terminating or purporting to
or advising of an intention to terminate the lease and as far as the Sellers are
aware no circumstance exists that may entitle the lessor under the Lease to do
so or to refuse to accept the exercise by the relevant Group Company of any
option to extend the Lease.

 
8.5
Encumbrances and third party rights

 
All right, title and interest of each Group Company in each of the Properties is
held free and clear of any Encumbrance and none of the Properties is subject to
any lease, licence, option, caveat, covenant, easement, overriding interest,
restriction, condition, or other right in favour of any third party.
 
8.6
Occupation and ancillary rights

 
Each Group Company specified in the second column of part 1 of Schedule 4 as the
registered proprietor of a Freehold Property or in the second column of part 2
of Schedule 4 as the lessee of a Leasehold Property has exclusive possession,
occupation and quiet enjoyment of the land included in each Property and holds
all easements, rights, interests and privileges in connection with that land
necessary to enable that Group Company to carry on the Business.
 
8.7
Use

 
The use of each of the Properties for carrying on the Business complies with and
is permitted by all applicable laws and regulations and the terms of any
relevant Lease.
 
8.8
Buildings and improvements

 
All buildings and improvements on any Property are in a good state of repair and
condition and fit for their current use.
 
 
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8.9
Disputes

 
No Group Company is involved in any dispute with any landlord, tenant, neighbour
or other person or with any Regulatory Authority in relation to the Properties
or the operation of the Business from the Properties and as far as the Sellers
are aware no circumstance exists that is likely to give rise to any such
dispute.
 
8.10
Nuisance and environmental complaints

 
The operation of the Business from the Properties has not caused and is not
causing any nuisance and no Group Company has received in the 12 months before
the date of this agreement any complaint about the effects of the operations of
the Business on the Environment.
 
8.11
Contamination

 
No Group Company has caused or contributed to, or is otherwise responsible or
liable for, the presence in, on or under any air, land or water of any
substance, odour, sound, vibration or radiation (Contamination) at a level that
would entitle any Regulatory Authority or any other person to require that Group
Company, whether now or in the future:
 
 
(a)
to clean up, remove, remedy, treat, control or contain, monitor or otherwise
manage that Contamination, or contribute to the cost of doing so; or

 
 
(b)
to pay compensation to any person in respect of that Contamination.

 

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9.
Intellectual property and confidential information

 

9.1
Registered Intellectual Property Rights

 
Complete and accurate details of all Intellectual Property Rights owned by each
Group Company that are capable of registration are set out in parts 1 and 2 of
Schedule 5 and:
 
 
(a)
all of those Intellectual Property Rights have been registered or are the
subject of an application for registration by a Group Company; and

 
 
(b)
all registration, application and other fees due for payment in relation to
those Intellectual Property Rights have been paid in full.

 
9.2
Unregistered Intellectual Property Rights

 
Complete and accurate details of all commercially significant unregistered
Intellectual Property Rights owned by each Group Company have been disclosed to
the Buyer in the Due Diligence Materials.
 
9.3
Ownership and use of Intellectual Property Rights

 
A Group Company is the sole legal and beneficial owner of each of those
Intellectual Property Rights referred to in the Warranties in paragraphs 9.1 and
9.2 of this Schedule 8 and:
 
 
(a)
no person other than the owner of those Intellectual Property Rights has any
right to use such Intellectual Property Rights and there has been no
unauthorised use by any other person of those Intellectual Property Rights;

 
 
(b)
nothing has been done or omitted to be done by any Group Company and as far as
the Sellers are aware no other circumstance exists that may affect the validity
or ownership of those Intellectual Property Rights; and

 
 
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(c)
there are no liens or encumbrances on any of those Intellectual Property Rights.

 
9.4
Intellectual Property Licences

 
Complete and accurate details of all material Intellectual Property Licences
have been disclosed to the Buyer in the Due Diligence Materials and, in relation
to each such Intellectual Property Licence:
 
 
(a)
as far as the Sellers are aware the Intellectual Property Licence is valid,
binding and enforceable;

 
 
(b)
the relevant Group Company is not in breach of the Intellectual Property Licence
and has not received any notice alleging breach of the Intellectual Property
Licence;

 
 
(c)
the licensor under that Intellectual Property Licence has not given any notice
terminating or purporting to or advising of an intention to terminate that
Intellectual Property Licence and as far as the Sellers are aware no
circumstance exists that may entitle the licensor to do so; and

 
 
(d)
as far as the Sellers are aware, no circumstance exists that may affect the
validity or ownership of the Intellectual Property Rights the subject of that
Intellectual Property Licence or the use by any Group Company of those
Intellectual Property Rights.

 
9.5
Adequacy of Intellectual Property Rights

 
Each Group Company owns or has licensed to it pursuant to an Intellectual
Property Licence all Intellectual Property Rights necessary to enable the Group
Companies to conduct the Business in the manner in which it is conducted at the
date of this agreement.
 
9.6
Infringement of third party rights

 
As far as the Sellers are aware none of the activities of any Group Company
infringes or is likely to infringe any Intellectual Property Rights of any third
party and as far as the Sellers are aware no claim has been made against any
Group Company in respect of any alleged infringement.
 
9.7
Assignments

 
Each contractor engaged by any Group Company for the purpose of undertaking any
activity that has given rise to or may give rise to the creation of any
Intellectual Property Right has executed an assignment of that Intellectual
Property Right to that Group Company and any employee of any Group Company who
has devised any invention which is or may become the subject of any application
for a patent or registered design outside Australia has executed an assignment
of that invention, and the right to be granted a patent in relation to the
invention, to that Group Company.
 
9.8
Confidential Information

 
No Group Company has disclosed and no Seller has disclosed to any person other
than the Buyer or the Buyer's Representatives any Confidential Information
except:
 
 
(a)
where such disclosure was made in the ordinary course of business and where the
recipient is either an employee of the Group Company which made such disclosure
or has acknowledged the confidentiality of the Confidential Information in
writing and has agreed neither to use that Confidential Information nor disclose
that Confidential Information to any person except for the purpose for which
that Confidential Information was disclosed;

 
 
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(b)
to professional advisers of the Group Company which made such disclosure who are
bound by obligations of confidentiality by reason of their role as adviser; or

 
 
(c)
where required or compelled by law.

 

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10.
Business Names and Domain Names

 
10.1
Ownership of Business Names

 
A Group Company is the sole legal and beneficial owner of each Business Name and
there are no other business names used in the Business at the date of this
agreement.
 
10.2
Rights to use Domain Names

 
A Group Company holds a valid licence to use, and has paid in full all licence
fees in respect of, each Domain Name and there are no other domain names used in
the Business at the date of this agreement.
 
10.3
Validity, ownership and rights to use

 
Nothing has been done or omitted to be done by any Group Company and as far as
the Sellers are aware no circumstance exists that may affect the validity or
ownership of the Business Names or the rights of any Group Company to use the
Domain Names.
 

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11.
Systems

 
11.1
Ownership and control

 
The Systems are owned by a Group Company or leased or licensed to a Group
Company and are under the possession or control of a Group Company or (in the
case of mobile communications devices) an employee of a Group Company and as far
as the Sellers are aware no circumstance exists that may entitle any person to
terminate any lease or licence in relation to the Systems.
 
11.2
Independence

 
The Systems are discrete information technology systems capable of functioning
without any recourse to any other information technology systems operated by any
Seller and represent all of the information technology systems necessary for the
continued conduct of the Business in the manner in which it is conducted as at
the date of this agreement.
 
11.3
Support

 
The Systems are maintained and supported by the relevant manufacturer or
authorised reseller in accordance with the manufacturer's recommendations under
valid, binding and enforceable support agreements.
 
11.4
Performance

 
The Systems perform in all material respects their intended functions and there
has been no material unscheduled disruption to or failure in the operation or
performance of the Systems in the period of 12 months before the date of this
agreement.
 
 
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11.5
Security and integrity

 
The Group Companies have taken all reasonable precautions to preserve the
security and integrity of the Systems and the data and information stored on
them and as far as the Sellers are aware there has been no unauthorised access
to the Systems or any of the data or information stored on them.
 

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12.
Employees

 
12.1
Terms of employment

 
Complete and accurate details of each of the following have been disclosed to
the Buyer in the Due Diligence Materials or, in the case of any changes to those
details after the date of this agreement and before Completion, by notice to the
Buyer given no later than 3 Business Days before Completion:
 
 
(a)
the name, position, location and start date of:

 
 
(i)
each employee of each Group Company; and

 
 
(ii)
each person who has accepted an offer of employment with any Group Company but
whose employment has not started;

 
 
(b)
the terms of employment of or offered to each person referred to in
paragraph (a) above including all remuneration and other benefits payable during
or upon termination of that employment or engagement;

 
 
(c)
any arrangement under which any employee or former employee of any Group Company
has received in the 12 months before the date of this agreement or may be
entitled to receive any bonus or other payment or benefit (whether contractual
or discretionary) that is calculated by reference to the performance of any
Group Company or any division of any Group Company, the performance of the
employee or former employee or any combination of these;

 
 
(d)
accrued annual leave, long service leave and personal/carer's leave entitlements
of each employee of each Group Company;

 
 
(e)
all policies and practices (whether contractual or discretionary) that are or
may be applicable to employment or the termination of employment of any employee
of any Group Company;

 
 
(f)
all Modern Awards which cover any employee; and

 
 
(g)
all commitments given to any employee of any Group Company in relation to change
of ownership of the Company or the transactions contemplated by this agreement,

 
and no Group Company has made any commitment, offer or proposal that if
implemented or accepted would result in any of those details being inaccurate in
any material respect.
 
12.2
Service and consultancy agreements

 
True and complete copies of each of the following have been disclosed to the
Buyer in the Due Diligence Materials:
 
 
(a)
each service agreement entered into between any Group Company and any employee
whose total remuneration exceeds $1,000 per annum; and

 
 
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(b)
each agreement for the provision of consultancy services to any Group Company.

 
12.3
Contractors

 
No individual providing services to any Group Company as or on behalf of a
contractor is an employee of any Group Company.
 
12.4
Enterprise Agreements and Transitional Instruments

 
No Group Company is covered by any Enterprise Agreement or Transitional
Instrument and is party to or bound by any other registered or unregistered
agreement with any group of employees or any trade union and no such Enterprise
Agreements, Transitional Instruments or other registered or unregistered
agreements otherwise apply to any employees of the any Group Company.  There are
no discussions or negotiations with any employees or trade unions or any of
their representatives that may result in any Group Company becoming covered by
any Enterprise Agreement or other unregistered agreement.
 
12.5
Notice periods

 
Each Group Company that is the employer of any employee is legally entitled to
terminate the employment of each of its employees by 3 months notice or less
without liability for damages, redundancy or other compensation.
 
12.6
Compliance with obligations

 
Each Group Company has:
 
 
(a)
paid all amounts due to each employee and former employee other than in respect
of remuneration accrued for the current salary payment period and current
expense claims;

 
 
(b)
otherwise complied in all material respects with all of its obligations in
relation to the employment of its employees including all obligations arising
under any Transitional Instrument, Modern Award or Enterprise Agreement and all
obligations in relation to occupational health and safety and workers'
compensation; and

 
 
(c)
made sufficient provision in its accounting records as at the Last Balance Date
for all annual leave, long service leave and personal/carer's leave entitlements
then due to all employees.

 
12.7
Termination

 
No employee of or consultant to any Group Company:
 
 
(a)
has been given notice of dismissal or termination by the relevant Group Company;

 
 
(b)
has given notice resigning from employment with the relevant Group Company or
terminating that consultancy or has otherwise indicated an intention to
terminate the employment or consultancy; or

 
 
(c)
has been placed on gardening leave or any equivalent arrangement.

 
12.8
Disputes

 
No Group Company is involved in any industrial dispute or other dispute with any
trade or industrial union or an association, group of employees or individual
employee, no such dispute has been threatened and as far as the Sellers are
aware no circumstance exists that is likely to give rise to any such dispute.
 
 
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13.
Superannuation

 

13.1
No defined benefits

 
No employee of a Group Company accrues benefits which are, or will be,
determined by reference to a formula based on the employee's length of service
and/or superannuation salary under any Fund and no promise, assurance or
representation has been made to any employee of a Group Company that their
accumulation benefits under any Fund will at any point in the future equate
(approximately or exactly) to or not be less than any particular amount however
calculated.
 
13.2
Funds

 
Complete and accurate details of each of the following have been disclosed to
the Buyer in the Due Diligence Materials:
 
 
(a)
the name and superannuation fund number of each Fund; and

 
 
(b)
in respect of each Fund:

 
 
(i)
the identity of each employee and each other person in respect of whom each
Group Company makes contributions to that Fund;

 
 
(ii)
the level of contributions which that Group Company is obliged to make or has
voluntarily committed to make in respect of each such person; and

 
 
(iii)
the benefit design under the terms of the Fund (including all insurance
benefits).

 
13.3
Documentation

 
True and complete copies of each of the following documents in relation to each
Fund have been disclosed to the Buyer in the Due Diligence Materials:
 
 
(a)
the governing rules and any product disclosure statement or member booklet
provided to members of the Fund and any document updating, amending or setting
out any proposed amendment to any of those documents; and

 
 
(b)
the latest annual report to members of the Fund.

 
13.4
Compliance

 
Each Fund is a complying superannuation fund within the meaning of the
Superannuation Industry (Supervision) Act 1993.
 
13.5
Contributions

 
Each Group Company:
 
 
(a)
has made when due all contributions to each Fund that the relevant Group Company
is obliged to make or has voluntarily committed to make;

 
 
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(b)
has not since December 31, 2008 increased the amount of  the contributions to
any Fund that the relevant Group Company is obliged to make or has voluntarily
committed to make; and

 
 
(c)
has made all superannuation contributions required to avoid any liability for a
superannuation guarantee charge under the Superannuation Guarantee Charge Act
1992.

 

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14.
Legal proceedings

 

14.1
Litigation

 
No Group Company is a claimant or defendant in, or otherwise a party to, any
litigation, arbitration or mediation proceedings, there are no such proceedings
pending or threatened against any Group Company and as far as the Sellers are
aware no circumstance exists that is likely to give rise to any such
proceedings.
 
14.2
Investigations and prosecutions

 
No Group Company is the subject of any investigation, inquiry, prosecution or
enforcement proceedings by any Regulatory Authority, there are no such
investigations, inquiries, prosecutions or proceedings pending or threatened
against any Group Company and as far as the Sellers are aware no circumstance
exists that is likely to give rise to any such investigation inquiry,
prosecution or proceedings.
 
14.3
Orders and judgments

 
There is no unsatisfied order, judgment or award against any Group Company.
 

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15.
Insurance

 
15.1
Assets

 
All assets of each Group Company of an insurable nature have at all material
times been insured with a reputable and duly authorised insurer to their full
reinstatement value against all risks usually or prudently insured against, and
on terms usually or prudently maintained by any person holding assets the same
as or similar to those held by that Group Company or performing a business
activity the same or similar to any business activity performed by that Group
Company.
 
15.2
Business risks

 
Each Group Company has at all material times been adequately insured in relation
to any business activity of that Group Company by effecting insurance cover with
a reputable and duly authorised insurer against all risks usually or prudently
insured against, and in amounts and on terms usually or prudently maintained by
any person performing a business activity similar to any business activity
performed by that Group Company.
 
15.3
Effectiveness

 
Each Group Company has at all times promptly paid all premiums in relation to
each insurance policy and has not done or omitted to be done anything that might
render any such policy void or unenforceable or otherwise limit, prejudice or
reduce recovery under any such policy and as far as the Sellers are aware no
other circumstance exists that might render any such policy void or
unenforceable or otherwise limit, prejudice or reduce recovery under any such
policy.
 
 
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15.4
Coverage

 
Complete and accurate details of all insurance policies relating to the Group
Companies that are current as at the date of this agreement have been disclosed
to the Buyer in the Due Diligence Materials and all such insurance policies are
in full force and effect and as far as the Sellers are aware no circumstance
exists that might render any such policy void or unenforceable or otherwise
limit, prejudice or reduce recovery under any such policy.
 
15.5
Claims

 
There is no claim outstanding under any policy of insurance held by or for the
benefit of any Group Company and as far as the Sellers are aware no circumstance
exists that is likely to give rise to such a claim.
 
15.6
Contracts affecting insurance coverage

 
No Group Company is party to any contract or arrangement under which:
 
 
(a)
it has agreed to limit its ability to claim for breach of warranty or other
contractual obligation in a way that might affect the rights of subrogation of
any insurer; or

 
 
(b)
it has assumed a liability to indemnify any other person in respect of any
liability for which it would not have been liable in the absence of that
contract or arrangement.

 

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16.
Tax

 
16.1
 
Membership of Consolidated Group

 
No Group Company is or has ever been a member of a Consolidated Group and no
election has been made to include any Group Company in a Consolidated Group.
 
16.2
Payments

 
All Tax and Tax Funding Liabilities that have become lawfully due and payable by
each Group Company have been paid on or before the due date for such payment.
 
16.3
Withholding

 
All amounts required by any law or regulation relating to Tax to be withheld by
any Group Company at source have been correctly withheld and accounted for to
the proper Tax Authority.
 
16.4
Returns and assessments

 
Each Group Company has lodged by the due date all returns and other documents
relating to Tax required to be lodged with any Tax Authority and:
 
 
(a)
all information contained in those documents was complete and accurate in all
material respects and not false, misleading or deceptive; and

 
 
(b)
no dispute exists in relation to any of those documents and as far as the
Sellers are aware no circumstances exist which might give rise to such a
dispute.

 
 
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16.5
Penalties

 
No Group Company has in the 5 years before the date of this agreement paid or
become liable to pay any penalty, fine or interest under any law or regulation
relating to Tax and as far as the Sellers are aware no circumstance exists that
may result in any Group Company becoming liable to pay any such penalty, fine or
interest.
 
16.6
Investigations and disputes

 
No Group Company has in the 5 years before the date of this agreement been the
subject of any investigation or audit by, or in dispute with, any Tax Authority
and as far as the Sellers are aware no such investigation, audit or dispute is
pending or threatened and no circumstances exist that may result in any such
investigation, audit or dispute.
 
16.7
Rulings

 
Complete copies of all rulings, advices, consents, advance opinions and
clearances from a Tax Authority affecting a Group Company (Rulings) have been
disclosed to the Buyer in the Due Diligence Materials and:
 
 
(a)
all transactions carried into effect in reliance on any Ruling have been
implemented in the manner disclosed in the application for the relevant Ruling;
and

 
 
(b)
no Group Company has taken any action which has or might alter or prejudice any
arrangement which has been negotiated with a Taxation Authority or any Tax
Ruling which has previously been obtained from or issued by any Taxation
Authority.

 
16.8
Records

 
Each Group Company has retained:
 
 
(a)
copies of all returns and other documents lodged with any Tax Authority;

 
 
(b)
all records and other documents required by that Group Company to calculate
income tax liabilities, capital gains, capital losses, net capital gains and net
capital losses after Completion; and

 
 
(c)
all other records and other documents required by any law or regulation relating
to Tax to be retained by any Group Company for the requisite period.

 
16.9
Franking accounts

 
Each Group Company has accurately maintained a franking account in accordance
with the Tax Act at all relevant times and:
 
 
(a)
complete and accurate details of the balance of each such franking account and
any existing or pending franking debits have been provided to the Buyer in the
Due Diligence Materials;

 
 
(b)
each Group Company franked all dividends in accordance with the benchmark
franking rule; and

 
 
(c)
no Group Company will have a franking deficit at Completion.

 
 
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16.10
Tainted share capital

 
No Group Company has a tainted share capital account or has taken any action
that might cause its share capital account to become a tainted share capital
account or made any election at any time to untaint its share capital account.
 
16.11
Distributions

 
No Group Company has:
 
 
(a)
paid or credited an amount, transferred any property, made any distribution or
loan or forgiven any debt which may be deemed to give rise to a dividend under
the Tax Act; or

 
 
(b)
streamed any distribution or non-share dividends for the purposes of
division 204 of the Tax Act.

 
16.12
Remuneration and other payments

 
No Group Company has paid or credited remuneration or an allowance, gratuity or
compensation on retirement to an associated person in excess of a reasonable
amount allowable as a deduction in computing the taxable income of the relevant
Group Company as a result of which deductions claimed or claimable by the
relevant Group Company may be denied.
 
16.13
Loans and debt forgiveness

 
No Group Company has:
 
 
(a)
paid or credited an amount on behalf of or for the benefit of an associate, made
an advance or loan or loans that may be treated as an amalgamated loan, or
forgiven all or part of a debt owed to the relevant Group Company directly or
through an interposed entity, in relation to which a dividend may be taken to
have been paid or a franking debit may arise under the Tax Act; or

 
 
(b)
agreed to waive, forgive or otherwise not seek to recover any debt owing by any
person.

 
16.14
Waiver of debts

 
No amount has been waived, forgiven or otherwise abandoned by any person in
respect of debts owed by any Group Company to any other person which would give
rise to a net forgiven amount.
 
16.15
Capital gains

 
There has been no application of a provision of the Tax Act in respect of any
asset acquired or deemed to have been acquired by any Group Company before
20 September 1985 which would result in that asset being deemed to have been
acquired by a Group Company before 20 September 1985 (other than as a result of
this agreement).
 
16.16
Rollover relief

 
No Group Company has sought capital gains tax rollover relief under the Tax Act
with respect to any asset which it has acquired and owns at Completion.
 
 
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16.17
Participation in certain transactions

 
No Group Company has participated in any transaction that could be affected by
the exercise of discretionary powers of any Tax Authority including transactions
relating to trading stock, plant and equipment, securities or assets subject to
the capital gains tax provisions of the Tax Act and schemes to which any general
anti avoidance provision might apply.
 
16.18
Future income tax benefits

 
No fact, matter or circumstances exist which has prevented or might prevent any
Group Company from obtaining any future income tax benefit provided for in the
Last Accounts.  All tax losses and capital losses recorded in any tax working
papers included in the Due Diligence Materials (and whether disclosed in the
Last Accounts or not) would be available to a Group Company to use to reduce
assessable income or capital gains at the Completion Date if the current tax
year for the relevant Group Company had sufficient income or capital gains for
that tax year.
 
16.19
Interposed entity election

 
No Group Company has made an interposed entity election within the meaning of
schedule 2F of the Tax Act.
 
16.20
GST compliance

 
All invoicing and other systems of each Group Company are GST compliant and have
at all times since 1 July 2000 operated correctly to capture appropriate GST
information as required by the GST Law.
 

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17.
Disclosure

 
17.1
Schedules to this agreement

 
All information relating to the Group Companies and their assets contained in
Schedule 1 to Schedule 7 of this agreement is complete, accurate and not
misleading.
 
17.2
Accuracy of Due Diligence Materials

 
All information contained in the Due Diligence Materials is accurate and not
misleading or deceptive.
 
17.3
Completeness of Due Diligence Materials

 
The Due Diligence Materials include all information relating to any Group
Company:
 
 
(a)
which the Sellers know or should reasonably be expected to know is material to
the Buyer in entering into and completing the transactions contemplated by this
agreement; or

 
 
(b)
the disclosure of which might reasonably be expected to affect the willingness
of the Buyer to buy any Shares or the price or other terms or conditions on
which the Buyer would be willing to buy any Shares.

 
17.4
Forecasts and similar information

 
Each forecast, budget, estimate, projection, statement of opinion or statement
of intention contained in the Due Diligence Materials has been prepared in good
faith and with due skill and care and on the basis of reasonable assumptions.
 
 
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18.
Buyer Shares

 
18.1
Representations, Warranties and Certain Agreements of Sellers

 
 
(a)
Accredited Investor.  Except as set forth in the Disclosure Letter, each Seller
is an “accredited investor” as defined by Rule 501 under the Securities Act of
1933, as amended (the “Act”), and is capable of evaluating the merits and risks
of its investment in shares of Buyer Shares and has the capacity to protect its
own interests.

 
 
(b)
Non- US Person.  Except as set forth in the Disclosure Letter, each Seller not a
US Person within the meaning of Rule 902(o) of Regulation S promulgated under
the Act.

 
 
(c)
Absence of Offering Memorandum or Similar Document.  Each Seller has not
received, nor has it requested, nor does it have any need to receive, any
offering memorandum or any other document describing the business and affairs of
the Buyer, nor has any document been prepared for delivery to, or review by,
each Seller in order to assist it in making the decision to acquire Buyer
Shares.

 
 
(d)
Restricted Securities.  Each Seller acknowledges that the Buyer Shares when
issued will not be registered under the Act and will be “restricted securities”
as that term is defined in Regulation S and Rule 144 under the Act and that the
Buyer Shares must be held indefinitely unless subsequently registered under the
Act or unless an exemption from such registration is available.  Each Seller
acknowledges that the provisions of Rule 144 promulgated under the Act which
permit resale by non-affiliates of Buyer of common stock purchased in a private
placement provided that there is certain public information available about
Buyer and the resale occurs not less than six months after a party has purchased
and paid for the security to be sold.

 
 
(e)
Investment.  Each Seller is acquiring the Buyer Shares for investment purposes
for its own account and not, in whole or in part, for the account of any other
person and not with a view to distribution or resale, nor with the intention of
selling, transferring or otherwise disposing of all or any part thereof for any
particular price, or at any particular time, or upon the happening of any
particular event or circumstances, except selling, transferring, or disposing
the Buyer Shares in full compliance with the applicable provisions of the Act,
the rules and regulations promulgated thereunder, and applicable state
securities laws.  Each Seller has not formed any entity for the purpose of
acquiring the Buyer Shares.

 
 
(f)
Information.  Each Seller has had the opportunity to ask questions of, and
receive answers from Buyer or any person acting on its behalf concerning Buyer
and its business and to obtain any additional information, to the extent
possessed by Buyer (or to the extent it could have been acquired by Buyer
without unreasonable effort or expense) necessary to verify the accuracy of the
information received by each Seller.  In connection therewith, each Seller
acknowledges that each Seller has had the opportunity to discuss Buyer’s
business, management and financial affairs with Buyer’s management or any person
acting on its behalf.  Each Seller has received and reviewed all the information
concerning Buyer that it desires.  Without limiting the generality of the
foregoing, each Seller has been furnished with or has had the opportunity to
acquire, and to review: (i) copies of all of Buyer’s publicly available
documents, and (ii) all information that it desires with respect to Buyer’s
business, management, financial affairs and prospects.  In determining whether
to accept the Buyer Shares in connection with the transactions hereunder, each
Seller has relied solely on each Seller’s own knowledge and understanding of
Buyer and its business based upon any information furnished to each Seller in
writing.  Each Seller understands that no person has been authorized to give any
information or to make any representations which were not furnished pursuant to
this Section and each Seller has not relied on any other representations or
information.

 
 
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(g)
Advisors.  Each Seller has carefully considered and has discussed with each
Seller’s professional legal, tax, accounting and financial advisors, to the
extent that each Seller has deemed necessary, the suitability of this investment
and the transaction agreements contemplated by this Agreement and for each
Seller’s particular federal, provincial, local and foreign tax and financial
situation and has determined that the acquisition of the Buyer Shares and the
transactions contemplated by this Agreement are suitable for each Seller.  Each
Seller relies solely on such advisors and not on any statements or
representations of Buyer or any of its agents.  Each Seller understands that
each Seller (and not Buyer) shall be responsible for each Seller’s own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.

 
 
(h)
Risk of Ownership of the Buyer Shares.  Each Seller acknowledges that ownership
of the Buyer Shares is speculative and involves a high degree of risk and that
each Seller can bear the economic risk of ownership of the Buyer Shares,
including a total loss of its investment.

 
 
(i)
No Governmental Recommendation.  Each Seller acknowledges that no federal,
provincial or foreign agency has recommended or endorsed each Seller’s
acquisition of the Buyer Shares.

 
 
(j)
Legends.  Each Seller acknowledges that any and all certificates representing
the Buyer Shares and any and all securities issued in replacement thereof or in
exchange therefor shall bear one of the following legends or one substantially
similar thereto, which each Seller has read and understands:

 
For one-half of the Buyer Shares issued to each Seller:
 
“THE SECURITIES REPRESENTED HEREBY WERE ORIGINALLY ISSUED WITHOUT REGISTRATION
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) AND
MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION ONLY (A) TO THE CORPORATION or (B) PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS, PROVIDED IN SUCH LATTER CASE THAT
THE HOLDER UPON REQUEST PRIOR TO SUCH SALE FURNISHES TO ACORN ENERGY, INC. AN
OPINION OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY SATISFACTORY
TO ACORN ENERGY, INC.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED
HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.

UNTIL OCTOBER 28, 2010, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THAT CERTAIN SHARE
SALE AGREEMENT DATED APRIL 28, 2010.”

 
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For the remaining one-half of the Buyer Shares issued to each Seller:

“THE SECURITIES REPRESENTED HEREBY WERE ORIGINALLY ISSUED WITHOUT REGISTRATION
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) AND
MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION ONLY (A) TO THE CORPORATION or (B) PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS, PROVIDED IN SUCH LATTER CASE THAT
THE HOLDER UPON REQUEST PRIOR TO SUCH SALE FURNISHES TO ACORN ENERGY, INC. AN
OPINION OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY SATISFACTORY
TO ACORN ENERGY, INC.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED
HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.

UNTIL APRIL 28, 2011, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THAT CERTAIN SHARE SALE
AGREEMENT DATED APRIL 28, 2010.”
 
 
(k)
Stop-Transfer.  Because of the restrictions imposed on resale, each Seller
acknowledges that Buyer shall have the right to note stop-transfer instructions
in its stock transfer records, and that Buyer intends to do so.  Any sales,
transfers, or any other dispositions of the Buyer Shares by each Seller, if any,
will be in compliance with the Act.

 
 
(l)
Investment Experience.  Each Seller acknowledges that each Seller has such
knowledge and experience in financial and business matters that each Seller is
capable of evaluating the merits and risks of an investment in the Buyer Shares
and of making an informed investment decision.

 
 
(m)
No Advertisement or General Solicitation.  Each Seller represents that each
Seller is not acquiring the Buyer Shares as a result of any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over the Internet, television or radio or presented
at any seminar or meeting.

 
 
(n)
Read and Understood this Agreement and the Escrow Agreement.  Each Seller has
carefully read and understands this Agreement and the Escrow Agreement.

 
 
(o)
Representations and Warranties.  No representations or warranties have been made
to each Seller by Buyer, or any officer, employee, agent, affiliate or
subsidiary of Buyer, other than the representations of Buyer contained herein,
and in acquiring the Buyer Shares each Seller is not relying upon any
representations other than those contained in this Agreement.

 
 
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(p)
No Brokers. Each Seller represents and warrants no finder, broker, agent,
financial advisor or other intermediary, nor any purchaser representative or any
broker-dealer acting as a broker, is entitled to any compensation in connection
with the transactions contemplated by this Agreement.

 
 
(q)
No Reliance upon Buyer’s or Company’s Counsel.  Each Seller is not being
represented by counsel to Buyer or the Company and has been advised to obtain
independent legal advice regarding an investment in the Buyer Shares.

 
 
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Schedule 9 Buyer Warranties
 

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1.
The Buyer

 
1.1
Capacity and authorisation

 
The Buyer is a company properly incorporated and validly existing under the laws
of Delaware, has the legal right and full corporate power and capacity to
execute, deliver and perform its obligations under this agreement and has
obtained all necessary authorisations and consents and taken all other actions
necessary to enable it to do so.
 
1.2
Valid obligations

 
Each Transaction Document constitutes (or will when executed constitute) valid
legal and binding obligations of the Buyer and is enforceable against the Buyer
in accordance with their respective terms.
 
1.3
Breach or default

 
The execution, delivery and performance of this agreement by the Buyer does not
and will not result in a breach of or constitute a default under:
 
 
(a)
any agreement to which the Buyer is party;

 
 
(b)
any provision of the Certificate of Incorporation of the Buyer; or

 
 
(c)
any law or regulation or any order, judgment or determination of any court or
Regulatory Authority by which the Buyer is bound.

 
1.4
Solvency

 
None of the following events has occurred in relation to the Buyer:
 
 
(a)
a receiver, receiver and manager, liquidator, provisional liquidator,
administrator, trustee or similar officer is appointed in respect of the Buyer
or any of its assets or an event occurs that gives any person the right to seek
such an appointment;

 
 
(b)
an application is made to court or a resolution is passed or an order is made
for the winding up or dissolution of the Buyer or an event occurs that would
give any person the right to make such an application;

 
 
(c)
the Buyer proposes or takes any steps to implement a scheme of arrangement or
other compromise or arrangement with its creditors or any class of them;

 
 
(d)
the Buyer is declared or taken under any applicable law to be insolvent or the
Buyer's board of directors resolves that the Buyer is, or is likely to become at
some future time, insolvent; or

 
 
(e)
any person in whose favour the Buyer has granted any Encumbrance becomes
entitled to enforce any security under that Encumbrance or any floating charge
under that Encumbrance crystallises.

 
 
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Attachment 1 Last Accounts and Base Balance Sheet
 
 
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Attachment 2 Disclosure Letter
 
Not Applicable.
 
 
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Attachment 3 Index of Due Diligence Materials
 
 
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Attachment 4 Due diligence questions and answers
 
 
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Attachment 5 Form of resignation letter
 
Not applicable.
 
 
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Attachment 6 Escrow Agreement
  
 
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