CHI Systems Inc. Share Purchase Agreement



 






 Exhibit 4.11

SHARE PURCHASE AGREEMENT




THIS AGREEMENT made as of the 2nd day of November, 2005.




AMONG:




OFFSHORE SYSTEMS INTERNATIONAL LTD., a British Columbia
corporation having its head office in North Vancouver, British
Columbia (“OSIL”)



OF THE FIRST PART




AND:




OSI HOLDINGS INC., a Delaware corporation having its
registered office in Wilmington, Delaware (“Newco”)



OF THE SECOND PART




AND:




THE UNDERSIGNED SHAREHOLDERS OF CHI SYSTEMS INC.
(individually a “Seller” and collectively the “Sellers”)



OF THE THIRD PART




AND:




CHI SYSTEMS INC., a Pennsylvania corporation having its head
office in Fort Washington, PA (“CHI”)



WITNESSES THAT WHEREAS:



A. The Sellers are, and on Closing will be, the registered and beneficial owners of all of the CHI
Shares;



B. OSIL wishes to purchase all of the CHI Shares;



C. Newco is a wholly owned subsidiary of OSIL, has no assets or operations and has been organized
by OSIL for the purpose of acquiring all of the CHI Shares;



D. The Sellers have agreed to sell their CHI Shares and OSIL has agreed to purchase the CHI Shares
upon the terms and conditions set forth herein; and



E. This Agreement, upon execution, will replace the Letter of Intent.




NOW THEREFORE the parties agree as follows:



PART 1




INTERPRETATION




 









 








Definitions




1.1 In this Agreement, including the recitals:



“Adjustment Time” means 11:59 p.m., Eastern Time, on the Closing Date;



“Affiliate” of a particular Person means another Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, the particular Person, and for the
purposes of this definition, “control”, “controlling” and “controlled” import the power to direct
management and policies, directly or indirectly, whether through ownership of voting securities, by
contract or otherwise;



“Applicable Securities Laws” means the securities legislation having application and the rules,
policies, notices and orders issued by applicable securities regulatory authorities, including the
TSX and the United States Securities and Exchange Commission (“SEC”), having application to OSIL;



“Business Day” means a day which is not a Saturday, Sunday or a statutory holiday in British
Columbia or Pennsylvania;



“CHI Financial Statements” means collectively the unaudited financial statements of CHI for the
financial years ended September 30, 2004, 2003 and 2002, true copies of which are attached as
Schedule 2.1.9;



“CHI Financial Statement Date” means September 30, 2004;



“CHI Options” means the outstanding options granted to certain Sellers to acquire Class B
non-voting shares in the capital stock of CHI as described in the Schedule 2.1.5;



“CHI Shares” means all of the issued and outstanding shares and other securities of any class of
CHI owned by the Sellers as at the Adjustment Time;



“Closing” means the completion of the sale and purchase of CHI Shares provided for herein;



“Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations
thereunder;



“Disposal,” “Storage,” and “Treatment” shall have the meanings assigned them at 42 U.S.C. §
6903(3), (33) and (34), respectively;



“DSS” means the Defense Security Service of the United States Department of Defense;



“Encumbrance” means a security interest, mortgage, pledge, hypothecation, lien, lease, license,
assignment, option, claim or other title defect, encumbrance or charge whatsoever, whether or not
perfected or unperfected, filed or unfiled;




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“Environmental Laws” means any Law pertaining to the environment or the health or safety of the
public and the Release or threatened Release of Hazardous Materials or otherwise regulating the
manufacture, processing, distribution, use, Treatment, Storage, transport or handling of Hazardous
Materials, including, without limitation: the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. § 9601, et seq.; the Solid Waste Disposal Act, 42 U.S.C. § 6901, et
seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. § 5101, et seq. ; the Clean Air Act, 42 U.S.C. §
7401, et seq.; the Clean Water Act, 33 U.S.C. § 1251, et seq.; the Toxic Substances Control Act, 15
U.S.C. § 2601, et seq.; and the Oil Pollution Act of 1990, 33 U.S.C. § 2701, et seq.; each as
amended; any state or local Law similar to the foregoing; and all regulations issued pursuant to
the foregoing;



“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder;



“Facility Security Clearance” means an administrative determination that, from a security
viewpoint, a facility is eligible for access to classified information of a certain category and
all lower categories that has been determined pursuant to Executive Order 12958 or any predecessor
order to require protection against unauthorized disclosure and is so designated. The
classifications Top Secret, Secret and Confidential are used to designate such information;



“GAAP” means generally accepted accounting principles as in effect in the United States on the
Closing Date, applied on a basis consistent with CHI’s past practices;



“Governmental Authority” means a federal, state, regional, municipal or local government and any
agency or subdivision thereof, (including without limitation the US Department of Defense)
including an entity or person exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government or subdivision, and including
without limitation DSS;



“Hazardous Material” means any waste, chemical or other substance that is listed, defined,
designated, identified or classified as hazardous, radioactive, reactive, toxic, ignitable or
corrosive, or a pollutant or a contaminant, under or pursuant to any Environmental Law, and
specifically including petroleum and all derivatives thereof, asbestos or asbestos-containing
materials and polychlorinated biphenyls;



“Law” means any common law decision and any federal, state, regional, local or foreign law,
statute, ordinance, code, rule, regulation, order or treaty;



“Letter of Intent” means the letter of intent respecting the transactions contemplated hereby dated
July 8, 2005 among OSIL, CHI, Wayne W. Zachary and Floyd A. Glenn III, as amended;



“Majority Shareholders” means Wayne W. Zachary and Floyd A. Glenn III;



“Minority Shareholders” means the Sellers other than the Majority Shareholders;




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“NASD” means the National Association of Securities Dealers.



“Option Plan” means the CHI Systems, Inc. 1998 Stock Option Plan;



“Party” means a party to this Agreement, and “Parties” means two or more of such parties;



“Person” includes an individual, corporation, body corporate, partnership, joint venture,
association, trust or unincorporated organization or any trustee, executor, administrator or other
legal representative thereof;



“Personnel Security Clearance” means an administrative determination that an individual is
eligible, from a security point of view, for access to classified information of the same or lower
category as the level of personnel clearance granted;



“Public Record” means information which has been publicly filed at www.sedar.com or
www.sec.gov/edgar/searchedgar/webusers.htm by OSIL under Applicable Securities Laws;



“Release” shall have the meaning assigned it at 42 U.S.C. § 9601(22);



“Retained Earnings Threshold” means $1,476,321, which is the amount of CHI’s retained earnings as
shown on CHI’s balance sheet for its financial year ended September 30, 2004.



“Schedule” means a schedule to this Agreement;



“Settlement Date” means the date that is 90 days after the Closing Date;



“Shareholders’ Agreement” means that certain shareholders’ agreement among CHI and certain of the
Sellers dated June 30, 1991 as amended by amending agreements dated August 23, 1995 and September
24, 2003; and



“TSX” means the Toronto Stock Exchange.



Each term in the following table has the meaning set forth in the Section number across from such
term.




	 	 	 	 	 	 	 	 	 
	TERM	 	—	 	§
	1933 Act
	 	 	—	 	 	 	2.2.7	 
	Accounts Receivable
	 	 	—	 	 	 	4.3.2	(b)
	AR Deficiency
	 	 	—	 	 	 	4.3.2	(b)
	AR Report
	 	 	—	 	 	 	4.3.2	(b)
	Bid
	 	 	—	 	 	 	2.1.25	(f)
	Business of CHI
	 	 	—	 	 	 	2.1.68	 
	Cash Purchase Price
Reduction
	 	 	—	 	 	 	9.7	 
	CFIUS
	 	 	—	 	 	 	6.1.10	 
	Leases
	 	 	—	 	 	 	2.1.22	 
	Material Contracts
	 	 	—	 	 	 	2.1.24	 
	Mindbuzz
	 	 	—	 	 	 	6.1.12	(a)
	NIDs
	 	 	—	 	 	 	9.4	(b)
	NISPOM
	 	 	—	 	 	 	9.4	(b)
	Objections
	 	 	—	 	 	4.3.2	(a)(ii)
	OSIL Intellectual Property
	 	 	—	 	 	 	3.1.16	(a)
	OSIL’s Losses
	 	 	—	 	 	 	10.2	 






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	TERM	 	—	 	§
	CHI Intellectual Property
	 	 	—	 	 	 	2.1.12	 
	CHI Terrain
	 	 	—	 	 	 	6.1.12	(b)
	Closing Balance Sheet
	 	 	—	 	 	 	4.3.2	(a)
	Closing Date
	 	 	—	 	 	 	5.1	 
	Confidentiality Agreement
	 	 	—	 	 	 	2.1.76	 
	DDTC
	 	 	—	 	 	 	6.1.10	 
	DoE
	 	 	—	 	 	 	6.1.10	 
	Domain Name
	 	 	—	 	 	 	2.1.19	 
	Exon-Florio
	 	 	—	 	 	 	6.1.10	 
	FCPA
	 	 	—	 	 	 	2.1.25	(d)
	FOCI
	 	 	—	 	 	 	6.1.10	 
	Government Contract
	 	 	—	 	 	 	2.1.25	(f)
	Holdback
	 	 	—	 	 	 	4.3.2	 
	Holder
	 	 	—	 	 	 	9.7	 
	ITAR
	 	 	—	 	 	 	6.1.10	 
	OSIL Shares
	 	 	—	 	 	 	4.3.4	(a)
	Plans
	 	 	—	 	 	 	2.1.30	 
	Purchase Price
	 	 	—	 	 	 	4.2	 
	Real Property
	 	 	—	 	 	 	2.1.22	 
	Registered Shares
	 	 	—	 	 	 	9.11	 
	Retained Earnings
	 	 	—	 	 	 	4.3.2	(a)
	Retained Earnings Deficiency
	 	 	—	 	 	 	4.3.2	(a)
	Retained Earnings Surplus
	 	 	—	 	 	 	4.3.2	(a)
	Sellers’ Losses
	 	 	—	 	 	 	10.4	 
	Selling Investor
	 	 	—	 	 	 	9.11	 
	Stock Purchase Price Reduction
	 	 	—	 	 	 	9.7	 
	
Strike Price Amount
	 	 	—	 	 	 	9.7	 
	Tax, Taxes
	 	 	—	 	 	 	2.1.54	 
	Tax Return, Tax Returns
	 	 	—	 	 	 	2.1.54	 





Other terms defined within the body of this Agreement will have the meanings so ascribed to them
throughout this Agreement.



1.2 The Schedules to this Agreement include the following:




CHI SCHEDULES




	 	 	 	 	 
	Schedule 2.1.5
	 	—	 	Authorized and Issued Capital of CHI
	Schedule 2.1.5-1
	 	—	 	Form of CHI Option
	Schedule 2.1.9
	 	—	 	CHI Financial Statements
	Schedule 2.1.10
	 	—	 	No Material Adverse Changes
	Schedule 2.1.11
	 	—	 	Unusual Transactions
	Schedule 2.1.12
	 	—	 	CHI Intellectual Property
	Schedule 2.1.20
	 	—	 	Title to Properties
	Schedule 2.1.21
	 	—	 	List of Leased Equipment
	Schedule 2.1.22
	 	—	 	List of Leases of Real Property
	Schedule 2.1.23
	 	—	 	Material Contracts
	Schedule 2.1.24
	 	—	 	Material Contract Exceptions
	Schedule 2.1.25
	 	—	 	Defaults and Notices of Non-Compliance under Material Contracts
	Schedule 2.1.26
	 	 	 	Information respecting CHI Employees
	Schedule 2.1.30
	 	—	 	Employee Benefit Plans
	Schedule 2.1.32
	 	—	 	Employment Claims
	Schedule 2.1.33
	 	—	 	Employment Obligations
	Schedule 2.1.39
	 	—	 	Guarantees or Indemnities
	Schedule 2.1.40
	 	—	 	Conflicting Agreements
	Schedule 2.1.41
	 	—	 	Litigation






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	Schedule 2.1.43
	 	—	 	CHI Insurance Policies
	Schedule 2.1.53
	 	—	 	Approvals Required
	Schedule 2.1.60
	 	—	 	Inventory
	Schedule 2.1.67
	 	—	 	Loss Carryforwards and Credit Carryforwards
	Schedule 2.1.68
	 	—	 	Transactions with Related Parties
	Schedule 2.1.73
	 	—	 	CHI Bank Accounts and Business Numbers
	Schedule 2.1.74
	 	—	 	Environmental Matters
	Schedule 2.1.76
	 	—	 	Confidentiality Agreements
	Schedule 2.1.77
	 	—	 	Restrictions on Business
	Schedule 2.1.78
	 	—	 	Undisclosed Liabilities
	Schedule 4.3.1
	 	—	 	Allocation of $7,250,000 Cash Portion of Purchase Price Among Sellers
	Schedule 4.3.2(b)
	 	—	 	Accounts Receivable and Government Contract Holdbacks
	Schedule 4.3.3
	 	—	 	Form of Escrow Agreement re Portion of Purchase Price
	Schedule 4.3.4(a)
	 	—	 	Allocation of OSIL Share Portion of Purchase Price Among Sellers
	Schedule 4.3.4(b)
	 	—	 	Allocation of Cash In Lieu of OSIL Shares Portion of Purchase Price Among Sellers
	Schedule 6.1.7
	 	—	 	Forms of Employment Agreements between CHI and Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke
	Schedule 6.1.9
	 	—	 	Form of Non-Competition Agreement
	Schedule 6.1.10
	 	—	 	Governmental Consents
	Schedule 6.1.12
	 	—	 	Capital Contribution Agreement
	Schedule 6.1.13(e)
	 	—	 	Form of Release
	Schedule 6.1.13(l)
	 	—	 	Form of Legal Opinion of Counsel to CHI and Sellers
	Schedule 8.1
	 	—	 	Conduct of CHI Business
	Schedule 10.3.1
	 	—	 	Majority Shareholder Purchase Price Received
	Schedule 10.3.2
	 	—	 	Minority Shareholder Purchase Price Received






OSIL SCHEDULES




	 	 	 	 	 
	Schedule 3.1.5

	 	—
	 	Exceptions respecting OSIL Financial Statements
	Schedule 3.1.13

	 	—
	 	OSIL Authorized Capital
	Schedule 3.1.15

	 	—
	 	Preemptive Rights and Rights of First Refusal
	Schedule 7.1.9(g)

	 	—
	 	Form of Legal Opinion of Counsel to OSIL and Newco
	Schedule 9.8

	 	—
	 	Re-domiciling Memorandum






Interpretation



1.3 For the purposes of this Agreement, except as otherwise expressly provided herein:




     1.3.1 “this Agreement” means this Agreement, including the Schedules, as it may from time to
time be supplemented or amended and in effect;



     1.3.2 the words “herein”, “hereof” and “hereunder” and other words of similar import



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refer to this Agreement as a whole and not to any particular section, paragraph, subparagraph or
other subdivision or Schedule;



     1.3.3 a reference to a Part of this Agreement refers to the section, paragraph, subparagraph,
clause or subclause of this Agreement so designated;



     1.3.4 the singular of any term includes the plural and vice versa;



     1.3.5 the word “or” is not exclusive and the word “including” is not limiting (whether or not
non-limiting language such as “without limitation” or “but not limited to” or other words of
similar import is used with reference thereto);



     1.3.6 a reference to a statute or regulation includes and is a reference to such statute and
to the regulations made pursuant thereto with all amendments made thereto and in force as of the
date of execution of this Agreement, and to any statute or regulations that have been passed prior
to the date of execution of this Agreement that have the effect of supplementing or superseding
such statute or such regulations;



     1.3.7 where the phrase “to the best of the knowledge of” or “to the knowledge of” or a phrase
of similar import is used, it will mean to the best of the knowledge, information and belief, after
having made reasonable inquiry, of the Party or Parties giving such covenant, representation and
warranty;



     1.3.8 the headings to the sections and subsections of this Agreement are inserted for
convenience only and do not form a part of this Agreement and are not intended to interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof;



     1.3.9 a reference to a corporate entity includes and is also a reference to any corporate
entity that is a successor to such entity;



     1.3.10 the language in all parts of this Agreement will in all cases be construed as a whole
and neither strictly for nor strictly against any party;



     1.3.11 every covenant, representation or warranty of each Seller contained herein will be such
Seller’s several, and not joint and several, covenant, representation or warranty unless otherwise
stipulated;



     1.3.12 every reference to “$” or money in this Agreement is to lawful money of the United
States of America unless otherwise stipulated; and



     1.3.13 nothing in any Schedule hereto shall be deemed adequate to disclose an exception to a
representation or warranty made by CHI herein unless such Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail. Notwithstanding
the foregoing, an item disclosed on any Schedule shall be deemed to be disclosed on any other
Schedule to which such item is relevant whether or not specifically disclosed on any other
Schedule.



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PART 2




REPRESENTATIONS AND WARRANTIES OF SELLERS




Representations and Warranties of Majority Shareholders



2.1 In order to induce OSIL and Newco to enter into and consummate the transactions contemplated by
this Agreement, the Majority Shareholders severally, and not jointly and severally, represent and
warrant to OSIL and Newco that as of the date hereof, except as otherwise specified herein or in
specified in the relevant Schedule:




     Organization and Good Standing of CHI



     2.1.1 CHI is duly incorporated and is validly existing under the laws of Pennsylvania and is
subsisting in the Commonwealth of Pennsylvania and has all necessary corporate power, authority and
capacity to own its assets and to carry on its business as presently conducted and to enter into
this Agreement;



     2.1.2 CHI’s head office is located in Fort Washington, Pennsylvania, and CHI has branch
offices in Orlando, Florida and San Diego, California. Neither the nature of the business of CHI
nor the location or character of the property owned or leased by it requires that CHI be
registered, licensed or otherwise qualified, or to be in good standing, in any other jurisdiction
other than the States of Pennsylvania, California and Florida, and it is subsisting or in good
standing in each of these States;



     Corporate Records and Proceedings



     2.1.3 CHI has made available to OSIL the following documents which are currently and shall be
on the Closing Date, true, current, complete and correct in all material respects, and any
signatures contained in such documents are the true signatures of the Persons who are purported to
have signed same:



          (a) its Articles of Incorporation and Bylaws and all amendments thereto;




          (b) the minute books containing minutes of all meetings of its directors and shareholders or
resolutions in lieu thereof;




          (c) a list of all of its officers and directors; and




          (d) CHI’s stock ledger;




     Permits and Licences



     2.1.4 CHI holds all permits, licenses, consents, registrations and authorizations issued by
any Governmental Authority, that are necessary in connection with the conduct and operation of its
business, and the ownership or leasing of its assets as they are now owned, leased,



8









 







conducted or operated, except for such permits, licenses, consents, registrations and
authorizations the failure of which to hold would not have a material adverse effect on CHI’s
business, properties, assets or future prospects, and CHI is not, in any material respect, in
breach of or in default under any term or condition of any thereof;



     Authorized and Issued Capital



     2.1.5 The authorized capital of CHI consists of 150,000 Class A voting shares of common stock
with no par value and 100,000 Class B non-voting shares of common stock, of which 17,100 Class A
shares, 1,042 Class B shares and 2,009 CHI Options are issued and outstanding and are held by the
Sellers in the amounts set forth opposite their respective names in Schedule 2.1.5, and after
giving effect to the exercise of CHI Options pursuant to Section 9.7, the authorized capital of CHI
will consist of 150,000 Class A voting shares of common stock with no par value and 100,000 Class B
non-voting shares of common stock, of which 17,100 Class A shares, 3,051 Class B shares and no CHI
Options will be issued and outstanding and will held by the Sellers in the amounts and in the
percentages set forth opposite their respective names in Schedule 2.1.5. The exercise prices of
the CHI Options are set out in Schedule 2.1.5. The CHI Options conform in all material respects to
the form of option attached hereto as Schedule 2.1.5-1. Subject to the issuance of CHI Shares to
the Optionees in accordance with their exercise of CHI Options, as set forth in Section 9.7, all of
the CHI Shares have been duly and validly issued and are outstanding as fully paid and
non-assessable shares;



     Options, etc. in CHI



     2.1.6 Except as set forth on Schedule 2.1.5, no Person has any agreement or option, present or
future, contingent, absolute or capable of becoming an agreement or option or which with the
passage of time or the occurrence of any event could become an agreement or option:



          (a) to require CHI to:




               (i) allot or issue any further or other share in its capital or any other security convertible
or exchangeable into any share in its capital, or



               (ii) convert or exchange any security into or for any share its capital, or



          (b) to require CHI to purchase, redeem or otherwise acquire any issued and outstanding shares
in its capital, other than those Sellers who hold CHI Options;




     No Violation of Charter Documents



     2.1.7 The execution, delivery and performance of this Agreement by Sellers and CHI will not
(with or without notice or lapse of time) violate any provision of the Articles of Incorporation or
Bylaws of CHI;



     Business and Assets of CHI



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     2.1.8 CHI does not own any shares in or other securities of, or have any interest in the
assets or business of, any other Person;



     CHI Financial Statements



     2.1.9 The CHI Financial Statements (which are attached hereto as Schedule 2.1.9):



          (a) reflect accurately the transactions entered into the books and accounts of CHI as at the
dates thereof;




          (b) are true, complete and correct in all material respects and present fairly the balance
sheet, profit and loss and financial condition of CHI as at the dates thereof; and




          (c) have been prepared in accordance with GAAP;




     No Material Adverse Changes



     2.1.10 Except as set forth on Schedule 2.1.10, since the CHI Financial Statement Date:



          (a) CHI has carried on its business in the ordinary and normal course;




          (b) there has not been any change in the condition or operations of the business, assets or
financial affairs of CHI which are, individually or in the aggregate, adverse in any material
respect to the properties, assets, business, future prospects or financial conditions of CHI;




          (c) there has not been any damage, destruction or loss, labour trouble or other event,
development or condition, of any character (whether or not covered by insurance) which has or may,
in any material respect, adversely affect the business, properties, assets or future prospects of
CHI; and




          (d) no capital expenditures (which, for greater certainty does not include repair and
maintenance expenditures in the ordinary course of the routine daily affairs of CHI) that, in the
aggregate, exceed $100,000.00, have been authorized, committed or made by CHI;




     No Unusual Transactions



     2.1.11 Except as provided for in the CHI Financial Statements or except as otherwise set forth
on Schedule 2.1.11, CHI has not, since the CHI Financial Statement Date:



          (a) transferred, assigned, sold or otherwise disposed of any asset reflected in the CHI
Financial Statements or cancelled any debt or claim except in each case in the ordinary and normal
course of its business, or except where any such transfers, assignments, dispositions or
cancellations would not individually or collectively have a material adverse effect on CHI;




          (b) incurred or assumed any obligation or liability (fixed or contingent),




10









 







except unsecured current obligations and liabilities incurred in the ordinary and normal
course of its business;




          (c) authorized, issued or sold any share in its capital or any warrant, bond, debenture or
other corporate security or issued, granted or delivered any right, option or other commitment for
the issuance of any such or other security;




          (d) declared or made, or committed itself to make, any payment of any dividend or other
distribution on or in respect of any share in its capital or purchased or redeemed or split,
consolidated or reclassified any such share;




          (e) suffered an operating loss or any extraordinary loss or entered into any commitment or
transaction other than in the ordinary and normal course of its business;




          (f) waived or surrendered any right of material value;




          (g) made any gift of money or of any property or asset to any Person;




          (h) purchased any material asset, other than in the ordinary course of business;




          (i) amended or changed or taken any action to amend or change the Articles of Incorporation or
Bylaws of CHI;




          (j) increased or agreed to increase the remuneration of, or paid or agreed to pay any pension,
bonus, share of profits or other similar benefit to, any current or former employee, consultant,
director or officer of CHI or any Seller;




          (k) made any payment of any kind to or on behalf of any current or former employee,
consultant, director or officer of CHI or any Seller or any affiliate or associate of any or all of
the Sellers or under any management agreement with CHI other than business-related expenses and
salaries in the ordinary and normal course of its business and at the regular rates payable to them
as at the date such payments were made;




          (l) mortgaged, pledged, subjected to lien, granted a security interest in or otherwise
encumbered any of its assets or property, whether tangible or intangible; or




          (m) authorized or agreed or otherwise become committed to do any of the foregoing;




     CHI Intellectual Property



     2.1.12 Schedule 2.1.12 annexed hereto is a complete and accurate list of all material
registered and unregistered, issued and pending, trademarks, service marks, trade names, patents,
inventions, trade secrets, Domain Names (as defined in Section 2.1.19), copyrights, service marks,
industrial designs, proprietary hardware, proprietary software, applications for the registration
thereof and other industrial and intellectual property (collectively the “CHI



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Intellectual Property”) owned or licensed by CHI;




     2.1.13 Except as set forth on Schedule 2.1.12, CHI has the right to use all such CHI
Intellectual Property without restriction of any nature whatsoever and the consummation of the
transactions contemplated herein will not adversely affect the right of CHI to use such CHI
Intellectual Property without restriction;



     2.1.14 Except for CHI Intellectual Property that is licensed by CHI and identified as such in
Schedule 2.1.12, CHI is the registered and beneficial owner of all CHI Intellectual Property with
good and marketable title, unencumbered, and subject to no pending challenge, revocation, expiry or
termination;



     2.1.15 Except as set forth on Schedule 2.1.12, to the Majority Shareholders’ knowledge, there
are no judgments, decrees or orders restricting or limiting the use by CHI of any of the CHI
Intellectual Property and the operation of the business of CHI does not violate, breach or infringe
any patents, copyrights, trade names, trademarks, industrial designs or licenses held by others and
the Sellers have no knowledge of any alleged breach or violation thereof;



     2.1.16 Except as disclosed in Schedule 2.1.12, CHI has not granted any other party rights with
respect to the CHI Intellectual Property or disclosed any source codes for its proprietary software
(if any) to any third party, and the patents, trademarks, service marks, industrial designs and
copyrights set forth in Schedule 2.1.12 are valid and all applications for registration or issuance
in respect thereof set forth on Schedule 2.1.12 have been duly filed;



     2.1.17 The use of the material CHI Intellectual Property by CHI has not infringed upon the
rights of any other party and CHI has not received any notice of the revocation, withdrawal,
expiration, abandonment or breach of any right to use the CHI Intellectual Property;



     2.1.18 To the Majority Shareholders’ knowledge no party is (i) infringing upon CHI’s rights to
the CHI Intellectual Property; (ii) in breach of any license or other agreement respecting the CHI
Intellectual Property; or (iii) otherwise engaged in any unlawful license, sale or use of the CHI
Intellectual Property;



     2.1.19 All Domain Names of CHI are duly registered with the authority charged with maintaining
same and such domain names do not violate or exist in breach of the intellectual property rights of
any other Person; CHI has the right to own and use the domain names listed in Schedule 2.1.12. The
term “Domain Name” as used herein is a name or address used to identify or locate a particular
U.R.L. on the Internet;



     Title to Properties



     2.1.20 Except as set forth on Schedule 2.1.20, CHI has good and marketable title to all of its
assets, properties, interests in properties, real and personal, including those reflected in the
CHI Financial Statements or that have been acquired since the CHI Financial Statement Date (except
for those which have been transferred, sold or otherwise disposed of in the ordinary and normal
course of business), free and clear of all Encumbrances, and none of CHI’s properties or



12









 







assets is in the possession of or under the control of any other Person except for its lease
of the Real Property;



     Leased Equipment



     2.1.21 CHI has no equipment that, as of Closing Date, is leased or is held under license or
similar arrangement except as set forth in Schedule 2.1.21;



     Leases of Real Property



     2.1.22 CHI does not own any real property. Schedule 2.1.22 identifies all real property
presently leased, subleased to, or otherwise occupied by CHI (collectively, the “Real Property”).
The leases relating to the Real Property are referred to as the “Leases”. The Leases are each
valid and in full force and effect against CHI, and against the other parties thereto, and CHI
holds valid and existing leasehold interests thereunder for the respective terms set forth in the
Leases. CHI is not in default under the material terms of any of the Leases. Since September 30,
2004, neither CHI nor any of its Affiliates has received written notice of any pending or
threatened condemnations, planned public improvements, annexation, special assessments, zoning or
subdivision changes, or other adverse claims affecting the Real Property;



     Material Contracts



     2.1.23 Schedule 2.1.23 contains a complete and accurate list and description of any and all
contracts material to CHI, including:



          (a) contracts that involve commitments to make capital expenditures or that provide for the
purchase of goods or services by CHI from any one Person under which the undelivered balance of
such goods or services has a purchase price in excess of $25,000;




          (b) contracts that provide for the sale of goods or services by CHI and under which the
undelivered balance of such goods or services has a sale price in excess of $75,000;




          (c) each contract relating to the borrowing of money by CHI, to the granting by CHI of an
Encumbrance on any of its assets, or any guaranty or similar undertaking by CHI of any obligation
in respect of borrowed money or otherwise;




          (d) each contract with dealers, distributors or sales representatives;




          (e) each contract and any other agreement with any employee, officer, consultant, shareholder,
management advisor or Affiliate of CHI;




          (f) each contract commitment or arrangement that, by its terms, limits the freedom of CHI to
engage in any business or compete with any Person;




          (g) each contract pursuant to which CHI is a lessor or a lessee of any personal property or
any real property, or holds or operates any tangible personal property owned by




13









 





another Person;




          (h) each power of attorney executed on behalf of CHI or any officer of CHI or any Seller that
is currently effective and outstanding;




          (i) each contract entered into other than in the ordinary course of business that contains or
provides for an express undertaking by CHI to be responsible for consequential damages;




          (j) each contract providing for payments to or by any Person based on sales, purchases or
profits, other than direct payment for goods;




          (k) other contracts material to CHI’s business; and




          (l) any commitments to enter into any of the foregoing.




     2.1.24 All of the contracts required to be identified in Schedule 2.1.23, including
amendments, supplements and modifications thereto are referred to collectively as the “Material
Contracts”. All of the Material Contracts are in full force and effect in all material respects
and are enforceable in accordance with their respective terms, except as enforceability may be
restricted, limited or delayed by applicable bankruptcy or other laws affecting creditors’ rights
generally and except as enforceability may be subject to general principles of equity. Except as
set forth on Schedule 2.1.24, CHI has performed in all material respects all obligations required
to be performed by it pursuant to such contracts, and there is no existing or, to the knowledge of
the Majority Shareholders, threatened default under or violation of any of such contracts by any
other party thereto.



     2.1.25 In addition to the representations set forth in Section 2.1.24, or except as set forth
on Schedule 2.1.25:



          (a) With respect to each Government Contract or Bid (as defined below) to which CHI is a
party, since September 30, 2004, (A) CHI has complied with all material terms and conditions
thereof and in all material respects with all applicable Laws; (B) no written notice has been
received alleging that CHI is in breach or violation of any statutory, regulatory or contractual
requirement; (C) no written notice of termination for convenience, termination for default, cure
notice or show-cause notice has been received by CHI; (D) no cost incurred by CHI pertaining to
such Government Contract for which CHI have sought reimbursement from any Governmental Authority
directly or indirectly has been formally questioned or challenged by written notice to CHI, or has
been disallowed by such Governmental Authority; and (E) no money due to CHI has been (or, to the
knowledge of the Majority Shareholders, has been threatened to be) withheld or set off;



          (b) Since September 30, 2004, (A) CHI has not received any written notice of, and neither CHI
nor, to the knowledge of the Majority Shareholders, any of CHI’s employees, agents or consultants
is under, any administrative, civil or criminal investigation by any Governmental Authority
relating to, any alleged material irregularity, misstatement or omission



14









 







arising under or relating to any Government Contract or Bid; and (B) CHI has not made any
voluntary disclosure to any Governmental Authority with respect to any irregularity, misstatement
or omission arising under or relating to a Government Contract;



          (c) (i) neither CHI nor, to the knowledge of the Majority Shareholders, any of CHI’s
employees, agents or consultants is (or since September 30, 2004 has been) suspended or debarred
from doing business by any Governmental Authority or declared nonresponsible or ineligible for
government contracting, (ii) as of the date hereof, no suspension or debarment action is pending,
or to the knowledge of the Majority Shareholders threatened, against CHI or any of CHI’s employees,
agents or consultants for which CHI has received written notice thereof, and (iii) as of the date
hereof, to the knowledge of the Majority Shareholders, there are no facts or circumstances which
would reasonably be likely to result in a suspension or debarment proceeding or a finding of
non-responsibility or ineligibility against CHI or any of CHI’s employees, agents or consultants;



          (d) Since September 30, 2004, CHI has complied in all material respects with all applicable
U.S. federal and state procurement laws, rules and regulations, including all applicable provisions
of the U.S. Truth in Negotiations Act, the U.S. Procurement Integrity Act, the U.S. Cost Accounting
Standards and the U.S. Foreign Corrupt Practices Act (“FCPA”);



          (e) To the knowledge of the Majority Shareholders, no Governmental Authority or any prime
contractor, subcontractor or vendor is asserting (or since September 30, 2004 has asserted) any
claim or is initiating any dispute proceeding against CHI relating to Government Contracts or Bids,
nor is CHI asserting (or since September 30, 2004 has CHI asserted) any claim or initiating (or
since September 30, 2004 has CHI initiated) any dispute proceeding directly or indirectly against
any such party concerning any Government Contract or Bid;



          (f) For purposes of this Section 2.1.25, the following terms shall have the following meaning:
(i) “Government Contract” means any prime contract, subcontract, teaming agreement or arrangement,
joint venture, basic ordering agreement, letter contract, purchase order, delivery order, Bid,
change order, arrangement or other commitment of any kind between CHI and (a) any Governmental
Authority, (b) any prime contractor to any Governmental Authority or (c) any subcontractor with
respect to any contract described in clause (a) or (b), and (ii) “Bid” means any quotation, bid or
proposal by CHI which, if accepted or awarded, would lead to a contract with any Governmental
Authority or any other entity, including a prime contractor or a higher tier subcontractor to any
Governmental Authority, for the design, manufacture or sale of products or the provision of
services by CHI.



     Employees, Etc.



     2.1.26 Schedule 2.1.26 sets forth the names, titles and places of work of all of the
employees, associates and consultants of CHI, together with particulars of the material terms and
conditions of employment or engagement of such Persons, including rates of remuneration, benefits,
positions and Personnel Security Clearances held;



15









 





     2.1.27 Each employee, associate or consultant of CHI has been paid all wages, income,
remuneration and other amounts due and owing to him or her by CHI as at the end of the most recent
completed pay period;



     2.1.28 None of the Majority Shareholders is aware of any labour dispute with any of CHI’s
employees, associates or consultants;



     2.1.29 No individual who provides services to CHI and is not treated as an employee for
federal income tax purposes is an employee for such purposes;



     Benefit Plans



     2.1.30 Set forth in Schedule 2.1.30 is a list of all material employee benefit plans (as
defined in Section 3(3) of ERISA), with respect to which CHI currently is the sponsor or obligated
to make contributions under the plan terms in connection with its employees (the “Plans”). Except
as set forth on Schedule 2.1.30:



          (a) none of the Plans is a “multiemployer plan” (as defined in Title I or Title IV of ERISA)
or is subject to Title IV of ERISA, and CHI has not maintained or contributed to any such Plan for
the five years prior to September 30, 2005;




          (b) each of the Plans that is intended to be tax-qualified under Section 401(a) of the Code
has received a favorable determination letter or opinion letter from the Internal Revenue Service
and is so qualified, except that no representation is made with respect to any formal qualification
requirement with respect to which the remedial amendment period under Section 401(b) of the Code
has not yet expired;




          (c) all of the Plans have been operated in substantial compliance with their respective terms
and all Laws, and all contributions required under the terms of the Plans or applicable Law have
been timely made;




          (d) there are no pending or, to the knowledge of Majority Shareholders, threatened, actions,
suits or claims by or on behalf of any of the Plans, by any employee or beneficiary covered under
any Plan or otherwise involving any Plan (other than routine claims for benefits);




          (e) none of the Plans provide medical benefits to any retired Person, or any current employee
of CHI following such employee’s retirement or other termination of employment, except as required
by applicable Law (including Section 4980B of the Code), and CHI has complied in all material
respects with the requirements of Section 4980B of the Code and any applicable similar state laws;




          (f) CHI does not maintain any Plan under which it would be obligated to pay benefits solely
because of the consummation of the transactions contemplated by this Agreement, disregarding any
termination of employment that may occur on or after the Closing;




16









 








          (g) neither CHI, nor any other “disqualified person” or “party in interest,” as defined in
Section 4975 of the Code and Section 3(14)of ERISA, respectively, has engaged in any “prohibited
transaction,” as defined in Section 4975 of the Code or Section 406 of ERISA that is not covered by
a prohibited transaction exemption pursuant to Section 408(a) of ERISA, with respect to any Plan,
nor have there been any fiduciary violations under ERISA, which could subject CHI (or any officer,
director or employee thereof) to any material penalty or tax under Section 502(i)of ERISA or
Section 4975 of the Code;




          (h) all reports and disclosures relating to the Plans required to be filed or furnished to
governmental agencies or plan participants or beneficiaries have been filed or furnished in a
timely manner; and




          (i) as of the date hereof there is no litigation, audit, claim or, to the knowledge of the
Majority Shareholders, investigation pending with respect to any Plan before the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation.




     Unions and Labour Practices



     2.1.31 No labor union, counsel of labor unions, employee bargaining representative or
affiliated bargaining representative:



          (a) holds bargaining rights with respect to any of CHI’s employees by way of certification,
interim certification, voluntary recognition, designation or successor rights; or




          (b) has filed any petition seeking to be certified as the bargaining representative of any of
CHI’s employees.




     2.1.32 Except as set forth on Schedule 2.1.32, during the two years immediately preceding the
date of execution of this Agreement there has been no complaint, grievance, claim, work order or
investigation filed, made or commenced against CHI in respect of or affecting CHI or its business
pursuant to any applicable employee or employment legislation and there are no outstanding
decisions or settlements or pending settlements under any such legislation that place any
obligation upon CHI to do or refrain from doing any act or that place a financial obligation upon
CHI;



     2.1.33 Except as set forth on Schedule 2.1.33: CHI has paid or accrued all current obligations
under all employment legislation in relation to CHI; CHI has not been subject to any special or
penalty assessment under any employment legislation that has not been paid and CHI’s workers’
compensation claims experience has not resulted in any surcharge or additional premium being
imposed on CHI under any workers’ compensation legislation, and there are not currently pending any
claims or investigations with respect to any of the foregoing;



     2.1.34 There is no labour strike, picketing, work slow-down, work stoppage or lock-out
actually pending or threatened against or directly or indirectly affecting CHI or any of its
operations, and CHI has not experienced any strike, slowdown or work stoppage, lock-out or other
collective labour action by or with respect to its employees;



17









 





     2.1.35 There are no charges with respect to or relating to CHI before any commission, agency
or body responsible for the prevention of unlawful employment practices. CHI has no notice from
any federal, state, local or other agency responsible for the enforcement of labour or employment
laws of an intention to conduct an investigation of CHI or any of its business or employment
practices and no such investigation is in progress;



     2.1.36 CHI has complied in all material respects with all applicable laws relating to
employment and employment practices, wages, hours and terms and conditions of employment with
respect to employees, including part-time employees (if any) and has not engaged in any unfair
labour practice;



     2.1.37 No agreement that is binding on CHI restricts it from relocating or closing any of its
operations;



     Withholdings



     2.1.38 All amounts required to be withheld for Taxes (as defined in Section 2.1.54 below) by
CHI from payments made to any Person has been withheld and paid on a timely basis to the proper
governmental body pursuant to applicable legislation;



     No Guarantees or Indemnities



     2.1.39 Except as set forth on Schedule 2.1.39, CHI is not a party to or bound to any agreement
of guarantee, indemnification (other than an indemnification of directors and officers in
accordance with the bylaws of CHI, as the case may be, and applicable laws and other standard
indemnities in favour of CHI’s bankers to support any letter of credit obligations entered into in
the ordinary course of business) or any other like commitments in respect of the obligations,
liabilities (contingent or otherwise) or indebtedness of any other Person;



     Conflicting Agreements



     2.1.40 Except as set forth on Schedule 2.1.40, CHI is not a party to, bound by or subject to
any indenture, mortgage, lease, agreement, instrument, judgement or decree which would be violated
or breached, or under which default would occur or which could be terminated, cancelled or
accelerated, in whole or in part, as a result of the execution and delivery of this Agreement or
the consummation of any of the transactions provided for herein;



     Litigation



     2.1.41 Except as set forth on Schedule 2.1.41, there is no suit, action, litigation,
arbitration proceeding or governmental proceeding, including any appeal or application for review,
in progress, to the knowledge of the Sellers, pending or threatened against, or relating to CHI or
affecting any of its properties or assets or its business;



     2.1.42 There is not presently outstanding against the Sellers or CHI any judgement, decree,
injunction, rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator;



18









 





     Insurance



     2.1.43 Schedule 2.1.43 sets forth a list and brief description of all policies of fire,
liability and other forms of insurance currently held by CHI, including the aggregate coverage
amount and type of insurance (including whether such coverage is on a per occurrence or claims-made
basis, where applicable) generally applicable deductibles and the expiry dates thereof;



     2.1.44 Except as set forth on Schedule 2.1.43, all premiums for such policies have been paid;




     2.1.45 All insurance policies held by CHI:



          (a) are valid, outstanding and in full force and effect;




          (b) are in such amounts and provide insurance against such losses and risks as are adequate
and consistent with the requirements of CHI’s business as currently conducted;




          (c) are sufficient for compliance with all requirements of law and all agreements to which CHI
is a party;




          (d) will not in any way be affected by or terminated or lapsed by reason of the consummation
of the transactions contemplated by this Agreement;




     2.1.46 CHI is not in default under any provision of any policy of insurance and has not
received notice of cancellation, non-renewal, termination or reduction of coverage of or under any
such insurance, and no misstatement or misrepresentation has been made by CHI in any application
for any policy of insurance;



     2.1.47 There is no claim by CHI pending under any policies as to which coverage has been
questioned, denied or disputed by the underwriters or carriers of such policies;



     2.1.48 CHI has not received any notice from or on behalf of any insurance carrier issuing such
policies that insurance rates will hereafter be substantially increased, that there will hereafter
be a cancellation, a change in the type of coverage provided, or an increase in a deductible (or an
increase in premiums in order to maintain an existing deductible) or non-renewal of existing
policies, or that alteration of any equipment or any improvements to real estate occupied by or
leased to or by CHI, the purchase of any additional equipment, or the modification of any of the
methods of doing business of CHI, will be required or suggested;



     2.1.49 Except as set forth on Schedule 2.1.43, the Majority Shareholders have no knowledge of
any state of facts, or of the occurrence of any event, that the Majority Shareholders know or have
reason to believe might reasonably (i) form the basis for any claim against CHI not fully covered
by insurance or for any liability on account of any express or implied warranty or omission or
commission, or (ii) result in a material increase in insurance premiums of CHI;



     2.1.50 CHI has not been refused any insurance with respect to its assets or operations,



19









 







nor has its coverage been limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three (3) years;



     2.1.51 Schedule 2.1.43 sets forth (i) CHI’s premiums and losses by year and by type of
coverage for the past three (3) years, (ii) all outstanding insurance claims by CHI for damage to
or loss of property or income that have been referred to insurers or that the Majority Shareholders
believes to be covered by commercial insurance and (iii) any agreements, arrangements or
commitments by or relating to CHI under which CHI indemnifies any other Person or is required to
carry insurance for the benefit of any other Person;



     Copies of Agreements and other Documents



     2.1.52 True, correct and complete copies of all CHI Material Contracts, agreements,
instruments and other documents listed in the Schedules have been delivered or made available to
OSIL prior to the date of execution of this Agreement;



     Approvals Required



     2.1.53 Other than as contemplated by Section 6.1.10 and except as otherwise set forth on
Schedule 2.1.53, no authorization, approval, order, license, permit or consent of any Governmental
Authority, regulatory body or court, and no registration, declaration or filing by any of the
Majority Shareholders with any such Governmental Authority, regulatory body or court is required in
order:



          (a) for the Majority Shareholders to incur the obligations expressed to be incurred by each of
them pursuant to this Agreement;




          (b) for the Majority Shareholders to execute and deliver all of the documents and instruments
to be delivered by each of them pursuant to this Agreement;




          (c) for the Majority Shareholders to duly perform and observe the terms and provisions of this
Agreement; or




          (d) to render this Agreement legal, valid, binding and enforceable in accordance with its
terms.




     Tax Returns



     2.1.54 Other than CHI’s federal tax return and Pennsylvania state tax return for the fiscal
year ended September 30, 2005, all returns (including, without limitation, income tax, corporation
tax, commodity tax, capital tax, transfer business tax, import duties, goods and services tax,
value added tax, franchise tax, sales and use tax, unemployment compensation, customs duty, excise
tax, severance, property tax, gross receipts tax, profits tax, payroll and withholding tax returns
and information returns) and reports of or relating to any federal, municipal, state, foreign or
local tax, assessment or charge of any nature whatsoever (all, together with any penalties,
additions to tax, fines and interest thereon or related thereto, herein



20









 







referred to collectively as “Taxes” or singularly as a “Tax”) that are required to be filed
(taking into account all extensions) on or before the Closing Date for, by, on behalf of or with
respect to CHI (all such returns and reports herein referred to collectively as “Tax Returns” or
singularly as a “Tax Return”), have been or will be timely filed with the appropriate taxation
authority on or before the Closing Date, and all Taxes shown to be due and payable on such Tax
Returns or related to such Tax Returns have been paid in full when due; and CHI has delivered to
OSIL true copies of income Tax Returns and all other material Tax Returns of CHI (i) in respect of
the financial years ended September 30, 2004, 2003, 2002, (ii) in respect of any other period filed
within four calendar years prior to the date hereof and (iii) for any other reporting periods
during such financial years for which CHI was required to file Tax Returns;



     2.1.55 All Tax Returns and the information and data contained therein have been properly and
accurately compiled and completed in all respects, fairly present in all respects the information
purported to be shown therein, and reflect or will reflect all liabilities for Taxes for the
periods covered by such Tax Returns, unless such liability is otherwise adequately provided for in
the CHI Financial Statements;



     2.1.56 No Tax Returns are now under audit or examination by any taxation or other authority
and there are no agreements, waivers or other arrangements providing for an extension of time with
respect to the assessment or collection of any Tax or Tax deficiency of any nature against CHI, or
with respect to any Tax Return and there are no suits or similar proceedings now pending or, to the
best of the knowledge of the Majority Shareholders, threatened against any of them with respect to
any Tax, and there are no matters under discussion with any taxation or other authority relating to
any Tax, or any claims for any additional Tax asserted by any such authority;



     Tax Liabilities



     2.1.57 CHI does not have any liability, obligation or commitment for the payment of Taxes,
except those disclosed in the CHI Financial Statements and such Taxes known to the Sellers not yet
due as have arisen since the CHI Financial Statement Date in the usual and ordinary course of
business and for which adequate provision in the accounts of CHI has been made;



     2.1.58 CHI has properly and timely paid all Taxes required to be withheld and paid in any
taxing or other authority;



     2.1.59 There are no currently outstanding assessments, reassessments or written inquiries that
have been raised by any governmental authority relating to Taxes or which may lead to the
imposition of Taxes or the assessment or reassessment of any Taxes;



     2.1.60 Except as set forth on Schedule 2.1.60, CHI has no inventory;




     2.1.61 Since the CHI Financial Statement Date to the Closing Date, CHI has not acquired or had
the use of any material property from a Person with whom it was not dealing at arm’s length;



21









 





     2.1.62 Since the CHI Financial Statement Date to the Closing Date, CHI has not disposed of
anything material to a Person with whom it was not dealing at arm’s length for proceeds less than
the fair market value thereof;



     2.1.63 Since the CHI Financial Statement Date to the Closing Date, CHI has not discontinued
carrying on any business in respect of which any material non-capital losses were incurred;



     2.1.64 No monies are owing by CHI on account of sales tax or similar tax other than monies
which are accruing for current filing periods for which Tax Returns respecting such Taxes are not
yet due;



     2.1.65 CHI has no obligation, pursuant to any Tax sharing agreement, indemnity agreement, tax
allocation agreement or any other agreement, or any statute or regulation, to pay the Tax liability
of any other person or to reimburse any other person for Taxes. CHI has not been a member of an
affiliated group of corporations filing consolidated Tax Returns for U.S. federal income tax
purposes or of any analogous group of corporation, or combined, consolidated or unitary group of
taxpayers, under the rules of any other taxing jurisdiction; and



     2.1.66 No taxing jurisdiction in which CHI has not filed Tax Returns has asserted that CHI is
required either to file such Tax Returns or to pay Taxes.



     2.1.67 Schedule 2.1.67 sets forth the balance of CHI’s net operating loss carryforwards,
capital loss carryforwards, and credit carryforwards, and the last date on which each such tax
attribute may be used, as of the close of the last taxable year ending prior to the date hereof.



     Relationships with Related Parties



     2.1.68 Except as set forth on Schedule 2.1.68, no Majority Shareholder nor any Affiliate of a
Majority Shareholder or of CHI has, or since September 30, 2004 has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible), used in or
pertaining to CHI’s business; no Majority Shareholder nor any Affiliate of a Majority Shareholder
or of CHI is, or since September 30, 2004 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has engaged in any work or
activity for or with, or have any financial interest in, any business materially in competition
with, or which may materially compete with the Business of CHI within any country, state, region,
or locality in which CHI or such affiliate is or was at that time then doing business or marketing
its products. For purposes of this Agreement, the “Business of CHI”, (includes any affiliate)
means the provision of research and development services and tools to Federal Government agencies
responsible for national defense, homeland defense, and healthcare clinical information management
– specifically, in areas relating to training systems, cognitive engineering, decision support
systems, and command, control, communications, computing, intelligence, surveillance, and
reconnaissance (C4ISR) systems business dealings, and a material financial interest in any
transaction with CHI, but shall not include ownership for investment purposes of less than two
percent of any class of securities of a publicly held corporation.



22









 




Except as set forth on Schedule 2.1.68, no Affiliate of a Majority Shareholder or of CHI is a
party to any contract with, or has any claim or right against, CHI;




     Condition of Assets



     2.1.69 All material assets and all other material plant, machinery, facilities, computer
hardware, computer software, and equipment used by CHI in connection with its business are in good
operating condition and in a good state of maintenance and repair for equipment of similar age
relative to the standards of maintenance and repair maintained by those carrying on similar
businesses in the jurisdictions in which such assets are located;



     Undisclosed Information



     2.1.70 None of the Majority Shareholders has any specific information relating to CHI that is
not generally known or that has not been disclosed to OSIL which would have any material adverse
effect on the value of the CHI Shares or CHI’s business;



     Warranty Claims



     2.1.71 There are no material existing or threatened claims or, to the best of the knowledge of
Sellers, any facts or state of affairs, upon which any claim could be based against CHI for breach
of any express or implied warranty or contract requirement or negligence with respect to any work,
services or products partially or wholly performed, produced or sold by CHI prior to the Closing
Date;



     Bid and Performance Bonds and Guarantees



     2.1.72 There are no specific outstanding bid and performance bonds, letters of credit,
agreements of guarantee and agreements of indemnification made in favour of any Person with respect
to any work, services or products performed, produced or sold by CHI;



     Bank Accounts and Business Numbers



     2.1.73 Schedule 2.1.73 is a true and complete list showing the name of each bank, trust
company or similar institution in which CHI has accounts or safe deposit boxes, the identification
numbers of each such account or safe deposit box, the names of all Persons authorized to draw
thereon or to have access thereto and the number of signatories required on each account, and all
credit cards numbers, non-bank account numbers, codes, and business numbers used by CHI for
purposes of remitting Taxes, dues, assessments or other fees;



     Environmental Matters



     2.1.74 Except as set forth in Schedule 2.1.74, to the knowledge of each Majority Shareholder:



          (a) CHI’s operation of the business and the Real Property comply in all




23









 







material respects with applicable Environmental Laws;




          (b) there has been no Treatment, Storage or Disposal by CHI or any of its Affiliates of any
Hazardous Material at, on, under or from any of the Real Property or any real property that was
owned, leased or operated by CHI prior to the date hereof which could reasonably be expected to
result in liability under applicable Environmental Laws;




          (c) there has been no Release by CHI or any of its Affiliates of any Hazardous Material at,
on, under or from any of the Real Property or any real property that was owned, leased or operated
by CHI prior to the date hereof in an amount or concentration that could reasonably be expected to
give rise to any legal requirement to perform any investigation, clean-up, removal, response or
other remedial action, pursuant to any Environmental Law;




          (d) there has been no arrangement by CHI or any of its Affiliates for Disposal or Treatment or
transport for Disposal or Treatment of any Hazardous Material at or to any off-site facility which
could reasonably be expected to result in liability under applicable Environmental Laws;




          (e) neither CHI nor any of its Affiliates has been named in any suit or proceeding concerning,
and has not received any written or, to the knowledge of the Majority Shareholders, oral, notice or
request for information from any third party with respect to, a Release or threatened Release of
any Hazardous Material or of a violation or alleged violation of any Environmental Law;




          (f) there are no underground storage tanks or related piping, or surface impoundments located
on, under or at any of the Real Property. Neither Majority Shareholders nor CHI or any of its
Affiliates has removed or caused any such tank or piping to be removed from any Real Property;




          (g) Majority Shareholders have made available to OSIL any documents, reports, assessments or
correspondence in the possession or control of the Majority Shareholders or CHI or any of its
Affiliates concerning CHI’s liabilities under or compliance with the Environmental Laws.




     Security Clearances



     2.1.75 CHI holds all Facility Security Clearances and its employees hold all Personnel
Security Clearances necessary to provide its services to its customers under the Material
Contracts;



     Confidentiality Agreements



     2.1.76 Except as disclosed in Section 2.1.77 or except as set forth on Schedule 2.1.76, CHI is
not a party to any confidentiality agreement with any Person (other than OSIL under that certain
Confidentiality Agreement dated as of June 29, 2005 (the “Confidentiality Agreement”)) respecting
the confidentiality of information provided to such Persons or



24









 




reviewed by such Persons;




     Restrictions on Business



     2.1.77 Except as set forth on Schedule 2.1.77, there is no non-competition, exclusivity or
other similar agreement, commitment or understanding in place to which CHI is a party or to which
it is otherwise bound that would now or hereafter in anyway limit its business or operations in a
particular manner or to a particular locality or geographic region or for a specified period of
time, and the execution, delivery and performance of this Agreement does not and will not result in
any restriction of CHI from engaging in its business or from competing with any Person or in any
geographic area;



     Undisclosed Liabilities



     2.1.78 Except as set forth on Schedule 2.1.78, since October 1, 2004, CHI has not, incurred
any liabilities that are of a nature that would be required to be disclosed on a balance sheet of
CHI prepared in conformity with GAAP, including the footnotes thereto, other than (a) liabilities
under this Agreement relating to or in connection with the transactions contemplated hereby, or (b)
liabilities incurred in the ordinary course of business; and



     Certain Payments



     2.1.79 The Majority Shareholders have not, and to the best of the Majority Shareholders’
knowledge, since its inception, neither CHI nor any director, officer, agent, representative or
employee of CHI, or any other Person associated with or acting for or on behalf of CHI, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favourable treatment in securing business, (ii) to pay for
favourable treatment for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of CHI or any Affiliate of CHI, or (iv) in
violation of any Law, or (b) established or maintained any fund or asset that has not been recorded
in the books and records of CHI.



Representations and Warranties of All Sellers



2.2 In order to induce OSIL and Newco to enter into and consummate the transactions contemplated by
this Agreement, each Seller severally, and not jointly and severally, represents and warrants to
OSIL and Newco that, except as otherwise specified herein or in specified in the relevant Schedule:




     Title to Shares



     2.2.1 Such Seller is the registered and beneficial owner of and has good and marketable title
to all of the CHI Shares and, if applicable, the CHI Options held by him or her as set forth
opposite his or her name in Schedule 2.1.5 and holds such CHI Shares and CHI Options free and clear
of any and all Encumbrances whatsoever;



25









 





     Voting Trust



     2.2.2 None of such Seller’s CHI Shares is subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend
rates or disposition of the CHI Shares other than the Shareholders’ Agreement;



     Authority



     2.2.3 Such Seller has due and sufficient right and authority to enter into this Agreement on
the terms and conditions set forth herein and to transfer the registered, legal and beneficial
title and ownership of his or her CHI Shares to OSIL free and clear of any and all Encumbrances;



     Residency of the Sellers



     2.2.4 Such Seller is a resident of the State set out under his or her name in Schedule 2.1.5;



     Agreement Valid



     2.2.5 This Agreement has been duly executed by such Seller and constitutes a legal, valid and
binding obligation of such Seller enforceable against each Seller in accordance with its terms,
except as enforceability may be restricted, limited or delayed by applicable bankruptcy or other
laws affecting creditors’ rights generally and except as enforceability may be subject to general
principles of equity; and



     No Conflicts



     2.2.6 Such Seller is not a party to, bound by or subject to any indenture, mortgage, lease,
agreement, instrument, statute, regulation, order, judgement, decree or law which would be
violated, contravened or breached by or under which any default would occur as a result of the
execution and delivery by such Seller of this Agreement or the performance by such Seller of any of
the terms hereof.



     Investment Representation



     2.2.7 Each Seller who is acquiring OSIL Shares is acquiring the OSIL Shares solely for his or
her own account, for investment purposes only, and not with a view to, or with any present
intention of, reselling or otherwise distributing the OSIL Shares or dividing his or her
participation herein with others. Such Seller has sufficient experience in business, financial and
investment matters to be able to evaluate the purchase of the OSIL Shares and to make an informed
investment decision with respect to such purchase. Such Seller is an “accredited investor” within
the meaning of Rule 501 promulgated under the Securities Act of 1933, as amended (the “1933 Act”).
Such Seller understands and acknowledges that (a) none of the OSIL




26









 






Shares have been registered or qualified under the 1933 Act, or under any securities Laws of
any state of the United States or other jurisdiction, in reliance upon specific exemptions
thereunder for transactions not involving any public offering; (b) all of the OSIL Shares
constitute “restricted securities” as defined in Rule 144 under the 1933 Act; and (c) none of the
OSIL Shares may be sold, transferred or otherwise disposed of unless a registration statement under
the 1933 Act with respect to such OSIL Shares and qualification in accordance with any applicable
state securities Laws becomes effective or unless such registration and qualification is
inapplicable, or an exemption therefrom is available. Such Seller will refrain from transferring or
otherwise disposing of any of the OSIL Shares acquired hereunder or any interest therein in any
manner that may cause any Seller to be in violation of the 1933 Act or any applicable state
securities Laws. Notwithstanding the foregoing, the parties agree and acknowledge that the
representations contained in this Section 2.2.7 shall in no way affect the liability of Majority
Shareholders for breaches of their representations and warranties.




Correct on Closing Date



2.3 Each of the Sellers severally, and not jointly and severally, covenants, represents and
warrants to and in favour of and with OSIL and Newco that all of the representations and warranties
of such Seller set forth in Sections 2.1 and 2.2, in each case those that are qualified as to
materiality shall be true and correct and those that are not qualified as to materiality shall be
true and correct in all material respects at the Closing Date as if made on that date.




Survival of the Sellers’ Warranties



2.4 The representations, warranties and covenants of the Sellers contained in this Agreement or
contained in any document or certificate given pursuant hereto will survive the Closing and,
notwithstanding the Closing, will continue in full force and effect for the benefit of OSIL and
Newco, provided that:




     2.4.1 Except as provided in Sections 2.4.2 and 2.4.3, no claim based upon or with respect to
the inaccuracy or non-performance or non-fulfilment or breach of any representation or warranty of
the Sellers contained herein may be made or brought by OSIL and Newco or either of them after the
expiration of twenty-four months after the Closing Date unless OSIL has given written notice to the
Sellers of particulars of the basis of such claim within such period;



     2.4.2 Any claims based upon or with respect to the inaccuracy or non-performance or
non-fulfilment or breach of any representation or warranty of the Majority Shareholders contained
herein may, if such claim is based upon or relates to the liability of CHI for Taxes for a
particular taxation year, be made or brought by OSIL and Newco or either of them at any time up to
the date which is six months following the expiry date, if any, of any period during which an
assessment, reassessment or other form of recognized document assessing liability for Taxes,
interest and/or penalties in respect of such taxation year under the applicable tax legislation
could be issued; and



     2.4.3 Any claims based upon or with respect to the inaccuracy or non-performance or
non-fulfilment or breach of any representation or warranty of any Seller contained herein may, if



27









 




such claim is based upon or relates to the right, title and ownership of such Seller to such
Seller’s CHI Shares, the authorized and issued capital of CHI and the entitlement of any other
Person to acquire any of the CHI Shares or acquire any shares from the treasury of CHI, or is based
on fraud or fraudulent misrepresentation, be made or brought by OSIL and Newco or either of them at
any time subject only to any limitation periods as may be imposed by applicable laws.




Reliance



2.5 The Sellers and CHI acknowledge and agree that OSIL and Newco have entered into this Agreement
in reliance on the warranties and representations and other terms and conditions of this Agreement,
notwithstanding any independent searches or investigations that may be undertaken by or on behalf
of OSIL and Newco and that no information known to OSIL and or their respective officers, directors
or professional advisers will limit or extinguish OSIL’s right to indemnification hereunder.




PART 3




REPRESENTATIONS AND WARRANTIES OF OSIL




Representations and Warranties



3.1 In order to induce the Sellers to enter into and to consummate the transactions contemplated by
this Agreement, each of OSIL and Newco hereby severally, and not jointly and severally, represents
and warrants to the Sellers that as of the date hereof:




     Organization and Good Standing of OSIL and Newco



     3.1.1 OSIL is duly organized and validly existing under the laws of the Province of British
Columbia and is in good standing with respect to its filings required by the Business Corporations
Act (British Columbia) and has all necessary corporate power, authority and capacity to own its
assets and to carry on its business as presently conducted; and OSIL has all necessary corporate
power, authority and capacity to enter into this Agreement; Newco is duly incorporated and validly
existing under the laws of the state of Delaware and is in good standing in the State of Delaware;
Newco has not previously carried on any business and has no assets and no liabilities; and Newco
has all necessary corporate power, authority and capacity to enter into this Agreement;



     Agreement Valid



     3.1.2 This Agreement constitutes a valid and binding obligation of OSIL and Newco;



     No Conflicting Agreements



     3.1.3 Upon the execution of this Agreement and at the Closing, neither OSIL nor Newco will be
a party to, be bound by or be subject to any indenture, mortgage, lease, agreement, instrument,
statute, regulation, order, judgement, decree or law which would be



28









 




violated, contravened or breached by or under which any default would occur as a result of the
execution and delivery by OSIL and Newco of this Agreement or the performance by OSIL and Newco of
any of the terms hereof;




     Approvals Required



     3.1.4 Except as otherwise provided herein no authorization, approval, order, license, permit
or consent of any Governmental Authority, regulatory body or court, and no registration,
declaration or filing by OSIL or Newco with any such Governmental Authority, regulatory body or
court is required in order:



          (a) For OSIL and Newco to incur the obligations expressed to be incurred by OSIL and Newco
pursuant to this Agreement;




          (b) for OSIL and Newco to execute and deliver all of the documents and instruments to be
delivered by OSIL and Newco pursuant to this Agreement;




          (c) for OSIL and Newco to duly perform and observe the terms and provisions of this Agreement;
or




          (d) to render this Agreement legal, valid, binding and enforceable in accordance with its
terms;




     OSIL Financial Statements



     3.1.5 The financial statements of OSIL contained in the Public Record accurately reflect the
financial position of OSIL as at their respective dates, and since the date of OSIL’s last
financial statements contained in the Public Record, except as set forth in the Public Record or on
Schedule 3.1.5 hereto, (i) no material adverse changes in the financial position of OSIL have taken
place, (ii) OSIL has not incurred any liabilities (contingent or otherwise) other than (X)
liabilities incurred in the ordinary course of business consistent with past practice and (Y)
liabilities not required to be reflected in OSIL’s financial statements pursuant to GAAP or
otherwise required to be disclosed in Public Record, (iii) OSIL has not altered its method of
accounting or the identity of its auditors, and (iv) OSIL has not declared or made any payment or
distribution of cash or other property to its stockholders or officers or directors (other than in
compliance with existing OSIL stock option or stock purchase plans or the terms of any convertible
or derivative securities of OSIL) with respect to its capital stock, or purchased or redeemed (or
made any agreements to purchase or redeem) any shares of its capital stock;



     Filings



     3.1.6 OSIL has timely filed all documents that it is required to file pursuant to the
Applicable Securities Laws and all of the documents so filed as part of the Public Record comply in
all material respects with the requirements of the Applicable Securities Laws and contain no untrue
statements of a material fact and do not omit to state a material fact that is required to be
stated or that is necessary to prevent a statement that is made from being false or misleading in



29









 




the circumstances in which it was made;




     Listing and Maintenance Requirements Compliance



     3.1.7 Except as set forth in the Public Record, OSIL has not, in the twelve (12) months
preceding the date hereof, received notice (written or oral) from any securities market, quotation
system or exchange on which OSIL’s common stock is trading to the effect that OSIL is not in
compliance with the listing or maintenance requirements of such exchange or market;



     Registration Rights; Rights of Participation



     3.1.8 Except as set forth in Section 9.11 and the Public Record, OSIL has not granted or
agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any
securities of OSIL registered with any Governmental Authority which would grant any Person any
right of first refusal, preemptive right, right of participation, or any similar right to
participate in the issuance, and/or registration of the sale of, the OSIL Shares contemplated by
this Agreement.



     OSIL Shares



     3.1.9 The OSIL Shares to be issued to the Sellers on Closing under this Agreement will, at
Closing, be issued as fully paid and non-assessable shares, free of any Encumbrance.



     No Violation of Charter Documents



     3.1.10 The execution, delivery and performance of this Agreement by either OSIL or Newco will
not (with or without notice or lapse of time) violate any provision of their respective articles of
incorporation or bylaws;



     Undisclosed Information



     3.1.11 Neither OSIL nor Newco has any specific information relating to OSIL or Newco that is
not generally known or that has not been disclosed or made available to the Majority Shareholders
which would have any material adverse effect on the value of the OSIL Shares or OSIL’s business;



     Private Offering



     3.1.12 Assuming that each Seller receiving OSIL Shares is an “accredited investor” as such
term is defined in Regulation D under the 1933 Act and that the offer and sale of the OSIL Shares
has been completed, the offer, issuance and sale of the OSIL Shares to the Sellers as contemplated
hereby are exempt from the registration requirements of the 1933 Act. Neither OSIL nor any Person
acting on its behalf has taken or is, to the knowledge of OSIL, contemplating taking any action
which could subject the offering, issuance or sale of the OSIL Shares to the Sellers to the
registration requirements of the 1933 Act, including soliciting any offer to buy or sell the OSIL
Shares by means of any form of general solicitation or advertising.



30









 





     Authorized and Issued Capital



     3.1.13 The authorized capital of OSIL and Newco are set forth on Schedule 3.1.13;



     Certain Payments; FCPA



     3.1.14 To the best of knowledge of OSIL and Newco, since their inception, neither OSIL, Newco,
any subsidiary thereof nor any director, officer, agent, representative or employee of OSIL, Newco
or any subsidiary thereof, or any other Person associated with or acting for or on behalf of OSIL,
Newco or any subsidiary thereof, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain favourable treatment in
securing business, (ii) to pay for favourable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in respect of OSIL, Newco,
any subsidiary thereof or any Affiliate of any of the foregoing, or (iv) in violation of any Law,
(b) established or maintained any fund or asset that has not been recorded in the books and records
of OSIL or Newco, or (c) violated the FCPA;



     Right of First Refusal; Stockholders’ Agreement; Voting and Registration Rights



     3.1.15 Except as set forth in the Public Record or on Schedule 3.1.15, no party has any right
of first refusal, right of first offer, right of co-sale, preemptive right or other similar right
regarding OSIL’s securities. The issuance of the OSIL Shares is not subject to any of the rights
set forth on Schedule 3.1.15. There are no provisions of OSIL’s notice of articles or articles, no
agreements to which OSIL is a party and no agreements by which OSIL no any subsidiary or the OSIL
Shares are bound, which (a) may affect or restrict the voting rights of any Seller with respect to
the OSIL Shares in its capacity as a stockholder of OSIL, (b) restrict the ability of the Seller,
or any successor thereto or assignee or transferee thereof, to transfer the OSIL Shares, (c) would
adversely affect any Seller’s right or ability to consummate this Agreement or comply with the
transactions contemplated hereby, (d) require the vote of more than a majority of OSIL’s issued and
outstanding common stock, voting together as a single class, to take or prevent any corporate
action, other than those matters requiring a class vote under applicable Law, or (e) entitle any
party to nominate or elect any director of OSIL or require any of OSIL’s stockholders to vote for
any such nominee or other person as a director of OSIL;



     Patents and Trademarks



     3.1.16 (a) OSIL, Newco and each subsidiary thereof have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade names, copyrights,
licenses and rights which are necessary or material for use in connection with their respective
business and which the failure to so have would have a material adverse effect (collectively, the
“OSIL Intellectual Property”); and (b) there are no judgments, decrees or orders restricting or
limiting the use by OSIL, Newco or any subsidiary thereof of OSIL Intellectual Property and the
operation of the business of OSIL, Newco and any subsidiary thereof does not violate, breach or
infringe any patents, copyrights, trade names, trademarks,



31









 




industrial designs or licenses held by others;



      Certain Fees



      3.1.17 No fees or commissions will be payable by OSIL or Newco to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other Person with
respect to the transactions contemplated by this Agreement;



      Employees



      3.1.19 The total number of employees of OSIL, Newco and any subsidiary thereof in the
aggregate is less than 200;



      Permits and Licences



      3.1.20 To best of the knowledge of OSIL and Newco, OSIL and Newco hold all permits, licenses,
consents, registrations and authorizations issued by any Governmental Authority, that are necessary
in connection with the conduct and operation of their business, and the ownership or leasing of
their assets as they are now owned, leased, conducted or operated and are not, in any material
respect, in breach of or in default under any term or condition of any thereof;




      Correct on Closing



      3.2 Each of OSIL and Newco severally, and not jointly and severally, covenants, represents and
warrants with and in favour of each of the Sellers that all of the representations and warranties
set forth in Section 3.1 will be true and correct at the Closing Date as if made on that date.



      Survival of OSIL’s and Newco’s Warranties



      3.3 The representations, warranties and covenants of OSIL and Newco contained in this Agreement or
in any document or certificate given pursuant hereto will survive the Closing and, notwithstanding
the Closing and any investigation made by or on behalf of the Majority Shareholders, will continue
in full force and effect for the benefit of the Sellers, provided that no claim based upon or with
respect to the inaccuracy or non-performance or non-fulfilment or breach of any representation or
warranty of OSIL contained herein may be made or brought by the Majority Shareholders after the
expiration of twenty-four months from the Closing Date unless the Sellers have given written notice
to OSIL of particulars of the basis of such claim within such period.



      Reliance



      3.4 OSIL and Newco acknowledge and agree that the Sellers have entered into this Agreement in
reliance on the warranties and representations and other terms and conditions of this Agreement
notwithstanding any independent searches or investigations that may be undertaken by or on behalf
of the Sellers and that no information which is known to any of the Sellers and CHI or their
professional advisers will limit or extinguish the right to indemnification




32









 







hereunder.




PART 4




PURCHASE AND SALE OF CHI SHARES




Purchase and Sale



4.1 Subject to the conditions, representations and warranties contained in this Agreement, the
Sellers shall sell and OSIL and Newco shall purchase the CHI Shares free and clear of all
Encumbrances.




Purchase Price



4.2 The aggregate purchase price payable to the Sellers for the CHI Shares shall be the sum of
$9,000,000 subject to payment and adjustment as set forth in this Part 4 (as adjusted from time to
time, the “Purchase Price”).




Manner and Terms of Payment



4.3 The Purchase Price will be paid as follows:




     4.3.1 $7,250,000 on account of the Purchase Price be paid on Closing by Newco to the Sellers
by way of certified trust cheque, bank draft, or such other method as may be acceptable to Sellers
and OSIL, acting reasonably, in the proportions set forth on Schedule 4.3.1;



     4.3.2 $750,000 on account of the Purchase Price (the “Holdback”) will be delivered on Closing
to an escrow agent mutually acceptable to OSIL and Sellers’ Representative, acting reasonably, and
will be held in escrow for a period of 90 days following Closing pending the making of final
adjustments to the Purchase Price as follows:



          (a) OSIL and Newco will engage OSIL’s auditors to prepare an audited balance sheet of CHI
(“Closing Balance Sheet”) in accordance with GAAP consistent with CHI’s past practices as of the
Closing Date setting forth CHI’s retained earnings as of the Closing Date (“Retained Earnings”) and
the amount by which such Retained Earnings exceed the Retained Earnings Threshold (the “Retained
Earnings Surplus”) or the amount by which such Retained Earnings are less than the Retained
Earnings Threshold (the “Retained Earnings Deficiency”). Funds paid to CHI pursuant to the
exercise of the CHI Options pursuant to Section 9.7 shall be excluded from, and shall not be
included in, the calculation of Retained Earnings, Retained Earnings Surplus or Retained Earnings
Deficiency. OSIL and Newco will deliver to Sellers’ Representative the Closing Balance Sheet not
later than the Settlement Date;




               (i) If Sellers’ Representative does not object to the Closing Balance Sheet, then the Closing
Balance Sheet shall be treated as the final Closing Balance Sheet.



               (ii) If Sellers’ Representative objects to the Closing Balance Sheet, he shall deliver a
detailed statement (“Objections”) describing his objections to OSIL within 30



33









 




days after receiving the Closing Balance Sheet and setting forth the Sellers’ calculations and
amounts for the Retained Earnings. OSIL and Sellers’ Representative will use reasonable efforts to
resolve any such Objections themselves, and if the parties obtain a final resolution, OSIL will
revise the Closing Balance Sheet as appropriate to reflect the resolution of any Objections thereto
pursuant to this Section 4.3.2(a)(ii), and such revised balance sheet shall be treated as the final
Closing Balance Sheet.




               (iii) If OSIL and Sellers’ Representative do not obtain a final resolution within thirty (30)
days after OSIL has received the Objections, OSIL and Sellers’ Representative will select an
accounting firm mutually acceptable to them to resolve any remaining Objections. If OSIL and
Sellers’ Representative are unable to agree on the choice of an accounting firm, they will select a
nationally recognized accounting firm by lot (after excluding their respective regular outside
accounting firms). The determination of any accounting firm so selected will be set forth in
writing, will set forth the accounting firm’s calculations and amounts for Retained Earnings and
will be conclusive and binding upon the Parties. OSIL will revise the Closing Balance Sheet as
appropriate to reflect the resolution of any Objections thereto pursuant to this Section
4.3.2(a)(iii), and such revised balance sheet shall be treated as the final Closing Balance Sheet.



               (iv) In the event the Purchaser and Sellers’ Representative submit any unresolved Objections
to an accounting firm for resolution as provided in Section 4.3.2(a)(iii) above, if the accounting
firm’s calculation of Retained Earnings is closer in value to:



                    (Y) the Sellers’ calculation of Retained Earnings as set forth in the Objections than to
OSIL’s calculation of Retained Earnings as set forth in the Closing Balance Sheet delivered by OSIL
to Sellers’ Representative under Section 4.3.2(a), then OSIL will be responsible for all of the
fees and expenses of the accounting firm; or



                    (Z) OSIL’s calculation of Retained Earnings as set forth in the Closing Balance Sheet
delivered by OSIL to Sellers’ Representative under Section 4.3.2(a) than to Sellers’
Representative’s calculation as set forth in the Objections, then Sellers will be responsible for
all of the fees and expenses of the accounting firm.



               (v) OSIL and Newco will make the work papers and back up materials used in preparing the
Closing Balance Sheet available to Sellers’ Representative and Sellers’ accountants and other
representatives at reasonable times and upon reasonable notice at any time during the review and
preparation by OSIL of the Closing Balance Sheet; and



          (b) Within fourteen days after Closing, CHI shall deliver a listing of each of CHI’s accounts
receivable as of the Closing Date (the “Accounts Receivable”) which shall be attached hereto as
Schedule 4.3.2(b). For the avoidance of doubt, “Accounts Receivable” shall not include the amount
of holdbacks under government contracts identified as “Government Contract Holdbacks” on Schedule
4.3.2(b), and the Purchase Price shall not be adjusted for the non-collection of such Government
Contract Holdbacks. Following the Closing Date, OSIL and Newco shall cause CHI to use commercially
reasonable efforts to collect the Accounts Receivable. On the Settlement Date, OSIL and Newco
shall deliver to the Sellers’ Representative a report (the “AR Report”) setting forth the amount of
each Account Receivable that has not been collected (the aggregate total of such amounts, the “AR
Deficiency”). Following delivery of the AR Report, the Sellers’ Representative shall have a period
of ten (10) Business Days from his receipt thereof in which to review the same. For the purpose of
such




34









 







review, OSIL and Newco agree to permit or to cause their accountants to permit the Sellers’
Representative and his accountants to examine all invoices, records, working papers, schedules and
other documentation related to the Accounts Receivable. In the event of any discrepancy between
amounts paid by such payors with respect to the Accounts Receivable and amounts reflected in the AR
Report, the Sellers’ Representative may dispute such discrepancy and OSIL and Sellers’
Representative agree to work diligently to resolve such discrepancy within ten (10) Business Days.
OSIL agrees to promptly revise and prepare a final AR Report to reflect the agreement of OSIL and
Sellers’ Representative with respect to the collected Accounts Receivable. If Sellers’
Representative does not dispute the initial AR Report, then such report shall be treated as the
final AR Report.




          (c) If there is a Retained Earnings Surplus which exceeds the AR Deficiency, if any, the
Purchase Price shall not be adjusted, and the escrow agent shall be directed to pay to the Sellers’
Representative for the benefit of the Sellers on the Settlement Date the entire Holdback.




          (d) If there is a Retained Earnings Surplus which is less than the AR Deficiency, the escrow
agent shall be directed to pay to the Sellers’ Representative for the benefit of the Sellers on the
Settlement Date the Holdback minus the difference between the AR Deficiency minus the Retained
Earnings Surplus, and the Purchase Price shall be deemed adjusted accordingly. The parties shall
then resolve any disputes pursuant to the dispute resolution proceedings set forth in Section
4.3.2(a)-(b) to determine the final Retained Earnings Surplus and AR Deficiency. Upon completing
the dispute resolution proceedings, the escrow agent shall pay to OSIL and Newco an amount equal to
the difference of the final AR Deficiency minus the final Retained Earnings Surplus and shall pay
the remaining Holdback amount, if any, to the Sellers’ Representative for the benefit of the
Sellers. Thereafter, OSIL and Newco will continue to cause CHI to use its commercially reasonable
efforts to collect the remaining Accounts Receivable and will pay to Sellers’ Representative for
the benefit of the Sellers, as and when collected, an amount equal to the difference of the final
AR Deficiency minus the final Retained Earnings Surplus.




          (e) If there is a Retained Earnings Deficiency, then the escrow agent shall be directed to pay
to the Sellers’ Representative for the benefit of the Sellers on the Settlement Date the Holdback
minus any AR Deficiency and minus any Retained Earnings Deficiency, and the Purchase Price shall be
deemed adjusted accordingly. Thereafter, the parties shall resolve any disputes pursuant to the
dispute resolution proceedings set forth in Section 4.3.2(a)-(b) to determine the final Retained
Earnings Deficiency or Retained Earnings Surplus, as the case may be, and AR Deficiency. Upon
completing the dispute resolution proceedings, the escrow agent shall pay to OSIL and Newco an
amount equal to the final AR Deficiency plus the final Retained Earnings Deficiency and shall pay
the remaining Holdback amount, if any, to the Sellers’ Representative for the benefit of the
Sellers. Thereafter, OSIL and Newco will cause CHI to continue to use its commercially reasonable
efforts to collect the remaining Accounts Receivable and will cause CHI to pay the same to Sellers’
Representative for the benefit of the Sellers, as and when collected.




          (f) If, after completing the dispute resolution proceedings set forth in Section 4.3.2(a)-(b),
the final Retained Earnings Deficiency and AR Deficiency exceed the Holdback,





35









 







the Sellers shall remit such amount to OSIL promptly upon receipt of notice from OSIL requesting
payment therefor, and the Purchase Price shall be deemed adjusted accordingly. Thereafter, OSIL
and Newco will continue to cause CHI to use its commercially reasonable efforts to collect the
remaining Accounts Receivable and will cause CHI to pay the same to Sellers’ Representative for the
benefit of the Sellers, as and when collected, but only if and to the extent that the amounts so
collected exceed the amount by which the final AR Deficiency plus the final Retained Earnings
Deficiency exceed the Holdback;.




          (g) All cash payments to the Sellers pursuant to this Section 4.3.2 shall be paid in
proportion to their percentage ownership of CHI Shares on Closing, as set forth on Schedule 4.3.1.




     4.3.3 The provisions of Sections 4.3.2 shall be embodied in a formal escrow agreement
substantially in the form of Schedule 4.3.3, which shall be executed and delivered on Closing.



     4.3.4 (a) The sum of $898,220 will be paid and satisfied by the issue on Closing by OSIL to
those Sellers identified on Schedule 4.3.4(a) of 1,067,975 fully paid and non-assessable common
voting shares without par value in the capital stock of OSIL (the “OSIL Shares”), in the amounts
set forth on Schedule 4.3.4(a) hereto.



          (b) The Sellers identified on Schedule 4.3.4(b) hereto either do not meet the definition of
“accredited investor” or have elected to receive cash in lieu of OSIL Shares to which they would
otherwise be entitled under Section 4.3.4(a). The sum of $101,780 will be paid and satisfied by
the issue on Closing by OSIL to those Sellers identified on Schedule 4.3.4(b) in the amounts set
forth on Schedule 4.3.4(b) hereto.




     4.3.5 OSIL covenants with the Sellers that OSIL will provide the necessary funds to Newco to
enable Newco to pay and satisfy the cash portion of the Purchase Price on Closing.



     4.3.6 The Sellers acknowledge and agree that OSIL and Newco shall have the right to adjust the
proportion of the consideration paid by each of them to the Sellers for the CHI Shares as OSIL may
determine, acting reasonably, in its discretion.



     4.3.7 OSIL and Newco agree that CHI may pay costs incurred by the Sellers in connection with
this Agreement and the transactions evidenced hereby in the amount of up to $75,000. Such payment
shall be included in the calculation of Retained Earnings.



TSX Acceptance



4.4 The Parties acknowledge that the transactions contemplated hereby shall be subject to the
acceptance of the TSX and all other regulatory authorities having jurisdiction. Without limiting
the generality of the foregoing, the Parties acknowledge that the number and deemed price of the
OSIL Shares to be issued to the Sellers is subject to TSX approval. OSIL agrees that promptly upon
execution of this Agreement, it shall make application to the TSX and use its reasonable efforts to
obtain such approval as soon as reasonably practicable. The Majority Shareholders and CHI agree to
cooperate with OSIL and provide all such information and documentation as the TSX may reasonably
request in support of OSIL application for approval.




36









 








Securities Laws



4.5 The Sellers and CHI acknowledge that OSIL intends to deliver the OSIL Shares to the Sellers in
reliance upon exemptions from the registration and prospectus requirements of Applicable Securities
Laws, and that accordingly the OSIL Shares will be issued subject to such trading restrictions,
escrow arrangements and hold periods as may be imposed under Applicable Securities Laws. The
Sellers and CHI further acknowledge that, except as otherwise set forth herein, OSIL has no
obligation to qualify the distribution of the OSIL Shares by way of prospectus or a registration
statement in any jurisdiction.




PART 5




CLOSING




Closing Time and Location



5.1 The Closing will take place on November 30, 2005 at 10:00 a.m. Eastern Time (the “Closing
Date”) at the offices of Schnader Harrison Segal & Lewis LLP at 1600 Market Street, Suite 3600,
Philadelphia, Pennsylvania, or such other date, time and place as is agreed upon in writing by OSIL
and the Sellers’ Representative, subject to satisfaction or waiver of all of the conditions
precedent to closing set forth herein. Notwithstanding the Closing Date, all adjustments shall be
made as of the Adjustment Time.




Sellers’ Closing Documents



5.3 At the Closing, the Sellers (through the Seller’s Representative), and CHI will deliver, or
cause to be delivered, to OSIL the closing documents set forth in Section 6.1.




OSIL’s and Newco’s Closing Documents



5.4 At the Closing, OSIL and Newco will deliver to the Sellers the documents set forth in Section
7.1.




PART 6




CONDITIONS PRECEDENT TO PERFORMANCE BY OSIL AND NEWCO

OF THEIR OBLIGATIONS UNDER THIS AGREEMENT




Conditions of OSIL and Newco



6.1 The obligations of OSIL and Newco to complete the purchase of the CHI Shares at the Closing
will be subject to the satisfaction of, or compliance with, each of the following conditions
precedent:




     Truth and Accuracy of Representations of the Sellers and CHI at Closing



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     6.1.1 The representations and warranties of the Sellers and CHI made in Part 2 shall be true
and correct in all material respects at and as of the Closing as though then made;



     Performance of Obligations



     6.1.2 The Sellers and CHI have performed and complied in all material respects with all the
obligations to be performed and complied with by them hereunder;



     No Claim Regarding Stock Ownership or Sale Proceeds



     6.1.3 There must not have been made or threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, any
of the CHI Shares, or (b) is entitled to all or any portion of the Purchase Price payable for the
CHI Shares.



     Absence of Injunctions, Etc.



     6.1.4 No injunction or restraining order of any Court or administrative tribunal of competent
jurisdiction shall be in effect prohibiting the transactions contemplated hereby and no action or
proceeding shall have been instituted or shall be pending before any Court or administrative
tribunal to restrain or prohibit the transactions between the parties contemplated hereby;



     Absence of Change of Conditions



     6.1.5 No event shall have occurred or condition or state of facts of any character shall have
arisen or legislation (whether by statute, rule, regulation, by-law or otherwise) been introduced
which might reasonably be expected to have a materially adverse effect upon the financial
condition, results of operations or business prospects of CHI and OSIL is satisfied, acting
reasonably, that the major clients and suppliers of consulting services to CHI are prepared to
continue their business relationships with OSIL after the Closing and that the execution and
delivery of this Agreement and the consummation of the transactions contemplated herein will not
constitute defaults under any Material Contracts or any contract with any governmental authority;



     Absence of Damages, Etc.



     6.1.6 No material damage, destruction or loss to any property of CHI shall have occurred that
is not adequately covered by insurance (less amounts which are “deductibles” under such insurance
where such “deductibles” do not exceed those set out in Schedule 2.1.43, and the Parties
acknowledge that all risks respecting such damage, destruction or loss shall remain with the
Sellers and CHI until the Closing.



     Employment Agreements



     6.1.7 On the Closing Date Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke



38









 




will enter into employment agreements with CHI substantially in the forms set out in Schedule
6.1.7;




     TSX Approval



     6.1.8 The TSX shall have accepted this Agreement for filing and approved the listing of the
OSIL Shares for trading on the TSX;



     Non-Competition Agreements



     6.1.9 On the Closing Date Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke will enter
into non-competition agreements substantially in the form of Schedule 6.1.9;



     Governmental Consents, Authorizations, Etc.



     6.1.10 Except as set forth on Schedule 6.1.10, all U.S. governmental notices, confirmations,
consents and approvals required in order to effect the purchase of the CHI Shares under this
Agreement, and in order for CHI to carry on its business in substantially the same manner as such
business was transacted prior to Closing, shall have been given and/or obtained as applicable,
including, without limitation: (i) written confirmation by the Committee on Foreign Investment in
the United States (“CFIUS”) of the successful completion of the review process under the
Exon-Florio amendment to the Defense Production Act of 1950, as amended (“Exon-Florio”), with
respect to the acquisition, and (ii) written approval of DSS and, to the extent applicable, the
U.S. Department of Energy (“DoE”), to operate the business of CHI pursuant to a foreign ownership,
control or influence (“FOCI”) mitigation proposal proposed by, and acceptable to, OSIL in its sole
discretion, and (iii) any approvals required by the Directorate of Defense Trade Controls (“DDTC”)
pursuant to the International Traffic in Arms Regulations (“ITAR”).



     Termination of Shareholders’ Agreement and Stock Option Plan



     6.1.11 The Shareholders’ Agreement and any stock option plans established by CHI or stock
option agreements between CHI and any person shall be terminated without any liability, payment or
continuing obligations;



     Termination of License Agreements



     6.1.12 (a) The license agreement between CHI and Mindbuzz Technologies Inc. (“Mindbuzz”) shall
be terminated in accordance with its terms, and OSIL and Newco consent to CHI’s payment to Mindbuzz
shareholders to repay their capital contributions and loans to Mindbuzz in an aggregate amount not
to exceed $10,000 and agree that that such payment shall be deemed to have no impact on the
calculation of Retained Earnings;



               (b) CHI and the shareholders of CHI Systems Terrain Products, Inc. (“CHI Terrain”) shall have
entered into an agreement with CHI, effective as of the Closing Date, pursuant to which all of the
shareholders of CHI Terrain agree to contribute their shares of CHI





39









 







Terrain to the capital of CHI, and such agreement shall be substantially in the form of
Schedule 6.1.12.




     Closing Documentation



     6.1.13 OSIL and Newco shall have received from the Sellers and, where applicable, CHI or third
parties as noted, the following closing documentation which shall be in form and substance
satisfactory to OSIL, acting reasonably:



          (a) the share certificates representing the CHI Shares, duly endorsed for transfer to Newco;



          (b) certified copies of resolutions of the directors of CHI authorizing the execution and
delivery of this Agreement and the completion of the transactions contemplated hereby including,
without limitation, the transfer of the CHI Shares to Newco, the registration of the CHI Shares in
the name of Newco and the issuance of share certificates representing the CHI Shares registered in
the name of Newco;



          (c) a certificate of each of the Majority Shareholders certifying that the conditions set
forth in this Part 6 have been satisfied, if that is the case;



          (d) the resignations of such directors of CHI as OSIL may determine;



          (e) releases substantially in the form set forth as Schedule 6.1.13(e) executed by each Seller
in favour of CHI releasing CHI from any and all manner of actions, causes of action, suits,
proceedings, debts, dues, profits, expenses, contracts, damages, claims, demands and liabilities
whatsoever, in law or equity, that the Sellers or any of them, ever had or now has against CHI for
or by reason of any matter, cause or thing whatsoever related to such Seller’s ownership interest
in such Seller’s CHI Shares done or omitted to be done by CHI up to the Closing;



          (f) any other consents, waivers, including waivers of pre-emptive rights, and authorizations
reasonably required to enable the transfer of the CHI Shares to OSIL and the issuance of OSIL
shares by OSIL as provided for in this Agreement;



          (g) any such instruments of transfer, duly executed, which in the opinion of OSIL, acting
reasonably, are necessary or desirable to effect and evidence the transfer of the CHI Shares to
Newco free and clear of all Encumbrances;



          (h) the Escrow Agreement substantially in the form of Schedule 4.3.3, duly executed by the
Sellers;



          (i) true copies of agreements terminating the Shareholders Agreement and cancelling any CHI
Options which have not been exercised prior to Closing, duly executed by the Parties to the
Shareholders Agreement, the holders of the CHI Options and CHI as required;



40









 





          (j) the agreements referred to in Sections 6.1.7 and 6.1.9;




          (k) a certificate, duly completed and executed by each Seller pursuant to Section
1.1445-2(b)(2) of the Treasury Regulations, certifying that such Seller is not a “foreign person”
within the meaning of Section 1445 of the Code;




          (l) legal opinions from the respective legal counsel of CHI and the Sellers substantially in
the form attached hereto as Schedule 6.1.13(l);




          (m) the termination agreement referred to in Section 6.1.12(a); and




          (n) such other instruments and documents, including third party consents, as are contemplated
hereby or as OSIL and Newco may reasonably require to be delivered at Closing by or on behalf of
the Majority Shareholders pursuant to the terms hereof or as are reasonably required to evidence
compliance with the representations, warranties and covenants of the Majority Shareholders
contained herein.




Right of Waiver



6.2 The conditions set forth in Section 6.1 are for the exclusive benefit of OSIL and Newco and may
be waived by OSIL and Newco in writing in whole or in part on or before the Closing by notice in
writing to the Sellers and CHI.




Merger of Conditions



6.3 The conditions set out in Section 6.1 shall be conclusively deemed to have been satisfied,
waived or released on Closing except as otherwise agreed in writing by OSIL, Newco, the Majority
Shareholders and CHI at the time of Closing.




PART 7




CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLERS

AND CHI OF THEIR OBLIGATIONS UNDER THIS AGREEMENT




Conditions of Sellers and CHI



7.1 The obligations of the Sellers and CHI to complete the sale of the CHI Shares and the other
transactions contemplated hereby at the Closing will be subject to the satisfaction of, or
compliance with, each of the following conditions precedent:




     Truth and Accuracy of Representations of OSIL and Newco at Closing Time



     7.1.1 The representations and warranties of OSIL and Newco made in Part 3 that are not
qualified by materiality shall be true and correct in all material respects at and as of the
Closing as though then made, and the representations and warranties of OSIL and Newco contained in
Part 3 that are qualified by materiality shall be true and correct at and as of the



41









 




Closing as though then made;




     Performance of Agreements



     7.1.2 OSIL and Newco shall have performed and complied in all material respects with all the
obligations to be performed by them hereunder;



     Governmental Consents, Authorizations, Etc.



     7.1.3 All U.S. governmental notices, confirmations, consents and approvals required in order
to effect the purchase of the CHI Shares under this Agreement, and in order for CHI to carry on its
business in substantially the same manner as such business was transacted prior to Closing, shall
have been given and/or obtained as applicable, including, without limitation: (i) written
confirmation by CFIUS of the successful completion of the review process under the Exon-Florio
amendment to the Defense Production Act of 1950, as amended Exon-Florio, with respect to the
acquisition, and (ii) written approval of DSS and, to the extent applicable, the U.S. Department of
Energy DoE, to operate the business of CHI pursuant to a foreign ownership, control or influence
FOCI mitigation proposal proposed by, and acceptable to, OSIL in its sole discretion, and (iii) any
approvals required by the Directorate of Defense Trade Controls DDTC pursuant to the International
Traffic in Arms Regulations ITAR.



     TSX Approval



     7.1.5 The TSX shall have accepted this Agreement for filing and approved the listing of the
OSIL Shares for trading on the TSX;



     Absence of Injunctions, Etc.



     7.1.6 No injunction or restraining order of any Court or administrative tribunal of competent
jurisdiction shall be in effect prohibiting the transactions contemplated hereby and no action or
proceeding shall have been instituted or shall be pending before any Court or administrative
tribunal to restrain or prohibit the transactions between the parties contemplated hereby;



     Absence of Change of Conditions



     7.1.7 No event shall have occurred or condition or state of facts of any character shall have
arisen or legislation (whether by statute, rule, regulation, by-law or otherwise) been introduced
which might reasonably be expected to have a materially adverse effect upon the financial
condition, results of operations or business prospects of OSIL;



     Absence of Damages, Etc.



     7.1.8 No material damage, destruction or loss to any property of OSIL shall have occurred that
is not adequately covered by insurance;



42









 





     Closing Documentation and Payment



     7.1.9 The Sellers shall have received from OSIL and Newco, as applicable, the following in
form and substance satisfactory to the Sellers, acting reasonably:



          (a) the Purchase Price in the manner set out in Section 4.3;




          (b) certified copies of resolutions of the directors of OSIL and Newco authorizing the
creation, execution and delivery of this Agreement and the completion of the transactions
contemplated hereby;




          (c) a copy of the notice of acceptance issued by the TSX;




          (d) a certificate of OSIL and Newco certifying that the conditions set forth in this Part 7
have been satisfied, if that is the case;




          (e) the Escrow Agreement substantially in the form of Schedule 4.3.3, duly executed by OSIL;




          (f) the agreements referred to in Section 6.1.7;




          (g) a legal opinion from the legal counsel of OSIL and Newco substantially in the form
attached hereto as Schedule 7.1.9(g); and




          (h) such other instruments and documents as are contemplated hereby or as the Sellers and CHI
may reasonably require to be delivered to Closing by or on behalf of OSIL and Newco pursuant to the
terms hereof or as are reasonably required to evidence compliance with the representations,
warranties and covenants of OSIL contained herein.




     Employees



     7.1.10 The number of employees of OSIL, Newco and any Subsidiary thereof (excluding any CHI
employees) shall be less than 500 as of the Closing Date;



     SBIR Qualification



     7.1.11 OSIL shall have delivered to Sellers’ Representative a report, reasonably acceptable to
Sellers’ Representative setting out the basis for OSIL’s position under the Small Business
Innovative Research funding program, and Sellers’ Representative shall be satisfied with the same,
acting reasonably.



Right of Waiver


7.2 The conditions set forth in Section 7.1 are for the exclusive benefit of the Sellers and CHI
and may be waived by the Majority Shareholders and CHI in writing in whole or in part on or before
the Closing by notice in writing to OSIL.




Merger of Conditions



43









 




7.3 The conditions set out in Section 7.1 shall be conclusively deemed to have been satisfied,
waived or released on Closing except as otherwise stipulated in writing by OSIL, Newco, the
Majority Shareholders and CHI at the time of Closing.




PART 8




INTERIM MATTERS




Conduct of CHI Business



8.1 From the date of this Agreement until the Closing, except as otherwise expressly provided for
in this Agreement or except to the extent OSIL otherwise consents, (i) Majority Shareholders shall
cause CHI to be operated in the ordinary course of business and (ii) Majority Shareholders shall
cause CHI to use commercially reasonable efforts to preserve intact its business organizations and
relationships with Persons doing business with CHI. Without limiting the generality of the
foregoing, except as expressly provided by this Agreement or as set forth on Schedule 8.1, during
the period from the date of this Agreement to the Closing Date, Majority Shareholders will




     8.1.1 cause CHI to:



          (a) operate CHI’s cash management practices in accordance with past practices, including the
payment of indebtedness, collection of receivables, purchase of inventory, provision of services,
payment of payables and incurrence, payment or financing of capital expenditures;




          (b) maintain and protect all CHI Intellectual Property rights of CHI so as not to materially
or adversely affect the validity or enforceability thereof;




          (c) maintain the material assets of CHI in good repair, order and condition (normal wear and
tear excepted) consistent with current needs;




          (d) maintain the books, accounts and records of CHI in accordance with past practice and
custom as used in the preparation of the CHI Financial Statements;




          (e) file on a timely basis all Tax Returns (which shall be true, complete and correct)
required to be filed on or before the Closing Date; and




          (f) seek to maintain relationships with employees, customers and suppliers; and




     8.1.2 not permit CHI, without the prior written consent of OSIL, to:



          (a) accelerate the collection of accounts receivable, defer or delay the purchase of
inventories or the payment of accounts payable or otherwise conducting any pricing,




44









 







sales, receivables and payables other than in the ordinary course of business;




          (b) settle or compromise any litigation or settle, pay or compromise any claims, except where
such settlement, compromise or payment would not have a material adverse effect on CHI; effect any
recapitalization, redemption or repurchase of the capital stock of CHI;




          (c) terminate, or permit the lapse by reason of inaction of, one or more insurance policies,
unless such policy or policies is replaced by a policy or policies with the same or substantially
similar coverage;




          (d) enter into any transaction with Sellers or an Affiliate of any Seller or CHI;




          (e) modify any Material Contract in any respect other than in the ordinary course of business;




          (f) change any tax election, tax filing, tax accounting period or accounting methodology; or




          (g) take any action that would result in the occurrence of any of the transactions or events
set forth in Section 2.1.11.




PART 9




ADDITIONAL COVENANTS




Consents



9.1 If the sale and transfer of the CHI Shares hereunder requires any consent under or assignment
of any contract, licence, permit, lease or agreement, the Sellers and CHI will promptly apply for
or otherwise seek, and use their respective reasonable commercial efforts to obtain, such consent
or assignment. This Agreement will not constitute an agreement to assign or transfer any contract,
licence, permit, lease or agreement if an attempted assignment thereof without the consent of a
third party would constitute a breach thereof. If such consent or assignment is not obtained, or
if an attempted assignment or transfer would be ineffective, the Sellers and CHI will use their
respective reasonable best efforts and cooperate with OSIL and Newco in any commercially reasonable
lawful arrangement designed to provide for OSIL and Newco the maximum benefits under such contract,
licence, permit, lease or agreement.




Non-Disclosure of Information



9.2 Until the Closing and thereafter, the Parties will comply with the terms of the Confidentiality
Agreement.




Return of Information




45









 







9.3 If this Agreement is terminated, promptly after such termination all documents, work papers and
other written material obtained from a Party in connection with this Agreement and not theretofore
made public (including all copies and photocopies thereof), will be returned to the Party which
provided such material.




U.S. Government Applications



9.4 (a) As soon as practicable after the date of execution of this Agreement, OSIL and CHI (if they
have not done so prior to such execution) shall prepare and file with CFIUS a joint voluntary
notice under Exon-Florio with respect to the transaction contemplated by this Agreement. OSIL and
CHI shall provide CFIUS with any additional or supplemental information reasonably requested by
CFIUS or its member agencies during the Exon-Florio review process. In cooperation with OSIL, CHI
shall take all commercially reasonable steps advisable, necessary or desirable to finally and
successfully complete the Exon-Florio review process as promptly as practicable.




     (b) As soon as practicable after the date of execution of this Agreement, OSIL (if it has not
done so prior to execution) shall prepare and submit to DSS and, to the extent applicable, DoE a
notification under the National Industrial Security Program Operating Manual (“NISPOM”) and any
applicable DoE security regulations, and fully cooperate with OSIL in requesting from DSS and to
the extent applicable, DoE, approval to operate the business of CHI pursuant to a FOCI mitigation
proposal submitted in relation to the transaction contemplated by this Agreement, which mitigation
proposal shall be jointly prepared by and acceptable to both OSIL and CHI, in accordance with the
NISPOM and any applicable DoE security regulations. If applicable, at the request of OSIL, CHI
shall take all commercially reasonable steps necessary or desirable to obtain favorable National
Interest Determinations (“NIDs”) in accordance with the NISPOM or any applicable DoE security
regulations for continued performance of CHI’s existing government contracts, and, at the request
of CHI, OSIL shall take all commercially reasonable steps advisable, necessary or desirable to
assist CHI in obtaining such NIDs.



     (c) As soon as reasonably practicable, CHI (if it has not previously done so) shall prepare
and file with DDTC any pre-closing notifications required under the ITAR. The notifications
required under 22 C.F.R. Section 122.4(b) shall be filed by each of OSIL and CHI with DDTC within
five Business Days after the date of this Agreement.



Access



9.5 From the date of this Agreement until the Closing, subject to applicable Law, Majority
Shareholders shall cause CHI to (a) provide to OSIL and its representatives reasonable access to
the personnel, facilities and records of CHI, (b) continue to deliver to OSIL and OSIL’s
representatives copies of all such contracts, books and records, and other existing documents and
data as OSIL may reasonably request, (c) furnish OSIL and OSIL’s representatives with such
additional financial, operating, and other data and information as OSIL may reasonably request, and
(d) permit OSIL and its representatives to conduct such necessary inspections as OSIL may
reasonably request.




46









 








Exercise of CHI Options



9.7 At the Adjustment Time, each Seller who is a holder (“Holder”) of CHI Options by execution of
this Agreement acknowledges and agrees that such Holder shall be deemed to have exercised such
Holder’s right to purchase Class B non-voting shares of CHI’s capital stock and to have received
such number of Class B non-voting shares of common stock of CHI as set forth opposite such Holder’s
name in Table 1 on Schedule 2.1.5. The portion of the Purchase Price payable to such Holder shall
be reduced by the aggregate strike price of the Options such Holder is deemed to have exercised
pursuant to this Section 9.7, as set forth in Table 1 on Schedule 2.1.5 (the “Strike Price Amount”)
as follows: (i) the amount of cash payable to such Holder pursuant to Section 4.3.1 shall be
reduced by an amount equal to the product of the Strike Price Amount multiplied by .88% (such
product, the “Cash Purchase Price Reduction”); and (ii)(Y) for each Holder receiving OSIL Shares
pursuant to Section 4.3.4(a), the number of OSIL Shares payable to such Holder pursuant to Section
4.3.4(a) shall be reduced by the number of OSIL Shares equal in value to the product of the Strike
Price Amount multiplied by .12% and (Z) for each Holder receiving cash in lieu of OSIL Shares
pursuant to Section 4.3.4(b), the amount of cash payable to such Holder pursuant to Section
4.3.4(b) shall be reduced by an amount equal to the product of the Strike Price Amount multiplied
by .12% (the value of OSIL Shares or cash equal to such product, the “Stock Purchase Price
Reduction”). OSIL shall contribute to the capital of CHI cash equal in value to the aggregate Cash
Purchase Price Reductions and Stock Purchase Price Reductions of all Holders.




Re-Domiciling of OSIL



9.8 OSIL shall: (a) use its reasonable commercial efforts after Closing to re-domicile as a United
States corporation or to otherwise become or to cause its successor corporation to become a United
States corporation pursuant to the procedures and within the time limits set forth in the
memorandum attached hereto as Schedule 9.8 or otherwise as OSIL may reasonably determine in
consultation with its legal counsel; and (b) cause any successor to OSIL as a result of
re-domiciling to be bound to the terms and conditions of this Agreement in the same manner as OSIL.




Furnishing of Information



9.9 As long as Sellers own OSIL Shares, OSIL covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports required to be filed OSIL
under Applicable Securities Laws by OSIL after the date hereof. OSIL further covenants that it will
take such further action as Sellers may reasonably request, to the extent required from time to
time to enable Sellers to sell OSIL Shares without registration under the Applicable Securities
Laws within the limitation of the exemptions available under the Applicable Securities Laws,
including the limitation provided by Rule 144 promulgated under the 1933 Act. The Sellers
acknowledge that it is their responsibility to obtain any legal opinions required to remove any
legends on any certificates representing the OSIL Shares. If requested by the Sellers, OSIL shall
request that its legal counsel provide such legal opinions. The cost of such legal opinions, shall
be borne by the Sellers.




Listing of Shares



47









 




9.10 OSIL shall (i) in the time and manner required by the NASD, TSX and such other securities
market, quotation system or exchange on which OSIL’s common stock is then, if required, trading,
prepare and file with such securities market, quotation system or exchange on which Buyer’s common
stock is then trading an additional shares listing application covering all of the OSIL Shares and,
(ii) take all steps necessary to cause such OSIL Shares to be approved for listing on such
securities market, quotation system or exchange on which OSIL’s common stock is then listed as soon
as possible thereafter.




Piggyback Registration




     9.11 If at any time OSIL proposes for any reason to register any of its shares (“Registered
Shares”) under any Applicable Securities Laws including, without limitation, any registration
pursuant to the exercise of the demand registration rights of any Person other than the Sellers, on
any form that would also permit the registration of OSIL Shares, OSIL shall promptly give written
notice to the Sellers’ Representative of its intention to so register the Registered Shares and,
upon the written request, given within 5 business days after delivery of any such notice by OSIL,
of Sellers’ Representative to include in such registration OSIL Shares held by any Seller (a
“Selling Investor”) (which request shall specify the number of OSIL Shares proposed to be included
in such registration), OSIL shall use its reasonable commercial efforts to cause all such OSIL
Shares to be included in such registration on the same terms and conditions as the securities
otherwise being qualified for sale in such registration, provided, however, that if at any time
after giving written notice of its intention to register any securities, and prior to the effective
date of the registration statement filed in connection with such registration, OSIL shall determine
for any reason not to proceed with the proposed registration of the securities to be sold by it,
OSIL may, at its election, give written notice of such determination to the Sellers’ Representative
and, thereupon, shall be relieved of its obligation to register any OSIL Shares in connection with
such registration; and provided further that if any agent or underwriter engaged by OSIL in
connection with an offering of securities which are qualified for sale under a registration
statement directs that OSIL exclude all or a portion of the OSIL Shares from registration under
such registration statement, OSIL shall have no obligation to the Sellers to include the OSIL
Shares in the registration statement to the extent that the exclusion thereof is directed by such
underwriter or agent. In connection with any underwritten offering under this Section 9.11, OSIL
shall not be required to include OSIL Shares in such underwritten offering unless the Sellers’
Representative, on behalf of the Sellers of such OSIL Shares, accepts the terms of the underwriting
of such offering that have been agreed upon between OSIL and the underwriters selected by OSIL,
including without limitation, the underwriting agreement and the fees and expenses in connection
therewith. Notwithstanding the foregoing, OSIL agrees that each Selling Investor shall be entitled
to share in, on a pro rata basis, the same rights and benefits afforded to any other third party
security holder whose securities are being qualified for sale under a registration statement
pursuant to the exercise of piggyback registration rights, subject to any applicable obligation
relating thereto, including, without limitation, where there is a determination that the number of
shares to be included in a registration exceeds the number of shares which can be sold under such
registration without jeopardizing or delaying the success of the related offering (including the
price per share) and their number of shares included in such registration is therefore reduced,.
OSIL agrees to provide copies of the pertinent registration rights agreements and underwriting
agreements to the Sellers’ Representative together with the aforementioned notice to be given by
OSIL to the Sellers’ Representative. OSIL’s obligations



48









 




under this Section 9.11 shall terminate with respect to a particular Selling Investor at such time
as such Selling Investor’s shares are eligible for sale without volume restrictions pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended.




Release of Guarantees



9.12 Prior to Closing, CHI shall use its reasonable commercial efforts (which includes the
substitution of a guarantee by OSIL for the guarantee by any Seller) to release each Seller from
any guaranty by such Seller of obligations of CHI, and OSIL and Newco shall cooperate with CHI in
obtaining such releases.




PART 10




INDEMNITIES




Indemnification of OSIL and Newco by the Majority Shareholders



10.1 Subject to the limitations set out in Section 10.3, the Majority Shareholders shall severally,
and not jointly and severally, indemnify and save harmless OSIL and Newco against all liabilities,
claims, demands, actions, causes of action, damages, losses, costs or expenses (including all
reasonable legal fees and disbursements) suffered or incurred by OSIL, directly or indirectly, by
reason of or arising out of:




     10.1.1 The untruth of any warranty or representation on the part of the Majority Shareholders
set forth in Section 2.1;



     10.1.2 a breach of any agreement, term or covenant on the part of any of the Majority
Shareholders made or to be observed or performed pursuant hereto; and



     10.1.3 without limiting the generality of the foregoing, any liability for Taxes for any
matter or thing arising at any time prior to the Closing Date, whether currently known or unknown
and disclosed herein or in any Schedule hereto including any Taxes relating to a pre-closing period
that arises in connection with a Tax audit.



Indemnification of OSIL and Newco by the Sellers



10.2 Subject to the limitations set out in Section 10.3, each of the Sellers shall severally, and
not jointly and severally, indemnify and save harmless OSIL and Newco against all liabilities,
claims, demands, actions, causes of action, damages, losses, costs or expenses (including all
reasonable legal fees and disbursements) suffered or incurred by OSIL, directly or indirectly, by
reason of or arising out of:




     10.2.1 The untruth of any warranty or representation on the part of such Seller set forth in
Section 2.2; and



     10.2.2 a breach of any agreement, term or covenant on the part of any of such Seller made or
to be observed or performed pursuant hereto.



49









 





The liabilities, claims, demands, actions, causes of action, damages, losses, costs and expenses of
OSIL and Newco referred to in this Section 10.2 and in Section 10.1 are collectively referred to as
“OSIL’s Losses”.




Limitations



10.3 The Sellers will be liable only for OSIL’s Losses in respect of which a claim for indemnity is
made by OSIL and Newco or either of them on or before the applicable expiry dates for the survival
of the Sellers’ representations and warranties as set out in Section 2.4; provided further that in
no event shall Sellers be liable for OSIL’s Losses until such time as OSIL’s Losses exceed $75,000,
in which event Sellers shall be liable for all of OSIL’s Losses in excess of $50,000, subject to a
maximum of:




     10.3.1 In the case of each Majority Shareholder, sixty percent (60%) of the portion of the
Purchase Price actually paid to such Majority Shareholder, as set forth on Schedule 10.3.1; and



     10.3.2 in the case of each Minority Shareholder, sixty percent (60%) of the portion of the
Purchase Price actually paid to such Minority Shareholder, as set forth on Schedule 10.3.2. For
the purposes of calculating the Purchase Price actually paid to any Minority Shareholder who is a
Holder, the Purchase Price shall include the Strike Price Amount of such Minority Shareholder’s
options.



Indemnification of the Sellers by OSIL and Newco



10.4 Subject to the limitations set out in Section 10.5, OSIL and Newco will severally, and not
jointly and severally, indemnify the Sellers from and after Closing against all liabilities,
claims, demands, actions, causes of action, damages, losses, costs or expenses (including all
reasonable legal fees and disbursements) suffered or incurred by the Sellers, directly or
indirectly, by reason of or arising out of:




     10.4.1 The untruth of any warranty or representation on the part of OSIL and Newco set forth
in Part 3;



     10.4.2 a breach of any agreement, term or covenant on the part of OSIL and Newco made or to be
observed or performed pursuant hereto,


which liabilities, claims, demands, actions, causes of action, damages, losses, costs and expenses
are collectively referred to as the “Sellers’ Losses”.




Limitation



10.5 OSIL and Newco will be liable only for the Sellers’ Losses in respect of which a claim for
indemnity is made by a Seller on or before the expiry date for the survival of OSIL’s and Newco’s
representations and warranties as set out in Section 3.3, provided however, that in no event shall
OSIL or Newco be liable for any Sellers’ Losses until such time as such Sellers’ Losses exceed
$75,000, in which event OSIL and Newco shall be liable for all of Sellers’ Losses





50









 







in excess of $50,000, subject to a maximum of 60% of the portion of the Purchase Price paid to such
Seller.




Claims Under Indemnity



10.6 (a) If any claim is made by any Person against OSIL and Newco or either of them in respect of
which OSIL and Newco or either of them may incur or suffer damages, losses, costs or expenses that
might reasonably be considered to be subject to the indemnity obligation of the Sellers or any of
them as provided in Section 10.1, or if any project of assessment by any taxation authority is
presented to OSIL and Newco or either of them in respect of CHI for any matter having its origin
prior to the Effective Date, OSIL will notify the Sellers’ Representative in writing as soon as
reasonably practicable, of the nature of such claim or project of assessment and the Sellers will
be entitled but not required to assume the defence of any suit brought to enforce such claim, and
to sign any waivers respecting time limits for payment of Taxes to any taxing authority (unless a
Seller is also a party to such proceeding and OSIL determines in good faith that joint
representation would be inappropriate).




        (b) If any claim is made by any Person against Sellers or any of them in respect of which
Sellers or any of them may incur or suffer damages, losses, costs or expenses that might reasonably
be considered to be subject to the indemnity obligation of OSIL or Newco or either of them as
provided in Section 10.3, such Seller will notify OSIL as soon as reasonably practicable, of the
nature of such claim or project of assessment and OSIL and Newco will be entitled but not required
to assume the defence of any suit brought to enforce such claim.


10.7 The defence of any indemnified claim (whether or not assumed by the Sellers or OSIL and Newco,
as the case may be) will be through legal counsel or, in the case of a dispute respecting Taxes,
their tax lawyers or tax accountants, and will be conducted in a manner acceptable to OSIL and the
Sellers’ Representative, acting reasonably, and no settlement may be made by the Sellers’
Representative, OSIL or Newco without the written consent of the others; provided, however, that
Sellers, at their own cost and expense, shall have the right to settle any claim for Taxes for
which Sellers have agreed to indemnify OSIL and Newco pursuant to Section 10.1.3 without the
consent of OSIL or Newco, provided that such settlement includes full and final releases from any
liability for such Taxes in favour of CHI, OSIL, Newco and their respective directors and senior
officers.



10.8 (a) If the Sellers assume the defence of any claim and OSIL and Newco retain separate legal
counsel, then OSIL, Newco and their counsel will cooperate with the Sellers’ Representative and his
counsel in the course of the defence, such cooperation to include using reasonable best efforts to
provide or make available to the Sellers’ Representative and his counsel documents and information
and witnesses for attendance at examinations for discovery and trials.




        (b) If OSIL and Newco assume the defence of any claim and Sellers retain separate legal
counsel, then Sellers and their counsel will cooperate with OSIL and Newco and their counsel in the
course of the defence, such cooperation to include using reasonable best efforts to provide or make
available to OSIL and Newco and their counsel documents and information and



51









 




witnesses for attendance at examinations for discovery and trials.



10.9 (a) All reasonable legal fees and disbursements and other costs of such defence from any claim
assumed by Sellers will, from and after such assumption, be borne by the Sellers, provided that if
the Sellers assume the defence of the claim and OSIL and Newco elect to retain separate legal
counsel, the costs of such legal counsel will be borne by OSIL and Newco.




        (b) All reasonable legal fees and disbursements and other costs of such defence from any claim
assumed by OSIL and Newco will, from and after such assumption, be borne by the OSIL and Newco,
provided that if OSIL and Newco assume the defence of the claim and Sellers elect to retain
separate legal counsel, the costs of such legal counsel will be borne by Sellers.



PART 11




AMENDMENT AND TERMINATION




Amendment



11.1 This Agreement may not be amended except by mutual written agreement of the Parties.




Termination



11.2 This Agreement may be terminated at any time prior to the Closing:




     11.2.1 By mutual written agreement of the Parties;



     11.2.2 By OSIL and Newco by written notice to the Sellers’ Representative, if any of the
conditions precedent set out in Section 6.1 have not been complied with or waived on or before the
date required for performance thereof; provided, however, that OSIL and Newco may not rely on the
failure to satisfy any of the conditions set out in Section 6.1 if the condition would have been
satisfied but for a material failure by OSIL or Newco in complying with their obligations
hereunder;



     11.2.3 By the Sellers by written notice from the Sellers’ Representative to OSIL and Newco, if
any of the conditions precedent set out in Section 7.1 have not been complied with or waived on or
before the date required for performance thereof; provided, however, that the Sellers’
Representative may not rely on the failure to satisfy any of the conditions set out in Section 7.1
if the condition would have been satisfied but for a material failure by any Seller in complying
with his or her obligations hereunder;



     11.2.4 By OSIL and Newco if any Seller’s representations, warranties, agreements or
obligations herein have been breached, which breach would result in the failure to satisfy one or
more conditions set forth in Section 6.1 and such breach is not curable or, if curable, is not
cured within 20 days after notice thereof has been delivered to the Sellers’ Representative;



     11.2.5 By the Sellers’ Representative if OSIL and Newco have breached any of their



52









 




representations, warranties, agreements or obligations herein, which breach would result in
the failure to satisfy one or more conditions set forth in Section 7.1 and such breach is not
curable or, if curable, is not cared with in 20 days after notice thereof has been delivered to
OSIL and Newco;




     11.2.6 By either OSIL and Newco or by the Sellers’ Representative if there shall be in effect
any law or regulation that prohibits the consummation of the Closing or if consummation of the
Closing would violate any non-appealable final order, decree or judgement of any court or
governmental body having competent jurisdiction;



     11.2.7 By the Sellers’ Representative if the Closing shall not have occurred on or before
December 31, 2005; or



     11.2.8 By OSIL and Newco if the Closing shall not have occurred on or before December 31,
2005.



Effect of Termination



11.3 If this Agreement is terminated in accordance with Section 11.2 hereof, this Agreement shall
thereafter become void and have no effect, and no Party hereto shall have any liability to the
other Party hereto or their respective Affiliates, directors, officers or employees, except for the
obligations of the Parties hereto contained in Sections 9.2, 9.3, 12.5, 12.6, 12.7 and this Section
11.3; provided that neither the termination of this Agreement nor anything contained in this
Section 11.3 shall relieve any Party from any liability for any breach by it of this Agreement,
including liability arising from any inaccuracy in its representations and warranties and any
non-performance by it of its covenants and agreements made herein. If it shall be judicially
determined that termination of this Agreement was caused by breach of this Agreement, then in
addition to any other remedies at law or equity for breach of this Agreement, the Party so found to
have breached this Agreement shall indemnify and hold harmless the other Parties who are not in
breach for their out of pocket costs, including fees and expenses of their legal counsel,
accountants, financial advisors and other experts and advisors, incidental to the negotiation,
preparation and execution of this Agreement and related documentation.




PART 12




GENERAL




Investigation



12.1 Any investigation by a Party and its advisors shall not mitigate, diminish or effect the
representations and warranties of any other Party to this Agreement.




News Releases and Public Notices



12.2 All news releases, notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement will be jointly planned and co-ordinated by OSIL





53









 







and CHI. Neither OSIL nor CHI will act unilaterally in this regard without the approval of the
other Party, such approval not to be unreasonably withheld. CHI acknowledges that OSIL is a
reporting issuer and that, as such, has an obligation to disclose to the public by way of a news
release, material change report and Form 8-K any material change in its affairs promptly upon the
occurrence thereof.




Expenses



12.3 Each of the parties to this Agreement shall be responsible for his, her or its own legal,
consulting and other costs and expenses incurred by it with respect to this Agreement.




Time



12.4 Time will be of the essence hereof.




Notices



12.5 Any notice or other writing required or permitted to be given hereunder or for the purposes
hereof will be sufficiently given if delivered in person or mailed, by commercially reputable
overnight courier, addressed to such party at:




          (a) If to OSIL and/or Newco:





Offshore Systems International Ltd.

Suite 107 — 930 West 1st Street

North Vancouver, B.C.

V7P 3N4




Attention: Ken Kirkpatrick



          with a copy to OSIL’s Solicitors at:





Clark Wilson LLP

800-885 West Georgia Street

Vancouver, British Columbia

V6C 3H1




Attention: Gerald J. Shields



          (b) If to CHI or the Sellers:





c/o CHI Systems Inc.

Suite 300 — 1035 Virginia Drive

Fort Washington, Pennsylvania

USA, 19034



54









 






Attention: Wayne Zachary



          with a copy to CHI’s lawyers at:





Schnader Harrison Segal & Lewis LLP

1600 Market Street, Suite 3600

Philadelphia, Pennsylvania 19103




Attention: Arthur Brandolph, Esq.


or at such other address as the party to whom such writing is to be given will have last notified
to the party giving it in the manner provided in this Section 12.5.



12.6 A notice so mailed will be deemed to have been given and received on the 5th Business Day
after the date of mailing unless at the time of mailing or within 5 Business Days thereafter there
occurs a postal interruption which could have the effect of delaying the mail in the ordinary
course, in which case a notice will be effectively given only if actually delivered or sent by
telecopy.



12.7 A notice delivered to the party to whom it is addressed will be deemed to have been given and
received on the day it is delivered or transmitted providing this is during normal business hours
at the place of the recipient, except that if that day is not a Business Day then the notice will
be deemed to have been given and received on the next Business Day after that day.



Governing Law



12.8 This Agreement will be governed by and construed in accordance with the laws of the State of
Delaware, notwithstanding any conflict of laws doctrines to the contrary. The parties irrevocably
attorn to the exclusive jurisdiction of the Courts of the State of Delaware with respect to any
legal proceedings arising herefrom.



Severability



12.9 If any one or more of the provisions contained in this Agreement is invalid, illegal or
unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such
provision or provisions will not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining provisions contained
herein will not in any way be affected or impaired thereby, unless in either case as a result of
such determination this Agreement would fail in its essential purpose.



Entire Agreement



12.10 This Agreement, together with the Confidentiality Agreement and the Schedules hereto,
constitutes the entire agreement between the parties and supersedes all previous agreements and
understandings, oral or written, by and between any of the parties with respect to the subject





55









 







matter hereof, including, but not limited to, the Letter of Intent.



Independent Advice



12.11 Each Party acknowledges that such Party has been advised to obtain independent legal,
accounting and tax advice with respect to this Agreement and the transactions contemplated hereby
and that such Party has done so.



Further Assurances



12.12 The Parties will with reasonable diligence do all such things and provide all such reasonable
assurances as may be required to consummate the transactions contemplated hereby, and each Party
will provide such further documents, instruments and assurances as any other Party may reasonably
require to give effect to the terms and intention of this Agreement whether before or after the
Closing.



Enurement



12.13 This Agreement and each of the terms and provisions hereof will enure to the benefit of and
be binding upon the Parties and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. No Party may assign this Agreement without the
prior written consent of the other Parties, which consent may be arbitrarily withheld.



Counterparts



12.14 This Agreement may be executed in as many counterparts as may be necessary or by facsimile
and each such agreement or facsimile so executed will be deemed to be an original and such
counterparts together will constitute one and the same document.



Appointment of Sellers’ Representative.



12.15 Sellers hereby designate (and OSIL and Newco hereby consent to such designation) Wayne W.
Zachary as the Sellers’ Representative and authorizes Sellers’ Representative to execute any and
all instruments or other documents on behalf of Sellers, and to do any and all other acts or things
on behalf of Sellers, that the Sellers’ Representative may deem necessary or advisable, or that may
be required pursuant to this Agreement or otherwise, in connection with the consummation of the
transactions contemplated hereby and the performance of all obligations hereunder before, at or
following the Closing. Without limiting the generality of the foregoing, Sellers’ Representative
shall have the full and exclusive authority to (i) agree with OSIL and Newco with respect to any
matter or thing required or deemed necessary by Sellers’ Representative in connection with the
provisions of this Agreement calling for the agreement of Sellers, give and receive notices on
behalf of all Sellers, and act on behalf of Sellers in connection with any matter as to which
Sellers are or may be obligated under this Agreement or the Escrow Agreement, all in the absolute
discretion of Sellers’ Representative, (ii) in general, do all things and perform all acts,
including without limitation executing and delivering all agreements, certificates, receipts,
consents, elections, instructions, instruments of transfer and




56









 







other instruments or documents contemplated by, or deemed by Sellers’ Representative to be
necessary or advisable in connection with, this Agreement, and (iii) take all actions necessary or
desirable in connection with the defense or settlement of any indemnification claims pursuant to
Part 10 and performance of obligations under Part 5, including to withhold funds for satisfaction
of expenses or other liabilities or obligations or to withhold funds for potential indemnification
claims made hereunder. Sellers shall cooperate with Sellers’ Representative and any accountants,
attorneys or other agents whom he may retain to assist in carrying out his duties hereunder. All
decisions by Sellers’ Representative shall be binding upon all Sellers, and no Seller shall have
the right to object, dissent, protest or otherwise contest the same. Sellers’ Representative may
communicate with any Seller or any other Person concerning his responsibilities hereunder, but he
is not required to do so. Sellers’ Representative has a duty to serve in good faith the interests
of Sellers and to perform his designated role under this Agreement, but Sellers’ Representative
shall have no financial liability whatsoever to any Person relating to his service hereunder
(including any action taken or omitted to be taken), except that he shall be liable for harm that
he directly causes by an act of willful misconduct. Sellers shall jointly and severally indemnify
and hold harmless Sellers’ Representative against any loss, expense (including reasonable
attorney’s fees) or other liability arising out of his service as Sellers’ Representative under
this Agreement, other than for harm directly caused by an act of willful misconduct.



Confidentiality Agreement.



12.16 Prior to, or contemporaneous with the execution of this Agreement, Newco shall have signed a
joinder to become a party to the Confidentiality Agreement.




[signature pages follow]





57









 






IN WITNESS WHEREOF the parties have executed this Share Purchase Agreement as of the day and
year first above written.




	 	 	 	 	 
	 	 	OFFSHORE SYSTEMS INTERNATIONAL LTD.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Ken Kirkpatrick
	 

	 	 	 	 
	 

	 	 	 	Authorized Signatory
	 
	 	 	 	 
	 	 	OSI HOLDINGS INC.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Ken Kirkpatrick
	 

	 	 	 	 
	 

	 	 	 	Authorized Signatory
	 
	 	 	 	 
	 	 	CHI SYSTEMS INC.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Wayne W. Zachary
	 

	 	 	 	 
	 

	 	 	 	Wayne W. Zachary
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Floyd A. Glenn III
	 

	 	 	 	 
	 

	 	 	 	Floyd A. Glenn III






	 	 	 
	/s/ Christine Volk

	 	/s/ Wayne W. Zachary
	 

	 	 
	Signature of Witness

	 	Wayne W. Zachary
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Floyd A. Glenn III
	 

	 	 
	Signature of Witness

	 	Floyd A. Glenn III
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 






58









 






	 	 	 
	/s/ Christine Volk

	 	/s/ Joan Ryder
	 

	 	 
	Signature of Witness

	 	Joan Ryder
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Geraldine Burke
	 

	 	 
	Signature of Witness

	 	Geraldine Burke
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Phillip Rollhauser
	 

	 	 
	Signature of Witness

	 	Phillip Rollhauser
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Romi Toyloy

	 	/s/ Kelly Neville
	 

	 	 
	Signature of Witness

	 	Kelly Neville
	 
	 	 
	Romi Toyloy
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/KevinBracken
	 

	 	 
	Signature of Witness

	 	Kevin Bracken
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Darius Miller

	 	/s/ Kenneth P. Graves
	 

	 	 
	Signature of Witness

	 	Ken Graves
	 
	 	 
	Darius Miller
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 






59









 






	 	 	 
	/s/ Kenneth P. Graves

	 	/s/ Darius Miller
	 

	 	 
	Signature of Witness

	 	Darius Miller
	 
	 	 
	Kenneth P. Graves
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Brian Convery
	 

	 	 
	Signature of Witness

	 	Brian Convery
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Donna Reynolds
	 

	 	 
	Signature of Witness

	 	Donna Reynolds
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Michael Szczepkowski
	 

	 	 
	Signature of Witness

	 	Michael Szczepkowski
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Clint Bowers

	 	/s/ Janis Cannon-Bowers
	 

	 	 
	Signature of Witness

	 	Janis Cannon-Bowers
	 
	 	 
	Clint Bowers
	 	 
	 	 	 
	Name of Witness (Please Print
	 	 






60









 





Schedule 2.1.5

Authorized and Issued Capital of CHI Systems




<redacted>




 









 








Schedule 2.1.5-1

Form of CHI Option




CHI SYSTEMS, INC.




STOCK OPTION




     This STOCK OPTION (the “Option”) is granted as of the                      day of                     , 200___ by CHI
SYSTEMS, INC., a Pennsylvania corporation (the “Company”), to                                                                                  (“Optionee”).



BACKGROUND




     A. Optionee is an employee of the Company.



     B. In consideration of services to be performed, Company desires to afford Optionee an
opportunity to purchase shares of its Class B Common Stock in accordance with the Company’s 1998
Stock Option Plan (the “Plan”) as hereinafter provided.



     C. Any capitalized terms not otherwise defined herein shall have the meaning accorded them
under the Plan.



     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the parties, hereto, intending to be legally bound, agree as
follows:



     1. Grant of Option. Company hereby irrevocably grants to Optionee the right and
option (the “Option”) to purchase, all or any part of an aggregate of                                          (___) shares
of the Class B Common Stock of Company (“Common Stock”), par value $1.00 per share (the “Option
Share”) which option shall constitute an “incentive stock option” under the Plan, at those purchase
prices listed in Paragraphs 4 and 5 hereof (the “Option Prices”), during the period and subject to
the conditions hereinafter set forth.



     2. Option Period. The Option may be exercised in accordance with the provisions of
Paragraphs 4 and 5 hereof during the Option Period, which shall begin on the date hereof and shall
end on the Option Expiration Date defined in Paragraph 3 hereof. All rights to exercise the Option
shall terminate on the Option Expiration Date if not sooner terminated pursuant to the terms of
Paragraph 6 hereof.



     3. Option Expiration Date. The Option Expiration Date shall be                     , or the
termination date of the Plan, whichever is earlier.



     4. Exercise of Option.



          (a) This Option shall not be exercisable prior to the first anniversary of the date of grant
of the Option, except as provided in subparagraph 4(b), and thereafter shall be exercisable at the
rate of up to 25% per year of the total number of shares for which this Option




 









 







is granted, at an exercise price of $                     per Option Share, provided that any portion of this
Option which is exercisable in any year, but not exercised, may be carried forward and exercised in
any future year during the term hereof.




               The exercise of this Option is conditioned upon the Optionee executing and delivering to the
Company a binding instrument agreeing to be bound by the terms and conditions of the Shareholders’
Agreement.



          (b) Notwithstanding the foregoing, subject to the terms of any employment agreement between
Company and Optionee, Optionee may purchase all or any portion of the unexercised balance of this
Option upon the effective date of a change in the control of the Company, including, without
limitation, a (i) sale, exchange, transfer or other disposition of substantially all of the assets
of Company to another entity, except to an entity controlled directly or indirectly by Company;
(ii) merger, consolidation or other reorganization of Company, unless (A) the shareholders of
Company immediately before such merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or reorganization at least ___% of the
combined voting power of the outstanding voting securities of the Company resulting from such
merger, consolidation or reorganization in substantially the same proportion as their ownership of
the voting securities immediately before such merger, consolidation or reorganization, or (B) the
individuals who were members of the Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization constitute at least ___% of the members
of the Board of Directors of the surviving corporation; (iii) plan of liquidation or dissolution of
Company, other than pursuant to bankruptcy or insolvency laws is adopted; or (iv) during any period
of two consecutive fiscal years of Company those individuals, who at the beginning of such period
constituted the Board, cease for any reason to constitute at least a majority of the Board, unless
the election, or the nomination for election by Company’s shareholders, of each new director was
approved by a vote of at least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of such period. There shall be excluded from the foregoing any
transaction otherwise commonly referred to as a “management leveraged buy-out.”




     5. Manner of Exercise. Exercise of the Option shall be by written notice to Company
pursuant to Paragraph 12 hereof. The notice shall be accompanied by payment in full in cash or, at
the sole discretion of the Committee determined at or prior to exercise, Class B Common Stock of
the Company, or a combination thereof, in the amount of the Option Price. Notwithstanding the
foregoing, Class B Common Stock acquired pursuant to the exercise of an incentive stock option may
not be tendered as payment unless the holding period requirements of Code Section 422(a)(1) have
been met. Upon receipt of such notice and payment, Company shall deliver a certificate or
certificates representing the Option Shares purchased. The certificate or certificates
representing the Option Shares shall be registered in the name of the Optionee, or if the Optionee
so requests, shall be issued in or transferred into the name of the Optionee and another person
jointly with the right of survivorship. The certificate or certificates shall be delivered to or
upon the written order of the Optionee. No Optionee or his legal representative, legatees or
distributees, as the case may be, shall be or shall be deemed to be a holder of any shares subject
to this Option unless and until certificates for such shares are issued to him or them upon the
exercise of this Option. The Option Shares that shall be purchased upon the exercise of the Option
as provided herein shall be fully paid and nonassessable.



     6. Rights in the Event of Termination of Employment After Vesting.



 









 





          (a) Upon the voluntary termination of employment, termination of employment for cause,
termination of employment due to disability or the death of Optionee, vested Options will survive
or terminate, as the case may be, in accordance with the provisions of Article 8 of the Plan, the
terms of which are herein incorporated by reference.




          (b) Any Option Shares acquired pursuant to the exercise of an Option on or prior to Optionee’s
date of termination of employment are entitled to be reacquired by the Company from Optionee in
accordance with the provisions of Article 8 of the Plan, the terms of which are herein incorporated
by reference.




     7. Transferability of Option. The Option is not transferable by Optionee other than
by will or by the laws of descent and distribution in the event of the Optionee’s death, in which
event the Option may be exercised by the heirs or legal representatives of the Optionee as
provided in Paragraph 6 hereof. The Option may be exercised during the lifetime of the Optionee
only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option
contrary to the provisions hereof or the levy of any execution, attachment or similar process upon
the Option shall be null and void and without effect. Any exercise of the Option by a person other
than the Optionee shall be accompanied by appropriate proofs of the right of such person to
exercise the Option.



     8. Option Shares to be Purchased for Investment. Unless Company has notified Optionee
pursuant to Paragraph 12 hereof that a registration statement covering the Option Shares has become
effective under the Securities Act of 1933 (the “Act”), it shall be a condition to the exercise of
the Option that the Option Shares acquired upon such exercise be acquired for investment and not
with a view to distribution. If requested by the Company upon advice of its counsel that the same
is necessary or desirable, the Optionee shall, at the time of purchase of the Option Shares,
deliver to the Company Optionee’s written representation that Optionee (a) is purchasing the Option
Shares for his own account for investment, and not with a view to public distribution or with any
present intention of reselling any of the Option Shares (other than a distribution or resale which,
in the opinion of counsel satisfactory to the Company, may be made without violating the
registration provisions of the Act; (b) has been advised and understands that (i) the Option Shares
have not been registered under the Act and are subject to restrictions on transfer and (ii) the
Company is under no obligation to register the Option Shares under the Act or to take any action
which would make available to the Optionee any exemption from such registration; and (c) has been
advised and understands that such Option Shares may not be transferred without compliance with all
applicable federal and state securities laws.



     9. Changes in Capital Structure. Notwithstanding any other provision of this Option,
in the event of any change in the outstanding capital stock of the Company by reason of a stock
dividend, merger, consolidation, recapitalization, reclassification, split-up, combination of
shares or otherwise, the number and class of shares subject to the Option and the Option Price will
be proportionately adjusted by the Company, as more particularly described in Article 9 of the
Plan, the terms of which are herein incorporated by reference.



     10. Legal Requirements. If the listing, registration or qualification of the Option
Shares upon any securities exchange or under any federal or state law, or the consent or approval
of any governmental regulatory body is necessary as a condition of or in connection with the
purchase of the Option Shares, the Company shall not be obligated to issue or deliver the certificates



 









 







representing the Option Shares as to which the Option has been exercised unless and until
such listing, registration, qualification, consent or approval shall have been effected or
obtained. This Option does not hereby impose on the Company a duty to so list, register, qualify,
or effect or obtain consent or approval. If registration is considered unnecessary by the Company
or its counsel, the Company may cause a legend to be placed on the certificates for the Option
Shares being issued calling attention to the fact that they have been acquired for investment and
have not been registered, such legend to read as follows:




“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS THERE IS A REGISTRATION
STATEMENT IN EFFECT COVERING SUCH SECURITIES OR THERE IS AVAILABLE AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS.”



     11. No Obligation to Exercise Option. The Optionee shall be under no obligation to
exercise the Option.



     12. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed to be properly given when personally delivered to the party entitled to receive the
notice or when sent by certified or registered mail, postage prepaid, properly addressed to the
party entitled to receive such notice at the address stated below:



	 	 	 	 	 
	 

	 	If to Company:
	 	CHI Systems, Inc.
	 

	 	 	 	Gwynedd Office Park
	 

	 	 	 	716 N. Bethlehem Pike, Suite 300
	 

	 	 	 	Lower Gwynedd, PA 19002
	 
	 	 	 	 
	 

	 	If to Optionee:	 	 






     13. Administration. This Option has been granted pursuant to the 1998 Stock Option
Plan adopted by the Board of Directors of the Company and accepted by the Shareholders of the
Company, and is subject to the terms and provisions thereof. By acceptance hereof, the Optionee
acknowledges receipt of a copy of the Plan. All questions of interpretation and application of the
Plan and this Option shall be determined by the Committee, and such determination shall be final,
binding and conclusive.



     14. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.



     15. Governing Law. This Agreement shall be governed by and construed under the laws
of the Commonwealth of Pennsylvania without regard to conflicts of laws principles.



     16. Counterparts. This Agreement may be executed in two or more counterparts,



 









 







each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.



     17. Amendment. This Agreement may not be amended except by an instrument in writing
signed by the parties.



     18. Inconsistent Provisions. In the event there is a conflict or inconsistency
between the terms and conditions of this Option and the terms and conditions of the Plan, the terms
and conditions of the Plan shall control.



     IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date first above
written.



	 	 	 	 	 
	 	 	CHI SYSTEMS, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Wayne W. Zachary, President & CEO
	 
	 	 	 	 
	 	 	 
	 

	 	 	 	          , Optionee






 









 





Schedule 2.1.9

CHI Financial Statements




<redacted>




 









 








Schedule 2.1.10

No Material Adverse Changes




<redacted>




 









 








Schedule 2.1.11

Unusual Transactions




<redacted>




 









 








Schedule 2.1.12

CHI Intellectual Property




<redacted>




 









 








Schedule 2.1.20

Title to Properties




<redacted>




 









 








Schedule 2.1.21

List of Leased Equipment




<redacted>




 









 








Schedule 2.1.22

List of Leases of Real Property




<redacted>




 









 








Schedule 2.1.23

Material Contracts




<redacted>




 









 








Schedule 2.1.24

Material Contracts Exceptions




None




 









 








Schedule 2.1.25

Defaults and Notices of Non-Compliance under Material Contracts




None




 









 








Schedule 2.1.26

Information Respecting CHI Employees




<redacted>




 









 








Schedule 2.1.30

Employee Benefit Plans




<redacted>




 









 








Schedule 2.1.32

Employment Claims




None




 









 








Schedule 2.1.33

Employment Obligations




None




 









 








Schedule 2.1.39

Guarantees or Indemnities




<redacted>




 









 








Schedule 2.1.40

Conflicting Agreements




<redacted>




 









 








Schedule 2.1.41

Litigation




None




 









 








Schedule 2.1.43

CHI Insurance Policies




<redacted>




 









 








Schedule 2.1.53

Approvals Required




Each of CHI’s government contracts contains a provision requiring CHI to give 30 days written

notice of a change in ownership to CHI’s Administrative Contracting Officer.




 









 





Schedule 2.1.60

Inventory




None




 









 





Schedule 2.1.67

Loss Carryforwards and Credit Carryforwards




<redacted>




 









 








Schedule 2.1.68

Transactions with Related Parties




<redacted>




 









 








Schedule 2.1.73

CHI Bank Accounts and Business Numbers




<redacted>




 









 








Schedule 2.1.74

Environmental Matters




None




 









 








Schedule 2.1.76

Confidentiality Agreements



Each Material Contract and all CHI’s other contracts, subcontracts, teaming agreements, licenses
and proposals submitted contain confidentiality obligations. In addition, each current employee of
CHI and each former CHI employee with a start date after May 2003 has entered into a
confidentiality agreement in favor of CHI.




 









 








Schedule 2.1.77

Restrictions on Business




<redacted>




 









 








Schedule 2.1.78

Undisclosed Liabilities




<redacted>




 









 









  Schedule 4.3.1

Allocation of  $7,250,000   Cash Portion of Purchase Price Among Sellers






<redacted>




 









 








Schedule 4.3.2(b)

Accounts Receivable and Government Contract Holdbacks




<redacted>




 









 








Schedule 4.3.3

Form of Escrow Agreement re Portion of Purchase Price




<redacted>




 









 








Schedule 4.3.4(a)

Allocation of OSIL Share Portion of Purchase Price Among Sellers




<redacted>




 









 








Schedule 4.3.4(b)

Allocation of Cash In Lieu of OSIL Shares Portion of Purchase Price Among Sellers




<redacted>




 









 








Schedule 6.1.7

Forms of Employment Agreements between CHI and Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke




<redacted>




 









 








Schedule 6.1.9

Form of Non-Competition Agreement




<redacted>




 









 








Schedule 6.1.10

Governmental Consents




<redacted>




 









 








Schedule 6.1.12

Capital Contribution Agreement




<redacted>




 









 








Schedule 6.1.13(e)

Form of Release




<redacted>




 









 








Schedule 6.1.13(l)

Form of Legal Opinion of Counsel to CHI and Sellers




<redacted>




 









 








Schedule 8.1

Conduct of CHI Business




As a result of this transaction, CHI systems will experience a modified fiscal year and modified

accounting cycle in order to accommodate the closing of the books on December 15, 2005. CHI

Systems’ normal fiscal year is October 1 – September 30 and normal accounting periods run monthly.

The December 15th closing will cause a premature close of the books for the fiscal year

and a modified accounting period cycle for the month of December.




 









 





Schedule 10.3.1

Majority Shareholder Purchase Price Received




<redacted>




 









 








Schedule 10.3.2

Minority Shareholder Purchase Price Received




<redacted>




 









 








Schedule 3.1.5

Exceptions respecting OSIL Financial Statements




Nil




 









 





Schedule 3.1.13

OSIL Authorized Capital




OSIL has the following authorized capital stock:





	 	(1)	 	An unlimited number of Common Voting Shares without par value;
	 
	 	(2)	 	100,000,000 Class A Preference Shares without par value issuable in series of
which one series of shares has been created, being 10,000,000 shares designated as
Class A Preference Shares Series A Convertible without par value;
	 
	 	(3)	 	100,000,000 Class B Preference Shares with a par value of $50 each issuable in
series, of which two series of shares have been created, namely;






	 	(a)	 	10,000,000 shares designated as Class B Series One Preference
Shares with a par value of $50 each, and
	 
	 	(b)	 	10,000,000 shares designated as Class B Series Two Preference
Shares with a pare value of $50 each.






	 	(4)	 	An unlimited number of Class C Preference Shares without par value issuable in
series, of which no series have been created.





Authorized Share Capital of Newco



Newco’s authorized capital consists of 1000 shares of common stock with a par value of $0.01 per
share.




 









 








Schedule 3.1.15

Preemptive Rights and Rights of First Refusal



The holders of Class B Series Two Preference Shares of OSIL have a right of first offer to purchase
all or part of any equity, equity linked or debt financing which OSIL intends to proceed with
within a period of twenty four months from the date of issuance of those shares. Those shares were
issued on April 11, 2005, and therefore the right of first offer expires on April 10, 2007.




 









 








Schedule 7.1.9(g)

Form of Legal Opinion of Counsel to OSIL and Newco




<redacted>




 









 








Schedule 9.8

Re-domiciling Memorandum




<redacted>