Document:

ex-10.1

 
 

 

 June 12, 2015
 

 Steve Smith
 John Suhr
 Aura Suhr
 Kevin Suhr
 Joleen Smith
 

 

 Re:
 Proposed Stock Purchase Agreement for all issued and outstanding capital stock in J.S. Technologies, Inc., a California corporation (“JS”)
 

 Ladies and Gentlemen:
 We are pleased to submit this binding Letter of Intent (“LOI”) whereby Avalanche International Corp., a Nevada corporation (“AVLP”) proposes to enter into a Stock Purchase Agreement with the stockholders of JS (collectively referred to herein as the “JS Stockholders”) under which AVLP will purchase all of the issued and outstanding shares of capital stock of JS from the JS Stockholders. These terms are not comprehensive and we expect that additional terms, including reasonable representations and warranties, will be incorporated into a final Stock Purchase Agreement (the “Definitive Agreement”) to be negotiated and prepared.  
 

 Item
 Description
 

 1. Stock Purchase
 Under the Definitive Agreement, AVLP shall acquire all of the issued and outstanding capital stock of JS, as listed by current stockholder and share amount on Schedule A attached hereto (the “JS Shares”).  
 

 2. Purchase Price
 The total purchase price to be paid to the JS Stockholders shall be $11,000,000, to be paid amongst each of the JS Stockholders in the specific amounts for each shareholder as set forth on Schedule A attached hereto.  Each JS Stockholder shall, at his election, receive his portion of the purchase price in cash, in the form of shares of preferred stock, or a combination of both.  All JS Stockholders must make their election in writing and within seven (7) days of the Closing Date.
 

 

 

 
 

 3.  Class B 
 Convertible
 Preferred Stock
 AVLP will designate a class of preferred stock for the transaction entitled “Class B Convertible Preferred Stock” and consisting of 2,750,000 shares.  The Class B Convertible Preferred Stock shall have a stated value of $4.00 per share and a first-position liquidation preference of $4.00 per share. The Class B Convertible Preferred Stock shall be convertible to common stock of AVLP at a rate of four (4) shares of common stock for each share of preferred stock converted.  The Class B Convertible Preferred Stock shall accrue dividends at a rate of six percent (6%) per year.  All accrued dividends shall be payable on or before 36 months from the date of issue.  All dividends shall be payable in cash, or at the option of AVLP, in shares of common stock valued at $1.00 per share.  All Class B Convertible Preferred Stock issued and outstanding at 36 months after the Closing Date shall be automatically converted to common stock of AVLP at the rate provided herein. Shares of Class B Convertible Preferred Stock shall be entitled to vote, and an as-if-converted basis, together with the share of common stock on all matters submitted to a vote of the stockholders of AVLP.
 

 4. Closing
 The anticipated effective date of the closing of the Definitive Agreement shall be the later of: (i) 120 days from the date of this LOI, or (ii) 60 days after delivery of the PCAOB audit as specified in 6(d), below (the “Closing Date.”). The Closing Date may be extended by agreement of the parties in writing, which shall not be unreasonably withheld.  All parties hereto covenant and agree to use their best efforts to facilitate the progress of the audit, to provide any assistance with the audit process which may be reasonably requested, and to work toward completion of the audit as quickly as practicable.
 

 5. Customary
 Provisions
 The Definitive Agreement will contain customary representations and warranties for a transaction of this type, including:
 

 a)
 AVLP and JS are legal entities duly organized, validly existing and in good standing under the laws of its respective governmental jurisdiction where the entity was incorporated or formed, and has corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted;
 

 

 

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 b)
 The party has, to the best of his, her or its knowledge, information and belief, complied with all applicable laws and regulations including, without limitation, all federal and state securities laws and regulations; and the party is not, and has not, and to his, her or its knowledge the past and present officers, directors and affiliates of such party are not and have not, been the subject of, nor does any such party have any reason to believe that it or any of its officers, directors or affiliates will be the subject of, any civil or criminal proceeding or investigation by any federal or state agency alleging the violation of any laws or regulations; 
 

 c)
 The party has not been the subject of any voluntary or involuntary bankruptcy proceeding, nor has he, she or it been a party to any material litigation other than as provided in a separate schedule to the other parties;
 

 The Definitive Agreement will also contain customary indemnification provisions to secure breaches of representations and warranties by the parties.
 

 6. Conditions
 Closing of the transaction contemplated under the Definitive Agreement shall be subject to certain conditions, including:
 

 a)
 Execution of the Definitive Agreement by JS Stockholders holding not less than sixty-five percent (65%) of the issued and outstanding capital stock of JS, together with such additional approvals or consents as are required by the Bylaws of JS and that certain JS “Shareholders’ Agreement with Buy/Sell Provisions” dated on or about January 27, 1998.  While it is AVLP’s goal under this LOI to acquire 100% of the issued and outstanding shares of JS, the effective acquisition of 65% of the issued and outstanding shares of JS, in compliance with the aforementioned documents, will be sufficient to bind AVLP to perform this LOI and Definitive Agreement. In the event that the parties are unable to obtain the shareholder approvals necessary, under the terms of such documents, to lawfully effect the sale to AVLP of at least 65% of the issued and outstanding capital stock of JS, then the transaction contemplated hereby will proceed as either: (i) a merger of JS with and into a subsidiary of AVLP, or (ii) a sale of substantially all of the assets of JS to AVLP.
 

 

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 b)
 AVLP will: (i) stand ready, willing, and able to deliver the purchase price as listed on Schedule A hereto with regard to each minority shareholder of JS who agrees to sell his or her JS shares under the Definitive Agreement; and (ii) will consummate the purchase of the JS shares held by each such stockholder on the Closing Date.
 

 c)
 Absence of pending or threatened litigation regarding JS or its business or operations. “Threatened litigation” shall mean any claim that is communicated to any party to this LOI where a lawsuit, administrative claim or arbitration is threatened or demanded;
 

 d)
 AVLP and JS obtaining all necessary board and stockholder approvals and consents;
 

 e)
 JS obtaining an unqualified audit opinion from a PCAOB accredited audit firm regarding its financial statements for the last two fiscal years, together with an auditor review of its financial statements for any subsequent interim quarterly periods.   There shall be no other conditions pertaining to the PCAOB audit, other than the following:
 i.
 The audited financial statements must confirm a minimum of $10,000,000 in gross sales for JS over the prior 12 months;
 ii.
 The audited financial statements must confirm total fixed assets for JS of at least 90% of the current unaudited figure, which is $1,579,247.32; and
 iii.
 The audited financial statements must confirm a total balance for the S&J Equipment Loan of not more than $700,000.
 In the event that the transaction contemplated hereby does not close, JS may retain a copy of the audited financial statements and audit report for its own use.
 

 

 

 

 

 

 

 

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 f)
 On the Closing Date, the concurrent closing of an agreement by AVLP to purchase all of the issued and outstanding members’ interests in S&J Design Labs, LLC.  John Suhr, Steve Smith and AVLP are to agree upon a purchase price of S&J Design Labs, LLC within 30 days of execution of this LOI.  In the event John Suhr, Steve Smith and AVLP are unable to agree upon a purchase price for S&J Design Labs, LLC within 30 days of execution of this LOI, they agree to the following process for the determination of the sales price of S&J Design Labs, LLC:  AVLP and any seller will have the right retain to their own interested appraiser to submit a proposed appraisal of S&J Design Labs, LLC with the appraisal date being the date of this LOI.  The parties’ proposed appraisals shall be submitted to a disinterested appraiser, to be agreed upon mutually by all parties, who shall act as a referee and will make a binding determination of the purchase price for S&J Design Labs, LLC.  Alternatively, the parties have the option of hiring one disinterested appraiser to render a binding determination of the purchase price of S&J Design Labs, LLC.
 

 g)
  [REDACTED]
 

 h)
 On the Closing Date, the issued and outstanding capital stock of JS consists of 1,000 shares, all of which are free of any lien, pledge, encumbrance, or other claim, except as set forth in that certain JS “Shareholders’ Agreement with Buy/Sell Provisions” dated on or about January 27, 1998;
 

 i)
 [REDACTED]
 

 i.
 [REDACTED]
 

 ii.
 [REDACTED]
 

 j)
 [REDACTED]
 

 k)
 [REDACTED]
 

 

 

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 l)
 There have been no material adverse changes in the assets, liabilities, business, properties, operations, financial condition, results of operations, or prospects of JS’s business between the date of this LOI and the Closing Date. “Material adverse change” shall mean any adverse change of such a nature that it would be substantially likely to be viewed by a reasonable person in AVLP’s position to have significantly altered the total mix of information made available regarding JS.
  
 m)
 [REDACTED]
 

 n)
 Effective as of the Closing Date, JS shall release the Suhrs and the Smiths from any and all claims, known and unknown, that JS may have against any of them as of the date of closing of the Definitive Agreement.  Effective as of the Closing Date, JS and AVLP agree to defend and indemnify the Suhrs and the Smiths against any lawsuit or claim brought by any other shareholder of JS that is derivative in nature and provided that the claim asserted is a claim that could have been brought by JS for conduct occurring prior to the close of the Definitive Agreement.  AVLP agrees to make reasonable efforts to obtain written releases of all known and unknown claims that could be brought against JS or the Suhrs or the Smiths when the shares of the minority shareholders are purchased under this LOI and Definitive Agreement.  Further, effective as of the Closing Date, AVLP agrees to defend and indemnify the Suhrs and the Smiths against any lawsuit or claim brought by any shareholder of AVLP for any and all claims concerning the LOI or the Definitive Agreement, including any claim against such parties relating to their entry into this LOI or their execution and consummation of the Definitive Agreement.
 

 o)
 In connection with the closing of the Definitive Agreement, AVLP or SJ shall, with regard to all liabilities of JS and S&J Design Labs, LLC, to which the Suhrs or the Smiths are personally obligated and which are disclosed prior to the close of the Definitive Agreement, either satisfy such obligations in full or re-finance or re-negotiate such obligations so that the Suhrs and/or the Smiths have no further personal obligation.  In addition to any other such obligations which shall be disclosed in writing, such obligations include the following:
 i.
 a certain equipment loan made to S&J Design Labs, LLC by America West Bank, which has an approximate balance of $642,000; and 
 

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 ii.
 a certain equipment loan made by America West Bank to JS, which has an approximate balance of $79,000.
 

 p)
 All of the JS Stockholders agreeing to sell their shares under the Definitive Agreement shall agree to a general release of JS, S&J Design Labs, LLC, and their respective past and present officers, directors, employees, and shareholders.
 

 7. Operation of 
 JS prior to Closing
 Date
 Until the Closing Date, the business of JS will be conducted in substantially the same manner as it is presently conducted and no material changes in the business of JS will be made without informing AVLP prior thereto.  Between the date of this LOI and the Closing Date, Steve Smith and Larry Campbell will receive their normal compensation and benefits and will continue to work at the JS facility.
 

 Closing of the transaction contemplated under the Definitive Agreement shall be conditioned upon there having been no material adverse changes and no material adverse developments in the assets, liabilities, business, properties, operations, financial condition, results of operations, or prospects of JS’s business between the date of this LOI and the Closing Date.
 

 Between the date of this LOI and the Closing Date, an independent financial controller will be appointed by AVLP to oversee day-to-day accounting and financial transactions of JS until the close of the transaction.  Further, between the date of this LOI and the Closing Date, Steve Smith, John Suhr, and representatives of AVLP will meet regularly to review the operations of JS, and no material changes to the operations of JS shall be made without the agreement of Steve Smith, John Suhr, and AVLP.
 

 [REDACTED]
 

 8. [REDACTED]
 

 

 9. [REDACTED]
 

 

 

 

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 10. No-shop and
 Breakup Fees
 The parties hereto agree to work in good faith expeditiously towards a closing.  Between execution of the LOI and close of the Definitive Agreement, JS, Steve Smith, John Suhr, and Aura Suhr agree that they will not, directly or indirectly, (i) take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than AVLP relating to the sale or issuance, of any of the capital stock of JS or the acquisition, sale, lease, license or other disposition of JS or any material part of the stock or assets of JS, or (ii) enter into any discussions, negotiations or execute any agreement related to any of the foregoing, and shall notify the AVLP promptly of any inquiries by any third parties in regards to the foregoing. 
 

 If, in violation of this provision, JS, Steve Smith, John Suhr, and/or Aura Suhr enter to any agreement relating to the sale or issuance, of any of the capital stock of JS or the acquisition, sale, lease, license or other disposition of JS or any material part of the stock or assets of JS, such parties shall pay to AVLP an amount equal to ten percent (10%) of the total consideration received by each of them as a result of such agreement.
 

 In the event that AVLP is ready, willing and able to close the transaction contemplated hereby on or before the Closing Date and any other party hereto otherwise fails or refuses to close the transaction and sell his or her shares to AVLP, such party, severally and not jointly, shall pay to AVLP, as liquidated damages, a termination fee of $250,000.
 

 In the event that all of the other parties hereto are ready, willing and able to close the transaction contemplated hereby on or before the Closing Date and AVLP fails or refuses to close the transaction, AVLP shall pay to JS, as liquidated damages, a termination fee of $250,000.
 

 11. Pre-Closing
 Covenants
 The Parties shall cooperate with each other and use their reasonable best efforts to execute and deliver the Definitive Agreement and all other documents necessary and desirable to effect the transaction contemplated hereby as soon as possible and to thereafter satisfy each condition to Closing specified thereunder.
 

 12. Due Diligence
 and Costs
 Immediately upon execution of this LOI, AVLP and its advisors will have full access during normal business hours to copies of all documents and information (the “Materials”) regarding the assets and the business and operations of JS that are pertinent to the transaction contemplated by this LOI.
 

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 Each party will bear their own costs and expenses relating to this due diligence process as well as the negotiation and implementation of the Definitive Agreement, including all legal and accounting fees.  Upon the abandonment of this transaction by the parties, each party will return to the other any Materials received or certify the Materials as destroyed if the Definitive Agreement is not executed.
 

 13. Governing Law
 This LOI and the Definitive Agreement shall be governed and construed in accordance with the laws of the State of California without giving effect to principles of conflicts or choice of laws thereof. 
 

 14. Dispute 
 Resolution
 In the event of a dispute or any alleged breach of the Definitive Agreement, any litigation shall be resolved in the trial courts of of Los Angeles or Orange County, California.  The prevailing party in any litigation shall be entitled to recover all expenses, costs and fees, including attorney fees, from the losing party.
 

 15. Non-
 disparagement
 For a period commencing on the date hereof and continuing indefinitely, all parties hereto hereby covenant and agree that they shall not, directly or indirectly, defame, disparage, create false impressions, or otherwise put in a false or bad light any of the other parties hereto, or JS’s products or services, its business, reputation, conduct, practices, past or present employees, financial condition or otherwise.  Further, no party hereto shall induce, solicit, influence, or attempt to influence any agent, vendor, supplier, employee, consultant, or independent contractor of JS to terminate their position or relationship with JS, reduce the amount of business that it historically has done with JS, or otherwise adversely alter its business relationship with JS.
 

 This LOI may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument.  Delivery to us of an executed copy of this LOI by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery to us of the LOI as of the date of successful transmission to us.
 

 

 

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 We look forward to working with you to complete the Definitive Agreement successfully and expeditiously.  If the foregoing correctly sets forth your understanding, please evidence your agreement to this LOI by executing a copy in the space set forth below.
 

 Sincerely,
 

 Avalanche International Corp.
 

 By: /s/ Milton C. Ault III
 Milton C. Ault III, Chairman of the Board
 

 Agreed to and Accepted:
 

 This 12th day of June 2015.
 

 

 

 

 J.S. Technologies, Inc.
 

 By: /s/ John Suhr
 Print name: John Suhr
 Title: CEO
 

 

 /s/ Steve Smith
 Steve Smith
 

 

 /s/ Joleen Smith
 Joleen Smith
 

 

 /s/ John Suhr
 John Suhr
 

 /s/ Aura Suhr
 Aura Suhr
 

 /s/ Kevin Suhr
 Kevin Suhr
 

 

 

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 Schedule A – JS Stockholders
 

 	 	 	 	
	 Name
	 Number of JS Shares
	 Purchase Price (all Cash)
	 Purchase Price (all AVLP Class B Convertible Preferred Shares)

	 Steve Smith 
	 275
	 $3,000,000
	 750,000

	 John Suhr
	 275
	 $4,000,000
	 1,000,000

	 Aura Suhr
	 50
	 [joint with John Suhr]
	 [joint with John Suhr]

	 Jamie Laura
	 150
	 $1,500,000
	 375,000

	 Kuntaku Sei
	 50
	 $500,000
	 125,000

	 Tatsuo Okada
	 50
	 $500,000
	 125,000

	 John Wolfe
	 50
	 $500,000
	 125,000

	 Jeff Wolfe 
	 50
	 $500,000
	 125,000

	 Adam Roller
	 50
	 $500,000
	 125,000

	 Totals
	 1,000
	 $11,000,000
	 2,750,000

 

 

 11Preferred Stock Purchase Agreement

  Series C Cumulative, Convertible
 Preferred Stock Purchase Agreement
 

 This Series C Cumulative, Convertible Preferred Stock Purchase Agreement (“Agreement”) is made as of June 10, 2015 (the “Effective Date”), between Pernix Group, Inc., a Delaware corporation (“Pernix” or “Seller”), and Ernil Continental S.A., BVI (“Buyer”).
 

 RECITALS
 

 Seller desires to sell, and Buyer desires to purchase, shares of Pernix Series C Preferred Stock as delineated for the consideration and on the terms set forth in this Agreement.
 

 	 	 	 	
	 Investment Date
	 Total Shares
	 Price Per Share
	 Total Investment

	 June 10, 2015
 

	 550,000
 

	 $10.00
 

	 $5,500,000.00
 

 

 

 AGREEMENT
 

 The Parties, intending to be legally bound, agree as follows:
 

 1.
 Definitions.  The following defined terms are used in this Agreement: 
 

 1.1
 “Best Efforts” means the efforts that a prudent person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible.
 

 1.2
 “Buyer” means Ernil Continental S.A., BVI, with its European office at Herrengasse 5, PO Box 1155, FL – 9490 Vaduz, Liechtenstein.
 

 1.3
 “Closings” means the events described in Section 2.4 and encompass the consummation of the transactions described in this Agreement.
 

 1.4
 “Closing Date(s)” means the dates and time as of which the Closing actually takes place.
 

 1.5
 “Party” means, individually, the Buyer and the Seller.  “Parties” collectively refers to the Buyer and the Seller.
 

 1.6
 “Securities Act” means the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law, as well as any other United States securities laws applicable to this transaction.
 

 1.7
 “Seller” or “Pernix” or the “Company” means Pernix Group, Inc., a Delaware corporation with its offices at 151 E. 22nd Street, Lombard, Illinois 60148, United States.  
 

 1.8
 “Shares” means shares of Series C Cumulative, Convertible Preferred Stock described below in Paragraph 2.1 to be issued by Pernix as a result of this transaction.
 

 

 

 

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 2.
 Sale and Transfer of Shares; Closing
 

 2.1
 Authorization.  The Company has, or before the initial Closing will have, duly authorized for the sale and issuance, pursuant to the terms of this Agreement, 550,000 shares of its Series C Cumulative, Convertible Preferred Stock, $0.01 par value per share, having the rights, restrictions, privileges and preferences set forth in the Certificate of Designation, the form of which is attached as Exhibit A.  The Company has/will adopt and file the Certificate of Designation with the Secretary of State of Delaware.
 

 2.2
 Shares.  Subject to the terms and conditions of this Agreement, at the Closings, Seller will sell and transfer a total of Five Hundred Fifty Thousand (550,000) Shares to Buyer, and Buyer will purchase the Shares from Seller.
 

 2.3
 Purchase Price.  The purchase price (the “Purchase Price”) for the Shares will be Ten Dollars ($10.00 USD) per share.
 

 2.4
 Closings.  The purchase and sale (the “Closings”) provided for in this Agreement will take place on or about the dates listed below:
 

 (i)
 on or about June 10, 2015 (for 550,000 Shares) or
 (ii)
 at such other time and place as the Parties may agree.  Subject to the provisions of Section 4, failure to consummate the purchase and sale provided for in this Agreement on the dates and times and at the places determined pursuant to this Section 2.4 will not result in the termination of this Agreement and will not relieve any Party of any obligation under this Agreement.
 

 2.5
 Closing Obligations.  At each Closing:
 

 2.5.1
 Seller will deliver to Buyer:  (i) confirmation that funds have been received by the Company and (ii) either a copy of a letter instructing the transfer agent of the Company to issue the new certificates representing the Shares purchased at such Closing or the Company shall deliver to the Buyer a certificate for the number of Shares being purchased at such Closing, registered in the name of the Buyer.
 

 2.5.2
 Buyer will deliver to Seller the amount of the aggregate Purchase Price for the Shares purchased at such Closing by wire transfer to an account specified by Pernix.
 

 2.6
 Reservation of Common Stock.  The Company shall reserve and maintain a sufficient number of shares of Common Stock for issuance upon conversion of all of the outstanding Shares.
 

 2.7
 Redemption.  The Parties may negotiate in good faith for the redemption of Shares for cash, upon 20 days written request to the Company. Such redemption is not mandatory on the part of the Seller.
 

 

 

 

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 3. 
 Representations and Warranties of the Buyer.  Buyer represents and warrants to Seller as follows:
 

 3.1
 Buyer is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act.  For this purpose, Buyer understands that an “accredited investor” includes:
 

 3.1.1.
 any individual who: (i) has a net worth (with spouse) in excess of $1 million; or (ii) has had an individual income in excess of $200,000 (or joint income with spouse in excess of $300,000) in each of the two most recent years and who reasonably expects the same income level for the current year; or (iii) who is an executive officer or director of the Company;
 

 3.1.2
 any entity in which all of the equity owners or partners are “accredited investors”; or
 

 3.1.3
 any corporation or partnership with total assets in excess of $5,000,000 that was not formed for the specific purpose of purchasing the securities sold hereunder.
 

 3.2
 Buyer considers itself to be a sophisticated investor in companies similarly situated to the Company, and Buyer has substantial knowledge and experience in financial and business matters (including knowledge of finance, securities and investments, generally, and experience and skill in investments based on actual participation) such that Buyer is capable of evaluating the merits and risks of the prospective investment in the Company.
 

 3.3
 Buyer’s current address is as set forth in Section 1. 
 

 3.4
 Buyer has been advised and acknowledges that the issuance of the Shares, or the shares of common stock into which the Shares may be converted, will not be registered under the Securities Act, in reliance upon the exemption(s) from registration promulgated thereunder, and, therefore, are “restricted securities.” Buyer also acknowledges that the issuance of the Shares will not be registered under the securities laws of any state. Consequently, Buyer agrees that the Shares cannot be resold unless they are registered under the Securities Act and applicable state securities laws, or unless an exemption from such registration requirements is available.  Buyer has been advised and acknowledges that the Company is under no obligation to take any action necessary in order to make available any exemption for the transfer of the Shares without registration.
 

 3.5
 Buyer is purchasing the Shares, and the shares of common stock into which the Shares may be converted, solely for Buyer’s own account and not as nominee for, representative of, or otherwise on behalf of, any other person.  Buyer is purchasing the Shares with the intention of holding the Shares for investment, with no present intention of participating directly or indirectly in a subsequent public distribution of the Shares unless registered under the Securities Act and applicable state securities laws, or unless an exemption from such registration requirements is available. Buyer shall not make any sale, transfer or other disposition of the Shares in violation of state or federal law.
 

 3.6
 Buyer has been advised that there is no assurance that the Company will continue to be a “Public Company” (i.e., a company with equity securities registered with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or, even if the Company continues to be a Public Company, that there will be an active market for the Shares or the shares of common stock into which the Shares may be converted.  Buyer is aware that Buyer’s investment in the Company is speculative and involves a high degree of risk of loss arising from, among other things, substantial market, operational, competitive and other risks, and, having made Buyer’s own evaluation of the risks associated with this investment, Buyer is aware and Buyer has been advised that Buyer must bear the economic risks of a purchase of the Shares.
 

 

 

 

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 3.7
 Buyer acknowledges that the Shares were not offered to Buyer by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which Buyer was invited by any of the foregoing means of communication.
 

 3.8
 Buyer understands and agrees that the Company, and all current and future stockholders of the Company, are relying on the agreements and representations contained herein.
 

 3.9
 In connection with the purchase of the Shares by Buyer, Buyer has not paid and will not pay, and has no knowledge of the payment of, any commission or other direct or indirect remuneration to any person or entity for soliciting or otherwise coordinating the purchase of the Shares.
 

 3.10
 Buyer has been advised and agrees that there will be placed on any certificates representing the Shares, or the shares of common stock into which the Shares may be converted, or any substitution(s) thereof, a legend stating in substance the following (and including any restrictions or conditions that may be required by any applicable state law), and Buyer has been advised and further agrees that the Company will refuse to permit the transfer of the Shares out of Buyer’s name in the absence of compliance with the terms of such legend:
 

 “The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under any state securities laws and may not be sold, pledged, transferred, assigned or otherwise disposed of except in accordance with such Act and the rules and regulations thereunder and in accordance with applicable state securities laws.  The Company will transfer such shares only upon receipt of evidence satisfactory to the Company, which may include an opinion of counsel, that the registration provisions of such Act have been compiled with or that such registration is not required and that such transfer will not violate any applicable state securities laws.”
 

 3.11
 Buyer is aware that the Company may offer and sell additional shares of Preferred Stock, Common Stock or other securities in the future, thereby diluting Buyer’s percentage equity ownership of the Company.
 

 3.12
 Buyer is acquiring the Shares, or the shares of common stock into which the Shares may be converted, for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act.
 

 3.13
 There is no pending proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the contemplated transactions in this Agreement.  To Buyer's knowledge, no such proceeding has been threatened.
 

 3.14
 Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents’ commissions or other similar payment in connection with this Agreement and will indemnify and hold Sellers harmless from any such payment alleged to be due by or through Buyer as a result of the action of Buyer or its officers or agents.
 

 

 

 

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 4. 
 Termination.  
 

 4.1
 Termination Events.  This Agreement may be terminated prior to the Closing by mutual consent of Buyer and Seller.
 

 4.2
 Effect of Termination.  If this Agreement is terminated pursuant to Section 4.1, all further obligations of the Parties under this Agreement will terminate, except that the obligations in Section 5.1 will survive; provided, however, that if this Agreement is terminated by a Party because of the breach of the Agreement by the other Party or because one or more of the conditions to the terminating Party’s obligations under this Agreement is not satisfied as a result of the other Party’s failure to comply with its obligations under this Agreement, the terminating Party’s right to pursue all legal remedies will survive such termination unimpaired.
 

 5. 
 General Provisions.
 

 5.1
 Expenses.  Except as otherwise expressly provided in this Agreement, each Party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the contemplated transactions, including all fees and expenses of agents, representatives, counsel, and accountants. 
 

 5.2
 Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a Party may designate by notice to the other Party):
 

 

 	 	
	 Seller:
	 Pernix Group, Inc.

	 

	 151 E. 22nd Street

	 

	 Lombard Ill. 60148 USA

	 

	 

	 Attention:
	 Nidal Z. Zayed

	 

	 CEO and President

	 

	 

	 Fax:
	 (630) 620-4753

	 

	 

	 Buyer:
	 Ernil Continental S.A., BVI

	 

	 Herrengasse 5

	 

	 PO Box 1155

	 

	 FL – 9490 Vaduz

	 

	 

	 Attention:
	 Mrs. Sandra A. Marc-Büchel

	 

	 Director & President

	 

	 

	 Fax:
	 00423 237 69 78

 

 

 

 

 

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 5.3
 Waiver.  The rights and remedies of the parties to this Agreement are cumulative and not alternative.  Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable law, (i) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party; (ii) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (iii) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.
 

 5.4
 Entire Agreement and Modification.  This Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter.  This Agreement may not be amended except by a written agreement executed by the Party to be charged with the amendment.
 

 5.5
 Assignments, Successors, No Third-Party Rights.  Neither Party may assign any of its rights under this Agreement without the prior consent of the other Party (which will not be unreasonably withheld), except that Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer.  Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties.  Nothing expressed or referred to in this Agreement will be construed to give any person or entity other than the Parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and assigns.
 

 5.6
 Severability.  If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
 

 5.7
 Governing Law.  This Agreement will be governed by the laws of the State of Delaware without regard to conflicts of laws principles.
 

 5.8
 Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
 

 IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the Effective Date through their duly authorized and empowered representatives.
 

 	 	 	 	 	
	 Buyer:
	 

	 

	 Seller:
	 

	 

	 
/s/ Sandra A. Marc-Büchel
	 

	 

	 
/s/ Nidal Z. Zayed

	 

	 Sandra A. Marc-Büchel
	 

	 

	 Nidal Z. Zayed

	 

	 Director & President
	 

	 

	 President & Chief Executive Officer

	 

	 Ernil Continental S.A., BVI
	 

	 

	 Pernix Group, Inc.

 

 

 

 

 6

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