Document:

Exhibit 10.1

 

MEMBERSHIP INTEREST
PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST
PURCHASE AGREEMENT (this “Agreement”) is entered into as of March 30, 2012, by and between BRYCE JOHNSON
(“Johnson”), PAUL KELLY, (“Kelly”), and VINCE HILS (“Hils”)
(Hils, Johnson and Kelly are individually referred to as a “Seller” and collectively as the “Sellers”),
and POWERVERDE, INC., a Delaware corporation (the “Buyer”). The Buyer and each of the Sellers are sometimes
referred to in this Agreement as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

WHEREAS, the Sellers
together are the sole owners and holders of record of all of the issued and outstanding membership interests (collectively, the
“Interests”) in Cornerstone Conservation Group LLC, an Arizona limited liability company (the “Company”);

 

WHEREAS, the Sellers
desire to sell to the Buyer, and the Buyer desires to purchase and acquire from the Sellers, all of the Interests, on the terms
and subject to the conditions set forth in this Agreement; and

 

WHEREAS, on November
1, 2011, the Parties entered into a binding letter of intent (the “LOI”) setting forth the principal terms of
the transactions set forth herein, and this Agreement is the Definitive Document contemplated by the LOI.

 

NOW, THEREFORE, for
and in consideration of the mutual representations, warranties, promises and agreements made in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound,
hereby agree as follows:

 

AGREEMENT:

 

1.              Definitions.Except
as otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings set forth in this Section
1.

 

1.1           “Accredited
Investor” has the meaning set forth in Regulation D promulgated under the Securities Act.

 

1.2           “Adverse
Consequences” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees
and expenses.

 

1.3          “Code”
means the Internal Revenue Code of 1986, as amended.

 

    	

    	 

    

 

1.4          “Environmental
Requirements” means all federal, state, and local statutes, regulations, and ordinances concerning pollution or protection
of the environment, including all those relating to the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of
any hazardous materials, substances, or wastes, as such requirements are enacted and in effect on or prior to the Closing Date.

 

1.5          “Lien”
means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings, (b) purchase money liens and
liens securing rental payments under capital lease arrangements, and (c) other liens arising in the ordinary course of business
and not incurred in connection with the borrowing of money.

 

1.6          “Person”
means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization, any other business entity or a governmental entity (or any department, agency,
or political subdivision thereof).

 

1.7          “Securities
Act” means the Securities Act of 1933, as amended.

 

1.8          “Sellers’
Representative” means Bryce Johnson.

 

1.9          “Tax”
or “Taxes” means any federal, state, or local income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.

 

1.10          “Tax
Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment thereof.

 

1.11          “Intellectual
Property” means:

 

(a) all trademarks
(registered or unregistered), service marks, brand names, trade names, domain names, certification marks, trade dress, assumed
names, other indications of origin and the goodwill associated therewith, and all registrations or applications for registration
thereof in any jurisdiction, including any extension, modification or renewal of any such registration or application (collectively,
“Trademarks”);

 

(b) all patents,
patent applications, continuations, continuations-in-part, divisionals and foreign counterparts in any jurisdiction, and any inventions
whether patented, patentable or not (collectively, “Patents”);

 

(c) all copyrights,
database rights and moral rights in both published works and unpublished works, including all such rights in Software, user and
training manuals, marketing and promotional materials, internal reports, business plans and any other writings, expressions, mask
works, firmware and videos, whether copyrighted, copyrightable or not, and all registrations or applications for registration of
copyrights thereof and any renewals or extensions thereof in any jurisdiction (collectively, “Copyrights”);

 

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(d) trade secret
and confidential information, and rights in any jurisdiction to limit the use or disclosure thereof by a third party, including
such rights in inventions, discoveries and ideas, whether patented, patentable or not in any jurisdiction (and whether or not reduced
to practice), know-how, customer lists, technical information, proprietary information, technologies, processes and formulae, software,
data, plans, drawings and blue prints, whether tangible or intangible and whether stored, compiled, or memorialized physically,
electronically, photographically or otherwise; and

 

(e) any similar
intellectual property or proprietary rights similar to any of the foregoing, licenses (whether implied or otherwise), immunities,
obligations to assign, transfer or license, covenants not to sue and the like relating to the foregoing, and any claims or causes
of action arising out of or related to any infringement, misuse or misappropriation of any of the foregoing, including actions
arising out of infringements, misuses, or misappropriations that occurred prior to the effective date of this Agreement.

 

2.              Purchase
and Sale of Interests.

 

2.1            Basic
Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Sellers,
and the Sellers agree to sell to the Buyer, all of the Interests for the consideration specified below in this Section 2.

 

2.3            Consideration.
In consideration of the Interests purchased hereunder, the Buyer agrees to provide to the Seller at the Closing the following
consideration:

 

(a)            The
issuance of 2,260,000 shares of the Buyer’s common stock to Sellers and/or their affiliates (collectively, the “Common
Shares”) as follows:

 

	 	(i)	1,575,000 shares to Johnson or a trust designated by Johnson;
	 	 	 
	 	(ii)	337,500 shares to Kelly or a trust designated by Kelly;
	 	 	 
	 	(iii)	337,500 shares to Hils or a trust designated by Hils; and
	 	 	 
	 	(iv)	10,000 shares to Paul Smith or a trust designated by Smith.

 

(b)          The
issuance of fully vested three–year warrants (collectively, the “Warrants”) to purchase an aggregate of
300,000 shares of the Buyer’s common stock as follows:

 

	 	(i)	50,000 shares to Johnson at an exercise price of $2.00 per share, exercisable beginning January 1, 2012, through December 31, 2016;
	 	 	 

 

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	 	(ii)	50,000 shares to Kelly at an exercise price of $2.00 per share, exercisable beginning January 1, 2012, through December 31, 2016;
	 	 	 
	 	(iii)	50,000 shares to Johnson at an exercise price of $3.00 per share, exercisable beginning July 1, 2012, through June 30, 2017;
	 	 	 
	 	(iv)	50,000 shares to Kelly at an exercise price of $3.00 per share, exercisable beginning July 1, 2012, through June 30, 2017;
	 	 	 
	 	(v)	50,000 shares to Johnson at an exercise price of $4.00 per share, exercisable beginning January 1, 2013, through December 31, 2017; and
	 	 	 
	 	(vi)	50,000 shares to Kelly at an exercise price of $4.00 per share, exercisable beginning January 1, 2013, through December 31, 2017.

 

3.              Appointment
to Board.

 

3.1            In
further consideration of the purchase of the Interests hereunder, the Parties hereby agree and acknowledge that (i) pursuant to
the LOI Johnson has been appointed to Buyer’s Board of Directors on November 1, 2011; and (ii) Kelly shall be appointed to
Buyer’s Board of Directors no later than November 1, 2012.

 

4.              Transition
Services.

 

4.1            Until
the close of business in Phoenix, Arizona, on December 31, 2011 (the “Initial Period”), Sellers shall provide
to Buyer and/or the Company at no charge such part-time consulting services as Buyer shall reasonably request, including, but not
limited to, services relating to (i) further development of the Company’s combined cooling, heating and power (“CCHP”)
systems; (ii) national and international distribution of CCHP systems; (iii) development of geothermal hybrid systems and advance
cooling tower assisted geothermal systems; and (iv) improvement and application of Buyer’s waste heat systems. After the
Initial Period, the Parties agree to negotiate in good faith appropriate compensation/service agreements for Sellers’ further
services, including intellectual property contributions, subject to mutual approval, which shall not be unreasonably withheld.

 

5.              Closing.

 

5.1         The
closing of the transactions contemplated by this Agreement (the “Closing”) shall occur simultaneously upon the
due execution and delivery of this Agreement and will take place at the offices of Carlton Fields, P.A. at 100 SE 2nd
Street, Suite 4200, Miami, Florida 33131 or at such other time and place as the parties may agree in writing (the date on which
the Closing actually occurs is hereinafter referred to as the “Closing Date”).

  

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6.              Deliveries
at Closing.

 

6.1            Sellers’
Deliverables. At the Closing, Sellers will execute and/or deliver to Buyer

 

(i)         any
and all assignments of membership interests and/or such other instruments as shall reasonably be required to transfer to Buyer
all right, title and interest in and to the Interests, and sufficient to transfer the Interests to Buyer free and clear of all
Liens; and

 

(ii)         such
other documents or instruments as Buyer or its counsel may reasonably request consistent with Sellers’ obligations hereunder.

 

6.2            Buyer’s
Deliverables. At the Closing, Buyer will execute and deliver to Sellers

 

	 	(i)	the stock certificates evidencing the Common Shares; and
	 	 	 
	 	(ii)	the Warrants.

 

7.              Representations
and Warranties Concerning Transaction.

 

7.1            The
Sellers’ Representations and Warranties.  The Sellers, jointly and severally, represent and warrant to the Buyer
that the statements contained in this Section are correct and complete as of the Closing Date.

 

(c)            Authorization
of Transaction. Each of the Sellers has full power and authority to execute and deliver this Agreement and to perform his obligations
under this Agreement. This Agreement is a valid and legally binding obligation of the Sellers, enforceable in accordance with its
terms and conditions. The Sellers need not give any notice to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement and all other agreements contemplated by this Agreement have been duly authorized by
the Sellers.

 

(d)            Non-contravention.
Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement,
will: (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of the Sellers is subject; (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which any of
the Sellers is a party or by which he is bound or to which any of his assets is subject; or (iii) result in the imposition or creation
of a Lien upon or with respect to the Interests.

 

(e)            Brokers’
Fees. The Sellers have no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.

 

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(f)             Interests.
The Sellers are the holders of record and beneficially own all of the Interests, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws), taxes, Liens, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The Sellers are not a party to any option, warrant, purchase right, or other
contract or commitment (other than this Agreement) that could require the Sellers to sell, transfer, or otherwise dispose of the
Interests. None of the Sellers is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting
of the Interests.

 

(g)            Securities
Laws. Each of the Sellers expressly agrees and acknowledges that the Common Shares, the Warrants and the common shares underlying
the Warrants (collectively the “Securities”) are not being registered and Buyer has no present intention of
registering such Securities pursuant to the Securities Act or otherwise, and the issuance of the Securities is intended to be exempt
from registration under Section 4(2) of the Securities Act as a “transaction by an issuer not involving any public offering”
and that reliance on such exemption is predicated, in part, on the Sellers’ representations and warranties contained herein.
The Sellers further acknowledge that the Securities are being obtained solely for the Sellers’ own account and for investment
purposes only, within the meaning of the Securities Act, and that the Sellers have no plan, intention, contract, understanding,
agreement or arrangement with any person to sell, assign, pledge, hypothecate or otherwise transfer to any person the Securities
or any part thereof. Each of the Sellers understands that the Securities are characterized as “restricted securities”
under the federal securities laws inasmuch as such Securities are being acquired from Buyer in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities
Act, only in certain limited circumstances. In this connection, each Seller is familiar with SEC Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities Act.

 

(h)            Disclosure.
No representation or warranty by the Sellers contained in this Agreement or any document or certificate furnished or to be furnished
by or on behalf of the Sellers to the Buyer in connection herewith or with the Closing contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact required to make the statements contained herein or therein
not misleading.

 

7.2            The
Buyer’s Representations and Warranties. The Buyer represents and warrants to the Sellers that the statements
contained in this Section are correct and complete as of the Closing Date.

 

(a)            Organization
of the Buyer. The Buyer is a corporation duly organized, validly existing, and in good standing or with active status under
the laws of Delaware.

 

(b)            Authorization
of Transaction. The Buyer has full power and authority (including full corporate or other entity power and authority) to execute
and deliver this Agreement and to perform its obligations under this Agreement. This Agreement is a valid and legally binding obligation
of the Buyer, enforceable in accordance with its terms and conditions. The Buyer need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of this Agreement and all other agreements contemplated
by this Agreement have been duly authorized by the Buyer.

 

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(c)            Non-contravention.
Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement,
will: (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter, bylaws, or other
governing documents or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is
subject.

 

(d)            Brokers’
Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.

 

(e)            Investment.
The Buyer is not acquiring the Interests with a view to or for sale in connection with any distribution thereof within the meaning
of the Securities Act.

 

(f)            Valid
Issuance of the Shares. The Common Shares that are being issued to the Sellers hereunder, when issued and delivered in accordance
with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable,
and will be free of all Liens and restrictions on transfer other than restrictions on transfer under this Agreement and under applicable
state and federal securities laws and free of preemptive rights.

 

(g)            Disclosure.
No representation or warranty by the Buyer contained in this Agreement or any document or certificate furnished or to be furnished
by or on behalf of the Buyer to the Sellers in connection herewith or with the Closing contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact required to make the statements contained herein or therein
not misleading.

 

8.              Representations
and Warranties Concerning the Company. The Sellers, jointly and severally, represent and warrant to the Buyer that
the statements contained in this Section are correct and complete as of the Closing Date.

 

8.1           Organization,
Qualification and Limited Liability Company Power. The Company is a limited liability company duly organized, validly
existing, and has active status under the laws of Arizona. The Company is duly authorized to conduct business and is in good
standing or has active status under the laws of each jurisdiction where such qualification is required. The Company has full
limited liability company power and authority to carry on the business in which it is engaged and to own and use the
properties owned and used by it.

  

8.2            Capitalization.
The Interests constitute 100% of the issued and outstanding membership and equity interests of the Company, all of which are
held by the Sellers. There are no outstanding or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its membership interests or other equity interests. There are no
outstanding or authorized equity appreciation, phantom membership interests, profit participation, or similar rights with
respect to the Company.

 

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8.3           Non-contravention.
Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which the Company is subject or any provision of the
certificate of formation or the operating agreement of the Company; or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Company is a
party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Lien upon any of
its assets). The Company does not need to give any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by
this Agreement.

 

8.4           Brokers’
Fees. The Company has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.

 

8.5           Title
to Tangible Assets. The Company has good and marketable title to, or a valid leasehold interest in, the material tangible
assets it uses regularly in the conduct of its business.

 

8.6           Financial
Statements; Liabilities. The financial statements of the Company provided to the Buyer present fairly the financial
condition of the Company as of the dates set forth therein and the results of operations of the Company for the periods ended
on such dates. The Company has no liabilities as of the date hereof other than those set forth on Schedule 8.6 attached
hereto.

 

8.7           Material
Changes. Since February 29, 2012, the date of the last Company financial statements provided to the Buyer, there has not
been any material adverse change in the business, operations, Intellectual Property or financial condition of the
Company.

 

8.8           Legal
Compliance. The Company has complied in all material respects with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state and local
governments (and all agencies thereof).

 

8.9           Tax
Matters. The Company has filed all Tax Returns that it was required to file under applicable laws and regulations and has
reported all of its net income, if any, on its Tax Returns. All such Tax Returns were correct and complete in all material
respects and were prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by the
Company (whether or not shown on any Tax Return) have been paid. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company.
The Company has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, member, or other third party. No federal, state, or local Tax audits
or administrative or judicial Tax proceedings are pending or being conducted with respect to the Company.

 

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8.10         Real
Property. The Company does not own any real property and does not lease any real property except as set forth on Schedule
8.12 attached hereto.

 

8.11         Intellectual
Property. Schedule 8.11 attached hereto is a complete list of the Intellectual Property owned or (i) in which the
Company has or purports to have an ownership interest of any nature (whether exclusively, jointly with another Person, or
otherwise), (ii) used by the Company, or (iii) that is necessary to operate the Business as now conducted or as presently
contemplated to be conducted (collectively, the “Company Intellectual Property”). As set forth in more
detail below, to Sellers’ knowledge, the Company owns or has the right to use, free and clear of all Liens, all Company
Intellectual Property without any conflict with or infringement of the rights of others and the consummation of the
transactions contemplated hereby will not alter or impair in an adverse manner the Company Intellectual Property.

 

(a)           Except
as is expressly disclosed on Schedule 8.11, no third party has been granted a license in or to any Company Intellectual Property.

 

(b)           No
third party has any ownership right, title, interest, claim in or Lien on any of the Company Intellectual Property, and the Company
has taken all reasonable steps to preserve and protect its legal rights in, and the secrecy of, the Company Intellectual Property.

 

(c)           The
Company is not in default under any agreement pursuant to which it is licensing Intellectual Property of a third party or granting
licenses to the Company Intellectual Property. The Company has not received any communications alleging that the Company has violated
in any respect any other person’s Intellectual Property rights or has engaged in unfair competition against such person.

 

(d)           To
the knowledge of the Sellers, the Company (i) does not now infringe or misappropriate any third party’s Intellectual Property
rights, and (ii) does not have any Liability for any past infringement or misappropriation. To the knowledge of the Sellers, no
claim has been made or is threatened with regard to any third party’s Intellectual Property, including any allegation of
Intellectual Property infringement or misappropriation or of any breach or default of an Intellectual Property license or similar
agreement. The Company has written documents (including without limitation licenses and model releases and consents) authorizing
the royalty-free use by Company and its successors of all Company Intellectual Property that is not owned by Company.

 

(e)           Each
of the Company’s patents, patent applications, registered copyrights, copyright applications, trademarks, service marks,
trademark and service mark applications, mask work registrations and mask work registration applications are set forth on Schedule
8.11.

 

(f)           Schedule
8.11 accurately identifies; (A) each agreement pursuant to which any person has been granted any license under, or otherwise has
received or acquired any right (whether or not currently exercisable) or interest in, any Company Intellectual Property; and (B)
whether the license or licenses so granted by the Company are exclusive or nonexclusive.

 

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(g)           Except
as set forth in Schedule 8.11, the Company exclusively owns all right, title, and interest to and in the Company Intellectual Property
free and clear of any Liens.

 

(h)           Without
limiting the generality of the foregoing:

 

(i)           All
documents and instruments necessary to establish, secure and perfect the rights of the Company in the Company Intellectual Property
that is registered with a governmental authority have been validly executed, delivered, and filed in a timely and appropriate manner.

 

(ii)          To
the knowledge of the Sellers, no employee of the Company has any claim, right (whether or not currently exercisable), or interest
to or in any Company Intellectual Property and no employee or independent contractor of the Company is: (A) bound by or otherwise
subject to any contract restricting him or her from performing his or her duties for the Company; or (B) in breach of any contract
with any former employer or other Person concerning Intellectual Property rights or confidentiality as a result of his or her activities
with the Company.

 

(iii)         No
funding, facilities, or personnel of any Governmental Authority or any university, college, or other educational or research institution
were used, directly or indirectly, to develop or create, in whole or in part, any Company Intellectual Property.

 

(iv)         Except
as set forth in Schedule 2.20, the Company is not bound by, and no Company Intellectual Property is subject to, any agreement containing
any covenant or other provision that in any way limits or restricts the ability of the Company to use, exploit, assert, or enforce
any Company Intellectual Property anywhere in the world.

 

(v)          To
the knowledge of the Sellers, all Company Intellectual Property is valid, subsisting, and enforceable. Without limiting the generality
of the foregoing, no the knowledge of the Sellers, no interference, opposition, reissue, reexamination, or other action of any
nature is or has been pending or threatened, in which the scope, validity, or enforceability of any Company Intellectual Property
is being, has been, or could reasonably be expected to be contested or challenged, and there is no basis for a claim that any Company
Intellectual Property is invalid or unenforceable.

 

(vi)         Neither
the execution, delivery or performance of this Agreement or any of nor the consummation of any of the transactions contemplated
hereby will, with or without notice or the lapse of time or both, result in or give any other person the right or option to cause
or declare: (a) a loss of, or lien on, any Company Intellectual Property; (b) the release, disclosure or delivery of any Company
Intellectual Property by or to any escrow agent or other Person; or (c) the grant, assignment or transfer to any other person of
any license or other right or interest under, to or in the Company Intellectual Property.

 

(vii)        To
the knowledge of the Sellers, no person has infringed, misappropriated, or otherwise violated, and no person is currently infringing,
misappropriating, or otherwise violating, any Company Intellectual Property.

 

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(viii)       To
the knowledge of the Sellers, the Company has never infringed (directly, contributorily, by inducement, or otherwise), misappropriated,
or otherwise violated any Intellectual Property right of any other person, and no Company Intellectual Property has ever infringed,
misappropriated or otherwise violated any Intellectual Property Right of any other person.

 

(ix)          The
Company is not bound by any contract to indemnify, defend, hold harmless, or reimburse any other person with respect to, or otherwise
assumed or agreed to discharge or otherwise take responsibility for, any existing or potential liability of another person for
infringement, misappropriation or violation of any Intellectual Property right.

  

(x)           No
claim or action involving any Intellectual Property or Intellectual Property right licensed to the Company is, to the knowledge
of Sellers, pending or has been threatened.

 

8.12         Contracts.
The Sellers have delivered to the Buyer a correct and complete copy of each material contract or other agreement (as amended
to date) to which the Company is a party. A list of these material contracts is attached as Schedule 8.12. All of these
contracts are in good standing, and no breach or default exists with respect to any such contract.

 

8.13         Powers
of Attorney. There are no outstanding powers of attorney executed on behalf of the Company.

 

8.14         Litigation.
The Company is not (i) subject to any outstanding injunction, judgment, order, decree, ruling, or charge; or (ii) a party to
any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, or local jurisdiction.

  

8.15         Employee
Benefits. The Company does not maintain, sponsor or contribute to any employee benefit plan or pension plan.

  

8.16         Customers,
Suppliers, Consultants and Regulatory Authorities. The Company’s relationships with all customers, suppliers,
consultants and regulatory authorities are materially stable and in good standing.

 

8.17         Environmental
Matters. The Company is in compliance with all Environmental Requirements.

 

8.18         Permits.
The Company has all permits, licenses and any similar authority necessary for the conduct of its business as now conducted and
as presently proposed to be conducted. The Company is not in default in any respect under any of such permits, licenses or similar
authority.

 

9.             Post-Closing
Covenants. The Parties agree as follows with respect to the period following the Closing.

  

9.1           General.
In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, with each Party bearing its own costs and expenses
(unless a Party is entitled to indemnification therefor under Section 10, below).

 

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9.2           Non-Discouragement.
The Sellers will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Company from maintaining the same business relationships with the
Company after the Closing as it maintained with the Company prior to the Closing.

  

10.          Indemnification.

  

10.1         Survival
of Representations and Warranties. All of the other representations and warranties of the Parties contained in this
Agreement shall survive the Closing and continue in full force and effect for the length of the applicable statutes of
limitations.

 

10.2         Indemnification
Provisions for the Buyer’s Benefit.

 

(a)           In
the event any of the Sellers breaches any of its representations, warranties, and/or covenants contained in this Agreement, and
provided that the Buyer makes a written claim for indemnification against the Sellers pursuant to Section 10.4, below, within the
survival period, if any, then the Sellers, jointly and severally, shall be obligated to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer (including any Adverse Consequences the Buyer may suffer after the end
of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach.

 

10.3         Indemnification
Provisions for the Sellers’ Benefit. In the event the Buyer breaches any of its representations, warranties, and
covenants contained in this Agreement and provided that the Sellers makes a written claim for indemnification against the
Buyer pursuant to Section 10.4, below, within the survival period, if any, then the Buyer shall indemnify the Sellers from
and against the entirety of any Adverse Consequences the Sellers shall suffer (including any Adverse Consequences the Seller
shall suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach.

 

10.4         Notice
of Claims. Upon obtaining actual knowledge of any Adverse Consequence which has given rise to, or could reasonably give rise
to, a claim for indemnification hereunder, the party seeking indemnification (the “Indemnified Party”) shall,
as promptly as reasonably practicable following the date the Indemnified Party has obtained such knowledge, give written notice
(a “Notice of Claim”) of such claim to the party or parties from which indemnification is or will be sought
under this Section (the “Indemnifying Party”); provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation under this Agreement. The Indemnified
Party shall furnish to the Indemnifying Party in good faith and in reasonable detail such information as the Indemnified Party
may have with respect to such indemnification claim (including copies of any summons, complaint or other pleading which may have
been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same). No failure
or delay by the Indemnified Party in the performance of the foregoing shall reduce or otherwise affect the obligation of the Indemnifying
Party to indemnify and hold the Indemnified Party harmless, except to the extent that such failure or delay shall have materially
adversely affected the Indemnifying Party’s ability to defend against, settle or satisfy any liability, damage, loss, claim
or demand for which such Indemnified Party is entitled to indemnification hereunder.

 

    	12

    	 

    

 

10.5         Matters
Involving Third Parties.

 

(a)           If
any claim set forth in the Notice of Claim given by an Indemnified Party pursuant to Section 10.4 hereof is a claim asserted by
a third party (a “Third-Party Claim”), then the Indemnified Party shall, as soon as reasonably possible, notify
each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any obligation under this Agreement.

 

(b)           Any
Indemnifying Party will have the right to assume the defense of the Third-Party Claim with counsel of its choice reasonably satisfactory
to the Indemnified Party at any time within 15 days after the Indemnified Party has given notice of the Third-Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the Third-Party Claim actively and diligently thereafter in order
to preserve its rights in this regard; and provided further that the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third-Party Claim.

 

(c)           So
long as the Indemnifying Party has assumed and is conducting the defense of the Third-Party Claim in accordance with Section 10.5(b)
above, (1) the Indemnifying Party will not consent to the entry of any judgment on or enter into any settlement with respect to
the Third-Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld) unless the judgment
or proposed settlement involves only the payment of money damages by the Indemnifying Party and does not impose an injunction or
other equitable relief upon the Indemnified Party; and (2) the Indemnified Party will not consent to the entry of any judgment
on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party
(not to be unreasonably withheld).

 

(d)           In
the event the Indemnifying Party does not assume and conduct the defense of the Third-Party Claim in accordance with Section 10.5(b)
above, however, (1) the Indemnified Party may defend against, and consent to the entry of any judgment on or enter into any settlement
with respect to, the Third-Party Claim in any manner it may reasonably deem appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection therewith) and (2) the Indemnifying Party will remain responsible
for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third-Party Claim to the fullest extent provided in this Section.

  

11.          Miscellaneous.

  

11.1         Press
Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the Buyer and the Sellers; provided, however, that any
Party may make any public disclosure it believes in good faith is required by applicable law (in which case the disclosing Party
will use its reasonable best efforts to advise the other Party prior to making the disclosure).

 

    	13

    	 

    

 

11.2         No
Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.

  

11.3         Entire
Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties
and supersedes the LOI and any other prior understandings, agreements, or representations by or among the Parties, written or
oral, to the extent they relate in any way to the subject matter hereof.

 

11.4         Succession
and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named in this Agreement and
their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests,
or obligations under this Agreement without the prior written approval of the Buyer and the Sellers; provided, however, that
the Buyer may: (i) assign any or all of its rights and interests under this Agreement to one or more of its affiliates; and
(ii) designate one or more of its affiliates to perform its obligations under this Agreement (in any or all of which cases
the Buyer nonetheless shall remain responsible for the performance of all of its obligations under this Agreement).

 

11.5         Counterparts.
This Agreement may be executed in one or more counterparts (including by means of facsimile), each of which shall be deemed
an original but all of which together will constitute one and the same instrument.

 

11.6         Headings.
The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.

 

11.7         Notices.
All notices, requests, demands, claims, and other communications under this Agreement shall be in writing. Any notice,
request, demand, claim, or other communication under this Agreement shall be deemed duly given: (i) when delivered personally
to the recipient; (ii) 1 business day after being sent to the recipient by reputable overnight courier service (charges
prepaid); or (iii) 1 business day after being sent to the recipient by facsimile transmission or electronic mail, and
addressed to the intended recipient as set forth below:

 

    	14

    	 

    
 

	
        If to the Sellers, to Sellers’ Representative:

         

Bryce Johnson

        13237 N. 76th Place

        Scottsdale, Arizona 85260

 

        
	 
	
        If to the Buyer:

         

PowerVerde, Inc.

        420 S. Dixie Highway

        Suite 4B

        Coral Gables, FL 33146

        Attention: Richard H. Davis, CEO

        Fax: (305) 660-0028
	
        Copy to:

         

        Robert B. Macaulay

        Carlton Fields, P.A.

        100 SE 2nd Street

        Suite 4200

        Miami, FL 33131

        Fax: (305) 530-0055

 

Any Party may change the
address to which notices, requests, demands, claims, and other communications under this Agreement are to be delivered by giving
the other Parties notice in the manner herein set forth.

  

11.8         Governing
Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Florida
without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other
jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida.

  

11.9         Amendments
and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Sellers. No waiver by any Party of any provision of this Agreement or any default,
misrepresentation, or breach of warranty or covenant under this Agreement, whether intentional or not, shall be valid unless
the same shall be in writing and signed by the Party making such waiver, nor shall such waiver be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or covenant under this Agreement or affect in any way
any rights arising by virtue of any prior or subsequent such occurrence.

 

11.10        Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.

  

11.11       Expenses.
The Buyer and the Sellers will each bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated by this Agreement.

  

11.12       Construction.
The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, or local statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including”
shall mean including without limitation.

 

11.13       Incorporation
of Exhibits, Annexes, and Schedules. The exhibits, schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.

  

[Signatures appear on
the following page.]

 

    	15

    	 

    
  

IN WITNESS WHEREOF,
the Parties to this Agreement have executed this Agreement as of the date first above written.

 

	 	BUYER:
	 	 	 
	 	POWERVERDE, INC.
	 	 	 
	 	By:	/s/ Richard H. Davis
	 	 	Richard H. Davis
	 	 	Chief Executive Officer
	 	 	 
	 	SELLERS:
	 	 	 
	 	 	/s/
    Bryce Johnson
	 	Bryce Johnson
	 	 	 
	 	 	/s/
    Paul Kelly .
	 	Paul Kelly
	 	 	 
	 	 	/s/
    Vince Hils.
	 	Vince Hils

 

    	16

    	 

    

 

SCHEDULE 8.11

 

INTELLECTUAL PROPERTY

 

	•	U.S. Patent
    Application No.  12,749,416 filed on March 29, 2010, entitled “Solar Photovoltaic Closed Fluid Loop Evaporative
    Tower.”
	 	 
	•	All trade secrets as of March 30, 2012, relating to the Company’s (i) Toyota Aisin combined cooling, heating and power systems, and (ii) advance cooling tower assisted geothermal hybrid systems.

  

17velatel_8k-ex1001.htm

EXHIBIT 99.1

    

STOCK PURCHASE AGREEMENT

 

 

 

 

 

BETWEEN

 

 

 

 

 

VELATEL GLOBAL COMMUNICATIONS, INC.

 

(through its wholly owned subsidiary)

 

GULFSTREAM CAPITAL PARTNERS LIMITED

 

 

 

 

 

AND

 

 

 

 

 

ZAPNA, APS

    

  

  

  

   

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (“Agreement”) is made as of the 3rd day of April, 2012 (“Effective Date”) by and between (1) Zapna, ApS (“Zapna” or “Company,”), a corporation organized under the laws of Denmark, (2) Omair Khan (“Seller”), who owns 100% of Zapna’s capital stock (“Zapna Stock”), and (3) Gulfstream Capital Partners Limited (“Gulfstream”), a corporation organized under the laws of Seychelles and a wholly owned subsidiary of VelaTel Global Communications, Inc. (“VelaTel” or together with Gulfstream “Purchaser”) for the purchase and sale of shares of 75% of Zapna’s Stock.  Seller and Purchaser are each sometimes referred to individually in this Agreement as a “Party” and together as “Parties.”

 

RECITALS

 

A.   VelaTel is a corporation organized under the laws of the United States (“US”) (specifically, Nevada law), with headquarters in San Diego, California.  The Series A common stock of VelaTel is publicly traded on the OTC Service, Inc. under the symbol “OTCQB:VELA” (“VELA Stock”).  VelaTel is in the business of designing, building, deploying and operating wireless broadband telecommunications networks in key markets throughout the world.

 

B.   Zapna offers solutions for telephony operators and subscribers (and adaptable to wireless broadband operators and subscribers) including mobile application IP rights, prepaid and postpaid billing platforms, front end portals, administration modules, roaming, SMS and voice termination services, and products to deliver such services.

 

C.   Seller owns 100% of the Zapna Stock, which consists of one class or series of common stock with 100 shares outstanding and 0 shares authorized but not issued.

 

D.   It is the intention of the Parties that Seller shall at Closing transfer to Gulfstream 75 shares of Zapna Stock, such that Gulfstream will own 75% of the total number of shares of Zapna Stock that shall be outstanding as of Closing.

 

NOW, THEREFORE, for good and valuable consideration, the Parties to this Agreement agree as follows:

 

AGREEMENT

 

1.   Purchase and Sale of Zapna Stock.

 

The securities that are the subject of this Agreement are shares of Zapna Stock.

 

1.1   Sale of Zapna Stock.  Subject to the terms and conditions of this Agreement, Seller shall sell and deliver to Purchaser at the Closing, and Purchaser shall purchase from Seller 75 shares of Zapna Stock, which shall represent 75% of the total shares of Zapna Stock issued and outstanding as of the Closing (“Purchased Shares”).

 

1.2   Purchase Price. The purchase price (“Purchase Price”) for the Purchased Shares is 6,000,000 restricted shares of VELA Stock, which Purchaser shall issue and deliver to Seller at Closing (“Purchase Price Shares”) free and clear of any pledge and/or lien and/or other third parties’ rights.  Purchaser warrants the total value of the Purchase Price Shares shall be at least $200,000 as measured by the closing price per share over the ten trading days immediately following the Closing (“Valuation Calculation” and “Valuation Date”).  If the total value of the Purchase Price Shares is less than $200,000 on the Valuation Date, Purchaser shall issue and deliver to Seller within ten business days of the Valuation Date that number of additional shares of VELA Stock that shall represent the difference between $200,000 and the total value of the Purchase Price Shares based on the Valuation Calculation (“Price Protection Shares”).

    

  

1

  

   

1.3   Closing; Delivery.  The closing of this Agreement (“Closing”) shall take place upon signatures of all of the Parties.  Immediately following the Closing, Seller shall cause the transfer and deliver the Purchased Shares in the name of Purchaser.  Seller intends to hold the Purchase Price Shares and to transfer the remaining 25 shares of Zapna Stock in the name of Alhamd Holding Company, a new Danish corporation Seller is in the process of forming.  Immediately following formation of Alhamd Holding Company, VelaTel shall issue the Purchase Price Shares as Seller shall direct.  The Parties shall proceed expeditiously with such issuance and delivery of the shares.

 

1.4   Post-Closing Operations.  After Closing, Purchaser shall have the right to report the financial results of the Company on Purchaser’s consolidated financial statements.

 

1.5   Pledge of Seller’s Remaining Zapna and the Purchase Price Shares.  Seller and/or Alhmad Holding Company shall pledge all 25 shares of its remaining Zapna Stock (“Pledged Zapna Shares”) and all 6,000,000 of the Purchase Price Shares in favor of Purchaser as collateral for any liability of Seller or the Company to Purchaser for any claim for Indemnification described in Section 7 of this Agreement.  Such pledge of the shares shall be pursuant to the pledge agreement attached as Schedule 1 (“Pledge Agreement”).  Subject to the Pledge Agreement, the pledge agent shall release to Seller or as Seller directs (1) the Purchase Price Shares 180 days following the Closing Date, and (2) the Pledged Zapna Shares on the third anniversary of the Closing Date.

 

1.6   Board of Directors and Minority Rights.  As of the Closing, the authorized size of the Company’s board of directors shall 5, of which Purchaser shall be entitled to appoint 3 and Seller 2.  Between the Effective Date and Closing, Purchaser and Seller shall submit to the Company their respective slates of directors, the directors and/or shareholders of the Company shall conduct special meetings and prepare appropriate resolutions to confirm the resignation and substitution of all applicable directors, each to become effective only upon Closing of this Agreement.  Sellers’ Directors shall have veto rights over certain fundamental decisions, including purchase of subsidiaries, public listing of Zapna’s assets, declaring bankruptcy or similar proceedings, or termination of employment of any of the three members of Zapna’s senior management identified in the next Section.

 

1.7   VelaTel Stock Option Plan. Zapna’s three members of senior management, consisting of Hamad Raza, Omair Khan and Connie Duedahl shall be eligible to participate in VelaTel’s employee stock option plan on the same basis as other senior management representatives of VelaTel of equal rank and upon similar criteria for award of options, provided that Zapna’s financial performance shall expressly be a criterion.

    

  

2

  

    

1.8   Chief Executive Officer.  Hamad Raza has been and will continue to act as Chief Executive Officer of the Company.  His salary as CEO is reflected on the 2012 budget for the Company’s operations approved by Seller.

 

1.9   Strategic Relationships. Purchaser shall assist Zapna in obtaining a favorable distributorship and other contractual relationships with Taisys Holding Co., Ltd. and its subsidiaries. VelaTel shall also provide Zapna access to and favorable relationships with each of VelaTel’s current and future operating subsidiaries.  VelaTel and Zapna shall develop a strategic plan to exploit synergies between their respective operations as soon as the agreement has been signed and within 3 months.

 

1.10   Tag-Along Right. In the event Purchaser wishes to sell its shares of the Company, Seller shall have the right to participate (a "Tag-Along Right") in such sale with respect to any shares of Zapna Stock (including shares obtainable upon the conversion of common shares) held by them, on a pro rata basis (based on the ratio of the aggregate number of shares of Zapna Stock (or common stock equivalents) to be sold by Purchaser to the aggregate number of shares of Zapna Stock beneficially owned by Seller immediately prior to such sale), for the greatest consideration per share of Zapna Stock and otherwise on the best terms by which Purchaser sells its shares of Zapna Stock (or common stock equivalent).

 

1.11   Right of First Refusal.  Purchaser shall have the right to sell up to 24% equity interest in the Company to one or more outside investors.  Should Purchaser elect to sell more than 24%, Seller shall have a right of first refusal to acquire all but not less than all of the interest Purchaser proposes to sell, on the same terms as the outside offer, for a period of 30 days.

 

1.12   Defined Terms Used in this Agreement. Wherever used in this Agreement, the following terms displayed in “bold” text shall have the following meanings, even if the same term appears in “bold” in other sections of this Agreement immediately following a reference to such term defined in this section.  Any term which appears in other sections of this Agreement in “bold,” but which is not otherwise defined in this section, shall have the meaning ascribed by the words or clause immediately preceding such reference to the term in “bold.”

 

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

"Capital Stock" means (a) in the case of a corporation, its authorized shares of every class of capital stock, (b) in the case of a partnership or limited liability company, its partnership or membership interests or units (whether general or limited), and (c) any other interest that confers on a person the right to receive a share of the profits and losses, or distribution of assets, of the issuing entity.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company Intellectual Property” means all patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, trade secrets, licenses, domain names, mask works, information and proprietary rights and processes as are necessary to the conduct of the business of the Company or any Subsidiary as now conducted and as presently proposed to be conducted.

   

  

3

  

    

“Key Employee” means any executive-level employee (including division director and vice president-level positions) as well as any employee or consultant who either alone or in concert with others develops, invents, programs or designs any Company Intellectual Property.

 

“Knowledge” of Seller or any similar phrase means, with respect to any fact or matter, the actual knowledge of the directors and executive officers of Seller as at the date of this Agreement, the Company and any Subsidiary and any other employee of Seller, the Company and any Subsidiary with a title of Vice-President, General Manager or above, together with such knowledge that such directors, executive officers or other employees could be expected to discover after due investigation concerning the existence of the fact or matter in question.

 

“Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, or results of operations of the Company, or any Subsidiary of the Company, as the case may be.  No event that has less than $50,000 effect on the Company or any Subsidiary shall be considered material.

 

“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

“Purchased Shares” means 75 shares of Zapna Stock, which shall represent 75% of the total shares of Zapna Stock that shall have been issued and are outstanding as of the Closing of this Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Subsidiary” means, with respect to the Company, any corporation, partnership, limited liability company, trust, unincorporated association or other entity, of which the Company (a) is a general partner, or (b) owns directly or indirectly at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other entity.  The term “Company and (or) any Subsidiary” refers to the Company and (or) each and every Subsidiary of the Company, if any.

 

2.             Representations and Warranties of Seller.  Seller hereby represents and warrants to Purchaser that the following representations are true and complete as of the date of the Agreement.

 

2.1           Organization and Qualification of Seller.  Seller is an individual, and has all requisite power and authority to carry on his business as presently conducted and as proposed to be conducted.  Seller has full power and authority to enter into this Agreement.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

 

2.2           Authorization.  All actions required to be taken by Seller in order to enter into the Agreement, and all actions necessary for the execution and delivery of the Agreement, and to sell, transfer and deliver to Purchaser the Purchased Shares, have been taken or will be taken prior to the Closing.  The Agreement, when executed and delivered by Seller, shall constitute a valid and legally binding obligation of Seller, enforceable against Seller in accordance with its terms.

 

   

  

4

  

   

2.3   Organization and Qualification of the Company and any Subsidiary.  The Company and any Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of their respective jurisdiction of incorporation, and each has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted and is duly licensed or qualified and in good standing as a foreign corporation in each jurisdiction in which it is required to be so licensed or so qualified.  Seller has heretofore delivered to Purchaser complete and correct copies of the articles or certificates of incorporation, by-laws or similar corporate organizational documents of the Company and any Subsidiary as currently in effect.

 

2.4   Capitalization of the Company and any Subsidiary.

 

(a)   The authorized Capital Stock of the Company consists of 100 common shares, all of one class, of which 100 are outstanding.

 

(b)   The Company has no Subsidiaries.

 

(c)          There are no outstanding options, warrants or other rights of any kind to acquire any additional shares of any class of Capital Stock of the Company or any Subsidiary, or securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire, any such additional shares, nor is the Company or any Subsidiary committed to issue any such option, warrant, right or security.

 

(d)   Neither the Company nor any Subsidiary has outstanding or authorized any stock appreciation, phantom stock, profit participation, or similar rights.

 

(e)   None of the Company or any Subsidiary is a party or subject to any stockholder agreement, voting agreement, voting trust or any other similar arrangement which has the effect of restricting or limiting the transfer, voting or other rights associated with the Capital Stock of the Company or the Subsidiary Shares.

 

2.5   Ownership of Purchased Shares.  Seller is the lawful record beneficial owner of the Purchased Shares.  Seller owns the Purchased Shares free and clear of all liens and encumbrances.  Upon delivery of the Purchased Shares to Purchaser in accordance with this Agreement, Purchaser will acquire the beneficial and legal, valid and indefeasible title to such Purchased shares, free and clear of all liens and encumbrances except for restrictions on transfer under state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser.

 

2.6   Litigation.  To Seller’s Knowledge, as against the Company, any Subsidiary, or Seller in Seller’s capacity as a stockholder of the Company, none of the following are pending or to Seller’s knowledge are threatened in writing:  any consent order, judgment, injunction, award or decree of any court, government or regulatory body or arbitration tribunal, claim, action, suit, proceeding, arbitration, complaint, governmental investigation or charge other than as specified in Company’s financial statements.  There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate.  The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefore known to the Company) involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.

   

  

5

  

   

2.7   Compliance with Other Instruments.  The Company and each Subsidiary is not in violation or default: (i) of any provisions of its respective Articles of Incorporation or Bylaws; (ii) of any instrument, judgment, order, writ or decree; (iii) under any mortgage; or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound, or, to Seller’s knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company or any Subsidiary, the violation of which would have a Material Adverse Effect.  The execution, delivery and performance of the Agreement and the consummation of the transactions contemplated by the Agreement will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or any Subsidiary, or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company or any Subsidiary.

 

2.8   Agreements; Actions.

 

(a)   There are no agreements, understandings, instruments, contracts or proposed transactions to which the Company or any Subsidiary is a party or by which it is bound that involve: (i) obligations (contingent or otherwise) of, or payments to, the Company or any Subsidiary in excess of One Hundred Thousand U.S. Dollars ($100,000.00); (ii) the license of any patent, copyright, trademark, trade secret or other proprietary right to or from the Company or any Subsidiary; (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other Person that limit the exclusive right of the Company or any Subsidiary to develop, manufacture, assemble, distribute, market or sell its products; except those customers of Zapna who were granted territorial exclusivity to sell and market the Zapna products; or (iv) indemnification by the Company or any Subsidiary with respect to infringements of proprietary rights.

 

(b)   Except as disclosed in the Financial Statements, neither the Company nor any Subsidiary has: (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its Capital Stock; (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of Fifty Thousand U.S. Dollars ($50,000.00) or in excess of One Hundred Thousand U.S. Dollars in the aggregate ($100,000.00); (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.  For the purposes of subsections (b) and (c) of this Section, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same Person (including Persons Seller has reason to believe are affiliated with each other) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsection. Purchaser acknowledges that the Financial Statements disclose a loan to the Company in the amount of $150,000, which the Company began retiring in January 2012, and the continuing retirement of which is reflected in the 2012 budget of the Company that Purchaser has approved.

 

(c)   To Seller’s Knowledge, neither the Company nor any Subsidiary is a guarantor or indemnitor of any indebtedness of any other Person.

   

  

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2.9   Related Party Transactions.

 

(a)   Other than: (i) standard employee benefits generally made available to all employees; and (ii) standard director and officer indemnification agreements approved by the board of directors, in each instance, approved in the written minutes of the board of directors (previously provided to Purchaser), there are no agreements, understandings or proposed transactions between the Company or any Subsidiary and any of its respective officers, directors, consultants or Key Employees, or any Affiliate thereof.

 

(b)   Neither the Company nor any Subsidiary is indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business.  None of the directors, officers or employees of the Company or any Subsidiary, or any members of their immediate families, or any Affiliate of the foregoing are, directly or indirectly, indebted to the Company.

 

2.10   Absence of Liens.  Except as reflected in the Financial Statements (as defined below), the property and assets that the Company and any Subsidiary owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets.  With respect to the property and assets it leases, the Company and any Subsidiary is in compliance with such leases and, to Seller’s knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets.

 

2.11   Real and Personal Property.

 

(a)   Real Property.  Neither the Company nor any Subsidiary owns any real property.    Each of the leases for the Leased Real Property is in full force and effect and has not been modified, amended, or altered, in writing or otherwise.  Neither the Company nor any other party is in default under any of said leases, nor has any event occurred which, with the giving of notice or the passage of time, or both, would give rise to a default.

 

(b)   Personal Property.  The Company and any Subsidiary has good and marketable title to all of its personal property and assets and all such personal property and assets are in good working condition.  None of such personal property or assets is subject to any mortgage, pledge, lien, conditional sale agreement, security agreement, encumbrance or other charge.  The Financial Statements reflect all personal property and assets of the Company and any Subsidiary (other than assets disposed of in the ordinary course of business subsequent to September 30, 2011), and such properties and assets are sufficient for the Company and any Subsidiary to conduct its business as currently conducted and as proposed to be conducted.

   

  

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2.12   Financial Statements; Liabilities.  Seller has delivered to Purchaser the audited financial statements for the period ending December 31, 2010, and the unaudited financial statements of the Company as of December 31, 2011 (including balance sheet, income statement and statement of cash flows) and for the period ending December 31, 2011 (collectively, “Financial Statements”).  The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated.  The Financial Statements fairly present in all material respects the financial condition and operating results of the Company and any Subsidiary as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments.  Except as set forth in the Financial Statements, neither the Company nor any Subsidiary has any material liabilities or obligations, contingent or otherwise, other than: (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2011; (ii) obligations under contracts and commitments incurred in the ordinary course of business; and (iii) liabilities and obligations of a type or nature not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect.  The Company and any Subsidiary maintains and will continue to maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles.

 

2.13   2012 Budget and Cash Burn. Purchaser has reviewed and approved the 2012 operating budget of the Company, which reflects a negative EBITDA that Purchaser agrees to cover.

 

2.14   Changes.  Since the date of the most recent Financial Statements, there has not been:

 

(a)   any material change in the assets, liabilities, financial condition or operating results of the Company or any Subsidiary from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect;

 

(b)   any damage, destruction or loss that would have a Material Adverse Effect;

 

(c)   any waiver or compromise by the Company or any Subsidiary of a valuable right or of a material debt owed to it;

 

(d)   any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company or any Subsidiary, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;

 

(c)   any material change to a material contract or agreement by which the Company or any Subsidiary or their respective assets is bound or subject;

 

(d)   any resignation or termination of employment of any officer or Key Employee of the Company or any Subsidiary;

 

(e)   any mortgage, pledge, transfer of a security interest in, or lien, created by the Company or any Subsidiary, with respect to any of its respective material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the ownership or use of such property or assets by the Company or any Subsidiary;

 

(f)   any loans or guarantees made by the Company or any Subsidiary to or for the benefit of its respective employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

   

  

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(g)   any declaration, setting aside or payment or other distribution in respect of any of the Company’s Capital Stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company or any Subsidiary;

 

(h)   any sale, assignment or transfer of any Company Intellectual Property that could reasonably be expected to result in a Material Adverse Effect;

 

(i)   receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company or any Subsidiary;

 

(j)   to Seller’s knowledge, any other event or condition of any character, other than events affecting the economy or the Company’s industry generally, that could reasonably be expected to result in a Material Adverse Effect; or

 

(k)   any arrangement or commitment by the Company or any Subsidiary to do any of the things described in this Section.

 

2.14   Tax Matters.

 

(a)   The Company and any Subsidiary has duly filed, or will cause to be duly prepared and timely filed when due, all tax returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of corporations, in each jurisdiction in which it is required to do so. All such tax returns are (or, to the extent filed after the date hereof, will be) true, correct and complete.  The Company and any Subsidiary has paid, or made provision for the payment of, all taxes that have or may have become due pursuant to those tax returns or otherwise.  All taxes that the Company or any Subsidiary is required by applicable law to collect, deduct or withhold relating to its respective business have been duly collected, deducted or withheld and have been timely paid over to the appropriate governmental entity or are properly recorded as a liability on the Financial Statements.  The Company expects to timely file its tax return in Denmark for 2011 on or before May 30, 2012.

 

(b)   During the last five years, there have not been related to the Company or any Subsidiary any (i) pending or, to Seller’s knowledge, threatened tax proceedings by any governmental entity, (ii) rulings by any governmental entity with respect to Taxes, (iii) liens for Taxes against any assets, or (iv) elections to change any tax accounting methods.  Neither the Company nor any Subsidiary has agreed, or is required, to make any adjustment under Section 481(a) of the Code (or any comparable provision of another applicable law) by reason of a change in accounting method or otherwise.

 

(c)   The Company and any Subsidiary (i) is and has at all times been in compliance with the provisions of Section 6011, Section 6111 and Section 6112 of the Code, relating to tax shelter disclosure, registration and list maintenance, and with the Treasury Regulations thereunder, and (ii) has not, at any time, (A) engaged in or entered into a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2), Treasury Regulation Section 301.6111-2(b)(2) or Treasury Regulation Section 301.6112-1(b)(2) or (B) filed IRS Form 8275 or Form 8275-R or any predecessor or successor thereof or analogous or similar Tax Return under applicable law.

 

(d)   Neither the Company nor any Subsidiary is a party to any contract that would result, separately or in the aggregate, in the payment of any (i) Taxes of any other Person, or (ii) excess parachute payments within the meaning of Section 280G of the Code (or any comparable provision of another applicable law).

   

  

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(e)   Neither the Company nor any Subsidiary is required to (A) treat any of its respective assets as owned by another Person pursuant to the safe harbor leasing provisions of the Code or as tax-exempt use property within the meaning of Section 168(h) of the Code or (B) apply any of the foregoing rules under any comparable applicable law with respect to Taxes.

 

(f)   Neither the Company nor any Subsidiary has any deferred intercompany gain or loss arising as a result of a deferred intercompany transaction within the meaning of Treasury Regulation Section 1.1502-13 (or similar provision under Applicable Law) or any excess loss accounts within the meaning of Treasury Regulation Section 1.1502-19.  Neither the Company nor any Subsidiary is or has been a US real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(ii) of the Code.  Neither the Company nor any Subsidiary has agreed to include or is required to include in income for any year beginning after the Closing Date any adjustment under either Section 481(a) or Section 482 of the Code (or an analogous provision of applicable law) by reason of a change in accounting method or otherwise.  No net operating losses of the Company or any Subsidiary are limited under Section 382 of the Code, and no excess credits, net capital losses or foreign tax credits of the Company or any Subsidiary are limited under Section 383 of the Code.  Neither the Company nor any Subsidiary has distributed stock of another Person, or had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

 

2.15   Employee Matters.

 

(a)   Seller has provided Buyer (i) a list of all directors, employees, contractors and consultants of the Company and any Subsidiary (including title and position) as of the date hereof, (ii) the base compensation and benefits of each such director, employee, contractor and consultant whose base compensation and target bonus exceeds $100,000 in the year ending 2011, and (iii) a list of all former directors, employees, contractors and consultants of the Company and any Subsidiary who are receiving benefits or scheduled to receive benefits in the future, and the pension benefit, medical insurance coverage and other benefits of each such former director, employee, contractor and consultant.  Except as set forth in this Agreement, all directors, employees, contractors and consultants of the Company and any Subsidiary may be terminated by the Company or Subsidiary at any time with or without cause and without any severance or other Liability to the Acquired Company or such Subsidiary.

 

(b)   Neither the Company nor any Subsidiary is a party or subject to any labor union or collective bargaining agreement.  There have not been since January 1, 2010 and there are not pending or threatened any labor disputes, work stoppages, requests for representation, pickets, work slow-downs due to labor disagreements or any actions or arbitrations which involve the labor or employment relations of the Company or any Subsidiary. There is no unfair labor practice, charge or complaint pending, unresolved or, to Seller's Knowledge, threatened before the National Labor Relations Board. No event has occurred or circumstance exist that may provide the basis of any work stoppage or other labor dispute.

 

(c)   Each of the Company and any Subsidiary has complied with and is not in violation of any law relating to anti-discrimination and equal employment opportunities and there are, and have been, no violations of any other law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person.  Each of the Company and any Subsidiary has filed and/or posted all reports, information and notices required under any law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person, and will timely file prior to Closing all such reports, information and notices required by any Law to be given prior to Closing.

   

  

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(d)   The Company and any Subsidiary has paid or properly accrued in the ordinary course of business all wages and compensation due to employees, including all vacations or vacation pay, holidays or holiday pay, sick days or sick pay, and bonuses.

 

(e)   None of Seller, the Company or any Subsidiary is a party to any contract which restricts the Company or any Subsidiary from relocating, closing or terminating any of its operations or facilities or any portion thereof.  None of Seller, the Company or any Subsidiary have since January 1, 2009 effectuated a "plant closing" (as defined in the WARN Act) or (ii) a "mass lay-off" (as defined in the WARN act), in either case affecting any site of employment or facility of the Acquired Company or any Subsidiary , except in accordance with the WARN Act.  The consummation of the Acquisition will not create liability for any act by Seller, the Company or any Subsidiary on or prior to the Closing under the WARN Act or any other Law respecting reductions in force or the impact on employees on plant closings or sales of businesses.

 

(f)   Neither the Company nor any Subsidiary has any employee benefit plans within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

 

2.16   Intellectual Property.

 

(a)   The Company and any Subsidiary owns or possesses sufficient legal rights to all Company Intellectual Property without any known conflict with, or infringement of, the rights of others.  To the Company’s knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by the Company or any Subsidiary violates or will violate any license or infringes or will infringe any intellectual property rights of any other Person.

 

(b)   Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the Company Intellectual Property, nor is the Company or any Subsidiary bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person.

 

(c)   Neither the Company nor any Subsidiary has received any communications alleging that the Company or Subsidiary has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets, mask works or other proprietary rights or processes of any other Person.

 

(d)   The Company and any Subsidiary has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with the business of the Company or Subsidiary.

 

(e)   To Seller’s knowledge, it will not be necessary for the Company or any Subsidiary to use any inventions of any employee or consultant (or Persons either currently intends to hire) made prior to the employment of such person by the Company or Subsidiary.

   

  

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2.17   Accounts Receivable.  All accounts receivable of the Company and any Subsidiary that are reflected on the balance sheet of the Financial Statements as of the Closing Date (collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business.  Unless paid prior to the Closing, the Accounts Receivable are or will be as of the Closing current and collectible net of the respective reserves shown on the balance sheet as of the Closing (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing, will not represent a Material Adverse Change in the composition of such Accounts Receivable in terms of aging). Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within ninety days after the day on which it first becomes due and payable. There is no contest, claim, or right of set-off, other than returns in the ordinary course of business, under any contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable.

 

2.18   Inventory.  All inventory of the Company and any Subsidiary, whether or not reflected in the balance sheet of the Financial Statements, consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the balance sheet as of the Closing. All inventories not written off have been priced at the lower of cost or net realizable value on a first in, first out basis. The quantities of each item of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable in the present circumstances of the Company and any Subsidiary.

 

2.19   Permits.  The Company and any Subsidiary has all the permits, licenses and any similar authority necessary to conduct its business, the lack of which could reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any Subsidiary is in default in any material respect under any of such permits, licenses or other similar authority.

 

2.20   Environmental and Safety Laws.  Except as could not reasonably be expected to have a Material Adverse Effect to the best of Seller’s knowledge: (i) the Company and any Subsidiary is and has been in compliance with all Environmental Laws; (ii) there has been no release or to Seller’s knowledge threatened release of any pollutant, contaminant or toxic or hazardous material, substance or waste, or petroleum or any fraction thereof, (each a “Hazardous Substance”) on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company or any Subsidiary; (iii) there have been no Hazardous Substances generated by the Company or any Subsidiary that have been disposed of or come to rest at any site that has been included in any published US federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the US; and (iv) there are no underground storage tanks located on, no polychlorinated biphenyls (“PCBs”) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored on, any site owned or operated by the Company, except for the storage of hazardous waste in compliance with Environmental Laws.  For purposes of this Section 2.18, “Environmental Laws” means any law, regulation, or other applicable requirement relating to: (a) releases or threatened release of Hazardous Substance; (b) pollution or protection of employee health or safety, public health or the environment; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.

 

2.21   Disclosure. Seller has made available to Purchaser all the information reasonably available regarding the Company and any Subsidiary that Purchaser has requested for deciding whether to acquire the Purchased Shares, including certain of the Company’s projections describing its proposed business plan (the “Business Plan”).  No representation or warranty of Seller contained in this Agreement, and no certificate furnished or to be furnished to Purchaser at the Closing contains any untrue statement of a material fact or, to Seller’s knowledge, omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.  The Business Plan was prepared in good faith; however, Seller does not warrant that the Company will achieve any results projected in the Business Plan.  It is understood that this representation is qualified by the fact that Seller has not delivered to the Purchaser, and has not been requested to deliver, a private placement or similar memorandum or any written disclosure of the types of information customarily furnished to purchasers of securities.

   

  

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3.   Representations and Warranties of the Purchaser.  Purchaser hereby represents and warrants to Seller that:

 

3.1   Authorization.  Purchaser has full power and authority to enter into the Agreement.  The Agreement to which Purchaser is a party, when executed and delivered by Purchaser, will constitute valid and legally binding obligations of Purchaser, enforceable in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

3.2   Purchase Entirely for Own Account.  This Agreement is made with Purchaser in reliance upon Purchaser’s representation to Seller, which by Purchaser’s execution of this Agreement, Purchaser hereby confirms that the Purchased Shares to be acquired by Purchaser will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, Purchaser further represents that Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Purchased Shares.  Purchaser has not been formed for the specific purpose of acquiring the Purchased Shares.

 

3.3   Disclosure of Information; Investment Experience.  Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Purchased Shares with Seller and the Company’s management and has had an opportunity to review the Company’s facilities. The foregoing, however, does not limit or modify the representations and warranties of Seller regarding the Company, any Subsidiary, or any New Subsidiary in Section 2 of this Agreement, or the right of Purchaser to rely thereon, provided that Seller’s representations and warranties regarding the New Subsidiaries is limited to the accuracy of their Financial Statements issued prior to the date of this Agreement.  Purchaser represents that Purchaser is experienced in evaluating and investing in transactions involving securities of companies in a similar stage of development and acknowledges that Purchaser is able to fend for himself, herself or itself, can bear the economic risk of Purchaser’s investment, and has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of the investment in the Purchased Shares.

 

3.4   Accredited Investor.  Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

   

  

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3.5   No General Solicitation.  Neither Purchaser, nor any of its officers, directors, employees, agents, stockholders or partners, has, either directly or indirectly, including through a broker or finder, (i) engaged in any general solicitation; or (ii) published any advertisement in connection with the proposed purchase and sale of the Purchased Shares.

 

3.6   Disclosure. Purchaser has made available to Seller all the information reasonably available regarding the Purchaser and any Subsidiary that Seller has requested for deciding whether to enter into the transaction contemplated hereunder.  No representation or warranty of Purchaser contained in this Agreement, and no certificate furnished or to be furnished to Seller at the Closing contains any untrue statement of a material fact or, to Purchaser’s Knowledge, omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

 

4.   Mutual Representations of the Parties.  Each Party hereby represents to the other (Seller’s representations apply to each of Seller, the Company and the Company’s Subsidiaries, as applicable; Purchaser’s representations apply to Purchaser and any affiliate of Purchaser, as applicable):

 

4.1   Foreign Corrupt Practices Act.  To the best of the representing Party’s knowledge, neither the Party, nor any of their respective directors, officers or employees have made, directly or indirectly, any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to: (i) any foreign official (as such term is defined in the US Foreign Corrupt Practices Act (“FCPA”) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a governmental authority; or (ii) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, in the case of both (i) and (ii) above, in order to assist the representing Party or their respective affiliates to obtain or retain business for, or direct business to, the representing Party or their respective affiliates, as applicable.  Neither the representing Party, nor any of their respective directors, officers or employees has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation.

 

4.2   Compliance with Office of Foreign Assets Control.

 

(a)   To the representing Party’s knowledge, neither the Party, nor any of their respective directors, officers or employees is an OFAC Sanctioned Person (as defined below).  The representing Party and their respective directors, officers or employees are in compliance with, and have not previously violated, the US Patriot Act of 2001, as amended through the date of this Agreement, to the extent applicable to the representing Party, and all other applicable anti-money laundering laws and regulations.  None of: (i) the purchase and sale of the Zapna Stock or the VELA Shares; (ii) the execution, delivery and performance of this Agreement; or (iii) the consummation of any transaction contemplated hereby or thereby, or the fulfillment of the terms hereof or thereof, will result in a violation by anyone of any of the OFAC Sanctions (as defined below) or of any anti-money laundering laws of the United States or any other applicable jurisdiction.

   

  

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(b)   For the purposes of Section4.2(a) of this Agreement:

 

(i)   “OFAC Sanctions” means any sanctions program administered by the Office of Foreign Assets Control of the US Department of the Treasury (“OFAC”) under authority delegated to the Secretary of the Treasury (“Secretary”) by the President of the US or provided to the Secretary by statute, and any order or license issued by, or under authority delegated by, the President or provided to the Secretary by statute in connection with a sanctions program thus administered by OFAC.  For ease of reference, and not by way of limitation, OFAC Sanctions programs are described on OFAC's website at www.treas.gov/ofac;

 

(ii)   “OFAC Sanctioned Person” means any government, country, corporation or other entity, group or individual with whom or which the OFAC Sanctions prohibit a US Person from engaging in transactions and includes, without limitation, any individual or corporation or other entity that appears on the current OFAC list of Specially Designated Nationals and Blocked Persons (“SDN List”).  For ease of reference, and not by way of limitation, OFAC Sanctioned Persons other than governments and countries can be found on the SDN List on OFAC's website at www.treas.gov/offices/enforcement/ofac/sdn; and

 

(iii)   “US Person” means any US citizen, permanent resident alien, entity organized under the laws of the US (including foreign branches), or any person (individual or entity) in the US and, with respect to the Cuban Assets Control Regulations, also includes any corporation or other entity that is owned or controlled by one of the foregoing, without regard to where it is organized or doing business.

 

5.   Conditions to the Purchaser’s Obligations at Closing.  The obligations of Purchaser to purchase the Purchased Shares at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

5.1   Representations and Warranties.  The representations and warranties of Seller contained in Section 2 shall be true and correct in all respects as of the Closing.

 

5.2   Performance.  Seller shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by Seller on or before the Closing.

 

5.3   Compliance Certificate.  The Chief Executive Officer of Seller shall deliver to the Purchaser at the Closing a certificate certifying that the conditions specified in Sections 5.1 and 5.2 have been fulfilled.  Seller shall deliver resolutions of its board of directors approving the Agreement and the transactions contemplated under the Agreement.

 

5.4   Qualifications.  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the US or of any state that are required in connection with the lawful sale of the Purchased Shares pursuant to this Agreement shall be obtained and effective as of the Closing.

 

6.   Conditions of the Seller’s Obligations at Closing.  The obligations of Seller to sell Purchased Shares to Purchaser at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

   

  

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6.1   Representations and Warranties.  The representations and warranties of Purchaser contained in Section 3 shall be true and correct in all respects as of the Closing.

 

6.2   Performance.  Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Purchaser on or before the Closing.

 

6.3   Compliance Certificate.  The Chief Executive Officer of Purchaser shall deliver to the Seller at the Closing a certificate certifying that the conditions specified in Sections 6.1 and 6.2 have been fulfilled.  Purchaser shall deliver resolutions of its board of directors approving the Agreement and the transactions contemplated under the Agreement.

 

6.4   Qualifications.  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the US or of any state that are required in connection with the lawful issuance and delivery of the Purchase Price Shares pursuant to this Agreement shall be obtained and effective as of the Closing.

 

7.   Indemnification.

 

Each Party agrees to defend, indemnify and hold harmless the other Party and its successors, permitted assigns, employees, officers, agents, managers, shareholders and affiliates, from and against any and all losses, deficiencies, liabilities, damages, assessments, judgments, costs and expenses, including reasonable attorneys’ fees (both those incurred in connection with the defense or prosecution of an indemnity claim and those incurred in connection with the enforcement of this provision) resulting from or arising out of (i) any failure of the indemnifying Party to perform or fulfill any undertaking, covenant or agreement applicable to such Party in this Agreement, and (ii) any material breach of a representation and warranty contained in Sections 2-4 of this Agreement and applicable to the indemnifying Party.

 

8.   Miscellaneous.

 

8.1   Survival of Warranties.  Unless otherwise set forth in this Agreement, the representations and warranties of Seller and Purchaser contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing, and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of Seller or Purchaser.

 

8.2   Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the Parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

8.3   Governing Law.  This Agreement is made and any controversy arising out of or relating to this Agreement shall be governed by, and construed and enforced in accordance with, the laws of New York, without regard to the conflict of laws principles thereof.

 

8.4   Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

   

  

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8.5   Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the Party to be notified; (ii) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after deposit with a worldwide recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt.  All communications shall be sent to the respective Parties at their address as set forth on the signature page, or to such e-mail address, facsimile number or address as subsequently modified by Notice given in accordance with this Section.  If Notice is given to Purchaser, Notice shall also be given to the General Counsel of VelaTel delivered in the same manner as to VelaTel at the address, facsimile number or e-mail address set forth below:

 

Kenneth L. Waggoner

Executive Vice President Legal, General Counsel and Director

VelaTel Global Communications, Inc.

12526 High Bluff Drive, Suite 155

San Diego, California 92130 USA

Facsimile: + (760) 359-7042

E-Mail:  kwaggoner@velatel.com

 

8.6   Finder’s Fee and Commission.  Purchaser represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission in connection with this transaction.  Purchaser agrees to indemnify and to hold harmless Seller from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction, including the costs and expenses of defending against such liability or asserted liability.  Seller represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission in connection with this transaction.  Seller agrees to indemnify and hold harmless Purchaser from any liability for said commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction, including the costs and expenses of defending against such liability or asserted liability.

 

8.7   Dispute Resolution.  Any dispute between the Parties to this Agreement which arises out of or relates to this Agreement shall be submitted to binding arbitration to be conducted by the  Judicial Arbitration and Mediation Services, Inc. (“JAMS”), sitting in San Diego, California, for resolution by a single arbitrator acceptable to both Parties.  If the Parties fail to agree to an arbitrator within ten (10) days of a written demand for arbitration being sent by one Party to the other Party, then JAMS shall select the arbitrator according to the JAMS Rules for Commercial Arbitration.  The arbitration shall be conducted pursuant to the California Code of Civil Procedure and the California Code of Evidence.  The award of the arbitrator shall be final and binding on the Parties and may be enforced by any court of competent jurisdiction.  The Party prevailing in the arbitration shall be entitled to recover from the non-prevailing Party its reasonable attorney fees and other costs and expenses incurred in connection with the arbitration and/or any action to enforce the results of the arbitration.

 

8.8   Attorney Fees.  If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of this Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled.

     

  

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8.9   Severability.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

8.10   Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any Party under this Agreement, upon any breach or default of any other Party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting Party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of either Party of any breach or default under this Agreement, or any waiver on the part of either Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to either Party, shall be cumulative and not alternative.

 

8.11   Entire Agreement.  This Agreement, including the Exhibits hereto, constitute the full and entire understanding and agreement between the Parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the Parties is expressly canceled.

 

8.12   Counterparts.  This Agreement may be executed in one or more counterparts, including facsimile copy of signatures, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same Agreement.

 

IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement as of the date first written above.

    

	
GULFSTREAM CAPITAL PARTNERS LIMITED

 

 

 

By /s/ Colin Tay                                                               

      Colin Tay, its Executive Director

    

4F-1 No. 102 Kuang Fu South Road

Taipei  106, TAIWAN

Facsimile: + (886) 2 2778-1534

E-Mail:  ctay@velatel.com

	
ZAPNA, APS

 

 

 

By /s/ Hamad Raza                                                     

      Hamad Raza, its Chief Executive Officer

 

Smedeholm 13 B

DK-2730 Herlev, DENMARK

E-Mail: hrk@zapna.com

	  	
 

 

“SELLER”

 

 

 

/s/ Omair Khan                                                            

Omair Khan

 

Smedeholm 13 B

DK-2730 Herlev, DENMARK

E-Mail: okhan@zapna.com

 

 

 

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