Document:

exhibit10-3.htm

EXHIBIT 10.3

 

ESCROW AGREEMENT

 

ESCROW AGREEMENT, dated as of December 20, 2011, by and among Dynamic Ventures Corp., a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), Centurion Private Equity, LLC, a Georgia Limited Liability Company (the “Investor”) and Gracin & Marlow, LLP, solely in its capacity as escrow agent (the “Escrow Agent”).

 

WHEREAS, the Investment Agreement, dated as of the date hereof, by and between the Company and the Investor (the “Investment Agreement”), provides that within three days of the date of execution of the Investment Agreement the Company shall issue a number of Escrow Shares (as defined below) of Common Stock having a value as determined in the Investment Agreement equal to Seventy Five Thousand Dollars ($75,000), in the name of the Investor, and deposit the Escrow Shares in trust with the Escrow Agent, to be held in escrow in and be disbursed in accordance with the terms hereof.

 

WHEREAS, unless otherwise specified, capitalized terms set forth herein shall have the meanings ascribed to them in the Investment Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth, and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereby agree as follows:

1. Escrow Duties.  Each of the Company and the Investor hereby appoints and designates the Escrow Agent to receive and hold in escrow the Escrow Shares, and to release the Escrow Shares in accordance with the terms, conditions and provisions of this Agreement.  The Escrow Agent agrees to receive, hold and dispose of the Escrow Shares, and to act as Escrow Agent, in accordance with all of the terms, conditions and provisions of this Agreement.

2.           Deliveries.                      Simultaneously hereto, the Company shall deliver to the Escrow Agent certificates representing 1,284,246 shares of Common Stock of the Company registered in the name of the Investor and shall initially bear a restrictive legend under the Securities Act of 1933, as amended, subject to legend removal as required under the Investment Agreement.  The Escrow Agent hereby acknowledges receipt of the Escrow Shares and agrees to hold and
deliver the Escrow Shares in accordance with this Agreement.

3.           Terms and Conditions of Escrow.  Anytime on or after the Initial Liquidity Date (as defined in the Investment Agreement), the Investor may give written notice to the Escrow Agent and the Company (“Investor Instruction Notice”) setting forth the Initial Liquidity Date, an explanation of why such date is the Initial Liquidity Date and the Investor’s calculations of the Second Commitment Share Number (as defined in the Investment Agreement) and instructing the Escrow Agent (a) to release to the Investor a
number of Escrow Shares equal to the lesser of (x) the Second Commitment Share Number (as defined in the Investment Agreement), or (y) the total number of Escrow Shares held in escrow (such lesser amount being referred to as the “Investor Shares”) and (b) to release to the Company any remaining Escrow Shares after release of the Investor Shares to the Investor.

 

 

  

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The Escrow Agent shall promptly provide a copy of the Investor Instruction Notice to the Company. The Company hereby instructs the Escrow Agent to follow the Investor Instruction Notice within three (3) Business Days of the Escrow Agent’s receipt of the Investor Instruction Notice to the Escrow Agent (the “Delivery Deadline”), subject to the following:

(1) The Company shall promptly consent to the Investor Instruction Notice in writing unless it has a reasonable bona fide objection thereto. If the Company consents, in writing or fails to object, in writing, with a reasonable bona fide objection to the Investor Instruction Notice by 12:00 Noon, New York City Time on the Delivery Deadline, then the Escrow Agent shall deliver the number of Escrow Shares specified in the Investor Instruction Notice to the Investor and the Company, respectively on the Delivery Deadline.

(2) If the Company has a reasonable bona fide objection to the Investor Instruction Notice, it shall provide written notice of such objections (“Company Objection Notice”) to the Company before the Delivery Deadline.  In the event that the Escrow Agent receives a Company Objection Notice, it shall promptly notify the Investor and submit the matter for dispute resolution pursuant to Section 7 hereof, absent a resolution between the parties.

(3) Notwithstanding the above, if at any time prior to the date that Escrow Shares are required to be released to the Investor, the Escrow Agent receives Seventy Five Thousand Dollars ($75,000) in federal clearing house funds from the Company, then the Escrow Agent shall promptly release all of the Escrow Shares to the Company and the Seventy Five Thousand Dollars ($75,000) shall be released to the Investor.

4.           Escrow Agent.  The acceptance by the Escrow Agent of its duties under this Agreement is subject to the following terms and conditions, which shall govern and control with respect to the Escrow Agent’s rights, duties, liabilities and immunities:

 

(a) The duties and obligations of the Escrow Agent shall be determined solely by the provisions of this Agreement, and the Escrow Agent shall not be liable to any person except for the performance of such duties and obligations as are specifically set forth in this Agreement.

 

(b) The Escrow Agent shall not be responsible in any manner for any failure or inability of the Company or the Investor to honor any of the provisions of this Agreement or the Investment Agreement or any of the agreements contemplated by the Investment Agreement or any other instrument or agreement executed and delivered pursuant thereto.

 

(c) Each of the Company and the Investor agrees (i) to make no claim, and to bring no action, suit or proceeding, against the Escrow Agent by reason of any alleged loss, liability, claim or charge arising out of, or in connection with, the Escrow Agent’s acceptance or performance (including acts and omissions), in good faith and without willful misconduct or gross negligence, of its duties and obligations under this Agreement and (ii) to reimburse and indemnify the Escrow Agent for, and hold it harmless against, any loss, liability, cost or expense (including, without limitation, attorneys’ fees and
disbursements) incurred without bad faith, willful misconduct or gross negligence on the part of the Escrow Agent, and arising out of, or in connection with, the Escrow Agent’s acceptance or performance of its duties hereunder, as well as the costs and expenses of instituting, prosecuting or defending any claim, action suit or proceeding arising out of, or relating to, this Agreement, including, without limitation, any action for a declaratory judgment in such regard instituted by the Escrow Agent.

 

 

  

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(d) The Escrow Agent shall, in the absence of its own gross negligence or willful misconduct, be fully protected in acting and relying upon any written advice, certificate, notice, direction, instruction, request, order, judgment, decree or other document given to it which the Escrow Agent in good faith believes to be genuine and to have been signed or presented by the proper party or parties, and may assume that any person purporting to give such advice, certificate, notice, direction, instruction, request or other document has been duly authorized to do so.  The Escrow Agent assumes no responsibility
for the accuracy of the contents of any such document.

 

(e) The Escrow Agent may seek the advice of legal counsel in the event of any dispute or question as to the construction of the provisions of this Agreement or its duties hereunder, and may rely on an opinion of such counsel.  In rendering such opinion, such counsel may rely on statements of fact furnished to them by persons reasonably believed by such counsel to be credible, and such counsel shall have no liability for the accuracy of the facts so relied upon, nor shall such counsel have any liability for matters of their own judgment forming a part of the process of providing such
opinion.

 

(f) The Escrow Agent and any successor escrow agent, as the case may be, may resign as escrow agent hereunder and be discharged from all other further duties and obligations hereunder at any time upon giving thirty (30) days’ notice to the Company and the Investor, who shall thereupon jointly designate a successor escrow agent hereunder within such 30-day period, to whom the Escrow Agent shall deliver the Escrow Shares then held by the Escrow Agent.  The Company and the Investor may jointly terminate this Agreement at any time by notice to the Escrow Agent, and, in such event, shall jointly (i)
designate a successor escrow agent hereunder to whom the Escrow Agent shall deliver the Escrow Shares then held by the Escrow Agent or (ii) direct the Escrow Agent to otherwise dispose of the Escrow Shares then held by the Escrow Agent.  In either case, in the absence of such a joint designation of a successor escrow agent, the Escrow Agent shall, without further liability or responsibility, retain any Escrow Shares then held by the Escrow Agent as custodian thereof until otherwise jointly directed by the Company and the Investor.

 

(g) The Escrow Agent does not have and shall not have any interest in the Escrow Shares but is serving only as escrow holder thereof.

 

(h) This Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto.  No implied duties or obligations shall be read into this Agreement against the Escrow Agent, and the Escrow Agent shall not be bound to the provisions of any agreement among the other parties hereto except this Agreement.

 

(i) In the event of a dispute among the parties hereto that cannot be resolved after diligent efforts by the parties, the Escrow Agent, may its option upon ten (10) days’ prior written notice to the other parties, elect to deposit the Escrow Shares with the Supreme Court of the State of New York in New York, New York, or other comparable court of equivalent jurisdiction, for such court to determine the disposition of the Escrow Shares and in such event, each of the Company, the Investor and the Escrow Agent shall abide by such court’s decision.

 

 

  

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5.           Fees.           The Company shall pay and/or reimburse the Escrow Agent for the ordinary course fees, costs and disbursements incurred by the Escrow Agent in connection with the performance by the Escrow Agent of its duties under this Agreement, which fees and costs shall not exceed $1,500.00; provided, however, that such limit on fees and costs shall
not apply in the event that a dispute among the Company and the Investor over the subject of this Escrow Agreement involves the Escrow Agent, and makes the Escrow Agent a party, in any litigation among the Company and the Investor.

 

 

6.           Notices.  Any notices or other communication provided for hereunder shall be in writing and shall have been sufficiently given for all purposes: (a) if delivered personally to the party or to an executive officer of the party to whom such notice, demand or other communication is directed on the date of such personal delivery, or (b) if sent by registered or certified mail, postage prepaid, addressed to each party at its respective address indicated on the signature page hereof, or, as to any party, at such other address as shall be designated by such party in a written
notice to the other party its address (as set forth below) on the fifth business day after the date on which it was deposited in a regularly maintained receptacle for the deposit of United States mail; or (c) if sent by overnight delivery service, such as Federal Express, United Parcel Service, U.S. Express Mail, etc., on the second business day following delivery of such notice to the overnight delivery carrier, provided the same is fully paid for and properly addressed; or (d) if sent by facsimile transmission, on the date of such transmission, if confirmed as received that day by the receiving party or a written confirmation of transmission, and the original notice is sent that day by first class mail, postage prepaid; or (e) if sent by email, on the date of the email, if confirmed as received that day by the receiving party or a written confirmation of transmission, and the original
notice is sent that day by first class mail, postage prepaid.

 

7.           Resolution of Disputes; Attorneys’ Fees and Costs.

 

(a)           The parties to this Agreement shall act in good faith to resolve any dispute or other controversy arising under this Agreement.  Absent agreement resolving a dispute within ten (10) days after the dispute has arisen, any party shall have the right to seek to settle the matter by court action or, if the parties agree at the time, by arbitration.  If any party should institute legal proceedings to enforce such party’s rights under this Agreement, or otherwise with respect to the subject matter of this Agreement or the Escrow Shares or any part thereof, the prevailing party
or parties shall recover, in addition to all other costs and damages awarded, and the losing party or parties shall pay, the reasonable attorneys’ fees and costs at trial, on appeal, upon petition for review, or in any bankruptcy proceeding, of the prevailing party or parties, whether or not such fees and costs are prescribed by statute, and shall pay the fees and costs of the Escrow Agent incurred in connection with such dispute, including reimbursement to the prevailing party of such fees and costs previously paid, in each case as determined by the court at trial or upon any appeal.  The parties hereby consent to the jurisdiction of the Supreme Court of the State of New York in New York, New York with respect to any claims, actions or proceedings arising under this Agreement.

 

 

  

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(b)           In the event the parties involved in any dispute or other controversy arising under this Agreement seek to resolve such dispute or controversy by arbitration, any such arbitration shall be conducted according to the applicable rules of the American Arbitration Association and shall take place in New York, New York.  Such arbitration shall be heard by a single arbitrator, selected on the basis of relevant legal and industry experience.  Each party involved in the dispute shall designate an individual also possessing the relevant legal and industry experience within thirty (30)
days after any party shall request arbitration; the designees will then select an individual to be the arbitrator, who shall not be one of the designees.   If the designees are unable to agree upon an arbitrator within ten (10) days after their appointment, then an arbitrator shall be selected according to the Rules of the American Arbitration Association as at the time in effect in New York, New York by the American Arbitration Association.  The decision of the arbitrator shall be final and binding upon the parties hereto.

 

8.           Termination.                      This Agreement shall terminate, upon the Escrow Agent’s delivery of the Escrow Shares pursuant to Section 3, except that the provisions of Sections 4, 5 and 7 shall survive the termination of this Agreement.

 

9.           Successors and Assigns.  This Agreement shall be binding upon, enforceable against and inure to the benefit of, the parties hereto and their respective heirs, administrators, executors, personal representatives, successors and assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person.  This Agreement may not be assigned by any party hereto except with the prior written consent of all the other parties, which consent shall not be unreasonably withheld.

 

10.           Severability.                      If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited, but only to the extent necessary to render such provision and this Agreement enforceable.

 

11.           Governing Law.  This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles.

 

12.           Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may be executed on signature pages exchanged by facsimile or .pdf, in which event each party shall promptly deliver to the others such number of original executed copies as the others may reasonably require, but for evidentiary purposes, such facsimile or .pdf signatures shall constitute original signatures hereof; provided, however, the failure to exchange such
original signature pages after exchanging any facsimile or scanned .pdf signature pages shall not affect the enforceability of this Agreement.

 

13.           Acknowledgement.  The Investor acknowledges and agrees that Gracin & Marlow, LLP has acted as legal counsel for the Company with respect to the subject matters addressed by the Investment Agreement and this Agreement, and hereby waives any conflicts to, and agrees that it shall not raise, any objections, claims or demands in respect of Gracin & Marlow, LLP serving as Escrow Agent hereunder.

 

 

  

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

 

	
Address:

8776 East Shea Boulevard

Suite BA-615Scottsdale, AZ  85260

Attn: Paul Kalkbrenner, CEO

Fax:  (480) 517-5003

Email:dbrown@bbsiaz.com

	
DYNAMIC VENTURES CORP.

 

By: /s/ Paul Kalkbrenner                                                              

Name:

Title:

 

	
Address:

1120 Sanctuary Parkway, Suite 325

Alpharetta, GA  30009

Attn: Eric S. Swartz

Facsimile:  (770) 777-5844

Email: eswartz@rosewellcapitalpartners.com

	
CENTURION PRIVATE EQUITY, LLC

 

By: /s/ Eric S. Swartz                                                             

Name:

Title:

 

ESCROW AGENT:

	
Address:

 

Chrysler Building

405 Lexington Avenue

26th Floor

New York, New York 10174

Attn: Leslie Marlow, Esq.   

Facsimile: (212) 208-4657

email: lmarlow@gracinmarlow.com

 

	
GRACIN & MARLOW, LLP, solely in its capacity as Escrow Agent

By: /s/ Leslie Marlow                                                                

Leslie Marlow

	  	  

 

  

Page - 6Unassociated Document

 

EXHIBIT 10.1

 

EXCHANGE AGREEMENT AND

 

PLAN OF REORGANIZATION

 

	
THIS EXCHANGE AGREEMENT AND
PLAN OF REORGANIZATION dated as of December 10, 2011, has been made and entered into between Richard Lawrence, Allen S.
Mason, Gordon Sumner, Jr., Michael M. Thacker and Damon Giovanielli (herein singularly called the “Stockholder”
and collectively called the “Stockholders”), and Sigma Labs, Inc., a Nevada corporation (herein called
“Sigma”).

WHEREAS, the Stockholders are the owners in the aggregate of ten thousand (10,000) shares of Common Stock (“SAI Stock”) of Sumner Associates, Inc., a New Mexico corporation (“SAI”), the SAI Stock constituting all of the issued and outstanding shares of SAI; and

WHEREAS, the Stockholders are the owners in the aggregate of fourteen thousand two hundred twenty-five (14,225) shares of Common Stock (“La Mancha Stock”) of La Mancha Company, a New Mexico corporation (“La Mancha”), the La Mancha Stock constituting all of the issued and outstanding shares of stock of La Mancha; and

WHEREAS, the Stockholders desire to transfer to Sigma and Sigma desires to acquire from the Stockholders the SAI Stock and the La Mancha Stock for the consideration and upon the terms and conditions hereinafter set forth, such transaction to be a Plan of Reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended;

NOW, THEREFORE, in consideration of the premises and of the mutual agreements hereinafter set forth, the parties hereto agree as follows:

	
  

	
1.

	
Exchange of Stock:  On the terms and subject to the conditions set forth in this Agreement, each of the Stockholders hereby agrees to assign and transfer to Sigma on the Closing Date (as herein defined), free and clear of all liens, pledges and encumbrances of any kind, nature or description, and Sigma agrees to acquire from each of the Stockholders on said date, the number of shares of SAI Stock and La Mancha Stock set forth opposite his name on the signature page of this Agreement for an aggregate consideration as provided in Paragraph 2 hereof, if, but only if, at the Closing Date 100% of all outstanding shares of SAI Stock and La Mancha Stock are transferred to Sigma.  Each Stockholder hereby waives all preferential purchase rights of whatever nature which the Stockholder has or may have as to any of the outstanding shares of SAI Stock and La Mancha Stock.

 

	
  

	
2.

	
Consideration:  The consideration to be paid for the SAI Stock and the La Mancha Stock by Sigma to the Stockholders shall be an aggregate number of shares of presently authorized but unissued Common Stock of Sigma equal to $300,000 divided by the average closing price of Sigma’s Common Stock for the ten trading days ended December 29, 2011; provided however, that the number of shares shall not be less than twenty five million (25,000,000) or more than thirty five million (35,000,000).  The shares to be issued by Sigma pursuant to this Agreement are sometimes referred as the “Sigma Stock”.

 

	
  

	
3.

	
The Closing:  The exchange provided for herein shall be made at the offices of Sigma, 3900 Paseo del Sol, Santa Fe, New Mexico 87507, or at such other place as the parties shall mutually agree, at 10:00 A.M. on December 31, 2011, or at such other time as the parties shall mutually agree upon in writing (such time being herein called the “Closing Date”).  The Closing shall be effective as of the close of business on December 31, 2011.

 

 

  

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On the Closing Date:  (i) the Stockholders shall deliver to Sigma stock powers duly executed in blank, in proper form for transfer covering the transfer of all of SAI Stock and La Mancha Stock and shall make available to Sigma the books and records of SAI and La Mancha; and (ii) Sigma shall issue and deliver to the Stockholders (in proportion among them to their ownership of SAI Stock and La Mancha Stock) certificates representing the Sigma Stock registered in their respective names.

 

	
  

	
4.

	
Management Structure of SAI and La Mancha: The organizational structure of SAI and La Mancha shall be maintained after closing and the SAI and La Mancha management and staff who are in place as of the date of Closing (including officers, directors, contractors and employees) shall be retained in their positions after closing for a period of at least two years if they are able and choose to serve. The current directors of the two companies are Damon Giovanielli, Richard Lawrence, Allen S. Mason, Gordon Sumner, Jr. and Michael M. Thacker. Decisions relating to the management and operation of SAI and La Mancha will continue to be made after Closing by the Boards of Directors and Officers of SAI and La Mancha as provided in their bylaws.

 

	
  

	
After Closing, the financial affairs of Sumner and La Mancha will, for at least two years, be managed and executed by their management structure in the same manner as before Closing.  In particular, the Directors and Officers of SAI and La Mancha will determine compensation for officers, directors and employees of SAI and La Mancha who provide services to these corporations up to an aggregate maximum of $45,000 per quarter (subject to upward adjustment by the Board of Directors of Sigma) , however, the directors and officers of SAI and La Mancha shall not be compensated except on a funds available basis after payment of all operating expenses.

 

	
  

	
The employees of SAI and La Mancha will be eligible to participate, to the extent possible, in any Sigma benefit plan made available by Sigma to all of its employees.

 

	
  

	
5.

	
Access to Properties and Records of SAI and La Mancha:  From and after the date of signing of this Agreement, the Stockholders shall cause SAI and La Mancha to afford to the officers, attorneys, accountants and other authorized representatives of Sigma, free and full access to the offices, properties, books and records of SAI and La Mancha in order that Sigma may have full opportunity to make such investigation as it shall desire to make of the affairs of SAI and La Mancha, provided that such investigation shall not unreasonably interfere with the operations of SAI and La Mancha, as the case may be. Sigma shall provide to the Shareholders and their agents, accountants, attorneys and other authorized agents the same access to the offices, properties, books and records of Sigma as is to be provided by Shareholders to Sigma as required by this paragraph in order for the Shareholders to make such investigations as they shall desire to make of the affairs of Sigma, provided such investigation shall not unreasonably interfere with the operations of Sigma.  All information obtained by each party pursuant to this Paragraph 5 shall be retained in confidence by such party.

 

	
  

	
6.

	
Representations and Warranties of Stockholders:  Each of the Stockholders represents, warrants and agrees as follows:

 

	
  

	
(a)

	
Each of SAI and La Mancha is a corporation duly organized and existing and in good standing under the laws of the State of New Mexico, and has the corporate power to own its properties and to carry on its business as is now being conducted in all states, if any, in which such business is conducted.

 

	
  

	
(b)

	
The SAI Stock and the La Mancha Stock, as set forth on the signature page hereto, are validly issued and outstanding and are fully paid and non-assessable, and there are no outstanding securities of either SAI or La Mancha; and there are no outstanding subscriptions, options, warrants or other agreements or commitments obligating SAI or La Mancha to issue any additional shares of its capital stock of any class, or any options or rights with respect thereto, or any securities convertible into any shares of stock of any class.

 

 

  

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(c)

	
Neither SAI nor La Mancha has any subsidiaries or affiliated companies of any kind.

 

	
  

	
(d)

	
The Stockholders have furnished to Sigma true and correct copies of the Articles of Incorporation and Bylaws of SAI and La Mancha.

 

	
  

	
(e)

	
The Stockholders are the owners of all of the shares of SAI Stock and La Mancha Stock and have good and marketable title thereto and the absolute right to sell, assign and transfer the same to Sigma free and clear of all liens, pledges, encumbrances or any other claims of any kind.

 

	
  

	
(f)

	
Annexed hereto as Exhibit A are the respective balance sheets and profit and loss statements of SAI and La Mancha, as of November 30, 2011, and for the period then ended.  Said financial statements are correct and complete and present fairly the financial condition of such companies as of November 30, 2011, and the result of their respective operations for the period then ended; and they were prepared in conformity with generally accepted accounting principles applied on a consistent basis.  Since November 30, 2011, there has been no adverse change in the financial condition, business, properties, net worth or operations of SAI and La Mancha and there have been no dividends or other distributions, declared, paid or otherwise made by SAI or La Mancha to their respective Stockholders, except as set forth in Schedule 6(f) hereto, except accrued salaries in the ordinary and usual course of business at rates not in excess of rates in effect during the period ended November 30, 2011.  At November 30, 2011, neither SAI nor La Mancha had any liabilities, absolute or contingent which are not shown or provided for in the respective balance sheets as of that date.

 

	
  

	
(g)

	
Annexed hereto as Exhibit B is a list of all material contracts and other documents to which either SAI or La Mancha are a party.  Excepting only the contracts and documents included in said list, SAI and La Mancha are not parties to any written or oral (i) contract not made in the ordinary course of business; (ii) employment contracts; (iii) contract with any labor union or association; (iv) bonus, pension, profit sharing, retirement, stock purchase, stock option, hospitalization, insurance or other plan providing employee benefits; (v) lease with respect to any property, real or personal, whether as lessor or lessee; (vi) continuing contract for future purchase of materials, supplies or equipment; (vii) contracts or commitments for capital expenditures in excess of $5,000 in the aggregate; (viii) contract continued over a period of more than one year from its date.  Each of SAI and La Mancha has in all material respects performed all obligations required to be performed by it to date and is not in default in any material respect under any franchise, contract, agreement, lease, or other documents to which it is a party or by which it is bound.

 

	
  

	
(h)

	
Annexed hereto as Exhibit C is a copy of the SAI’s lease of its offices at 100 Cienega  in Santa Fe, New Mexico. This is the only interest in real property held by SAI or La Mancha.  SAI is in full compliance with the terms of this lease.    Exhibit C also lists all intellectual property, owned, licensed or registered in the name of SAI or La Mancha.

 

	
  

	
(i)

	
Annexed hereto as Exhibit D is a list and description of all policies of fire, liability and other forms of insurance held by SAI and La Mancha.  Valid policies for such insurance will be outstanding and duly in force at all times between the date hereof and the Closing Date.

 

	
  

	
(j)

	
There are no actions, suits or proceedings pending or, to the knowledge of the Stockholders, threatened against or affecting SAI and La Mancha or the Stockholders’ respective interests in SAI and La Mancha.

 

	
  

	
(k)

	
SAI and La Mancha each has duly filed all tax returns required to be filed by it on or before the Closing Date and has paid all taxes claimed to be due by any taxing authority.  The amounts set up as provisions for taxes on the respective balance sheets of SAI and La Mancha at November 30, 2011, if any, are sufficient for the payment of all accrued and unpaid federal, state, county and local taxes of SAI and La Mancha whether disputed or not, for the period ended on said date and for all periods prior thereto. The Stockholders assume full responsibility for such taxes through December 31, 2011.

 

 

  

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(l)

	
Since November 1, 2011, neither SAI nor La Mancha has: (i) issued or sold, or granted any option or right to purchase, any of its stock, bonds or other corporate securities, incurred any obligations or liability (absolute or contingent), except obligations and liabilities incurred in the ordinary course of business and except obligations under contracts, if any, not made in the ordinary course of business disclosed in this Agreement or in the exhibits hereto; (ii) discharged or satisfied any lien or encumbrance, or paid any obligation or liability (absolute or contingent), other than current liabilities included in the respective balance sheets of SAI and La Mancha at September 30, 2011 and current liabilities incurred since that date in the ordinary course of business; (iii) except for increases paid to associates and consultants performing work under contracts with others, made any general wage or salary increases; (iv) mortgaged, pledged or subjected to lien or any other encumbrance, any of its assets, tangible or intangible; (v) sold or transferred any of its tangible assets or cancelled any debts or claims, except in each case in the ordinary course of business and in any event not in an aggregate amount which is material; (vi) sold, assigned or transferred any patents, trademarks, trade names, copyrights, licenses or other tangible assets; (vii) suffered any extraordinary losses or waived any rights of substantial value; or (viii) entered into any transactions other than in the ordinary course of business. After September 30, 2011, Stockholders purchased from Thomas F. Stratton all of his SAI and La Mancha Stock and apportioned that stock among themselves according to the amount of money each of them contributed to the purchase; and the division of his shares among the Stockholders is reflected in the number of shares owned by each of them in the total shares appearing beside their names on the signature page of this Agreement.

 

	
  

	
(m)

	
Each of SAI and La Mancha has all licenses and agreements necessary for it to carry on its business in the manner in which it is now conducted and is in compliance with all environmental laws, and not in default under any licenses or agreements or any laws, rules or zoning ordinances.

 

	
  

	
(n)

	
A list of employee benefit plans of SAI and La Mancha is attached as Exhibit E.  Except as set forth on Exhibit E, neither SAI nor La Mancha maintains any plan or arrangement for the benefit of its employees.

 

	
  

	
(o)

	
Neither SAI nor La Mancha needs to obtain the consent of any third party or governmental authority in connection with the transaction contemplated hereby.

 

	
  

	
(p)

	
Each Stockholder is acquiring the shares of the Sigma Stock for his own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act of 1933, as amended (the "1933 Act").

 

	
  

	
(q)

	
Each Stockholder is an “accredited investor” as that term is defined in Rule 501(a)(3) of Regulation D.

 

	
  

	
(r)

	
Each Stockholder understands that the shares of Sigma Stock are being issued in reliance on specific exemptions from the registration requirements of United States federal and state securities laws.

 

	
  

	
(s)

	
Each Stockholder has been furnished with or has been given access to all materials relating to the business, finances and operations of Sigma and materials relating to the shares which have been requested by such Stockholder.  Each Stockholder is familiar with the business, operations, and financial condition of Sigma.  The Stockholders understand that an investment in Sigma Stock involves a high degree of risk.  Each Stockholder has sought such accounting, legal and tax advice as he deemed necessary to make an informed investment decision with respect to the exchange of the SAI Stock and La Mancha Stock for the Sigma Stock.

 

  

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(t)

	
Each Stockholder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the shares or the fairness of the exchange of the shares contemplated hereby, nor have such authorities passed upon or endorsed the merits of the exchange.

 

	
  

	
(u)

	
Each Stockholder understands that the Sigma Stock has not been and will not be registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Stockholder shall have delivered to Sigma an opinion of counsel to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Stockholder provides Sigma with reasonable assurance that such securities can be sold, assigned or transferred in compliance with an exemption from registration under the 1933 Act.

 

	
  

	
7.

	
Survival of Representations and Warranties:  The representations and warranties set forth in this Agreement shall remain in full force and effect regardless of any investigation, verification or approval by any party hereto or anyone acting on behalf of any party hereto, and shall survive the closing.  The provisions of this Paragraph may be altered or waived by the parties only by an agreement in writing making specific reference hereto.

 

	
  

	
8.

	
Representations and Warranties of Sigma:  Sigma represents and warrants as follows:

 

	
  

	
(a)

	
Sigma is a corporation duly organized and existing and in good standing under the laws of the State of Nevada, and has corporate power to carry on the business now conducted by it in said state.

 

	
  

	
(b)

	
All corporate and other proceedings required to be taken by or on the part of Sigma to authorize it to carry out this Agreement have been, or will prior to the Closing Date be, duly and properly taken, and this Agreement is a valid and binding obligation of Sigma.

 

	
  

	
(c)

	
The shares of Sigma Stock at the time of their issuance and delivery to Stockholders pursuant to this Agreement shall be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock.

 

	
  

	
(d)

	
Sigma has delivered to Stockholders its 10-Q for the quarter ended

 

	
  

	
September 30, 2011.  The financial statements included in such 10-Q were prepared in accordance with generally accepted accounting principles and such financial statements present fairly the financial condition of Sigma as of September 30, 2011 and the results of Sigma’s operations for the quarter ended September 30, 2001.

 

	
  

	
9.

	
Conditions to Obligations of Sigma:  The obligations of Sigma under this Agreement are, at the option of Sigma, subject to the conditions that, at or before the Closing Date:

 

	
  

	
(a)

	
All the terms, covenants and conditions of this Agreement to be complied with and performed by the Stockholders at or before the Closing Date shall have been duly complied with and performed.

 

	
  

	
(b)

	
All of the representations and warranties made by the Stockholders herein shall be true as of the Closing Date with the same force and effect as though such representations and warranties had been made as of the Closing Date and the Stockholders shall have delivered to Sigma a certificate to such effect signed by each of them.

 

 

  

- 5 -

  

 

	
  

	
(c)

	
Neither the business, properties nor operations of SAI or La Mancha shall have been adversely affected in any material way as a result of any fire, accident or other casualty or any labor disturbance or act of God or the public enemy.  There shall have been no changes in the business, properties, operations or financial condition of SAI or La Mancha since September 30, 2011, which would have an adverse effect on the value of the respective businesses of SAI and La Mancha.

 

	
  

	
(d)

	
All actions, proceedings, instruments and documents required to carry out this Agreement or incidental thereto and all other related legal matters shall have been approved by counsel for Sigma, which approval will not be unreasonably withheld.

 

	
  

	
(e)

	
All approvals and permissions of regulatory agencies required of Sigma in order for it to issue shares of Sigma and otherwise to carry out this Agreement shall have been received by Sigma, shall be in full force-and effect and shall be adequate and appropriate in the opinion of its counsel to authorize the performance by Sigma required by this Agreement.

 

	
  

	
(f)

	
Sigma shall have received written representations from each of the Stockholders, dated the `Closing Date, to the effect that such Stockholder is acquiring the shares of Sigma Stock for investment and without any intention to resell or distribute any thereof and that he understands that the certificates representing the Sigma Stock will bear a restrictive legend relating to compliance with the Securities Act of 1933, as amended.

 

	
  

	
10.

	
Conditions to Obligations of the Stockholders:  The obligations of the Stockholders under this Agreement are, at the option of the Stockholders, subject to the condition that, at or before the Closing Date, all the terms, covenants and conditions of this Agreement that are to be complied with and performed by Sigma at or before the Closing Date shall have been duly complied with and performed.

 

	
  

	
11.

	
Actions of SAI or La Mancha Prior to Closing Date:  Prior to the Closing Date, the Stockholders will not, except in accordance with this agreement, and with the prior written consent of Sigma, permit SAI or La Mancha to:

 

	
  

	
(a)

	
Issue or sell, or grant any option or right to purchase, any of its stock, or other corporate securities (this paragraph does not preclude the already completed purchase by the Stockholders of all of the SAI and La Mancha stock of Thomas F. Stratton).

 

	
  

	
(b)

	
Incur any obligations or liabilities (absolute or contingent), except obligations and liabilities incurred in the ordinary course of business or liabilities for capital expenditures not exceeding $5,000 in the aggregate.

 

	
  

	
(c)

	
Discharge or satisfy any lien or encumbrance, or pay any obligation or liability (absolute or contingent) other than current liabilities included in the balance sheets of SAI or La Mancha at September 30, 2011, current liabilities incurred since that date in the ordinary course of business and for capital expenditures permitted by this Agreement.

 

	
  

	
(d)

	
Mortgage, pledge or subject to lien or to any other encumbrance (other than the lien of taxes not yet payable), any of its assets, tangible or intangible.

 

	
  

	
(e)

	
Sell or transfer any of its tangible assets or cancel any debts or claims, except in each case in the ordinary course of business and provided that all such sales, transfers and cancellations, in the aggregate, shall not be material;

 

	
  

	
(f)

	
Sell, assign or transfer any patents, trademarks, trade names, copyrights, licenses or other intangible assets;

 

 

  

- 6 -

  

 

	
  

	
(g)

	
Waive any right of any substantial value; or

 

	
  

	
(h)

	
Enter into any transaction other than in the ordinary course of business.

 

12.         Indemnification from Liabilities:

 

	
  

	
(a)

	
The Stockholders shall indemnify Sigma and SAI or La Mancha against and hold each of them harmless from and against and in respect of any or all of the following:

 

	
  

	
(i)

	
Any and all liabilities of SAI or La Mancha of every kind and description, absolute or contingent which are not disclosed on the balance sheets of SAI or La Mancha at November  30, 2011, not disclosed on Exhibit B to this Agreement.

 

	
  

	
(ii)

	
Any and all damage or deficiency resulting in the event that any of the representations and warranties made by the Stockholders in this Agreement or in any statement or certificate furnished in connection with the transactions contemplated hereby, or as of the Closing Date as required hereunder, shall be determined to be untrue, and in such event, Stockholders will pay to Sigma an amount equal to the amount which it would cost at the time of discovery to put Sigma or SAI or La Mancha in a position that it or they would have been in had such representation or warranty been true and correct.

 

	
  

	
(b)

	
Sigma shall indemnify the Stockholders against and hold each of them harmless from and against and in respect of any and all damage or deficiency resulting in the event that any of the representations and warranties made by Sigma in this Agreement or in any statement or certificate furnished in connection with the transactions contemplated hereby, or as of the Closing Date as required hereunder, shall be determined to be untrue, and in such event, Sigma will pay to the Stockholders an amount equal to the amount which it would cost at the time of discovery to put the Stockholders in a position that they would have been in had such representation or warranty been true and correct.

 

	
  

	
13.

	
Covenant Not to Compete:  The Stockholders, and each of them, covenant and agree not to carry on anywhere in any county in any state in which Sigma or SAI or La Mancha is conducting business, or in any state in the United States, either for himself, or as a member of any partnership or as a stockholder, director, officer, agent or employee of another person, firm or corporation or otherwise, any business similar to that now carried on by SAI or La Mancha during a period of five years following the Closing Date.  Individual Stockholders will continue to be able to participate on various review committes and advisory panels as they have in the past. In the event this covenant not to compete is held unenforceable or invalid as to any part, the remaining portions of the covenant shall nevertheless remain valid and in full force and effect.

 

14.         Miscellaneous:

 

	
  

	
(a)

	
Sigma and the Stockholders shall consult with each other before issuing any press release or other public statements with respect to this Agreement.

 

	
  

	
(b)

	
The Stockholders shall indemnify Sigma against and hold it harmless from any and all liabilities (including, without limitation, reasonable counsel fees and other reasonable costs of defending against such liabilities) to any person, firm or corporation for any brokerage commission or finders’ fee in connection with any of the transactions contemplated by this Agreement, arising out of acts of the Stockholders, and Sigma shall similarly indemnify the Stockholders against and hold them harmless from any and all such liabilities arising out of acts of Sigma.

 

	
  

	
(c)

	
The Stockholders will, at any time and from time to time after the Closing Date, upon request of Sigma, to execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be required to convey and transfer to and vest in Sigma and protect the right, title and interest in and enjoyment of all the SAI Stock or La Mancha Stock intended to be assigned, transferred and conveyed pursuant to this agreement. Sigma will provide the same post closing assistance as described in this paragraph for Stockholders as is to be provided it by Stockholders to Sigma to protect Stockholders right, title and interest in and enjoyment of Sigma Stock to be transferred to Stockholders pursuant to this Agreement.

 

 

  

- 7 -

  

 

	
  

	
(d)

	
Subject to the terms and conditions hereof, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

	
  

	
(e)

	
Any notice, instruction or other document to be given hereunder to any party shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, as follows:

 

To the Shareholders of SAI and La Mancha:

c/o Sumner Associates, Inc.

100 Cienega, Suite D

Santa Fe, New Mexico 87501

To SAI and La Mancha:

100 Cienega, Suite D

Santa Fe, New Mexico 87501

To: Sigma Labs, Inc.

3900 Paseo Del Sol

Santa Fe, New Mexico 87507

(Signatures on following page)

  

- 8 -

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

 

SIGMA LABS, INC.

 

By: /s/ James A. Stout

James A. Stout

Chairman of the Board

 

SIGMA LABS, INC.

 

By: /s/ Richard Mah

Richard Mah

Chief Executive Officer

 

 

	
STOCKHOLDERS:

	 	
Shares of SAI

	
Shares of La Mancha

	  	 	  	  
	
 /s/ Richard Lawrence

	 	
1,200

	
1489

	
Richard Lawrence

	 	  	  
	  	 	  	  
	
 /s/ Allen S. Mason

	 	
1,874

	
2,429

	
Allen S. Mason

	 	  	  
	  	 	  	  
	
 /s/ Michael M. Thacker

	 	
1,175

	
2,885

	
Michael M. Thacker

	 	  	  
	  	 	  	  
	
 /s/
Damon Giovanielli

	 	
4,375

	
5,998

	
Damon Giovanielli

	 	  	  
	  	 	  	  
	
 /s/ Gordon Sumner, Jr.

	 	
1,376

	
1,424

	
Gordon Sumner, Jr.

	 	  	  
	  	 	  	  
	 	 	 	 

- 9 -

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