Document:

ex10_z.htm

Exhibit 10.z

 

 

 

THIS CHANGE IN CONTROL AGREEMENT is made and entered into by and between MTS Systems Corporation, a Minnesota corporation with its principal offices at 14000 Technology Drive, Eden Prairie, MN 55344 (the “Company”) and Steven G. Mahon (the “Executive”), residing at 14000 Technology Drive, Eden Prairie, MN, and shall be effective as of this October 6, 2011.

WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and

WHEREAS, the Executive is expected to make, due to the Executive's future intimate knowledge of the business and affairs of the Company, its policies, methods, personnel, and problems, a significant contribution to the profitability, growth, and financial strength of the Company; and

WHEREAS, the Company, as a publicly held corporation, recognizes that the possibility of a Change in Control may exist, and that such possibility and the uncertainty and questions which it may raise among management may result in the departure or distraction of the Executive in the performance of the Executive's duties, to the detriment of the Company and its shareholders; and

WHEREAS, it is in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of management personnel, including the Executive, to their assigned duties without distraction and to ensure the continued availability to the Company of the Executive in the event of a Change in Control; and

WHEREAS, the Company intends that the Agreement be exempt from the requirements applicable to nonqualified deferred compensation plans pursuant to Section 409A of the Code and regulations promulgated thereunder, and this Agreement shall be construed and administered in a manner that is consistent with and gives effect to such intention.

THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:

 

  

  

  

 

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1.            Term of Agreement.  This Agreement shall be effective from and after the date hereof and shall continue in effect through December 31, 2009, and shall automatically be extended for successive one-year periods thereafter unless the Board of Directors of the Company (the “Board”) shall have approved, and the Executive is notified in writing, prior to January 1, 2010 and each January 1 thereafter, that the term of this Agreement shall not be extended or further extended; provided, however, that if a Change in Control shall have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of 24 months from the date of the occurrence of a Change in Control or, if  an event triggering the Company’s severance payment obligations to the Executive under Section 4(d) has occurred during such 24-month period, this Agreement shall continue in effect until the benefits payable to the Executive hereunder have been paid in full. In the event that more than one Change in Control shall occur during the original or any extended term of this Agreement, the 24-month period shall follow the last Change in Control.  This Agreement shall neither impose nor confer any further rights or obligations on the Company or the Executive on the day after the end of the term of this Agreement.  Expiration of the term of this Agreement of itself and without subsequent action by the Company or the Executive shall not end the employment relationship between the Company and the Executive.

2.            Change in Control.  No benefits shall be payable hereunder unless there shall have been a Change in Control. For purposes of this Agreement, a “Change in Control” of the Company shall mean a change in control which would be required to be reported in response to Item 6(e) on Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement, including, without limitation, if:

 

(a)            Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or

(b)           During any period of two consecutive years (not including any period ending prior to the effective date of this Agreement), the Incumbent Directors cease for any reason to constitute at least a majority of the Board of Directors.  The term “Incumbent Directors” shall mean those individuals who are members of the Board of Directors on the effective date of this Agreement and any individual who subsequently becomes a member of the Board of Directors (other than a director designated by a person who has entered into agreement with the Company to effect a transaction contemplated by Section 2(c)) whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the then Incumbent Directors; or

 

  

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(c)           (i) The Company consummates a merger, consolidation, share exchange, division or other reorganization of the Company with any corporation or entity, other than an entity owned at least 80% by the Company, unless immediately after such transaction, the shareholders of the Company immediately prior to such transaction beneficially own, directly or indirectly 51% or more of the combined voting power of resulting entity’s outstanding voting securities as well as 51% or more of the Total Market Value of the resulting entity, or in the case of a division, 51% or more of the combined voting power of the outstanding voting securities of each entity resulting from the division as well as 51% or more of the Total Market Value of each such entity, in each case in substantially the same proportion as such shareholders owned shares of the Company prior to such transaction; (ii) the shareholders of the Company approve an agreement for the sale or disposition (in one transaction or a series of transactions) of assets of the Company, the total consideration of which is greater than 51% of the Total Market Value of the Company, or (iii) the Company adopts a plan of complete liquidation or winding-up of the Company.  “Total Market Value” shall mean the aggregate market value of the Company’s or the resulting entity’s outstanding common stock (on a fully diluted basis) plus the aggregate market value of the Company’s or the resulting entity’s other outstanding equity securities as measured by the exchange rate of the transaction or by such other method as the Board determines where there is not a readily ascertainable exchange rate.

3.            Termination Following Change in Control.  If a Change in Control shall have occurred during the term of this Agreement, the Executive shall be entitled to the benefits provided in subsection 4(d) unless such termination is (A) because of the Executive's death or Retirement, (B) by the Company for Cause or Disability, or (C) by the Executive other than for Good Reason. The Company and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 3 constitutes a Separation from Service as defined in subsection 3(h).

(a)            Disability.  Termination by the Company or the Executive of the Executive’s employment based on “Disability” may occur in the event the Executive has incurred or is afflicted with any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, and as a result, has become eligible for and begun receiving income replacement benefits under the terms of the Company’s long-term disability plan or policy as may be in effect from time to time.

 

  

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(b)            Retirement. Termination by the Company or the Executive of the Executive's employment based on “Retirement” shall mean termination on or after attaining age sixty-five (65).

(c)            Cause. For purposes of this Agreement,  “Cause” shall mean:

(i)          the willful and continued failure by the Executive (other than any such failure resulting from (1) the Executive’s incapacity due to physical or mental illness, (2) any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason or (3) the Company’s active or passive obstruction of the performance of the Executive’s duties and responsibilities) to perform substantially the duties and responsibilities of the Executive’s position with the Company after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the duties or responsibilities;

(ii)         the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct which, in the good faith opinion of the Company, would impair the Executive’s ability to perform his or her duties or impair the business reputation of the Company; or

(iii)        the willful engaging by the Executive in fraud or dishonesty that is demonstrably and materially injurious to the Company, monetarily or otherwise.

No act, or failure to act, on the Executive’s part shall be deemed “willful” unless committed, or omitted by the Executive in bad faith and without reasonable belief that the Executive’s act or failure to act was in the best interest of the Company and the Executive shall have either failed to correct, or failed to take all reasonable steps to correct, such act or failure to act within sixty (60) days from the Executive’s receipt of written notice from the Company demanding that the Executive take such action.  The Executive shall not be terminated for Cause unless and until the Company shall have delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive’s conduct was Cause and specifying the particulars thereof in detail.

 

  

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(d)           Good Reason.  The Executive shall be entitled to terminate his or her employment for Good Reason; provided, however, that no such termination under this Section  3(d) shall be effective unless: (A) the Executive provides written notice to the Chair of the Board of Directors of the Company of the existence of a condition specified in paragraphs (i) through (v) below within 90 days of the initial existence of the condition; (B) the Company does not remedy such condition within 30 days of the date of such notice; and (C) the Executive terminates employment within 90 days following the last day of the remedial period described above.  For purposes of this Agreement, “Good Reason” shall mean, without the Executive's express written consent, any of the following:

(i)          the assignment to the Executive of any duties inconsistent in any respect with the Executive’s authority, duties or responsibilities with respect to the Executive’s position immediately prior to the Change in Control, or any action by the Company that results in a diminution in such authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity);

(ii)         a material reduction in the Executive’s base compensation in effect immediately prior to the Change in Control;

(iii)        a material reduction in the budget over which the Executive retains authority;

(iv)        a material change in the geographic location at which the Executive must perform services for the Company; and

iv)         Any material violation of this Agreement by the Company, including but not limited to any purported termination of the Executive’s employment that is not made pursuant to a Notice of Termination satisfying the requirements of this Agreement.

For purposes of this Section 3(d), any good faith determination of Good Reason made by the Executive shall be conclusive.  The Executive’s mental or physical incapacity following the occurrence of an event described above in paragraphs (i) through (v) shall not affect the Executive’s ability to terminate employment for Good Reason and the Executive’s death following delivery of a Notice of Termination for Good Reason shall not affect the Executive’s estate’s entitlement to the payments and benefits provided hereunder upon a termination of employment for Good Reason.

 

  

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(e)            Notice of Termination.  Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth the facts and circum­stances claimed to provide a basis for termination of the Executive's employment.

(f)             Date of Termination.  For purposes of this Agreement, “Date of Termination” shall mean:

(i)          If the Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that the Executive shall have been absent from full-time performance of duties for at least three (3) months and shall not have returned to the full-time performance of the Executive's duties during such 30 day period, in accordance with Section 3(a) hereof);

(ii)         If the Executive's employment is terminated pursuant to subsections (b) or (c) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to subsection (b) above shall not be less than 10 days, and in the case of a termination pursuant to subsection (c) above shall not be less than 10 nor more than 30 days, respectively, from the date such Notice of Termination is given); and

(iii)        Notwithstanding anything contained herein to the contrary, the date on which a Separation from Service takes place.

(g)           Dispute of Termination.  If, within 10 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.  Notwithstanding the pendency of any such dispute, the Company shall continue to pay the Executive full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this subsection.  Amounts paid under this subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts under this Agreement.

 

  

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(h)           Separation from Service.  Separation from Service means the Executive’s termination of employment (as defined in this subsection 3(h)) from the Company and its Affiliates. A Executive incurs a termination of employment that constitutes a Separation from Service if the Executive and the Compensation Committee of the Board of Directors of the Company reasonably anticipate either than the Executive will not perform any additional services after a certain date for the Company and any Affiliate (the “Company Group”), or that the Executive’s level of bona fide services for the Company Group will permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period. The Executive does not incur a Separation from Service if on military leave, sick leave, or other bona fide leave of absence if such leave does not exceed a period of 6 months, or if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Company Group, provided that there is a reasonable expectation that the Executive will return to perform further services. If an Executive’s leave exceeds 6 months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of 6 months. Where a leave of absence is due to a Disability, the 6 month leave period described above shall be 12 months unless the leave is earlier terminated. The service of the Executive as a director of the board of any entity in the Company Group will not be considered in determining whether the Executive has incurred a Separation from Service as an employee of the Company Group. The Compensation Committee will determine whether a Executive has incurred a Separation from Service based on the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(h)(1)(ii). For purposes of this subsection 3(h), “Affiliate” means an entity that would be considered with the Company a single employer under Sections 414(b) and (c) and 1563(a) of the Code, except that 50% shall be substituted for the 80% each place it appears in  Sections 414(b) and (c) and 1563(a) of the Code.

 

  

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4.             Compensation Upon Termination or During Disability.  Following a Change in Control of the Company, as defined in subsection 2(a), upon termination of the Executive's employment or during a period of Disability, the Executive shall be entitled to the following benefits:

(a)           During any period that the Executive fails to perform full-time duties with the Company as a result of a Disability, the Company shall pay the Executive, the Executive's base salary as in effect at the commencement of any such period and the amount of any other form or type of compensation otherwise payable for such period if the Executive were not so disabled, until such time as the Executive is determined to be eligible for long term disability benefits in accordance with the Company's insurance programs then in effect or the Executive is terminated for Disability.”

(b)           If the Executive's employment shall be terminated by the Company for Cause or by the Executive other than for Good Reason or Disability, the Company shall pay to the Executive his or her full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to the Executive under this Agreement, except with respect to any benefits to which the Executive is entitled under any Company pension or welfare benefit plan, insurance program or as otherwise required by law.

(c)           If the Executive's employment shall be terminated by the Company or by the Executive for Disability or Retire­ment, or by reason of death, the Company shall immediately commence payment to the Executive (or the Executive's designated beneficiaries or estate, if no beneficiary is designated) of any and all benefits to which the Executive is entitled under the Company's retirement and insurance programs then in effect.

(d)           If the Executive's employment shall be terminated (A) by the Company other than for Cause, Retirement, Disability or the Executive’s death or (B) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below:

 

  

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(i)          The Company shall pay the Executive, through the Date of Termination, the Executive's base salary as in effect at the time the Notice of Termination is given and any other form or type of compensation otherwise payable for such period;

 

(ii)         In lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay a severance payment (the “Severance Payment”) equal to two times the Executive's Annual Compensation as defined below. For purposes of this Section 4, “Annual Compensation” shall mean the Executive’s annual salary (regardless of whether all or any portion of such salary has been contributed to a deferred compensation plan), the average annual Management Variable Compensation (“MVC”) earned by the Executive during the three (3) fiscal years immediately preceding the Date of Termination or, if less, the actual number of fiscal years the Executive has participated in the MVC plan, and any other type or form of compensation paid to the Executive by the Company (or any corporation (an “Affiliate”) affiliated with the Company within the meaning of Section 1504 of the Internal Revenue Code of 1986 as it may be amended from time to time (the “Code”)) and included in the Executive’s gross income for federal tax purposes during the 12-month period ending immediately prior to the Date of Termination, but excluding: a) any amount actually paid to the Executive as a cash payment of the target bonus (regardless of whether all or any portion of such Company bonus was contributed to a deferred compensation plan); b) compensation income recognized as a result of the exercise of stock options or sale of the stock so acquired; and c) any payments actually or constructively received from a plan or arrangement of deferred compensation between Company and the Executive.  All of the items included in Annual Compensation shall be those in effect on the Date of Termination and shall be calculated without giving effect to any reduction in such compensation that would constitute a breach of this Agreement. The Severance Payment shall be made in a single lump sum within 30 days after the Date of Termination;

(iii)        For the 18-month period after the Date of Termination (the “Benefit Continuation Period”), the Company shall arrange to provide, at its sole expense, the Executive with life, disability, accident and health insurance benefits substantially similar to those that the Executive is receiving or entitled to receive immediately prior to the Notice of Termination.  The Executive shall be responsible for the payment of his or her portion of the premiums for such benefits at the same relative percentage of total premiums as the Executive paid prior to the Date of Termination . Following the end of the Benefit Continuation Period, the Executive shall be eligible for continued health coverage as required by Code Section 4980B or other applicable law (“COBRA Coverage”), as if the Executive’s employment with the Company had terminated as of the end of the Benefit Continuation Period, and the Company shall take such actions as are necessary to cause such COBRA Coverage not to be offset by the provision of benefits under this paragraph (iii) and to cause the period of COBRA Coverage to commence at the end of the Benefit Continuation Period.    The cost of providing such benefits shall be in addition to (and shall not reduce) the Severance Payment.  Benefits otherwise receivable by the Executive pursuant to this paragraph (iii) shall be reduced to the extent comparable benefits are actually received by the Executive during the Benefit Continuation Period, and any such benefits actually received by Executive shall be reported to the Company; and

 

  

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(iv)        The Company shall also pay to the Executive all legal fees and expenses incurred by the Executive as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); provided that such payment for legal fees and expenses shall be made not later than the last day of the calendar year following the year in which the Executive incurred the fees and expenses and the Executive’s right to such payment may not be liquidated or exchanged for any other benefit.

(e)            The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 (except as expressly provided in Section 4(d)(iii)) be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise.

(f)            The Executive shall be entitled to receive all benefits payable to the Executive under the Company pension and welfare benefit plans or any successor of such plan and any other plan or agreement relating to retirement benefits which shall be in addition to, and not reduced by, any other amounts payable to the Executive under this Section 4.

 

  

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(g)           The Executive shall be entitled to exercise all rights and to receive all benefits accruing to the Executive under any and all Company stock purchase and stock option plans or programs, or any successor to any such plans or programs, which shall be in addition to, and not reduced by, any other amounts payable to the Executive under this Section 4.

 

(h)           The Company will indemnify the Executive (and the Executive’s legal representative or other successors) to the fullest extent permitted (including payment of expenses in advance of final disposition of the proceeding) by the laws of the State of Minnesota, as in effect at the time of the subject act or omission, or the Articles of Incorporation and By-Laws of the Company as in effect at such time or on the date of this Agreement, whichever affords or afforded greater protection to the Executive; and the Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and officers, against all costs, charges and expenses whatsoever incurred or sustained by the Executive or the Executive’s legal representatives in connection with any action, suit or proceeding to which the Executive (or the Executive’s legal representative or other successors) may be made a party by reason of the Executive’s being or having been a director, officer or employee of the Company or any of its subsidiaries or his or her serving or having served any other enterprise as a director, officer or employee at the request of the Company, provided that the Company shall cause to be maintained in effect for not less than six years from the date of a Change in Control (to the extent available) policies of directors’ and officers’ liability insurance of at least the same coverage as those maintained by the Company on the date of this Agreement and containing terms and conditions which are no less advantageous than such policies.

Notwithstanding anything herein to the contrary, if the Executive’s employment is governed by a separate written employment agreement that provides benefits upon a termination of employment, the aggregate of any payments or benefits payable under such employment agreement shall offset and reduce the aggregate of payments and benefits under this Agreement.

5.              Non-Compete and Confidentiality.

(a)            Noncompetition.  Except as provided in subsection (c) below, the Executive agrees that, as a condition of receiving benefits under this Agreement, the Executive will not render services directly or indirectly to any competing organization, wherever located, for a period of one year following the Date of Termination, in connection with the design, implementation, development, manufacture, marketing, sale, merchandising, leasing, servicing or promotion of any “Conflicting Product” which as used herein means any product, process, system or service of any person, firm, corporation, organization other than the Company, in existence or under development, which is the same as or similar to or competes with, or has a usage allied to, a product, process, system, or service produced, developed, or used by the Company.  The Executive agrees that violation of this covenant not to compete with the Company shall result in immediate cessation of all benefits hereunder, other than insurance benefits, which the Executive may continue where permitted under federal and state law at his or her own expense.

 

  

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 (b)           Confidentiality.  The Executive further agrees and acknowledges the Executive’s existing obligation that at all times during and subsequent to his or her employment with MTS, the Executive will not divulge or appropriate to the Executive’s own use or the uses of others any secret or confidential information or knowledge pertaining to the business of MTS, or any of its subsidiaries, obtained during his or her employment by MTS or any of its subsidiaries.

(c)           Waiver - Unfriendly Change in Control.  Notwithstanding anything herein to the contrary: the restriction on competition under subsection (a) shall not apply if the Executive’s employment terminates following a Change in Control which has not been approved by a majority of the Incumbent Directors in office immediately prior to the Change in Control (an “Unfriendly Change in Control”).  Furthermore, in such event, the Company waives any other restriction on the Executive’s employment and consents unconditionally to any employment the Executive may subsequently obtain.

6.             Limits on Payments and Benefits.  In the event that the vesting, acceleration and payment of any equity awards or other compensation or benefits, together with all other payments and the value of any benefit received or to be received by the Executive would result in all or a portion of such payment being subject to excise tax under Section 4999 of the Code, then the amounts due under Section 4 that the Company shall pay to the Executive shall be either (A) the full payment or (B) such lesser amount determined by the Company in accordance with this Section 6 that would result in no portion of the payment being subject to excise tax under Section 4999 of the Code (the “Excise Tax”), whichever of the foregoing amounts, taking into account the applicable Federal, state, and local employment taxes, income taxes, and the Excise Tax, results in the receipt by the Executive, on an after-tax basis, of the greatest amount of the payment notwithstanding that all or some portion of the payment may be taxable under Section 4999 of the Code.  In the event the amounts due under Section 4 are reduced, the amounts shall be reduced in the following order of priority: first, with respect to any amount that does not constitute the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder,  disregard the acceleration in the time of payment and then disregard the acceleration of vesting as a result of a Change in Control and second, with respect to any amount that constitutes the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregard the acceleration in the time of payment and then disregard the acceleration of vesting as a result of a Change in Control first with respect to Company funded amounts and then the Executive’s deferrals, in each case only to the extent necessary to satisfy (B) above. All determinations required to be made under this Section 14 shall be made by a nationally recognized accounting firm that is the Company’s outside auditor immediately prior to the event triggering the payments that are subject to the Excise Tax (the “Accounting Firm”).  The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and Executive.  Notice must be given to the Accounting Firm within fifteen (15) business days after an event entitling Executive to an amount due under this Agreement.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  The Accounting Firm’s determinations must be made with substantial authority (within the meaning of Section 6662 of the Code).  For the purposes of all calculations under Section 280G of the Code and the application of this Section 6, all determination as to present value shall use 120 percent of the applicable Federal rate (determined under Section 1274(d) of the Code) compounded based on the nature of the payment, as in effect on the date of this Agreement, but if not otherwise specified, the Company and Executive agree to compound such rate on a semiannual basis.  The determination by the Accounting Firm shall be final and binding on the Company and the Executive.

 

  

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7.             Funding of Payments. In order to assure the performance of the Company or its successor of its obligations under this Agreement, the Company may deposit in a so-called “rabbi” trust an amount equal to the maximum payment that will be due the Executive under the terms hereof; provided, however, that the Company shall deposit in trust the amount equal to the maximum payment due Executive immediately upon an Unfriendly Change in Control.  Under such written trust instrument, the trustee shall be instructed to pay to the Executive (or the Executive’s legal representative, as the case may be) the amount to which the Executive shall be entitled under the terms hereof, and the balance, if any, of the trust not so paid or reserved for payment shall be repaid to the Company.  If the Company deposits funds in trust, payment shall be made no later than the occurrence of the Change in Control.  The written instrument governing the trust shall be irrevocable from and after such Change in Control and shall contain such provisions protective of the Executive as are contained in similar trust agreements approved by the Internal Revenue Service in published private letter rulings (provided that the assets of the trust shall be reachable by creditors of the Company as required by such rulings).  The trustee shall be a national bank selected by the Company with the consent of the Executive, with trust powers and whose principal officers are located in the Minneapolis/St. Paul metropolitan area.  The trustee shall invest the assets of the trust in any readily marketable securities of U.S. corporations (other than the Company, its successor, or any affiliate of the Company or its successor). If and to the extent there are not amounts in trust sufficient to pay Executive under this Agreement, the Company shall remain liable for any and all payments due to Executive.

 

  

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8.             Successors; Binding Agreement.

(a)           The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to 51% or more of the ­business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to the compensation and benefits from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive terminated his or her employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

 

(b)           This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, successors, heirs, and designated beneficiaries.  If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's designated beneficiaries, or, if there is no such designated beneficiary, to the Executive's estate.

9.             Notice.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the last known residence address of the Executive or in the case of the Company, to its principal office to the attention of each of the then directors of the Company with a copy to its Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

10.           Non-application of Section 409A of the Code.   It is the intent of the Company and the Executive that this Agreement satisfy those requirements of Section 409A of the Code to constitute first a “short term deferral” and then a “separation pay plan” to exempt the payments hereunder from the definition of a “nonqualified deferred compensation plan” under Section  409A of the Code, and the Agreement shall be so administered and interpreted in manner consistent with, and that gives effect to, such intention. The Company shall have the authority, without the consent of the Executive to amend such provision to maintain to maximum extent practicable the intent that this Agreement remains exempt from the requirements applicable to a “nonqualified deferred compensation plan” under Section 409A of the Code and regulations and other guidance promulgated thereunder.

 

  

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11.           Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modifica­tion or discharge is agreed to in writing and signed by the parties.  No waiver by either party hereto at any time of any breach by the other party to this Agreement of, or compliance with, any condition or provision of this Agreement to be performed by such other-party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or similar time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.  The validity, interpretation, construc­tion and performance of this Agreement shall be governed by the laws of the State of Minnesota.

 

12.           Validity.  The invalidity or unenforceability or any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

IN WITNESS WHEREOF, the undersigned officer, on behalf of MTS Systems Corporation, and the Executive have hereunto set their hands as of the date first above written.

 

	 	MTS SYSTEMS CORPORATION
	 	 	 	 
	 	 	 	 
	
 

	
By

	 	 
	 	Its	Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	EXECUTIVE:	 
	 	 	 
	 	 	 

 

 

15AGREEMENT FOR THE PURCHASE OF COMMON STOCK

 

THIS PURCHASE AGREEMENT,  (this “Agreement”) made this 17th  day of October, 2011, by and between Mariya Kokho, an individual (“Kokho”), Vasiliy Ignatenko, an individual (“Ignatenko” and together with Kokho, the “Sellers”), Soton Holdings Group, Inc., a Nevada corporation (the “Company” or “Soton”), and Petrina Advisors, Inc., a New York corporation (“Purchaser”), setting forth the terms and conditions upon which Sellers will sell to Purchaser and Purchaser will purchase from Sellers certain securities (the “Securities”) consisting of Two Million Five Hundred Thousand (2,500,000) shares of Soton Holdings Group, Inc. common stock (the “Shares”).  Together the Sellers, Soton and the Purchaser are referred to herein as the “Parties.”

In consideration of the mutual promises, covenants, and representations contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:

WITNESSETH

WHEREAS, the Sellers own the Shares, representing approximately 79% of the issued and outstanding stock of the Company;

WHEREAS, the Sellers desire to sell, and the Purchaser desires to purchase, the Shares in accordance with the terms set forth herein;

WHEREAS, the Parties desire and intend that the transactions contemplated by this Agreement will be a tax free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.

WHEREAS, the Parties have appointed The Lebrecht Group, APLC, to act as the Escrow Agent ("Escrow Agent") for this transaction and to receive and hold all consideration received from the Purchaser for the purchase of the Shares and all documents, stock certificates, stock powers and corporate records of Soton received from the Sellers, through the Closing, unless other arrangements are agreed to by the Parties in writing and given to the Escrow Agent.

WHEREAS, the Parties and Escrow Agent, have entered into an Escrow Agreement dated of even date herewith, a copy of which is attached hereto as Exhibit A (the “Escrow Agreement”).

NOW THEREFORE, in consideration of the premises and respective mutual agreements, covenants, representations and warranties herein contained, it is agreed between the Parties hereto as follows:

  

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ARTICLE I

SALE OF SECURITIES

1.01      Sale of the Shares.  Subject to the terms and conditions of this Agreement, and the representation and warranties contained herein, the Sellers agree to sell the Shares to the Purchaser for a total of Sixteen Thousand Dollars (U.S.) ($16,000) (the “Purchase Price”).  This is a private transaction between the Sellers and Purchaser.

1.02      Appointment of Escrow Agent.  The Seller and Purchaser hereby appoint The Lebrecht Group, APLC, to act as the Escrow Agent as to the distribution of the Funds received for the purchase of the Shares and distribution of the Shares and documents of Soton to be held in escrow per the Escrow Agreement, unless it is agreed by the Parties, in a signed writing delivered to the Escrow Agent, that the documents and certificates shall be distributed to the Purchaser in another way.

1.03      Payment:    The Parties agree that the full Purchase Price of Sixteen Thousand Dollars (U.S.) ($16,000) has been or will be wired on or before September 9, 2011 (the “Closing Date”), to The Lebrecht Group, APLC Client Trust Account (“Escrow Account”). This entire sum is fully refundable (less escrow and wire transfer fees) for any reason or for no reason until the Close of the transaction.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

To induce the Purchaser to enter into this Agreement and to consummate the transactions contemplated hereby, the Sellers and the Company represent and warrant as of the date hereof and as of the Closing, as follows:

2.01      Organization.  Soton is a Nevada corporation duly organized, validly existing, and in good standing under the laws of that state, has all necessary corporate powers to own properties and carry on a business, and is duly qualified to do business and is in good standing in the state of Nevada and elsewhere.  All actions taken by the incorporators, directors and/or shareholders of Soton have been valid and in accordance with the laws of the state of Nevada.

2.02          Capital.   The authorized capital stock of Soton consists of 75,000,000 shares of Common Stock, $0.001 par value, of which 3,175,000 shares of Common Stock are issued and outstanding.  The Company does not have any Preferred Stock authorized.  All outstanding shares are fully paid and non-assessable, free of liens, encumbrances, options, restrictions and legal or equitable rights of others not a party to this Agreement.  At the Closing, there will be no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating Soton to issue or to transfer from treasury any additional shares of its capital stock.  None of the outstanding shares of Soton are subject to any stock restriction agreements.  There are 29 shareholders of record of Soton and one shareholder that holds shares in a brokerage account (street name). All of such shareholders have valid title to such shares and acquired their shares in a lawful transaction and in accordance with Nevada corporate law and the applicable securities laws of the United States.  Of the 3,175,000 shares of common stock of the Company, 675,000 shares, were validly issued pursuant to an exemption from registration provided by Regulation S of the Securities Act and have been registered for resale under the Registration Statement on Form S-1 originally filed by the Company on November 4, 2010 and which went effective March 11, 2011.

  

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2.03      Subsidiaries.  “Subsidiary” or “Subsidiaries” means all corporations, trusts, partnerships, associations, joint ventures or other Persons, as defined below, of which a corporation or limited liability company or any other Subsidiary of such corporation or limited liability company owns not less than twenty percent (20%) of the voting securities or other equity or of which such corporation or limited liability company or any other Subsidiary of such corporation or limited liability company possesses, directly or indirectly, the power to direct or cause the direction of the management and policies, whether through ownership of voting shares, management contracts or otherwise.  “Person” means any individual, corporation, trust, association, partnership, proprietorship, joint venture or other entity.  The Company has no subsidiaries.

2.04      Financial Statements. The Company has audited financial statements and more recent unaudited financial statements which can be found on Edgar in the last Form S-1 and 10-Q that were filed.  The Company has supporting documentation for all entries on its audited and unaudited financial statements and all financial statements of the Company were prepared in accordance with generally accepted accounting principles (GAAP).

2.05      Public Company Status.  The Company is a fully reporting company under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), public company listed on the OTC Bulletin Board, and has been assigned the trading symbol of SDGU.  The Company is in compliance with all listing requirements of the OTC Bulletin Board.  After the Purchase, the Purchaser of the Shares shall file any required filing(s) disclosing the acquisition of the Shares by the Purchaser (”Disclosure Document”).

2.06     Filings with Government Agencies.  Soton is current in its Exchange Act reporting requirements, including, but not limited to, its annual and quarterly reports required to be filed with the Securities and Exchange Commission.  The Company recently filed a 10-Q with the SEC with unaudited, XBRL-compliant, financial statements covering the period ended June 30, 2011.  All of Soton’s Securities Act and Exchange Act filings with the Securities and Exchange Commission are compliant with the applicable rules promulgated for such filing.  The Registration Statement on Form S-1 originally filed by the Company on November 4, 2010 and which went effective March 11, 2011, is current and can be relied upon to remove the restrictive legend from the shares of the Company’s common stock owned by the Selling Stockholders listed in the Registration Statement.  Soton has made all filings with the state of Nevada that might be required.  Upon the purchase of the Shares by the Purchaser, the Purchaser will have the full responsibility for filing any and all documents required by the Securities and Exchange Commission, and/or any other government agency that may be required.  The Sellers will supply the Purchaser with all information that is relevant for the Company.  After the Closing, the Purchaser understand that the Seller will have no responsibility whatsoever for any filings made by the Company in the future, either with the SEC, FINRA, DTC or the State of Nevada, but agree to cooperate fully with the Purchaser in the event input or information is required from the Sellers.  The Company has current Edgar filing codes which will be supplied to the incoming officers and directors of the Company at Closing.

2.07      Shell Company Status.  Since inception and through the Closing the Company has not been a “shell company” as such term is defined in Section 405 of the Securities Act of 1933, as amended (the “Securities Act”).  The Company’s periodic filings with the Securities and Exchange Commission prior to Closing have properly reflected the Company’s non-shell status.

  

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2.08      DTC-Eligibility.  The Company has approval from The Depository Trust Company to transfer its shares between brokers electronically and is “DTC-Eligible.”

2.09      Liabilities.  It is understood and agreed that the purchase of the Shares is predicated on Soton not having any liabilities at Closing, and the Company will not, as of Closing, have any debt, liability, or obligation of any nature, whether accrued, absolute, contingent, or otherwise that will not be paid by the Company or the Sellers at Closing.  Soton shall have paid all liabilities outstanding, including, but not limited to, federal and state taxes, edgar fees, and transfer agent fees.  The Sellers are not aware of any pending, threatened or asserted claims, lawsuits or contingencies involving the Company or its securities. To the best of knowledge of the Sellers, there is no dispute of any kind between Soton and any third party, and no such dispute will exist at the Closing of this transaction; and at the Closing, Soton will be free from any and all liabilities, liens, claims and/or commitments.  The Sellers agree to indemnify the Purchaser against any past liabilities pertaining to its conduct of business that should arise within one (1) year of Closing.

2.10      Tax Returns.  Soton is current and has filed all required federal income tax returns and state income tax returns and is current with its State of Nevada franchise taxes.  As of Closing, there shall be no taxes of any kind due or owing.  The Sellers agree to assist the Purchaser and the Company with the preparation of the Company’s tax returns by providing any information reasonably needed by the preparer of the tax returns.

2.11      Ability to Carry Out Obligations.  The Sellers have the right, power, and authority to enter into, and perform their obligations under this Agreement.  The execution and delivery of this Agreement by the Sellers and the performance by the Sellers of its obligations hereunder will not cause, constitute, or conflict with or result in (a) any breach or violation of any of the provisions of or constitute a default under any license, indenture, mortgage, charter, instrument, articles of incorporation, bylaws, or other agreement or instrument to which Soton the officers, directors or Sellers are a party, or by which they may be bound, nor will any consents or authorizations of any party other than those hereto be required, (b) an event that would cause Soton (and/or assigns) to be liable to any party, or (c) an event that would result in the creation or imposition of any lien, charge, or encumbrance on any asset of Soton or upon the Shares.

2.12      Contracts, Leases and Assets.  Soton is not a party to any contract, agreement or lease other than those agreements listed on Schedule 2.12 (unless such contract, agreement or lease has been assigned to another party or Soton has been released from its obligations thereunder).  No person holds a power of attorney from Soton or the Sellers.  At the Closing, Soton will have no assets or liabilities.

2.13      Guaranties.  The Company has not guaranteed any dividend, obligation or indebtedness of any person or legal entity; nor has any person or legal entity guaranteed any dividend, obligation or indebtedness of the Company.

  

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2.14      Compliance with Laws.  To the best of knowledge of the Sellers, Soton has complied in all material respects, with, and is not in violation of any, federal, state, or local statute, law, and/or regulation pertaining to its corporate organization and its business.  To the best of the knowledge of the Sellers, Soton has complied with all federal and state securities laws in connection with the offer, sale and distribution of its securities.  At the time that Soton sold Shares to the Sellers, the Company was entitled to use the exemptions provided by the Securities Act relative to the sale of its securities, including, but not limited to, the Shares.  The Shares being sold herein are being sold in a private transaction between the Sellers and the Purchaser, and the Sellers make no representation as to whether the Shares are subject to trading restrictions under the Securities Act of 1933, as amended and rules thereunder.

2.15      Litigation.  Soton is not a party to any suit, action, arbitration, or legal administrative, or other proceeding, or pending governmental investigation. To the best knowledge of the Seller, there is no basis for any such action or proceeding and no such action or proceeding is threatened against Soton.  Soton is not a party to or in default with respect to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency, or instrumentality.

2.16      Conduct of Business.  Prior to the Closing, Soton shall conduct its business in the normal course, and shall not (without the prior written approval of Purchaser) (i) sell, pledge, or assign any assets, (ii) amend its Certificate of Incorporation or Bylaws, (iii) declare dividends, or redeem, sell, or issue any stock or other securities (iv) incur any liabilities, except in the normal course of business, (v) acquire or dispose of any assets, enter into any contract, guarantee obligations of any third party, or (vi) enter into any other transaction.

2.17      Books and Records.  The Company keeps its books, records and accounts (including, without limitation, those kept for financial reporting purposes and for tax purposes) in accordance with good business practice and in sufficient detail to reflect the transactions and dispositions of their assets, liabilities and equities.  The minute books of the Company contain records of their shareholders’ and directors’ meetings and of action taken by such shareholders and directors.  The meetings of directors and shareholders referred to in such minute books were duly called and held, and the resolutions appearing in such minute books were duly adopted.  The signatures appearing on all documents contained in such minute books are the true signatures of the persons purporting to have signed the same.

2.18      Closing Documents.   All articles, bylaws, minutes, consents or other documents pertaining to Soton to be delivered at the Closing shall be valid and in accordance with the laws of Nevada.

2.19      Title.   The Sellers have good and marketable title to all of the Shares being sold by him to the Purchaser pursuant to this Agreement.  The Securities will be, at the Closing, free and clear of all liens, security interests, pledges, charges, claims, encumbrances and restrictions of any kind, except for restrictions on transfer imposed by federal and state securities laws.  None of the Securities are or will be subject to any voting trust or agreement.  No person holds or has the right to receive any proxy or similar instrument with respect to such Securities.  Except as provided in this Agreement, the Seller is not a party to any agreement which offers or grants to any person the right to purchase or acquire any of the Securities.  There is no applicable local, state or federal law, rule, regulation, or decree which would, as a result of the purchase of the securities by Purchaser (and/or assigns) impair, restrict or delay voting rights with respect to the Securities.

  

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2.20       Transfer of Shares.  The Sellers agree to supply all necessary paperwork, including the share certificates representing the Shares and medallion-guaranteed stock powers, or other sufficient transfer authorization, to transfer the Shares into the Purchaser’s name and to actually transfer the Shares into the Purchaser’s name and deliver the physical certificates to the Escrow Agent to be released to the Purchaser at the Closing.

2.21       Representations.  All representations shall be true as of the Closing and all such representations shall survive the Closing.

ARTICLE III

CLOSING

3.01       Closing for the Purchase of the Shares.  The Closing (the “Closing”) of this transaction for the purchase of the Shares will occur when all of the documents and consideration described in 3.02 below, have been delivered, or other arrangements made and agreed to.  Unless the Closing of this transaction takes place on or before October 31, 2011, then either party may terminate this Agreement.

3.02       Documents and Payments to be Delivered at Closing of the Purchase.  As part of the Closing of the purchase of the Shares, the following documents, in form reasonably acceptable to counsel to the Parties, shall be delivered:

(a)         By the Sellers:

	 	
(i)

	
Certificate of Incorporation and all amendments thereto;

	 	
(ii)

	
Bylaws and all amendments thereto;

	 	
(iii)

	
Minutes and Consents of Shareholders;

	 	
(iv) 

	
Minutes and Consents of the board of directors;

	 	
(v) 

	
List of officers and directors;

	 	
(vi)

	
Evidence of Good Standing with the Secretary of State of Nevada;

	
  

	
(vii)

	
Current Shareholder list from the Transfer Agent;

	
  

	
(viii)

	
True and correct copies of all of the business records of Soton, including but not limited to correspondence files and agreements and contracts;

	
  

	
(ix)

	
Stock certificates in the name of the Purchaser, without restrictive legend, representing the Shares (2,500,000 shares of common stock of the Company);

	
  

	
(x)

	
Board of directors resolution appointing a new President, Secretary and Treasurer of the Company as designated by Purchaser, and the acceptance of all resignations of all officers of Soton;

  

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(xi)

	
Resignations of all officers of Soton;

	
  

	
(xii)

	
Board of directors resolution appointing new director(s) of Soton as designated by  the Purchaser and the resignation of all its current directors;

	
  

	
(xiii)

	
Board of directors resolution approving the signing of this Agreement by the Company and confirming the representations and warranties of the Company in this Agreement;

	
  

	
(xiv)

	
Copies of Soton’s federal and state tax returns for their last fiscal year and any other tax returns filed by Soton, along with written confirmation that said tax returns were filed with the appropriate federal and state agencies and that all taxes, if any, including fees, interest and fines, have been paid in full;

	
  

	
(xv)

	
A fully executed copy of the Amendment No. 1 to the Bottle Supply Agreement by and between Soton and Hangzhou Yangcheng Company, Ltd. in form attached hereto as Exhibit  B; and

	
  

	
(xvi)

	
Such other documents of Soton as may be reasonably required by Purchaser, if available.

(b)         By Purchasers:

(i)          Wire transfer to The Lebrecht Group, APLC Client Trust Account the amount of $16,000, representing the total Purchase Price for the Shares, to the wire instructions provided by the Escrow Agent.

3.03       Conditions Precedent.  This Agreement, and the transactions contemplated hereby, shall be subject to the following conditions precedent:

The obligation of the Purchaser to pay the Purchase Price shall be subject to the fulfillment (or waiver by the Purchaser), at or prior to the Closing or the applicable delivery date thereof, of the following conditions, which the Seller and the Company agree to use their best efforts to cause to be fulfilled:

 

(a)        Representations, Performance.  If the Closing Date is not the date hereof, the representations and warranties contained in Article 2 hereof shall be true at and as of the date hereof and shall be repeated and shall be true at and as of the Closing Date with the same effect as though made at and as of the Closing Date, except as affected by the transactions contemplated hereby; the Sellers and the Company shall have duly performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.

 

(b)        Consents.  Any required consent to the transactions contemplated by this Agreement shall have been obtained or waived.

  

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(c)         Litigation.  No suit, action, arbitration or other proceeding or investigation shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit or to obtain material damages or other material relief in connection with this Agreement or the consummation of the transactions contemplated hereby or which is likely to affect materially the value of the Shares or the Company.

(d)         Proceedings and Documentation.  All corporate and other proceedings of the Company in connection with the transactions contemplated by this Agreement, and all documents and instruments incident to such corporate proceedings, shall be satisfactory in form and substance to the Purchaser and the Purchaser’s counsel, and the Purchaser and the Purchaser’s counsel shall have received all such receipts, documents and instruments, or copies thereof, certified if requested, to which the Purchaser is entitled and as may be reasonably requested.

(e)         Property Loss.  No portion of Soton’s assets shall have been destroyed or damaged or taken by condemnation under circumstances where the loss thereof will not be substantially reimbursed to the Purchaser through the proceeds of applicable insurance or condemnation award.

(f)          Consents and Approvals.  All material licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental or regulatory bodies which are (1) necessary to enable the Purchaser to fully operate the business of Soton as contemplated from and after the Closing shall have been obtained and be in full force and effect, or (2) necessary for the consummation of the transactions contemplated hereby, shall have been obtained.  Any notices to or consents of any party to any agreement or commitment constituting part of the transactions contemplated hereby, or otherwise required to consummate any such transactions, shall have been delivered or obtained.

ARTICLE IV

INVESTMENT INTENT

4.01       Transfer Restrictions.  The Purchaser (and/or assigns) agrees that the securities being acquired pursuant to this Agreement may be sold, pledged, assigned, hypothecated or otherwise transferred, with or without consideration (“Transfer”) only pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Act”), or pursuant to an exemption from registration under the Act.

4.02.      Investment Intent.  The Purchaser is acquiring the Shares for their own account for investment, and not with a view toward distribution thereof.

4.03.      No Advertisement.   The Purchaser acknowledges that the Shares have been offered to them in direct communication between them and Seller, and not through any advertisement of any kind.

  

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4.04.      Knowledge and Experience.   (a) The Purchaser acknowledges that it has been encouraged to seek their own legal and financial counsel to assist them in evaluating this purchase. The Purchaser acknowledges that Seller has given them and all of their counselors access to all information relating to Soton’s business that they or any one of them have requested. The Purchaser acknowledges that it has sufficient business and financial experience, and knowledge concerning the affairs and conditions of Soton so that they can make a reasoned decision as to this purchase of the Shares and are capable of evaluating the merits and risks of this purchase.

4.05.      Restrictions on Transferability.   The Purchasers are aware of the restrictions on transferability of the Shares and further understand the certificate representing these shares shall bear the following legend.

(a) THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED IN SECTIONS 4(1) AND 4(2) AND REGULATION D UNDER THE ACT. AS SUCH, THE PURCHASE OF THIS SECURITY WAS MADE WITH THE INTENT OF INVESTMENT AND NOT WITH A VIEW FOR DISTRIBUTION. THEREFORE, ANY SUBSEQUENT TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE UNLAWFUL UNLESS IT IS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

(b) The Purchaser understands that these Shares may only be disposed of pursuant to either (i) an effective registration statement under the Act, or (ii) an exemption from the registration requirements of the Act.

(c) Neither Soton nor the Sellers have neither filed such a registration statement with the SEC or any state authorities nor agreed to do so, nor contemplates doing so in the future, and in the absence of such a registration statement or exemption, the Purchaser may have to hold the Shares indefinitely and may be unable to liquidate them in case of an emergency.

  

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ARTICLE V

COVENANTS, INDEMNIFICATION

5.01       To induce the Purchaser to enter into this Agreement and to consummate the transactions contemplated hereby, and without limiting any covenant, agreement, representation or warranty made, the Sellers and the Company covenant and agree as follows:

(a)         Notices and Approvals.  The Company and the Sellers agree: (a) to give all notices to third parties which may be necessary or deemed desirable by the Purchaser in connection with this Agreement and the consummation of the transactions contemplated hereby; (b) to use their best efforts to obtain all federal and state governmental regulatory agency approvals, consents, permit, authorizations, and orders necessary or deemed desirable by the Purchaser in connection with this Agreement and the consummation of the transactions contemplated hereby; and (c) to use their best efforts to obtain all consents and authorizations of any other third parties necessary or deemed desirable by the Purchaser in connection with this Agreement and the consummation of the transactions contemplated hereby.

(b)         Information for the Purchaser’s Statements and Applications.  The Sellers and the Company and their employees, accountants and attorneys shall cooperate fully with the Purchaser in the preparation of any statements or applications made by the Purchaser or the Company to any federal or state governmental regulatory agency in connection with this Agreement and the transactions contemplated hereby and to furnish the Purchaser with all information concerning the Company and the Sellers necessary or deemed desirable by the Purchaser for inclusion in such statements and applications, including, without limitation, all requisite financial statements and schedules.

(c)         Access to Information.  The Purchaser, together with his appropriate attorneys, agents and representatives, shall be permitted to make the full and complete investigation of the Sellers and the Company and have full access to all of the books and records of the other during reasonable business hours.  Notwithstanding the foregoing, such parties shall treat all such information as confidential and shall not disclose such information without the prior consent of the other.

ARTICLE VI

REMEDIES

6.01       Arbitration.   Any controversy or claim arising out of, or relating to, this Agreement, or the making, performance, or interpretation thereof, shall be settled by arbitration in Texas in accordance with the Rules of the U.S. Arbitration Association then existing, and judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of the controversy.

6.02       Termination.  In addition to any other remedies, the Purchaser may terminate this Agreement, if at the Closing, the Sellers have failed to comply with all material terms of this Agreement have failed to supply any documents required by this Agreement unless they do not exist, or have failed to disclose any material facts which could have a substantial effect on any part of this transaction.

  

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6.03       Indemnification.  From and after the Closing, the Parties, jointly and severally, agree to indemnify the other against all actual losses, damages and expenses caused by (i) any material breach of this Agreement by them or any material misrepresentation contained herein, or (ii) any misstatement of a material fact or omission to state a material fact required to be stated herein or necessary to make the statements herein not misleading.

6.04       Indemnification Non-Exclusive.  The foregoing indemnification provision is in addition to, and not derogation of any statutory, equitable or common law remedy any party may have for breach of representation, warranty, covenant or agreement.

ARTICLE VII

MISCELLANEOUS

7.01       Captions and Headings.  The article and paragraph headings throughout this Agreement are for convenience and reference only, and shall in no way be deemed to define, limit, or add to the meaning of any provision of this Agreement.

7.02       No Oral Change.  This Agreement and any provision hereof, may not be waived, changed, modified, or discharged, orally, but only by an agreement in writing signed by both Parties.

7.03       Non Waiver.  Except as otherwise expressly provided herein, no waiver of any covenant, condition, or provision of this Agreement shall be deemed to have been made unless expressly in writing and signed by the party against whom such waiver is charged; and (i) the failure of any Party to insist in any one or more cases upon the performance of any of the provisions, covenants, or conditions of this Agreement or to exercise any option herein contained shall not be construed as a waiver or relinquishment for the future of any such provisions, covenants, or conditions, (ii) the acceptance of performance of anything required by this Agreement to be performed with knowledge of the breach or failure of a covenant, condition, or provision hereof shall not be deemed a waiver of such breach or failure, and (iii) no waiver by any Party of one breach by another Party shall be construed as a waiver with respect to any other or subsequent breach.

7.04       Time of Essence.  Time is of the essence of this Agreement and of each and every provision hereof.

7.05       Entire Agreement.  This Agreement, including any and all attachments hereto, if any, and the Escrow Agreement contain the entire agreement and understanding between the Parties, and supersede all prior agreements and understandings.

7.06       Significant Changes   The Sellers understand that significant changes may be made in the capitalization and/or stock ownership of Soton, which changes could involve a forward or reverse stock split and/or the issuance of additional shares, thus possibly having a dramatic negative effect on the percentage of ownership and/or number of shares owned by present shareholders of Soton.

  

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7.07       Counterparts.  This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Facsimile signatures will be acceptable to all parties.

7.08       Notices.  All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the second day if faxed or sent by overnight mail, and properly addressed or faxed as follows:

If to the Sellers:

	
Mariya Kokho

	  
	  
	  
	

Phone:

	 
	

Fax:

	 
	

E-mail: 

	 
	  
	
Vasiliy Ignatenko

	  
	  
	  
	

Phone:

	 
	

Fax:

	 
	

E-mail:

	 

If to the Company:

	
Soton Holdings Group, Inc.

	  	  
	  	  
	  	  
	
Attn.

	
Mariya Kokho

	
Phone:

	  
	
Fax:

	  
	
E-mail: 

	  

If to the Purchaser:

	
Petrina Advisors, Inc.

	
180 Madison Ave., Suite 1702

	
New York, NY  10016

	
Attn. Paul Vassilakos, President

	
Phone: (646) 240-4262

	
Fax: (212) 696-4571

	
Email: pvassilakos@cullenagritech.com

  

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with a copy to:

	
The Lebrecht Group, APLC

	
9900 Research Drive

	
Irvine, CA  92618

	
Attn.  Craig V. Butler, Esq.

	
Phone:  (949) 635-1240

	
Fax:  (949)635-1244

	
Email:  cbutler@thelebrechtgroup.com

7.09       Binding Effect.   This Agreement shall inure to and be binding upon the heirs, executors, personal representatives, successors and assigns of each of the parties to this Agreement.

7.10       Effect of Closing.   All representations, warranties, covenants, and agreements of the Parties contained in this Agreement, or in any instrument, certificate, opinion, or other writing provided for in it, shall be true and correct as of the Closing and shall survive the Closing of this Agreement.

7.11       Mutual Cooperation.    The parties hereto shall cooperate with each other to achieve the purpose of this Agreement, and shall execute such other and further documents and take such other and further actions as may be necessary or convenient to effect the transaction described herein.

7.12       Expenses.  Except as otherwise specifically provided for herein, whether or not the transactions contemplated hereby are consummated, each of the Parties hereto shall bear the cost of all fees and expenses relating to or arising from its compliance with the various provisions of this Agreement and such Party’s covenants to be performed hereunder, and except as otherwise specifically provided for herein, each of the Parties hereto agrees to pay all of its own expenses (including, without limitation, attorneys and accountants’ fees and printing expenses) incurred in connection with this Agreement, the transactions contemplated hereby, the negotiations leading to the same and the preparations made for carrying the same into effect, and all such fees and expenses of the Parties hereto shall be paid prior to Closing.

7.13       Finders’ and Related Fees.  Each of the Parties hereto is responsible for, and shall indemnify the other against, any claim by any third party to a fee, commission, bonus or other remuneration arising by reason of any services alleged to have been rendered to or at the instance of said Party to this Agreement with respect to this Agreement or to any of the transactions contemplated hereby.

7.14       Governing Law.  This Agreement has been negotiated and executed in the State of New York and shall be construed and enforced in accordance with the laws of such state.

7.15       Forum.  Each of the Parties hereto agrees that any action or suit which may be brought by any Party hereto against any other Party hereto in connection with this Agreement or the transactions contemplated hereby may be brought only in a federal or state court in New York County, New York.

  

13

  

IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as of the date first above written.

	
“Sellers”

	  	
“Purchaser”

	  	  	  
	
Mariya Kokho

	  	
Petrina Advisors, Inc.

	
an individual

	  	
a New York corporation

	  	  	  
	  	
/s/ Mariya Kokho

	  	  	
/s/ Paul Vassilakos

	
By:

	
Mariya Kokho

	  	
By:

	
Paul Vassilakos

	  	  	
Its:

	
President

	  	  	  
	
Vasiliy Ignatenko

	  	  
	
an individual

	  	  
	  	  	  
	  	
/s/ Vasily Ignatenko

	  	  
	
By:

	
Vasiliy Ignatenko

	  	  
	  	  	  
	
“Company”

	  	  
	  	  	  
	
Soton Holdings Group, Inc.,

	  	  
	
a Nevada corporation

	  	  
	  	  	  
	  	
/s/ Mariya Kokho

	  	  
	
By:

	
Mariya Kokho

	  	  
	
Its:

	
President

	  	  

  

14

  

Schedule 2.12

Material Agreements

	
  

	
1)

	
Letter of Intent with Khan Krum Winery dated September 30, 2010.

	
  

	
2)

	
Bottle Supply Agreement with Hangzhou Yangcheng Company, Ltd. dated November 25, 2010.

	
  

	
3)

	
Amendment No. 1 to Bottle Supply Agreement with Hangzhou Yangcheng Company, Ltd. dated August 15, 2011.

	
  

	
4)

	
Transfer Agent Agreement with Island Stock Transfer dated January 31, 2011.

  

15

  

Exhibit A

Escrow Agreement

  

16

  

Exhibit B

Amendment No. 1 to Bottle Supply Agreement

  

17

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