STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is made this 30th
day of
April, 2008, among PCMT Corporation, a Delaware corporation (the “Company”),
Suspect Detection Systems Ltd., an Israeli corporation (“SDS”), Xxxxxxx Xxxxxx,
the chief executive officer of SDS (the “Principal”), and the shareholders of
SDS that are identified on Exhibit
A
annexed
hereto, including the Principal (each a “Seller” and collectively the
“Sellers”).
RECITALS
A. Sellers
are the owners of 100% of the issued and outstanding shares of SDS (the
“Shares”).
B. The
persons (the “Optionees”) whose names are set forth on Schedule 5.2 annexed
hereto are the owners of 100% of the issued and outstanding securities of SDS
that are convertible or exercisable into shares of SDS (the “SDS Convertible
Securities”).
C. The
Company’s common stock, $0.0001 par value (the “Common Stock”), is registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and quoted for trading on the OTC Bulletin Board.
D. Pursuant
to the terms and conditions of this Agreement, Sellers desire to sell, and
the
Company desires to purchase, all of the Sellers’ rights, title, and interest in
and to all of the Shares as further described herein.
E. As
contemplated by this Agreement, at the Closing (hereafter defined), the
Optionees shall surrender all of the SDS Convertible Securities and all of
their
rights, title and interest therein, and in exchange therefor, the Company shall
issue to the Optionees options to purchase shares of Common Stock (the “Company
Options”). The number of shares of Common Stock into which the Company Options
to be granted to each such Optionee at the Closing shall be exercisable shall
equal the aggregate of the Consideration Shares and Underlying Shares issued
and
granted at Closing multiplied by the percentage holdings in SDS on a fully
diluted basis represented by the SDS Option Shares held by each Optionee (the
shares of Common Stock underlying the Company Options, the “Underlying Shares”).
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1.
Agreement
to Purchase and Sell.
Subject
to the terms and conditions of this Agreement, at the Closing, the Sellers
shall
sell, assign, transfer, convey, and deliver to the Company, and the Company
shall accept and purchase, the Shares and any and all of their respective
rights, title and interest in the Shares, and by doing so Sellers shall be
deemed to have assigned all of their rights, title and interests in and to
the
Shares to the Company.
2.
Consideration.
(a) In
consideration for the Shares and the SDS Convertible Securities, at the Closing
the Company shall issue and deliver to the Sellers an aggregate of 21,768,063
shares of Common Stock (the “Consideration Shares”) and to the Optionees Company
Options exercisabe into an aggregate of 6,831,937 Underlying Shares. The number
of Consideration Shares issued to each Seller at the Closing shall be as
indicated next to such Seller’s name on Exhibit
A
annexed
hereto.
(b) The
Consideration Shares and the Underlying Shares are intended to represent 31%
of
(i) the issued and outstanding shares of Common Stock on the earlier of (x)
the
date that the Investment Target, as defined in Section 7.1 below, is achieved
(the “Investment Target Achievement Date”) and (y) December 1, 2008 (the
“Investment Target Cut-Off Date”), plus (ii) any shares of Common Stock in
excess of 500,000 shares issuable upon the exercise of options, warrants or
other securities convertible into shares of Common Stock or pre-emptive rights,
issued or granted by the Company, or undertaken to be issued or granted by
the
Company, after the date of this Agreement and on or before the earlier of the
Investment Target Achievement Date and the Investment Target Cut-Off Date (the
earlier of the Investment Target Achievement Date and the Investment Target
Cut-Off Date, the “Break Date”). The calculation of 31% of issued and
outstanding shares of Common Stock shall exclude, for all purposes, shares
of
Common Stock to be held in escrow pursuant to Section 7.1 below, for the removal
of doubt, whether or not such shares of Common Stock shall be cancelled or
transferred pursuant to Section 7.1 below (the “Escrowed Shares”). The
number of issued and outstanding shares of Common Stock on the Break Date plus
shares of Common Stock in excess of 500,000 shares issuable upon exercise of
options, warrants or other securities convertible into shares of Common Stock
or
pre-emptive rights, as aforesaid, not taking into account the Escrowed Shares
as
aforesaid, is referred to hereinafter as the “Net Number of Shares.” In
the event that the Consideration Shares and the Underlying Shares represent
less
than 31% of the Net Number of Shares on the Break Date, the Company shall issue
and deliver such number of additional shares of Common Stock to the Sellers
which, in the aggregate and in addition to the Consideration Shares delivered
at
the Closing, shall represent 23.59% of the Net Number of Shares on the Break
Date. It is hereby acknowledged and agreed that the Company Options shall
provide that in such event the amount of Underlying Shares shall be
automatically increased, on a pro-rata basis according to the proportion that
each Optionee’s Underlying Shares bears to the aggregate number of Underlying
Shares at Closing, such that the Consideration Shares and the Underlying Shares
shall represent 31% of the Net Number of Shares on the Break Date. The Sellers
shall not be required to pay any consideration to the Company for the additional
shares of Common Stock issued to the Sellers pursuant to this Section
2(b). Additional shares of Common Stock issued pursuant to this Section
2(b) shall be issued to the Sellers on a pro-rata basis according to the
proportion of the Consideration Shares issued to each Seller at the Closing.
3. Closing.
(a) Time
of Closing.
The
closing shall take place at such time and place (the “Closing Date”) as the
parties hereto may agree (the “Closing”) at any time after satisfaction or
waiver of any other condition or action to be performed on or prior to Closing
under the terms of this Agreement and delivery of all of the items specified
in
Section 4 below, provided,
however,
that
the Closing shall not occur before the completion of the Company’s current
report on Form 8-K regarding the transactions contemplated by this Agreement
including, without limitation, the requisite financial statements, which the
Company hereby undertakes to make its best efforts to complete within 7 calendar
days of the execution of this Agreement.
4.
Closing;
Deliveries.
(a)
At
the
Closing, the delivery of the following documents shall occur simultaneously,
and
no document shall be deemed to have been delivered until all required documents
are delivered, unless waived:
(1)
Each
Seller shall deliver an executed representation letter agreement to the Company.
The form of such representation letter shall be attached hereto at the Closing
as Exhibit B. In addition, each of the Sellers shall deliver to the Company
(A)
stock certificates evidencing the Shares held by each of them, duly endorsed
in
blank or accompanied by share transfer deeds duly executed in blank, or other
instruments of transfer in form and substance reasonably satisfactory to the
Company, (B) documentary evidence, filed with the Israeli Registrar of
Companies, establishing the due recordation in the share register of SDS of
the
issuance of the Shares to each Seller, and (C) such other documents as may
be
required under applicable law or reasonably requested by the Company to effect
the transfer of the Shares to the Company.
(2) SDS
shall
deliver to the Company (A) a legal opinion on behalf of SDS opining as to
matters customary in a transaction of this nature, (B) all the books and records
of SDS, and (C) such other documents as may be required under applicable law
or
reasonably requested by the Company to effect the transfer of the Shares to
the
Company.
(3) The
Company shall deliver to each Seller a certificate evidencing the number of
Consideration Shares indicated next to such Seller’s name on Exhibit
A
annexed
hereto.
(4) Xx.
Xxxxx
Xxxxx Xxxxxxxxx, the Company’s Secretary, shall deliver to the Company a fully
executed copy of an escrow agreement, in form and substance satisfactory to
the
Company and the Sellers (the “Escrow Agreement”). The Sellers shall become a
party to the Escrow Agreement. A copy of the Escrow Agreement shall be delivered
by the Company to each of the Optionees at Closing.
(5)
The
Company shall deliver a legal opinion to the Principal and the remaining Sellers
from Xxxxx Xxxxx & Associates PLLC on behalf of the Company opining as to
matters customary in a transaction of this nature.
(6)
SDS
and
the Principal shall have delivered to each other a duly executed employment
agreement between SDS and the Principal, in form and substance satisfactory
to
SDS, the Company and the Principal. The form of such employment agreement shall
be attached hereto at the Closing as Exhibit D (the “Shoval Employment
Agreement”). The Shoval Employment Agreement shall provide for, inter alia, the
grant of three (3) warrants (the “Shoval Warrants”) to purchase shares of Common
Stock. The terms of each Shoval Warrant shall include that upon the achievement
of a milestone (each Shoval Warrant to provide a different milestone), the
amount of shares of Common Stock exercisable under such warrant shall equal
3.33% of the total number of outstanding shares of Common Stock at the time
the
milestone is achieved at an exercise price of $0.15 per share and shall provide
for cashless exercise.
(7)
SDS
and
Xxxx Xxxxxxxx shall have delivered to each other a duly executed employment
agreement between SDS and Xx. Xxxxxxxx, in form and substance satisfactory
to
SDS, the Company and Xx. Xxxxxxxx. The form of such employment agreement shall
be attached hereto at the Closing as Exhibit E (the “Xxxxxxxx Employment
Agreement”). The Xxxxxxxx Employment Agreement shall provide for, inter alia,
the grant of three (3) warrants (the “Xxxxxxxx Warrants”) to purchase shares of
Common Stock. The terms of each Xxxxxxxx Warrant shall include that upon the
achievement of a milestone (each Xxxxxxxx Warrant to provide a different
milestone), the amount of shares of Common Stock exercisable under such warrant
shall equal 1.67% of the total number of outstanding shares of Common Stock
at
the time the milestone is achieved at an exercise price of $0.15 per share
and
shall provide for cashless exercise.
(8)
The
Company, the Sellers and Xx. Xxxxxxxx shall have delivered to each other a
duly
executed Registration Rights Agreement, in form and substance satisfactory
to
such persons to cover the registration for resale of the Consideration Shares,
Escrowed Shares, the Underlying Shares and shares of Common Stock issuable
upon
exercise of the Shoval Warrants and the Xxxxxxxx Warrants. The form of such
Registration Rights Agreement shall be attached hereto at the Closing as Exhibit
F. Such agreement shall provide for unlimited piggyback rights from the Closing
Date and demand rights available from 18 months from the Closing Date, provided
such demand rights shall be available only if the Company shall have cash and
cash-equivalents in an amount equal to or exceeding $500,000.
(9) The
Israeli Office of the Chief Scientist shall have approved the transactions
contemplated by this Agreement and the Company shall deliver to SDS an executed
undertaking, addressed to the Israeli Office of the Chief Scientist,
substantially in the form of Exhibit G hereto.
(10) SDS
shall
deliver to the Company a waiver, executed by NG - The Northern Group LP and
in
form and substance satisfactory to the Company, with respect to any right or
rights of NG - The Northern Group LP under the Amended and Restated Articles
of
Association of SDS (the “SDS Articles”) or otherwise associated with the Series
A Preferred Shares of SDS held by NG - The Northern Group LP, including rights
of first refusal, the exercise of which may interfere with the consummation
of
the transactions as contemplated by this Agreement. Prior to or upon the
Closing, NG - The Northern Group LP shall have converted said Series A Preferred
Shares of SDS into ordinary shares in SDS on a one-to-one basis.
(11)
The
Optionees shall have executed option agreements in respect of the Company
Options in form and substance satisfactory to the Company and the Sellers.
The
terms of such option agreements shall include an exercise price equal to
$0.0001, a ten-year exercise period, shall provide for cashless exercise and
shall include an automatic increase in the Underlying Shares as contemplated
by
Section 2(b) above and Section 7.1 below. The form of such option agreements
shall be attached hereto at the Closing as Exhibit H.
(12) The
Sellers and the Optionees shall have received pre-rulings from the Israeli
Tax
Authority, in form and substance satisfactory to them concerning the
transactions contemplated by this Agreement.
5. Representations
and Warranties of SDS.
As
further inducement to the Company to enter into this Agreement and to consummate
the transactions contemplated herein, the Principal hereby represents and
warrants to the Company that to the best of his knowledge, as of the date of
this Agreement and as of the Closing Date:
5.1 Organization
and Good Standing.
SDS is
duly organized and validly existing under the laws of the State of Israel,
with
full power and authority to own, lease, use and operate its properties and
to
carry on its business as and where now owned, leased, used, operated and
conducted. SDS does not own, directly or indirectly, any capital stock of any
corporation or any equity, profit sharing, participation or other interest
in
any corporation, partnership, limited liability company, joint venture or other
entity.
5.2 Capitalization.
As of
the Closing, the authorized capital of SDS will consist of (a) 20,000,000
Ordinary Shares, NIS 0.01 par value per share, authorized, 1,170,295 of which
shares are issued and outstanding, fully paid and non-assessable, (i) with
each
holder thereof being entitled to cast one vote for each share held on all
matters properly submitted to the shareholders for their vote, and (ii) there
being no pre-emptive or similar rights and no cumulative voting. Other than
as
set forth in Schedule 5.2, SDS has no shares reserved for issuance pursuant
to a
stock option plan or agreement or pursuant to securities exercisable for, or
convertible into or exchangeable for shares of its capital stock. All issuances
by SDS of shares of its capital stock in past transactions have been legally
and
validly effected. All past issuances of shares of SDS were conducted in full
compliance with the requirements of Israeli law and the then effective Articles
of Association of SDS. Other than as set forth on Schedule 5.2 to this
Agreement, there are (i) no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating
to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of SDS or arrangements by which SDS is or may become bound to
issue additional shares of capital stock, (ii) no agreements or arrangements
under which SDS is obligated to register for resale any of its or Sellers’
securities under the US Securities Act of 1933, as amended, and (iii) no
anti-dilution or price adjustment provisions contained in any security issued
by
SDS (or in any agreement providing any such rights).
5.3 Post-Closing
Ownership.
Upon
the consummation of the transactions contemplated herein, the Company will
own
100% of the issued and outstanding share capital of SDS on a fully-diluted
basis.
5.4 Employees.
Other
than as set forth on Schedule 5.4 to this Agreement, SDS does not (i) have
any
employees, (ii) as at the Closing, will not owe any compensation of any kind,
deferred or otherwise, to any person (other than liabilities with regard to
current one-month salaries, current one month social and other benefits or
current reimbursable expenses) including, without limitation, any agent,
representative, consultant, accountant or attorney, (iii) have any written
or
oral employment agreement with any person, nor (iv) is it a party to or bound
by
any collective bargaining agreement, other than by operation of law. Other
than
as set forth on Schedule 5.4 to this Agreement, there are no loans or other
monetary obligations payable to or owing by SDS to any stockholder, officer,
director, agent, representative, consultant, accountant, attorney or otherwise,
nor are there any loans or debts payable or owing by any such persons to SDS
or
any guarantees by SDS of any loan or obligation of any nature to which any
such
person is a party.
5.5 Intellectual
Property.
(a) Schedule
5.5(a) annexed hereto is a complete and accurate list of all the patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(the “Intellectual Property”) registered by SDS, or with respect to which SDS
has any rights, and it specifies, where applicable, the jurisdictions in which
each such item of Intellectual Property has been issued or registered or in
which an application for such issuance and registration has been filed. Prior
to
the date hereof, the Company has been provided with the respective registration
or application numbers. Other than as set forth in Schedule 5.5(a), all of
the
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Intellectual Property have been filed
with
the relevant patent, copyright, trademark or other authorities in Israel and
or
in foreign jurisdictions, as the case may be, for the purposes of maintaining
such Intellectual Property. Other than as set forth in Schedule 5.5(a), there
is
no claim or action by any person pertaining to, or proceeding pending or
threatened, which challenges the right of SDS with respect to any of the
Intellectual Property. Other than as set forth on Schedule 5.5(a), SDS owns
and
has good and exclusive title to, or has license (sufficient for the conduct
of
its business as currently conducted and as proposed to be conducted) to, each
item of the Intellectual Property free and clear of any Encumbrances (excluding
licenses and related restrictions). Other than as set forth in Schedule 5.5(a),
none of the Intellectual Property is subject to any law, rule or regulation
of
the Israeli government, the United States government or any agency thereof,
and
there is no outstanding order of any governmental authority of competent
jurisdiction in Israel or in the United States, restricting the use or licensing
of any of the Intellectual Property. For the purposes of this Agreement, the
term “Encumbrances” shall mean all liens, pledges, hypothecations, charges,
adverse claims, options, preferential arrangements or restrictions of any kind,
including, without limitation, any restriction of the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
(b) Other
than as set forth in Schedule 5.5(b), all employees, consultants and
subcontractors of SDS, and any other individual or entity that took any part
in
the development of the Intellectual Property, have executed valid and subsisting
agreements duly assigning and transferring all of their rights in the
Intellectual Property to SDS.
(c) Other
than as set forth in Schedule 5.5(c), SDS is not obligated under any law, rule,
regulation or order of the Israeli government, the United States government
or
any agency thereof, or any stipulation or agreement of any kind, to pay any
royalty or other payment to any third party with respect to the marketing,
sale,
distribution, manufacture, license or use of any of the Intellectual Property.
(d) Other
than as set forth in Schedule 5.5(d), SDS has not violated and is not currently
violating or infringing on any Intellectual Property of any other person or
entity, and SDS has not received any communication alleging any such violation
or infringement.
(e) Other
than as set forth in Schedule 5.5(e), all providers of services to SDS, and
all
persons and entities engaged by SDS that would have access to SDS’s Intellectual
Property, have executed valid and subsisting non-disclosure agreements with
SDS
with respect to SDS’s Intellectual Property.
(f) SDS
has
taken reasonable security measures to protect the confidentiality and value
of
all of its Intellectual Property.
(g) Except
as
set forth in Schedule 5.5(g), the Principal is not obligated under any agreement
(including licenses, covenants or other commitments) or subject to any judgment,
decree or order of any court or governmental agency, that would interfere in
a
material manner with his ability to carry out his duties to SDS or to the
Company as contemplated by the Shoval Employment Agreement.
(h) Except
as
set forth in Schedule 5.5(h), SDS has not received any grant or other benefit
from the United States government or the Israeli government, through the office
of the Chief Scientist under the Encouragement of Research and Development
in
Industry Law, 5744-1984, or otherwise.
5.6 No
Loan Agreements.
SDS is
not a party to any contract, arrangement or agreement, whether oral or in
writing, including without limitation, loan agreements, credit lines, promissory
notes, mortgages, pledges, guarantees, security agreements, factoring
agreements, letters of credit, powers of attorney or other arrangements to
loan
or borrow money or extend credit.
5.7 Taxes.
SDS has
made or filed all income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and has paid all taxes
and
other governmental assessments and charges that are material in amount, shown
or
determined to be due on such returns, reports and declarations. There are no
unpaid taxes claimed to be due by the taxing authority of any jurisdiction,
and
SDS knows of no basis for any such claim. SDS has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, state or local tax. None of SDS’s tax returns is
presently being audited by any taxing authority. SDS expressly assumes and
shall
pay any taxes due by SDS up to the date of the Closing.
5.8 Licenses.
SDS is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Permits”), and there is no
action pending or threatened regarding suspension or cancellation of any of
the
Permits. SDS is not in conflict with, or in material default or violation of,
any of the Permits. SDS has not received any notification with respect to
possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations that have not
been resolved.
5.9 Real
Property.
SDS
does not own any real property.
5.10 Information.
All
information relating to or concerning SDS that has been provided to the Company
and all of the representations and warranties of the Principal set forth in
this
Agreement and otherwise in connection with the transactions contemplated hereby,
are true and correct in all material respects and the Principal has not omitted
to state any fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to
SDS
or its business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure
or
announcement by SDS but which has not been so publicly announced or disclosed.
There is no fact known to the Principal that has specific application to the
Shares and that materially adversely affects or, as far as can be reasonably
foreseen, materially threatens the Shares that has not been set forth in this
Agreement.
6. Representations
and Warranties of the Company.
As an
inducement to Sellers and the Principal to enter into this Agreement and to
consummate the transactions contemplated herein, the Company hereby represents
and warrants to each of the Sellers and to the Principal that as of the date
of
this Agreement and as of the Closing Date:
6.1 Organization
and Good Standing.
The
Company is duly organized, validly existing and in good standing under the
applicable laws of the state of its incorporation and has full power and
authority to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and conducted.
6.2 Authority.
The
execution and delivery of this Agreement and the documents ancillary hereto,
and
the transactions contemplated hereby and thereby, have been duly approved by
the
board of directors of the Company and does not require the approval of the
shareholders of the Company. This Agreement and the documents ancillary hereto
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with the terms hereof and
thereof.
6.3
Consents. All
material consents, approvals, authorizations and orders, required for the
consummation by the Company of any of the transactions on its part contemplated
under this Agreement and the documents ancillary hereto, have been obtained,
and
all reports required by the Company with any governmental authority prior to
the
execution of this Agreement have been made.
6.4 No
Conflict.
None of
the execution, delivery, or performance of this Agreement and the documents
ancillary hereto, and the consummation of the transactions contemplated hereby
and thereby, conflicts or will conflict with, or (with or without notice or
lapse of time, or both) result in a termination, breach or violation of (i)
to
the best of the Company’s knowledge, any instrument, contract or agreement to
which the Company is a party or by which it or its assets is bound; (ii) the
certificate of incorporation and by-laws of the Company, or (iii) to the best
of
the Company’s knowledge, any federal, state, local or foreign law, ordinance,
judgment, decree, order, statute, or regulation, or that of any other
governmental body or authority, applicable to the Company.
6.5 Company
Shares.
The
Consideration Shares are duly authorized and will be duly and validly issued,
fully paid and nonassessable, free and clear of all Encumbrances and in full
compliance with all U.S. federal and state securities laws. The Underlying
Shares, the shares of Common Stock issuable upon exercise of the Shoval Warrants
and the Xxxxxxxx Warrants and the additional shares that may be issued pursuant
to Section 2(b) hereof and additional shares that may be issuable under the
Company Options, when issued, will be duly authorized and will be duly and
validly issued, fully paid and nonassessable, free and clear of all Encumbrances
and in full compliance with all U.S. federal and state securities laws. The
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable pursuant to this Agreement and all documents
ancillary hereto and will from time to time reserve any additional number of
shares of Common Stock that may be issuable pursuant to this Agreement and
all
documents ancillary hereto. All of the outstanding shares of capital stock
of
the Company are validly issued, fully paid and nonassessable, and none of such
outstanding shares was issued in violation of any preemptive rights, rights
of
first refusal or similar rights to subscribe for or purchase securities and
were
issued in full compliance with all U.S. federal and state securities laws.
6.6 Company
Reports.
The
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by the Company with the Securities and Exchange
Commission pursuant to the requirements of the Exchange Act. To the best
knowledge of the Company, as of their respective dates, all reports, schedules,
forms, statements and other documents filed by the Company with the Securities
and Exchange Commission (the “SEC Documents”) complied in all material respects
with the requirements of the Exchange Act and applicable rules and regulations
as in effect at the time of filing, and none of the SEC Documents, at the time
they were filed, contained any untrue statement of a material fact or omitted
to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were
made, not misleading.
6.7 Litigation.
There
is no civil, criminal or administrative suit, claim, hearing, inquiry, action,
proceeding or investigation pending, to which the Company is a party, or to
the
best of the Company’s knowledge, threatened in writing to the Company, against
the Company, except as would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the Company and its business.
The Company is not subject to any outstanding order, writ, injunction or decree,
except as would not, individually or in the aggregate, reasonably be expected
to
have a material adverse effect on the Company or its business. There has not
been, and to the best knowledge of the Company, there is no pending or
contemplated, civil, criminal or administrative suit, claim or investigation,
including by the Securities and Exchange Commission, in which the Company or
any
current or former officer or director of the Company, in his or her capacity
as
such, is a party or the subject thereof.
6.8 Major
Shareholders.
To the
best of the Company’s knowledge, other than as set forth on Schedule 6.8 to this
Agreement, no shareholder or group of shareholders of the Company has beneficial
ownership of more than 4.99% of any class of the Company’s equity securities.
For
the
purposes of this Section 6.8, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act, and Rule 13d-3 thereunder.
Schedule 6.8 sets forth the amount of issued shares of Common Stock. Other
than
as set forth in Schedule 6.8, there are no outstanding options, warrants or
other securities convertible or exercisable into shares of Common
Stock.
6.9
Listing
and Maintenance Requirements.
The
shares of Common Stock are registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the Commission is contemplating terminating such registration. The Company
has
not, in the 12 months preceding the date hereof, received notice from the
OTC Bulletin Board to the effect that the shares of Common Stock will not
continue to be listed for trade on the OTC Bulletin Board. The Company is,
and
has no reason to believe that the shares of Common Stock will not in the
foreseeable future continue to be listed for trade on the OTC Bulletin
Board.
7. Covenants.
7.1 Escrowed
Shares.
On the
Closing Date, Xx. Xxxxx Xxxxxx Bernshten, the Company’s Secretary, will forfeit
and relinquish 7 million shares of Common Stock that are registered in his
name,
by depositing such shares, which shall be free and clear of any Encumbrances,
in
an escrow account to be managed by Xxxxx Xxxxx & Associates, PLLC, pursuant
to the Escrow Agreement. If the Investment Target is achieved on or before
the
Investment Target Cut-Off Date, the Escrowed Shares shall be cancelled without
payment of any consideration. Alternatively, if the Investment Target is not
achieved on or before the Investment Target Cut-Off Date, then, as described
in
Schedule 7.1 hereto (a) a portion of such Escrowed Shares will be transferred
to
the Sellers, on a pro-rata basis according to the proportion of the
Consideration Shares issued to each Seller on the Closing Date, without payment
of any consideration by Sellers, (b) the remaining Escrowed Shares shall be
cancelled by the Company, and (c) the number of Underlying Shares issuable
upon
exercise of the Company Options shall be automatically increased by the amount
of such cancelled shares on a pro-rata basis according to the proportion of
the
Underlying Shares of each Optionee’s Company Option at the Closing. The term
“Investment Target” means the actual receipt by the Company of an aggregate
amount of at least $1.5 million through the sale of non-debt equity securities
of the Company during the period commencing October 2, 2007 and ending on
December 1, 2008. It is hereby acknowledged that as of the date of this
Agreement the Company has received $1,060,700.50 towards the Investment Target
and the use of such monies by the Company is not restricted in any
manner.
7.2 Directors.
For so
long as the Sellers shall collectively hold at least 5% of the outstanding
Common Stock, Xxxxxxx Xxxxxx shall have the right to appoint one member of
the
Company’s board of directors.
7.3 Officers.
On or
prior to the Closing Date, the resignations of Xxxxx Xxxxxx Xxxxxxxxx and
Xxxxxxx Xxxxxx Xxxxx as officers of the Company shall become effective and,
provided the Closing has occurred, Xxxxxxx Xxxxxx shall be appointed to serve
as
the chief executive officer of the Company.
7.4 Ownership
of Shares.
The
Company acknowledges that the transactions contemplated under this Agreement
by
the Sellers and the Optionees are being performed under Section 103 of the
Israeli Income Tax Ordinance [New
Version], 5721-1961 (the “Ordinance”). For
the
purpose of complying with Section 103 of the Ordinance,
the
Company hereby agrees and undertakes, to the best of its ability and knowledge,
from the Closing, not to take any action which might be anticipated to result
in
a violation of the terms and conditions of Section 103 of the Ordinance, which
terms and conditions include, inter alia, subject to certain exceptions, the
Company retaining all of the ownership rights acquired by the Company in SDS
pursuant to this Agreement, SDS retaining the ownership rights in its assets
and
restrictions as to the issuance of additional shares of Common Stock, during
the
period commencing on the Closing Date and ending two (2) years from the end
of
the calendar year in which the Closing occurs.
8.
Indemnification;
Survival.
8.1
Indemnification.
The
Principal shall indemnify and hold harmless the Company its agents,
beneficiaries, affiliates, representatives and their respective successors
and
assigns (collectively, the “Company Indemnified Persons”) from and against any
and all damages, losses, liabilities, taxes, costs and expenses (including,
without limitation, attorneys’ fees and costs) (collectively, “Losses”)
resulting directly or indirectly from (a) any inaccuracy, misrepresentation,
breach of warranty or non-fulfillment of any of the representations and
warranties made by the Principal and contained in Article 5 of this Agreement
and in the representation letter agreement referred to in Section 4(a)(1),
or
any actions, omissions or statements of fact inconsistent in any material
respect with any such representation or warranty, (b) any failure on the part
of
SDS or the Principal to perform or comply with any agreement, covenant or
obligation in this Agreement; provided,
however,
that
(i) the indemnification provided by the Principal pursuant to this Section
8.1
shall terminate on the second anniversary of this Agreement, and it shall have
no further force or effect thereafter, notwithstanding anything to the contrary
contained in any provision of this Agreement or applicable law; and (ii) the
indemnification provided by the Principal under this Section 8.1 shall be
limited, in that the Principal’s total liability to the Company and to any other
Company Indemnified Person, in the aggregate, for all claims made under this
Section 8.1, by the Company and any other Company Indemnified Person, at any
time or from time to time, shall not exceed $10,000 and shall be satisfied
and
recoverable only through surrender by the Principal to the Company and
forfeiture of shares of Common Stock with a fair market value equal to the
relevant Losses up to a maximum aggregate amount of $10,000. If a claim for
indemnification is made by any Company Indemnified Person other than the
Company, the Company shall make a cash payment to the Company Indemnified Person
in an amount equal to the fair market value of the shares of Common Stock
surrendered by the Principal. For the purposes of this Section 8.1, fair market
value shall mean the average of the closing bid and ask prices for a share
of
Common Stock as quoted by the OTC Bulletin Board (or other US market or exchange
on which the Common Stock is listed or quoted for trading if not listed or
quoted for trading on the OTC Bulletin Board) on the five (5) trading days
immediately following the date on which the Company Indemnified Person notifies
the Principal, in writing as required pursuant to Section 10.2 below, that
he
has a claim for indemnification under this Section 8.1. If the price of a share
of Common Stock is not so reported, the fair market value of a share of Common
Stock shall be determined by agreement in good faith between the Company and
the
Principal.
The
Company shall indemnify the Principal, the remaining Sellers and SDS, their
agents, beneficiaries, affiliates, representatives and their respective
successors and assigns, and hold each of them harmless from and against any
and
all damages, losses, liabilities, taxes, costs and expenses (including, without
limitation, attorneys’ fees and costs) resulting directly or indirectly from (A)
any inaccuracy, misrepresentation, breach of warranty or non-fulfillment of
any
of the representations and warranties of the Company in this Agreement, or
any
actions, omissions or statements of fact inconsistent in any material respect
with any such representation or warranty, (B) any failure by the Company to
perform or comply with any agreement, covenant or obligation in this Agreement;
provided,
however,
that
(1) the indemnification provided by the Company pursuant to this Section 8.1
shall terminate on the second anniversary of this Agreement, and it shall have
no further force or effect thereafter, notwithstanding anything to the contrary
contained in any provision of this Agreement or applicable law; and (2) the
indemnification provided by the Company under this Section 8.1 shall be limited,
in that the Company’s total liability to the Principal, the remaining Sellers
and SDS, their agents, beneficiaries, affiliates, representatives and their
respective successors and assigns, in the aggregate, for all claims made under
this Section 8.1 at any time or from time to time, shall not exceed an aggregate
maximum amount of $10,000. Notwithstanding the aforementioned, the limitations
set forth in the previous sentence shall not apply to Sections 6.5, 6.9 and
7.4.
The
provisions of this Section 8.1 shall be the sole and exclusive remedy for
breaches of the matters set forth in said Section.
8.2
Survival.
Unless
otherwise stated in this Agreement, all covenants and agreements of the parties
contained herein or in any other certificate or document delivered pursuant
hereto shall survive the date hereof until the later of the expiration of the
applicable statute of limitations or the second anniversary of the date
hereof.
9. Termination.
This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned at any time prior to the Closing, by the Company or by SDS, if
(a) the Closing shall not have been consummated by October 31, 2008, or
(b) any injunction or order of any governmental authority permanently
restraining, enjoining or otherwise prohibiting consummation of the transaction
contemplated by this Agreement shall have become final and non-appealable;
provided,
however,
that
the right to terminate this Agreement pursuant to this Section 9 shall not
be available to any party that has breached its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the transactions contemplated by this Agreement.
10.
Miscellaneous.
10.1 Further
Assurances.
From
time to time, whether at or following the Closing, each party shall make
reasonable commercial efforts to take, or cause to be taken, all actions, and
to
do, or cause to be done, all things reasonably necessary, proper or advisable,
including as required by applicable laws, to consummate and make effective
as
promptly as practicable the transactions contemplated by this
Agreement.
10.2
Notices.
All
notices or other communications required or permitted hereunder shall be in
writing and shall be deemed duly given (a) if by personal delivery, when so
delivered, (b) if mailed, three (3) business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below (or ten (10) business
days if the address to which such notice is addressed is not in the same country
in which such notice is mailed), or (c) if sent through an overnight delivery
service in circumstances to which such service guarantees next day delivery,
the
second day following being so sent to the addresses of the parties as indicated
on Exhibit
A
annexed
hereto. Any party may change the address to which notices and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
10.3
Choice
of Law.
This
Agreement shall be governed, construed and enforced in accordance with the
laws
of the State of New York, without giving effect to principles of conflicts
of
law.
10.4
Jurisdiction.
The
parties hereby irrevocably consent to the in personam jurisdiction and venue
of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of or relating
to
this Agreement, any document or instrument delivered pursuant to, in connection
with or simultaneously with this Agreement, or a breach of this Agreement or
any
such document or instrument. EACH
PARTY HERETO WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING
OUT
OF THIS AGREEMENT OR ANY BREACH OR ALLEGED BREACH HEREOF.
10.5 Entire
Agreement.
This
Agreement sets forth the entire agreement and understanding of the parties
in
respect of the transactions contemplated hereby and supersedes all prior and
contemporaneous agreements, arrangements and understandings of the parties
relating to the subject matter hereof. No representation, promise, inducement,
waiver of rights, agreement or statement of intention has been made by any
of
the parties which is not expressly embodied in this Agreement.
10.6 Assignment.
Each
party's rights and obligations under this Agreement shall not be assigned or
delegated, by operation of law or otherwise, without the other parties’ prior
written consent, and any such assignment or attempted assignment without the
other parties’ prior written consent shall be void, of no force or effect, and
shall constitute a material default by such party. Notwithstanding the
aforesaid, the Principal shall have the right to assign his rights under this
Agreement to an entity in which the Principal, alone or together with any of
his
relatives of the first degree, own 100% of the voting rights.
10.7
Amendments.
This
Agreement may be amended, modified, superseded or cancelled, and any of the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed by the parties
hereto.
10.8 Waivers.
The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or the breach of any term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach
or a
waiver of any other term, covenant, representation or warranty of this
Agreement.
10.9 Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts and by
facsimile, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
10.10 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination, the parties shall negotiate
in
good faith to modify this Agreement so as to give effect the original intent
of
the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated
to
the fullest extent possible.
10.11
Interpretation.
The
parties agree that this Agreement shall be deemed to have been jointly and
equally drafted by them, and that the provisions of this Agreement therefore
shall not be construed against a party or parties on the ground that such party
or parties drafted or was more responsible for the drafting of any such
provision(s). The parties further agree that they have each carefully read
the
terms and conditions of this Agreement, that they know and understand the
contents and effect of this Agreement and that the legal effect of this
Agreement has been fully explained to their satisfaction by counsel of their
own
choosing. The various paragraph and/or section headings in this Agreement are
for reference and convenience only and shall not be considered in the
interpretation hereof for any purpose and in no way alter, modify, amend, limit,
or restrict any contractual obligations of the parties.
10.12 Pronouns.
The use
herein of the masculine pronouns "him" or "his" or similar terms shall be deemed
to include the feminine and neuter genders as well and the use herein of the
singular pronoun shall be deemed to include the plural as well and vice versa.
10.13 Expenses. Each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of this
Agreement, provided that the Company shall participate and pay SDS and the
Principal up to the following amounts upon delivery of itemized invoices with
respect thereto (or shall reimburse them on account thereof) (a) up to $20,000
in accountant fees incurred by SDS and/or the Principal, including for obtaining
the pre-rulings referred to in Section 4, and (b) up to $15,000 in legal fees
incurred by SDS and/or the Principal. The Company shall pay all transfer agent
fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any securities of the Company as contemplated by this
Agreement.
IN
WITNESS WHEREOF, the parties have duly executed this Stock Purchase Agreement
as
of the date first above written.
|
PCMT
CORPORATION
|
SUSPECT
DETECTION SYSTEMS LTD.
|
|
By:
/s/ Xxxxx
Xxxxxxx
|
By:
/s/ Xxxxxxx
Xxxxxx
|
|
Name:
Xxxxx Xxxxxxx
|
Name:
Xxxxxxx Xxxxxx
|
|
Title:
CFO
|
Title:
CEO
|
PRINCIPAL
/s/
Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx
SELLER
By:
/s/
Ishayahu Xxxxxxxx
Name:
Ishayahu (Sigi)
Xxxxxxxx
SELLER
NG
- The
Northern Group LP
By:
/s/
Illegibile
Name:
Illegible
Title:
CFO
EXHIBIT
A
|
Name
of Seller
|
Address
|
SDS
Shares Sold
|
Consideration
Shares Acquired at Closing
|
|
Xxxxxxx
Xxxxxx
|
c/o
Suspect Detection
Systems
Ltd.
000
Xxxxxx
Xxxxxx,
Xxxxxx
Fax:
(972) (0) 0-000-0000
|
750,000
|
13,950,371
|
|
Ishayahu
Xxxx
Xxxxxxxx
|
00
Xxx Xxxxxx Xx.
Xxxxx
Xxx, Xxxxxx
(972)
(0) 0-000-0000
|
250,000
|
4,650,122
|
|
NG
- The Northern
Group
LP
|
00
Xxxxx Xx.
Xxxxxxxx,
Xxxxxx
Fax:
(972) (0) 0-000-0000
|
170,295*
|
3,167,570
|
*
Represents Preferred A Shares which are anticipated to be converted by NG -
The
Northern Group LP into ordinary shares of SDS upon the Closing.
|
The
address for notices to the Company is:
|
0
Xxxxxx Xxxxxx
|
|
Xxxxxxxxx,
Xxxxxx
|
|
|
00000
|
|
|
Fax:
000-000-0000
|
EXHIBIT
G
Form
of OCS Undertaking
| To: |
The
Research Committee
|
The
Office of the Chief Scientist
Jerusalem
Relating
to projects that have been financed by or are currently being financed by the
Office of the Chief Scientist of the Ministry of Industry, Trade and Labor
(the
"OCS")
(Project no. 34581 and File no. 36325) and to projects of the Company (as this
term is defined below) that may be financed by the OCS in the future (the
"Projects").
Undertaking
We,
the
undersigned, PCMT Corporation, a company incorporated, organized and existing
under the laws of the State of Delaware, USA and whose registered office is
at 0
Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxx, 00000, having, by an agreement dated April
30,
2008, purchased 100% of the issued and outstanding share capital of Suspect
Detection Systems (S.D.S.) Ltd. (the "Company");
Recognizing
that the Company's research and development Projects are currently, have been
or
will be financially supported by the Government of the State of Israel, through
the OCS under and subject to the provisions of The Encouragement of Research
and
Development in Industry Law 5744-1984 (the "R&D
Law")
and
the regulations, rules and procedures promulgated there under;
Recognizing
that the R&D Law places strict constraints on the transfer of know-how
and/or production rights, making all such transfers subject to the absolute
discretion of the OCS' research committee (the "Research
Committee"),
acting in accordance with the aims of the R&D Law and requiring that any
such transfer receive the prior written approval of the Research
Committee;
Hereby
declare and undertake:
| 1. |
To
observe strictly all the requirements of the R&D Law and the
regulations, rules and procedures promulgated there under, as applied
to
the Company and as directed by the Research Committee, in particular
those
requirements stipulated under Sections 19, 19A and 19B of the R&D Law
relating to the prohibitions on the transfer of know-how and/or production
rights.
|
|
2.
|
As
a shareholder of the Company, to make all reasonable efforts that
the
Company shall observe strictly all the requirements of the R&D Law and
the regulations, rules
and procedures promulgated there under,
as applied to the Company and as directed by the Research Committee,
in
particular those requirements stipulated under Sections 19, 19A and
19B of
the R&D Law relating to the prohibitions on the transfer of know-how
and/or production rights.
|
|
Date
|
Name
(block letters) and signature of Authorized Company Representative
and
Company Seal
|
