SHARE EXCHANGE AGREEMENT
THIS
SHARE EXCHANGE AGREEMENT
(the
“Agreement”)
is
made as of January 12, 2007 (the “Effective
Date”),
by
and among O2Diesel
Corporation,
a
corporation organized under the laws of the State of Delaware (“Purchaser”),
ProEco
Energy Company, Inc.,
a
corporation organized under the laws of the State of South Dakota (“Company”),
and
each of the undersigned selling shareholders of Company (each a “Seller”
and
collectively the “Sellers”).
Preliminary
Statements
A. Sellers
own all of the issued and outstanding capital stock of Company, consisting
of
85,750,000 shares of common stock, $0.0001 par value per share (“Company
Shares”).
B. Purchaser
desires to acquire 68,600,000 Company Shares from the Sellers, in the amounts
specified on Schedule I
of this
Agreement (“Schedule
I”),
which
Company Shares equal 80% of the outstanding equity interests of Company on
a
fully-diluted basis as of the Closing Date (as defined below), in exchange
for
9,174,312 shares of Purchaser’s common stock, par value US$0.0001 per share (the
“Purchaser
Stock”),
upon
the terms and subject to the conditions contained in this Agreement (the
“Purchase”);
C. The
parties intend this transaction to qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”);
and
D. In
separate transactions in connection with the Purchase, (i) Purchaser and Company
intend to work together to construct a new fuel-grade ethanol plant (the
“Ethanol
Plant”)
with
planned capacity of 100 million gallons per year to be built in two 50-million
gallon trains (each, a “Train”
and
collectively, “Trains”)
(the
“Potential
Project”);
and
(ii) Purchaser has extended credit to Company to finance the Potential Project
(the “Financing
Transaction”),
including but not limited to purchase of an option (“Option”)
to
purchase parcels of land (collectively, the “Parcels”)
on
which the Ethanol Plant would be constructed.
NOW,
THEREFORE,
for and
in consideration of the premises, covenants, and agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties do covenant, agree, represent, warrant,
and
stipulate as follows:
Agreement
1. EXCHANGE
1.1 Valuation
and Issuance and Transfer of Purchaser Stock.
(a) Purchase
Price.
Subject
to the terms and conditions set forth herein, Purchaser hereby agrees to
transfer to the Sellers 9,174,312 shares of Purchaser Stock (the “Transaction
Shares”).
The
Transaction Shares shall be distributed to the Sellers in accordance with the
terms of Section
1.1(b)
of this
Agreement.
(b) Transfer
of Transaction Shares.
On the
Closing Date (as defined below), Purchaser shall transfer and instruct the
transfer agent to register in the name of the several Sellers 60% of the
Transaction Shares (the “Closing
Shares”)
as set
forth on Schedule
I.
Purchaser shall transfer and instruct the transfer agent to register in the
name
of the several Sellers the balance of the Transaction Shares (the “Earnout
Shares”)
as set
forth on Schedule
I
upon the
achievement, in the reasonable business judgment of Purchaser, of the milestones
relating to the Potential Project as set forth on Schedule
II
of this
Agreement (the “Project
Milestones”).
The
“Closing
Date”
shall
be the date that the Purchase closes. For avoidance of doubt, the Closing Shares
and the Earnout Shares collectively shall constitute all of the Transaction
Shares.
(c) Earnout
Shares.
The
Earnout Shares shall be held in escrow with an escrow agent to be mutually
agreed upon by the parties (the “Escrow
Agent”),
to be
held by the Escrow Agent pursuant to an escrow agreement in a form and on terms
to be mutually agreed upon by the parties (the “Escrow
Agreement”).
The
Escrow Agreement will authorize the Escrow Agent to release the Earnout Shares
to the several Sellers upon the achievement of the applicable Project
Milestones, within fifteen (15) days of such milestone, as confirmed in writing
by Purchaser to the Escrow Agent. Purchaser agrees to instruct the Transfer
Agent to register any Earnout Shares so released in the name of each individual
Seller as specified on Schedule
I.
(d) Stockholder
Agreement.
In
connection with this Agreement, each Seller agrees to enter into a stockholder
agreement with Purchaser in a form and on terms to be mutually agreed upon
by
the parties (the “Stockholder
Agreement”).
Such
terms shall include, but not be limited to, a holding period for the Closing
Shares (subject to customary exceptions with respect to tender offers) to end
on
the later of (x) the date that the final Train is completed and demonstrated
to
be operational to Purchaser’s reasonable satisfaction or (y) the end of a
twelve-month period, rights to one (1) demand registration and unlimited
registrations on Form S-3 of the Transaction Shares (each subject to customary
black-out periods), unlimited piggy-back registration rights of the Transaction
Shares, representation by the Sellers as a group on the board of directors
of
Purchaser (“Purchaser’s
Board”)
based
on the Sellers’ ownership of the Transaction Shares and in accordance with and
subject to the listing standards of the American Stock Exchange (“AMEX”),
including but not limited to the AMEX independence standards.
1.2 Transfer
of Company Shares to Purchaser.
(a) Subject
to the terms and conditions set forth herein, the Sellers hereby agree to
jointly and severally transfer to Purchaser the Company Shares, as set forth
on
Schedule I
on the
Closing Date.
(b) On
the
Closing Date, Company shall transfer and instruct the transfer agent to register
in the name of Purchaser the Company Shares as set forth on Schedule
I.
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2. REPRESENTATIONS
AND WARRANTIES OF THE SELLERS AND COMPANY
Except
as
set forth on the Company Disclosure Schedule attached to this Agreement as
Schedule
III
to this
Agreement (the “Company
Disclosure Schedule”)
and
delivered to Purchaser prior to the Effective Date, the Sellers and Company,
jointly and severally, represent and warrant to Purchaser as of the Effective
Date as follows:
2.1 Execution
and Delivery; Valid and Binding Agreements.
Each
Seller and the Company have duly executed and delivered this Agreement and,
assuming that this Agreement is the legal, valid and binding agreement of
Purchaser, this Agreement constitutes the legal, valid and binding obligations
of such Seller and the Company, enforceable against each such party, in
accordance with its terms.
2.2 Authority;
No Breach.
Each
Seller and the Company have all requisite power and authority (and capacity
in
the case of a Seller who is an individual) to execute and deliver this Agreement
and to perform their obligations hereunder (including all right, power, capacity
and authority to sell, transfer, and convey the Company Shares). The execution,
delivery and performance by each Seller and Company of this Agreement and the
agreements provided for herein, and the consummation by Company and each Seller,
as applicable, of the transactions contemplated hereby and thereby, including
but not limited to the Potential Project, will not, with or without the giving
of notice or the passage of time or both, directly or indirectly
(A) contravene, conflict or result in a violation of (i) any provision
of Company’s organizational or formation documents; (ii) any law, statute, rule,
regulation, ordinance, code, directive, writ, injunction, settlement, permit,
license, decree, judgment or order (collectively, “Laws”)
of any
governmental authority to which Company or any Seller or the assets of Company
are subject, or by which the same may be bound; or (iii) any of the terms,
conditions or provisions of any material contract to which Company or any Seller
is a party; (B) constitute or create a default, or give rise to any right of
termination, cancellation or acceleration under any material contract to which
Company or any Seller is a party; (C) result in the imposition of a lien on
the
Company Shares or all or any portion of Company’s assets; or (D) require any
filing with, or permit, consent or approval of, or the giving of any notice
to,
any governmental authority or third party, in each case except as specified
on
the Company Disclosure Schedule.
2.3 Corporate
Matters.
Company
(i) is a corporation, duly registered, validly existing, and in good
standing under the laws of its jurisdiction of organization; and (ii) has
full power and authority to carry on the businesses in which it is engaged,
and
to own and use the properties owned and used by it. Company
is duly qualified as a foreign entity in the jurisdiction set forth on the
Company Disclosure Schedule and is in good standing as a foreign entity in
all
jurisdictions where the properties owned, leased or operated by it and relating
to the business are located or where the business is conducted, except where
failure to qualify or be in good standing is not reasonably likely to have
a
material adverse effect on the business, results of operations, prospects or
financial condition of the business (a “Material
Adverse Effect”).
The
address of Company’s principal office and all of Company’s additional places of
business are listed on the Company Disclosure Schedule. Except as set forth
on
the Company Disclosure Schedule, during the past five (5) years, Company has
not
been known by or used any corporate, fictitious or other name in the conduct
of
Company’s business or in connection with the use or operation of its assets. The
Company Disclosure Schedule lists all current directors and officers of Company.
Company has no subsidiaries. Company has delivered to Purchaser copies of
Company’s organizational or formation documents as currently in
effect.
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2.4 Capitalization.
The
Company Disclosure Schedule sets forth the authorized and issued capital stock
of Company as of the date hereof, together with a description of the rights
and
preferences of each class of Company’s capital stock. As
of the
date hereof, there are no outstanding options, warrants, preemptive rights,
indebtedness having general voting rights or debt convertible into securities
having such rights or subscriptions or other rights agreements or any other
outstanding security or agreement entitling the holder thereof or party thereto
to acquire any capital stock of Company. The Company Shares (i) have been duly
and validly issued; (ii) are fully paid and nonassesable, (iii) are held
beneficially and of record solely by the Sellers as specified on Schedule
I;
and
(iv) were not issued in violation of any preemptive rights or rights of first
refusal or first offer.
2.5 Title
to Company Shares.
Each
Seller owns good, valid and marketable title to the Company Shares owned by
such
Seller, free and clear of any and all liens, and upon delivery of the Company
Shares to Purchaser on the Closing Date in accordance with this Agreement,
good,
valid and marketable title to the Company Shares, free and clear of all Liens
(other than liens permitted in connection with the Financing Transaction
(“Permitted
Liens”)),
will
pass to Purchaser.
2.6 Financial
Statements.
The
Company Disclosure Schedule sets forth true, correct and complete copies of
the
unaudited consolidated balance sheet of Company as of December 31, 2006 and
the
related statements of income for the period ended December 31, 2006 (the
“Company
Financial Statements”).
The
Company Financial Statements present fairly the financial position of Company
as
of the dates thereof and its results of operations for the periods covered
thereby and, except as set forth on the Company Disclosure Schedule, the Company
Financial Statements have been prepared in all material respects in accordance
with generally accepted accounting principles as adopted and in effect within
the United States (“GAAP”)
consistently applied. Except as set forth in the Company Financial Statements
or
the Company Disclosure Schedule, (i) Company has no material liabilities,
contingent or otherwise, other than (a) liabilities incurred in the
ordinary course of business, and (b) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Company Financial Statements; (ii) there has
been no adverse change in the assets, business, liabilities, properties,
prospects, condition (financial or otherwise) or results of operations of
Company that would be likely to have a Material Adverse Effect (a “Material
Adverse Change”);
(iii) neither the business, condition or operations of Company nor any of
its properties or assets have been materially or adversely affected as a result
of any legislative or regulatory change, any revocation or change in any
franchise, license or right to do business, or any other event or occurrence,
whether or not insured against; and (iv) Company has not entered into any
material transaction outside of the ordinary course of business or made any
distribution on its capital stock or other ownership interest.
2.7 The
Sellers’ Share Percentage.
The
Company Shares to be acquired by Purchaser represent eighty percent (80%) of
all
of the issued and outstanding capital stock of Company on a fully-diluted basis.
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2.8 Due
Diligence Information.
The due
diligence information presented to Purchaser by the Sellers and Company in
connection with Purchaser’s due diligence investigation of Company, including
each of the representations, warranties and covenants of Company and each Seller
in this Agreement, is complete and accurate in all material respects and does
not contain any untrue statement of a material fact or omit to state a material
fact required to make the statements made, in light of the circumstances under
which they were made, not misleading.
2.9 Litigation;
Compliance with Law.
Except
as
specified in the Company Disclosure Schedule, there is no material litigation,
including but not limited to any action, suit, claim, proceeding or
investigation, arbitration proceeding relating to Company or any governmental
inquiry pending or, to the best of the knowledge of Company or any Seller,
threatened against or affecting Company, at law or in equity, or before or
by
any municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, and, to the best of the
knowledge of Company or any Seller, there is no reasonable basis for any of
the
foregoing. Company is not in default with respect to any governmental order,
writ, judgment, injunction or decree known to or served upon Company of any
court or of any governmental department, commission, board, bureau, agency
or
instrumentality, domestic or foreign. There is no action or suit by Company
pending or threatened against others. Company has complied in all respects
with
all laws, rules, regulations and orders applicable to its businesses,
operations, properties, assets, products and services, and Company has all
necessary permits, licenses and other authorizations required to conduct its
business as conducted and as proposed to be conducted, except to the extent
failure to comply or obtain any such permits, licenses or authorizations will
not have a Material Adverse Effect. There is no existing law, rule, regulation
or order, and Company is not aware of any proposed law, rule, regulation or
order, which would prohibit or materially restrict Company from, or otherwise
materially and adversely affect Company in, conducting its business in any
jurisdiction in which it is now conducting business or in which it proposes
to
conduct business.
2.10 Proprietary
Information of Third Parties.
No
third
party has claimed or has reason to claim that any person employed by or
affiliated with Company has (a) violated or may be violating to any
material extent any of the terms or conditions of his or her employment,
non-competition, non-disclosure or similar type of agreement with such third
party, (b) disclosed or may be disclosing or utilized or may be utilizing
any trade secret or proprietary information or documentation of such third
party, or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees, or has requested information from Company that suggests that such
a
claim might be contemplated. To the best of the knowledge of Company or any
Seller, no person employed by or affiliated with Company has improperly utilized
or proposes to improperly utilize any trade secret or any information or
documentation proprietary to any former employer, and to the best of the
knowledge of Company or any Seller, no person employed by or affiliated with
Company has violated any confidential relationship which such person may have
had with any third party, in connection with the development, manufacture or
sale of any product or proposed product or the development or sale of any
service or proposed service of Company, and Company has no reason to believe
there will be any such employment or violation. To the best of the knowledge
of
Company or any Seller, none of the execution or delivery of this Agreement
and
the other related agreements and documents executed in connection herewith,
or
the carrying on of the business of Company as officers, employees or agents
by
any officer, director or employee of Company identified by Company and Purchaser
and listed on the Company Disclosure Schedule (each, a “Company
Key Employee”),
or
the conduct or proposed conduct of the business of Company, will materially
conflict with or result in a material breach of the terms, conditions or
provisions of or constitute a material default under any contract, covenant
or
instrument under which any such person is obligated.
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2.11 Title
to and Sufficiency of Assets; Insurance.
Company
has valid and marketable title to all of its assets now carried on its books
including those reflected in the most recent balance sheet of Company which
forms a part of the Company Financial Statements, or acquired since the date
of
such balance sheet (except personal property disposed of since said date in
the
ordinary course of business) free of any liens, charges or encumbrances of
any
kind whatsoever, except such encumbrances and liens that arise in the ordinary
course of business and do not materially impair Company’s ownership or use of
such property or assets or Permitted Liens. Company does not own any real
property. Company is in compliance in all material respects under all leases
for
property and assets under which it is operating, and all said leases are valid
and subsisting and are in full force and effect. The assets of Company
constitute all of the assets, rights and properties that are used in the
operation of Company’s business as it is now conducted or that are used or held
by Company for use in the operation of Company’s business. The assets of Company
are sufficient for the continued conduct of Company’s business after the Closing
Date in substantially the same manner as conducted prior to the Closing Date.
The Company Disclosure Schedule lists all insurance policies (by policy number,
insurer, expiration date, type (i.e., “claims made” or an “occurrence” policy),
amount and scope of coverage held by Company relating to Company, its assets
or
the business, properties or employees of Company. Such insurance policies (a)
are sufficient in all material respects for compliance with all requirements
of
Law and for all agreements to which Company is a party and (b) provide
commercially reasonable insurance coverage for the assets and operations of
Company in light of present insurance market conditions.
2.12 Intellectual
Property Assets.
Company
has, or has rights to use, all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
trade names or copyrights, any applications for such which are in the process
of
being prepared and other intellectual property rights and similar rights
necessary or material for use in connection with its business (collectively,
“Company
Intellectual Property”).
The
Company Intellectual Property is sufficient to permit Company to conduct its
business as presently conducted, without any conflict with or infringement
of
the rights of others, and as proposed to be conducted, and, except as disclosed
in the Company Disclosure Schedule, no claim is pending or, to the best of
the
knowledge of Company or any Seller, threatened to the effect that the operations
of Company infringe upon or conflict with the asserted rights of any other
person under any Company Intellectual Property, and, to the best of the
knowledge of Company or any Seller, there is no basis for any such claim
(whether or not pending or threatened). Except as disclosed in the Company
Disclosure Schedule, no claim is pending or, to the best of the knowledge of
Company or any Seller, threatened to the effect that any such Company
Intellectual Property owned or licensed by Company, or which Company otherwise
has the right to use, is invalid or unenforceable by Company, and, to the best
the knowledge of Company or any Seller, there is no basis for any such claim
(whether or not pending or threatened). To the best of the knowledge of Company
or any Seller, all material technical information developed by and belonging
to
Company that has not been patented has been kept confidential. Company has
not
granted or assigned to any other person or entity any right to manufacture,
have
manufactured or assemble the products or proposed products or to provide the
services or proposed services of Company. Company has no material obligation
to
compensate any person for the use of any Company Intellectual Property nor
has
Company granted to any person any license or other rights to use in any manner
any Company Intellectual Property.
6
2.13 Assumptions,
Guaranties, etc., of Indebtedness of Other Persons.
Company
has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable for any material amount of indebtedness of any other person
(including, without limitation, any liability by way of agreement, contingent
or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss).
2.14 No
Brokers or Finders.
No
person
has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or valid claim against or upon Company for any
commission, fee or other compensation as a finder or broker arising out of
the
transactions contemplated by this Agreement.
2.15 No
Material Adverse Change.
Since
November 30, 2006 except as set forth on the Company Disclosure Schedule:
(i) there has been no Material Adverse Change in the financial condition,
or in the results of operations, affairs or prospects of Company, whether or
not
arising in the ordinary course of business; and (ii) there have been no
transactions entered into by Company, other than those in the ordinary course
of
business, which are material to Company.
2.16 Investment.
Each
Seller is acquiring his or her portion of the Transaction Shares for his or
her
own account and beneficial interest for investment and not for sale or with
a
view to, or for resale in connection with, the distribution thereof, has no
present intention of selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the Transaction Shares,
and does not presently have any reason to anticipate a change in such intention.
2.17 Accredited
Investors.
Each
Seller is, or together with such Seller’s Purchaser Representative, as such term
is defined in Rule 501(h) of Regulation D under the Securities Act of 1933,
as
amended (“Securities
Act”),
is, an “accredited
investor”
within the meaning of Rule 501(a) (1), (2), (3) or (7) of Regulation D under
the
Securities Act.
2.18 Information.
Each
Seller has received all information it has requested from Company that it
considers necessary or appropriate for deciding whether to acquire the Purchaser
Stock, including, but not limited to, information meeting the requirements
of
Rule 502(b) of Regulation D under the Securities Act. Each Seller has
had an opportunity to ask questions and receive answers from Purchaser regarding
the terms of the Transaction Shares and to obtain any additional information
necessary to verify the accuracy of the information given to it.
7
2.19 Experience.
Each
Seller has such knowledge and experience in financial and business matters
that
he is capable of evaluating the merits and risk of an investment in Transaction
Shares and is able to bear the economic risk of such investment.
2.20 Restricted
Securities.
Each
Seller understands that the Transaction Shares are characterized as
“restricted
securities”
under
the Securities
Act, inasmuch
as they are being acquired from Purchaser in a transaction not involving a
public offering and that under the Securities
Act and
applicable regulations thereunder such securities may be resold without
registration under the Securities
Act only
in
certain limited circumstances. In this connection, each Seller represents that
he or she is familiar with Rule 144
under
the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities
Act. Each Seller also understands that the certificates evidencing the
Transaction Shares will bear the legend set forth below:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
FOR
ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION
OF SUCH SECURITIES. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE
ACT AND IN COMPLIANCE WITH SUCH STATE SECURITIES LAWS, (II) IN COMPLIANCE WITH
RULE 144 UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR (III) UPON
THE DELIVERY TO O2DIESEL CORPORATION (THE
“COMPANY”)
OF AN
OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND/OR COMPLIANCE IS NOT REQUIRED.
2.21 Material
Contract Defaults.
Company
is not in default in any material respect under the terms of any outstanding
contract, agreement, lease, or other commitment which is material to the
business, operations, properties, assets, or financial condition of either
of
them, and there is no event of default or other event which, with notice or
lapse of time or both, would constitute a default in any material respect under
any such contract, agreement, lease, or other commitment in respect of which
Company has not taken adequate steps to prevent such a default from occurring.
2.22 Government
Authorizations.
Except
as set forth on the Company Disclosure Schedule, the Company has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable them to conduct their business on the Effective Date, except
where any failure to do so shall have a Material Adverse Effect on Company.
No
authorization, approval, consent, or order of, or registration, declaration,
or
filing with, any court or other governmental body is required in connection
with
the execution and delivery by Company or any Seller of this Agreement and the
consummation by Company or any Seller of the transactions contemplated
hereby.
2.23 Foreign
Investors.
If such
Seller is not a United States person (as defined by Section 7701(a)(30) of
the
Internal Revenue Code of 1986, as amended), such Seller hereby represents that
it has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for or purchase
his
or her portion of the Transaction Shares or any use of this Agreement, including
(a) the legal requirements within its jurisdiction for the purchase of his
or
her portion of the Transaction Shares, (b) any foreign exchange restrictions
applicable to such purchase or acquisition, (c) any government or other consents
that may need to be obtained, and (d) the income tax and other tax consequences,
if any, that may be relevant to the purchase, holding, redemption, sale or
transfer of
his or her portion of the Transaction Shares. Such Seller’s beneficial ownership
of his or her portion of the Transaction Shares will
not violate any applicable securities or other laws of Seller’s
jurisdiction.
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2.24 Tax
Matters
(a) All
tax
returns (whether for income taxes or any other type of tax) required to have
been filed by or with respect to Company have been timely filed. All such filed
tax returns are true, correct and complete in all material respects. Company
has
timely paid (or caused to be paid) all taxes due and owing, whether or not
shown
on any tax return. No claim has ever been made by a taxing authority in a
jurisdiction where Company does not file tax returns that Company is subject
to
taxation by that jurisdiction. Company has properly and timely withheld and
paid
(or is holding for payment) all taxes required to have been withheld and paid
in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(b) Company
has given to Purchaser true, correct and complete copies of (i) all income
tax
returns filed by the Company since its incorporation, (ii) the most recently
filed tax return[s] filed by Company for all non-income tax returns, and (iii)
examination reports and statements of deficiencies issued by any taxing
authority with respect to Company.
(c) Company
has made
all required estimated tax payments sufficient to avoid any underpayment
penalties
with respect to taxes required to be paid by it.
(d) No
Seller is a “foreign person” within the meaning of Section 1445 of the
Code.
(e) Company
(i) is not now and has not at any time been a member of any affiliated group
required to join in the filing of consolidated federal income tax returns,
and
(ii) has not
otherwise joined in the filing of tax returns on a consolidated, combined or
unitary group basis.
(f) Company
is not a
party to any agreement relating to the sharing, allocation or indemnification
of
taxes, or any similar agreement, contract or arrangement, and does not have,
by
contract or otherwise, any
liability for taxes of any individual, partnership, joint venture, corporation,
trust, unincorporated organization, limited liability company, group,
governmental authority, and any other person or entity (a “Person”)
as a transferee or successor.
(g) There
are no outstanding agreements, waivers or arrangements extending the statutory
period of limitations applicable to any claim for, or the period for
the
collection
or
assessment of, taxes due from or payable by Company for any taxable period
and
no written, or to the knowledge of Company or any Seller oral, request from
a
taxing authority for any such waiver or extension is currently
pending.
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(h) No
closing agreement pursuant to Section 7121 of the Code (or any predecessor
provision) or any similar provision of any state, local or foreign Law has
been
entered into by or on behalf of Company which would have binding effect on
Company for any taxable year ending after the Closing Date. Company has not
requested or received a ruling from any taxing authority or signed any agreement
with a taxing authority that might impact any tax attribute of, or the amount
of
tax due from, Company on or after the Closing Date. Company will not be required
to include any item of income in, or exclude any item of deduction from, taxable
income as a result of any change in Company’s method of accounting.
(i) (i)
No
audit or other proceeding by any taxing authority is pending or threatened
in
writing with respect to any taxes due from Company, (ii) Company has not
received any written notification that such an audit or proceeding may be
commenced, with respect to any taxes due from Company, (iii) to the knowledge of
Company or any Seller, there is no proceeding referred to in (i) or (ii) above
based upon personal contact with any agent of a taxing authority with any
employee or representative of Company, and (iv) all deficiencies for taxes
asserted or assessed against Company have been fully and timely paid, or
otherwise settled with the relevant taxing authority, or are properly reflected
in the Company Financial Statements.
(j) Other
than as
set forth on the Company Disclosure Schedule, there are no liens for taxes
upon
the assets or properties of Company, except for statutory liens for current
taxes not yet due, and neither Company nor any Seller has knowledge of any
audit
or other proceeding relating to taxes that, if adversely determined, would
result in any lien on any of the assets or properties of Company.
(k) No
property owned by Company (i) is property required to be treated as being
owned by another Person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior
to
the enactment of the Code, (ii) constitutes “tax-exempt use property”
within the meaning of Section 168(h)(1) of the Code or (iii) is
“tax-exempt bond financed property” within the meaning of Section 168(g)(5)
of the Code.
(l) Company
has made all necessary disclosures required by Treasury Regulations Section
1.6011-4. Company has not been a participant in a reportable transaction within
the meaning of Treasury Regulations Section 1.6011-4(b). Company has disclosed
on its federal income tax returns all positions taken therein that could give
rise to a substantial understatement of federal income tax under Section 6662(d)
of the Code.
(m) Company
has not made any payment nor is obligated to make any payment, and is not a
party to any agreement that under any circumstances could obligate it to make
any payment, that would be nondeductible under Section 280E of the Code.
(n) The
representations and warranties of Company set forth in Section
2.6
are
correct and complete
with respect to any unpaid taxes, tax liabilities or tax assets of
Company.
10
2.25 Environmental
Matters.
Except
as set forth on the Company Disclosure Schedule, Company has not received any
written, or to the knowledge of Company or any Seller oral, claim or notice
alleging that Company is not in compliance with or is in violation of any
Environmental Law (as defined below), or has liability or responsibility under
any Environmental Law. There are no pending or, to the knowledge of Company
or
any Seller threatened, investigations, inquiries, administrative proceedings,
actions, suits, claims, charges, complaints, demands, notices or legal
proceedings against Company, Company’s business or assets, under Environmental
Laws, including those that involve or relate to Environmental Conditions (as
defined below), Environmental Noncompliance (as defined below) or the release,
use, disposal or arranging for disposal of any Hazardous Materials (as defined
below) on or from any real property used, leased or owned by Company. Except
as
set forth on the Company Disclosure Schedule, Company has not released any
Hazardous Materials on, under or about any real property used, leased or owned
by Company in quantities that are required to be reported under or that requires
investigation or remediation pursuant to Environmental Law or that otherwise
is
in violation of any requirement of any Environmental Law. Company is in
compliance with Environmental Laws. Company has not generated, stored, treated,
handled, disposed of, or arranged to dispose of, Hazardous Materials in a manner
or to a location that could reasonably be expected to result in liability to
Company under Environmental Laws. Company has not exposed any employee or other
individual to any Hazardous Materials or conditions that could reasonably be
expected to form the basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand for damage to,
or
investigation and remediation of, any site, location or body of water (surface
or subsurface), or any illness of or personal injury to any employee or
individual. “Environmental
Condition”
means
any contamination or damage to the environment caused by or relating to the
use,
handling, storage, treatment, recycling, generation, transportation, release,
spilling, leaching, pumping, pouring, emptying, discharging, injection,
escaping, disposal, dumping or threatened release of Hazardous Materials by
Company or any other Person. With respect to claims by employees or any other
third parties, Environmental Condition shall also include the exposure of
Persons to amounts of Hazardous Materials in amounts that have been determined
to be deleterious to human health. “Environmental
Law”
means
all currently applicable federal, state and local laws, ordinances, rules and
regulations and standards, policies and other governmental requirements,
administrative rulings and court judgments and decrees, including all
amendments, and requirements applicable under common law that relate to (1)
pollution; (2) the protection of human health and safety; (3) the protection
or
regulation of the environment, including without limitation, air, soils,
wetlands, surface and underground water; (4) aboveground or underground storage
tank regulation or removal; (5) wildlife; (6) protection or regulation of
natural resources; (7) radioactive materials, including without limitation
radon; (8) indoor air quality; and (9) chemicals, pesticides, mold or fungus
or
similar substances. “Environmental Laws” include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et
seq.,
the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.,
the
Toxic Substance Control Act, 15 U.S.C. 2601, et
seq.,
the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et
seq.,
the
Hazardous Materials Transportation Act, 49 U.S.C. 5101, et
seq.,
the
Clean Air Act, 42 U.S.C. Section 651, et
seq.,
the
Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C. 11001,
et
seq.,
the
Atomic Energy Act, 42 U.S.C. Section 2014, et
seq.,
the
National Environmental Policy Act, 42 U.S.C. Section 4321, et
seq.,
the
Endangered Species Act, 16 U.S.C. Section 1531, et
seq.,
the
Federal Insecticide, Fungicide & Rodenticide Act, 7 U.S.C. 136, et
seq.,
and
their state analogs, all applicable state superlien or environmental clean-up
or
disclosure statutes in the state in which Company operates or conducts business
or owns, leases or uses any property, and all similar local laws, and all
implementing regulations. “Environmental
Noncompliance”
means
any violation of any Environmental Law. “Hazardous
Materials”
means
any materials regulated as hazardous or toxic under applicable Environmental
Laws, or any other material regulated, or that could result in the imposition
of
liability, under Environmental Laws, including, without limitation, petroleum,
petroleum products, fuel oil, crude oil or any fraction thereof, derivatives
or
byproducts of petroleum products or fuel oil, natural gas, mold, hazardous
substances, toxic substances, polychlorinated biphenyls, any materials
containing more than one percent (1%) asbestos by weight and any other substance
determined to present a deleterious effect on human health or the
environment.
11
2.26 ERISA
and Employee Benefits.
Except
as specified on the Company Disclosure Schedule, Company is not now maintaining
or contributing to, nor has within the prior six (6) years ever maintained
or
contributed to, or been obligated to contribute to, any Benefit Plan (as defined
below) or Multiemployer Plan (as defined below), has no ERISA Affiliates (as
defined below) and is not otherwise subject to any provision of ERISA (as
defined below). All benefit plans to which Company is a party are specified
on
the Company Disclosure Schedule. “ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended. “Benefit
Plan”
means
an employee pension benefit plan, excluding any Multiemployer Plan, which is
subject to Title IV of ERISA. “ERISA
Affiliate”
means
with respect to any Person, any trade or business (whether or not incorporated)
which is a member of a group of which such Person is a member and which would
be
deemed to be a “controlled group” within the meaning of Sections 414(b),
(c), (m) and (o) of the Code. “Multiemployer
Plan”
means
a
“multiemployer plan” as defined in Section 3(37) of ERISA to which Company or
any ERISA Affiliate of Company has been obligated to contribute at any time
during the past six years, or has liability.
2.27 No
Other Agreement to Sell.
Neither
Company nor any Seller has any legal obligation, absolute or contingent, to
any
other Person to sell, encumber or otherwise transfer Company, Company Shares,
the assets or Company’s business (in whole or in part), or effect any merger,
consolidation, combination, share exchange, recapitalization, liquidation,
dissolution or other reorganization involving Company, or to enter into any
agreement with respect thereto.
2.28 Transactions
with Certain Persons.
Except
as specified on the Company Disclosure Schedule, no officer, director or Seller
or any member of such individual’s immediate family, or any affiliate of such
individual or member of such individual’s immediate family is presently a party
to any transaction or contract with Company.
12
3. REPRESENTATIONS
AND WARRANTIES OF PURCHASER.
Except
as
set forth on the Purchaser Disclosure Schedule attached to this Agreement as
Schedule
IV
to this
Agreement (the “Purchaser
Disclosure Schedule”)
and
delivered to Company prior to the Effective Date, Purchaser represents and
warrants to Company and each Seller as of the Effective Date as
follows:
3.1 Organization,
Execution and Delivery; Valid and Binding Agreements.
Purchaser has duly executed and delivered this Agreement and, assuming that
this
Agreement is the legal, valid and binding agreement of the Sellers and Company,
this Agreement constitutes the valid and binding obligation of Purchaser,
enforceable against it in accordance its terms. Purchaser is a corporation,
duly
registered, validly existing and in good standing under the laws of the State
of
Delaware. Purchaser is duly qualified as a foreign entity in the jurisdiction
set forth on the Purchaser Disclosure Schedule and is in good standing as a
foreign entity in all jurisdictions where the properties owned, leased or
operated by it and relating to the business are located or where the business
is
conducted, except where failure to qualify or be in good standing is not
reasonably likely to have a Material Adverse Effect. The address of Purchaser’s
principal office and all of Purchaser’s additional places of business are listed
on the Disclosure Schedule. Except as set forth on the Purchaser Disclosure
Schedule, during the past five (5) years, Purchaser has not been known by or
used any corporate, fictitious or other name in the conduct of Purchaser’s
business or in connection with the use or operation of its assets. The Purchaser
Disclosure Schedule lists all current directors and officers of Purchaser.
Purchaser has no subsidiaries, except as set forth on the Purchaser Disclosure
Schedule. Purchaser has delivered to Company copies of Purchaser’s
organizational or formation documents as currently in effect.
3.2 Authority;
No Breach or Conflicts.
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder (including all right,
power, capacity and authority to issue, sell, transfer and convey the
Transaction Shares, subject to applicable federal and state securities law
restrictions). The execution, delivery and performance by Purchaser of this
Agreement and the agreements provided for herein, and the consummation by
Purchaser of the transactions contemplated hereby and thereby, including but
not
limited to the Potential Project, will not, with or without the giving of notice
or the passage of time or both, directly or indirectly (A) contravene, conflict
or result in a violation of (i) any provision of Purchaser’s organizational or
formation documents; (ii) any Laws of any governmental authority to which
Purchaser or Purchaser’s assets are subject, or by which the same may be bound;
(iii) or any of the terms, conditions or provisions of any material contract
to
which Purchaser is a party; (B) constitute or create a default, or give rise
to
any right of termination, cancellation or acceleration under any material
contract to which Purchaser is a party; (C) result in the imposition of a lien
on the Transaction Shares or all or any portion of Purchaser’s assets; or (D)
require any filing with, or permit, consent or approval of, or the giving of
any
notice to, any governmental authority or third party, in each case except as
specified on the Purchaser Disclosure Schedule.
3.3 Investment.
Purchaser
is acquiring the Company Shares for its own account and beneficial interest
for
investment and not for sale or with a view to, or for resale in connection
with,
the distribution thereof, has no present intention of selling (in connection
with a distribution or otherwise), granting any participation in, or otherwise
distributing the Company Shares, and does not presently have any reason to
anticipate a change in such intention.
13
3.4 Capitalization.
The
Purchaser Disclosure Schedule sets forth the authorized and issued capital stock
of Purchaser as of the date hereof, together with a description of the rights
and preferences of each class of Purchaser’s capital stock, including any
conversion rights attached to any outstanding shares of preferred stock or
convertible securities, any outstanding options, warrants, preemptive rights,
indebtedness having general voting rights or subscriptions or other rights
agreements or any other outstanding security or agreement entitling the holder
thereof or party thereto to acquire any capital stock of Company. The
Transaction Shares, when issued in compliance with the provisions of this
Agreement, will be duly and validly issued, fully paid and non-assessable;
provided, however, that the Transaction Shares are subject to restrictions
on
transfer under US federal or state securities laws. The issuance of the
Transaction Shares is not subject to any preemptive rights or rights of first
refusal.
3.5 Purchaser
Reports; Financial Statements.
(a) Purchaser
has made available to Company each registration statement, report, proxy
statement or information statement prepared by it since December 31, 2005
(the “Audit
Date”)
and
filed with the US Securities and Exchange Commission (“SEC”),
including the Purchaser’s Annual Report on Form 10-K-SB for the year ended
December 31, 2005, each in the form (including exhibits, annexes and any
amendments thereto) as filed with the SEC. Purchaser has filed or furnished
all
forms, statements, reports and documents required to be filed or furnished
by it
with the SEC pursuant to applicable securities statutes, regulations, policies
and rules since the Audit Date (the forms, statements, reports and documents
filed or furnished with the SEC since the Audit Date and those filed or
furnished with the SEC subsequent to the date of this Agreement, if any,
including any amendments thereto, the “Reports”).
Except as set forth in the Purchaser Disclosure Schedule, each of the Reports,
at the time of its filing (including any amendments), complied or will comply
in
all material respects with the applicable requirements of the Securities and
Exchange Act of 1934, as amended (“Exchange
Act”)
and
the rules and regulations thereunder and complied in all material respects
with
then applicable accounting standards. As of its respective dates (or, if
amended, as of the date of such amendment), the Reports did not contain any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements made therein, in light
of
the circumstances in which they were made, not misleading.
(b) Each
of
the consolidated balance sheets included in or incorporated by reference into
the Reports (including the related notes and schedules) fairly presents the
consolidated financial position of Purchaser as of its date and each of the
consolidated statements of income, shareholders’ equity and cash flows included
in or incorporated by reference into the Reports (including any related notes
and schedules) fairly presents, or in the case of Reports filed after the date
hereof, will fairly present, the net income, total shareholders’ equity and net
increase in cash and cash equivalents, as the case may be, of Purchaser for
the
periods set forth therein (subject, in the case of unaudited statements, to
notes and normal year-end audit adjustments that will not be material in amount
or effect), in each case in accordance with GAAP consistently applied during
the
periods involved, except as may be noted therein. Except as set forth in the
Purchaser Financial Statements or the Purchaser Disclosure Schedule,
(i) Purchaser has no material liabilities, contingent or otherwise, other
than (a) liabilities incurred in the ordinary course of business, and
(b) obligations under contracts and commitments incurred in the ordinary
course of business and not required under GAAP to be reflected in the Purchaser
Financial Statements; (ii) there has been no adverse change in the assets,
business, liabilities, properties, prospects, condition (financial or otherwise)
or results of operations of Purchaser that would be likely to have a Material
Adverse Change; (iii) neither the business, condition or operations of
Purchaser nor any of its properties or assets have been materially or adversely
affected as a result of any legislative or regulatory change, any revocation
or
change in any franchise, license or right to do business, or any other event
or
occurrence, whether or not insured against; and (iv) Purchaser has not
entered into any material transaction outside of the ordinary course of business
or made any distribution on its capital stock or other ownership
interest.
14
3.6 Due
Diligence Information.
The due
diligence information presented to the Sellers and Company by Purchaser in
connection with their due diligence investigation of Purchaser, including each
of the representations, warranties and covenants of Purchaser in this Agreement,
is complete and accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact required
to
make the statements made, in light of the circumstances under which they were
made, not misleading.
3.7 Litigation;
Compliance with Law.
Except
as
disclosed on the Purchaser Disclosure Schedule, there is no material litigation,
including but not limited to any action, suit, claim, proceeding or
investigation, arbitration proceeding relating to Purchaser or any governmental
inquiry pending or, to the best of Purchaser’s knowledge, threatened against or
affecting Purchaser, at law or in equity, or before or by any municipal or
other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and, to the best of Purchaser’s knowledge, there is no
reasonable basis for any of the foregoing. Purchaser is not in default with
respect to any governmental order, writ, judgment, injunction or decree known
to
or served upon Purchaser of any court or of any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
There
is no action or suit by Purchaser pending or threatened against others.
Purchaser has complied in all respects with all laws, rules, regulations and
orders applicable to its businesses, operations, properties, assets, products
and services, and Purchaser has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed
to
be conducted, except to the extent failure to comply or obtain any such permits,
licenses or authorizations will not have a Material Adverse Effect. There is
no
existing law, rule, regulation or order, and Purchaser is not aware of any
proposed law, rule, regulation or order, which would prohibit or materially
restrict Purchaser from, or otherwise materially and adversely affect Purchaser
in, conducting its business in any jurisdiction in which it is now conducting
business or in which it proposes to conduct business.
3.8 Proprietary
Information of Third Parties.
No
third party has claimed or has reason to claim that any person employed by
or
affiliated with Purchaser has (a) violated or may be violating to any
material extent any of the terms or conditions of his employment,
non-competition, non-disclosure or similar type of agreement with such third
party, (b) disclosed or may be disclosing or utilized or may be utilizing
any trade secret or proprietary information or documentation of such third
party, or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees, or has requested information from Purchaser that suggests that such
a
claim might be contemplated. To the best of Purchaser’s knowledge, no person
employed by or affiliated with Purchaser has improperly utilized or proposes
to
improperly utilize any trade secret or any information or documentation
proprietary to any former employer, and to the best of Purchaser’s knowledge, no
person employed by or affiliated with Purchaser has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product
or
the development or sale of any service or proposed service of Purchaser, and
Purchaser has no reason to believe there will be any such employment or
violation. To the best of Purchaser’s knowledge, none of the execution or
delivery of this Agreement and the other related agreements and documents
executed in connection herewith, or the carrying on of the business of Purchaser
as officers, employees or agents by any officer, director or key employee of
Purchaser identified by Company and Purchaser and listed on the Purchaser
Disclosure Schedule (each, a “Purchaser
Key Employee”),
or
the conduct or proposed conduct of the business of Purchaser, will materially
conflict with or result in a material breach of the terms, conditions or
provisions of or constitute a material default under any contract, covenant
or
instrument under which any such person is obligated.
15
3.9 Title
to and Sufficiency of Assets; Insurance.
Purchaser has valid and marketable title to all of its assets now carried on
its
books including those reflected in the most recent balance sheet of Purchaser
which forms a part of the Reports, or acquired since the date of such balance
sheet (except personal property disposed of since said date in the ordinary
course of business) free of any liens charges or encumbrances of any kind
whatsoever, except such encumbrances and liens that arise in the ordinary course
of business and do not materially impair Purchaser’s ownership or use of such
property or assets. Purchaser does not own any real property. Purchaser is
in
compliance in all material respects under all leases for property and assets
under which it is operating, and all said leases are valid and subsisting and
are in full force and effect. Purchaser’s assets constitute all of the assets,
rights and properties that are used in the operation of Purchaser’s business as
it is now conducted or that are used or held by Purchaser for use in the
operation of Purchaser’s business. The Purchaser Disclosure Schedule lists all
insurance policies (by policy number, insurer, expiration date, type (i.e.,
“claims made” or an “occurrence” policy), amount and scope of coverage held by
Purchaser relating to Purchaser, its assets or the business, properties or
employees of Purchaser. Such insurance policies (a) are sufficient in all
material respects for compliance with all requirements of Law and for all
agreements to which Purchaser is a party and (b) provide commercially reasonable
insurance coverage for the assets and operations of Purchaser in light of
present insurance market conditions.
3.10 Intellectual
Property Assets.
Purchaser has, or has right to use all patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names or copyrights, any applications for such which are
in
the process of being prepared and other intellectual property rights and similar
rights necessary or material for use in connection with its business
(collectively, “Purchaser
Intellectual Property”).
The
Purchaser Intellectual Property is sufficient to permit Purchaser to conduct
its
business as presently conducted, and, except as disclosed in the Purchaser
Disclosure Schedule, no claim is pending or, to the best of Purchaser’s
knowledge, threatened to the effect that the operations of Purchaser infringe
upon or conflict with the asserted rights of any other person under any
Purchaser Intellectual Property, and, to the best of Purchaser’s knowledge,
there is no basis for any such claim (whether or not pending or threatened).
Except as disclosed in the Purchaser Disclosure Schedule, no claim is pending
or, to the best of Purchaser’s knowledge, threatened to the effect that any such
Purchaser Intellectual Property owned or licensed by Purchaser, or which
Purchaser otherwise has the right to use, is invalid or unenforceable by
Purchaser, and, to the best of Purchaser’s knowledge, there is no basis for any
such claim (whether or not pending or threatened). To the best of Purchaser’s
knowledge, all material technical information developed by and belonging to
Purchaser that has not been patented has been kept confidential. Purchaser
has
not granted or assigned to any other person or entity any right to manufacture,
have manufactured or assemble the products or proposed products or to provide
the services or proposed services of Purchaser. Purchaser has no material
obligation to compensate any person for the use of any Purchaser Intellectual
Property nor has Purchaser granted to any person any license or other rights
to
use in any manner any Purchaser Intellectual Property, except as set forth
on
the Purchaser Disclosure Schedule.
16
3.11 Assumptions,
Guaranties, etc. of Indebtedness of Other Persons.
Purchaser
has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable for any material amount of indebtedness of any other person
(including, without limitation, any liability by way of agreement, contingent
or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss).
3.12 No
Brokers or Finders.
Except
as set forth on the Purchaser Disclosure Schedule, no person has or will have,
as a result of the transactions contemplated by this Agreement, any right,
interest or valid claim against or upon Purchaser for any commission, fee or
other compensation as a finder or broker arising out of the transactions
contemplated by this Agreement.
3.13 No
Material Adverse Change.
Since
the date of Purchaser’s last report Form 10-Q-SB as filed with the SEC
(including any amendments) and as specified in the Purchaser Disclosure
Schedule: (i) there has been no Material Adverse Change affecting
Purchaser, whether or not arising in the ordinary course of business; and
(ii) there have been no transactions entered into by Purchaser, other than
those in the ordinary course of business, which are material to Purchaser.
3.14 Investment.
The
Purchaser is acquiring the Company Shares for investment and not for sale or
with a view to, or for resale in connection with, the distribution thereof,
has
no present intention of selling (in connection with a distribution or
otherwise), granting any participation in, or otherwise distributing the Company
Shares, and does not presently have any reason to anticipate a change in such
intention.
3.15 Information.
Purchaser has received all information requested from Company, including the
Company’s business plan and feasibility study, and the Sellers that it considers
necessary or appropriate for deciding whether to acquire the Company Shares.
Purchaser has had an opportunity to ask questions and receive answers from
Company and the Sellers regarding the terms of the Company Shares and to obtain
any additional information necessary to verify the accuracy of the information
given to it.
17
3.16 Material
Contract Defaults.
Purchaser is not in default in any material respect under the terms of any
outstanding contract, agreement, lease, or other commitment which is material
to
the business, operations, properties, assets, or financial condition of either
of them, and there is no event of default or other event which, with notice
or
lapse of time or both, would constitute a default in any material respect under
any such contract, agreement, lease, or other commitment in respect of which
the
Purchaser has not taken adequate steps to prevent such a default from occurring.
3.17 Government
Authorizations.
Purchaser has all licenses, franchises, permits, and other governmental
authorizations that are legally required to enable them to conduct their
business in all material respects as conducted on the Effective Date, except
where any failure to do so shall have a Material Adverse Effect on Purchaser.
No
authorization, approval, consent, or order of, or registration, declaration,
or
filing with, any court or other governmental body is required in connection
with
the execution and delivery by Purchaser of this Agreement and the consummation
by Purchaser of the transactions contemplated hereby.
3.18 Accuracy
of Information.
Neither
this Agreement nor any document furnished to the Company or the Sellers in
connection with the negotiation, execution and delivery of this Agreement or
the
transaction contemplated hereby, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein not materially misleading.
4. CONTINUING
COVENANTS
From
and
after the execution and delivery of this Agreement, the parties agree as
follows:
4.1 Stockholder
and AMEX Approval.
Purchaser agrees to use reasonable efforts to obtain approval of the issuance
of
the Transaction Shares and the Potential Project from Purchaser stockholders
and
any necessary approvals from AMEX. Company and each Seller agree to cooperate
fully with Purchaser and provide such information as Purchaser may reasonably
request in order to obtain such approvals.
4.2 Notice
of Developments.
Each
party will give prompt written notice to the other party of any material adverse
development causing a breach or likely breach of any of its covenants in this
Agreement.
4.3 Access.
Each
party will provide to the other party and such party’s employees, agents,
representative and advisors (including counsel and accountants (collectively,
“Representatives”),
complete access to all information necessary to complete its due diligence
review and to cooperate fully with such party in connection with its due
diligence review, in each case as specified in this Agreement and in the letter
of intent, dated November 30, 2006, between Purchaser and Company (the
“LOI”).
18
4.4 No
Negotiations.
Company
and each Seller agree to immediately cease any existing discussion or
negotiation with any Person (other than Purchaser) conducted prior to the date
of this Agreement with respect to (a) any proposed, potential or contemplated
acquisition of Company Shares, any assets of Company or (b) participation in
the
Potential Project, except as needed to negotiate any agreements or transactions
in connection with the Potential Project as contemplated in this Agreement.
Company and each Seller will refrain, and will cause each of their respective
Representatives to refrain, from taking, directly or indirectly, any action
(x)
to solicit or initiate the submission of any proposal or indication of interest
from any Person (other than Purchaser) relating to an acquisition of Company
Shares, assets of Company or any merger, consolidation, combination, share
exchange, recapitalization, liquidation or dissolution involving Company, or
participation in the Potential Project (except as needed to negotiate any
agreements or transactions in connection with the Potential Project as
contemplated in this Agreement), (y) to participate in any discussion or
negotiations regarding, or furnish to any Person any information with respect
to, or that may reasonably be expected to lead to, an acquisition of Company
Shares, assets of Company or any merger, consolidation, combination, share
exchange, recapitalization, liquidation or dissolution involving Company, or
participation in the Potential Project (except as needed to negotiate any
agreements or transactions in connection with the Potential Project contemplated
in this Agreement) or any proposal or indication of interest relating to any
of
the foregoing) with any Person (other than Purchaser or (z) to authorize, engage
in, or enter into any agreement or understanding (other than with Purchaser)
with respect to an acquisition of Company Shares, assets of Company or any
merger, consolidation, combination, share exchange, recapitalization,
liquidation or dissolution involving Company, or participation in the Potential
Project (except as needed to negotiate any agreements or transactions in
connection with the Potential Project as contemplated in this Agreement) or
any
proposal or indication of interest relating to any of the foregoing. If any
proposal described in this Section
4.4
is
received by Company or any Seller, such party(ies) agrees to promptly notify
Purchaser in writing and disclose the material terms of any such proposal
(including the identify of the prospective purchaser) to Purchaser, and such
party(ies) will notify any prospective purchaser of their obligations hereunder
and assure that any disclosure does not violate any agreement binding on
Company.
4.5 Operational
Restrictions during the Build-Out Period.
During
the period specified as the build-out period in the EPC Contracts (as defined
below), Company shall take such steps as are required to insure that the Ethanol
Plant shall be a nameplated facility nameplated to produce ethanol at a level
of
at least 100 million gallons of production a year.
4.6 Tax
Treatment.
The
parties acknowledge and agree that each party intends that the exchange of
the
Company Shares for the Transaction Shares as contemplated by this Agreement
is
intended to be a reorganization under Section 368(a) of the Code. The parties
shall cooperate to implement the transactions contemplated by this Agreement
in
a manner consistent with this Section
4.6
and
shall report such transactions for federal income tax purposes in a manner
that
is consistent with this Section
4.6.
4.7 Permits.
The
Company will use its reasonable efforts to obtain the DENR/EPA Air Quality
Permits.
19
5. CLOSING
CONDITIONS
5.1 Conditions
to the Obligations of Purchaser.
The
obligations of Purchaser to consummate this Agreement and close the transactions
contemplated hereunder are subject to the satisfaction or waiver of each of
the
following conditions on or prior to the Closing Date:
(a) Representations
and Warranties.
The
representations and warranties of Company and each of the Sellers contained
in
this Agreement (and in any certificates delivered by Company or any Seller
pursuant to this Agreement) will be true and correct in all respects as of
the
Closing Date.
(b) Compliance
with Covenants.
All of
the covenants and obligations to be complied with and performed by Company
and/or any Seller on or before the Closing Date shall have been duly complied
with and performed in all material respects.
(c) Closing
Documents.
On the
Closing Date, Company and/or the Sellers shall have delivered or caused to
be
delivered to Purchaser the duly executed closing documents specified
below:
(i) certificates
representing the Company Shares, duly endorsed or accompanied by stock powers
duly executed in blank and otherwise in a form acceptable for transfer on the
books of Company;
(ii) copies
of
resolutions of Company’s board of directors and stockholders authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, including but not limited to the Potential Project, and
of
Company’s Certificate of Incorporation and Bylaws, as amended, all as certified
by Company’s corporate secretary;
(iii) an
incumbency certificate executed by Company’s corporate secretary;
(iv) a
certificate executed by Company and each Seller attesting that each of Company
and each Seller has complied with all of the obligations and covenants of
Company or any Seller set forth in Section
4
of this
Agreement;
(v) a
cross-receipt executed by each Seller, in a form reasonably satisfactory to
Purchaser and each Seller;
(vi) certificates
from the State of South Dakota and from each jurisdiction where Company is
qualified to do business, dated no earlier than ten (10) days prior to the
Closing Date, as to the good standing of Company in such
jurisdictions;
(vii) a
legal
opinion of Xxxxxxxxxx Law Offices, PC in a form satisfactory to
Purchaser;
(viii) the
Stockholder Agreement;
20
(ix) the
Escrow Agreement;
(x) employment
agreements, retention agreements, consulting agreements or other similar type
of
agreement with Key Company Employees or consultants identified by Purchaser
and
Company and specified in the Company Disclosure Schedule, in each case in a
form
and on terms mutually acceptable to the parties and as approved by Purchaser’s
Board (the “Company
Employment Contracts”);
(xi) executed
offtake or marketing agreement(s) for purchase of the Ethanol Plant production
(the “Production
Agreement”)
in a
form and on terms mutually acceptable to the parties;
(xii) evidence
reasonably acceptable to Purchaser that Company has purchased or made payments
toward the purchase of the Option; and
(xiii) documentation
reasonably satisfactory to Purchaser of out-of-pocket fees and expenses
associated with the acquisition and permitting of the Parcels and the planning,
engineering and design of the Ethanol Plant (the “Plant
Expenses”).
(d) Company
Required Consents.
Company
and/or the Sellers shall have delivered or caused to be delivered to Purchaser
the consents, permits, waivers or other approvals and copies of the notices
set
forth in the Company Disclosure Schedule, including, but not limited to
government consents and third party consent, and all such consents must be
in
full force and effect.
(e) Approval
of Issuance of the Transaction Shares.
(i)
Purchaser’s stockholders shall have approved the issuance of the Transaction
Shares and (ii) Purchaser shall have received approval from AMEX, to the extent
such approval is required, for the issuance of the Transaction Shares.
(f) Approval
of Potential Project.
Purchaser’s Board and a majority of Purchaser’s stockholders shall have approved
the Potential Project.
(g) Absence
of Litigation.
As of
the Closing Date, no Law shall have been adopted, promulgated, entered, enforced
or issued by any governmental authority, or action, claim, suit or proceeding
shall be pending or threatened before any court, other governmental authority
or
arbitrator which is reasonably likely to (i) enjoin, restrain or prohibit the
consummation of the transactions contemplated by this Agreement, including
the
Potential Project, or any Transaction Document (as defined below), (ii) have
the
effect of making illegal or otherwise prohibiting the transactions contemplated
hereby or by any Transaction Document or (iii) materially adversely affect,
including through the imposition of any requirement to divest or hold separate
any assets or segments of the business of Company, the right of Purchaser
following the Closing Date to own the Company Shares.
(h) Material
Adverse Change.
There
shall have been no Material Adverse Change affecting Company or any Seller
during the period from the Effective Date to the Closing Date.
21
(i) Satisfactory
Completion of Purchaser’s Due Diligence.
Purchaser shall have completed its due diligence review of (i) the business,
assets, contracts, prospects and financial condition of Company, (ii) the
Potential Project, including but not limited to financial and business models,
contracts, assets, permits, prospects and operations and (iii) the Parcels,
including but not limited to reviews of title, environmental matters and
suitability of the Parcels for construction of the Ethanol Plant, and Purchaser
shall be satisfied in all respects with the results of such due diligence in
each case.
(j) Financing
Commitment for Potential Project.
Purchaser shall have obtained a firm commitment to raise capital, either through
debt or equity financing, or both, on terms mutually acceptable to the parties
for construction of the first Train.
(k) Capital
for Purchase of Parcels.
Purchaser shall have raised sufficient capital, or have a commitment for such
capital, to make the final payment on the Parcels.
(l) Engineering,
Procurement and Construction Contracts.
Company
shall have in place definitive forms of engineering, procurement and
construction contracts (“EPC
Contracts”)
in a
form and on terms mutually acceptable to the parties. For avoidance of doubt,
the EPC Contracts do not need to be executed, but each contract must be subject
only to execution by the relevant parties.
(m) Permits.
Company
shall have obtained all necessary permits required for the construction and
operation of the Ethanol Plant.
(n) Performance
Bond.
Company
shall have in place a performance bond, if required, reasonably satisfactory
to
Purchaser for the work to be performed by the contractors pursuant to the EPC
Contracts.
(o) Insurance.
Company
shall insure all facilities and equipment comprising and related to the
Potential Project, including but not limited to the Ethanol Plant, with an
insurer and on terms that in each case are reasonably satisfactory to Purchaser.
5.2 Conditions
to the Obligations of Company and the Sellers.
The
obligations of Company and each of the Sellers to consummate this Agreement
and
close the transactions contemplated hereunder are subject to the satisfaction
or
waiver of each of the following conditions on or prior to the Closing
Date:
(a) Representations
and Warranties.
The
representations and warranties of Purchaser contained in this Agreement (and
in
any certificates delivered by Purchaser pursuant to this Agreement) will be
true
and correct in all respects as of the Closing Date.
(b) Compliance
with Covenants.
All of
the covenants and obligations to be complied with and performed by Purchaser
on
or before the Closing Date shall have been duly complied with and performed
in
all material respects.
22
(c) Closing
Documents.
On the
Closing Date, Purchaser shall have delivered or caused to be delivered to
Company the duly executed closing documents set forth below:
(i) certificates
representing the Closing Shares, duly endorsed or accompanied by stock powers
duly executed in blank and otherwise in a form acceptable for transfer on the
books of Purchaser;
(ii) copies
of
resolutions of Purchaser’s Board and stockholders authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, including but not limited to the Potential Project and issuance of
the
Transaction Shares, and of Purchaser’s Certificate of Incorporation and Bylaws,
as amended, all as certified by Purchaser’s corporate secretary;
(iii) an
incumbency certificate executed by Purchaser’s corporate secretary;
(iv) a
certificate executed by Purchaser attesting that Purchaser has complied with
all
obligations and covenants of Purchaser set forth in Section
4
of this
Agreement;
(v) a
cross-receipt executed by Purchaser, in a form reasonably satisfactory to
Purchaser and each Seller;
(vi) a
certificate from the State of Delaware, dated no earlier than ten (10) days
prior to the Closing Date, as to the good standing of Purchaser in the State
of
Delaware;
(vii) a
legal
opinion of Xxxxxx & Xxxxxx llp
as to
the valid issuance and non-assessability of the Transaction Shares;
(viii) the
Stockholder Agreement;
(ix) the
Escrow Agreement;
(x) employment
agreements, retention agreements, consulting agreements or other similar type
of
agreement with those certain key Purchaser employees identified by Purchaser
and
Company and specified in the Purchaser Disclosure Schedule, in each case in
a
form and on terms mutually acceptable to the parties (the “Purchaser
Employment Contracts”,
and
together with this Agreement, the LOI, the Stockholder Agreement, the Escrow
Agreement, the Company Employment Contracts, the EPC Contracts, the Production
Agreement and the Mutual Disclosure Agreement, dated December 8, 2006, by and
between Purchaser and Company, the “Transaction
Documents”);
(xi) evidence
of transfer of funds as directed by Purchaser to reimburse Company of the
documented, out-of-pocket fees and expenses associated with the acquisition
and
permitting of the Parcels and the planning, engineering and design of the
Ethanol Plant up to, but not including the Closing Date; and
23
(xii) a
commitment letter for financing of the first Train.
(d) Required
Consents.
Purchaser shall have delivered or caused to be delivered to Company the
consents, permits, waivers or other approvals and copies of the notices set
forth in the Purchaser Disclosure Schedule, including but not limited to
government consents, third party consents and any approval that may be required
from AMEX.
(e) Absence
of Litigation.
As of
the Closing Date, no Law shall have been adopted, promulgated, entered, enforced
or issued by any governmental authority, or action, claim, suit or proceeding
shall be pending or threatened before any court, other governmental authority
or
arbitrator which is reasonably likely to (i) enjoin, restrain or prohibit the
consummation of the transactions, including the Potential Project, contemplated
by this Agreement or any Transaction Document, (ii) have the effect of making
illegal or otherwise prohibiting the transactions contemplated hereby or by
any
Transaction Document or (iii) materially adversely affect, including through
the
imposition of any requirement to divest or hold separate any assets or segments
of the business of Purchaser, the right of any Seller following the Closing
Date
to own the Transaction Shares.
(f) Financing
Commitment for Potential Project.
Purchaser shall have obtained a firm commitment to raise capital, either through
debt or equity financing, or both, on terms mutually acceptable to the parties
for construction of the first Train.
(g) Material
Adverse Change.
There
shall have been no Material Adverse Change affecting Purchaser during the period
from the Effective Date to the Closing Date.
(h) Satisfactory
Completion of Company’s Due Diligence.
Company
shall have completed its due diligence review of the business, assets, contracts
and financial condition of Purchaser and shall be satisfied in all respects
with
the results of such due diligence.
(i) Purchaser’s
Capital Structure.
Company
shall have completed a review of Purchaser’s capital structure as set forth in
the Purchaser Disclosure Schedule and shall be satisfied in all respects with
such capital structure.
6. TERMINATION
6.1 Termination. This
Agreement may be terminated at any time prior to the Closing Date:
(a) by
mutual
written agreement of the parties;
(b) by
Purchaser, if Company or any Seller has committed a material breach of any
provision of this Agreement that has not been cured within thirty (30) days
of
written notice of such material breach;
24
(c) by
Company or any Seller, if Purchaser has committed a material breach of any
provision of this Agreement that has not been cured within thirty (30) days
of
written notice of such material breach;
(d) by
any
party hereto, if an order, decree, ruling, judgment or injunction has been
entered by any governmental authority of competent jurisdiction permanently
restraining, enjoining or otherwise limiting or prohibiting the consummation
of
the transaction, including but not limited to the Potential Project,
contemplated by this Agreement and such order, decree, ruling, judgment or
injunction has become final and non-appealable;
(e) by
any
party, if the parties are unable to consummate a financing transaction on
mutually acceptable terms from mutually acceptable financial institutions or
other mutually acceptable entities for construction of the Ethanol Plant;
or
(f) automatically,
without any action by any party, if the Closing has not occurred before 5 p.m.,
Newark, Delaware time, on the Maturity Date (as defined in the Loan Agreement,
dated as of December 22, 2006, by and among Company as Borrower, the Sellers
as
Pledgors and Purchaser as Lender, of the term loans made available by Purchaser
to Company in the Financing Transaction).
6.2 Effect
of Termination.
If this
Agreement is terminated as provided in Section
7.1,
then
all further obligations under this Agreement shall terminate and no party hereto
shall have any liability in respect of the termination of this Agreement;
provided, however, that the confidentiality obligations of each party described
in Section
4.5
will
survive any such termination; provided further that no such termination will
relieve any party from liability for any breach of any representation, warranty,
covenant or agreement set forth in this Agreement prior to such termination
and
in the event of such breach, the parties to this Agreement shall be entitled
to
exercise any and all remedies available under law or equity in accordance with
this Agreement and, if such termination resulted from a breach of any covenant
in this Agreement by the breaching party(ies), the non-breach party(ies) shall
be entitled to be reimbursed by the breaching party(ies) for any and all
reasonable out-of-pocket expenses incurred by such non-breaching part(ies)
in
connection with this Agreement, the transactions contemplated hereby and/or
such
breach of covenant.
7. MISCELLANEOUS
7.1 Remedies
Cumulative; Remedies Not Waived.
Except
as provided in Section 6.7no remedy herein conferred upon the parties is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No course of dealing between the parties, nor any delay on the part
of the parties in exercising any rights hereunder, shall operate as a waiver
of
any of the rights of any of the parties, either individually or in the
aggregate.
7.2 Waiver
and Amendment.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective heirs, legal representatives, successors and assigns.
This Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
This Agreement shall not be changed, modified or amended except by a writing
signed by the parties hereto.
25
7.3 Assignability.
Neither
party may assign or transfer this Agreement or its rights hereunder without
the
prior written consent of the other party, which consent shall not be
unreasonably withheld.
7.4 Disclosure
Schedules.
With
respect to information contained in either the Company Disclosure Schedule
or
the Purchaser Disclosure Schedule, each party shall use reasonable best efforts
to provide specific cross-references to each representation and warranty that
is
modified or otherwise affected by such information; provided, that absent any
such cross-reference, information disclosed on the Company Disclosure Schedule
or the Purchaser Disclosure Schedule, as applicable, for any individual
representation or warranty shall be deemed to be disclosed under and
incorporated into any other representation or warranty for the respective party
if the relevance of such information to such other representation or warranty
is
reasonably apparent.
7.5 Notices.
All
notices and other communications required or permitted hereunder shall be in
writing and shall be sent by registered or certified mail (return receipt
requested and postage prepaid), transmitted by telecopy, or delivered by hand,
by messenger or by a recognized overnight delivery service, addressed as
follows, or to such other address as such party may have from time to time
furnished to the other party in writing:
If to the Purchaser: |
O2Diesel
Corporation
|
Xxxxx
000
000
Xxxxxxxx Xxxxx
Xxxxxx,
XX 00000
Facsimile:
(000) 000-0000
If to the Company: |
Pro
Eco Energy Company, Inc.
|
X.X.
Xxx
000
Xxxxx
Xxxxxxx, Xxxxx Xxxxxx 00000
Facsimile:
(000) 000-0000
Each
such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given (i) if sent by registered or certified
mail, the earlier of receipt and five (5) Business Days after dispatch, (ii)
if
transmitted by telecopy, on the Business Day of confirmed receipt by the
addressee thereof, and (iii) if delivered in person or by overnight courier,
on
the Business Day delivered.
7.6 Expenses.
Each
party shall pay its expenses, including attorneys fees, in connection with
this
Agreement and the transactions contemplated hereby.
7.7 Counterparts.
This
Agreement may be executed in several counterparts, and each executed copy shall
constitute an original instrument, but all such counterparts shall together
constitute but one and the same instrument. Facsimiles of signatures shall
be
deemed to be originals.
26
7.8 Headings;
Construction.
The
headings of the several sections, divisions or subsections of this Agreement
shall not be construed to constitute any part or to affect the meaning of any
such sections, divisions or subsections. The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption of burden of proof shall arise favoring or not
favoring any party by virtue of the authorship of any of the provisions of
this
Agreement.
7.9 Severability.
If any
provision of this Agreement or portion of any provision, or the application
thereof to any person or circumstance, shall, to any extent, be held invalid
or
unenforceable, the remainder of this Agreement or the remainder of such
provision and the application thereof to other persons or circumstances, other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and be enforced to the fullest extent permitted by law.
7.10 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. The parties hereby waive
all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
7.11 Compliance
Required.
The
obligations of each of the parties arising pursuant to this Agreement shall
be
expressly conditioned upon the full compliance by the other party hereto with
the terms set forth this Agreement and in the other Transaction Documents.
[Signature
Page Follows]
27
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
COMPANY: | ||
ProEco Energy Company, Inc. | ||
By: | /s/ Xxxx X. Xxxxxx | |
Name: Xxxx X. Xxxxxx | ||
Title: President |
SELLERS: | ||
/s/ Xxxx X. Xxxxxx | ||
Name: Xxxx X. Xxxxxx |
/s/ Xxxxxxx Xxxx | ||
Name: Xxxxxxx Xxxx |
/s/ Xxxxxx X. Xxxxxxxxxx | ||
Xxxxxxxxxx Law Offices, PC | ||
By: Xxxxxx X. Xxxxxxxxxx | ||
Title: President |
28
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
By: | /s/ Xxx Xxxxxx | |
Name: Xxx Xxxxxx |
[EXECUTED
IN SEPARATE COUNTERPART]
29
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
By: | /s/ Xxx Xxxx | |
Name: Xxx Xxxx |
[EXECUTED
IN SEPARATE COUNTERPART]
30
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
By: | /s/ Xxx Xxxxxx | |
Name: Xxx Xxxxxx |
[EXECUTED
IN SEPARATE COUNTERPART]
31
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
By: | /s/ Xxx Xxxxxxx | |
Name: Xxx Xxxxxxx |
[EXECUTED
IN SEPARATE COUNTERPART]
32
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
By: | /s/ Xxxxxx XxXxxxxx | |
Name: Xxxxxx XxXxxxxx |
[EXECUTED
IN SEPARATE COUNTERPART]
33
IN
WITNESS WHEREOF,
the
parties hereto have caused this Share Exchange Agreement to be executed and
delivered by their respective corporate officers thereunto duly authorized
on
the day and year first above written.
PURCHASER: | ||
O2Diesel Corporation | ||
By: | /s/ Xxxx Xxx | |
Name: Xxxx Xxx | ||
Title: Chief Executive Officer |
34
SCHEDULE I
COMPANY
SHARES TO BE EXCHANGED
Name
|
No.
of Shares
|
Certificate
No.
|
Percent
of Total Company Shares
|
|||||||
Xxxx
Xxxxxx
Xxxxxxx
Xxxx
Xxxxxxxxxx
Law Offices, PC
Xxx
Xxxxxxx
Xxxxxx
XxXxxxxx
Xxx
Xxxxxx
Xxx
Xxxx
Xxx
Xxxxxx
|
30,000,000
13,800,000
6,896,000
3,672,000
3,904,000
3,440,000
3,672,000
3,216,000
|
010
011
012
013
014
015
016
017
|
43.73
20.12
10.05
5.35
5.69
5.01
5.35
4.69
|
%
%
%
%
%
%
%
%
|
||||||
Total
|
68,600,000
|
100
|
%
|
I-1
TRANSACTION
SHARES TO BE EXCHANGED
Total
No. of Shares
|
Release
Schedule for Earnout Shares
|
||||||||||||
Name
|
Closing
Shares
|
Earnout
Shares |
20%
|
20%
|
|||||||||
Xxxx
Xxxxxx
Xxxxxxx
Xxxx
Xxxxxxxxxx
Law Offices, PC
Xxx
Xxxxxxx
Xxxxxx
XxXxxxxx
Xxx
Xxxxxx
Xxx
Xxxx
Xxx
Xxxxxx
|
2,407,254
1,107,337
553,347
294,648
313,264
276,031
294,648
258,057
|
1,604,836
738,225
368,898
196,432
208,843
184,021
196,432
172,039
|
802,418
369,112
184,449
98,216
104,422
92,010
98,216
86,020
|
802,418
369,113
184,449
98,216
104,421
92,011
98,216
86,019
|
|||||||||
Total
|
5,504,586
|
3,669,726
|
1,834,863
|
1,834,863
|
I-2
Schedule
II
Project
Milestones
Milestone
|
Percentage
of Earnout Shares to be Distributed
|
|||
1.
Completion of construction on first Train
|
20%
of the Earnout Shares
|
|||
2.
Commencement of construction on the final Train
|
20%
of the Earnout Shares
|
II-1
SCHEDULE
III
UPDATED
COMPANY DISCLOSURE SCHEDULE AS OF 3/19/07
Schedule 2.2 |
Authority;
No Breach
|
Sellers
and Company have all requisite authority to execute and deliver the Agreement
and to perform the obligations defined therein. In doing so the execution of
the
Agreement is not a breach of any organizational formation document or the
violation of any statute, rule, regulation, ordinance, quote or other law.
Schedule 2.3 |
Corporate
Matters
|
A
copy of
the Company’s Articles of Incorporation and any amendments thereto; applicable
resolutions; by-laws containing a current list of all shareholders, officers
and
directors of the company are attached hereto as Schedule III paragraph 2.3
exhibits.
Schedule 2.4 |
Capitalization
|
Pro
has
issued Certificates to 8 shareholders representing 85,750,000 shares which
is
85.75% of the total authorized stock of 100,000,000 shares with a par value
of
$.0001 (1/1000).
Schedule 2.6 |
Financial
Statement
|
The
Company came into existence on November 21, 2006. The only cash proceeds
received in the Company are loan funds advanced pursuant to the Term Loan
Agreement and attending documents and an advance from one of the
Company's stockholders.
Schedule 2.9 |
Litigation;
Compliance With Law
|
None
Schedule 2.10 |
Proprietary
Information of Third
Parties
|
None
Schedule 2.11 |
Title
to and Sufficiency of Assets;
Insurance
|
The
Company has not acquired title to any capital assets.
Schedule 2.15 |
No
Material Adverse
Change
|
None
III-1
Schedule 2.22 |
Government
Authorizations
|
The
Company is in the process of making applications for all governmental permits,
licenses and franchises required to complete the potential Project.
Schedule 2.24 |
Tax
Matters
|
No
tax
returns have been filed nor are any tax returns presently past due.
Schedule 2.25 |
Environmental
Matters
|
None
Schedule
2.26
|
ERISA
and Employee Benefits
|
The
Company reaffirms the representations in paragraph 2.26 of the Agreement.
Schedule 2.28 |
Transactions
with Certain Persons
|
Xxxxxxx
(Bud) Xxxxxx is a first cousin of Xxxx X. Xxxxxx who will assist with
procurement activities.
III-2
Schedule
IV
Updated
Purchaser Disclosure Schedule as of 3/19/07
Schedule 3.1 |
Organization,
Execution and Delivery; Valid and Binding
Agreements
|
Foreign
Qualifications
Maryland
California
Colorado
Ohio
Texas
Virginia
Brazil
Ireland
United
Kingdom
Spain
Other
Names
AAE
Technologies International Plc
Directors
& Officers
Xxxx
Xxx,
Chief Executive Officer, Director & Secretary
Xxxxxxx
Xxxxx, President and Chief Operating Officer
Xxxxx
Xxxxxxx, Chief Financial Officer
Xxxxxx
Xxxxx, Chairman of the Board of Directors
Xxxxx
Xxxxxx, Director
X.
Xxxx
Xxxxxxxx, Director
Xxxxxxx
Xxxxxxxx, Director
Xxxxx
Xxxxxxxxxx, Director
Xxxxxx
Xxxxxx-Xxxx, Director
Subsidiaries
Name | State or Jurisdiction of Organization |
O2Diesel, Inc. | Delaware |
O2Diesel Químicos, Ltda. | Brazil |
O2Diesel R&D SPA, S.L. | Spain |
O2Diesel Europe PLC | Ireland |
Schedule 3.2 |
Authority;
No Breach or Conflicts
|
None.
IV-1
Schedule 3.4 |
Capitalization
|
Authorized Shares | ||
Issued as of 12/31/06 |
75,125,014
|
|
Restricted shares issued to Xxxxxxx Xxxxx as of 12/31/06 |
500,000
|
|
Options issued as of 12/31/06 |
7,500,000
|
|
Warrants remaining as of 12/31/06 |
12,306,636
|
|
Issued and Outstanding as of 12/31/06 |
95,431,650
|
Schedule 3.5 |
Purchaser
Reports; Financial
Statements
|
None.
Schedule 3.7 |
Litigation;
Compliance with Law
|
None.
Schedule 3.8 |
Proprietary
Information of Third
Parties
|
Purchaser
Key Employees
Xxxx
Xxx
Xxxxx
Xxxxxxx
Xxxxxxx
Xxxxx
Schedule 3.9 |
Title
to and Sufficiency of Assets;
Insurance
|
Provided
under separate cover
Schedule 3.10 |
Intellectual
Property Assets
|
None.
Schedule 3.12 |
No
Brokers or Finders
|
Xxx
Xxxxxxxx
Schedule 3.13 |
No
Material Adverse Change
|
None.
IV-2