OPTION AND ESCROW AGREEMENT
THIS OPTION AND ESCROW AGREEMENT ("AGREEMENT") is made and entered into
effective on the 10th day of July, 2003 by and among (i) O2Diesel Corporation
(formerly, Dynamic Ventures Inc.), a Washington corporation ("O2DIESEL"), (ii)
Distinct Holdings Ltd. (the "STOCKHOLDER") and (iii) Comerica Bank, a Michigan
banking corporation (the "ESCROW AGENT"). O2Diesel, the Stockholder and the
Escrow Agent are sometimes hereinafter referred to collectively as the
"PARTIES."
RECITALS
WHEREAS, O2Diesel has commenced an offer to acquire all of the issued and
outstanding ordinary shares of AAE Technologies International PLC, a corporation
governed by the laws of the Republic of Ireland ("AAE"), in exchange for
18,000,000 shares of common stock of O2Diesel (the "O2DIESEL EXCHANGE SHARES")
pursuant to the terms set forth in the Recommended Offer Document dated June 16,
2003 (the "SHARE EXCHANGE OFFER");
WHEREAS, the Share Exchange Offer was commenced pursuant to and in
accordance with the terms of a Letter of Intent dated March 20, 2003, by and
among O2Diesel, AAE and certain stockholders of AAE, and O2Diesel, AAE and
certain stockholders of AAE have entered into a Support Agreement dated June 17,
2003 to support the Share Exchange Offer (the "SUPPORT AGREEMENT");
WHEREAS, as a condition to closing of the Share Exchange Offer and in order
to induce the board of directors of AAE to recommend the Share Exchange Offer to
the AAE stockholders, O2Diesel was required to cause one or more stockholders of
O2Diesel to (i) deposit into escrow a total of 1,000,000 shares of common stock
of O2Diesel (the "ESCROW") and (ii) to grant to O2Diesel an option to purchase
such shares at a price of US$0.20 per share, subject to the terms and condition
of this Agreement, concurrent with the closing date of the Share Exchange Offer
(the "SHARE EXCHANGE CLOSING DATE");
WHEREAS, the Stockholder has determined that it is in the best interest of
O2Diesel and the Stockholder that O2Diesel complete the Share Exchange Offer;
and
WHEREAS, the Stockholder has agreed to place into the Escrow with the
Escrow Agent one million (1,000,000) shares of common stock of O2Diesel (the
"ESCROWED SHARES") and to grant O2Diesel an option to purchase such shares at a
price of US$0.20 per share, subject to the terms and conditions set forth in
this Agreement,
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth herein, and intending to be legally bound hereby, the
Parties agree as follows:
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1. Stock Option
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(a) Grant of Option. Upon the terms and subject to the conditions
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set forth herein, the Stockholder hereby grants to O2Diesel an irrevocable
option (the "OPTION") to purchase the Escrowed Shares in the manner set forth
below at a purchase price (the "PURCHASE PRICE") per Escrowed Share equal to
US$0.20. The number of Escrowed Shares that may be received upon the exercise of
the Option and the Purchase Price are subject to adjustment as set forth herein.
(b) Exercise of Option.
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(i) The Option may be exercised by O2Diesel, in whole or in part, at
any time or from time to time after the occurrence of the
Exercise Event (as defined below) and prior to the occurrence of
a Termination Event (as defined below).
(ii) The "EXERCISE EVENT" shall occur for purposes of this Agreement
if
(A) within six (6) months of the Share Exchange Closing Date (1)
O2Diesel enters into a binding agreement for the acquisition
of a fuel distribution business or company on terms
satisfactory to the Stockholder and O2Diesel at each of
their sole and absolute discretion, or (2) O2Diesel and the
Stockholder mutually agree on an alternative to an
acquisition of such fuel distribution business or company on
terms satisfactory to O2Diesel and the Stockholder at each
of their sole and absolute discretion (the "INITIAL
CONDITION"); and
---
(B) the transaction(s) contemplated in the Initial Condition is
not closed within eight (8) months of the Share Exchange
Closing Date solely because O2Diesel has not closed a
non-brokered private placement equity offering of an
additional US$3,500,000 of shares of common stock in the
capital of O2Diesel at a price of not less than US$1.50 per
share (the "FOLLOW-ON PRIVATE PLACEMENT").
(iii) A "TERMINATION EVENT" shall occur for purposes of this Agreement
upon the first to occur of any of the following:
(A) the closing of the Follow-On Private Placement;
(B) the Initial Condition is not met within six (6) months of
the Share Exchange Closing Date (which is July 11, 2003);
(C) the transaction(s) contemplated in the Initial Condition is
not closed within eight (8) months of the Share Exchange
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Closing Date for any reason other than the non-closing of
the Follow-On Private Placement;
(D) immediately following the exercise of the Option in full; or
(E) thirty (30) days following the Exercise Event.
O2Diesel shall to use its reasonable commercial efforts to
send a written notice to the Escrow Agent and the
Stockholder of the occurrence of a Termination Event within
five (5) business days of such occurrence in the form
attached hereto as Exhibit A (the "TERMINATION NOTICE").
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(iv) In the event O2Diesel wishes to exercise the Option, O2Diesel
shall (A) send a written notice to the Stockholder and the Escrow
Agent in the form attached hereto as Exhibit B (an "EXERCISE
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NOTICE") specifying the total number of Escrowed Shares that
O2Diesel wishes to purchase and the date (subject to the earlier
of the satisfaction or waiver of the condition set forth in
Section 1(d)) on which such Escrowed Shares are to be
transferred) of the closing (the "CLOSING") of such purchase and
(b) tender to the Escrow Agent the Purchase Price by certified
bank check or wire transfer (if permitted by the Escrow Agent);
provided, that, if the Closing cannot be consummated by reason of
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any applicable law, then the period of time that would otherwise
run pursuant to this sentence shall run instead from the date on
which such restriction on consummation has expired or has been
terminated.
(c) Adjustments. In the event of any change in Escrowed Shares by reason
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of a stock dividend, split-up, subdivision, consolidation, recapitalization,
combination, exchange of shares, or similar transaction or any other
extraordinary change in the corporate or capital structure of O2Diesel
(including the declaration or payment of an extraordinary dividend of cash,
securities or other property), the type and number of shares or securities to be
sold by the Stockholder upon exercise of the Option and the Purchase Price shall
be adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that O2Diesel shall receive upon exercise of the
Option the number and class of shares and/or other securities and/or cash and/or
property that O2Diesel would have received in respect of Escrowed Shares if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable, and elected, to the fullest extent it would have been
permitted to elect, to receive such securities, cash or other property.
(d) Condition to Closing. The obligation of the Escrow Agent, on behalf
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of the Stockholder, to deliver Escrowed Shares upon any exercise of the Option
pursuant to Section 1(b) is subject to the condition that no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting such issuance of Escrowed Shares shall be in effect.
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(e) Closing. In the event of a Closing pursuant to Section 1(b), the
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Escrow Agent shall deliver to O2Diesel a certificate or certificates evidencing
the applicable number of Escrowed Shares (in the denominations specified
therein), and O2Diesel shall purchase each such Escrowed Share from the
Stockholder at the Purchase Price. The Escrow Agent shall deliver the Purchase
Price to the Stockholder and certificates representing the Escrow Shares not
purchased by O2Diesel, if any.
2. Escrow Deposit. Concurrent with the Share Exchange Closing, the
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Stockholder shall deliver to the Escrow Agent for deposit into the Escrow the
certificates representing the Escrowed Shares and an executed Stock Power to
transfer such shares in substantially the form attached hereto as Exhibit C, and
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the Escrow Agent shall acknowledge receipt of stock certificates representing
the Escrowed Shares and hold the Escrowed Shares in accordance with the terms of
this Agreement.
3. Further Assurance. O2Diesel shall use reasonable commercial
-----------------
efforts to satisfy the Initial Condition within six (6) months and to complete
the Follow-On Private Placement within eight (8) months.
4. Transfers from Escrow.
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(a) At any time after the occurrence of the Exercise Event and prior
to the occurrence of a Termination Event, O2Diesel may, by (i) giving written
Exercise Notice to the Stockholder and the Escrow Agent, and (ii) tendering to
the Escrow Agent the Purchase Price by certified bank check or wire transfer (if
permitted by the Escrow Agent), exercise the Option under Section 1(b) of this
Agreement.
(b) If the Stockholder gives written notice to O2Diesel and the Escrow
Agent stating that it objects to a transfer of Escrowed Shares solely because
the Exercise Event has not occurred or a Termination Event has occurred, within
seven (7) days following the date on which it receives the Exercise Notice, then
O2Diesel and the Stockholder shall jointly endeavor to determine if the Option
is exercisable. If O2Diesel and the Stockholder are unable to agree on the
determination that the Option is exercisable, then the Escrow Agent shall not
make any transfers of the Escrowed Shares except upon receipt of a written
statement executed by O2Diesel and the Stockholder evidencing their agreement on
the exercisability of the Option or by reason of any non-appealable order or
decree of a court of competent jurisdiction. The Escrow Agent shall take the
action specified in notices signed by, and received from, O2Diesel and the
Stockholder as soon as practical after its receipt thereof.
(c) If the Stockholder fails to give written notice to O2Diesel and the
Escrow Agent that it objects to a transfer of Escrowed Shares in respect of the
Exercise Notice within seven (7) days following the date on which the
Stockholder receives the Exercise Notice and the Escrow Agent has not otherwise
received a Termination Notice, then the Escrow Agent shall promptly (i) transfer
to O2Diesel the number of Escrowed Shares as directed and specified in the
Exercise Notice and (ii) tender the Purchase Price to the Stockholder.
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(d) Within five (5) days following the Escrow Agent's receipt of a
Termination Notice, the Escrow Agent shall transfer the Escrowed Shares to the
Stockholders in accordance with their respective interests.
(e) Notwithstanding the other provisions of this Section 4, the Escrow
Agent shall release and distribute the Escrowed Shares to the Stockholder
pursuant to any written instructions executed by O2Diesel and the Stockholder or
by reason of any non-appealable order or decree by a court of competent
jurisdiction.
(f) The Escrow Agent may deliver the certificates representing the
Escrow Shares to the transfer agent for the Escrowed Shares, with appropriate
instructions, whenever necessary to effectuate a transfer of the Escrowed Shares
in accordance with the terms hereof::
Interwest Transfer Company, Inc.
0000 X. 0000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxxxxx
5. Dividends; Voting.
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(a) Dividends. Any dividends declared and paid, and any distributions
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made with respect to, the Escrowed Shares shall be delivered to the Escrow Agent
and shall be held and transferred by the Escrow Agent in the same manner that
the Escrowed Shares are held and transferred hereunder. All such dividends and
distributions made in shares of the common stock of O2Diesel shall be deemed to
be Escrowed Shares (allocated on the basis of the pro rata interest represented
by such Escrowed Share) for any and all purposes hereunder.
(b) Voting. The Stockholder shall be entitled to vote the Escrowed
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Shares held by the Escrow Agent as its nominee in accordance with its interests
therein on all matters submitted to a vote of the stockholders of O2Diesel
during the term of this Agreement but shall not be entitled to exercise any
investment or dispositive powers over the Escrowed Shares.
6. Fees of Escrow Agent.
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(a) Ordinary Escrow Service Fees. O2 Diesel shall pay the Escrow
----------------------------
Agent, as compensation for its services hereunder: (a) a $2,500 non-refundable
start-up fee, payable upon the Escrow Agent's execution of this Agreement; and
(b) an annual renewal fee of $1,100, payable on each anniversary date of this
Agreement; and (c) a $35escrow processing fee for each receipt and disbursement
of Escrow Shares and funds upon the Escrow Agent's demand.
(b) Extraordinary Service Fees. If the conditions of this Agreement
--------------------------
are not promptly fulfilled, or if Escrow Agent renders any service not provided
for in this Agreement at the joint request of O2Diesel and Stockholder, or if
O2Diesel and the Stockholder request a substantial modification of its terms, or
if any controversy arises,
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or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to the Escrow or its subject matter (each case, an "EXTRAORDINARY
SERVICE"), then the Escrow Agent shall be reasonably compensated for such
Extraordinary Services and reimbursed for all costs, reasonable attorney's fees,
including allocated costs of in-house counsel, and expenses occasioned by such
default, delay, controversy or litigation, and the Escrow Agent shall have the
right to retain all documents and/or other things of value at any time held by
the Escrow Agent in the Escrow until such compensation, fees, costs, and
expenses are paid. O2Diesel and the Stockholder jointly and severally promise to
pay these sums in connection with Extraordinary Services upon demand, which sums
shall be borne equally by O2Diesel and the Stockholder.
7. Rights and Duties of the Escrow Agent.
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(a) The Escrow Agent shall have no implied duties and no obligation to
take any action hereunder except for any action specifically provided by this
Agreement to be taken by the Escrow Agent. The Escrow Agent shall have no
responsibility or obligation of any kind in connection with this Agreement or
the Escrowed Shares, and shall not be required to deliver the same or any part
thereof or take any action with respect to any matters that might arise in
connection therewith, other than to receive, hold, and make delivery of the
Escrowed Shares as herein provided or by reason of any non-appealable order of a
court of competent jurisdiction. The Escrow Agent shall not be liable to any
party for any action taken or omitted to be taken hereunder or in connection
herewith except for its own gross negligence or willful misconduct or breach of
the specific provisions of this Agreement. The Escrow Agent may execute any of
its duties hereunder by or through employees, agents and attorneys-in-fact.
(b) O2Diesel and the Stockholder hereby agree to jointly and severally
indemnify, hold harmless and defend the Escrow Agent and its directors,
officers, agents and employees (collectively, the "INDEMNITEES") from and
against any and all claims, liabilities, losses, damages, fines, penalties and
expenses, including out-of-pocket and incidental expenses and legal fees and
expenses ("LOSSES"), that may be imposed on, incurred by or asserted against,
the Indemnitees or any of them for following any instructions or other
directions upon which they are authorized to rely pursuant to the terms of this
Agreement. In addition to and not in limitation of the immediately preceding
sentence, O2Diesel and the Stockholder also agree to indemnify and hold the
Indemnitees and each of them harmless from and against any and all Losses that
may be imposed on, incurred by or asserted against the Indemnitees or any of
them in connection with or arising out of the Escrow Agent's performance under
this Agreement, provided the Indemnitees have not acted with gross negligence or
engaged in willful misconduct. The provisions of this Section 7(b) shall
survive the termination of this Agreement and the resignation or removal of the
Escrow Agent for any reason.
(c) The Escrow Agent shall have the right to resign after first having
given O2Diesel and the Stockholder notice in writing of its intent to resign at
least thirty (30) days in advance. At the expiration of such thirty (30) days,
the Escrow Agent shall deliver the remaining Escrowed Shares to a successor
Escrow Agent designated in writing by O2Diesel and the Stockholder. If the
O2Diesel and the Stockholder fail to
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designate a successor to the Escrow Agent within such time, the Escrow Agent
shall, at the expense of O2Diesel and the Stockholder, institute a xxxx of
interpleader as contemplated by Section 7(e)(ii) hereof. Any corporation or
association into which the Escrow Agent in its individual capacity may be merged
or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation or
association to which all or substantially all the corporate trust business of
the Escrow Agent in its individual capacity may be sold or otherwise
transferred, shall be the Escrow Agent under this Agreement without further act.
(d) The Escrow Agent shall be entitled to rely upon the accuracy, act
in reliance upon the contents and assume the genuineness of any notice which is
given to the Escrow Agent in proper form pursuant to this Agreement and
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper person, without the necessity of the Escrow Agent verifying
the truth or accuracy thereof. The Escrow Agent shall not be obligated to
investigate or in any way determine whether the Option is exercisable.
(e) Should any controversy arise between or among O2Diesel, the
Stockholder and/or any other person, firm or entity with respect to this
Agreement, the Escrowed Shares or any part thereof, or the right of any party or
other person to receive the Escrowed Shares, or should O2Diesel and the
Stockholder fail to designate another Escrow Agent as provided in Section 7(c)
hereof, or if the Escrow Agent should be in doubt as to what action to take, the
Escrow Agent shall have the right (but not the obligation) to (i) withhold
delivery of the Escrowed Shares until the controversy is resolved and/or (ii)
institute a xxxx of interpleader in any court of competent jurisdiction to
determine the rights of the parties hereto (the right of the Escrow Agent to
institute such xxxx of interpleader shall not, however, be deemed to modify the
manner in which Escrow Agent is entitled to make transfers from the Escrowed
Shares as hereinabove set forth other than to tender the Escrowed Shares into
the possession and control of such court).
8. Term. This Agreement shall continue in full force and effect until
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all Escrowed Shares have been transferred in accordance with Section 4 hereof.
9. Miscellaneous.
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(a) Time Periods. For purposes of computing time periods hereunder,
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all references to "days" shall mean regular business days of the Escrow Agent.
Whenever under the terms hereof the time for giving a notice or performing an
act falls upon a Saturday, Sunday or bank holiday, such time shall be extended
to the Escrow Agent's next business day.
(b) Legal Counsel. The Escrow Agent may consult with its counsel or
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other counsel satisfactory to it with respect to any question relating to its
duties or responsibilities hereunder or otherwise in connection herewith and
shall not be liable for any reasonable action taken, suffered or omitted by the
Escrow Agent in good faith upon the advice of such counsel.
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(c) Severability. If one or more of the provisions contained herein
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shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(d) Survival of Indemnification. Notwithstanding termination of this
---------------------------
Agreement, the provisions of Sections 7(a) and 9(b) shall remain in full force
and effect for so long as the Escrow Agent may have any liability.
(e) Default. Waiver of any default shall not constitute waiver of any
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other or subsequent default.
(f) Notices. All notices and other communications hereunder shall be
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in writing (including wire, telefax or similar writing) and shall be delivered,
addressed or telefaxed as follows:
If to O2Diesel:
O2Diesel Corporation
1650 - 0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxx, President
Fax: (000) 000-0000
With a required copy to:
Blake, Xxxxxxx & Xxxxxxx LLP
Suite 2600, Three Bentall Centre
Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxx
Fax: (000) 000-0000
If to the Stockholder:
Distinct Holdings Ltd.
c/o Blake, Xxxxxxx & Xxxxxxx LLP
Suite 2600, Three Bentall Centre
Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxx
Fax: (000) 000-0000
If to the Escrow Agent:
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Comerica Bank
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Fax: 000-000-0000
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 9(f) (or in accordance with the latest
unrevoked written direction from such party); (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 9(f)
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
(g) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be deemed one and the same agreement.
(h) Amendment. This Agreement may not be amended or modified except by
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a written agreement signed by each of the parties hereto.
(i) Governing Law. This Agreement shall be construed, enforced, and
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administered in accordance with the laws of the State of New York, without
giving effect to any provision thereof that would compel the application of the
substantive laws of any other jurisdiction.
(j) Defined Terms. All defined terms used herein shall have the
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meanings herein defined or, if not defined herein, shall have the meanings
ascribed to such terms in the Support Agreement.
(k) Entire Agreement. This Agreement constitutes the entire agreement
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and understanding among O2Diesel, the Stockholder and the Escrow Agent and
supersedes any prior agreement and understanding relating to the subject matter
of this Agreement.
* * *
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IN WITNESS WHEREOF, this Option and Escrow Agreement has been executed by
the parties as of the date first above written.
O2DIESEL CORPORATION
(formerly, DYNAMIC VENTURES, INC.)
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: President
ESCROW AGENT:
COMERICA BANK
By:_______________________________
Name:_____________________________
Title:____________________________
SHAREHOLDER
DISTINCT HOLDINGS LTD.
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
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Title: President
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EXHIBIT A
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TERMINATION NOTICE
This Termination Notice shall constitute proper notice pursuant to
Section 1(b)(iii) of that certain Option and Escrow Agreement (the "Agreement")
dated effective as July 10, 2003, by and among O2Diesel Corporation (formerly,
Dynamic Ventures Inc.), a Washington corporation ("O2Diesel"), Distinct Holdings
Ltd. (the "Shareholder") and the Escrow Agent. Capitalized terms used in this
Termination Notice have the meanings set forth in the Agreement.
O2Diesel hereby provides notice that the following "Termination Event"
has occurred under Section 1(b)(iii) of the Agreement:
____ the closing of the Follow-On Private Placement;
____ the Initial Condition was not met within six (6) months of the
Share Exchange Closing Date;
____ the transaction(s) contemplated in the Initial Condition was not
closed within eight (8) months of the Share Exchange Closing Date
for any reason other than the non-closing of the Follow-On
Private Placement;
____ thirty (30) days have passed since an Exercise Event.
The undersigned has executed this Notice this ____ day of __________,
200__.
O2DIESEL CORPORATION
______________________________
Signature
______________________________
Name and Title
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EXHIBIT B
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EXERCISE NOTICE
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This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 1(b) of that certain Option and Escrow Agreement (the
"Agreement") dated as of effective July 10, 2003, by and among O2Diesel
Corporation (formerly, Dynamic Ventures Inc.), a Washington corporation
("O2Diesel"), Distinct Holdings Ltd. (the "Stockholder") and the Escrow Agent.
O2Diesel hereby elects to exercise optionee's option to purchase
__________ shares of Common Stock of O2Diesel at a price of US$0.20 per share,
for aggregate consideration of $______, on the terms and conditions set forth in
the Agreement. Such aggregate consideration, in the form specified in Section
1(b) of the Agreement, accompanies this notice.
The undersigned has executed this Notice this ____ day of __________,
200__.
O2DIESEL CORPORATION
______________________________
Signature
______________________________
Name and Title
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EXHIBIT C
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STOCK POWER
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STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
O2Diesel Corporation, a Washington corporation, one million (1,000,000) shares
of Common Stock of O2Diesel Corporation represented by stock certificate number
___________ and does hereby irrevocably constitute and appoint Comerica Bank,
its attorney to transfer said shares on the books of said corporation with full
power of substitution in the premises in accordance with that certain Option and
Escrow Agreement dated effective as of July 10, 2003.
DATED: ________, 2003
SIGNATURE:
DISTINCT HOLDINGS LTD.
_________________________________________
_________________________________________
Print or Type Name and Title
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