STOCK EXCHANGE AGREEMENT
THIS
STOCK EXCHANGE AGREEMENT (the “Agreement”) is made and entered into as of this
24th
day of April, 2009 (the “Effective Date”) by and among Tree Top Industries,
Inc., a Nevada corporation (the “Company”), BioEnergy Applied Technologies, LLC,
a Nevada corporation (“BAT”) and each of the shareholders of BAT listed on
Section 1.1(a)(i)-(ii) (collectively, the “Shareholders” and together with BAT
and the Company, individually a “Party” and collectively, the
“Parties”).
WHEREAS:
BAT is the originator and incubator of environmentally friendly technologies
useful in the areas of energetic materials, chemicals and chemical processes,
gasification, and the safe and novel destruction of biological and other
hazardous wastes;
WHEREAS:
the Shareholders are interested in transferring all of the outstanding common
stock of BAT (the “BAT Stock”) to the Company;
WHEREAS:
the Company is willing to undertake a common stock exchange with the
Shareholders; and
WHEREAS:
the Company has agreed to use its best efforts to raise capital on behalf of BAT
and the Shareholders desire that the Company perform such services for
BAT.
NOW
THEREFORE, in consideration of the mutual promises and the covenants and
promises hereinafter contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
SECTION
1. EXCHANGE OF BAT
STOCK.
1.1 Exchange. On the terms and
subject to the conditions set forth in this Agreement, at the Closing (as
defined below) the Shareholders will sell, convey, transfer and assign to the
Company, and the Company will accept from the Shareholders all right, title and
interest in and to the BAT Stock, which BAT Stock are held as
follows:
(i) 850
shares of BAT Stock are held by BioEnergy System Management, LLC., a corporation
owned/controlled by Xx. Xxxxxxxxx Xxxxxxxxxx.
(ii) 850
shares of BAT Stock are held by Wimase Limited, a corporation owned/controlled
by Xxxxx X. Xxxxxx.
(iii) 300
Shares of BAT Stock are held by Energetic Systems Inc., LLC., a corporation
owned/controlled by Xx. Xxxxxxxxxx and Xxxxx Xxxxxx.
1.2 Due
Diligence Review. The Company shall have a period of time commencing
upon the Effective Date and ending at 5:00 P.M. ten (10) business days
thereafter to review such business, legal and accounting due diligence matters,
in such manner as the Company may deem necessary or appropriate, associated with
BAT and its affiliates, including, but not limited to the adequacy of the
valuation of BAT provided by Xx. Xxxxxxxxx Xxxxxxxxxx. The
Shareholders shall have an equal right of due diligence, as pertaining to the
Company.
1.3 Closing
Date. The closing (“Closing”) shall occur on or before May __, 2009 and shall be
on a date reasonably agreed upon by the parties hereto after the conditions set
forth in Section 6 below have been met or have been waived in writing by the
applicable party (the “Closing Date”).
1.4
Exchange Rate. The exchange rate shall be 2,000 shares of common
stock of the Company, par value $.001 per share (the “Common Stock”), per each
share of BAT Stock, which equals 3,500,000 shares of Common Stock (the
“Shareholder Common Stock”).
1.5 Escrow. At
Closing, the Shareholder Common Stock shall be placed into an escrow account for
a period of eighteen (18) months, pursuant to an escrow agreement to be
reasonably agreed to by the Parties (the “Escrow Agreement”). The
Escrow Agreement shall include a provision which provides for a return to the
Company of some or all Shareholder Common Stock in the event BAT incurs any
liability, lien, tax, compensation, or similar charge, related to any period
prior to the Closing Date. Furthermore, if a liability, lien, tax, compensation,
or similar charge, related to any period prior to the Closing Date, is
discovered after the termination of the Escrow Agreement, the Company may place
a direct lien on the aggregate shares of Shareholder Common Stock, pro rata, which shall be of a
value equal to such liability, lien, tax, compensation, or similar
charge.
1.6 Voting. For
a period of two (2) years from the Closing Date, the voting rights pertaining to
such Shareholder Common Stock (the “Voting Rights”) shall be vested in Xx.
Xxxxxxxxx Xxxxxxxxxx. In the event Xx. Xxxxxxxxxx is unable or
unwilling to exercise the Voting Rights, the Voting Rights shall automatically
be transferred to the Secretary of the Company, or to his or her
assignee. The above shall be governed by a voting agreement to be
reasonably agreed to by the Parties (the “Voting Agreement”).
1.7 Discount. The
Shareholders are hereby granted the right to purchase additional shares of
Common Stock (which shall have the restrictions on resale described in Section
2.1 below) under the following terms:
(a) For
sixty (60) calendar days following the Closing Date the additional shares may be
purchased by the Shareholders at a price per share equal to seventy percent
(70%) of the average closing price of the Common Stock for the previous five (5)
business days; and
(b) For
sixty (60) calendar days following the period covered in Section 1.7(a) the
additional shares may be purchased by the Shareholders at a price per share
equal to eighty percent (80%) of the average closing price of the Common Stock
for the previous five (5) business days.
1.8 Dilution. The
Shareholder’s ownership interest in the Company shall not be diluted by any
action of the Board of Directors which a reasonable person would find indicative
of an action made without sound business judgment.
SECTION
2. RESALE OF SHAREHOLDER COMMON
STOCK.
2.1
Restrictions on Resale. The Shareholder Common Stock shall be
restricted from trading for two (2) years following the Closing, as is the
Company’s practice in the issuance of Common Stock as consideration in a
transaction or as compensation for services
performed. Notwithstanding the foregoing, the Shareholders may
transfer the Shareholder Common Stock to: (a) any of such Shareholder’s spouse
or lineal descendants, heirs, executors or legal representatives or trusts for
the benefit of such Shareholder and (b) to any Affiliate of such Shareholder,
provided in each instance that such transferee agrees in writing to be bound by
all of the provisions of this Agreement. Affiliate shall mean any person or
entity, directly or indirectly controlling, controlled by or under common
control with such person or entity.
2.2 Rule
144. The shares of Shareholder Common Stock may be resold in the
future (after two years) under Rule 144 (“Rule 144”) under the Securities Act of
1933 (the “Securities Act”), subject to compliance with all of the provisions of
such Rule and the terms herein. Rule 144 provides that securities may be resold
after a one-year holding period from the date of payment subject to compliance
with such Rule. Among other things, an order to sell the securities may only be
placed after Form 144 has been mailed to the Securities and Exchange Commission
(the “Commission”), the securities must be sold to or through a broker-dealer,
the volume limitations must be met (i.e., the greater of 1% of the outstanding
shares or the average weekly trading volume for the four weeks preceding the
filing of Form 144) and there can be no solicitation of any buy
orders.
2.3 Registration
Rights.
(a) Piggyback
Registration.
(i) Each
time that the Company proposes to register any of its Common Stock under the
Securities Act, in connection with a proposed offer and sale of its Common
Stock, either for its own account or on behalf of any other security holder
(“Proposed Registration”), other than pursuant to a registration statement on
Form X-0, Xxxx X-0 or any similar forms, the Company shall promptly give written
notice of such Proposed Registration to each of the Shareholders, and shall
offer to the Shareholders the right to request inclusion of the Shareholder
Common Stock, issued pursuant to the terms of the Agreement, in the Proposed
Registration.
(ii) The
Shareholders shall have 30 days from the receipt of such notice to deliver to
the Company a written request specifying the number of shares of Shareholder
Common Stock that such Shareholder intends to sell in the Proposed Registration,
as well as information on Shareholder’s intended method of
disposition.
(iii) If
the offering is to be an underwritten offering, and a Shareholder proposes to
distribute its shares of Shareholder Common Stock through such underwritten
offering, such Shareholder agrees to enter into an underwriting agreement with
the underwriter or underwriters selected for such underwriting by the Company.
The Shareholders may withdraw their Shareholder Common Stock from such offering
at any time until the day prior to the Effective Date by written notice to the
Company and the managing underwriter.
Notwithstanding
the foregoing, if the managing underwriter determines and advises the Company in
writing that the inclusion of the Shareholder Common Stock in the underwritten
public offering would interfere with the successful marketing of such
securities, the managing underwriter may exclude the Shareholder Common Stock,
on a pro rata basis, from the Proposed Registration.
(b) Preparation
and Filing. If and whenever the Company is under an obligation pursuant to this
Agreement to use its best efforts to affect the registration of any shares of
its Common Stock, the Company shall, as expeditiously as
practicable:
(i)
prepare and file with the Commission a registration statement for such
securities, and use its best efforts to cause such registration statement to
become and remain effective; and
(ii)
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective until the earlier of (A)
the sale of all Common Stock covered thereby or (B) three months after the
Effective Date of the registration statement, and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
Common Stock covered by such registration statement.
SECTION
3. REPRESENTATIONS AND
WARRANTIES.
3.1 BAT’s
Representations and Warranties. BAT hereby represents and warrants to the
Company, all of which representations and warranties are true, complete, and
correct in all respects as of the Effective Date and will be as of the Closing
Date, as follows:
(a) Organization
and Qualification. BAT is a limited liability company duly formed, validly
existing and in good standing under the laws of Nevada. BAT has all requisite
power and authority to own those properties and conduct those businesses
presently owned or conducted by it, and is duly qualified to do business as it
is now being conducted and is in good standing as a foreign corporation in each
other jurisdiction where the property owned, leased or used by it or the conduct
of its business makes such qualification necessary, except for those jurisdictions in which
the adverse effects of all such failures by BAT to be qualified, licensed or
admitted and in good standing does not have a material adverse effect on the
condition of BAT. The copies of the certificate of formation and
operating agreement of BAT, which have been (or will be, at least two days
before the expiration of the due diligence review period discussed in Section
1.2 above) delivered to the Company, are complete and correct and are in full
force and effect at the Effective Date.
(b) Authorization,
No Restrictions, Consents or Approvals. BAT has full power and authority to
enter into and perform this Agreement. This Agreement has been duly executed by
BAT and constitutes the legal, valid, binding and enforceable obligation of BAT
and is enforceable against it in accordance with its terms subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws of general applicability relating to creditors rights and to
general principles of equity. The execution and delivery of this Agreement and
the consummation by BAT of the transactions contemplated herein, do not and will
not on the Closing Date (i) conflict with or violate any of the terms of the
certificate of formation and operating agreement of BAT or any applicable law
relating to BAT, (ii) conflict with, or result in a breach of any of the terms
of, or result in the acceleration of any indebtedness or obligations under, any
agreement, obligation or instrument by which BAT is bound or to which any
property of BAT is subject, or constitute a default thereunder, (other than such
conflicts, violations or breaches (A) which do not adversely affect the validity
or enforceability of this Agreement or have a material adverse effect
on the condition of BAT or (B) as would occur solely as a result of the identity
or the legal or regulatory status of Company); (iii) result in the creation or
imposition of any lien on any of the assets of BAT, (iv) constitute an event
permitting termination of any agreement or instrument to which BAT is a party or
by which any property or asset of BAT is bound or affected, pursuant to the
terms of such agreement or instrument, or (v) conflict with, or result in or
constitute a default under or breach or violation of or grounds for termination
of, any license, permit or other governmental authorization to which BAT is a
party or by which BAT may be bound, or result in the violation by BAT of any
laws to which it may be subject, which would materially adversely affect the
transactions contemplated herein. No authorization, consent or approval of,
notice to, or filing with, any public body or governmental authority or any
other person is necessary or required in connection with the execution and
delivery by BAT of this Agreement or the performance by BAT of its obligations
hereunder except (A)
where the failure to obtain any such consent, approval or action, to make any
such filing or to give any such notice could not reasonably be expected to
adversely affect the ability of the Shareholders and BAT to consummate the
exchange contemplated hereinor to perform their respective obligations
hereunder, or to have a material adverse effect on the condition of BAT or (B)
those as would be required solely as a result of the identity or the legal or
regulatory status of Company.
(c) Capitalization. As
of the Effective Date, BAT had 2,000 issued and outstanding shares of BAT
Stock.
(d) Brokers’
Fees. BAT has no liability or obligation to pay any fees or commissions to any
broker, finder, or agent, other than Xxxxxxx Xxxx, with respect to the
transactions contemplated by this Agreement for which the Company could become
liable or obligated.
(e) Assets. BAT has good and marketable
title to the material assets it holds (the “Assets”), free and clear of any
lien, except for liens that neither
individually nor in the aggregate could reasonably be expected to have a
material adverse effect on the business or condition of BAT. The
Assets are not subject to any Contracts (as defined on Schedule 3.1(e)) other
than those listed on Schedule 3.1 (e).
(f) Intellectual
Property. BAT owns or possesses all right, title and interest (or holds valid
licenses) to use, whether or not registered, all intellectual property listed on
Schedule 3.1 (f) (the “Intellectual Property”). Schedule 3.1 (f)
includes all United States, state and foreign registrations or applications for
registration thereof and all agreements relating thereto. All actions reasonably
necessary to maintain the registered Intellectual Property have been taken by
BAT. BAT is not required to pay any royalty, license fee or similar compensation
in connection with the current or prior conduct of its business. The use by BAT
of any of the Intellectual Property does not violate the proprietary rights of
any other person and no claims have been asserted by any person with respect to
the use of the Intellectual Property by BAT. No person is infringing upon the
Intellectual Property. BAT has taken reasonable security measures to protect the
secrecy, confidentiality and value of the Intellectual Property. The
value of the Intellectual Property is directly and inseparably linked with
intellectual property held by UTEC, Inc., a Nevada corporation
("UTEC"). The Assets include the Intellectual Property.
(g) Disclosure.
No statement, representation or warranty by BAT in this Agreement, including the
Schedules hereto, contains any untrue statement of material fact, or omits to
state a material fact, necessary to make such statements, representations or
warranties not misleading.
(h) Tax
Matters.
(i) BAT
has filed all tax returns that it was required to file. To the
knowledge of the Shareholders, all such tax returns were materially correct and
complete in all respects. To the knowledge of the Shareholders, all
taxes owed by BAT have been paid. BAT currently is not the
beneficiary of any extension of time within which to file any tax
return. No claim has ever been made by an authority in a jurisdiction
where BAT does not file tax returns that it is or may be subject to taxation by
that jurisdiction.
(ii) To
the knowledge of the Shareholders, BAT has withheld and paid all taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, Shareholder, or other third
party.
(i) Litigation. Schedule
3.1 (i) sets forth information regarding any material litigation
matters. Other than as indicated in Schedule 3.1 (i), the
Shareholders have no knowledge that any action, suit, proceeding, hearing, or
investigation may be brought or threatened against BAT.
(j) Employees. To
the knowledge of BAT no executive, key employee, or group of employees has any
plans to terminate employment. BAT is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining
disputes. BAT has not committed any unfair labor
practice.
(k) Environment,
Health, and Safety. BAT has complied with all Environmental, Health,
and Safety Laws, excepts for such failures to comply which would not have a
material adverse effect, individually or in the aggregate, on the condition of
BAT, and to the knowledge of the Shareholders no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply.
(l) Liabilities. All
liabilities of BAT that would be required to be disclosed on a financial
statement prepared in accordance with generally acceptable accounting principles
are listed on Schedule 3.1(l).
3.2 The
Shareholders’ Representations and Warranties. Each of the
Shareholders represents and warrants, jointly and severally, to the Company, all
of which representations and warranties are true, complete, and correct in all
respects as of the Effective Date and will be as of the Closing Date, as
follows:
(a) Authorization
of Transaction. Each Shareholder has full power and authority to
execute and deliver this Agreement and to perform the obligations of such
Shareholder hereunder. This Agreement constitutes the valid and
legally binding obligation of the Shareholders, enforceable in accordance with
its terms and conditions. The Shareholders, as solely pertaining to
their status as shareholders of BAT, need not give any notice to, make any
filing with, or obtain any authorization, consent or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement.
(b) Title.
The Shareholders hold of record and own beneficially the BAT Stock, free and
clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), taxes, security interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. No Shareholder is a party to any option, warrant, purchase
right, or other contract or commitment that could require the Shareholder to
sell, transfer, or otherwise dispose of the BAT Stock.
(c) Noncontravention. Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which a
Shareholder is subject, or conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which a
Shareholder is a party or by which a Shareholder is bound or to which any of the
assets of a Shareholder is subject.
(d)
Brokers’ Fees. No Shareholder has any liability or obligation to pay
any fees or commissions to any broker, finder, or agent, other than Xxxxxxx
Xxxx, with respect to the transactions contemplated by this Agreement for which
the Company could become liable or obligated.
(e)
Investment. Each Shareholder:
(i) understands
that the Shareholder Common Stock has not been registered under the Securities
Act, or under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering;
(ii) that
there shall be imprinted on the face of each certificate representing the
Shareholder Common Stock the following legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”). THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT WITH RESPECT TO SUCH SECURITIES, OR AN OPINION OF THE ISSUER’S COUNSEL TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT.”
(iii)
acknowledges that the Shareholder Common Stock will be restricted from trading
for a period of two (2) years from the Effective Date, which restriction may be
reduced in length at the sole discretion of the Board of Directors of the
Company;
(iv) understands
the provisions of Rule 144 permit limited resale of securities purchased in a
private transaction, subject to the satisfaction of certain conditions as set
forth in the Rule;
(v) is
acquiring the Shareholder Common Stock solely for the account of such
Shareholder for investment purposes, and not with a view to the distribution
thereof;
(vi) is
a sophisticated investor with knowledge and experience in business and financial
matters;
(vii) has
received information concerning the Company and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and the
risks inherent in acquiring and holding the Common Stock; and
(viii) is
able to bear the economic risk and lack of liquidity inherent in holding the
Common Stock.
3.3 Company’s
Representations and Warranties. The Company hereby represents and warrants to
the Shareholders, all of which representations and warranties are true,
complete, and correct in all respects as of the Effective Date and will be as of
the Closing Date, as follows:
(a) Organization
and Qualification. The Company is a corporation duly organized, validly existing
and in good standing under the laws of Nevada. The Company has all requisite
power and authority to own those properties and conduct those businesses
presently owned or conducted by it, and is duly qualified to do business as it
is now being conducted and is in good standing as a foreign corporation in each
other jurisdiction where the property owned, leased or used by it or the conduct
of its business makes such qualification necessary, except in any case where a
failure so to qualify would not have a material adverse effect on the Company.
The copies of the articles of incorporation, certificate of designation and
bylaws of the Company, which have been delivered to the Shareholders, are
complete and correct and are in full force and effect at the Effective
Date.
(b) Authorization;
No Restrictions, Consents or Approvals. The Company has full power and authority
to enter into and perform this Agreement and all corporate action necessary to
authorize the execution and delivery of this Agreement and the performance its
obligations hereunder has been duly taken. This Agreement has been duly executed
by the Company and constitutes the legal, valid, binding and enforceable
obligation of the Company, enforceable against the Company in accordance with
its terms.
(c) Disclosure.
No statement by the Company in the documents described in the receipt attached
hereto, contains any untrue statement of a material fact, or omits to state any
material fact, necessary to make such statements, in the light of the
circumstances under which they were made, not misleading. The Company knows of
no material fact which specifically applies to the Company and (so far as the
Company can reasonably foresee) materially threatens the Company or its
business, which has not been disclosed in such documents, or disclosed to the
Shareholders.
(d) No
Broker. Other than Xxxxxxx Xxxx, the Company has used no broker, and knows of no
broker, which may have a claim against BAT or any Shareholder for brokerage of
this transaction.
(e) Intellectual
Property. The Company hereby recognizes and accepts that the value of the
Intellectual Property is directly and inseparably linked with intellectual
property held by UTEC and the Company shall use reasonable efforts to acquire
such intellectual property, within a reasonable amount of time, through the
initiation and completion of a registered exchange offering with the
shareholders of UTEC.
SECTION
4. CAPITAL
RAISE.
4.1 Finance
Services. The Company hereby agrees to use its best efforts to introduce
potential investors (each, an “Investor”) to BAT and assist in the negotiation
of the terms of any resulting investment. The Company hereby
acknowledges that BAT seeks financing of Five Million Dollars
($5,000,000).
4.2 Best
Efforts. The Company undertakes to use its best efforts to find
funding sources for BAT. The Company shall also assist in bridging
the gap, if any, in operating cash required by BAT in the event such required
capital has not been raised from Investors. Such assistance by the
Company shall be in any reasonable form as related to or required by the source
from which, and the process by which, such bridge financing is acquired,
including assisting in gaining approval for the borrowing of such
funds. Notwithstanding the above, any such action taken by the
Company shall require the approval of the Board of Directors of the Company,
such approval may be withheld for any reason.
SECTION
5. COVENANTS
PRIOR TO CLOSING.
5.1 Conduct
of Business. BAT and the Shareholders covenant that, except as otherwise
consented to in writing by the Company, from and after the Effective Date until
the Closing or the earlier termination of this Agreement, BAT (i) will use
reasonable efforts consistent with past practice to preserve the Assets, (ii)
shall not enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale relating to the Assets other than Contracts in the ordinary
course of business; (iii) shall not enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, or permit any lien
to be placed upon the Assets
other than in the ordinary course of business; (iv) will keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees; and (v) will pay all salary and bonuses due
to its employees as of Closing.
5.2 Takeover
Statutes; Inconsistent Actions. If any “fair price,” “moratorium,”
“control share,” “business combination,” “stockholder protection” or similar or
other anti-takeover statute or regulation enacted under any state or federal law
shall become applicable to the transaction, the Company shall grant such
approvals and take all such actions as are within its authority so that the
Closing may occur as promptly as practicable on the terms contemplated hereby
and otherwise use its best efforts to eliminate the effects of such statute or
regulation on the transaction.
SECTION
6. CLOSING.
6.1 Conditions
to the Company’s Obligations. The obligations of the Company under this
Agreement, (including, without limitation, the obligation to consummate and
affect the exchange of shares), shall be subject to satisfaction of the
following conditions, unless waived by the Company:
(a) BAT
and the Shareholders shall have performed, in all material respects, all
agreements, and satisfied in all material respects all conditions on its part to
be performed or satisfied hereunder at or prior to the Closing
Date.
(b)
All representations and warranties of BAT and the Shareholders made herein shall
have been true and correct in all material respects when made (or will have been
made true and correct by the Closing Date), shall have continued to have been
true and correct in all material respects at all times subsequent thereto, and
shall be true and correct in all material respects on and as of the Closing Date
as though made on, as of and with reference to such Closing Date.
(c) There
shall not have occurred any material adverse change with respect to the
Assets.
(d) The
Shareholders shall have executed and delivered to the Company all documents
necessary to transfer the BAT Stock to the Company, as contemplated by this
Agreement.
(e) The
Company shall have reasonably completed its due diligence review.
6.2 Conditions
to BAT’s and the Shareholders’ Obligations. The obligations of BAT and the
Shareholders under this Agreement, (including, without limitation, the
obligation to consummate and effect the equity exchange) shall be subject to
satisfaction of the following conditions, unless waived by BAT and the
Shareholders:
(a)
The Company shall have performed in all material respects all agreements, and
satisfied in all material respects all conditions on its part to be performed or
satisfied hereunder, at or prior to the Closing Date.
(b) All
of the representations and warranties of the Company herein shall have been true
and correct in all material respects when made, shall have continued to have
been true and correct in all material respects at all times subsequent thereto,
and shall be true and correct in all material respects on and as of the Closing
Date as though made on, as of, and with reference to such Closing
Date.
(c) The
Company shall have executed and delivered to the Shareholders all documents
necessary to transfer the Shareholder Common Stock to the Shareholders, as
contemplated by this Agreement.
(d) BAT
and the Shareholders have reasonably completed their due diligence
review.
6.3 Closing
Documents.
(a) At
the Closing, BAT or a Shareholder shall deliver to the Company, in form and
substance reasonably satisfactory to the Company, all consents required under
the Contracts. Furthermore, BAT or a Shareholder shall deliver all
documents necessary to (i) effect or evidence the sale, conveyance, assignment
and transfer to the Company of the BAT Stock, as contemplated hereby, (ii) place
the Company in full possession and enjoyment of the BAT Stock, as contemplated
hereby and (iii) govern and document all other rights and obligations of the
Parties contemplated herein. The items listed in this Section 6.3(a)
shall include the following:
(A) A
certificate evidencing the BAT Stock registered in the name of the
Company.
(B) Copies
of BAT’s operating agreement and resolutions adopted by its Board of Directors,
authorizing the execution and delivery of, and performance of the obligations
under, this Agreement.
(C) A
certified copy of BAT’s certificate of formation, including amendments, if any,
together with a certificate of good standing issued by the Secretary of State of
Nevada and dated not more than 20 business days prior to the Closing
Date.
(D) The
Escrow Agreement.
(E) The
Voting Agreement.
(b) At
the Closing, the Company shall deliver to the Shareholders, in form and
substance reasonably satisfactory to the Shareholders, all appropriate documents
to (i) effect or evidence the sale, conveyance, assignment and transfer to the
Shareholders of the Shareholder Common Stock, as contemplated hereby, (ii)
necessary to place the Shareholders in full possession and enjoyment of the
Shareholder Common Stock, as contemplated hereby and (iii) govern and document
all other rights and obligations of the Parties contemplated
herein. The items listed in this Section 6.3(b) shall include the
following:
(A) Certificates
evidencing the Shareholder Common Stock registered in the name of the
Shareholders.
(B) The
Escrow Agreement.
(C) The
Voting Agreement.
SECTION
7. POST-CLOSING
CONVENANTS.
7.1 Autonomy.
For a period of two (2) years from the Closing Date, the Company shall maintain
BAT as a separate entity, to the extent BAT remains a financially viable going
concern.
7.2 Employment.
The Company, through its ownership of BAT, will cause BAT to enter into an
employment contract with Xxxxxxxxx Xxxxxxxxxx for the management of BAT in the
form of Exhibit A.
7.3 Indemnity
for Taxes. From and after the Closing Date, the Shareholders agree to
indemnify and hold harmless the Company against Taxes imposed on BAT with
respect to taxable years or periods ending on or before the Closing
Date. Payment of such indemnity shall be in accordance with an escrow
agreement to be reasonably agreed to by the Parties. The Company
shall indemnify and hold harmless the Shareholders from and against any Taxes
imposed on BAT or the Company in respect of any taxable year or period that
begins after the Closing Date.
7.4. Apportionment
of Taxes. (a) In order to apportion appropriately any Taxes relating
to any taxable year or period that begins prior to Closing Date and ends after
the Closing Date, the Parties shall, to the extent permitted under applicable
law, elect with the relevant Taxing authority to treat for all purposes, the
Closing Date as the last day of the taxable year or period of BAT, and such
period shall be treated as a short taxable year for purposes of this Section
7.4.
(b)
In any case where applicable law does not permit BAT to treat the Closing Date
as the last day of the taxable year or period of BAT, with respect to Taxes that
are payable with respect to such period, the portion of any such Tax that is
allocable to the portion of such period ending on the Closing Date shall
be:
(i) in
the case of Taxes that are either (A) based upon or related to income or
receipts, or (B) imposed in connection with any sale or other transfer or
assignment of property (real or personal, tangible or intangible) deemed equal
to the amount which would be payable if the taxable year or period ended
on the Closing Date (except that, solely for purposes of
determining the marginal Tax rate applicable to income or receipts during such
period in a jurisdiction in which such Tax rate depends upon the level of income
or receipts, annualized income or receipts may be taken into account, if
appropriate, for an equitable sharing of such Taxes); and
(ii) in
the case of Taxes not described in subparagraph (i) above that are imposed on a
periodic basis and measured by the level of any item, deemed to be the amount of
such Taxes for the entire period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is the number of calendar days
in the relevant period ending on the Closing Date and the denominator
of which is the number of calendar days in the entire relevant
period.
7.5. Contests. (a)
After the Closing Date, the Company shall, and prior to the Closing Date, BAT
shall, promptly notify the other Party in writing of any written notice of a
proposed assessment or claim in an audit or administrative or judicial
proceeding involving the other Party which, if determined adversely
to the taxpayer, would be grounds for indemnification under this Section 7;
provided, however, that a failure to give such notice will not affect the
Shareholders’ or the Company’s right, as the case may be, to indemnification
hereunder, except to the extent, if any, that, but for such failure, the other
Party could have avoided or contested the Tax liability in
question.
(b) In
the case of an audit or administrative or judicial proceeding that relates to
any period ended on or before the Closing Date, provided that within 30 days
after the Shareholders receive the written notice from Company, and prior to
taking any action with respect to such audit or administrative or judicial
proceeding, the Shareholders acknowledges in writing the Shareholders’ liability
under Section7.3(a) of this Agreement to hold the Company harmless against the
full amount of any adjustment which may be made as a result of such audit or
proceeding that relates to such period, except to the extent provided otherwise
in Section 7.5(c) below, The Shareholders shall have the right at the
Shareholders’ own expense to control the conduct of such audit or
proceeding. The Company also may participate in any such audit or
proceeding at the Company’s expense and, if the Shareholders do not assume the
defense of any such audit or proceeding, the Company may, without any
effect to the Company’s right to indemnification under this Section 7, defend
the same in such manner as it may deem appropriate, including, but not limited
to, settling such audit or proceeding after giving five days’ prior written
notice to the Shareholders setting forth the terms and conditions of
such settlement.
(c) With
respect to a proposed adjustment for which both the Shareholders (as evidenced
by the Shareholders’ acknowledgment under this Section 7.5) and the Company
could be liable, or which involves an adjustment to a period ended on or before
the Closing Date or a change of accounting method or other issue that recurs for
any post Closing period (whether or not the subject of an audit or
proceeding at such time), (i) each Party may participate in the audit or
proceeding, and (ii) the audit or proceeding shall be controlled by that Party
which would bear the burden of the greater portion of the sum of the adjustment
and any corresponding adjustments that may reasonably be anticipated for future
Tax periods. The principle set forth in the preceding sentence shall
govern also for purposes of deciding any issue that must be decided jointly (in
particular, choice of judicial forum) in situations in which separate issues are
otherwise controlled hereunder by the Company and the Shareholders.
|
SECTION
8.
|
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
|
8.1 Survival
of Representations and Warranties and Covenants. The representations,
warranties, covenants, and obligations of the Company, BAT and the Shareholders
set forth in this Agreement and in any certificate, agreement, or instrument
delivered in connection with the transactions contemplated hereby, shall survive
the Closing for a period of eighteen (18) months (the “Cut-off Date”) after
which time there shall be no liability in respect thereof on the part of either
Party or the Parties’ officers, directors, employees, agents and
Affiliates.
8.2 No
Other Representations. Notwithstanding anything to the contrary contained in
this Agreement, it is the explicit intent of each Party that the Company, the
Shareholders and BAT are making no representation or warranty whatsoever,
express or implied, except those representations and warranties contained in
Section 3. In particular, the Company, the Shareholders and BAT make
no representation or warranty with respect to any financial projection or
forecast relating to the condition of the Company or BAT. With
respect to any projection or forecast delivered by or on behalf of the Company,
BAT or the Shareholders, it is hereby acknowledged that (a) there are
uncertainties inherent in attempting to make such projections and forecasts, (b)
the Parties are familiar with such uncertainties, (c) the Parties
are taking full responsibility for making its own evaluation of the
adequacy and accuracy of all such projections and forecasts and (d) their shall
be no claim against any Party with respect thereto. None of the
Company, BAT or the Shareholders are aware of any facts or circumstances that
would serve as a basis for a claim based upon a breach of any representation and
warranty contained in this Agreement, or breach of any covenant or agreements to
be performed at or prior to Closing. A Party shall be deemed to have
waived in full any breach of any of Shareholders’ representations,
warranties, covenants and agreement of which such Party has such awareness at
the Closing.
8.3 Indemnification
by the Shareholders. In addition to and not in limitation of any Shareholders’
indemnification obligations set forth elsewhere in this Agreement (but subject
to the Cut-off Date), the Shareholders jointly shall, defend, indemnify, and
hold harmless the Company and its affiliates and its respective officers,
directors, shareholders, agents and employees (individually, a “Company
Indemnitee” and collectively the “Company Indemnitees”), from and against any
and all claims, losses, deficiencies, liabilities, obligations, damages,
penalties, punitive damages, costs, and expenses (including, without limitation,
reasonable legal, accounting and consulting fees), whether or not resulting from
third party claims (collectively, “Losses”), suffered by a Company Indemnitee,
which arise out of or result from:
(a) any
inaccuracy or misrepresentation in or breach of any of the representations,
warranties, covenants or agreements made by BAT or the Shareholders in this
Agreement or in any document, certificate or affidavit delivered by BAT or the
Shareholders pursuant to the provisions of this Agreement;
(b) any
obligation, liability, debt or commitment of BAT which is required to be
disclosed herein but which is not disclosed, whether or not paid by the Company;
and
(c) any
other matter related to the use or ownership of the Assets prior to the Closing
(including, but not limited to, all acts, omissions and conditions existing or
occurring prior to the Closing for which any of the Company Indemnitees is
alleged to be liable pursuant to any successor or similar theory of
liability).
8.4 Indemnification
by the Company. The Company shall defend, indemnify and hold harmless, the
Shareholders and their affiliates, agents, employees, heirs, successors and
assigns (the “Shareholder Indemnitees”) from and against any and all Losses,
suffered by the Shareholder Indemnitees, which arise out of or result
from:
(a)
any inaccuracy or misrepresentation in or breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
any document, certificate or affidavit delivered by the Company pursuant to the
provisions of this Agreement; or
(b) any
other matter related to the use or ownership of the Assets subsequent to the
Closing (including, but not limited to, all acts, omissions and conditions
occurring after the Closing).
8.5 Indemnification
Payments. The indemnity payments, whether by the Company or a Shareholder, to be
made under this Agreement, shall initially be made in immediately available
funds, if any, and then through the return of the Shareholder Common Stock or
BAT Stock, as applicable, by the indemnifying party. The indemnifying
Party is not required to use any other source as a means of making any indemnity
payments, but must account for any Shareholder Common Stock or BAT Stock such
Party has sold or transferred.
8.6
Procedure for Third Party Claims.
(a) Notice
to the indemnifying Party shall be given promptly after receipt by a Shareholder
Indemnitee or a Company Indemnitee of actual knowledge of the commencement of
any action or the assertion of any claim that will likely result in a claim by
it for indemnity pursuant to this Agreement. Such notice shall set forth in
reasonable detail the nature of such action or claim to the extent known, and
include copies of any written correspondence or pleadings from the party
asserting such claim or initiating such action. The indemnified party shall be
entitled, at its own expense, to assume or participate in the defense of such
action or claim. If the indemnifying party assumes the defense of such action or
claim, it shall be conducted by counsel chosen by such party and approved by the
party seeking indemnification, which approval shall not be unreasonably
withheld.
(b) For
actions where the indemnifying party does not exercise its right to assume the
defense, the party seeking indemnification shall assume and control the defense
of and contest such action with counsel chosen by it and approved by the
indemnifying party, which approval shall not be unreasonably withheld. The
indemnifying party shall be entitled to participate in the defense of such
action, the cost of such participation to be at its own expense. The
indemnifying party shall pay the reasonable attorneys’ fees and expenses of the
party seeking indemnification to the extent that such fees and expenses relate
to claims as to which indemnification is payable under Sections 8.2 or 8.3, as
such expenses are incurred.
(c) Both
the indemnifying party and the indemnified party shall cooperate fully with one
another in connection with the defense, compromise, or settlement of any such
claim or action, including, without limitation, by making available to the other
all pertinent information and witnesses within its control.
(d) No
indemnified party shall have the right to settle any action brought against it
without the consent of the indemnifying party. The indemnifying party shall have
the right to settle any action brought against an indemnified party as long as
the indemnified party has been delivered a complete release as a condition of
the settlement.
8.7 Remedies
Cumulative. The remedies provided for herein shall be cumulative and shall not
preclude assertion by any party of any other rights or the seeking of any other
remedies against any other party.
8.8 Successors.
The merger, consolidation, liquidation, dissolution or winding up of, or any
similar transaction with respect to the Parties hereto, shall not affect in any
manner the obligations of the Parties pursuant to this Section 8 or any other
term or provision of this Agreement, and the parties covenant and agree to make
adequate provision for their liabilities and obligations hereunder in the event
of any such transaction.
SECTION
9. GENERAL
PROVISIONS.
9.1 Documentary
Taxes. A party is responsible for payment of documentary or other taxes, arising
from the issuance of any capital stock by such party.
9.2 No
Third Party Beneficiaries. Nothing in this Agreement shall it be construed, to
confer any rights or benefits upon any person (including, but not limited to,
any employee or former employee of BAT) other than the parties hereto, and
solely to the extent provided in Section 8, the Shareholder Indemnitees and the
Company Indemnitees, and no other person, shall have any rights or remedies
hereunder.
9.3 Specific
Performance. All of the parties acknowledges and agrees that the other parties
could be damaged irreparably if any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, it is hereby agreed that a Party may be entitled, without the
necessity of pleading or proving irreparable harm or lack of an adequate remedy
at law or posting any bond or other security, to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof. Any such claim for specific
performance shall be brought and determined in the appropriate federal or state
court, in the State of New York and in no other forum. The parties hereby
irrevocably submit to the jurisdiction of any such New York state court or
federal court in New York, New York, in connection with such claim for a
specific performance.
9.4 Severability.
If any parts of this Agreement are found to be void, the remaining provisions of
this Agreement shall nevertheless be binding with the same effect as though the
void parts were deleted.
9.5 Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument. The execution of this Agreement may be by actual or facsimile
signature.
9.6 Benefit.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their legal representatives, successors, heirs and permitted
assigns.
9.7 Notices.
Any notice, report, demand, waiver, consent or other communication given by a
Party under this Agreement shall be in writing, may be given by a Party or its
legal counsel, and shall deemed to be duly given upon delivery by Federal
Express or similar overnight courier service which provides evidence of
delivery, or when delivered by facsimile transmission if a copy thereof is also
delivered in person or by overnight courier. Notices of address change shall be
effective only upon receipt notwithstanding the provisions of the foregoing
sentence.
Notice to
the Shareholders:
____________________________
With a
copy to:
Santoro,
Driggs, Walch, Kearney, Xxxxxx & Xxxxxxxx
000 Xxxxx
Xxxxxx Xxxxxx
Xxx
Xxxxx, Xxxxxx 00000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxxxx, Esq.
Notice to
the Company shall be sufficient if given to:
000 Xxxxx
Xxxxxx
Xxxxx
000
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxxx
Xxxxxxxx
With a
copy to:
Xxxxxxxxx
& McMurdo, LLP
000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx,
XX 00000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
XxXxxxx, Esq.
9.8 Oral
Evidence. This Agreement constitutes the entire agreement between the parties
and supersedes all prior oral and written agreements between the parties hereto
with respect to the subject matter hereof.
9.9 Governing
Law. This Agreement and any dispute, disagreement, or issue of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the internal laws of the State of New York without
regard to choice of law considerations.
9.10 Public
Announcements. At all times at or before the Closing, the
Shareholders, BAT and the Company will not issue or make any reports, statements
or releases to the public with respect to this Agreement or the transactions
contemplated hereby without the consent of the other, which consent shall not be
unreasonably withheld. If either Party is unable to obtain the
approval of its public report, statement or release from the other Party and
such report, statement or release is, in the opinion of legal counsel to such
Party, required by Law in order to discharge such Party’s disclosure
obligations, then such Party may make or issue the legally required report,
statement or release and promptly furnish the other Party with a copy
thereof.
9.11 Arbitration.
Any controversy, dispute or claim arising out of or relating to this Agreement,
or its interpretation, application, implementation, breach or enforcement which
the parties are unable to resolve by mutual agreement, shall be settled by
submission by either party of the controversy, claim or dispute to binding
arbitration in New York, New York (unless the parties agree in writing to a
different location), before a single arbitrator in accordance with the rules of
the American Arbitration Association then in effect. In any such arbitration
proceeding the parties agree to provide all discovery deemed necessary by the
arbitrator. The decision and award made by the arbitrator shall be final,
binding and conclusive on all parties hereto for all purposes, and judgment may
be entered thereon in any court having jurisdiction thereof.
9.12 Amendments and
Waivers. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by the Company and the
Shareholders. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed under seal as of the date first above written.
-----------------------------------
By:
BioEnergy
Applied Technologies, LLC.
---------------------------------------
By:
SHAREHOLDERS
BioEnergy
System Management, LLC
_________________________________
By: Xx
Xxxxxxxxx Xxxxxxxxxx, President
Wimase
Limited
_________________________________
By: Xxxxx
X. Xxxxxx, President
Energetic
Systems Inc., LLC
_________________________________
By: Xxxxx
X. Xxxxxx, Managing Member
SCHEDULE
3.1(e)
---------------
CONTRACTS
RELATED TO THE ASSETS OF BAT
-----------------------------
“Contracts”
means all contracts, agreements and other arrangements whether
written
or oral, to which BAT is a party as to which the breach,
non-performance,
failure to renew, or cancellation could have a material adverse
effect on
the Assets.
SCHEDULE
3.1(f)
---------------
INTELLECTUAL
PROPERTY OF BAT
-----------------------------------------
SCHEDULE
3.1(i)
---------------
LITIGATION
OF BAT
--------------------------------------------------
SCHEDULE
3.1(l)
----------------
LIABILITIES
OF BAT
