EXHIBIT 10.10
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is
entered into as of the 17th day of October, 2008, by and among American
Environmental Energy, Inc., a Nevada corporation ("Purchaser"), each of the
members of Equinox Carbon Equities, LLC, a Nevada limited liability company
("Equinox"), listed on the signature page hereto (collectively, the "INITIAL
MEMBERS").
RECITALS
WHEREAS, the Initial Members hold all of the issued and outstanding
membership interests of Equinox (the "ORIGINAL SECURITIES");
WHEREAS, Purchaser desires to acquire from the Initial Members, and
each of the Initial Members desires to sell to Purchaser, eighty percent (80%)
of the membership interests of Equinox; and
WHEREAS, in connection with the transactions contemplated by this
Agreement, and pursuant to the terms set forth herein, Purchaser shall use
commercially reasonable efforts to identify an investor or lender to raise an
additional $6,000,000 of debt or equity for Equinox.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
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SECTION 1.1 DEFINITIONS. As used herein, the following terms shall have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with, such specified Person through one or more intermediaries or otherwise. For
the purposes of this definition, "control" means, where used with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have correlative meanings.
"CONTRACT" means any contract, agreement, indenture, note, bond,
mortgage, loan, instrument, lease, license, commitment or other arrangement,
understanding, undertaking, commitment or obligation.
"GOVERNMENTAL AUTHORITY" means any federal, state, municipal, local or
similar governmental authority, regulatory or administrative agency, court or
arbitral body.
"LAW" means any applicable law, rule, regulation, ordinance, order,
judgment or decree of a Governmental Authority, in each case as in effect on and
as interpreted on the date of this Agreement.
"LEGAL PROCEEDING" means any judicial, administrative or arbitral
actions, suits or proceedings (public or private) by or before a Governmental
Authority.
"LIENS" mean any lien, security interest, claim, mortgage, assessment,
equitable interest, option, pledge, right of first refusal or other encumbrances
or restrictions of any kind, including any restrictions on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership, but
excluding any Permitted Liens.
"ORDER" means any order, injunction, judgment, doctrine, decree,
ruling, writ, assessment or arbitration award of a Governmental Entity or
arbitral tribunal.
"ORGANIZATIONAL DOCUMENTS" means any charter, certificate of
incorporation, articles of organization, articles of association, bylaws,
operating agreement or similar formation or governing documents and instruments.
"Permitted Liens" mean (a) statutory Liens not yet delinquent or the
validity of which are being contested in good faith by appropriate actions
(provided that in the event a contested statutory Lien exceeds $5,000.00, an
escrow or cash reserve account has been established for the full amount of the
potential liability), (b) purchase money Liens arising in the ordinary course,
(c) Liens for Taxes not yet delinquent, (d) mechanics', carriers', workers',
repairers' and similar Liens arising or incurred in the ordinary course of
business that are not material to the business, operations or financial
condition of the property of Equinox so encumbered and that do not result from a
breach, default or violation by Equinox of any Contract or Law, and (e) such
imperfections of title, easements, encumbrances and mortgages or other liens as
are not substantial in character, amount or extent, do not and will not
materially detract from the value or interfere with the present use of the
properties subject thereto or affected thereby or otherwise materially impair
business operations.
"PERSON" means any individual, firm, corporation, partnership, limited
liability company, incorporated or unincorporated association, joint venture,
joint stock company, Governmental Authority or other entity of any kind.
"TAX AUTHORITY" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or imposition of any Tax.
"TAX RETURNS" means any report, return, election, document, estimated
tax filing, declaration or other filing provided to any Tax Authority including
any amendments thereto.
"TAXES" means all taxes, assessments, charges, duties, fees, levies,
imposts or other similar charges imposed by a Governmental Authority, including
all income, franchise, profits, capital gains, capital stock, transfer, gross
receipts, sales, use, transfer, service, occupation, ad valorem, property,
excise, severance, windfall profits, premium, stamp, license, payroll,
employment, social security, unemployment, disability, environmental,
alternative minimum, add-on, value-added, withholding and other taxes,
assessments, charges, duties, fees, levies, imposts or other similar charges of
any kind whatsoever (whether payable directly or by withholding and whether or
not requiring the filing of a Tax Return), and all estimated taxes, deficiency
assessments, additions to tax, additional amounts imposed by any Governmental
Authority, penalties and interest.
SECTION 1.2 TERMS DEFINED ELSEWHERE IN THIS AGREEMENT. For purposes of
this Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
Agreement ............................ Preamble
Amended Operating Agreement ........................... 2.3(a)(ii)
Certificate of Designation ........................... 2.1(b)
Closing ........................... 2.2
Closing Date ........................... 2.2
Damages ........................... 6.2(a)
Equinox ........................... Recitals
Indemnified Party ........................... 6.5(a)
Indemnifying Party ........................... 6.5(a)
Original Securities ........................... Recitals
Preferred Stock ........................... 2.1(b)
Purchase Price ........................... 2.1(a)
Purchaser ........................... Preamble
Purchaser Documents ........................... 5.2
Purchaser Indemnitees ........................... 6.2(a)
Securities Act ........................... 5.6
Member Documents ........................... 3.1
Member Indemnitees ........................... 6.3
Initial Members ........................... Preamble
Third Party Claim ........................... 6.5(a)
Transferred Securities ........................... 2.1
SECTION 1.3 RULES OF INTERPRETATION. Unless otherwise expressly
provided hereby, for purposes of this Agreement, the following rules of
interpretation shall apply:
(a) All article, section, schedule and exhibit references used in this
Agreement are to articles, sections, schedules and exhibits to this Agreement
unless otherwise specified. The schedules and exhibits attached to this
Agreement constitute a part of this Agreement and are incorporated herein for
all purposes.
(b) If a term is defined as one part of speech (such as a noun), it
shall have a corresponding meaning when used as another part of speech (such as
a verb). Terms defined in the singular have the corresponding meanings in the
plural, and vice versa. Unless the context of this Agreement clearly requires
otherwise, words importing the masculine gender shall include the feminine and
neutral genders and vice versa. The term "includes" or "including" shall mean
"including without limitation." The words "hereof," "hereto," "hereby,"
"herein," "hereunder" and words of similar import, when used in this Agreement,
shall refer to this Agreement as a whole and not to any particular section or
article in which such words appear.
(c) The parties acknowledge that each party and its attorneys have
reviewed this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting party, or any similar rule
operating against the drafter of an agreement, shall not be applicable to the
construction or interpretation of this Agreement.
(d) The captions in this Agreement are for convenience only and shall
not be considered a part of or affect the construction or interpretation of any
provision of this Agreement.
ARTICLE II
PURCHASE AND SALE
-----------------
SECTION 2.1 PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, each of the Initial Members will sell, convey, transfer, assign
and deliver to Purchaser, free and clear of any Liens, those Original Securities
held by the Initial Members and set forth opposite their respective names on
Schedule 2.1 (the "Transferred Securities") for an aggregate purchase price (the
"Purchase Price") consisting of:
(a) Three Hundred Thousand Dollars ($300,000) in cash, receipt of which
is hereby acknowledged as being paid in the following three installments:
$150,000 paid June 12, 2008, $50,000 paid on June 26, 2008 and $100,000 paid on
July 3, 2008 which funds were loaned by the Initial Members to the Company to
further its operations ("Loans") which Loans shall be repaid by the Company
immediately upon the funding set forth in Section 7.2(a).
(b) 900,000 shares of Series A Preferred Stock (the "Preferred Stock")
of Purchaser having the rights, preferences and privileges set forth in the
Certificate of Designation attached hereto as Exhibit A (the "Certificate of
Designation"), of which:
(i) 300,000 shares of the Preferred Stock shall immediately
vest upon the Closing;
(ii) 300,000 shares of Preferred Stock shall vest if Equinox
shall have achieved a pre-tax net profit, determined in accordance with
generally accepted accounting principles ("GAAP") of not less than
$5,000,000 for the 12 calendar months commencing upon the Closing Date
of the Initial Offering (as defined below) The preferred stock shall
have a cumulative annual dividend equal to 3% of the implied value of
$5 per share minimum; and
(iii) 300,000 shares of Preferred Stock shall vest if Equinox
shall have achieved a pre-tax net profit, determined in accordance with
GAAP, of not less than $10,000,000 for the 12 calendar months
commencing upon 12 months after the Closing Date of the Initial
Offering (as defined below).
(c) The delivery of $125,000, receipt of which is hereby acknowledged,
which shall be treated as a payment of a portion of the Initial Offering.
SECTION 2.2 Employment Agreements with the Initial Members. As a
condition to the Closing, ECE shall enter into three-year employment agreements
with each of the Initial Members pursuant to which they will in the aggregate
receive a distribution to the Initial Members, based as follows - Xxxx Xxxxxxx -
40%, Xxxxx Xxxxxxxx - 30%, and Xxxx Xxxxx - 30%, of ten percent (10%) of the net
carbon credits received by Purchaser, Equinox, or any related entity in
conjunction with Equinox related projects, on projects identified by Equinox, so
long as their employment continues with Equinox. The employment agreements may
only be terminated for "Cause" as defined therein. The employment agreements
shall set forth the position, benefits and other standard terms, including,
without limitation, that any ten percent (10%) of any credits originated during
the employment period shall be continued to be paid to each Member after the
termination of such employment.
SECTION 2.3 CLOSING. The closing of the purchase and sale of the
Transferred Securities (the "Closing") shall take place at the offices of
Purchaser's counsel, Xxxxxx, Xxxxxxx & Xxxxxxx, P.C., 0000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxx, Xxxxxxxxxx 00000, within ten (10) days after the execution and delivery
of this Agreement (the "Closing Date").
SECTION 2.4 CLOSING DELIVERIES. At the Closing:
(a) Equinox shall:
(i) deliver to Purchaser certificates representing the
Transferred Securities; and
(ii) execute and deliver the Amended and Restated Operating
Agreement of Equinox in the form attached hereto as Exhibit C (the
"Amended Operating Agreement").
(b) Each Initial Member shall:
(i) Execute and deliver the Amended Operating Agreement of
Equinox; and
(ii) Cause Equinox to transfer the Transferred Securities to
the Purchaser.
(c) Purchaser shall:
(i) deliver to each Initial Member certificates representing
the Preferred Stock that immediately vests under Section 2.1(b)(i) due
to such Initial Member for the Transferred Securities being sold by
such Member; and
(ii) execute and deliver to Equinox the Amended Operating
Agreement.
ARTICLE III
INITIAL MEMBERS' INDIVIDUAL REPRESENTATIONS AND WARRANTIES
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Each Initial Member, , hereby represents and warrants to Purchaser that
the following representations and warranties are true and correct:
SECTION 3.1 AUTHORIZATION OF AGREEMENT. Such Initial Member has all
requisite power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, instrument or certificate to be
executed by such Initial Member in connection with the consummation of the
transactions contemplated by this Agreement (the "Member Documents"), and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and each of the Member Documents, and
the consummation of the transactions contemplated hereby and thereby, has been
duly authorized and approved by all required action on the part of such Initial
Member. This Agreement has been, and each of the Member Documents will be at or
prior to the Closing, duly and validly executed and delivered by such Initial
Member and (assuming due authorization, execution and delivery by Purchaser)
this Agreement constitutes, and each of the Member Documents when so executed
and delivered will constitute, legal, valid and binding obligations of such
Initial Member, enforceable against such Initial Member in accordance with its
terms.
SECTION 3.2 NO CONFLICTS. None of the execution and delivery by such
Initial Member of this Agreement or the Member Documents, the consummation of
the transactions contemplated hereby or thereby, or compliance by such Initial
Member with any of the provisions hereof or thereof will conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination or cancellation under any
provision of (a) the Organizational Documents of such Initial Member (if not a
natural person); (b) any Contract to which such Initial Member is a party or by
which any of the properties or assets of such Initial Member are bound (c) any
Order of any Governmental Authority applicable to such Initial Member or by
which any of the properties or assets of such Initial Member are bound; or (d)
any applicable Law.
SECTION 3.3 CONSENTS AND APPROVALS. No consent, waiver, approval, Order
or authorization of, or declaration or filing with, or notification to, any
Governmental Authority or third party is required on the part of such Initial
Member in connection with the execution and delivery of this Agreement, the
Member Documents, the compliance by such Initial Member with any of the
provisions hereof, or the consummation of the transactions contemplated hereby.
SECTION 3.4 OWNERSHIP AND TRANSFER OF MEMBERSHIP INTEREST. Such Initial
Member is the owner of the Original Securities designated as owned by it on
Schedule 2.1, free and clear of any and all Liens. Upon the sale of the
Transferred Securities sold by such Initial Member pursuant to this Agreement,
Purchaser will possess good and marketable title to such Transferred Securities,
free and clear of any and all Liens.
SECTION 3.5 LITIGATION. There is no Legal Proceeding pending or, to the
knowledge of such Initial Member, threatened against Equinox or such Initial
Member or to which such Initial Member is otherwise a party relating to the
Original Securities, this Agreement, the Member Documents or the transactions
contemplated hereby or thereby.
SECTION 3.6 FINANCIAL ADVISOR. No financial advisor, broker, finder or
investment bank is entitled to any brokerage, finder's fee or other fee or
commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by Equinox, such
Initial Member or any of its Affiliates.
ARTICLE IV
SELLERS' REPRESENTATIONS AND WARRANTIES AS TO EQUINOX
-----------------------------------------------------
The Initial Members jointly and severally hereby represent and warrant
to Purchaser that the following representations and warranties are true and
correct:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Equinox is a limited
liability companies duly organized and validly existing under the Laws of the
State of Nevada and has all requisite limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as now conducted and to consummate the transactions contemplated hereby. Except
as set forth in Schedule 4.1, Equinox is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned,
leased, or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary. Equinox has made available to
Purchaser accurate and complete copies of its Organizational Documents, each as
currently in effect.
SECTION 4.2 NO CONFLICTS. None of the execution and delivery of this
Agreement by the Initial Members, the consummation of the transactions
contemplated hereby, or compliance by the Initial Members with any of the
provisions hereof will conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination or cancellation under any provision of (a) the
Organizational Documents of Equinox; (b) any Contract to which Equinox is a
party or by which any of the properties or assets of Equinox are bound; (c) any
Order of any Governmental Authority applicable to Equinox or by which any of its
properties or assets are bound; or (d) any applicable Law.
SECTION 4.3 CAPITALIZATION. The authorized equity securities of Equinox
immediately preceding the date hereof consist of membership interests, all of
which are owned beneficially and of record by the Initial Members in the amounts
set forth on Schedule 4.3. The Initial Members are not subject to any agreements
or understandings with respect to the voting or transfer of any of the Original
Securities (except as contemplated by this Agreement or as set forth in
Equinox's Organizational Documents). All of the Original Securities have been
duly authorized and validly issued and are fully paid and nonassessable. There
are no outstanding subscriptions, options, convertible securities, warrants or
calls or preemptive rights of any kind issued or granted by, or binding upon,
the Initial Members or Equinox to purchase or otherwise acquire or to sell or
otherwise dispose of any security of or equity interest in Equinox.
SECTION 4.4 SUBSIDIARIES. Equinox does not own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity. Equinox is not a participant in any joint venture, partnership,
or similar agreement.
SECTION 4.5 FINANCIAL STATEMENTS; ABSENCE OF CHANGES.
(a) Attached hereto as Schedule 4.5 are copies of the unaudited
financial statements of Equinox as of September 30, 2008 (the "Equinox Financial
Statements"). The Equinox Financial Statements fairly present the financial
condition and the results of operations, changes in members' equity and cash
flow of Equinox as at the respective dates of and for the periods referred to in
such Equinox Financial Statements and are consistent with the books and records
of Equinox.
(b) Since February 4, 2008, Equinox has conducted its business only in
the ordinary course, and since such date there has not occurred any event having
a material adverse effect or, to Equinox's knowledge, any event or development
which is reasonably likely to cause an event that could reasonably be expected
to cause a material adverse effect.
SECTION 4.6 NO UNDISCLOSED LIABILITIES; INDEBTEDNESS.
(a) Except as set forth in Schedule 4.6, Equinox does not have any
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, unliquidated, civil, criminal or otherwise, and whether due or to
become due, other than liabilities that (i) are disclosed in the Equinox
Financial Statements, (ii) were incurred since its respective date of formation
in the ordinary course of business and (iii) arise under Contracts, copies of
which have been made available to Purchaser.
(b) Except as provided herein and as set forth on Schedule 4.5, Equinox
does not have any outstanding indebtedness for borrowed money.
SECTION 4.7 REAL PROPERTY. Equinox does not have and has not since its
inception had any interest in any real property other than any lease provided to
Purchaser.
SECTION 4.8 INTELLECTUAL PROPERTY.
(a) Equinox has such ownership of or such rights by license or
otherwise in all patents and patent applications, mask works, trademarks and
service marks, trademark and service xxxx registrations and applications, trade
names, logos, brands, titles, copyrights, subsidiary rights, copyright
registrations and applications, trade secrets, names and likenesses, know-how,
proprietary processes, compositions of matter, formulae, designs, computer
software programs and other proprietary rights as are necessary to conduct and
permit the conduct of the business of Equinox as currently conducted
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"), except where the failure to
have such ownership or right by license or otherwise, individually and in the
aggregate, would not reasonably be expected to have a material adverse effect.
Attached as Schedule 4.8 is a list of all (i) registered Intellectual Property
Rights owned by Equinox and (ii) material registered Intellectual Property
Rights licensed or otherwise used by Equinox in the conduct of its business.
(b) The conduct of the business of Equinox as currently conducted does
not infringe upon the intellectual property rights of any third party or violate
the privacy rights of any third party or defame any third party and there are no
such present or, to the knowledge of the Initial Members, threatened
infringements or violations of the Intellectual Property Rights by any third
party, except, in either case, for such infringements or violations which,
individually and in the aggregate, would not reasonably be expected to have a
material adverse effect.
SECTION 4.9 TAXES.
(a) Because Equinox has been in operation for less than 1 calendar
year, Equinox has not filed any Tax Returns required to be filed by it .
(b) As used in this Agreement, "TAX RETURNS" shall mean all domestic or
foreign (whether national, Federal, state, provincial, local or otherwise)
returns, declarations, statements, reports, schedules, forms and information
returns relating to Taxes and any amended Tax Return.
(c) No liens for Taxes (other than for current Taxes not yet due and
payable) exist with respect to any assets or properties of Equinox. Equinox is
not bound by any agreement with respect to Taxes.
SECTION 4.10 LITIGATION. Except as set forth in Schedule 4.10, there is
no Legal Proceeding pending or, to the knowledge of the Initial Members or
Equinox, threatened against Equinox or to which Equinox or any Member is
otherwise a party.
SECTION 4.11 COMPLIANCE WITH LAWS. Except as set forth in Schedule
4.11, Equinox is in compliance in all material respects with all applicable
Laws. Except as set forth on Schedule 4.11, Equinox has not received written
notice of, and there has never been, any citation, fine or penalty imposed or
asserted against Equinox for any violation or alleged violation of such Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser hereby represents and warrants to Initial Members that the
following representations and warranties are true and correct:
SECTION 5.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has all requisite corporate power and authority to own,
lease and operate properties and carry on its business as now conducted and to
consummate the transactions contemplated hereby. Purchaser is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary. Purchaser has
made available to Equinox accurate and complete copies of its Organizational
Documents, each as currently in effect.
SECTION 5.2 AUTHORIZATION OF AGREEMENT. Purchaser has all requisite
power, authority and legal capacity to execute and deliver this Agreement and
each other agreement, document, instrument or certificate to be executed by
Purchaser in connection with the consummation of the transactions contemplated
by this Agreement (the "Purchaser Documents"), and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and each of the Purchaser Documents, and the
consummation of the transactions contemplated hereby and thereby, has been duly
authorized and approved by all required action on the part of Purchaser. This
Agreement has been, and each of the Purchaser Documents will be at or prior to
the Closing, duly and validly executed and delivered by Purchaser and (assuming
due authorization, execution and delivery by Initial Members) this Agreement
constitutes, and each of the Purchaser Documents when so executed and delivered
will constitute, legal, valid and binding obligations of Purchaser, enforceable
against such Member in accordance with its terms.
SECTION 5.3 NO CONFLICTS. None of the execution and delivery by
Purchaser of this Agreement or the Purchaser Documents, the consummation of the
transactions contemplated hereby or thereby, or compliance by Purchaser with any
of the provisions hereof or thereof will conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination or cancellation under any
provision of (a) the Organizational Documents of Purchaser; (b) any Contract to
which Purchaser is a party or by which any of the properties or assets of
Purchaser are bound (c) any Order of any Governmental Authority applicable to
Purchaser or by which any of the properties or assets of Purchaser are bound; or
(d) any applicable Law.
SECTION 5.4 CONSENTS AND APPROVALS. No consent, waiver, approval, Order
or authorization of, or declaration or filing with, or notification to, any
Governmental Authority or third party is required on the part of Purchaser in
connection with the execution and delivery of this Agreement, the Purchaser
Documents, the compliance by Purchaser with any of the provisions hereof, or the
consummation of the transactions contemplated hereby.
SECTION 5.5 LITIGATION. There is no Legal Proceeding pending or, to the
knowledge of Purchaser, threatened against Purchaser or to which Purchaser is
otherwise a party relating to the purchase of the Transferred Securities, this
Agreement, the Purchaser Documents or the transactions contemplated hereby or
thereby.
SECTION 5.6 SECURITIES MATTERS. Purchaser is an "accredited investor"
as defined in Rule 501 under the Securities Act of 1933, as amended (the
"Securities Act"), and is acquiring the Transferred Securities from Initial
Members solely for its own account and not with a view to any distribution or
disposition thereof. Purchaser understands that the Transferred Securities (a)
have not been registered under the Securities Act or registered or qualified
under any applicable state securities laws in reliance upon specific exemptions
therefrom, and (b) may not be transferred or sold except in a transaction
registered or exempt from registration under the Securities Act, and registered
or qualified or exempt from registration or qualification under any applicable
state securities laws.
SECTION 5.7 FINANCIAL ADVISOR. No financial advisor, broker, finder or
investment bank is entitled to any brokerage, finder's fee or other fee or
commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by Purchaser or any
of their Affiliates.
ARTICLE VI
INDEMNIFICATION
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SECTION 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Initial Members and the representations
and warranties of Purchaser shall survive until the earlier of the first
anniversary of the Closing. All of the covenants made by each party in this
Agreement shall survive the consummation of the transactions contemplated hereby
and shall continue in full force and effect after the Closing indefinitely until
all obligations with respect to any such covenants are fulfilled in their
entirety.
SECTION 6.2 INDEMNIFICATION BY INITIAL MEMBERS. Subject to Sections 6.1
and 6.4, after the Closing
(a) Each Member individually will indemnify and hold harmless Purchaser
and its representatives, members and affiliates (collectively, the "Purchaser
Indemnitees") for, and will pay to the Purchaser Indemnitees the amount of, any
loss, liability, claim, damage (specifically excluding incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with (i) any breach of any representation or warranty made by such
Member in Article III and Article IV of this Agreement or any other certificate
or document delivered by such Member pursuant to this Agreement and (ii) any
breach by such Member of any covenant or obligation of such Member in this
Agreement or any Member Document.
SECTION 6.3 INDEMNIFICATION BY PURCHASER. Subject to Sections 6.1 and
6.4, after the Closing, Purchaser will indemnify and hold harmless each Initial
Member and their representatives, members and affiliates (collectively, the
"Member Indemnitees") for, and will pay to the Member Indemnitees the amount of,
any Damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by Purchaser in Article V of this
Agreement or any other certificate or document delivered by Purchaser pursuant
to this Agreement and (b) any breach by Purchaser of any covenant or obligation
of Purchaser in this Agreement or any Purchaser Document.
SECTION 6.4 LIMITATION ON LIABILITY.
(a) No party shall be liable to any other party for consequential
damages for breaches of such party's representation or warranties herein,
provided that this shall not limit any party's right to indemnification
hereunder to the extent such party becomes obligated to pay consequential
damages to a third party in connection with a claim that is subject to
indemnification hereunder.
SECTION 6.5 THIRD PARTY CLAIMS.
(a) In the event that any party desires to make a claim under Sections
6.2 or 6.3 in connection with any action, suit, proceeding, or demand at any
time instituted against or made upon any party for which such party may seek
indemnification hereunder (a "Third Party Claim"), the party or parties entitled
to indemnification hereunder (the "Indemnified Party") shall promptly notify the
party or parties required to provide indemnification hereunder (the
"Indemnifying Party") of such Third Party Claim and the claim of indemnification
with respect thereto, provided that failure of the Indemnified Party to give
such prompt notice shall not relieve the Indemnifying Parties of their
obligations under this Article VI, except to the extent, if at all, that the
Indemnifying Parties shall have been prejudiced thereby.
(b) Upon receipt of notice from the Indemnified Party pursuant to
Section 6.5(a), the Indemnifying Parties will, subject to the provisions of
Section 6.5(c), assume the defense and control of such Third Party Claim, but
shall allow the Indemnified Party a reasonable opportunity to participate in the
defense of such Third Party Claim with its own counsel and at its own expense;
provided, that if an Indemnifying Party is also subject to the Third Party Claim
and counsel to the Indemnified Party reasonably determines in writing that a
conflict or potential conflict exists between the Indemnifying Party and the
Indemnified Party, then the Indemnifying Parties shall be liable under this
Article VI for the fees of the Indemnified Party's counsel and any other
expenses related to the defense of such Third Party Claim. The Indemnifying
Parties shall select counsel, contractors and consultants of recognized standing
and competence after consultation with the Indemnified Party; shall take all
steps necessary in the defense or settlement of such Third Party Claim; and
shall at all times diligently and promptly pursue the resolution of such Third
Party Claim. The Indemnified Party shall, and shall cause each of its Affiliates
and representatives to, cooperate fully with the Indemnifying Parties in the
defense of any Third Party Claim defended by the Indemnifying Parties.
(c) The Indemnifying Parties shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third Party Claim,
without the consent of any Indemnified Party; but only if the Indemnifying
Parties shall (i) pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness of such settlement;
(ii) not encumber any of the assets of any Indemnified Party or agree to any
restriction or condition that would apply to or adversely affect any Indemnified
Party or to the conduct of any Indemnified Party's business; (iii) obtain, as a
condition of any settlement or other resolution, a complete release of any
Indemnified Party potentially affected by such Third Party Claim.
(d) The parties each hereby consents to the nonexclusive jurisdiction
of any court in which a proceeding in respect of a Third-Party Claim is brought
against any Indemnified Party for purposes of any claim that an Indemnified
Party may have under this Agreement with respect to such proceeding or the
matters alleged therein and agree that process may be served on the Indemnifying
Party with respect to such a claim anywhere in the world.
SECTION 6.6 EXCLUSIVE REMEDY. The indemnities set forth in this Article
VI shall be the exclusive remedies of the parties for any misrepresentation,
breach of warranty or nonfulfillment or failure to perform any covenant or
agreement contained in this Agreement, and the parties shall not be entitled to
any further indemnification rights or claims of any nature whatsoever in respect
thereof.
ARTICLE VII
OTHER AGREEMENTS
----------------
SECTION 7.1 REIMBURSEMENT FOR TAXES. Purchaser acknowledges that the
Initial Members will be taxed on the ordinary income each Initial Member
receives on the sale of the Transferred Securities. Purchaser agrees that at
Closing Equinox will, from the proceeds of the Initial Offering, reimburse the
Initial Members in an amount equal to the difference between the federal and
state income tax paid with respect to the sale of the Transferred Securities and
the amount which the Initial Members would have paid if the sale of the
Transferred Securities were taxed as long term capital gains, provided that such
amount shall not exceed $100,000 in the aggregate for all Initial Members. Such
amount shall be paid no later than thirty (30) calendar days prior to the date
that the Initial Members federal taxes are due.
SECTION 7.2 PRIVATE PLACEMENT FOR EQUINOX. After the Closing, Purchaser
shall use commercially reasonable efforts to identify a bridge lender or
investor to invest at least $6,000,000 (the "Initial Offering") in Equinox, the
proceeds of which shall be used for overhead and operating expenses for Equinox
and to produce the projects and carbon credits to invest in alternative energy
projects selected by Equinox. Such Initial Offering shall be closed as follows:
(a) At least Two Million Dollars ($2,000,000) will be invested in
Equinox within 90 days after the Closing of this Agreement;
(b) At least Four Million Dollars ($4,000,000) in the aggregate will be
invested in Equinox within 180 days after the Closing of this Agreement; and
(c) At least Six Million Dollars ($6,000,000) in the aggregate will be
invested in Equinox within 270 days after the Closing of this Agreement.
(d) The closing of the Initial Offering (the "Offering Closing Date")
shall be deemed to occur upon receipt of $2.0 million by Equinox.
(e) The terms of the Initial Offering shall be on terms and conditions
as agreed upon by Purchaser and a majority of the Initial Members; provided,
however, the Initial Members shall not unreasonably withhold their consent. Any
membership interests issued and sold in the Initial Offering will result in
dilution of the membership interests of both Purchaser and the Members;
provided, however, that the Initial Member's remaining interest shall not be
diluted by any offering, reverse merger, or conversion to less than 15% of the
total equity ownership until the Company has received not less than $25.0
million in gross proceeds from equity offerings. Thereafter, the Initial Members
shall be subject to dilution from any equity offering.
SECTION 7.3 INITIAL PUBLIC OFFERING. In addition, subject to market
conditions and the availability of an underwriter, Purchaser will use
commercially reasonable efforts to engage an investment bank to conduct a firm
commitment public offering of Equinox securities to raise approximately $25.0
million, the proceeds of which shall be used for alternative energy projects, to
fund the operations of the carbon credit trading program and as otherwise
approved by the managing board of Equinox.
SECTION 7.4 EXISTING AGREEMENTS. Purchaser hereby acknowledges that the
Initial Members individually or together operate several other businesses
("Businesses") all of which provide services to Equinox. Furthermore, Equinox
has entered into an agreement with the Businesses whereby the Businesses have a
right of first refusal to provide particular services to Equinox. Purchaser and
the Initial Members shall cooperate in good faith to ensure that such agreements
are in the best interests of Equinox and, to the extent determined by Purchaser
and a majority in number of the Initial Members, none of whom shall be recused
from voting, such agreement shall be terminated, cancelled or modified.
Notwithstanding anything to the contrary in the Amended [and Restated] Operating
Agreement, the Purchaser and each Initial Member shall vote not by percentage of
ownership, but rather by each casting a single vote on issues arising pursuant
to this Section 7.4.
SECTION 7.5 REMEDY FOR FAILURE TO RAISE CAPITAL. If Purchaser fails to
raise the capital required by Section 7.1 in a timely manner as required by
Section 7.1, then the Initial Members, as their sole remedy at law or in equity,
shall receive warrants to purchase 1,000,000 shares of Purchaser common stock at
an exercise price of $0.01 per share for each breach of Section 7.1(a), (b) or
(c), which warrants will not be exercisable until the earlier of (i) two years
from the date of issuance or (ii) until the Initial Members exercise the
Repurchase Option (as defined in Section 7.6 below). Purchaser acknowledges and
agrees that such warrants shall be issued as liquidated damages, which Purchaser
acknowledges is fair and reasonable in light of the difficulty of determining
the actual damages caused by Purchaser's breach. The number of warrants shall be
reduced proportionately to the extent a portion of any required capital is
actually received by Equinox.
SECTION 7.6 REPURCHASE RIGHT.
(a) In the event that Purchaser fails to raise or invest in Equinox
gross proceeds of at least $6,000,000 in the Initial Offering on or before the
date that is one year after the Closing of this Agreement, the Initial Members
shall, from and after such date for a period of thirty (30) days, have an
irrevocable, exclusive option ("Repurchase Option") to repurchase thirty-one
percent (31%) of the Transferred Interests from the Purchaser (the "Restricted
Interests"); provided, however, such thirty-one percent (31%) shall be reduced
proportionately to the extent Equinox has received any equity or debt investment
prior to the date that is one year after the Closing. The purchase price for the
Restricted Interests shall be One Dollar ($1.00) (the "Purchase Price"). The
Repurchase Option may be assigned by the Initial Members to any third person.
(b) The Repurchase Option shall be exercised by written notice by the
Member to the Purchaser, with a check in the amount of the Purchase Price for
the Restricted Interest being repurchased. Upon delivery by Member of such
notice and payment of the Purchase Price, the Member shall become the legal and
beneficial owner of the Restricted Interest being repurchased and all rights and
interest therein or related thereto, and the Initial Member Purchaser shall have
the right to transfer to its own name the Restricted Interest being repurchased
by the Initial Member, without further action by the Purchaser.
SECTION 7.7 NONRECOURSE. Purchaser agrees that the $300,000.00
delivered pursuant to Section 2.1 shall be nonrecourse should the transaction
fail to close and the Purchaser waives any and all rights shall to seek recovery
of the $300,000.00 from the Initial Members.
ARTICLE VIII
MISCELLANEOUS
-------------
SECTION 8.1 FURTHER ASSURANCES. The parties agree to (a) furnish upon
request to each other such further information, (b) execute and deliver to each
other such other documents, and (c) do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
SECTION 8.2 EXPENSES. Except as otherwise provided in this Agreement,
each party shall bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.
SECTION 8.3 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (a) when delivered
personally by hand (with written confirmation of receipt), (b) when sent by
facsimile (with written confirmation of transmission) or (c) one (1) business
day after the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to Purchaser: American Environmental Energy, Inc.
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn.: Xxxxx Xxxxxx
With required copy to: Xxxxxx, Xxxxxxx & Xxxxxxx, P.C.
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn.: Xxxxxxxxxxx X. Xxxxxx
If to the Initial Members: 00000 XX Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Xxxx Xxxxx,
Xxxx Xxxxxxx
With required copy to: Xxxxxx, Yoss, Alvarado, & Xxxxx
0 XxxXxxxxx Xxxxx Xxxxx 000
Xxxxx Xxx, Xx 00000
Telecopy: (000) 000-0000
Attn.: Xxxxx Xxxxx
SECTION 8.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter herein
and supersedes and cancels any prior agreements, representations, warranties, or
communications, whether oral or written, between the parties hereto relating to
the transactions contemplated hereby or the subject matter herein.
SECTION 8.5 MODIFICATIONS. Neither this Agreement nor any provision
hereof may be modified, amended, changed, waived, discharged or terminated
orally, but only by an agreement in writing signed by the party against whom or
which the enforcement of such modification, amendment, change, waiver, discharge
or termination is sought.
SECTION 8.6 ASSIGNMENT; BINDING EFFECT; NO THIRD PARTY BENEFICIARIES.
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement may be assigned or delegated, in whole or in part, by operation
of Law or otherwise by any party hereto without the prior written consent of the
other parties hereto, and any such assignment without such prior written consent
shall be null and void. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and permitted assigns. No provision of
this Agreement or any agreement referenced herein shall create a third-party
beneficiary relationship or otherwise confer any benefit, entitlement or right
upon any Person other than the parties to this Agreement or such referenced
agreement, as the case may be.
SECTION 8.7 GOVERNING LAW. The provisions of this Agreement, all of the
documents delivered pursuant hereto, their execution, performance or
nonperformance, interpretation, construction and all matters based upon, arising
out of or related to this Agreement or the negotiation, execution or performance
of this Agreement (whether in tort or contract) shall be governed by the laws,
both procedural and substantive, of the State of California without regard to
its conflict of laws provisions that if applied might require the application of
the laws of another jurisdiction.
SECTION 8.8 SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) The Initial Members, on behalf of themselves and each of the other
Member Indemnitees, and Purchaser, on behalf of itself and each of the other
Purchaser Indemnitees, hereby irrevocably submit to the exclusive personal
jurisdiction of the state courts located in Orange County within the State of
California and the federal courts within the Central District of the State of
California over any dispute arising out of or relating to this Agreement or any
of the transactions contemplated hereby and each party hereby irrevocably agrees
that all claims in respect of such dispute or any suit, action or proceeding
related thereto may be heard and determined in such courts. The Initial Members,
on behalf of themselves and each of the other Member Indemnitees, and Purchaser,
on behalf of itself and each of the other Purchaser Indemnitees, hereby
irrevocably waive, to the fullest extent permitted by applicable Law, any
objection that they may now or hereafter have to the laying of venue of any such
dispute brought in such courts or any defense of inconvenient forum for the
maintenance of such dispute. The Initial Members, on behalf of themselves and
each of the other Member Indemnitees, and Purchaser, on behalf of itself and
each of the other Purchaser Indemnitees, hereto agree that a judgment in any
such dispute may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by Law.
(b) The Initial Members, on behalf of themselves and each of the other
Member Indemnitees, and Purchaser, on behalf of itself and each of the other
Purchaser Indemnitees, hereby consent to process being served by any party to
this Agreement in any suit, action or proceeding by delivery of a copy thereof
in accordance with the provisions of Section 8.3.
SECTION 8.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
SECTION 8.10 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any Law or
public policy, all other terms or provisions of this Agreement shall
nevertheless remain in full force and effect so long as the legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
AMERICAN ENVIRONMENTAL ENERGY, INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
EQUINOX CARBON EQUITIES, LLC
By: /s/ XXXX XXXXXXX
-------------------------------
Name: Xxxx Xxxxxxx
Title: Authorized Member
INITIAL MEMBERS:
/s/ XXXXXXX X. XXXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ XXXX XXXXXXX
-----------------------------------
Xxxx Xxxxxxx
/s/ XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
Schedule 4.1
Organization and Qualification
------------------------------
Equinox has filed appropriate documents with the California Secretary of State
seeking to qualify to do business in California as a foreign limited liability
company. Equinox has not yet received confirmation from the State that the
qualification documents have, in fact, been filed.
Schedule 4.3
Capitalization
Member Ownership Percentage Capitalization
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 30% $40.00
Xxxx Xxxxxxx 40% $100.00
Xxxx X. Xxxxx 30% $40.00
Schedule 4.5
Financial Statements
[Unaudited financial statements of Equinox as of 9/30/08]
---------------------------------------------------------
Schedule 4.6
Undisclosed Liabilities
-----------------------
None
Schedule 4.8
Intellectual Property
---------------------
As is customary for the industry, Equinox does not own the copyright to any
architectural plans created for Equinox, including any plans created by
Xxxxxxx/Baile and Associates, an Architectural corporation.
Schedule 4.10
Litigation
----------
None
Schedule 4.11
Compliance with Laws
--------------------
None
