THIS SUPPORT AGREEMENT is made as of 17 June, 2003
BETWEEN:
O2DIESEL CORPORATION, a corporation governed by the laws of the State
of Washington
(the "PURCHASER")
- and -
AAE TECHNOLOGIES INTERNATIONAL PLC, a corporation governed by the laws
of The Republic of Ireland
(the "COMPANY")
- and -
THE SHAREHOLDERS OF THE COMPANY listed on Schedule A
(individually, a "SELLER" and, collectively, the "SELLERS").
RECITALS:
A. The Purchaser has made an offer to the shareholders of the Company offering
to acquire all of the outstanding ordinary shares in the capital of the
Company in exchange for common stock in the capital of the Purchaser.
B. Each of the Sellers beneficially owns and controls such number of ordinary
shares in the capital of the Company as is set out opposite its name in
Schedule A.
C. The Purchaser has made it a condition to the completion of the Offer that
the Company and the Sellers enter into this Agreement as of the date
hereof.
THEREFORE, the parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the
meanings set out below unless the context requires otherwise:
(1) "1933 ACT" means the United States Securities Act of 1933, as amended.
(2) "1934 ACT" means the United States Securities and Exchange Act of
1934, as amended.
(3) "AAE SUBJECT SHARES" has the meaning set forth in Section 2.1.
(4) "AAE OPTIONS" means the outstanding options to purchase up to
25,159,101 AAE Shares.
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(5) "AAE SHARES" means the ordinary shares in the capital of the Company.
(6) "AAE SHAREHOLDERS" means the holders of AAE Shares.
(7) "AFFILIATE" means, with respect to any Person, any other Person who
directly or indirectly controls, is controlled by, or is under direct or
indirect common control with, such Person, and includes any Person in like
relation to an Affiliate. A Person shall be deemed to control a Person if such
Person possesses, directly or indirectly, 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 term
"controlled" shall have a similar meaning.
(8) "AGREEMENT" means this Agreement, including the Exhibits and the
Schedules to this Agreement, as it or they may be amended or supplemented from
time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER",
"HEREBY" and similar expressions refer to this Agreement and not to any
particular Section or other portion of this Agreement.
(9) "APPLICABLE LAW" means, with respect to any Person, property,
transaction, event or other matter, any law, rule, statute, regulation,
instrument, order, judgment, decree, treaty or other requirement having the
force of law (collectively, the "LAW") relating or applicable to such Person,
property, transaction, event or other matter. Applicable Law also includes,
where appropriate, any interpretation of the Law (or any part thereof) by any
Person having jurisdiction over it, or charged with its administration or
interpretation.
(10) "ASSETS" means all the properties, assets, interests and rights of the
Company or any Subsidiary, as applicable.
(11) "BOARD OF DIRECTORS" means the board of directors of the Company.
(12) "BRIDGE LOAN" means the loan in the aggregate amount of $1,000,000
previously made by Dynamic Touch Ltd. to the Company as evidenced by Promissory
Notes dated March 18, 2003 and March 31, 2003.
(13) "BUSINESS" means the business carried on by the Company and the
Subsidiaries as at the date hereof, which primarily involves the development and
commercialisation of certain fuel and fuel additive technologies for the motor
fuel market.
(14) "BUSINESS DAY" means any day except Saturday, Sunday or any day on
which banks are generally not open for business in the City of New York.
(15) "CLAIM" has the meaning given in Section 6.1.
(16) "CLOSING" means the completion of the acquisition of the of the AAE
Subject Shares in accordance with the provisions of this Agreement and the
Offer.
(17) "COMPLETION DATE" has the meaning set forth in the Offer but in no
event shall be later than 22 August, 2003.
(18) "CLOSING TIME" means the time of closing on the Completion Date
provided for in Section 3.1.
(19) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time (and any successor statute), and the rules and regulations thereunder.
(20) "COMPANY" means AAE Technologies International plc.
(21) "COMPANY'S U.S. COUNSEL" means Xxxxxx & Xxxxxx.
(22) "COMPANY'S IRISH COUNSEL" means XxXxxxx & Desmond.
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(23) "COMPANY MATERIAL CONTRACT" means an agreement (whether oral, written
or in electronic form) to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of the Assets or the Business is
bound or affected, except an agreement which involves or may reasonably be
expected to involve the payment to or by the Company or any Subsidiary of less
than $25,000 over the term of the agreement and is not otherwise material to the
operation of the Business.
(24) "CONSENTS AND APPROVALS" means all consents and approvals required to
be obtained in connection with the execution and delivery of this Agreement and
the completion of the transactions contemplated by this Agreement.
(25) "CONTRACTS" means all rights and interests of the Company in all
pending and/or executory contracts, agreements, leases and arrangements to which
the Company is a party or by which the Company or any of the Assets or the
Business is bound or affected including the Company Material Contracts and the
Leases.
(26) "DIRECTOR" means a director of the Company; and "DIRECTORS" means
every Director.
(27) "EMPLOYEE" means an individual who is employed by the Company or any
Subsidiary; and "EMPLOYEES" means every Employee.
(28) "EMPLOYEE PLANS" has the meaning given in Section 5.2(24).
(29) "ENVIRONMENTAL LAWS" shall mean Applicable Law that is intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants or which are intended to assure the safety of
employees, workers or other persons, including the public or in respect of the
manufacture, importation, handling, transportation, storage, disposal and
treatment of Hazardous Substances.
(30) "ENVIRONMENTAL PERMITS" means all permits, certificates, approvals,
consents, registrations and licences issued or required by any Environmental
Laws or any court or governmental authority and relating to or required for the
ownership and/or operation of the Business and/or the Assets.
(31) "EXCHANGE RATIO" means the fraction of a O2D Exchange Share issuable
in exchange for each AAE Share pursuant to the Offer, determined in accordance
with the following formula: the quotient obtained by dividing 18,000,000 by the
sum of the number of AAE Shares issued and outstanding immediately prior to
Closing and the number of AAE Shares issuable upon the exercise of
non-cancelled, unexercised options outstanding immediately prior to Closing.
(32) "FINANCIAL STATEMENTS" has the meaning given in Section 5.2(6).
(33) "FOLLOW-ON PRIVATE PLACEMENT" means a non-brokered private placement
equity offering of $3,500,000 of shares of common stock in the capital of the
Purchaser at a price of not less than $1.50 per share, to be undertaken by the
Purchaser following, and subject to the completion of, the Offer, the Private
Placement and certain conditions set out in Section 8.4 hereof.
(34) "GAAP" means those accounting principles which are recognized as being
generally accepted in the applicable jurisdiction from time to time,
consistently applied.
(35) "GAAS" means those accounting standards which are recognized as being
generally accepted in the applicable jurisdiction from time to time,
consistently applied.
(36) "HAZARDOUS SUBSTANCE" means any solid, liquid, gas, odour, heat,
sound, vibration, radiation or combination of them that may impair the natural
environment, injure or damage property or plant or animal life or harm or impair
the health of any individual.
(37) "INDEMNITY ESCROW AGREEMENT" means the escrow agreement in the form
attached as Exhibit H.
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(38) "INCLUDING" means "including without limitation", and "INCLUDES" means
"includes without limitation".
(39) "INDEMNIFIED PARTY" means a Person whom the Sellers or the Purchaser,
as the case may be, has agreed to indemnify under Article 6.
(40) "INDEMNIFYING PARTY" means, in relation to an Indemnified Party, the
Party to this Agreement that has agreed to indemnify that Indemnified Party
under Article 6.
(41) "INTELLECTUAL PROPERTY" means all rights to and interests in:
(a) all business and trade names, corporate names, brand names and slogans
Related to the Business;
(b) all inventions, patents, patent rights, patent applications (including
all reissues, divisions, continuations, continuations-in-part and
extensions of any patent or patent application), industrial designs
and applications for registration of industrial designs Related to the
Business;
(c) all copyrights and trade-marks (whether used with wares or services
and including the goodwill attaching to such trade-marks),
registrations and applications for trade-marks and copyrights (and all
future income from such trade-marks and copyrights) Related to the
Business;
(d) all rights and interests in and to processes, lab journals, notebooks,
data, trade secrets, designs, know-how, product formulae and
information, manufacturing, engineering and other drawings and
manuals, technology, blue prints, research and development reports,
agency agreements, technical information, technical assistance,
engineering data, design and engineering specifications, and similar
materials recording or evidencing expertise or information Related to
the Business;
(e) all of the intellectual property affected by the registrations and
applications for registration listed in Schedule 5.2(14a) and the
permissions and licences listed in Schedules 5.2(14e(i)) and
5.2(14e(ii));
(f) all other intellectual and industrial property rights throughout the
world Related to the Business;
(g) all licences of the intellectual property listed in items (a) to (f)
above;
(h) all future income and proceeds from any of the intellectual property
listed in items (a) to (f) above and the licences listed in item (g)
above; and
(i) all rights to damages and profits by reason of the infringement of any
of the intellectual property listed in items (a) to (g) above.
(42) "INTERIM PERIOD" means the period from the date of this Agreement to
the Closing.
(43) "INVENTORIES" means all inventories of stock-in-trade and merchandise
including materials, supplies, work-in-progress, finished goods, tooling,
service parts and purchased finished goods owned by the Company (including those
in possession of suppliers, customers and other third parties).
(44) "LEASED PREMISES" means all real property that is leased or occupied
by the Company under the Premises Leases.
(45) "LEASES" means Personal Property Leases and Premises Leases.
(46) "LIABILITIES" means all costs, expenses, charges, debts, liabilities,
claims, demands and obligations, whether primary or secondary, direct or
indirect, fixed, contingent, absolute or otherwise, under or in respect of any
contract, agreement, arrangement, lease, commitment or undertaking, Applicable
Law and Taxes.
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(47) "LICENCES AND PERMITS" means all licences, permits, filings,
authorizations, approvals or indicia of authority issued to the Company
including the Environmental Permits.
(48) "LIEN" means any lien, mortgage, charge, hypothec, pledge, security
interest, prior assignment, option, warrant, lease, sublease, right to
possession, encumbrance, claim, right or restriction which affects, by way of a
conflicting ownership interest or otherwise, the right, title or interest in or
to any particular property.
(49) "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT" means a change
in the business, operations or capital of the Company or the Purchaser, as the
case may be, which has had or could reasonably be expected to have a significant
adverse effect on the value of the shares of the Company or the Purchaser, as
applicable, or the ability of the Company or the Purchaser, as applicable, to
consummate the transactions contemplated by this Agreement; provided, however,
that Material Adverse Change or Material Adverse Effect shall not be deemed to
include the impact of any change, effect, event, occurrence, state of facts or
development primarily attributable to (i) economic conditions in general, (ii)
conditions in the fuel additive industry in general, (iii) the execution or
announcement of this Agreement, (iv) any actions taken by the Purchaser or its
Affiliates after the date hereof and prior to the Completion Date that relate
to, or affect, the business of the Company and the Subsidiaries, or (v)
compliance by the Company with the terms of this Agreement.
(50) "NOTICES" means the notices and forms required to be given to any
Person under Applicable Law or pursuant to any contract or other obligation to
which the Company is a party or by which the Company is bound or which is
applicable to any of the Assets in connection with the execution and delivery of
this Agreement or the completion of the transactions contemplated by this
Agreement.
(51) "O2D EXCHANGE SHARES" means shares of common stock in the capital of
the Purchaser to be issued to the AAE Shareholders in exchange for AAE Subject
Shares at the Exchange Ratio in accordance with Section 2.1.
(52) "OFFER" has the meaning given in Section 2.1.
(53) "OFFICER" means an officer of the Company; and "OFFICERS" means every
Officer.
(54) "OPTION AND ESCROW AGREEMENT" means the escrow agreement in the form
attached as Exhibit F.
(55) "PARTY" means a party to this Agreement and any reference to a Party
includes its successors and permitted assigns; and "PARTIES" means every Party.
(56) "PERMITTED LIENS" means:
(a) Liens for Taxes if such Taxes are not due and payable;
(b) mechanics', construction, carriers', workers', repairers', storers' or
other similar liens (inchoate or otherwise) which individually or in
the aggregate are not material, arising or incurred in the ordinary
course of business which have not been filed, recorded or registered
in accordance with Applicable Law or of which notice has not been
given to the Company; and
(c) the mortgages, charges and other liens listed in Schedule 1.1(56).
(57) "PERSON" is to be broadly interpreted and includes an individual, a
corporation, a body corporate, a partnership, a trust, an unincorporated
organization, the government of a country or any political subdivision thereof
or any agency or department of any such government, and the executors,
administrators or other legal representatives of an individual in such capacity.
(58) "PERSONAL PROPERTY" means all machinery, equipment, furniture, motor
vehicles and other chattels owned or leased by the Company (including those in
possession of third parties).
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(59) "PERSONAL PROPERTY LEASES" means all chattel leases, equipment leases,
rental agreements, conditional sales contracts and other similar agreements.
(60) "PREMISES LEASES" means all the leases, agreements to lease,
subleases, licence agreements and occupancy or other agreements relating to the
Leased Premises.
(61) "PRIME RATE" means the prime rate of interest per annum quoted by Bank
of America from time to time as its reference rate of interest for U.S. Dollar
demand loans made to its commercial customers in the United States and which
Bank of America refers to as its "prime rate", as such rate may be changed from
time to time.
(62) "PRIVATE PLACEMENT" means a non-brokered private placement equity
offering of $5,000,000 of shares of common stock in the capital of the Purchaser
at a price of not less than $1.50 per share, to be completed on or before the
Completion Date.
(63) "PURCHASER MATERIAL CONTRACT" means an agreement (whether oral,
written or in electronic form) to which the Purchaser is a party or by which the
Purchaser or any of its assets or business is bound or affected, except an
agreement which involves or may reasonably be expected to involve the payment to
or by the Purchaser of less than $25,000 over the term of the agreement and is
not otherwise material to the Purchaser.
(64) "PURCHASER'S CANADIAN COUNSEL" means Blake, Xxxxxxx & Xxxxxxx LLP.
(65) "PURCHASER'S U.S. COUNSEL" means Xxxxxx & Whitney LLP.
(66) "RAE TRUST" means Quarryside Ltd.
(67) "RECEIVABLES" means all accounts receivable, bills receivable, trade
accounts, book debts and insurance claims of the Company together with any
unpaid interest accrued on such items and any security or collateral for such
items, including recoverable deposits.
(68) "RELATED TO THE BUSINESS" means, directly or indirectly, used in,
arising from or relating in any manner to the Business.
(69) "RELEASE" includes an actual or potential discharge, deposit, spill,
leak, pumping, pouring, emission, emptying, injection, escape, leaching, seepage
or disposal of a Hazardous Substance which is or may be in breach of any
Environmental Laws.
(70) "SEC" means the United States Securities and Exchange Commission.
(71) "SHARE EXCHANGE OFFER DOCUMENT" means the document pursuant to which
the Purchaser made the Offer, which document is attached hereto as Exhibit G.
(72) "SUBSIDIARIES" means the corporations listed in Schedule 5.2(1).
(73) "TAXES" means all taxes, charges, fees, levies, imposts and other
assessments, including all income, sales, use, goods and services, value added,
capital, capital gains, alternative, net worth, transfer, profits, withholding,
payroll, employer health, excise, franchise, real property and personal property
taxes, and any other taxes, customs duties, fees, assessments or similar charges
in the nature of a tax including pension plan contributions, unemployment
insurance payments and workers' compensation premiums, together with any
instalments with respect thereto, and any interest, fines and penalties imposed
by any governmental authority (including federal, state, provincial, municipal
and foreign governmental authorities), and whether disputed or not.
(74) "TAX RETURNS" means any return, report, form or other information
filed with any Tax authority with respect to Taxes.
(75) "THIRD PARTY CLAIM" has the meaning given in Section 6.4.
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(76) "U.K." or "UK" means United Kingdom.
(77) "U.S." or "US" means United States.
1.2 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into
Articles and Sections, the insertion of headings, and the provision of any table
of contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 NUMBER AND GENDER. Unless the context requires otherwise, words
importing the singular include the plural and vice versa and words importing
gender include all genders.
1.4 BUSINESS DAYS. If any payment is required to be made or other action
is required to be taken pursuant to this Agreement on a day which is not a
Business Day, then such payment or action shall be made or taken on the next
Business Day.
1.5 CURRENCY AND PAYMENT OBLIGATIONS. Except as otherwise expressly
provided in this Agreement:
(1) all dollar amounts referred to in this Agreement are stated in U.S.
dollars;
(2) any payment contemplated by this Agreement shall be made by cash,
certified cheque or any other method that provides immediately available funds;
and
(3) except in the case of any payment due on the Completion Date, any
payment due on a particular day must be received and available not later than
4:30 p.m. (Pacific time) on the due date and any payment made after that time
shall be deemed to have been made and received on the next Business Day.
1.6 KNOWLEDGE. Any reference to the knowledge of (i) the Purchaser or the
Company means to the actual knowledge, information and belief of the directors,
officers and employees of the Purchaser or the Company, as the case may be
having responsibility for the relevant matter and (ii) any Seller means to the
actual knowledge of such Shareholder, except in the case of the Rae Trust in
which case any reference to knowledge shall mean actual knowledge of all of Xxxx
Xxx, the Rae Trust and Xxxxxxxx Xxx, and except in the case of Xxxxxxx
Xxxx-Xxxxx in which case any reference to knowledge shall mean actual knowledge
of both of Xxxxxxx Xxxx-Xxxxx and Xxxxxxx Xxxx-Xxxxx.
1.7 CALCULATION OF INTEREST. In calculating interest payable under this
Agreement for any period of time, the first day of such period shall be included
and the last day of such period shall be excluded.
1.8 STATUTE REFERENCES. Any reference in this Agreement to any statute or
any section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.9 SECTION AND SCHEDULE REFERENCES. Unless the context requires otherwise,
references in this Agreement to Sections, Exhibits or Schedules are to Sections,
Exhibits or Schedules of this Agreement. The Exhibits and Schedules to this
Agreement are as follows:
EXHIBITS
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A Company's Bring-Down Certificate
B Seller's Bring-Down Certificate
C Company's Corporate Certificate
D Purchaser's Bring-Down Certificate
E Purchaser's Corporate Certificate
F Option and Escrow Agreement
G Share Exchange Offer Document
H Indemnity Escrow Agreement
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SCHEDULES
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A List of Sellers and Shares Held
1.1(56) Permitted Liens
5.2(1) Authorized Capital and Other Information concerning the Company
and the Subsidiaries
5.2(6) Financial Statements
5.2(9) Lease Premises
5.2(11) Company Material Contracts
5.2(14) Intellectual Property
5.2(16) Undisclosed Liabilities
5.2(25) Bonuses
5.2(27) Tax Filings
5.2(32) Brokerage Fees
5.3(8) Purchaser Material Contracts
5.3(11) Purchaser's Notices
ARTICLE 2
OFFER TO PURCHASE SHARES
2.1 THE OFFER.
(1) Confirmation of Offer. The Purchaser confirms it has made the offer
(the "OFFER") to purchase all of the outstanding AAE Shares and all of the AAE
Shares to be issued on the exercise of presently outstanding AAE Options
(collectively the "AAE SUBJECT SHARES") in exchange for O2D Exchange Shares
based upon the Exchange Ratio, all on the terms of the Share Exchange Offer
Document.
(2) Agreement to Tender into Offer. Subject to the satisfaction or waiver
of the conditions set forth in Section 4.2, each Seller agrees to exercise, or
agrees to the cancellation of, all AAE Options held by the Seller and
irrevocably undertakes to accept the Offer (and not withdraw such acceptance) in
respect of all AAE Subject Shares held or to be held by the Seller.
(3) Agreement to Take-Up Under the Offer. Subject to the satisfaction or
waiver of the conditions set forth in Section 4.1 and in the Offer, the
Purchaser shall accept for payment and pay for all AAE Subject Shares in respect
of which valid acceptances are received (and not properly withdrawn) pursuant to
the Offer.
2.2 COMPANY ACTION.
(1) The Company represents and warrants to the Purchaser that:
(a) the Board of Directors of AAE, having been advised on the financial
implications of the Offer, has determined unanimously that the Offer
is fair and acceptance of the Offer is in the best interests of the
Company and the AAE Shareholders and has unanimously recommended that
AAE Shareholders accept the Offer; and
(b) the Board of Directors of AAE, upon consultation with its advisors,
has determined unanimously that this Agreement is in the best
interests of the Company and the AAE Shareholders.
(2) The Company represents and warrants to the Purchaser that the Board of
Directors have received advice on the financial implications of the Offer given
by a competent person who is independent of and who has no substantial financial
interest in the Company or the Purchaser, being advice which gives the opinion
of that person in relation to the Offer and that such advice has been provided
by Xxxxxx XxXxxxxx & Company, Chartered Accountants of 00 Xxxxxxxx Xxxxxx,
Xxxxxx 0, Xxxxxxx in the form attached to and forming part of the Share Exchange
Offer Document.
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2.3 OFFER DOCUMENTS. Each of the Purchaser and the Company acknowledge that
they worked together jointly in the preparation and mailing of the Share
Exchange Offer and to its knowledge the Share Exchange Offer complies with all
applicable laws.
2.4 SUBSEQUENT COMPULSORY ACQUISITION. If the Purchaser takes up and pays
for AAE Subject Shares pursuant to the Offer, the Company shall use all
reasonable efforts to enable the Purchaser to acquire the balance of the AAE
Subject Shares as soon as practicable after completion of the Offer by way of
compulsory acquisition, arrangement, amalgamation or other type of acquisition
transaction.
2.5 SOLICITATION OF ACCEPTANCE OF OFFER. The Company shall use all
reasonable efforts to solicit acceptances by AAE Shareholders of the Offer.
2.6 OUTSTANDING STOCK OPTIONS. The Company shall use all reasonable efforts
to encourage all persons holding AAE Options to exercise their AAE Options, or
agree to have them voluntarily cancelled, prior to the expiry of the Offer and
to accept the Offer in respect of all AAE Subject Shares issued in connection
therewith. The Company represents and warrants that all AAE Options shall
automatically terminate on July 7, 2003 (which date is 42 days from the date of
notification of the Offer) unless previously exercised.
2.7 TAX-DEFERRED REORGANIZATION; NO REPRESENTATIONS BY PURCHASER. The
Parties intend to adopt this Agreement as a "plan of reorganization" and to
treat the Offer as a tax-deferred reorganization in accordance with the
provisions of Section 368(a)(1) of the Code (a "REORGANIZATION") for US federal
income tax purposes. However, Purchaser makes no representation or warranty to
the Company, any Seller or any other holder of Company securities (including,
without limitation, stock options or warrants of the Company) regarding (i) the
qualification of the Offer as a Reorganization or (ii) the US federal income tax
consequences to the Company, any Seller or any such holder of Company securities
arising from the Offer, this Agreement, any of the agreements attached as
Exhibits to this Agreement, or any of the transactions contemplated by this
Agreement or any of the agreements attached as Exhibits to this Agreement. The
Company and the Sellers acknowledge that the Company and the Sellers are relying
solely on their own financial advisor, accountant or tax counsel regarding (i)
the qualification of the Offer as a Reorganization and (ii) the U.S. federal
income tax consequences to the Company and the Sellers arising from the Offer,
this Agreement, any of the agreements attached as Exhibits to this Agreement,
and the transactions contemplated by this Agreement and the agreements attached
as Exhibits to this Agreement.
ARTICLE 3
CLOSING ARRANGEMENTS
3.1 CLOSING. Provided that the Offer is to become or is to be declared
unconditional in all respects, the Closing shall take place at the time (the
"Closing Time") one minute prior to the Offer being declared or becoming
unconditional in all respects on the Completion Date at the London offices of
Blake, Xxxxxxx & Xxxxxxx LLP, or at such other time on the Completion Date or
such other place as may be agreed orally or in writing by the Company and the
Purchaser.
3.2 CLOSING DELIVERIES OF THE SELLERS AND THE COMPANY. At the Closing, the
Sellers and the Company shall deliver or cause to be delivered to the Purchaser
the following documents:
(1) a certificate of the President or other senior officer of the Company
dated as of the Completion Date in the form of Exhibit A;
(2) a certificate of each of the Sellers dated as of the Completion Date in
the form of Exhibit B;
(3) a certificate of the Secretary or other officer of the Company in the
form of Exhibit C;
(4) evidence in form satisfactory to the Purchaser acting reasonably that
the Consents and Approvals have been obtained;
(5) evidence in form satisfactory to the Purchaser of the termination of or
compliance with all outstanding agreements, voting trusts or arrangements among
one or more shareholders of the Company;
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(6) confidentiality and intellectual property agreements in a form agreed
to by the Purchaser, acting reasonably, each duly executed by the Company's and
the Subsidiaries' Employees and consultants;
(7) non-competition agreements in a form agreed to by the Purchaser, acting
reasonably, each duly executed by each of Xxxx Xxx, Xxxxxxx Xxxx-Xxxxx and Xxxxx
Xxxxxx;
(8) employment agreements in a form agreed to by the Purchaser, acting
reasonably, each duly executed by Xxxx Xxx and Xxxxx Xxxxxx;
(9) an opinion of the Company's U.S. Counsel addressed to the Purchaser in
a form agreed to by the Purchaser, acting reasonably;
(10) an opinion of the Company's Irish Counsel addressed to the Purchaser,
in a form agreed to by the Purchaser, acting reasonably;
(11) the resignation and release of Claims against the Company of each
Director and Officer in a form agreed to by the Purchaser, acting reasonably,
duly executed;
(12) a release of Claims against the Company in a form agreed to by the
Purchase, acting reasonably, duly executed by the Sellers;
(13) the Indemnity Escrow Agreement, duly executed by each of the Sellers
and by Xxxxxx Xxxxxxx, or such other person the Sellers designate acting
reasonably as representative of all AAE Shareholders.
(14) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Purchaser to complete the
transactions provided for in this Agreement.
3.3 PURCHASER'S CLOSING DELIVERIES. At the Closing, the Purchaser shall
deliver or cause to be delivered to the Sellers and the Company the following
documents and payments:
(1) a certificate of the President or other senior officer of the Purchaser
dated as of the Completion Date in the form of Exhibit D;
(2) a certificate of the Secretary or other officer of the Purchaser in the
form of Exhibit E;
(3) the Option and Escrow Agreement placing in escrow an aggregate of
1,000,000 shares of common stock in the capital of the Purchaser substantially
in the form of Exhibit F;
(4) an opinion of the Purchaser's U.S. Counsel addressed to the Company and
the Sellers in a form agreed to by the Company and the Sellers, acting
reasonably;
(5) the resignation and release of Claims against the Purchaser of each
director and officer of the Purchaser who shall resign on or before the
Completion Date in a form agreed to by the Company, acting reasonably, duly
executed; and
(6) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Sellers to complete the
transactions provided for in this Agreement.
3.4 CLOSING ESCROW. All of the documents delivered under Section 3.2 and
3.3 shall be held in escrow and shall be released as follows:
(1) to the person to whom they were to be delivered in the event the Offer
becomes or is declared unconditional in all respects; or
(2) to the person who made the delivery if the Offer does not become or is
not declared unconditional in all respects within 24 hours.
-11-
ARTICLE 4
CONDITIONS OF CLOSING
4.1 PURCHASER'S CONDITIONS. The Purchaser shall not be obliged to complete
the purchase and sale of the AAE Subject Shares pursuant to this Agreement and
the Offer unless, at or before the Closing Time, each of the conditions in the
Offer have been satisfied, it being understood that such conditions are included
for the exclusive benefit of the Purchaser and may be waived, in whole or in
part, in writing by the Purchaser at any time; and the Company and each Seller
severally agrees with the Purchaser to take all such actions, steps and
proceedings as are reasonably within its control as may be necessary to ensure
that such conditions are fulfilled at or before the Closing Time.
4.2 SELLERS' CONDITIONS. The Sellers shall not be obliged to complete the
transactions contemplated by this Agreement and tender their AAE Shares into the
Offer unless, at or before the Closing Time, each of the following conditions
has been satisfied, it being understood that the following conditions are
included for the exclusive benefit of the Sellers and may be waived, in whole or
in part, in writing by the Sellers at any time; and the Purchaser agrees with
the Sellers to take all such actions, steps and proceedings as are reasonably
within the Purchaser's control as may be necessary to ensure that the following
conditions are fulfilled at or before the Closing Time:
(1) Representations and Warranties. The representations and warranties of
the Purchaser in Section 5.3 qualified as to materiality shall be true and
accurate, and those not so qualified shall be true and accurate in all material
respects, at and as of the Closing with the same force and effect as if made as
of the Closing (other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date).
(2) Purchaser's Compliance. The Purchaser shall have performed and complied
with all of the material terms and conditions in this Agreement on its part to
be performed or complied with at or before the Closing Time and shall have
executed and delivered or caused to have been executed and delivered to the
Seller or the Company, as applicable, at the Closing Time all the documents
contemplated in Section 3.3 or elsewhere in this Agreement.
(3) Private Placement. The Private Placement shall have closed on or before
the Completion Date.
(4) Escrow of Shares. The Purchaser shall have caused one or more of its
shareholders to have entered into the Option and Escrow Agreement with an escrow
agent mutually acceptable to the Purchaser and the Company, acting reasonably,
pursuant to which an aggregate of not less than 1,000,000 shares of common stock
in the capital of the Purchaser shall have been placed in escrow.
(5) Consents and Approvals. All the Consents and Approvals shall have been
obtained.
(6) Due Diligence Investigation. The Sellers shall have conducted and
completed its investigation of the Purchaser and shall have been satisfied in
all respects with the results of such investigation in its sole and absolute
discretion.
(7) Material Adverse Change. During the Interim Period, there shall have
been no Material Adverse Change with respect to the Purchaser.
(8) Composition of Board of Directors. At the Closing Time, the board of
directors of the Purchaser shall be comprised of six directors, three of whom
shall be nominated by the Sellers, two of whom shall be nominated by the
Purchaser and one of whom shall be a mutually agreed upon chairperson.
(9) No Litigation. There shall be no litigation or proceedings:
(a) pending or threatened against any of the Parties or against any of
their respective Affiliates or any of their respective directors or
officers, for the purpose of enjoining, preventing or restraining the
completion of the transactions contemplated by this Agreement; or
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(b) pending or threatened against any of the Parties or against any of
their respective Affiliates or any of their respective directors or
officers which in the judgement of the Company, would make the
completion of the transactions contemplated by this Agreement
inadvisable.
4.3 CONDITION NOT FULFILLED. If any condition in Section 4.2 shall not have
been fulfilled at or before the Closing Time, then the Sellers in their sole
discretion may, without limiting any rights or remedies available to the Sellers
at law or in equity, either:
(1) terminate this Agreement by notice to the Purchaser in which event the
Sellers and the Company shall be released from all obligations under this
Agreement; or
(2) waive compliance with any such condition without prejudice to its right
of termination in the event of non-fulfilment of any other condition.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF EACH SELLER REGARDING THE SELLER. As
a material inducement to the Purchaser entering into this Agreement, and
completing the transactions contemplated by this Agreement and acknowledging
that the Purchaser is entering into this Agreement in reliance upon the
representations and warranties of the Sellers set out in this Section 5.1, the
Sellers severally represent and warrant to the Purchaser as follows:
(1) Authorization by Seller. The Seller has the power, authority and
capacity to own and dispose of the AAE Shares set out opposite the Seller's name
on Schedule A and to enter into this Agreement and all other agreements and
instruments to be executed by the Seller as contemplated by this Agreement and
to carry out the Seller's obligations under this Agreement and such other
agreements and instruments.
(2) Enforceability of Seller's Obligations. This Agreement constitutes a
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms subject, however, to limitations on enforcement
imposed by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of the rights of creditors and others and to the extent that
equitable remedies such as specific performance and injunctions are only
available in the discretion of the court from which they are sought.
(3) Bankruptcy. Unless otherwise disclosed to the Purchaser, the Seller is
not an insolvent person within the meaning of Applicable Laws and will not
become an insolvent person as a result of the Closing nor has the Seller
committed an act of bankruptcy, proposed a compromise or arrangement to his or
its creditors generally, had any petition in bankruptcy filed against him or it,
made a voluntary assignment bankruptcy or taken any proceeding to be declared
bankrupt.
(4) Ownership of Shares. The Seller is, and at the Closing Time will be,
the registered and beneficial holder of the AAE Shares set out opposite the
Sellers' name on Schedule A, with good and marketable title thereto, free and
clear of all Liens and such AAE Shares constitute all of the AAE Shares owned by
the Seller. No Person other than the Purchaser has any agreement, option, right
or privilege capable of becoming an agreement for the purchase from the Seller
of any of the AAE Subject Shares owned by the Seller
(5) Due Diligence. The Seller acknowledges that it has received all such
information as Seller deems necessary and appropriate to enable it to evaluate
the financial risk inherent in entering into this Agreement, including but not
limited to the Purchaser's reports filed under the 1934 Act with the SEC. The
Seller further acknowledges that Seller has received satisfactory and complete
information concerning the business and financial condition of the Purchaser in
response to all inquiries in respect thereof.
(6) Investment Matters. The Seller alone, or with the assistance of
professional advisors, has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of the transactions contemplated in this Agreement. The Seller
acknowledges there may be material tax consequences to the Seller of an
acquisition or disposition of the O2D Exchange Shares. The Purchaser gives no
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opinion and makes no representation with respect to the tax consequences to the
Seller under United States, state, local or foreign tax law of the Seller's
acquisition or disposition of such securities.
(7) US Securities Law Matters. The Purchaser has informed the Seller and
the Seller understands, acknowledges and agrees that:
(a) the O2D Exchange Shares have not been and will not be registered under
the 1933 Act and may not be offered or sold in the United States
unless registered under the 1933 Act and the securities laws of all
applicable states of the United States or an exemption from such
registration requirements is available;
(b) the certificates evidencing the O2D Exchange Shares will be endorsed
with a legend indicating that the O2D Exchange Shares have not been
registered and may not be transferred or resold except in compliance
with the 1933 Act and the 1934 Act. The Seller agrees that it may not
be transferred or resold for a period of one year following the
issuance of the O2D Exchange Shares and the certificates shall bear a
lien indicating this agreement; and
(c) the issuance of the O2D Exchange Shares has not been reviewed or
approved by the SEC, any State security agency or any foreign
securities agency.
(8) Hold Period and Legending. Notwithstanding the actual length of the
applicable hold period prescribed under Applicable Laws, the O2D Exchange Shares
shall be subject to a one year restriction on transfer, assignment or sale
beginning on the Completion Date, during which time the holder of the O2D
Exchange Shares will not, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of or
otherwise dispose of or transfer any O2D Exchange Shares or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of O2D
Exchange Shares, whether any such swap or transaction is to be settled by
delivery of shares of common stock of the Purchaser or other securities in cash
or otherwise. The O2D Exchange Shares shall bear a restrictive legend indicating
the same.
5.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material inducement
to the Purchaser entering into this Agreement and completing the transactions
contemplated by this Agreement and acknowledging that the Purchaser is entering
into this Agreement in reliance upon the representations and warranties of the
Company set out in this Section 5.2, the Company represents and warrants to the
Purchaser as follows:
(1) Organization of the Company and Subsidiaries. The information set out
in Schedule 5.2(1) concerning the name and jurisdiction of incorporation, the
authorized, issued and outstanding shares and the directors and officers of the
Company and each Subsidiary is true and complete. The Company and each
Subsidiary is incorporated and validly subsisting under the laws of its
jurisdiction of incorporation. Each of the Company and each Subsidiary is duly
qualified or licensed and in good standing to do business as a foreign
corporation in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties or other assets makes such
qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing, individually or in the aggregate, has
not had and could not reasonably be expected to have a Material Adverse Effect.
A list of the jurisdictions in which the Company and the Subsidiaries are so
qualified or licensed is set forth on Schedule 5.2(1). Each of the Company and
the Subsidiaries has full corporate power to carry on its business and to own
and operate its assets, properties and business as now carried on and owned and
operated. Except as set forth in Schedule 5.2(1), there are no rights,
subscriptions, warrants, options, conversion rights, calls, commitments or plans
or agreements of any kind outstanding which would enable any Person to purchase
or otherwise acquire any shares or other securities of the Company or any
Subsidiary including, without limitation, any securities convertible into or
exchangeable or exercisable for shares or other securities of the Company or any
Subsidiary.
(2) Due Authorization. The Company has the corporate power, authority and
capacity to enter into this Agreement and all other agreements and instruments
to be executed by it as contemplated by this Agreement and to carry out its
obligations under this Agreement and such other agreements and instruments. The
execution and delivery of this Agreement and such other agreements and
-14-
instruments and the completion of the transactions contemplated by this
Agreement and such other agreements and instruments have been duly authorized by
all necessary corporate action on the part of the Company.
(3) Enforceability of Company's Obligations. This Agreement constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms subject, however, to limitations on enforcement
imposed by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of the rights of creditors and others and to the extent that
equitable remedies such as specific performance and injunctions are only
available in the discretion of the court from which they are sought.
(4) Corporate Records. The minute books of each of the Company and the
Subsidiaries contain true, correct and complete copies of its articles, its
by-laws, the minutes of every meeting of its board of directors and every
committee thereof and of its shareholders and every written resolution of its
directors and shareholders. The share certificate book, minute book, register of
shareholders, register of transfers and register of directors and officers of
the Company and each Subsidiary are complete and accurate in all material
respects.
(5) Bankruptcy. Neither the Company nor any Subsidiary has made an
assignment in favour of its creditors nor a proposal in bankruptcy to its
creditors or any class thereof nor had any petition for a receiving order
presented in respect of it. Neither the Company nor any of the Subsidiaries has
initiated proceedings with respect to a compromise or arrangement with its
creditors or for its winding up, liquidation or dissolution. No receiver has
been appointed in respect of the Company or any Subsidiary or any of the Assets
and no execution or distress has been levied upon any of the Assets.
(6) Financial Statements. The Company has furnished the Purchaser with the
audited consolidated financial statements of the Company for the period ended
September 30, 2001, the consolidated unaudited financial statements of the
Company for the fifteen month period ended December 31, 2002, and the interim
unaudited consolidated financial statements of the Company for the three months
ended March 31, 2003 (collectively, the "FINANCIAL STATEMENTS"), true and
complete copies of which are annexed as Schedule 5.2(6). The Financial
Statements have been prepared in accordance with UK and Irish GAAP and the
consolidated audited financial statements for the period ended September 30,
2001 have been audited in accordance with UK and Irish GAAS. The balance sheets
contained in such Financial Statements fairly present the financial position of
the Company and the Subsidiaries as of their respective dates and the statements
of earnings and retained earnings contained in the Financial Statements fairly
present the results of operations for the periods indicated.
(7) Title to Assets. The Company and each Subsidiary has good and
marketable title to all the Assets, free and clear of any and all Liens, except
for Permitted Liens. The Assets are sufficient to permit the continued operation
of the Business in substantially the same manner as conducted in the year ended
on the date of this Agreement. There is no agreement, option or other right or
privilege outstanding in favour of any Person for the purchase from the Company
or any Subsidiary of the Business or of any of the Assets out of the ordinary
course of business.
(8) Real Property. Neither the Company nor any Subsidiary owns any real
property.
(9) Leased Premises. Except as disclosed on Schedule 5.2(9), neither the
Company nor any Subsidiary has any Premises Leases.
(10) Personal Property Leases. Neither the Company nor any Subsidiary has
any material Personal Property Leases.
(11) Material Contracts. Schedule 5.2(11) lists all the Company Material
Contracts. Neither the Company nor any Subsidiary is in default under any
Company Material Contract and there has not occurred any event which, with the
lapse of time or giving of notice or both, would constitute a default under any
Company Material Contract by the Company or any Subsidiary or any other party to
the Company Material Contract. Each Company Material Contract is in full force
and effect, unamended by written or oral agreement, and the Company or the
Subsidiary, as applicable, is entitled to the full benefit and advantage of each
Company Material Contract in accordance with its terms. Neither the Company nor
any Subsidiary is aware of, nor has it received any notice of a default by the
Company or the Subsidiary, as applicable, or a dispute between the Company or
-15-
the Subsidiary and any other party in respect of any Company Material Contract
or any intention of any party to any Company Material Contract to modify or
change in any material manner any Company Material Contract.
(12) Receivables. None of the Receivables is due from an Affiliate of the
Company.
(13) Inventories. Neither the Company nor any Subsidiary has any material
Inventories.
(14) Intellectual Property.
(a) Schedule 5.2(14a) lists all of the registrations and applications for
registration of the Intellectual Property. All of the registrations
and applications for registration of the Intellectual Property are
valid and subsisting in good standing and are recorded in the name of
the Company or the Subsidiary, as applicable. No application for
registration of any of the Intellectual Property listed on Schedule
5.2(14A) has been rejected.
(b) Except as disclosed on Schedule 5.2(14b) the Company or the
Subsidiary, as applicable, is the first and only owner of the
Intellectual Property and is entitled to the exclusive and
uninterrupted use of the Intellectual Property without payment of any
royalty or other fees. No Person has any right, title or interest in
any of the Intellectual Property and all such persons have waived
their moral rights in any copyright works within the Intellectual
Property. The Company and each Subsidiary has diligently protected its
legal rights to the exclusive use of the Intellectual Property.
(c) There is no current litigation relating to the Intellectual Property.
(d) The Employees have agreed to maintain the confidentiality of
confidential Intellectual Property.
(e) All of the Company's and each Subsidiary's permissions and licences to
use the industrial or intellectual property of other Persons are
disclosed in Schedule 5.2(14e(i)). Neither the Company nor any
Subsidiary has permitted or licensed any Person to use any of the
Intellectual Property except as disclosed in Schedule 5.2(14e(ii)).
Each licence referred to in Schedules 5.2(14e(i)) and 5.2(14e(ii)) is
in full force and effect and neither the Company nor any Subsidiary,
as applicable, nor the licensor is in default of its obligations
thereunder in any material respect.
(f) Except as disclosed on Schedule 5.2(14f), no Person has challenged the
validity of any registrations for the Intellectual Property or the
Company's or any Subsidiary's rights to any of the Intellectual
Property.
(g) To the knowledge of the Company, neither the use of the Intellectual
Property nor the conduct of the Business has infringed or currently
infringes upon the industrial or intellectual property rights of any
other Person.
(h) To the knowledge of the Company, no other Person has infringed the
Company's or any Subsidiary's rights to the Intellectual Property,
except as set out in Schedule 5.2(14h).
(i) To the knowledge of the Company, there is no governmental prohibition
or restriction on the use of the Intellectual Property.
(15) Licences and Permits. Neither the Company nor any Subsidiary has any
Licenses and Permits.
(16) Undisclosed Liabilities. Except as disclosed on Schedule 5.2(16), the
Company does not and will not, as of immediately prior to the Closing, have any
liabilities, obligations, indebtedness or commitments, whether accrued,
absolute, contingent or otherwise, which are not disclosed in the Financial
Statements or referred to or disclosed herein, other than liabilities,
obligations and indebtedness incurred in the normal course of business, and the
total amount of all liabilities, obligations, indebtedness and commitments of
the Company shall not exceed of $1,500,000 (excluding any amounts outstanding
under the Bridge Loan).
-16-
(17) Consents and Approvals. No material Consents and Approvals are
required to be obtained by the Company, the Subsidiaries or the Sellers in
connection with the execution and delivery of this Agreement and the completion
of the transactions contemplated by this Agreement or to permit the Company to
carry on the Business after the Closing as the Business is currently carried on
by the Company.
(18) Notices. No Notices are required to be delivered to any Person in
connection with the execution and delivery of this Agreement and the completion
of the transactions contemplated by this Agreement or to permit the Company to
carry on the Business after the Closing as the Business is currently carried on
by the Company.
(19) Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by the Company and the completion (with any
required Consents and Approvals and Notices) of the transactions contemplated by
this Agreement do not and will not result in or constitute any of the following:
(a) a default, breach or violation or an event that, with notice or lapse
of time or both, would be a default, breach or violation of any of the
terms, conditions or provisions of the articles or by-laws of the
Company or any Subsidiary;
(b) an event which, pursuant to the terms of any Contract or Licence or
Permit, causes any material right or interest of the Company or any
Subsidiary to come to an end or be amended in any way that is
detrimental to the Business in any material respect or entitles any
other Person to terminate or amend any such right or interest;
(c) the creation or imposition of any Lien on any Asset; or
(d) the violation of any Applicable Law by the Company or any Subsidiary,
except for such violations that are not likely to result in a Material
Adverse Change.
(20) Litigation. There is no action, suit, proceeding, claim, application,
complaint or investigation in any court or before any arbitrator or before or by
any regulatory body or governmental or non-governmental body pending or
threatened by or against the Company or any Subsidiary related to the Business
or affecting the Business or the operations or capital of the Company or any
Subsidiary or the transactions contemplated by this Agreement, and to the
knowledge of the Company there is no factual or legal basis which could give
rise to any such action, suit, proceeding, claim, application, complaint or
investigation.
(21) Environmental Matters.
(a) The Business and the Assets as carried on or used by the Company, the
Subsidiaries and their predecessors (including the condition of the
Lands and the waters on or under the Lands) have been carried on and
used and are currently carried on and used in compliance in all
material respects with all Environmental Laws.
(b) The Company, the Subsidiaries and their predecessors have not used any
machinery, equipment or facility included in the Assets, or permitted
them to be used, to generate, manufacture, refine, treat, transport,
store, handle, dispose of, transfer, produce or process any Hazardous
Substance except in compliance in all material respects with all
Environmental Laws.
(c) Neither the Company nor any Subsidiary has been, subject to any
proceedings alleging the violation of any Environmental Law or to
determine whether any remedial action is needed to respond to a
Release or the presence of a Hazardous Substance on the Lands.
(d) There are no circumstances that could reasonably be expected to give
rise to any civil or criminal proceedings or Liability regarding the
Release or presence of a Hazardous Substance or the violation of any
Environmental Law by the Company or the Subsidiaries, or their
employees, agents or others for whom they are responsible.
(e) Neither the Company nor any Subsidiary has any Environmental Permits.
-17-
(f) To the knowledge of the Company, all Hazardous Substances disposed of,
treated or stored by the Company, the Subsidiaries or their
predecessors have been disposed of, treated and stored in compliance
in all material respects with all Environmental Laws and no part of
the Assets contains a Hazardous Substance which exceeds an applicable
soil, groundwater or other environmental, health or safety criteria or
standard published or enacted by a governmental authority or agency
having jurisdiction over the Assets, whether or not such criteria or
standard constitutes Environmental Law.
(g) There are no proceedings in which it is alleged that the Company, the
Subsidiaries or their predecessors are potentially responsible for a
domestic or foreign federal, provincial, state, municipal or local
clean-up or remediation of lands contaminated with Hazardous
Substances or for any other remedial or corrective action under an
Environmental Law.
(h) The Company, the Subsidiaries and their predecessors have maintained
all environmental and operating documents and records in the manner
and for the time periods required by any Environmental Law, except
where the failure to keep such documents and records is not likely to
have a Material Adverse Effect and have never conducted an
environmental audit of the Business and Assets. For purposes of this
Section, an environmental audit includes any evaluation, assessment,
review or study performed at the request of or on behalf of the
Company or any Subsidiaries, as applicable, a prospective purchaser of
the Business or the Assets, a court or governmental authority.
(i) To the Company's knowledge, there are no pending or proposed changes
to Environmental Laws which would render illegal or materially
restrict the Business or the operations of the Company.
(22) Employment Contracts. Neither the Company nor any Subsidiary is a
party to or bound by any contracts with any current or former officers or
directors of the Company, except Company Material Contracts.
(23) Collective Agreements. Neither the Company nor any Subsidiary is (i) a
party to any collective bargaining agreement, contract or legally binding
commitment to any trade union or employee organization or group in respect of or
affecting Employees, (ii) currently engaged in any labour negotiation or (iii)
the subject of any union organization effort.
(24) Employee Plans. All of the Company's and Subsidiaries' employee
benefit, health, welfare, supplemental unemployment benefit, bonus, pension,
profit sharing, deferred compensation, stock compensation, stock purchase,
retirement, hospitalization insurance, medical, dental, legal, disability and
similar plans or arrangements or practices relating to the Employees or former
Employees which are currently maintained or were maintained at any time in the
last five calendar years (the "EMPLOYEE PLANS") are and have been established,
registered, qualified, invested and administered in all respects in accordance
with all laws, regulations, orders or other legislative, administrative or
judicial promulgations applicable to the Employee Plans.
(25) Bonuses. Except as disclosed on Schedule 5.2(25), neither the Company
nor any Subsidiary has paid any bonus, fee, distribution, remuneration or other
compensation to any Person (other than salaries, wages or bonuses paid or
payable to Employees in the ordinary course of business in accordance with
current compensation levels and practices).
(26) Affiliated Transactions. Neither the Company nor any Subsidiary is
liable in respect of advances, loans, guarantees to or on behalf of any
shareholder, officer, director, Employee or Affiliate of the Company or the
Subsidiary, as applicable, or any other Person with whom the Company or the
Subsidiary, as applicable, does not deal at arm's length.
(27) Tax Filings. Except as set forth on Schedule 5.2(27), (i) all Tax
Returns required to be filed by or with respect to the Company or the
Subsidiaries, taking into account any extensions, have been timely filed, such
Tax Returns are accurate in all material respects and all Taxes shown as due
from the Company or the Subsidiaries on any such Tax Returns have been paid or
are being contested in good faith; (ii) no request has been made for any
extension of time within which to file any Tax Returns required to be filed by
or with respect to the Company or the Subsidiaries that have not since been
filed; (iii) there are no material disputes or claims concerning any Tax
-18-
liability relating solely to the assets or business of the Company or the
Subsidiaries claimed or raised in writing by any Authority; (iv) there are no
ongoing audits, examinations or other administrative or court proceedings
involving Taxes that relate solely to the Company or the Subsidiaries, and none
of the Company or Subsidiaries has received written notification from any Tax
authority that any such audit, examination or proceeding is contemplated or
pending; (v) no deficiencies for any Tax have been proposed, asserted or
assessed against or with respect to any of the Company or the Subsidiaries that
have not been settled and paid; and (vi) there are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any material
Tax Returns required to be filed by or with respect to the Company or the
Subsidiaries and for which Purchaser may be responsible under this Agreement. No
current claim is being made in writing by any Tax authority in a jurisdiction
where any of the Company or the Subsidiaries does not file Tax Returns that the
Company or any Subsidiary is or may be subject to taxation by that jurisdiction;
and (vi) with respect to any Tax Returns not filed as disclosed on Schedule
5.2(27), no Taxes or penalties are owing.
(28) Withholdings and Remittances. The Company has withheld from each
payment made to any of its present or former employees, officers and directors,
all amounts required by law to be withheld, and furthermore, has remitted such
withheld amounts within the prescribed periods to the appropriate governmental
body. The Company has remitted all pension plan contributions, unemployment
insurance premiums, employer health taxes and other Taxes payable by it in
respect of its employees and has remitted such amounts to the proper
governmental body within the time required under the applicable legislation. The
Company has charged, collected and remitted on a timely basis all Taxes as
required under applicable legislation on any sale, supply or delivery
whatsoever, made by the Company.
(29) Capital Gains. Neither the Company nor any of its Subsidiaries will at
any time be deemed to have a capital gain as a result of any transaction or
event taking place in any taxation year ending on or before the Completion Date.
(30) Absence of Certain Changes or Events. Since 31 March, 2003 and except
as disclosed on Schedule 5.2(3), neither the Company nor any Subsidiaries has:
(a) suffered any Material Adverse Change;
(b) amended its articles;
(c) declared or made any payment of any dividend or other distribution in
respect of its shares and has not redeemed, purchased or otherwise
acquired any shares;
(d) issued or sold any shares or other securities or issued, sold or
granted any option, warranty or right to purchase any shares or other
securities;
(e) disposed of any of the Assets reflected on the balance sheet forming
part of the Financial Statements, except sales of Assets in the normal
course of business;
(f) changed any accounting or costing systems or methods in any material
respect;
(g) suffered any extraordinary loss or cancelled or waived any debt, claim
or other right;
(h) incurred or assumed any liabilities, obligations or indebtedness
(whether accrued, absolute, contingent or otherwise), except unsecured
current liabilities, obligations and indebtedness incurred in the
normal course of business;
(i) made or granted any bonus, increased the compensation paid (other than
for normal merit and cost of living increases) or made loans or
advances to any Director, Officer or Employee;
(j) mortgaged, pledged, granted a security interest in or otherwise
encumbered any of the Assets, except in the normal course of business
and in amounts which, individually and in the aggregate are not
material to the financial condition of the Company or operation of the
Business.
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(k) entered into any Company Material Contract or any other transaction
that was not in the normal course of business; or
(l) terminated, cancelled or modified in any material respect or received
notice or a request for termination, cancellation or modification in
any material respect of any Company Material Contract.
(31) Subsidiary Bodies Corporate. The Company has no subsidiary bodies
corporate within the meaning of the Companies Acts, 1963 to 1999 (The Republic
of Ireland) other than the Subsidiaries.
(32) Brokerage Fees. Except as disclosed in Schedule 5.2(32), the Company
has not entered into any agreement which would entitle any Person to any valid
claim against either the Company or the Purchaser for a broker's commission,
finder's fee or any like payment in respect of the purchase and sale of the AAE
Subject Shares or any other matters contemplated by this Agreement.
(33) Foreign Private Issuer Status. The Company is a foreign private
issuer, as that term is defined under Rule 3b-4(c) of the Exchange Act, and less
than 10% of the AAE Subject Shares are beneficially owned by shareholders
resident in the United States.
(34) Dissent Rights. No AAE Shareholder has a right of dissent, or similar
right, to receive cash for its AAE Shares as a result of the Offer or other
transactions contemplated herein.
(35) Disclosure. The Company accepts responsibility for the information
contained in the Share Exchange Offer Document relating to the Company, its
Subsidiaries, its Directors and members of their immediate families and persons
connected with them and their interests and to the knowledge of the Company, the
information contained in the Share Exchange Offer Document for which it accepts
responsibility is in accordance with the facts and does not omit any material
facts.
5.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Sellers as follows:
(1) Incorporation. The Purchaser is a corporation duly incorporated under
the laws of the jurisdiction of its incorporation and is duly organized, validly
subsisting and in good standing under such laws.
(2) Organization of the Purchaser. The authorized capital of the Purchaser
consists of 100,000,000 shares of common stock, of which there will be 6,900,000
shares of common stock duly and validly issued as fully-paid and non-assessable
shares in the capital of the Company immediately prior to the Closing and the
Private Placement. Except as contemplated in this Agreement, there are no
rights, subscriptions, warrants, options, conversion rights, calls, commitments
or plans or agreements of any kind outstanding which would enable any Person to
purchase or otherwise acquire any shares or other securities of the Purchaser
including, without limitation, any securities convertible into or exchangeable
or exercisable for shares or other securities of the Purchaser.
(3) Due Authorization. The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and to carry
out its obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Purchaser.
(4) Enforceability of Purchaser's Obligations. This Agreement constitutes a
valid and binding obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms subject, however, to limitations on enforcement
imposed by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and to the extent that equitable remedies such as
specific performance and injunctions are only available in the discretion of the
court from which they are sought.
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(5) Issuance of Shares. The O2D Exchange Shares to be issued in exchange
for the AAE Subject Shares in accordance with the terms of this Agreement and
the Offer, as applicable, will be validly issued and outstanding as fully paid
and non-assessable shares in the capital of the Purchaser.
(6) Corporate Records. The minute books of the Purchaser contain true,
correct and complete copies of its articles, its by-laws, the minutes of every
meeting of its board of directors and every committee thereof and of its
shareholders and every written resolution of its directors and shareholders. The
register of directors and officers of the Purchasers are complete and accurate
in all material respects.
(7) Bankruptcy. The Purchaser is not an insolvent person within the meaning
of Applicable Laws nor has made an assignment in favour of its creditors nor a
proposal in bankruptcy to its creditors or any class thereof nor had any
petition for a receiving order presented in respect of it. The Purchaser has not
initiated proceedings with respect to a compromise or arrangement with its
creditors or for its winding up, liquidation or dissolution. No receiver has
been appointed in respect of the Purchaser or any of its assets and no execution
or distress has been levied upon any of its assets.
(8) Material Contracts. Schedule 5.3(8) lists all the Purchaser Material
Contracts. The Purchasers is not in default under any Purchaser Material
Contract and there has not occurred any event which, with the lapse of time or
giving of notice or both, would constitute a default under any Purchaser
Material Contract by the Purchaser or any other party to the Purchaser Material
Contract. Each Purchaser Material Contract is in full force and effect,
unamended by written or oral agreement, and the Purchasers is entitled to the
full benefit and advantage of each Purchaser Material Contract in accordance
with its terms. The Purchaser has not received any notice of a default by the
Purchasers or a dispute between the Purchasers and any other party in respect of
any Material Contract.
(9) Undisclosed Liabilities. The Purchaser does not and will not, as of
immediately prior to the Closing, have any liabilities, obligations,
indebtedness or commitments, whether accrued, absolute, contingent or otherwise,
other than $100,000, together with interest, outstanding under a promissory note
and costs, fees and expenses associated with operating a public company and with
the transactions contemplated by this Agreement.
(10) Consents and Approvals. No consent or approval of any Person is
required by the Purchaser in connection with the execution and delivery of this
Agreement and the completion of the transactions contemplated by this Agreement.
(11) Notices. Except for the Notices set forth in Section 5.3(11), no
notice is required to be delivered by the Purchaser to any Person in connection
with the execution and delivery of this Agreement and the completion of the
transactions contemplated by this Agreement.
(12) Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by the Purchaser and the completion (with any
required Consents and Approvals and Notices) of the transactions contemplated by
this Agreement do not and will not result in or constitute any of the following:
(a) a default, breach or violation or an event that, with notice or lapse
of time or both, would be a default, breach or violation of any of the
terms, conditions or provisions of the articles or by-laws of the
Purchaser;
(b) an event which, pursuant to the terms of any contract or licence or
permit of the Purchaser, causes any right or interest of the Purchaser
to come to an end or be amended in any way that is detrimental to the
Purchasers or entitles any other Person to terminate or amend any such
right or interest;
(c) the creation or imposition of any lien on any asset of the Purchaser;
or
(d) the violation of any Applicable Law by the Purchaser.
(13) Litigation. There is no action, suit, proceeding, claim, application,
complaint or investigation in any court or before any arbitrator or before or by
any regulatory body or governmental or non-governmental body pending or
threatened by or against the Purchaser which will or may have a material adverse
affect upon the Purchaser after giving affect to the transactions contemplated
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by this Agreement, or which may prevent the completion by the Purchaser of the
transactions contemplated by this Agreement, and there is no factual or legal
basis which could give rise to any such action, suit, proceeding, claim,
application, complaint or investigation.
(14) Affiliated Transactions. The Purchaser is not liable in respect of
advances, loans, guarantees to or on behalf of any shareholder, officer,
director, Employee or Affiliate of the Purchaser or any other Person with whom
the Purchaser does not deal at arm's length, except a loan in the principal
amount of $100,000, together with accrued interest, made by a private
corporation controlled by the President of the Purchaser to the Purchaser.
(15) Subsidiary Bodies Corporate. The Purchaser does not own, directly or
indirectly, beneficially or of record, (a) an amount of voting securities or
other interests in any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any company limited by shares,
limited liability company or joint stock company), firm, society or other
enterprise, association, organization or entity that is sufficient to enable the
Purchaser to elect at least a majority of the members of such entity's board of
directors or other governing body, or (b) at least 50% of the outstanding equity
or financial interests of such entity.
(16) Public Listing. The common shares of the Purchaser are quoted on the
National Association of Securities Dealers Over the Counter Bulletin Board.
(17) Public Filings. To the knowledge of the Purchaser, the Purchaser has
filed all reports required by it during the 12 month period ending immediately
before the date of this Agreement under the 1934 Act and the Company's Form
10-KSB for the period ending December 31, 2002 and any subsequent reports filed
with the Securities and Exchange Commission does not contain any material
misstatement or any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(18) Tax Filings. (i) All Tax Returns required to be filed by or with
respect to the Purchaser, taking into account any extensions, have been timely
filed, such Tax Returns are accurate in all material respects and all Taxes
shown as due from the Purchaser on any such Tax Returns have been paid or are
being contested in good faith; (ii) no request has been made for any extension
of time within which to file any Tax Returns required to be filed by or with
respect to the Purchaser that have not since been filed; (iii) there are no
material disputes or claims concerning any Tax liability relating solely to the
assets or business of the Purchaser claimed or raised in writing by any Tax
Authority; (iv) there are no ongoing audits, examinations or other
administrative or court proceedings involving Taxes that relate solely to the
Purchaser, and the Purchaser has not received written notification from any Tax
authority that any such audit, examination or proceeding is contemplated or
pending; (v) no deficiencies for any Tax have been proposed, asserted or
assessed against or with respect to the Purchaser that have not been settled and
paid; and (vi) there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any material Tax Returns required
to be filed by or with respect to the Purchaser and for which the Company may be
responsible under this Agreement. No current claim is being made in writing by
any Tax authority in a jurisdiction where the Purchaser does not file Tax
Returns that the Purchaser is or may be subject to taxation by that
jurisdiction.
(19) Withholdings and Remittances. The Purchaser has withheld from each
payment made to any of its present or former employees, officers and directors,
all amounts required by law to be withheld, and furthermore, has remitted such
withheld amounts within the prescribed periods to the appropriate governmental
body. The Purchaser has remitted all pension plan contributions, unemployment
insurance premiums, employer health taxes and other Taxes payable by it in
respect of its employees and has remitted such amounts to the proper
governmental body within the time required under the applicable legislation. The
Purchasers has charged, collected and remitted on a timely basis all Taxes as
required under applicable legislation on any sale, supply or delivery
whatsoever, made by the Purchasers.
(20) Additional Information. The Purchaser acknowledges that it has been
afforded the opportunity to ask questions and receive answers concerning the
Company and to obtain additional information that it has requested to verify the
accuracy of the information contained herein and in the Company's business plan
and other information provided by the Company. Notwithstanding the foregoing,
nothing contained herein shall operation to modify or limit in any respect the
representations and warranties of the Company or to relieve the Company from any
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obligations to the Purchaser for breach thereof or the making of misleading
statements or the omission of material facts in connection with the transactions
contemplated herein.
5.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(1) The representations and warranties of the Sellers and the Company
contained in Section 5.1 and Section 5.2, respectively, or any other agreement,
certificate or instrument delivered pursuant to this Agreement shall survive the
Closing for a period of eighteen months from the Completion Date, and
notwithstanding the Closing and any inspection or inquiries made by or on behalf
of the Purchaser, shall continue in full force and effect for the benefit of the
Purchaser, after which time the Company and the Sellers shall be released from
all obligations in respect of such representations and warranties except with
respect to any Claims asserted by the Purchaser in writing (setting out in
reasonable detail the nature of the Claim and the approximate amount of such
Claim) before the expiration of such period.
(2) The representations and warranties of the Purchaser contained in
Section 5.3 or any other agreement, certificate or instrument delivered pursuant
to this Agreement shall survive the Closing for a period of eighteen months from
the Completion Date, and notwithstanding the Closing, shall continue in full
force and effect for the benefit of the Sellers, after which time the Purchaser
shall be released from all obligations in respect of such representations and
warranties except with respect to any Claims asserted by the Sellers in writing
(setting out in reasonable detail the nature of the Claim and the appropriate
amount thereof) before the expiration of such period.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNITY BY COMPANY AND SELLERS.
(1) The Company shall indemnify and hold the Purchaser, its directors,
officers, employees, agents, representatives and the Purchaser's Affiliates and
their respective directors, officers, employees, agents, representatives
harmless in respect of any claim, demand, action, cause of action, damage, loss,
cost, liability or expense (hereinafter referred to as a "CLAIM") which may be
made or brought against an Indemnified Party or which it may suffer or incur
directly or indirectly as a result of, in respect of or arising out of:
(a) any incorrectness in or breach of any representation or warranty of
the Company contained in this Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement; or
(b) any breach of or any non-fulfilment of any covenant or agreement on
the part of the Company under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement.
(2) Each Seller shall indemnify and hold the Purchaser, its directors,
officers, employees, agents, representatives and the Purchaser's Affiliates and
their respective directors, officers, employees, agents, representatives
harmless in respect of any Claim which may be made or brought against an
Indemnified Party or which it may suffer or incur directly or indirectly as a
result of, in respect of or arising out of:
(a) any incorrectness in or breach of any representation or warranty of
the Seller contained in this Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement;
(b) any breach of or any non-fulfilment of any covenant or agreement on
the part of the Seller under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement;
(c) any incorrectness in or breach of any representation or warranty of
the Company contained in this Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement, which is a result of or based on fraud or intentional
misrepresentation of which the Seller had knowledge; or
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(d) any breach of or any non-fulfilment of any covenant or agreement on
the part of the Company under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement, which is a result of or based on based on fraud or
intentional misrepresentation of which the Seller had knowledge.
6.2 INDEMNITY BY THE PURCHASER. The Purchaser shall indemnify and hold the
Sellers harmless in respect of any Claim which may be made or brought against an
Indemnified Party or which it may suffer or incur directly or indirectly as a
result of, in respect of or arising out of:
(1) any incorrectness in or breach of any representation or warranty of the
Purchaser contained in this Agreement or under any other agreement, certificate
or instrument executed and delivered pursuant to this Agreement; or
(2) any breach or non-fulfilment of any covenant or agreement on the part
of the Purchaser under this Agreement or under any other agreement, certificate
or instrument executed and delivered pursuant to this Agreement.
6.3 LIMITATIONS.
(1) No Party shall have any Liability for indemnification pursuant to
Section 6.1 or 6.2 or relating to any breach of any of the representations and
warranties contained in Sections 5.1, 5.2 or 5.3 unless and until the
accumulated aggregate amount of Claims of such party arising from breaches of
representations and warranties hereunder exceeds $100,000, following which all
such accumulated Claims and all further Claims of such party shall be
recoverable as provided in this Agreement.
(2) In the event of a Claim pursuant to Section 6.1(1), the Indemnified
Party shall make such Claim under the terms of the Indemnity Escrow Agreement:
(a) during the period ending 12 months from the Completion Date, pro rata
among all AAE Shareholders; and
(b) during the period beginning 12 months from the Completion Date and
ending 18 months from the Completion Date, pro rata among all Sellers.
(3) In the event of a Claim pursuant to Section 6.1(2)(a) or (b), the
Indemnified Party shall make such Claim under the terms of the Indemnity Escrow
Agreement during the period ending 18 months from the Completion Date.
(4) Each Seller's maximum aggregate liability for all Claims under Section
6.1 shall be an amount equal to the number of O2D Exchange Shares received by
the Seller under the Offer multiplied by US$1.50.
(5) Any Claims made by an Indemnified Party under Section 6.1(1) shall be
satisfied solely by delivery to the Indemnified Party of O2D Shares at a deemed
value of US$1.50 per share pursuant to the terms of the Indemnity Escrow
Agreement.
(6) Notwithstanding any provision of this Section 6.3, in the event a Claim
arises under Section 6.1(2)(c) or (d), none of the limitations in this Section
6.3 shall apply.
6.4 NOTICE OF CLAIM. If an Indemnified Party becomes aware of a Claim in
respect of which indemnification is provided for pursuant to either of Section
6.1 or 6.2 as the case may be, the Indemnified Party shall promptly give written
notice of the Claim to the Indemnifying Party. Such notice shall specify
whether the Claim arises as a result of a claim by a Person against the
Indemnified Party (a "THIRD PARTY CLAIM") or whether the Claim does not so arise
(a "DIRECT CLAIM"), and shall also specify with reasonable particularity (to the
extent that the information is available):
(a) the factual basis for the Claim; and
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(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does not
receive notice of any Claim in time effectively to contest the determination of
any liability susceptible of being contested, then the Liability of the
Indemnifying Party to the Indemnified Party under this Article shall be reduced
by the amount of any losses incurred by the Indemnifying Party resulting from
the Indemnified Party's failure to give such notice on a timely basis.
6.5 DIRECT CLAIMS. In the case of a Direct Claim, the Indemnifying Party
shall have 60 days from receipt of notice of the Claim within which to make
such investigation of the Claim as the Indemnifying Party considers necessary or
desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or before the expiration of such 60 day period (or any mutually agreed
upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim, failing which the matter shall be referred to
binding arbitration in such manner as the parties may agree or shall be
determined by a court of competent jurisdiction.
6.6 THIRD PARTY CLAIMS. In the case of a Third Party Claim, the
Indemnifying Party shall have the right, at its expense, to participate in or
assume control of the negotiation, settlement or defence of the Claim. If the
Indemnifying Party elects to assume such control, the Indemnifying Party shall
reimburse the Indemnified Party for all of the Indemnified Party's out-of-pocket
expenses incurred as a result of such participation or assumption. The
Indemnified Party shall have the right to participate in the negotiation,
settlement or defence of such Third Party Claim and to retain counsel to act on
its behalf, provided that the fees and disbursements of such counsel shall be
paid by the Indemnified Party unless the Indemnifying Party consents to the
retention of such counsel at its expense or unless the named parties to any
action or proceeding include both the Indemnifying Party and the Indemnified
Party and a representation of both the Indemnifying Party and the Indemnified
Party by the same counsel would be inappropriate due to the actual or potential
differing interests between them (such as the availability of different
defences). The Indemnified Party shall cooperate with the Indemnifying Party so
as to permit the Indemnifying Party to conduct such negotiation, settlement and
defence and for this purpose shall preserve all relevant documents in relation
to the Third Party Claim, allow the Indemnifying Party access on reasonable
notice to inspect and take copies of all such documents and require its
personnel to provide such statements as the Indemnifying Party may reasonably
require and to attend and give evidence at any trial or hearing in respect of
the Third Party Claim. If, having elected to assume control of the negotiation,
settlement or defence of the Third Party Claim, the Indemnifying Party
thereafter fails to conduct such negotiation, settlement or defence with
reasonable diligence, then the Indemnified Party shall be entitled to assume
such control and the Indemnifying Party shall be bound by the results obtained
by the Indemnified Party with respect to such Third Party Claim. If any Third
Party Claim is of a nature such that (i) the Indemnified Party is required by
Applicable Law or the order of any court, tribunal or regulatory body having
jurisdiction, or (ii) it is necessary in the reasonable view of the Indemnified
Party acting in good faith and in a manner consistent with reasonable commercial
practices, in respect of (A) a Third Party Claim by a customer relating to
products or services supplied by the Business or (B) a Third Party Claim
relating to any Contract which is necessary to the ongoing operations of the
Business or any material part thereof in order to avoid material damage to the
relationship between the Indemnified Party and any of its major customers or to
preserve the rights of the Indemnified Party under such an essential Contract,
to make a payment to any person (a "THIRD PARTY") with respect to the Third
Party Claim before the completion of settlement negotiations or related legal
proceedings, as the case may be, then the Indemnified Party may make such
payment and the Indemnifying Party shall, promptly after demand by the
Indemnified Party, reimburse the Indemnified Party for such payment. If the
amount of any liability of the Indemnified Party under the Third Party Claim in
respect of which such a payment was made, as finally determined, is less than
the amount which was paid by the Indemnifying Party to the Indemnified Party,
the Indemnified Party shall, promptly after receipt of the difference from the
Third Party, pay the amount of such difference to the Indemnifying Party. If
such a payment, by resulting in settlement of the Third Party Claim, precludes a
final determination of the merits of the Third Party Claim and the Indemnified
Party and the Indemnifying Party are unable to agree whether such payment was
unreasonable in the circumstances having regard to the amount and merits of the
Third Party Claim, then such dispute shall be referred to and finally settled by
binding arbitration from which there shall be no appeal.
6.7 SETTLEMENT OF THIRD PARTY CLAIMS. If the Indemnifying Party fails to
assume control of the defence of any Third Party Claim, the Indemnified Party
shall have the exclusive right to contest, settle or pay the amount claimed.
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Whether or not the Indemnifying Party assumes control of the negotiation,
settlement or defence of any Third Party Claim, the Indemnifying Party shall not
settle any Third Party Claim without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, that the liability of the Indemnifying Party shall be limited to the
proposed settlement amount if any such consent is not obtained for any reason
within a reasonable time after the request therefor.
6.8 INTEREST ON CLAIMS. The amount of any Claim submitted under Section 6.1
or 6.2 as damages or by way of indemnification shall bear interest from and
including the date any Indemnified Party is required to make payment in respect
thereof at the Prime Rate calculated from and including such date to but
excluding the date reimbursement of such Claim by the Indemnifying Party is
made, and the amount of such interest shall be deemed to be part of such Claim.
6.9 TAX ADJUSTMENTS.
(1) The amount of any Claim submitted under Section 6.1 or 6.2 as damages
or by way of indemnification shall be determined on an after-tax basis, and
without limiting the generality of the foregoing shall:
(a) be net of the present value of any Tax benefits to the indemnified
party resulting from the claim for indemnity and indemnification; and
(b) include the amount necessary to hold the indemnified party harmless
after Tax;
and the present value of any Tax benefits shall be the amount, calculated on the
date that is the Business Day immediately preceding the date of payment of the
Claim, that is required to provide a yield from such date to the last day of the
latest taxation year of the Indemnified Party to which the Tax benefits relate
that is equal to the sum of the yield to maturity on such date, assuming
semi-annual compounding, that a non-callable U.S. Government bond would carry if
issued in U.S. Dollars in the United States of America at 100% of its principal
amount on such date and maturing approximately on the last day of the latest
taxation year of the Indemnified Party to which the Tax benefits relate, plus
five per cent.
(2) The amount of any Claim submitted under Section 6.1 or 6.2 as damages
or by way of indemnification as determined without regard to this Section 6.10
shall be increased by an amount equal to the rate of goods and services tax
applied to such amount.
(3) Set-off. The Purchaser shall be entitled to set-off the amount of any
Claim submitted under Section 6.1 or 6.2 as damages or by way of indemnification
against any other amounts payable by the Purchaser to the Sellers whether under
this Agreement or otherwise.
6.10 INDEMNITY ESCROW. As security for the indemnity provided by the
Company in Section 6.1, the Company and each of the Sellers agree that (a) 10%
of all of the O2D Exchange Shares issued to the AAE Shareholders pursuant to and
under the terms of the Offer and any compulsory offer contemplated in connection
with the Offer and (b) 100% of the O2D Exchange Shares issued to the Sellers
pursuant to and under the terms of the Offer shall be delivered to the Escrow
Agent and will be held by the Escrow Agent and dealt with in accordance with the
terms of the Indemnity Escrow Agreement and Sections 6.3(2) and 6.3(3) of this
Agreement.
ARTICLE 7
INTERIM PERIOD
7.1 INVESTIGATION. Until the Closing, the Parties and their respective
representatives and advisers shall be permitted to make such investigations,
inspections, surveys or tests of the properties and assets of the other Parties,
as the case may be, their predecessor companies and their Affiliates and of
their respective financial and legal condition as such Party deems necessary or
desirable to familiarize itself with such properties, assets and other matters.
Without limiting the generality of the foregoing, the Parties shall, during
normal business hours, be permitted complete access to all documents relating to
information scheduled or required to be disclosed under this Agreement by a
Party. Any such investigations, inspections, surveys or tests shall not,
however, affect or mitigate the representations and warranties of any Party
under this Agreement which shall continue in full force and effect as provided
under this Agreement.
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7.2 AUTHORIZATIONS. Each Party shall execute and deliver any authorizations
required to permit the investigations, inspections, surveys or tests described
in Section 7.1.
7.3 CONFIDENTIALITY.
(1) Each Party shall (and shall cause each of its Representatives (as
defined below) to) hold in strictest confidence and not use in any manner, other
than as expressly contemplated by this Agreement, any Confidential Information
(as defined below) of the other Party. Notwithstanding the preceding sentence or
any other provision of this Agreement to the contrary, the obligations of
confidentiality contained in this Agreement shall not apply, and any Party to
this Agreement (and its Representatives) may disclose to any and all persons,
without limitation of any kind, (i) the "tax treatment" and "tax structure" of
the "transactions" contemplated by this Agreement (as these terms are used in
Section 1.6011-4(b)(3) of the Treasury Regulations pursuant to Section 6011 of
the Code) and (ii) all materials of any kind (including opinions or other tax
analyses) that are provided to such Party relating to such tax treatment or tax
structure; provided, however, that such disclosure may not be made (A) until the
earliest of (1) the date of the public announcement of the discussions relating
to such transactions, (2) the date of the public announcement of such
transactions or (3) the date of the execution of this Agreement, and (B) to the
extent required to be kept confidential to comply with any applicable federal or
state securities laws.
(2) Section 7.3(1) shall not apply to the disclosure of any Confidential
Information where such disclosure is required by Applicable Law. In that case,
the Party required to disclose (or whose Representative is required to disclose)
shall, as soon as possible in the circumstances, notify the other Party of the
requirement. Upon receiving such notification, the other Party may take any
reasonable action to challenge the requirement, and the affected Party shall (or
shall cause the applicable Representative to), at the expense of the other
Party, assist the other Party in taking such reasonable action.
(3) Following the termination of this Agreement in accordance with the
provisions of either of Sections 4.1 or 4.2, each Party shall (and shall cause
each of its Representatives to) promptly, upon a request from the other Party,
return to the requesting Party all copies of any tangible items (other than this
Agreement), if any, which are or which contain Confidential Information of the
requesting Party; provided that if the Party so obligated to return Confidential
Information or its Representatives have prepared summaries or analyses
containing or concerning any Confidential Information, then such Party may,
instead of returning the summaries or analyses, destroy them and provide a
certificate to that effect to the requesting Party.
(4) For the purposes of this Section 7.3:
(a) "CONFIDENTIAL INFORMATION" of a Party at any time means all
information relating to the business of such Party and its Affiliates
(including business plans, way of doing business, business results and
prospects and customer lists) which,
(i) at the time is of a confidential nature (whether or not
specifically identified as confidential) and is known or should
be known by the other Party or its Representatives as being
confidential, and
(ii) has been or is from time to time made known to or is otherwise
learned by the other Party or any of its Representatives as a
result of the matters provided for in this Agreement,
including the following information:
(iii) the terms of this Agreement;
(iv) a Party's proprietary software; and
(v) a Party's business records,
but not including any information that at such time:
-27-
(vi) has become generally available to the public other than as a
result of a disclosure by the other Party or any of its
Representatives;
(vii) was available to the other Party or its Representatives on a
non-confidential basis before the date of this Agreement; or
(viii) becomes available to the other Party or its Representatives on
a non-confidential basis from a Person other than the
first-mentioned Party or any of its Representatives who is not,
to the knowledge of such other Party or its Representatives,
otherwise bound by confidentiality obligations to such
first-mentioned Party in respect of such information or otherwise
prohibited from transmitting the information to the other Party
or its Representatives; and
(b) "REPRESENTATIVES" with respect to any party means its Affiliates and
its and their respective directors, officers, employees, agents and
other representatives and advisers.
7.4 CONDUCT OF BUSINESS OF COMPANY. During the Interim Period, each of the
Sellers shall cause the Company to conduct its business only in the usual,
ordinary and regular course of business and consistent with past practice.
Without limiting the generality of the foregoing and except as expressly
contemplated by this Agreement, during the Interim Period each of the Sellers
shall cause the Company:
(a) not to take, approve or disclose an intention to take or refrain from
taking any action intended to or that would reasonably be expect to
result in, a breach or non-fulfilment of any condition set forth in
the Offer;
(b) not to make or agree to make any material change in the compensation
of any Director, Officer or Employee and not to pay or agree to pay or
set aside any bonus, profit sharing, retirement, insurance, death,
severance or fringe benefit or other extra-ordinary or indirect
compensation to, for or on behalf of any Director, Officer or
Employee;
(c) not to sell, assign, transfer, mortgage, pledge or otherwise encumber
any of the Assets, except for sales of Inventories in the normal
course of business;
(d) not to enter into any contract, agreement, commitment or transaction
outside the normal course of business;
(e) not to issue any shares or other securities of the Company;
(f) not to declare or cause to be paid any dividend or make any other form
of distribution or payment on the AAE Shares or any other securities
of the Company;
(g) not to default in the performance of any term or condition of any
Company Material Contract or Licenses and Permits;
(h) not to cancel or amend any policy of insurance which relates to the
Company or any of the Assets, except with the prior written consent of
the Purchaser;
(i) not to enter into any Company Material Contracts, except in the normal
course of business;
(j) to maintain relations with the suppliers, customers and landlords of
the Company in accordance with past custom and practice;
(k) to pay before delinquency all Taxes and other obligations which become
due and payable by the Company; and
(l) generally, to carry on the Business in the normal course.
-28-
7.5 CONDUCT OF BUSINESS OF PURCHASER. During the Interim Period, the
Purchaser shall conduct its business only in the usual, ordinary and regular
course of business and consistent with past practice. Without limiting the
generality of the foregoing and except as expressly contemplated by this
Agreement, during the Interim Period the Purchaser shall:
(a) not to take, approve or disclose an intention to take or refrain from
taking any action intended to or that would reasonably be expect to
result in, a breach or non-fulfilment of any condition set forth in
the Offer;
(b) not to make or agree to make any material change in the compensation
of any director, officer or employee and not to pay or agree to pay or
set aside any bonus, profit sharing, retirement, insurance, death,
severance or fringe benefit or other extra-ordinary or indirect
compensation to, for or on behalf of any director, officer or
employee;
(c) not to sell, assign, transfer, mortgage, pledge or otherwise encumber
any of its assets;
(d) not to enter into any contract, agreement, commitment or transaction
outside the normal course of business, provided however, that the
Purchaser shall be permitted to enter into an investor relations
agreement with aggregate fees payable thereunder not to exceed
$500,000 on an annual basis;
(e) not to issue any shares or other securities of the Purchaser;
(f) not to declare or cause to be paid any dividend or make any other form
of distribution or payment on the AAE Shares or any other securities
of the Purchaser;
(g) not to default in the performance of any term or condition of any
Purchaser Material Contract or license or permit;
(h) not to enter into any Purchaser Material Contracts, except in the
normal course of business;
(i) to pay before delinquency all Taxes and other obligations which become
due and payable by the Purchaser;
(j) not to enter into any transaction that would cause the Company to
cease to be a foreign private issuer or to cause more than 10% of the
AAE Subject Shares to be held by shareholders resident in the United
States; and
(k) generally, to carry on its business in the normal course.
7.6 EXCLUSIVE DEALINGS. From the date of this Agreement until Closing or 30
days after termination of this Agreement, neither the Company nor the Sellers
nor any Affiliate of any of them will take, nor will either Company or the
Sellers permit any of them to take any action, directly or indirectly, to
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any Person, other than the Purchaser and its designated and
authorized representatives, concerning any sale, transfer or assignment of the
AAE Shares or the Assets involving the Company. The Sellers shall notify the
Purchaser promptly if any such discussions or negotiations are sought or if any
proposal for a sale, transfer or assignment of the AAE Shares or the Assets is
received or being considered.
7.7 UPDATES TO INFORMATION.
(1) The Company shall update on or before the Closing, by amendment or
supplement, any of the informational disclosure schedules referred to in this
Agreement and any other disclosure in writing from the Company to the Purchaser
as soon as reasonably possible after new or conflicting information comes to the
attention of the Company. The Purchaser shall not be obligated to accept any
such amendment or supplement and receipt of
-29-
any such amendment or supplement shall not be deemed to be a waiver or release
by the Purchaser of any provision of this Agreement.
(2) The Purchaser shall update on or before the Closing, by amendment or
supplement, any of the informational disclosure schedules referred to in this
Agreement which relate to the Purchaser and any other disclosure in writing from
the Purchaser to the Sellers as soon as reasonably possible after new or
conflicting information comes to the attention of the Purchaser. The Sellers
shall not be obligated to accept any such amendment or supplement and receipt of
any such amendment or supplement shall not be deemed to be a waiver or release
by the Sellers of any provision of this Agreement.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 FURTHER ASSURANCES. Each of the Purchaser, the Sellers and the Company
shall use their reasonable commercial efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to obtain the Consents and Approvals and all other applicable consents and
approvals that may be required, to fulfil all conditions and satisfy all
provisions of, and to consummate and make effective as promptly as practicable
the transactions contemplated by, this Agreement, including the Offer, the
Private Placement and the Follow-on Private Placements.
8.2 COMPANY SUPPORT. The Company covenants in favour of the Purchaser that
it shall:
(a) support the transactions contemplated by the Offer, the Private
Placement and the Follow-on Private Placements; and
(b) execute such documents and instruments and do such things as may be
necessary to implement and carry out the intent of the Offer, the
Private Placement and the Follow-On Private Placement.
8.3 PRIVATE PLACEMENT. The Purchaser covenants that it shall use its
reasonable commercial efforts to complete the Private Placement on or before the
Completion Date at a price of not less than $1.50 per share, the proceeds of
which the Purchaser shall use as follows:
(a) $2,200,000 shall be advanced to the Company for general working
capital purposes, including the Company's legal and other costs and
expenses for the transactions contemplated in this Agreement;
(b) $1,000,000 shall be used to repay the Bridge Loan, subject to the
option of the holder thereof to convert the outstanding principal into
common stock in the capital of the Purchaser under the Private
Placement;
(c) up to $300,000 shall be used to pay the Purchaser's legal and other
costs and expenses for the transactions contemplated in this
Agreement; and
(d) $1,500,000 of the Private Placement shall be closed in escrow with the
shares to be issued and the funds to be released to the Company as
follows:
A. $750,000 to be released three months from Closing; and
B. $750,000 to be released six months from Closing.
-30-
8.4 FOLLOW-ON PRIVATE PLACEMENT. The Purchaser covenants that, subject to
the Closing and the completion of the Private Placement, it shall use its
reasonable commercial efforts to complete the Follow-on Private Placement at a
price of not less than $1.50 per share as soon as practicable after the Company
meets either of the following conditions:
(a) the Company enters into a binding agreement for the acquisition of a
fuel distribution business or company on terms satisfactory to the
Company and the Purchaser at each of their sole and absolute
discretion; or
(b) the Purchaser and the Company mutually agree on an alternative to an
acquisition of such fuel distribution business or company on terms
satisfactory to the Purchaser and the Company at each of their sole
and absolute discretion.
8.5 OPTION AND ESCROW AGREEMENT. Concurrent with the Closing, the Purchaser
shall cause one or more of the Purchaser's shareholders to place in escrow with
an escrow agent, mutually acceptable to the Parties, an aggregate 1,000,000
shares of common stock in the capital of the Purchaser to be held and dealt with
in accordance with the terms and conditions of the Option and Escrow Agreement.
8.6 PREPARATION OF AUDITED FINANCIAL STATEMENTS. The Company covenants that
it shall deliver to the Purchaser:
(a) concurrent with the Closing, audited consolidated financial statements
of the Company for the 15 month fiscal period ended 31 December 2002
and unaudited consolidated financial statements the Company for the
three month period ended 31 December 2001, the twelve month period
ended 31 December 2003 and the three month period ended 31 March 2003;
and
(b) no later than 60 days after the Closing, audited consolidated
financial statements of the Company for the fiscal year ended
September 30, 2001, the audited consolidated financial statements of
the Company for the three month period ended December 31, 2001 and the
audited consolidated financial statements of the Company for the
twelve month period ended December 31, 2002, all of which shall be
prepared in accordance with UK and Irish GAAP and reconciled in
accordance with US GAAP and satisfying the requirements set forth in
Item 17 of Form 20-F for registration statements under the Securities
Exchange Act of 1934, as amended, and audited in accordance with US
GAAS.
ARTICLE 9
GENERAL
9.1 EXPENSES. Each Party shall be responsible for its own legal and other
expenses (including any Taxes imposed on such expenses) incurred in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement and for the
payment of any broker's commission, finder's fee or like payment payable by it
in respect of the purchase and sale of the Assets pursuant to this Agreement.
9.2 PAYMENT OF TAXES. Except as otherwise provided in this Agreement, the
Purchaser shall pay all Taxes applicable to, or resulting from transactions
contemplated by this Agreement (other than Taxes payable under applicable
legislation by the Sellers) and any filing or recording fees payable in
connection with the instruments of transfer provided for in this Agreement.
9.3 PUBLIC ANNOUNCEMENTS. Except to the extent otherwise required by law or
with the prior consent of the other Party, no Party shall make any public
announcement regarding this Agreement or the transactions contemplated by this
Agreement, including the Offer, the Private Placement and the Follow-on Private
Placements.
-31-
9.4 NOTICES.
(1) Any notice, certificate, consent, determination or other communication
required or permitted to be given or made under this Agreement shall be in
writing and shall be effectively given and made if (i) delivered personally,
(ii) sent by prepaid courier service or mail, or (iii) sent prepaid by fax or
other similar means of electronic communication, in each case to the applicable
address set out below:
(i) if to any of the Sellers, to:
Xxxx Xxx
c/o AAE Technologies, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxxxx Xxxx-Xxxxx
0 Xxxxxx Xxxxx
00-00 Xxxxxxx Xxxx
Xxxxxxxx
Xxxxxxxx
XX0 0XX
Xxxxxx Xxxxxxx
Fax: 00(0)00000 000000
(ii) if to the Company, to:
AAE Technologies International plc
000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx & Xxxxxx
Xxxxx 000, 0000 Xxxxxx Xxxxxxxxx
XxXxxx, XX 00000-0000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
(iii) if to the Purchaser, to:
O2Diesel Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000-000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx, President
Fax: (000) 000-0000
with a copy to:
Blake, Xxxxxxx & Xxxxxxx LLP
Suite 2600,Three Bentall Centre
Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxx
Fax: (000) 000-0000
-32-
(2) Any such communication so given or made shall be deemed to have been
given or made and to have been received on the day of delivery if delivered, or
on the day of faxing or sending by other means of recorded electronic
communication, provided that such day in either event is a Business Day and the
communication is so delivered, faxed or sent before 4:30 p.m. on such day.
Otherwise, such communication shall be deemed to have been given and made and to
have been received on the next following Business Day. Any such communication
sent by mail shall be deemed to have been given and made and to have been
received on the fifth Business Day following the mailing thereof; provided
however that no such communication shall be mailed during any actual or
apprehended disruption of postal services. Any such communication given or made
in any other manner shall be deemed to have been given or made and to have been
received only upon actual receipt.
(3) Any Party may from time to time change its address under this Section
by notice to the other Party given in the manner provided by this Section.
9.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement in all
respects.
9.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties pertaining to the subject matter of this Agreement and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written. There are no conditions, warranties, representations
or other agreements between the Parties in connection with the subject matter of
this Agreement (whether oral or written, express or implied, statutory or
otherwise) except as specifically set out in this Agreement.
9.7 WAIVER. A waiver of any default, breach or non-compliance under this
Agreement is not effective unless in writing and signed by the party to be bound
by the waiver. No waiver shall be inferred from or implied by any failure to
act or delay in acting by a party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other party.
The waiver by a party of any default, breach or non-compliance under this
Agreement shall not operate as a waiver of that party's rights under this
Agreement in respect of any continuing or subsequent default, breach or
non-observance (whether of the same or any other nature).
9.8 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
9.9 NON-MERGER. Each Party hereby agrees that all provisions of this
Agreement, other than (a) the conditions in Article 4 and (b) the
representations and warranties contained in Article 5 and the related
indemnities in Sections 6.1 and 6.2 hereof (which shall be subject to the
special arrangements provided in such Articles or Sections) shall forever
survive the execution, delivery and performance of this Agreement, Closing and
the execution, delivery and performance of any and all documents delivered in
connection with this Agreement.
9.10 JURISDICTION AND VENUE. Each Party agrees (i) that any action or
proceeding relating to this Agreement may (but need not) be brought in any court
of competent jurisdiction in the City of New York, State of New State, and for
that purpose now irrevocably and unconditionally submits to the jurisdiction of
such New York court; (ii) not to oppose any such New York action or proceeding
on the basis of forum non conveniens or for any other reason; and (iii) not to
oppose the enforcement against it in any other jurisdiction of any judgment or
order duly obtained from a New York court as contemplated by this Section.
Such service may be made by mailing or delivering a copy of such process to the
applicable party in care of its agent at the address given in this Section and
each of the parties hereto hereby irrevocably authorizes and directs the
respective agents to accept such service on their behalf. If and to the extent
that such service and any summons or other legal process cannot for any reason
be effected upon the applicable agent as in this Agreement provided, each of the
parties to this Agreement further irrevocably consents to the service of any and
all legal process in any such action, suit or proceeding by the mailing of
copies of such process in the manner specified in Section 8.4. Nothing in this
Section will affect the rights of the Parties to serve legal process in any
other manner permitted by law.
9.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New York State, United States of America.
-33-
9.12 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of,
and be binding on, the Parties and their respective successors and permitted
assigns. No Party may assign or transfer, whether absolutely, by way of
security or otherwise, all or any part of its respective rights or obligations
under this Agreement without the prior written consent of the other Parties.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-34-
9.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument.
Counterparts may be executed either in original or faxed form and the Parties
adopt any signatures received by a receiving fax machine as original signatures
of the Parties; provided, however, that either Party providing its signature in
such manner shall promptly forward to the other Party an original of the signed
copy of this Agreement which was so faxed.
IN WITNESS WHEREOF the Parties have executed this Agreement.
O2DIESEL CORPORATION
/s/ Xxxx Xxxxxxx
------------------------------
By: Xxxx Xxxxxxx, President
AAE TECHNOLOGIES INTERNATIONAL PLC
/s/ Xxxx Xxx
------------------------------
By: Xxxx Xxx, COO
SIGNED, SEALED & DELIVERED |
In the presence of |
|
|
/s/ Xxxxx X. Xxxxx | /s/ Xxxx Xxx
----------------------------------------- | -----------------------------------
Witness | XXXX XXX
|
SIGNED, SEALED & DELIVERED |
In the presence of: | Quarryside Ltd.
|
|
| /s/ Xxxxx X. Xxxxx
| ------------------
/s/ [illegible] | By:Xxxxx X. Xxxxx, Attorney-in-Fact
|
----------------------------------------- | -----------------------------------
Witness | QUARRYSIDE LTD.
|
SIGNED, SEALED & DELIVERED |
In the presence of |
|
|
/s/ Xxxxxxx Xxxx |
---------------------------------- |
[address illegible] | /s/ Xxxxxxx Xxxx-Xxxxx
----------------------------------------- | -----------------------------------
Witness | XXXXXXX XXXX-XXXXX
|
-35-
SIGNED, SEALED & DELIVERED |
In the presence of |
|
|
/s/ [illegible] | /s/ Xxxxx Xxxxxx
----------------------------------------- | -----------------------------------
Witness | XXXXX XXXXXX
|
SIGNED, SEALED & DELIVERED |
In the presence of: |
|
|
/s/ Xxxxx X. Xxxxx | /s/ Xxxxxxxx Xxx
----------------------------------------- | -----------------------------------
Witness | XXXXXXXX XXX
SIGNED, SEALED & DELIVERED |
In the presence of |
|
|
/s/ Xxxxxxx Xxxx |
------------------------------------- |
[address illegible] | /s/ Xxxxxxx Xxxx-Xxxxx
----------------------------------------- | -----------------------------------
Witness | XXXXXXX XXXX-XXXXX
|
EXHIBITS
--------
A Company's Bring-Down Certificate
B Seller's Bring-Down Certificate
C Company's Corporate Certificate
D Purchaser's Bring-Down Certificate
E Purchaser's Corporate Certificate
F Escrow Agreement
G Share Exchange Offer Document
H Indemnity Escrow Agreement
SCHEDULES
---------
A List of Sellers and Shares Held
1.1(56) Permitted Liens
5.2(1) Authorized Capital and Other Information concerning the Company
and the Subsidiaries
5.2(6) Financial Statements
5.2(9) Lease Premises
5.2(11) Company Material Contracts
5.2(14) Intellectual Property
5.2(16) Undisclosed Liabilities
5.2(25) Bonuses
5.2(27) Tax Filings
5.2(32) Brokerage Fees
5.3(8) Purchaser Material Contracts
5.3(11) Purchaser's Notices
EXHIBIT A
COMPANY'S BRING-DOWN CERTIFICATE
TO: O2DIESEL CORPORATION
BLAKE, XXXXXXX & XXXXXXX LLP
RE: SUPPORT AGREEMENT DATED JUNE 17, 2003 (THE "SUPPORT AGREEMENT")
The undersigned hereby certifies in his capacity as an officer of AAE
Technologies International Plc that:
1. there has been no Material Adverse Change in the Company from the date
of the Support Agreement to the date hereof;
2. all of the terms and conditions set forth in the Support Agreement to
be complied with or performed by the Company at or prior to Closing have been
complied with or performed by the undersigned at or prior to Closing; and
The capitalized terms used herein have the meaning given in the Support
Agreement.
DATED ________________, 2003.
AAE TECHNOLOGIES INTERNATIONAL PLC
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
EXHIBIT B
SELLER'S BRING-DOWN CERTIFICATE
TO: O2DIESEL CORPORATION
BLAKE, XXXXXXX & XXXXXXX LLP
RE: SUPPORT AGREEMENT DATED JUNE 17, 2003 (THE "SUPPORT AGREEMENT")
The undersigned hereby certifies in his capacity as a shareholder of
AAE Technologies International plc that:
1. there has been no Material Adverse Change in the Company from the date
of the Support Agreement to the date hereof;
2. all of the terms and conditions set forth in the Support Agreement to
be complied with or performed by the undersigned at or prior to Closing have
been complied with or performed by the undersigned at or prior to Closing; and
3. all representations and warranties set forth in sections 5.1 and 5.2
of the Support Agreement are true and correct on the date hereof.
The capitalized terms used herein have the meaning given in the
Support Agreement.
DATED ________________, 2003.
SIGNED, SEALED AND DELIVERED in the )
presence of: )
)
)
--------------------------- )
Signature )
) Signed:
) -----------------------
)
--------------------------- )
Name ) Name:
) -------------------------
)
--------------------------- )
Address )
)
)
--------------------------- )
Occupation )
EXHIBIT C
CORPORATE CERTIFICATE OF AN OFFICER OF
AAE TECHNOLOGIES INTERNATIONAL PLC
TO: O2DIESEL CORPORATION
BLAKE, XXXXXXX & XXXXXXX LLP
RE: SUPPORT AGREEMENT DATED JUNE 17, 2003 (THE "SUPPORT AGREEMENT")
I, Xxxx Xxx, President of AAE Technologies International plc (the
"Company"), hereby certify as follows with no personal liability:
1. I have made or caused to be made such examinations or investigations
as are, in my opinion, necessary to make these statements, and I have furnished
this certificate with the intent that it may be relied upon by the addressees
hereof in connection with the above-noted transactions.
2. The Company was incorporated under the laws of the Republic of
Ireland on April 14, 2000. A copy of the certificate of incorporation, articles
and by-laws of the Company, together with all amendments thereto to the date
hereof, are attached as Annex "A" to this Certificate (collectively, the
"Constating Documents"). The Constating Documents have not been further amended
or supplemented and are in full force and effect and no proceedings have been
taken or are pending to further amend, supplement or cancel the Constating
Documents.
3. Attached as Annex "B" hereto is a true and complete copy of
resolutions duly passed by the directors of the Company on the dates set forth
therein, which resolutions are now in full force and effect, unamended.
4. The persons named below are duly elected or appointed directors and
officers of the Company holding the office(s) set forth opposite their
respective names, and the signatures set forth opposite their respective names
are true specimens of the signatures of the directors and officers of the
Company who have executed and delivered, or are expected to execute and deliver,
on behalf of the Company, all documents required in connection with the
above-noted transactions. The addressees hereby may conclusively rely upon this
certificate as to the names and signatures of the officers and directors of the
Company until they receive a further certificate of an officer of the Company
cancelling or amending this certificate and submitting the names and signatures
of the officers and directors named in such further certificate.
NAME POSITION SIGNATURE
---- -------- ---------
Xxxxxxx Xxxx-Xxxxx Chairman and
Chief Executive Officer ---------------------------
Xxxx Xxx Chief Operating Officer
---------------------------
Xxxxxx Xxxxxxx Secretary
---------------------------
DATED _______________, 2003
-------------------------------
Xxxx Xxx
ANNEX "A"
TO EXHIBIT C
CONSTATING DOCUMENT OF AAE TECHNOLOGIES INTERNATIONAL PLC
ANNEX "B"
TO EXHIBIT C
RESOLUTIONS OF AAE TECHNOLOGIES INTERNATIONAL PLC
EXHIBIT D
PURCHASER'S BRING-DOWN CERTIFICATE
TO: THE SHAREHOLDERS OF AAE TECHNOLOGIES INTERNATIONAL PLC
RE: SUPPORT AGREEMENT DATED JUNE 17, 2003 (THE "SUPPORT AGREEMENT")
The undersigned officer of O2Diesel Corporation (the "Purchaser") hereby
certifies for and on behalf of the Corporation without personal liability that:
1. all of the terms and conditions set forth in the Support Agreement to be
complied with or performed by the Purchaser at or prior to Closing have been
complied with or performed by the Corporation at or prior to Closing; and
2. there has been no Material Adverse Change in the Purchaser from the date
of the Purchase Agreement to the date hereof;
3. all representations and warranties set forth in section 5.3 of the
Support Agreement are true and correct on the date hereof.
The capitalized terms used herein have the meaning given in the Support
Agreement.
DATED __________________, 2003.
O2DIESEL CORPORATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
EXHIBIT E
PURCHASER'S CORPORATE CERTIFICATE
CERTIFICATE OF AN OFFICER OF
O2DIESEL CORPORATION
TO: THE SHAREHOLDERS OF AAE TECHNOLOGIES INTERNATIONAL PLC
RE: SUPPORT AGREEMENT DATED JUNE 17, 2003
I, Xxxx Xxxxxxx, Director, President and Secretary of O2Diesel
Corporation (the "Corporation"), hereby certify for and on behalf of the
Corporation without personal liability that:
1. I have made or caused to be made such examinations or investigations
as are, in my opinion, necessary to make these statements, and I have furnished
this certificate with the intent that it may be relied upon by the addressees
hereof in connection with the above-noted transactions.
2. The Corporation was incorporated under the laws of the State of
Washington on April 10, 2000 and is validly subsisting thereunder.
3. Attached as Annex "A" hereto is a true and complete copy of
resolutions duly passed by the directors of the Corporation on the dates set
forth therein, which resolutions are now in full force and effect, unamended.
4. The persons named below are duly elected or appointed directors and
officers of the Corporation holding the office(s) set forth opposite their
respective names, and the signatures set forth opposite their respective names
are true specimens of the signatures of the directors and officers of the
Corporation who have executed and delivered, or are expected to execute and
deliver, on behalf of the Corporation, all documents required in connection with
the above-noted transactions. The addressees hereby may conclusively rely upon
this certificate as to the names and signatures of the officers and directors of
the Corporation until they receive a further certificate of an officer of the
Corporation cancelling or amending this certificate and submitting the names and
signatures of the officers and directors named in such further certificate.
NAME POSITION SIGNATURE
---- -------- ---------
Xxxx Xxxxxxx President and Secretary
---------------------------
DATED _________________, 2003.
O2DIESEL CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ANNEX "A"
TO EXHIBIT E
RESOLUTIONS OF O2DIESEL CORPORATION
EXHIBIT F
ESCROW AGREEMENT
EXHIBIT G
SHARE EXCHANGE OFFER DOCUMENT
EXHIBIT H
INDEMNITY ESCROW AGREEMENT
SCHEDULE A
LIST OF SELLERS AND SHARES HELD
SELLER ORDINARY SHARES OPTIONS
--------------------------------------------------------------------------------
Quarryside Ltd. 4,449,500 3,200,000
Xxxx Xxx 0 0
Xxxxxxxx Xxx * 0
Xxxxxxx Xxxx-Xxxxx 9,307,591 7,053,333
Xxxxxxx Xxxx-Xxxxx 368,819 0
* It is anticipated that prior to the closing, Quarryside Ltd. will exercise
the options held by it for the benefit of Xxxxxxxx Xxx and that the shares
issued upon exercise of those options will be held by Xxxxxxxx Xxx.
COMPANY DISCLOSURE LETTER
June 17, 2003
The following Schedule 1.1(56) and Schedules 5.2(1) - 5.2(32) are AAE
Technologies International PLC's, a corporation governed by the laws of the
Republic of Ireland (the "Company"), Schedules to the to the Support Agreement
by and among Dynamic Ventures, Inc., a corporation governed by the laws of the
state of Washington (the "Purchaser"), the Shareholders of the Company
(individually, a "Seller and, collectively, the "Sellers"), and the Company
dated as of the date hereof (the "Agreement"). Unless otherwise stated, all
statements made herein are made as of the date of the execution of the
Agreement, and capitalized terms used but not otherwise defined herein have the
meanings given to them in the Agreement.
The disclosure in any Section of these Schedules qualifies (a) the
corresponding Section of the Agreement and (b) the other sections of the
Agreement only to the extent that that such disclosure fairly and logically
relates to such other sections.
In some instances and in some respects, these Schedules provide information
not strictly called for by the Agreement. Such information is provided where it
was thought helpful and no implication should be drawn that such information is
necessarily material or is otherwise required to be disclosed or that the
inclusion of such information establishes or implies any standard set forth in
the Agreement.
The information in these Schedules is not intended to be, nor shall it be
construed to be, a representation or warranty by the Company independent of the
representations and warranties of the Company set forth in Section 5.2 of the
Agreement. Capitalized terms used herein without definition have the respective
meanings given to them in the Agreement.
SCHEDULE 1.1(56)
Permitted Liens
---------------
1. Security Lien in favor of Dynamic Touch Ltd. (Holder) or order at Nominee -
X/X Xxxxxxx X. Xxxxxx, Xxx., Xxxxxx & Associates, 00000 Xxx Xxxxxxx, Xxxxx
X, Xxxxxxxxxx 00000. On March 18, 2003 Dynamic Touch Ltd. loaned US $50,000
to AAE Technologies International Plc (Maker).
2. Security Lien in favor of Dynamic Touch Ltd. (Holder) or order at Nominee -
X/X Xxxxxxx X. Xxxxxx, Xxx., Xxxxxx & Associates, 00000 Xxx Xxxxxxx, Xxxxx
X, Xxxxxxxxxx 00000. On March 31, 2003 Dynamic Touch Ltd. loaned US
$950,000 to AAE Technologies International Plc (Maker).
SCHEDULE 5.2(1)
Authorized Capital and Other Information
Concerning the Company and the Subsidiaries
-------------------------------------------
NAME AAE TECHNOLOGIES AAE AAE TECHNOLOGIES
INTERNATIONAL PLC TECHNOLOGIES, INC. HOLDINGS PLC
------------------------------ -------------------------------------------------------------
AUTHORIZED SHARES
Ordinary A Shares 38,100
Ordinary Shares 500,000,000 1,500,000 100,000,000
OUTSTANDING SHARES
Ordinary A Shares None
Ordinary Shares 73,004,848 1,000 47,513,754
OUTSTANDING OPTIONS/ 25,159,101 10% of Ordinary Shares None
WARRANTS
COUNTRY INCORPORATED Ireland United States (Delaware) Great Britain
QUALIFIED TO DO BUSINESS Ireland United States (Delaware) Great Britain
DIRECTORS Xxxxxxx Xxxx-Xxxxx 1 Xxxxxxx Xxxx Xxxxx - Chm Xxxxxxx Xxxx Xxxxx - Chm
a. Xxxx Xxx 2 Xxxx Xxx Xxxxxxx Xxxx
Xxxxxx Xxxxxxx 3
Xxxxxxxx Xxxxxxxx 4
DIRECTOR
SHAREHOLDINGS b. 9,307,591 1 None None
a. 4,449,500 2
300,000 3
None 4
OFFICERS Xxxxxxx Xxxx-Xxxxx - Chm & CEO Xxxxxxx Xxxx-Xxxxx - Chairman Xxxxxxx Xxxx-Xxxxx - Chairman
Xxxx Xxx - COO Xxxx Xxx - President & COO Xxxxxxx Xxxx - Secretary
Xxxxxx Xxxxxxx - Secretary Xxxxx Xxxxxx- CFO
Xxxxx Xxxxx - Secretary
AAE AAE (RESEARCH AND
NAME DEVELOPMENT)
TECHNOLOGIES LIMITED LIMITED
----------------------------------------------------------
AUTHORIZED SHARES
Ordinary A Shares
Ordinary Shares 10,000,000 100,000
OUTSTANDING SHARES
Ordinary A Shares
Ordinary Shares GBP 1,000 2
OUTSTANDING OPTIONS/ None
WARRANTS
COUNTRY INCORPORATED Great Britain Ireland
QUALIFIED TO DO BUSINESS Great Britain Ireland
DIRECTORS Xxxxxxx Xxxx Xxxxx - Chm Xxxxxxx Xxxx Xxxxx - Chm
Xxxx Xxx
Xxxxxx Xxxxxxx
DIRECTOR
SHAREHOLDINGS None None
OFFICERS Xxxxxxx Xxxx-Xxxxx - Chairman Xxxxxxx Xxxx Xxxxx - Chm
Xxxxxxx Xxxx - Secretary Xxxxxx Xxxxxxx - Secretary
a. Held in A. Rae Trust -
Quarryside Ltd.
b. Shares held by
Xxxxxxx Xxxx-Xxxxx
only and not by family
members.
SCHEDULE 5.2(6)
Financial Statements
--------------------
AAE TECHNOLOGIES INTERNATIONAL PLC
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED
30 SEPTEMBER 2001
COMPANY REGISTRATION NUMBER 327106 (EIRE)
AAE TECHNOLOGIES INTERNATIONAL PLC
FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
CONTENTS PAGE
Officers and professional advisers 1
The directors' report 2
Independent auditors' report to the shareholders 4
Profit and loss account 6
Group balance sheet 7
Balance sheet 8
Group cash flow 9
Notes to the financial statements 10
PAGE 1
AAE TECHNOLOGIES INTERNATIONAL PLC
OFFICERS AND PROFESSIONAL ADVISERS
THE BOARD OF DIRECTORS Mr A Xxxx-Xxxxx
Mr A Rae
Mr P Xxxxxxx
Mr C Desmond
COMPANY SECRETARY Mr C Desmond
REGISTERED OFFICE The Arch
Father Xxxxxxx Xxxx
Cork
Eire
AUDITORS PRB Xxxxxx Xxxxxxx
Chartered Accountants
& Registered Auditors
0/0 Xxxxxx Xxxx Xxxxxxxx Xxxx
Xxxxxx Road
Haywards Xxxxx
Xxxx Sussex
RH16 1TX
BANKERS Ulster Bank Ireland Limited
XX Xxx 000
00 Xxxxxxx Xxxxx
Xxxxxx 0
Eire
AAE TECHNOLOGIES INTERNATIONAL PLC
THE DIRECTORS' REPORT
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
The directors present their report and the financial statements of the group for
the period from 14 October 2000 to 30 September 2001.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The principal activity of the company during the year was that of a holding
company. On 26th October 2000, the company changed its name from Millingham
Limited to AAE Technologies International Limited and on 5th December 2000 it
re-registered as a public company.
The principal activities of the group's subsidiaries are as follows:
- AAE Holdings Plc - intermediate holding company
- AAE Technologies Limited - the development and marketing of
proprietary fuel additive technologies for the international motor
fuel market.
- AAE (Research and Development) Limited - non trading
RESULTS AND DIVIDENDS
The trading results for the period, and the group's financial position at the
end of the period are shown in the attached financial statements. The directors
are unable to recommend a dividend. The deficit for the period amounting to
437,904 Pounds will be carried forward to the following year.
THE DIRECTORS AND THEIR INTERESTS
The directors who served the company during the period together with their
beneficial and family interests in the shares of the company were as follows:
AT 30 SEPTEMBER 2001 AT 14 OCTOBER 2000
MR A XXXX-XXXXX
'A' Ordinary shares of 1 Euro each - 1
Ordinary shares of $1 each - 16,499
Ordinary shares of $0.01 each 7,265,385 -
MR A RAE -
'A' Ordinary shares of 1 Euro each - 1
Ordinary shares of $1 each - 16,498
Ordinary shares of $0.01 each 4,449,500 -
MR P XXXXXXX
Ordinary shares of $0.01 each 244,677 -
MR C DESMOND
Ordinary shares of $0.01 each 200,000 -
========= ========
FIXED ASSETS
The movements in fixed assets are recorded in the notes to the financial
statements.
SAFETY, HEALTH AND WELFARE ACT 1989
The company is taking the necessary action to ensure compliance with the Act,
including the adoption of a safety statement.
PAGE 3
AAE TECHNOLOGIES INTERNATIONAL PLC
THE DIRECTORS' REPORT
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the group at the end of the period and of the group's profit or
loss for the period then ended.
In preparing those financial statements, the directors are required to:
select suitable accounting policies, as described on page 10, and then
apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and to enable them to ensure that the financial statements comply with the
Companies Act, 1963 to 1999. The directors are also responsible for safeguarding
the assets of the group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
POLICY ON THE PAYMENT OF CREDITORS
The group's policy for the year to 30th September 2002 for all suppliers is to
fix terms of payment when agreeing the terms of each business transaction, to
ensure the supplier is aware of those terms and to abide by the agreed terms of
payment. The creditor payment days outstanding for the group at 30th September
2001 were 158 days.
POST BALANCE SHEET EVENTS
After the year-end, the company issued a further 24,181,038 shares for a total
consideration of 1,586,786 Euros.
AUDITORS
During the period, the auditors, PRB Xxxxxx Xxxxxxx were appointed and will
continue in office in accordance with section 160(2) of the Companies Xxx 0000,
subject to shareholder approval at the Annual General Meeting.
Registered office: Signed on behalf of the directors
The Arch
Father Xxxxxxx Xxxx "Xxxxxxx Xxxx-Xxxxx"
Cork
Eire MR A XXXX-XXXXX
Director
PAGE 4
AAE TECHNOLOGIES INTERNATIONAL PLC
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
We have audited the financial statements on pages 6 to 16 which have been
prepared under the historical cost convention and the accounting policies set
out on page 10.
RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS AND THE AUDITORS
As described on page 3, the group and company's directors are responsible for
the preparation of the financial statements in accordance with applicable law
and Irish Accounting Standards.
It is our responsibility to audit the financial statements in accordance with
relevant legal and regulatory requirements and Auditing Standards promulgated by
the Auditing Practices Board in Ireland and the United Kingdom.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Acts.
We also report to you whether in our opinion: proper books of account have been
kept by the group and company; whether, at the balance sheet date, there exists
a financial situation requiring the convening of an extraordinary general
meeting of the company; and whether the information given in the directors'
report is consistent with the financial statements. In addition, we state
whether we have obtained all the information and explanations necessary for the
purposes of our audit and whether the group and company's balance sheet and its
profit and loss account are in agreement with the books of account.
We report to the shareholders if, in our opinion, any information specified by
law regarding directors' remuneration and directors' transactions is not given
and, where practicable, include such information in our report.
We read the directors' report and consider the implications for our report if we
become aware of any apparent misstatements within it.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the group's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
PAGE 5
AAE TECHNOLOGIES INTERNATIONAL PLC
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS (CONTINUED)
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the group and company as at 30 September 2001 and of its loss for
the period then ended, and have been properly prepared in accordance with the
Companies Acts 1963 to 1999.
We have obtained all the information and explanations we consider necessary for
the purposes of our audit. In our opinion proper books of account have been kept
by the group and company. The financial statements are in agreement with the
books of account. In our opinion the information given in the directors' report
on pages 2 to 3 is consistent with the financial statements.
The net assets of the company, as stated in the balance sheet on page 8 are more
than half of the amount of its called up share capital and in our opinion, on
that basis there did not exist at 30 September 2001 a financial situation which
under Section 40(1) of the Companies (Amendment) Xxx 0000 may require the
convening of an extraordinary general meeting of the company.
0/0 Xxxxxx Xxxx Xxxxxxxx Xxxx PRB XXXXXX XXXXXXX
Bridge Road Chartered Accountants
Haywards Heath & Registered Auditors
Xxxx Xxxxxx
XX00 0XX
PAGE 6
AAE TECHNOLOGIES INTERNATIONAL PLC
PROFIT AND LOSS ACCOUNT
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
Period from Period from
14 Oct 00 to 14 Apr 00 to
Note 30 Sep 01 13 Oct 00
Euro Euro
GROUP TURNOVER 2 3,443 -
Cost of sales (550) -
--------- -------
GROSS PROFIT 2,893 -
Administrative expenses (469,311) -
--------- -------
OPERATING LOSS 3 (466,418) -
Interest receivable 561 -
Interest payable 6 (13,024) -
--------- -------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (478,881) -
Tax on loss on ordinary activities - -
--------- -------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (478,881) -
Minority interests 40,977 -
--------- -------
LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY 7 (437,904) -
--------- -------
LOSS FOR THE FINANCIAL PERIOD (437,904) -
======== =======
The company has no recognised gains or losses other than the results for the
period as set out above.
All of the activities of the company are classed as continuing.
The company has taken advantage of section 3(2) of the Companies
(Amendment) Xxx 0000 not to publish its own Profit and Loss Account.
These financial statements were approved by the directors on the . . . . .,
and are signed on their behalf by:
MR A XXXX-XXXXX
Director
THE NOTES ON PAGES 10 TO 16 FORM PART OF THESE FINANCIAL STATEMENTS.
PAGE 7
AAE TECHNOLOGIES INTERNATIONAL PLC
GROUP BALANCE SHEET
30 SEPTEMBER 2001
NOTE 30 SEP 01 13 Oct 00
Euro Euro Euro Euro
FIXED ASSETS
Intangible assets 8 890,276 -
Tangible assets 9 26,635 -
--------- --------
916,911 -
CURRENT ASSETS
Debtors 11 43,292 28,042
Cash at bank 13,882 9,346
--------- --------
57,174 37,388
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 12 (990,047) -
--------- --------
NET CURRENT (LIABILITIES)/ASSETS (932,873) 37,388
--------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES (15,962) 37,388
MINORITY INTERESTS 50,123 -
--------- --------
34,161 37,388
========= ========
CAPITAL AND RESERVES
Called-up equity share capital 13 472,065 37,388
Profit and Loss Account 14 (437,904) -
--------- --------
SHAREHOLDERS' FUNDS 15 34,161 37,388
========= ========
These financial statements were approved by the directors on the . . . . .,
and are signed on their behalf by:
MR A XXXX-XXXXX
Director
THE NOTES ON PAGES 10 TO 16 FORM PART OF THESE FINANCIAL STATEMENTS.
PAGE 8
AAE TECHNOLOGIES INTERNATIONAL PLC
BALANCE SHEET
30 SEPTEMBER 2001
NOTE 30 SEP 01 13 Oct 00
Euro Euro Euro Euro
FIXED ASSETS
Investments 10 472,065 2
CURRENT ASSETS
Debtors 11 - 28,042
Cash at bank - 9,346
------ --------
- 37,388
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 12 - (2)
------ --------
NET CURRENT ASSETS - 37,386
--------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES 472,065 37,388
========= ========
CAPITAL AND RESERVES
Called-up equity share capital 13 472,065 37,388
--------- --------
SHAREHOLDERS' FUNDS 472,065 37,388
========= ========
These financial statements were approved by the directors on the , and are
signed on their behalf by:
MR A XXXX-XXXXX
Director
THE NOTES ON PAGES 10 TO 16 FORM PART OF THESE FINANCIAL STATEMENTS.
PAGE 9
AAE TECHNOLOGIES INTERNATIONAL PLC
GROUP CASH FLOW
PERIOD FROM 14 OCTOBER 200 TO 30 SEPTEMBER 2001
Period from Period from
14 Oct 00 to 14 Apr 00 to
Note 30 Sep 01 13 Oct 00
Euro Euro Euro Euro
NET CASH OUTFLOW FROM
OPERATING ACTIVITIES 16 (701,240) (28,042)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 561 -
Interest paid (13,024) -
-------- --------
NET CASH OUTFLOW FROM RETURNS
ON INVESTMENTS AND SERVICING OF
FINANCE (12,463) -
ACQUISITIONS AND DISPOSALS
Cash acquired with subsidiaries 12,500 -
-------- --------
NET CASH INFLOW FROM
ACQUISITIONS AND DISPOSALS 12,500 -
--------- --------
CASH OUTFLOW BEFORE FINANCING (701,203) (28,042)
FINANCING
Issue of equity share capital - 37,388
-------- --------
NET CASH INFLOW FROM FINANCING - 37,388
--------- --------
(DECREASE)/INCREASE IN CASH 17 (701,203) 9,346
========= ========
THE NOTES ON PAGES 10 TO 16 FORM PART OF THESE FINANCIAL STATEMENTS.
PAGE 10
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
1. ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost
convention, and in accordance with applicable accounting standards.
BASIS OF CONSOLIDATION
The consolidated accounts incorporate the accounts of the company and all
group undertakings. These are adjusted, where appropriate, to conform to
group accounting policies. Acquisitions are accounted for under the
acquisition method and goodwill on consolidation is capitalised and written
off over five years from the year of acquisition. The results of companies
acquired or disposed of are included in the profit and loss account after
or up to the date that control passes respectively. As a consolidated
profit and loss account is published, a separate profit and loss account
for the parent company is omitted from the group accounts by virtue of
section 3(2)(3) of the Companies (Amendment) Xxx 0000.
FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into euros at
the rates of exchange ruling at the balance sheet date. Transactions in
foreign currencies are translated into euros at the rate of exchange ruling
at the date of the transaction. Exchange differences are taken into account
in arriving at the operating profit.
AMORTISATION
Amortisation is calculated so as to write off the cost of an asset, less
its estimated residual value, over the useful economic life of that asset
as follows:
Intellectual property - over the life of the rights
Goodwill on consolidation - 5 years straight line
DEPRECIATION
Depreciation is calculated so as to write off the cost of an asset, less
its estimated residual value, over the useful economic life of that asset
as follows:
Office equipment - 33.33% reducing balance basis
2. TURNOVER
The turnover and loss before tax are attributable to the principal activity
of the group.
An analysis of turnover is given below:
Period from Period from
14 Oct 00 to 14 Apr 00 to
30 Sep 01 13 Oct 00
Xxxx Xxxx
Xxxxxx Xxxxxxx 3,443 -
======= ==========
PAGE 11
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
3. OPERATING LOSS
The group operating loss is stated after charging:
Period from Period from
14 Oct 00 to 14 Apr 00 to
30 Sep 01 13 Oct 00
Euro Euro
Amortisation 58,733 -
Depreciation 13,318 -
Operating lease costs:
Vehicles 3,989 -
Auditors remuneration 5,000 -
======== =========
4. PARTICULARS OF EMPLOYEES
The aggregate payroll costs to the Group were:
Period from Period from
14 Oct 00 to 14 Apr 00 to
30 Sep 01 13 Oct 00
Euro Euro
Wages and salaries 60,447 -
Social welfare costs 8,719 -
-------- ---------
69,166 -
======== =========
The average number of staff employed by the group during the financial
period amounted to 4.
5. DIRECTORS' EMOLUMENTS
The directors' aggregate emoluments in respect of qualifying services to
the Group were:
Period from Period from
14 Oct 00 to 14 Apr 00 to
30 Sep 01 13 Oct 00
Euro Euro
Emoluments payable 60,447 -
======== =========
6. INTEREST PAYABLE
Period from Period from
14 Oct 00 to 14 Apr 00 to
30 Sep 01 13 Oct 00
Euro Euro
Interest payable on group bank borrowing 13,024 -
======== =========
7. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY
The profit dealt with in the accounts of the parent company was Nil Euros.
PAGE 12
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
8. INTANGIBLE FIXED ASSETS
INTELLECTUAL GOODWILL ON
GROUP PROPERTY CONSOLIDATION TOTAL
EURO EURO EURO
COST
Additions 389,612 559,397 949,009
------------ ------------- -------
AT 30 SEPTEMBER 2001 389,612 559,397 949,009
============ ============= =======
AMORTISATION
Charge for the period 12,100 46,633 58,733
------------ ------------- -------
AT 30 SEPTEMBER 2001 12,100 46,633 58,733
============ ============= =======
NET BOOK VALUE
AT 30 SEPTEMBER 2001 377,512 512,764 890,276
============ ============= =======
9. TANGIBLE FIXED ASSETS
GROUP OFFICE EQUIPMENT
EURO
COST
Additions 39,953
----------------
AT 30 SEPTEMBER 2001 39,953
================
DEPRECIATION
Charge for the period 13,318
----------------
AT 30 SEPTEMBER 2001 13,318
================
NET BOOK VALUE
AT 30 SEPTEMBER 2001 26,635
================
PAGE 13
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
10. INVESTMENTS
GROUP
COMPANY COMPANIES
EURO
COST
Additions 472,065
---------
At 30 September 2001 472,065
=========
NET BOOK VALUE
AT 30 SEPTEMBER 2001 472,065
=========
The above investment relates to a 90.52% shareholding in AAE Holdings Plc
and its subsidiary undertaking, AAE Technologies Limited. Both companies
are registered in England. AAE Holdings Plc is an intermediate holding
company and AAE Technologies Limited develops and markets proprietary fuel
additive technologies for the international motor fuel market. The company
also has a 100% shareholdings in AAE (Research and Development) Limited, a
non-trading company registered in the Republic of Ireland.
11. DEBTORS
GROUP COMPANY
30 SEP 01 13 Oct 00 30 SEP 01 13 Oct 00
EURO Euro EURO Euro
Trade debtors 7,055 - - -
Other debtors 36,237 - - -
Called up share capital not paid - 28,042 - 28,042
--------- --------- --------- ---------
43,292 28,042 - 28,042
========= ========= ========= =========
12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
GROUP COMPANY
30 SEP 01 13 Oct 00 30 SEP 01 13 Oct 00
EURO Euro EURO Euro
Bank overdraft 705,739 - - -
Trade creditors 191,623 - - -
Taxation and social welfare 6,535 - - -
Other creditors 83,730 2 - 2
Accruals and deferred income 2,420 - - -
--------- --------- --------- ---------
990,047 2 - 2
========= ========= ========= =========
The bank overdraft is secured by a personal guarantees.
PAGE 14
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
13. SHARE CAPITAL
AUTHORISED SHARE CAPITAL:
30 SEP 01 13 Oct 00
EURO Euro
'A' Ordinary Shares of Euro1 each 38,100 2
========== ==========
$ $
100,000 Ordinary Shares of $1 each - 100,000
500,000,000 Ordinary Shares of $0.01 each 5,000,000 -
========== ==========
ALLOTTED AND CALLED UP:
30 SEP 01 13 Oct 00
NO. EURO No. Euro
'A' Ordinary Shares of Euro1 each - - 2 2
========== ======== ====== =======
NO. $ No. $
Ordinary Shares of $1 each - - 33,000 33,000
Ordinary Shares of $0.01 each 43,008,772 430,088 - -
========== ======== ====== =======
At the year-end, the following share options had been granted:
ISSUE NUMBER OF EXERCISE PERIOD OF
DATE ORDINARY SHARES PRICE EXERCISE
14/7/2001 2,800,000 5p 5 years
14/7/2001 75,000 10p 5 years
14/7/2001 850,000 15p 5 years
14/7/2001 150,000 25p 5 years
14/7/2001 2,500,000 29p 5 years
14/7/2001 7,425,435 30p 5 years
14/7/2001 4,800,000 40p 5 years
---------------
18,600,435
===============
PAGE 15
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
14. RESERVES
PROFIT AND
GROUP LOSS ACCOUNT
EURO
Loss for the period (437,904)
-------------
Balance carried forward (437,904)
=============
15. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
30 SEP 01 13 Oct 00
EURO Euro
Loss for the financial period (437,904) -
New equity share capital subscribed 434,677 37,388
---------- ---------
Net addition to funds (3,227) 37,388
Opening shareholders' equity funds 37,388 -
---------- ---------
Closing shareholders' equity funds 34,161 37,388
========== =========
16. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
PERIOD FROM Period from
14 OCT 00 TO 14 Apr 00 to
30 SEP 01 13 Oct 00
EURO Euro
Operating loss (466,418) -
Amortisation 58,733 -
Depreciation 13,318 -
Decrease in debtors 8,807 (28,042)
Decrease in creditors (315,680) -
------------- -------------
Net cash outflow from operating activities (701,240) (28,042)
============= =============
17. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
30 SEP 01 13 Oct 00
EURO Euro
(Decrease)/Increase in cash in the period (701,203) 9,346
---------- ---------
Movement in net debt in the period (701,203) 9,346
========== =========
Net funds at 14 Oct 00 9,346 -
---------- ---------
Net debt at 30 Sep 01 (691,857) 9,346
========== =========
PAGE 16
AAE TECHNOLOGIES INTERNATIONAL PLC
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM 14 OCTOBER 2000 TO 30 SEPTEMBER 2001
18. ANALYSIS OF CHANGES IN NET DEBT
AT 14 OCT AT 30 SEP
2000 CASH FLOWS 2001
EURO EURO EURO
Net cash:
Cash in hand and at bank 9,346 4,536 13,882
Overdrafts - (705,739) (705,739)
--------- ----------- ----------
Net debt 9,346 (701,203) (691,857)
========= =========== ==========
19. POST BALANCE SHEET EVENTS
After the year-end, the company issued a further 24,181,038 shares for a
total consideration of Euro1,586,786.
AAE GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FOR THE FIFTEEN FOR THE THREE
FROM 14 OCT 2000 MONTH PERIOD MONTH PERIOD
TO ENDED ENDED
30 SEPTEMBER 31 DECEMBER 31 MARCH
2001 2002 2003
UNAUDITED UNAUDITED
NOTES $ $ $
Turnover 2. 3,137 50,701 0
Cost of sales (500) (64,505) (882)
------------------------------------------------------
Gross profit 2,637 (13,804) (882)
Operating expenses (427,580) (2,401,313) (383,185)
------------------------------------------------------
Operating profit/(loss) 3. (424,943) (2,415,117) (384,067)
Other operating income 249,983 2,403
------------------------------------------------------
(424,943) (2,165,134) (381,664)
Interest receivable 511 9,388 34
Interest payable 6 (11,866) (60,675) (14,741)
------------------------------------------------------
Profit/(loss) before taxation (436,298) (2,216,421) (396,371)
Tax on loss on ordinary activities 0 39,080 0
------------------------------------------------------
Profit/(loss) after taxation (436,298) (2,177,341) (396,371)
Minority Interest 37,333 79,955 9,536
Loss attributable to members of the
------------------------------------------------------
parent company (398,965) (2,097,386) (386,835)
------------------------------------------------------
------------------------------------------------------
Loss for the financial period (398,965) (2,097,386) (386,835)
------------------------------------------------------
AAE GROUP CONSOLIDATED BALANCE SHEET
AS AT AS AT AS AT
30 SEPTEMBER 31 DECEMBER 31 MARCH
2001 2002 2003
UNAUDITED UNAUDITED
$ $ $
FIXED ASSETS
Intangible assets 7. 811,112 650,627 619,330
Tangible assets 8. 24,267 26,208 24,115
------------------------------------------------------
835,379 676,835 643,445
CURRENT ASSETS
Debtors 9. 39,244 97,849 199,677
Cash at bank 12,846 119,296 1,013,714
------------------------------------------------------
52,090 217,145 1,213,391
CREDITORS (AMOUNTS FALLING DUE WITHIN
ONE YEAR) 10. (902,012) (1,499,360) (2,677,030)
------------------------------------------------------
NET CURRENT LIABILITIES (849,922) (1,282,215) (1,463,639)
TOTAL ASSETS LESS CURRENT LIABILITIES (14,543) (605,380) (820,194)
Minority Interest 45,666 125,621 157,577
------------------------------------------------------
31,123 (479,759) (662,617)
------------------------------------------------------
CAPITAL AND RESERVES
Called-up equity share capital 11. 430,088 678,929 730,048
Share Premium 1,417,618 1,580,012
Profit and Loss Account 12. (398,965) (2,576,306) (2,972,677)
------------------------------------------------------
13. 31,123 (479,759) (662,617)
------------------------------------------------------
NOTES TO THE AAE GROUP CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The following Accounting Policies have been applied consistently in dealing with
items which are considered material in relation to the group financial
statements.
BASIS OF ACCOUNTING
The Financial Statements have been prepared under historical cost convention,
and in accordance with generally accepted accounting principles and comply with
the financial reporting standards of the Accounting Standards Board, as
promulgated by The Institute of Chartered Accountants in Ireland.
BASIS OF CONSOLIDATION
The group financial statements consolidate the financial statements of the
company and all its subsidiary undertakings made up to the dates as outlined.
The results of the subsidiary undertakings acquired and disposed of in the
periods outlined are included in the consolidated profit and loss account from
the date of acquisition or up to the date of disposal. Upon the acquisition of
a business, fair values are attributed to the identifiable net assets acquired.
The group accounting policy in relation to goodwill is set out below.
TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost or at valuation, less accumulated
depreciation. The charge for depreciation is calculated to write down the cost
or valuation of tangible fixed assets to their estimated residual values by
equal annual installments over their expected economic lives. The economic
lives are as follows:
Office Equipment 3 years
Provision is also made for any impairments of tangible fixed assets.
GOODWILL
Purchased goodwill arising on the acquisition of a business represents the
excess of the acquisition cost over the fair value of the identifiable net
assets when they were acquired. Any excess of the aggregate of the fair value
of the identifiable assets acquired over the fair value of the acquisition cost
is negative goodwill.
Purchased goodwill arising on the purchase of a company is capitalised in the
balance sheet and amortised over the estimated economic life of the goodwill as
follows:
Goodwill on consolidation 5 years
INTANGIBLE FIXED ASSETS
Acquired intellectual property is capitalised when it has been assessed for
commercial viability and when the costs can be foreseen with reasonable
assurance. This is amortized to the profit and loss account on a basis which
matches the revenue from the intellectual property. The amortisation of
intangible assets is as follows:
Intellectual property over life of the rights
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transactions or at a contracted rate. The resulting monetary assets and
liabilities are translated at the rate on the balance sheet date or the
contracted rate and the exchange differences are dealt with in the profit and
loss account.
2. TURNOVER
PERIOD FROM FIFTEEN MONTH THREE MONTH
14 OCT 00 TO PERIOD ENDED PERIOD ENDED
The turnover and loss before tax are 30 SEPT 01 31 DEC 02 31 MAR 03
attributable to the principal activity of the group $ $ $
The geographical analysis of turnover is as
follows:
United States of America 50,701
United Kingdom 3,137
-----------------------------------------------
3. OPERATING LOSS
PERIOD FROM FIFTEEN MONTH THREE MONTH
14 OCT 00 TO PERIOD ENDED PERIOD ENDED
The group operating loss is stated after 30 SEPT 01 31 DEC 02 31 MAR 03
charging: $ $ $
Amortisation 53,510 160,484 31,297
Depreciation 12,153 23,680 2,093
Operating lease costs: Vehicles 3,634
Auditors remuneration 4,555 25,485 11,700
===============================================
4. PARTICULARS OF EMPLOYEES
PERIOD FROM FIFTEEN MONTH THREE MONTH
14 OCT 00 TO PERIOD ENDED PERIOD ENDED
The aggregate payroll costs for the Group 30 SEPT 01 31 DEC 02 31 MAR 03
were: $ $ $
Wages and salaries 55,072 85,443 130,286
Social welfare costs 7,944 19,372 8,521
-----------------------------------------------
63,016 104,815 138,807
===============================================
5. DIRECTORS' EMOLUMENTS
PERIOD FROM FIFTEEN MONTH THREE MONTH
14 OCT 00 TO PERIOD ENDED PERIOD ENDED
The directors' aggregate emoluments in 30 SEPT 01 31 DEC 02 31 MAR 03
respect of qualifying services to the Group $ $ $
were:
Emoluments payable 55,072 85,443
===============================
6. INTEREST PAYABLE
PERIOD FROM FIFTEEN MONTH THREE MONTH
14 OCT 00 TO PERIOD ENDED PERIOD ENDED
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
Interest payable on group bank borrowing (11,866) (60,675) (14,741)
===============================================
7. INTANGIBLE ASSETS
INTELLECTUAL GOODWILL ON
PROPERTY CONSOLIDATION TOTAL
$ $ $
COST
Additions 354,967 509,655 864,622
-----------------------------------------------
At 30 September 2001 354,967 509,655 864,622
-----------------------------------------------
Additions
-----------------------------------------------
At 31 December 2002 354,967 509,655 864,622
-----------------------------------------------
Additions
-----------------------------------------------
At 31 March 2003 354,967 509,655 864,622
-----------------------------------------------
AMORTISATION
Charge for the period 11,024 42,486 53,510
-----------------------------------------------
At 30 September 2001 11,024 42,486 53,510
-----------------------------------------------
Charge for the period 33,071 127,414 160,484
----------------------------------------------
At 31 December 2002 44,095 169,900 213,995
-----------------------------------------------
Charge for the period 7,214 24,084 31,297
-----------------------------------------------
At 31 March 2003 51,308 193,984 245,292
-----------------------------------------------
NET BOOK VALUE
At 31 March 2003 303,659 315,671 619,330
===============================================
At 31 December 2002 310,872 339,755 650,627
===============================================
At 30 September 2001 343,943 467,168 811,112
===============================================
8. TANGIBLE FIXED ASSETS
OFFICE
EQUIPMENT TOTAL
$ $
COST
Additions 36,420 36,420
---------------------------
At 30 September 2001 36,420 36,420
---------------------------
Additions 25,621 25,621
---------------------------
At 31 December 2002 62,041 62,041
---------------------------
Additions 0
---------------------------
At 31 March 2003 62,041 62,041
---------------------------
ACCUMULATED DEPRECIATION
Charge for the period 12,153 12,153
---------------------------
At 30 September 2001 12,153 12,153
---------------------------
Charge for the period 23,680 23,680
---------------------------
At 31 December 2002 35,833 35,833
---------------------------
Charge for the period 2,093 2,093
---------------------------
At 31 March 2003 37,926 37,926
---------------------------
NET BOOK VALUE
At 31 March 2003 24,115 24,115
==========================
At 31 December 2002 26,208 26,208
==========================
At 30 September 2001 24,267 24,267
==========================
9. DEBTORS
AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
Trade debtors 6,428 23,206 115,722
Other debtors 32,816 74,643 83,955
-----------------------------------------------
39,244 97,849 199,677
===============================================
10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
Bank overdraft 642,984 804,333 788,097
Trade creditors 174,584 537,988 649,053
Taxation and social welfare 5,954 52,781 52,781
Other creditors 76,284 80,607 119,444
Accruals and deferred income 2,206 23,651 67,655
Financing Loan 1,000,000
-----------------------------------------------
902,012 1,499,360 2,677,030
===============================================
The bank overdraft is secured by a personal guarantee from a director and
certain shareholders.
11. SHARE CAPITAL
AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
AUTHORISED SHARE CAPITAL:
"A" Ordinary shares of Euro1 each 38,100 38,100 38,100
500,000,000 Ordinary shares of $0.01 each 5,000,000 5,000,000 5,000,000
----------------------------------------
5,038,100 5,038,100 5,038,100
========================================
ALLOTTED AND CALLED UP: AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
Ordinary shares of $0.01 NUMBER NUMBER NUMBER
------------------------
As at beginning of period 0 43,008,772 67,892,921
Issued during period 43,008,772 24,884,149 5,111,927
----------------------------------------
As at end of period 43,008,772 67,892,921 73,004,848
========================================
AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
----------------------------------------
Ordinary shares of $0.01 each 430,088 678,929 730,048
========================================
12. RESERVES
AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
Profit and Loss Account
Opening balance 0 398,965 2,576,306
Loss for the period 398,965 2,177,341 396,371
----------------------------------------
Closing balance 398,965 2,576,306 2,972,677
========================================
13. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS'
FUNDS
AS AT AS AT AS AT
30 SEPT 01 31 DEC 02 31 MAR 03
$ $ $
Loss for the financial period (436,298) (2,177,341) (396,371)
New equity capital subscribed 430,088 248,841 51,119
Share premium attached to capital subscribed 1,417,618 162,394
----------------------------------------
(6,210) (510,882) (182,858)
Opening shareholders' equity funds 37,333 31,123 (479,759)
----------------------------------------
Closing shareholders' equity funds 31,123 (479,759) (662,617)
========================================
14. DETAILS OF FINANCIAL STATEMENTS
With regard to the financial statements printed in this document, the
figures to 30 September 2001 have been audited by PRB Xxxxxx Xxxxxxx, of
Bridge Road, Haywards, Heath, West Sussex, RH16 ITX, United Kingdom. These
audited figures exclude the United States subsidiary, AAE Technologies Inc.
With regard to the figures relating to the 15 month period ended 31
December 2002 and to the 3-month period ended 31 March 2003, these figures
have not been audited and are provided by Management to enable an informed
decision on the financial position of the group.
SCHEDULE 5.2(9)
Lease Premises
--------------
The Company leases space from Octel Starreon, LLC, a Delaware LLC, pursuant to
an oral month-to-month lease for which it is paying US$3,000 per month.
SCHEDULE 5.2(11)
Company Material Contracts
--------------------------
1. Cooperation Agreement between AAE Holdings PLC and Cognis Deutschland GmbH
Signed April 7, 2000 and continuing for 4 years with automatic 12-month
renewal periods. Agreement calls for the joint development of co-solvency
additive products as well as joint ownership of patents for such products.
Cognis has world-wide rights to manufacture products and AAE has world-wide
rights to market and sell additive products.
2. Supply and Distribution Agreement between AAE Technologies, Inc. and Octel
Starreon LLC
Executed July 10, 2001, this Agreement grants exclusive marketing rights to
Octel Starreon to sell AAE products in the United States and Canada. This
Agreement is scheduled to continue for 5 years and may be renewed for 5
successive one-year periods provided Octel Starreon has met certain
minimums. As part of this Agreement and subject to meeting certain minimum
sales targets, Octel Starreon was given a warrant to purchase for US$0.01
per share up to 10% of the common stock of AAE Technologies, Inc.
3. Consulting Services Agreement between AAE Technologies, Inc. and Xxxxxxxxxx
Xxxxxxx Racing, LLC
Executed April 21, 2003 and continuing for 2 years, Xxxxxxxxxx Xxxxxxx
Racing is to provide consulting and marketing services for the sale of
product in exchange for specified cash payments and for unspecified
performance payments, which may include a combination of cash and shares.
4. Definitized Subcontract No. ZCL-3-32068-01 - NREL Contract between AAE
Technologies, Inc. and Midwest Research Institute National Renewable Energy
Laboratory Division
Effective from December 23, 2002 through November 22, 2003 in the amount of
US$1,107,734. This is a grant administered by the US Department of Energy
under which AAE is authorized to conduct product tests as described per the
contract. This is a cost-sharing arrangement and AAE is required to incur
expenditures of US$221,547 over the 11 month term of the contract. As part
of this contract, AAE has entered into subcontracts with University of
California at Riverside and the Southwest Research Institute to perform
tests and provide technical services.
5. Employment Agreements between AAE Technologies, Inc. and Xxxx Xxxx, Xxxxx
Xxxx and Xxxxx Xxxxxx
In May 2003, AAE Technologies, Inc. entered into "at will" employment
agreements with each of the individuals listed above. Under these
Agreements, Xx. Xxxx and Xx. Xxxxxx will provide sales and marketing
services and Xx. Xxxx will provide technical services.
6. Consulting Services and Introductory Commission between AAE Technologies,
Inc and Xxxxxxx Xxxxx (Oral Agreement)
AAE entered into a month-to-month agreement with Xx. Xxxxx to provide
marketing services including the writing of company brochures and other
company documents. Xx. Xxxxx is paid US$2,500 per month under this part of
the agreement. In addition, AAE has an oral agreement to pay Xx. Xxxxx a 3%
finders fee for the funds raised in the proposed transaction with Dynamic
Ventures, Inc. Xx. Xxxxx will be paid in cash and stock of Dynamic Ventures
in equal amounts. AAE understands that Xx. Xxxxx will split his finder's
fee with Xx. Xxxxx Xxxxxxx, a current employee of AAE Technologies, Inc.
7. Consulting Services Agreement between AAE Technologies, Inc. and Faiss
Xxxxx Xxxxxx (Oral Agreement)
-2-
AAE has entered into a month-to-month oral agreement to pay US $1,500 per
month to the firm of Faiss Xxxxx Xxxxxx for public relations work in
connection with a test program being carried out under the NREL contract.
8. Consulting and Lobbying Services Agreement between AAE Technologies Inc,
and X. X. Xxxxx & Associates
AAE entered into a contract with X. X. Xxxxx & Associates in May 2000 under
which X. X. Xxxxx & Associates was to provide consulting and lobbying
services in Washington, D.C. That contract has expired and AAE continues to
retain this firm pursuant to an oral understanding on a month-to-month
basis at a cost of $7,500 per month.
9. Test Program between Xxxx Deere, AAE Technologies, Inc., and National Corn
Growers Association
In early 2002, AAE agreed to participate at a cost of $25,000 in a test
program with Xxxx Deere and others to use the AAE's product in off road
equipment.
10. Consulting Services Agreement between AAE Technologies, Inc. and Hi-Tech
Fuels, Inc. (Oral Agreement)
In May 2003, AAE entered into an oral agreement on a month-to-month basis
with Hi-Tech Fuels, Inc. under which it is paid US$2,500 per month to
provide consulting services concerning the availability and sourcing of
ethanol.
11. Technical Services Contract between AAE Technologies, Inc. and Southwest
Research Institute
This contract, signed in December 2002 is a fixed price contract under
which Southwest Research is to provide technical testing services to AAE in
connection with its contract with NREL. The contract price is US$132,734
and the period is for 1 year.
12. Agreement for Rental Space and Secretarial Services between AAE
Technologies, Inc. and Octel Starreon LLC (Oral Contract)
AAE has an oral understanding with Octel Starreon under which AAE is
provided office space and related facilities on a month to month basis for
US$3,000 per month. In addition, AAE is obligated to pay US$ 1,637 for
secretarial services as part of this arrangement.
13. Technical Services Contract between AAE Technologies, Inc. and University
of California at Riverside (Pending)
AAE plans to enter into a written contract with the University of
California at Riverside whereby the University will to provide technical
services in connection with the NREL contract. It is anticipated that the
contract with the University of California at Riverside will be in the
amount of US $236,562 and the period is expected to be for approximately
one year.
14. Memorandum of Understanding between the Company and BASF Aktiengesellschaft
(Pending)
AAE and BASF have prepared and plan to execute a Memorandum of
Understanding wherein BASF will be granted the global rights with certain
exceptions to develop fuel packages using AAE additive products. AAE will
sell such packages worldwide and obtain technical support from BASF.
SCHEDULE 5.2(14)
Intellectual Property
---------------------
a) PATENTS OWNED SOLELY BY THE COMPANY
SUBJECT COUNTRY STATUS APP'N NO. HGF REF.
-------------------------------- ------------ ------- ----------------- ---------
Levulinic acid in Fuel PCT Pending PCT/GB02/02109 P036069WO
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel Brazil Pending PI0108703-7 P36190BR
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel Canada Pending 2,400,944 P36190CA
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel China (PRC) Pending 01805562.1 P36190CN
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel Europe Pending 01907896.3 P36190EP
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel India Pending IN/PCT/2002/00855 P36190IN
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel Mexico Pending PA/A/2002/008272 P36190MX
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel Poland Pending P 357 388 P36190PL
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel Thailand Pending 063805 P36190TH
-------------------------------- ------------ ------- ----------------- ---------
Ethoxylate Surfactants Biodiesel USA Pending 10/220,079 P36190US
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants Brazil Pending PI 0108704-5 P36198BR
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants Canada Pending PCT/GB01/00777 P36198CA
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants China (PRC) Pending 01808496.6 P36198CN
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants Europe Pending 01909955.5 P36198EP
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants India Pending IN/PCT/2002/00854 P36198IN
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants Mexico Pending PA/A/2002/008273 P36198MX
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants Poland Pending P-357416 P36198PL
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants Thailand Pending 0638413 P36198TH
-------------------------------- ------------ ------- ----------------- ---------
Oleic Acid Surfactants USA Pending 10/220,087 P36198US
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Brazil Pending PI 9711430-8 P36057BR
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Canada Granted 2,267,864* P36057CA
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Switzerland Pending 718/99 P36057CH
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions China (PRC) Pending 97198892.7 P36057CN
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Germany Pending 19782068.9 P36057DE
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions UK Granted 2334964* P36057GB
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Hong Kong Pending 00103597.1 P36057HK
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Japan Pending 519064/1998 P36057JP
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions Sweden Pending 9901364-1 P36057SE
-------------------------------- ------------ ------- ----------------- ---------
Fuel Compositions USA Pending 09/459,789 P36057US
-------------------------------- ------------ ------- ----------------- ---------
Surfactants Petrol Conductivity Thailand Pending 060690 P36058TH
-------------------------------- ------------ ------- ----------------- ---------
Surfactants Petrol Conductivity Europe Pending 00909529.0 P36058EP
-------------------------------- ------------ ------- ----------------- ---------
Surfactants Petrol Conductivity Hong Kong Pending 02104 P36058HK
-------------------------------- ------------ ------- ----------------- ---------
Low Xxxx Vapour Pressure Canada Pending 2,355,265 P36070CA
-------------------------------- ------------ ------- ----------------- ---------
Low Xxxx Vapour Pressure Europe Pending 99961192.4 P36070EP
-------------------------------- ------------ ------- ----------------- ---------
Low Xxxx Vapour Pressure USA Pending 10/081,735 P36070US
-------------------------------- ------------ ------- ----------------- ---------
-2-
b) PATENTS JOINTLY OWNED BY THE COMPANY AND COGNIS. EACH OWNS 50 PERCENT.
SUBJECT COUNTRY STATUS APP'N NO. HGF REF.
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives Australia Pending PCT/GB01/04947 P036662AU
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives Brazil Pending PCT/GB01/04947 P036662BR
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives Canada Pending PCT/GB01/04947 P036662CA
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives China (PRC) Pending PCT/GB01/04947 P036662CN
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives Europe Pending PCT/GB01/04947 P036662EP
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives India Pending PCT/GB01/04947 P036662IN
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives Japan Pending PCT/GB01/04947 P036662JP
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives Mexico Pending PCT/GB01/04947 P036662MX
----------------------------------- ----------- ------- -------------- ---------
Alkanolamide free fuel additives USA Pending PCT/GB01/04947 P036662US
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel Australia Pending PCT/GB01/04934 P036668AU
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel Brazil Pending PCT/GB01/04934 P036668BR
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel Canada Pending PCT/GB01/04934 P036668CA
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel China (PRC) Pending PCT/GB01/04934 P036668CN
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel Europe Pending PCT/GB01/04934 P036668EP
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel India Pending PCT/GB01/04934 P036668IN
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel Japan Pending PCT/GB01/04934 P036668JP
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel Mexico Pending PCT/GB01/04934 P036668MX
additives
----------------------------------- ----------- ------- -------------- ---------
Alkoxylate and alcohol free fuel USA Pending PCT/GB01/04934 P036668US
additives
----------------------------------- ----------- ------- -------------- ---------
Oleic acid and oleic diethanolamide PCT Pending PCT/GB02/01867 P036614WO
fuel additives
----------------------------------- ----------- ------- -------------- ---------
*Patent Number
Xxxxx Xxxxx and Xxx Xxxxxxxxxx, the original founders of AAE, had ownership
interests in certain of the Company's patents (these certain patents, the
"Subject Patents") . Messrs. Xxxxx and Xxxxxxxxxx transferred all of their
interests (ownership, moral or otherwise) in the Subject Patents to the Company
and the Subject Patents are not material to the Company's business as presently
conducted or proposed to be conducted.
- 3 -
e) (i) INDUSTRIAL OR INTELLECTUAL PROPERTY PERMISSIONS AND LICENSES GIVEN
TO THE COMPANY
None.
(ii) INTELLECTUAL OR INDUSTRIAL PROPERTY PERMISSIONS AND LICENSES GIVEN
BY THE COMPANY
There is one inter-company between the Company and AAE Technologies,
Inc.
f) CHALLENGES TO THE COMPANY'S INTELLECTUAL PROPERTY
None.
h) INFRINGEMENTS OF THE COMPANY'S INTELLECTUAL PROPERTY
Following analysis of a product marketed by International Fuel
Technology, Inc. ("IFT"), a company based in St. Louis, Missouri, the
Company sent a cease and desist letter to IFT. The Company has no
further evidence that they have sold any infringing products.
SCHEDULE 5.2(16)
Undisclosed Liabilities
-----------------------
COMPANY:
AAE TECHNOLOGIES, INC.
AAE TECHNOLOGIES, INC. TOTAL
======================================================
US $
XXXX XXX 68,856.75 NOTE: DUE TO A CASH SHORTAGE, AAE IS
XXXXXX & XXXXXX 2,452.50 LATE IN PAYING MANY OF THE LIABILITIES
AT & T WIRELESS 594.83 DISCLOSED ON THIS SCHEDULE.
ATC VAN COM 12,550.97
XXXXXXX PHLEGER & XXXXXXXX LLP 5,069.61
CANADIAN RENEWABLE FUEL ASSN. 20,717.59
COGNIS CORPORATION 7,833.00
XXXXX & XXXXX 8,433.42
FAISS XXXXX XXXXXX 12,984.40 VERBAL CONTRACT - PAYABLE $1,500 MONTH TO MONTH
FEDEX 28.21
FILTER SUPPLY AMERICA, INC. 827.59
GATEWAY OUTDOOR ADVERTISING 941.67
GROWMARK -0.10
HI-TECH FUELS, INC. 2,137.00 VERBAL CONTRACT - PAYABLE $2,500 MONTH TO MONTH
INTERTEK TESTING SERVICES 3,470.40
J & P CONSULTING 12,478.36
XXXXXXXXX, XXXX & CO. LLC. 20,000.00
MCI 70.60
MOTIVA ENTERPRISES LLC 5,844.37
OCTEL - STARREON - TECHNOLOGIES 41,898.90
OCTEL STARREON - HOLDINGS 5,796.23
PMC MARKETING GROUP, INC 2,202.96
REBEL OIL CO., INC. 7,857.69
RENEWABLE FUELS ASSOCIATION 1,500.00
SANTORABAFFONE CPA GROUP 531.25
SEYFARTH XXXX 5,675.74
SILVER STATE PETROLEUM SERVICE, INC 28,032.55
SOUTHWEST RESEARCH INSTITUTE 176,016.00
XXXXXXX & XXXXXXXXX SERVICES, INC. 11,500.00
SUNDANCE FUELS, LTD. 1,075.90
XXXX & COMPANY 872.00
TOP & JEFFERIES LIMITED 10,695.84
UNIVERSITY OF CALIFORNIA, RIVERSIDE 79,736.02
VERIZON TELEPHONE 184.47
WESTERN ETHANOL COMPANY LLC 1,598.21
XXXXXXX X. XXXXXXX 1,350.00
------------
561,814.93
============
COMMITMENTS
X. X. XXXXX & ASSOCIATES 7,500.00 VERBAL CONTRACT - PAYABLE $7,500 MONTH TO MONTH
XXXX XXXXX 150,000.00 VERBAL CONTRACT - PAYABLE $2,500 MONTH TO MONTH
XXXXXXXXXX XXXXXXX RACING TEAM LLC. 350,000.00
NREL - UNIVERSITY OF CALIFORNIA 156,825.98
NREL - SOUTHWEST RESEARCH INSTITUTE 64,334.00
NREL CONTRACT - AAE 20% SHARE REMAINING 165,100.13
------------
893,760.11
============ There will be some T & E expenses submitted
by employees following the end of May.
------------ No amount has been estimated for these items.
TOTAL BALANCE SHEET DEBT AND COMMITMENTS 1,455,575.04 But the amounts should be consistent with
============ prior periods.
COMPANIES:
AAE TECHNOLOGIES
INTERNATIONAL PLC
AAE HOLDINGS PLC
AAE TECHNOLOGIES LIMITED
NOTE: DUE TO A CASH SHORTAGE, AAE IS TOTAL
LATE IN PAYING MANY OF THE LIABILITIES US $
DISCLOSED ON THIS SCHEDULE. ============
AAE TECHNOLOGIES INTERNATIONAL PLC
----------------------------------
XXXXXX XXXXXXXX FIRM 12,200.00
XXXXXX XXXXXXXX - OPINION LETTER 48,800.00 TO BE NEGOTIATED.
XXXXXXX XXXX XXXXX 57,050.00
LOYENS LOEFF 25,000.00
XXXXXXX XXXXXXX 48,000.00
DYNAMIC TOUCH - INTEREST PAYABLE 117.36
STAMP DUTY 38,890.20 ESTIMATE ONLY. ACTUAL LIABILITY EQUALS 1%
------------ OF THE VALUE OF COMPANY SHARES
TOTAL 230,057.56 TRANSFERRED
============
DYNAMIC TOUCH LTD. BRIDGE LOAN 1,000,000.00
============
AAE TECHNOLOGIES, LIMITED.
--------------------------
HAARISON XXXXXXX XXXXX 29,355.65
RBSCOTLAND CREDIT CARD 1,630.00
LOAN FROM SIMON ORANGE 81,500.00
PRB XXXXXX XXXXXXX AUDIT FEES 3,260.00
------------
TOTAL 115,745.65
============
AAE HOLDINGS, PLC
-----------------
PRB XXXXXX XXXXXXX AUDIT FEES 3,260.00
INLAND REVENUE 1,956.00
ROYAL BANK OF SCOTLAND - OVERDRAFT 823,912.84
ENDEAVOUR CORP 80,735.43
XXXXXXXX XXXXXX 9,576.25
------------
919,440.52
============
NOTE: IN JULY 2002, AAE TECHNOLOGIES INTERNATIONAL PLC RECEIVED A PAYMENT OF US
$250,000 FROM BASF IN ANTICIPATION OF CONCLUDING A LICENSE AGREEMENT BETWEEN THE
COMPANY AND BASF. THERE IS NO REQUIREMENT TO REPAY THIS AMOUNT, BUT IT WILL BE
TREATED AS A REDUCTION AGAINST ANY FUTURE LICENSE AND/OR ROYALTY PAYMENTS TO BE
RECEIVED FROM BASF.
SUMMARY SCHEDULE
COMPANY LIABILITIES COMMITMENTS BRIDGE LOAN
=========== =========== ===========
AAE TECHNOLOGIES INTERNATIONAL PLC 230,058 0 1,000,000
AAE HOLDINGS PLC 919,441 0 0
AAE TECHNOLOGY LIMITED 115,746 0 0
AAE TECHNOLOGIES, INC 561,815 893,760 0
AAE (RESEARCH AND DEVELOPMENT) LIMITED 0 0 0
----------- ----------- -----------
TOTAL 1,827,059 893,760 1,000,000
=========== =========== ===========
SEE SUPPORTING SCHEDULES FOR EACH COMPANY.
NOTE: IN JULY 2002, AAE TECHNOLOGIES INTERNATIONAL PLC RECEIVED A PAYMENT OF US
$250,000 FROM BASF IN ANTICIPATION OF CONCLUDING A LICENSE AGREEMENT BETWEEN THE
COMPANY AND BASF. THERE IS NO REQUIREMENT TO REPAY THIS AMOUNT, BUT IT WILL BE
TREATED AS A REDUCTION AGAINST ANY FUTURE LICENSE AND/OR ROYALTY PAYMENTS TO BE
RECEIVED FROM BASF.
NOTE: DUE TO A CASH SHORTAGE, AAE IS LATE IN PAYING MANY OF THE LIABILITIES
DISCLOSED ON THIS SCHEDULE.
THERE WILL BE SOME T & E EXPENSES SUBMITTED
BY EMPLOYEES FOLLOWING THE END OF MAY.
NO AMOUNT HAS BEEN ESTIMATED FOR THESE ITEMS.
BUT THE AMOUNTS SHOULD BE CONSISTENT WITH
PRIOR PERIODS.
SCHEDULE 5.2(25)
Bonuses
-------
Xxxxxx Xxxxxxx resigned as a Director of AAE Technologies International Plc as
of April 4, 2003 and was paid a severance payment of 20,000 on April 9, 2003.
SCHEDULE 5.2(27)
Tax Filings
-----------
AAE Technologies, Inc. has not filed its United States Federal Income Tax Return
or its Delaware State Income Tax Return for the year ended December 31, 2001.
SCHEDULE 5.2(32)
Brokerage Fees
--------------
The Company agreed to pay Xx. Xxxx Xxxxx a fee equal to 3% of the funds raised
in connection with the transaction with the Purchaser. Xx. Xxxxx will receive a
3% fee for both the Private Placement and the Follow-on Private Placement. The
fee may be paid in cash and/or shares of the Purchaser, with the exact amounts
of each subject to further negotiation. The Company understands that Xx. Xxxxx
has a verbal agreement with Xx. Xxx Xxxxxxx to split his 3% fee with Xxxxxxx.
Xx. Xxxxxxx is an employee of AAE Technologies, Inc.
SCHEDULE 5.3(8)
Purchaser's Material Contracts
------------------------------
1. A consulting agreement dated March 1, 2003 between a private company and
the Purchaser under which the private company provides the services of Xxxx
Xxxxxxx to the Purchaser for a gross payment of U.S. $4,000 per month. This
agreement may be terminated at the option of the Purchaser upon 60 days
notice and notice of termination is expected to be given at Completion of
the Offer.
2. A licence agreement dated April 10, 2000 between Xxxxxxxxxxxxxxx.xxx and
the Purchaser under which the Purchaser was granted a licence to market and
distribute Xxxxxxxxxxxxxxx.xxx products in Nevada and Utah via the Internet
until April 10, 2006, unless renewed. The Purchaser is not required to make
any financial payments under this agreement.
3. The Purchaser is currently negotiating an investor relations agreement with
Standard Atlantic Plc, a private UK company, under which Atlantic will
provide investor relations and marketing for the Purchaser. The fees
payable to Standard Atlantic will be U.S. $20,000 per month, plus expenses,
to a maximum of U.S. $400,000 per year. It is expected that this agreement
will be entered into on or before the completion of the Offer.
4. The Purchaser has distributed to prospective subscribers in the Private
Placement a subscription agreement for a possible subscription of the
Purchaser Shares at a price of U.S. $1.50 per share.
SCHEDULE 5.3(11)
Purchaser's Notices
-------------------
1. O2Diesel Corporation was required to file a form CB with the United States
Securities and Exchange Commission concurrently with the mailing of the
Offer Document to AAE Shareholders.
2. O2Diesel Corporation is required to file a current report on Form 8-K
within 15 days of completion of the Offer, providing the required
disclosure under Item 1, Change of Control; Item 2, Acquisition of Disposal
of Assets; and Item 7, Financial Statements and Exhibits.
3. O2Diesel Corporation is required to file a Schedule 14A not less than 10
days prior to the date a majority of the members of the Board of Directors
are appointed under the terms of the Offer pursuant to Rule 14f-1 of the
Exchange Act, setting forth the information required by Items 6(a), (d) and
(e) of Schedule 14A. This information must also be mailed to shareholders
of O2Diesel Corporation concurrently with the filing.
O2DIESEL CORPORATION
- AND -
AAE TECHNOLOGIES INTERNATIONAL PLC
- AND -
THE SHAREHOLDERS OF THE COMPANY LISTED ON SCHEDULE A
--------------------------------------------------------------------------------
SUPPORT AGREEMENT
FOR MAJOR INVESTORS
JUNE 17, 2003
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE 1 INTERPRETATION 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Headings and Table of Contents . . . . . . . . . . . . . . . . . . 7
1.3 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . 7
1.4 Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 Currency and Payment Obligations . . . . . . . . . . . . . . . . . 7
1.6 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.7 Calculation of Interest. . . . . . . . . . . . . . . . . . . . . . 7
1.8 Statute References . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 Section and Schedule References. . . . . . . . . . . . . . . . . . 7
ARTICLE 2 OFFER TO PURCHASE SHARES . . . . . . . . . . . . . . . . . . 8
2.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(1) Confirmation of Offer . . . . . . . . . . . . . . . . . . . . 8
(2) Agreement to Tender into Offer. . . . . . . . . . . . . . . . 8
(3) Agreement to Take-Up Under the Offer. . . . . . . . . . . . . 8
2.2 Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Offer Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Subsequent Compulsory Acquisition. . . . . . . . . . . . . . . . . 9
2.5 Solicitation of Acceptance of Offer. . . . . . . . . . . . . . . . 9
2.6 Outstanding Stock Options. . . . . . . . . . . . . . . . . . . . . 9
2.7 Tax-Deferred Reorganization; No Representations by Purchaser.. . . 9
ARTICLE 3 CLOSING ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . 9
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Closing Deliveries of the Sellers and the Company. . . . . . . . . 9
3.3 Purchaser's Closing Deliveries . . . . . . . . . . . . . . . . . . 10
3.4 Closing Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 CONDITIONS OF CLOSING. . . . . . . . . . . . . . . . . . . . 11
4.1 Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Sellers' Conditions. . . . . . . . . . . . . . . . . . . . . . . . 11
(1) Representations and Warranties. . . . . . . . . . . . . . . . 11
(2) Purchaser's Compliance. . . . . . . . . . . . . . . . . . . . 11
(3) Private Placement . . . . . . . . . . . . . . . . . . . . . . 11
(4) Escrow of Shares. . . . . . . . . . . . . . . . . . . . . . . 11
(5) Consents and Approvals. . . . . . . . . . . . . . . . . . . . 11
(6) Due Diligence Investigation . . . . . . . . . . . . . . . . . 11
(7) Material Adverse Change . . . . . . . . . . . . . . . . . . . 11
(8) Composition of Board of Directors . . . . . . . . . . . . . . 11
(9) No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Condition not Fulfilled. . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 12
5.1 Representations and Warranties of each Seller Regarding the Seller 12
(1) Authorization by Seller . . . . . . . . . . . . . . . . . . . 12
(2) Enforceability of Seller's Obligations. . . . . . . . . . . . 12
(3) Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . 12
(4) Ownership of Shares . . . . . . . . . . . . . . . . . . . . . 12
(5) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . 12
(6) Investment Matters. . . . . . . . . . . . . . . . . . . . . . 12
(7) US Securities Law Matters . . . . . . . . . . . . . . . . . . 13
(8) Hold Period and Legending . . . . . . . . . . . . . . . . . . 13
5.2 Representations and Warranties of the Company. . . . . . . . . . . 13
-i-
TABLE OF CONTENTS
(CONTINUED)
(1) Organization of the Company and Subsidiaries. . . . . . . . . 13
(2) Due Authorization . . . . . . . . . . . . . . . . . . . . . . 13
(3) Enforceability of Company's Obligations . . . . . . . . . . . 14
(4) Corporate Records . . . . . . . . . . . . . . . . . . . . . . 14
(5) Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . 14
(6) Financial Statements. . . . . . . . . . . . . . . . . . . . . 14
(7) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 14
(8) Real Property . . . . . . . . . . . . . . . . . . . . . . . . 14
(9) Leased Premises . . . . . . . . . . . . . . . . . . . . . . . 14
(10) Personal Property Leases . . . . . . . . . . . . . . . . . . 14
(11) Material Contracts . . . . . . . . . . . . . . . . . . . . . 14
(12) Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 15
(13) Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 15
(14) Intellectual Property. . . . . . . . . . . . . . . . . . . . 15
(15) Licences and Permits . . . . . . . . . . . . . . . . . . . . 15
(16) Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . 15
(17) Consents and Approvals . . . . . . . . . . . . . . . . . . . 15
(18) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(19) Absence of Conflicting Agreements. . . . . . . . . . . . . . 16
(20) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 16
(21) Environmental Matters. . . . . . . . . . . . . . . . . . . . 16
(22) Employment Contracts . . . . . . . . . . . . . . . . . . . . 17
(23) Collective Agreements. . . . . . . . . . . . . . . . . . . . 17
(24) Employee Plans . . . . . . . . . . . . . . . . . . . . . . . 17
(25) Bonuses. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(26) Affiliated Transactions. . . . . . . . . . . . . . . . . . . 17
(27) Tax Filings. . . . . . . . . . . . . . . . . . . . . . . . . 17
(28) Withholdings and Remittances . . . . . . . . . . . . . . . . 18
(29) Capital Gains. . . . . . . . . . . . . . . . . . . . . . . . 18
(30) Absence of Certain Changes or Events . . . . . . . . . . . . 18
(31) Subsidiary Bodies Corporate. . . . . . . . . . . . . . . . . 19
(32) Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . . 19
(33) Foreign Private Issuer Status. . . . . . . . . . . . . . . . 19
(34) Dissent Rights . . . . . . . . . . . . . . . . . . . . . . . 19
(35) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Representations and Warranties of the Purchaser. . . . . . . . . . 19
(1) Incorporation . . . . . . . . . . . . . . . . . . . . . . . . 19
(2) Organization of the Purchaser.. . . . . . . . . . . . . . . . 19
(3) Due Authorization . . . . . . . . . . . . . . . . . . . . . . 19
(4) Enforceability of Purchaser's Obligations . . . . . . . . . . 19
(5) Issuance of Shares. . . . . . . . . . . . . . . . . . . . . . 20
(6) Corporate Records . . . . . . . . . . . . . . . . . . . . . . 20
(7) Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . 20
(8) Material Contracts. . . . . . . . . . . . . . . . . . . . . . 20
(9) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 20
(10) Consents and Approvals . . . . . . . . . . . . . . . . . . . 20
(11) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(12) Absence of Conflicting Agreements. . . . . . . . . . . . . . 20
(13) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 20
(14) Affiliated Transactions. . . . . . . . . . . . . . . . . . . 21
(15) Subsidiary Bodies Corporate. . . . . . . . . . . . . . . . . 21
(16) Public Listing . . . . . . . . . . . . . . . . . . . . . . . 21
(17) Public Filings . . . . . . . . . . . . . . . . . . . . . . . 21
-ii-
TABLE OF CONTENTS
(CONTINUED)
(18) Tax Filings. . . . . . . . . . . . . . . . . . . . . . . . . 21
(19) Withholdings and Remittances . . . . . . . . . . . . . . . . 21
(20) Additional Information . . . . . . . . . . . . . . . . . . . 21
5.4 Survival of Representations and Warranties . . . . . . . . . . . . 22
ARTICLE 6 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Indemnity by Company and Sellers . . . . . . . . . . . . . . . . . 22
6.2 Indemnity by the Purchaser . . . . . . . . . . . . . . . . . . . . 23
6.3 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Notice of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Direct Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . 24
6.7 Settlement of Third Party Claims . . . . . . . . . . . . . . . . . 24
6.8 Interest on Claims . . . . . . . . . . . . . . . . . . . . . . . . 25
6.9 Tax Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Indemnity Escrow. . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 7 INTERIM PERIOD . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Conduct of Business of Company . . . . . . . . . . . . . . . . . . 27
7.5 Conduct of Business of Purchaser . . . . . . . . . . . . . . . . . 28
7.6 Exclusive Dealings . . . . . . . . . . . . . . . . . . . . . . . . 28
7.7 Updates to Information . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 8 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . 29
8.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Company Support. . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.3 Private Placement. . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Follow-On Private Placement. . . . . . . . . . . . . . . . . . . . 30
8.6 Preparation of Audited Financial Statements. . . . . . . . . . . . 30
ARTICLE 9 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . 30
9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.9 Non-Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.10 Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . 32
9.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.12 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 32
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
iii
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