SHARE EXCHANGE AGREEMENT
by and among
COMPOSITE TECHNOLOGY CORPORATION
("BUYER")
and
SHAREHOLDERS OF
EU ENERGY PLC
("EUE SHAREHOLDERS")
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Effective Date: June 2, 2006
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this "Agreement") is entered into as of
June 2, 2006, by and among COMPOSITE TECHNOLOGY CORPORATION, a Nevada
corporation (the "Buyer") and certain of the persons who are shareholders of EU
Energy plc., a U.K. public company registered in England and Wales under company
number 05026943 proposing to re-register as a private limited company (the
"Parent Company"), set forth in Schedule B (each referred to as a "EUE
Shareholder" or a "Seller," and collectively as the "EUE Shareholders" or the
"Sellers"), including without limitation, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ Limited, Keeley
Services Limited, Wellsford Management Limited, and Laikadog Holdings Limited,
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (these five shareholders and ▇▇▇▇▇▇ shall be referred to as
"Major Shareholders").
R E C I T A L S:
WHEREAS, the EUE Shareholders collectively own at least 95% of the
issued and outstanding shares of common stock of the Parent Company;
WHEREAS, the Parent Company owns 100% of the issued and outstanding
capital stock of ▇▇▇▇▇▇ Holdings Limited, a United Kingdom company registered in
England and Wales under company number 05309221 ("▇▇▇▇▇▇ UK"), EU Energy Wind
Ltd., a United Kingdom company registered in England and Wales under company
number 04942587 ("EUE Wind"), EU Energy North America Inc, a Nevada company
("EUE US"), and EU Energy Service & Maintenance GmbH, a German company ("EUE
Maintenance");
WHEREAS, the Parent Company, through ▇▇▇▇▇▇ UK, owns all of the issued
and outstanding stock of ▇▇▇▇▇▇ GmbH, a German company ("▇▇▇▇▇▇ GmbH") and
Direcktwind GmbH, a German company ("Direcktwind"), and Parent Company owns 75%
of the issued and outstanding stock of EU Energy WingPower Ltd., a U.K. company
("EUE WingPower"), and owns indirectly EU Energy Canada Limited, a Canadian
company ("EUE Canada"), and EU Energy Wind Turbines GmbH, a German corporation
("EU Turbines", and along with ▇▇▇▇▇▇ UK, EUE Wind, EUE US, EUE Maintenance,
▇▇▇▇▇▇ GmbH, Direcktwind, EUE Canada, and EUE WingPower, and the Parent Company,
the "EUE Companies");
WHEREAS, Buyer desires to acquire from the Sellers, and the Sellers
desire to sell to Buyer, the issued and outstanding capital stock of the Parent
Company listed against such Sellers name in Schedule B (the "Parent Company
Shares") in exchange for newly-issued shares of Buyer common stock ("Buyer
Shares"), subject to the terms and conditions contained herein ("Share
Exchange");
WHEREAS, the Major Shareholders hold more than 73.895% of the
outstanding common stock of the Parent Company and hereby intend to make certain
representations and warranties regarding the EUE Companies and to agree to
certain transferability restrictions of their Buyer Shares during the first year
following the date of Closing;
NOW, THEREFORE, in consideration of the premises, agreements and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and in reliance upon
the mutual representations and warranties contained herein, the parties hereto
agree as follows:
A G R E E M E N T
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. Capitalized terms used in this Agreement but
not defined in the body hereof shall have the meanings ascribed to them in
Exhibit A. Capitalized terms defined in the body of this Agreement are listed in
Exhibit A by location herein.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 2
ARTICLE II
PURCHASE AND SALE; CLOSING
2.1 Transfer of Parent Company Shares. Upon the terms and subject to
the conditions of this Agreement, at the Closing:
(a) the Sellers shall sell, transfer, assign, convey and
deliver to the Buyer the Parent Company Shares; and
(b) in exchange for the Parent Company Shares, the Buyer shall
issue to Sellers the Buyer Shares (as defined below).
2.2 Share Exchange.
(a) Each Seller shall receive stock certificates representing
three (3) Buyer Shares for every two (2) Parent Company Shares held ("Buyer
Share Certificates") such Buyer Shares to be issued to the Sellers as set out in
Schedule A. If the Sellers were to deliver 100% of the outstanding Parent
Company Shares, then the total consideration to be paid by the Buyer to the
Sellers for the sale, transfer, assignment, conveyance and delivery of the
Parent Company Shares, shall be the issue of Thirty Nine Million, One Hundred
Sixty Nine Thousand Six Hundred Sixty Five (39,169,665) shares of the Buyer's
common stock ("Buyer Shares").
(b) Buyer Shares issued to the Major Shareholders shall be
subject to a Lock-up agreement with indemnification obligations called an EU
Energy Principals' Agreement set forth in Exhibit B.
(c) The Parties have agreed that the value of all outstanding
Parent Company Shares shall be fixed and based on the closing trading price of
the Buyer Shares on 11 May 2006 and that such value is approximately $60.7
million. Any subsequent increase or decrease in the share price shall not affect
the exchange of shares as contemplated herein.
ARTICLE III
CLOSING; CLOSING DELIVERIES
3.1 Closing. The closing of the purchase and sale of the Parent Company
Shares (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
LLP, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, at any
time commencing at 9:00 a.m., Los Angeles time, on July 3, 2006 or a date
mutually agreed upon by the parties (the "Closing Date").
3.2 Seller Deliveries. At the Closing, the Sellers shall deliver or
cause to be delivered to the Buyer:
(a) EUE Companies Share Certificates (or indemnity for lost
share certificates) and stock transfer forms. Certificates representing the
Parent Company Shares (or indemnity for lost share certificates), and stock
transfer forms duly endorsed by the Seller to the Buyer or accompanied by
separate powers sufficient for the transfer of all of the Sellers' right, title
and interest in such Parent Company Shares to Buyer;
(b) EUE Companies Secretary Certificates. Certificates, dated
the Closing Date, signed by the Chief Executive Officer of each EUE Company (i)
attaching certified copies of the EUE Organizational Documents applicable to
such EUE Company, and (ii) certifying that all director, shareholder and other
actions required to authorize and approve the execution and delivery of this
Agreement and the other documents and agreements provided for herein and the
transactions contemplated hereby and thereby have been taken and setting forth
copies of such actions;
(c) Approvals and Consents. Copies of all permits, consents or
approvals of third parties or Governmental Authorities, the granting of which
are necessary for the consummation of the transactions contemplated herein or
for preventing the termination of any right, privilege, license, permit,
certificate or agreement of the EUE Companies upon the consummation of the
transactions contemplated herein;
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 3
(d) Public Certificates. Copies of certificates of existence
and good standing for each of the EUE Companies issued by the appropriate public
officials of Germany, the United Kingdom and the State of Nevada (USA), as
applicable, each dated within ten (10) Business Days prior to Closing;
(e) Resignations. The written resignations of each director
and officer (or the equivalent in any relevant jurisdiction) of each of the EUE
Companies incorporated under U.K. law other than EUE WingPower set forth on
Schedule 3.2(e);
(f) EU Energy Principals' Agreement. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have executed the EU Energy Principals' Agreement set forth
as Exhibit B.
(g) Appointments. The appointment of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to the
board of the Parent Company and the appointment of not less than one (1)
reasonably acceptable Buyer nominated person to the board of any other of the
EUE Companies as may be required by the Buyer at Closing;
(h) Legal Opinion. Sellers shall cause an opinion of counsel
to be delivered to Buyer substantially in the form set forth in Exhibit C;
(i) Other Documents. All other documents reasonably requested
by Buyer to be delivered by the Sellers in connection with the consummation of
the transactions contemplated by this Agreement.
3.3 Buyer Deliveries. At the Closing, Buyer shall deliver or cause to
be delivered:
(a) Buyer Shares. Stock certificates representing Buyer Shares
in the names of such of the Sellers as have agreed to sell their holding of
Parent Company Shares as of Closing in accordance with Section 2.2.
(b) Buyer Secretary Certificate. A certificate, dated the
Closing Date, signed by the secretary of Buyer certifying on behalf of Buyer
that all corporate actions by Buyer required to authorize and approve the
execution and delivery of this Agreement and the other documents and agreements
provided for herein and the transactions contemplated hereby and thereby have
been taken and setting forth copies of such corporate actions;
(c) Approvals and Consents. Copies of all permits, consents or
approvals of third parties or Governmental Authorities, the granting of which
are necessary for the consummation of the transactions contemplated herein; and
(d) Other Documents. All other documents reasonably requested
by the Sellers to be delivered by Buyer in connection with the consummation of
the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING
TO EACH EUE SHAREHOLDER
Subject to the provisions of Article IX hereof, each EUE Shareholder
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ severally hereby represents and warrants to the Buyer as of
the Closing Date as follows in respect of the Parent Company Shares listed
against his name in Schedule A and/or himself only (as applicable) and each EUE
Shareholder and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby acknowledges that Buyer is relying on the
following representations and warranties in entering into this Agreement.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 4
4.1 Authority of Shareholders; Enforceability. The EUE Shareholder and
its representative (if any) has all requisite power and authority, corporate or
otherwise, to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the other
Transaction Documents to which the EUE Shareholder is a party and the
performance of the transactions contemplated hereby and thereby have been duly
and validly approved by such action, necessary on behalf of the EUE Shareholder.
This Agreement and each of the Transaction Documents to which the EUE
Shareholder is a party constitute the legal, valid and binding obligations of
the EUE Shareholder, enforceable against the EUE Shareholder in accordance with
their terms, subject to applicable bankruptcy, insolvency or other similar laws
relating to or affecting the enforcement of creditors' rights generally and to
general principles of equity (such laws and principles being referred to herein
as "Creditors' Rights"). All other documents required hereunder to be executed
and delivered by the EUE Shareholder at the Closing have been duly authorized,
executed and delivered by the EUE Shareholder and constitute the legal, valid
and binding obligations of the EUE Shareholder, enforceable against the EUE
Shareholder in accordance with their terms, subject to the Creditors' Rights.
4.2 Consents of Shareholders; Absence of Conflicts. Except as set forth
on Schedule 4.2, neither the execution and delivery of this Agreement or the
other Transaction Documents by the EUE Shareholder, nor the consummation of the
transactions contemplated hereby and thereby will (a) violate any provision of
the Organizational Documents of such EUE Shareholder applicable to any EUE
Shareholder that is not a natural person; (b) violate or breach the terms of,
cause a default under, conflict with, result in the loss by the EUE Shareholders
of any rights or benefits under, impose on such EUE Shareholder any additional
or greater burdens or obligations under, create in any party additional or
greater rights or benefits under, create in any party the right to accelerate,
terminate, modify or cancel, require any notice or consent or give rise to any
preferential purchase or similar right under (i) any applicable Legal
Requirement or (ii) any Contract to which such EUE Shareholder is a party or by
which such EUE Shareholder, or any of their respective properties, is bound; or
(c) with the passage of time or the giving of notice or the taking of any action
of any third party have any of the effects set forth in clause (a) or (b) of
this Section 4.2. Except as set forth on Schedule 4.2, such EUE Shareholder is
not required to obtain or provide any consent or notice in connection with the
consummation of the transactions contemplated by this Agreement. All such
consents or notices have been obtained or given and have been furnished in
writing to the Buyer.
4.3 Ownership. The EUE Shareholder is the beneficial owner of the
number of shares of the Parent Company set forth on Schedule A. The EUE
Shareholder owns such shares of the Parent Company free and clear of all Liens.
Upon delivery of stock powers relating to the Parent Company Shares or
certificates representing the Parent Company Shares duly endorsed to Buyer,
together with any other documents reasonably requested by Buyer, the EU
Shareholder at Closing will transfer valid title thereto to the Buyer and, in
relation to its own Parent Company Shares, such title shall be free of any Lien.
4.4 Brokers' Fees. The EUE Shareholder does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Buyer
or its Affiliates (including the EUE Companies after the Closing) could become
liable or obligated.
4.5 Access to Information. Each EUE Shareholder has had the opportunity
to carefully review all filings of the Buyer made with the United States
Securities and Exchange Commission at ▇▇▇.▇▇▇.▇▇▇.
4.6 Sophistication and Knowledge. The EUE Shareholder is not relying on
the Buyer with respect to the tax and other economic considerations of an
investment in the Shares, and the EUE Shareholder has relied on the advice of,
or has consulted with, only the EUE Shareholder's own advisor(s).
4.7 Economic Risk. The EUE Shareholder acknowledges that the
acquisition of the Buyer Shares involves a high degree of risk and further
acknowledges that it can bear the economic risk of the purchase of the Shares,
including the total loss of its investment. Each EUE Shareholder that is not a
US Person ("U.S. Person" as defined in Regulation S ("Regulation S") promulgated
by the Securities and Exchange Commission ("SEC") pursuant to the Securities Act
of 1933 (the "Securities Act")) acknowledges and understands that the Shares may
not be sold to a U.S. Person or into the United States for a period of one (1)
year from the date of purchase without registration of such securities and that
such EUE Shareholder has no present need for liquidity in connection with its
purchase of the Shares. Each EUE Shareholder that is a US Person acknowledges
and understands that the Shares may not be sold without registration of such
securities except in compliance with rule 144 promulgated by the SEC pursuant to
the Securities Act or another exemption under the Securities Act and that such
EUE Shareholder has no present need for liquidity in connection with its
purchase of the Shares. All EUE Shareholders shall comply in all respects with
US federal and state securities laws, particularly with respect to any resale of
the Shares in any transaction subject to United States jurisdiction.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 5
4.8 No Public Solicitation. The EUE Shareholder is not subscribing for
the Buyer Shares as a result of or subsequent to any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not previously known
to the EUE Shareholder in connection with investments in securities generally.
Neither the Parent Company nor the EUE Shareholder has engaged in any `Directed
Selling Efforts in the U.S.' as defined in Regulation S promulgated by the SEC
pursuant to the Securities Act.
4.9 Requirements for Transfer. Each EUE Shareholder that is not a US
Person understands and accepts that the Buyer shall not be required to transfer
the Buyer Shares unless (i) the transferee certifies that he, she or it is not a
U.S. Person, if such transfer is requested for unregistered Shares prior to one
year from the Closing. All EUE Shareholders understand and accept that the Buyer
shall not be required to transfer the Buyer Shares unless such transfer
otherwise complies in all respects with all applicable US federal and state
securities laws. EUE Shareholders requiring the transfer of Buyer Shares shall
provide an opinion of counsel if reasonably requested by Buyer.
4.10 Compliance with Local Laws. Any resale of the Buyer Shares by a
EUE Shareholder that is not a US Person during the `distribution compliance
period' as defined in Rule 902(f) to Regulation S shall only be made in
compliance with exemptions from registration afforded by Regulation S. Further,
any such sale of the Buyer Shares in any jurisdiction outside of the United
States will be made in compliance with the securities laws of such jurisdiction.
No EUE Shareholder will offer to sell or sell the Buyer Shares in any
jurisdiction unless such EUE Shareholder obtains all required consents, if any,
and has complied with all applicable laws.
4.11 Regulation S Exemption. Each EUE Shareholder that is not a US
Person understands that the Buyer Shares are being offered and sold to it in
reliance on an exemption from the registration requirements of United States
federal and state securities laws under Regulation S promulgated under the
Securities Act and that the Buyer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the EUE Shareholders set forth herein in order to determine the applicability of
such exemptions and the suitability of the EUE Shareholder to acquire the Buyer
Shares. In this regard, each EUE Shareholder that is not a U.S. Person
represents, warrants and agrees that:
(a) the EUE Shareholder is not a U.S. Person and is not an
Affiliate of the Buyer. A U.S. Person includes any one of the following:
i. any natural person resident in the United States
of America;
ii. any partnership or corporation organized or
incorporated under the laws of the United States of America;
iii. any estate of which any executor or
administrator is a U.S. person;
iv. any trust of which any trustee is a U.S. person;
v. any agency or branch of a foreign entity located
in the United States of America;
vi. any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person;
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 6
vii. any discretionary account or similar account
(other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated or (if an individual)
resident in the United States of America; and
viii. any partnership or corporation if:
(1) organized or incorporated under the laws
of any foreign jurisdiction; and;
(2) formed by a U.S. person principally for
the purpose of investing in securities not registered under
the Securities Act, unless it is organized or incorporated,
and owned, by accredited EUE Shareholders (as defined in Rule
501(a) under the Securities Act) who are not natural persons,
estates or trusts.
(b) At the time of the origination of contact concerning this
Agreement and the date of the execution and delivery of this Agreement, the EUE
Shareholder was outside of the United States.
(c) The EUE Shareholder will not, during the period commencing
on the date of issuance of the Buyer Shares and ending on the first anniversary
of such date, or such shorter period as may be permitted by Regulation S or
other applicable securities law (the "Restricted Period"), offer, sell, pledge
or otherwise transfer the shares in the United States, or to a U.S. Person for
the account or for the benefit of a U.S. Person, or otherwise in a manner that
is not in compliance with Regulation S or otherwise in compliance with U.S.
securities laws.
(d) The EUE Shareholder will, after expiration of the
Restricted Period, offer, sell, pledge or otherwise transfer the Buyer Shares
only pursuant to registration under the Securities Act or an available exemption
therefrom and, in accordance with all applicable federal, state and foreign
securities laws.
(e) Neither the EUE Shareholder nor any person acting on its
behalf has engaged in, and prior to the expiration of the Restricted Period will
engage in, any short selling of or any hedging transaction with respect to the
Buyer Shares, including without limitation, any put, call or other option
transaction, option writing or equity swap.
(f) Neither the EUE Shareholder nor or any person acting on
its behalf has engaged, nor will engage, in any directed selling efforts to a
U.S. Person with respect to the Buyer Shares and the EUE Shareholder and any
person acting on its behalf have complied and will comply with the "offering
restrictions" requirements of Regulation S under the Securities Act.
(g) The transactions contemplated by this Agreement have not
been pre-arranged with a buyer located in the United States or with a U.S.
Person, and are not part of a plan or scheme to evade the registration
requirements of the Securities Act.
(h) Neither the EUE Shareholder nor any person acting on its
behalf has undertaken or carried out any activity for the purpose of, or that
could reasonably be expected to have the effect of, conditioning the market in
the United States, its territories or possessions, for any of the Buyer Shares.
The EUE Shareholder agrees not to cause any advertisement of the Buyer Shares to
be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Buyer Shares, except such
advertisements that include the statements required by Regulation S under the
Securities Act, and only offshore and not in the U.S. or its territories, and
only in compliance with any federal, state and local applicable securities laws.
(i) Each certificate representing the Buyer Shares sold under
Regulation S shall be endorsed with the following legends, in addition to any
other legend required to be placed thereon by applicable federal or state
securities laws:
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 7
"THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE WERE OFFERED TO
PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE
U. S. SECURITIES ACT OF 1933, AS AMENDED ("THE SECURITIES ACT")) AND
WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT AND IN RELIANCE UPON REGULATION S
PROMULGATED UNDER THE SECURITIES ACT. TRANSFER OF THESE SHARES IS
PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S,
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO
AVAILABLE EXEMPTION FROM REGISTRATION."
(j) The EUE Shareholder consents to, and the Buyer shall,
make a notation on its records and give instructions to any transfer agent of
the Buyer in order to implement the restrictions on transfer of the Buyer Shares
set forth in this Article IV.
4.12 Regulation D Exemption. Each EUE Shareholder that is a
U.S. Person ("U.S. EUE Shareholder") represents that such person is an
"Accredited Investor" as that term is defined in Regulation D promulgated under
the Securities Act. Each U.S. EUE Shareholder represents that the Buyer Shares
being acquired, are being acquired solely for the account of such Person for
such shareholder's investment and not with a view to, or for resale in
connection with, any distribution in any jurisdiction where such sale or
distribution would be precluded. The U.S. EUE Shareholder is not acquiring the
Buyer Shares as a result of any advertisement, article, notice or other
communication regarding the Buyer Shares published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement. Such U.S. EUE
Shareholder, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Buyer Shares, and has so evaluated the merits and risks of such
investment. Such U.S. EUE Shareholder is able to bear the economic risk of an
investment in the Buyer Shares and, at the present time, is able to afford a
complete loss of such investment. Each certificate representing the Buyer Shares
sold under Regulation D shall be endorsed with the following legends, in
addition to any other legend required to be placed thereon by applicable federal
or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO COUNSEL TO THE
ISSUER THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE."
ARTICLE V
MAJOR SHAREHOLDERS'
REPRESENTATIONS AND WARRANTIES
RELATING TO THE EUE COMPANIES
Subject to the provisions of Article IX hereof, the Major Shareholders
hereby, jointly and severally, represent and warrant to Buyer as of the Closing
Date as follows and the Major Shareholders hereby acknowledge that Buyer is
relying on the following representations and warranties in entering into this
Agreement.
5.1 Organization. Each of the Parent Company and its Subsidiaries is a
company duly organized, validly existing and in good standing under the laws of
the country of its organization. EUE US is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. The Major
Shareholders have delivered to the Buyer true and complete copies of the
Organizational Documents of each of the EUE Companies, each as amended to date
and presently in effect (collectively, the "EUE Organizational Documents").
5.2 Qualification; Power. Each EUE Company is duly qualified to do
business in jurisdictions where it has the permanent right of establishment and
is in good standing in each jurisdiction in which the nature of the business as
now conducted or the character of the property owned or leased by it makes such
qualification necessary, and a list of all such jurisdictions has been delivered
to the Buyer, excepting where listed (as applicable to each EUE Company) on
Schedule 5.2. Each EUE Company has all requisite corporate power and authority
to own its properties and assets and to carry on its business as currently
conducted.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 8
5.3 Consents; Absence of Conflicts. Except as set forth on Schedule
5.3, neither the execution and delivery of this Agreement or the other
Transaction Documents by the Sellers, nor the consummation of the transactions
contemplated hereby and thereby will (a) violate or breach the terms of, cause a
default under, conflict with, result in the loss by any EUE Company of any
rights or benefits under, impose on any EUE Company any additional or greater
burdens or obligations under, create in any party additional or greater rights
or benefits under, create in any party the right to accelerate, terminate,
modify or cancel, require any notice or consent or give rise to any preferential
purchase or similar right under (i) any applicable Legal Requirement, (ii) the
EUE Organizational Documents or (iii) any Contract to which any EUE Company is a
party or by which any EUE Company, or any of its properties, is bound, including
without limitation, the Material Contracts; (b) result in the creation or
imposition of any Lien on any of the EUE Assets or the Parent Company Shares;
(c) result in the cancellation, forfeiture, revocation, suspension or
modification of any EUE Asset or any existing consent, approval, authorization,
license, permit, certificate or order of any Governmental Authority; or (d) with
the passage of time or the giving of notice or the taking of any action of any
third party have any of the effects set forth in clause (a), (b) or (c) of this
Section 5.3. Except as set forth on Schedule 5.3, no EUE Company is required to
obtain or provide any consent or notice in connection with the consummation of
the transactions contemplated by this Agreement. All such consents or notices
have been obtained or given and have been furnished in writing to Buyer.
5.4 Capitalization.
(a) Schedule 5.4 sets forth a true and complete list that
accurately reflects the outstanding Interests in each EUE Company. Schedule 5.4
also lists all names and the number of shares held by each shareholder of the
Parent Company.
(b) The issued and outstanding shares of capital stock of the
EUE Companies (the "EUE Company Shares") have been duly authorized, are validly
issued and are fully paid and non-assessable and were not issued in violation
of, and are not subject to, any preemptive rights, rights of first refusal or
other similar rights of any Person. No EUE Company Share has been redeemed or
repurchased and no capital in respect of any EUE Company Share has been repaid.
(c) There are no shares of capital stock of any EUE Company
outstanding other than as reflected in Schedule 5.4. There are no Contracts
(including, without limitation, options, warrants, calls and preemptive rights)
obligating any Seller or any EUE Company (i) to issue, sell, pledge, dispose of
or encumber any Interests in such EUE Company, (ii) to redeem, purchase or
acquire in any manner any Interests in such EUE Company or (iii) to make any
dividend or distribution of any kind with respect to any Interests in such EUE
Company.
(d) Except as set forth in Schedule 5.4, there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights affecting the Interests in any EUE Company.
There are no voting trusts, proxies, or other shareholder or similar agreements
or understandings with respect to the voting of the Interests in any of the EUE
Companies.
5.5 Subsidiaries. Other than any EUE Company and except as disclosed on
Schedule 5.5, there are no, and there have not been any, Persons (including any
joint ventures) in which an EUE Company owns, or, has owned during the past five
years, of record or beneficially, any direct or indirect (through a subsidiary
or otherwise) Interest. There are no outstanding obligations of any EUE Company
to provide funds or make any investment (in either case, in the form of a loan,
capital contribution, purchase of an Interest (whether from the issuer or
another Person) or otherwise) in, any other Person.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 9
5.6 Absence of Changes.
(a) Except as set forth on Schedule 5.6, since March 31, 2006:
(1) there has not been any Material Adverse Effect;
(2) the Business has been operated and maintained in
the Ordinary Course of Business;
(3) there has not been any material damage,
destruction or loss to any material portion of the EUE
Assets, whether covered by insurance or not;
(4) there has been no merger or consolidation of
any EUE Company with any other Person or any acquisition by any EUE Company
of the stock, material assets or business of any other Person or any agreement
with respect thereto;
(5) there has been no (i) issuance of any Interests
in any EUE Company, (ii) any repurchase or redemption of any Interests in any
EUE Company, or (iii) split, combination or reclassification of any Interests
in any EUE Company;
(6) there has been no declaration or payment of any
dividend or other payment on the Interests in any
EUE Company;
(7) there has been no borrowing of funds, agreement
to borrow funds, or guaranty or agreement to maintain the financial position of
any Person by any EUE Company;
(8) no EUE Company has entered into any employment,
consulting, severance or indemnification agreement or an agreement with respect
to a retention bonus with any of its employees or any other Person, nor has
any EUE Company incurred or entered into any collective bargaining agreement
or other obligation to any labor organization or employee;
(9) there has been no actual, pending or, to the
Knowledge of the Major Shareholders, threatened, adverse change in the
relationship of any EUE Company with any customer, supplier, distributor or
sales representative of the Business;
(10) there has been no material increase in the
compensation or benefits of any director, officer or employee of any EUE Company
or the Business;
(11) other than the repayment of the loans and other
payments as scheduled on Schedule 5.6(a)(11) there has been no payment by any
EUE Company to any director, officer, member, partner, employee or holder of
any Interest in any EUE Company, or any Affiliate of the foregoing (whether as
a loan or otherwise) except regular compensation, expense reimbursements and
usual benefits payments consistent with past practices;
(12) no EUE Company has entered into any contract,
agreement or arrangement with any director, officer, member, partner, employee
of or holder of any Interest in any EUE Company or any Affiliate of the
foregoing; and
(13) there is no Contract to do any of the foregoing,
except as expressly permitted by this Agreement.
(b) Except as set forth on Schedule 5.6, since April 1, 2005,
no EUE Company has sold or disposed of any of its material assets (other than
any such sales of products in the Ordinary Course of Business and transfers to
other EUE Companies).
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 10
5.7 Affiliate Transactions. Schedule 5.7 describes all services and
assets owned, licensed to or otherwise held by any EUE Shareholder or any of
their respective Affiliates (other than an EUE Company), that are or were made
available or provided to or used by an EUE Company or the Business within the
one-year period prior to the date of this Agreement or which may be required to
operate the Business from and after the Closing Date consistent with past
practices in the preceding year. Except as set forth in Schedule 5.7, (a) no EUE
Company is obligated to pay currently or in the future any amounts to any EUE
Shareholder or any of their respective Affiliates save under customary
employment or consultancy arrangements in the ordinary course of business, and
none of the EUE Shareholders nor any of their respective Affiliates is obligated
to pay currently or in the future any amounts to any EUE Company and (b) since
April 1, 2005, no EUE Company has purchased, transferred or leased any real or
personal property from or for the benefit of any EUE Shareholder or of their
respective Affiliates and no EUE Company has sold, transferred or leased any
real or personal property to any EUE Shareholder or of their respective
Affiliates.
5.8 Real Property.
(a) No EUE Company owns any real or freehold property
(beneficially or of record).
(b) Except as set forth in Schedule 5.8(b), the Due Diligence
Documents set forth a complete and accurate list with copies of all real estate
leases pursuant to which the EUE Companies lease real property ("Scheduled
Leases"). Each of the EUE Companies has valid and enforceable leases with
respect to the real property that is leased to the EUE Companies. The real
property leased by the EUE Companies is appropriate and adequate for purposes of
conducting their respective businesses as currently being conducted. The real
property leased by the EUE Companies is not and is not reasonably expected to be
subject to any liens, administrative measures or litigation which may adversely
affect their value or use.
(c) The business conducted by the EUE Companies on the Leased
Real Property is duly authorized by the applicable lease agreements. Such
agreements do not provide that the lessee shall be responsible for the cost of
any works required to bring any buildings into conformity with applicable laws
and regulations or otherwise. No event or condition exists, or is alleged by any
other party, to have occurred or exist, which constitutes a basis for
termination of any such agreements.
(d) To the knowledge of the Major Shareholders no decisions
have been taken by any competent authority which is reasonably expected to
adversely affect the permitted use of any of the real property used by any of
the Companies.
(e) The real property leased pursuant to the Scheduled Leases
constitutes all of the real property ("Leased Real Property") which is used in
connection with the ownership and operations of the Business. The Sellers have
furnished Buyer with true and complete copies of all deeds, leases, title
opinions, title insurance policies and surveys in its possession or in the
possession of any of the EUE Companies that relate to the Real Property,
together with copies of all reports of any engineers, environmental consultants
or other consultants in their possession relating to any of the Leased Real
Property.
(f) All utilities (including, without limitation, water, sewer
or septic, gas, electricity, trash removal and telephone service) are available
to the Leased Real Property in sufficient quantities and quality to adequately
serve the Leased Real Property in connection with the operation of the Business
conducted therefrom as such operations are currently conducted thereon.
5.9 Personal Property.
The EUE Companies own or lease all of the tangible personal
property (the "Personal Property") necessary for the continued ownership, use
and operation of the Business consistent in all material respects with the past
practices of EUE Companies since July 4, 2005 and with the practices of the EUE
Companies as of the date hereof. Except as set forth on Schedule 5.9, the EUE
Companies have good and marketable title to such Personal Property and all other
tangible personal property used or held for use by the EUE Companies or any of
their Affiliates in connection with the Business, free and clear of all Liens
except Permitted Liens. Upon the consummation of the transactions contemplated
by this Agreement, the EUE Companies will have good title to the Personal
Property and such other tangible personal property free and clear of all Liens
except Permitted Liens. Each item of Personal Property is in good working order
and repair in all material respects (taking its age and ordinary wear and tear
into account), has been operated and maintained in the Ordinary Course of
Business and remains in suitable and adequate condition in all material respects
for use consistent with its primary use since July 4, 2005 (or later acquisition
date). The EUE Companies and their Affiliates have not deferred maintenance of
any such item in contemplation of the transactions contemplated by this
Agreement.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 11
5.10 Permits. A full and complete list of all permits, licenses,
certificates, authorizations and approvals granted by any Governmental Authority
(each, a "Permit") and used or held by an EUE Company in connection with the
ownership of the EUE Assets and used in the Ordinary Course of Business of the
EUE Companies (the "Scheduled Permits") is included in the Due Diligence
Documents and has been delivered to the Buyer. The Scheduled Permits constitute
all Permits necessary for the continued ownership, use and operation of the
Business consistent in all material respects with the past practices of the
Business. Except as set forth in Schedule 5.10, the Scheduled Permits are valid
and in full force and effect and no EUE Company is in default, and no condition
exists that with notice or lapse of time or both would constitute a default,
under any of the Scheduled Permits.
5.11 Contracts.
(a) Each of the following Contracts used in connection with
the Business to which an EUE Company is a party or by which it or its properties
is bound shall be referred to as a "Material Contract":
(1) any Contract or group of related Contracts that
provides for the payment by an EUE Company of more than $50,000 in any
consecutive 12-month period or more than $250,000 over the remaining life of
such Contract other than a Contract that (A) is terminable by any party thereto
giving notice of termination to the other party thereto not more than 30 days
in advance of the proposed termination date and (B) even if so terminable,
contains no post-termination obligations, termination penalties, buy-back
obligations or similar obligations;
(2) any Contract that constitutes a purchase order or
other Contract relating to the sale, purchase, lease or provision by an EUE
Company of goods or services in excess of $50,000 in any 12-month period;
(3) any Contract that grants any Person the right to
sell products or provide services within any geographical region other than a
Contract that (A) is terminable by any party thereto giving notice of
termination to the other party thereto not more than 30 days in advance of the
proposed termination date and (B) even if so terminable, contains no
post-termination obligations, termination penalties, buy-back obligations
or similar obligations;
(4) any Contract that purports to limit the freedom
of any EUE Company to compete in any line of business or to conduct business in
any geographic location;
(5) any Contract that is for the sale of goods or
services by an EUE Company and which (A) was entered into by such EUE Company on
terms known at the time the Contract was entered into not to be commercially
reasonable or (B) was entered into with the expectation that such EUE Company
would incur a loss;
(6) any Contract that was entered into outside of the
Ordinary Course of Business of the EUE Companies;
(7) any Contract constituting a partnership, joint
venture, strategic alliances or other similar
arrangement;
(8) any Contract relating to Indebtedness for
Borrowed Money, any Contract creating a capital lease obligation, any Contract
for the sale of accounts receivable, any Contract constituting a guarantee of
debt of any third Person or any Contract requiring an EUE Company to maintain
the financial position of any other Person;
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 12
(9) any Contract in respect of Intellectual Property
Rights granted to or by an EUE Company, excluding license agreements for
off-the-shelf commercial software;
(10) any lease (including any master lease covering
multiple items of personal property) of any item or items of personal property
with a rental expense under such lease (whether for a single item or multiple
items) in excess of $50,000 in any consecutive 12-month period;
(11) any Contract providing for the deferred payment
of any purchase price including any "earn out" or other contingent fee
arrangement;
(12) any Contract creating a Lien on any of the EUE
Assets that will not be fully discharged at or prior to the Closing;
(13) any Contract between an EUE Company, on the one
hand, and any EUE Shareholder or any Affiliate of an EUE Shareholder, on the
other hand (including any Contract providing for (i) compensation, the
acceleration of benefits or the loss of any rights in connection with the
consummation of the transactions contemplated by this Agreement or (ii)
indemnification by an EUE Company);
(14) any Contract providing for the purchase or sale
of real property;
(15) any Contract with any Governmental Authority;
(16) any Contract involving interest rate swaps, cap
or collar agreements, commodity or financial future or option contracts or
similar derivative or hedging Contracts; and
(17) any Contract otherwise material to the EUE
Companies.
(b) True and complete copies (including all amendments) of
each Material Contract have been provided to the Buyer as part of the Due
Diligence Documents if such Material Contract is in writing; if such Material
Contract is oral, a summary of the material terms of such Material Contract has
been included in the Due Diligence Documents and such Material Contract has been
identified as an oral Contract. Except as disclosed in Schedule 5.11: (i) each
Material Contract is the legal, valid obligation of the EUE Company which is a
party thereto, and, any other Person party thereto, binding and enforceable
against EUE Companies and, any other Person party thereto, in accordance with
its terms subject to Creditors' Rights; (ii) each Material Contract has not been
terminated, and neither the relevant EUE Companies nor, any other Person is in
breach or default thereunder, and no event has occurred that with notice or
lapse of time, or both, would constitute a breach or default, or permit
termination, modification in any manner adverse to the applicable EUE Companies
or acceleration thereunder; (iii) no party has asserted or has (except by
operation of law) any right to offset, discount or otherwise ▇▇▇▇▇ any amount
owing under any Material Contract except as expressly set forth in such Material
Contract; (iv) there are no Material Waivers regarding any Material Contract
that have not been disclosed in writing to Buyer; and (v) the Material Contracts
are sufficient for the EUE Companies to be able to carry on their business in
the manner intended.
5.12 Intellectual Property.
(a) A list of all EUE Registered Intellectual Property is at
Schedule 5.12 (a). All EUE Registered Intellectual Property is owned or licensed
by the EUE Companies. There are no proceedings or actions in which any EUE
Company is a named party and in which the EUE Registered Intellectual Property
is being claimed, attacked or opposed by any third party and that are pending as
of the date hereof before any court or tribunal of competent jurisdiction
(including the U.S. Patent and Trademark Office (the "PTO") or equivalent
authority anywhere in the world) related to any of the EUE Registered
Intellectual Property or any other such proceeding or action that such EUE
Company has knowledge of (whether or not the EUE Company is a party thereto).
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 13
(b) To the Knowledge of the Major Shareholders each item of
EUE Intellectual Property listed in Schedule 5.12(a) which is owned by the
stated EUE Company is free and clear of any Liens other than liens arising in
the normal course of business of such EUE Companies (excluding EUE Intellectual
Property Rights licensed to such EUE Company under any license and any
Intellectual Property Rights co-owned with any third party). To the Knowledge of
the Major Shareholders each EUE Company (i) owns exclusively all trademarks,
service marks and trade names listed in Schedule 5.12(a) and (ii) owns
exclusively, and has good title to, all copyrighted materials that comprise EUE
Company products or other works of authorship that comprise the EUE Assets or
which the EUE Company otherwise purports to own; provided, however, that such
works may incorporate copyrighted works or works of authorship of third parties
which are licensed to or co-owned by the EUE Company or are in the public
domain.
(c) To the extent that any EUE Intellectual Property has been
developed or created by any Person other than an EUE Company, the EUE Company
has a written agreement with such Person with respect thereto and the Company
has either (i) obtained ownership of, and is the exclusive or co-owner of, all
such EUE Intellectual Property by operation of law or by valid assignment of any
such rights or (ii) has obtained a License under or to such EUE Intellectual
Property. Except as provided in Exhibit 5.12(c), no person is entitled to or has
claimed any payment in respect of any of the EUE Registered Intellectual
Property. In particular, the EUE Companies are not, and will not be, under any
obligation to pay compensation to any former or current employee under the
German Employee Invention Act (Gesetz uber Arbeitnehmererfindungen) and or under
the German Copyright Act (Urheberrechtsgesetz).
(d) Except in the ordinary course of business, no EUE Company
has transferred ownership of or granted any license of or other right to use or
authorized the retention of any rights to use any Intellectual Property Rights
that is or was EUE Intellectual Property, to any other Person other than to an
EUE Company.
(e) The EUE Intellectual Property constitutes all the
Intellectual Property Rights (other than patents, copyright or trademark
registrations which may issue to an EUE Company) necessary to the conduct of the
EUE Companies' Business as it currently is conducted or as currently proposed to
be conducted.
(f) The Contracts listed in Schedule 5.12 (f) include all
contracts to which an EUE Company is a party with respect to any Intellectual
Property Rights. Except as set out in Schedule 5.12 (f). no Person other than a
EUE Company has ownership rights to improvements made by the EUE Company in
Intellectual Property Rights which has been licensed to the EUE Company.
(g) Schedule 5.12(g) lists all Contracts between each EUE
Company and any other Person wherein or whereby such EUE Company has agreed to,
or assumed, any obligation or duty to indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or Liability or provide a
right of rescission with respect to the infringement or misappropriation by the
EUE Company or such other Person of the Intellectual Property Rights of any
Person other than the EUE Company.
(h) To the Knowledge of the Major Shareholders, the operation
of the business of each EUE Company as currently conducted does not infringe or
misappropriate the Intellectual Property Rights of any Person (other than
patents that may issue in the future), violate the rights of any Person
(including rights to privacy or publicity), or constitute unfair competition or
trade practices under any applicable laws, and no EUE Company has received
written notice from any Person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of such EUE Company infringes or misappropriates the
Intellectual Property of any Person or constitutes unfair competition or trade
practices under any applicable law, including notice of third party patent or
other Intellectual Property Rights from a potential licensor of such
Intellectual Property Rights.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 14
(i) To the Knowledge of the Major Shareholders, each item of
EUE Registered Intellectual Property is valid and subsisting, and all necessary
registration, maintenance, renewal fees, annuity fees and taxes in connection
with such Registered Intellectual Property have been paid and all necessary
documents and certificates in connection with such EUE Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States, United Kingdom, Germany or any other
jurisdiction, as the case may be, for the purposes of maintaining such EUE
Registered Intellectual Property save in respect of EUE Registered Intellectual
Property which the relevant EUE Company has decided at its discretion and in the
ordinary course of its business to allow to lapse or to cease to protect. In
each case in which any EUE Company has acquired any Registered Intellectual
Property rights from any Person, such EUE Company has obtained an assignment
sufficient to irrevocably transfer such rights in such Registered Intellectual
Property to the extent required by such EUE Company to the EUE Company and, to
the maximum extent provided for by, and in accordance with, applicable laws, the
EUE Company has recorded each such assignment with the relevant Governmental
Authority where such Registered Intellectual Property is registered, including
the PTO, the U.S. Copyright Office, or their respective equivalents in any
relevant foreign jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between any EUE Company
and any other Person with respect to EUE Intellectual Property under which there
is any dispute known to any EUE Company regarding the scope of such Contract or
License, or performance under such Contract or License, including with respect
to any payments to be made or received by the EUE Company thereunder.
(k) To the Knowledge of the Major Shareholders, no Person is
infringing or misappropriating any EUE Intellectual Property.
(l) Each EUE Company has taken commercially reasonable steps
to protect such EUE Company's rights in confidential information and trade
secrets of such EUE Company or to protect rights in confidential information or
trade secrets provided by any other Person to the EUE Company subject to a duty
of confidentiality. Without limiting the foregoing, each EUE Company has, and
enforces, a policy requiring each employee, consultant and independent
contractor to execute agreements containing appropriate confidentiality and
invention, copyright and other intellectual property provisions given the nature
of the individuals appointment and all relevant current and former employees,
consultants and independent contractors of each EUE Company have executed such
an agreement.
(m) To the Knowledge of the Major Shareholders EUE
Intellectual Property or product, technology or service of any EUE Company is
subject to any order or action or proceeding instituted by a non-regulatory
third party that restricts, or that is reasonably expected to restrict in any
manner, the use, transfer or licensing of any EUE Intellectual Property by such
EUE Company or that may affect the validity, use or enforceability of such EUE
Intellectual Property.
(n) There is no order, action or proceeding pending or, to the
Knowledge of the Major Shareholders, threatened alleging that any (i) product,
technology, service or publication of any EUE Company, (ii) material published
or distributed by any EUE Company or (iii) conduct or statement of any EUE
Company constitutes material, false advertising or otherwise violates any
applicable Law.
(o) Neither this Agreement nor any transactions contemplated
by this Agreement will result in any EUE Company granting any rights or licenses
with respect to the EUE Intellectual Property to any Person pursuant to any
Contract to which such EUE Company is a party or by which any of its EUE Assets
and EUE Intellectual Property is bound.
5.13 Accounts Receivable. Except as disclosed in Schedule 5.13, each of
the Accounts Receivable arose in the Ordinary Course of Business of the EUE
Companies and represents the genuine, valid and legally enforceable indebtedness
of the account debtor and no contra account, set-off, defense, counterclaim,
allowance or adjustment (other than discounts for prompt payment shown on the
invoice) has been asserted or, to the Knowledge of Major Shareholders, is
threatened by any of the account debtors of such Accounts Receivable. To the
Knowledge of the Major Shareholders, none of the account debtors of the Accounts
Receivable is involved in a bankruptcy or insolvency proceeding or is generally
unable to pay its debts as they become due except as disclosed in Schedule 5.13.
The EUE Companies have good and valid title to the Accounts Receivable free and
clear of all Liens except Permitted Liens. No goods or services, the sale or
provision of which gave rise to any Accounts Receivable, have been returned or
rejected by any account debtor or lost or damaged prior to receipt thereby. Set
forth on Schedule 5.13 is a listing of aged Accounts Receivable as of a date no
more than seven days prior to the date hereof. The EUE Companies have not
written off any of its accounts receivable as uncollectible, except as set forth
on Schedule 5.13 or in the Financial Statements. To the knowledge of the Major
Shareholders, all accounts receivable are fully collectible subject only to
reserves expressly provided on the Financial Statements of the EUE Companies
dated March 31, 2006.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 15
5.14 Brokers' Fees. Except as set forth on Schedule 5.14, none of the
EUE Companies or any of their Affiliates has any liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer or its Affiliates
(including any of the EUE Companies after the Closing) could become liable or
obligated.
5.15 Financial Statements.
(a) Attached hereto as Schedule 5.15(a) are copies of the
audited balance sheet of the EUE Companies (on a consolidated basis) at March
31, 2006 and the related audited statements of income for the year then ended.
The Audited Financial Statements are referred to sometimes as the "Financial
Statements." Except as set forth on Schedule 5.15(a), the Financial Statements
(i) have been prepared in accordance with Applicable Accounting Standards,
consistently applied throughout the periods covered thereby, (ii) fairly
present, in all material respects, the financial condition and results of
operations of the EUE Companies as of the respective dates thereof and for the
respective periods covered thereby, and, in the case of the Financial
Statements, and (iii) have been provided from, and are in accordance with, the
books and records of the EUE Companies. Since March 31, 2006, there has been no
change in any accounting policies, principles, methods or practices, including
any change with respect to reserves (whether for bad debts, contingent
liabilities or otherwise), of the Company.
(b) The March 31, 2006 balance sheet reflects the cash
position of the Parent Company as of such date. Since March 31, 2006 and except
as provided in Schedule 5.6(a)(11), the EUE Companies have not made any cash
payments or distributions to any of the Major Shareholders or repaid any loans
or other obligations of the EUE Companies in favor of any of the Major
Shareholders or any of their Affiliates except in the ordinary course of
business.
5.16 No Undisclosed Liabilities. Except as set forth on Schedule 5.16,
none of the EUE Companies nor the Business has any liability or off-balance
sheet undertakings, and in particular none of them have granted any guarantees
(in any form whatsoever, including as a comfort letter) or security interest
with regard to, or assumed any liability for, the performance of obligations or
liabilities of third parties (including partners, shareholders, corporate
officers and employees) and there has been no guarantee or security interest
been extended or liability been assumed by any third party with regard to or for
the performance of obligations or liabilities of the Companies, other than (i)
liabilities set forth on the Audited Financial Statements and/or (ii)
liabilities which have arisen after the date of the Audited Financial Statements
in the Ordinary Course of Business.
5.17 Legal Compliance. Each EUE Company is in compliance in all
material respects with all applicable Legal Requirements.
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5.18 Taxes. Except as disclosed on Schedule 5.18 (i) all Tax Returns
required to be filed on or before the Closing Date by or with respect to the EUE
Companies or with respect to the income or operations of the EUE Companies or
the EUE Assets have been duly and timely filed with the appropriate Governmental
Authority, (ii) all Tax Items required to be included in each such Tax Return
have been so included and all such Tax Items and any other information provided
in each such Tax Return are true, correct and complete in all material respects,
(iii) all Taxes owed by the EUE Companies or owed with respect to the income or
operations of the EUE Companies or the EUE Assets, including without limitation
value added taxes and sales taxes, that have become due have been timely paid in
full, or if not due and payable, have been adequately provided for, (iv) no
penalty, interest or other charge is or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax, (v) all Tax
withholding and deposit requirements imposed with respect to the EUE Companies
or their employees or with respect to the income or operations of the EUE
Companies have been satisfied in full, (vi) there are no Liens (other than
Permitted Liens) on any of the EUE Assets or the shares of any of the EUE
Companies that arose in connection with any failure (or alleged failure) to pay
any Tax, (vii) there is no claim pending or, to the Knowledge of the Major
Shareholders, threatened by any Governmental Authority in connection with any
such Tax, (viii) none of such Tax Returns is now under audit or examination by
any Governmental Authority, (ix) there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the filing of
any such Tax Return or the assessment or collection of any such Tax, (x) no EUE
Company is a party to any Tax indemnity agreement or arrangement and has any
obligation to indemnify or make a payment to any person in respect of any Tax
for any past, current or future period, (xi) to the Knowledge of the Major
Shareholders, no claim has ever been made by a Governmental Authority in a
jurisdiction in which an EUE Company does not file Tax Returns that it is or may
be required to file a Tax Return in that jurisdiction, (xii) none of the EUE
Assets is held in an arrangement that could be classified as a partnership for
Tax purposes, (xiii) the EUE Companies will not be required to include any
amount in income for any taxable period as a result of a change in accounting
method for any taxable period ending on or before the Closing Date or pursuant
to any agreement with any Governmental Authority with respect to any such
taxable period, or to include in any period ending after the Closing Date any
income that accrued in a prior period but was not recognized in the prior period
as a result of the installment method of accounting, the completed contract
method of accounting, or the long-term contract method of accounting, (xiv) none
of the transactions contemplated by this Agreement will result in any Tax
liability or the recognition of any material item of income or gain to an EUE
Company, (xv) none of the EUE Companies has benefited from any fiscal advantage
(including any subsidies) or favorable tax regime in exchange for undertakings,
covenants or obligations by which it is still bound, directly or indirectly, or
shall incur any additional burden after the Closing Date as a result of having
obtained a benefit from any fiscal advantage (including any subsidies) or
favorable Tax regime, (xvi) none of the EUE Companies has recorded shares or any
other fixed assets below their adjusted book values, (xvii) none of the EUE
Companies holds tainted shares that cannot be disposed of under a beneficial tax
regime generally applicable to the disposition of shares, and (xviii) all Tax
relevant transactions and events have been duly documented in the books and
records of the EUE Companies and all bookkeeping and relevant business records
(including transfer pricing documentations) have been properly prepared and
retained and are available for all tax periods. No EUE Company has made any
payments representing installments of corporation tax pursuant to the
Corporation Tax (Instalment Payments) Regulations 1998 in respect of any current
or preceding accounting periods and is not under any obligation to do so. No EUE
Company has paid since inception or will become liable to pay any penalty, fine,
surcharge or interest charged by virtue of the provisions of the TMA 1970 or any
other applicable law. The EUE Companies are each taxable persons and are duly
registered for the purposes of VAT with quarterly prescribed accounting periods,
such registration not being pursuant to paragraph 2 of Schedule 1 to the VATA
1994 or subject to any conditions imposed by or agreed with HM Revenue & Customs
and no EUE Company is (nor are there any circumstances by virtue of which they
may become) under a duty to make monthly payments on account under the Value
Added Tax (Payments on Account) Order 1993. The EUE Companies have complied with
all statutory provisions, rules, regulations, orders and directions in respect
of VAT.
5.19 Inventory. Each EUE Company owns its inventory free and clear of
all Liens except Permitted Liens. None of such inventory is covered by any
financing statements except those filed in connection with Permitted Liens.
Except as disclosed on Schedule 5.19, such inventory was acquired for sale in
the Ordinary Course of Business and is in good and saleable condition and is not
obsolete, slow moving or damaged, except to the extent reflected in reserves set
forth in the Financial Statements. Such inventory is located at the locations as
noted on Schedule 5.19 and none of such inventory is subject to any consignment,
bailment, warehousing or similar arrangement, except as set forth on Schedule
5.19.
5.20 Litigation. Except has been disclosed in the Due Diligence
Documents or as set forth on Schedule 5.20, there are no actions, suits or
proceedings pending or, to the Knowledge of the Major Shareholders, threatened
at law or in equity, or before or by any Governmental Authority or before any
arbitrator of any kind, against an EUE Company or any of its Affiliates that
affect or would affect the Business or the EUE Assets or the consummation of the
transactions contemplated hereby.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 17
5.21 Product and Service Warranty.
(a) Except as disclosed in Schedule 5.21 the Due Diligence
Documents have identified and disclosed any warranty claim asserted during the
three year period prior to the date hereof from which an EUE Company or any of
its Affiliates has incurred costs in excess of $50,000.
(b) Except as disclosed in Schedule 5.21 and ignoring any
matter with a value less than $50,000, (i) there is no notice, demand, claim,
action, suit, inquiry, hearing, proceeding, notice of violation or investigation
of a civil, criminal or administrative nature before any court or governmental
or other regulatory or administrative agency, commission or authority against or
involving any product, substance or material (collectively, a "Product"), or
class of claims or lawsuits involving the same or similar EUE Product
manufactured, produced, distributed or sold by or on behalf of any of the EUE
Companies which is pending or, to the Knowledge of the Major Shareholders,
threatened, resulting from an alleged defect in design, manufacture, materials
or workmanship of any EUE Product manufactured, produced, distributed or sold by
or on behalf of any of the EUE Companies, or any alleged failure to warn, or
from any breach of implied warranties or representations, (ii) to the Knowledge
of the Major Shareholders, there has not been any Occurrence (as defined below),
and (iii) there is not, nor is there under consideration or investigation by the
Companies, any Product recall, rework, retrofit or post-sale warning
(collectively "Recalls") conducted by or on behalf of the EUE Companies
concerning any EUE Products manufactured, produced, distributed or sold by or on
behalf of the EUE Companies or, to the Knowledge of the Major Shareholders, any
product recall conducted by or on behalf of any entity as a result of any
alleged defect in any EUE Product supplied by the EUE Companies.
(c) For purposes of this Section 5.21, the term "Occurrence"
shall mean any accident, happening or event which is caused or allegedly caused
by any alleged hazard or alleged defect in manufacture, design, materials or
workmanship, including, without limitation, any alleged failure to warn or
breach of express or implied warranties or representations, with respect to, or
any such accident, happening or event otherwise involving an EUE Product
(including any parts or components) manufactured, produced, distributed or sold
by or on behalf of the EUE Companies.
5.22 Employees; Employee Relations.
(a) Schedule 5.22(a) identifies for each EUE Company the
following:
(1) any increase currently planned to become
effective after the date of this Agreement in the total compensation or rate of
total compensation (including, without limitation, normal bonus, profit-sharing,
pension benefits and other compensation) payable to each of its employees, other
than ordinarily scheduled increases based on seniority in the Ordinary Course of
Business;
(2) all presently outstanding loans and advances
(other than routine travel advances to be repaid or formally accounted for
within 60 days) made by any EUE Company to, or made to any EUE Company by, any
director, senior manager or employee of any EUE Company; and
(3) all transactions outside of the Ordinary Course
of Business between any EUE Company and any of its directors, senior managers or
employees since January 1, 2005.
(b) Except as set forth on Schedule 5.22(b) or to the extent
accrued as a current liability on the Audited Financial Statements, all bonuses,
all wage taxes and/or social security contributions and all other sums to which
any employees of the EUE Companies are entitled prior to the Closing, if any,
due and payable as of the Closing Date to employees of the EUE Companies have
been or will be paid in full to such employees prior to Closing. The
compensation and benefits (including vacation benefits) paid or provided with
respect to all employees of the EUE Companies have been reflected in the
Financial Statements for the periods covered thereby. Except as set forth on
Schedule 5.22(b), as of the date of this Agreement, no current or former
employee of an EUE Company is on a disability leave of absence, is receiving
disability benefits, or is in an elimination or other waiting period with
respect to his or her receipt of disability benefits. The EUE Companies have
effected all increases in pension, survivor, disability and medical care
benefits as required under applicable laws and regulations.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 18
(c) Except as disclosed on Schedule 5.22(c), no EUE Company is
a party to, or is bound by, the terms of any collective bargaining agreement,
shop agreements (Betriebsvereinbarungen), or any other Contract with any labor
union or representative of employees, and no such agreements are being
negotiated. With respect to employees based in Germany, to the Knowledge of the
Major Shareholders, none of the EUE Companies has established any material
special employees' rights by way of a regular practice (betriebliche Ubung).
Except as set forth on Schedule 5.22(c), there are no labor disputes existing
or, to the Knowledge of the Major Shareholders, threatened involving, by way of
example, strikes, work stoppages, slowdowns, picketing, or any other
interference with work or production and no EUE Company has experienced any
labor difficulties during the last year. No grievance or other legal action
arising out of any such collective bargaining agreement or relationship exists,
or to the Knowledge of the Major Shareholders, is threatened.
(d) The relationship of each EUE Company with its employees,
as a group, is satisfactory and, to the Knowledge of the Major Shareholders,
such employees have not indicated that they will not continue in their employ
following the Closing. Except as listed on Schedule 5.22(d), no EUE Company is
(i) a party to any employment, consulting, non-compete, management, severance,
termination pay or similar Contract with any individual or employee, either
express or implied, or (ii) currently negotiating, and does not have any
outstanding offer with respect to, any such agreement or matter.
(e) No legal proceedings, charges, complaints, grievances or
similar actions have been commenced or, to the Knowledge of the Major
Shareholders, threatened, with respect to any EUE Company under any Legal
Requirement affecting the employment relationship, and to the Knowledge of the
Major Shareholders, no facts or circumstances exist which would give rise to any
such proceedings, charges, complaints, or claims. No EUE Company is subject to
any settlement or consent decree with any present or former employee, employee
representative or any Governmental Authority relating to claims of
discrimination or other claims in respect of employment practices and policies.
No Governmental Authority has issued a judgment, order, decree or finding with
respect to the labor and employment practices (including practices relating to
discrimination) of any EUE Company.
(f) To the Knowledge of the Major Shareholders, each EUE
Company is and has been in compliance with all applicable Legal Requirements
relating to the employment of labor, including but not limited to employment and
employment practices, terms and conditions of employment, wages and hours,
payroll documents, equal opportunity, occupational health and safety, severance,
termination or discharge, collective bargaining and the payment of employee
welfare and retirement and other Taxes, and no EUE Company is in violation of
any Legal Requirements concerning retention of independent contractors.
(g) None of the EUE Companies has made any commitment in
connection with any collective dismissal that has not been performed in full,
nor has any of the EUE Companies made any commitment in connection with any
future collective dismissal or reorganization.
(h) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any current or former employee, consultant, director or officer of any
of the EUE Companies to any increased or modified benefit or payment; (ii)
increase the amount of compensation due to any such employee, consultant,
director or officer; or (iii) accelerate the vesting, payment or funding of any
compensation, stock-based benefit, incentive or other benefit.
(i) Schedule 5.22(i) sets forth a description of the
obligations of the EUE Companies vis-a-vis bodies representing their employees,
insofar as such obligations exceed those provided for by Law or the collective
status referred to in Section 5.22(c).
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 19
(j) The Sellers have caused the workers' committees of the EUE
Companies to be informed of and/or consulted, as required under applicable Law,
in connection with the execution of this Agreement and the transactions
contemplated hereunder.
(k) Exhibit 5.22(k) sets forth all undertakings, obligations
and agreements of any EUE Company made vis-a-vis or with former employees,
officers or directors, which have not yet been fully discharged or terminated.
5.23 Employee Benefit Matters.
(a) Schedule 5.23 lists each of the following (collectively
referred to as the "Plans," and individually referred to as a "Plan") which is
sponsored, maintained or contributed to or by any EUE Company for the benefit of
the current or former employees, senior managers or directors of any EUE
Company, or has been so sponsored, maintained or contributed to within six years
prior to the Closing Date:
(1) each personnel policy, stock option or stock
bonus plan, collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, fringe benefits (e.g., company cars),
advantages in kind, vacation policy, severance pay plan, policy or agreement,
retention or other agreement, deferred compensation agreement or arrangement,
profit sharing agreement or arrangement, executive compensation or supplemental
income or retirement arrangement or any other long-term incentive or equity
based plan, policy, agreement or arrangement, such as stock appreciation rights
or phantom stock, incentive and company savings schemes, consulting agreement,
employment agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding which is not described in
Section 5.23(a)(1); and
(2) any regional, local or individual company or
establishment practices which provide for advantages which exceed those
resulting from applicable laws.
(b) True, correct and complete copies of each of the Plans,
and related trusts, if applicable, including all amendments thereto, have been
furnished or made available to Buyer. There has also been furnished or made
available to Buyer, with respect to each Plan and to the extent applicable: (i)
the most recent annual or other report filed with each Governmental Authority,
(ii) the insurance contract and other funding agreement, and all amendments
thereto, and (iii) the most recent summary plan description.
(c) Except to the extent set forth in accordance with
applicable laws, no Plan or Contract listed on Schedule 5.23(c) provides retiree
medical or retiree life insurance benefits to any Person, and EUE Companies is
not contractually or otherwise obligated (whether or not in writing) to provide
any Person with life insurance or medical benefits upon retirement or
termination of employment.
(d) Each EUE Company has substantially performed all
obligations, whether arising by operation of any Legal Requirement or by
contract, required to be performed by it in connection with the Plans, and each
Plan has been administered in substantial compliance with its governing
documents and applicable Legal Requirements. There are no actions, suits or
claims pending (other than routine claims for benefits) or, to the Knowledge of
the Major Shareholders, threatened against, or with respect to, any of the Plans
or their assets, and there is no matter pending with respect to any of the Plans
before any Governmental Authority. Except for the Plans, there are no employee
benefit plans, that are sponsored, maintained or contributed to, or have been
sponsored, maintained or contributed to within six years prior to the Closing
Date, by any EUE Company or any Affiliate of an EUE Company.
(e) Except as listed in Schedule 5.23(e), none of the EUE
Companies had in the past compensation plans in place, including any deferred
compensation plan, profit sharing plan, gain sharing plan, stock option plan,
stock bonus plan, executive compensation plan, executive perquisites, executive
supplemental retirement plan or any other long-term incentive plan, such as
stock appreciation rights or phantom stock. None of the EUE Companies has
disseminated in writing or otherwise generally notified its employees of any
intent or commitment (whether or not legally binding) to create or implement any
additional employee benefit plan or to amend, modify or terminate any existing
employee benefit plan.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 20
(f) Except as disclosed in Schedule 5.23(f) or required under
German statutory social security law, with respect to employees based in
Germany, no Company has committed to pay retirement or other benefits to any of
its current or former employees. Pension accruals have been, or will be, made in
the statutory annual accounts of the German EUE Companies as of March 31, 2004,
up to the maximum amount permitted under Section 6a of the German Income Tax Act
(Einkommensteuergesetz).
(g) Other than the obligation on Parent Company to contribute
to the personal pension plans of Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ as set
forth in the Due Diligence Documents (the "Personal Pension Plans") and other
than the obligation of the EUE Companies to provide health plan benefits to
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as set out in their service/consultancy agreements
(copies of which are in the Due Diligence Documents) no EUE Company has any
obligation (legally binding or otherwise) to provide or contribute towards
pension benefits, death benefits or healthcare benefits in respect of its past
or present officers or employees. Parent Company has fulfilled all of its
obligations under the Personal Pension Plans.
(h) Parent Company has a designated stakeholder pension scheme
in accordance with the requirements of the Welfare Reform and Pensions ▇▇▇ ▇▇▇▇
(and the regulations made under it) and has at all times complied with its
obligations under that Act in relation to all of its "relevant employees" (as
defined for the purposes of that Act) and full details of that designated scheme
are set out in Schedule 5.23.
(i) No unlawful discrimination on grounds of sex, disability,
marital status, hours of work, sexual orientation, religion or belief is or has
at any stage been made in the provision of pension benefits, death benefits
and/or healthcare benefits by any EUE Company.
(j) So far as the Major Shareholders are aware no claims or
complaints have been made or are pending in respect of the provision of (or
failure to provide) pension benefits, death benefits or healthcare benefits by
any employee of a EUE Company. No proposal or announcement has been made to any
employee of a EUE Company or to any officer of a EUE Company about the
introduction, continuance, increase or improvement of any pension benefits,
death benefit or healthcare benefit.
5.24 Environmental Matters.
(a) The EUE Companies have obtained all licenses, permits,
authorizations, approvals and consents from Governmental Authorities which are
required under any applicable environmental law and necessary for it to carry on
its activities and operations as currently conducted ("Environmental Permits").
All such Environmental Permits are in full force and effect and will not be
adversely affected by the consummation of this Agreement and the transactions
contemplated hereby. The EUE Companies are in compliance with the terms and
conditions of all such Environmental Permits, and have been and are in
compliance with all applicable environmental laws.
(b) No Environmental Claims are pending or, to the Knowledge
of the Major Shareholders threatened, with respect to any of the EUE Companies.
(c) No past or present actions, conditions or incidents with respect to the EUE
Companies, the associated properties or assets, or the activities or operations
thereon, including, without limitation, the emission, discharge, release or
disposal (on-site or off-site) of any hazardous materials, require notification,
investigation or remediation, or are reasonably likely to give rise to costs or
liabilities, pursuant to applicable environmental laws.
5.25 Customers, Vendors and Suppliers. To the best belief of the Major
Shareholders, there is no present intent of any customer, vendor or supplier
material to the Business to discontinue or substantially alter its relationship
as such with the Business or EUE Company upon consummation of the transactions
contemplated hereby.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 21
5.26 Bank Accounts; Powers of Attorney. Schedule 5.26 sets forth each
bank, savings institution and other financial institution with which an EUE
Company has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto. Except as disclosed on
Schedule 5.26, no EUE Company has given any revocable or irrevocable powers of
attorney or similar grant of authority to any Person relating to its business
for any purpose whatsoever.
5.27 Insurance. Except as set forth in Schedule 5.27, the Due Diligence
Documents sets forth a true and complete list of all policies, binders, and
insurance contracts with copies of all such documents under which any EUE
Company, the Business or any of the EUE Assets is insured (the "Insurance
Policies"). With respect to each Insurance Policy, a true and correct
description of (a) the scope of coverage, (b) the limits of liability, (c)
deductibles and other similar amounts, and (d) the aggregate limits and
available coverage (if less than the aggregate limits) has been delivered as
part of the Due Diligence Documents. Each of the Insurance Policies is in full
force and effect, there has been no written notice of any cancellation or any
threatened cancellation of any Insurance Policy.
5.28 Books and Records. All books and records relating to the ownership
and operation of the Business and the EUE Assets are located at the premises of
the Business to which such books and records primarily relate, have been
maintained substantially in accordance with applicable Legal Requirements and
comprise all of the material books and records relating to the ownership and
operation of the Business and the EUE Assets.
5.29 Certain Payments. (a) Except as set forth in Schedule 5.29, no
finder's fee or other payment has been, or will be, made by or on behalf of any
of the EUE Companies in respect of, or in connection with, any commitment to any
Person which is not a party to such commitment. Except as set forth in Schedule
5.29, no funds or assets of any of the EUE Companies have been used for illegal
purposes; no unrecorded funds or assets of any of the EUE Companies have been
established for any purpose; no accumulation or use of the EUE Companies'
corporate funds or assets has been made without being properly accounted for in
the books and records of such EUE Company; all payments by or on behalf of each
of the EUE Companies have been duly and properly recorded and accounted for in
their respective books and records; no fraudulent entry has been made in the
books and records of any of the EUE Companies for any reason; no payment has
been made by or on behalf of any of the EUE Companies with the understanding
that any part of such payment is to be used for any purpose other than that
described in the documents supporting such payment; and none of the EUE
Companies has made, directly or indirectly, any illegal contributions to any
political party or candidate, either domestic or foreign.
(b) Neither any EUE Company nor any director, officer,
employee has made any direct or indirect unlawful payment to any foreign or
domestic governmental official or employee, or made any illegal bribe, rebate,
payoff, influence payment, kickback or other unlawful payment in connection with
the Business. To the Knowledge of the Major Shareholders, neither any agent nor
any other person associated with or acting on behalf of any EUE Company has made
any direct or indirect unlawful payment to any foreign or domestic governmental
official or employee, or made any illegal bribe, rebate, payoff, influence
payment, kickback or other unlawful payment in connection with the Business.
5.30 Information All information relating to the Parent Company
contained in the letter from Parent Company to its shareholders dated 23 May
2006 was at such date and will be at Closing true, complete, accurate and not
misleading. Each EUE Company has fully disclosed or made available to the Buyer
any fact, matter or occurrence that is or could reasonably be expected to be
material in the context of such EUE Company's current financial position.
5.31 Subsidies. None of the EUE Companies has been granted any subsidy
by any Governmental Authority which the EUE Company is obliged to repay either
in full or in part until the Closing, or would be obliged to repay either in
full or in part subsequent to the Closing as a result of any of the transactions
contemplated by this Agreement.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as of the Closing Date as
follows. Buyer hereby acknowledges that the Sellers are relying on the following
representations and warranties in entering into this Agreement.
6.1 Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada.
6.2 Authority; Enforceability. Buyer has all requisite corporate power
and authority to execute and deliver this Agreement and any other Transaction
Documents to which it is a party and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the other
Transaction Documents to which Buyer is a party and the performance of its
obligations contemplated hereby and thereby have been duly and validly approved
by all corporate action necessary on behalf of Buyer. This Agreement and each of
the Transaction Documents to which Buyer is a party constitutes the legal, valid
and binding obligations of Buyer, enforceable against it in accordance with
their terms, subject to Creditors' Rights. All other documents required
hereunder to be executed and delivered by Buyer at the Closing have been duly
authorized, executed and delivered by such entity and constitute the legal,
valid and binding obligations of Buyer, enforceable against it in accordance
with their terms, subject to the Creditors' Rights.
6.3 Absence of Conflicts. Neither the execution and delivery by Buyer
of this Agreement or the other Transaction Documents to which it is a party, nor
the consummation of the transactions contemplated hereby and thereby will (a)
violate or breach the terms of, cause a default under, conflict with, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, require any notice or consent or give rise to any preferential
purchase or similar right under (i) any applicable Legal Requirement, or (ii)
any material Contract to which Buyer is a party or by which it, or any of its
properties, is bound; (b) result in the creation or imposition of any Lien
(other than a Permitted Lien) on any of Buyer's assets or properties; (c) result
in the cancellation, forfeiture, revocation, suspension or adverse modification
of any existing consent, approval, authorization, license, permit, certificate
or order of any Governmental Authority; or (d) with the passage of time or the
giving of notice or the taking of any action of any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section 6.3.
6.4 SEC Documents; Buyer Financial Statements. Buyer has furnished or
made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC since January 1, 2005, all in the form so filed. As of
their respective filing dates, such SEC Documents filed by Buyer and all SEC
Documents filed after the date hereof but before the Closing complied or will
comply in all material respects with the requirements of the Securities Act and
the Exchange Act and the rules and regulations of the SEC thereunder, as the
case may be, and none of the SEC Documents contained or will contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent such
SEC Documents have been corrected, updated or superseded by a document
subsequently filed with the SEC. The financial statements of Buyer, including
the notes thereto, included in the SEC Documents (the "Buyer Financial
Statements") comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
under the Exchange Act) and present fairly the consolidated financial position
of Buyer at the dates thereof and the consolidated results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
financial statements, to normal year-end adjustments). There has been no change
in Buyer's accounting policies except as described in the notes to the Buyer
Financial Statements. Except as reflected or reserved against in the Buyer
Financial Statements, Buyer has no material Liabilities, except for Liabilities
and obligations (i) incurred in the ordinary course of business since the date
of the most recent Buyer Financial Statements or (ii) that would not be required
to be reflected or reserved against in the balance sheet of Buyer prepared in
accordance with GAAP.
6.5 Capitalization. The authorized capital stock of Buyer consists of
300,000,000 shares of Common Stock, $0.001 par value per share, of which
136,368,543 shares of Common Stock, were issued and outstanding as of the close
of business on June 1, 2006. The shares of Buyer Common Stock to be issued
pursuant to the Share Exchange will be duly authorized, validly issued, fully
paid, and non-assessable.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 23
6.6 Brokers' Fees. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Sellers or their respective
Affiliates could become liable or obligated.
6.7 Information. All information relating to the Buyer contained in the
memorandum from Parent Company to its shareholders dated 23 May 2006 was at such
date and will be at Closing true, complete, accurate and not misleading. Buyer
has fully disclosed to emw law LLP, counsel to the Major Shareholders, any fact,
matter or occurrence that is or could reasonably be expected to be material in
the context of Buyers or its Affiliates current financial position, subject to
an obligation to maintain confidentiality over material, non-public information
pertaining to the Buyer.
ARTICLE VII
COVENANTS
7.1 Releases and Termination. Save in respect of obligations created
under this Agreement and for any rights under any employment or consultancy
agreement each EUE Shareholder severally hereby releases and discharges Buyer
and its Affiliates (including each EUE Company after the Closing) and their
respective successors, heirs and assigns, officers, directors, employees,
consultants, representatives and agents from any and all obligations (including
indemnification obligations) and Claims, known and unknown, that have accrued or
may accrue and that relate to acts or omissions prior to the Closing Date,
including any and all Damages, whether such obligations, Claims or Damages arise
in tort, contract or statute, including without limitation obligations, Claims
or Damages (a) arising under EUE Organizational Documents or any Contract of any
of the EUE Companies and (b) relating to actions or omissions of such EUE
Company, or any acts or omissions of the directors, shareholders or officers
(former or present) including those committed while serving in their capacity as
shareholders, directors, officers, employees or similar capacities of such EUE
Company, and including in each case any and all Claims which the EUE Shareholder
does not know or suspect to exist in his, her or its favor as of the date
hereof. Each EUE Shareholder hereby waives any preemptive rights that he or it
may have, or ever had, with respect to any Interest in any EUE Company and
waives any right he or it may have under the EUE Organizational Documents or
otherwise to acquire any Interest in any EUE Company being transferred pursuant
to, or as contemplated by, this Agreement or any transfer that occurred prior to
the date hereof. THE RELEASES CONTAINED IN THIS SECTION 7.1 APPLY TO ALL CLAIMS,
AND EACH EUE SHAREHOLDER AGREES TO WAIVE THE BENEFITS OF ANY LAW (INCLUDING
PRINCIPLES OF COMMON LAW) OF ANY JURISDICTION OF THE UNITED STATES OR OF ANY
JURISDICTION OUTSIDE OF THE UNITED STATES THAT PROVIDES THAT A GENERAL RELEASE
DOES NOT EXTEND TO CLAIMS WHICH THE CLAIMANT DOES NOT KNOW OR SUSPECT TO EXIST
IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT. IN PARTICULAR EACH EUE SHAREHOLDER
HEREBY EXPRESSLY, VOLUNTARILY AND KNOWINGLY WAIVES, RELINQUISHES AND ABANDONS
EACH AND EVERY RIGHT, PROTECTION AND BENEFIT TO WHICH THEY WOULD BE ENTITLED NOW
OR AT ANY TIME HEREAFTER UNDER SECTION 1542 OF THE CALIFORNIA CIVIL CODE, which
provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
In making this voluntary express waiver of the protection of California Civil
Code Section 1542 (or its equivalent in other jurisdictions), the EUE
Shareholders acknowledge that they are aware that they may discover claims or
facts in addition to or different from those which are known or believed to
exist with respect to the matters mentioned herein. The EUE Shareholders hereby
fully and forever settle and release any and all such matters, claims and
disputes, whether known or unknown, suspect or unsuspected, anticipated or
unanticipated.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 24
7.2 Non-Competition.
(a) (i) Each Major Shareholder and, its officers, directors,
partners, controlling shareholders (if any) or any other Affiliate of such Major
Shareholder (each a "Non-Competition Party" and collectively, the
"Non-Competition Parties"), in order to induce Buyer to enter into this
Agreement, expressly covenants and agrees on a several basis that during the
Prohibited Period (as defined below), (A) the Non-Competition Party will not
engage directly or indirectly in any business in which the Business is engaged
at Closing (a "Competing Business") in the world (the "Restricted Area"), (B)
the Non-Competition Party will not, and will cause its Affiliates not to,
directly or indirectly, own, manage, operate, join, become an employee or
consultant of, control or participate in or be connected with, , any business,
individual, partnership, firm, corporation or other entity, which engages in a
Competing Business in the Restricted Area and (C) the Non-Competition Party will
not, and will cause its Affiliates not to, sell or market, directly or through
distributors, brokers or other intermediaries, any EUE Products and the
Non-Competition Party will not join, become an employee or consultant of,
control or participate in or be connected with, or loan money to or sell or
lease equipment to, any Person which sells any EUE Products, in each case in the
Restricted Area in which EUE sells or markets, directly or through distributors,
brokers or other intermediaries, any EUE Products as of the Closing Date. As
used in this Section 7.2(a), "Business" shall refer to the products sold and
services provided by any EUE Company in the operation of the Business during the
12-month period preceding the Closing Date. "Prohibited Period" shall mean three
years from and after the Closing Date. "EUE Products" shall mean the products
provided by the EUE Companies in the operation of the Business during the
12-month period preceding the Closing Date, or other products that are
functionally equivalent.
(ii) Notwithstanding the restrictions contained in
Section 7.2(a)(i), a Non-Competition Party may own an aggregate of not more than
3% of the outstanding stock of any class of any corporation engaged in a
Competing Business, if such stock is listed on a national securities exchange or
regularly traded in the over-the-counter market by a member of a national
securities exchange, without violating the provisions of Section 7.2(a)(i),
provided that neither the Non-Competition Party nor its Affiliates have the
power, directly or indirectly, to control or direct the management or affairs of
any such corporation and are not involved in the management of such corporation.
(iii) Each of the Non-Competition Parties further
expressly covenants and agrees that during the Prohibited Period, the
Non-Competition Parties will not, and the Non-Competition Parties will cause its
Affiliates not to (1) engage or employ, or solicit or contact with a view to the
engagement or employment of any person who is an officer, employee, consultant
or advisor of Buyer and its controlled Affiliates (including the EUE Companies
after the Closing) or (2) canvass, solicit, approach or entice away or cause to
be canvassed, solicited, approached or enticed away from Buyer and its
controlled Affiliates (including the EUE Companies after the Closing) any person
who or which is a customer, distributor, or supplier of Buyer and its controlled
Affiliates (including the EUE Companies after the Closing) or (3) call on or
solicit any of Buyer's customers, distributors or suppliers, or their controlled
Affiliates for the purpose of providing that Person any of Buyer's proprietary
information or any other confidential information that relates to Buyer's
business or services.
(iv) To the extent that any part of this Section
7.2(a) may be invalid, illegal or unenforceable for any reason, it is intended
that such part shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part, if more limited in scope, would
have been enforceable, and such part shall be deemed to have been so written and
the remaining parts shall as written be effective and enforceable in all events.
(b) The Non-Competition Parties and Buyer agree and
acknowledge that the limitations as to time, geographical area and scope of
activity to be restrained as set forth in Section 7.2(a) are reasonable and do
not impose any greater restraint than is necessary to protect the legitimate
business interests of Buyer. The Non-Competition Parties and Buyer further agree
and acknowledge that, in the event of a breach or threatened breach of any of
the provisions of this Section 7.2, Buyer shall be entitled to immediate
injunctive relief, as any such breach would cause Buyer irreparable injury for
which it would have no adequate remedy at law. Nothing herein shall be construed
so as to prohibit Buyer from pursuing any other remedies available to it
hereunder, at law or in equity for any such breach or threatened breach.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 25
(c) The Non-Competition Parties hereby represent to Buyer that
they have read and understand, and agree to be bound by, the terms of this
Section 7.2. The Non-Competition Parties acknowledge that the geographic scope
and duration of the covenants contained in this Section 7.2 are the result of
arm's-length bargaining and are fair and reasonable in light of (i) the nature
and worldwide potential scope of the operations of the EUE Companies, (ii) the
fact that the Business is conducted throughout the geographic area where
competition is restricted by this Agreement, and (iii) the amount of
consideration that the Non-Competition Parties or their Affiliates are receiving
in connection with the transactions contemplated by this Agreement. It is the
desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest extent permitted under applicable Legal Requirements,
whether now or hereafter in effect and therefore, to the extent permitted by
applicable Legal Requirements, the parties hereto waive any provision of
applicable Legal Requirements that would render any provision of this Section
7.2 invalid or unenforceable.
7.3 Use of Name. Except in the normal course of employment with Buyer
or one of its subsidiaries, from and after the Closing Date, no EUE Shareholder
nor any of their Affiliates will directly or indirectly use in any manner any
trade name, trademark, service ▇▇▇▇ or logo used by any of the EUE Companies or
any word or logo that is similar in sound or appearance.
7.4 Further Assurances. Each party hereto will, at the request of any
other party hereto, take such further actions as are requested and execute any
additional documents, instruments or conveyances of any kind which may be
reasonably necessary to further effect the transactions contemplated by this
Agreement.
7.5 Confidentiality. Each EUE Shareholder severally agrees that for a
period of five years after the Closing Date and any facts, information, know
how, processes, trade secrets, customer lists or confidential matters that
relate in any way to the Business or an EUE Company shall be maintained in
confidence and shall not be divulged by the EUE Shareholder or any of its
Affiliates to any party unless and until they shall become public knowledge
(other than by disclosure in breach of this Section 7.5) or as required by
applicable Legal Requirements; provided however, before any EUE Shareholder or
any of its Affiliates discloses any of the foregoing as may be required by
applicable Legal Requirements, such Person shall, if possible, give Buyer
reasonable advance notice and take such reasonable actions as Buyer may propose
to minimize the required disclosure.
7.6 Books and Records. The Major Shareholders acknowledge and agree
that from and after the Closing Buyer will be entitled to the originals of all
Books and Records that are in the Major Shareholders' possession. The Major
Shareholders will promptly deliver to Buyer such originals or copies of all
Books and Records. Buyer shall cooperate in all reasonable respects with Sellers
and will make available to the Sellers, during normal business hours, the Books
and Records which relate to the period preceding the Closing Date and which are
necessary or useful in connection with any third-party tax inquiry, audit or
similar investigation or any dispute or litigation; provided, however, that
prior to receiving access to any of the Books and Records, the Sellers shall
enter into a customary confidentiality agreement binding on them and any other
Person to whom the information may be disclosed; and provided further, however,
that Buyer shall be entitled to destroy Books and Records in accordance with a
customary document retention policy.
7.7 Publicity. Except as required by a court of competent jurisdiction
or applicable Legal Requirements, including applicable securities laws and
regulations, and except for disclosures required to be made in the financial
statements of Buyer or any of its Affiliates or in offering documents, none of
the parties hereto nor any of their respective Affiliates shall, without the
prior consent of the other parties (which shall not be unreasonably withheld),
make any statement or any public announcement or press release with respect to
the transactions contemplated by this Agreement.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 26
7.8 Intentionally Deleted.
7.9 Access and Investigation. Subject to the terms of this Agreement
regarding confidentiality, during the period commencing on the date of this
Agreement and ending at the Closing (the "Interim Period") or until this
Agreement is terminated pursuant to Section 11, upon reasonable notice to the
Major Shareholders representative, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the Major Shareholders shall,
and shall cause such Sellers' Representatives to: (a) provide Buyer and Buyer's
Representatives with reasonable access during normal business hours to such
Buyer's Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the EUE Companies that Buyer may reasonably request in connection with this
Agreement and the consummation of the Transactions; (b) provide Buyer and
Buyer's Representatives with such copies of the existing books, records, Tax
Returns, work papers, product data, and other documents and information relating
to the EUE Companies, and with such additional financial, operating and other
data and information regarding the EUE Companies as Buyer may reasonably request
in connection with this Agreement and the consummation of the Transactions; and
(c) permit Buyer's officers and other employees to meet, upon reasonable notice
and during normal business hours, with the chief financial officer and other
officers and managers of the EUE Companies responsible for the Parent Company's
consolidated financial statements and the internal controls of Parent Company to
discuss such matters as Buyer may reasonably deem necessary or appropriate in
order to enable Buyer to satisfy its obligations under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
and the rules and regulations relating thereto. Without limiting the generality
of any of the foregoing, during the Interim Period or until this Agreement is
terminated pursuant to Section 11, Major Shareholders shall cause the Parent
Company to promptly provide Buyer with copies of:
(a) the unaudited monthly consolidated balance sheets of each
EUE Company as of the end of each calendar month and the related unaudited
monthly consolidated statements of operations, statements of stockholders'
equity and statements of cash flows for such calendar month, which shall be
delivered within fifteen days after the end of such calendar month;
(b) all material operating and financial reports prepared by
each EUE Company for its senior management;
(c) any written materials or communications sent by or on
behalf of any EUE Company to its stockholders;
(d) any material notice, document or other communication sent
by any EUE Company that is a party to any Material Contract, or sent to any EUE
Company by any party to any Material Contract (other than any communication that
relates solely to routine commercial transactions between such Party and the
other party to any such Material Contract, and that is of the type sent in the
ordinary course of business and consistent with past practices);
(e) any notice, report or other document filed with or
otherwise furnished, submitted or sent to any Governmental Authority on behalf
of a Party in connection with the Transactions;
(f) any non-privileged notice, document or other communication
sent by or on behalf of, or sent to, an EUE Company relating to any pending or
threatened Legal Proceeding involving or affecting such Party; and
(g) any material notice, report or other document received by
a Party from any Governmental Authority.
7.10 Operation of EUE and Buyer Business.
(a) During the Interim Period the Major Shareholders shall
cause: (i) each EUE Company to conduct its business and operations: (A) in the
ordinary course of business and in accordance with past practices, (other than
taking such actions as may be necessary or advisable in connection with the
consummation of the Transactions); and (B) in compliance with all applicable
Legal Requirements and the requirements of all Material Contracts; (ii) each EUE
Company to use commercially reasonable efforts to preserve intact its current
business organization, keep available the services of its current senior
managers and other employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with any EUE Company; and (iii) each
EUE Company to notify the Buyer promptly of: (A) any notice or other
communication from any Person alleging that the Consent of such Person is or may
be required in connection with any of the Transactions; and (B) any Legal
Proceeding against, relating to, involving or otherwise affecting any EUE
Company that is commenced, or, to the Knowledge of Major Shareholders,
threatened against, any EUE Company.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 27
(b) Except as set forth in Schedule 7.10 or as may be
necessary or advisable in connection with the consummation of the Transactions,
during the Interim Period, the Major Shareholders shall not (with respect to the
business or operations of the Parent Company), and Major Shareholders shall
cause each EUE Company not to, without the prior written consent of Buyer:
(i) declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of
capital stock or other security, or repurchase, redeem or
otherwise reacquire any share capital, interests or other
securities;
(ii) sell, issue, grant or authorize the sale,
issuance or grant of: (A) any share capital or other security;
(B) any option, call, warrant or right to acquire any share
capital or other security; or (C) any instrument convertible
into or exchangeable for any share capital or other security;
(iii) amend or waive any of its rights under, or
permitted the acceleration of vesting under any provision of:
(A) any restricted stock purchase agreement; or (B) any other
Contract evidencing or relating to any equity award (whether
payable in cash or stock);
(iv) amend or permit the adoption of any amendment to
its certificate of incorporation or memorandum and articles of
association, or effect or become a party to any merger,
consolidation, share exchange, business combination,
amalgamation, recapitalization, reclassification of shares,
stock split, reverse stock split, division or subdivision of
shares, consolidation of shares or similar transaction or
otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the business of
EUE (save in the ordinary course of business);
(v) form any Subsidiary or acquire any equity
interest or other interest in any other Person or enter into
any material partnership arrangements, joint development
agreements or strategic alliances;
(vi) make any material capital expenditure;
(vii) acquire, lease or license any right or other
asset from any other Person or sell encumber, convey, assign,
or otherwise dispose of or transfer of, or lease or license or
sublicense, any right or other asset or interest therein to
any other Person (except in each case for assets (that are not
material individually or in the aggregate) acquired, leased,
licensed or disposed of by EUE in the ordinary course of
business and consistent with past practices), or waive or
relinquish any material right;
(viii) other than in the ordinary course of business
consistent with past practice, write-off as uncollectible, or
establish any extraordinary reserve with respect to any
material receivable or other indebtedness;
(ix) make any pledge of any of its assets or permit
any of its assets to become subject to any Encumbrances,
except for pledges of or Encumbrances with respect to
immaterial assets made in the ordinary course of business
consistent with past practices;
(x) lend money to any Person, or incur or guarantee
any indebtedness or issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt
securities of EUE;
(xi) other than in the ordinary course of business
consistent with past practices, establish, adopt, enter into
or amend any stock option or bonus plan, pay any bonus or make
any profit-sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or
other compensation (including equity-based compensation,
whether payable in stock, cash or other property) or
remuneration payable to any of its directors or any of its
officers or other employees except as required by law;
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 28
(xii) make any grant of exclusive rights to any third
party;
(xiii) make any material Tax election or adopt or
change any accounting methods, principles or practices;
(xiv) commence or settle any material Legal
Proceeding;
(xv) enter into any material transaction or take any
other material action outside the ordinary course of business
or inconsistent with past practices;
(xvi) commence or settle any Legal Proceeding, other
than in the ordinary course of business consistent with past
practices;
(xvii) agree or commit to take any of the actions
described in clauses "(i)" through "(xvi)" of this Section
7.10(b).
(c) During the Interim Period, the Major Shareholders shall
cause Parent Company to promptly notify Buyer in writing, by delivery of an
updated Disclosure Schedule, of: (i) the discovery by any EUE Company of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made regarding any EUE Company in this
Agreement or an inaccuracy or warranty regarding any EUE Company in this
Agreement that would have a Material Adverse Effect; (ii) any event, condition,
fact or circumstance that occurs, arises or exists after the date of this
Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made with respect to any EUE Company in this
Agreement if: (A) such representation or warranty had been made as of the time
of the occurrence, existence or discovery of such event, condition, fact or
circumstance; or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of Parent Company; and (iv) any event,
condition, fact or circumstance that could reasonably be expected to make the
timely satisfaction of any of the conditions set forth in Sections 8.2
impossible or materially less likely or that has resulted in or would reasonably
be expected to result in an EUE Material Adverse Effect. Without limiting the
generality of the foregoing, Seller shall promptly advise Buyer in writing of
any Legal Proceeding or claim threatened, commenced or asserted against or with
respect to, or otherwise affecting, any EUE Company or, to the Knowledge of
Major Shareholders, any director or officer of a EUE Company. No notification
given to Buyer pursuant to this Section 7.10(c) shall limit or otherwise affect
any of the representations, warranties, covenants or obligations of Seller or
EUE contained in this Agreement.
(d) During the Pre-Closing Period, the Seller will not, and
will not agree or commit to, sell, transfer, dispose of or otherwise Encumber
any of the EUE Shares.
(e) During the Interim Period Buyer will not dispose of any
material part of its business and/or assets without the prior written consent of
▇▇▇▇▇▇.
7.11 No Solicitation. Each Major Shareholder severally agrees that
neither it nor any of its Subsidiaries shall, nor shall it nor any of its
Subsidiaries authorize or permit any of the officers, directors, investment
bankers, attorneys or accountants retained by it or any of its Subsidiaries to,
and that it shall use commercially reasonable efforts to cause its and its
Subsidiaries' non-officer employees and other agents not to (and shall not
authorize any of them to) directly or indirectly: (i) solicit, initiate,
encourage, induce or knowingly facilitate the communication, making, submission
or announcement of any Acquisition Proposal or Acquisition Inquiry or take any
action that could reasonably be expected to lead to an Acquisition Proposal or
Acquisition Inquiry; (ii) furnish any information regarding any EUE Company to
any Person in connection with or in response to an Acquisition Proposal or
Acquisition Inquiry; (iii) engage in discussions or negotiations with any Person
with respect to any Acquisition Proposal or Acquisition Inquiry; (iv) approve,
endorse or recommend any Acquisition Proposal; or (v) execute or enter into any
letter of intent or similar document or any Contract contemplating or otherwise
relating to any Acquisition Transaction.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 29
7.12 Registration Rights. The Buyer shall:
(a) as soon as practicable after the Closing, but in no event
later than the ninetieth (90th) day following the Closing, prepare and file with
the SEC a registration statement under the Securities Act on Form S-3 (or, if
the Company is ineligible to use Form S-3, then on Form SB-2 or S-1) (the
"Registration Statement") relating to the sale of the Buyer Shares by the EUE
Shareholders from time to time on the OTC Bulletin Board;
(b) subject to receipt of necessary information from the EUE
Shareholders, use its best efforts to cause the SEC to declare the Registration
Statement effective as soon as possible after its filing;
(c) notify emw Law LLP whose address appears in Section 10.2
promptly upon the Registration Statement, and any post-effective amendment
thereto, being declared effective by the SEC;
(d) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus contained therein
and take such other action, if any, as may be necessary to keep the Registration
Statement effective until the earlier of (i) the second anniversary of the
Closing Date or (ii) all of the Buyer Shares have been sold pursuant to the
Registration Statement or Rule 144 under the Securities Act or any other rule of
similar effect;
(e) during the period when copies of the prospectus are
required to be delivered under the Securities Act or the Securities Exchange Act
of 1934 (the "Exchange Act"), file all documents required to be filed with the
SEC pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods
required by the Exchange Act and the rules and regulations promulgated
thereunder;
(f) bear all expenses for the procedures in paragraphs (a)
through (g) of this Section 7.12 in connection with registration of the Buyer
Shares.
(g) Each of the Parties shall ensure that the Registration
Statement (so far as it relates to information about the Party) will not at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
Each Party shall promptly furnish to the other Party all information
concerning such Party and such Party's subsidiaries and such Party's
stockholders that may be required or reasonably requested in connection with any
action contemplated by this Section 7.12.
7.13 Parent Company Stockholders' Meeting.
(a) Subject to Section 8.2 Major Shareholders shall cause
Parent Company to hold an extraordinary general meeting or meetings of the
holders of Seller's outstanding share capital (the "Parent Company Stockholders'
Meeting"). Sellers agree that such notice shall include resolution that Parent
Company be re-registered as a private limited company, (collectively, the
"Resolution"). The Parent Company Stockholders' Meeting shall be held on June
15, 2006. In the event that holders of at least 95% of the outstanding Parent
Company Common Stock do not approve the Resolution, at Buyer's written request,
each Major Shareholder shall take all actions necessary to cause shareholder
approval of this transaction, including without limitation, assisting Buyer in
preparing an Offer Letter to acquire EUE Shares that complies with the City Code
on Takeovers and Mergers.
7.14 Regulatory Approvals. Each Party shall use commercially reasonable
efforts to file or otherwise submit, as soon as practicable after the date of
this Agreement, all applications, notices, reports and other documents
reasonably required to be filed by such Party with or otherwise submitted by
such Party to any Governmental Authority with respect to the Transactions, and
to submit promptly any additional information requested by any such Governmental
Authority.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 30
7.15 Additional Agreements.
(a) Subject to Section 7.15(b), the Parties shall use
commercially reasonable efforts to cause to be taken all actions necessary to
consummate and make effective the Transactions and to vest Buyer with full
right, title, interest and possession of and to all of the EUE Shares. Without
limiting the generality of the foregoing, but subject to Section 7.15(b), each
Party to this Agreement: (i) shall make all filings and other submissions (if
any) and give all notices (if any) required to be made and given by such Party
in connection with the Transaction; (ii) shall use commercially reasonable
efforts to obtain each Consent (if any) reasonably required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
Party in connection with the Transactions or for such Contract to remain in full
force and effect; (iii) shall use commercially reasonable efforts to lift any
injunction prohibiting, or any other legal bar to, the Transactions; and (iv)
shall use all commercially reasonable efforts to satisfy the conditions
precedent to the consummation of the Transactions. Each Party shall provide to
the other Party a copy of each proposed filing with or other submission to any
Governmental Authority relating to the Transactions, and shall give the other
Party a reasonable time prior to making such filing or other submission in which
to review and comment on such proposed filing or other submission. Each Party
shall promptly deliver to the other Party a copy of each such filing or other
submission made, each notice given and each Consent obtained by such Party
during the Interim Period.
(b) Notwithstanding anything to the contrary contained in
this Agreement, no Party shall have any obligation under this Agreement: (i) to
dispose of or transfer or cause any of its Subsidiaries to dispose of or
transfer any assets; (ii) to discontinue or cause any of its Subsidiaries to
discontinue offering any product or service; (iii) to license or otherwise make
available, or cause any of its Subsidiaries to license or otherwise make
available to any Person any intellectual property; (iv) to hold separate or
cause any of its Subsidiaries to hold separate any assets or operations (either
before or after the Closing Date); (v) to make or cause any of its Subsidiaries
to make any commitment (to any Governmental Authority or otherwise) regarding
its future operations; or (vi) to contest any Legal Proceeding or any order,
writ, injunction or decree relating to the Transactions if such Party determines
in good faith that contesting such Legal Proceeding or order, writ, injunction
or decree could materially adversely affect such Party.
7.16 Disclosure. Without limiting any of either Party's obligations
under the Letter of Intent dated February 28, 2006, each Party shall not, and
shall not permit any of its Subsidiaries or any Representative of such Party to,
issue any press release or make any disclosure (to any customers or employees of
such Party, to the public or otherwise) regarding the Transactions unless: (a)
the other Party shall have approved such press release or disclosure in writing;
or (b) such Party shall have determined in good faith, after consultation with
outside legal counsel, that such disclosure is required by applicable Legal
Requirements and before such press release or disclosure is issued or made, such
Party advises the other Party of, and consults with the other Party regarding,
the text of such press release or disclosure.
7.17 EU Energy Principals' Agreements. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall execute
and deliver to Buyer, prior to the Closing, an EU Energy Principals' Agreement
in the form of Exhibit B. Buyer shall not register, or allow its transfer agent
to register, on its books any transfer of any shares of its share capital owned
by any "affiliate" of Parent Company who has not provided a signed EU Energy
Principals' Agreement in accordance with this Section 7.17.
7.18 Officers and Directors. The board of directors of Buyer shall take
all actions necessary at or immediately following the Closing to appoint ▇▇▇▇▇▇▇
▇▇▇▇▇▇ as an officer of the Buyer with the title of President and as the
President of Parent Company. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall take all actions necessary to
ensure that he shall comply with the filing and other obligations required by
his appointment as an officer of the Buyer.
7.19 10% Ownership; U.S. Securities Law compliance. Each EUE
Shareholder shall notify Buyer if he, she or it acquires 10% or more of the
outstanding shares of Buyer common stock, including options, warrants or
convertible debentures exercisable or convertible into shares of Buyer common
stock. Such EUE Shareholder shall make all required filings under Section 16 of
the Securities Exchange Act of 1934, as amended, including without limitation,
all Form 3s, Form 4s and Form 5s (or any equivalent forms) required thereunder.
Each EUE Shareholder holding 5% or more of the outstanding common stock on a
fully-diluted basis shall file a Schedule 13D or Schedule 13G (or any equivalent
forms) as required by applicable U.S. Securities laws.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 31
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Mutual Obligations. The obligations of each Party to effect the
Transactions are subject to the satisfaction or, to the extent permitted by
applicable law, the written waiver by each of the Parties, at or prior to the
Closing, of each of the following conditions:
(a) No Restraints. No temporary restraining order, preliminary
or permanent injunction or other order preventing the consummation of any of the
Transactions shall have been issued by any court of competent jurisdiction or
other Governmental Authority and remain in effect, and there shall not be any
Legal Requirement which has the effect of making the consummation of the any of
the Transactions illegal.
(b) No Governmental Proceedings Relating to Transactions or
Right to Operate Business. There shall not be any Legal Proceeding pending, or
overtly threatened in writing by an official of a Governmental Authority in
which such Governmental Authority indicates that it intends to conduct any Legal
Proceeding or taking any other action: (a) challenging or seeking to restrain or
prohibit the consummation of any of the Transactions; (b) that would materially
and adversely affect the right or ability of Seller or Buyer to own the assets
or operate the business of Buyer or EUE; or (c) seeking to compel Seller, EUE or
Buyer to dispose of or hold separate any material assets as a result of the
Transactions.
8.2 Additional Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to effect the Transactions are subject to the satisfaction
or the written waiver by Buyer, at or prior to the Closing, of each of the
following conditions:
(a) Re-Registration as a Private Limited Company. Provision to
the Buyer or the Buyer's legal advisors of a certified copy of the certificate
of re-registration of a public company as a private limited company under the
Companies ▇▇▇ ▇▇▇▇ as applicable to the Parent Company.
(b) Supermajority. EUE Shareholders holding more than 80% of
the Parent Company Shares shall have entered into this Share Exchange Agreement.
(c) Accuracy of Representations. Save in respect of any
matters having in aggregate a value of less than $500,000 the representations
and warranties of Sellers, including Major Shareholders, contained in this
Agreement shall have been true and correct on and as of June 14, 2006 and the
Closing Date with the same force and effect as if made on June 14, 2006 and
Closing Date, respectively, except (a) in each case, or in the aggregate, where
the failure to be true and correct would not reasonably be expected to have an
EUE Material Adverse Effect, or (b) for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct, subject to the qualifications as set forth in the
preceding clause (a), as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties, all
"EUE Material Adverse Effect" qualifications and other qualifications based on
the word "material" contained in such representations and warranties shall be
disregarded
(d) Performance of Covenants. All of the covenants and
obligations in this Agreement that Seller is required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
by Seller in all material respects.
(e) Agreements and Other Documents. The Buyer shall have
received the following agreements and other documents, each of which shall be in
full force and effect:
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 32
(1) EU Energy Principals' Agreements in the form of
Exhibit B, executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ of Parent
Company;
(2) a certificate executed by the Chief Executive
Officer of the Parent Company confirming that the conditions
set forth in Sections 8.2(c) and (d) have been duly satisfied
with respect to Major Shareholders and to the best of their
knowledge by all other Sellers.
(3) to the extent applicable, certificates of good
standing of the EUE Companies in their jurisdictions of
organization and the various foreign jurisdictions in which
they are qualified, certified charter documents;
(f) No EUE Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any EUE Material Adverse Effect, and
since the date of this Agreement no event shall have occurred and no
circumstance shall have come into existence that, in combination with any other
events or circumstances, would reasonably be expected to result in an EUE
Material Adverse Effect.
(g) Cash Balances. Immediately prior to the Closing, Parent
Company shall hold an amount of Cash equal to or greater than the amount of cash
shown on the Audited Financial Statements, less any purchases or payments made
in the normal course of business since the date of such Audited Financial
Statements and less any other payments agreed in advance with the Buyer.
(h) Drag-Along Exercise. Except where EUE Shareholders holding
100% of the Parent Company Shares have executed this Agreement, Major
Shareholders shall provide written evidence that a drag notice has been validly
served prior to Closing on such of the EUE Shareholders who have not executed
this Agreement in accordance with the provisions of article 22 of the Parent
Company's articles of association.
(i) Due Diligence. The Buyer shall have been satisfied, by the
close of business on June 14, 2006 Pacific Standard Time, with the results of
its intellectual property, financial, customer, technical and legal due
diligence, in its sole discretion. Such diligence to include access with Parent
Company's external auditors and review of their paperwork.
(j) Fairness Opinion. The Buyer shall have received a fairness
opinion, by the close of business on June 14, 2006, Pacific Standard Time, from
The Mentor Group or another comparable independent appraiser stating that the
transaction is fair to Buyer shareholders from a financial point of view.
8.3. Additional Conditions Precedent to Obligations of each Seller. The
obligations of any Seller to effect the Transactions are subject to the
satisfaction or the written waiver by Seller, at or prior to the Closing, of
each of the following conditions:
(a) Accuracy of Representations. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on and
as of June 14, 2006 and Closing Date with the same force and effect as if made
on June 14, 2006 and Closing Date, respectively, except (a) in each case, or in
the aggregate, where the failure to be true and correct would not reasonably be
expected to have a Buyer Material Adverse Effect, or (b) for those
representations and warranties which address matters only as of a particular
date (which representations shall have been true and correct, subject to the
qualifications as set forth in the preceding clause (a), as of such particular
date) (it being understood that, for purposes of determining the accuracy of
such representations and warranties, all "Buyer Material Adverse Effect"
qualifications and other qualifications based on the word "material" contained
in such representations and warranties shall be disregarded.
(b) Performance of Covenants. All of the covenants and
obligations in this Agreement that Buyer is required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 33
(c) Documents. The representative of the Seller at the Closing
or if no representative is present, the Parent Company shall have received the
following documents:
(1) a certificate executed by the Chief Executive
Officer and Chief Financial Officer of Buyer confirming that
the conditions set forth in Section 8.3(a) and (b);
(2) to the extent applicable, certificates of good
standing of Buyer in its jurisdiction of organization,
certified charter documents, certificates as to the incumbency
of officers and the adoption of resolutions of its board of
directors authorizing the execution of this Agreement.
(3) The Buyer shall have transferred to emw law LLP
the Seller's legal costs not to exceed the amount fixed in
Section 10.6.
(d) Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the
Buyer shall have concluded a consultancy agreement substantially in the form
attached hereto as Exhibit "D".
(e) Buyer having completed due diligence and received the
report of the Mentor Group (as referred to in 8.2 (i) and (j) respectively) by
the due date or any subsequent date agreed upon by Buyer and ▇▇▇▇▇▇.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnities of the Major Shareholders.
(a) Major Shareholder Indemnified Liabilities. Subject to the
provisions of this Article IX, from and after the Closing, each Major
Shareholder shall, jointly and severally, indemnify defend and hold harmless the
Buyer, the Buyer's Affiliates, and their respective directors, stockholders,
officers, partners, successors, transferees and assignees (collectively, the
"Buyer Indemnified Parties") from, against and in respect of any Damages or
Claims that arise out of, relate to or result from any of the following
described matters (herein collectively referred to as the "Major Shareholder
Indemnified Liabilities," and individually as a "Major Shareholder Indemnified
Liability"): (i) any breach of any representation or warranty in Article 5 of
this Agreement; (ii) any breach by any Major Shareholder or EUE Company of any
covenant or obligation of this Agreement; (iii) any breach of any representation
or warranty in Article 4 of this Agreement as it pertains to such Major
Shareholder only; and (iv) any pre-closing liability of any Major Shareholder or
EUE Company which shall include any liabilities or obligations arising out of
the operation of the business of the EUE Companies prior to the Closing other
than liabilities, obligation or Claims specifically disclosed in the Disclosure
Schedules attached to this Agreement or liabilities or obligations which have
arisen in the ordinary course of business since March 31, 2006 and do not
individually or in the aggregate materially and adversely impact the EUE
Companies.
(b) Time Limitations. Notwithstanding anything to the contrary
in this Agreement, in no event shall any of the Buyer Indemnified Parties be
permitted to make any Claim under Section 9.1(a) unless such Claim is first made
on or prior to the first anniversary of the Closing; provided, however, that
such one year survival period shall not apply to (i) any Claim under Section
9.1(a)(i) relating to the breach of any representation or warranty contained in
Article IV or any representation or warranty regarding the title to the Parent
Company Shares (which Claim, in any such case, may be asserted indefinitely),
(ii) any Claim under Section 9.1(a)(i) relating to the breach of any
representation or warranty contained in Section 5.18 (which Claim, in any such
case, may be asserted on or before the date which is six months after all
indemnifiable Taxes have become finally binding and non-appealable and all
applicable statutes of limitation periods have expired), (iii) any Claim under
Section 9.1(a)(ii) that applies to a breach of Section 7.2 (Noncompetition) or
Section 7.5 (Confidential Information), which Claim may be asserted within one
year after the applicable breach of the covenant by the Major Shareholder, or
(iv) cases of fraud or willful concealment.
(c) Additional Limitation. Notwithstanding anything to the
contrary in this Agreement, the liability of the Sellers in respect of any Claim
shall be limited as follows:
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 34
(1) the aggregate maximum liability of each EUE
Shareholder in respect of all and any Claims shall in no event
exceed the amount resulting from multiplying the number of the
Buyer Shares delivered to the Seller under this Agreement by
$1.55;
(2) a Major Shareholder shall not be liable in
respect of all and any claims for a Claim unless and until the
aggregate cumulative liability of the Major Shareholder in
respect of all and any such claims exceeds $500,000 in which
event the Major Shareholder shall be liable for all and any
Claims;
(3) the liability of the Major Shareholders shall be
reduced to the extent that such Claim is attributable to any
voluntary act or transaction or arrangement carried out by the
Buyer after the date hereof otherwise than in the ordinary
course of business that has the effect of retroactively
causing a Major Shareholder to breach a representation or
warranty under Article 5 of this Agreement.
9.2 Indemnities of Buyer.
(a) Buyer Indemnified Liabilities. Subject to the provisions
of this Article IX, from and after the Closing, Buyer shall indemnify, defend
and hold harmless the Sellers, (collectively, the "Seller Indemnified Parties")
from, against and in respect of any Damages or Claims that arise out of, relate
to or result from any of the following described matters (herein collectively
referred to as the "Buyer Indemnified Liabilities"): (i) breach of any
representation or warranty made by Buyer in this Agreement or (ii) any breach by
Buyer of any covenant or obligation of Buyer in this Agreement.
(b) Time Limitation. Notwithstanding anything to the contrary
in this Agreement, in no event shall any of the Seller Indemnified Parties be
permitted to make any Claim under Section 9.2 unless such Claim is first made on
or prior to the first anniversary of the Closing; provided, however, that such
one year survival period shall not apply to any Claim under Section 9.2(a)(ii)
(which Claim may be asserted within one year after the applicable breach of a
covenant by Buyer) nor shall it apply in cases of fraud or willful concealment.
(c) Additional Limitation. Notwithstanding anything to the
contrary in this Agreement, the liability of the Buyer in respect of any Breach
shall be limited as follows:
(1) the aggregate maximum liability of the Buyer in
respect of all and any Breaches shall in no event exceed the
amount resulting from multiplying the number of the Buyer
Shares delivered to the Sellers under this Agreement by $1.55;
(2) Buyer shall not be liable in respect of all and
any claims for a Breach unless and until the aggregate
cumulative liability of the Buyer in respect of all and any
such claims exceeds $500,000 in which event the Buyer shall be
liable for all and any claims for a Breach.
9.3 Claim Procedures. Each party that desires to make a Claim for
indemnification pursuant to this Article IX (an "Indemnified Party") shall
provide notice (a "Claim Notice") thereof in writing to Buyer (if the
Indemnified Party is a Seller Indemnified Party) or to the Seller (if the
Indemnified Party is a Buyer Indemnified Party) ("Indemnifying Party"),
specifying the nature and basis for such claim and a copy of all papers served
with respect to such claim (if any). Any claim in respect of which notice shall
have been given in accordance with this Section shall be deemed to have been
irrevocably withdrawn and lapsed (not having been previously satisfied, settled
or withdrawn) if proceedings in respect of such claim have not been issued and
notice of such issuance delivered to the relevant Party not later than the
expiry of the period of 6 months after the date of such notice. For purposes of
this Section 9.3, receipt by a party of written notice of any Third-Party Claim
which gives rise to a Claim on behalf of such party shall require prompt
delivery of a Claim Notice to the Indemnifying Party of the receipt of such
Third-Party Claim; provided, however, that an Indemnified Party's failure to
send or delay in sending a Claim Notice shall not relieve an Indemnifying Party
from liability hereunder with respect to such Claim except to the extent and
only to the extent the Indemnifying Party is materially prejudiced by such
failure or delay.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 35
9.4 Calculation, Timing, Manner and Characterization of Indemnification
Payments.
(a) Subject to the provisions hereof, payments of all amounts
owing by an Indemnifying Party as a result of a Third-Party Claim shall be made
as and when damages with respect thereto are incurred by the Indemnified Party
and within five Business Days after the Indemnified Party makes demand therefor
to the Indemnifying Party. Payments of all amounts owing by an Indemnifying
Party other than as a result of a Third-Party Claim shall be made within five
Business Days after the later of (i) the date the Indemnifying Party is deemed
liable therefor pursuant to this Article IX or (ii) if disputed, the date of the
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. All amounts due and payable under this Article IX (y) with
respect to a Third-Party Claim, shall bear interest at the Past Due Rate from
the date due and payable hereunder until the date paid and (z) with respect to a
claim other than a Third-Party Claim, shall bear interest at the Past Due Rate
from the date the Indemnified Party suffers the damages until the date paid
except that interest payable with respect to any delinquent Earn-Out Payments
shall be governed by Section 3.4.
(b) Any indemnity payments made hereunder shall be treated for
all Tax purposes as an adjustment to the Purchase Price, unless otherwise
required by applicable Legal Requirements.
9.5 Survival. Except to the extent expressly limited by this Agreement,
the representations, warranties, covenants, and indemnities set forth in this
Agreement shall survive the Closing and delivery of the Transaction Documents.
9.6 Control of Third-Party Claims.
(a) In the event of the assertion of any Third-Party Claim,
the Indemnifying Party, at its option, may assume (with legal counsel reasonably
acceptable to the Indemnified Party) at its sole cost and expense the defense of
such Third-Party Claim if it acknowledges to the Indemnified Party in writing
its obligations to indemnify the Indemnified Party with respect to all elements
of such Third-Party Claim and may assert any defense of the Indemnified Party or
the Indemnifying Party; provided that the Indemnified Party shall have the right
at its own expense to participate jointly with the Indemnifying Party in the
defense of any such Third-Party Claim. Counsel representing both the
Indemnifying Party and the Indemnified Party must acknowledge in writing its
obligation to act as counsel for all parties being represented and must
acknowledge and respect separate attorney-client privileges with respect to each
party represented. If the Indemnifying Party elects to undertake the defense of
any Third-Party Claim hereunder, the Indemnified Party shall cooperate with the
Indemnifying Party in the defense or settlement of the Third-Party Claim,
including providing access to information, making documents available for
inspection and copying, and making employees available for interviews,
depositions and trial. The Indemnifying Party shall not be entitled to settle
any Third-Party Claim without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed.
(b) If the Indemnifying Party, by the 30th day after receipt
of notice of any Third-Party Claim (or, if earlier, by the tenth day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such Third-Party Claim)
does not assume actively and in good faith the defense of any such Third-Party
Claim or action resulting therefrom, the Indemnified Party may, at the
Indemnifying Party's expense, defend against such claim or litigation, after
giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such action, with
its counsel and at its own expense. The Indemnified Party shall not settle or
compromise any Third-Party Claim for which it is entitled to indemnification
hereunder, without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld or delayed).
(c) Notwithstanding anything in this Section 9.6 to the
contrary, Buyer shall in all cases be entitled to control the defense of a
Third-Party Claim if Buyer reasonably believes such Third-Party Claim could
adversely effect in any material respect Buyer or its Affiliates other than as a
result of money damages or if injunctive or other non-monetary relief has been
sought against Buyer or its Affiliates.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 36
(d) Buyer shall and shall cause any EUE Company to take
reasonable steps to mitigate any loss suffered arising from any Breach by the
Sellers and/or Major Shareholders.
9.8 Offset Rights and Limitations. If any amounts are owing or in
dispute to Buyer from any Major Shareholder in accordance with the terms of this
Agreement, the relevant Major Shareholders may elect (at its sole option) to
offset Major Shareholder Indemnified Liabilities when they become payable as set
forth in Section 9.4 against the Buyer Shares that were delivered to the Major
Shareholders by surrendering that number of shares of Buyer common stock
("Offset Shares") with a value (calculated on the market price of such shares at
the time of notifying Buyer of such election) equal to the amount due to the
Buyer by notifying Buyer of such election within the appropriate time period
specified in Section 9.4. Major Shareholder shall deliver the Offset Shares to
Buyer along with duly endorsed stock transfer forms within five days of such
election. In the event that Major Shareholder fails to make such election with
such time period or deliver the Offset Shares to Buyer within the five day
period, then the Major Shareholder Indemnified Liabilities shall be payable in
cash.
9.9 Express Negligence. THE PARTIES HERETO INTEND THAT THE INDEMNITIES
SET FORTH IN THIS ARTICLE IX BE CONSTRUED AND APPLIED AS WRITTEN ABOVE,
NOTWITHSTANDING ANY RULE OF CONSTRUCTION TO THE CONTRARY. WITHOUT LIMITING THE
FOREGOING, BUT LIMITED TO THE EXTENT PROVIDED ABOVE, SUCH INDEMNITIES SHALL
APPLY NOTWITHSTANDING ANY STATE'S "EXPRESS NEGLIGENCE" OR SIMILAR RULE THAT
WOULD DENY COVERAGE BASED ON AN INDEMNIFIED PARTY'S SOLE OR CONCURRENT, ACTIVE
OR PASSIVE NEGLIGENCE OR GROSS NEGLIGENCE. IT IS THE INTENT OF THE PARTIES THAT,
TO THE EXTENT PROVIDED ABOVE, THE INDEMNITIES SET FORTH IN THIS ARTICLE IX SHALL
APPLY TO AN INDEMNIFIED PARTY'S SOLE OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE
OR GROSS NEGLIGENCE. THE PARTIES AGREE THAT THIS PROVISION IS "CONSPICUOUS" FOR
PURPOSES OF ALL STATE LAWS.
9.10 Injunctive Relief. In the event of a breach or threatened breach
by any Major Shareholder of any of the provisions of Sections 7.2, 7.3 or 7.5,
Buyer shall be entitled to immediate injunctive relief, as the Major
Shareholders acknowledge and agree that any such breach would cause Buyer
irreparable injury for which they would have no adequate remedy at law; and (b)
any party hereto shall be entitled to seek specific performance against any
other party hereto pursuant to Section 10.11.
ARTICLE X
MISCELLANEOUS
10.1 Assignment. This Agreement and the rights hereunder may not be
assigned by Buyer without the prior written consent of the Seller. This
Agreement and the rights hereunder may not be assigned by any Seller without the
prior written consent of Buyer. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
10.2 Notices. Unless otherwise provided herein, any notice, request,
consent, instruction or other document to be given hereunder by any party hereto
to another party hereto shall be in writing and will be deemed given (a) when
received if delivered personally or by courier; or (b) on the date receipt is
acknowledged if delivered by certified mail, postage prepaid, return receipt
requested or (c) one day after transmission if sent by facsimile transmission
with confirmation of transmission, as follows:
If to any of the EUE Shareholders, to emw law LLP alone.
emw law LLP
Seckloe House, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇ ▇▇▇▇-▇▇▇▇
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 37
If to Buyer, addressed to:
COMPOSITE TECHNOLOGY CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others in accordance with this Section
10.2.
10.3 Choice of Law; Arbitration. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California applicable
to contracts made and wholly performed within such State, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws.
Any controversy, dispute or claim of any nature whatsoever arising out of, in
connection with or in relation to this Agreement will be resolved by final
binding arbitration in accordance with the American Arbitration Association
(International) Rules by a retired judge at Judicial Arbitration and Mediation
Service (JAMS) in Los Angeles, California and all parties hereto consent to such
jurisdiction for such arbitration and enforcement of any awards by JAMS.
10.4 Entire Agreement; Amendments and Waivers. This Agreement, together
with all Exhibits, Annexes and Schedules hereto, and the other Transaction
Documents constitute the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties including the letter of intent dated February 28, 2006 and there are no
other warranties, representations or other agreements between the parties in
connection with the subject matter. No amendment, supplement, modification or
waiver of this Agreement shall be binding unless executed by Buyer and the
Majority-In-Interest of Parent Company. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless expressly agreed to in writing by the affected party.
10.5 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile signature pages
shall suffice for Closing with the agreement that original pages shall be
forthcoming.
10.6 Expenses. Each party hereto will be responsible for its own legal
fees and other expenses incurred in connection with the negotiation,
preparation, execution or performance of this Agreement. Notwithstanding the
foregoing, any stamp taxes or other transfer taxes or duties payable upon
transfer of the shares of the Parent Company from Sellers to Buyer shall be
borne by the Buyer and on Closing the Buyer shall transfer payment of the
Sellers' legal costs up to a total maximum amount of $400,000 plus
disbursements.
10.7 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.
10.8 References; Headings; Interpretation. All references in this
Agreement to Annexes, Exhibits, Schedules, Articles, Sections, subsections and
other subdivisions refer to the corresponding Annexes, Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions of or to this Agreement
unless expressly provided otherwise. Titles appearing at the beginning of any
Articles, Sections, subsections or other subdivisions of this Agreement are for
convenience only, do not constitute any part of this Agreement, and shall be
disregarded in construing the language hereof. The words "this Agreement,"
"herein," "hereby," "hereunder" and "hereof" and words of similar import refer
to this Agreement as a whole and not to any particular subdivision unless
expressly so limited. The words "this Article," "this Section" and "this
subsection" and words of similar import refer only to the Article, Section or
subsection hereof in which such words occur. The word "or" is not exclusive, and
the word "including" (in its various forms) means including without limitation.
Pronouns in masculine, feminine or neuter genders shall be construed to state
and include any other gender, and words, terms and titles (including terms
defined herein) in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. All references to "$" or
"dollars," in the Agreement shall refer to the United States dollars unless
otherwise specifically noted.
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 38
10.9 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto, the Buyer Indemnified Parties, the Seller
Indemnified Parties, emw law LLP and their successors and assigns permitted
under this Agreement, and no provisions of this Agreement shall be deemed to
confer upon any other Persons any remedy, claim, liability, reimbursement, cause
of action or other right except as expressly provided herein.
10.10 No Presumption Against Any Party. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against any
party, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by each of the parties and their counsel and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
10.11 Specific Performance. Each of the parties hereto acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties hereto shall be entitled, to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any State thereof having
jurisdiction over the parties hereto and the matter, in addition to any other
remedy to which they may be entitled, at law or in equity.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated prior to the Closing
(whether before or after receipt of either or both Required Stockholder
Approvals):
(a) by mutual written consent of the Parties duly authorized
by the board of directors of Buyer and the Majority-in-Interest of Parent
Company;
(b) by either the Buyer or the Majority-in-Interest of the
Parent Company if a court of competent jurisdiction or other Governmental
Authority shall have issued a final and nonappealable order, decree or ruling,
or shall have taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Transactions;
(c) by the Majority-in-Interest of the Parent Company, (i)
upon a breach of any representation, warranty, covenant or agreement on the part
of Buyer set forth in this Agreement, or if any representation or warranty of
Buyer shall have become inaccurate, in either case such that any condition set
forth in Section 8.3 would not be satisfied as of the time of such breach or as
of the time such representation or warranty shall have become inaccurate;
provided that if such inaccuracy in Buyer's representations and warranties or
breach by Buyer is curable by Buyer, then this Agreement shall not terminate
pursuant to this Section 11.1(c) as a result of such particular breach or
inaccuracy until the earlier of (A) the expiration of a fifteen (15) day period
commencing upon delivery of written notice from the Majority-in-Interest of the
Parent Company to Buyer of such breach or inaccuracy and (B) Buyer ceasing to
exercise commercially reasonable efforts to cure such breach (it being
understood that this Agreement shall not terminate pursuant to this Section
11.1(c) as a result of such particular breach or inaccuracy if such breach by
Buyer is cured prior to such termination becoming effective) and (ii) any of the
closing conditions in Section 8.1 and 8.3 have not been satisfied or waived
within 30 days of the Closing Date.; or
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 39
(d) by Buyer, (i) upon a breach of any representation,
warranty, covenant or agreement on the part of any Seller set forth in this
Agreement, or if any representation or warranty of any Seller shall have become
inaccurate, in either case such that any condition set forth in Section 8.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate; provided that if such
inaccuracy in Seller's representations and warranties or breach by Seller is
curable by Seller, then this Agreement shall not terminate pursuant to this
Section 11.1(d) as a result of such particular breach or inaccuracy until the
earlier of (A) the expiration of a fifteen (15) day period commencing upon
delivery of written notice from Buyer to Seller of such breach or inaccuracy and
(B) Seller ceasing to exercise commercially reasonable efforts to cure such
breach (it being understood that this Agreement shall not terminate pursuant to
this Section 11.1(d) as a result of such particular breach or inaccuracy if such
breach by Seller is cured prior to such termination becoming effective) and (ii)
any of the closing conditions in Section 8.1 and 8.2 have not been satisfied or
waived within 30 days of the Closing Date.
11.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 11.1, this Agreement shall be of no further
force or effect, provided, however, that (i) Sections 7.5, 7.7, 10.3, 10.10 and
10.11 shall survive the termination of this Agreement and shall remain in full
force and effect, and (ii) the termination of this Agreement shall not relieve
any Party from any liability for any breach of any representation, warranty,
covenant, obligation or other provision contained in this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Share Exchange
Agreement as of the day and year first above written.
"Buyer"
COMPOSITE TECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Address:
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▇▇▇ ▇▇▇▇-▇▇▇▇ (as attorney for the Sellers save for
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
/s/ ▇▇▇ ▇▇▇▇-▇▇▇▇
-----------------------------------
Address:
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-------------------------------------------------------
-------------------------------------------------------
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 40
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Address:
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Share Exchange Agreement - CTC & Shareholders of EU Energy plc Page 41
EXHIBIT A
DEFINED TERMS
Accounts Receivable means all accounts and notes receivable from
account, note and other debtors of the EUE Companies outstanding as of the date
hereof.
Acquisition Proposal, with respect to any EUE Company, (i) any inquiry,
proposal or offer for a merger, consolidation, dissolution, acquisition or sale
of substantial stock or assets, tender offer, recapitalization, share exchange
or other business combination involving such EUE Company or any subsidiary of
such EUE Company, (ii) any proposal for the issuance by such EUE Company of over
10% of its equity securities or (iii) any proposal or offer to acquire in any
manner, directly or indirectly, over 10% of the equity securities or
consolidated total assets of such EUE Company, in each case other than the share
exchange transaction contemplated by this Agreement.
Affiliate means with respect to any Person, any Person which, directly
or indirectly, controls, is controlled by, or is under a common control with,
such Person. The term "control" (including the terms "controlled by" and "under
common control with") as used in this definition means the possession, directly
or indirectly, of the power to direct or cause the direction of management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise. With respect to any natural person, the term "Affiliate"
shall also mean (1) the spouse of such Person; and any trust whose primary
beneficiary is such Person, such Person's spouse, such Person's siblings and/or
one or more of such Person's lineal descendants, (2) the legal representative or
guardian of such Person or of any such immediate family member in the event such
Person or any such immediate family member becomes mentally incompetent and (3)
any Person controlled by or under the common control with any one or more of
such Person and the Persons described in clauses (1) or (2) preceding.
Agreement has the meaning set forth in the introductory paragraph.
Audited Financial Statements has the meaning set forth in Section 5.15.
Applicable Accounting Standards means the generally accepted accounting
standards of the United States and United Kingdom, consistently applied.
Books and Records means all books and records pertaining to the EUE
Companies, the Business, and the EUE Assets, including, but not limited to, all
books of account, journals and ledgers, files, correspondence, memoranda, maps,
plats, customer lists, suppliers lists, personnel records relating to the
employees of the EUE Companies, catalogs, promotional materials, data processing
programs and other computer software, building and machinery diagrams and plans.
Business means the business and operations as are currently being
performed by the EUE Companies, including the manufacture, sale and distribution
of wind energy industry products.
Business Day means any day other than a Saturday, Sunday or legal
holiday under the laws of the United States or the State of California.
Buyer has the meaning set forth in the introductory paragraph.
Buyer Indemnified Liabilities has the meaning set forth in Section
9.2(a).
Buyer Indemnified Parties has the meaning set forth in Section 9.1(a).
Claim means any and all claims, causes of action, demands, lawsuits,
suits, proceedings, governmental investigations or audits and administrative
orders.
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Exhibit "A": Share Exchange Agreement - CTC Page 42
& Shareholders of EU Energy plc
Claim Notice has the meaning set forth in Section 9.3.
Closing means the fulfillment of the conditions listed in Section 8..
Closing Date has the meaning set forth in Section 3.1.
Code means the Internal Revenue Code of 1986, as amended.
Competing Business has the meaning set forth in Section 7.2(a)(i)(A).
Contract means any contract, agreement, option, right to acquire,
preferential purchase right, preemptive right, warrant, indenture, debenture,
note, bond, loan, loan agreement, collective bargaining agreement, lease,
mortgage, franchise, license, purchase order, bid, commitment, letter of credit,
guaranty, surety or any other legally binding arrangement, whether oral or
written.
Creditors' Rights has the meaning set forth in Section 4.1.
Damages means all debts, liabilities, obligations, losses, including
diminution of value, damages, loss of profits, cost and expenses, whether
actual, consequential or punitive, interest (including, without limitation,
prejudgment interest), penalties, reasonable legal fees, disbursements and costs
of investigations, deficiencies, levies, duties and imposts.
Due Diligence Documents means the documents and disclosures that have
been specifically identified as "disclosure documents" and transferred on
permanent electronic memory storage (WORM device) and received by the Buyer and
its US Counsel prior to the end of business, on June 9, 2006 clearly labeled and
referencing the present Agreement.
Entity means a corporation, partnership, limited liability company,
trust or any other similar entity.
Environmental Authority means any department, agency, or other body or
component of any Governmental Authority that exercises any form of jurisdiction
or authority under any Environmental Law.
Environmental Authorization means any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or action
required under any Environmental Law.
Environmental Laws means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including without limitation ambient air, surface, water, ground
water, land surface or subsurface strata), including without limitation laws and
regulations relating to emissions, discharges, Releases or threatened Releases
of Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
Environmental Liabilities means any and all obligations to pay the
amount of any judgment or settlement, the cost of complying with any settlement,
judgment or order for injunctive or other equitable relief, the cost of
compliance or corrective action in response to any notice, demand or request
from an Environmental Authority, the cost of performing any remedial action
required under Environmental Laws in response to a Release of Hazardous
Materials, the amount of any civil penalty or criminal fine, and any court costs
and reasonable amounts for attorneys' fees, fees for witnesses and experts, and
costs of investigation and preparation for defense of any claim or proceeding,
regardless of whether such claim or proceeding is threatened, pending or
completed, that may be or have been asserted against or imposed upon any owner
or operator of the Business, to the extent any of the foregoing arise out of:
(a) failure of an EUE Company or any of its Affiliates, any
Predecessor, or the Business to comply at any time before the Closing Date with
all Environmental Laws;
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Exhibit "A": Share Exchange Agreement - CTC Page 43
& Shareholders of EU Energy plc
(b) presence of any Hazardous Materials on, in, under, at or in any way
affecting any property used in the Business at any time before the Closing Date;
(c) a Release at any time before the Closing Date of any Hazardous
Materials on, in, at, under or in any way affecting the Business or any property
used therein or at, on, in, under or in any way affecting any adjacent site or
facility;
(d) identification of an EUE Company or any of its Affiliates or any
Predecessor as a potentially responsible party under any Environmental Law for
matters relating to the period prior to Closing;
(e) presence at any time before the Closing Date of any above-ground
and/or underground storage tanks, or any asbestos-containing material on, in,
at, or under any property used in connection with the Business; or
(f) any and all claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating at the Business or
any adjoining property, resulting from operation thereof, or located at the
Business, where such exposure allegedly occurred prior to the Closing Date.
EUE Assets means all of the assets, whether real, personal (tangible or
intangible) or mixed, owned (in fee or any lesser interest including leasehold
interests) by the EUE Companies.
EUE Companies has the meaning set forth in the recitals
EUE Intellectual Property means all Intellectual Property Rights owned
by or licensed to any of the EUE Companies.
EUE Organizational Documents has the meaning set forth in Section 5.1.
EUE Products has the meaning set forth in Section 7.2(a)(i).
EUE Registered Intellectual Property means all Registered Intellectual
Property owned by any EUE Company.
EUE Shareholders has the meaning set forth in the introductory
paragraph.
EUE Maintenance has the meaning set forth in the recitals.
EUE US has the meaning set forth in the recitals.
Facilities has the meaning set forth in Section 5.8(c).
Financial Statements has the meaning set forth in Section 5.15.
GAAP means generally accepted accounting principles in the United
States, UK or Germany (as appropriate).
Governmental Authority means any governmental, quasi-governmental,
state, county, city or other political subdivision of the United States or any
other country, or any agency, court or instrumentality, foreign or domestic, or
statutory or regulatory body thereof.
Hazardous Materials shall mean chemicals, pollutants, contaminants,
wastes and toxic substances, including without limitation, materials designated
as solid or hazardous waste, hazardous substances or toxic substances.
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Exhibit "A": Share Exchange Agreement - CTC Page 44
& Shareholders of EU Energy plc
Indemnified Party has the meaning set forth in Section 9.3.
Indemnifying Party has the meaning set forth in Section 9.3.
Insurance Policies has the meaning set forth in Section 5.27.
Intellectual Property Rights means all United States and foreign (i)
patents, patent applications, utility models or statutory invention
registrations (whether or not filed), and invention disclosures; (ii)
trademarks, service marks, logos, designs, trade names, trade dress, domain
names and corporate names and registrations and applications for registration
thereof (whether or not filed) and the goodwill associated therewith; (iii)
copyrights, whether registered or unregistered, and registrations and
applications for registration thereof (whether or not filed) and other works of
authorship, whether or not published; (iv) trade secrets, proprietary
information, know-how, inventions, customer lists and information, supplier
lists, manufacturer lists, manufacturing and production processes and
techniques, blueprints, drawings, schematics, manuals, software, firmware and
databases; (v) the right to ▇▇▇ and collect damages for any past, present, and
future infringement, misappropriation, or other violation of any of the
foregoing; and (vi) rights relating to any of the foregoing.
Interest means (a) capital stock, member interests, partnership
interests, other equity interests, rights to profits or revenue and any other
similar interest, (b) any security or other interest convertible into or
exchangeable or exercisable for any of the foregoing and (c) any right
(contingent or otherwise) to acquire any of the foregoing.
Knowledge of the Major Shareholders means the knowledge of each of the
Major Shareholders after reasonable investigation.
Leased Real Property has the meaning set forth in Section 5.8(c).
Legal Requirement means any law, statute, code, ordinance, order, rule,
regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization, or other directional requirement (including, without
limitation, any of the foregoing that relates to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls including those arising under Environmental Laws) of any Governmental
Authority.
Lien means any lien, pledge, condemnation award, claim, restriction,
charge, preferential purchase right, security interest, mortgage or encumbrance
of any nature whatsoever including as a statutory landlord lien.
Majority-in-Interest of Parent Company means those shareholders holding
a majority of the outstanding capital interest of Parent Company.
Major Shareholders has the meaning set out in the preamble to this
Agreement.
Material Adverse Effect means any material and adverse effect on the
assets, liabilities, financial condition, business, operations, or affairs of
any EUE Company or the Business.
Material Contract has the meaning set forth in Section 5.11(a).
Material Waiver means a waiver by the relevant Party of a provision of
a Material Contract which waiver will result in an EUE Company either (i)
receiving less consideration under the Material Contract than would have been
received without the waiver, or (ii) incurring greater liability under the
Material Contract than would have been incurred without the waiver.
Non-Competition Parties has the meaning set forth in Section 7.2.
Occurrence has the meaning set forth in Section 5.21(b).
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Exhibit "A": Share Exchange Agreement - CTC Page 45
& Shareholders of EU Energy plc
Ordinary Course of Business means, when used in reference to any
Person, the ordinary course of business consistent with past customs and
practices of such Person.
Organizational Documents means, with respect to a particular Person
(other than a natural person), the certificate or articles of incorporation,
bylaws, partnership agreement, limited liability company agreement, trust
agreement or similar organizational document or agreement, as applicable, of
such Person.
Party means any party to this Agreement.
Parent Company has the meaning set forth in the recitals.
Parent Company Shares has the meaning set forth in the recitals.
Permit has the meaning set forth in Section 5.10.
Permitted Liens means:
(i) Liens for Taxes which are not yet due and
payable;
(ii) inchoate Liens arising by operation of law,
including materialman's, mechanic's, repairman's,
laborer's, warehousemen, carrier's, employee's, contractor's and operator's
Liens arising in the Ordinary Course of Business but only to the extent such
liens secure obligations that, as of the Closing, are not due and payable and
are not being contested unless being contested in good faith and a reserve or
other appropriate provision, if any, as required by GAAP is made therefor in the
Financial Statements; and
(iii) Liens from one EUE Company in favor of another
EUE Company
Person means any natural person, firm, partnership, association,
corporation, limited liability company, company, trust, entity, public body or
government.
Personal Property has the meaning set forth in Section 5.9(c).
Plan or Plans has the meaning set forth in Section 5.23(a).
▇▇▇▇▇▇ means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
Predecessor shall mean any Person whose liabilities, including without
limitation liabilities arising under any Environmental Law, have or may have
been retained or assumed by any Seller Party or any of its Affiliates, either
contractually or by operation of law.
Product has the meaning set forth in Section 5.21(b).
Prohibited Period has the meaning set forth in Section 7.2(a)(i).
Purchase Price has the meaning set forth in Section 2.2.
Recalls has the meaning set forth in Section 5.21(b).
Registered Intellectual Property shall mean all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks and servicemarks,
applications to register trademarks and servicemarks and intent-to-use
applications; (iii) registered copyrights and applications for copyright
registration; (iv) any mask work registrations and applications to register mask
works; and (v) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
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Exhibit "A": Share Exchange Agreement - CTC Page 46
& Shareholders of EU Energy plc
Release shall mean "release" as defined in any Environmental Law.
Restricted Area has the meaning set forth in Section 7.2(a)(i)(A)
SEC means the United States Securities and Exchange Commission
SEC Documents means, with respect to any Person, each report, exhibit,
schedule, form, statement or other document filed with the SEC by such Person
pursuant to Section 13(a) or 14(a) of the Exchange Act.
Securities Act means the United States Securities Act of 1933 as
amended from time to time
Scheduled Leases has the meaning set forth in Section 5.8(b).
Scheduled Permits has the meaning set forth in Section 5.10.
Scheduled Personal Property has the meaning set forth in Section
5.9(b).
Seller(s) has the meaning set forth in the introductory paragraph.
Seller Indemnified Liabilities or Seller Indemnified Liability has the
meaning set forth in Section 9.1(a).
Seller Indemnified Parties has the meaning set forth in Section 9.2(a).
Subsidiary. One Entity shall be deemed to be a "Subsidiary" of another
Entity if such second Entity directly or indirectly owns, beneficially or of
record, (a) an amount of voting securities or other interests in such first
Entity that is sufficient to enable such second Entity to elect at least a
majority of the members of such first Entity's board of directors or other
governing body, or (b) at least 50% of the outstanding equity, voting,
beneficial or financial interests in such first Entity.
Tax or Taxes means any taxes, assessments, fees, unclaimed property and
escheat obligations, and other governmental charges imposed by any Governmental
Authority, including income, profits, gross receipts, net proceeds, alternative
or add-on minimum, ad valorem, real property (including assessments, fees or
other charges imposed by any Governmental Authority that are based on the use or
ownership of real property) value added, turnover, sales, use, property,
personal property (tangible and intangible), environmental, stamp, leasing,
lease, user, excise, duty, franchise, capital stock, transfer, registration,
license, withholding, social security (or similar), unemployment, disability,
payroll, employment, fuel, excess profits, occupational, premium, windfall
profit, severance, estimated, or other charge of any kind whatsoever, including
any interest, penalty, or addition thereto, whether disputed or not, including
any item for which liability arises by contract or as a transferee or successor.
Tax Items means all items of income, gain, loss, deduction and credit
and other tax items.
Tax Return means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Third Party Claim means a third party claim asserted against an
Indemnified Party by a Person other than (a) an Affiliate of such Indemnified
Party or (b) any director, stockholder, officer, member, partner or employee of
any such Indemnified Party or its Affiliates.
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Exhibit "A": Share Exchange Agreement - CTC Page 47
& Shareholders of EU Energy plc
Transaction Documents means this Agreement and all agreements,
conveyances, documents, instruments and certificates delivered at the Closing
pursuant to this Agreement.
Transactions means the transactions contemplated by this Agreement.
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Exhibit "A": Share Exchange Agreement - CTC Page 48
& Shareholders of EU Energy plc
EXHIBIT B
FORM OF EU ENERGY PRINCIPALS' AGREEMENT
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Exhibit "B": Share Exchange Agreement - CTC Page 49
& Shareholders of EU Energy plc
EU Energy Principals' Agreement
EU ENERGY PRINCIPALS' AGREEMENT
THIS EU ENERGY PRINCIPALS' AGREEMENT (this "Agreement"), is made and
entered into as of June __, 2006 by and among ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"),
▇▇▇▇▇▇ Services Limited ("Keeley"), Laikadog Holdings Ltd. ("Laikadog"), ▇▇▇▇▇
Limited ("▇▇▇▇▇") and Wellsford Management Limited ("Wellsford"), and, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ("▇▇▇▇▇▇") on the one hand ("collectively "EU Energy Principals"), and
Composite Technology Corporation, a Nevada Corporation ("Buyer").
RECITALS
A. The Buyer and substantially all shareholders of EU Energy including the EU
Energy Principals have entered into a Share Exchange Agreement (the "Share
Exchange Agreement") pursuant to which the shareholders of EU Energy plc, a
company organized under the laws of the United Kingdom ("EU Energy") and ▇▇▇▇▇▇
shall exchange their equity securities for newly-issued stock of the Buyer (the
"Transaction").
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, Wellsford, and Laikadog (collectively, the
"Shareholders") shall be shareholders of the Buyer upon closing of the
Transaction and ▇▇▇▇▇▇ will be the President of the Buyer.
C. In order to induce the Buyer to complete the Transaction, the Shareholders
have agreed to the lock-up provisions relating to all of the shares of the
common stock of the Buyer owned, as of the date of the closing date of the
Transaction (the "Closing Date"), by each of the Shareholders as set forth in
this Agreement ("Locked Up Shares").
D. The Shareholders have further agreed that their outstanding Company common
stock may be used to satisfy any indemnification obligations pursuant to Section
9 of the Share Exchange Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Lock-Up. For a period of 12 months following the closing date of the
Transaction (the "Lock-Up Period"), each of the Shareholders shall not make a
Transfer of the Locked Up Shares; provided however, that in each month after the
Closing Date, 1/12th of the Locked Up Shares held by each Shareholder shall be
relieved from such restriction, such that by the 12th month after the Closing
Date, all of the Locked Up Shares shall no longer be bound by this obligation;
provided, however, that Shareholder may not Transfer more than 1/6th of the
Locked Up Shares during any 30 day period of the Lock-Up Period. "Transfer"
shall mean transfer, sell, assign, pledge, hypothecate, give, create a security
interest in or lien on, place in trust (voting trust or otherwise), or in any
other way encumber or dispose of, directly or indirectly and whether or not
voluntarily, without the express prior written consent of the Buyer.
2. Injunctive Relief. The Parties agree that a breach of this Agreement may
cause the Buyer irreparable harm for which monetary damages are not adequate. In
addition to all other available legal remedies, the Buyer shall have the right
to injunctive relief to enforce this Agreement.
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Exhibit "B": Share Exchange Agreement - CTC Page 50
& Shareholders of EU Energy plc
3. Other Restrictions.
(a) Legends. Each Shareholder's Locked Up Shares shall be divided
equally into 12 separate stock certificates ("Stock Certificate"). In addition
to any other legends required to be placed on each outstanding certificate
representing the Locked Up Shares, each of the Shareholders hereby agrees that
each outstanding stock certificate representing the Locked Up Shares during the
Restricted Period shall bear a legend reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS SET FORTH IN A EU ENERGY PRINCIPALS'
AGREEMENT, DATED AS OF JUNE 3, 2006 COPIES OF WHICH MAY BE
OBTAINED FROM THE ISSUER. NO TRANSFER OF SUCH SECURITIES WILL
BE MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY
EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT. THE
COMPANY ACKNOWLEDGES THAT THIS LEGEND (BUT THIS LEGEND ONLY)
RELATING TO THE EU ENERGY PRINCIPALS AGREEMENT MAY BE REMOVED
AT ANY TIME AFTER [Legend Termination Date]"
Each of the 12 Stock Certificates shall bear a different "Legend
Termination Date" ranging from the one-month anniversary of the Closing Date to
the 12-month anniversary of the Closing.
(b) Termination of Restrictive Legends. The restrictions referred to in
Section 1 shall cease and terminate in their entirety at the end of the Lock-Up
Period. Whenever such restrictions shall cease and terminate as to any Locked Up
Shares, the Shareholder holding such shares shall be entitled to receive from
the Buyer, in exchange for such legended certificates, without expense, new
certificates for a like number of Locked Up Shares not bearing the legend set
forth in Section 3(a), provided however, that if any Claim has been made against
the Shareholder for any breach of the Share Exchange Agreement, then the
Shareholder will not be able to remove the legend on that number of shares
sufficient to satisfy the extent of such Claim.
(c) Copy of Agreement. A copy of this Agreement shall be filed with the
corporate secretary of the Buyer and with the Transfer Agent of the Buyer and
shall be kept with the records of the Buyer and shall be made available for
inspection by any shareholders of the Buyer.
(d) Recordation. The Buyer shall not record upon its books any Transfer
to any person except Transfers in accordance with this Agreement.
4. Indemnification. In the event that a Shareholder is required to indemnify the
Buyer under Section 9 of the Share Exchange Agreement, the Locked Up Shares may
be surrendered to the Buyer to satisfy such indemnification obligations.
5. Compliance With Applicable Regulations. The Shareholders and ▇▇▇▇▇▇ warrant
and confirm that they shall comply in all respects with any regulations
applicable to the disclosure of their share holdings in the Buyer and the
transfer of such shares.
6. Specific Performance. The Shareholders acknowledge that there would be no
adequate remedy at law if any Shareholder fails to perform any of its
obligations hereunder, and accordingly agree that the Buyer, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any Shareholder under this
Agreement in accordance with the terms and conditions of this Agreement. Any
remedy under this Section 5 is subject to certain equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
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Exhibit "B": Share Exchange Agreement - CTC Page 51
& Shareholders of EU Energy plc
7. Notices. All notices, statements, instructions or other documents required to
be given hereunder shall be in writing and shall be given either personally or
by mailing the same in a sealed envelope, first-class mail, postage prepaid and
either certified or registered, return receipt requested, or by telecopy, and
shall be addressed to the Buyer at its principal offices and to one or more
Shareholders at the respective addresses furnished to the Buyer by such
Shareholders.
8. Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns.
9. Recapitalizations and Exchanges Affecting Shares. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to the
Shares, to any and all shares of capital stock or equity securities of the Buyer
which may be issued by reason of any stock dividend, stock split, reverse stock
split, combination, recapitalization, reclassification or otherwise.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts to
be performed in California.
11. Waiver of Trial by Jury. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT OR IN CONNECTION HEREWITH IS
HEREBY WAIVED.
12. Descriptive Headings, Etc. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, references to "hereof," "herein," "hereby," "hereunder" and
similar terms shall refer to this entire Agreement.
13. Amendment. This Agreement may not be amended or supplemented except by an
instrument in writing signed by each of the parties hereto.
14. Severability. If any term or provision of this Agreement shall to any extent
be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
15. Complete Agreement; Counterparts. This Agreement constitutes the entire
agreement and supersedes all other agreements and understandings, both written
and oral, among the parties or any of them, with respect to the subject matter
hereof. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
16. Independent Termination. This Agreement is independent of any other
agreement and will terminate on its own terms.
******THE SIGNATURES OF THE PARTIES APPEAR ON THE NEXT PAGE******
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Exhibit "B": Share Exchange Agreement - CTC Page 52
& Shareholders of EU Energy plc
IN WITNESS WHEREOF, the parties have executed this EU Energy Principals'
Agreement on the above written date.
"Major Shareholders"
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- -------------------------------
By:
Title:
Address: Address:
------------------------------------------------ -------------------------------
------------------------------------------------ -------------------------------
------------------------------------------------ -------------------------------
Keeley Services Limited Laikadog Holdings Limited
-------------------------------
----------------------------------- By:
By: Title:
Title:
Address: Address:
------------------------------------------------ -------------------------------
------------------------------------------------ -------------------------------
------------------------------------------------ -------------------------------
▇▇▇▇▇ Limited Wellsford Management Limited
-------------------------------
-----------------------------------
By: -------------------------------
Title: By:
Title:
Address: Address:
------------------------------------------------ -------------------------------
------------------------------------------------ -------------------------------
------------------------------------------------ -------------------------------
--------------------------------------------------------------------------------
Exhibit "B": Share Exchange Agreement - CTC Page 53
& Shareholders of EU Energy plc
EXHIBIT C
FORM OF LEGAL OPINION
--------------------------------------------------------------------------------
Exhibit "C": Share Exchange Agreement - CTC Page 54
& Shareholders of EU Energy plc
OPINION OF EU ENERGY COUNSEL
1. This opinion relates only to English law as at the date of this opinion
and to matters governed by English law (whether or not the English
courts would apply English law to the matter in question) and is based
on the following assumptions:
1.1 that all signatures on documents examined by us are genuine, that all
documents examined by us as copies are complete and conform to the
originals, and that the originals of such documents are authentic;
1.2 that the statutory books are accurate and up to date with the
information which is recorded therein and that any resolutions passed
by EU Energy plc ("the Company") have conformed with the Company's
memorandum of association and articles of the company and where
necessary been quorate.
2. Reference to "Closing" used within this opinion shall have the same
meaning as set out in the Share Exchange Agreement made between the
shareholders of the Company and Composite Technology Corporation and
dated 2 June 2006 ("the Agreement").
3. The Company is a corporation duly incorporated, and validly existing
under the laws of England and Wales, and has the requisite corporate
power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties.
4. Immediately prior to the Closing, the authorized share capital stock of
the Company consists solely of 100,000,000 ordinary shares of par value
(pound)0.01 per share ("Company Common Stock"). There are 26,113,110
shares of Company Common Stock issued. The Extraordinary General
Meeting seeking approval of the Company's shareholders (as referred to
under Article VII of the Agreement) was properly convened in compliance
with English law.
5. Other than as set forth in the Share Exchange Agreement (including the
Company's Disclosure Schedule attached thereto and the Due Diligence
Documents as defined therein) to our knowledge, the Company does not,
as of the date hereof, have outstanding any subscriptions, options,
warrants, rights (including "phantom" stock rights), preemptive rights
or other contracts, commitments, understandings, plans or arrangements,
including any right of conversion or exchange under any outstanding
security, instrument or agreement, obligating the Company to issue or
sell any shares of capital stock of the Company or to grant, extend or
enter into any option with respect thereto.
6. Other than as set forth in the Share Exchange Agreement (including the
Company's Disclosure Schedule attached thereto and the Due Diligence
Documents as defined therein), to our knowledge there are no actions,
suits, arbitrations, investigations or proceedings pending or overtly
threatened against the Company or any of its assets and properties. To
our knowledge, the Company is not subject to any order, writ, judgment,
decree or injunction.
--------------------------------------------------------------------------------
Exhibit "C": Share Exchange Agreement - CTC Page 55
& Shareholders of EU Energy plc
7. Each Major Shareholder has the requisite power and authority, corporate
or otherwise, to enter into the Share Exchange Agreement and the
Ancillary Agreements, if any, to which it is a party (the "Transaction
Documents"), to perform its obligations thereunder and to consummate
the transactions contemplated thereby. The execution, delivery and
performance of the Transaction Documents by each Major Shareholder, and
the consummation by the Major Shareholder of the transactions
contemplated thereby, have been duly and validly approved by the
requisite governing bodies of each Major Shareholder, such as the board
of directors of the Seller and by the shareholders of the Seller, as
appropriate. Each of the Transaction Documents has been duly and
validly executed and delivered by each Major Shareholder and
constitutes the legal, valid and binding obligations of such Major
Shareholder enforceable against the Seller in accordance with its
terms; provided, however, that the validity, binding nature and
enforceability of such Seller's obligations under the Transaction
Documents may be subject to or limited by (i) bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent transfer and other
similar laws affecting the rights of creditors generally; (ii) general
principles of equity (whether relief is sought in a proceeding at law
or in equity), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the discretion of any
court of competent jurisdiction in awarding specific performance or
injunctive relief and other equitable remedies; and (iii), without
limiting the generality of the foregoing, the effect of California
court decisions and statutes which indicate that provisions of the
Transaction Documents which permit Composite Technology Corporation
("Buyer") or any other person or entity ("Person") to take action or
make determinations may be subject to a requirement that such action be
taken or such determinations be made on a reasonable basis in good
faith or that it be shown that such action is reasonably necessary for
the protection of Buyer or such other Person.
--------------------------------------------------------------------------------
Exhibit "C": Share Exchange Agreement - CTC Page 56
& Shareholders of EU Energy plc
EXHIBIT D
FORM OF CONSULTANCY AGREEMENT
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 57
& Shareholders of EU Energy plc
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement") is made and entered into
as of June ___, 2006, by and between Composite Technology Corporation, a Nevada
corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Executive"). In consideration
of the mutual covenants and conditions contained herein, the parties, intending
to be legally bound and acknowledging that this Agreement shall supplant,
supersede and cause to terminate the Services Agreement between EU Energy plc (a
wholly owned subsidiary of the Company as of the effective date of this
Agreement) and Executive dated December 13, 2004 and the Contract for Services
between EU Energy plc and Laikadog Holdings Limited (an entity owned and
controlled by Executive), agree as follows:
ARTICLE 1
EMPLOYMENT
1.1 Employment. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, upon the terms and subject to the
conditions hereinafter set forth, to hold the office of President of Composite
Technology Corporation. Executive shall do and perform, and shall have the
authority to do and perform, all services, acts and other things necessary to
perform such tasks as may be assigned to Executive by the Company. Executive
shall adhere to the Company's policies, ethical practices and standards of care
and competence. Executive shall devote his full business time and attention and
best effort to the affairs of the Company, and Executive shall not engage in any
other business duties or pursuits, or directly or indirectly render any services
of a business, commercial or professional nature to any other entity or person,
whether for compensation or otherwise, without the prior written consent of the
Company; provided, however, that Executive may participate in charitable and
other civic functions so long as such other activities do not adversely affect
Executive's ability to perform his responsibilities hereunder.
1.2 Term. This Agreement shall be effective as of the date of the
closing of the acquisition of EU Energy plc (anticipated to be July 3, 2006),
and shall, unless otherwise terminated as provided herein, terminate on July 2,
(the "Initial Term"). The Initial Term shall be extended automatically for an
additional one year period on each July 2, commencing July 2, unless the Company
provides notice to the contrary (the "Non-Renewal Notice") at least thirty (30)
days prior to the expiration of the Initial Term or any such one year period
(the period from the effective date of this Agreement until the termination of
this Agreement is referred to as the "Term").
ARTICLE 2
COMPENSATION AND BENEFITS
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 58
& Shareholders of EU Energy plc
2.1 Base Salary. During the Term, the Company shall pay to Executive a
base salary of $400,000 per year (the "Base Salary"), payable in equal
semimonthly installments, or at such other time or times as the Company
generally pays employees. The Company shall review the Base Salary at least
annually during the first quarter of each calendar year and may increase the
Base Salary in its sole discretion.
2.2 Annual Bonus. During the Term, Executive shall be eligible to earn
an annual bonus, based upon the achievement, as determined by the Company in its
sole discretion. Any such discretionary bonus shall be paid no later than the
end of the first quarter of the calendar year following each year of the Term
and shall be payable to Executive only if Executive continues to be employed by
the Company on the day any such annual bonus is actually paid.
2.3 Benefits. During the Term, Executive and Executive's spouse shall
be eligible to participate in and shall be covered by any and all medical,
disability, life and other insurance plans, stock option incentive programs,
401K plans and other benefits generally available to other employees of the
Company in similar employment positions, as such plans and benefits may change
from time to time, on the same terms as such employees, subject to meeting any
and all applicable eligibility requirements. Notwithstanding the foregoing, if
the medical insurance benefits cannot be arranged for ▇▇▇▇▇▇▇ and his wife by
the Company , then the Company agrees to pay his medical expenses.
2.4 Employment Taxes. All payments to Executive hereunder shall be made
after deduction for any federal, state and local withholding and payroll taxes,
all as determined under applicable law. The Company shall make all reports and
similar filings required by law with respect to such payments, withholdings and
taxes.
2.5 Vacation. During the Term, Executive shall receive paid vacation
annually in accordance with the Company's practices for executive officers, as
in effect from time to time, but in any event not less than four weeks per
calendar year.
ARTICLE 3
TERMINATION
3.1 Termination for Cause. The Company shall have the right at any
time, exercisable immediately with or without notice, to terminate this
Agreement for "Cause." As used herein, "Cause" shall mean any of the following:
(i) Executive materially breaches any provision of this Agreement; (ii)
Executive is indicted, convicted or pleads "no contest" to a felony, or any
other conduct of a criminal nature (other than traffic violations); (iii)
Executive engages in fraud, embezzlement or any other illegal or wrongful
conduct materially detrimental to the Company or the Company's reputation,
regardless of whether such conduct is designed to defraud the Company or others;
(iv) Executive takes action (or fails to take action) that Executive knew or
should have reasonably known was likely to materially damage the Company; (v)
Executive is grossly negligent in the performance of, or willfully disregards,
Executive's obligations hereunder; (vi) Executive intentionally imparts material
Proprietary Information to competitors or other third parties other than in the
course of carrying out Executive's duties hereunder; or (vii) Executive refuses
to obey the reasonable and lawful orders of the Chief Executive Officer or Board
of Directors of the Company. Upon termination for Cause, Executive shall be
entitled to receive (1) the Base Salary then in effect and the benefits set
forth in Section 2.3 through the effective date of such termination and (2) no
other payments or compensation of any kind, except to the extent required by
law. The Company's exercise of its right to terminate Executive for Cause shall
be without prejudice to any other remedy to which the Company may be entitled at
law, in equity or under this Agreement.
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 59
& Shareholders of EU Energy plc
3.2 Resignation. Executive shall have the right at any time,
exercisable upon 60 days notice, to resign and terminate the Agreement for any
reason or no reason. Upon Executive's termination of this Agreement pursuant to
this Section 3.2, Executive shall be entitled to receive (i) the Base Salary
then in effect and the benefits set forth in Section 2.3 through the effective
date or such resignation and (ii) no other payments or compensation of any kind,
except to the extent required by law.
3.3 Termination Due to Death or Disability. This Agreement shall
automatically terminate upon the death of Executive. In addition, the Company
shall have the right, exercisable upon ten (10) days notice, to terminate the
Agreement if Executive is unable to perform Executive's duties hereunder by
reason of any mental or physical disability or incapacity for a period of 90
consecutive days. Upon termination due to death or disability pursuant to this
Section 3.3, Executive (or Executive's estate, as the case may be) shall be
entitled to receive (i) the Base Salary then in effect and the benefits set
forth in Section 2.3 through the effective date of such termination and (ii) no
other payments or compensation of any kind, except to the extent required by
law.
3.4 Termination Without Cause or Non-Renewal by the Company . The
Company shall have the right at any time and without any prior notice to
terminate this Agreement for any reason other than as set forth in Sections 3.1
or 3.3, or for no reason. Upon the Company's termination of this Agreement
pursuant to this Section 3.4, Executive shall be entitled to receive (i) the
Base Salary then in effect and the benefits set forth in Section 2.3 through the
effective date of such termination, (ii) as severance pay or liquidated damages
or both, payments at the Base Salary rate then in effect in equal semimonthly
installments (or at such other time or times as the Company generally pays
employees), for a period of six months following the effective date of such
termination and (iii) no other payments or compensation of any kind except to
the extent required by law.
3.5 Continuation of Health Insurance Benefits. Upon the termination of
this Agreement for any reason other than due to Executive's death, Executive
shall be eligible to continue the health insurance benefits provided to
Executive immediately prior to such termination for the period of time and
subject to the terms and conditions required under the Consolidated Omnibus
Budget Reconciliation Act of 1985 or as otherwise required by law.
ARTICLE 4
CERTAIN AGREEMENTS
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 60
& Shareholders of EU Energy plc
4.1 Confidentiality. Executive acknowledges that the Company and its
present or future subsidiaries or affiliates, including, but not limited to EU
Energy plc, (which, collectively with the Company, are referred to herein as the
"Company") owns and will own and has developed and will develop proprietary
information concerning its business and its customers and clients which derives
value by not being generally known to the Company's competitors or others. Such
information (the "Proprietary Information") includes, among other things, trade
secrets, financial information, prices, costs, product plans, customer lists,
marketing plans, systems, manuals, training materials, forecasts, inventions,
improvements, ideas, business strategies, formulas, product ideas, computer
programs and software, software designs and documentation, source codes, object
codes, data and data bases, algorithms, techniques, schematics, compensation
information, clinical trial information, know-how and other intellectual
property. Executive shall, at all times, both during the Term and thereafter,
keep all Proprietary Information in confidence and trust and will not use or
disclose any Proprietary Information or anything relating to it without the
prior written consent of the Company, except as may be necessary in the ordinary
course of performing Executive's duties for the Company.
4.2 The Company's Property. Executive recognizes that all Proprietary
Information, however stored or memorialized, and all identification cards, keys,
access codes, marketing materials, samples, tape recordings, notes, tools,
documents, records, apparatus and other equipment or property which the Company
provides to or makes available to Executive are the sole property of the
Company. Executive shall use such property solely for the benefit of the Company
and for no other purpose. Upon the termination of this Agreement, Executive
shall (i) refrain from taking any such property from the Company's premises,
(ii) immediately return to the Company any such property in Executive's
possession or control (including any and all copies thereof) and (iii) certify
in writing that Executive has complied with this Section 4.2.
4.3 Assignment of Inventions to the Company. Executive shall promptly
disclose to the Company all improvements, inventions, formulas, ideas, works of
authorship, processes, computer programs and software, software designs and
documentation, algorithms, techniques, schematics, know-how and trade secrets,
whether or not patentable, made or conceived or reduced to practice or developed
by Executive, either alone or jointly with others, during Executive's employment
with the Company (collectively "Inventions"). All Inventions, and all patents,
copyrights, trade secret rights and other intellectual property rights related
thereto (including any extensions, renewals, continuations or divisions of any
of the foregoing), shall be the sole property of the Company to the maximum
extent permitted by law and, to the extent permitted by law, shall be "works
made for hire." Executive hereby assigns to the Company any rights Executive may
have or may acquire in all Inventions and agrees to perform, both during the
Term and thereafter, all acts necessary or desirable by the Company to permit
and assist the Company, at the Company's expense, in obtaining and enforcing
patents, copyrights, trade secrets or other intellectual property rights with
respect to such Inventions in any and all countries. Executive hereby
irrevocably designates and appoints the Company and its duly authorized officers
and agents as Executive's agents and attorneys-in-fact to act for and in
Executive's name and stead, to execute and file any applications or related
filings and do all other lawfully permitted acts to further the prosecution and
issuance or patents, copyrights, trade secret rights or other intellectual
property rights with respect to any Inventions with the same legal force and
effect as if executed by Executive. The foregoing notwithstanding, the Company
acknowledges and agrees that the Company will not own, and Executive is not
obligated to disclose or assign to the Company, any of Executive's rights in any
invention that Executive develops entirely on Executive's own time without using
the Company's equipment, supplies, facilities, or Proprietary Information except
for those inventions that either (i) relate either (a) at the time of conception
or (b) at the time of reduction to practice to the Company's business or actual
or demonstrably anticipated research or development of the Company, or (ii)
result from any work performed by Executive for the Company.
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 61
& Shareholders of EU Energy plc
4.4 Non-Solicitation of Employees and Others. During the Term and for
two years thereafter, Executive shall not directly or indirectly (i) encourage,
solicit, induce, or attempt to encourage, solicit or induce any employee, agent
or representative of the Company to leave his/her employment with, terminate
his/her relationship with or devote less of his/her time on behalf of the
Company , or (ii) hire or attempt to hire any person who is an employee, agent
or representative of the Company at such time or was an employee, agent or
representative of the Company at any time within 180 days preceding such time.
4.5 Non-Solicitation of Customers and Clients. During the Term and for
two years thereafter, Executive shall not directly or indirectly on behalf of
any person or entity competitive with the Company solicit, divert or attempt to
solicit or divert any actual or identified prospective customer or client of the
Company at the time of such solicitation, diversion or attempted solicitation or
diversion or within one year preceding such time. Executive acknowledges and
agrees that actual and identified prospective customers and clients of the
Company constitute protectable trade secrets as defined and covered by the
Uniform Trade Secrets Act (California Civil Code ss. 3426, et seq).
4.6 Non-Interference. During the Term and for two years thereafter,
Executive shall not directly or indirectly hire, engage, sell any work to, place
orders with, or in any manner be associated with any supplier, contractor,
subcontractor or other business relation of the Company during such period if
such action by Executive would have a material adverse effect on the business,
assets or financial condition of the Company, or materially interfere with the
relationship between any such person or entity and the Company.
4.7 Covenant Not to Compete during Employment. During the Term,
Executive shall not directly or indirectly own, manage, finance, operate, join,
control or participate in the ownership, management or operation of or be
employed, provide services to or otherwise be connected in any manner with, any
person or entity competitive with the Company.
4.8 Competitor Defined. For the purposes of this Article 4, a person or
entity shall be deemed to be competitive with the Company if such person or
entity conducts, operates, carries out or otherwise engages in the development,
production, marketing or servicing of (i) any service or product of, or similar
to that of, the Company or (ii) any service or product which, or similar to that
which, the Company is developing, producing, marketing or servicing or plans to
develop, produce, market or service, provided that Executive was involved in any
manner or gained any knowledge regarding such product or service in the course
of Executive's employment with the Company.
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 62
& Shareholders of EU Energy plc
4.9 Certain Representations of Executive. In connection with the
provisions of Sections 4.4, 4.5, 4.6, 4.7 and 4.8, Executive represents that
Executive's experience, capabilities and circumstances are such that such
provisions will not prevent him from earning a livelihood. Executive further
agrees that the limitations set forth in such sections are reasonable and
properly required for the adequate protection of the current and future business
of the Company.
4.10 Injunctive Relief. Executive acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provision of this Article 4
would be inadequate and, therefore, agrees that the Company shall be entitled to
injunctive relief in addition to any other available rights and remedies in case
of any such breach or threatened breach; provided, however that nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other rights and remedies available for any such breach or threatened breach.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be judicially
declared to be invalid, unenforceable, void or voidable, such decision will not
have the effect of invalidating, voiding or rendering voidable the remainder of
this Agreement or affect the application of such provision to other persons or
circumstances or in other jurisdictions, and the parties agree that the
provision of this Agreement so held to be invalid, unenforceable, void or
voidable will be deemed to have been stricken (except as set forth in the
following sentence) and the remainder of this Agreement will have the same force
and effect as if such provision had never been included. In the event that any
provision of this Agreement, or the application of such provision to any person
or circumstance, is judicially declared to be invalid, unenforceable, void or
voidable by reason of being unreasonably broad in scope or by reason of
extending for an unreasonably long period or time, then such provision or
application shall be reduced and reformed by such court to a scope or time
period which such court shall deem reasonable.
5.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit or and be
binding upon the respective successors and permitted assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
5.3 Notices. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given (i) on the date of personal service,
(ii) on the third business day after mailing, if the document is mailed by
registered mail, (iii) one day after being sent by professional or overnight
courier or messenger service guaranteeing one-day delivery, with receipt
confirmed by the courier, or (iv) on the date of transmission if sent by
telecopy or other means of electronic transmission, with receipt confirmed. Any
such notice shall be delivered or addressed to the address set forth below such
party's signature to this Agreement or at the most recent address specified by
the addressee through written notice under this provision. Failure to conform to
the requirements of this Section shall not defeat the effectiveness of notice
actually received by the addressee. Notices shall be delivered as follows:
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 63
& Shareholders of EU Energy plc
If to the Company: Composite Technology Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
If to Executive: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
or to such other address as a party shall have specified most recently by like
Notice.
5.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to the
conflicts of law provisions thereof.
5.5 Entire Agreement and Amendment. This Agreement, including any
exhibits attached hereto: (1) is the final, complete and exclusive statement of
the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements, promises, assurances,
guarantees, representations, understandings, conduct, proposals, conditions,
commitments, acts, course of dealing, warranties, interpretations or terms of
any kind, oral or written, including but not limited to, the Services Agreement
between EU Energy plc (which Executive and the Company acknowledge is a wholly
owned subsidiary of the Company as of the effective date of this Agreement) and
Executive dated December 13, 2004 and the Contract for Services between EU
Energy plc and Laikadog Holdings Limited (which Executive represents, warrants
and acknowledges he is the controlling shareholder) (collectively and severally,
the "Prior Agreements"), and that any such Prior Agreements are of no force or
effect except as expressly set forth herein other than the Share Exchange
Agreement by and among the Company and the shareholders of EU Energy plc dated
June 2, 2006 which shall remain in effect, and (3) may not be varied,
supplemented or contradicted by evidence of Prior Agreements, or by evidence of
subsequent oral agreements. Executive's obligations under this Agreement may be
amended, supplemented, modified and/or rescinded only through an express written
instrument executed by the Chief Executive Officer of the Company. The Company's
obligations under this Agreement may be amended, supplemented, modified and/or
rescinded only through an express written instrument executed by the Executive.
5.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
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Exhibit "D": Share Exchange Agreement - CTC Page 64
& Shareholders of EU Energy plc
5.7 Arbitration. To the fullest extent allowed by law, any controversy
or claim arising out of or relating to this Agreement, Executive's employment
with the Company, or termination of the Agreement or such employment, shall be
settled by binding and non-appealable arbitration by a single arbitrator in the
County of Orange in the State of California. Possible disputes covered by the
foregoing, include, but are not limited to, wage, contract, discrimination, or
other employment-related claims under laws known as Title VII of the Civil
Rights Act, Americans with Disabilities Act, Age Discrimination in Employment
Act, and any other federal, state or local statutes, rules or regulations
relating to an employee's relationship with his/her employer. However, claims
for workers' compensation benefits and unemployment insurance are not covered by
this arbitration provision and such claims may be presented to the appropriate
court or state agency. If there is a controversy or claim, Executive and the
Company shall initially confer and attempt to agree on the individual to be
appointed as the arbitrator. If no agreement is reached, the parties shall
request from the Judicial Arbitration and Mediation Services ("JAMS") office in
Orange, California, a list of five retired judges affiliated with JAMS.
Executive and the Company shall each alternately strike names from such list
until only one name remains and such person shall thereby be selected as the
arbitrator. The arbitration shall be conducted in conformity with the applicable
California arbitration laws and, to the extent that anything in this Agreement
conflicts with such laws, the provisions of such laws shall govern. The
arbitrator shall (i) allow the discovery authorized by such laws in arbitration
proceedings (ii) issue a written award that sets forth the essential findings
and conclusions on which the award is based, and (iii) have the authority to
award any relief authorized by law in connection with the asserted claims or
disputes. The arbitrator's award shall be subject to correction, confirmation,
or vacation, as provided by the applicable law setting forth the standard of
judicial review of arbitration awards. Any final decision of the arbitrator may
be enforced by a court of competent jurisdiction. The Company agrees to pay for
(1) the arbitrator's fee (2) any other expense or cost that the Executive would
not be required to bear if Executive were free to bring the dispute or claim in
court, and (3) any other expense or cost that is unique to arbitration. If
either party is determined by the arbitrator to be the prevailing party in the
arbitration, then that party will be entitled to reimbursement from the other
party of all the reasonable fees (including attorneys' fees) and expenses
incurred in connection with such arbitration. The parties intend that this
Section 5.7 shall be valid, binding, enforceable and irrevocable. Executive
acknowledges that Executive is waiving Executive's right to a jury trial and
agrees that the decision of the arbitrator shall be final and binding.
5.8 Survival. It is understood and agreed that the provisions of
Article 4 and this Article 5 shall survive the expiration of this Agreement.
5.9 Preparation of Agreement. It is acknowledged by each party that
such party either had separate and independent advice of counsel or the
opportunity to avail itself or himself of same. In light of these facts it is
acknowledged that no party shall be construed to be solely responsible for the
drafting hereof, and therefore any ambiguity shall not be construed against any
party as the alleged draftsman of this Agreement.
5.10 Cooperation. Each party agrees, without further consideration, to
cooperate and diligently perform any further acts, deeds and things and to
execute and deliver any documents that may from time to time be reasonably
necessary or otherwise reasonably required to consummate, evidence, confirm
and/or carry out the intent and provisions of this Agreement, all without undue
delay or expense.
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Exhibit "D": Share Exchange Agreement - CTC Page 65
& Shareholders of EU Energy plc
5.11 Waiver. No breach of any agreement or provision herein contained,
or of any obligation under this Agreement, may be waived, nor shall any
extension of time for performance of any obligations or acts be deemed an
extension of time for performance of any other obligations or acts contained
herein, except by written instrument signed by the party to be charged or as
otherwise expressly authorized herein. No waiver of any breach of any agreement
or provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof, or a waiver or relinquishment of any other agreement
or provision or right or power herein contained.
5.12 Headings; References; Incorporation; Gender. The headings used in
this Agreement are for convenience and reference purposes only, and shall not be
used in construing or interpreting the scope or intent of this Agreement or any
provision hereof. References to this Agreement shall include all amendments or
renewals thereof. Any exhibit referenced in this Agreement shall be construed to
be incorporated in this Agreement. As used in this Agreement, each gender shall
be deemed to include the other gender, including neutral genders or genders
appropriate for entities, if applicable, and the singular shall be deemed to
include the plural, and vice versa, as the context requires.
5.13 Execution by All Parties Required to be Binding; Electronically
Transmitted Documents. This Agreement shall not be construed to be an offer and
shall have no force and effect until this Agreement is fully executed by all
parties hereto. If a copy or counterpart of this Agreement is originally
executed and such copy or counterpart is thereafter transmitted electronically
by facsimile or similar device, such facsimile document shall for all purposes
be treated as if manually signed by the party whose facsimile signature appears.
IN WITNESS WHEREOF, the parties have executed this Agreement.
Company:
Composite Technology Corporation
By:
------------------------------------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇, CEO and Chairman
Executive:
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------------------------------------
Exhibit "D": Share Exchange Agreement - CTC Page 66
& Shareholders of EU Energy plc
SCHEDULE A
SHAREHOLDERS OF EU ENERGY
------------------------------------------- --------------------------------------------------- ---------------------
Name Address Number of Shares
------------------------------------------- --------------------------------------------------- ---------------------
A.C. Directors, Ltd. * 0
------------------------------------------- --------------------------------------------------- ---------------------
A.C. Secretaries Limited * 0
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ Allahiary * 47,619
------------------------------------------- --------------------------------------------------- ---------------------
Alternative Products Limited * 100,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇ * 238,096
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 238,096
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ * 10,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 7,718,503
------------------------------------------- --------------------------------------------------- ---------------------
Blossomville Ventures Corporation * 96,774
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ * 120,556
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇ ▇▇▇▇▇▇▇ * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
Colpro Holdings Limited * 1,225,968
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇ ▇▇▇▇▇ * 375,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇ * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ * 15,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇▇ Elisabeth ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 20,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 41,447
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ Enterprises Limited * 83,333
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇ * 48,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇ * 10,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 55,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇ * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇ * 12,000
------------------------------------------- --------------------------------------------------- ---------------------
[*] Confidential information has been omitted and separately filed with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.
--------------------------------------------------------------------------------
Schedule "A": Share Exchange Agreement - CTC Page 67
& Shareholders of EU Energy plc
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Holdings S.A. * 10,000
------------------------------------------- --------------------------------------------------- ---------------------
Keeley Services Limited * 2,500,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇ * 23,809
------------------------------------------- --------------------------------------------------- ---------------------
Nuria Koorehpaz * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ * 35,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇ * 85,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 60,278
------------------------------------------- --------------------------------------------------- ---------------------
Laikadog Holdings Limited * 2,327,754
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇-▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ * 50,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇ * 50,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ * 371,569
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇ * 107,143
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ * 20,000
------------------------------------------- --------------------------------------------------- ---------------------
Miele-Tec Limited * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ * 36,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ * 25,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 23,810
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 100,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇ Patching * 23,809
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇ * 35,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 0
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 1,696,658
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ * 12,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ Limited * 3,000,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇▇ Banbery * 10,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ * 7,601
------------------------------------------- --------------------------------------------------- ---------------------
[*] Confidential information has been omitted and separately filed with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.
--------------------------------------------------------------------------------
Schedule "A": Share Exchange Agreement - CTC Page 68
& Shareholders of EU Energy plc
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇ * 362,653
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ * 60,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 207,504
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ * 7,320
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ * 30,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ * 35,714
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 135,096
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ * 25,000
------------------------------------------- --------------------------------------------------- ---------------------
The Baron Homes Corporation Limited * 25,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ * 20,000
------------------------------------------- --------------------------------------------------- ---------------------
Siegfried Vullriede * 35,000
------------------------------------------- --------------------------------------------------- ---------------------
Wellsford Management Limited * 3,750,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇ ▇▇▇▇-▇▇▇▇ * 210,000
------------------------------------------- --------------------------------------------------- ---------------------
26,113,110
---------------------
[*] Confidential information has been omitted and separately filed with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.
--------------------------------------------------------------------------------
Schedule "A": Share Exchange Agreement - CTC Page 69
& Shareholders of EU Energy plc
SCHEDULE B
EUE SHAREHOLDERS EXECUTING THE SHARE EXCHANGE AGREEMENT
------------------------------------------- --------------------------------------------------- ---------------------
Name Address Number of Shares
------------------------------------------- --------------------------------------------------- ---------------------
A.C. Directors, Ltd. *
------------------------------------------- --------------------------------------------------- ---------------------
A.C. Secretaries Limited *
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ Allahiary * 47,619
------------------------------------------- --------------------------------------------------- ---------------------
Alternative Products Limited * 100,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 238,096
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 7,718,503
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ * 120,556
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇ ▇▇▇▇▇▇▇ * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
Colpro Holdings Limited * 1,225,968
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇ ▇▇▇▇▇ * 375,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ * 15,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇ * 48,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇ * 10,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 55,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇ * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇ * 12,000
------------------------------------------- --------------------------------------------------- ---------------------
Keeley Services Limited * 2,500,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ * 35,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇ * 85,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 60,278
------------------------------------------- --------------------------------------------------- ---------------------
Laikadog Holdings Limited * 2,327,754
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇ * 50,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ * 371,569
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇ * 107,143
------------------------------------------- --------------------------------------------------- ---------------------
[*] Confidential information has been omitted and separately filed with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.
--------------------------------------------------------------------------------
Schedule "B": Share Exchange Agreement - CTC Page 70
& Shareholders of EU Energy plc
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ * 20,000
------------------------------------------- --------------------------------------------------- ---------------------
Miele-Tec Limited * 24,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ * 36,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ * 25,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 100,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇ * 35,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 0
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 1,696,658
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ Limited * 3,000,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇ * 362,653
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ * 60,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ * 207,504
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ * 30,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ * 35,714
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ * 135,096
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ * 25,000
------------------------------------------- --------------------------------------------------- ---------------------
The Baron Homes Corporation Limited * 25,000
------------------------------------------- --------------------------------------------------- ---------------------
Siegfried Vullriede * 35,000
------------------------------------------- --------------------------------------------------- ---------------------
Wellsford Management Limited * 3,750,000
------------------------------------------- --------------------------------------------------- ---------------------
▇▇▇ ▇▇▇▇-▇▇▇▇ * 210,000
[*] Confidential information has been omitted and separately filed with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.
--------------------------------------------------------------------------------
Schedule "B": Share Exchange Agreement - CTC Page 71
& Shareholders of EU Energy plc
LIST OF ADDITIONAL SCHEDULE DISCLOSURES
Schedule 3.2(e) -- Resigning Officers and Directors
Schedule 5.2 -- Jurisdictions where EU Companies have permanent business
establishments
Schedule 5.4 -- Equity Ownership Table for each EU Company (other than EU
Energy plc)
Schedule 5.5 -- List of Subsidiaries
Schedule 5.7 -- Related Party Transactions.
Schedule 5.8(b) -- Real property leases
Schedule 5.9(a) -- Equipment leases
Schedule 5.10 -- Permits
Schedule 5.11 -- Material Contracts
Schedule 5.12 -- Registered Intellectual Property (patents, trademarks, and
copyrights)
Schedule 5.12(f) -- Intellectual Property Contracts and Licenses
Schedule 5.12(i) -- Required actions within 180 days of the Agreement signing
Schedule 5.15(a) -- Audited Financial Statements for year ended March 31, 2006
Schedule 5.21 -- Warranty Claims asserted during the last three years
Schedule 5.22(a) -- Employee Information
Schedule 5.23 -- Employee Benefit Plans (i.e., pension plans, etc.)
Schedule 5.24 -- Environmental Authorizations
Schedule 5.25 -- Customers, Suppliers
Schedule 5.26 -- Banks or financial institution used by any EUE Company
Schedule 5.27 -- Insurance Policies
--------------------------------------------------------------------------------
Other Schedules: Share Exchange Agreement - CTC Page 72
& Shareholders of EU Energy plc