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EQUITY PURCHASE AGREEMENT
by and among
EU Energy Inc.,
and
CTC Wind Systems Corporation
Dated as of December 15, 2005
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TABLE OF CONTENTS
EXHIBIT INDEX..........................................................................................iii
ARTICLE 1 PURCHASE AND SALE OF EQUITY....................................................................1
1.1 Purchase and Sale of Equity...................................................................1
1.2 Place and Date of Closing; Closing Deliveries.................................................1
1.3 The Purchase Price............................................................................2
1.4 Payment of Purchase Price.....................................................................2
1.5 Use of Purchase Price.........................................................................2
1.6 Shareholders' Agreement.......................................................................2
Article 2 Representations And Warranties Of The Seller...........................................4
2.1 Shares; Agreements............................................................................4
2.2 Status........................................................................................4
2.3 Authority.....................................................................................4
2.4 Governmental Authorization....................................................................5
2.5 Non-Contravention.............................................................................5
2.6 Capitalization; Subsidiaries..................................................................5
2.7 Changes.......................................................................................5
2.8 Taxes.........................................................................................7
2.9 Financial Statements; Solvency; Current Assets................................................7
2.10 Absence of Undisclosed Liabilities............................................................8
2.11 Materials Contracts and Agreements............................................................8
2.12 Litigation....................................................................................9
2.13 Compliance with Applicable Laws...............................................................9
2.14 Environmental Compliance; OSHA; MSHA..........................................................9
2.15 Leases, Other Real Property..................................................................10
2.16 Intellectual Property........................................................................11
2.17 Employee Benefit Plans; ERISA................................................................12
2.18 Labor Matters, etc...........................................................................13
2.19 Business Relationships.......................................................................13
2.20 Insurance Policies...........................................................................14
2.21 Related Party Transactions...................................................................14
2.22 Brokerage and Financial Advisors.............................................................14
2.23 Warranties True and Correct..................................................................14
Article 3 Representations And Warranties Of Buyer...............................................14
3.1 Status.......................................................................................14
3.2 Authority....................................................................................15
3.3 Non-Contravention, Approvals and Consents....................................................15
Article 4 Covenants.............................................................................15
4.1 Operation of the Business....................................................................15
4.2 Application for Regulatory Consent and Licenses..............................................16
4.3 Access to Facilities, Files and Records......................................................16
4.4 Notice of Proceedings........................................................................17
4.5 Reasonable Commercial Efforts................................................................17
4.6 Notification of Certain Matters..............................................................17
4.7 Expenses.....................................................................................17
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Article 5 Conditions To Closing.................................................................17
5.1 Conditions to Obligations of Each Party......................................................17
5.2 Conditions to the Obligations of Seller......................................................18
5.3 Conditions to Obligations of Buyer...........................................................18
Article 6 Termination...........................................................................20
6.1 Termination by Mutual Consent................................................................20
6.2 Termination by Either Seller or Buyers.......................................................20
6.3 Termination by Seller........................................................................20
6.4 Termination by Buyer.........................................................................20
6.5 Effect of Termination and Abandonment........................................................21
Article 7 Indemnification.......................................................................21
7.1 Survival.....................................................................................21
7.2 Agreement of Seller to Indemnify.............................................................21
7.3 Agreement of Buyer to Indemnify..............................................................22
7.4 Procedures for Indemnification...............................................................22
7.5 Defense of Third Party Claims................................................................23
7.6 General Tax Indemnity........................................................................24
7.7 Limitations..................................................................................24
Article 8 Closing And Due Diligence.............................................................25
8.1 Closing and Due Diligence....................................................................25
8.2 Termination due to unsatisfactory Due Diligence..............................................25
Article 9 General Provisions....................................................................26
9.1 Certain Definitions..........................................................................26
Article 10 Miscellaneous.........................................................................31
10.1 Entire Agreement; No Third Party Beneficiaries...............................................31
10.2 Amendments; Waiver...........................................................................31
10.3 Assignment...................................................................................31
10.4 Notices......................................................................................32
10.5 Governing Law; Dispute Resolution............................................................32
10.6 Counterparts.................................................................................34
10.7 Captions.....................................................................................34
10.8 Interpretations..............................................................................34
10.9 Severability.................................................................................34
10.10 Right to Specific Performance................................................................34
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EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (this "Agreement"), dated as of December
15, 2005, is entered into by and among EU Energy Incorporated, a Nevada
corporation ("EU Inc." or "Seller"), and CTC Wind Systems Corporation, a Nevada
corporation ("CTC" or "Buyer").
RECITALS:
WHEREAS, the Seller has the ability and approval, by its Board of
Directors and Shareholder, to issue [Insert number of shares] shares of common
stock of EU Inc. (the "Shares"), which subsequent to being issued, constitute
[approximately 48%] of all the issued and outstanding shares of capital stock in
EU Inc.;
WHEREAS, the Seller desires to sell to Buyer, and Buyer desires to
purchase from the Seller, directly or indirectly, all of the Shares upon the
terms and conditions set forth herein;
WHEREAS, the Board of Directors of each of Buyer and Seller has approved
and adopted this Agreement and the transaction contemplated hereby or will have
adopted by resolution dated concurrent with the date hereof.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein and for other good a valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
ARTICLE 1 PURCHASE AND SALE OF EQUITY
1.1 Purchase and Sale of Equity.
Subject to the terms and conditions set forth in this Agreement, at the
Closing, the Seller shall sell, assign, convey and transfer to the Buyer and the
Buyer shall purchase from the Seller, directly or indirectly, free and clear of
any and all Liens, all of the Shares.
1.2 Place and Date of Closing; Closing Deliveries.
(a) The Closing shall take place at the offices of Composite Technology
Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, ▇▇ Monday, January 31, 2005 or, if
later, on a date not later than five (5) business days after (i) all conditions
in Article 5 have been satisfied or waived by the party in whose favor each such
condition existed and (ii) CTC shall have completed its due diligence review in
accordance with the terms of Article 8, or on such other date as the Seller and
Buyer may agree to in writing.
(b) At the Closing, the Seller shall execute and/or deliver to Buyer, (i)
certificates representing all the Shares, duly endorsed by the applicable Seller
(or accompanied by duly executed stock powers), and (ii) the documents and
instruments specified in Section 5.3.
(c) At the Closing, Buyer shall execute and/or deliver to the Seller the
documents and instruments specified in Section 5.2. The Purchase Price for the
Shares shall be as provided in Section 1.3 and paid as provided in Section 1.4
below.
1.3 The Purchase Price.
Subject to the terms described in Section 1.4, the total consideration to be
paid by Buyer for the Shares shall be an aggregate of a maximum of Five Million
Dollars ($5,000,000) (the "Purchase Price") as set forth in Section 1.4.
1.4 Payment of Purchase Price.
(a) At the Closing, a cash payment shall be made by Buyer by wire transfer
of immediately available funds to such account or accounts as the Seller shall
designate in writing in the aggregate amount of One Million Dollars
($1,000,000).
(b) The remaining Four Million Dollars ($4,000,000) shall be paid to
Seller in two (2) equal installments of Two Million Dollars ($2,000,000) within
ten (10) days of the later of the following dates:
1st Installment: March 1, 2006 or sixty (60) days after the date of
Closing; and
2nd Installment: April 1, 2006 or ninety (90) days after the date of
Closing
If any of the payments referenced in this Section 1.4(b) are not paid to
Seller on or about the dates referenced, the Buyer shall pay to Seller interest
of 6.0% annually on any unpaid balances and such payments shall be paid monthly.
1.5 Use of Purchase Price.
The Purchase Price shall be used by the Seller to fund regular operations
and for working capital purposes of the Seller. The Seller shall not distribute
or cause to distribute any of the Purchase Price to any shareholder, party,
affiliate, subsidiary or related party.
1.6 Shareholders' Agreement
The Parties shall procure that all of the shareholders of EU Inc at the
time of Closing ("EU Shareholders") shall sign a shareholders' agreement
("Shareholders' Agreement") that shall contain the following substantive terms:
Buyer shall have the right to appoint 2 Board Members to the Board of
Directors of EU Inc. and collectively the other EU Shareholders shall have the
right to appoint 2 Board Members. The initial directors shall be appointed at a
meeting to be held concurrently with the Closing. Any Major Decisions to be made
by the Board of Directors of EU Inc. will require a unanimous decision of the
Board. "Major Decisions" shall be listed in the Shareholders' Agreement and
shall include, but are not limited to, the following:
(a) the variation of the authorized or issued capital stock of EU Inc. or
the allottment, issuance or grant of any option over or interest in, or other
right to subscribe for shares or convert into any securities of EU Inc. or issue
any instrument carrying rights of conversion into, any share or other equity
security;
(b) the alteration of the Bylaws of EU Inc.;
(c) the taking steps to wind up or dissolve EU Inc., or the filing of a
petition in bankruptcy or the making of any arrangement with any creditors, or
the permitting or suffering of any act or thing whereby it may be wound up or
placed into bankruptcy;
(d) any disposal of all or substantially all of the Business;
(e) the removal of any of the members of the Board of Directors, provided
however that neither CTC nor any EU Shareholder will unreasonably refuse to
permit the removal and replacement of any member of the Board by the shareholder
that has nominated such members;
(f) the entry into or material change to any contract or transaction or
waiver of any right under any contract whose value exceeds $500,000 except in
the ordinary and proper course of business on commercial terms;
(g) the acquisition, purchase or subscription for any shares, debentures,
or other securities (or any interest therein) in any company, trust or other
body;
(h) the acquisition or purchase of the business;
(i) the sale, transfer, lease, license, assignment, creation of any option
or right of pre-emption or right of first refusal or conversion over, or
otherwise disposal of all or any material part of EU Inc.'s business, property
and/or assets (or any interest therein) whether by a single transaction or
series of related transactions;
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(j) the increase in the remuneration of any senior employee, director or
consultant of EU Inc. who is paid more than $120,000 per annum by more than 10%;
(k) the implementation or variation of any bonus, incentive or commission
arrangements of EU Inc., excluding, however, the regular benefits that are
required to be paid By contract or by law or other applicable legal act or which
are usual in the employment market of any State in which EU is doing business;
(l) the creation of any fixed or floating charge, lien (other than a lien
arising by operation of law) or other encumbrance over the whole or any part of
EU Inc.'s undertaking, property or assets other than that which is required or
usual in the normal course of business;
(m) the borrowing of any sum of money that exceeds an aggregate of
$100,000 or where the interest rate is unusually high except from its bankers
and credit card providers in the ordinary and proper course of its business;
(n) the making of any loan or advance or giving any credit (other than
normal trade credit) in excess of $10,000 by EU Inc. to any person;
(o) the giving of any guarantee or indemnity by EU Inc. to secure the
liabilities or obligations of any person, except for the purposes of settling
any employee related litigation or pursuant to any of the normal employee
procedures of complaint, or for civil liability cases not exceeding $100,000;
(p) the entry into any contract, arrangement or commitment involving
capital expenditure other than approved budgets in the normal course of business
or the realization of capital assets if the amount of such expenditure or
realization by EU Inc. would exceed $10,000;
(q) the initiation, conduct, settlement or abandon of any legal or
arbitration proceedings where the amount claimed exceeds $50,000 or the making
of any admission of liability in respect of such a matter by EU Inc., excepting
for matters relating to employees who are neither directors nor officers of EU
Inc;
(r) the declaration or payment of any dividend or other distribution in
cash or otherwise (whether out of revenue profits, capital profits or capital
reserves) on any Share by EU Inc. ; or
(s) the grant of any power of attorney by EU Inc. unless such power of
attorney shall be for a limited period and only where EU Inc would reasonably be
expected to suffer damage in the event of a delay.
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby warrants and represents to Buyer, as of the date hereof
and as the Closing Date, as follows:
2.1 Shares; Agreements.
The Seller has the ability and has obtained any and all necessary
approvals, including, without limitation, that of its Board of Directors and
Shareholders, to issue the Shares. At the Closing, the Seller shall execute
and/or deliver to Buyer, certificates or valid and marketable title representing
all the Shares clear of any Liens. There are no registration rights agreements,
voting trust agreements, powers of attorney, shareholder agreements, operating
agreements, partnership agreements, proxies or any other Contracts relating to
the voting, dividend or economic rights, management or Control rights, or
disposition or pledge of the Shares or otherwise granting any Person any right
in respect of such Shares, with the exception of the Shareholders' Agreement,
and except for this Agreement and the Ancillary Agreements executed in
connection herewith, there are no restrictions on the transfer of the Shares or
other the equity securities of EU Inc. other than those imposed by federal and
state securities laws, generally.
2.2 Status.
Seller is duly organized, validly existing and in good standing as a
corporation under the laws of the state of its formation and in any place where
it is doing business. Seller has the requisite power and authority to own or
lease all of its properties and assets and to conduct businesses as they are now
being conducted. Seller has no subsidiaries.
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2.3 Authority.
Seller has the power and authority to execute and deliver this Agreement
and the other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. All company actions and
proceedings necessary to be taken by or on the part of the Seller in connection
with this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby have been or will prior to the Closing be duly
and validly taken. This Agreement has been, and at the Closing the other
Transaction Documents will be, duly and validly executed and delivered by Seller
and shall constitute the legal, valid and binding obligations of Seller,
enforceable against it in accordance with and subject to their terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws from time to time in effect
affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
2.4 Governmental Authorization.
With the exception of filing to do business in any State that is required
as a result of the Parties agreement during the due diligence process and which
has been recorded and approved by the Board of Directors of EU Inc on or before
the Closing, neither Seller nor any of its Affiliates nor any of their
respective officers, directors or managing employees is required to obtain any
material license, approval or consent from, or give any notice or make any other
filing with respect to, any Regulatory Authority in connection with the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents.
2.5 Non-Contravention.
Neither the execution and delivery by Seller of this Agreement nor the
consummation of the transactions contemplated hereby will (a) violate any
provision of the organizational, governing documents, or articles of
incorporation of EU Inc., (b) result in a Default under, or require the other
contracting party to Consent to the assignment or continuation of, any Material
Contract to which Seller is a party or by which any Asset of EU Inc. is bound,
(c) violate any Order against or binding upon EU Inc., (d) violate any agreement
with any Governmental Authority with or in respect of EU Inc., (e) subject to
obtaining the governmental authorizations referred to in Section 2.4 hereof,
violate any Law, (f) result in a Default under, or otherwise cause an impairment
or a revocation of, any Permit of EU Inc., or (g) result in the creation of any
Lien on any Asset of EU Inc.
2.6 Capitalization; Subsidiaries.
The entire authorized capital stock or other equity interests of EU Inc.
and the number of shares of capital stock or other equity interests which are
issued and outstanding of EU Inc., including the Shares to be issued in
connection with this Agreement, and the record and beneficial owners thereof are
as set forth in Schedule 2.6 attached hereto. All of the outstanding shares of
capital stock and other equity interests of EU Inc. are held free and clear of
all Liens. All of the outstanding shares of capital stock and other equity
interests of EU Inc. are fully paid and non-assessable. None of the outstanding
shares of capital stock and other equity interests of EU Inc. have been issued
in violation of any pre-emptive rights of the current or former
shareholders/partners/members. There are no outstanding equity securities, or
warrants, options, subscriptions, convertible or exchangeable securities or
other Contracts pursuant to which EU Inc. is obligated to issue, sell, purchase,
retire or redeem any shares of capital stock or other equity interests of EU
Inc.
2.7 Changes.
From the effective date of this Agreement through the Closing Date the
business of EU Inc. has been conducted only in the ordinary course of business
and there has not been:
(a) any change in EU Inc.'s authorized or issued capital stock or equity
interests; any grant of any stock option or right to purchase shares of capital
stock or equity interest of EU Inc.; any issuance of any security convertible
into such capital stock or equity interest; any grant of any registration rights
with respect to such stock or equity interest; any dividend or other
distribution or payment in respect of shares of capital stock or equity interest
in EU Inc.; any purchase, redemption, retirement, or other acquisition by EU
Inc. of any shares of its capital stock or equity interests;
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(b) any amendment to the articles of incorporation, bylaws or other
organizational documents of EU Inc.;
(c) any change in the assets, liabilities, financial condition or results
of operations of EU Inc. from that reflected in the Financial Statements, except
changes in the ordinary course of the Business and consistent with past
practices that individually, or in the aggregate, have not had a Material
Adverse Effect;
(d) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the Business, properties or financial
condition of Seller;
(e) any waiver or compromise by Seller of a valuable right or of a
material debt owed to it;
(f) any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by Seller, except in the ordinary course of business
consistent with past practices and that is not material to the Business,
properties or financial condition of Seller;
(g) any new material contract or agreement or any material change to a
material contract or agreement by which Seller or any of its assets is bound or
subject;
(h) any material change in any compensation (including severance and other
benefits), arrangement or agreement with any employee, officer, manager or
member, except changes in the ordinary course of business, consistent with past
practices;
(i) any sale, assignment, transfer or license of any Intellectual Property
or any settlement regarding the breach or infringement of any license or any
Intellectual Property;
(j) any resignation or termination of employment of any officer or key
employee of Seller, and Seller is not aware of any impending resignation or
termination of employment of any such officer or key employee;
(k) any mortgage, pledge, transfer of a security interest in, or Lien,
created by Seller, with respect to any of its material properties or assets,
except Liens for Taxes not yet due or payable;
(l) any loan or guarantee made by Seller to any Person, other than travel
advances and other advances to employees, officers or directors made in the
ordinary course of its business, consistent with past practices;
(m) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of, or third-party doing business with,
Seller;
(n) any declaration, setting aside or payment or other distribution in
respect to any of Seller's capital stock (or any securities convertible into or
exchangeable for any such capital stock), or any direct or indirect redemption,
purchase, or other acquisition of any of such capital stock by Seller;
(o) to Seller's Knowledge, any other event or condition of any character
relating principally to the Business that is reasonably likely to result in a
Material Adverse Effect;
(p) any material transaction or event not in the ordinary course of
business and consistent with past practices; or
(q) any change in any method of accounting or accounting practice,
principles, methods or policies;
(r) any arrangement or commitment by Seller to do any of the things
described in this Section 2.7.
2.8 Taxes.
Seller has timely filed all Tax Returns required to be filed by or on
behalf of EU Inc. for any period on or before the date hereof, taking into
account any extension of time to file that has been granted to or obtained on
behalf of Seller, and all such Tax Returns are correct and complete in all
material respects. Seller has paid when due all Taxes shown as due on such Tax
Returns. All other Taxes that are due (or claimed by any Regulatory Authority to
be due) in connection with EU Inc., that are chargeable as a Lien upon EU Inc.,
or that may become due in connection with EU Inc., have been paid or have been
adequately reserved for in the books and records of Seller. All Taxes required
to be withheld by EU Inc. have been duly withheld and paid to the proper taxing
authority or properly reserved for in accounts for such purpose. No deficiency
for Tax has been asserted or assessed by a taxing authority against EU Inc. No
written document or comparable consent extending or waiving, or having the
effect of extending or waiving, the application of the statute of limitations
with respect to any Taxes or Tax Returns in respect of, or relating to EU Inc.,
and no power of attorney with respect to any such Taxes or Tax Returns, is
currently outstanding, pending or otherwise in effect with the Internal Revenue
Service ("IRS") or any other taxing authority. No Tax Returns or Taxes in
respect of, or relating to EU Inc. are currently under audit by any taxing
authority.
2.9 Financial Statements; Solvency; Current Assets.
(a) Schedule 2.9 shall consist of complete and correct copies of the
unaudited consolidated balance sheet of EU Inc. as of December 31, 2005 and the
related unaudited consolidated statements of income and cash flow from
operations since inception (the "Financial Statements"). The Financial
Statements (i) are in accordance with the books and records of EU Inc., which
have been properly maintained and are complete and correct in all material
respects, (ii) have been prepared in accordance with GAAP consistently applied,
except that the interim Financial Statements are subject to normal and customary
year-end adjustments which will not, in the aggregate, be material, and (iii)
present fairly the financial position of EU Inc. as of the dates indicated and
the results of their operations and cash flows for the periods indicated.
(b) EU Inc. has not admitted in writing its inability to pay its debts,
generally as they become due; filed or consented to the filing against it
respectively of a petition in bankruptcy or a petition to take advantage of an
insolvency act; made an assignment for the benefit of its creditors; consented
to the appointment of a receiver for itself or for the whole or any substantial
part of its property; had a petition in bankruptcy filed against it; been
adjudged a bankrupt or filed a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any law or statute of the
United States of America or any other jurisdiction.
(c) All accounts receivable shown on the Financial Statements represent,
and the accounts receivable of EU Inc. outstanding on the Closing Date will
represent, sales actually made or services actually performed in the ordinary
course of business in bona fide transactions completed in accordance with the
terms and provisions contained in any documents relating thereto. All accounts
receivable shown on the Existing Receivables schedule will be fully collectible
to the extent not reserved for in the Existing Receivables schedule.
(d) All Inventory, except Inventory in transit, whether reflected on the
Financial Statements or subsequently acquired, (i) is now and at the Closing
Date will be located on the Real Property or on the Leased Real Property
consistent with past practices, (ii) to the extent acquired from third parties,
has been or will be acquired by EU Inc. only in bona fide transactions entered
into in the ordinary course of business, (iii) with respect to inventory held
for resale, is valued at Inventory Value, and (iv) unless its Inventory Value is
zero, is useable and salable at no less than Inventory Value in the ordinary
course of business of EU Inc. EU Inc. has now and on the Closing Date will have
valid legal title to its Inventory free and clear of any Liens, other than
Permitted Liens. The quantities of all categories of Inventory are not
excessive, but are reasonable and consistent with past practice. To the
Knowledge of Seller, EU Inc. has no Liability with respect to the return of
Inventory in the possession of customers, except for potential buy backs of
excess inventory in the ordinary course at levels that are consistent with
historic experience and that are not in the aggregate material.
2.10 Absence of Undisclosed Liabilities.
Except as and to the extent accrued or reserved for and disclosed in the
Financial Statements, EU Inc. has no Liabilities, other than those incurred in
the ordinary course of business since the date of its incorporation on August
26, 2005, and not exceeding $10,000 individually and $100,000 in the aggregate.
EU Inc. is not directly or indirectly liable, by guarantee, indemnity, or
otherwise, upon or with respect to, or obligated, by discount or repurchase
agreement or in any other way, to provide funds in respect to, or obligated to
guarantee or assume any Liability of any other Person.
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2.11 Materials Contracts and Agreements.
(a) Except for agreements explicitly set forth in Schedule 2.11(a), there
are no agreements, understandings or proposed transactions between Seller and
any of its officers, directors, members, Affiliates, or any Affiliate thereof.
(b) Except for agreements explicitly set forth in Schedule 2.11(a), there
are no agreements, understandings, instruments, contracts or commitments to
which Seller is a party or by which it is bound that (i) involve obligations
(contingent or otherwise) of, or payments to, Seller in excess of, $25,000, (ii)
involve the license to or from others, or the restriction, of Intellectual
Property, other than end-user licenses granted in the ordinary course of
business consistent with past practices, (iii) involve the grant of rights to
manufacture, produce, assemble, license, market, or sell its products to any
other person or affect Seller's exclusive right to develop, manufacture,
assemble, distribute, market or sell its products, or (iv) are otherwise
material to the Business (collectively, the "Contracts"). All the Contracts are
valid, binding and in full force and effect in all material respects. Neither
Seller nor any of its Affiliates nor, to the Knowledge of Seller, any other
party thereto has materially breached any of the Contracts. Seller has delivered
or made available to Buyer correct and complete copies of each of the Contracts.
(c) Seller does not have any liability or obligation in connection with
any Contract which has been terminated by Seller or for which notice of
termination has been delivered by Seller.
(d) After reasonable inquiry, Seller does not have Knowledge that any of
its employees is obligated under or in violation of any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would materially interfere with the use of such employee's best efforts to
promote the interest of Seller or that would materially conflict with the
Business. Neither the execution or delivery of this Agreement, nor the carrying
on of Seller's Business by the employees of Seller, nor the conduct of Seller's
Business as proposed, will, to Seller's Knowledge after reasonable inquiry,
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any such employee is now obligated.
2.12 Litigation.
Except as set forth on Schedule 2.12, there is no Litigation, proceeding
or investigation pending or, to the Knowledge of Seller, threatened, against
Seller, any of its Affiliates.
2.13 Compliance with Applicable Laws
EU Inc. is in compliance in all material respects with all Laws, and has
not received any written notice alleging any violation of any such Law. EU Inc.
is not currently subject to any fine, penalty, Liability or restriction, which
relates to EU Inc. or its Assets, as a result of a failure to comply with any
Law, nor has EU Inc. received any notice of such non-compliance. EU Inc. has the
Permits listed by its name on Schedule 2.13 which are all of the Permits
necessary to conduct its business in the manner it is presently being conducted,
and all such Permits are valid and in full force and effect. EU Inc. has not
engaged in any activity that is reasonably likely to cause revocation or
suspension of any such Permit and no action or proceeding looking to or
contemplating the revocation or suspension of any such Permit is pending or, to
Knowledge of Seller, threatened.
2.14 Environmental Compliance; OSHA; MSHA.
Hereto,
(a) EU Inc. is, and has been at all times, in material compliance with all
Environmental Laws. EU Inc. has not (i) been notified that it is potentially
liable under or (ii) received any written requests for information or other
correspondence under, any Environmental Law;
(b) EU Inc. has prepared and timely filed with the appropriate
jurisdictions all reports and filings required pursuant to any Environmental
Law, and such reports and filings were accurate in all material respects;
(c) EU Inc. has not entered into or received, nor is EU Inc. in Default
under, any Order (draft or final) relating to environmental protection;
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(d) EU Inc. has obtained all Environmental Permits and has been and is in
material compliance with each such Environmental Permit;
(e) EU Inc. has not been, or is not currently, a "generator" of "hazardous
waste" (as those terms are defined by the Resource Conservation and Recovery Act
of 1976, or any analogous state, and the regulations promulgated thereunder);
(f) All waste containing any Hazardous Material disposed at off-site
locations by EU Inc., or sent by EU Inc. for disposal at an off-site location,
has been released or disposed of in compliance with applicable reporting
requirements under Environmental Laws, and there are not any environmental
claims, requests for information from a Governmental Authority or written
demands to take response, removal, corrective, remedial or other responsive
action or to pay for the costs of any such action at the site with respect to
any such release or disposal;
(g) There is no Litigation pending or, to Seller' Knowledge, threatened by
any Governmental Authority or other Person, against EU Inc. or any Seller
relating to environmental protection, compliance with Environmental Laws, or the
condition of the Leased Real Property or the Real Property or, to the Actual
Knowledge of Seller, any real property previously owned, operated or leased by
EU Inc.;
(h) (i) There are no Hazardous Materials (A) at, on, in, above or under
the Real Property, the Leased Real Property or any real property previously
owned, operated or leased by EU Inc., (B) originating or emanating from any
other property that are present in, on, under or above the Real Property, the
Leased Real Property or any real property previously owned, operated or leased
by EU Inc., or (C) originating or emanating from the Real Property, the Leased
Real Property or any real property previously owned, operated or leased by EU
Inc. that are present in, on, under or above any other property, and (ii) no
Hazardous Materials have ever been generated, treated, stored, disposed of,
handled on, spilled, discharged or released on or from or removed from the Real
Property, the Leased Real Property or any real property previously owned,
operated or leased by EU Inc.;
(i) To the Knowledge of Seller, no audit or other investigation has been
conducted as to environmental matters at the Leased Real Property or the Real
Property other than Phase 1s in the ordinary course of business and Buyer's
diligence inquiries;
(j) EU Inc. has not operated, nor, to Seller' Knowledge has a third party
operated, an underground storage tank on the Real Property or the Leased Real
Property, and, to Seller' Knowledge, no underground storage tanks are located
on, nor have any underground storage tanks been removed from, the Real Property
or the Leased Real Property or to Seller' Actual Knowledge any real property
previously owned, operated or leased by EU Inc.;
(k) To the extent in the possession or control of the Seller, Seller have
provided to Buyer true and complete copies of all reports and other
documentation regarding any environmental assessment, testing or sampling at or
with respect to the Real Property or the Leased Real Property or any real
property previously owned, operated or leased by EU Inc.; and
(l) EU Inc. is in compliance, and has at all times been in compliance, in
all material respects, with the Occupational Safety and Health Act, 29 U.S.C.
▇▇.▇▇. 651, et seq., and with the Mined Safety Health Act, 30 U.S.C. ▇▇.▇▇. 801,
et seq.
2.15 Leases, Other Real Property.
(a) No real property, or interest in real property, is used in the
operation of EU Inc. except for the Leased Premises, listed on Schedule 2.15(a).
Seller has delivered to Buyer correct and complete copies of the Leases.
(b) Each Lease is the legal, valid and binding obligation of Seller and,
to Seller's Knowledge, the other signatories thereto, and each is enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws from time to time in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies. Seller has
performed in all material respects all obligations required to be performed by
it under the Leases and is not in default thereunder, and no event has occurred
which, with the lapse of time or action by a third party could result in a
default by Seller, or, to Seller's Knowledge, by any other party thereto, under
any Lease. Seller enjoys peaceful and undisturbed possession of the Leased
Premises under its Leases.
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(c) To Seller's Knowledge, each of the Leased Premises is in compliance
with all Applicable Law, including applicable building, zoning, subdivision and
other land use and similar laws and regulations affecting the Real Property
(collectively, "Real Property Laws"), except to the extent that the failure to
be in compliance with such Real Property Laws would not be reasonably likely to
have a Material Adverse Effect, and Seller has not received any notice of
violation or claimed violation and, to the Knowledge of Seller, no violation is
threatened in respect of any Real Property Law.
(d) Seller has no Knowledge that (i) any real property taxes, sales levies
or assessments with respect to the Leased Premises which are payable by Seller
have not been paid in full or (ii) any proceedings with respect thereto have
been commenced.
(e) Schedule 2.15(e) sets forth a list and location of all Personal
Property of EU Inc. having an original or replacement value greater than $5,000.
EU Inc. (i) has good and valid title to all of the Personal Property it purports
to own and (ii) owns such Personal Property free and clear of all Liens except
for Permitted Liens. All of the Personal Property, whether owned or leased, by
EU Inc. are in the possession and control of EU Inc., and, if leased, is leased
subject to one or more of the valid and binding leases listed on Schedule
2.11(a). No Seller, third party or Affiliate of any Seller has any claim or
interest in any of the Personal Property of EU Inc..
(f) The Assets of EU Inc. are in good operating condition and repair,
ordinary wear and tear excepted, and such Assets include all rights, properties,
interest in properties and other Assets necessary to permit EU Inc. to continue
its business after the Closing Date as presently conducted. The Seller have no
Actual Knowledge of any present or future condition or state of facts or
circumstances that would prevent EU Inc. from carrying on its business after the
Closing Date in the same manner as it is presently being carried on. EU Inc. has
only conducted its business under such names and at such locations as are
identified on Schedule 2.15(f) and all of the Assets of EU Inc. are currently
located at those locations identified on Schedule 2.15(f).
2.16 Intellectual Property.
(a) Schedule 2.16 sets forth a complete and accurate list of all patents,
trademarks, trade names, service marks, domain names, copyrights and computer
software (excluding commonly available software acquired via shrink wrap
licenses) used in the conduct of the business of EU Inc.. Except as set forth on
Schedule 2.16, EU Inc. owns or has the uncontested right to use all Intellectual
Property necessary for the conduct of its business as presently conducted. For
purposes of this Agreement, the term "Intellectual Property" shall mean,
collectively, patents, designs, inventions, trademarks, trade names, domain
names, service marks, copyrights, computer software, manufacturing processes and
confidential or proprietary information.
(b) No claim is pending, or to the Knowledge of Seller threatened, and
Seller has not received any written notice that the conduct of EU Inc.'s
business (including without limitation, its use of any Intellectual Property)
infringes upon, misappropriates or conflicts with any rights in Intellectual
Property claimed by any third party. No claim is pending, or to the Knowledge of
Seller threatened, which alleges that any Intellectual Property owned or
licensed by or to EU Inc. or which EU Inc. otherwise has the right to use is
invalid or unenforceable by EU Inc.
(c) Except as set forth in Material Contracts listed on Schedule 2.11(a),
no royalties or fees are payable by EU Inc. to anyone for use of any
Intellectual Property.
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2.17 Employee Benefit Plans; ERISA.
(a) Schedule 2.17 lists and identifies each Employee Benefit Plan
maintained or contributed to by Seller, or under which Seller has any liability
or contingent liability, that provides or may provide benefits or compensation
in respect of any Employee or former Employee of Seller or the beneficiaries or
dependents of any such Employee or former Employee or under which any Employee
is or may become eligible to participate or derive a benefit and that is or has
been maintained or established by Seller. Seller has provided or made available
to the Buyer complete and correct copies of: (i) such Employee Benefit Plan, if
written, or a description of such Employee Benefit Plan if not written, and (ii)
to the extent applicable to such Employee Benefit Plan, all trust agreements,
insurance contracts or other funding arrangements, the two lost recent trust
reports, the two most recent Forms 5500 required to have been filed with the IRS
and all schedules thereto, the most recent IRS determination letter, all current
summary plan descriptions, all material communications received from or sent to
the IRS or the Department of Labor (including a written description of any oral
communication), if any, and all amendments and modifications to any such
document. Seller has not communicated to any Employee any binding commitment to
modify any Employee Benefit Plan or to establish or implement any other employee
or retiree benefit compensation plan or arrangement.
(b) Each Employee Benefit Plan is in material compliance with Applicable
Laws and has been and currently is administered and operated in accordance with
its terms in all material respects. Each Employee Benefit Plan which is intended
to be `qualified' within the meaning of section 401(a) of the Code has received
a favorable determination letter from the IRS or is within the remedial
amendment period with respect to such plan's qualified status since the plan's
inception or the most recent determination letter, and no event has occurred and
no condition exists which could reasonably be expected to result in the
revocation of any such determination. There are no material pending or, to
Seller's Knowledge, threatened claims by or on behalf of any of the Employee
Benefit Plans, by any Employee or otherwise involving any such Employee Benefit
Plan or the assets of any Employee Benefit Plan (other than routine claims for
benefits).
(c) No Employee Benefit Plan is a "multiemployer plan" within the meaning
of section 4001(a)(3) of ERISA or a "multiple employer plan" as addressed in
section 413 of the Code. None of the Employee Benefit Plans, now, or within the
preceding six years, is or has been subject to Title IV of ERISA. None of
Seller, or any entity required to be aggregated with Seller for purposes of
section 414 of the Code or section 4001 of ERISA ("Related Persons") has ever
maintained, contributed to, or had any liability for any employee pension
benefit plan (as defined in section 3(2) of ERISA) that is or has been subject
to Title IV of ERISA.
(d) Neither Seller nor any Related Person has incurred (either directly or
indirectly, including as a result of an indemnification obligation) any material
liability under or pursuant to Title I or IV of ERISA or the penalty, excise Tax
or joint and several liability provisions of the Code relating to Employee
Benefit Plan and, to the Knowledge of Seller after due inquiry, no event,
transaction or condition has occurred or exists that could result in any such
liability to Seller any such Related Person or, following the Closing, the Buyer
or any of its Affiliates. All required contributions to, and all payments with
respect to, the Employee Benefit Plans have been timely made.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee, officer, or director of
Seller to any severance or termination pay, or (ii) increase the amount of or
accelerate the time of payment of any compensation due any such employee,
officer, or director.
2.18 Labor Matters, etc.
Seller is not a party to or bound by any collective bargaining agreement
and there are no labor unions or other organizations representing, purporting to
represent or attempting to represent any employees employed in the operation of
EU Inc. There has not occurred or, to the Knowledge of Seller, been threatened
any material strike, slowdown, picketing, work stoppage, concerted refusal to
work overtime or other similar labor activity with respect to any employees
employed in the operation of EU Inc. There are no labor disputes currently
subject to any grievance procedure, arbitration or litigation and there is no
representation petition or, to the Knowledge of Seller, no representation
application pending or threatened with respect to any employee employed in the
operation of EU Inc. Seller has complied with all provisions of Applicable Laws
pertaining to the employment of employees, including, without limitation, all
such Applicable Laws relating to labor relations, equal employment, fair
employment practices, entitlements, prohibited discrimination or other similar
employment practices or acts, except to the extent the failure to comply with
such Applicable Laws would not be reasonably likely to have a Material Adverse
Effect.
9
2.19 Business Relationships.
The relationships between EU Inc. and all customers, clients, third party
payors, suppliers, vendors, employees and those others who receive goods and
services from or provide goods and services to EU Inc. are in the reasonable,
good faith judgment of Seller, satisfactory, and EU Inc. has no Knowledge of (a)
any facts or circumstances which could reasonably be expected to materially
alter, negate, impair or in any way adversely affect the continuity of any such
relationships, excluding any event, occurrence or condition to the extent it
results from changes in the Nevada economy in general or (b) any material
complaints, claims, threats, plans or intentions to discontinue or curtail
relations under any such relationships. EU Inc. is not required, in the ordinary
course of business, to provide any bonding or any other financial security
arrangements in connection with its transactions with any customer or supplier.
2.20 Insurance Policies.
All of the Assets, employees and operations of EU Inc. are insured under
various policies of general liability and other forms of insurance, which
policies are of the type and in the amounts in the reasonable, good faith
judgment of Seller customary and adequate for the business of EU Inc.. Correct
and complete copies of all current insurance policies and certificates of EU
Inc. have been delivered to Buyer prior to the date of this Agreement and all
current policies are in full force and effect and enforceable in accordance with
their terms. EU Inc. is not in Default regarding the provisions of any such
policy, including, without limitation, failure to make timely payment of all
premiums due thereon. To the Knowledge of the Seller', EU Inc. has never been
refused, or denied renewal of, any insurance coverage by insurance companies
offering such insurance. Seller have provided to Buyer copies of all insurance
audit reports, loss prevention reports, all claims made and loss history reports
in respect of any insurance maintained by EU Inc. or any predecessor thereof
during the past five (5) years.
2.21 Related Party Transactions.
Except as set forth on Schedule 2.21 there are no existing arrangements or
proposed transactions (a) between EU Inc., and (i) any Seller or any officer or
director of EU Inc. or any member of the immediate family of any of the
foregoing persons (such Seller, officers, directors and family members being
hereinafter individually referred to as a "Related Party"), or (ii) any business
(corporate or otherwise) which a Related Party owns, or controls directly or
indirectly, or in which a Related Party has an ownership interest, or (b)
between any Related Party and any business (corporate or otherwise) with which
EU Inc. regularly does business material to the operations of EU Inc.
2.22 Brokerage and Financial Advisors.
No broker, finder or financial adviser has acted directly or indirectly as
such for, or is entitled to any compensation from, the Seller or their
Affiliates in connection with this Agreement or the transactions contemplated
hereby.
2.23 Warranties True and Correct.
No warranty or representation by the Seller contained in this Agreement,
the exhibits or schedules attached hereto, or in any Ancillary Agreement taking
into account Knowledge, Actual Knowledge and materiality qualifying language,
contains or will contain any untrue statement of fact or omits or will omit to
state any material fact required to make the statements therein contained, in
light of the circumstances in which they were made, not misleading.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller as follows:
3.1 Status.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all requisite power and
authority required to carry on its business as now conducted.
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3.2 Authority.
Buyer has the power and authority to execute and deliver this Agreement
and the other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. All company actions and
proceedings necessary to be taken by or on the part of the Buyer in connection
with this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby have been or will prior to the Closing be duly
and validly taken. This Agreement has been, and at the Closing the other
Transaction Documents will be, duly and validly executed and delivered by Buyer
and shall constitute the legal, valid and binding obligations of Buyer,
enforceable against it in accordance with and subject to their terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws from time to time in effect
affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
3.3 Non-Contravention, Approvals and Consents.
(a) Neither the execution and delivery by Buyer of this Agreement and the
other Transaction Documents to which it is a party nor the consummation of the
transactions contemplated hereby and thereby is an event that, in and of itself
or with the giving of notice or the passage of time or both, will (i) conflict
with the Buyer's organizational documents, (ii) constitute a violation of, or
conflict with or result in any breach of or any default under, or constitute
grounds for termination or acceleration of, any material agreement or instrument
to which Buyer is a party or by which Buyer is bound or (iii) violate any
Governmental Approval, material judgment, decree or order or statute, rule or
regulation applicable to Buyer.
(b) Neither Buyer nor any of its Affiliates nor any of their respective
officers, directors or managing employees is required to obtain any material
license, approval or consent from, or give any notice or make any other filing
with respect to, any Regulatory Authority in connection with the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents, except for approvals allowing Buyer to assume and perform, or
novations of, the Government Contracts.
ARTICLE 4 COVENANTS
From the date of this Agreement until the completion of the Closing,
subject to the requirements of Applicable Law and Regulatory Authorities, Seller
shall comply with the covenants set forth in this Article 4.
4.1 Operation of the Business.
Seller shall cause the Business to continue to be carried on in the
ordinary course and consistent with past practices in compliance in all material
respects with all Applicable Laws and Seller shall use commercially reasonable
efforts to preserve the Business, its operations and employees and the goodwill
of its customers and others having business relations with it. Without limiting
the generality of the foregoing, without the prior written consent of Buyer,
Seller covenants and agrees that Seller will not do or agree to do any of the
following (other than in the ordinary course of business consistent with
Seller's past practices) on or before the Closing:
(a) grant any increase in salary, fringe benefits or other compensation
payable, or to become payable, by Seller to any officer, employee, agent or
representative of Seller;
(b) enter into any contract, commitment or transaction;
(c) make capital expenditures on or lease any items of capital equipment
having a cost in excess of $15,000 in the aggregate;
(d) sell or dispose of any capital equipment other than capital equipment
which is worn out or obsolete;
(e) waive, cancel or compromise any material right or claim of Seller;
(f) modify, amend, cancel or terminate any material contract or agreement
by which Seller or any of its assets is bound; or
(g) knowingly take any action that would cause any of the representations
and warranties set forth in Article 2 to be untrue in any material respect.
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Seller covenants and agrees that Seller will do or agree to do the
following continuously until the Closing:
(i) conduct all Tax affairs relating to Seller other than in substantially
the same manner as such affairs would have been conducted if the parties had not
entered into this Agreement.
4.2 Application for Regulatory Consent and Licenses.
To the extent that Buyer or its Affiliates requires any license or other
approvals, consents or authorizations from, or is required to give or make any
notices to or filings with respect to, any Regulatory Authority to permit Buyer
or its Affiliates to conduct the Business from and after the Closing Date,
including, without limitation, any relating to the Government Contracts, Seller
shall use all commercially reasonable efforts, as promptly as practicable after
the date of this Agreement, and in no event later than fifteen (15) days after
the date of this Agreement, to assist Buyer in the filing of all requisite
applications and make all other requisite filings with the appropriate
Regulatory Authorities in all cases at Buyer's expense. Seller shall diligently
assist Buyer in taking all steps (at Buyer's expense) that are necessary, proper
or desirable to expedite the preparation of such regulatory and license
applications and filings and their prosecution to a favorable conclusion. Seller
will promptly provide Buyer with copies of any application, amendment, pleading,
notice, order, request for additional information or other document filed by it
or served on it relating to such applications. Buyer shall cooperate with Seller
and provide to Seller all information regarding the Business reasonably required
by Seller for use in connection with such applications and filings.
4.3 Access to Facilities, Files and Records.
During the Due Diligence Period (as that term is defined in Section 8.1)
and in addition to its obligations of disclosure contained in this Agreement,
the Seller and its Affiliates will give or cause to be given to the officers,
employees, accountants, counsel and authorized representatives of Buyer (a)
reasonable access during normal business hours upon reasonable prior notice to
the management personnel, property, and provide copies of the Contracts, Leases
and other records and files relating to the Business and Buyer's due diligence
thereof, other than matters which, by their terms, are subject to
confidentiality agreements with third parties or which are documents subject to
the attorney-client privilege which matters will be disclosed and shall be
reasonably satisfactory to Seller as a condition to Closing, and (b) all such
other information solely relating to the transactions contemplated by this
Agreement as Buyer may reasonably request.
4.4 Notice of Proceedings.
Seller will promptly notify Buyer in writing upon (a) becoming aware of
any order or decree or any complaint praying for any order or decree restraining
or enjoining the execution of this Agreement or the consummation of the
transactions contemplated hereunder, or (b) receiving any notice from any court
or any Regulatory Authority of its intention (i) to institute a suit or
proceeding to restrain or enjoin the execution of this Agreement or the
consummation of the transactions contemplated by this Agreement, or (ii) to
nullify or render ineffective this Agreement if executed or such transactions if
consummated.
4.5 Reasonable Commercial Efforts.
Subject to the terms of this Agreement, Seller agrees, at its sole
expense, to use its reasonable commercial efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary under Applicable Laws to permit consummation of the transactions
contemplated hereby and by the other Transaction Documents as promptly as
practicable and otherwise enable consummation of the transactions contemplated
hereby, including satisfaction of the conditions set forth in Section 5.2
hereof, and shall cooperate fully with Buyer to that end.
4.6 Notification of Certain Matters.
Seller shall give prompt notice to Buyer of any fact, event or
circumstance known to it that (a) is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect or (b) would cause or constitute a breach of any
of its representations, warranties, covenants or agreements contained herein.
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4.7 Expenses.
Except as otherwise specifically provided in this Agreement, the parties
to this Agreement shall bear their respective expenses incurred in connection
with the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including, without limitation, all fees and
expenses of agents, representatives, counsel, investment bankers, actuaries and
accountants, and all such expenses of EU Inc. shall be either paid in full prior
to Closing or EU Inc shall procure that such expenses shall be paid by the EU
Shareholders.
ARTICLE 5 CONDITIONS TO CLOSING
5.1 Conditions to Obligations of Each Party.
The respective obligations of each party to consummate the transactions
contemplated hereby are subject to completion of their Due Diligence obligations
(as defined in Article 8) and the further fulfillment prior to or at Closing of
the following conditions and the conditions set forth in Sections 5.2 and 5.3,
unless waived by the Seller and Buyer in writing:
(a) No action, proceeding, investigation or legislation shall have been
instituted, threatened or proposed before any Governmental Body to enjoin,
restrain, prohibit or obtain substantial damages in respect of this Agreement or
the consummation of the transactions contemplated hereunder; and
(b) The completion and execution of any and all agreements and/or
modifications to agreements that may be identified in the Due Diligence carried
out by the Buyer that will establish, secure, define or otherwise contribute to
the proposed business of EU Inc in accordance with the intentions of the
parties.
5.2 Conditions to the Obligations of Seller.
The obligations of the Seller to consummate the transactions contemplated
hereby are subject to the fulfillment prior to or at Closing of the following
conditions, unless waived by the Seller in writing:
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing shall
have been duly performed and complied with in all material respects;
(b) Each of Buyer's representations and warranties contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as if made on the Closing Date (except
as to any representation or warranty that specifically relates to an earlier
date, which shall be true and correct in all respects only as of such date or
time period); provided that any such representation or warranty with a
qualification or limitation by reference to the materiality of matters stated
therein or as to matters having or not having a Material Adverse Effect or words
of similar effect shall be true and correct in all respects; and
(c) Seller shall have received from Buyer a certificate signed by a duly
authorized officer of Buyer to the effect that the conditions set forth in
Section 5.2(a) and (b) have been satisfied.
(d) Seller shall have received from Buyer a certified copy of the
resolutions duly adopted by CTC's board of directors approving the execution and
delivery of this Agreement and the Transaction Documents and the consummation of
the transactions contemplated hereby and thereby.
5.3 Conditions to Obligations of Buyer.
The obligations of Buyer to consummate the transactions contemplated
hereby are subject to the fulfillment prior to or at Closing of the following
conditions, unless waived by Buyer in writing:
(a) All of the covenants and obligations that EU Inc. are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
shall have been duly performed and complied with in all material respects;
(b) Each Seller's representations and warranties contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as if made on the Closing Date (except
as to any representation or warranty that specifically relates to an earlier
date, which shall be true and correct in all respects only as of such date or
time period); provided that any such representation or warranty with a
qualification or limitation by reference to the materiality of matters stated
therein or as to matters having or not having a Material Adverse Effect or words
of similar effect shall be true and correct in all respects;
13
(c) Buyer shall have received from the Seller each of the following:
(i) A certificate signed by the Seller to the effect that the
conditions set forth in Section 5.3(a) and (b) have been satisfied;
(ii) A certified copy of the resolutions duly adopted by EU Inc.'s
board of directors approving the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby;
(iii) A certificate of good standing regarding EU Inc. certified by
the Secretary of State of the State of Nevada dated not more than seven (7)
business days prior to the Closing;
(iv) A copy of the charter, articles of incorporation, bylaws and/or
other organizational and governing documents of EU Inc., certified as true and
in full force and effect as of the Closing by such EU Inc.'s Secretary or other
duly authorized representative;
(v) Complete copies of all shareholders' and directors' resolutions
since the incorporation of EU Inc.;
(vi) Documentation duly executed and evidencing conveyance of
unencumbered title to the Shares to the Buyer together with a certified copy of
the entire share transfer log showing the transfer as well as all other prior
issuances and transfers;
(vii) A certified copy of the minutes of a Shareholders' Meeting
held on the date of the Closing that shall implement the following resolutions:
i. Nomination of the new directors of the EU Inc. whose
identities have been agreed prior to closing;
ii. Any initial changes to the Bylaws of EU Inc that have
been agreed prior to closing.
(viii) A certified copy a resolution of the Board of Directors of EU
Inc. that shall implement the following resolutions:
i. Nomination of all of the officers of EU Inc. to their
respective positions, including as a minimum, persons to
assume the roles of the President/Chief Executive
Officer, the Corporate Secretary, the Treasurer/Senior
Financial Officer;
ii. Location of the US head office of EU Inc. together with
a decision to apply to do business within the State in
which such office is located and authorization for
filing the same;
iii. Establishment of the Financial year of EU Inc;
iv. Appointment of the auditors of EU Inc;
v. Approval of any important operating matters that have
been identified and agreed during due diligence
(ix) An executed original of the Shareholders' Agreement as
contemplated herein;
(x) A certificate attesting to the accuracy and completeness at the
Effective Time of (1) the list of all of the assets of EU Inc appended thereto
and (2) the list of all of the agreements to which EU Inc is a party or by which
it may be bound (with copies of all such written agreements appended thereto);
(xi) An opinion of counsel to Seller substantially in the form
attached hereto as Exhibit 5.3(c)(vi);
(d) There shall not have been any Material Adverse Effect with respect to
EU Inc. or their Assets between the date hereof and the Closing Date, and Buyer
shall have received a certificate dated as of the Closing Date, signed by the
Seller to such effect.
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ARTICLE 6 TERMINATION
6.1 Termination by Mutual Consent.
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned at any time prior to the Closing pursuant to the terms of
Section 8.1 or by mutual written consent of Seller and Buyer.
6.2 Termination by Either Seller or Buyers.
This Agreement may be terminated and the transactions contemplated hereby
abandoned (a) on written notice by either the Seller or Buyer if the Closing
shall not have occurred by May 1, 2006 (the "Termination Date"), provided
however, that any cure period provided to any party pursuant to Sections 4.3 and
6.4 shall move the Termination Date to another date that is the same number of
days removed from any fixed Termination Date as the length of such cure period;
(b) on written notice by either the Seller or Buyer if any Order permanently
restraining, enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Agreement shall become final and non-appealable; provided,
that the right to terminate this Agreement pursuant to clause (a) above shall
not be available to Seller if Seller, or to Buyer if Buyer, has breached in any
material respect his or its obligations under this Agreement in any manner that
shall have proximately contributed to the occurrence of the failure of the
transactions contemplated by this Agreement to be consummated.
6.3 Termination by Seller.
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date by the Seller on written notice
to Buyer if (i) any condition in Section 5.1 or Section 5.2 is not performed
(other than as a result of a Default by Seller in the performance of its
obligations hereunder) and the performance of such condition has not been waived
by Seller in writing at or prior to the Closing Date, or (ii) there has been a
material breach by Buyer of any representation, warranty, covenant or agreement
contained in this Agreement that is not curable or, if curable, is not cured
within 20 business days after written notice of such breach is given by Seller
to Buyer.
6.4 Termination by Buyer.
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date by Buyer on written notice to
Seller if (i) any condition in Section 5.1 or Section 5.3 is not performed
(other than as a result of a Default by Buyer in the performance of its
obligations hereunder) and the performance of such condition has not been waived
by Buyer in writing at or prior to the Closing Date, (ii) there has been a
material breach by Seller of any representation, warranty, covenant or agreement
contained in this Agreement that is not curable or, if curable, is not cured
within 20 business days after written notice of such breach is given by Buyer to
the Seller, or (iii) any condition in Section 8.1 is unsatisfactory to Buyer, at
Buyer's sole discretion.
6.5 Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandonment of the
transactions pursuant to this Article 6, this Agreement shall become void and of
no effect; provided, however, that the provisions of this Section 6.5, and
Articles 7, 9 and 10 (excluding Section 9.10) shall survive any such
termination, and any such termination shall not relieve any party hereto of any
Liability for damages resulting from any prior breach of this Agreement.
ARTICLE 7 INDEMNIFICATION
7.1 Survival.
All agreements, covenants, representations and warranties made by Seller
in this Agreement or pursuant hereto or in any certificate delivered pursuant
hereto shall survive the Closing Date for the time periods indicated in this
Article 7. The representations, warranties, covenants and agreements made by any
of the Seller shall not be affected or deemed waived by reason of the fact that
Buyer or its Representatives should have known that any such representations,
warranties, covenants or agreements are or might be inaccurate in any respect.
Any furnishing of information to Buyer by Seller or their respective
Representatives, pursuant to, or otherwise in connection with, this Agreement
shall not waive Buyer's right to rely on any representation, warranty, covenant
or agreement made by any of the Seller.
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7.2 Agreement of Seller to Indemnify.
Subject to the provisions of this Article 7, regardless of any
investigation (including any environmental investigation or assessment or any
due diligence review or investigation) conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time before or after
the execution and delivery of this Agreement, the Seller agrees to indemnify,
defend, and hold harmless the Buyer Group from, against, for, and in respect of
any and all Losses asserted against, imposed upon, or incurred by the Buyer
Group by reason of, resulting from, based upon, or arising out of:
(a) the breach of any representation or warranty of any Seller contained
in or made pursuant to this Agreement, any Ancillary Agreement or in any
certificate, Schedule, or Exhibit attached hereto or specifically required to be
delivered hereunder. For purposes of determining whether any Seller has breached
any such representation or warranty, any qualification or limitation of such
representation or warranty by reference to the materiality of matters stated
therein or as to matters having or not having a Material Adverse Effect or words
of similar effect shall be disregarded;
(b) the breach or non-fulfillment of any covenant or agreement of any
Seller contained in or made pursuant to this Agreement, any Ancillary Agreement
or in any certificate, Schedule, or Exhibit attached hereto or specifically
required to be delivered hereunder;
(c) any brokerage or finder's fees or commissions or similar payments due
in respect of the transactions contemplated hereto based on contracts or
understandings with Seller;
(d) a failure to file or an incomplete filing of any Form 5500 for the
Employee Benefit Plans that should have been filed with the Internal Revenue
Service on or prior to the Closing Date, including any sanctions or penalties
imposed and any costs incurred in the preparation of such Form 5500;
(e) any failure to maintain a signed written plan document for any Code
Section 125 plan;
(f) any Litigation listed on Schedule 2.12.
7.3 Agreement of Buyer to Indemnify.
Subject to the terms and conditions of this Article 7, regardless of any
investigation (including any environmental investigation or assessment or any
due diligence review or investigation) conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time before or after
the execution and delivery of this Agreement, Buyer agrees to indemnify, defend,
and hold harmless the Seller Group from, against, for, and in respect of any and
all Losses asserted against, imposed upon, or incurred by the Seller Group by
reason of, resulting from, based upon, or arising out of:
(a) the breach of any representation or warranty of Buyer contained in or
made pursuant to this Agreement, any Ancillary Agreement or in any certificate,
Schedule, or Exhibit furnished by Buyer in connection herewith or therewith. For
purposes of determining whether Buyer has breached any such representation or
warranty, any qualification or limitation of such representation or warranty by
reference to the materiality of matters stated therein or as to matters having
or not having a Material Adverse Effect or words of similar effect shall be
disregarded;
(b) the breach or non-fulfillment of any covenant or agreement of Buyer
contained in or made pursuant to this Agreement, any Ancillary Agreement or in
any certificate, Schedule, or Exhibit furnished by Buyer in connection herewith
or therewith; and
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7.4 Procedures for Indemnification.
(a) An Indemnification Claim shall be made by the Indemnitee by delivery
of a written declaration to the Indemnitor requesting indemnification and
specifying in reasonable detail the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim, attaching
any written correspondence asserting such Third Party Claim. With respect to a
Third Party Claim, an Indemnitee shall deliver such declaration to Indemnitor
promptly after receiving notice of such Third Party Claim; provided, however,
the failure to notify the Indemnitee will not relieve the Indemnitor of any
liability that it may have to the Indemnitee, except to the extent that the
Indemnitor's defense of or ability to settle such Indemnification Claim is
actually and materially prejudiced by the Indemnitee's failure to give such
notice.
(b) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 7.5 hereof shall be observed by the Indemnitee
and the Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor shall have twenty (20) Business Days to object to
such Indemnification Claim by delivery of a written notice of such objection to
the Indemnitee specifying in reasonable detail the basis for such objection. If
an objection is timely interposed by the Indemnitor, then the Indemnitee and the
Indemnitor shall negotiate in good faith for a period of fifteen (15) Business
Days from the date (such period is hereinafter referred to as the "Negotiation
Period") the Indemnitee receives such objection. After the Negotiation Period,
if the Indemnitor and the Indemnitee still cannot agree on an Indemnification
Claim, either the Indemnitor and Indemnitee may commence litigation regarding
the dispute.
(d) Upon determination of the amount of an Indemnification Claim that is
binding on both the Indemnitor and the Indemnitee, the Indemnitor shall pay the
amount of such Indemnification Claim by wire transfer of immediately available
funds within ten (10) days of the date such amount is determined.
7.5 Defense of Third Party Claims.
The Indemnitor shall have the right, upon receipt of the Indemnification
Claim involving a Third Party Claim and at its expense using counsel reasonably
satisfactory to the Indemnitee, to defend such Third Party Claim actively and
diligently, and in such manner as to minimize the risk of the Indemnitee
becoming subject to Liability for any other significant matter, in its own name
or, if necessary, in the name of the Indemnitee; provided however, that the
assumption of the defense by the Indemnitor of a Third Party Claim shall
constitute a final and binding acknowledgment by the Indemnifying Party that it
is obligated under this Article 7 to indemnify the Indemnitee in respect of such
Third Party Claim. If an Indemnitor assumes the defense of such Third Party
Claim, the Indemnitee will cooperate with and make available to the Indemnitor
such assistance and materials as may be reasonably requested of it, and the
Indemnitee shall have the right, at its expense, to participate in the defense.
The Indemnitor shall have the right to settle and compromise such claim only
with the consent of the Indemnitee (which consent shall not be unreasonably
withheld or delayed) unless the sole relief provided is monetary damages that
are paid in full by the Indemnitor and such settlement includes an unconditional
term releasing the Indemnitee from all Liability.
In the event the Indemnitor shall notify the Indemnitee that it does not
wish to defend the Third Party Claim, or if the Indemnitor fails to undertake
the defense or to notify the Indemnitee within ten (10) days of the
Indemnification Claim that it is undertaking the defense, then the Indemnitee
shall have the right to conduct a defense against such Third Party Claim. In
addition, and Section 7.5(a) notwithstanding, if a Third Party Claim involves,
in the Indemnitee's reasonable opinion, a matter that could have a material
adverse effect on the business, operations, prospects or Assets of the
Indemnitee, then the Indemnitee shall have the right to the defense of the Third
Party Claim. All costs, expenses and fees, including all reasonable attorneys'
fees which may be incurred by the Indemnitee in connection with conducting the
defense, compromise or settlement of Third Party Claims referenced in this
Section 7.5(b) shall be included as part of the indemnification obligations of
the Indemnitor hereunder to the extent that the Indemnitee is entitled to
indemnification. The Indemnitee shall have the right to settle and compromise
the Third Party Claims referenced in this Section 7.5(b) if it acts reasonably
and in good faith upon ten (10) days notice to, but without the consent of, the
Indemnitor.
With respect to Seller' indemnification of Buyer Group for the Litigation
listed on Schedule 2.12, the parties acknowledge and agree that Buyer and EU
Inc., together with any relevant insurance companies, shall control the defense
of such Third Party Claims, and provided that Buyer shall not agree to any
settlement of any such Litigation without the prior written consent of Seller,
not to be unreasonably denied, if such settlement creates any Liabilities for
the Seller.
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7.6 General Tax Indemnity.
Notwithstanding anything to the contrary in the Agreement, the Seller
shall indemnify the Buyer Group and hold them harmless from and against (without
duplication), any and all Losses attributable to (i) all Taxes (or the
non-payment thereof) of EU Inc. for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable
period that includes (but does not end on) the Closing Date ("Pre-Closing Tax
Period"), (ii) all Taxes of any member of an affiliated, consolidated, combined
or unitary group of which EU Inc. (or any predecessor of any of the foregoing)
is or was a member on or prior to the Closing Date, including pursuant to
Treasury Regulation ss.1.1502-6 or any analogous or similar state, local, or
foreign law or regulation, and (iii) any and all Taxes of any person (other than
EU Inc.) imposed on EU Inc. as a transferee or successor, by contract or
pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before the Closing. Seller shall reimburse Buyer for any
Taxes of EU Inc. which are the responsibility of Seller pursuant to this Section
7.6 within fifteen (15) business days after payment of such Taxes by Buyer or EU
Inc. For purposes of this Agreement, in the case of any Taxable period that
includes (but does not end on) the Closing Date (a "Straddle Period"), the
amount of any Taxes based on or measured by income or receipts of EU Inc. for
the Pre-Closing Tax Period shall be determined based on an interim closing of
the books as of the close of business on the Closing Date (and for such purpose,
the taxable period of any partnership or other pass-through entity in which EU
Inc. holds a beneficial interest shall be deemed to terminate at such time) and
the amount of other Taxes of EU Inc. for a Straddle Period which relate to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the
entire Taxable period multiplied by a fraction the numerator of which is the
number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.
7.7 Limitations.
Seller shall be obligated to indemnify the Buyer Group under Section
7.2(a) only when the aggregate of all Losses suffered or incurred by the Buyer
Group as to which a right of indemnification is provided solely under Section
7.2(a) exceeds Two Hundred Thousand Dollars ($200,000) (the "Threshold Amount");
provided, however, that the Threshold Amount shall not apply to claims for
breach of Sections 2.1 and 2.6. After the aggregate of all such Losses suffered
or incurred by the Buyer Group exceeds the Threshold Amount, the Seller shall be
obligated to indemnify the Indemnitee to the full extent of such Losses in
excess of the Threshold Amount. The aggregate Liability of the Seller under
Section 7.2(a): (i) with respect to claims for breach of any representation or
warranty other than those contained in Sections 2.1, 2.6, 2.8 and 2.14, shall
not exceed Five Million Dollars ($5,000,000); (ii) with respect to claims for
breach of any representation or warranty in Section 2.14, shall not exceed Five
Million Dollars ($5,000,000); and (iii) with respect to Sections 2.1, 2.6 and
2.8, shall not exceed the Purchase Price.
The indemnification rights of the parties hereto for Losses resulting
solely from a breach of representations and warranties contained in this
Agreement under Sections 7.2(a) are subject to the condition that the Seller
shall have received an Indemnification Claim for the Losses for which indemnity
is sought within two (2) years after the Closing Date; provided, however, that,
the indemnification rights of Buyer Group for Losses resulting from a breach of
the representations and warranties made by the Seller in (a) Sections 2.3, 2.4,
2.5, 2.14 and 2.17 are subject to the condition that the Seller shall have
received written notice of the Losses for which indemnity is sought within six
(6) years after the Closing Date and (b) Sections 2.1, 2.6 and 2.8 shall survive
indefinitely. There is no time limitation for Indemnification Claims for Losses
other than under subsection 7.2(a).
Notwithstanding any provision in this Agreement to the contrary, the
limitations described in this Section 7.7 shall only apply to claims for Losses
under Section 7.2(a).
Except in the case of fraud and for equitable remedies, a party's
exclusive remedy for claims for monetary Losses arising solely out of any breach
of any representation or warranty shall be indemnification pursuant to Section
7.2(a).
Notwithstanding anything in this Agreement to the contrary, the Seller
shall not be liable for breaches or non-fulfillment of any Ancillary Agreement
executed solely by an individual Seller. In such cases only the respective
breaching Seller shall be liable to the Buyer Group.
The amount of any Loss subject to indemnification hereunder shall be
calculated net of any insurance proceeds actually received by the Indemnitee
(net of any incremental collection and other expenses with respect thereto) that
are directly attributable to such Losses. Each Indemnitee shall use good faith
efforts to seek full recovery under any insurance policies covering an
indemnifiable Loss; provided, however, that each Indemnitor shall make any and
all payments required under this Article 7 without regard to any future
potential recovery by the Indemnitee under any such insurance policy. In the
event that an insurance recovery is made by the Indemnitee with respect to a
Loss for which it has been previously indemnified hereunder, then a refund equal
to the amount of the recovery (but not exceeding the amount previously
indemnified) shall be made promptly to the Seller' Representative, who shall be
responsible for distributing such amount among the Seller.
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ARTICLE 8 CLOSING AND DUE DILIGENCE
8.1 Closing and Due Diligence.
From the date of the execution of this Agreement and until such time as
the Buyer shall have completed its due diligence review ("Due Diligence
Period"), the Buyer shall undertake the normal due diligence review of all of
the operations and business of EU Inc. The Due Diligence Period shall extend for
a period not to exceed 15 business days from the date on which the Seller shall
provide the Buyer with copies of the Due Diligence Materials.
The term "Due Diligence Materials" shall mean any information that has or may
reasonably be expected to have a material affect on the business of EU Inc in
whatever form held, stored or maintained and shall include Actual Knowledge and
any unwritten knowledge of any Director, Officer or employee of EU Inc. The term
shall also include any information which any Director, Officer or employee of EU
Inc shall be aware is in the possession of any EU Shareholders or its other
affiliates.
8.2 Termination due to unsatisfactory Due Diligence.
This agreement may be terminated, however such termination shall not be
unreasonable, at any time prior to Closing, at Buyer's sole discretion, if Buyer
is not satisfied with its due diligence investigations, or is unable to obtain
satisfactory financing to meet the terms of Section 1.3 and 1.4 of this
Agreement.
ARTICLE 9 GENERAL PROVISIONS
9.1 Certain Definitions.
The following capitalized terms shall have the respective meanings set
forth below:
"Actual Knowledge" means, with respect to the Seller, the actual knowledge
of each of the following individuals: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇-▇▇▇▇ and any
director or officer of EU Inc.
"Affiliate" means, with respect to a specified Person, at the time in
question, any other Person Controlling, Controlled by or under common Control
with the specified Person or any officer, director, manager, partner or direct
or indirect beneficial owner of any 10% or greater equity or voting interest of
such Person. In addition, with respect to EU Inc., the term "Affiliate" also
includes any Person capable of being controlled by any combination of EU Inc.
and it's respective Affiliates.
"Agreement" means this Equity Purchase Agreement together with all
Schedules and Exhibits, as the same may be amended or modified from time to
time.
"Ancillary Agreements" means, as to any party, the agreements, documents
and instruments to be executed and delivered by such party pursuant to this
Agreement.
"Assets" of a Person means all of the assets, properties, businesses and
rights of such Person of every kind, nature, character and description, whether
real, personal or mixed, tangible or intangible, accrued or contingent, or
otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such Person, and whether or not owned in the name of such Person or any
Affiliate of such Person and wherever located.
"Business" means the business carried on by Seller from time to time, and
all businesses and activities ancillary thereto.
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"Business Day" or "business day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of California are
permitted or obligated by applicable Law to be closed.
"Buyer" has the meaning set forth in the preface above.
"Buyer Group" means the Buyer and each of its respective Affiliates, and
Representatives.
"Closing" means the consummation of the transactions contemplated by this
Agreement, except to the extent such transactions are specified to occur, if
ever, after the Closing.
"Closing Date" means the date on which the Closing actually occurs.
"Code" means the Internal Revenue Code of 1986, as amended. Any citation
to a provision of the Code includes a citation to any successor provision.
"Consent" means any consent, notice, approval, authorization, filing,
declaration, registration, clearance, exemption, waiver or similar affirmation
by any Person pursuant to any Contract, applicable Law or Order.
"Contract" has the meaning set forth in Section 2.11(b).
"Control, Controlling, or Controlled" means possessing, directly or
indirectly, the power to direct or cause the direction of the management and
policies of another Person, whether through ownership of voting securities, by
contract or otherwise.
"Default" means (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law or Order, (ii) any
occurrence of any event that with the passage of time or the giving of notice or
both would constitute a breach or violation of, default under, contravention of,
or conflict with, any Contract, Law or Order, or (iii) any occurrence of any
event that with or without the passage of time or with or without the giving of
notice would give rise to a right of any Person to exercise any remedy or obtain
any relief under, terminate or revoke, suspend, cancel, or modify or change the
current terms of, or renegotiate, or to accelerate the maturity or performance
of, or to increase or impose any Liability under, any Contract, Law or Order.
"Effective Time" means 11:59 p.m. in Irvine, California on the day
preceding the Closing.
"Employee Benefit Plans" shall include pension and profit sharing plans,
retirement and post retirement welfare benefits, health insurance benefits
(medical, dental and vision), disability, life and accident insurance, sickness
benefits, vacation, employee loans and banking privileges and any bonus,
incentive, deferred compensation, stock purchase, stock option, phantom stock or
other equity-based severance, employment, change of control or fringe benefit
plan, program or agreement (whether written or oral), including any employee
benefit plans as defined in ERISA.
"Environmental Laws" means any and all Laws in effect on or prior to the
Closing Date relating to pollution or protection of human health or the
environment (including ambient air, indoor air, surface water, ground water,
land surface, or subsurface strata), including, without limitation, (i) the
Comprehensive Environmental Response Compensation and Liability Act, as amended
(42 U.S.C. ss.ss.9601 et seq. ("CERCLA")), (ii) the Resource Conservation and
Recovery Act, as amended (42 U.S.C. ss.ss.6901 et seq. ("RCRA")), (iii) the
Clean Air Act (42 U.S.C. ▇▇.▇▇. 7401 et seq.); (iv) the Clean Water Act (33
U.S.C. ss.ss.1251 et seq.), (v) the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. ▇▇.▇▇. 11011 et seq.), (vi) the Oil Pollution Act
of 1990 (33 U.S.C. ▇▇.▇▇. 2701 et seq.), (vii) the Hazardous Materials
Transportation Act (49 U.S.C. ▇▇.▇▇. 1801 et seq.), (viii) the Toxic Substances
Control Act (15 U.S.C. ▇▇.▇▇. 2601 et seq.), (ix) any state or local Law
analogous to the Laws listed in parts (i) - (viii) of this subparagraph, (x) any
amendments to the statues, laws or ordinances listed in parts (i) - (viii) of
this subparagraph, in existence on the date hereof, and (xi) any other Law now
in effect relating to emissions, discharges, releases, threatened releases
generation, management, handling, control, use, treatment, storage, disposal,
transport, removal, remediation or recovery of any Hazardous Material.
"Environmental Permit" means Permits, Consents, Orders, and other
authorizations that are required under Environmental Laws in connection with the
operation of the business of each Purchased Entity or the ownership, use, or
lease of the Assets of each Purchased Entity.
20
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all final and temporary regulations thereunder.
"Financial Statements" has the meaning set forth in Section 2.8(a).
"GAAP" means United States generally accepted accounting principles as in
effect from time to time and consistently applied to the Financial Statements.
"Governmental Authority" means any federal, state, county, local, foreign
or other governmental or public agency, instrumentality, commission, authority,
court, board or other body.
"Hazardous Materials" means and shall include, without limitation, any
material, substance, waste, chemical, compound, product, solid, gas, liquid,
byproduct, pollutant or contaminant which as of or prior to the Closing Date is
or was: (a) listed in the United States Department of Transportation Hazardous
Materials Table (49 C.F.R. ▇▇.▇▇. 172.101, including the Appendix thereto); (b)
identified by the United States Environmental Protection Agency as a hazardous
substance (40 C.F.R. Part 301); (c) designated as a "hazardous substance" in
Section 311 of the federal Water Pollution Control Act (33 U.S.C. ▇▇.▇▇. 1251,
et seq.; (d) defined as a "hazardous waste" under Section 1004 of the federal
Resource Conservation Recovery Act, (42 U.S.C. ▇▇.▇▇. 6901, et seq.); (e)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response Compensation Liability Act, 42 U.S.C ▇▇.▇▇. 9601, et
seq., as amended by the Superfund Amendments and Reauthorization Act of 1986
("▇▇▇▇"); (f) any material containing asbestos above regulated levels; (g) any
radioactive materials; (h) any regulated petroleum hydrocarbon, petroleum
hydrocarbon product, or natural gas material; (i) defined as "hazardous waste,"
"hazardous material," "hazardous substance," or words of similar import under
any applicable federal, state or local, environmental or worker health and
safety Laws; or (j) which is prohibited, limited, or regulated under any
amendments, revisions, supplements or replacements of any of the above and any
regulations implementing any of the above.
"Indebtedness" means (a) indebtedness for borrowed money, (indebtedness
for any deferred purchase price (other than trade payables for goods or services
payable on terms of net 30 days (or less) and arising in the ordinary course of
business), (c) indebtedness under title retention agreements, (d) obligations as
lessee under capital leases, (e) Liabilities for unfunded benefits under any
pension plan or scheme for employees, (f) obligations under currency, interest
rate or other hedging arrangements or swaps, and (g) any Liability required to
be reflected on a balance sheet other than current Liabilities, all as
determined in accordance with GAAP, consistently applied.
"Indemnitee" means a party seeking indemnification under Section 1.7, or
Article 7.
"Indemnification Claim" means a claim for indemnification under Section
1.7 or Article 7.
"Indemnitor" means a party from whom indemnification is sought under
Section 1.7 or Article 7.
"Intellectual Property" has the meaning set forth in Section 2.16(a).
"IRS" has the meaning set forth in Section 2.8.
"Inventory" means inventory held for sale/resale and raw materials.
"Inventory Value" means the value of the raw materials and inventory of EU
Inc. as of the Effective Time, provided that all the raw materials are valued at
cost.
"Knowledge" means, with respect to the Seller, (i) the actual knowledge of
each of the following individuals: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇-▇▇▇▇ and any
director or officer of EU Inc.; and (ii) the knowledge a prudent individual in
the position of any of the foregoing individuals could be reasonably expected to
possess concerning the existence of the matters at issue.
"Law" means any domestic or foreign federal, state or local statute, law,
ordinance, rule, administrative interpretation, regulation, order, judgment or
decree.
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"Leased Premises" shall mean the offices and other facilities leased by
Seller or any of its Affiliates pursuant to the Leases and used in connection
with the Business.
"Leased Real Property" means real property leased by EU Inc.
"Leases" shall mean the real property leases and rental agreements
(including subleases), as amended, entered into with respect to the Leased
Premises, as set forth in Schedule 2.15(a).
"Liability" means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including costs of
investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, known or unknown,
disputed or undisputed, secured or unsecured, joint or several, or otherwise,
and whether or not the same is required to be accrued or disclosed on the
financial statements of such Person.
"Lien" means any claim, charge, conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, security interest or other security arrangement,
or any adverse right or interest of any nature whatsoever of, on or with respect
to any Asset.
"Litigation" means any action, litigation, arbitration, cause of action,
lawsuit, claim, complaint, criminal prosecution, governmental or other
examination or investigation, audit (other than regular audits of financial
statements by outside auditors), compliance review, inspection, hearing,
administrative or other proceeding (whether civil, criminal, administrative,
investigative or informal).
"Loss" means any and all demands, claims, actions or causes of action,
damage, assessments, diminution of value, losses, damages (including special and
consequential damages), liabilities, costs or expenses, including, but not
limited to, interest, penalties, reasonable attorneys' fees and expenses and
reasonable costs of investigation and defense.
"Major Decisions" has the meaning set forth in Section 1.6.
"Material" or "material" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in question,
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
"Material Adverse Effect" means a violation, inaccuracy, breach, default,
failure to comply, change in circumstances, loss, effect, fact, agreement,
arrangement, commitment, understanding, obligation, event or occurrence which,
individually or in the aggregate, has had or would reasonably be expected to
have a material adverse effect or material adverse impact on (i) the business,
financial condition, Assets or results of operations of EU Inc. taken as a
whole, or (ii) the ability of any Seller to perform its/his/her obligations
under this Agreement and the Ancillary Agreements or to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements.
"Material Contracts" means, collectively, the contracts described in
Section 2.11 hereof.
"Negotiation Period" has the meaning set forth in Section 7.4(c).
"Order" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
Governmental Authority, or any binding determination pursuant to arbitration or
other similar alternative dispute resolution forum.
"Permits" means all licenses, permits, orders, approvals, registrations,
authorizations, qualifications and filings with and under all federal, state,
local or foreign laws or Governmental Authority.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable, (ii)
materialmen's or similar liens or obligations arising in the ordinary course of
business securing accrued obligations not yet due and payable, (iii) Liens under
equipment leases and capitalized leases with Persons entered into in the
ordinary course of business, which in each case are disclosed on Schedule
2.11(a).
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"Person" means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust, estate,
unincorporated organization, business unit, division or other entity, or any
Governmental Authority.
"Pre-Closing Tax Period" has the meaning set forth in Section 7.6.
"Purchase Price" has the meaning set forth in Section 1.3(a).
"Real Property" means all real property currently owned by EU Inc.
"Related Party" has the meaning set forth in Section 2.21.
"Representative" means with respect to a particular Person, any director,
officer, agent, advisor or other representative of such Person, including legal
counsel, accountants and financial advisors.
"Seller" or "Seller" has the meaning set forth in the preface above.
"Seller Group" means the Seller and each of their respective Affiliates
and Representatives.
"Shares" has the meaning set forth in the Recitals section of this
Agreement.
"Straddle Period" has the meaning set forth in Section 7.6.
"Tax" means any federal, state, county, local or foreign income, premium,
payroll, withholding, unclaimed property, excise, sales, use, gains, transfer,
real and personal property, use and occupation, capital stock, franchise or
other tax, levy, charge, duty or other assessment of any kind whatsoever,
including interest, additions and penalties thereon.
"Taxing Authority" means the IRS and any other Governmental Authority
responsible for the administration of any Tax.
"Tax Return" means any return, report or statement required to be filed
with or provided to any Taxing Authority with respect to any Tax (including any
attachments thereto, and any amendment thereof), including any information
return, claim for refund, amended return or declaration of estimated Tax.
"Termination Date" has the meaning set forth in Section 6.2.
"Threshold Amount" has the meaning set forth in Section 7.7(a).
"Third Party Claim" means any Litigation threatened or instituted against
the Indemnitee, which, if prosecuted successfully, would be a matter for which
the Indenmitee is entitled to indemnification under this Agreement.
"Transaction Documents" means this Agreement and all other documents
required to give effect to the transaction contemplated hereby.
9.2 Singular and Plural.
Any singular term in this Agreement shall be deemed to include the plural,
and any plural term the singular.
ARTICLE 10 MISCELLANEOUS
10.1 Entire Agreement; No Third Party Beneficiaries.
This Agreement, the Exhibits and Schedules attached hereto and the
Ancillary Agreements constitute the entire agreement between the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral. Nothing in
this Agreement, expressed or implied, is intended to confer upon any Person,
other than the parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
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10.2 Amendments; Waiver.
This Agreement may be amended only by a subsequent writing signed by the
Seller and Buyer. No waiver hereto or hereunder shall be valid unless in writing
signed by an authorized signatory of the party or parties to be affected
thereby.
10.3 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto (whether by operation of law or
otherwise), in whole or in part, without the prior written consent of the other
parties; provided, however, that, Buyer may assign its rights and obligations
under this Agreement without the consent of Seller to any affiliate of Buyer or
to any party that acquires substantially all of the assets or stock of Buyer or
any successor entity resulting from a merger or consolidation of or with Buyer.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
10.4 Notices.
All notices or other communications that are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by certified mail, postage pre-paid, or by courier or overnight
carrier, to the Persons at the addresses set forth below (or at such other
address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
If to Seller: EU Energy Inc.
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇▇▇ ▇▇▇▇
Copy to Counsel ▇▇▇ ▇▇▇▇-▇▇▇▇
EMW Law
▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇
Phone: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇▇▇
If to Buyer: CTC Wind Systems Corporation
Attention: ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇, President
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇
▇▇-▇▇▇-▇▇▇-▇▇▇▇
▇▇-▇▇▇-▇▇▇-▇▇▇▇
Copy to Counsel ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
10.5 Governing Law; Dispute Resolution.
Notwithstanding the place where this Agreement may be executed by any of
the parties, the parties hereto expressly agree that this Agreement shall in all
respects be governed by, and construed in accordance with, the laws of the State
of California.
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Except for obtaining a temporary restraining order or an injunction in
accordance with Section 10.5(h), any claim or controversy under or involving
this Agreement shall be finally settled by binding arbitration under the
Commercial Arbitration Rules of the American Arbitration Association, except as
modified herein (the "Rules").
The arbitration shall be held in Irvine, California. There shall be one
arbitrator, who shall have experience in the building products industry. The
Buyer and the Shareholders' Representative shall attempt to agree on such a
single mutually acceptable arbitrator within ten (10) business days after any
party invokes arbitration under this Section 10.5. If the Buyer and
Shareholders' Representative are unable to agree on an arbitrator within such
ten (10) business day period, the Buyer and Shareholders' Representative shall
with ten (10) business days each select one potential arbitrator in accordance
with the Rules. The two named potential arbitrators shall then select the single
arbitrator within thirty (30) days of the selection of the second potential
arbitrator. If either the Buyer or the Shareholders' Representative does not
name a potential arbitrator within such period, then the potential arbitrator
identified by the other party shall be the single arbitrator for the claim or
controversy. If the two named potential arbitrators have not agreed on the
single arbitrator within the time limits specified above, then such appointment
shall be made by the American Arbitration Association in accordance with the
Rules upon the written request of the Buyer or the Shareholders' Representative
within (30) days of such request. The arbitration hearing shall be held, if
possible, within one hundred eighty (180) days of the appointment of the single
arbitrator, and the award shall be issued, if possible, within thirty (30) days
after the close of the hearing.
Any decision or award of the arbitrator shall be based solely on the terms
of this Agreement, applicable law, and the facts presented by the parties. The
Parties hereby waive any rights of application or appeal to any court or
tribunal of competent jurisdiction (including without limitation the courts of
the United States and the State of California) to the fullest extent permitted
by law in connection with any question of law arising in the course of the
arbitration or with respect to any award made. Notwithstanding the foregoing, by
agreeing to arbitration, the parties do not intend to deprive any court of its
jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, or
other order in aid of arbitration proceedings and enforcement of any award.
Without prejudice to such provisional remedies as may be available under the
jurisdiction of a court, the arbitrator shall have full authority to grant
provisional remedies and to direct the parties to request that any court modify
or vacate any temporary or preliminary relief issued by such court, and to award
damages for the failure of any party to respect the arbitrator's order to that
effect.
The decision or award of the arbitrator shall be the sole and exclusive
remedy between the parties regarding any and all issues presented to the
arbitrator. The award shall be final and binding upon the parties, and judgment
upon any award may be entered in any court in the State of Nevada or any other
court of competent subject matter jurisdiction, having jurisdiction thereof.
Each party hereby irrevocably consents to the personal jurisdiction of the
courts in the State of Nevada, solely for purposes of confirmation of, entry of
judgment upon, and enforcement of the arbitral award. Each party further hereby
irrevocably waives and covenants not to assert any defenses in any such
proceeding based on any alleged defects in jurisdiction, venue, or convenience
of the forum.
The non-prevailing party or parties to the arbitration shall pay the
compensation, costs, fees and expenses of its own and the prevailing party's
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall also be borne by the non-prevailing party or parties. The
single arbitrator shall determine which party(ies) is(are) the prevailing
party(ies) and the non-prevailing party(ies). In the event that the arbitrator
shall determine that any party to the arbitration was, as a result of multiple
disputes or otherwise, both a prevailing and non-prevailing party, then the
arbitrator shall be authorized to award costs, fees and expenses in its
discretion, provided that in any event the party(ies) that the arbitrator
determines is(are) most fairly characterized as the non-prevailing party(ies) in
the arbitration (taken as a whole) must, at a minimum, pay the compensation,
costs, fees and expenses of its own witnesses, experts and counsel and the
compensation and any costs and expenses of the arbitrator.
Each party will, upon the written request of another party, provide the
other with copies of specific documents relevant to the issues raised by any
claim or counterclaim. Any dispute regarding discovery shall be determined by
the arbitrator, whose determination shall be binding.
The parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
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10.6 Counterparts.
This Agreement may be executed in two or more counterparts (including
facsimile counterparts), each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
10.7 Captions.
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
10.8 Interpretations.
No uncertainty or ambiguity herein shall be construed or resolved against
any party, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. The parties acknowledge and agree
that this Agreement has been reviewed, negotiated and accepted by all parties
and their attorneys 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.
10.9 Severability.
Any term or provision of this Agreement that is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
10.10 Right to Specific Performance.
The parties hereto agree that the Shares constitute unique property, that
there is no adequate remedy at law for the damage which any of them might
sustain for the failure of the others to consummate this Agreement, and,
accordingly, that each of them is entitled to the remedy of specific performance
to enforce such consummation subject, however, to all of the terms and
provisions of this Agreement.
[Signatures on Following Pages]
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IN WITNESS WHEREOF, the parties have executed this Equity Purchase
Agreement as of the date first above written.
BUYER: CTC Wind Systems Corporation
By: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
Title: President
SELLER: EU Energy, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
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Schedule 1.7
Schedule detailing purchase price allocation.
Schedule 2.6
Schedule detailing capitalization of EU Inc..
Schedule 2.9
Schedule including the financial statements of EU Inc.
Schedule 2.11(a)
List of all material contracts and agreements.
Schedule 2.12
Description of any known litigation.
Schedule 2.13
List of all of the Permits necessary to conduct its business in the manner it is
presently being conducted.
Schedule 2.15(a)
List of all leases and premises which they are connected to.
Schedule 2.15(e)
List and location of all Personal Property of EU Inc. having an original or
replacement value greater than $5,000
Schedule 2.15(f)
Names and at locations where EU Inc. conducts its business and where all of the
Assets of EU Inc. are currently located.
Schedule 2.16
List of all patents, trademarks, trade names, service marks, domain names,
copyrights and computer software (excluding commonly available software acquired
via shrink wrap licenses) used in the conduct of the business of EU Inc.
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Schedule 2.17
Lists of each Employee Benefit Plan maintained or contributed to by Seller.
Schedule 2.21
List of any Related Party transactions.
Exhibit 5.3(c)(vi) - Opinion of Counsel
Opinion of counsel.
29