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Alaska Pacific Energy Corp
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8-K
Sep 22, 12:19 PM ET
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Alaska Pacific Energy Corp 8-K
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Contents
170
Article I INTERPRETATION
1.1 Definitions
(a) “Act” means the Income Tax Act, R.S.C. 1985, c.1 (5th Supplement) as amended;
(b) “Agreement” means this Agreement, the Schedules and any amendments to this Agreement;
(c) “Beneficial Change” means with respect to the Corporation, any change to the business, whether direct or indirect, that is beneficial to the business prospects or financial stability of the Corporation, including without limitation: (i) any accretive equity or debt financing completed by the Corporation; (ii) contracts with a third party(ies) entered into by the Corporation; and (iii) joint venture or partnering agreements with a third party;
(d) “BCA” means the Business Corporations Act (Alberta), R.S.S. 1978, c.B-10;
(e) “Business Day” means any day other than Saturday, Sunday or a statutory holiday when the banks conducting business in the City of Calgary are generally open for the transaction of banking business;
(f) “Closing” means the actual conveyance and delivery of the Shares to the Purchaser;
(g) “Closing Date” means October 31, 2010, or such other date as may be agreed upon in writing by the parties to this Agreement;
(h) “Closing Time” means 2:00 p.m. (Calgary Time) on the Closing Date or such other time as may be agreed upon by the parties to this Agreement;
(i) “Convertible Debenture” has the meaning ascribed to that term in Section 2.2;
(j) “Corporation” means Engineering Technology Inc., a body corporate incorporated under the laws of the Province of Alberta;
(k) “Existing Unanimous Shareholder Agreements” means the unanimous shareholder agreement among the Parties hereto;
(l) “Final Financial Statements” means the balance sheet of the Corporation as at June 30, 2010 prepared on a “Notice to Reader” basis;
(m) “Financial Statement Date” means June 30, 2010;
(n) “License Agreement” means the technology license agreement dated March 18, 2010 between the Corporation and the Purchaser;
(o) “Owned Shares” means those shares that are to be sold, assigned and transferred to the Purchaser by the Vendors as set forth in Schedule A attached hereto;
(p) “Person” means an individual, partnership, corporation, trust, unincorporated organization, joint venture, union, government or any department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual;
(q) “Purchase Price” has the meaning ascribed to that term in Section 2.2;
(r) “Schedules” means the schedules referred to in Section 1.4;
(s) “Shares” means all of the issued and outstanding shares in every class of the share capital of the Corporation;
(t) “Solicitors for the Vendors” means Carscallen Leitch LLP;
(u) “Transition Period” means the period beginning at 11:59 p.m. on the date hereof and ending on the Closing Date; and
(v) “Vendor” means any one of the Vendors individually.
1.2 Articles, Sections and Headings
1.3 Rules of Construction
(a) words importing the singular number only shall include the plural and vice versa and words including the masculine gender shall include the feminine and neuter genders and vice versa;
(b) if a word is defined in this Agreement, a derivative of that term has a corresponding meaning;
(c) the word “including” means, including without limitation;
(d) the use of the word “or” in a series is not necessarily exclusive;
(e) “hereof”, “hereto”, “hereunder” and similar expressions mean and refer to this Agreement; and
(f) all dollar amounts referred to in this Agreement are in Canadian funds, unless otherwise indicated herein.
1.4 Schedules
Article II PURCHASE OF SHARES
2.1 Purchase of Shares
2.2 Purchase Price
2.3 Delivery of Shares
(a) the Vendors shall deliver to the Purchaser certificates representing the Owned Shares duly registered in the name of the Purchaser or its nominees or, in the alternative, duly endorsed for transfer into the name of the Purchaser or its nominees; and
(b) all of the Owned Shares shall be delivered free and clear of all mortgages, hypothecations, charges, liens, security interests and adverse claims or interests of any nature or kind whatsoever, other than restrictions on transfer contained in the articles of incorporation of the Corporation.
2.4 Purchase Price Adjustment
Article III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Corporation and the Vendors
(a) Authorization
(b) Information Regarding this Agreement and Alaska
(c) Compliance with Securities Laws
(i) No formal or informal investigation or examination by the United States Securities and Exchange Commission (the “Commission”) or by the securities administrator of any jurisdiction is pending or threatened against the Corporation.
(ii) Entec has not been convicted of any felony or misdemeanour in connection with the sale or purchase of any security or involving the making of any false filing in any jurisdiction.
(iii) Entec is not subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently restraining or enjoining it from engaging in or continuing any conduct or practice in connection with the sale or purchase of any security or involving the making of any false filing with the Commission.
(iv) The Vendors are aware of their obligations toward Alaska respecting United States securities regulations and undertakes to comply fully with the United States Securities Act and the regulations pursuant to the Act and will continue to make all required filings and disclosures in a timely manner.
(v) Entec shall deliver to Alaska all of its rights, titles and interests in the assets and all attendant or related assets (the “Assets”), including, but not limited to: equipment, patents, proprietary intellectual property, current and potential client lists, documents, deeds, plans, operating manuals, files, know-how and good-will, together with any other items, products, files, records, documents, signatures, titles, interests or rights pertaining to or relating to the Assets, all of which shall be more particularly set forth in the list to be provided to the Purchaser pursuant to Section 5.1(b)(iv);
(vi) Each Vendor warrants and confirms that as a person or entity acquiring 5% or more of the Alaska Shares, it will file the required documents with the Commission in a proper and timely manner and that such filings will fully and accurately disclose the beneficial ownership of the said shares.
(vii) Each Vendor warrants that the Alaska Shares issued to it will not be assigned or collateralized without the written permission of the board of directors of Alaska. All Share positions must be disclosed, and/or approvals obtained from all necessary governing authorities.
(d) Non-Competition
(e) Share Ownership
(f) Authorized and Issued Capital
(g) No Issue of Shares or Convertible Securities
(h) Licences and Authorizations
(i) Subsidiaries
(j) Financial Statements
(k) Corporate Records
(l) Accuracy of Books and Records
(m) Material Contracts
3.2 Representations and Warranties of the Purchaser
(a) Formation and Organization
(b) Due Execution
(i) any of the terms, conditions or provisions of any indenture, mortgage, deed of trust, loan agreement or other agreement, written or oral, to which the Purchaser or its assets, properties or businesses is a party or is bound;
(ii) any law, rule or regulation applicable to the Purchaser or its assets, properties or businesses;
(iii) any judgment, decree, order, statute, rule or regulation applicable to the Purchaser or its assets, properties or businesses; or
(iv) any terms, conditions or provisions of the organizing documents of the Purchaser.
(g) Legality of Conversion Shares
(h) Compliance with Securities Laws
(i) No formal or informal investigation or examination by the Securities and Exchange Commission (the “Commission”) or by the securities administrator of any state is pending or threatened against Alaska, its Officers or Directors.
(ii) Alaska and its Officers and Directors have not been convicted of any felony or misdemeanour in connection with the sale or purchase of any security or involving the making of any false filing with the Commission.
(iii) Alaska and its Officers and Directors are not subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently restraining or enjoining such entity or person from engaging in or continuing any conduct or practice in connection with the sale or purchase of any security or involving the making of any false filing with the Commission.
(i) No Undisclosed Issues or Liabilities
(j) Stock Bonus and Stock Options
(k) Compliance
(i) violate any provision of its Articles of Incorporation or Bylaws;
(ii) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a materially adverse effect on its business or operations;
(iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon Alaska; and
(iv) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute or with notice or lapse of time, or both constitute) a default under any contract or other agreement to which Alaska is a party or by or to which it or any of its assets or properties may be bound or subject.
(l) Finders Fee
(m) Authorized and Issued Capital
(n) Restrictive Legend
Alaska confirms that any certificate or certificates representing the Conversion Shares issued upon conversion of the Convertible Debenture will bear the following restrictive legend:
Article IV INDEMNITIES
4.1 Indemnification of the Purchaser
(a) The Vendors jointly and severally, in respect of all representations and warranties made or given by the Vendors in this Agreement, covenant and agree to indemnify and save harmless the Purchaser from any and all actions, claims, demands, suits, proceedings, losses, damages (direct or indirect or punitive or otherwise), liabilities (incidental or direct), costs (including legal costs on a solicitor-client basis), penalties and expenses of whatsoever nature (collectively called the “Damages”) suffered by, incurred by or which may be brought against the Purchaser directly or indirectly (whether by, through or against the Corporation or otherwise) as a result of or arising out of any breach of the representations or warranties as contained in this Agreement.
(b) The liability of the Vendors and the indemnity hereby granted by the Vendors to the Purchaser shall not extend to any Damages to the extent that the same are reimbursed (or reimbursable) by insurance maintained by the Corporation.
4.2 Indemnification of the Vendors
4.3 Survival
(a) The representations and warranties of the Corporation and the Vendors contained in Article III shall be true and correct as of the date of this Agreement and as of the Closing Date, shall survive the completion of the transactions contemplated by this Agreement and notwithstanding such completion shall continue in full force and effect for the benefit of the Vendors or the Purchaser, as the case may be for a period of two (2) years from the Closing Date and notice of any claim in respect thereof shall be made within such two (2) year period;
(b) It is further agreed and understood that the furnishing of information to the Purchaser prior to Closing or any due diligence investigations by the Purchaser prior to Closing shall not affect the Purchaser's rights to rely on the representations and warranties made by the Vendors in this Agreement. It is further agreed and understood that the furnishing of information to the Vendors prior to Closing or any due diligence investigations by the Vendors prior to Closing shall not affect the Vendors’ rights to rely on the representations and warranties made by the Purchaser in this Agreement.
4.4 Claim for Indemnity
(a) The parties to this Agreement covenant and agree that if a party (the “Claiming Party”) has a claim for Damages pursuant to Section 4.1 or 4.2, then the Claiming Party shall deliver written notice of such claim to the party from whom indemnification for Damages will be sought (the “Paying Party”) as soon as possible after the Claiming Party becomes aware of such claim. Such notice shall contain a detailed description of the claim including a reference to the covenant, representation or warranty alleged to have been breached; provided, however, the failure of the Claiming Party to notify the Paying Party will not relieve the Paying Party from any liability that the Paying Party may have to the Claiming Party except that the Claiming Party's right to indemnification may be reduced to the extent that such failure to notify the Paying Party or such delay in notifying the Paying Party prejudiced the defence of the claim or demand or increased the amount of liability or cost of defence and provided that, notwithstanding anything else contained in this Agreement, no claim for indemnity in respect of the breach of any representation or warranty contained in this Agreement may be made unless notice of such claim has been given prior to the expiry of the survival period applicable to such representation, warranty or covenant as set forth in Section 4.3.
(b) If the claim relates to a claim being made by a third party, then upon receipt of notice of the claim the Paying Party may elect to resist, compromise, settle or defend the claim. If the Paying Party elects to resist, compromise, settle or defend the claim, the Paying Party shall notify the Claiming Party in that regard and upon so notifying the Claiming Party, the Paying Party and the Claiming Party shall consult and co-operate in proceeding with the claim; provided however, the Claiming Party shall control the settling or defending of such claim. If the claim does not relate to a claim by a third party and the Paying Party objects to such claim, then the Paying Party shall give notice of such objection to the Claiming Party within 15 Business Days of receiving notice of such claim from the Claiming Party.
(c) If the Paying Party elects not to resist, compromise, settle or defend the claim or does not give timely notice to the Claiming Party that it intends to do so, the Claiming Party shall be entitled to deal with or defend the claim in any manner it feels appropriate; provided however, if the Claiming Party settles any claim without first providing written notice to the Paying Party then the Paying Party shall not be obligated to indemnify the Claiming Party for any such settlement.
(d) The Claiming Party shall have carriage of any resistance, compromise, settlement or defence of a claim being made by a third party and the Paying Party shall be solely responsible for all costs associated therewith.
4.5 No Merger
4.6 Threshold
Article V COVENANTS OF THE PARTIES
5.1 Covenants of the Vendors
(i) acquire (by merger, amalgamation, consolidation or acquisition of shares or assets) any corporation, partnership or other business organization or division thereof, or, make any investment, either by purchase of shares, other securities, contributions of capital, property transfer, or purchase of any property or assets of any other individual or entity;
(ii) make or authorize any amendment or change to the articles or by-laws of any of Corporation;
(iii) issue, grant, sell or pledge or agree to issue, grant, sell or pledge any shares of the Corporation, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, any shares in the Corporation;
(iv) adopt a plan of liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation or reorganization;
(v) any other transaction or commitment entered into other than in the ordinary and usual course of business by the Corporation other than the payment or accrual of management fees and bonuses of which the Purchaser has been advised;
(vi) make or authorize any split, consolidation or reclassification of any outstanding shares, or issue, sell or dispose of any shares of capital stock, issue, sell or grant any option, warrant, incentive award or other right to acquire or otherwise dispose of any of the authorized but unissued capital stock or other equity securities of the Corporation;
(vii) alter the manner of the keeping of the books, accounts or records of the Corporation or in the accounting practices therein reflected; or
(viii) declare or pay any dividend or other distribution to shareholders.
(i) co-operate with and cause the Corporation to co-operate with the Purchaser to obtain consents, if any, of all third parties and governmental authorities necessary for the consummation of the transactions contemplated by this Agreement;
(ii) take all such actions as are within their power to control, and shall use all reasonable commercial efforts to cause other actions to be taken which are not within their power to control (except for actions in control of the Purchaser), so as to ensure compliance with and satisfaction of all the conditions precedent to the obligations of the Purchaser set forth in Section 6.1;
(iii) cause Entec, upon the execution of this Agreement, to initiate a full audit of its accounts and financial statements, which audit shall be conducted by a Public Company Accounting Oversight Board (PCAOB) approved auditor and in accordance with United States Generally Accepted Accounting Principles (USGAAP). The Purchaser agrees to be responsible for all costs relating to such audit; and
(iv) within 30 days of the execution of this Agreement, Entec shall deliver to Alaska, in a form acceptable to Alaska, a full and comprehensive list of the Assets.
5.2 Covenants of the Purchaser
(i) co-operate with the Vendors to obtain consents, if any, of all third parties and governmental authorities necessary for the consummation of the transactions contemplated by this Agreement;
(ii) upon receipt of the License Fee Shares at Closing, cancel the License Fee Shares;
(iii) take all such actions as are within its power to control and shall use all reasonable commercial efforts to cause other actions to be taken which are not
within its power to control (except for actions in control of the Vendors), so as to ensure compliance with and satisfaction of all the conditions precedent to the obligations of the Vendors set forth in Section 6.2; and
(iv) on or prior to the Closing Date, complete an equity financing for an amount where the Purchaser shall have, as at Closing (after payment of the Cash forming part of the Purchase Price) not less than US$5,000,000, in working capital.
Article VI CLOSING CONDITIONS
6.1 Closing Conditions of the Purchaser
(a) At Closing, the Vendors shall have delivered to the Purchaser the share certificates for the Owned Shares for cancellation.
(b) At Closing, the Corporation shall have delivered to the Purchaser the License Fee Shares duly endorsed for transfer to the Purchaser.
(c) At Closing, to the extent the Vendors have custody or access to the following, the Vendors shall have delivered to the Purchaser all books, records, files, documents, shareholder lists, agreements, contracts, materials or other information pertaining or relating to, in any manner whatsoever, the Corporation or the business and activities of the Corporation.
(d) As at Closing, no action or proceeding shall have been instituted, pending or threatened or claim or demand made against the Purchaser or the Vendors before any court or other governmental body seeking to restrain or prohibit or to obtain substantial damages with respect to the consummation of the transactions contemplated in this Agreement.
(e) As at Closing, there shall have been no material adverse change in the affairs, assets, liabilities, business outlook or financial condition of the Corporation nor shall any legislation (whether by statute, by-law, regulation or otherwise) have been enacted, which in the reasonable opinion of the Purchaser materially adversely affects the operations and business of the Corporation.
(f) As at Closing, there shall have been obtained from the directors of the Purchaser and all appropriate and required governmental or administrative bodies and other third parties such approvals or consents as are required to permit the transactions contemplated by this Agreement.
(g) At Closing, the Purchaser shall have received a certificate from an officer of the Corporation setting forth a resolution of the Corporation's board of directors:
(i) authorizing and approving entering into of this Agreement and the carrying out of the obligations of the Corporation hereunder;
(ii) authorizing and approving the transfer of the Owned Shares from the applicable Vendors to the Purchaser;
(iii) authorizing and approving the transfer of the License Fee Shares to the Purchaser for cancellation; and
(iv) certifying that such resolution was duly adopted and has not been rescinded or amended as of the Closing Date
(h) At Closing, the Purchaser shall have received a certificate from an officer of each of the Vendors setting forth a resolution of such Vendors:
(i) authorizing and approving entering into of this Agreement and the carrying out of its obligations hereunder; and
(ii) certifying that such resolution was duly adopted and has not been rescinded or amended as of the Closing Date.
(i) At Closing, the Purchaser shall have received the Final Financial Statements and the audited financial statements of the Corporation completed pursuant to Section 5.1(b)(iii) hereof.
(j) At Closing, the Purchaser shall have received a certificate from each of the Vendors certifying that the respective representations and warranties of the Vendors and the Corporation set forth in this Agreement are true and correct as at the Closing Date.
(k) At Closing, the Purchaser shall have received a certificate from each of the Vendors certifying that the respective covenants of the Vendors and the Corporation set forth in this Agreement to be complied with at or prior to Closing have been complied with.
6.2 Closing Conditions of the Vendors
(a) At Closing, the Purchaser shall have delivered or caused to be delivered to the Vendors or Solicitors for the Vendors a certified cheque, bank draft, trust cheque or
wired funds and shares registered in the names of the Vendors for US$7,000,000 representing the Cash portion of the Purchase Price and Convertible Debentures for an aggregate principle amount representing the Convertible Debenture Amount registered in the names of the Vendors in the allocations set forth in Schedule A.
(b) At Closing, the Vendors shall have received a certificate from an officer of the Purchaser certifying that the covenants of the Purchaser set forth in this Agreement to be complied with at or prior to Closing have been complied with.
(c) At Closing, the Vendors shall have received a certificate from the Purchaser certifying that the respective representations and warranties of the Purchaser set forth in this Agreement are true and correct as at the Closing Date.
(d) At Closing, the Vendors shall have received a certificate from an officer of the Purchaser setting forth a resolution of its board of directors:
(i) authorizing and approving entering into of this Agreement and the carrying out of the obligations of the Purchaser hereunder;
(ii) authorizing and approving the cancellation of the License Fee Shares;
(iii) reserving for issuance, up to 27,000,000 Common Shares of the Purchaser issuable upon conversion of the Convertible Debenture; and
(iv) certifying that such resolution was duly adopted and has not been rescinded or amended as of the Closing Date.
(e) At Closing, the Vendors shall receive, with respect to the security provided under the Convertible Debenture, from the Purchaser:
(i) an executed general security agreement securing the assets of Entec to and in favour of the Vendors; and
(ii) an escrow agreement in a form satisfactory to the parties acting reasonably, for the deposit of the Owned Shares with an escrow agent for the term of the Convertible Debenture.
(f) Prior to Closing, the Purchaser shall have completed a financing for an amount where the Purchaser shall have, as at Closing (after payment of the Cash forming part of the Purchase Price), not less than US$5,000,000 in working capital.
(g) Prior to Closing, the Corporation shall have distributed by way of management fees and bonuses or other fees an amount sufficient to result in the net income of the Corporation being no greater than the threshold amount permitted to remain a “small business corporation” as defined under the Income Tax Act (Canada).
(h) Prior to the Closing, the Corporation has not terminated this Agreement in accordance with Section 2.4.
Article VII CLOSING ARRANGEMENTS
7.1 Date, Time and Place of Closing
7.2 Closing Procedure
7.3 Termination
Article VIII MISCELLANEOUS
8.1 Further Assurances
8.2 Governing Laws
8.3 Survival
8.4 Entire Agreement and Amendments
8.5 Time of the Essence
8.6 No Waiver
8.7 Listing on Other Venues
8.8 Enurement
8.9 Notices
8.10 Counterparts
Contents
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