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EX-10.1 - COMPOSITE TECHNOLOGY CORP | v204967_ex10-1.htm |
EX-10.2 - COMPOSITE TECHNOLOGY CORP | v204967_ex10-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
Amendment
No. 1
Current
Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
Report (Date of earliest event reported): August 10, 2009
(Exact
name of registrant as specified in its charter)
Nevada
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000-10999
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59-2025386
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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2026
McGaw Avenue
Irvine,
CA 92614
(Address
of principal executive offices, including zip code)
Registrant's
telephone number, including area code: (949) 428-8500
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Explanatory
Note
On
October 29, 2010 we received a letter from the Securities and Exchange
Commission relating to a confidential treatment application we submitted on
September 29, 2010. The confidential treatment application asked that we be
permitted to keep confidential certain information included in exhibits 10.1 and
10.2 of the Current Report on Form 8-K (the “Original Report”) filed on August
14, 2009. We have withdrawn the confidential treatment application. Therefore,
we are filing this Amendment No. 1 to the Original Report for the purpose of
re-filing exhibits 10.1 and 10.2.
Forward
Looking Statements
This Form
8-K and other reports filed by the Registrant from time to time with the
Securities and Exchange Commission (collectively the “Filings”) contain or may
contain forward looking statements and information that are based upon beliefs
of, and information currently available to, Registrant’s management as well as
estimates and assumptions made by Registrant’s management. When used in the
filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”,
“intend”, “plan” or the negative of these terms and similar expressions as they
relate to Registrant or Registrant’s management identify forward looking
statements. Such statements reflect the current view of Registrant with respect
to future events and are subject to risks, uncertainties, assumptions and other
factors (including the risks contained in the section of the Registrant’s Form
10-K entitled “Risk Factors”) relating to Registrant’s industry, Registrant’s
operations and results of operations and any businesses that may be acquired by
Registrant. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated, expected, intended or
planned.
Although
the Registrant believes that the expectations reflected in the forward looking
statements are reasonable, the Registrant cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, the
Registrant does not intend to update any of the forward-looking statements to
conform these statements to actual results.
On August
10, 2009, Composite Technology Corporation (the “Registrant” or “CTC”) and its
wholly-owned subsidiary DeWind, Inc. (“DeWind”), a Nevada corporation, entered
into an Asset Purchase Agreement (“Purchase Agreement”) with Daewoo Shipbuilding
& Marine Engineering Co., Ltd., a Korean corporation (“Buyer”). Under
the Purchase Agreement, DeWind agreed to sell substantially all of its assets
for $46.5 million and assumption of certain liabilities.
Also on
August 10, 2009, DeWind, Ltd., a UK private limited company and a wholly-owned
subsidiary of the Registrant (“UK DeWind”), entered into an Asset Purchase
Agreement (“UK Agreement”, and together with the Purchase Agreement, the
“Agreements”) with Buyer under which UK DeWind agreed to sell certain assets,
including without limitation the D8.2 prototype turbine at Cuxhaven,
and an assignment of a lease agreement with DEWI-OCC Offshore and Certificate
Centre GmbH dated June 29, 2006 (“Cuxhaven Lease”), for the purchase price of
$3.0 million.
DeWind,
Inc. Asset Purchase Agreement
Under the
Purchase Agreement, DeWind agreed to sell, assign, transfer, convey and deliver
to Buyer, free and clear of liens, except for certain permitted liens under the
Purchase Agreement (“Permitted Liens”), all assets related to the business of
designing, developing, assembling, manufacturing and selling wind turbines for
the production of wind energy and the development and management of “wind farms”
for the harnessing and sale of wind energy (“Business”) except for certain
excluded assets (the “Purchased Assets”) for the purchase price of (i)
$46,500,000 in cash, subject to adjustment as set forth in the Purchase
Agreement, and (ii) the assumption of the certain assumed
liabilities.
2
The
Purchased Assets include, but are not limited to, the following assets,
properties and rights:
(a)
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all
inventory;
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(b)
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all
equipment;
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(c)
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all
intellectual property;
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(d)
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subject
to obtaining any necessary third party consents, all contracts related to
the Business but which shall not include any employee benefit plans or
related contracts covering employees in the U.S.;
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(e)
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all
accounts receivable;
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(f)
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all
business authorizations that are permitted to be
transferred
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(g)
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all
books and records;
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(h)
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all
claims arising from or relating to the other Purchased Assets or the
Assumed Liabilities;
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(i)
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all
insurance benefits other than those relating to any Benefit Plans covering
employees in the U.S., including rights and proceeds, arising from or
relating to the other Purchased Assets or the Assumed
Liabilities;
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(j)
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all
prepaid expenses;
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(k)
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all
security deposits, earnest deposits and all other forms of deposit or
security placed with or by DeWind for the performance of an Assigned
Contract;
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(l)
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all
of DeWind’s equity interest in its subsidiaries directly owned by it;
and
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(m)
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all
goodwill of the Business as going
concern.
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The
Purchased Assets do not include (collectively, the “Excluded
Assets”):
(a)
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all
cash, cash equivalents and bank accounts of DeWind, other than security
deposits for the performance of an Assigned Contract;
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(b)
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all
contracts that are not Assigned Contracts (the “Excluded Contracts”), and
all benefit plans and related contracts covering employees in the
U.S.;
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(c)
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the
corporate seals, charter documents, minute books, stock books, tax
returns, books of account or other records having to do with the corporate
organization of DeWind;
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(d)
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all
insurance policies that do not relate to the Purchased Assets or Assumed
Liabilities, and all rights and benefits thereunder;
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(e)
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the
rights that accrue or will accrue to DeWind under the Purchase Agreement
or ancillary agreements;
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(f)
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any
tax refunds for periods ending on or before the closing date and for
pre-closing tax periods except for tax refunds of any of its subsidiaries
to the extent such refunds represent the carry-back of net operating
losses arising during the post-closing tax period; and
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(g)
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any
Assets relating to CTC, CTC’s subsidiaries or CTC’s affiliates (other than
DeWind and its subsidiaries).
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3
Buyer agreed
to assume from and after the closing the following liabilities of DeWind (the
“Assumed Liabilities”):
(a)
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all
accounts payable to trade creditors of the Business that are unpaid at the
closing date and that either (i) are reflected on the March 31, 2009
balance sheet or (ii) arose in the ordinary course of the Business between
March 31, 2009 and the closing date;
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(b)
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all
liabilities that remain unpaid or unperformed in respect of the Assigned
Contracts except for product liability or intellectual property
infringement related claims and liabilities under certain
DeWind Ltd. related contracts;
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(c)
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all
customer turbine advance payments and deposits; and
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(d)
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all
holiday pay, vacation pay and accrued payroll for transferred employees of
DeWind.
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Other
than as described above, Buyer will not assume any other liabilities of
DeWind.
The
Purchaser Price will be subject to adjustment based on the value of the
Purchased Assets less Assumed Liabilities (“Final Net Assets”) at closing.
If Final Net Assets is less than $25,288,000 (“Base Net Assets”), DeWind shall
pay to Buyer, as an adjustment to the Purchase Price, an amount of cash equal to
the difference between the Base Net Assets and Final Net Assets. If Final
Net Assets exceed the Base Net Assets, Buyer shall pay to DeWind, an amount of
cash equal to the difference between Final Net Assets and the Base Net
Assets.
At the
closing, DeWind will provide, among other things an executed Bill of Sale, an
Assignment and Assumption Agreement, Intellectual Property Assignments, and an
Escrow Agreement. The Purchase Agreement states that Buyer will pay
DeWind 85% of the Purchase Price and will place 15% into an escrow
fund to secure the indemnification obligations of DeWind at closing. The parties
have subsequently agreed that $35,475,000 of the Purchase Price will be paid to
DeWind at closing and $11,025,000 will be placed into escrow.
DeWind
has made customary representations and warranties regarding the Business,
related to, among other things: organization and good standing; authority and
enforceability of the Purchase Agreement; its subsidiaries; consents; financial
statements of DeWind; undisclosed liabilities; inventory; accounts receivable;
taxes; compliance with law; business authorizations; title and permitted liens;
condition of tangible assets; real property; intellectual property; absence of
certain changes or events; contracts; sufficiency of purchased assets;
litigation; employee benefits; labor and employment matters; environmental
issues; insurance; product warranties; solvency; brokers; and disclosures.
All representations and warranties contained in the Purchase Agreement were made
strictly for the purposes of allocating contractual risk between the parties and
not as a means of establishing facts. The Purchase Agreement may have
different standards of materiality. The facts may have changed since the
date of the Purchase Agreement and only parties to such agreement and specified
third-party beneficiaries have a right to enforce such agreement.
Until the
earlier of the termination of the Purchase Agreement or the closing date,
DeWind shall:
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(a)
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(i) maintain its corporate
existence, (ii) pay or perform the liabilities of the Business when due,
(iii) carry on the Business in the usual, regular and ordinary course in a
manner consistent with past practice and in accordance with the provisions
of the Purchase Agreement and in compliance with all laws, business
authorizations and material contracts and (iv) keep the level and quality
of its inventory, accounts receivable, accounts payable and supplies (A)
in approximately the same proportions as reflected on the March 31, 2009
balance sheet, (B) in a manner consistent with past practice and (C) so as
to be sufficient for the conduct of the Business by Buyer following the
closing in a manner consistent with the past practice of the
Business;
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(b)
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use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
business organization and, subject to the other provisions of the Purchase
Agreement, preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having dealings with the
Business, to the end that the goodwill of the Business be substantially
unimpaired on the closing date; provided that DeWind is not authorized to,
and shall not, make any commitments on behalf of
Buyer;
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4
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(c)
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maintain the real property and
other assets, properties and rights included in the Purchased Assets in
the same state of repair, order and conditions as they are on the date
hereof, reasonable wear and tear
excepted;
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(d)
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maintain the books and records in
accordance with past practice, and use its commercially reasonable efforts
to maintain in full force and effect all business authorizations and
policies;
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(e)
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(i) confer with Buyer prior to
implementing operational decisions of a material nature, (ii) report on a
weekly basis concerning the status of the Business, and (iii) promptly
notify Buyer of any event or occurrence not in the ordinary course of the
Business; and
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(f)
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use its commercially reasonable
efforts to cause all of the conditions to the obligations of Buyer under
the Purchase Agreement to be satisfied as soon as practicable following
the date hereof;
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If the
closing has not occurred by the 30th day after August 10, 2009, then nothing in
the Purchase Agreement shall prohibit CTC, DeWind, their respective affiliates
or any representative thereof from taking any course of action that it, he or
she reasonably believes, based on the advice of reputable legal counsel, is
necessary to comply with or avoid breach of its, his or her fiduciary
obligations to CTC, DeWind or their shareholders under applicable laws;
provided, DeWind shall promptly notify Buyer in writing of the occurrence of
such action or failure to take such action.
Without
prior approval from Buyer, DeWind shall not, and shall not permit any subsidiary
to, do any of the following, in each case with respect to the Business, certain
actions including:
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(a)
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modify any compensation, benefits
payable or similar payments or to become payable to any current or former
directors, employees, contractors or consultants of the Business, except
to the extent any such compensation or payment represents Excluded
Liabilities, or enter into any employment, severance or termination
agreement that creates any Assumed
Liabilities;
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(b)
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other than in the ordinary course
of business, or as required by law, establish, adopt, enter into, amend or
terminate any benefit plan or other similar compensation
arrangement;
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(c)
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sell, lease, transfer or assign
any assets, properties or rights of DeWind or any subsidiary related to
the Business, except (i) sales of inventory, (ii) the grant of
non-exclusive Out-Bound Licenses, (iii) the sale of obsolete equipment,
and (iv) the sale of Excluded Assets, in each case in the ordinary course
of the Business consistent with past
practice;
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(d)
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assume, incur or guarantee any
indebtedness or modify the terms of any existing
indebtedness;
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(e)
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cancel any debts or waive any
claims or rights of substantial
value;
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(f)
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mortgage, pledge or subject to
liens (in each case, other than Permitted Liens) any assets, properties or
rights related to the
Business;
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(g)
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amend, modify, cancel or waive
any rights under any Assigned
Contract;
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(h)
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enter into any material
contract;
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(i)
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take any action or engage in any
transaction that is material to, or outside the ordinary course of, the
Business;
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(j)
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(i) make any material capital
expenditure, or commit to make any material capital expenditure, or (ii)
acquire any material assets, properties or rights other than Inventory in
the ordinary course of the Business consistent with past
practice;
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5
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(k)
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make any filings or registrations
with any governmental entity, except routine filings and registrations
made in the ordinary course of the Business consistent with past
practice;
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(l)
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be party to any merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving the
Business;
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(m)
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make any changes in its
accounting methods, principles or
practices;
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(n)
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take any action or omit to do any
act which action or omission will cause it to breach any obligation
contained in the Purchase Agreement or cause any representation or
warranty of DeWind not to be true and correct as of the closing date;
or
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(o)
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agree, whether in writing or
otherwise, to do any of the
foregoing;
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If the
closing has not occurred by the 30th day after August 10, 2009, then nothing in
the Purchase Agreement shall prohibit CTC, DeWind, their respective affiliates
or any Representative thereof from taking any course of action that it, he or
she reasonably believes, based on the advice of reputable legal counsel, is
necessary to comply with or avoid breach of its, his or her fiduciary
obligations to CTC, DeWind or their shareholders under applicable laws;
provided, DeWind shall promptly notify Buyer in writing of the occurrence of
such action or failure to take such action.
On or
prior to the closing date, DeWind shall cause to be released all liens
(other than certain permitted liens as defined in the Purchase Agreement) in and
upon any of the Purchased Assets.
DeWind
shall use its commercially reasonable efforts to obtain all consents that are
required under the Assigned Contracts in connection with the consummation of the
transactions contemplated by the Purchase Agreement; provided that no Assigned
Contract shall be amended and no right thereunder shall be waived to obtain any
such consent. Buyer shall cooperate with DeWind in such
efforts.
CTC and
DeWind each covenant that, commencing on the closing date and ending on the
5-year anniversary of the closing date (the “Noncompetition Period”), each shall
not, and each shall cause their affiliates (other than shareholders of CTC) and
their and their affiliates’ directors and officers not to compete with the
Business.
More
specifically each of such parties shall not, directly or indirectly, in any
capacity, engage in or have any direct or indirect ownership interest in, or
permit the name of CTC, DeWind or any of their Affiliates (other than any
director or shareholder of CTC) to be used in connection with the promotion of,
any business anywhere in the world which is engaged, either directly or
indirectly, in the business of developing, manufacturing, marketing or selling
any products or equipment or providing any services which are competitive with
products or equipment manufactured, marketed, sold or under development by, or
services provided by, the Business to the extent related to the development,
manufacture and sale of wind turbines (the “Restricted Business”).
Notwithstanding
the foregoing, the Restricted Business does not include the development,
construction, operation or sale of wind farm projects or related
ventures.
CTC and
DeWind each covenant that during the Noncompetition Period, each shall not, and
it shall cause their affiliates (other than shareholders of CTC) and their and
their respective affiliates’ directors and officers not to, solicit the
employment or engagement of services of any person who is or was employed as an
employee, consultant or contractor in the Business during the Noncompetition
Period on a full or part time basis; provided that CTC, DeWind and
their affiliates may continue to engage and use any consultants and contractors
used by any of them as of the date hereof other than with respect to the
Purchased Assets. The Noncompetition Period shall be extended for an additional
period equal to any period during which CTC, DeWind or any Subsidiary is in
breach of its noncompetition and nonsolicitation obligations.
6
With
respect to employees in the U.S, Buyer may offer employment to any DeWind
employee on such terms and conditions as it deems appropriate in its sole
discretion, such employment to be contingent upon and effective immediately
following the closing. Any and all liabilities relating to or arising out
of the employment, or cessation of employment, of any DeWind employee (whether
or not the employee is retained by Buyer) on or prior to the close of business
on the closing date shall be the sole responsibility of DeWind.
With
respect to German employees of DeWind, the parties have agreed that 71 employees
will be transferred to Buyer (“Transferred German Employees”). The
employment contracts of the Transferred German Employees shall be transferred to
Buyer with all rights and obligations with effect as of the closing date
provided that the relevant German Employee does not object to the
transfer. In the event that a claim or allegation is made by an employee or
former employee of DeWind who is not a Transferred German Employees” (an
“Unexpected Employee”) that he/she has or should have transferred to the Buyer
by virtue of German law, DeWind shall indemnify Buyer against any Liabilities
incurred by the Buyer arising out of or in connection with the transfer of the
Unexpected Employee. DeWind shall indemnify Buyer against any Liabilities
incurred by Buyer arising from claims by Transferred German Employees in respect
of and/or related to the time prior to the transfer of the employment.
Buyer shall indemnify DeWind unless agreed expressly otherwise in the Purchase
Agreement – against any liabilities incurred by DeWind arising from claims by
Transferred German Employees in respect of and/or related to the time post
transfer.
DeWind
will be responsible for the preparation and filing of all tax returns for
DeWind for all periods as to which tax returns are due after the closing date
(including the tax returns for DeWind that include the operations of DeWind and
its subsidiaries for any period ending on or before the closing date).
DeWind will make all payments required with respect to any such tax
return.
Buyer
will be responsible for the preparation and filing of all tax returns for DeWind
subsidiaries for all periods as to which tax returns are due after the closing
date (other than taxes with respect to periods which the tax returns of DeWind
will include the operations of DeWind and DeWind Subsidiaries). Buyer will
make all payments required with respect to any such tax return; provided,
however, that DeWind will reimburse Buyer concurrently therewith to the extent
(i) any payment Buyer is making relates to the operations of DeWind or any of
DeWind Subsidiaries for any period ending on or before the closing date and (ii)
such payment was not adequately reserved for on the Subsidiary’s financial
statements as of the closing date.
Buyer and
DeWind shall each bear an equal portion of all federal, state and local sales,
documentary and real estate and other transfer Taxes, if any, due as a result of
the purchase, sale or transfer of the Purchased Assets in accordance herewith
whether imposed by law on DeWind, DeWind Subsidiaries or Buyer.
All
personal property taxes and similar ad valorem obligations levied with respect
to the Purchased Assets for a taxable period that includes (but does not end on)
the closing date shall be apportioned between DeWind and Buyer as of the closing
date based on the number of days of such taxable period included in the period
ending with and including the closing date, and the number of days of such
taxable period beginning after the closing date.
Buyer and
DeWind hereby waive compliance by Buyer and DeWind with the bulk sales law and
any other similar Laws in any applicable jurisdiction in respect of the
transactions contemplated by the Purchase Agreement and the ancillary
agreements; provided, however, that DeWind shall pay and discharge when due all
claims of creditors asserted against Buyer or the Purchased Assets by reason of
such noncompliance and shall take promptly all necessary actions required to
remove any lien which may be placed upon any of the Purchased Assets by reason
of such noncompliance.
Buyer and
DeWind shall cooperate, and each shall use its commercially reasonable efforts,
to effect the full and unconditional release, effective as of the closing date,
of the Registrant from any guarantee relating to an Assumed Liability (“Parent
Guarantee”) and Buyer, will (among other things) (i) furnish a guarantee to
replace such Parent Guarantee, which replacement guarantee is issued by a Person
having creditworthiness at least comparable to that of CTC and containing terms
and conditions that are substantially similar to the terms and conditions of
such Parent Guarantee, or (ii) providing other credit support reasonably
acceptable to the appropriate guarantee beneficiary.
7
Buyer and
DeWind shall each negotiate in good faith and use its commercially reasonable
efforts to finalize and execute a transition services agreement. DeWind agrees
to promptly pay all judgments and settlements of certain pending lawsuits to the
extent such judgments and settlements are in excess of certain reserve
amounts.
The
obligations of Buyer and DeWind to consummate the transactions contemplated by
the Purchase Agreement are subject to the satisfaction on or prior to the
closing date of various customary conditions, among other things, including (a)
Bank of Korea related approvals; (b) lack of governmental order preventing the
consummation of the asset sale; (c) lack of any law that makes the consummation
of the asset sale illegal. (d) absence of any pending or threatened action
before any governmental entity that would materially and adversely affect the
asset sale.
The
obligation of Buyer to consummate the asset sale is subject to the satisfaction
(or waiver by Buyer in its sole discretion) of additional further conditions
relating to, among other things: (a) accuracy and completeness of the
representations and warranties of DeWind; (b) performance or compliance in
all material respects with all obligations and covenants required by the
Purchase Agreement; (c) delivery of a certificate of an authorized officer
of DeWind, dated as of the closing date, stating that certain closing conditions
have been satisfied; (d) absence of any material adverse effect on the Purchased
Assets or the Business; (e) DeWind’s delivery to Buyer of all agreements and
other documents required to be delivered by DeWind to Buyer pursuant to the
Purchase Agreement; (f) receipt of evidence in form and substance reasonably
satisfactory to Buyer that all liens other than Permitted Liens with respect to
the Purchased Assets have been released; (g) DeWind’s completion of such
actions as are reasonably necessary to cause certain employees and their covered
dependents to cease participation in all DeWind benefit plans covering such
employees in the United States, except with respect to available continuation or
conversion coverage pursuant to applicable law and the terms of such benefit
plans; (h) Buyer’s receipt a comfort letter from a certain third party; (i)
resolution of certain pending lawsuits; and (j) receipt of evidence reasonably
acceptable to Buyer that DeWind Energy Development Company LLC owns a majority
of the capital stock of DeWind SW1 Wind Farms, LLC. The obligation of
DeWind to consummate the asset sale is subject to the satisfaction (or waiver by
DeWind in its sole discretion) of the following further conditions, relating to
among other things: (a) accuracy and completeness of the
representations and warranties of Buyer; (b) performance or compliance with all
obligations and covenants required by the Purchase Agreement to be performed or
complied with by Buyer; (c) if the closing has not occurred by the
30th day after August 10, 2009, a nationally recognized investment bank shall
have delivered to the board of directors of CTC (or a committee thereof) a
written bring-down letter with respect to an opinion provided by such investment
bank, which confirms that, as of the closing date, the consideration to be
received by DeWind in connection with the asset sale contemplated hereby is,
from a financial point of view, fair to CTC. Some of these closing
conditions are dependent upon actions of or absence of actions by various third
parties. The Registrant cannot assure an investor that the closing conditions of
Buyer’s obligations or DeWind’s obligations will be satisfied.
This
Agreement may be terminated at any time prior to the closing by mutual written
consent of Buyer and DeWind. It may be also terminated by either Buyer or
DeWind if: (a) the closing does not occur on or before the 45th day after August
10, 2009; provided that the right to terminate the Purchase Agreement shall not
be available to any party whose breach of a representation, warranty, covenant
or agreement under the Purchase Agreement has been the cause of or resulted in
the failure of the closing to occur on or before such date; or (b) a
governmental entity shall have issued an order or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Purchase
Agreement.
This
Agreement may be terminated by Buyer if (a) any condition to the
obligations of Buyer hereunder becomes incapable of fulfillment other than as a
result of a breach by Buyer of any covenant or agreement contained in the
Purchase Agreement, and such condition is not waived by Buyer; or (b) there
has been a material breach by DeWind of any representation, warranty, covenant
or agreement contained in the Purchase Agreement or DeWind Disclosure Schedule
to the Purchase Agreement, or if any representation or warranty of
DeWind became untrue in either case such that the closing conditions would
not be satisfied prior to closing in a material manner and is not subsequently
cured;
If DeWind
has not terminated the Purchase Agreement, the closing has not occurred by the
30th day after August 10, 2009 and DeWind or any of its subsidiaries has taken
any action (or failed to take any action), the result of which would have been a
material breach of its covenants but for the provisos thereto; provided that, if
Buyer exercises its termination right and both (a) all other mutual conditions
precedent have either been met or waived and (b) Buyer is not in breach of the
Purchase Agreement, then DeWind shall promptly pay a break-up fee to Buyer equal
to $2,000,000.
8
DeWind
may terminate the Purchase Agreement if any condition to the obligations of
DeWind hereunder becomes incapable of fulfillment other than as a result of a
breach by DeWind of any covenant or agreement contained in the Purchase
Agreement, and such condition is not waived by DeWind; provided that if DeWind
exercises this termination right because an investment bank cannot provide a
bring down of the fairness opinion and both (a) all other mutual conditions
precedent have either been met or waived and (b) Buyer is not in breach of the
Purchase Agreement; then DeWind shall promptly pay a break-up fee to Buyer
equal to $2,000,000.
DeWind
may also terminate the Purchase Agreement if there has been a material breach by
Buyer of any representation, warranty, covenant or agreement contained in the
Purchase Agreement or the Buyer Disclosure Schedule, or if any representation or
warranty of Buyer shall have become untrue, in either case such that the closing
conditions would not be satisfied; provided that any such breach is not cured by
Buyer within a certain grace period.
All
representations and warranties contained in the Purchase Agreement, the
ancillary agreements, any schedule, certificate or other document delivered
pursuant to the Purchase Agreement or the ancillary agreements, shall survive
the closing for a period of eighteen (18) months. Notwithstanding the
foregoing, all representations and warranties of DeWind regarding DeWind’s
organization and good standing, and authority and enforceability of the Purchase
Agreement shall survive indefinitely; representations and warranties
regarding taxes and employee benefits shall survive for a period equal to the
applicable statute of limitations plus 60 days. The representations and
warranties of DeWind regarding subsidiaries and related
entities; intellectual property; employee benefits; and brokers or finders;
and the representations and warranties of Buyer regarding Buyer’s organization
and good standing; authority and enforceability; and brokers or finders shall
survive the closing for a period of three (3) years.
All
covenants and agreements that, by their terms herein, explicitly contemplate
performance until a specific date after the closing date, shall survive the
closing until a date that is eighteen (18) months after such specific
date. All other covenants and agreements herein shall survive the closing
for a period of eighteen (18) months.
The
period for which a representation or warranty, covenant or agreement survives
the closing is referred to herein as the “Applicable Survival
Period.” In the event notice of claim for indemnification under the
Purchase Agreement is given within the Applicable Survival Period, the
representation or warranty, covenant or agreement that is the subject of such
indemnification claim (whether or not formal legal action shall have been
commenced based upon such claim) shall survive with respect to such claim until
such claim is finally resolved.
DeWind
and CTC will indemnify and defend Buyer and its Affiliates and their respective
representatives (the “Buyer Indemnitees”) against, and shall hold them harmless
from all losses resulting from, arising out of, or incurred by any Buyer
Indemnitee in connection with, or otherwise with respect to: (i) the failure of
any representation and warranty (as qualified by DeWind Disclosure Schedule) or
other statement by DeWind contained in the Purchase Agreement, any ancillary
agreements, DeWind Disclosure Schedule or any certificate furnished or to be
furnished to Buyer in connection with the transactions contemplated by the
Purchase Agreement and the ancillary agreements to be true and correct in all
respects as of the date of the Purchase Agreement and as of the closing
date; (ii) any breach of any covenant or agreement of DeWind
contained in the Purchase Agreement, the ancillary agreements, DeWind Disclosure
Schedule or any certificate furnished or to be furnished to Buyer in connection
with the transactions contemplated by the Purchase Agreement and the ancillary
agreements; or (iii) any Excluded Liability.
Buyer
Indemnitees will be entitled to indemnification with respect to any claim for
indemnification described in the foregoing paragraph: (i) only if the amount of
losses with respect to such claim exceeds the amount of $50,000 (any claim
involving Losses equal to or less than such amount being referred to as a “De
Minimis Claim”); (ii)only if, and then only to the extent that, the aggregate
losses to all Buyer Indemnitees, with respect to all claims for indemnification
(other than De Minimis Claims), exceed the amount of $150,000 (the
“Deductible”), whereupon DeWind shall be obligated to pay in full all such
amounts but only to the extent such aggregate damages are in excess of the
amount of the Deductible; and
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Notwithstanding
anything to the contrary, the Buyer Indemnitees shall not be entitled to
aggregate Losses in excess of the amount of 35% (the “Cap”) of the amount
of the cash consideration adjusted after the Final Net Asset adjustment
(“Adjusted Cash Consideration”), except with regard to actual fraud and except
for specific performance relating to noncompetition and nonsolicitation clauses;
provided, however, that the Buyer Indemnitees shall be entitled to losses in
excess of the Cap solely to the extent that such losses arise on or prior to
September 30, 2010 solely with respect to a breach of the representation
regarding intellectual property of DeWind Ltd. (“4.15(n) Losses”), but in no
event shall the Buyer Indemnitees be entitled to aggregate losses (including
4.15(n) Losses) in excess of 75% of the amount of the adjusted cash
consideration, except that the Cap may not apply in certain circumstances
involving bankruptcy proceedings.
Buyer
shall indemnify and defend DeWind and its Affiliates and their respective
representatives (the “DeWind Indemnitees”) against, and shall hold them harmless
from, any and all losses resulting from, arising out of, or incurred by any
DeWind Indemnitee in connection with, or otherwise with respect to: (i) the
failure of any representation and warranty or other statement by Buyer contained
in the Purchase Agreement, the ancillary agreements, the Buyer Disclosure
Schedule or any certificate or other document furnished or to be furnished to
DeWind pursuant to the Purchase Agreement to be true and correct in all respects
as of August 10, 2009 and as of the closing date; (ii) any breach of any
covenant or agreement of Buyer contained in the Purchase Agreement, the
ancillary agreements, the Buyer Disclosure Schedule or any certificate or other
document furnished or to be furnished to DeWind; and (iii) any failure to
perform when due the Assumed Liabilities.
DeWind
Indemnitees shall be entitled to indemnification with respect to any claim for
indemnification (i) only if the losses are not a De Minimis Claim; (ii) only if,
and then only to the extent that, the aggregate losses to all DeWind
Indemnitees, with respect to all claims for indemnification (other than De
Minimis Claims), exceed the Deductible, but only to the extent such aggregate
damages are in excess of the amount of the Deductible. DeWind Indemnitees
shall not be entitled to aggregate losses in excess of the Cap, except with
regard to fraud.
At the
closing, an escrow fund shall be delivered to the escrow agent to be held and
administered by the escrow agent in accordance with the terms of the Escrow
Agreement to be signed by the parties at closing and subject to release of
certain amount of the funds upon the expiration of certain time periods all as
set forth in such agreement.
No item
included in the closing Net Asset Statement or included in the calculation of
the Final Net Assets or Adjusted Cash Consideration shall constitute losses for
purposes of the indemnification provisions of the Purchase
Agreement.
UK
DeWind Agreement
Under the
UK Agreement, UK DeWind agreed to sell certain assets to Buyer (“Turbine
Assets”), for the purchase price of $3.0 million, free of any liens other than
certain permitted liens under such agreement (“Permitted Liens”). Buyer
also agreed to assume the Cuxhaven Lease at and after the closing
date.
The
consideration to be paid by Buyer to UK DeWind for the Turbine Assets shall be
$3,000,000 (the “Purchase Price”). This Purchase Price includes all
payments of the European Union Value Added Tax or any other tax (each a “Tax”)
that may apply to the sale of the Turbine Asset. Buyer and UK DeWind agree
to deduct from the Purchase Price the amount required to pay for all such
applicable Taxes. Buyer shall pay the Purchase Price in immediately
available funds on the closing date.
UK DeWind
shall terminate, simultaneous with the Closing, all its license rights granted
under that certain Asset Purchase Agreement between UK DeWind and DeWind, Inc.,
dated September 30, 2008 (the “Prior License”). Buyer grants UK DeWind a
limited perpetual (subject to Section 1.5(c)), non-exclusive, royalty free
license (the “Turbine License”) to use all of the intellectual property
previously granted under the Prior License.
The UK
Agreement shall immediately and automatically, without any further action from
any other person, terminate upon the termination of the Purchase Agreement in
accordance with its terms. In the event of termination of the UK Agreement
as provided herein, the UK Agreement shall immediately become null and void and
there shall be no further obligations on the part of UK DeWind or Buyer;
provided that such termination will not relieve a party in breach of this
Agreement from any liability to the other party for such
breach.
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The
closing of the transactions contemplated by the UK Agreement simultaneously
with, or as soon as possible after, the closing of the transactions contemplated
by the Purchase Agreement (unless another time and/or place is agreed to in
writing by the parties)
On or
prior to the closing date (i) UK DeWind shall deliver evidence of the
termination by UK DeWind of the Prior License and acceptance of such termination
by DeWind, Inc. and (ii) UK DeWind and Buyer shall execute or deliver, and file
as necessary, such other documents as are (a) necessary to complete the
transactions contemplated herein, or (b) reasonably requested by either party,
including (x) a Bill of Sale, and such other good and sufficient instruments of
transfer as Buyer reasonably deems necessary and appropriate to vest in Buyer
all right, title and interest in, to and under the Turbine Assets and (y) such
other good and sufficient instruments as UK DeWind reasonably deems necessary
and appropriate to relieve UK DeWind of its obligations with respect to the
Assumed Liabilities (the “ancillary agreements”).
Title to
the Turbine Assets will pass to Buyer as of the Closing. All information
capable of electronic transmission will be transmitted to Buyer in such
manner. All other assets and information will be delivered immediately at
Closing by UK DeWind to Buyer at the locations where such Turbine Assets reside
as of the date hereof; provided that the molds held at the premises of SINOI
GmbH shall remain at such premises, and UK DeWind shall notify SINOI GmbH of the
sale of such molds to Buyer.
In the UK
Agreement, UK DeWind has made representations and warranties to Buyer pertaining
to: (a) organization and good standing of UK DeWind; (b) authority and
enforceability of the UK Agreement; (c) no conflicts; (d) title to Turbine
Assets; (e) condition of Turbine Assets; (f) Cuxhaven Lease; (g) lack of
employees; and (h) completeness of disclosure.
Buyer
made customary representations and warranties to UK DeWind as of the
date hereof and as of the closing date, including the representation that Buyer
has cash available or has existing borrowing facilities which together are
sufficient to enable it to consummate the transactions contemplated by the UK
Agreement.
Prior to
and after the Closing, Buyer and UK DeWind shall cooperate, and each shall use
its commercially reasonable efforts, to effect as of the closing date the full
and unconditional release of UK DeWind from the Cuxhaven Lease bond and the
Cuxhaven Lease liens, including the return to UK DeWind of the amount of the
Cuxhaven Lease bond; provided that Buyer shall not be required to provide
security to any person on terms that are, on the whole, materially less
favorable to Buyer than the terms of the Cuxhaven Lease bond and the Cuxhaven
Lease liens are, on the whole, to UK DeWind.
After the
closing and through December 31, 2010, Buyer shall make available to UK DeWind
the personnel and other resources reasonably requested by Buyer to support UK
DeWind’s general operations, including providing operational services for (and
monitoring of) UK DeWind’s existing turbine fleet and existing orders,
supporting commissioning of turbines, and administering the business
relationships. In exchange for such services, UK DeWind shall pay to Buyer
reasonable fees to be negotiated by Buyer and UK DeWind in good
faith.
The
obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (or waiver by Buyer in its sole
discretion) of several closing conditions, including among other things, that
Buyer and UK DeWind . shall have consummated the transactions contemplated in
the Purchase Agreement; and that UK DeWind shall have obtained the consent of
the lessor under the Cuxhaven Lease for the Cuxhaven Lease to be assigned to
Buyer. The obligation of UK DeWind to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (or waiver by UK
DeWind in its sole discretion) of several customary conditions.
The
description of the Agreements are each qualified in its entirety by reference to
such agreement attached hereto as Exhibit 10.1 and Exhibit 10.2,
respectively.
A copy of
the press release regarding the asset sale was attached as Exhibit 99.1 to the
Original Report.
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Item
8.01 Other Events
The
Registrant held a conference call and simultaneous audio webcast to discuss the
results of operations for the quarter ended June 30, 2009 and the agreement with
Buyer on August 11, 2009. A transcript of the conference call was attached as
Exhibit 99.2 to the Original Report.
The press
release and presentation attached to the Original Report as Exhibit 99.1 and
99.2, respectively, were furnished pursuant to Item 8.01 and shall not be deemed
"filed" for the purposes of Section 18 of the Securities and Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that Section. The
information in the Original Report shall not be incorporated by reference into
any registration statement pursuant to the Securities Act of 1933, as
amended.
Item
9.01 Financial Statements and Exhibits
(c)
Exhibits
|
10.1
|
Asset
Purchase Agreement by and between Daewoo Shipbuilding & Marine
Engineering Co. Ltd. and DeWind, Inc. and the Registrant dated as of
August 10, 2009
|
|
10.2
|
Asset
Purchase Agreement by and between Daewoo Shipbuilding & Marine
Engineering Co. Ltd. and DeWind, Ltd. dated as of August 10,
2009
|
|
99.1
|
Press
Release*
|
|
99.2
|
Transcript
of a Conference Call held on August 11,
2009*
|
*Previously
filed.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
COMPOSITE
TECHNOLOGY CORPORATION
(Registrant)
Date:
December 8, 2010
|
By:
|
/s/
Benton H Wilcoxon
|
|
Title: Chief Executive
Officer
|
12