Document:

Exhibit 10.1

WARRANT
EXERCISE AGREEMENT

                    THIS
WARRANT EXERCISE AGREEMENT (“Agreement”) is dated as of August 19, 2011
by and among China Hydroelectric Corporation, a Cayman Islands exempted company
(the “Company”), and Vicis Capital Master Fund (the “Investor”).

W I T N
E S S E T H:

                    WHEREAS, on April 11, 2007, the Company
issued the Investor a warrant (the “Existing Warrant”) to purchase from the
Company up to 18,666,666 ordinary shares, par value $.001 per share, of the
Company (the “Ordinary Shares”); and

                    WHEREAS, in order to enable the Investor to
exercise a portion of the Existing Warrant to purchase $10,000,000 (the “Purchase
Price”) of Ordinary Shares from the Company and in consideration of such
partial exercise of the Existing Warrant by the Investor, the Company has
agreed to (i) amend the terms of the Existing Warrant so as to decrease the
Exercise Price (as defined in the Existing Warrant) and (ii) amend and restate
the Existing Warrant on the terms and conditions set forth herein; 

                    NOW, THEREFORE, in consideration of the
foregoing premises and the covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

ARTICLE I

Share Purchase; Amendment of Existing Warrant

          Section 1.1
Adjustment to Exercise Price; Share Purchase. Upon Closing (as
hereinafter defined) (i) the Company shall amend the terms of the Existing
Warrant so as to decrease the Exercise Price from $5.00 per Warrant Share (as
defined in the Existing Warrant) to $1.15 (representing the average of the last reported sale price
of the Company’s American Depositary Shares (“ADS”), consisting of three
Ordinary Shares per ADS, for the twenty-five (25) trading days ending on August
17, 2011) (the “Adjusted Exercise Price”), and (ii) the Investor shall
exercise that portion of the Existing Warrant, at the Adjusted Exercise Price,
so as to purchase $10,000,000 in Ordinary Shares from the Company (such
Ordinary Shares so purchased, hereinafter referred to as the “Purchased
Shares”).

          Section 1.2
Amendment of Existing Warrant. Upon Closing, in consideration for the
Investor’s agreement to purchase the Purchased Shares at the Adjusted Exercise
Price, the Company shall issue to the Investor an amended and restated warrant
(the “Amended Warrant”) to purchase that number of Ordinary Shares equal
to the difference between (a) 18,666,666 Ordinary Shares covered by the
Existing Warrant (the “Existing Warrant Shares”) and (b) the number of
the Purchased Shares on the same terms and conditions as the Existing Warrant; provided,
however,
that the Amended Warrant shall: (i) be exercisable for the Adjusted Exercise Price;
(ii) be exercisable at any time after the Closing Date until 5:00 p.m., New
York City Time, on the earlier of (x) December 31, 2013 or (y) upon redemption
of the Amended Warrant in accordance with the terms and conditions set forth
therein; (iii) be exercisable on a cashless basis; and (iv) contain
full-ratchet anti-dilution protection.

          Section 1.3
The Closing. 

                    (a)
The closing of the issuance of the Amended Warrant (the “Closing”) shall
take place at the offices of DLA Piper LLP (US), within one business day
following receipt by the Company’s board of directors (the “Board”) of a
fairness opinion relating to the fairness of the transactions contemplated by
this Agreement from an investment bank reasonably acceptable to the Board.

                    (b)
On the Closing Date, (i) the Company shall deliver to the Investor a
certificate representing the Amended Warrant deliverable hereunder registered
in the name of the Investor or its nominee, and (ii) the Investor shall deliver
the Purchase Price to the Company. The Purchase Price shall be delivered by the
Investor by wire transfer in immediately available funds to an account
designated in writing by the Company. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing Date. 

ARTICLE II

Representations and Warranties

          Section 2.1
Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Investor from and as of the
date hereof through the Closing Date:

                    (a)
Organization and Authority of the Company. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Cayman Islands and has all requisite power and authority to own or hold under
lease the property it purports to own or hold under lease and to conduct its
business as presently conducted. The Company has all requisite power and
authority to execute and deliver this Agreement and all other documents and
agreements contemplated hereby and to perform the provisions hereof and
thereof. The Company has all necessary corporate power and authority to enter
into this Agreement and any other documents or agreements contemplated hereby,
and to perform its obligations hereunder and thereunder. Each of this Agreement
and any other documents or agreements contemplated hereby or thereby has been
duly authorized, executed and delivered by, and each is the valid and binding
obligation of, the Company, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, liquidation, reorganization,
insolvency, moratorium or other similar laws or by legal or equitable principles
relating to or limiting creditors’ rights generally. Neither the execution and
delivery of this Agreement and all other documents and agreements contemplated
hereby, nor the performance of the Company’s obligations hereunder and
thereunder, will violate any provision of the Company’s memorandum and articles
of association or bylaws or violate or result in a breach of or default under
any material contract, indenture, mortgage or other agreement to which the
Company is a party or by which it or its property is or may be bound. 

                    (b)
Issuance of Purchased Shares. The Purchased Shares have been duly
authorized and reserved for issuance and, upon exercise in accordance with
terms of the Existing Warrant, such Purchased Shares will be validly issued,
and are fully paid and non-assessable, 

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free and clear of any and all liens, claims and encumbrances, and the
holder of such Purchased Shares shall be entitled to all rights and preferences
accorded to a holder of Ordinary Shares.

          Section 2.2
Representations and Warranties of the Investors. The Investor hereby
makes the following representations and warranties to the Company as of the
date hereof and on the Closing Date:

                    (a)
Authorization; Enforcement. (i) The Investor has the requisite power and
authority to enter into and perform this Agreement and to acquire the Purchased
Shares and Amended Warrant being issued to the Investor hereunder, (ii) the
execution and delivery of this Agreement by the Investor and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, as required, and (iii) this
Agreement constitutes the valid and binding obligation of the Investor
enforceable against the Investor in accordance its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors’ rights and remedies or by
other equitable principles of general application.

                    (b)
Investment Representation; Accredited Investor. The Investor represents
and warrants to the Company that (i) such Investor is acquiring the Amended
Warrant for its own account for investment purposes only and not with a view to
the distribution or sale of such Amended Warrant within the meaning of the
Securities Act of 1933, as amended (the “Securities Act”), (ii) the
Investor is an “accredited investor,” as such term is defined in Rule 501
promulgated under the Securities Act, (iii) the Investor has read this
Agreement and the annual financial statements of the Company for its most
recently completed fiscal year, together with any available quarterly financial
statements of the Company for quarterly periods subsequent to the end of the
Company’s most recently completed fiscal year (collectively, the “Supplemental
Information”) and is capable of evaluating and understanding this Agreement
and the Supplemental Information, (iv) the Investor has been provided with all
information that it has requested from the Company and has been afforded the
opportunity to ask questions and receive answers concerning the terms and
conditions of the offering and the Supplemental Information, (v) the Investor
understands the significant risks involved with the partial exercise of the
Existing Warrant and corresponding investment in the Amended Warrant, (vi) such
Investor understands that the neither the Purchased Shares, the Amended Warrant
nor any Ordinary Share acquired upon the exercise thereof (the “Amended
Warrant Shares”) have been nor will be registered under the Securities Act
or registered or qualified under any state securities or blue sky laws and that
the Purchased Shares, the Amended Warrant and any Amended Warrant Shares must
be held indefinitely unless such Purchased Shares, Amended Warrant and/or
Amended Warrant Shares, as the case may be, are subsequently registered under
the Securities Act and applicable state securities and blue sky laws or an
exemption from such registration is available, and (vii) the Investor
understands that no federal or state agency has passed upon the Supplemental
Information or made any finding or determination as to the fairness of the
investment or any recommendation or endorsement of the Purchased Shares, the
Amended Warrant or any Amended Warrant Shares. 

                    (c)
Reliance by the Company. The Investor understands that the issuance of
the Purchase Shares and the Amended Warrant is a transaction being conducted in
reliance on a 

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transactional exemption from the registration requirements of Federal
and state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to
acquire the Purchase Shares and the Amended Warrant.

ARTICLE III

Covenants

          Section 3.1
Covenants by the Company. 

                    (a)
Securities Compliance. The Company shall notify or disclose to the U.S.
Securities and Exchange Commission and the New York Stock Exchange, to the
extent required by their respective requirements, of the transactions
contemplated by this Agreement and the Amended Warrant and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Amended Warrant
and the Purchased Shares. 

                    (b)
Reservation of Stock Issuable Upon Exercise. The Company shall at all
times reserve and keep available out of its authorized but unissued Ordinary
Shares, solely for the purpose of affecting the exercise of the Amended
Warrant, such number of shares of Ordinary Shares as shall from time to time be
sufficient to effect the exercise of the Amended Warrant.

                    (c)
Share Certificates. As soon as reasonably practicable, but in no event
more than ten (10) business days from the Closing Date, the Company shall issue
one or more certificates for the number of the Purchased Shares.

ARTICLE IV

Conditions

          Section 4.1
Conditions Precedent to the Obligation of the Company to Issue the Amended
Warrant. The obligation hereunder of the Company to issue the Amended
Warrant to the Investor is subject to the satisfaction, at or before the
Closing Date, of each of the conditions set forth below. These conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion.

                    (a)
Accuracy of the Investor’s Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).

                    (b)
Performance by the Investor. The Investor shall have performed all
agreements and satisfied all conditions required hereby to be performed or
satisfied by the Investor at or prior to the Closing Date, including the
delivery of payment in connection with its partial exercise of the Existing
Warrant for the Purchased Shares at the Adjusted Exercise Price.

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                    (c)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

          Section 4.2
Conditions Precedent to the Obligation of the Investor to Exercise the
Existing Warrant. The obligation hereunder of the Investor to acquire and
pay for the Purchased Shares and Amended Warrant is subject to the
satisfaction, at or before the Closing Date, of each of the conditions set
forth below. These conditions are for the Investor’s sole benefit and may be
waived by the Investor at any time in its sole discretion.

                    (a)
Accuracy of the Company’s Representations and Warranties. The
representation and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).

                    (b)
Performance by the Company. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied
by the Company at or prior to the Closing Date.

                    (c)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority or competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

ARTICLE V

Legend and Stock

          Section 6.1
Share Legend. The certificate representing the Purchased Shares shall be
stamped or otherwise imprinted with a legend substantially in the following
form:

                    THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED
THE WRITTEN OPINION OF COUNSEL OF THE ISSUER, OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE ISSUER, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE “BLUE
SKY” OR SIMILAR SECURITIES LAW.

          Section 6.2
Warrant Legend. The certificate representing the Amended Warrant shall
be stamped or otherwise imprinted with a legend substantially in the following
form:

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                    THIS
WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SUCH ACT.

ARTICLE VI

Miscellaneous

          Section 6.1
Stamp Taxes; Agent Fees. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Amended Warrant
pursuant hereto and the issuance of the Purchased Shares issued upon the
partial exercise of the Existing Warrant.

          Section 6.2
Specific Enforcement; Consent to Jurisdiction.

                    (a)
The Company and the Investor acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.

                    (b)
The Company and the Investor (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the District of New York
and other courts of the United States sitting in New York County, New York for
the purposes of any suit, action or proceeding arising out of or relating to
this Agreement and (ii) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue of the suit, action or proceeding is improper.
The Company and the Investor consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing in this paragraph shall affect or limit any right to serve process in
any other manner permitted by law.

          Section 6.3
Entire Agreement; Amendment. This Agreement together with the agreements
and documents executed in connection herewith, contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of
any such amendment or waiver is sought.

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          Section 6.4
Notices. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be given in
accordance the terms of the Existing Warrant.

          Section 6.5
Indemnity. Each party shall indemnify the other party against any loss,
cost or damages (including reasonable attorney’s fees but excluding
consequential damages) incurred as a result of such parties’ breach of any
representation, warranty, covenant or agreement in this Agreement.

          Section 6.6
Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.

          Section 6.7
Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

          Section 6.8
Successors and Assigns. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The parties hereto may amend this
Agreement without notice to or the consent of any third party. The Company may
not assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Investor (which consent may be withheld for any reason
in its sole discretion), except that the Company may assign this Agreement in
connection with a merger, consolidation, business combination or the sale of
all or substantially all of its assets provided that the Company is not
released from any of its obligations hereunder, such successor in interest or
assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement is made, in form and
substance satisfactory to the Investor, to place the Investor in substantially
the same position as it would have been but for such assignment. The Investor
may assign this Agreement (in whole or in part) or any rights or obligations
hereunder without the consent of the Company in connection with any sale or
transfer of all or any portion of the Amended Warrant and Purchased Shares held
by the Investor, provided that the Investor may not assign this Agreement prior
to the Closing Date without the Company’s prior consent except to an affiliate
or affiliates of the Investor.

          Section 6.9
No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

          Section
6.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to such state’s principles of conflict of laws.

          Section
6.11 Survival. The representations and warranties and the agreements and
covenants of the Company and the Investor contained herein shall survive the
Closing.

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          Section
6.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.

[Signature Page Follows]

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IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of the
date first above written.

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 CHINA HYDROELECTRIC CORPORATION

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ John D. Kuhns

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
  

 	
 John D. Kuhns, Chairman and Chief
          Executive Officer

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
 VICIS CAPITAL MASTER FUND

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Shad
 Stastney

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
  

 	
 Name: Shad
 Stastney

 
	
  

 	
  

 	
 Title:
 Member, Vicis Capital LLC, Advisor to the Vicis Capital Master Fund

 

Exact Name in
Which Amended Warrant Should 

be registered: Vicis Capital Master Fund

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EXHIBITS AND SCHEDULES

	
  

 	
  

 	
  

 
	
 Exhibit A

 	
  

 	
 Form of
 Amended Warrant

 

	
  

 	
  

 	
  

 
	
  

 	
           THIS
 WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
 REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED
 FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
 AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR
 PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR UNLESS SOLD
 PURSUANT TO RULE 144 UNDER SUCH ACT. 

 	
  

 

	
  

 	
  

 
	
 No. W-4

 	
 Warrant to
 Purchase 10,004,157 Ordinary 

 
	
  

 	
 Shares
 (subject to adjustment)

 

AMENDED
AND RESTATED

WARRANT

TO PURCHASE ORDINARY SHARES

OF

CHINA HYDROELECTRIC CORPORATION

          This
Warrant (the “Warrant”) is issued to Vicis Capital Master Fund or
his, her or its permitted assigns (“Holder”) by CHINA HYDROELECTRIC CORPORATION, a Cayman Islands exempted company
(the “Company”), on August 18, 2011 (the “Warrant Issue Date”)
for agreed upon consideration, receipt and sufficiency of which is hereby
acknowledged. This Warrant amends and restates the previous warrant granted to the
Holder by the Company on April 11, 2007 to purchase up to 18,666,666 ordinary
shares in the capital of the Company.

          1. Purchase
Shares. Subject to the terms and conditions hereinafter set forth, the
Holder is entitled, upon surrender of this Warrant at the principal office of
the Company (or at such other place as the Company shall notify the holder
hereof in writing), to purchase from the Company up to 10,004,157 ordinary
shares, par value $0.001 per share (“Shares”), of the Company (the “Warrant
Share”) at the Exercise Price (defined below), subject to adjustment as
provided in Section 8 hereof. 

          2. Exercise
Price. The purchase price for the Warrant Share shall be $1.15 per Warrant
Share, as adjusted from time to time pursuant to Section 8 or Section 9 hereof
(the “Exercise Price”). 

          3. Exercise
Period. This Warrant may be exercised at any time after the date hereof
until 5:00 p.m., New York City time, on the earlier of (a) December 31, 2013 or
(b) upon redemption of this Warrant in accordance with the terms and conditions
set forth in Section 4 hereof.

          4. Redemption.
(a) All but not less than all of the outstanding Warrants may be redeemed at
the option of the Company at any time during the Exercise Period, at the
principal office of the Company, upon the notice referred to in
Section 4(b), at the price of $0.01 per Warrant (“Redemption Price”), provided that
the last reported bid price of the Company’s 

American Depositary Shares (“ADS”), representing three Ordinary
Shares per ADS, equals or exceeds $17.66 per share, on each of any twenty (20)
trading days within a thirty (30) trading day period ending three business days
prior to the date on which notice of redemption is given. Notwithstanding the foregoing, Warrants held by
the officers and directors of the Company will not be redeemable so long as
such officers and directors hold such warrants. 

                    (b)
Date Fixed for, and Notice of, Redemption. In the event the Company
shall elect to redeem all of the Warrants, the Company shall fix a date for the
redemption. Notice of redemption shall be mailed by first class mail, postage
prepaid, by the Company not less than thirty (30) days prior to the date fixed
for redemption to the registered holders of the Warrants to be redeemed at
their last addresses as they shall appear on the registration books. Any notice
mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the registered holder received such notice.

                    (c)
Exercise After Notice of Redemption. The Warrants may be exercised with
the terms of this Agreement at any time after notice of redemption shall have
been given by the Company pursuant to Section 4(b) hereof and prior to the
time and date fixed for redemption. On and after the redemption date, the
record holder of the Warrants shall have no further rights except to receive,
upon surrender of the Warrants, the Redemption Price.

          5. Method
of Exercise. While this Warrant remains outstanding and exercisable in
accordance with Section 3 above, the Holder may exercise, in whole or in part,
the purchase rights evidenced hereby. Such exercise shall be effected by:

	
  

 	
  

 
	
  

 	
           (a) the
 surrender of the Warrant, together with a duly executed copy of the form of
 Notice of Exercise attached hereto, to the Secretary of the Company at its
 principal offices set forth on the signature page hereof and the payment in
 the form of a certified or bank cashier’s check payable to the order of the
 Company in an amount equal to the Exercise Price multiplied by the number of
 Warrant Shares for which this Warrant is being exercised; or

 
	
  

 	
  

 
	
  

 	
           (b) in
 lieu of making the cash payment contemplated above, the Holder may, in its
 sole discretion, elect instead to receive upon such exercise the “Net
 Number” of Shares determined according to the following formula (a “Cashless
 Exercise”):

 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Net Number = 
 

 	
 (A x B) - (A
 x C)

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
  

 	
 B

 	
  

 

	
  

 	
  

 
	
  

 	
 For purposes
 of the foregoing formula:

 
	
  

 	
  

 
	
  

 	
 A = the total
 number of Shares with respect to which this Warrant is then being exercised.

 
	
  

 	
  

 
	
  

 	
 B = the
 25-Day Average Price as of the date of such exercise;

 
	
  

 	
  

 
	
  

 	
 C = the
 Exercise Price.

 

          “25-Day
Average Price” means the average of the last reported sale price of the ADS
divided by three (3), for the twenty-five (25) trading days ending on the
trading day prior to the date of determination (or the average closing bid and
asked prices for each such day if no such sale is made on such trading day).

          6. Certificates
for Shares. Upon the exercise of the purchase rights evidenced by this
Warrant, one or more certificates for the number of Warrant Shares so purchased
shall be issued as soon as practicable thereafter (with appropriate restrictive
legends, if applicable), and in any event within ten (10) business days of the
delivery of the Notice of Exercise.

          7. Issuance
of Shares. The Company covenants that the Warrant Shares, when issued
pursuant to the exercise of this Warrant, will be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens, and charges with
respect to the issuance thereof.

          8. Adjustment
of Exercise Price and Kind and Number of Shares. The number and kind of
securities purchasable upon exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time as follows:

	
  

 	
  

 
	
  

 	
           (a) Subdivisions,
 Combinations and Other Issuances. If the Company shall at any time prior
 to the expiration of this Warrant (i) subdivide its Shares, by split-up or
 otherwise, or combine its Shares, or (ii) issue additional shares of its
 Shares or other equity securities as a dividend with respect to any shares of
 its Shares; the number of shares of Shares issuable on the exercise of this
 Warrant shall forthwith be proportionately increased in the case of a
 subdivision (by stock split, stock dividend or otherwise), or proportionately
 decreased in the case of a combination. Appropriate adjustments shall also be
 made to the Exercise Price payable per share, but the aggregate Exercise
 Price payable for the total number of Warrant Shares purchasable under this
 Warrant (as adjusted) shall remain the same. Any adjustment under this
 Section 8(a) shall become effective at the close of business on the date the
 subdivision or combination becomes effective, or as of the record date of
 such dividend, or in the event that no record date is fixed, upon the making
 of such dividend.

 
	
  

 	
  

 
	
  

 	
           (b) Reclassification,
 Reorganization and Consolidation. In case of any reclassification,
 capital reorganization, or change in the Shares of the Company (other than as
 a result of a subdivision, combination, or stock dividend provided for in
 Section 8(a) above), then, as a condition of such reclassification, reorganization,
 or change, lawful provision shall be made, and duly executed documents
 evidencing the same from the Company or its successor shall be delivered to
 the Holder, so that the Holder shall have the right at any time prior to the
 expiration of this Warrant to purchase, at a total price equal to that
 payable upon the exercise of this Warrant (subject to adjustment of the
 Exercise Price as provided in Section 8), the kind and amount of shares of
 stock and other securities and property receivable in connection with such
 reclassification, reorganization, or change by a holder of the same number of
 shares of Shares as were purchasable by the Holder immediately prior to such
 reclassification, reorganization, or change. In any such case appropriate
 provisions shall be made with respect to the rights and interest of the
 Holder so that the provisions hereof shall thereafter be applicable with
 respect to any shares of stock or other securities and property deliverable
 upon exercise

 

	
  

 	
  

 	
  

 
	
  

 	
 hereof, and appropriate
 adjustments shall be made to the purchase price per share payable hereunder,
 provided the aggregate Exercise Price shall remain the same.

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)
 Notice of Adjustment. When any adjustment is required to be made in the
 number or kind of shares purchasable upon exercise of the Warrant, or in the
 Exercise Price, the Company shall promptly notify the holder of such event
 and of the number of shares of Shares or other securities or property
 thereafter purchasable upon exercise of this Warrant.

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)
 Issuance of New Warrant. Upon the occurrence of any of the events
 listed in this Section 8 that results in an adjustment of the type, number or
 exercise price of the securities underlying this Warrant, the Holder shall
 have the right to receive a new warrant reflecting such adjustment upon the
 Holder tendering this Warrant in exchange. The new warrant shall otherwise
 have terms identical to this Warrant.

 
	
  

 	
  

 	
  

 
	
           9.
 Adjustment to Exercise Price. (a) Subject to Section 9(b) hereto, the
 Company agrees that if, at any time prior to exercise or redemption of this
 Warrant, the Company issues or sells any Shares (or issues or sells
 securities convertible into or exercisable for Shares) (each a “Dilutive
 Issuance”), at a price per Share (or at a conversion or exercise price
 per Share) less than the Exercise Price (subject to any adjustments outlined
 in Section 8 or Section 9 hereto) (the “Dilutive Price”), then,
 concurrent with such Dilutive Issuance the Exercise Price shall be adjusted
 to equal the Dilutive Price (the “Adjusted Exercise Price”).

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)
 Exceptions to Adjustment to Exercise Price. The Investor acknowledges
 and agrees that the provisions of Section 9(a) hereto shall not apply to the
 issuance or sale of Shares (or any right or option to acquire the same) by
 the Company: (i) upon the exercise of warrants and options outstanding on the
 date of this Warrant, including options granted under any of the Company’s
 existing or future share incentive plans; (ii) to person who hereafter
 becomes an employee of or a consultant to the Company; (iii) in a Strategic
 Transaction (as hereinafter defined); or (iv) in connection with the issuance
 or sale of preferred equity or preferred debt, in each case, convertible into
 Ordinary Shares or ADS, in a aggregate of not more than $40,000,000, in a
 single transaction or a series of related transactions, in each case, so long
 as (x) the Investor is offered the right to acquire such shares on terms no
 less favorable to those offered to third party purchasers, (y) the terms of
 such securities are approved by the Board of Directors of the Company and (z)
 any such issuances are consummated on or before December 31, 2011. For the
 purposes hereof, a “Strategic Transaction” shall mean the issuance or
 sale of the Company’s equity securities to a strategic investor, including,
 without limitation, persons engaged in the business of the Company, as set
 forth in the Company’s most recent filing on Form 20-F with the U.S. Securities
 and Exchange Commission, (X) with which the Company has entered into a
 contractual or commercial relationship and (Y) whose aggregate investment in
 the Company (including the “fair market value” of any investment in the form
 of service to the Company or non-financial assets) on a per share basis shall
 be no less than the Exercise Price. For the purpose of this Section 9(b),
 “fair market value” shall be determined in good faith by the Board of
 Directors of the Company.

 

	
  

 	
  

 	
  

 
	
           10.
 No Impairment. Pursuant to the terms and conditions of this Warrant,
 Company shall: (i) reserve an appropriate number of shares of Company’s
 Shares to facilitate the issuance of shares to Holder pursuant to this
 Warrant, (ii) not amend its Articles of Association or take any other action
 that would materially impair Company’s ability to comply with the terms of
 the Warrant, and (iii) provide Holder with at least ten (10) days prior
 written notice of the record date for any proposed dividend or distribution
 by the Company.

 
	
  

 	
  

 	
  

 
	
           11.
 No Fractional Shares or Scrip. No fractional shares or scrip
 representing fractional shares shall be issued upon the exercise of this
 Warrant, but in lieu of such fractional shares the Company shall make a cash
 payment therefor on the basis of the Exercise Price then in effect, unless
 such cash payment is less than one dollar ($1.00). 

 
	
  

 	
  

 	
  

 
	
           12. No
 Stockholder Rights. Prior to exercise of this Warrant, the Holder shall
 not be entitled to any rights of a stockholder with respect to the shares of
 Shares issuable on the exercise hereof, including (without limitation) the
 right to vote such shares of Shares, receive dividends or other distributions
 thereon, exercise preemptive rights or be notified of stockholder meetings,
 and such holder shall not be entitled to any notice or other communication
 concerning the business or affairs of the Company. However, nothing in this
 Section 12 shall limit the right of the Holder to be provided the notices
 required under this Warrant.

 
	
  

 	
  

 	
  

 
	
           13.
 Successors and Assigns. The terms and provisions of this Warrant shall
 inure to the benefit of, and be binding upon, the Company and the Holder and
 their respective successors and assigns.

 
	
  

 	
  

 	
  

 
	
           14.
 Amendments and Waivers. Any term of this Warrant may be amended and
 the observance of any term of this Warrant may be waived (either generally or
 in a particular instance and either retroactively or prospectively), with the
 written consent of the Company and the Holder. Any waiver or amendment effected
 in accordance with this Section shall be binding upon each holder of any
 shares of Shares purchased under this Warrant at the time outstanding
 (including securities into which such shares have been converted), each
 future holder of all such Shares, and the Company.

 
	
  

 	
  

 	
  

 
	
           15.
 Notices. All notices required under this Warrant and shall be deemed
 to have been given or made for all purposes (i) upon personal delivery,
 (ii) upon confirmation receipt that the communication was successfully
 sent to the applicable number if sent by facsimile; (iii) one day after
 being sent, when sent by professional overnight courier service, or
 (iv) five days after posting when sent by registered or certified mail.
 Notices to the Company shall be sent to the principal office of the Company
 (or at such other place as the Company shall notify the Holder hereof in
 writing). Notices to the Holder shall be sent to the address of the Holder on
 the books of the Company (or at such other place as the Holder shall notify
 the Company hereof in writing).

 
	
  

 	
  

 	
  

 
	
           16.
 Attorneys’ Fees. If any action of law or equity is necessary to
 enforce or interpret the terms of this Warrant, the prevailing party shall be
 entitled to its reasonable attorneys’ fees, costs and disbursements in addition
 to any other relief to which it may be entitled.

 

	
  

 	
  

 	
  

 
	
           17.
 Captions. The section and subsection headings of this Warrant are
 inserted for convenience only and shall not constitute a part of this Warrant
 in construing or interpreting any provision hereof.

 
	
  

 	
  

 	
  

 
	
           18.
 Governing Law. This Warrant shall be governed by the laws of the State
 of New York, without regard to the provisions thereof relating to conflict of
 laws.

 

 

          IN WITNESS
WHEREOF, CHINA HYDROELECTRIC CORPORATION caused
this Warrant to be executed by an officer thereunto duly authorized.

	
 

	
 

	
 

	
 

	
CHINA HYDROELECTRIC
CORPORATION

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	

	
 

	
 

	
Name:
Richard Hochman

	
 

	
 

	
Title:
  Director

NOTICE OF EXERCISE

	
 

	
 

	
To:

	
CHINA HYDROELECTRIC CORPORATION

	
Attn:

	
Corporate
Secretary

	
 

	
 

	
 

	
The
undersigned hereby elects to:

          Purchase
_________________ shares of Shares of CHINA
HYDROELECTRIC CORPORATION, pursuant to the terms of the attached Warrant
and payment of the Exercise Price per share required under such Warrant
accompanying this notice.

          The
undersigned hereby represents and warrants that the undersigned is acquiring
such shares for its own account for investment purposes only, and not for resale
or with a view to distribution of such shares or any part thereof.

	
 

	
 

	
 

	
HOLDER:

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Address:

Date:

Name in which
shares should be registered:exh10-1_stockagmt.htm

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT DATED AUGUST 12, 2011

 

 

 

 

  

  

  

EXECUTION COPY

 

 

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”) is entered into as of August 12, 2011 (“Effective Date”), by and among Energy Composites Corporation, a Nevada corporation (“Seller”) and Jamie Mancl and Jennifer Mancl, a husband and wife residing in Wisconsin (the “Mancls”), the Jamie & Jennifer Mancl 2009 GST Trust (the “Trust”), M&W Fiberglass, LLC (“M&W”, and together with the Mancls and the Trust, individually and collectively, “Buyer”).

WHEREAS, Seller acquired all the issued and outstanding shares of ECC Corrosion, Inc. (f/k/a Advanced Fiberglass Technologies, Inc.), a Wisconsin corporation (“Company”), from Buyer and the Company’s other shareholders via a reverse acquisition (“ECC Acquisition”) effective October 14, 2008; and

WHEREAS, as a result of the ECC Acquisition, Buyer acquired a majority of Seller’s then issued and outstanding shares and voting control of Seller; and

WHEREAS, subsequent to the ECC Acquisition, the Mancls continued to manage and operate the Company; and

WHEREAS, the Mancls are familiar and knowledgeable about the Company and desire, with the Trust, to re-acquire the Company from the Seller, and Seller is willing to transfer the Company to Buyer on the terms and conditions set forth in this Agreement; and

WHEREAS, the Disinterested Directors, at a meeting duly called and held, have, subject to the conditions set forth herein, (i) determined that this Agreement and the sale of the Company to Buyer, on the terms and subject to the conditions of this Agreement, is advisable and in the best interests of Seller and Seller’s shareholders and (ii) recommended the Board of Directors of Seller (the “Seller Board”) to adopt resolutions approving and adopting this Agreement and recommending that Seller’s shareholders approve and adopt this Agreement (to the extent required by applicable Legal Requirements) (collectively, the “Disinterested Directors’ Recommendation”); and

WHEREAS, the Seller Board, acting on the recommendation of the Disinterested Directors, at a meeting duly called and held, has, on the terms and subject to the conditions of this Agreement and in accordance with applicable Legal Requirements, (i) determined that it is advisable and in the best interest of Seller and Seller’s shareholders to sell the Company to Buyer on the terms and subject to the conditions set forth herein, (ii) approved and adopted this Agreement, and (iii) recommended that Seller’s shareholders approve and adopt this Agreement (to the extent required by applicable Legal Requirements) (collectively, the “Seller Board Recommendation”).

NOW, THEREFORE, in consideration of the premises and mutual agreements, representations, warranties, covenants and understandings hereinafter set forth, the parties hereto agree as follows:

SECTION 1

Certain Definitions

 

As used in this Agreement, the following terms (whether used in singular or plural forms) shall have the following meanings:

 

“Buyer’s Transferred Stock” has the meaning ascribed to it in Section 2.2, below.

 

  

Page 1 of 22

  

“Contract” means any written contract, mortgage, deed of trust, bond, indenture, lease, license, note, franchise, certificate, option, warrant, right, or other instrument, document or agreement, and any oral obligation, right or agreement.

 

“Disclosure Document” means a document required to be filed with the SEC or required to be distributed or otherwise disseminated to Seller’s shareholders in connection with the transactions contemplated by this Agreement.

 

“Disinterested Directors” means Samuel Fairchild, Thomas Klismith, James Miller, and Daniel Wergin.

 

 “Governmental Authority” means (i) the United States of America, any state, commonwealth, territory or possession thereof and any political subdivision or quasi-governmental authority of any of the same, including but not limited to courts, tribunals, departments, commissions, boards, bureaus, agencies, counties, municipalities, provinces, parishes, and other instrumentalities, and (ii) any foreign (as to the United States of America) sovereign entity, including but not limited to nations, states, republics, kingdoms and principalities, any state, province, commonwealth, territory or possession thereof, and any political subdivision, quasi-governmental authority or instrumentality of any of the same.

 

 “Judgment” means any judgment, writ, order, injunction, award or decree of any court, judge, justice or magistrate, including any bankruptcy court or judge, and any order of or by any Governmental Authority.

 

“knowledge” of Seller of or with respect to any matter means that either Seller or any of its executive officers or directors has actual awareness or knowledge of such matter, and “knowledge” of Buyer of or with respect to any matter means that either Buyer has actual awareness or knowledge of such matter.

 

“Lakeshore Agreement” means that certain Agreement dated July 30, 2011, between Lakeshore Wind Investments, LLC, and Jamie Mancl.

 

“Legal Requirements” means applicable common law and any statute, ordinance, code or other law, rule, regulation, order, technical or other standard, requirement or procedure enacted, adopted, promulgated, applied or followed by any Governmental Authority, including Judgments.

 

“Lien” means any security agreement, financing statement filed with any Governmental Authority, conditional sale or other title retention agreement, any lease, consignment or bailment given for purposes of security, any lien, mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive trust or other trust, claim, attachment, exception to or defect in title or other ownership interest (including but not limited to reservations, rights of entry, possibilities of reverter, encroachments, easement, rights-of-way, restrictive covenants leases and licenses), which otherwise constitutes an interest in or claim against property, but excepting ad valorem taxes not currently due and payable.

 

“Litigation” means any claim, action, suit, proceeding, arbitration, investigation, hearing, or other activity or procedure that could result in a Judgment.

 

“Losses” means any claims, losses, liabilities, damages, Liens, penalties, costs and expenses, including but not limited to interest which may be imposed in connection therewith, expenses of investigation, reasonable fees and disbursements of counsel and other experts, and the cost to any Person seeking the recovery of damages or indemnification under this Agreement with respect to funds expended 

 

  

Page 2 of 22

  

by such Person by reason of the occurrence of any event with respect to which indemnification or damages are sought, but shall in no event include incidental or consequential damages.

 

“Order” means any order, judgment, injunction, award, decree or writ of any Governmental Authority.

 

“Person” means any natural person, Governmental Authority, corporation, general or limited partnership, joint venture, trust, association, unincorporated entity or other entity of any kind.

 

“Retained Buyer’s Stock” means those 523,592 shares of common stock of Seller currently registered in the name of Jamie L. Mancl and Jennifer L. Mancl, as Trustees of the Jamie L. and Jennifer L. Mancl Revocable Trust u/a/d January 24, 2007, as amended.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Shares” means all the outstanding shares of common stock of the Company.

 

“Tax Return” means any report, return, statement or other written information supplied, or required by Legal Requirements to be supplied, to any Governmental Authority in connection with any Taxes.

 

“Taxes” means all levies and assessments of any kind or nature imposed by any Governmental Authority, including but not limited to all income, sales, use, ad valorem, value added, franchise, severance, net or gross proceeds, withholding, payroll, employment, excise or property taxes, together with any interest thereon and any penalties, additions to tax or additional amounts applicable thereto.

 

SECTION 2

Sale of Shares

 

2.1.           Transfer of Shares.  Subject to the terms and conditions of this Agreement, at Closing Seller shall sell and transfer to Buyer, and Buyer shall purchase from Seller, free and clear of all Liens, the Shares (the “Shares Transaction”).  Such transfer and purchase shall be pro rata among each individual Buyer in relation to their respective ownership of Buyer’s Transferred Stock.  Buyer and Seller shall, on the Closing Date, deliver all documents required to be delivered pursuant to Section 6 hereof.  All instruments and documents to be delivered at the Closing shall be in form and substance reasonably satisfactory to Buyer and Seller.

 

2.2.           Purchase Consideration.  As consideration for the Shares, Buyer shall: (i) transfer to Seller all outstanding stock of Seller owned directly or indirectly by Buyer but excepting (i) the Retained Buyer’s Stock (as excepted, “Buyer’s Transferred Stock”); (ii) relinquish to Seller all options and warrants to acquire any stock of Seller held, directly or indirectly, by Buyer; and (iii) agree to the cancellation of all benefits being received by Buyer, directly or indirectly, under any and all Contracts with Seller.

2.3.           Transfer Taxes.  Buyer shall be solely responsible for the payment of, and shall timely pay in accordance with all applicable Legal Requirements, all stamp, transfer and similar taxes and fees relating to the transactions contemplated hereby, if any, and shall indemnify and hold harmless Seller from and against all Losses arising with respect thereto.

 

2.4.           Retained Liabilities.  Seller acknowledges that the liabilities and obligations set forth on the attached Exhibit A (the “Retained Liabilities”) are the liabilities and obligations solely of Seller and 

 

 

  

Page 3 of 22

  

 

Seller shall retain and be responsible for the Retained Liabilities.  Seller shall not be liable for any liabilities, Contracts or other obligations of the Company which are not specifically listed on Exhibit A and Buyer shall indemnify Seller against all such liabilities, Contracts and other obligations.

 

2.5           Directors.  Following the date hereof and until the Closing Date, neither Seller nor the Mancls shall take any action to remove any of the Disinterested Directors.  Prior to the Closing Date, in addition to any approvals of the Seller Board or the Seller’s shareholders as may be required by the Seller’s Articles of Incorporation or By-laws or applicable Legal Requirements, the affirmative vote of a majority the Disinterested Directors shall be required (i) for Seller to terminate this Agreement or amend this Agreement, or (ii) for Seller to exercise or waive any of the Seller’s rights, benefits or remedies under this Agreement.

 

SECTION 3

Closing

 

3.1.           Date and Place.  The closing of the transactions contemplated by this Agreement (“Closing”) shall take place as promptly as practicable, but no later than five (5) business days, following the satisfaction or waiver of the conditions set forth in Section 6, at the offices of Dill Dill Carr Stonbraker & Hutchings, PC, 455 Sherman Street, Suite 300, Denver, Colorado, unless another place or time is agreed to by the Buyer and Seller.  The date upon which the Closing actually occurs is herein referred to as the “Closing Date.”

 

3.2.           Further Assurances.  At or after Closing, each party, at the request of the other party, shall promptly execute and deliver, or cause to be executed and delivered, to such other party, all such documents and instruments, in addition to those otherwise required by this Agreement, in form and substance satisfactory to the requesting party, as reasonably requested in order to carry out or evidence the terms of this Agreement.

SECTION 4

Representations and Warranties of Seller

 

Seller represents and warrants to Buyer as follows:

 

4.1.           Enforceability.  The execution, delivery and performance by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby are within Seller’s corporate powers and have been duly authorized by all necessary corporate action on the part of Seller.  This Agreement has been duly and validly executed and delivered by Seller, and is the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.

 

4.2.           Ownership of Shares.  Seller is the owner of the Shares, beneficially and of record, free and clear of all Liens.  Upon delivery to Buyer of the certificates for the Shares pursuant to this Agreement for the consideration provided herein, Buyer will be vested with full right and title to the Shares and all incidents of ownership thereof, free and clear of all Liens.  There are no stockholder agreements, voting trusts or other written agreements regarding the transferability of the Shares.

 

4.3.           Organization and Qualification of the Company.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Wisconsin, and has all requisite corporate power and authority to own and lease the properties and assets it currently owns and leases and to conduct its activities as currently conducted.

 

  

Page 4 of 22

  

4.4.           Capitalization of the Company.  The authorized capital stock of the Company consists solely of 9,000 shares of common stock, $0.01 per share par value.  Except for the Shares, there are no shares of capital stock of the Company issued or outstanding.  There are no authorized or outstanding subscriptions, options, convertible securities, warrants, calls or other rights of any kind issued or granted by, or binding upon, Seller or the Company to purchase or otherwise acquire any security of or equity interest in the Company.

 

4.5.           No Conflicts; Required Consents.  Except for those certain loans due to Nekoosa Port Edwards State Bank (“Bank”) and the City of Wisconsin Rapids, the execution, delivery and performance by Seller of this Agreement do not and will not:  (i) conflict with or violate any provision of the articles of incorporation or bylaws of Seller; (ii) conflict with, violate, result in a breach of, constitute a default under (without regard to requirements of notice, lapse of time, or elections of other Persons, or any combination thereof) or accelerate or permit the acceleration of the performance required by, any Contract or Lien to which Seller is a party or by which Seller is bound or affected; (iii) result in the creation or imposition of any Lien against or upon the Shares or any of the assets or properties owned or leased by the Company; (iv) except with respect to the Disclosure Documents, require any consent, approval or authorization of, or filing of any certificate, notice, application, report or other document with, any Governmental Authority or other Person; or (v) conflict with or violate any applicable Legal Requirement.

 

4.6           Governmental Authorization.  The execution, delivery and performance by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby require no action by or in respect of, or filing with, any Governmental Authority, other than (a)  compliance with any applicable requirements of any other applicable U.S. state or federal securities laws; and (b) any actions or filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Seller to consummate the transactions contemplated herein

 

4.7           No Undisclosed Liabilities.  Except (a) as adequately reflected or reserved against in the Company’s consolidated balance sheet dated March 31, 2011, included in Seller’s filings with the SEC, (b) for liabilities or obligations incurred since the date of such balance sheet in the ordinary course of business consistent with past practice, which have not had, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Seller or the Company, or (c) liabilities or obligations known by Buyer, neither Seller nor the Company has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that are required by GAAP to be reflected on a consolidated balance sheet (or the notes thereto) of Seller and the Company.

 

4.8           Absence of Litigation.  As of the date hereof, there is no material claim, action, proceeding or investigation pending or, to the knowledge of Seller, threatened against Seller or the Company, or any of their respective properties, assets or rights, at law or in equity, and there are no material Orders, before any arbitrator or Governmental Authority.

 

SECTION 5

Representations and Warranties of Buyer

 

Buyer, individually and jointly, represents and warrants to Seller as follows:

 

5.1.           Enforceability.  The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby are within Buyer’s powers and have been duly authorized by all necessary action on the part of Buyer.  This Agreement has been duly 

 

  

Page 5 of 22

  

 

and validly executed and delivered by Buyer, and is the valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms.

 

5.2.           No Conflicts; Required Consents.  The execution, delivery and performance by Buyer of this Agreement do not and will not:  (i) conflict with, violate, result in a breach of, constitute a default under (without regard to requirements of notice, lapse of time, or elections of other Persons, or any combination thereof) or accelerate or permit the acceleration of the performance required by, any Contract or Lien to which Buyer is a party or by which Buyer is bound or affected; (ii) result in the creation or imposition of any Lien against or upon the Shares or any of the assets or properties owned or leased by Buyer; (iii) require any consent, approval or authorization of, or filing of any certificate, notice, application, report or other document with, any Governmental Authority or other Person; or (iv) conflict with or violate any applicable Legal Requirement.

 

5.3.           Investment.  Buyer is acquiring the Shares for its or their own account, for investment purposes and not with a view to distribution or resale thereof in violation of applicable securities Legal Requirements.  Buyer understands that (a) the Shares have not been registered under the Securities Act of 1933, and state securities law, or any other applicable securities Legal Requirements on the grounds that the sale of the Shares is a limited or non-public offering and therefore exempt from registration, (b) in selling the Shares, Seller has relied upon the fact that the Shares are to be held by Buyer for investment, and (c) exemption from registration would not be available if the Shares were acquired by Buyer with a view to distribution or resale.

5.4.           Knowledge of Company and Seller.  The Mancls have managed and operated the Company prior to the ECC Acquisition and, at all times subsequent to the ECC Acquisition, have managed and operated the Company and Seller.  As a result, the Mancls are familiar with, and knowledgeable of, all managerial and operational matters relating to the Company and Seller.

5.5           Absence of Litigation.  As of the date hereof, there is no material claim, action, proceeding or investigation pending or, to the knowledge of Buyer, threatened against Buyer, or any of their respective properties, assets or rights, or against any employees of Buyer, at law or in equity, and there are no material Orders, before any arbitrator or Governmental Authority.

SECTION 6

CONDITIONS TO CLOSING

 

6.1           Conditions to Buyer’s Obligations.  The obligations of Buyer under this Agreement are subject, at the option of Buyer, to the fulfillment of each of the following conditions as of the Closing:

 

(a)           Accuracy of Representations and Compliance with Agreement.  All representations and warranties of Seller contained in this Agreement shall be true and accurate, in all material respects, as of the Closing, and Seller shall have performed and complied with, in all material respects, all of its obligations under this Agreement.

 

(b)           Consents or Waivers to Assignments and Transfers.  All consents, approvals or waivers required for the sale or assignment in accordance herewith of the Shares shall have been obtained by Seller on or before the Closing and all such consents, waivers and approvals shall be in full force and effect as of the Closing.

 

(c)           Threatened or Pending Proceedings.  No proceedings shall have been initiated or threatened by any person or governmental agency or instrumentality seeking to enjoin or otherwise restrain the consummation of the transactions contemplated hereby.

 

  

Page 6 of 22

  

(d)           Ordinary Course of Business.  Seller shall not have caused the Company to operate outside the Company’s ordinary course of business prior to Closing.

 

(e)           Disclosure Documents.  Seller shall have filed or distributed, as applicable, all Disclosure Documents which are required by applicable Legal Requirements.

 

(f)           Delivery of Documents.  Seller shall have delivered to Buyer the following documents:

 

(i)           the certificates representing the Shares, duly endorsed in blank or with separate stock powers endorsed in blank, with all requisite stock transfer stamps attached;

 

(ii)           copies of the written resignations of all current officers and directors of the Company, other than Buyer;

 

(iii)           all stock ledgers and corporate minute books of the Company, together with all other documents and instruments pertaining to or affecting the Company, including but not limited to all Contracts of the Company, that are in the actual possession of Seller;

 

(iv)           a certificate of the secretary of Seller, dated as of the Closing Date, certifying resolutions of the Seller Board approving the execution, delivery and performance of this Agreement by Seller;

 

(vi)           a certificate of the secretary of Seller, dated as of the Closing Date, certifying that the Company has obtained the approval and consent of Seller’s shareholders  required to be obtained by Seller to approve the execution, delivery and performance of this Agreement pursuant to applicable Legal Requirements; and

 

(vi)           a certificate, dated as of the Closing Date, executed by Seller, certifying as to the satisfaction of the conditions set forth in Section 6.1(a).

 

6.2           Conditions to Obligations of Seller.  The obligations of Seller under this Agreement are subject, at the option of Seller, to the fulfillment of each of the following conditions as of the Closing:

 

(a)           Accuracy of Representations and Compliance with Agreement.  All representations and warranties of Buyer contained in this Agreement shall be true and accurate, in all material respects, as of the Closing, and Buyer shall have performed and complied with, in all material respects, all of its obligations under this Agreement and there shall be no uncured default of Buyer under any term of this Agreement.

 

(b)           Threatened or Pending Proceedings.  No proceedings shall have been initiated or threatened by any person or governmental agency or instrumentality seeking to enjoin or otherwise restrain the consummation of the transactions contemplated hereby.

 

(c)           Ordinary Course of Business.  Buyer shall not have caused the Company to operate outside the Company’s ordinary course of business prior to Closing.

 

(d)           Officers Certificates.  Seller shall have received certificates in the form attached hereto as Exhibit B, executed by each of its Chief Executive Office, Chief Financial Officer and General Counsel.

 

  

Page 7 of 22

  

(e)           Release from Lenders.  Seller shall have received a full release from the Bank and from the City of Wisconsin Rapids in a form satisfactory to Seller.

 

 (f)           Delivery of Documents.  Buyer shall have delivered to Seller the following documents:

 

(i)           the certificates representing the Buyer’s Transferred Stock, duly endorsed in blank or with separate stock powers endorsed in blank, with all requisite stock transfer stamps attached;

(ii)           a document in form attached hereto as Exhibit C evidencing the relinquishment of Buyer’s options and/or warrants for Seller’s stock, executed by Buyer;

 

(iii)           a document in the form attached hereto as Exhibit D evidencing Buyer’s agreement to cancel all benefits being received, directly or indirectly, under any and all Contracts with Seller;

 

(iv)           Buyer’s resignation from all positions with Seller; and

 

(v)           a certificate, dated as of the Closing Date, executed by Buyer, certifying as to the satisfaction of the conditions set forth in Section 6.2(a).

 

6.3           Conditions to Obligations of all Parties.  The obligations of all parties under this Agreement are subject to fulfillment of each of the following conditions of the closing:

 

(a)           Lakeshore Agreements.  At or prior to the Closing execution of the Lakeshore Agreement, the related Escrow Agreement, and all agreements contemplated therein (including the option agreements referenced therein) by all applicable parties to such agreements, and transfer of all shares of Seller’s common stock and accounts payable of the Company, as contemplated therein.

 

(b)           Consents.  The parties shall have received all consents necessary for the consummation of the Transaction, including, without limitation, the approval of the Disinterested Directors and any consents required from Seller’s shareholders, any secured lender to Seller who holds a security interest in any of the assets of the Company, and/or any party whose consent is required to transfer the Shares.

 

SECTION 7

Certain Covenants of Buyer, Seller and Diversified

 

7.1.           Covenant Not to Compete.  Seller covenants and agrees that, during the two-year period from and after the Closing Date (“Restricted Period”), it will not, directly or indirectly own, manage, operate, or control, or become associated in any capacity with, or have any financial interest in, or lend its name to, or be employed by, any enterprise, firm, or corporation engaged in a business which is competitive in the United States of America with the business of the Company as conducted on the Closing Date (a “Buyer Competing Business”).

7.2           Non-Solicitation.  Each party agrees that during the Restricted Period, it will not in any way, directly or indirectly, (i) for the purpose of conducting or engaging in any business that competes with (a) as it relates to Seller, a Buyer Competing Business, or (b) as it relates to Buyer, the business of Seller, call upon, solicit, advise or otherwise do, or attempt to do, business with any customers of the Company or Seller; respectively, except in the ordinary course of business as conducted as of the Closing 

 

  

Page 8 of 22

  

 

Date, (ii) take away or interfere or attempt to interfere with any custom, trade, business or patronage of the other party’s business, or (iii) interfere with or attempt to interfere with any officers, employees, representatives or agents of Seller as it relates to Buyer, or the Company as it relates to Seller, or induce or attempt to induce any of them to leave the employ of the Seller or the Company as applicable, or violate the terms of their contracts, or any employment arrangements, with the Seller or the Company, as applicable.

7.3.           Confidentiality.  From and after Closing, Buyer shall not disclose to third parties, and will not use for its own account, any trade secrets or business secrets or other non-public information relating to Seller; and Seller shall not disclose to third parties, and will not use for its own account, any trade secrets or business secrets or other non-public information relating to the Company or Buyer; provided that (a) a party may use or disclose any such information once it has been publicly disclosed (other than by such party in breach of its obligations hereunder), and (b) to the extent that a party may become compelled by Legal Requirements to disclose any of such information, such party may disclose such information if it shall have used good faith reasonable efforts, and shall have afforded the other party the opportunity, to obtain an appropriate protective order or other satisfactory assurance of confidential treatment for the information compelled to be disclosed.

 

7.4.           Publicity.  Seller and Buyer shall each consult with and obtain the consent of the other before issuing any press release or making any other public disclosure concerning this Agreement or the transactions contemplated hereby unless, in the reasonable judgment of the disclosing party, a release or disclosure is required to discharge its disclosure obligations under applicable Legal Requirements, in which case such party shall notify the other party about the form, content and timing of such release or disclosure prior to such release or disclosure.

 

7.5.           Non-Disparagement.  Each party agree that it shall not disparage, defame, or deprecate the other party to this Agreement.  If either party breaches this non-disparagement agreement, then the disparaging party shall indemnify the disparaged party in full for all damages caused by the disparagement, including reasonable attorneys’ fees and costs.

 

7.6.           Use of Name.  Seller shall have no rights to, and shall not use, the name “Energy Composites Corporation” in any manner subsequent to the Closing.

7.7.           Directors and Officers Insurance.  Seller shall obtain director and officer liability insurance tail coverage for any Buyer who was a director or officer prior to the Closing and for whom such insurance coverage was in force prior to the Closing.  Such tail coverage shall be effective for a period of one year after the Closing Date.

7.8.           Retained Buyer’s Stock.  During the time that any Retained Buyer’s Stock is held by Lakeshore Wind Investments, LLC (or any successor entity or transferee thereof) or in escrow pursuant to the Lakeshore Agreement or any security agreement is effective and for a period of two years from and after the date such shares are returned to any Buyer, Buyer shall not request the registration of any shares of stock within the Retained Buyer’s Stock nor transfer any shares of such stock without Seller’s prior written consent.

7.9.           Disclosure Documents.  Seller shall file or distribute on behalf of Seller all necessary Disclosure Documents in connection with the transactions contemplated herein and agrees that the Disclosure Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to Seller’s Shareholders and at the Closing Date, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in 

 

  

Page 9 of 22

  

 

light of the circumstances under which they were made, not misleading.  Seller agrees promptly to correct any information in the Disclosure Documents if and to the extent that such information shall have become false or misleading in any material respect and Seller further agrees to take all steps necessary to cause the Disclosure Documents as so corrected to be filed with the SEC and distributed to Seller’s shareholders as and to the extent required by applicable federal securities laws.  Seller shall use its reasonable efforts to file or distribute, as applicable, all Disclosure Documents in a timely manner.  No later than 24 hours prior to filing or distributing as applicable, any Disclosure Document, Seller shall provide Buyer with a draft of such Disclosure Document and may incorporate any reasonable comments from Buyer to such Disclosure Document provided prior to filing or distribution, as applicable.  Buyer and Seller shall cooperate with each other and promptly provide any information or other materials required for Disclosure Documents.

7.10           No-Shop.  After execution of this Agreement and prior to Closing, Seller shall not solicit, initiate or encourage any inquiries or proposals from or discuss or negotiate with any other party, any direct or indirect possible sale of all or a substantial portion of the Shares or the business of the Company (“Alternate Sale”).  Notwithstanding the foregoing, Seller or any of its officers, directors, employees, or other agents may engage in the discussion or negotiation of an Alternate Sale upon receipt of a bona fide, unsolicited offer from a third party that, the Seller Board determines in good faith, is likely to result in terms that are more favorable to Seller’s shareholders from a financial point of view than the sale of Shares to Buyer contemplated by this Agreement.

7.11               Adverse Recommendation Change.  Subject to Section 9.1(c), each of the Disinterested Directors and the Seller Board shall (a) make the Disinterested Directors’ Recommendation and the Seller Board Recommendation, as applicable and (b) not withhold, withdraw, qualify, fail to make or modify in a manner adverse to Buyer the Disinterested Directors’ Recommendation or the Seller Board Recommendation or publicly recommend or announce its intention to take any action or make any statement inconsistent with the Disinterested Directors’ Recommendation or the Seller Board Recommendation (collectively, an ‘‘Adverse Recommendation Change”).

 

7.12               Notice of Certain Events.  Provided that the delivery of any notice pursuant to this Section 7.12 shall not limit or otherwise affect the remedies available hereunder to a party, each party shall promptly notify the other party of:

 

(a) to such party’s knowledge, any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with or relating to the transactions contemplated by this Agreement;

 

(b) any notice or other communication from any Governmental Authority received by such party in connection with or relating to the transactions contemplated by this Agreement; and

 

(c) any suits or proceedings commenced against Buyer, Seller or the Company that relate to the consummation of the transactions contemplated by this Agreement.

 

SECTION 8

Tax Matters

 

Buyer shall cause the Company to provide Seller with the right, upon reasonable notice, to have access to, and to copy and use, any records or information and personnel that may be relevant in connection with the preparation of any Tax Returns, any audit or other examination by any Governmental Authority or any litigation relating to liability for Taxes.  Buyer shall cause the Company to close its books, for tax purposes, as of the date of Closing and to use the accrual method of accounting to close the 

 

  

Page 10 of 22

  

 

Company’s tax year.   Buyer and Seller shall, and Buyer shall cause the Company to, execute, deliver and, if appropriate, file with the appropriate taxing authorities such tax elections and consents and such other documents as may be necessary to accomplish the foregoing.  Buyer and Seller shall, and Buyer shall cause the Company to, cooperate with each other concerning the information to be included and elections to be made on all state and federal income Tax Returns filed with respect to the Company or its business for the tax year 2011, and no such Tax Returns shall be filed by Buyer, Seller, or the Company without the approval of the others, which approval shall not be unreasonably withheld.

SECTION 9

Termination

 

9.1.           Grounds for Termination.  This Agreement may be terminated at any time prior to Closing:

 

                                 (a)            by mutual written agreement of Seller (provided that such termination has been approved by the Disinterested Directors) and Buyer; or

 

                                 (b)            by Seller if the Closing shall not have occurred on or prior to September 15, 2011 (as such date may be extended by Seller in its sole discretion as a result of a review of the Shares Transaction or any documents relating thereto by any Governmental Authority); or

 

  (c)           by Seller, if the Disinterested Directors determine in good faith that it would be inconsistent with its fiduciary duties under applicable Legal Requirements to continue to recommend that Seller’s shareholders, to the extent required by applicable Legal Requirements, approve this Agreement and the transactions contemplated herein.  In such case, the Disinterested Directors and the Seller Board (acting upon the recommendation of the Disinterested Directors) may make an Adverse Recommendation Change and terminate this Agreement; provided, that the Disinterested Directors and the Seller Board may not make an Adverse Recommendation Change until after at least 24 hours after notifying Buyer that the Disinterested Directors and/or the Seller Board intends to make such an Adverse Recommendation Change and the reasons therefor.  The Disinterested Directors and/or the Seller Board may consider any modifications proposed by Buyer during such 24-hour period in order to eliminate the need for such Adverse Recommendation Change.

 

9.2               Result of Termination.  Upon termination of this Agreement, the Agreement shall become void and there shall be no liability on the part of any party hereto, except that Seller’s obligation pursuant to Section 12.1 shall survive such termination and nothing herein shall relieve either party from liability for any breach of this Agreement that occurred prior to termination of this Agreement.

 

SECTION 10

Indemnification

 

10.1           Indemnification by Seller.  From and after Closing, Seller shall indemnify and hold harmless Buyer and their agents and representatives and any Person claiming by or through any of them, from and against any and all Losses arising out of or resulting from:

 

(i)           any representations and warranties of Seller in this Agreement not being true and accurate when made or when required by this Agreement to be true and accurate;

 

(ii)           any failure by Seller to perform any of their covenants, agreements or obligations in this Agreement;

 

  

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(iii)           all liabilities or obligations of the Seller, relating to, or arising out of its activities during periods prior to the ECC acquisition; and

 

(iv)           any shareholder claim that is raised by, through or as a result of actions of Diversified Equities Partners, LLC.

 

10.2           Indemnification by Buyer.  From and after Closing, Buyer shall indemnify and hold harmless Seller and their agents and representatives and any Person claiming by or through any of them, as the case may be, from and against any and all Losses arising out of or resulting from:

 

(i)           any representations and warranties of Buyer in this Agreement not being true and accurate when made or when required by this Agreement to be true and accurate;

 

(ii)           any failure by Buyer to perform any of their covenants, agreements or obligations in this Agreement; and

 

(iii)           all liabilities and obligations of the Company relating to, or arising out of its activities during periods on or subsequent to Closing, including, without limitation, liabilities owed to any taxing authority.

 

In addition, from and after Closing, Buyer shall cause the Company to indemnify and hold harmless Seller and their agents and representatives and any Person claiming by or through any of them, as the case may be, from and against any and all Losses arising out of or resulting from all liabilities and obligations of the Company relating to, or arising out of its activities during periods prior to Closing, including, without limitation, liabilities owed to any taxing authority.

 

10.3           Indemnification Against Third-Party Claims.  Promptly after receipt by a party entitled to indemnification hereunder (the “Indemnitee”) of written notice of the assertion or the commencement of any Litigation with respect to any matter referred to in Sections 10.1 or 10.2 the Indemnitee shall give written notice thereof to the party from whom indemnification is sought pursuant hereto (the “Indemnitor”) and thereafter shall keep the Indemnitor reasonably informed with respect thereto, provided that failure of the Indemnitee to give the Indemnitor notice as provided herein shall not relieve the Indemnitor of Indemnitor’s obligations hereunder.  In case any Litigation is brought against any Indemnitee, the Indemnitor shall be entitled to participate in (and at the request of the Indemnitee shall assume) the defense thereof with counsel satisfactory to the Indemnitee at the Indemnitor’s expense.  If the Indemnitor, at the Indemnitee’s request, shall assume the defense of any Litigation, Indemnitor shall not settle the Litigation unless the settlement shall include as an unconditional term thereof the giving by the claimant or the plaintiff of a release of the Indemnitee, satisfactory to the Indemnitee, from all liability with respect to such Litigation.

 

10.4           Time and Manner of Certain Claims.  The representations and warranties of Seller and Buyer in this Agreement shall survive Closing, provided, however, that notwithstanding any provision to the contrary in this Agreement, (a) an Indemnitor’s obligation to indemnify an Indemnitee under this Agreement shall not arise unless and until the aggregate of the Losses for which the Indemnitee is entitled to indemnification exceeds $50,000, in which event the Indemnitor’s obligation to indemnify shall be for the aggregate of all Losses (including the first $50,000), and (b) an Indemnitee shall be entitled to indemnification only if such Indemnitee gives written notice to the Indemnitor within two years after Closing.

SECTION 11

DISPUTE RESOLUTION

  

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11.1           Good Faith Negotiation.  If any dispute arises under this Agreement that is not settled promptly in the ordinary course of business, the parties shall seek to resolve such dispute between themselves by prompt face-to-face negotiations in good faith.  The representative of Seller shall be a member of its senior management.  The representative of Buyer shall be Jamie Mancl.  If the parties are unable to resolve their dispute in this manner within thirty (30) days (or such different period as they may otherwise select) following the date on which one party first notified the other (the “Notice Date”) that a dispute existed, then such dispute shall be resolved in the manner set forth in Section 11.2.

11.2           Arbitration.  Any dispute which has not been resolved by good faith negotiation pursuant to Section 11.1, shall be settled by arbitration, conducted on a confidential basis under the then current Commercial Arbitration Rules of the American Arbitration Association (the “AAA”) strictly in accordance with the terms of this Agreement and the substantive law of the State of Nevada, including such law with respect to the statute of limitations.  The arbitration shall be conducted at the AAA’s regional office located in or nearest to Las Vegas, NV by a single arbitrator.  The award of such arbitrator shall be final and may be entered by any party hereto in any court of competent jurisdiction.  The prevailing party in any such arbitration shall be entitled to all costs and expenses of such arbitration (including reasonable legal fees).  In the event that an award not entirely in favor of either party is entered by the arbitrator, the costs and expenses of the arbitration shall be paid as directed by the arbitrator.  The arbitrator is not empowered to award damages in excess of compensatory damages and each party hereby irrevocably waives any right to recover such damages with respect to any such dispute.

11.3           Miscellaneous.  Neither party shall be precluded hereby from securing equitable remedies in courts of any jurisdiction, including, but not limited to, temporary restraining orders and preliminary injunctions to protect its rights and interests, but shall not be sought as a means to avoid or stay arbitration.  Each party shall continue to observe and perform its obligations under this Agreement pending final resolution of this dispute arising thereunder, unless to do so would be impossible or impracticable under the circumstance.

SECTION 12

Miscellaneous

 

12.1.           Expenses.  Each of the parties shall pay their own expenses and the fees and expenses of their counsel, accountants and other experts, except that Seller shall reimburse Buyer for its documented, reasonable and necessary expenses actually incurred for legal and accounting advice relating to the proposed Shares Transaction up to an amount of $75,000 in the event this Agreement is terminated for any reason other than (i) by Seller due to breach of Buyer, or (ii) pursuant to Section 9.1.  Notwithstanding anything to the contrary herein, if any Litigation between Seller and Buyer with respect to this Agreement or the transactions contemplated hereby shall be resolved or adjudicated by a Judgment, the party prevailing under such Judgment shall be entitled, as part of such Judgment, to recover from the other party its reasonable attorneys’ fees and costs and expenses of litigation.

 

12.2.           Waivers.  The failure of one of the parties to insist upon the strict performance of any provision of this Agreement or to exercise any right, power, or remedy upon a breach thereof shall not constitute a waiver of that or any other provision of this Agreement or limit that party’s right thereafter to enforce any provision or exercise any right.

 

12.3.           Severability.  In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the 

 

  

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parties hereto.  The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.

 

12.4.           Notices.  All notices, reports, records, or other communications which are required or permitted to be given to the parties under this Agreement shall be sufficient in all respects if given in writing and delivered in person, by telecopy, by overnight courier, or by certified mail, postage prepaid, return receipt requested, to the receiving party at the following address:

 

If to Seller:

 

Energy Composites Corporation

c/o Choice Incorporated

100 Maritime Drive, Suite 3C

Manitowoc, WI 54220

Fax: 920.682.0300

Attention:  Daniel Wergin

With a copy (which shall not constitute notice) to:

Dill Dill Carr Stonbraker & Hutchings, P.C.

455 Sherman Street, Suite 300

Denver, Colorado 80203

Facsimile: 303-777-3823

Attention: Fay M. Matsukage

If to Buyer:

 

Jamie and Jennifer Mancl

4710 Black Forest Drive

Wisconsin Rapids, WI 54494

Fax: (715) 421-2408

With a copy to:

 

Sverre D. Roang, Esq.

Whyte Hirschboeck Dudek S.C.

33 E. Main Street, Suite 300

Madison, WI  53703

 

or to such other address as such party may have given to the other by notice pursuant to this Section.  Notice shall be deemed given on the date of delivery, in the case of personal delivery or telecopy, or on the delivery or refusal date, as specified on the return receipt, in the case of overnight courier or certified mail.

 

12.5.           Entire Agreement; Amendments.  This Agreement embodies the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect thereto.  This Agreement may not be modified orally, but only by an agreement in writing signed by the party or parties against whom any waiver, change, amendment, modification or discharge may be sought to be enforced.

 

  

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12.6.           Binding Effect; Benefits.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives, successors and permitted assigns.  Neither Buyer nor Seller shall assign this Agreement or delegate any of their duties hereunder to any other Person without the prior written consent of the other.

 

12.7.           Headings and Exhibits.  The section and other headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.  References to Exhibits shall, unless otherwise indicated, refer to the Exhibits attached to this Agreement, which shall be incorporated in and constitute a part of this Agreement by such reference.

 

12.8.           Counterparts.  This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together will be deemed to be one and the same Agreement.

 

12.9.           Governing Law.  The validity, performance and enforcement of this Agreement shall be governed by the laws of the State of Nevada, without giving effect to the principles of conflicts of law of such state.

 

12.10.                      Jurisdiction.  Subject to the provisions of Article 11 hereof, any action or proceeding against Buyer or Seller relating in any way to this Agreement or the obligations of any party arising from any of the transactions contemplated herein shall be brought and enforced only in the courts of the State of Nevada or of the United States for the District of Nevada, and Buyer and Seller each irrevocably submit to the jurisdiction of each such court in respect of any such action or proceeding.

 

12.11.                      Third Parties; Joint Ventures.  This Agreement constitutes an agreement solely among the parties hereto and, except as otherwise provided herein, is not intended to and will not confer any rights, remedies, obligations or liabilities, legal or equitable, including any right of employment, on any person (including but not limited to any Company employee or former employee) other than the parties hereto and their respective heirs, legal representatives, successors or assigns, or otherwise constitute any person a third party beneficiary under or by reason of this Agreement.  Nothing in this Agreement, expressed or implied, is intended to or shall constitute the parties hereto partners or participants in a joint venture.

 

12.12.                      Construction.  This Agreement has been negotiated by Buyer and Seller and their respective legal counsel, and legal or equitable principles that might require the construction of this Agreement or any provision hereof against the party drafting this Agreement shall not apply in any construction or interpretation of this Agreement.

 

12.13                      Facsimile or pdf Signatures.  Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document will have the same effect as physical delivery of the paper document bearing the original signature.

 

[Remainder of page intentionally left blank.  Signature pages follow.]

 

  

Page 15 of 22

  

IN WITNESS WHEREOF, Buyer and Seller have executed and delivered this Agreement effective as of the Effective Date.

 

SELLER:

 

ENERGY COMPOSITES CORPORATION

By:   /s/ James F. Miller                                 

Name:   James F. Miller                               

Title:      Director                                         

BUYER:

 

THE MANCLS

 

 

/s/ Jamie Mancl                                                     

                        Jamie Mancl

 

                    /s/ Jennifer Mancl                                             

                     Jennifer Mancl

JAMIE & JENNIFER MANCL 2009 GST TRUST

By: /s/ Robb N. Sigler                                             

       Robb N. Sigler                           , Trustee

M&W FIBERGLASS, LLC

By:  /s/ Jamie Mancl                                                

Name:   Jamie Mancl                                             

                      Title:        Member                                                

  

Page 16 of 22

  

EXHIBIT A

Retained Liabilities

	
1.  

	
Dill Dill Carr Stonbraker & Hutchings, PC                                                   [______________]

	
2.  

	
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC                                 [____________]

 

  

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Exhibit B-1

CERTIFICATE

Jamie Mancl does hereby certify as follows:

1.           He is the Chief Executive Officer of Energy Composites Corporation (“Seller”);

2.           To his knowledge, all representations and warranties made by Seller in that certain Stock Purchase Agreement (“Agreement”) effective August 12, 2011 among Seller, Jamie and Jennifer Mancl (the “Mancls”), the Jamie & Jennifer Mancl 2009 GST Trust (the “Trust”), M&W Fiberglass, LLC (“M&W”, and together with the Mancls and the Trust, individually and collectively, “Buyer”) are true and correct as of the date of the Agreement and as of the date of this Certificate with the same force and effect as though made on and as of such dates.

Dated:  September ___, 2011.

________________________________

Jamie Mancl

  

Page 18 of 22

  

 

Exhibit B-2

CERTIFICATE

Timothy Sherlock does hereby certify as follows:

1.           He is the Interim Chief Financial Officer of Energy Composites Corporation (“Seller”);

2.           To his knowledge, all representations and warranties made by Seller in that certain Stock Purchase Agreement (“Agreement”) effective August 12, 2011 among Seller, Jamie and Jennifer Mancl (the “Mancls”), the Jamie & Jennifer Mancl 2009 GST Trust (the “Trust”), M&W Fiberglass, LLC (“M&W”, and together with the Mancls and the Trust, individually and collectively, “Buyer”) are true and correct as of the date of the Agreement and as of the date of this Certificate with the same force and effect as though made on and as of such dates.

Dated:  September ___, 2011.

________________________________

Timothy Sherlock

  

Page 19 of 22

  

 

Exhibit B-3

CERTIFICATE

Ken Iwinski does hereby certify as follows:

1.           He is the General Counsel and Secretary of Energy Composites Corporation (“Seller”);

2.           To his knowledge, all representations and warranties made by Seller in that certain Stock Purchase Agreement (“Agreement”) dated August 12, 2011 among Seller, Jamie and Jennifer Mancl (the “Mancls”), the Jamie & Jennifer Mancl 2009 GST Trust (the “Trust”), M&W Fiberglass, LLC (“M&W”, and together with the Mancls and the Trust, individually and collectively, “Buyer”) are true and correct as of the date of the Agreement and as of the date of this Certificate with the same force and effect as though made on and as of such dates.

Dated:  September ___, 2011.

________________________________

Ken Iwinski

 

  

Page 20 of 22

  

 

Exhibit C

Buyer’s Relinquishment of Options and/Warrants

September ____, 2011

Energy Composites Corporation

4400 Commerce Drive

Wisconsin Rapids, WI  54494

Dear Sir/Madam:

Effective upon the closing of the transactions contemplated by that certain Stock Purchase Agreement dated effective as of August 12, 2011 Energy Composites Corporation (“Seller”), Jamie and Jennifer Mancl (the “Mancls”), the Jamie & Jennifer Mancl 2009 GST Trust (the “Trust”), M&W Fiberglass, LLC (“M&W”, and together with the Mancls and the Trust, individually and collectively, “Buyer”), Buyer hereby relinquishes any and all stock options and/or warrants for Seller’s stock.

Sincerely,

 

	THE MANCLS	 	 	M & W FIBERGLASS, LLC	 
	 	 	 	 	 
	
/s/

	 	 By:	
/s/ 

	 
	
Jamie Mancl

	 	 	
Name:

	 
	
 

	 	 	
Title:

	 
	 	 	 	 	 
	Jennifer Mancl	 	 	 	 
	 	 	 	 	 
	JAMIE & JENNIFER MANCL 2009 GST TRUST	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	                                         , Trustee	 	 	 	 
	 	 	 	 	 

 

 

  

Page 21 of 22

  

Exhibit D

Buyer’s Cancellation of Benefits under Contracts

September ____, 2011

Energy Composites Corporation

4400 Commerce Drive

Wisconsin Rapids, WI  54494

Dear Sir/Madam:

Effective upon the closing of the transactions contemplated by that certain Stock Purchase Agreement dated effective as of August 12, 2011 Energy Composites Corporation (“Seller”), Jamie and Jennifer Mancl (the “Mancls”), the Jamie & Jennifer Mancl 2009 GST Trust (the “Trust”), M&W Fiberglass, LLC (“M&W”, and together with the Mancls and the Trust, individually and collectively, “Buyer”), Buyer hereby agrees to the cancellation of all benefits being received or to be received, directly or indirectly, under any and all Contracts (as defined in the Agreement) with Seller.

Sincerely,

 

	THE MANCLS	 	 	M & W FIBERGLASS, LLC	 
	 	 	 	 	 
	
/s/

	 	 By:	
/s/ 

	 
	
Jamie Mancl

	 	 	
Name:

	 
	
 

	 	 	
Title:

	 
	 	 	 	 	 
	Jennifer Mancl	 	 	 	 
	 	 	 	 	 
	JAMIE & JENNIFER MANCL 2009 GST TRUST	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	                                         , Trustee	 	 	 	 
	 	 	 	 	 

Page 22 of 22

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