EXHIBIT 10.12
G.D.F. INTERNATIONAL
COMMON STOCK AND WARRANT PURCHASE
AGREEMENT
HYDROGEN BURNER TECHNOLOGY, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
JULY 13, 2000
TABLE OF CONTENTS
Page
1. Definitions..............................................................1
1.1 Certain Defined Terms..............................................1
1.2 Index of Other Defined Terms.......................................2
2. Agreement to Purchase and Sell Securities................................4
2.1 Agreement to Purchase and Sell the Shares..........................4
2.2 Consideration; Payment of Aggregate Purchase Price.................4
2.3 Agreement to Purchase and Sell Warrant.............................4
2.4 Right of First Offer...............................................4
3. Closing; Deliveries......................................................6
3.1 The Closing........................................................6
3.2 The Delivery.......................................................6
4. Representations and Warranties of Purchaser..............................7
4.1 Authorization......................................................7
4.2 Investment Intent; Capacity to Protect Interests...................7
4.3 Reliance On Purchaser's Representations............................7
4.4 Principal Address; Residency.......................................8
4.5 Information Concerning the Company.................................8
4.6 Sophisticated and Accredited Investor..............................8
4.7 No Public Market...................................................9
4.8 Economic Risk......................................................9
4.9 Offshore Transaction...............................................9
4.10 Restricted Securities..............................................9
4.11 Limitations on Disposition........................................11
4.12 No Government Recommendation or Approval..........................11
4.13 Compliance with Other Laws........................................11
4.14 Reliance on Own Investigation.....................................11
5. Representations and Warranties of the Company...........................12
5.1 Organization; Good Standing; Qualification........................12
5.2 Authorization.....................................................12
5.3 Valid Issuance of Shares and Warrant Shares.......................12
5.4 Governmental Consents.............................................12
5.5 Financial Statements..............................................13
5.6 Corporate Action; Books and Records...............................13
5.7 Capitalization of the Company.....................................13
5.8 No Commitments....................................................14
5.9 Subsidiaries and Other Investments................................14
5.10 Licenses and Permits..............................................14
5.11 Absence of Certain Changes........................................14
5.12 Litigation........................................................15
5.13 Judgment, Awards and Proceedings..................................15
5.14 No Violation......................................................15
5.15 Environmental Matters.............................................16
-i-
5.16 Title.............................................................16
5.17 Intellectual Property Assets......................................16
5.18 Disclosure........................................................18
6. Rights As Shareholder...................................................18
7. Rights of First Refusal.................................................18
7.1 General...........................................................18
7.2 Notice of Proposed Transfer.......................................18
7.3 Exercise of Right of First Refusal................................18
7.4 Purchase Price....................................................19
7.5 Payment...........................................................19
7.6 Selling Shareholder's Right to Transfer...........................19
7.7 Termination of Rights of First Refusal............................19
8. Restrictive Legends and Stop-Transfer Orders............................19
8.1 Legends...........................................................19
8.2 Stop-Transfer Notices.............................................21
8.3 Refusal to Transfer...............................................21
9. Covenants...............................................................21
9.1 Covenants of Purchaser............................................21
9.2 Covenants of the Company..........................................22
10. Company Rights..........................................................22
11. Conditions of the Company's Obligations at Closing......................22
11.1 Representations and Warranties....................................22
11.2 Performance.......................................................22
11.3 Qualifications....................................................22
12. Conditions of Purchaser's Obligations at Closing........................23
12.1 Representations and Warranties....................................23
12.2 Performance.......................................................23
13. Market Standoff Agreement...............................................23
14. Development Program; Purchaser's Continuing Obligations.................24
15. California Corporate Securities Law.....................................24
16. Miscellaneous...........................................................24
16.1 Governing Law; Severability.......................................24
16.2 Choice of Forum...................................................24
16.3 Survival of Representations, Warranties and Agreements............24
16.4 Successors and Assigns............................................24
16.5 No Waiver.........................................................25
16.6 Written Amendments................................................25
16.7 Notices...........................................................25
16.8 Further Instruments...............................................26
16.9 Finder's Fees.....................................................26
16.10 Dispute Resolution................................................26
16.11 Entire Agreement..................................................26
16.12 Counterparts......................................................26
16.13 Titles and Subtitles..............................................27
16.14 Attorneys' Fees...................................................27
-ii-
EXHIBIT A Form of Warrant
EXHIBIT B Conversion and Omnibus Termination Agreement and General
Release
EXHIBIT C Distribution Agreement
EXHIBIT D Voting Agreement
EXHIBIT E Form of Certificate of Non-U.S. Person
EXHIBIT F "Accredited Investor" Questionnaire
EXHIBIT G List of Diligence Materials
EXHIBIT H Schedule of Exceptions
EXHIBIT I Capitalization Table
EXHIBIT J Joint Development Program Term Sheet
iii
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Common Stock and Warrant Purchase Agreement (this "AGREEMENT") is
made to be effective as of July __, 2000 (the "EFFECTIVE DATE"), by and
between HYDROGEN BURNER TECHNOLOGY, INC., a California corporation (the
"COMPANY"), and G.D.F. INTERNATIONAL, a French corporation with registered
offices at 0, xxx Xxxxxxxxx, Xxxxx, Xxxxxx ("PURCHASER" or "GDFI"). GDFI is a
wholly-owned subsidiary of Gaz de France, a French public utility company
("GDF"). GDFI is acting on its own and on Gaz de France's behalf.
As consideration for the mutual covenants and agreements contained
herein, the Company and Purchaser hereby agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS
As used in this Agreement, the following terms shall have the following
respective meanings:
"AFFILIATES" means all persons who control, are controlled by or are
under common control with a person.
"ANCILLARY AGREEMENTS" means the Conversion and Omnibus Termination
Agreement and General Release, the Distribution Agreement, the Voting
Agreement, the Joint Development Preliminary Agreement, the Certificate of
Non-U.S. Person and the "Accredited Investor" Questionnaire, all of which are
defined below.
"COMMON STOCK" means the Company's common stock, no par value.
"EQUITY SECURITIES" means all securities of the Company having voting
rights with respect to the election of the Board of Directors, including, but
not limited to, shares of Common Stock and all securities (other than
outstanding stock options) convertible into or exercisable or exchangeable
for any of the foregoing securities.
"INTELLECTUAL PROPERTY ASSETS" include:
(i) the Company's name, all fictional business names, trading names,
registered and unregistered trademarks, service marks, and
applications (collectively, "MARKS");
(ii) all Company patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "PATENTS");
(iii) all Company copyrights in both published works and unpublished
works (collectively, "COPYRIGHTS"); and
(iv) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology,
plans, drawings, and
blue prints (collectively,"TRADE SECRETS") owned, used, or
licensed by the Company as licensee or licensor.
"PRO RATA SHARE" means, with respect to any holder, such holder's pro
rata share of the outstanding Equity Securities, shall be a fraction
calculated by dividing (i) the number of shares of Common Stock held by the
holder as of the applicable date plus the number of shares of Common Stock
issuable in conversion exercise or exchange of all other outstanding Equity
Securities held by the holder as of the applicable date, but not including
any of the Warrant Shares, by (ii) the total number of shares of Common Stock
outstanding as of such date plus the total number of shares of Common Stock
issuable on conversion, exercise or exchange of all other outstanding Equity
Securities as of such date.
"WARRANT" means the Company's Common Stock purchase warrant in the form
attached to this Agreement as EXHIBIT A.
"WARRANT SECURITIES" means, collectively, the Warrant and the Warrant
Shares (defined below).
"WARRANT SHARES" means the One Million (1,000,000) shares of Common
Stock issuable upon exercise of the Warrant.
1.2 INDEX OF OTHER DEFINED TERMS. In addition to the terms
defined above, the following terms have the respective meanings given to them
in the sections mentioned below:
DEFINED TERM SECTION
------------ -------
"Accredited Investor" Questionnaire 3.2(a)
Aggregate Purchase Price 2.1
Agreement Preamble
Company Preamble
Conversion Agreement 2.2(a)
Capitalization Table 5.7
Cash Purchase Price 2.2(b)
Certificate of Non-U.S. Person 3.2(a)
Closing 3.1
Diligence Materials 4.14
Directed Selling Efforts 4.9(b)
Distribution Agreement 3.2(a)
Effective Date Preamble
Financial Statements 5.5
GDF Preamble
GDFI Preamble
IPO Event 7.7
Joint Development Preliminary Agreement 14
Non-U.S. Person 4.9(a)
Notice 7.2
Offered Price 7.2
Offered Shares 7.2
PGS 2.2(a)
Proposed Transferee 7.2
Purchaser Preamble
Purchase Price 2.1
Purchaser Percentage 2.4
Restricted Period 4.10(c)
Rights of First Refusal 7.1
Schedule of Exceptions 5
Securities Act 4.2
Selling Shareholder 7.1
Shares 2.1
United States 4.9(a)
U.S. Person 4.9(a)
Voting Agreement 3.2(b)
2. AGREEMENT TO PURCHASE AND SELL SECURITIES
2.1 AGREEMENT TO PURCHASE AND SELL THE SHARES. Subject to the
terms and conditions of this Agreement, the Company hereby agrees to sell to
Purchaser, and Purchaser hereby agrees to purchase from the Company (at the
Closing) One Million Fifty Thousand (1,050,000) shares of the Company's
Common Stock (the "SHARES") at a price of Five Dollars ($5.00) per Share
(the "PURCHASE PRICE"), for an aggregate purchase price of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000) (the "AGGREGATE PURCHASE
PRICE").
2.2 CONSIDERATION; PAYMENT OF AGGREGATE PURCHASE PRICE. The
Aggregate Purchase Price shall be paid as follows:
(a) CANCELLATION OF INDEBTEDNESS; ACKNOWLEDGEMENT OF
SERVICES. One Million Five Hundred Fifty Thousand Dollars ($1,550,000) of
the Aggregate Purchase Price shall be paid and/or credited under the terms of
that certain Conversion and Omnibus Termination Agreement and General Release
dated of even date herewith by and between GDF and GDFI, on the one hand, and
the Company and Phoenix Gas Systems, LLC, a California limited liability
company and a subsidiary of the Company ("PGS"), on the other hand, a copy
of which is attached to this Agreement as EXHIBIT B (the "CONVERSION
AGREEMENT"), as follows: (i) Five Hundred Thousand Dollars ($500,000) shall
be paid by cancellation or conversion of certain advances originating from
ongoing business and financing arrangements between the Company and GDF, and
(ii) One Million Fifty Thousand Dollars ($1,050,000) shall be credited
against the Aggregate Purchase Price, as consideration for certain equipment
development and business support and demonstration services rendered at the
Natural Gas Technology Center, Montreal, Canada. All such arrangements and
transactions and the amounts set forth in this Section 2.2(a) are more fully
described in the Conversion Agreement.
(b) CASH PURCHASE PRICE. Purchaser shall pay the entire
remaining balance of the Aggregate Purchase Price in the amount of Three
Million Seven Hundred Thousand U.S. Dollars ($3,700,000) (the "CASH PURCHASE
PRICE") by wire transfer (in immediately available funds) to an account
designated by the Company.
2.3 AGREEMENT TO PURCHASE AND SELL WARRANT. Subject to the terms
and conditions of this Agreement, the Company hereby agrees to sell to
Purchaser, and Purchaser agrees to purchase from the Company, the Warrant to
purchase up to One Million (1,000,000) shares of the Company's Common Stock
(at a price of Four Dollars ($4.00) per share, subject to the terms and
conditions of the Warrant).
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.4 and subject to the rights of first refusal of
Sofinov Societe financiere d'innovation Inc. ("Sofinov"), the Company hereby
grants to the Purchaser a right of first offer with respect to future sales
by the Company of Equity Securities. After the date hereof, each time the
Company proposes to offer any of its Equity Securities, the Company shall make
an offering of such Equity Securities to the Purchaser in accordance with the
following provisions:
(a) Within ten (10) days after the Company receives a bona fide
written offer from a third party to purchase Equity Securities, the Company
shall deliver a notice in accordance with Section 16.7 hereof ("NOTICE") to
the Purchaser stating (i) its bona fide intention to offer such Equity
Securities, (ii) the number of Equity Securities to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such Equity
Securities.
(b) By written notification received by the Company, within
twenty (20) calendar days after giving of the Notice, the Purchaser may elect
to purchase or obtain, at the price and on the terms specified in the Notice,
the Purchaser Percentage (defined below) of those Equity Securities on those
same terms and conditions. The "PURCHASER PERCENTAGE" shall equal
Purchaser's Pro Rata Share before the proposed sale.
(c) If the Purchaser does not elect to purchase the entire
Purchaser Percentage of those Equity Securities, the Company shall be
entitled to make the proposed sale on the proposed terms and conditions;
PROVIDED, HOWEVER, that if the Company shall make any material change in the
terms and conditions specified in the original notice, or if the proposed
sale is not concluded within ninety (90) days after the Purchaser's receipt
of the original notice, then the provisions of this Section 2.4 shall again
become effective so as to require the Company to notify the Purchaser with
respect to any subsequent proposal to sell such securities.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance of any of the Company's Equity Securities
pursuant to any stock option, restricted stock or other Equity Securities to
any employee or consultant of the Company as incentive compensation or
pursuant to any benefit or compensation plan; (ii) to or after the
consummation of any transaction resulting in or constituting an IPO Event;
(iii) the issuance of Equity Securities upon conversion or exercise of
convertible or exercisable securities (including, without limitation,
outstanding options, warrants and rights); (iv) the issuance of Equity
Securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange
of stock or otherwise or any corporate partnering transaction approved by the
Board of Directors; (v) the issuance of Equity Securities to persons or
entities with which the Company has business or strategic relationships,
including (without limitation) banks, equipment lessors; or (vi) the issuance
of Equity Securities in a transaction approved by the holders of a majority
of the outstanding shares of the Company's Common Stock.
(e) The right of first offer set forth in this Section 2.4
shall terminate upon the earliest of the following to occur: (i) an IPO
Event; (ii) the first time that the Purchaser fails to exercise its right of
first offer under this Section 2.4; and (iii) the fifth anniversary of the
Closing.
(f) The right of first offer set forth in this Section 2.4 may
not be assigned or transferred, except that such right is assignable by the
Purchaser to any wholly-owned subsidiary or parent of, or to any corporation
or entity that is, within the meaning of the Securities Act, controlling,
controlled by or under common control with, Purchaser.
3. CLOSING; DELIVERIES.
3.1 THE CLOSING. The purchase and sale of the Shares shall occur
at a closing (the "CLOSING") to be held at a time to be mutually agreed on by
the Company and Purchaser but not later than July 13, 2000.
3.2 THE DELIVERY.
(a) PURCHASER'S DELIVERIES. Under the terms and subject to
the conditions of this Agreement, at the Closing, Purchaser shall deliver to
the Company:
(i) the Cash Purchase Price by wire transfer (in
immediately available funds) to an account designated by the Company;
(ii) the Conversion Agreement in the form attached to
this Agreement as EXHIBIT B;
(iii) that certain Distribution Agreement dated of even
date herewith, by and between PGS and GDF, a copy of which is attached to
this Agreement as EXHIBIT C;
(iv) that certain Voting Agreement dated of even date
herewith, by and between the Company and certain existing shareholders of the
Company, on the one hand, and Purchaser, on the other hand, a copy of which
agreement is attached to this Agreement as EXHIBIT D (the "VOTING
AGREEMENT");
(v) a Certificate of Non-U.S. Person in the form
attached to this Agreement as EXHIBIT E (the "CERTIFICATE OF NON-U.S.
PERSON"); and
(vi) an "Accredited Investor" Questionnaire in the form
attached to this Agreement as EXHIBIT F (the "'ACCREDITED INVESTOR'
QUESTIONNAIRE").
(b) THE COMPANY'S DELIVERIES. Under the terms and subject to
the conditions of this Agreement, at the Closing and after confirmation of
receipt of the Cash Purchase Price, the Company shall issue a stock
certificate evidencing the Shares registered in the name of Purchaser and
shall deliver such stock certificate to Purchaser at the Purchaser's
principal business address (or such other location that Purchaser may
designate) in the country of France. Under the terms and subject to the
conditions of this Agreement, at the Closing, the Company shall deliver to
Purchaser:
(i) the Warrant in the form attached to this Agreement as
EXHIBIT A;
(ii) the Distribution Agreement in the form attached to
this Agreement as EXHIBIT C; and
(iii) the Voting Agreement in the form attached to this
Agreement as EXHIBIT D.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. In connection with
Purchaser's purchase of the Shares and the Warrant Securities, Purchaser
hereby represents and warrants to the Company as follows:
4.1 AUTHORIZATION. All corporate action on the part of Purchaser
and its officers, directors and shareholders necessary for its authorization,
execution and delivery of this Agreement and the Ancillary Agreements and the
performance of the obligations of Purchaser hereunder has been taken.
Purchaser has full power and authority to enter into this Agreement, and this
Agreement, when executed and delivered, will constitute a valid and legally
binding obligation of Purchaser, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditor's rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
4.2 INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. Purchaser
is purchasing the Shares and Warrant Securities solely for Purchaser's own
account for investment and not with a view to or for sale in connection with
any distribution of the Shares, the Warrant Securities or any portion
thereof, and not with any present intention of selling, offering to sell,
granting any participation in or otherwise disposing of or distributing the
Shares, the Warrant Securities or any portion thereof in any transaction other
than a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). The Purchaser is
experienced in making investments in the unregistered and restricted
securities of developing and emerging growth companies such as the Company.
The Purchaser understands that such investments (including the Purchaser's
investment in the Shares and Warrant Securities) involve a high degree of
speculation and risk. The Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is capable of evaluating
the merits and risks of the investment in the Company represented by the
Shares and the Warrant Securities and, by reason of Purchaser's financial and
business experience and its pre-existing substantive relationship with the
Company, Purchaser has the capacity to protect the Purchaser's interests in
connection with the Shares and the Warrant Securities. The Purchaser is
financially able to bear the economic risk of the investment represented by
the Shares and Warrant Securities, including a total loss of such investment.
The entire legal and beneficial interest in the Shares and Warrant Securities
is being purchased by Purchaser and shall be held only for Purchaser's
account or the account of a Non-U.S. Affiliate and neither in whole nor in
part for any other entity. By executing this Agreement, Purchaser further
represents that Purchaser does not have any contract, undertaking, agreement
or arrangement with any entity to sell, transfer or grant any participation
to such entity or to any third party, with respect to any of the Shares or
Warrant Securities.
4.3 RELIANCE ON PURCHASER'S REPRESENTATIONS. Purchaser
understands and acknowledges that the Shares, the Warrant and the Warrant
Shares will not be registered under the Securities Act, on the ground that
the sale provided for in this Agreement is exempt from registration under the
Securities Act, and that the Company's reliance on such exemption (or
exemptions) is predicated on the Purchaser's representations that are set
forth in this Agreement,
the Certificate of Non-U.S. Person and the "Accredited Investor"
Questionnaire. Purchaser understands that the basis for such exemption may
not be present if, notwithstanding such representations, Purchaser intends to
acquire any of the Shares or Warrant Securities for a fixed or determinable
time in the future, or for a market rise, or for sale if the market does not
rise. Purchaser has no such intention and intends to acquire the Shares and
Warrant Securities for the purposes of investment, as set forth under Section
4.2 of this Agreement.
4.4 PRINCIPAL ADDRESS; RESIDENCY. Purchaser's principal business
address is as set forth on the signature page of this Agreement. Purchaser is
not a U.S. Person, as such term is defined under Regulations S and has
completed a Certificate of Non-U.S. Person. The Certificate of Non-U.S.
Person is incorporated herein by reference in its entirety and made a part of
this Agreement as if fully set forth herein. Purchaser acknowledges and
understands that, in addition to all other representations set forth in this
Agreement, the Company's reliance on the exemptions described under Section
4.3 of this Agreement is predicated on the representations, warranties and
certification set forth in the Certificate of Non-U.S. Person.
4.5 INFORMATION CONCERNING THE COMPANY. Without limiting the
terms of the investment representations set forth below, the Purchaser
represents that the Purchaser:
(a) has had an opportunity to ask questions and receive
answers from the Company and its officers and directors regarding matters
relevant to the Company and an investment therein (e.g., as represented by
the Shares), including, without limitation, (1) the terms and conditions of
the Shares, (2) the Company's intended business plan, (3) the Company's
capitalization and charter documents, (4) the status and nature of the
Company's assets, (5) the status and nature of the Company's liabilities
(including amounts and other obligations owed to third parties), (6) the
Company's current third party arrangements, (7) the early-stage, developing
and/or emerging nature of the Company's business, (8) the business prospects
and financial affairs of the Company, (9) the competitive environment that
the Company and its proposed products and services face and (10) the
Company's imminent need for substantial amounts of additional financing;
(b) has further had the opportunity to obtain any and all
information that the Purchaser deemed and deems necessary to evaluate the
Company and the Purchaser's acquisition of the Shares and Warrant Securities,
as well as to verify the accuracy of information otherwise provided to the
Purchaser;
(c) received and has reviewed the Diligence Materials
(defined below); and
(d) has otherwise received all such information Purchaser
deems necessary and appropriate to evaluate the financial risks inherent in
making, and the merits of, an investment in the Shares and the Warrant
Securities.
4.6 SOPHISTICATED AND ACCREDITED INVESTOR. By reason of
Purchaser's (i) pre-existing substantive relationship with the Company and
one or more of its officers, directors or control persons and (ii) by reason
of the Purchaser's business or financial experience, the
Purchaser is capable of evaluating the merits and risks of the investment
represented by the Shares and the Warrants Securities and the merits and
risks of protecting the Purchaser's own interests in connection with such
investment. The Purchaser is an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act. All statements and
representations made in the "Accredited Investor" Questionnaire, which was
or is being furnished concurrently herewith to the Company by Purchaser,
continue to be and are true, accurate and complete as of the Effective Date.
4.7 NO PUBLIC MARKET. Purchaser understands that no public market
now exists for any of the Shares or Warrant Securities and that there is no
assurance that a public market ever will exist for the Shares or the Warrant
Securities.
4.8 ECONOMIC RISK. Purchaser understands that the purchase of the
Shares and the Warrant Securities will be a highly speculative investment and
involves a high degree of risk, and Purchaser is able, without impairing
Purchaser's financial condition, to hold the Shares, the Warrant and Warrant
Shares for an indefinite time and to suffer a complete loss of Purchaser's
investment.
4.9 OFFSHORE TRANSACTION. Purchaser understands and acknowledges
that:
(a) The purchase and sale of the Shares and the Warrant
Securities under this Agreement are being offered and sold outside the United
States to an entity located outside the United States, which is not a U.S.
Person and which is not purchasing for the benefit or the account of a U.S.
Person (as defined below) (a "NON-U.S. PERSON"). Whenever used in this
Agreement, the terms "UNITED STATES" and "U.S. PERSON" shall have the
meanings given to them under Rule 902(k) and Rule 902(l) of Regulation S
under the Securities Act, a recitation of which is set forth in the
Certificate of Non-U.S. Person.
(b) Neither any offer nor the sale of the Shares or the
Warrant Securities to Purchaser under this Agreement was accomplished by
means of advertising in any publication or by means of "DIRECTED SELLING
EFFORTS" in the United States, as such term is defined under Rule 902(c) of
Regulation S under the Securities Act. A recitation of Rule 902(c) is set
forth in the Certificate of Non-U.S. Person.
(c) Neither the offer nor the sale of the Shares or the
Warrant was consummated in the United States.
(d) With respect to the offer and sale of the Shares and
Warrant under this Agreement and at all times contemplated herein, Purchaser
was and continues to remain located outside the United States.
4.10 RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(a) The sale of the Shares and the Warrant Securities has
not been registered under the Securities Act;
(b) The Shares and the Warrant Securities must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
the registration requirements of the Securities Act is available (such as
Rule 144 under the Securities Act), and the Company is under no obligation to
register any sale or transfer of the Shares or the Warrant Securities;
(c) The Shares and the Warrant Securities are "restricted"
securities within the meaning of Rule 144 and will be stamped with the
legends specified in Section 8 of this Agreement;
(d) Without limiting the acknowledgment set forth in subpart (a) of
this Section 4.10 and without limiting any of the other acknowledgements and
representations set forth in Section 4 and Section 9 of this Agreement,
before the expiration of the period commencing on the date of Closing and
ending one year thereafter (the "RESTRICTED PERIOD"):
(i) None of the Shares or Warrant Securities may be sold,
transferred or assigned, or offered for sale, transfer or assignment to a
U.S. Person or for the account or benefit of a U.S. Person;
(ii) None of the Shares or Warrant Securities may be sold,
transferred or assigned, or offered for sale, transfer or assignment, in the
United States or in any transaction consummated in the United States (in
whole or in part);
(e) Further, without limiting the acknowledgment set forth in
subpart (a) of this Section 4.10, none of the Shares or Warrant Securities
may be sold, transferred or assigned, or offered for sale, transfer or
assignment, before the expiration of the Restricted Period unless each of the
following conditions is satisfied:
(i) Each prospective subsequent purchaser of the Shares or
Warrant Securities certifies that such purchaser is not a U.S. Person and is
not acquiring the Shares and/or Warrant Securities for the account or benefit
of any U.S. Person;
(ii) Each such prospective subsequent purchaser agrees to
resell such securities in accordance with Regulation S, pursuant to a
registration under the Securities Act or pursuant to an available exemption
from registration (other than Regulation S); and
(iii) Each certificate evidencing all of the Shares and/or
Warrant Securities to be transferred contains a legend to the effect that
transfer of such Shares and/or Warrant Securities is prohibited except in
accordance with Regulation S, which may be in the form set forth in Section
8.1 of this Agreement;
(f) The Company will make a notation in its records of the
aforementioned restrictions on transfer and legends; and
(g) The Company has no obligation to register the transfer of any
of the Shares or Warrant Securities and shall refuse to register any such
transfer not in accordance with Regulation S.
4.11 LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, Purchaser further agrees that Purchaser
shall in no event make any disposition of all or any portion of the Shares or
Warrant Securities unless and until:
(a) (i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition, and such disposition is
made in accordance with such Registration Statement; (ii) the resale
provisions of Rule 144 are available and the proposed disposition would
comply with the requirements of Regulation S in the opinion of counsel to the
Company; or (iii)(A) Purchaser shall have notified the Company of the
circumstances surrounding the proposed disposition, (B) Purchaser shall have
furnished the Company with an opinion of Purchaser's counsel to the effect
that such disposition will not require registration of any of such Shares or
Warrant Securities under the Securities Act, (C) the proposed disposition
would comply with all applicable requirements of Regulation S, and (D)
counsel for the Company shall have concurred with such opinion of Purchaser's
counsel, and the Company shall have advised Purchaser of such concurrence; and
(b) Purchaser shall have complied with the terms of the Rights of
First Refusal set forth in Section 7 of this Agreement if they are in effect
at the time of the proposed disposition of the Shares or the Warrant
Securities, and each transferee of the Shares and/or Warrant Securities
agrees in writing to be bound by all terms of this Agreement, including,
without limitation, the "lock-up" provisions set forth in Section 13 of this
Agreement.
4.12 NO GOVERNMENT RECOMMENDATION OR APPROVAL. Purchaser understands
that no United States federal or state agency, or similar agency of any other
country, has passed on or made any recommendation or endorsement of the
Company, this transaction or the purchase of the Shares or any of the Warrant
Securities.
4.13 COMPLIANCE WITH OTHER LAWS. Purchaser has observed the laws of
Purchaser's jurisdiction in connection with any invitation to subscribe for
or purchase the Shares and the Warrant Securities or any use of this
Agreement, including (i) the legal requirements within Purchaser's
jurisdiction for the purchase of the Shares and the Warrant Securities, (ii)
any foreign exchange restriction applicable to such purchase, (iii) any
governmental or other consent that may need to be obtained and (iv) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale or transfer of the Shares and/or the
Warrant Securities. Purchaser's subscription and payment for, and Purchaser's
continued beneficial ownership of, the Shares and the Warrant Securities will
not violate any applicable securities or other law of Purchaser's
jurisdiction.
4.14 RELIANCE ON OWN INVESTIGATION. Purchaser has performed a thorough
independent due diligence review of the Company, its business enterprise and
operations. In connection with its due diligence review of the Company,
Purchaser received and has reviewed documents and information relating to the
Company's operations, facilities, finances, management, employees and other
aspects of the Company's business enterprise, including (without limitation)
the documents and information generally described on the List of Diligence
Materials attached to this Agreement as EXHIBIT G (the "DILIGENCE MATERIALS")
on behalf of the Company. The Diligence Materials were contained in twenty
(20) individual binders and
forwarded to Purchaser at Purchaser's request. Notwithstanding anything
contained in this Agreement to the contrary and notwithstanding the
representations set forth under Section 4.5 of this Agreement, in making an
investment decision with respect to the Shares and the Warrant Securities
under this Agreement, Purchaser is relying entirely on its own investigation
and examination of the Company and its business and has not based any
investment decision on statements from the Company or any of its officers,
directors, employees, agents or other representatives.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
on the Schedule of Exceptions furnished to Purchaser and attached hereto as
EXHIBIT H (the "SCHEDULE OF EXCEPTIONS"), the Company hereby represents and
warrants to Purchaser that:
5.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under, and
by virtue of, the laws of the State of California, has all requisite
corporate power and authority to own and operate its properties and assets
and to carry on its business as now conducted and as proposed to be conducted.
The Company is currently not qualified to transact business as a foreign
corporation in any other jurisdictions. The failure to so qualify to transact
business will not have a material adverse effect, however, on the Company's
business (as currently conducted).
5.2 AUTHORIZATION. All corporate action on the part of the
Company and its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Ancillary
Agreements to which the Company is a party, the performance of all
obligations of the Company hereunder and thereunder, the authorization,
issuance and delivery of the Warrant, and the authorization, issuance,
reservation for issuance, sale and delivery of the Shares being sold under
this Agreement and of the Warrant Shares, has been taken or will be taken
before the Closing. All necessary corporate action by PGS necessary for the
authorization, execution and delivery of the Distribution Agreement and the
performance of all obligations of PGS thereunder has been taken or will be
taken before the Closing. This Agreement and each Ancillary Agreement to
which the Company or PGS is a party is a valid and legally binding obligation
of the Company or PGS, as the case may be, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.
5.3 VALID ISSUANCE OF SHARES AND WARRANT SHARES. The Shares, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable. The Warrant Shares have been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of this
Agreement and the Warrant, will be duly and validly issued, fully paid and
nonassessable.
5.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state or federal
governmental authority in the United States is required on the part of the
Company or PGS in connection with the performance of this
Agreement or any of the Ancillary Agreements, the offer, sale or issuance of
the Shares or any of the Warrant Securities, except that any notice of sale
required to be filed with the Securities and Exchange Commission under the
Securities Act or such post-closing filings as may be required under
applicable state securities laws, will be filed timely after the Closing
within the applicable periods therefor.
5.5 FINANCIAL STATEMENTS. The Company furnished to the Purchaser
an audited balance sheet of the Company dated December 31, 1999, together
with audited statement of operations and statement of cash flows of the
Company for its fiscal year ended December 31, 1999, and an unaudited balance
sheet of the Company dated April 30, 2000, together with an unaudited profit
and loss statement for the four months ended April 30, 2000 (all such
financial statements being collectively referred to herein as the "FINANCIAL
STATEMENTS"). Such Financial Statements (a) are in accordance with the books
and records of the Company, (b) are true, correct and complete and present
fairly the financial condition of the Company at the date or dates therein
indicated and the results or operations for the period or periods therein
specified and (c) except for the unaudited balance sheet dated April 30,
2000, and the related profit and loss statement for the four months ended
April 30, 2000, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis, for the omission of
notes thereto and normal year-end audit adjustments. The respective balance
sheets of the Financial Statements disclose all of the Company's material
debts, liabilities and obligations of any nature, whether due or to become
due, as of their respective dates (including, without limitation, absolute
liabilities, accrued liabilities and contingent liabilities) to the extent
that such debts, liabilities and obligations are required to be disclosed in
accordance with generally accepted accounting principles. Since April 30,
2000, there has not been any change in the assets, liabilities, financial
condition, earnings, business, operations or prospects of the Company, other
than changes in the ordinary course of business and consistent with past
practice that have not been, either in any case or in the aggregate,
materially adverse to the Company.
5.6 CORPORATE ACTION; BOOKS AND RECORDS. From the date of the
Company's incorporation, all material corporate action that has been taken by
the Board of Directors, or Committees of the Board of Directors, or
shareholders of the Company is fully and accurately recorded in its minute
books, and the corporate books and the corporate books and records of the
Company are accurate and complete in all material respects.
5.7 CAPITALIZATION OF THE COMPANY. The authorized capital stock
of the company consists of Thirty Million (30,000,000) shares of the
Company's Common Stock, of which Twelve Million Seven Hundred Seventy Seven
Thousand Three Hundred Fifty Two (12,377,352) shares will be issued and
outstanding immediately after execution of this Agreement and the issuance of
the Shares hereunder (but assuming no exercise of the Warrant or any other
outstanding option, warrant or right), as described on the Capitalization
Table attached to this Agreement as EXHIBIT I (the "CAPITALIZATION TABLE").
Of the authorized shares of Common Stock, Five Million Six Hundred Six
Thousand (5,606,000) shares are reserved for issuance upon exercise of
outstanding options, warrants and rights, as set forth in the Capitalization
Table under the heading Outstanding Options and Warrants. All issued and
outstanding shares of the Company's capital stock have been duly authorized
and validly issued, are fully paid and nonassessable.
5.8 NO COMMITMENTS. There are no outstanding options, rights,
subscriptions, warrants, conversion rights, pre-emptive rights, agreements or
commitments of any kind to purchase or otherwise acquire from the company any
Equity Securities, except as set forth on the Capitalization Table (Exhibit
I) and Section 5.8 of the Schedule of Exceptions (Exhibit H). The Company is
not a party or subject to any agreement or understanding, and to the
Company's knowledge, there is not any agreement or understanding between any
persons and/or entities, that affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company,
except as set forth on the Capitalization Table and Section 5.8 of the
Schedule of Exceptions.
5.9 SUBSIDIARIES AND OTHER INVESTMENTS. The Company has no
subsidiaries or Affiliates, and it does not own, directly or indirectly, any
capital stock in any other corporation or ownership interest in any other
entity.
5.10 LICENSES AND PERMITS. The Company possesses all material
federal, state and local licenses or permits which are necessary to conduct
its business as now operated. Such permits include but are not limited to all
such environmental permits that are required (if any) pursuant to the Clean
Air Act, 42 U.S.C. Sections 740 ET. SEQ., the Clean Water Act, 33 U.S.C.
Sections 1251 ET SEQ., and the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 ET SEQ. The consummation of the transactions provided
for in this Agreement will not cause any of such licenses or permits to be
terminated or become in default, and no action or claim is pending, or, to
the knowledge of the Company, currently is overtly threatened, to revoke or
terminate any of such licenses or permits, or declare any of them invalid in
any material respect.
5.11 ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, the
Company has conducted its business only in the ordinary course, and there has
not been (except as reflected in the balance sheet dated April 30, 2000, and
the statement of profits and losses for the four months then ended):
(a) Any change in its condition (financial or otherwise),
assets, liabilities, earnings, business, operations or prospects
that either singly or in the aggregate has been materially adverse.
(b) To the Company's knowledge, any event (whether or not
insured against) that either singly or in the aggregate has
materially and adversely affected its assets, liabilities,
earnings, business operations, or prospects.
(c) Any mortgage or pledge of, or material lien or other
encumbrance placed on any of its properties or assets.
(d) Any sale, transfer or other disposition of any of its
material assets, including, without limitation, its Intellectual
Property Assets except inventory sold in the ordinary course of
business.
(e) Any purchase, redemption or other acquisition by the
Company of any shares of its capital stock.
(f) Any issuance, sale or other disposition of any shares or
rights to acquire shares of its capital stock, or of any evidence of
indebtedness or securities of the Company.
(g) Any incurrence or creation by the Company of any material
liability, commitment or obligation, except unsecured current
liabilities incurred in the ordinary course of business and
contracts and commitments entered into in the ordinary course of
business.
5.12 LITIGATION. There is no pending or, to the knowledge of
the Company, overtly threatened claim, action, suit, arbitration, proceeding
or investigation of any character against the Company by any party, including
government agencies.
5.13 JUDGMENT, AWARDS AND PROCEEDINGS. There are no judgments,
awards or proceedings outstanding against the Company that, singly or in the
aggregate, materially and adversely affects its business, operations or
properties, or which enjoins the Company or prohibits any material business
practice, the acquisition of any property or the conduct of business in any
area. The Company is not contemplating instituting any material claim, suit,
action, arbitration, or administrative or other proceeding.
5.14 NO VIOLATION.
(a) Neither the execution of this Agreement or the Ancillary
Agreements by the Company or PGS nor the consummation of the transactions
contemplated hereby or thereby will (i) violate or result in a breach of, or
constitute a default under, any provision of the Company's Articles of
Incorporation or Bylaws, or (ii) violate or result in a material breach of,
or constitute a material default (or would result in or constitute such a
material breach or default with notice or lapse of time or both) under any
provision of any indenture, mortgage, lien, lease, agreement, license,
contract, instrument, order, arbitration award, judgment, decree, law,
ordinance, regulation, or any other restriction of any kind or character to
which the Company or PGS is a party or by which either is bound (other than
such violations, breaches, or defaults which are not reasonably likely to
have a material adverse effect on the Company), or result in or constitute
any breach thereunder that would prevent, hinder or delay the consummation of
the transactions contemplated by this Agreement or create any material claim,
lien, charge or encumbrance upon any of the Company's property or assets. All
consents required in connection with the execution by the Company of this
Agreement and the Ancillary Agreements and the execution of the Distribution
Agreement by PGS, or the consummation by them of the transactions
contemplated thereby have been obtained.
(b) To the knowledge of the Company, the Company's operations do not
violate any law, statue, rule, ordinance or regulation of any governmental
body or agency, nor is it in default with respect to any judgment, decree or
award of any court or of any state, federal, municipal or other governmental
body or agency which, if pursued in either case, might have a material
adverse effect, singly or in the aggregate, on the business, financial
condition, properties, operations or prospects of the Company.
5.15 ENVIRONMENTAL MATTERS. The Company has conducted its business
and operations in compliance, in all material respects, with all applicable
federal, state and local environmental laws. The Company has received no notice
that it may be a potentially responsible party for any response or cleanup costs
for environmental contamination or damage. To the knowledge of the Company,
after reasonable investigation, none of the properties owned or leased by the
Company is contaminated with any wastes or hazardous substances.
5.16 TITLE. The Company has good title to its properties and
assets including all of its Intellectual Property Assets. Such properties and
assets are not subject to any liens, mortgages, pledges, encumbrances or
charges of any kind, except liens for current taxes and assessments not
delinquent. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms, and, to the Company's knowledge, no material default
exists under any of them.
5.17 INTELLECTUAL PROPERTY ASSETS. The Company has taken
commercially reasonable security measures to protect the secrecy,
confidentiality and value of all Intellectual Property Assets. The Intellectual
Property Assets are all those necessary for the operation of the Company's
business as it is currently conducted. The Company is the owner of all right,
title, and interest in and to each of the Intellectual Property Assets, free
and clear of all liens, security interests, charges, encumbrances, equities,
and other adverse claims, and has the right to use without payment to a third
party all of the Intellectual Property Assets.
No outstanding options, licenses or agreements of any kind exist with
respect to the Intellectual Property Assets, nor is the Company bound by or a
party to any option, license or agreement of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. The Company has not received any communication alleging that the
Company has violated, or by conducting the Company's business as proposed,
would violate, any of the patents, trademarks, service marks, trade names,
copyrights, trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of the Company's employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted.
All founders and former and current employees of the Company (who are
involved materially and substantively in the design and development of the
Company's products) have executed written contracts with the Company that assign
to the Company all rights to any inventions, improvements, discoveries, or
information relating to the business of the Company.
The Company has furnished to Purchaser a complete and accurate list and
summary description of all issued Patents and Patent applications. The Company
is the owner of all right, title, and interest in and to each of the Patents,
free and clear of all liens, security interests, charges, encumbrances,
entities, and other adverse claims. All of the issued Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination, and
maintenance fees and proofs of working or use) and, to the Company's knowledge,
are valid and enforceable. No issued Patent or Patent application has been or is
now involved in any interference, reissue, reexamination, or opposition
proceeding. To the Company's knowledge, there is no potentially interfering
patent or patent application of any third party. To the best of Company's
knowledge, neither the validity, enforceability, inventorship or ownership of
any issued Patent or Patent application has been challenged or threatened in any
way, nor is any Patent infringed by any third party. None of the products
manufactured and sold, nor any process or know-how used, by the Company is
alleged to infringe or, to the Company's knowledge, infringes any patent or
other proprietary right of any other person. All products sold by the Company
that are covered by any issued Patent have been marked with the proper patent
notice.
The Company has furnished to Purchaser a complete and accurate list and
summary description of all Marks. The Company is the owner of all right, title,
and interest in and to each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims. All Marks
that have been registered with the United States Patent and Trademark Office are
currently in compliance with all formal legal requirements and, to the Company's
knowledge are valid and enforceable. No Xxxx has been or is now involved in any
opposition, invalidation, or cancellation, and no such action is threatened with
the respect to any of the Marks. To the Company's knowledge, there is no
potentially interfering trademark or trademark application of any third party.
No Xxxx has been challenged or threatened in any way, nor, to the Company's
knowledge, is any of the Marks infringed by any third party. None of the Marks
used by the Company is alleged to infringe or, to the Company's knowledge
infringes any trade name, trademark, or service xxxx of any third party. All
products and materials containing a Xxxx xxxx the proper federal registration
notice where permitted by law.
The Company has furnished to Purchaser a complete and accurate list and
summary description of all works that the Company considers useful and valuable
to the Company's business, in which the Company may own a Copyright. The Company
is the owner of all right, title, and interest in and to each of the Copyrights,
free and clear of al liens, security interests, charges, encumbrances, equities,
and other adverse claims. All the Copyrights have been registered and are
currently in compliance with formal legal requirements, and, to the Company's
knowledge, are valid and enforceable. To the best of Company's knowledge,
neither the validity, enforceability, authorship or ownership of any Copyright
has been challenged or threatened in any way, nor, to the Company's knowledge,
is any of the Copyrights infringed by any third party. None of the subject
matter of any of the Copyrights is alleged to infringe or, to the Company's
knowledge, infringes any copyright of any third party or is a derivative work
based on the work of a third party. All published works under which the Company
may own Copyrights have been marked with the proper copyright notice.
With respect to each Trade Secret that the Company considers useful and
valuable to Company's business, the Company has documented such Trade Secret or
reduced such Trade Secret to writing [in current, accurate and sufficient detail
and content to identify and explain it and to allow its full and proper use
without reliance on the knowledge or memory of any individual.] The Company has
taken all reasonable precautions to protect the secrecy, confidentiality, and
value of the Trade Secrets. The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not
part of the
public knowledge or literature, and, to the Company's knowledge, have not
been used, divulged, or appropriated either for the benefit of any person or
to the detriment of the Company. To the best of Company's knowledge, neither
the validity, enforceability or ownership of any Trade Secret has been
challenged or threatened in any way, or has been infringed by a third party.
5.18 DISCLOSURE. This Agreement, and schedules hereto, and the
Diligence Materials furnished to Purchaser by or on behalf of the Company by
authorized representatives of the Company in connection with this Agreement
and the transactions contemplated herein, when taken together, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary (in light of the circumstances) to make the statements made herein
not misleading.
6. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares and the Warrant Shares, respectively, from
and after the date on which Purchaser delivers full payment for the Shares
and Warrant Shares until such time as Purchaser disposes of the Shares and
Warrant Shares or the Company and/or its assignee(s) exercises the Rights of
First Refusal as set forth in Section 7 of this Agreement. Upon such
exercise, Purchaser shall have no further rights as a holder of the Shares or
Warrant Shares so purchased except the right to receive payment for the
Shares or Warrant Shares so purchased in accordance with the provisions of
this Agreement, and Purchaser shall forthwith cause the certificate(s)
evidencing the Shares or Warrant Shares so purchased to be surrendered to the
Company for transfer or cancellation.
7. RIGHTS OF FIRST REFUSAL.
7.1 GENERAL. Before any of the Shares or Warrant Shares held by
Purchaser or any transferee (either being sometimes referred to in this
Agreement as the "SELLING SHAREHOLDER") may be sold or otherwise transferred
to any person or entity that is not an Affiliate of Purchaser, the Company or
its assignee(s) shall have rights of first refusal to purchase the Shares
and/or the Warrant Shares under the terms and conditions set forth in this
Section 7 (the "RIGHTS OF FIRST REFUSAL").
7.2 NOTICE OF PROPOSED TRANSFER. The Selling Shareholder of the
Shares shall deliver to the Company a written notice (the "NOTICE") stating:
(a) the Selling Shareholder's BONA FIDE intention to sell or otherwise
transfer such Shares and/or Warrant Shares (the "OFFERED SHARES"); (b) the
name of each proposed purchaser or other transferee (the "PROPOSED
TRANSFEREE"); (c) the number of Offered Shares to be transferred to each
Proposed Transferee; and (d) the BONA FIDE cash price or other consideration
for which the Selling Shareholder proposes to transfer the Offered Shares
(the "OFFERED PRICE"), and the Selling Shareholder shall offer the Offered
Shares at the Offered Price to the Company or its assignee(s).
7.3 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
fifteen (15) days after receipt of the Notice, the Company or its assignee(s)
may, by giving written notice to the Selling Shareholder, elect to purchase
all (but not less than all) of the Offered Shares, at the purchase price
determined in accordance with Section 7.4 below.
7.4 PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for
the Offered Shares purchased by the Company or its assignee(s) under this
Section 7.4 shall be the Offered Price. If the Offered Price includes
consideration other than cash, then the cash equivalent value of the non-cash
consideration shall be mutually determined by the Board of Directors of the
Company and Purchaser in good faith.
7.5 PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by wire transfer in
immediately available funds), by cancellation of all or a portion of any
outstanding indebtedness of the Selling Shareholder to the Company (or, in the
case of purchase by an assignee, to the assignee), or by any combination
thereof within Forty (40) days after receipt of the Notice or in the manner
and at the times set forth in the Notice. The sale shall constitute a
representation and warranty by the Selling Shareholder that the Shares and/or
Warrant Shares being sold are free and clear of all liens, claims and
encumbrances, except as contemplated by this Agreement.
7.6 SELLING SHAREHOLDER'S RIGHT TO TRANSFER. If all of the
Offered Shares proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by the Company or its assignee(s) as provided in
this Section 7, then none of the Offered Shares shall be purchased under this
Section 7, and the Selling Shareholder may sell or otherwise transfer the
Offered Shares to that Proposed Transferee at the Offered Price or at a
higher price, provided that such sale or other transfer (a) is consummated
within ninety (90) days after the date of the Notice, (b) is in accordance
with all of the terms of this Agreement and all other agreements between the
Selling Shareholder and the Company and (c) is effected in accordance with
all applicable securities laws, and the Proposed Transferee agrees in writing
that the provisions of this Agreement shall continue to apply to the Offered
Shares in the hands of such Proposed Transferee. If the Offered Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company or
its assignees shall again be offered the Rights of First Refusal before any
Offered Shares held by the Selling Shareholder may be sold or otherwise
transferred.
7.7 TERMINATION OF RIGHTS OF FIRST REFUSAL. The Rights of First
Refusal under this Section 7 shall not apply to and shall terminate
immediately before the closing of any initial public offering of the
Company's Common Stock pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission under the
Securities Act ("IPO EVENT") and shall be reinstated if there is no such
closing.
8. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
8.1 LEGENDS. Purchaser understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto to be placed on all certificates evidencing the Shares and the
Warrant Shares along with all other legends that may be required by the state
or federal securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE BEING OFFERED AND SOLD
ONLY PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ALL APPLICABLE STATE SECURITIES LAWS (IF ANY).
"THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY, BEFORE THE DATE WHICH IS ONE
YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES
ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S RIGHT BEFORE ANY OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATES AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO THE
COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF FURTHER
AGREES NOT TO ENGAGE IN HEDGING TRANSACTIONS INVOLVING THESE SECURITIES
UNLESS SUCH TRANSACTIONS MEET THE REQUIREMENTS AND COMPLY WITH THE
SECURITIES ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER, INCLUDING RIGHTS OF FIRST REFUSAL, AS SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180-DAY
MARKET STANDOFF PROVISION AS SET FORTH IN THE COMMON STOCK PURCHASE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH MARKET STANDOFF PROVISION IS BINDING ON TRANSFEREES OF THESE
SHARES."
8.2 STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions set forth in this Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
8.3 REFUSAL TO TRANSFER. The Company shall not be required (a) to
transfer on its books any of the Shares or Warrant Shares that have been
sold or otherwise transferred in violation of any of the provisions of this
Agreement or (b) to treat as owner of such Shares or Warrant Shares or to
accord the right to vote or pay dividends to any purchaser or other transferee
to whom such Shares or Warrant Shares have been so transferred.
9. COVENANTS.
9.1 COVENANTS OF PURCHASER. Purchaser shall not resell or offer
to resell any of the Shares or Warrant Shares, and shall not transfer, assign
or offer to transfer or assign any portion of the Warrant, except in
compliance with all applicable terms and conditions set forth in this
Agreement (including, without limitation, all applicable terms, conditions
and limitations set forth under Section 4 of this Agreement) and the
requirements of Regulation S. Purchaser shall not resell or offer to resell
any of the Shares or Warrant Shares, and shall not transfer, assign or offer
to transfer or assign any portion of the Warrant, in the United States or to
any person in the United States, to any U.S. Person or to others for the
benefit or account of any U.S. Person, at any time before the expiration of
the Restricted Period. Without limiting the application of any of the
remaining conditions set forth in this Section 9.1, Purchaser shall in no
case resell or offer to resell any of the Shares or Warrant Shares, and shall
not transfer, assign or offer to transfer or assign any portion of the
Warrant, before expiration of the Restricted Period, unless each of the
following additional conditions is satisfied:
(a) The prospective subsequent purchaser certifies that such
purchaser is not a U.S. Person and is not acquiring the Shares and/or Warrant
Securities for the account or benefit of any U.S. Person;
(b) The prospective subsequent purchaser agrees to resell all
such Shares and/or Warrant Securities in accordance with Regulation S,
pursuant to a registration under the Securities Act or pursuant to an
available exemption from registration; and
(c) Under the terms of the sale to such prospective
subsequent purchaser, each certificate evidencing all such Shares and/or
Warrant Securities to be transferred must contain a legend to the effect that
transfer of such Shares and/or Warrant Securities is
prohibited except in accordance with Regulation S, which may be in the form
set forth in Section 8.1 of this Agreement.
9.2 COVENANTS OF THE COMPANY. The Company covenants as
follows:
(a) Until the occurrence of an IPO Event, the
Company shall furnish to Purchaser within forty-five (45) days after the
close of each of its fiscal quarters a copy of the Company's unaudited
balance sheet and related profit and loss statement for the quarter, and
shall deliver to Purchaser within ninety (90) days after the close of its
fiscal year a copy of the Company's audited financial statements prepared in
accordance with generally accepted accounting principles.
(b) The Company shall not register the transfer of
any of the Shares or Warrant Securities that shall have been sold or
transferred in violation of Regulation S.
10. COMPANY RIGHTS. The Company shall not be required (a) to
transfer on the Company's books any of the Shares that are or have been sold
or transferred in violation of any of the terms or provisions set forth in
this Agreement (including, without limitation, the conditions and limitations
set forth under Section 4 and Section 9 of this Agreement) or (b) to treat as
owner of such Shares, or to accord voting rights associated with the
ownership of such Shares or to pay dividends to, any transferee to whom such
Shares have been so transferred.
11. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to Purchaser under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions:
11.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in Section 4 of this Agreement and those
contained in the Certificate of Non-U.S. Certificate and the "Accredited
Investor" Questionnaire shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as
of the Closing.
11.2 PERFORMANCE. Purchaser shall have performed and
complied with all agreements, obligations, covenants and conditions contained
in this Agreement that are required to be performed or complied with it at or
before the Closing.
11.3 QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
issuance and sale of the Common Stock pursuant to this Agreement shall be
duly obtained and effective as of the Closing.
12. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The
obligations of Purchaser to the Company under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions:
12.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 5 shall be true on the Closing
with the same effect as though such representations and warranties had been
made on the date of the Closing.
12.2 PERFORMANCE. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it at or
before the Closing.
13. MARKET STANDOFF AGREEMENT. Purchaser hereby agrees, if so
requested by the managing underwriters in a public offering of the Company's
capital stock, that, without the prior written consent of such managing
underwriters, Purchaser shall not offer, sell, contract to sell, grant any
option to purchase, make any short sale or otherwise dispose of, reduce
Purchaser's market risk with respect to or make a distribution of any capital
stock of the Company held by or on behalf of Purchaser or beneficially owned
by Purchaser in accordance with the rules and regulations of the Securities
and Exchange Commission for a period of up to one hundred and eighty days
after the date of the final prospectus relating to any initial public
offering by the Company.
14. DEVELOPMENT PROGRAM; PURCHASER'S CONTINUING OBLIGATIONS. As
consideration for the sale and issuance of the Shares and the Warrant and in
connection with the financing and commercial arrangements contemplated by
this Agreement, the Company and GDF agree to fund a joint development program
on the terms set forth in the Joint Development Preliminary Agreement, the
form of which is attached to this Agreement as EXHIBIT J (the "JOINT
DEVELOPMENT PRELIMINARY AGREEMENT"). The parties hereby acknowledge and
agree that the Joint Development Preliminary Agreement sets forth the
principle terms of a jointly funded development program, including (without
limitation) a general description of the scope of the research and
development program. The Joint Development Preliminary Agreement may be
modified and/or supplemented by a subsequent agreement between the parties,
which will set forth a more detailed description of the contemplated joint
development program.
15. CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
FOR SUCH SECURITIES BEFORE SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
16. MISCELLANEOUS.
16.1 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed
by and construed in accordance with the laws of the State of California,
excluding that body of law pertaining to conflicts of law. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions nevertheless shall remain effective and
shall remain enforceable.
16.2 CHOICE OF FORUM. Any judicial proceeding brought by any party
hereto as a result of a dispute or controversy arising out of or related to
this Agreement shall be commenced in courts located within Los Angeles
County, California. All parites hereto agree to submit to the jurisdiction of
the federal and state courts located within such county in the event of such
a dispute or controversy.
16.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained in this Agreement shall
not be discharged or dissolved at the Closing but shall survive and remain in
full force and effect after the Closing.
16.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and
be binding on the respective successors and assigns of the parties hereto
(including permitted transferees of the Shares, Warrant and the Warrant
Shares). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors
and assigns any
right, remedy, obligation or liability under or by reason of this Agreement,
except as expressly provided in this Agreement.
16.5 NO WAIVER. The failure of any party hereto at any time to
require performance by the other party hereto of any term or provision of
this Agreement shall not affect the right of such party to require
performance of that term or provision, and any waiver by any party hereto of
any breach of any term or provision of this Agreement shall not be contrued as
a waiver of any continuing or succeeding breach of such term or provision, a
waiver of the term or provision itself or a waiver of any right under this
Agreement.
16.6 WRITTEN AMENDMENTS. This Agreement may not be modified,
amended, altered or changed in any respect whatsoever except by further
agreement in writing, duly executed by all parties hereto. No oral statements
or representations made after the date of this Agreement by any party hereto
are binding on such party, and no party hereto shall have the right to rely on
such oral statements or representations.
16.7 NOTICES. Except as may be otherwise provided herein, all
notices, requests, waivers and other communications made pursuant to this
Agreement shall be in writing and shall be conclusively deemed to have been
duly given (a) when hand delivered to the other party; (b) when sent by
facsimile at the address and number set forth below, provided that the
notifying party provides a proof of receipt (if requested); (c) three (3)
business days after deposit with an international express delivery service,
with the cost of shipment and delivery prepaid, addressed to the parties as
set forth below, provided that the sending party receives a confirmation of
delivery from the delivery service provider.
To Purchaser:
00, xxx Xxxxxxxxx Xxxxxxx
00000 Xxxxx
Xxxxxx
Fax Number: (33-1) 47 54 31 75a l'attention du Directeur marketing
strategique
To the Company:
Hydrogen Burner Technology, Inc.
0000 Xxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx, President
Fax Number: (000) 000-0000
Each person making a communication hereunder by facsimile shall promptly
confirm by telephone to the person to whom such communication was addressed
each communication made by it by facsimile pursuant hereto but the absence of
such confirmation shall not affect the validity of any such communication. A
party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 16.7 by giving the other
party written notice of the new addresses in the manner set forth above.
16.8 FURTHER INSTRUMENTS. The Company and Purchaser agree to execute
such further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
16.9 FINDER'S FEES. Each party (a) represents and warrants to the
other party hereto that it has retained no finder or broker in connection
with the transactions contemplated by this Agreement, and (b) hereby agrees
to indemnify and to hold harmless the other party hereto from and against any
liability for any commission or compensation in the nature of a finder's fee
of any broker or other person or firm (and the costs and expenses of
defending against such liability or asserted liability) for which the
indemnifying party or any of its employees or representatives are responsible.
16.10 DISPUTE RESOLUTION. The parties agree to negotiate in good faith
to resolve any dispute between them regarding this Agreement. If the
negotiations do not resolve the dispute to the reasonable satisfaction of
both parties, then each party shall nominate one senior officer of the rank
of Vice President or higher as its representative. These representatives
shall, within thirty (30) days of a written request by either party to call
such a meeting, meet in person and alone (except for one assistant for each
party) and shall attempt in good faith to resolve the dispute. If the
disputes cannot be resolved by such senior managers in such meeting, the
parties agree that they shall, if requested in writing by either party, meet
within thirty (30) days after such written notification for one day with an
impartial mediator and consider dispute resolution alternatives other than
litigation. If an alternative method of dispute resolution is not agreed on
within thirty (30) days after the one day mediation, either party may begin
litigation proceedings. This procedure shall be a prerequisite before taking
any additional action hereunder.
16.11 ENTIRE AGREEMENT. This Agreement and Ancillary Agreements
constitute the entire agreement among the parties hereto and supersede in
their entirety all prior undertakings and agreements of the Company and
Purchaser with respect to the subject matter hereof and thereof (except as
expressly set forth herein and therein); PROVIDED, HOWEVER, that no party
shall be bound by any of the Ancillary Agreements to which such party is not
a signatory. No party shall be liable or bound to the other party in any
manner by any warranty, representation or covenant except as specifically set
forth herein or therein.
16.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
16.13 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
16.14 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Conversion
Agreement, the Voting Agreement or any of the other Ancillary Agreements, or
the Warrant, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and disbursements in addition to any other relief to which such
party may be entitled.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, this Agreement is effective as of the day and year
herein above first written.
THE "COMPANY":
Hydrogen Burner Technology, Inc.
By: /s/ Xxxxx Xxxxx
----------------------------
Xxxxx Xxxxx
Title: President
Address: 0000 Xxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
[SIGNATURE PAGE TO COMMON STOCK AND WARRANT PURCHASE AGREEMENT]
IN WITNESS WHEREOF, this Agreement is effective as of the day and year
herein above first written.
"PURCHASER":
G.D.F. International
/s/ Xxxxxxx Xxxxxxxxxxxx
By: Xxxxxxx Xxxxxxxxxxxxx
Its: Chief Executive Officer
Address: 0 xxx Xxxxxxxxx
00000 Xxxxx
Xxxxxx
Fax Number: 00 0 00 00 00 00
[SIGNATURE PAGE TO COMMON STOCK AND WARRANT PURCHASE AGREEMENT]
