Exhibit 10.3
OPTION AGREEMENT
by and among
AMERIGON INCORPORATED,
BSST, LLC
and
XX. XXX X. XXXX
Dated September 4, 2000
OPTION AGREEMENT
This OPTION AGREEMENT (this "Agreement") is entered into as of
September 4, 2000 by and among AMERIGON, INC., a California corporation (the
"Holder"), BSST, LLC, a Delaware limited liability company (the "Company"), and
XX. XXX X. XXXX, the sole member of the Company ("Xx. Xxxx").
R E C I T A L S
WHEREAS, Xx. Xxxx is party to an operating agreement with respect to
the Company, dated as of August 29, 2000;
WHEREAS, the Company and Xx. Xxxx, desire, subject to the terms and
conditions hereof, to grant to the Holder an Option (as defined below) to
subscribe for 2,000 Series A Preferred Units of the Company (the "Option
Units"), representing membership interests with such rights, preferences, and
privileges as set forth in the form of Amended and Restated Operating Agreement
("Amended Operating Agreement") attached as Exhibit A hereto;
---------
WHEREAS, concurrently with the exercise of this Agreement, (i) the
Company and Xx. Xxxx shall execute and deliver the Amended Operating Agreement
and the Employment Agreement attached as Exhibit B hereto and (ii) the Company
---------
shall grant to Xx. Xxxx a performance-based option based on the Milestones (as
defined in the Amended Operating Agreement) for 58,824 Class A Common Units,
which shall equal 5% of the fully-diluted membership interests of the Company
(the "Initial Class A Member Option") at the time of exercise of the Option;
WHEREAS, it being understood that the Company and Xx. Xxxx desire the
Option Units to be convertible into a number of Class B Common Units of the
Company equal to no less than 90% of the outstanding membership interests of the
Company at the time of exercise of the Option;
WHEREAS, the Holder is entering this Agreement concurrently and in
reliance upon the execution by the Company and Xx. Xxxx of the Assignment and
Subscription Agreement and Revenue Sharing Agreement each dated as of the date
hereof (the "Related Agreements");
WHEREAS, as consideration for the Option, the Holder has delivered
$150,000 in cash (the "Option Fee") to the Company and the Company and the
Holder agree that, in the event the Holder exercises the Option, such Option Fee
shall be credited to the Option Exercise consideration (as defined below); and
WHEREAS, Xx. Xxxx, being the sole member of the Company, has duly
authorized the grant of the Option and the issuance of the Option Units in
accordance with the terms hereof;
1
NOW, THEREFORE, in consideration of the promises, and of the parties'
respective representations, warranties, covenants and agreements set forth
below, the Company and the Holder agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
---------------
herein, as consideration for the payment of the Option Fee, the Company hereby
grants to the Holder an option (the "Option") to purchase the Option Units in
exchange for payment of the Option Exercise Price (as defined below) in
accordance with Sections 3 and 5; provided that such Option is exercised within
---------------- --------
the time and in the manner set forth in Section 2. The Option Fee shall be
---------
fully refundable to the Holder in the event that Xx. Xxxx is no longer an
employee of the Company, but under all other circumstances shall be non-
refundable.
2. Exercise of Option. The Option may be exercised by the Holder at
------------------
any time after the date hereof, but no later than January 31, 2001 (the "Option
Exercise Period"). The Holder may exercise the Option by delivering written
notice to the Company during the Option Exercise Period of the Holder's
intention to exercise the Option. The date, if any, on which the Holder shall
be deemed to have exercised the Option shall be the date within the Option
Exercise Period on which the Holder's written notice to the Company has been
effectively received by the Company pursuant to Section 11(b) (the "Exercise
-------------
Date"), whereupon such Option exercise shall become irrevocable.
3. Option Exercise Consideration. The consideration for exercise of
-----------------------------
the Option Units shall be a commitment by the Holder ("Option Exercise
Consideration") to pay to the Company an amount equal to $2,000,000 minus the
Option Fee (the "Commitment Amount") in accordance with the schedule set forth
in Section 5.
4. Option Units. The number of Option Units to be purchased by the
------------
Holder upon exercise of the Option shall be 2,000 of the Company's Series A
Preferred Units.
5. Payment and Closing.
-------------------
(a) In the event that the Holder exercises the Option in accordance
with Section 2, the Holder at the Option Closing (as defined below) shall pay
---------
$400,000 of the Commitment Amount to the Company in immediately available funds
by wire transfer to an account designated by the Company and the Company shall
thereupon issue to and register in the name of the Holder the Option Units.
(b) Upon five business days' prior notice and no more than once in
any three month period, the Company shall request the Holder to pay the
following amount to the Company of any remaining uncontributed portion of the
Commitment Amount in immediately available funds by wire transfer to an account
designated by the Company an amount equal to the lesser of (i) $400,000 and (ii)
the aggregate remaining uncontributed Commitment Amount. Unless waived in
writing by the Company, if the Holder does not pay such amount five business
days after the end of such calendar quarter, the Holder shall xxxxxx all rights
in, and Company shall cancel, a number of Option Units equal to the unpaid
portion of the requested amount divided by $1,000.
2
(c) The completion of the exercise of the Option shall take place
at the offices of the Company, or such other reasonable location as the Company
shall determine, on the third Business Day following the Exercise Date, or such
other reasonable time as the Company and the Holder may agree to in writing (the
"Option Closing"). At the Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 5(a), (i) the Company shall
------------
register the Option Units in the register of the Company, (ii) the Holder, Xx.
Xxxx and the Company shall execute and deliver the Amended Operating Agreement,
(iii) Xx. Xxxx and the Company shall execute and deliver the Employment
Agreement, and (iv) each of the parties hereto shall execute and deliver or
obtain or cause its equity holders and/or directors to execute and deliver or
obtain any and all other agreements, consents or instruments reasonably
necessary for the consummation of the transactions contemplated under this
Agreement.
6. The Holder's Representations and Warranties.
-------------------------------------------
(a) The Holder has full legal capacity and authority to enter into
this Agreement; the execution, delivery and performance of this Agreement does
not and will not breach, violate or conflict with any agreement to which the
Holder is a party or is bound; and this Agreement constitutes the legal, valid
and binding obligation of the Holder, enforceable against the Holder in
accordance with its terms.
(b) The Holder understands that the offering and sale of the Option
Units is intended to be exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), by virtue of Section 4(2) of the
Securities Act, as well as exempt from the Corporate Securities Law of 1968 of
California by virtue of Section 25102(f) and in accordance therewith and in
furtherance thereof, the Holder represents and warrants and agrees as follows:
(i) The Holder has a preexisting business relationship with the
Company and is fully aware of the risks entailed in an investment in the
Company in the form of Option Units, including but not limited to the risks
enumerated in the Company's confidential business plan.
(ii) THE HOLDER UNDERSTANDS AND ACKNOWLEDGES THAT ITS INVESTMENT IN
COMPANY INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR INVESTORS
OF SUBSTANTIAL MEANS WHO HAVE NO IMMEDIATE NEED FOR LIQUIDITY OF THE AMOUNT
INVESTED, AND THAT SUCH INVESTMENT INVOLVES A RISK OF LOSS OF ALL OR A
SUBSTANTIAL PART OF SUCH INVESTMENT.
(iii) The Holder is not subscribing for the Option Units as a result
of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or meeting,
or any solicitation of a subscription by a person other than a
representative of the Company;
(iv) The Holder has adequate means of providing for the Holder's
current financial needs and contingencies, is able to bear the substantial
economic risks of an
3
investment in the Company for an indefinite period of time, has no need for
liquidity in such investment, and, at the present time, could afford a
complete loss of such investment;
(v) The Holder has such knowledge and experience in financial, tax
and business matters so as to enable the Holder to utilize the information
available to the Holder to evaluate the merits and risks of an investment
in the Company and to make an informed investment decision with respect
thereto;
(vi) The Holder is not relying on the Company with respect to the
tax or other economic considerations of an investment in the Option Units
and has obtained, or had the opportunity to obtain, the advice of the
Holder's own legal, tax and other advisors;
(vii) The Holder will not sell or otherwise transfer the Option
Units for value without registration under the Securities Act or applicable
state or foreign securities laws or an exemption therefrom. The Option
Units have not been registered under the Securities Act or under the
securities laws of any other jurisdiction. the Holder represents that the
Holder is purchasing the Option Units for the Holder's own account, for
investment and not with a view to resale or distribution except in
compliance with the Securities Act. the Holder has not offered or sold any
portion of the Option Units being acquired nor does the Holder have any
present intention of selling, distributing or otherwise disposing of any
portion of the Option Units, which may be a violation of the Securities
Act, unless (i) a registration statement has been filed and declared
effective by the Securities and Exchange Commission covering such Option
Units to be resold or otherwise distributed; (ii) the passage of a fixed or
determinable period of time that makes such resale or distribution exempt
from registration and is pursuant to Rule 144 promulgated under the
Securities Act or upon the occurrence or nonoccurrence of any predetermined
event or circumstance in violation of the Securities Act; or (iii) the
transfer is not a "sale" of securities as said term is defined in the
Securities Act. the Holder is aware that there is currently no market for
the Company's Option Units;
(viii) The Holder is an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act;
(ix) The Holder's overall commitment to investments which are not
readily marketable is reasonable in relation to the Holder's net worth; and
(x) In making an investment decision the Holder has relied on the
Holder's own examination of the Company, including the merits and risks
involved. THE SECURITIES OFFERED IN THIS AGREEMENT HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
4
7. The Company's Representations and Warranties.
--------------------------------------------
(a) The Company has full legal capacity and authority to enter into
this Agreement; the execution, delivery and performance of this Agreement does
not and will not breach, violate or conflict with any agreement to which the
Company is a party or is bound; and this Agreement constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(b) The Company owes no commission, fee or other compensation to any
person as a finder or broker as a result of the transactions contemplated by
this Agreement.
(c) The Company is duly organized and existing under the laws of the
State of Delaware.
(d) The Company represents and warrants that the Option Units, when
issued, will be duly authorized and validly issued.
(e) As of the date hereof, 100,000 of the Company's Class A Common
Units and no units of any other class or series of the Company's Units are
issued and outstanding and no Units are held in the treasury of the Company.
8. Affirmative Covenants of the Company. Prior to exercise of the
------------------------------------
Option, the Company agrees as follows:
(a) Inspection Rights; Financial and Accounting Records. The Company
---------------------------------------------------
shall permit any authorized representatives designated by the Holder to visit
and inspect any proprieties of the Company, to inspect and copy its financial
and accounting records, and to discuss its affairs, finances and accounts with
the Company's officers and its independent public accountants, all at such
reasonable times and as often as the Holder may reasonably request. With
reasonable promptness, the Company shall deliver such other information and data
with respect to the Company as the Holder may from time to time reasonably
request.
(b) Financial Plans and Operating Budget. The Company shall provide
------------------------------------
to the Holder an annual financial plan and operating budget of the Company,
which shall include at least a projection of income and a projected cash flow
statement for each fiscal quarter and a projected balance sheet as of the end of
each fiscal quarter. Any material changes in such business plan and operating
budget shall be delivered to the Holder as promptly as practicable.
(c) Material Agreements. Within five business days of discovery,
-------------------
notification of any material non-compliance with any material agreement (except
if such non-compliance has been corrected within such five-day period).
(d) Compliance with Laws. The Company shall comply with all
--------------------
applicable laws, rules, regulations and orders relating to the conduct of its
businesses or to its properties or assets.
5
(e) Prompt Payment of Taxes. The Company will promptly pay and
-----------------------
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
--------
however, that any such tax, assessment, charge or levy need not be paid if the
-------
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the Company will pay
-------- -------
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms or otherwise, all other indebtedness
incident to operations of the Company.
(f) Insurance. The Company will keep its assets which are of an
---------
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated.
(g) Maintenance of Existence. The Company shall maintain in full
------------------------
force and effect its existence, rights and franchises and all licenses and other
rights in or to use patents, processes, licenses, trademarks, trade names or
copyrights owned or possessed by it and deemed by the Company to be necessary to
the conduct of its business.
(h) Proprietary Information and Inventions Agreements. The Company
-------------------------------------------------
will cause each person now or hereafter employed by it with access to
confidential information to enter into a proprietary information and inventions
agreement.
9. Negative Covenants of the Company. The Company covenants and
---------------------------------
agrees that the Company will not do any of the following without the consent of
the Holder prior to exercise of the Option:
(a) Dispositions. Convey, sell, lease, transfer, license or otherwise
------------
dispose of (collectively, a "Disposition"), or permit any of its subsidiaries to
dispose, all or any part of its business or property (including intellectual
property), other than Dispositions (i) of inventory in the ordinary course of
business and (ii) of worn-out or obsolete equipment.
(b) Changes in Business. Engage in any business other than the
-------------------
businesses currently engaged in by the Company or contemplated by the business
plan presented to the Holder and any business substantially similar or related
thereto (or incidental thereto).
(c) Mergers or Acquisitions. Merge or consolidate to merge or
-----------------------
consolidate, with or into any other business organization or entity, or acquire
all or substantially all of the capital stock or property of another Person.
6
(d) Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any indebtedness in excess of $100,000 whether senior, subordinated,
secured or unsecured, except advances and similar expenditures in the ordinary
course of business or for trade accounts of the Company in the ordinary course
of business.
(e) Encumbrances. Create, incur, assume or suffer to exist any
------------
encumbrance with respect to any of its property, or assign or otherwise convey
any right to receive income, including without limitation pursuant to the
Revenue Sharing Agreement dated as of the date hereof between the Company and
Xx. Xxxx, created after the date hereof pursuant to agreements in effect on the
date hereof, or created in the ordinary course of business.
(f) Distributions. Pay any other distribution or payment on account
-------------
of or in redemption, retirement or purchase of any equity interest.
(g) Investments. Directly or indirectly acquire or own, or make any
-----------
Investment (as defined below) in or to any Person. "Investment" means any
beneficial ownership of (including stock, partnership interest or other
securities) any Person, or any loan, advance or capital contribution to any
Person.
(h) Transactions with Affiliates. Engage in any loans, leases,
----------------------------
contracts or other transactions with any equity holder (other than the Holder),
director, officer or key employee of the Company, or any member of any such
person's immediate family, including the parents, spouse, children and other
relatives of any such person, on terms less favorable than the Company would
obtain in a transaction with an unrelated party.
(i) Equity Issuances. Issue any of its equity interests, or grant an
----------------
option or rights to subscribe for, purchase or acquire any of its equity
interests to any person, except the Company may concurrently with the exercise
of the Option, issue the Initial Class A Member Option in form and substance
reasonably satisfactory to the Holder.
(j) Compensation of Employees. Compensate any of its employees,
-------------------------
including officers, or consultants in an annual amount greater than $180,000.
(k) Amendment of Related Agreements. Amend, modify or change the
-------------------------------
terms or conditions of any Related Agreement.
10. Agreement of Xx. Xxxx. Xx. Xxxx agrees that all of his
---------------------
activities relating to the "Technology" as defined in the Assignment and
Subscription Agreement shall be carried out through the Company.
11. Miscellaneous.
-------------
(a) Governing Law. This Agreement and the rights and obligations of
-------------
the parties hereunder shall be governed by, and shall be construed and enforced
in accordance with, the internal laws of the state of California, without regard
to conflicts of laws principles, and of the United States.
7
(b) Notices. Any notice or other communication provided for in this
-------
Agreement shall be in writing and sent to the address listed under each party's
signature hereto or at such other address a party may from time to time in
writing designate. Each such notice or other communication shall be effective
(i) if given by telecommunication, when transmitted to the applicable number so
specified pursuant to this Section and a confirmation of transmission is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
(c) Amendments and Waiver. No amendment, modification, termination or
---------------------
waiver of any provision of this Agreement, shall be effective unless the same
shall be in writing and signed by the parties. Any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. Failure by either party, at any time, to require performance
by the other party or to claim a breach of any provision of this Agreement shall
not be construed as a waiver of any right accruing under this Agreement, nor
shall it affect any subsequent breach or the effectiveness of this Agreement or
any part hereof, or prejudice either party with respect to any subsequent
action.
(d) Severability. If any provision of this Agreement is held invalid
------------
or unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect, and if any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances, to the fullest extent permitted by
law.
(e) Integration. This Agreement, together with any exhibits and
-----------
schedules hereto, supersedes all prior agreements and understandings of the
parties in connection pertaining to the subject matter hereof. There are no
oral agreements between the parties that pertain to the subject matter hereof.
(f) Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement, its enforcement or interpretation, or because of an alleged
breach, default, or misrepresentation in connection with any of its provisions,
other than a controversy or claim arising out of or relating to a calculation
pursuant to any of its provisions, shall be submitted to arbitration, to be held
in Los Angeles County, California in accordance with California Civil Procedure
Code Sections 1282-1284.2. In the event either party institutes arbitration
under this Agreement, the party prevailing in any such arbitration shall be
entitled, in addition to all other relief, to reasonable attorneys' fees
relating to such arbitration. The nonprevailing party shall be responsible for
all costs of the arbitration, including but not limited to, the arbitration
fees, court reporter fees, etc.
(g) Further Assurances. Each party hereto agrees to execute,
------------------
acknowledge and deliver any and all further instruments, and to do any and all
further acts, as may be necessary or appropriate to carry out the intent and
purpose of this Agreement, and each party will use its best efforts to obtain
any and all third party consents or approvals necessary or useful for the
consummation of the transactions contemplated by this Agreement.
8
(h) Headings. The section headings in this Agreement are for
--------
convenience only, and shall not be considered a part of, or affect the
interpretation of, any provision of this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Signature page to follow]
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AMERIGON INCORPORATED
By:___________________________
Name:
Title:
Notice Address:
BSST, LLC
By:___________________________
Name:
Title:
Notice Address:
XX. XXX X. XXXX
______________________________
Notice Address:
S-1
