Exhibit 10.27
CONVERSION AND SUBSCRIPTION AGREEMENT
This CONVERSION AND SUBSCRIPTION AGREEMENT, dated as of the 13th day of
June, 1997, by and between QUIETPOWER SYSTEMS, INC. (formerly Active Acoustical
Solutions, Inc.), a Delaware corporation, with an address at 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), and BALTIMORE GAS AND ELECTRIC
COMPANY, a Maryland corporation, with an address at 00 Xxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000 ("BGE").
W I T N E S S E T H :
WHEREAS, BGE, NCT Power, Inc. (a Delaware corporation which has since been
dissolved), and Noise Cancellation Technologies, Inc. ("NCT"), are parties to a
Research Agreement dated as of December 21, 1990, and amended on November 10,
1992 (the "NCT Research Agreement"), pursuant to which BGE is to receive
royalties and/or other forms of consideration under Section 4(b) thereof; and
WHEREAS, the Company and BGE are, together with NCT, also parties to a
Participation Agreement, dated as of November 1993 (the "Participation
Agreement"), pursuant to which BGE is to receive royalties, product discounts
and/or other forms of consideration under Section 3 thereof; and
WHEREAS, the Company and BGE are also parties to a Research Agreement,
dated as of October 30, 1994 (together with the NCT Research Agreement and the
Participation Agreement, the "Agreements"), pursuant to which BGE is to receive
royalties, product discounts and/or other forms of consideration under Section 5
thereof; and
WHEREAS, the Company and NCT are parties to a Master Agreement, dated as
of March 27, 1995 (as amended, the "Master Agreement"), pursuant to which the
Company has agreed to assume all of NCT's obligations under the NCT Research
Agreement and the Participation Agreement.
NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
1. SUBSCRIPTION FOR THE SECURITIES
1.1 Subject to the terms and conditions hereinafter set forth, BGE
hereby agrees to accept 80,000 shares of the Company's Common Stock, par value
$.01 per share (the "Shares"), in satisfaction of all of BGE's rights to receive
royalties, product discounts and/or other forms of consideration under the
Agreements (the "Purchase Price"), and the Company, upon its execution hereof,
agrees to give such Shares to BGE in consideration of the Purchase Price.
2. REPRESENTATIONS BY BGE
2.1 BGE represents that it is an "accredited investor" as such term
is defined in Rule 501 of Regulation D promulgated under the United States
Securities Act of 1933, as amended (the "Act").
2.2 BGE acknowledges receipt of the Company's Registration Statement
on Form SB-2, as filed with the Securities and Exchange Commission ("SEC") on
May 8, 1997, and all other information regarding the Company which it has
requested or desired to know; that all documents which could be reasonably
provided have been made available for its inspection and review; and that BGE
has been afforded the opportunity to ask questions of and receive answers from
duly authorized officers or other representatives of the Company concerning the
Company and an investment therein, and any additional information which it has
requested.
2.3 BGE acknowledges that the disclosure related to the sale of the
Shares made hereby has not been reviewed by the SEC or by any other governmental
authority. BGE represents that the Shares are being purchased for its own
account, for investment and not for distribution or resale to others. BGE agrees
that it will not sell or otherwise transfer the Shares unless they are
registered under the Act or unless an exemption from such registration is
available.
2.4 BGE understands that the sale of the Shares has not been
registered under the Act and, therefore, the Shares may have to be held
indefinitely unless subsequently registered under the Act or an exemption from
such registration is available in the opinion of counsel to the Company. In
addition, BGE agrees and acknowledges that the certificate for the Shares shall
bear a restrictive legend in substantially the following form:
"The securities represented by this certificate have been acquired
for investment and have not been registered pursuant to the
Securities Act of 1933, as amended, or any applicable state
statutes. Such securities may not be sold, transferred, pledged,
hypothecated or otherwise disposed of without either an effective
registration statement relating to such disposition or an opinion of
counsel satisfactory to QuietPower Systems, Inc. that the securities
may be so disposed of without being registered."
2.5 BGE consents that the Company may, if it desires, permit the
transfer of the Shares out of its name only when its request for transfer is
accompanied by an opinion of counsel for the Company that neither the sale nor
the proposed transfer results in a violation of the Act or any applicable state
"blue sky" laws (collectively "Securities Laws"). BGE agrees to hold the Company
and its directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any sale or
distribution by BGE in violation of any Securities Laws.
2
3. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to BGE as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to conduct the business which it proposes to conduct.
(b) The Shares have been duly and validly authorized and, upon
issuance, will be duly and validly issued and fully paid and non-assessable. The
Shares upon issuance to BGE are free and clear of any liens and encumbrances or
restrictions other than the lock-up period restriction set forth in the lock-up
letter described in Section 5.1 and the Securities Laws restrictions described
in Section 2.4.
4. REGISTRATION
4.1 If the Company registers any of its securities under the Act,
other than a registration solely to implement an employee benefit plan, a
transaction to which Rule 145 under the Act is applicable, or any other form of
registration in which the Shares cannot be included under the Act and the Rules
thereunder, the Company shall advise BGE by written notice at least 20 days
prior to the filing of any such registration statement or post-effect amendment
thereto, and, upon the written request of BGE, the Company shall cause, subject
to Section 4.2 below, the Shares to be registered under the Act and qualified
for sale under such Securities Laws as BGE shall reasonably request.
4.2 The registration rights granted hereunder shall in all cases be
subject to (a) the priority rights granted by the Company to other parties
holding registration rights for such registration which are listed on Exhibit
One, and (b) the opinion of the underwriter managing such registration, if any,
that the distribution of all or a portion of the Shares requested to be included
in such registration statement would materially adversely affect the
distribution of securities by the Company for its own account, in either of
which cases BGE hereby agrees to waive its rights to include the Shares (or such
portion thereof as to which the underwriter objects) in any such registration
statement.
5. MISCELLANEOUS
5.1 Simultaneously herewith, BGE is executing the lock-up letter in
the form attached hereto as Exhibit Two.
5.2 BGE acknowledges that pursuant to the Master Agreement, the
Company has assumed all of the obligations owed by NCT to BGE under the
Agreements and BGE hereby consents to such assumption.
3
5.3 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by overnight delivery or facsimile,
addressed to the Company Attention: President and BGE Attention: XX Xxxxx, Chief
Financial Officer, at the addresses indicated on the first page of this
Agreement or the following facsimile numbers: Company - (000) 000-0000 and BGE -
(000) 000-0000. Notices shall be deemed to have been given on the business day
following the date on which the notice is sent.
5.4 This Agreement shall not be changed, modified or amended except
by a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
5.5 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
5.6 This Agreement and its validity, construction and performance
shall be governed in all respects by the laws of the State of New York.
5.7 This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
BALTIMORE GAS AND ELECTRIC
COMPANY
By: /s/ Xxxxx X. Xxxxx
--------------------------
Title: Vice President
QUIETPOWER SYSTEMS, INC.
BY: /s/ Xxxx X. Xxxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
4
