Capstone Turbine Corporation Shares of Common Stock, par value $0.001 SUBSCRIPTION AGREEMENT
EXHIBIT 10.3
Capstone Turbine Corporation
Shares of Common Stock, par value $0.001
Shares of Common Stock, par value $0.001
THIS SUBSCRIPTION AGREEMENT (the “AGREEMENT”) by and between ASSET MANAGERS INTERNATIONAL LTD,
an international business company incorporated in the British Virgin Islands (the “INVESTOR”), and
CAPSTONE TURBINE CORPORATION, a corporation organized and existing under the laws of the State of
Delaware (the “COMPANY”) is dated the 7th day of October, 2005 and effective as of the execution of
the Escrow Agreement by and between the Company, the Investor and Mellon Investor Services, LLC
(the “COMMENCEMENT DATE”).
Section 1.1 “ADVANCE” shall mean the portion of the Commitment Amount advanced by or on behalf
of the Investor to or for the benefit of the Company on any Advance Date for the purchase of shares
of Registered Stock.
Section 1.2 “ADVANCE DATE” shall mean each Trading Day during the Offering Period (other than
October 13, 2005) on which the Investor purchases, and the Company sells, Registered Stock during
the Offering Period in connection with an Advance.
Section 1.3 “ADVANCE NOTICE” shall mean a written (including by electronic transmission)
notice in the form attached hereto as Exhibit A to the Investor setting forth the Daily
Advance Amount that the Company is requesting with respect to the Advance Date.
Section 1.4 “AGREEMENT” shall have the meaning set forth in the preamble to this Agreement.
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Section 1.5 “BID PRICE” shall mean, on any Trading Day, the closing bid price (as reported by
Bloomberg, L.P.) of the Common Stock on the Principal Market.
Section 1.6 “COMMENCEMENT DATE” shall have the meaning set forth in the preamble to this
Agreement.
Section 1.7 “COMMITMENT AMOUNT” shall mean the aggregate amount of up to Thirty-four Million
Dollars ($34,000,000) which the Investor has agreed to provide to the Company during the Offering
Period in order to purchase the Company’s Registered Stock pursuant to the terms and conditions of
this Agreement.
Section 1.8 “COMMON STOCK” shall have the meaning set forth in the recitals to this Agreement.
Section 1.9 “COMPANY” shall have the meaning set forth in the preamble to this Agreement.
Section 1.10 “DAILY ADVANCE AMOUNT” shall mean, on the first Advance Date, $6,296,296.30, and
on each subsequent Advance Date $3,078,189.30, or such other amount advanced to or for the benefit
of the Company for the purchase of shares of Registered Stock as determined by the Company in
accordance with this Agreement (subject to the Maximum Daily Advance Amount).
Section 1.11 “ESCROW AGENT” shall mean Mellon Investor Services LLC, and its successors and
assigns under the Escrow Agreement.
Section 1.12 “ESCROW AGREEMENT” shall mean the escrow agreement among the Company, the
Investor, and Escrow Agent dated the date hereof.
Section 1.13 “EXCHANGE ACT” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
Section 1.14 “INVESTOR” shall have the meaning set forth in the preamble to this Agreement.
Section 1.15 “MARKET PRICE” shall mean the VWAP of each share of Common Stock on the Trading
Date with respect to which an Advance Notice has been delivered.
Section 1.16 “MAXIMUM DAILY ADVANCE AMOUNT” shall be $4,722,222.22 per any Advance Date (other
than the first Advance Date).
Section 1.17 “NASD” shall mean the National Association of Securities Dealers, Inc.
Section 1.18 “OFFERING PERIOD” shall mean the period commencing on the Trading Day immediately
following the Commencement Date and expiring on the tenth (10th) Trading Day after the
Commencement Date; provided, however, that the Offering Period shall not include October 13, 2005
as a Trading Day, and that the Offering Period shall be extended automatically by one Trading Day
for each Trading Day on which no Advance is made, up to a
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maximum of ten (10) additional Trading Days; and further provided that the Offering Period
shall automatically expire upon the first to occur of, in the aggregate, the purchase and sale of
17,000,000 shares of Common Stock or the purchase and sale of shares of Common Stock with an
aggregate purchase price of $54,000,000 pursuant to this Agreement and the Subscription Agreement
by and between the Company and Monarch Pointe Fund, Ltd., dated October 7, 2005.
Section 1.19 “PERSON” shall mean an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.20 “PRINCIPAL MARKET” shall mean the Nasdaq National Market.
Section 1.21 “PURCHASE PRICE” shall be ninety-six percent (96%) of the Market Price, computed
to three decimal places, on the applicable Advance Date; provided however, that if the Company
offers Common Stock to one or more third parties during the Offering Period at a price lower than
the Purchase Price calculated in accordance with the foregoing, the Purchase Price shall be the
lowest price at which the Company offers such shares of Common Stock.
Section 1.22 “REGISTERED STOCK” shall have the meaning set forth in the recitals to this
Agreement.
Section 1.23 “SHELF REGISTRATION STATEMENT” shall have the meaning set forth in the recitals
to this Agreement.
Section 1.24 “SEC” shall have the meaning set forth in the recitals to this Agreement.
Section 1.25 “SECURITIES ACT” shall mean the Securities Act of 1933, as amended.
Section 1.26 “TRADING DAY” shall mean any day during which the Principal Market shall be open
for business.
Section 1.27 “VWAP” shall mean the volume weighted average price of the Company’s Common Stock
as quoted by Bloomberg, LP on the applicable Trading Day.
Section 1.28 “WRITTEN DIRECTION TO DISBURSE” shall mean the written notice from the Investor
and the Company to the Escrow Agent in the form attached hereto as Exhibit B, which written
notice may be executed in two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party
and delivered to the other party.
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$6,296,296.30, and on each of the nine (9) Trading Days (subject to the following proviso and
sentence) thereafter during the Offering Period the Company shall, unless the Company delivers an
Advance Notice to the Investor requesting a different Daily Advance Amount from zero to the Maximum
Daily Advance Amount in accordance with Section 2.3, receive a Daily Advance Amount of
$3,078,189.30; provided, however, that no Advance will be made, and no shares of Registered Stock
will be purchased, on October 13, 2005. Notwithstanding anything to the contrary contained herein,
no Advance will be made on any of such nine (9) Trading Days, and the Investor shall not direct the
Escrow Agent to disburse any funds, on any such Trading Day on which between 6:30 a.m. (Pacific
Time) and 11:00 a.m. (Pacific Time) the VWAP of the Company’s Common Stock is below ninety percent
(90%) of the closing VWAP for the immediately preceding Trading Day; provided, however, that the
Company may elect to sell the previously designated number of shares of Registered Stock and the
Investor shall direct the Escrow Agent to disburse the Daily Advance Amount on such a day if the
Company delivers written notice (including by electronic transmission) to that effect to the
Investor before 11:00 a.m. (Pacific Time) on such date. All Advances shall be made on the Advance
Date after the determination of the Purchase Price and the number of shares of Registered Stock to
be purchased with respect to such Advance.
Section 2.3 ADVANCE NOTICE; WRITTEN DIRECTION TO DISBURSE. On or before 6:00 a.m. (Pacific
Time) on each Trading Day after the first Trading Day during the
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Offering Period, subject to all other terms and provisions herein, the Company shall deliver
to the Investor an Advance Notice setting forth the requested Daily Advance Amount (but not more
than the Maximum Daily Advance Amount) requested on such Advance Date. Subject to all other terms
and provisions herein, the Investor and the Company shall, after the close of the Principal Market
on each Trading Day including the first Trading Day during the Offering Period, deliver to the
Escrow Agent a Written Direction to Disburse, specifying the Daily Advance Amount to be disbursed
to the Company, the VWAP for the Common Stock on such Advance Date, the Purchase Price for the
shares of Registered Stock, and the number of shares of Registered Stock to be transferred to the
account of Investor. If the Company does not deliver an Advance Notice on or before 6:00 a.m.
(Pacific Time) with respect to an Advance Date other than the first Trading Day during the Offering
Period, the Daily Advance Amount for such Advance Date shall be $3,078,189.30.
| (a) | the execution and delivery by the Company, and the Investor, of this Agreement and the Exhibits and Schedules hereto; | ||
| (b) | the Company’s transfer agent shall have set aside in reserve the number of shares of Registered Stock required by Section 2.2(b) for the benefit of the Investor; | ||
| (c) | there shall not have been any stop order or suspension of the effectiveness of the Shelf Registration Statement; | ||
| (d) | the Company shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registered Stock, and the sale and issuance of the Registered Stock shall be legally permitted by all laws and regulations to which the Company is subject; | ||
| (e) | the Company shall file with the Commission in a timely manner a prospectus supplement under Securities Act Rule 424(b) describing the specific plan of distribution (the “PROSPECTUS SUPPLEMENT”) and all reports, notices |
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| and other documents required of a “reporting company” under the Exchange Act and applicable SEC regulations; and | |||
| (f) | the conditions set forth in Section 7.2 shall have been satisfied as of the time of the advancement of the Commitment Amount. |
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents to the Company that the following are true and correct as of the
date hereof:
Section 3.1 ORGANIZATION AND AUTHORIZATION. The Investor is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or organization and has all requisite
power and authority to purchase and hold the securities issuable hereunder. The decision to invest
and the execution and delivery of this Agreement by such Investor, the performance by such Investor
of its obligations hereunder and the consummation by such Investor of the transactions contemplated
hereby have been duly authorized and requires no other proceedings on the part of the Investor.
The undersigned has the right, power and authority to execute and deliver this Agreement and all
other instruments, on behalf of the Investor. This Agreement has been duly executed and delivered
by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section 3.2 NO UNDERWRITER. The Investor is not acting and will not act as an “underwriter”
(as that term is defined in the Securities Act) with respect to the Company’s Common Stock.
Section 3.3 NO STABILIZATION. Neither the Investor nor any of its directors, officers,
employees, agents, partners, members, controlling persons or shareholders holding 5% or more of the
Common Stock, has taken or will take, directly or indirectly, any actions designed, or that might
reasonably be expected to cause or result in the stabilization or manipulation of the price of the
Common Stock.
Section 3.4 NO SHORTING. Neither the Investor nor any of its affiliates has, directly or
indirectly, offered to “short sell”, contracted to “short sell,” otherwise engaged in any “short
selling” or encouraged others to “short sell” the securities of the Company, including, without
limitation, shares of Common Stock that will be received as a result of the transactions
contemplated by this Agreement, and neither the Company nor any of its affiliates will engage in
any of the foregoing at any time any of them own shares of Common Stock acquired under this
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Section 3.5 RESTRICTIONS ON RESALE. Investor shall not sell any shares of Common Stock
directly to any shareholder of the Company who owns of record or beneficially fifteen percent (15%)
or more, or any offeror for shares of Common Stock which is seeking to acquire fifteen percent
(15%) or more, of the Common Stock the Company; provided, however, that nothing herein shall
prevent the Investor from selling its Common Stock in an open-market transaction through a
registered broker or dealer (as such terms are defined in the Exchange Act).
Section 3.6 INVESTOR OWNERSHIP OF COMMON STOCK. Immediately prior to the Commencement Date,
neither the Investor nor any of its affiliates owns (either directly or indirectly) any shares of
Common Stock of the Company. Neither the Investor nor any of its affiliates has, directly or
indirectly, entered into any agreement with any third party to sell shares, or offered to sell, any
shares of Common Stock to be acquired pursuant to this Agreement.
The Company hereby represents and warrants to the Investor as follows:
Section 4.1 In connection with the sale of the Registered Stock, the Company has made
available, as requested (including electronically via the SEC’s XXXXX system) to Investor its
periodic and current reports, forms, schedules, proxy statements and other documents (including
exhibits and all other information incorporated by reference) filed with the SEC under the Exchange
Act. The Company’s Annual Report on Form 10-K for the year ended March 31, 2005 and all subsequent
reports, forms, schedules, statements, documents, filings and amendments filed by the Company with
the SEC under the Exchange Act, are collectively referred to as the “DISCLOSURE DOCUMENTS.” All
references in this Agreement to financial statements and schedules and other information which is
“contained,” “included” or “stated” in the Disclosure Documents (or other references of like
import) shall be deemed to mean and include all such financial statements and schedules, documents,
exhibits and other information which is incorporated by reference in the Disclosure Documents. The
Disclosure Documents as of their respective dates did not, and will not as of the Commencement Date
or any Advance Date, contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Disclosure Documents and the documents incorporated or deemed to be
incorporated by reference therein, at the time they were filed or hereafter are filed with the SEC,
complied and will comply, at the time of filing, in all material respects with the requirements of
the Securities Act and/or the Exchange Act, as the case may be, as applicable.
Section 4.2 Schedule 4.2(A) attached hereto sets forth a complete list of the
subsidiaries of the Company (the “SUBSIDIARIES”). Each of the Company and its Subsidiaries has
been duly incorporated and each of the Company and the Subsidiaries is validly existing in good
standing as a corporation under the laws of its jurisdiction of incorporation, with the
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requisite corporate power and authority to own its properties and conduct its business as now
conducted as described in the Disclosure Documents and is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification, except where the failure
to be so qualified would not, individually or in the aggregate, have a material adverse effect on
the business, condition (financial or other), properties or results of operations of the Company
and the Subsidiaries, taken as a whole (any such event, a “MATERIAL ADVERSE EFFECT”); as of the
Commencement Date, the Company will have the authorized, issued and outstanding capitalization set
forth in the Disclosure Documents (the “COMPANY CAPITALIZATION”); the Company does not have any
Subsidiaries or own directly or indirectly any of the capital stock or other equity or long-term
debt securities of or have any equity interest in any other person; all of the outstanding shares
of capital stock of the Company and the Subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and were not issued in violation of any preemptive or similar
rights and are owned free and clear of all liens, encumbrances, equities, and restrictions on
transferability (other than those imposed by the Securities Act and the state securities or “Blue
Sky” laws) or voting; except as set forth in the Disclosure Documents, all of the outstanding
shares of capital stock of the Subsidiaries are owned, directly or indirectly, by the Company;
except as set forth in the Disclosure Documents, no options, warrants or other rights to purchase
from the Company or any Subsidiary, agreements or other obligations of the Company or any
Subsidiary to issue or other rights to convert any obligation into, or exchange any securities for,
shares of capital stock of or ownership interests in the Company or any Subsidiary are outstanding;
and except as included in the Company’s public filings on file with the Securities and Exchange
Commission, there is no agreement, understanding or arrangement among the Company or any Subsidiary
and each of their respective stockholders or any other person relating to the ownership or
disposition of any capital stock of the Company or any Subsidiary or the election of directors of
the Company or any Subsidiary or the governance of the Company’s or any Subsidiary’s affairs, and,
if any, such agreements, understandings and arrangements will not be breached or violated as a
result of the execution and delivery of, or the consummation of the transactions contemplated by,
this Agreement.
Section 4.3 The Company has the requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company, will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in accordance with
its terms except as the enforcement thereof may be limited by (A) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors’ rights generally or (B) general principles of equity and the
discretion of the court before which any proceeding therefore may be brought (regardless of whether
such enforcement is considered in a proceeding at law or in equity) (collectively, the
“ENFORCEABILITY EXCEPTIONS”).
Section 4.4 The Common Stock of the Company conforms to the description thereof contained in
the Disclosure Documents. The stockholders of the Company have no preemptive or similar rights
with respect to the Common Stock.
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Section 4.5 No consent, approval, authorization, license, qualification, exemption or order of
any court or governmental agency or body or third party is required for the performance of this
Agreement by the Company or for the consummation by the Company of any of the transactions
contemplated thereby, or the application of the proceeds of the issuance of the Registered Stock as
described in this Agreement, except for such consents, approvals, authorizations, licenses,
qualifications, exemptions or orders (i) as have been obtained on or prior to the Commencement
Date, (ii) as are not required to be obtained on or prior to the Commencement Date that will be
obtained when required, or (iii) the failure to obtain which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 4.6 None of the Company or the Subsidiaries is (i) in material violation of its
articles of incorporation or bylaws (or similar organizational document), (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable to it or any of
its properties or assets, which breach or violation would, individually or in the aggregate, have a
Material Adverse Effect, or (iii) except as described in the Disclosure Documents, in default (nor
has any event occurred which with notice or passage of time, or both, would constitute a default)
in the performance or observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which it is a party or to which it is
subject, which default would, individually or in the aggregate, have a Material Adverse Effect.
Section 4.7 The execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated thereby and the fulfillment of the
terms thereof will not (a) violate, conflict with or constitute or result in a breach of or a
default under (or an event that, with notice or lapse of time, or both, would constitute a breach
of or a default under) any of (i) the terms or provisions of any contract, indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate or
agreement or instrument to which any of the Company or the Subsidiaries is a party or to which any
of their respective properties or assets are subject, (ii) the Certificate of Incorporation or
bylaws of any of the Company or the Subsidiaries (or similar organizational document) or (iii) any
statute, judgment, decree, order, rule or regulation of any court or governmental agency or other
body applicable to the Company or the Subsidiaries or any of their respective properties or assets
or (b) result in the imposition of any lien upon or with respect to any of the properties or assets
now owned or hereafter acquired by the Company or any of the Subsidiaries; which violation,
conflict, breach, default or lien would, individually or in the aggregate, have a Material Adverse
Effect.
Section 4.8 The audited consolidated financial statements included in the Disclosure Documents
present fairly the consolidated financial position, results of operations, cash flows and changes
in shareholders’ equity of the entities, at the dates and for the periods to which they relate and
have been prepared in all material respects in accordance with generally accepted accounting
principles applied on a consistent basis; the interim unaudited consolidated financial statements
included in the Disclosure Documents present fairly the consolidated financial position, results of
operations and cash flows of the entities, at the dates and for the periods to which they relate
subject to year-end audit adjustments and have been prepared in all material respects in accordance
with generally accepted accounting principles applied on a consistent basis with the audited
consolidated financial statements included therein; the selected financial
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data included in the Disclosure Documents present fairly the information shown therein and
have been prepared and compiled in all material respects on a basis consistent with the audited
financial statements included therein, except as otherwise stated therein; and each of the auditors
previously engaged by the Company or to be engaged in the future by the Company is an independent
certified public accountant as required by the Securities Act for an offering registered
thereunder.
Section 4.9 Except as described in the Disclosure Documents, there is not pending or, to the
knowledge of the Company, threatened any action, suit, proceeding, inquiry or investigation,
governmental or otherwise, to which any of the Company or the Subsidiaries is a party, or to which
their respective properties or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, that, if determined adversely to the Company or any such Subsidiary,
would, individually or in the aggregate, have a Material Adverse Effect or that seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Securities
to be sold hereunder or the application of the proceeds therefrom or the other transactions
described in the Disclosure Documents.
Section 4.10 The Company and the Subsidiaries own or possess adequate licenses or other rights
to use all patents, trademarks, service marks, trade names, copyrights and know-how that are
necessary to conduct their businesses as described in the Disclosure Documents. None of the
Company or the Subsidiaries has received any written notice of infringement of (or knows of any
such infringement of) asserted rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how that, if such assertion of infringement or conflict were
sustained, would, individually or in the aggregate, have a Material Adverse Effect.
Section 4.11 Each of the Company and the Subsidiaries possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals presently required or necessary to
own or lease, as the case may be, and to operate its respective properties and to carry on its
respective businesses as now or proposed to be conducted as set forth in the Disclosure Documents
(“PERMITS”), except where the failure to obtain such Permits would not, individually or in the
aggregate, have a Material Adverse Effect and none of the Company or the Subsidiaries has received
any notice of any proceeding relating to revocation or modification of any such Permit, except as
described in the Disclosure Documents and except where such revocation or modification would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 4.12 Subsequent to June 30, 2005 and except as described in the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2005 or in the Company’s Annual Report on Form
10-K for the year ended March 31, 2005, (i) the Company and the Subsidiaries have not incurred any
material liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business or (ii) the Company and the Subsidiaries have
not purchased any of their respective outstanding capital stock, or declared, paid or otherwise
made any dividend or distribution of any kind on any of their respective capital stock or otherwise
(other than, with respect to any of such Subsidiaries, the purchase of capital stock by the
Company), (iii) there has not been any material increase in the long-term indebtedness of the
Company or any of the Subsidiaries, (iv) there has not occurred any event or
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condition, individually or in the aggregate, that has a Material Adverse Effect, and (v) the
Company and the Subsidiaries have not sustained any material loss or interference with respect to
their respective businesses or properties from fire, flood, hurricane, earthquake, accident or
other calamity, whether or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding.
Section 4.13 There are no material legal or governmental proceedings nor are there any
material contracts or other documents required by the Securities Act to be described in a
prospectus that are not described in the Disclosure Documents. Except as described in the
Disclosure Documents, none of the Company or the Subsidiaries is in default under any of the
contracts described in the Disclosure Documents, has received a notice or claim of any such default
or has knowledge of any breach of such contracts by the other party or parties thereto, except for
such defaults or breaches as would not, individually or in the aggregate, have a Material Adverse
Effect.
Section 4.14 The Company and the Subsidiaries own no real property, and each has good and
marketable title to the leasehold estate in the real property described in the Disclosure Documents
as being leased by it, free and clear of all liens, charges, encumbrances or restrictions, except,
in each case, as described in the Disclosure Documents or such as would not, individually or in the
aggregate, have a Material Adverse Effect. All material leases, contracts and agreements to which
the Company or any of the Subsidiaries is a party or by which any of them is bound are valid and
enforceable against the Company or any such Subsidiary, are, to the knowledge of the Company, valid
and enforceable against the other party or parties thereto and are in full force and effect, in
each case subject to the Enforceability Exceptions.
Section 4.15 Each of the Company and the Subsidiaries has filed all necessary federal, state
and foreign income and franchise tax returns, except where the failure to so file such returns
would not, individually or in the aggregate, have a Material Adverse Effect, and has paid all taxes
shown as due thereon; and other than tax deficiencies which the Company or any Subsidiary is
contesting in good faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no tax deficiency that has been asserted against
the Company or any Subsidiary that would, individually or in the aggregate, have a Material Adverse
Effect.
Section 4.16 None of the Company or the Subsidiaries is, or immediately after any Advance Date
will be, required to register as an “investment company” or a company “controlled by” an
“investment company” within the meaning of the Investment Company Act of 1940, as amended (the
“INVESTMENT COMPANY ACT”).
Section 4.17 None of the Company or the Subsidiaries or, to the knowledge of any of such
entities’ directors, officers, employees, agents or controlling persons, has taken, directly or
indirectly, any action for the purpose of causing the stabilization or manipulation of the price of
the Common Stock.
Section 4.18 There is no strike, labor dispute, slowdown or work stoppage with the employees
of the Company or any of the Subsidiaries which is pending or, to the knowledge of the Company or
any of the Subsidiaries, threatened.
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Section 4.19 Each of the Company and the Subsidiaries carries general liability insurance
coverage comparable to other companies of its size and similar business.
Section 4.20 Except as disclosed in the Disclosure Documents, each of the Company and the
Subsidiaries maintains internal accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management’s authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its material assets is permitted only in accordance
with management’s authorization and (D) the values and amounts reported for its material assets are
compared with its existing assets at reasonable intervals.
Section 4.21 Other than the fee to Credit Suisse First Boston set forth in the Prospectus
Supplement, the Company does not know of any claims for services, either in the nature of a
finder’s fee or financial advisory fee, with respect to the offering of the Registered Stock and
the transactions contemplated by this Agreement.
Section 4.22 The Common Stock is traded on the Principal Market. Except as described in the
Disclosure Documents, the Company currently is not in violation of, and the consummation of the
transactions contemplated by this Agreement will not violate, any rule of the Principal Market.
Section 4.23 Set forth in the Prospectus Supplement is the Company’s intended use of the
proceeds from this transaction.
Section 4.24 To the Company’s knowledge, none of the officers or directors of the Company (i)
has been convicted of any crime (other than traffic violations or misdemeanors not involving
fraud) or is currently under investigation or indictment for any such crime, (ii) has been found by
a court or governmental agency to have violated any securities or commodities law or to have
committed fraud or is currently a party to any legal proceeding in which either is alleged, (iii)
has been the subject of a proceeding under the bankruptcy laws or any similar state laws, or (iv)
has been an officer, director, general partner, or managing member of an entity which has been the
subject of such a proceeding.
| (a) | In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor, and all of its officers, directors, partners, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “INVESTOR INDEMNITEES”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is |
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| sought), and including reasonable attorneys’ fees and disbursements (the “INDEMNIFIED LIABILITIES”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law. | |||
| (b) | In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “COMPANY INDEMNITEES”) from and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement or the Prospectus Supplement, or (ii) any breach of any covenant, agreement or obligation of the Investor contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Investor may be unenforceable for any reason, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law. | ||
| (c) | The obligations of the parties to indemnify or make contribution under this Section 5.1 shall survive termination. |
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written instrument the obligation to deliver to the Investor such shares of stock and/or
securities as the Investor is entitled to receive pursuant to this Agreement.
| (a) | ACCURACY OF THE INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Investor contained herein shall be true and correct in all material respects. | ||
| (b) | PERFORMANCE BY THE INVESTOR. The Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement the Commencement Date to be performed, satisfied or complied with by the Investor at or prior to the Commencement Date. |
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO SELL REGISTERED STOCK AND THE
OBLIGATION OF THE INVESTOR TO PURCHASE REGISTERED STOCK. The right of the Company to receive an
Advance and the obligation of the Investor hereunder to acquire and pay for shares of the Company’s
Common Stock incident to an Advance is subject to the fulfillment by the Company, of each of the
following conditions on each Advance Date:
| (a) | ACCURACY OF COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained herein shall be true and correct in all material respects. | ||
| (b) | REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Shelf Registration Statement shall have previously become effective and shall remain effective on each Advance Date and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to the Shelf Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the Shelf Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed and the Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of the Shelf Registration Statement or related prospectus shall exist. The Prospectus Supplement must have been filed with the SEC on or prior to the Commencement Date. | ||
| (c) | AUTHORITY. The Company shall have obtained all permits and qualifications required by any applicable state for the offer and sale of the |
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| shares of Common Stock, or shall have the availability of exemptions therefrom. The sale and issuance of the shares of Common Stock shall be legally permitted by all laws and regulations to which the Company is subject. | |||
| (d) | FUNDAMENTAL CHANGES. There shall not exist any fundamental changes to the information set forth in the Shelf Registration Statement which would require the Company to file a post-effective amendment to the Shelf Registration Statement. | ||
| (e) | PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to each Advance Date. | ||
| (f) | NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement. | ||
| (g) | NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock is not suspended by the SEC or the Principal Market. The issuance of shares of Common Stock with respect to the applicable Advance, if any, shall not violate the shareholder approval requirements of the Principal Market. The Company shall not have received any notice threatening the continued listing of the Common Stock on the Principal Market. | ||
| (h) | MAXIMUM DAILY ADVANCE AMOUNT. The amount of an Advance requested by the Company shall not exceed the Maximum Daily Advance Amount. In addition, notwithstanding anything to the contrary contained herein, in no event shall the number of shares the Investor is required or permitted to purchase pursuant to an Advance equal or exceed the number of shares that would cause the aggregate number of shares of Common Stock that are acquired as a result of the transactions contemplated hereby and beneficially owned by the Investor and its affiliates to exceed nine and 99/100 percent (9.99%) of the then outstanding Common Stock of the Company. Shares owned by any other investor pursuant to a Subscription Agreement referenced in this Agreement will not be aggregated with shares owned by the Investor for purposes of determining beneficial ownership. For the purposes of this Section beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. |
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| (i) | NO KNOWLEDGE. The Company has no knowledge of any event which would be more likely than not to have the effect of causing the Shelf Registration Statement to be suspended or otherwise ineffective. |
ARTICLE VIII
NON-DISCLOSURE OF NON-PUBLIC INFORMATION
NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Nothing herein shall require the Company to disclose non-public information to the Investor or
its advisors or representatives, and the Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the advisors and
representatives of the Investor of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or generally during
the course of due diligence by such persons or entities), which, if not disclosed in the prospectus
included in the Shelf Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.1 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to disclosure of such
information) may not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Shelf Registration Statement contains an untrue statement of material
fact or omits a material fact required to be stated in the Shelf Registration Statement or
necessary to make the statements contained therein, in light of the circumstances in which they
were made, not misleading.
Section 9.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE
PARTIES FURTHER AGREE THAT ANY ACTION BETWEEN THEM SHALL BE HEARD IN AND EXPRESSLY CONSENT TO THE
JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS LOCATED IN THE CITY OF LOS ANGELES,
CALIFORNIA FOR THE ADJUDICATION OF ANY CIVIL ACTION ASSERTED PURSUANT TO THIS PARAGRAPH.
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(i) The expiration of the Offering Period;
(ii) Investor provides written notice to the Company that Investor is terminating the
Agreement due to a material inaccuracy of any representation or warranty of the Company or its
failure to comply with any covenant or obligation hereunder, or the Company provides written notice
to the Investor that the Company is terminating the Agreement due to a material inaccuracy of any
representation or warranty of the Investor or its failure to comply with any covenant or obligation
hereunder;
(iii) immediately without further action by either party if the sale of Common Stock hereunder
is prohibited or enjoined by applicable law or governmental or self-regulatory body; and
(iv) by written agreement of the parties.
If to the Company, to:
|
Capstone Turbine Corporation | |
| 00000 Xxxxxxxx Xxxxxx | ||
| Xxxxxxxxxx, XX 00000 | ||
| Attention: Xxxx X. Xxxxxx | ||
| Telephone: 000-000-0000 | ||
| Facsimile: 000-000-0000 | ||
| Email: xxxxxxx@xxxxxxxxxxxxxxx.xxx | ||
With a copy to:
|
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC | |
| 000 Xxxxx Xxxxxx, Xxxxx 0000 | ||
| Xxxxxxxxx, XX 00000 | ||
| Attention: X. Xxxxx Xxxx, Esq. |
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| Telephone: (000) 000-0000 | ||
| Facsimile: (000) 000-0000 | ||
| Email: xxxxx.xxxx@xxxxxxxxx.xxx | ||
If to the Investor(s):
|
Asset Managers International Ltd | |
| x/x Xxxxxxx Xxxxxxx (Xxxxxxx) Ltd. Harcourt Center 0xx Xxxxx, Xxxxx 0 | ||
| Xxxxxxxx Xxxx Xxxxxx 0, Xxxxxxx | ||
| Attention: Xxxxxx Xxxxxxx | ||
| Facsimile: x000 (0) 000 0000 | ||
| Email: xxxxxxxx@xxxxxxxxxxxxxx.xx | ||
With a Copy to:
|
Pentagon Capital Management Plc | |
| 00 Xxxxx Xxxxxx, Xxxxxx X0X 0XX | ||
| Attention: Xxxxx Xxxxxxx | ||
| Telephone: x00 00 0 000 0000 | ||
| Facsimile: x00 00 0 000 0000 | ||
| Email: xxxxxxxx@xxxxxxxxxxxxxxx.xxx |
Each party shall provide two (2) days’ prior written notice to the other party of any change in
address or facsimile number.
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REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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| COMPANY: CAPSTONE TURBINE CORPORATION |
||||
| By: | /s/ Xxxx X. Xxxxxx | |||
| Name: | Xxxx X. Xxxxxx | |||
| Title: | President and Chief Executive Officer | |||
| |
||||
| INVESTOR: ASSET MANAGERS INTERNATIONAL LTD |
||||
| By: | /s/ Xxxxxxxx X. Xxxxx | |||
| Name: | Xxxxxxxx X. Xxxxx | |||
| Title: | Director | |||
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EXHIBIT A
ADVANCE NOTICE
The undersigned, _______________ hereby certifies, with respect to the sale of shares of
Common Stock of CAPSTONE TURBINE CORPORATION (the “COMPANY”), issuable in connection with this
Advance Notice dated __________________ (the “NOTICE”), delivered pursuant to the Subscription
Agreement (the “AGREEMENT”), as follows:
1. The undersigned is the duly elected _______________ of the Company.
2. The representations and warranties of the Company contained in the Agreement are true and
correct in all material respects and the Company is in compliance with each of its obligations
under such Agreement as of the date hereof.
3. The Daily Advance Amount requested on _______________, 2005, is $_______________.
The undersigned has executed this Notice this _______________day of _______________, 2005.
| COMPANY: CAPSTONE TURBINE CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
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EXHIBIT B
WRITTEN DIRECTION TO DISBURSE
The undersigned, _______________, hereby certifies as follows, on behalf of ASSET MANAGERS
INTERNATIONAL LTD (the “INVESTOR”), pursuant to the Subscription Agreement dated as of even date
herewith (the “AGREEMENT”).
1. The undersigned is the duly elected _______________of the Investor.
2. The Investor received an Advance Notice from Capstone Turbine Corporation (the “Company”)
on _______________, 2005, requesting a Daily Advance Amount of $_______________.
3. The VWAP of the shares of Common Stock is $_______________, and the Purchase Price per share for
such shares is $_______________.
4. Pursuant to the Agreement, the Investor shall acquire the number of shares of Registered
Stock equal to $_______________ [amount from 2 above] divided by the per share Purchase Price.
5. The Escrow Agent is directed to disburse immediately $_______________ to the account
designated by the Company in the Escrow Agreement.
6. The Escrow Agent is directed to effect immediately the transfer of _______________ shares of
Registered Stock to the Investor’s account set forth in the Escrow Agreement.
The undersigned has executed this Written Direction this _______________ day of _______________, 2005.
| ASSET MANAGERS INTERNATIONAL LTD |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
The signature below manifests the Company’s
agreement as to numbers 3, 4, 5 and 6 set
forth above.
agreement as to numbers 3, 4, 5 and 6 set
forth above.
| CAPSTONE TURBINE CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
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Schedule 4.2(A)
Capstone Turbine International, Inc.
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