NOTE CONVERSION AGREEMENT
Exhibit 10.66
This Note Conversion Agreement (the “Agreement”), dated as of the 13th day of May,
2011, is made and entered into by and among T3 Motion, Inc., a Delaware corporation (the
“Company”), and Ki Nam. (the “Investor”).
WHEREAS, on February 24, 2011, the Company issued to the Investor a 10% Promissory Note in the
original principal amount of up to $2,500,000 (the “Note”); and
WHEREAS, the Note, is due and payable, together with accrued interest, on March 31, 2012 (the
“Maturity Date”); and
WHEREAS, the outstanding balance on the Note, is $2,121,000; and
WHEREAS, the Company has filed a Registration Statement on Form S-1, File Number 333-171163
(the “Registration Statement”) relating to an underwritten public offering (the “Public Offering”)
of units (“units”), each unit comprised of (i) one share of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), one Class H common stock purchase warrant (the “Class H
Warrants”) and one Class I common stock purchase warrant (the “Class I Warrants”); and
WHEREAS, it is a condition to the underwriters’ obligation to purchase the Units in the Public
Offering that the outstanding indebtedness evidenced by the Note be converted into units
substantially identical to the Units (the “Nam Units”) at a conversion price equal to the per Unit
public offering price (the “Conversion Price”); and
WHEREAS, the Company and the Investor believe it is in their mutual best interest that the
conversion of the Note (the “Conversion”) be effected on the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, and for
other good and valuable consideration, and sufficiency of which are hereby acknowledged and
intending to be legally bound hereby the parties agree as follows:
1. Reserved.
2. Conversion Provisions. At the Closing (as defined in Section 3 below), the Company
shall issue to the Investor Nam Units, each comprised of (i) one share of Common Stock (the “Nam
Shares”), (ii) one warrant substantially identical to the Class H Warrants (the “Nam H Warrants”)
and (iii) one warrant substantially identical to the Class I Warrants (the “Nam I Warrants” and,
together with the Nam H Warrants, the “Nam Warrants”) in consideration for the cancellation by the
Investor of $2,121,000.00 principal amount of the Note and accrued interest thereon. The number of
Nam Units shall equal the total amount of principal and interest accrued through the date of the
Closing divided by the Conversion Price; provided, however, that the Company shall pay cash in lieu
of any fractional Nam Units that would otherwise be issuable upon the Conversion.
3. Closing. If, and only if, the closing of the Public Offering occurs on or prior to
5:00 p.m. eastern time on the Maturity Date, the closing of the Conversion (the “Closing”) shall
take place at the offices of LKP Global Law, LLP, 1901 Avenue of the Stars, Xxxxx 000 Xxx Xxxxxxx,
Xxxxxxxxxx 00000 or such other place to be specified by the Company and the Investor on the date
of, and simultaneously with, the closing of the Public Offering (the “Closing Date”).
4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investor as follows:
(a) Due Authorization. The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the Registration Rights Agreement
attached as Appendix A hereto (collectively, the “Conversion Agreements”) and the Conversion
Agreements have been duly authorized and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by the Investor, constitutes legal, valid
and binding agreements of the Company enforceable against the Company in accordance with their
respective terms, except as rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) Issuance of Nam Units; Reservation of Common Stock. The Nam Shares, Nam H
Warrants and Nam I Warrants comprising the Nam Units are duly authorized and, when issued and paid
for in accordance with this Agreement, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens and shall not be subject to preemptive or similar rights
of stockholders other than those which have been exercised or waived prior to the Closing Date.
The shares of common stock issuable upon exercise of the Nam Warrants (the “Warrant Shares”) have
been duly authorized and, when issued in accordance with the terms of the Nam Warrants will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive or similar rights of stockholders other than those which have been exercised
or waived prior to the Closing Date or which have been expressly entered into by Nam prior to the
Closing Date. Assuming the accuracy of the representations and warranties of the Investor in this
Agreement, the Nam Shares and Nam Warrants comprising the Nam Units will be issued in compliance
with all applicable federal and state securities laws. As of the Closing Date, the Company shall
have reserved from its duly authorized capital stock the number of shares of common stock issuable
upon exercise of the Nam Warrants and so long as any of the Nam Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and unissued capital stock,
solely for the purpose of effecting the exercise of the Nam Warrants, 100% of the number of shares
of Common Stock issuable upon exercise of the Nam Warrants.
(c) Non-Contravention. The execution and delivery of the Conversion Agreements, the
issuance and sale of the Nam Shares and Nam Warrants by the Company under this Agreement and the
consummation of the transactions contemplated hereby and thereby will not (A) conflict with or
constitute a violation of, or default (with the passage of time or otherwise) under, (i) any bond,
debenture, note or other evidence of indebtedness, or any
material lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or its wholly-owned subsidiary, T3 Motion, Ltd.
(the “Subsidiary”) is a party or by which the Company, the Subsidiary or any of their property is
bound, where such conflict, violation or default is likely to result in a Material Adverse Effect,
(ii) the charter, by-laws or other organizational documents of the Company or the Subsidiary, or
(iii) any law, administrative regulation, ordinance or order of any court or governmental agency,
arbitration panel or authority binding upon the Company or the Subsidiary or any of their property,
where such conflict, violation or default is likely to result in a Material Adverse Effect, or (B)
result in the creation or imposition of any Lien upon any of the material properties or assets of
the Company or the Subsidiary or an acceleration of indebtedness pursuant to any obligation,
agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness
or any indenture, mortgage, deed of trust or any other agreement or instrument to which the Company
or the Subsidiary is a party or by which the Company or the Subsidiary is bound or to which any of
the property or assets of the Company or the Subsidiary is subject. No consent, approval,
authorization or other order of, or registration, qualification or filing with, any regulatory
body, administrative agency, or other governmental body in the United States is required for the
execution, delivery and performance of the Conversion Agreements, the valid issuance and sale of
the Shares, other than such as have been made or obtained. “Material Adverse Effect” shall mean
any of (a) a material and adverse effect on the legality, validity or enforceability of this
Agreement, the schedules and exhibits attached hereto, and any other documents or agreements
executed in connection with the transactions contemplated hereunder, (b) a material and adverse
effect on the results of operations, assets, business or financial condition of the Company and the
Subsidiary, taken as a whole, or (c) any adverse impairment to the Company’s ability to perform in
any material respect on a timely basis its obligations under the Conversion Agreements.
5. Representations and Warranties of the Investor. The Investor hereby represents and
warrants to the Company as follows:
(a) Organization; Authority. The Investor is an individual with full right, power and
authority to enter into and to consummate the transactions contemplated by the Conversion
Agreements and otherwise to carry out its obligations hereunder and thereunder. The execution and
delivery of the Conversion Agreements and performance by the Investor of the transactions
contemplated by the Conversion Agreements have been duly authorized by all necessary corporate or
similar action on the part of the Investor. Each Conversion Agreement to which it is a party has
been duly executed by the Investor, and when delivered by the Investor in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the Investor, enforceable
against it in accordance with its terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Own Account. The Investor understands that the Nam Units are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is converting the Note into the Nam Units as principal for its own
account and not with a view to or for distributing or reselling such Nam Units or any part
thereof in violation of the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Nam Units in violation of the Securities Act or any
applicable state securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Nam Units (this
representation and warranty not limiting the Investor’s right to sell the Nam Units pursuant to any
registration statement or otherwise in compliance with applicable federal and state securities
laws) in violation of the Securities Act or any applicable state securities law. The Investor is
acquiring the Nam Units hereunder in the ordinary course of its business.
(c) Investor Status. At the time the Investor was offered the Nam Units, it was, and
as of the date hereof it is, and on the Closing Date it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act
or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. The
Investor is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience of the Investor. The Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective conversion of the
Note into Nam Units, and has so evaluated the merits and risks of such investment. The Investor is
able to bear the economic risk of an investment in the Nam Units and, at the present time, is able
to afford a complete loss of such investment.
6. Conditions to the Investor’s Conversion Obligation. The obligation of the Investor
hereunder to consummate the Conversion at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these conditions are for the
Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion by
providing the Company with prior written notice thereof:
(a) Issuance of Securities. The Company shall have delivered to the Investor
certificates representing the Nam Shares, the Nam H Warrants and the Nam I Warrants, together with
an executed copy of the Warrant Agency Agreement between the Company and its transfer agent (or
other warrant agent agreeable to the Company and the Underwriters) governing the Nam Warrants.
(b) Registration Rights. The Company shall have delivered to the Investor (i) a duly
executed copy of the Registration Rights Agreement, the form of which is attached to this Agreement
as Appendix A, and (ii) a draft of the Registration Statement on Form S-3 covering the resale of
the Nam Shares, the Nam Warrants and the Warrant Shares.
(c) Representations and Warranties. The representations and warranties of the Company
set forth in Section 4 of this Agreement shall be true and correct in all material respects (except
for those representations and warranties that are qualified by materiality or Material Adverse
Effect, which shall be true and correct in all respects) as of the date when made and as of the
Closing Date as though made at that time (except for representations and warranties that speak as
of a specific date) and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior to the
Closing Date.
(d) Performance. 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 it at or prior to the Closing.
(e) Officer’s Certificate. The Company shall have delivered to the Investor a
certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its
President certifying to the fulfillment of the conditions specified in Sections 5(c) and (d) in a
form reasonably acceptable to the Investor.
(f) Public Offering. The Registration Statement shall have been declared effective by
the Securities and Exchange Commission and the securities issued in the Public Offering shall have
commenced trading on the NYSE Amex, LLC.
7. Transfer Restrictions.
(a) Compliance with Laws. Notwithstanding any other provision of this Section 6, the
Investor covenants that the Nam Shares, the Nam Warrants and the Warrant Shares (collectively, the
“Securities”) may be disposed of only pursuant to an effective registration statement under, and in
compliance with the requirements of, the Securities Act of 1933, as amended (the “Securities Act”),
or pursuant to an available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state, federal or foreign
securities laws. In connection with any transfer of the Securities other than (i) pursuant to an
effective registration statement, (ii) to the Company, or (iii) pursuant to Rule 144 (provided that
the Investor provides the Company with reasonable assurances (in the form of seller and broker
representation letters) that the Securities may be sold pursuant to such rule), the Company may
require the transferor thereof to provide to the Company, at the transferor’s expense, an opinion
of counsel selected by the transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the Securities Act.
(b) Legends. Certificates evidencing the Securities shall bear any legend as required
by the “blue sky” laws of any state and a restrictive legend in substantially the following form,
until such time as they are not required under Section 6(c) or applicable law:
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE
BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. NO REPRESENTATION IS MADE BY THE ISSUER AS TO THE AVAILABILITY OF THE
EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THESE SECURITIES.
(c) Removal of Legends. The restrictive legend set forth in Section 6(b) above shall
be removed and the Company shall issue or shall cause its transfer agent to issue a certificate
without such restrictive legend or any other restrictive legend to the holder of the applicable
Securities upon which it is stamped or issue to such holder by electronic delivery at the
applicable balance account at the Depository Trust Company (“DTC”), if (i) such Securities are
registered for resale under the Securities Act (provided that, if the Investor is selling pursuant
to the effective registration statement registering the Securities for resale, the Investor agrees
to only sell such Securities during such time that such registration statement is effective and not
withdrawn or suspended, and only as permitted by such registration statement), (ii) such Securities
are sold or transferred pursuant to Rule 144 (if the transferor is not an “affiliate” of the
Company, as such term is defined in the Securities Act), or (iii) such Securities are eligible for
sale under Rule 144, without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such securities and without volume or
manner-of-sale restrictions. Certificates for Securities subject to legend removal hereunder may
be transmitted to the Investor by crediting the account of the Investor’s prime broker with DTC as
directed by the Investor.
(d) Acknowledgement. The Investor acknowledges its primary responsibilities under the
Securities Act and accordingly will not sell or otherwise transfer the Nam Shares, the Warrants or
the Warrant Shares or any interest therein without complying with the requirements of the
Securities Act. Except as otherwise provided below, while a registration statement covering the
Securities remains effective, the Investor may sell the Securities in accordance with the plan of
distribution contained in such registration statement and if it does so it will comply therewith
and with the related prospectus delivery requirements unless an exemption therefrom is available.
Both the Company and its transfer agent, and their respective directors, officers, employees and
agents, may rely on this Section 6(d).
8. Notices. All notices, requests, consents and other communications hereunder shall
be in writing, shall be mailed (A) if within domestic United States by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if delivered from outside the United States, by International Federal Express or
facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail
domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight
carrier, one (1) business day after so mailed, (iii) if delivered by International Federal Express,
two (2) business days after so mailed, (iv) if delivered by facsimile, upon electric confirmation
of receipt and shall be delivered as addressed as follows:
if to the Company, to:
T3 Motion, Inc.
0000 Xxxxxx Xxxxxx, Xxxxxxxx X
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Phone: (000) 000-0000
Telecopy: (000) 000-0000
0000 Xxxxxx Xxxxxx, Xxxxxxxx X
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Phone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
LKP Global Law LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx Xxxx
Phone: (000) 000-0000
Telecopy: (000) 000-0000
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx Xxxx
Phone: (000) 000-0000
Telecopy: (000) 000-0000
if to the Investor, to:
Ki Nam
0000 Xxxxxx Xxx., Xxxx X
Xxxxx Xxxx Xx, 00000
Phone: (000) 000-0000
0000 Xxxxxx Xxx., Xxxx X
Xxxxx Xxxx Xx, 00000
Phone: (000) 000-0000
9. Legal Fees and Expenses. The Company shall pay its own fees and expenses and shall
pay the reasonable and documented fees and expenses the Investor’s legal counsel in connection with
the Conversion Agreements and the transactions contemplated hereby and thereby.
10. Amendments; Existing Terms. This Agreement shall not be modified, amended or
terminated without the written consent of all of the parties hereto. Except as amended herein, the
Note remains in full force.
11. Further Assurances. Each of the parties hereto shall use its reasonable best
efforts to do all things necessary and advisable to make effective the transaction contemplated
hereby and shall cooperate and take such action as may be reasonably requested by the other party
in order in carry out fully the provisions and purposes of this Agreement and the transactions
contemplated thereby.
12. Counterparts. This Agreement may be executed in one or more counterparts
(including by facsimile) each of which shall be deemed to be an original, or which together shall
constitute one in the same instrument.
13. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to principles of conflicts of law.
[signature page follows]
IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
| T3 MOTION, INC. |
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| By: | /s/ Xxxxx Xxxxxxxx | |||
| Name: | ||||
| Title: | ||||
| Ki Nam |
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| By: | /s/ Ki Nam | |||
| Name: | ||||
| Title: | ||||
