UP TO 4,800,000 SHARES
ZAP
SERIES B PREFERRED STOCK
UNDERWRITING AGREEMENT
New York, New York
October 2, 2001
Alexander, Wescott & Co., Inc.
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Hyperion Partners Corp.
0000 Xxxxxxxxx Xxxxx
Xxxxx X000
Xxxxxxx, XX 00000
Dear Sirs:
SECTION 1. Introduction. ZAP (the "Company"), a California corporation,
has authorized capital consisting of 20,000,000 shares of common stock (the
"Common Stock") and 10,000,000 shares of preferred stock (the "Preferred
Stock"). As of the date hereof, 7,400,080 shares and only 7,400,080 shares of
Common Stock (not including shares of Common Stock issuable after the conversion
of 861 shares of Series A-1 Preferred Stock and 1,670 shares of Series A-2
Preferred Stock) are issued and outstanding. The Company proposes to issue and
sell up to 4,800,000 shares of Series B Preferred Stock (the "Shares") at a
price of $1.00 per share (the "Offering"), which Shares may be convertible into
an aggregate of up to 6,400,000 shares of Common Stock (at the floor price of
the greater of $0.75 or an amount equal to 90% of the closing prices on the five
(5) trading days immediately preceding the day that notice of conversion is
received by the Company; provided, however, that the conversion price shall not
exceed the amount of $2.00 per share).
The Company wishes to confirm your engagement as agents of the Company
in connection with the issuance and sale of the Shares. Except as to sales by
the Company to prospective investors listed on Schedule A attached, the agency
shall be on an exclusive basis. Each of you is referred to in the balance of
this Agreement as an "Underwriter" and collectively as the "Underwriters."
The Company agrees with the Underwriters as follows:
SECTION 2. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to, and agrees with, the Underwriters that:
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(a) The Company has filed a registration statement on Form SB-2 (No.
333-55478), including a prospectus, pursuant to the Securities Act of 1933, as
amended (the "Act"), relating to the sale of the Shares with the Securities and
Exchange Commission (the "Commission"). Such registration statement is proposed
to be amended by pre-effective amendment or post-effective amendment. For
purposes of this Agreement, "Effective Time" means, in the case of the preceding
sentence, the date and time as of which such registration statement, as amended
by such amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. "Effective Date" means the date of the Effective
Time. If the Effective Time is prior to the execution and delivery of this
Agreement: no other document relating to such registration statement has been
filed with the Commission; and no proceeding for the purpose of suspending such
effectiveness has been initiated or threatened or, to the knowledge of the
Company, is contemplated by the Commission. Such registration statement as
amended at the Effective Time, including all material incorporated by reference
therein and all exhibits thereto and including all information (if any)
contained in a prospectus subsequently filed with the Commission and deemed to
be part of the registration statement at the Effective Time pursuant to Rule
430A under the Act, is hereinafter referred to as the "Registration Statement,"
and the prospectus, in the form first filed pursuant to Rule 424(b) under the
Act ("Rule 424(b)") or, if no such filing is required, as included in the
Registration Statement, including all material incorporated by reference in such
prospectus, is hereinafter referred to as the "Prospectus."
(b) If the Effective Time is prior to the execution and delivery of
this Agreement: (i) on the Effective Date, the Registration Statement conformed,
on the date of this Agreement, the Registration Statement conforms, and at the
time of filing of any Prospectus pursuant to Rule 424(b), the Registration
Statement and the Prospectus will conform in all respects to the requirements of
the Act and the rules and regulations of the Commission thereunder (the "Rules
and Regulations"); (ii) on the Effective Date, neither the Registration
Statement nor the Prospectus included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; (iii) any amendment to the
Registration Statement, as of its date and as of its effective date, did not and
will not include any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and (iv) the Prospectus on the date of this Agreement,
as of its date, as of the date of any amendment or supplement thereto, and as
amended or supplemented at each Closing Date (as defined in Section 3), does not
and will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If the
Effective Time is subsequent to the execution and delivery of this Agreement:
(i) on the Effective Date, the Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus will
include any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) any amendment to the Registration Statement, as of
its date and as of its effective date, will not include any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not
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misleading; and (iii) the Prospectus, as of its date, as of the date of any
amendment or supplement thereto, and as amended or supplemented at each Closing
Date, will not contain any untrue statement of any material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing representations and warranties do not apply to statements or omissions
in the Registration Statement or any amendment thereto or the Prospectus, as
amended or supplemented, if applicable, based upon the information furnished in
writing to the Company by either Underwriter.
(c) The financial statements included in the Registration Statement and
Prospectus present fairly the financial position of the Company as of the dates
indicated and the results of its operations and the statements of its cash flows
for the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as indicated therein; and the
supporting schedules included in the Registration Statement present fairly the
information required to be stated therein.
(d) Since the respective dates as of which information is given in the
Registration Statement and in the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change in the condition,
financial or otherwise, earnings, business or prospects of the Company
considered as a whole, whether or not arising in the ordinary course of
business, and (ii) there have been no material transactions entered into by the
Company other than those in the ordinary course of business.
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California with
power and authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement and Prospectus and is duly
qualified to do business as a foreign corporation and is in good standing in all
other jurisdictions in which the nature of its business or the character or
location of its properties requires such qualification, except where failure to
so qualify will not materially affect the business, properties or financial
condition of the Company. The Company has no directly or indirectly held active
subsidiary. The Company has all power, authority, authorizations, approvals,
consents, orders, licenses, certificates and permits needed to enter into,
deliver and perform this Agreement and to issue and sell the Shares.
(f) The Company is not (i) in violation of its Articles of
Incorporation or bylaws, as the case may be, or other organizational documents,
or (ii) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument to which
it is a party or by which it or its properties may be bound, except in the case
of (ii) above, where such default would not, individually or in the aggregate,
result in a material adverse change in (A) the condition, financial or
otherwise, earnings, business or prospects of the Company taken as a whole, or
(B) the ability of the Company to enter into, perform and effect the
transactions contemplated hereby; no consent, approval, authorization, order,
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registration, filing or qualification of or with any court or governmental
authority or agency is required for the issue and sale of the Shares as
contemplated herein or the consummation by the Company of the transactions
contemplated by this Agreement, except such as may be required under the Act and
the Rules and Regulations or state securities or Blue Sky laws in connection
with the distribution of the Shares by the Underwriters; and the issue and sale
of the Shares as contemplated herein, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the Company is
a party or by which it may be bound or to which any of the property or assets of
the Company is subject, nor will any such action result in any violation of the
provisions of the charter or code of regulation of the Company or any law,
administrative regulation or administrative or court decree or order applicable
to the Company.
(g) The Company possesses all certificates, authorities or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct the business now operated by it, and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the condition, financial or otherwise,
earnings, business or prospects of the Company considered as a whole.
(h) Except as set forth in the Prospectus, as amended or supplemented,
there is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of the
Company, contemplated or threatened against the Company, which might result in
any material adverse change in the condition, financial or otherwise, earnings,
business or prospects of the Company considered as a whole, or might materially
and adversely affect the properties or assets thereof or might adversely affect
the lawful issuance and offering of the Shares in the manner contemplated by the
Prospectus; and there are no material contracts or other documents which are
required to be described in the Registration Statement or the Prospectus or
filed as exhibits to the Registration Statement by the Act or by the Rules and
Regulations which have not been so described or have not been so filed.
(i) The Company has good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by it, in
each case free and clear of all liens, encumbrances and defects except (i) such
as are referred to in the Prospectus, or (ii) such as do not materially and
adversely affect the value of such property to the Company, and do not
materially interfere with the use made and proposed to be made of such property
by the Company; and any real property and buildings held under lease by the
Company are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made by the Company.
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(j) The Company has an authorized capitalization as set forth in the
Prospectus, and 7,400,080 shares and only 7,400,080 shares of Common Stock (not
including shares of Common Stock issuable after the conversion of 861 shares of
Series A-1 Preferred Stock and 1,670 shares of Series A-2 Preferred Stock) are
issued and outstanding, and no other capital stock of the Company will be
outstanding prior to the issuance of the Shares. The Shares have been duly
authorized and, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable and will
conform to the description of them contained in the Prospectus. The issuance and
sale of all the Shares is not subject to preemptive or other similar rights or
to restrictions on transfer (other than those imposed by the Act, the Rules and
Regulations or state securities or Blue Sky laws). There are no outstanding
options, warrants or other rights calling for the issuance of, and no binding
commitment to issue, any share of stock of the Company or any security
convertible into or exchangeable for stock of the Company, except for stock
options, warrants and Underwriter Warrants (as defined below) described in the
Registration Statement (the "Stock Options") and Series A-1 and Series A-2
Preferred Stock described in the Registration Statement. The Common Stock, the
Preferred Stock, the Shares and the Stock Options conform to all statements in
relation thereto contained in the Registration Statement and the Prospectus.
(k) This Agreement has been duly authorized, executed and delivered by
the Company and is the legal, valid and binding agreement and obligation of the
Company, except (i) as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
enforcement of creditors rights or by general equity principles, including
requirements of reasonableness and good faith in the exercise of rights and
remedies, whether applied by a court of equity or a court of law in an action at
law or in equity, or by the discretionary nature of specific performance,
injunctive relief, and other equitable remedies, including the appointment of a
receiver and (ii) with respect to provisions relating to indemnification and
contribution, to the extent they are held by a court of competent jurisdiction
to be void or unenforceable as against public policy or limited by applicable
laws or the policies embodied in them.
(l) Neither the Company nor any of its officers, directors or holders
of five percent or more of any class of its capital stock or any of their
respective affiliates is a member of, or is associated or affiliated with a
member of, the National Association of Securities Dealers, Inc. ("NASD").
(m) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to
include such securities under the Registration Statement.
(n) Xxxxx Xxxxxxxx LLP, who has certified certain financial statements
of the Company, is an independent public accountant as required by the Act and
the Rules and Regulations.
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(o) Neither the Company nor, to the Company's knowledge, any director,
officer, agent, employee or other person associated with the Company, acting on
behalf of the Company, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(p) Neither the Company nor any of its affiliates has taken, and they
will not take, directly or indirectly, any action designed to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Shares in
order to facilitate the sale or resale of any of the Shares as contemplated by
the Rules and Regulations.
(q) No transaction has occurred between or among the Company and any of
its officers, directors, organizers or any affiliate or affiliates of any such
officer, director, organizer or shareholder, that is required to be described in
and is not described in the Prospectus.
(r) The Company is not and will not, upon completion of the Offering,
be an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(s) The Company has obtained from all of its officers and directors
listed in the Prospectus their written agreement ("Holdback Agreement") that for
a period of 180 days after the termination of the Offering ("Holdback Period")
they will not offer to sell, transfer, contract to sell or grant any option for
the sale of or otherwise dispose of, directly or indirectly, any shares of
Common Stock or Preferred Stock of the Company (or any securities convertible
into or exercisable for such shares of Common Stock or Preferred Stock), except
for (A) the exercise of Stock Options under the terms of the option plans and
agreements pursuant to which the Stock Options were issued (including, as
available, by means of "cashless exercise"); (B) gifts of Common Stock or
Preferred Stock (or other securities) to a donee or donees who agree in writing
to be bound by their donor's Holdback Agreement; (C) any stock transferred by
Ridgewood Capital by way of settlement of the Series A-1 and Series A-2
Preferred Stock conversion controversy; and (D) the Holdback Period for Common
Stock or Preferred Stock held by trusts or estates on the death of an executive
office or director of the Company shall be the lesser of 90 days or the
expiration of the Holdback Period.
(t) Each Warrant to Purchase Preferred Stock of the Company (each, an
"Underwriter Warrant") in the form of Exhibit A has been duly authorized,
executed, and delivered by the Company and is the legal, valid, and binding
obligation of the Company. The Company has the full power and authority to enter
into and perform its obligations under the Underwriter Warrants. Each share of
Preferred Stock issuable upon exercise of an Underwriter Warrant shall have been
duly and validly authorized and issued and, upon receipt by the Company of
payment therefor in accordance with the terms of the Warrant Agreement
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as set forth in Exhibit A attached hereto, will be fully paid and nonassessable,
will not be subject to preemptive rights or other similar rights or to
restrictions on transfer (other than those imposed by the Act, the rules and
regulations or state securities or Blue Sky Laws), and will conform in all
material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(u) At or prior to the Effective Date, the Underwriters shall have
received a "blue sky" memorandum of Xxxxx & Xxxxxxx, counsel for the Company,
addressed to the Underwriters and in form and scope reasonably satisfactory to
the Underwriters, concerning compliance with the blue sky or securities laws of
the states listed in Exhibit B attached to this Agreement.
(v) The Company will use its best efforts to obtain the consent of its
shareholders to an amendment to its Certificate of Incorporation to authorize
the issuance of Common Stock in an amount sufficient to issue all Common Stock
contemplated to be issued pursuant to this offering or otherwise issuable by the
Company.
SECTION 3. Engagement of the Underwriters and Closing. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the parties have agreed as follows:
(a) The Company shall and does hereby engage the Underwriters as the
Company's agents to sell for the Company's account up to 4,800,000 Shares;
provided, however, that the Underwriters will not sell more than 910,830 Shares
until such time as the Company authorizes the Underwriters to do so. This
engagement is exclusive, provided, however that the Company may sell shares to
the parties identified on Schedule A below and such sales will not be subject to
the commission payments provided for in subsection (e) below.
(b) Each Underwriter severally agrees to use its best-efforts as agent,
promptly after the Effective Time, to offer and obtain purchase subscriptions
for all of the Shares subject to the terms, provisions and conditions set forth
below. There is no assurance that any or all of the Shares to be offered by the
Company will be sold, and no Underwriter is under any obligation to purchase or
take down any of the Shares on its own behalf or on behalf of others.
(c) At each closing described in subparagraph (e) hereto, the
Underwriters shall pay the proceeds obtained from investors in this Offering,
less commissions and the unaccountable expense allowance, to the Company on the
date of each closing by wire transfer to the Company's account, held at Cal Fed,
000 Xx. Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000, Telephone No.: (800)
000-0000, Account No.: 000-000000-0, or otherwise as the Company may direct in
writing.
(d) The Underwriter may effect sales of Shares through dealers selected
by the Underwriter and pay such dealers out of the fees received by the
Underwriter whatever compensation the Underwriter may determine.
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(e) Subject to the satisfaction of the conditions set forth in this
Agreement, the first closing date shall be thirty (30) days following the
original Effective Date (the "First Closing Date"). Each closing described
herein (a "Closing") shall take place at the offices of Snow Xxxxxx Xxxxxx P.C.,
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000. The first closing shall be no later than
two (2) business days following the First Closing Date (the "First Closing")
unless otherwise agreed to in writing by the Parties. At the First Closing, the
Company shall pay each Underwriter a financing fee equal to $0.10 for each Share
subscribed through such Underwriter in the Offering during the 30-day period and
an unaccountable expense allowance of $.03 per Share issued with respect to such
Closing. At or prior to the First Closing, the Company shall deliver
certificates representing all of the Shares sold prior to the First Closing
Date. Following the First Closing Date, and upon the Underwriters' acceptance of
subscriber checks totaling Two Hundred Fifty Thousand Dollars ($250,000.00),
with such total to be determined after excluding all monies received from
subscribers between the Effective Date and the First Closing Date, there shall
be designated a second closing date (the "Second Closing Date"), whereupon the
Company shall pay each Underwriter a financing fee equal to $0.10 for each
Shares subscribed through such Underwriter in the Offering during the time
period between the First Closing Date and the Second Closing Date and the
unaccountable expense allowance of $.03 per Share issued at such Closing. The
second actual closing shall take place no later than two (2) business days
following the Second Closing Date (the "Second Closing"). At or prior to the
Second Closing, the Company shall deliver certificates representing all of the
Shares sold between the First Closing Date and the Second Closing Date. For
purposes of determining the date of future closings, there shall be designated
subsequent closing dates (each a "Subsequent Closing Date") only after the
Underwriters have accepted subscriber checks totaling Two Hundred Fifty Thousand
Dollars ($250,000.00), with such total to be determined after excluding all
monies received from subscribers prior to the previous closings. There shall be
an actual subsequent closing (each a "Subsequent Closing") that shall take place
not later than two (2) business days following the Subsequent Closing Date,
whereupon the Company shall pay each Underwriter a financing fee equal to $0.10
for each Share subscribed through such Underwriter in the Offering during the
time period between the previous closing date and the Subsequent Closing Date
and the unaccountable expense allowance of $.03 per Share issued at such
Closing. At or prior to each Subsequent Closing, the Company shall deliver
certificates representing all of the Shares sold during the applicable period.
Subject to the satisfaction of the conditions set forth in Section 6 of this
Agreement, on the 180th business day following the Effective Date (the "Final
Closing Date"), there shall be an actual final closing (the "Final Closing")
that shall take place not later than two (2) business days following the Final
Closing Date. At the Final Closing, the Company shall pay each Underwriter a
financing fee equal to $0.10 for each Share subscribed through such Underwriter
in the Offering during the time period between the previous closing date and the
Final Closing Date and the unaccountable expense allowance of $.03 per Share
issued at such Closing. At or prior to the Final Closing, the Company shall
deliver certificates representing all of the Shares sold during the applicable
period. At each Closing, the Company shall also deliver to each Underwriter as
additional compensation for its services in selling the Shares an Underwriter
Warrant duly executed by the Company's authorized officers. The underwriters'
warrants will be based on ten percent (10%) of the number of
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shares sold (e.g. 100 shares sold, 10 warrants granted). The exercise price
shall be 165% of the offering price of the Series B Preferred Stock. The term of
the warrants shall be for three (3) years from the Effective Time. It is
understood and agreed that the $0.10 per Share transaction fee, unaccountable
expense allowance and Underwriter Warrant shall represent the Underwriters'
entire compensation and commission, inclusive of any financial arrangements that
the Underwriter may make with dealers as contemplated by subsection (d) above
for the Underwriter's services in selling the Shares.
(f) Subject to the criteria identified in Section 10(b) below, it is
expressly agreed that the Company may terminate this engagement at any time upon
giving thirty (30) working days written notice of termination. Any sales of
securities made by the Underwriters prior to the termination notice shall be
subject to the commissions and warrants as agreed, even if the closing of such
sales occurs after the termination date.
SECTION 4. Offering by the Underwriters. After the Effective Time and
until the close of business on the day preceding the date of the Final Closing
(the "Termination Date"), the Underwriters will, as Company's agents, offer the
Shares for sale to the public on the terms and conditions as set forth in the
Prospectus.
SECTION 5. Covenants of the Company. The Company covenants and agrees
with the Underwriters that:
(a) The Company will advise the Underwriters promptly of any proposal
to amend or supplement the Registration Statement as filed, or the related
Prospectus, prior to each Closing Date, and will not effect such amendment or
supplement without the Underwriters' consent which will not be unreasonably
withheld; the Company will also advise the Underwriters promptly of the
effectiveness of the Registration Statement (if the Effective Time is subsequent
to the execution and delivery of this Agreement), of any amendment or supplement
to the Registration Statement or the Prospectus, and of receipt of notification
of the institution by the Commission of any stop order proceedings in respect of
the Registration Statement or of any order preventing or suspending the use of
any prospectus relating to the Shares, of the suspension of the qualification of
the Shares for offering or sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or of any request by the
Commission to amend or supplement the Registration Statement or Prospectus or
for additional information and will use its best efforts to prevent the issuance
of any such stop order or of any order preventing or suspending the use of any
prospectus relating to the Shares or suspending any such qualification and to
obtain as soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would, in the judgment of either
Underwriter, include an 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, or if it is necessary
at any time to amend or supplement the Prospectus to comply with the Act, or any
other law, the
9
Company promptly will prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance and will notify the Underwriters and, upon either
Underwriter's request prepare and furnish without charge to the Underwriters and
to any dealer in securities as many copies as the Underwriters may from time to
time reasonably request, of an amended Prospectus or a supplement to the
Prospectus complying with Section 8(a) of the Act which will correct such
statement or omission or effect such compliance.
(c) The Company will deliver to each Underwriter as many signed and
conformed copies of the Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith and documents incorporated
therein by reference) as such Underwriter may reasonably request and will also
deliver to the Underwriters a conformed copy of the Registration Statement and
each amendment thereto (including documents incorporated therein by reference).
(d) The Company will take such action as either Underwriter may
reasonably request to qualify the Shares for offering and sale under the
applicable securities laws of such states and other jurisdictions of the United
States as either Underwriter may designate, and will maintain such
qualifications in effect for as long as may be required for the distribution of
the Shares. The Company will file such statements and reports as may be required
by the laws of each jurisdiction in which the Shares have been qualified as
above provided.
(e) During the period of three years hereafter, the Company will
furnish to the Underwriters as soon as practicable after the end of each fiscal
year, a copy of its annual report to shareholders for such year, and the Company
will furnish to the Underwriters (i) as soon as available, a copy of each report
or definitive proxy statement of the Company filed with the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or mailed to
shareholders, and (ii) from time to time, such other information concerning the
Company as either Underwriter may reasonably request.
(f) The Company, during the period when the Prospectus relating to the
Shares is required to be delivered under the Act, will file promptly all
documents required to be filed with the Commission pursuant to Section 13, 14 or
15 of the Exchange Act.
(g) The Company currently has, and will continue to use its best
efforts to maintain, the listing of its Common Stock, which represent the stock
underlying the Shares if converted, on the NASDAQ SmallCap Market.
SECTION 6. Conditions to Transfer of Funds. The Underwriters' consent
to the transfer of funds to the Company upon each Underwriter's receipt of such
funds from investors, will be subject to the accuracy of the representations and
warranties on the part of the Company herein as of the date hereof and as of
such date of transfer with the same force and effect as if made as of that date,
to the performance by the Company of its obligations hereunder and to the
following additional conditions precedent:
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(a) If the Effective Time is not prior to the execution and delivery of
this Agreement, the Effective Time shall have occurred not later than 5:00 p.m.,
Eastern Time, on the date of this Agreement, or such later time or date as shall
have been consented to by the Underwriters. Prior to the First Closing, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
threatened, or to the knowledge of the Company or the Underwriters, shall be
contemplated by the Commission; and the Company shall have complied with all
requests for additional information on the part of the Commission to your
reasonable satisfaction.
(b) Neither Underwriter shall have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement thereto,
contains any untrue statement of fact or omits to state any fact which, you
concluded, is material and in the case of an omission is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) The Underwriters shall have received a favorable opinion of Xxxxx &
Xxxxxxx, counsel for the Company, dated the First Closing Date, to the effect
that:
(i) The Company has been duly incorporated and validly exists
as a corporation in good standing under the laws of the State of
California and is qualified to do business in California.
(ii) The Company has full corporate power and authority and
all material authorizations, approvals, orders, licenses, certificates
and permits necessary to own its properties and to conduct its business
as described in the Registration Statement and Prospectus, except for
such authorizations, approvals, orders, licenses, certificates and
permits as are not material to the ownership of its properties or
conduct of its businesses.
(iii) The Company has authorized capital stock as set forth in
the Prospectus and, on the Effective Date had 7,400,080 shares and only
7,400,080 shares of Common Stock (not including shares of Common Stock
issuable after the conversion of 861 shares of Series A-1 Preferred
Stock and 1,670 shares of Series A-2 Preferred Stock) issued and
outstanding, and no other capital stock of the Company issued or
outstanding; the Shares have been duly and validly authorized and
issued and upon receipt by the Company of payment therefor in
accordance with the terms of this Agreement will be fully paid and
nonassessable and are not and will not be subject to preemptive rights
or other similar rights or to restrictions on transfer (other than
those imposed by the Act, the rules and regulations or state securities
or Blue Sky Laws); the Shares and the other capital stock and Stock
Options of the Company and the Underwriter Warrants conform in all
material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(iv) This Agreement has been duly authorized, executed and
delivered by the Company and is the legal, valid and binding agreement
and obligation of the Company,
11
except (A) as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting enforcement of creditors rights or by general equity
principles, including requirements of reasonableness and good faith in
the exercise of rights and remedies, whether applied by a court of
equity or a court of law in an action at law or in equity, or by the
discretionary nature of specific performance, injunctive relief, and
other equitable remedies, including the appointment of a receiver and
(B) with respect to provisions relating to indemnification and
contribution, to the extent they are held by a court of competent
jurisdiction to be void or unenforceable as against public policy or
limited by applicable laws or the policies embodied in them.
(v) The certificates evidencing the Shares are in the form
approved by the Board of Directors of the Company, comply with the
bylaws and Articles of Incorporation of the Company and comply as to
form and in all other material respects with applicable legal
requirements.
(vi) The Registration Statement is effective under the Act and
no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued under the Act or
proceedings therefor initiated or threatened or are pending or
contemplated by the Commission.
(vii) Statements set forth in the Registration Statement and
Prospectus, insofar as they are descriptions of corporate documents,
stock option plans, contracts, agreements or descriptions of laws,
regulations or regulatory requirements, or refer to compliance with
laws or to statements of laws or legal conclusions, are correct in all
material respects.
(viii) No consent, approval, authorization, order, filing,
registration or qualification of or with any court or governmental
authority or agency is required for the issue and sale of the Shares or
the consummation of the transactions contemplated by this Agreement,
except such as may be required and have been obtained under the Act and
the Rules and Regulations and such as may be required under state
securities or Blue Sky laws in connection with the sale of the Shares
by the Underwriters; and, the issue and sale of the Shares, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, any material contract filed with the Registration
Statement in response to paragraphs (4) and (10) of Item 601(b) of
Regulation S-B promulgated under the Act and the Exchange Act
("Regulation S-B") or other instrument to which the Company is a party
or by which it or any of them may be bound or to which any of the
property or assets of the Company is subject, that is disclosed or
referred to in the Prospectus or which is actually known by such
counsel, nor will such action result in any violation of, the
provisions of the Articles of Incorporation or bylaws of the Company,
or any California
12
corporate law, or administrative regulation or, to the actual knowledge
of such counsel, any administrative or court decree or order applicable
to the Company.
(ix) To the actual knowledge of such counsel, (A) there is no
governmental action or proceeding and no litigation pending against the
Company which would adversely affect the lawful issuance and offering
of the Shares or that is required to be described in the Registration
Statement or Prospectus and is not so described, and (B) there are no
material contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not so described or
filed as required.
(x) The Registration Statement, as of its date or as of its
effective date, and the Prospectus, as of the Effective Date and as of
its date (other than the financial statements and related schedules and
other financial and statistical data included therein, as to which no
opinion need be expressed) complies as to form in all material respects
with the requirements of the Act and the Rules and Regulations.
In rendering the foregoing opinion, such counsel may rely upon
certificates of public officials (as to matters of fact and law) and officers of
the Company (as to matters of fact), and include qualifications in its opinion
as are reasonably acceptable to the Underwriters. Copies of all such
certificates shall be furnished to counsel to the Underwriters on such Closing
Date.
In addition, such counsel shall state that they have participated in
conferences with officers of the Company and representatives of the Underwriters
at which the contents of the Registration Statement and Prospectus and related
matters were discussed and although such counsel did not independently verify
the accuracy or completeness of the statements made in the Registration
Statement and Prospectus and does not assume any responsibility for the accuracy
or completeness of the statements in the Registration Statement and Prospectus,
on the basis of the foregoing, nothing has come to the attention of such counsel
that would lead them to believe that the Registration Statement or Prospectus,
as amended or supplemented, if amended or supplemented, contains any untrue
statement of a material fact or omits a material fact required to be stated
therein or necessary to make the statements therein not misleading; except that
such statement may exclude financial statements, financial data, and statistical
information included in the Registration Statement and Prospectus.
(d) The Underwriters shall have received from the President or any Vice
President and a principal financial or accounting officer of the Company a
certificate, dated such Closing Date, in which such officers, to the best of
their knowledge and after reasonable investigation, shall state that there has
not been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) any material adverse change in
the condition, financial or otherwise, earnings, business or prospects of the
Company considered as a whole, whether or not arising in the ordinary course of
business, or (ii) any material transactions entered into by the Company other
than those in the ordinary course of business, except in the case of clause (i)
and clause (ii) as set forth in or contemplated by the Prospectus; the
representations and warranties of the Company contained in Section 2 are true
and correct with
13
the same force and effect as though made on and as of such Closing Date and the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to such Closing Date;
and no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been initiated or
threatened or are contemplated by the Commission.
(e) The Underwriters shall have received from Xxxxx Xxxxxxxx, LLP,
independent public accountants, letters, dated on each such Closing Date,
addressed to the Underwriters, in a form as is reasonably acceptable to the
Underwriters.
(f) At such Closing Date, counsel for the Underwriters shall have been
furnished with such other documents and opinions as they may reasonably require.
(g) The Company's Common Stock, which represents the stock underlying
the Shares if converted, is currently listed on the NASDAQ Small Cap Market.
(h) The Underwriters shall have received from each director and
executive officer of the Company a written agreement to the effect set forth in
Section 2(s).
(i) At each Closing, the Underwriters shall have received a "blue sky"
memorandum of Xxxxx & Xxxxxxx, counsel for the Company, addressed to the
Underwriters and in form and scope reasonably satisfactory to the Underwriters,
concerning compliance with the blue sky or securities laws of the states listed
in Exhibit B attached to this Agreement.
(j) No order suspending the sale of the Shares prior to such Closing
Date, in any jurisdiction listed in Exhibit C, shall have been issued on such
Closing Date, and no proceedings for that purpose shall have been instituted or,
to either Underwriter's knowledge or that of the Company shall be contemplated.
(k) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to either Underwriter's participation in the
same.
If any condition to be fulfilled prior to or at such Closing Date is
not so fulfilled, either Underwriter may terminate this Agreement or, if such
Underwriter so elects, waive any such condition, which has not been fulfilled,
or extend the time of its fulfillment.
SECTION 7. Payment of Expenses. The Company will pay all costs,
expenses, fees, disbursements and taxes incident to (i) the preparation by the
Company, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), the Prospectus; and all
amendments and supplements to any of them prior to or during the period
specified in Section 5(b), (ii) the preparation, printing (including word
processing and duplication costs) and delivery of this Agreement (other than the
fees of Snow Xxxxxx Xxxxxx P.C.), Preliminary and Supplemental Blue Sky
Memoranda, and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the Shares,
(iii) the registration with the Commission, and the issuance by the Company, of
the Shares, (iv) the registration or qualification of the Shares for offer and
sale
14
under the securities or Blue Sky laws of the several states (including the
reasonable fees and disbursements of the counsel relating to such registration
or qualification), (v) filings and clearance with the NASD in connection with
the offering, (vi) fees and expenses, if any, incurred in connection with the
inclusion of the Shares on the NASDAQ Small Cap Market, (vii) the fees and
expenses of the Registrar and Transfer Agent for the Shares, and (viii) the
performance by the Company of its other obligations under this Agreement, and
all other costs and expenses incident to the performance of its obligations
hereunder in this Section 7. The Company shall also reimburse the Underwriters
at each Closing expenses incurred by such Underwriter in connection with the
performance of its services hereunder, not to exceed three percent (3.00%) of
the aggregate amount of funds raised by both Underwriters or Two Hundred
Eighty-eight Thousand Dollars ($288,000.00), whichever is the lesser amount.
Generally, these expenses will represent travel, document procurement and
delivery and related matters, but will also include the fees and expenses of the
Underwriters' attorneys and other professional advisors should their advice be
required, but in any event, the Underwriters need not account therefor.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 10(a) hereof, the Company shall not then be under any
liability to the Underwriters except as provided in Sections 7 and 8 hereof,
but, if for any other reason the Shares are not delivered by or on behalf of the
Company as provided herein, the Company shall reimburse the Underwriters for all
of its out-of-pocket expenses reasonably incurred in connection with marketing
and preparing for the purchase, sale and delivery of the Shares, including the
reasonable fees and disbursements of counsel for the Underwriters but the
Company shall then be under no further liability to the Underwriters except as
provided in Sections 7 and 8 hereof.
SECTION 8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls each Underwriter within the meaning of the
Act or the Exchange Act, from and against any and all losses, claims, damages
and liabilities (or actions in respect thereof) (including, without limiting the
foregoing, the reasonable legal and other expenses incurred in connection with
investigating or defending any action, suit or proceeding or any claim asserted,
as such expenses are incurred) arising out of or based on any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon the information
furnished to the Company in writing by the Underwriter in the Prospectus
concerning the terms of the offering by the Underwriter; provided, however, that
the Company shall not be liable to the Underwriter under this subsection (a) for
any such loss, claim, damage or liability arising from the Prospectus to the
extent that such loss, claim, damage or liability results from the fact that
such Underwriter sold Shares to a person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the Prospectus as
then amended or supplemented, in any case where (i) such delivery of the
Prospectus as then amended or supplemented to such person is required by the
Act, (ii) the
15
Company has previously furnished sufficient copies thereof to the Underwriter at
such time as is sufficient to permit such delivery prior to such confirmation,
and (iii) the loss, claim, damage or liability of the Underwriter results from
an untrue statement or omission of a material fact contained in the Prospectus
which was corrected in the Prospectus as amended or supplemented, excluding
documents incorporated therein by reference. This indemnity agreement will be in
addition to any liability, which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, the directors of the Company, the officers of the Company who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act from and against any and all
losses, claims, damages and liabilities (or actions in respect thereof) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or the Prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only with
reference to the information furnished to the Company by such Underwriter set
forth in writing. This indemnity agreement will be in addition to any liability,
which the Underwriters may otherwise have.
(c) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be instituted involving any person
in respect of which indemnity may be sought pursuant to any of the two preceding
paragraphs, such person (hereinafter called the indemnified party) shall
promptly notify the person against whom such indemnity may be sought
(hereinafter called the indemnifying party) in writing; provided, however, the
omission to so notify the indemnifying party shall relieve the indemnifying
party from liability under the two preceding paragraphs only to the extent
prejudiced thereby. The indemnifying party, upon request of the indemnified
party, shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others that the indemnifying party may designate and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
action or proceeding any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (i) the reasonable fees and expenses of more than
one separate firm (in addition to any local counsel) for an Underwriter and all
persons, if any, who control an Underwriter within the meaning of the Act or the
Exchange Act, and (ii) the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company, its directors,
its officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act, and that
all such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for an Underwriter and
16
such control persons of an Underwriter, the Underwriter shall designate such
firm in writing. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, the Company shall
designate such firm in writing. The Company shall not, without the prior written
consent of any indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any such indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If the indemnification provided for in this Section 8 is
insufficient or unavailable to an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and an Underwriter on the other from the offering of
the Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or if the indemnified party shall have failed to the
prejudice of the indemnifying party to give the notice required by Section 8(c),
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and an Underwriter on the other in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and an Underwriter on the other
shall be deemed to be in the same proportions as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
commissions received by an Underwriter. The relative fault of the Company on the
one hand and an Underwriter on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to Section 8(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to in the immediately preceding paragraph shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of Section 8(d), in no event shall any Underwriter be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section
17
12(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 9. Representations Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in the
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, including indemnity and contribution agreements, shall remain
operative and in full force and effect, regardless of any termination of this
Agreement, or any investigation, or any statement as to the results thereof,
made by or on behalf of any Underwriter or any person controlling any
Underwriter or by or on behalf of the Company, its officers or directors or
controlling persons and shall survive acceptance of and payment for Shares
hereunder.
If this Agreement is terminated pursuant to Section 10 or if for any
reason the sale of Shares by the Underwriters is not consummated, the Company
shall remain responsible for the reasonable expenses to be paid or reimbursed by
it pursuant to Section 7 and the respective obligations of the Company and the
Underwriters pursuant to Section 8 shall remain in effect.
SECTION 10. Termination.
(a) By the Underwriters. This Agreement may be terminated for any
reason at any time prior to the delivery and payment of the Shares on any
Closing Date, by the Underwriters upon the giving of written notice of such
termination to the Company, if prior to such time (i) there has been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, (A) any material adverse change in the condition, financial
or otherwise, earnings, business or prospects of the Company considered as a
whole, whether or not arising in the ordinary course of business or as described
in the Prospectus, or (B) any material transaction entered into by the Company
other than in the ordinary course of business, (ii) there has occurred any
outbreak or escalation of hostilities or other calamity or crisis or material
change in existing national or international financial, political, economic or
securities market conditions, the effect of which is such as to make it, in the
judgment of either Underwriter, impracticable or inadvisable to market the
Shares in the manner contemplated in the Prospectus or Subscriptions for
purchase of the Shares, or (iii) trading generally on the NASDAQ National Market
or the New York Stock Exchange has been suspended, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices for securities have
been required, by either of said exchanges or by order of the Commission or any
other governmental authority. This Agreement may also be terminated as provided
in Section 6. In the event of any such termination, the provisions of Sections 7
through 14 shall remain in effect.
(b) By the Company. This Agreement may not be terminated by the Company
so long as, (i) the Underwriters continue to use their best efforts to sell the
Shares, (ii) the Underwriters have obtained subscriptions for at least 500,000
Shares and (iii) sixty (60) days have not transpired from the date of this
Agreement. Following the expiration of sixty (60) days from the date of this
Agreement, the Company may terminate the Agreement in the event that the
Underwriters have not obtained subscriptions for at least 500,000 Shares in such
sixty
18
(60) days, or for an additional 250,000 Shares in each thirty (30) day period
thereafter. Notwithstanding the foregoing, the Company shall pay the
Underwriters the compensation provided for in this Agreement with respect to any
subscriptions obtained by them. Subject to the criteria above, and
notwithstanding anything in this Agreement to the contrary, the Company may
terminate this Agreement by providing thirty (30) days written notice to the
Underwriters at the addresses set forth in Section 11 below.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters c/o Alexander, Wescott & Co.,
Inc., 00 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile
transmission no. 000-000-0000, and c/o Hyperion Partners Corp, 0000 Xxxxxxxxx
Xxxxx, Xxx X000, Xxxxxxx, Xxxxxxx, 00000, facsimile transmission no. (770) 992
-6800, and notices to the Company shall be directed to it at 000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxx 00000, facsimile transmission no. (000) 000-0000,
attention of the Secretary with a copy to the Chief Financial Officer.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the Company, its directors and officers who signed the
Registration Statement, each Underwriter, any controlling persons referred to
herein and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person, firm or corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. No purchaser
of Shares from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
SECTION 13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without
application to its principles of conflicts of laws.
SECTION 14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
[The remainder of this page is intentionally left blank.]
19
If the foregoing is in accordance with your understanding of our
agreement, please sign this Agreement and return to us ten counterparts hereof.
Very truly yours,
ZAP
By:
------------------------------------
Name: Xxxx Xxxxx
Title: Chief Executive Officer
Confirmed and Accepted, as of the
date first above written:
ALEXANDER, WESCOTT & CO., INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
HYPERION PARTNERS CORP
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
20
Exhibit A
Underwriters' Warrant Agreement
00
Xxxxxxx X
Xxxx Xxx Xxxxxx
Xxxxxx: The Company will blue sky all 50 states.
22
Schedule A
Exclusive List of Investors to be Contacted by Company
Name:
1. Xxxxxxxx Xxxx
2. All board members of ZAP
23
EXHIBIT A
UNDERWRITERS'
WARRANT AGREEMENT
Underwriter's WARRANT AGREEMENT dated as of October 2, 2001 by and
between ZAP (the "Company") and Alexander, Wescott & Co., Inc. and Hyperion
Partners Corp. (the "Underwriter").
Preliminary Statement
The Underwriter has agreed, pursuant to an underwriting agreement (the
"Underwriting Agreement") dated October 2, 2001, between the Underwriter and
the Company, to act as the Underwriter in connection with the Company's proposed
public offering of 4,800,000 shares of the Company's convertible Series B
Preferred Stock (the "Preferred Stock"), at an initial public offering price of
$1.00 per share (the "Public Offering").
The Company proposes to issue to the Underwriter at the closing of the
Public Offering as part of the Underwriter's compensation in connection
therewith, warrants (the "Underwriter's Warrants") to purchase up to 480,000
shares of Preferred Stock at the rate of one warrant to purchase one share of
Preferred Stock for each ten (10) shares of Preferred Stock sold by the
Underwriter in the Public Offering.
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of Ten Dollars ($10.00), the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Holders (as defined in Section 3 below) are hereby
granted the right to purchase, at any time from ______________, 2001 until 5:00
p.m., New York City time, on _____________, 2004 an aggregate of __________
shares of Preferred Stock, at an initial purchase price of $1.65 per share
(subject to adjustment as provided in Section 6 hereof) (165% of the Public
Offering price of the Preferred Stock), subject to the terms and conditions of
this Agreement.
2. Warrant Certificates. The warrant certificates (the "Underwriter's
Warrant Certificates") to be delivered pursuant to this Agreement shall be in
the form set forth in
2
Exhibit A attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. Exercise of Underwriter's Warrants. The Underwriter's Warrants are
exercisable during the term set forth in Section 1 hereof and the Purchase Price
(as hereinafter defined) is payable by certified or cashier's check or money
order payable in lawful money of the United States. Upon surrender of an
Underwriter's Warrant Certificate with the annexed Form of Election to Purchase
duly executed, together with payment of the Purchase Price for the Preferred
Stock issuable upon exercise thereof (and such other amounts, if any, arising
pursuant to Section 4 hereof) at the Company's principal office (presently
located at 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, California 95472). The Purchase Price
may also be paid by delivery of shares of Preferred Stock having a Market Price
(as hereunder defined) equal to the Purchase Price or surrender for cancellation
of the unexercised portion of this Warrant in payment of the Purchase Price in
accordance with the formula set forth below, or any combination of the foregoing
methods of payment. The number of shares of Preferred Stock which may be
purchased upon surrender for cancellation of the unexercised portion of this
Warrant in payment of the Purchase Price shall be determined as follows:
W(MP-WP)
S = ---------------------
WP
where S = the number of shares of Preferred Stock
W = the unexercised portion of this Warrant surrendered
in payment of the Purchase Price
MP = the Market Price
WP = the Purchase Price
As used herein, the phrase "Market Price" at any date shall be deemed
to be the average of the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last reported
sale prices for the last three
3
trading days, in either case as officially reported by the principal
securities exchange on which the Preferred Stock is listed or admitted
to trading or as reported by the Nasdaq Stock Market ("Nasdaq"), or, if
the Preferred Stock is not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq National Market,
but is quoted on the Nasdaq SmallCap Market or the NASD's Electronic
Bulletin Board, the closing bid quotation as reported by Nasdaq, the
National Quotation Bureau, Incorporated or a similar organization, or
if the Preferred Stock is not quoted on Nasdaq, as determined in good
faith by resolution of the Board of Directors of the Company, based on
the best information available to it for the day immediately preceding
such issuance or sale, the day of such issuance or sale and the day
immediately after such issuance or sale. If the Preferred Stock is
listed or admitted to trading on a national securities exchange and
also quoted on the Nasdaq National Market, the Market Price shall be
determined as hereinabove provided by reference to the prices reported
on the Nasdaq National Market; provided that if the Preferred Stock is
listed or admitted to trading on the New York Stock Exchange, the
Market Price shall be determined as hereinabove provided by reference
to the prices reported by such exchange." In the event the Preferred
Stock is converted to Common Stock, the foregoing shall apply to such
Common Stock giving effect to such conversion in an equitable manner to
provide for the issuance of equivalent values upon exercise.
The registered holder of an Underwriter's Warrant Certificate
("Holders" or "Holders") shall be entitled to receive a certificate or
certificates for the Preferred Stock so purchased. The purchase rights
represented by each Underwriter's Warrant Certificate are exercisable at the
option of the Holders thereof, in whole or in part, as to the whole number of
shares of Preferred Stock purchasable therewith (but not as to fractions
thereof). In the case of the purchase of less than all the shares of Preferred
Stock purchasable upon the exercise of the
4
Underwriter's Warrants represented by an Underwriter's Warrant Certificate, the
Company shall cancel the Underwriter's Warrant Certificate represented thereby
upon the surrender thereof and shall execute and deliver a new Underwriter's
Warrant Certificate of like tenor for the number of Underwriter's Warrants which
have not been exercised.
4. Issuance of Certificates. Upon the exercise of the Underwriter's
Warrants and payment of the Purchase Price therefor, the issuance of
certificates representing the shares of Preferred Stock issuable upon exercise
thereof, shall be made forthwith (and in any event within five (5) business days
thereafter) without further charge to the Holder thereof, and such certificates
shall (subject to the provisions of Sections 5 and 7 hereof) be issued in the
name of, or in such names as may be directed by, the Holder thereof; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder, and the Company shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid. The Underwriter's Warrant Certificates and the
certificates representing the shares of Preferred Stock (and such other
securities, property or rights as may be represented by certificates) issuable
upon exercise thereof shall be executed on behalf of the Company by the manual
or facsimile signature of the then Chairman or Vice Chairman of the Board of
Directors, Chief Executive Officer, President or Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then Secretary or Assistant Secretary or Treasurer or
Assistant Treasurer of the Company. Underwriter's Warrant Certificates shall be
dated the date of issuance thereof by the Company upon initial issuance,
transfer or exchange, or in lieu of mutilated, lost, stolen or destroyed
Underwriter's Warrant Certificates.
5. Restriction On Transfer of Underwriter's Warrants. The Holder of an
Underwriter' s Warrant Certificate (and its Permitted Transferees, as defined
below), by its
5
acceptance thereof, covenants and agrees that the Underwriter's Warrants are
being acquired as an investment and not with a view to the distribution thereof;
that the Underwriter's Warrants may be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, to any person (a "Permitted
Transferee"), provided such transfer, assignment, hypothecation or other
disposition is made in accordance with the provisions of the Securities Act of
1933, as amended (the "Act"); and provided, further, that until ____________,
2002 [one year following the effective date of the Public Offering] only
officers and partners of the Underwriter, or any selling group member in the
Public Offering and their respective officers and partners, shall be Permitted
Transferees.
6. Purchase Price.
The initial purchase price of the Units issuable upon exercise of the
Underwriters' Warrants shall be $1.65 per Unit [165% of the Public Offering
Price].
7. Registration Rights.
(a) Registration Under the Securities Act of 1933. The
Underwriter's Warrants have not been registered under the Act. The Underwriter's
Warrant Certificates shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"), and may
not be offered for sale or sold except pursuant to (i) an
effective registration statement under the Act, or (ii) an opinion
of counsel, if such opinion shall be reasonably satisfactory to
counsel to the issuer, that an exemption from registration under
such Act is available.
(b) Demand Registration. (i) At any time commencing one (1)
year and expiring five (5) years after the effective date of the Company's
Registration Statement relating to the Public Offering (the "Effective Date"),
the Holders of a majority (as hereinafter defined) of the shares of Preferred
Stock purchased and purchasable upon exercise of the Underwriter's Warrants
shall have the right, exercisable by written notice to the Company, to have
6
the Company prepare and file with the Securities and Exchange Commission (the
"Commission"), solely on one (1) occasion, a registration statement on Form SB-2
(or other appropriate form), and such other documents, including a prospectus,
as may be necessary in the opinion of both counsel for the Company and counsel
for the Holders, in order to comply with the provisions of the Securities Act,
so as to permit a public offering and sale for a period of nine (9) months of
the shares of Preferred Stock purchased or purchasable by such Holders and any
other Holders of the Underwriter's Warrants upon exercise of the Underwriter's
Warrants (such shares of Preferred Stock being hereinafter referred to as the
"Registrable Securities"). The Holders of the Underwriter's Warrants may demand
registration without exercising the Underwriter's Warrants. The Company
covenants and agrees to give written notice of any registration request under
this Section 7(b) to all other registered Holders of the Underwriter's Warrants
and the Registrable Securities within ten (10) days from the date of the receipt
of any such registration request and upon the written request of any Holder
within fifteen (15) days after receipt of such notice to include in such
registration statement, the Registrable Securities of such Holder. As used
herein, the term "Majority" in reference to the Holders of the Underwriter's
Warrants shall mean in excess of fifty percent (50%) of the shares of Preferred
Stock issued or issuable upon exercise of the Underwriter's Warrants that (i)
are not held by the Company, an affiliate, officer, creditor, employee or agent
thereof or any of their respective affiliates, members of their family, persons
acting as nominees or in conjunction therewith, or (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
(c) Piggyback Registration. If, at any time within the period
commencing one (1) year and expiring seven (7) years after the Effective Date,
the Company should file a registration statement with the Commission under the
Securities Act (other than in connection with a merger or other business
combination transaction or pursuant to Form S-8) it will give written notice by
registered mail, at least thirty (30) calendar days prior to the filing of each
such registration statement, to the Underwriter and to all other Holders of the
Registrable
7
Securities. If the Holders of the Registrable Securities notify the Company
within ten (10) calendar days after receipt of any such notice of its or their
desire to include any Registrable Securities in such proposed registration
statement, the Company shall afford the Holders of the Registrable Securities
the opportunity to have such Registrable Securities included in such
registration statement; provided, however, that in the event a registration
statement is filed pursuant to the Registration Rights Agreement between the
Company and the holders of the Series A-1 and Series A-2 Preferred Stock dated
June 23, 2000, the Holders may not include such Registrable Securities therein.
Notwithstanding the provisions of this Section 7(c) and the provisions of
Section 7(d), the Company shall have the right at any time after it shall have
given written notice pursuant to this Section 7(c) (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file the registration statement as to which it gave notice to the
holders of the Registrable Securities, or to withdraw the same after the filing
but prior to the effective date thereof.
(d) Covenants of the Company With Respect to Registration. In
connection with any registration under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best-efforts to file a
registration statement within forty-five (45) calendar days of receipt of any
demand therefor pursuant to section 7(b); provided, however, that the Company
shall not be required to produce audited or unaudited financial statements for
any period prior to the date such financial statements are required to be filed
in a report on Form 10-KSB or Form 10-QSB, as the case may be. The Company shall
use its best-efforts to have any registration statement declared effective at
the earliest possible time, and shall furnish each Holder desiring to sell
Registrable Securities such number of prospectuses as shall reasonably be
requested.
(2) The Company shall pay all costs (excluding fees and
expenses of Holders' counsel and any underwriting discounts or selling fees,
expenses or commissions), fees and expenses in connection with any registration
statement filed pursuant to Sections 7(b)
8
and 7(c) hereof including, without limitation, the Company's legal and
accounting fees, printing expenses, blue sky fees and expenses. If the Company
shall fail to comply with the provisions of Section 7(d), the Company shall, in
addition to any other equitable or other relief available to the Holders, be
liable for any or all incidental and special damages and damages due to loss of
profit sustained by the Holders requesting registration of their Registrable
Securities.
(3) The Company will take all necessary action which may be
required to qualify or register the Registrable Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holders, provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(4) The Company shall indemnify the Holders of the Registrable
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise, arising
from such registration statement, but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriter contained in Section 8 of the Underwriting Agreement, and the
Holders shall indemnify the Company to the same extent and with the same effect
as the provisions pursuant to which the Underwriter have agreed to indemnify the
Company contained in Section 8 of the Underwriting Agreement.
(5) The Holders of the Registrable Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning
9
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act,
against all loss, claim, damage or expense or liability to which they may become
subject under the Securities Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or their successors or
assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 8 of the
Underwriting Agreement pursuant to which the Underwriter have agreed to
indemnify the Company.
(6) Nothing contained in this Agreement shall be construed as
requiring the Holders to exercise their Underwriter's Warrants (or the Warrants
purchasable upon exercise thereof) prior to the initial filing of any
registration statement or the effectiveness thereof.
(7) The Company shall not be entitled to include any
securities other than the Registrable Securities in any registration statement
filed pursuant to Section 7(b) hereof without the prior written consent of the
Holders of a Majority of the Registrable Securities.
(8) The Company shall furnish to a designated Underwriter of
the Holders participating in the offering and to each Underwriter, if any, a
signed counterpart, addressed to such Holder or Underwriter of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(and if such registration relates to an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration relates to an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement (the
"Accountants"), in each case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of the accountants' "cold comfort" letter, with respect to
events subsequent to the date of such financial statements, as are
10
customarily covered in opinions of issuer's counsel and in "cold comfort"
letters, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and in
"cold comfort" letters delivered to Underwriter in underwritten public offerings
of securities.
(9) The Company shall as soon as practicable after the
effective date of the registration statement make "generally available to its
security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the
Securities Act and covering a period of at least 12 consecutive months beginning
after the effective date of the registration statement.
(10) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence described below and
any managing Underwriter copies of all correspondence between the Commission and
the Company, its counsel or Accountants with respect to the registration
statement and permit each Holder and Underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and accountants, all to such reasonable extent and at such
reasonable times and as often as any such Holder shall reasonably request.
(11) The Company shall use its best-efforts to enter into an
underwriting agreement with the managing underwriter selected for such
underwriting by Holders holding a Majority of the Registrable Securities
requested to be included in such underwriting; provided, however, that (i) such
managing underwriter shall be reasonably acceptable to the Company, except that
in connection with an offering for which the Holders have piggyback rights, the
Company shall have the sole right to select the managing underwriter, and (ii)
the Holders shall be responsible for any selling fees or commissions in
connection with such underwriting. Such underwriting agreement shall be
satisfactory in form and substance to the Company, a Majority of such Holders
and such managing underwriter, and shall contain such
11
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Registrable Securities and may, at their
option, require that any or all the representations, warranties and covenants of
the Company to or for the benefit of such underwriter shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriter except as they may relate to such Holders and their intended methods
of distribution.
(e) Further Registrations. The Company will cooperate with the
Holders of the Registrable Securities in preparing and signing any registration
statement, in addition to the registration statements discussed above, required
in order to sell or transfer the Underwriter's Securities and will supply all
information required therefor, but such additional registration statement
expenses or offering statement expenses will be prorated between the Company and
the Holders of the Registrable Securities according to the aggregate sales price
of the securities being issued. The provisions of Section 7(d) shall apply to
any such registration statement.
(f) In connection with any offering involving an underwriting
of shares of the Company's capital stock under this Section 7, the Company shall
not be required to include any of the Holders' Registrable Securities in such
underwriting unless such Holders accept the terms of the underwriting (including
any lock-up periods applicable to unregistered shares) as agreed upon between
the Company and the underwriters so selected, and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the total amount of Registrable
Securities requested by the Holders, including other securities to be registered
by additional holders of the Company's capital stock, to be included in such
offering exceeds the amount of securities to be sold, other than by the Company,
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such Registrable Securities, and other securities,
which the underwriters
12
determine in their sole discretion will not jeopardize the success of the
offering. The securities so included shall be apportioned, to the extent
determined by the underwriters to be compatible with the offering, to Holders
selling Registrable Securities, and holders of other securities, pro rata
according to the total amount of securities entitled to be included therein
owned by each Holder of Registrable Securities and each holder of other
securities. For purposes of the preceding sentence concerning apportionment, for
any Holder of Registrable Securities which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "Holder,"
and any pro-rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder" as defined in this sentence.
8. Exchange and Replacement of Warrant Certificates. Each Underwriter's
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holders at the principal executive office of the Company, for
a new Underwriter's Warrant Certificate of like tenor and date representing in
the aggregate the right to purchase the same number of shares of Preferred Stock
in such denominations as shall be designated by the Holders thereof at the time
of such surrender. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
Underwriter's Warrant Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Underwriter's Warrant Certificates, if mutilated, the
Company will make and deliver a new Underwriter's Warrant Certificate of like
tenor, in lieu thereof.
9. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Underwriter's Warrants, nor shall it be required to
issue scrip or pay cash in lieu of fractional
13
interests; provided, however, that if a Holder exercises all Underwriter's
Warrants held of record by such Holder, the fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of shares of
Common Stock.
10. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Preferred
Stock, solely for the purpose of issuance upon the exercise of the Underwriter's
Warrants, such number of shares of Preferred Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of Underwriter's Warrants and payment
of the Purchase Price therefor, all the shares of Preferred Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. The Company further covenants and agrees that as long as the
Underwriter's Warrants shall be outstanding, the Company shall use its
best-efforts to cause the Preferred Stock to be listed (subject to official
notice of issuance) on all securities exchanges on which the Preferred Stock and
Common Stock issued in the Public Offering may then be listed or quoted.
11. Adjustment of Purchase Price and Number of Shares.
(a) Subdivision and Combination. In case of the Company shall
at any time subdivide or combine its outstanding shares of capital stock of
whatever nature, the Purchase Price shall forthwith be proportionately decreased
in the case of subdivision or increased in the case of combination.
(b) Adjustment in Number of Shares. Upon each adjustment of
the Purchase Price pursuant to the provisions of this Article 11, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Purchase Price in effect
immediately prior to such adjustment by the number of Shares issuable upon
exercise of the Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Purchase Price.
14
(c) Reclassification, Consolidation, Merger, etc. In case of
any reclassification or change of the outstanding shares of capital stock (other
than a change in par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of capital stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the shares of
Preferred Stock or the Common Stock issuable upon conversion thereof underlying
the Warrants immediately prior to any such events at a price equal to the
product of (x) the number of shares issuable upon exercise of the Warrants and
(y) the Purchase Price in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if such
Holder had exercised the Warrants.
(d) No Adjustment of Purchase Price in Certain Cases.
Notwithstanding anything herein to the contrary, no adjustment of the Purchase
Price shall be made:
(i) Upon the issuance or sale of the Warrants,
or the shares of Preferred Stock issuable upon the exercise of the Warrants;
(ii) Upon the issuance or sale of shares of
Preferred Stock issued by the Company in the public offering of its Shares being
purchased concurrently herewith;
(iii) Upon (i) the issuance of options pursuant to
the Company's employee stock option plan in effect on the date hereof or the
sale by the Company of any shares of capital stock pursuant to the exercise of
any such options, or (ii) the sale by the
15
Company of any shares of capital stock pursuant to the exercise of any options
or warrants previously issued and outstanding on the date hereof.
(iv) If the amount of said adjustment shall be
less than two cents ($0.02) per share, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents ($0.02) per Share.
(e) Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior to
the exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of capital stock or a cash dividend or distribution
payable out of current or retained earnings) or otherwise distribute to its
shareholders any monies, assets, property, rights, evidences of indebtedness,
securities (other than shares of capital stock), whether issued by the Company
or by another person or entity, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Preferred Stock other securities receivable upon the exercise thereof, to
receive, upon the exercise of such Warrants, the same monies, property, assets,
rights, evidences of indebtedness, securities or any other thing of value that
they would have been entitled to receive at the time of such dividend or
distribution. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Subsection 11(e).
(f) Subscription Rights for Shares of Capital Stock or Other
Securities. In the case that the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of all the Warrants
issue any rights to subscribe for shares of capital stock or any other
securities of the Company or of such affiliate to all the shareholders of the
Company, the Holders of the unexercised Warrants shall be entitled, in addition
to the shares of Preferred Stock or other securities receivable upon the
exercise of the Warrants, to receive such rights at the time such rights are
distributed to the other shareholders of the Company.
16
12. Notices to Underwriter's Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Underwriter's Warrants and their exercise, any of
the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of capital stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its capital
stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall
give written notice of such event at least fifteen (15) days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or
17
exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holders of the Underwriter's
Warrants, to the address of such Holders as shown on the books of the Company;
or
(b) If to the Company to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. The Company and the Underwriter may
from time to time supplement or amend this Agreement without the approval of any
Holders of Underwriter's Warrant Certificates (other than the Underwriter) in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of Underwriter's Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Underwriter,
the Holders and their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of
business on __________________, 2008. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on the expiration of any applicable statute of limitations.
17. Governing Law: Submission to Jurisdiction. This Agreement and each
Underwriter's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance
18
with the laws of said state without giving effect to the rules of said state
governing the conflicts of laws. The Company, the Underwriter and the Holders
hereby agree that any action, proceeding or claim against it arising out of, or
relating in any way to, this Agreement shall be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company, the Underwriter and the
Holders hereby irrevocably waive any objection to such exclusive jurisdiction or
inconvenient forum. Any such process or summons to be served upon any of the
Company, the Underwriter and the Holders (at the option of the party bringing
such action, proceeding or claim) may be served by transmitting a copy thereof,
by registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 12 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the party
so served in any action, proceeding or claim.
18. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement, to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and thereof. Subject to Section 14, this Agreement may not
be modified or amended except by a writing duly signed by the Company and the
Holders of a majority of the Registrable Securities.
19. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holders of the Underwriter's Warrant
Certificates or Registrable Securities any legal
19
or equitable right, remedy or claim under this Agreement, and this Agreement
shall be for the sole and exclusive benefit of the Company and the Underwriter
and any other Holders of the Underwriter' s Warrant Certificates or Registrable
Securities.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
23. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company, the Underwriter and their respective successors and
assigns and the Holders from time to time of the Underwriters' Warrant
Certificates.
24. Miscellaneous. In the event the Preferred Stock is converted to
Common Stock, all of the terms of this Agreement shall be applicable to such
Common Stock as though the Preferred Stock issuable upon exercise of this
Warrant has been issued, and the Purchase Price and the number of shares
issuable shall be calculated in an equitable manner so as to assure the issuance
of equivalent values with respect to all of the provisions in this Agreement.
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ZAP
By:
---------------------------------------
Name: Xxxx Xxxxx
Title: Chief Executive Officer
ALEXANDER, WESCOTT & CO., INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
HYPERION PARTNERS CORP
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
21
EXHIBIT A
ZAP
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING __________________, 2001 THROUGH
5:00 P.M., NEW YORK CITY TIME ON _____________, 2006
No. UW-1
______Warrants
This Warrant Certificate certifies that ___________________________, or
registered assigns, is the registered holder of _______ Warrants to purchase
initially, at any time from __________________, 2001 until 5:00 p.m., New York
City time on __________________ (the "Expiration Date"), _______ fully paid and
non-assessable shares of Preferred Stock (the "Preferred Stock"), of ZAP, a
California corporation (the "Company") at a purchase price of $_____ per share
(the "Stock Purchase Price") of the Company upon the surrender of this Warrant
Certificate and payment of the applicable Purchase Price at an office or agency
of the Company, but subject to the conditions set forth herein and in the
warrant agreement dated as of _____________, 2001 (the "Warrant Agreement")
between the Company and ____________________________(the "Underwriter").
No Warrant may be exercised after 5:00 p.m., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement between
the Company and the
22
Underwriter, which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the respective Purchase Prices and the type and/or number of the
Company's securities issuable upon the exercise of this Warrant, may, subject to
certain conditions, be adjusted. In such event, the Company will, at the request
of the holder, issue a new Warrant Certificate evidencing the adjustment in the
Purchase Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
23
IN WITNESS WHEREOF, the undersigned has executed this certificate this
2nd day of October, 2001.
ZAP
By: /s/ Xxxx Xxxxx
-------------------------------
Xxxx Xxxxx
Chief Executive Officer
ATTEST
By: /s/ Xxxx Xxxxxxxxx
-----------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
24
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
(Please print name and address of transferee)
This Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint his or its attorney-in-fact
to transfer the within Warrant Certificate on the books of ZAP, with full power
of substitution.
Dated:
Signature: __________________________________
(Signature must conform in all
respects to the name of holder
as specified on the face of the
Warrant Certificate.)
---------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
25
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right represented by
this Warrant Certificate to purchase:
___________shares of Preferred Stock
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of ZAP in the amount of $ , all in
accordance with the terms hereof. The undersigned requests that certificates for
such securities be registered in the name of whose address is and that such
certificates be delivered to ____________ whose address is _________________
_______________________________________________________________.
Dated:
--------------------------------
(Signature must conform in all
respects to the name of holder
as specified on the face of the
Warrant Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
26
