MEMORANDUM NO. ______________________
NAME OF OFFEREE _____________________
ZBB
ENERGY CORPORATION
A MAXIMUM OF US$2,500,000 OF BRIDGE NOTES DUE ON THE EARLIER
OF APRIL 15, 2007 OR UPON COMPLETION OF A MINIMUM EQUITY
FINANCING OF $6 MILLION
SUBSCRIPTION AND
INVESTMENT REPRESENTATION AGREEMENT
SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT
US$2,500,000 OF 15% CONVERTIBLE BRIDGE NOTES DUE APRIL 15, 2007
(OR UPON COMPLETION OF A MINIMUM EQUITY FINANCING OF $6 MILLION) (THE "NOTES")
(Except as otherwise noted, all references to "dollars" or "$" are in
United States dollars).
The undersigned, ___________________________________________ (the
"undersigned" or the "Investor"), hereby subscribes for the purchase of Notes
(the "Notes") of ZBB Energy Corporation, a Wisconsin corporation (the
"Company"), in the aggregate principal amount of $___________. The undersigned
herewith submits the undersigned's check or effects a wire transfer of
immediately available funds in the amount of $_________ in full payment for such
Notes (the "Subscription Price"). In exchange for such payment of the
Subscription Price, the undersigned shall receive from the Company $________
principal amount of Notes.
Principal and interest on the Notes will be due and payable upon the
earlier to occur of (i) April 15, 2007 and (ii) the closing by the Company of an
initial public offering of the Company's common stock, par value $0.01 per share
(the "Common Stock") or other equity financing yielding minimum proceeds of Six
Million Dollars ($6,000,000) (the "Equity Offering"). All amounts of principal
and interest remaining due under the Notes as of the closing of the Equity
Offering shall be, at the option of each holder thereof, (i) payable in cash
from the proceeds of the Equity Offering, together with two-year warrants to
purchase shares of the Common Stock at a price equal to 120% of the price per
share in the Equity Offering or (ii) convertible into shares of the Common Stock
at a price per share equal to 50% of the price per share paid by investors in
the Equity Offering.
The undersigned understands that (i) the Company is offering up to
$2,500,000 in note principal, (ii) there is no minimum amount of note principal
that must be sold to complete the offering, (iii) the offering is being made on
best efforts basis by both the Company and Empire Financial Group, Inc.
("Empire"), as placement agent, and (iv) upon completion of this offering,
Empire shall serve as investment banker to the Company in connection with other
contemplated equity financings.
The undersigned hereby agrees to send payment of the $_________
Subscription Price either:
a. by mailing a check, payable to "ZBB Energy Corporation" to ZBB
Energy Corporation, N93 W14475 Xxxxxxxxx Xxx, Xxxxxxxxx Xxxxx,
Xxxxxxxxx 00000, attn: Xxxxxx Xxxxx, Chief Executive Officer, or
b. wiring payment of the Subscription Price to the account set forth
below
Name of Bank: M&I Xxxxxxxx &Ilsley Bank
Address of Bank: 0000 Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000
Account Name: ZBB Energy Corporation
Account No: 00184 06531
ABA No: 000000000
Reference: ZBB Energy Corporation Convertible Notes.
In either case, the undersigned agrees to execute this Subscription and
Investment Representation Agreement and the Registration Rights Agreement
attached hereto and mail same to ZBB Energy Corporation, N93 W14475 Xxxxxxxxx
Xxx, Xxxxxxxxx Xxxxx, Xxxxxxxxx 00000, attn: Xxxxxx Xxxxx, Chief Executive
Officer.
Consummation of the sale of the Securities to the undersigned and to all other
Investors in connection with the offering of a maximum of $2,500,000 of Notes
shall be completed on or before 6 October, 2006 (the "Closing Date"), unless
such Closing Date shall be extended by mutual agreement of the Company and
Empire.
1. CERTAIN REPRESENTATIONS OF THE SUBSCRIBER
In connection with, and in consideration of, the sale of the
Securities to the undersigned, the undersigned hereby represents and warrants to
the Company and its officers, directors, employees, agents and shareholders that
the undersigned:
(a) Has received and is familiar with (i) a copy of the Company's
prospectus dated December 23, 2004 in connection with the Company's offering of
12,000,000 shares of Common Stock at A$0.50 per share and the listing of such
shares for trading on the Australian Stock Exchange, (ii) copies of all
announcements made by the Company to the ASX since the date of its listing,
(iii) the Company's 2005 and 2006 annual reports, and (iv) such other
information as the undersigned has received from the Company upon requested
(collectively, the "Company Materials").
(b) Has had an opportunity to review and ask questions of an officer
of the Company, concerning the Company Materials and desires no further
information respecting such Company Materials.
(c) Realizes that the Company has incurred losses since its inception
and must raise additional funds to support its operations and to develop,
manufacture and sell its energy storage products and technologies essential to
its longer-term viability.
(d) Realizes and accepts the personal financial risk attendant to the
fact that that purchase of the Securities represents a speculative investment
involving a high degree of risk, and should not be purchased by any persons not
prepared to lose their entire investment.
(e) Realizes that the Company has recently completed a private
placement of $1,000,000 of convertible notes and warrants to purchase shares of
Common Stock on terms and conditions that are the same as the terms of the Notes
and Warrants offered hereby.
(f) Realizes that, in connection with a contemplated additional equity
financing of up to $15 million that the Company will seek to consummate within
the next six months, the Company presently intends to effect a one-for-eight
reverse split of its outstanding Common Stock following (i) completion of this
offering of Securities, and (ii) the listing of its shares of Common Stock for
trading on the American Stock Exchange, NASD OTC-Bulletin Board or other United
States securities exchange, and that, as a result of such Reverse Split, the
aggregate number of shares that may be purchased on conversion of the Notes and
included in the Securities shall be 12.5% of the number of shares of Common
Stock issued and issuable to the undersigned on the closing date of this
investment.
(g) Can bear the economic risk of an investment in the Securities for
an indefinite period of time, can afford to sustain a complete loss of such
investment, has no need for liquidity in connection with an investment in the
Securities, and can afford to hold the Securities indefinitely.
(h) Realizes that there will be no market for the Securities, and that
there are significant restrictions on the transferability of such Securities.
(i) Realizes that the Securities have not been registered for sale
under the Securities Act of 1933, as amended (the "Act"), or applicable state
securities laws (the "State Laws"), and they may be sold only pursuant to
registration under the Act and State Law, or an opinion of counsel that such
registration is not required.
(j) Is experienced and knowledgeable in financial and business
matters, capable of evaluating the merits and risks of investing in the
Securities and does not need or desire the assistance of a knowledgeable
representative to aid in the evaluation of such risks (or, in the alternative,
has a knowledgeable representative whom such investor intends to use in
connection with a decision as to whether to purchase the Securities).
(k) Realizes that (a) there are substantial restrictions on the
transfer of the Securities; (b) there is not currently a public market for the
Securities, and it is unlikely that in the future there will exist a public
market for the Notes, and accordingly, for the above and other reasons, the
undersigned may not be able to liquidate an investment in such securities for an
indefinite period.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to and agrees with Investor, as follows:
(a) The Company Materials as of their respective dates do not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Company is authorized to issue 150,000,000 shares of its
Common Stock. As of the date hereof, an aggregate of 89,134,002 shares of Common
Stock are issued and outstanding, a maximum of 8,000,000 shares are issuable
upon conversion of an existing $1,000,000 convertible note due and 16,597,866
additional shares of Common Stock are reserved for issuance upon exercise of
outstanding stock options and warrants.
(c) All of the outstanding shares of capital stock of the Company and
the Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable.
(d) The Company has the requisite corporate power and authority to
enter into and execute, deliver and perform its obligations under this
Agreement, the Notes and the Warrant (collectively, the "Transaction
Documents"), including, without limitation to incur the Indebtedness evidenced
by the Notes and to permit the conversion of such Notes into Common Stock of the
Company. Each of the Transaction Documents has been duly and validly authorized
by the Company and, when executed and delivered by the Company, will constitute
a valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms except as the enforcement thereof may be
limited by (A) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally or (B) general principles of equity and
the discretion of the court before which any proceeding therefore may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the "Enforceability Exceptions").
(e) The Securities have been duly authorized and, when issued upon
payment thereof in accordance with this Agreement, will have been validly
issued, fully paid and non-assessable. The Conversion Shares have been duly
authorized by the Board of Directors and will be validly reserved for issuance,
and when issued upon conversion of the Notes in accordance with the terms of the
Notes, will have been validly issued, fully paid and non-assessable. The
stockholders of the Company have no preemptive or similar rights with respect to
the Common Stock. Upon conversion of the Notes, the delivery of the Conversion
Shares to Investor, duly endorsed or accompanied by duly executed stock xxxxxx,
xxxx transfer to Investor good and indefeasible title to such shares, free and
clear of all liens, proxies, encumbrances and claims of every kind and Company
will forever warrant and defend (with counsel acceptable to Investor) such
title, and indemnify Investor for all adverse claims, demands, or liability with
respect to the validity of such title or transfer thereof, against any claimants
thereto.
(f) The Conversion Price, Floor Price and Conversion Shares issuable
upon conversion of the Note issued to the undersigned under this Agreement, and
all other terms and conditions of the Note are (i) as described in this
Agreement and the Note, and (ii) identical in all material respects to the
conversion price, terms and conditions of conversion and other provisions of the
Securities issued to other Investors in the Securities.
(g) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby and the fulfillment of the terms thereof will not violate,
conflict with or constitute or result in a breach of or a default under (i) the
articles of incorporation or bylaws of any of the Company or the Subsidiaries
(or similar organizational document) or (ii) any statute, judgment, decree,
order, rule or regulation of any court or governmental agency or other body
applicable to the Company or the Subsidiaries or any of their respective
properties or assets.
3. COVENANTS AND AGREEMENTS OF THE COMPANY.
(a) Promptly following the Closing Date (and in no event later than
sixty (60) days thereafter), the Company shall cause to be filed with the United
States Securities and Exchange Commission ("SEC") either (i) a Form SB-2
registration statement pursuant to which the Company will offer to sell up to
$15.0 million of its Common Stock pursuant to an initial public offering in the
United States (the "IPO"), or (ii) a Form 10 registration statement in order to
register the publicly traded shares of Company Common Stock under The Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In addition, the Company
shall cause to be filed with the National Association of Securities Dealers,
Inc. ("NASD"), a Form 15c-211 to cause the Company Common stock to be listed for
trading on a "U.S. National Securities Exchange" defined below.
(b) The Company shall use its best efforts to cause the Form SB-2
registration statement or the Form 10 registration statement, as applicable
(each a "Registration Statement"), to be declared effective by the SEC and to
have shares of Company Common Stock approved for trading on any one of the
American Stock Exchange, the Nasdaq Stock Market or the NASD OTC-Bulletin Board
(a "U.S. National Securities Exchange"), as soon as practicable thereafter;
PROVIDED, HOWEVER, the Company shall consummate either the IPO or the listing of
shares of its Common Stock on a U.S. National Securities Exchange by not later
than April 15, 2007 (the "Outside U.S. Listing Date").
(c) Following consummation of the Sale of the Securities, the Company
will seek to raise between $6,000,000 and $15,000,000 from the sale of shares of
Common Stock either (i) through the IPO, or (ii) in connection with a private
placement of equity securities immediately following the listing of the Common
Stock on a U.S. National Securities Exchange; in either case, through Empire
and/or other investment bankers or registered broker/dealers acceptable to the
Company and Empire (the "Additional Financing"). The Company shall use its best
efforts (without being legally obligated) to consummate such Additional
Financing as soon as reasonably practicable.
(e) Simultaneous with the closing of the Additional Financing, and
based upon an initial Additional Financing at an assumed minimum price per share
of Common Stock of $2.00 per share, the Company shall consummate a reverse split
of its outstanding common stock (the "Reverse Stock Split").
BY HIS OR ITS EXECUTION OF THIS AGREEMENT, THE UNDERSIGNED INVESTOR ACKNOWLEDGES
AND AGREES THAT THE COVENANTS AND AGREEMENTS OF THE COMPANY SET FORTH IN THIS
SECTION 3 REPRESENT ONLY THE COMPANY'S COMMITMENT TO USE ITS REASONABLE BEST
EFFORTS TO CONSUMMATE THE U.S. NATIONAL SECURITIES EXCHANGE LISTING AND THE
ADDITIONAL FINANCING CONTEMPLATED HEREBY. THERE CAN BE NO ASSURANCE THAT SUCH
U.S NATIONAL SECURITIES EXCHANGE LISTING OR ADDITIONAL FINANCING SHALL BE
CONSUMMATED PRIOR TO THE MATURITY DATE OF THE NOTES OR UPON THE TERMS AND
CONDITIONS OUTLINED ABOVE, IF AT ALL. THE COMPANY SHALL HAVE NO LIABILITY TO THE
INVESTOR OR ANY OTHER HOLDERS OF THE NOTES IN THE EVENT IT IS UNABLE,
NOTWITHSTANDING ITS REASONABLE BEST EFFORTS, TO CONSUMMATE SUCH U.S. NATIONAL
SECURITIES EXCHANGE LISTING OR ADDITIONAL FINANCING.
4. INVESTMENT INTENT
The undersigned has been advised that the Securities have not been
registered under the Act or relevant State Laws but are being offered, and will
be offered, and sold pursuant to exemptions from the Act and State Laws, and
that the Company's reliance upon such exemption is predicated in part on the
undersigned's representations contained herein. The undersigned represents and
warrants that the Securities are being purchased for the undersigned's own
account and for long term investment and without the intention of reselling or
redistributing the Securities; that the undersigned has made no agreement with
others regarding any of the Securities; and that the undersigned's financial
condition is such that it is not likely that it will be necessary for the
undersigned to dispose of any of the Securities in the foreseeable future. The
undersigned is aware that (1) there is presently no public market for the
Securities, and in the view of the Securities and Exchange Commission a purchase
of securities with an intent to resell by reason of any
foreseeable specific contingency or anticipated change in market values, or any
change in the liquidation or settlement of any loan obtained for the acquisition
of any of the Securities and for which the Securities were or may be pledged as
security would represent an intent inconsistent with the investment
representations set forth above, and (2) the transferability of the Securities
is restricted and (a) requires the written consent of the Company, and (b) will
be further restricted by a legend placed on the certificate(s) representing the
Securities containing substantially the following language:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH
LAWS COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT, OFFER, PLEDGE OR OTHER DISTRIBUTION FOR
VALUE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
The undersigned further represents and agrees that if contrary to the
undersigned's foregoing intentions, the undersigned should later desire to
dispose of or transfer any of the Securities in any manner, the undersigned
shall not do so without first obtaining (1) an opinion of counsel satisfactory
to the Company that such proposed disposition or transfer may be made lawfully
without the registration of such Securities pursuant to the Act and applicable
State Laws, or (2) registration of such Securities (it being expressly
understood that the Company shall not have any obligation to register such
Securities except as explicitly provided by written agreement).
5. RESIDENCE
The undersigned represents and warrants that the undersigned is a bona
fide resident of the State of _________________________ and that the Securities
are being accepted by the undersigned in the undersigned's name solely for the
undersigned's own beneficial interest and not as nominee for, on behalf of, for
the beneficial interest of, or with the intention to transfer to, any other
person, trust or organization except as specifically set forth in this
Agreement).
PARAGRAPH 6 BELOW IS REQUIRED IN CONNECTION WITH EXEMPTIONS FROM
THE ACT AND STATE LAWS BEING RELIED ON BY THE COMPANY WITH
RESPECT TO OFFER AND SALE OF THE SHARES. ALL OF SUCH INFORMATION
WILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWED ONLY BY THE
COMPANY, THE AGENT, AND THEIR COUNSEL. THE UNDERSIGNED AGREES TO
FURNISH ANY ADDITIONAL INFORMATION WHICH THE COMPANY OR ITS
COUNSEL DEEMS NECESSARY IN ORDER TO VERIFY THE RESPONSES SET
FORTH ABOVE.
6. ACCREDITED STATUS
The undersigned represents and warrants as follows (check if
applicable):
a. Accredited Investor: Individual
(1)_______ The undersigned is an individual with a net worth, or
a joint net worth together with his or her spouse, in excess of
$1,000,000. (In calculating net worth, you may include equity in
personal property and real estate, including your principal
residence, cash, short term investments, stock and securities.
Equity in personal property and real estate should be based on
the fair market value of such property minus debt secured by such
property.)
(2)________ The undersigned is an individual who had an
individual income in excess of $200,000 in each of the prior two
years and reasonably expects an income in excess of $200,000 in
the current year; or
(3)________ The undersigned is an individual who had with his/her
spouse joint income in excess of $300,000 in each of the prior
two years and reasonably expects an income in
excess of $300,000 in the current year.
(4)________ The undersigned is a director or executive officer of
the Company.
b. Accredited Investor: Entity
(1)________ The undersigned is an entity all of whose equity
owners meet one of the tests set forth in a through d above.
(2)________ The undersigned is an entity and is an "Accredited
Investor" as defined in Rule 501(a) of Regulation D under the
Act. This representation is based on the following (check one or
more, as applicable):
(a)______ The undersigned (or in the case of a trust, the
undersigned trustee) is a bank or savings and loan
association as defined in Sections 3(a)(2) and 3(a)(5)(A) of
the Act, acting either in its individual or fiduciary
capacity.
(b)______ The undersigned is an insurance company as defined
in Section 2(13) of the Act.
(c)_______ The undersigned is an investment company
registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48)
of that Act.
(d)________ The undersigned is a Small Business Investment
Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment
Act of 1958.
(e)________ The undersigned is an employee benefit plan
within the meaning of Title I of the Employee Retirement
Income Security Act of 1974 and either (check one of more,
as applicable):
(i)________ the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association,
insurance company, or registered investment advisor; or
(ii)________ the employee benefit plan has total assets
in excess of $5,000,000; or
(iii)________ the plan is a self-directed plan with
investment decisions made solely by persons who are
"Accredited Investors" as defined under the 1933 Act.
(f)________ The undersigned is a private business
development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
(g)________ The undersigned has total assets in excess of
$5,000,000, was not formed for the specific purpose of
acquiring shares of the Company and is one or more of the
following (check one or more, as appropriate):
(i)________an organization described in Section
501(c)(3) of the Internal Revenue Code; or
(ii)________ a corporation; or
(iii)________ a Massachusetts or similar business,
trust; or
(iv)________ a partnership.
(h)_________ The undersigned is a trust with total assets
exceeding $5,000,000, which was not formed for the specific
purpose of acquiring shares of the Company and whose
purchase is directed by a person who has such knowledge and
experience in financial and business matters that he/she is
capable of evaluating the merits and risks of the investment
in the Securities. IF ONLY THIS RESPONSE IS CHECKED, PLEASE
CONTACT THE COMPANY TO RECEIVE AND COMPLETE AN INFORMATION
STATEMENT BEFORE THIS SUBSCRIPTION CAN BE CONSIDERED BY THE
COMPANY.
7. MANNER IN WHICH TITLE TO THE NOTES AND WARRANTS IS TO BE HELD
Please check one:
______Individual
______Joint Tenant with Right of Survivorship
______Partnership
______Tenants in Common
______Corporation
______Other (Specify_____________________)
8. MISCELLANEOUS
(a) The undersigned agrees that the undersigned understands the
meaning and legal consequences of the agreements, representations, and
warranties contained herein; agrees that such agreements, representations and
warranties shall survive and remain in full force and effect after the execution
of the Securities; and further agrees to indemnify and hold harmless the
Company, each current and future officer, director, employee, agent and
shareholder from and against any and all loss, damage or liability due to, or
arising out of, a breach of any agreement, representation or warranty of the
undersigned contained herein.
(b) This Agreement shall inure to the benefit of and be binding upon
Investor and the Company and their respective successors and legal
representatives. Neither the Company nor any Investor may assign this Agreement
or any rights or obligation hereunder without the prior written consent of the
other party.
(c) This Agreement, together with Transaction Documents, constitutes
the entire agreement among the parties hereto and supersedes all prior
agreements, understandings and arrangements, oral or written, among the parties
hereto with respect to the subject matter hereof and thereof.
(d) If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby.
(e) THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS
AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PROVISIONS
RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL COURTS
LOCATED IN THE CITY OF NEW YORK, NEW YORK AND HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
(f) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(g) Facsimile signatures shall be construed and considered original
signatures for purposes of enforcement of the terms of this agreement.
[SIGNATURE PAGE FOLLOWS - THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
INDIVIDUAL SUBSCRIBERS:
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Signature
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Name (Typed or Printed)
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Street Address
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City, State and Zip Code
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Home Telephone Number
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Social Security Number
Tax Identification Number (for corporations or other entities)
ZBB Energy Corporation, hereby acknowledges receipt from
__________________________________ of such subscriber's check in the amount of
$______________________, and accepts this subscription of _________ Securities
as of August__ 2006.
ZBB ENERGY CORPORATION
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Signature
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Name (Typed or Printed)
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Title
