SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this "Agreement") is dated as of the 25th
day of July, 2003, by and between ITOCHU Corporation, a Japanese kabushiki
kaisha ("ITOCHU"), and ENER1, Inc., a U.S., Florida corporation ("ENER1" and
collectively with ITOCHU the "Shareholders" and each individually as a
"Shareholder").
WHEREAS, the Shareholders are both shareholders of EnerStruct, Inc., a
Japanese kabushiki kaisha (the "Corporation"); and
WHEREAS, each of ITOCHU and ENER1 are, through separate license
agreements with the Corporation, granting licenses to the Corporation for
technologies contained in certain pending and granted patents, as more fully set
forth in said license agreements; and
WHEREAS, the Shareholders wish to establish certain terms, provisions
and conditions with respect to (i) the Common Stock of the Corporation owned or
controlled by the Shareholders; (ii) the management of the Corporation; (iii)
assuring continuity in the management and ownership of the Corporation; and (iv)
certain other matters relating to the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Shareholders agree as follows:
1. Definitions.
"Affiliate" means, as to any person or entity, any person or entity
controlling, controlled common control with such person or entity. For the
avoidance of doubt, no Shareholder shall be deemed to be an Affiliate of the
Corporation.
"Common Stock" means the Corporation's Common Stock or any capital
stock of the Corporation issued or issuable in respect of Common Stock in
connection with any reclassification, reorganization or similar transaction
affecting the Common Stock.
"Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not beneficially own in excess of 5% of the
Shares on a fully-diluted basis (a "5% Owner"), who is not an Affiliate of any
such 5% Owner and who is not the spouse, sibling or descendant (by birth or
adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner such
other persons.
"Initial Public Offering" means the public offer or sale of Shares of
the Corporation, pursuant to the registration thereof under applicable law.
"Sale of the Corporation" means the sale of the Corporation to an
Independent Third Party or group of Independent Third Parties, pursuant to which
such party or parties acquire (i) capital stock of the Corporation possessing
the voting power under normal circumstances to elect a majority of the
Corporation's Board of Directors (whether by merger, consolidation or sale or
transfer of the Corporation's capital stock) or (ii) all or substantially all of
the Corporation's assets determined on a consolidated basis.
1
"Shares" means, as of any date of determination thereof, (i) any Common
Stock or Preferred Stock of the Corporation, (ii) any equity securities issued
or issuable directly or indirectly with respect to any Common Stock or Preferred
Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Corporation, each of (i), (ii) and (iii) to the extent beneficially
owned by a Shareholder or an Affiliate thereof. Any determination hereunder of
the percentage of outstanding Stock held by one or more holders thereof shall be
performed on the basis that all Preferred Stock then outstanding is converted
into Common Stock in accordance with the terms of the Preferred Stock set forth
in the articles of incorporation of the Corporation, as in effect on the date of
such determination.
2. Initial Investments.
The Shareholders currently own the following amount of Shares:
Shareholder Number of Shares Percentage
ITOCHU 2,500 51%
ENER1 2,400 49%
The Shares initially represents one-hundred percent (100%) of the outstanding
equity of the Corporation as of the date of this Agreement.
3. Agreement with Respect to Voting.
The Shareholders agree to take all actions necessary, including,
without limitation, voting their Shares, to cause the Corporation to be managed
in accordance with the terms of this Agreement. The Shareholders acknowledge
that the provisions of this Section shall in no way affect or diminish their
obligations arising pursuant to any and all other sections of this Agreement.
4. Maintenance of Ownership Share; New Shares Authorization or
Issuance; Dilution.
(a) The Shareholders shall cause the Corporation to not
authorize or issue any additional Shares, unless all the Shareholders agree to
such issuance in writing.
(b) The Shareholders agree that upon the issuance of any
additional Shares by the Corporation, the Shareholders' ownership interest in
the Corporation shall be equally and proportionally diluted and shall remain in
compliance with Subsection (d) of this section.
(c) If the Corporation undertakes an Initial Public
Offering, the aggregate percentage of ownership by the Shareholders shall not
fall below 51% of the issued and outstanding Common Stock of the Corporation
following the completion of the Initial Public Offering.
2
(d) Unless agreed otherwise in writing, during the term
of this Agreement, ITOCHU and ENER1 shall directly or indirectly own or control
51% and 49%, respectively, of the Shares of the total Shares of the Corporation
owned or controlled by the Shareholders and their Affiliates. For example, if
the Shareholders and/or the Corporation agree to sell an interest in the
Corporation such that the purchaser would own 20% of the total outstanding stock
of the Corporation after the purchase, then ITOCHU's ownership would be 51% of
the remaining 80%, and ENER1's ownership would be 49% of the remaining 80%.
ITOCHU and its Affiliates shall not own or control more than 51% of the
outstanding Shares of the Corporation, and ENER1 and its Affiliates shall not
own or control more than 49% of the outstanding Shares of the Corporation.
5. Board of Directors; Management of Corporation.
(a) The Shareholders shall cause the Corporation to be
managed by the Board, which shall be composed of no less than five (5) and no
more thanseven (7) directors. The Shareholders shall cause the election of three
(3) directors designated by ITOCHU and two (2) directors designated by ENER1 as
of the date hereof and at each annual meeting of the Shareholders thereafter
during the term of this Agreement. The Shareholders shall cause the Corporation
to have one (1) representative director, who shall be designated by ITOCHU from
among the [three (3)] directors appointed by ITOCHU. If any Shareholder fails to
designate a representative to fill a directorship or if any directorship remains
unfilled following the designation of persons pursuant to the terms of this
Section 5, the election of a person to such directorship shall be accomplished
in accordance with applicable law.
(b) If any Shareholder is, at any time, no longer
entitled to designate a person to serve as a director of the Corporation, then,
any person previously nominated or designated by such Shareholder shall promptly
resign or the Shareholders will take such actions as may be required to remove
such director, and the vacancy so created shall be filled as provided in the
Corporation's articles of incorporation or by applicable law. The Shareholder
that designated a director may request the removal of such director by providing
written notice to the other Shareholder. Upon receipt of any such notice, the
Shareholders shall cause, or shall cause the directors designated by such
Shareholder to cause, the specified director to be removed from the Board. Each
Shareholder shall be solely liable for any costs or damages associated with the
removal of any director nominated by such Shareholder. The removal from the
Board (with or without cause) of any representative designated hereunder by a
Shareholder shall only be at such Shareholder's written request. If any
representative designated hereunder by any Shareholder for any reason ceases to
serve as a member of the Board during his term of office at any time while the
Shareholder is still entitled to designate a director hereunder, the resulting
vacancy on the Board shall be filled by a representative designated by such
Shareholder, as provided hereunder.
(c) The Shareholders agree and acknowledge that ITOCHU,
acting through the directors appointed by it to the Board or otherwise, shall
have the right to appoint the statutory auditor for the Corporation.
(d) The Shareholders agree and acknowledge that the
day-to-day operations of the Corporation shall be managed by officers and
employees as designated by ITOCHU, or appointed by a majority of the Board.
3
6. Conflicting Agreements.
Each Shareholder represents that it has not granted and is not a party
to any proxy, voting trust or other agreement which is inconsistent with or
conflicts with the provisions of this Agreement, and no Shareholder shall grant
any proxy or become party to any voting trust or other agreement which is
inconsistent with or conflicts with the provisions of this Agreement. No
Shareholder shall act, for any reason, as a member of a group or in concert or
enter into any agreement or arrangement with any other person in connection with
the acquisition, disposition or voting of Shares in any manner which is
inconsistent with the provisions of this Agreement.
7. Articles of Incorporation.
The articles of incorporation of the Corporation may be amended in any
manner permitted thereunder, except that the articles of incorporation shall not
be amended in any manner (i) that would conflict with, or be inconsistent with,
the provisions of this Agreement or (ii) as long as directors are entitled to be
appointed under this Agreement, that has not been approved by at least a
majority of the directors appointed pursuant to Section 5 of this Agreement;
provided, however, that this Section 7 shall not apply to an amendment to the
articles of incorporation of the Corporation to increase the authorized capital
stock of the Corporation.
8. Actions Consistent with Agreement.
The Shareholders shall take all steps necessary to ensure that the
Corporation does not circumvent this Agreement by taking any action through a
subsidiary or affiliate that would be prohibited under this Agreement.
9. Sale of the Corporation or Substantially all of the
Corporation's Assets.
(a) The Sale of the Corporation or the sale of
substantially all of the Corporation's assets shall require approval by a
majority of the Board, including the approval of the [two (2)] directors
appointed by ENER1. If a Sale of the Corporation or the sale of substantially
all of the Corporation's assets that is approved by a majority of the Board,
including the [two (2)] directors appointed by ENER1 (each such sale being an
"Approved Sale"), is structured as (i) a merger or consolidation, each of the
Shareholders shall waive any dissenter's rights, appraisal rights or similar
rights such holder may have in connection with such merger or consolidation, or
(ii) a sale of stock, each Shareholder shall agree to sell all of his Shares and
rights to acquire Shares on the terms and conditions approved by the Board. Each
Shareholder shall take all necessary or desirable actions in connection with the
consummation of an Approved Sale as reasonably requested by the Board.
(b) The obligations of each of the Shareholders with
respect to an Approved Sale shall be subject to the satisfaction of the
following conditions: (i) upon the consummation of an Approved Sale, each
Shareholder shall receive the same form of consideration and the same amount of
consideration as set forth in Section 10 below; and (ii) each Shareholder who,
at the time of an Approved Sale, holds then currently exercisable rights to
acquire shares of a class of Shares shall be given an opportunity to either (A)
exercise such rights prior to the consummation of the Approved Sale or (B)
receive in exchange for such rights consideration equal to the amount determined
by multiplying (1) the same amount of consideration per share of a class of
Shares received by holders of such class of Shares in connection with the
Approved Sale less the exercise price per share of such class of Shares of such
rights to acquire such class of Shares by (2) the number of shares of such class
of Shares represented by such rights.
4
10. Distributions Upon Sale of the Corporation.
In the event of a Sale of the Corporation, each Shareholder shall
receive in exchange for Shares held by such Shareholder the same form of
consideration on a pro rata basis from such a Sale of the Corporation that such
Shareholder would have received if such consideration had been distributed by
the Corporation in complete liquidation pursuant to the rights and preferences
set forth in the Corporation's articles of incorporation as in effect
immediately prior to such sale or exchange. Each Shareholder shall take all
necessary or desirable actions in connection with the distribution of such
consideration from such Sale of the Corporation as requested by the Corporation.
11. Transfer Restrictions.
(a) Notwithstanding any other provisions of this
Agreement to the contrary, no Shareholder may, directly or indirectly, sell,
assign, transfer, grant a participation in, pledge or otherwise dispose of (each
a "Transfer") the Shares held by such Shareholder to an any Person other than an
Affiliate of such Shareholder (each such Person being a "Prospective Buyer"),
unless such transferring Shareholder (the "Transferring Shareholder") first
gives the Corporation written notice (a "Transfer Notice") of such intention,
describing the price and the general terms upon which the Transferring
Shareholder intends to effect such transfer. The Corporation shall then have ten
(10) days following receipt of a Transfer Notice to purchase all, but not less
than all, of the Shares to be transferred (the "Offered Shares") at the same
price per share and on the same terms and conditions as which the Transferring
Shareholder is offering the Offered Shares to the Prospective Buyer by giving
written notice to the Transferring Shareholder of its intent to so purchase the
Offered Shares.
(b) In the event the Corporation fails to exercise its
right of first refusal set forth in Section 11(a) with respect to the Offered
Shares, then the Transferring Shareholder shall deliver a Transfer Notice to the
other Shareholder (the "Purchasing Shareholder"). The Purchasing Shareholder
shall have ten (10) days from the receipt of the Transfer Notice to agree to
purchase all, but not less than all, of the Offered Shares at the same price per
share and on the same terms and conditions as which the Transferring Shareholder
is offering the Offered Shares to the Prospective Buyer by giving written notice
to the Transferring Shareholder stating its intent to so purchase the Offered
Shares.
(c) In the event that both the Corporation and the
Purchasing Shareholder elect not to exercise their rights of first refusal
respectively set forth in Section 11(a) and Section 11(b), the Transferring
Shareholder may within sixty (60) days thereafter sell all, but not less than
all, of the Offered Shares to the Prospective Buyer at a per share price and
upon terms and conditions no more favorable than those specified in the Transfer
Notice. In the event that the Transferring Shareholder has not sold such Offered
Shares within such 60-day period, the Transferring Shareholder shall not
thereafter sell any Offered Shares without first offering the Offered Shares to
the Corporation and the other Shareholder in the manner provided for in this
Section 11.
5
(d) No Shareholder may transfer the Shares held by it (i)
other than in compliance with the provisions of this Agreement, (ii) unless,
prior to transferring any Shares to any person or entity, the transferring
Shareholder shall cause the prospective transferee to execute and deliver to the
Corporation and the other Shareholder a counterpart of this Agreement (which
shall be deemed to be an original part of this Agreement as though executed on
the date hereof) and (iii) unless such transfer is permitted under the Japanese
securities laws and any other applicable securities laws. Any attempt to
transfer or encumber any shares of Shares not in accordance with this Agreement
shall be null and void and, to the extent possible, each of the Shareholders
shall ensure that the Corporation does not give effect to such attempted
transfer or encumbrance in its stock records.
(e) If a Shareholder acquires any Shares as the result of
a transaction not subject to the provisions of Sections 11(a), 11(b) or 11(c)
(including in connection with a foreclosure), then such Shareholder will offer
to the Corporation and the other Shareholders the right to participate in such
acquisition in accordance with the provisions of Sections 11(a), 11(b) and 11(c)
hereof.
12. Confidential and Proprietary Corporation Information.
Each of the Shareholders agree to hold in absolute confidence all
confidential and proprietary business information of the Corporation, protect
all such information from disclosure and not to use any such information for his
or her personal gain or other benefit. Such information shall include, but not
be limited to: patents, trademarks, all accounting and financial data, customer
lists, contracts and correspondences, customer information, computer programs,
methods of manufacturing and business plans. The provisions of this Section 12
shall not apply to any information that (a) is or becomes publicly available
without breach of this Agreement; (b) can be shown by documentation to have been
known by a Shareholder prior to its receipt from the Corporation or the other
Shareholder; (c) is rightfully received from a third party who did not acquire
or disclose such information by a wrongful or tortious act; or (d) can be shown
by documentation to have been developed independently by a Shareholder without
reference to any confidential information of the Corporation.
13. Representations, Warranties, Covenants, and Indemnification.
(a) Each Shareholder represents and warrants to the other
Shareholder that, to its knowledge, there are no claims (or facts or
circumstances upon which such a claim could be based) that could dilute or
otherwise adversely affect the shareholdings of the other Shareholder. In the
event any such claim occurs, the other Shareholder may take such actions, in its
discretion, as necessary to protect its shareholdings in the Corporation; and
the Shareholder subject to the claim agrees to be fully responsible for all
legal fees incurred by the other Shareholder in protecting its interests from
such claim or claims.
(b) ITOCHU represents and warrants to ENER1 that:
(i) It is a corporation organized and existing,
and in good standing under, the laws of Japan, and that it has full and
unrestricted authority to enter into this Agreement and to perform its
obligations hereunder;
6
(ii) The execution, delivery and performance of
this Agreement by it will not result in any breach or violation of any contract,
agreement, undertaking, judgment, decree, order, law, regulation or rule to
which it is a party or by which it or any of its assets are bound; and
(iii) This Agreement has been duly and validly
executed and delivered by it and is binding upon and enforceable against it in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
(c) ENER1 represents and warrants to ITOCHU that:
(i) It is a corporation organized and existing,
and in good standing under, the laws of [the State of Florida, United States of
America], and that it has full and unrestricted authority to enter into this
Agreement and to perform its obligations hereunder;
(ii) The execution, delivery and performance of
this Agreement by it will not result in any breach or violation of any contract,
agreement, undertaking, judgment, decree, order, law, regulation or rule to
which it is a party or by which it or any of its assets are bound; and
(iii) This Agreement has been duly and validly
executed and delivered by it and is binding upon and enforceable against it in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
14. Patent Licenses.
The Shareholders shall license certain of their respective patent
rights to the Corporation as set forth in Schedule 14 hereto (each a "License
Agreement").
15. Term and Termination.
(a) This Agreement shall come into effect upon (i)
execution of this Agreement by each of the Shareholders and (ii) the completion
of each Shareholder's purchase of the Shares referenced in Section 2 above.
(b) This Agreement shall terminate upon the occurrence of
any of the following:
(i) the subsequent written agreement of the
Shareholders;
(ii) the termination of either License Agreement;
7
(iii) upon either Shareholder owning or
controlling less than twenty-five percent (25%) of
the Common Stock of the Corporation originally
purchased by such Shareholder and referenced in
Section 2 above ; or
(iv) any material breach or default of the terms
and conditions of this Agreement, if such breach or
default is not cured within thirty (30) days after
receipt of written notice from the non-breaching
party.
16. Amendment and Waiver.
Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this Agreement shall be effective against the parties
to this Agreement unless approved in writing by each of the Shareholders. The
failure of any Shareholder to enforce any of the provisions of this Agreement
shall in no way be deemed as a waiver of such provisions and shall not affect
the right of such Shareholder thereafter to each and every provision of this
Agreement in accordance with its terms.
17. Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law of any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or enforceability in any other jurisdiction, but this Agreement shall be
construed and enforced as if such invalid, illegal or unenforceable provision
had never been contained herein.
18. Entire Agreement.
Except as otherwise expressly set forth herein, this documents the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
19. Successors and Assigns.
Except as otherwise provided herein, this Agreement shall inure to the
benefit of and be enforceable by each of the Shareholders and any permitted
subsequent holders of Shares and the respective successors and permitted assigns
of each of them, so long as they hold any Shares.
20. Counterparts.
This Agreement may be executed in separate counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
and the same instrument.
8
21. Remedies.
Each of the Shareholders shall be entitled to enforce their rights
under this Agreement specifically, to recover damages by reason of any breach of
any provisions of this Agreement and to exercise all other rights existing in
their favor. The parties hereto agree and acknowledge that money damages may not
be an adequate remedy for any breach of the provisions of this Agreement and
that either of the Shareholders may, in its sole discretion, apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violation of the provisions
of this Agreement.
22. Notices.
All notices hereunder shall be made by certified or registered airmail,
return receipt requested, by reputable overnight courier, or by facsimile
transmission, and shall be sent to the following addresses (or at such other
address for a party as shall be specified by like notice; provided that notices
of a change of address shall be effective only upon receipt thereof):
Notices to ITOCHU: Xxxxxxxxx Xxxxxxx, Deputy Manager
Planning & Business Development Office
Industrial Machinery Division
ITOCHU Corporation
0-0-0 Xxxx-Xxxxxx
Xxxxxx-xx, Xxxxx 000-0000
XXXXX
Facsimile: 00-0-0000-0000
Notices to ENER1: Xxxxxx Xxxxxxx, CEO
ENER1, Inc.
000 X. Xxxxxxx Xxxxx Xx., Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
U.S.A.
Facsimile: 954.229.7595
With copy to: Xxxx Xxx, Director
ENER1, Inc.
000 X. Xxxxxxx Xxxxx Xx., Xxxxx 000
Ft. Xxxxxxxxxx, Xxxxxxx 00000
U.S.A.
Facsimile: 954.229.7595
Notices to the Corporation: Xxxxxxx Xxxxxx, President
EnerStruct, Inc.
0-0-0 Xxxx-Xxxxxx
Xxxxxx-xx, Xxxxx 000-0000
XXXXX
Facsimile: to be advised
Such notices shall be deemed effective, (a) if delivered in person or
by courier, upon actual receipt by the intended recipient, (b) if sent by
facsimile, on the date of transmission unless transmitted after normal business
hours at the location of the recipient, in which case on the following business
day; or (c) if mailed, upon the date of first attempted delivery.
9
23. Governing Law.
All questions concerning this Agreement shall be governed by and
interpreted in accordance with the laws of the Japan, without giving effect to
any choice of law or conflict of law provision or rules.
24. Jurisdiction.
The parties hereto hereby submit to the exclusive jurisdiction of
Japanese courts, with the Tokyo District Court as the court of first instance,
in respect of any controversy or claim arising out of, relating to or in
connection with this Agreement.
25. Descriptive Headings.
The descriptive headings of this Agreement are inserted for reference
only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
ITOCHU Corporation ENER1, Inc.
By: __________________________ By: __________________________
Name: __________________________ Name: __________________________
Title: __________________________ Title: __________________________
10
SCHEDULE 14
License Agreements
