STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is made and
entered into as of March 1, 2010, by and among The Quercus Trust (“Quercus” or the “Purchaser”), and Entech Solar,
Inc., a Delaware corporation (the “Company”).
WHEREAS,
the Purchaser desires to purchase from the Company, and the Company desires to
sell to Purchaser, shares of the Company’s common stock, par value $0.001
(“Common Stock”), on the
terms set forth herein; and
WHEREAS,
the Company is offering the Common Stock pursuant to Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
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1.
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Sale
of Shares.
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1.1. Purchase and Sale of
Shares. The Company hereby agrees to issue to Quercus
twenty-five million (25,000,000) shares of Common Stock at a price of $0.08 per
share (the “Share Price”), for an aggregate purchase price of $2,000,000, which
shares shall be purchased by Quercus upon the full execution of this
Agreement.
1.2. The
Closing. The sale and purchase of the Common Stock shall take
place at the offices of the Company, or at such other location as the Company
and Quercus mutually agree, on the date first set forth above (the “Closing”). At the
Closing, the Company shall deliver to Quercus a certificate representing the
Common Stock (the “ Certificate”) in the form set forth on Exhibit “A” hereto,
against delivery to the Company of a check or wire transfer in the amount of the
Share Price. The obligation of Quercus to consummate the purchase at
the Closing is subject to issuance of the Certificate by the Company and the
truth and accuracy of the representations and warranties of the Company in
Section 2 below.
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2.
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Representations and
Warranties of Company. The Company hereby represents and
warrants to Quercus that:
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2.1. Organization, Good Standing
and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has full corporate power and authority to own
and hold its properties and to conduct its business. The Company is
duly licensed or qualified to do business, and in good standing, in each
jurisdiction in which the nature of its business requires licensing,
qualification or good standing, except for any failure to be so licensed or
qualified or in good standing that would not have a material adverse effect on
(i) the Company, (ii) its consolidated results of operations, assets, or
financial condition, and (iii) its ability to perform its obligations under this
Agreement (a “Material Adverse
Effect”).
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2.2. Consents and
Approvals. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, regional, state or local governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement.
2.3. Authorization. The
Company has full corporate power and authority to execute, deliver and enter
into this Agreement and to consummate the transactions contemplated
hereby. All action on the part of the Company necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the Common Stock and
the performance of the Company’s obligations hereunder has been
taken. The Common Stock has been duly authorized and, when issued and
paid for in accordance with this Agreement, will be validly issued, fully paid
and non-assessable and will be free and clear of all liens imposed by or through
the Company other than restrictions imposed by this Agreement and applicable
securities laws. This Agreement has been duly executed and delivered
by the Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally and by general equitable principles, or (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
2.4. Compliance With Other
Instruments.
(a) The
execution and delivery by the Company of this Agreement and the consummation of
the transactions contemplated hereby will not (i) result in the violation of any
provision of the Certificate of Incorporation or By-laws of the Company, (ii)
result in any violation of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or by
which the Company is bound, (iii) except with respect to securities already held
by the Purchaser, trigger the increase in the rights of any holder of the
Company’s outstanding debt or equity securities, including securities converted
with such securities, (iv) conflict with, or result in a breach or violation of,
any of the terms or provisions of, or constitute (with due notice or lapse of
time or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement to which the Company is a party or
by which it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien upon any of the properties or
assets of the Company, in the cases of clauses (ii) and (iii) above, only to the
extent such conflict, breach, violation, default or lien reasonably could,
individually or in the aggregate, have or result in a Material Adverse
Effect.
(b) No
consent, approval, license, permit, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority remains to be obtained or is otherwise required to
be obtained by the Company in connection with the authorization, execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, including, without limitation the issue and sale of the Common Stock,
except filings as may be required to be made by the Company with (i) the United
States Securities and Exchange Commission (“SEC”) and (ii) state “blue sky” or
other securities regulatory authorities.
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2.5. Material Adverse
Changes. Since November 30, 2009, there has not occurred any
event or events which, singly or in the aggregate, have had or are reasonably
expected to have, a Material Adverse Effect upon the business, operations or
financial condition of the Company.
2.6. Issuance of
Securities. Except with respect to (i) shares of Common Stock
and certain warrants issued to Socius Capital Group, LLC, (ii) shares of Common
Stock issued to the Purchaser and (iii) any shares of restricted stock or stock
options issued to employees or directors under any of the Company’s equity
incentive plans, since September 30, 2009, the Company has not issued any
capital stock, or any securities convertible into, or exchangeable for, capital
stock, or entered into any written or oral commitment with respect thereto,
other than transactions with the Purchaser or in connection with the Company’s
stock option plan.
2.7. Litigation. There
are no pending or overtly threatened actions, claims, orders, decrees,
investigations, suits or proceedings by or before any governmental authority,
arbitrator, court or administrative agency which would have a Material Adverse
Effect, or which question the validity of this Agreement or any action taken or
to be taken by the Company in connection herewith, or which might result in any
impairment of the right or ability of the Company to enter into or perform his
obligations under this Agreement.
2.8. Reports; Financial
Statements. The Company’s Annual Report on Form 10-K for the
years ended December 31, 2007 and December 31, 2008 and Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30,
2009, and all Current Reports on Form 8-K filed to date (the “Reports”) have
been filed with the SEC and the Reports complied in all material respects with
the rules of the SEC applicable to such Reports on the date filed with the SEC,
and the Reports did not contain, on the date of filing with the SEC, any untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not materially misleading. The Reports have not been amended,
nor as of the date hereof has the Company filed any report on Form 8-K since
February 25, 2010. All of the consolidated financial statements included in the
Reports (the “Company Financial Statements”): (a) have been prepared
from and on the basis of, and are in accordance with, the books and records of
the Company and with generally accepted accounting principles applied on a basis
consistent with prior accounting periods; (b) fairly and accurately present in
all material respects the consolidated financial condition of the Company as of
the date of each such Company Financial Statement and the results of its
operations for the periods therein specified; and (c) in the case of the annual
financial statements, are accompanied by the audit opinion of the Company’s
independent public accountants. Except as set forth in the Company
Financial Statements, as of the date hereof, the Company has no liabilities
other than (x) liabilities which are reflected or reserved against in the
Company Financial Statements and which remain outstanding and undischarged as of
the date hereof, (y) liabilities arising in the ordinary course of business of
the Company since September 30, 2009, or (z) liabilities incurred as a result of
this Agreement or which were not required by generally accepted accounting
principles to be reflected or reserved on the Company Financial
Statements. Since September 30, 2009, there has not been any event or
change which has or will have a Material Adverse Effect and the Company has no
knowledge of any event or circumstance that would reasonably be expected to
result in such a Material Adverse Effect.
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2.9. Permits. The
Company has all franchises, permits, licenses and similar authorizations
necessary for the conduct of its business, and is not in default of any such
authorizations, where the absence or default of such authorization could have a
Material Adverse Effect.
2.10. Income Tax
Returns. The Company and each entity owned or controlled,
directly or indirectly by the Company or in which it has a fifty percent (50%)
or greater interest (each, a “Subsidiary”) has filed all federal and state
income tax returns which are required to be filed, and have paid, or made
provision for the payment of, all taxes which have become due pursuant to said
returns or pursuant to any assessment received by the Company or any Subsidiary,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. The Company has no knowledge of
any pending assessments or adjustments of the income tax payable of the Company
or its Subsidiaries with respect to any year.
2.11. Environmental
Matters. None of the operations of the Company or any
Subsidiary is the subject of any federal or state investigation evaluating
whether any remedial action involving a material expenditure is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment. To the Company’s knowledge, neither the Company nor any
Subsidiary has received notice of any actual or threatened claim, investigation,
proceeding, order or decree in connection with any release of any toxic or
hazardous waste or substance into the environment.
2.12. Offering. Subject
to the truth and accuracy of Purchaser’s representations set forth in Section 3
of this Agreement, the offer, sale and issuance of the securities contemplated
by this Agreement are exempt from the registration requirements of the
Securities Act, and the qualification or registration requirements of the Act or
other applicable blue sky laws. Neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemptions.
2.13. Patents and
Trademarks. The Company possesses all patents, patent rights,
trademarks, trademark rights, service marks, service xxxx rights, trade names,
trade name rights and copyrights necessary for its business without, to its
knowledge (but without having conducted any special investigation or patent
search), any conflict with or infringement of the valid rights of others and the
lack of which could materially and adversely affect the operations or condition,
financial or otherwise, of the Company, and the Company has not received any
notice of infringement upon or conflict with the asserted rights of
others.
2.14. Insurance. The
Company has in full force and effect fire and casualty insurance policies with
such coverages in amounts (subject to reasonable deductibles) customary for
companies similarly situated.
2.15. Related Party
Transactions. Except as disclosed in the Reports, no existing
contractual obligation of the Company or its Subsidiaries is with or for the
direct benefit of (i) any party owning, or formerly owning, beneficially or of
record, directly or indirectly, in excess of five percent (5%) of the
outstanding capital stock of the Company, (ii) any director, officer or similar
representative of the Company, other than employment agreements, (iii) any
natural person related by blood, adoption or marriage to any party described in
(i) or (ii), or (iv) any entity in which any of the foregoing parties has,
directly or indirectly, at least a five percent (5%)
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beneficial
interest (a “Related Party”). Without limiting the generality of the
foregoing, no Related Party, directly or indirectly, owns or controls any
material assets or material properties which are used in the Company’s business
and to the knowledge of the Company, no Related Party, directly or indirectly,
engages in or has any significant interest in or connection with any business
which is, or has been within the last two years, a competitor, customer or
supplier of the Company or has done business with the Company or which currently
sells or provides products or services which are similar or related to the
products or services sold or provided in connection with the
Business.
2.16. No Anti-Dilution
Rights. Except with respect to any such provisions for the
benefit of the Purchaser, the transactions contemplated hereby will not trigger
any anti-dilution provisions contained in any existing shareholder
agreements.
2.17. Full
Disclosure. No representation, warranty, schedule or
certificate of the Company made or delivered pursuant to this Agreement contains
or will contain any untrue statement of fact, or omits or will omit to state a
material fact the absence of which makes such representation, warranty or other
statement misleading.
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3.
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Representations and
Warranties of Quercus. Quercus hereby represents and
warrants to, and agrees with, the Company
that:
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3.1. Restricted
Securities. Quercus understands that (i) the Common Stock is
characterized as “restricted securities” under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering, (ii) under such laws and applicable regulations
such securities may be resold without registration under federal and state
securities laws only in certain limited circumstances, and (iii) the Company may
require a legal opinion of Quercus’ counsel with respect to unregistered
transfers.
3.2. Accredited
Investor. Quercus represents that it is an “accredited
investor” within the meaning of Regulation D promulgated under the Securities
Act.
3.3. Legends. Quercus
understands that the certificates evidencing the Common Stock will bear
substantially the following legends:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF
SUCH SECURITIES ACT.
3.4. Investment
Purposes. The securities will be acquired for investment for
Quercus’ own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the federal or state
securities laws, and Quercus has no present intention of selling, granting any
participation in, or otherwise distributing the same. Quercus further represents
that he or it does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the securities.
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3.5. Litigation. There
are no claims before any governmental entity or arbitrator pending or, to such
Purchaser’s knowledge, currently threatened against or with respect to such
Purchaser relating to or affecting the Common Stock which question the validity
of this Agreement or any action taken or to be taken by such Purchaser in
connection herewith, or which might result in any impairment of the right or
ability of such Purchaser to enter into or perform its obligations under this
Agreement.
3.6. Awareness of Company
Performance. Purchaser acknowledges that (i) it has received
and reviewed the Company’s financial statements (a) as of and for the year ended
December 31, 2008 and (b) as of and for the nine-month period ended September
30, 2009, (ii) it has received or has had full access to all the information
Purchaser considers necessary or appropriate to make an informed decision with
respect to the purchase of the Units pursuant to this Agreement, and (iii) it
has had an opportunity to ask questions and receive answers from the Company
regarding the Company’s financial performance and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Purchaser or to which Purchaser had
access.
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4.
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Survival of
Representations and Warranties. All representations,
warranties and agreements made by the Company and Quercus in this
Agreement or in any certificate or other instrument delivered pursuant
hereto shall survive the Closing and any investigation and discovery by
the Company or by Quercus, as the case may be, made at any time with
respect thereto; provided, however, that, other than with respect to
Section 2.6 (for which there shall be no time limit), neither Quercus nor
the Company shall have any liability to the other for any
misrepresentation, inaccuracy or omission in any representation or
warranty, or any breach of any representation or warranty, unless the
party asserting a claim with respect to any thereof gives to the other
written notice of such claim on or before the date which is two (2) years
following the Closing Date.
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5.
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Indemnification.
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5.1. Indemnification by the
Company. In addition to all other sums due hereunder or
provided for in this Agreement, the Company agrees to indemnify and hold
harmless the Purchaser and its respective “Affiliates” (as defined in Rule 12b-2
of the General Rules and Regulations under the Exchange Act) and their
respective officers, directors, agents, representatives, employees,
subsidiaries, partners and controlling persons (each, an “indemnified party”)
from and against any and all losses, claims, damages, expenses (including
reasonable fees, disbursements and other charges of counsel) or other
liabilities (“Liabilities”) resulting from any breach of any covenant,
agreement, representation or warranty of the Company in this Agreement;
provided, however, that the Company shall not be liable under this Section 5.1:
(a) for any amount paid in settlement of claims without the Company’s consent
(which consent shall not be unreasonably withheld) or (b) to the extent that it
is finally judicially determined that such Liabilities resulted primarily from
the willful misconduct or bad faith of such indemnified party; provided,
further, that if and to the extent that such indemnification is held, by final
judicial determination to be unenforceable, in whole or in part, for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of such indemnified Liability. In connection with the obligation of
the Company to indemnify for expenses as set forth above, the Company
further
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agrees to
reimburse each indemnified party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
indemnified party; provided, however, that if an indemnified party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Liabilities in question
resulted primarily from the willful misconduct or bad faith of such indemnified
party.
5.2. Notification;
Procedure. Each indemnified party under Section 5.1 will,
promptly after the receipt of notice of the commencement of any action or other
proceeding against such indemnified party in respect of which indemnity may be
sought from the Company under Section 5.1, notify the Company in writing of the
commencement thereof. The omission of any indemnified party so to
notify the Company of any such action shall not relieve the Company from any
liability which it may have to such indemnified party (i) other than pursuant to
Section 5.1 or (ii) under Section 5.1 unless, and only to the extent that, such
omission results in the Company’s forfeiture of substantive rights or
defenses. In case any such action or other proceeding shall be
brought against any indemnified party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that any
indemnified party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any
action or proceeding in which both the Company and an indemnified party is, or
is reasonably likely to become, a party, such indemnified party shall have the
right to employ separate counsel at the Company’s expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel to
such indemnified party, (a) there are or may be legal defenses available to such
indemnified party or to other indemnified parties that are different from or
additional to those available to the Company or (b) any conflict or potential
conflict exists between the Company and such indemnified party that would make
such separate representation advisable; provided, however, that in no event
shall the Company be required to pay fees and expenses under this sentence of
Section 5.1 for more than one firm of attorneys in any jurisdiction in any one
legal action or group of related legal actions. The Company agrees
that the Company will not, without the prior written consent of the Purchaser,
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters contemplated
hereby (if any indemnified party is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of the Purchaser and each other
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding. No such settlement shall impose any
restriction on the future conduct of any indemnified party without such party’s
consent, which may be withheld in such party’s discretion. The rights
accorded to indemnified parties hereunder shall be in addition to any rights
that any indemnified party may have at common law, by separate agreement or
otherwise.
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6.
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Miscellaneous.
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6.1. Entire
Agreement. This Agreement contains the entire agreement among
the parties with respect to the exchange contemplated hereby.
6.2. Governing
Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware.
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6.3. Counterparts. 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.
6.4. Severability. The
invalidity of any portion hereof shall not affect the validity, force, or effect
of the remaining portions hereof. If it is ever held that any restriction
hereunder is too broad to permit enforcement of such restriction to its fullest
extent, the parties agree that a court of competent jurisdiction may enforce
such restriction to the maximum extent permitted by law against those for whom
it may be enforceable, and each party hereby consents and agrees that such scope
may be judicially modified accordingly in any proceeding brought to enforce such
restriction.
6.5. Further
Assurances. The parties hereto shall, without additional
consideration, execute and deliver or cause to be executed and delivered such
further instruments and shall take or cause to be taken such further actions as
are necessary to carry out more effectively the intent and purpose of this
Agreement.
6.6. Successors and
Assigns. Except as otherwise provided herein, the terms and
conditions of Section 5 of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.7. Titles and
Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.8. Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified, (ii)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient, if not, then on the next business day; (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the
address as set forth on the signature page hereof or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto.
6.9. Finder’s
Fee. Each party represents that it neither is nor will be
obligated for any finders’ fee or commission in connection with this
transaction. Quercus agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finders’ fee (and the costs and expenses of defending against such liability or
asserted liability) for which Quercus or any of its trustees, employees or
representatives is responsible. The Company agrees to indemnify and
hold harmless Quercus from any liability for any commission or compensation in
the nature of a finders’ fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
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6.10. Amendments and
Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Quercus. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding, and each
future holder of all such securities and the Company.
6.11. Aggregation of
Stock. All shares of Common Stock held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
THE
QUERCUS TRUST
By: /s/ Xxxxx
Xxxxxxx
Xxxxx Xxxxxxx
Address:
0000
Xxxxxxxx Xxxxx
Xxxxxxx,
Xxxxxxxxxx 00000
By: /s/ Xxxxxx X.
Xxxxxx
Xxxxxx X. Xxxxxx, Chief Financial Officer
Address:
00000
Xxxx Xxxxx Xxxx., Xxxxx 000
Xxxx
Xxxxx, Xxxxx 00000
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