[REDACTED]
between
ENOVA SYSTEMS, INC.,
a California corporation
and
[REDACTED]
Dated as of June 14, 2001
VALUE PARTICIPATION AGREEMENT
THIS [REDACTED] AGREEMENT (this "Agreement") is dated as of June 14,
2001, by and between ENOVA SYSTEMS, INC., a California corporation (the
"Company"), and [REDACTED].
Statement of Purpose
The Company [REDACTED] wish to enter into a [REDACTED] arrangement
pursuant to which [REDACTED] would purchase or would direct its [REDACTED] to
purchase from the Company, and the Company would manufacture and
supply,[REDACTED]; and
As consideration for [REDACTED] entering into such arrangement with the
Company, the Company proposes [REDACTED]
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person; provided, that in no event shall [REDACTED].
Without limiting the foregoing, a Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power (a) to vote
10% or more of the securities having ordinary voting power for the election of
directors or other managers of such other Person or (b) to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
"Aggregate Number" [REDACTED]
"Agreement" means this [REDACTED] Agreement, as amended or supplemented
from time to time.
[REDACTED] has the meaning assigned thereto in Section 4.10(a)(ii).
"Articles of Incorporation" means the Articles of Incorporation of the
Company, as amended or supplemented from time to time in accordance with this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or other day
on which [REDACTED] are authorized or required by law or executive order to
close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital shares, partnership interests, membership interests or
other equivalent equity interests and any rights (other than debt securities
convertible into or exchangeable for capital shares), [REDACTED] or other equity
interests.
[REDACTED].
"Change of Control" means (a) a sale of all or substantially all of the
assets of the Company; or (b) any merger, consolidation, share exchange,
recapitalization or sale or transfer of capital shares of the Company (other
than a bona fide arms length financial transaction the principal purpose of
which is to raise capital for the Company), in each case in which any person or
group acquires beneficial ownership of more than 50.1% of either (i) the then
outstanding Common Stock (determined on a fully diluted and as converted basis)
or (ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors.
"Closing" has the meaning assigned thereto in Article VI.
"Closing Date" has the meaning assigned thereto in Article VI.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto, and the regulations thereunder.
"Commission" means the United States Securities and Exchange Commission
or any similar agency then having jurisdiction to enforce the Securities Act.
2
[REDACTED]
"Contractual Obligation" means, as to any Person, any provision of any
securities issued by such Person or of any indenture or credit agreement or any
agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound or to which it may be subject.
"Convertible Securities" means evidences of indebtedness, Capital Stock
or other securities which are directly or indirectly convertible or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock or Preferred Stock, either immediately or
upon the onset of a specified date or the happening of a specified event.
[REDACTED]
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Company or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Company or any current or former
ERISA Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C.ss. 9601 et. seq.), the Hazardous
Material Transportation Act (49 U.S.C.ss. 331 et. seq.), the Resource
Conservation and Recovery Act (42 U.S.C.ss. 6901 et. seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et. seq.), the Clean Air Act (42
U.S.C.ss. 7401 et. seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et. seq.), the Safe Drinking Water Act (42 U.S.C.ss. 300, et. seq.), the
Environmental Protection Agency's regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the rules and regulations promulgated
under each of these statutes, each as amended or supplemented.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto, and the regulations thereunder.
"ERISA Affiliate" means any Person who together with the Company is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
3
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
"GAAP" means generally accepted United States accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (b) which are
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health or the environment and are or
become regulated by any Authority, (c) the presence of which require
investigation or remediation under any Environmental Law or common law, (d) the
discharge or emission or release of which requires a permit or license under any
Environmental Law or other governmental approval, (e) which are deemed to pose a
health or safety hazard to persons or neighboring properties, (f) which are
materials consisting of underground or aboveground storage tanks, whether empty,
filled or partially filled with any substance, or (g) which contain, without
limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam
insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude
oil, nuclear fuel, natural gas or synthetic gas.
4
[REDACTED]
"Indemnified Party" has the meaning assigned thereto in Section 12.1
"Incremental Equity Financing" has the meaning assigned thereto in
Section 4.10(a)(ii).
"Intellectual Property" means all patents, patent rights, patent
applications, licenses, inventions, trade secrets, know-how, proprietary
techniques (including process and substances), trademarks, service marks, trade
names, copyrights and other intangible proprietary rights.
"Liabilities" has the meaning assigned thereto in Section 12.1.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether by law or by equity.
"Market Value Per Share" means if shares of Common Stock are then
listed or admitted for trading on any national securities exchange or traded on
any national market system or the NASDAQ Bulletin Board or Small Cap Markets,
the average of the daily closing prices for the ten (10) trading days before
such date, excluding any trades which are not bona fide, arm's length
transactions. The closing price for each day shall be the last sale price on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices on such date, in each case as officially reported
on the principal national securities exchange or national market system on which
such shares are then listed, admitted for trading or traded. [REDACTED].
"Material Adverse Effect" means a material adverse effect upon (a) the
business, assets or condition (financial or otherwise) of the Company, taken as
a whole including without limitation the inability of the Company to produce or
supply Units, (b) the ability of the Company [REDACTED].
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate is making, or is
accruing an obligation to make, or has made or accrued an obligation to make,
contributions within the preceding six years.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and
5
which (a) is maintained for employees of the Company or any ERISA Affiliates or
(b) has at any time within the preceding six years been maintained for the
employees of the Company or any of its current or former ERISA Affiliates.
[REDACTED]
"Person" means any individual, firm, corporation, partnership, trust,
limited liability company, incorporated or unincorporated association, joint
venture, joint stock company, Authority or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Principal Office" means the Company's principal office as set forth in
Section 13.2 hereof or such other principal office of the Company in the United
States of America the address of which first shall have been set forth in a
notice to the Holders.
"Public Offering" means any offering to the public of any securities of
the Company registered under the Securities Act.
"Register", "registered", and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
[REDACTED]
"Requirements of Law" means, with respect to a Person, the certificate
or articles of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule, regulation, right,
instrument, policy, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other Authority, in each case
applicable to or binding upon such Person or any of its securities or property
or to which such Person or any of its securities or property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"Regulatory Requirement" has the meaning assigned thereto in Section
4.9(c).
"Revenue Levels" has the meaning assigned thereto in Section 4.2.
"Revenue Report" has the meaning assigned thereto in Section 3.4.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
6
"Stock Combination" has the meaning assigned thereto in Section
4.10(a)(ii)(C).
"Stock Dividend" has the meaning assigned thereto in Section
4.10(a)(ii)(A).
"Stock Subdivision" has the meaning assigned thereto in Section
4.10(a)(ii)(B).
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
ARTICLE II
OBLIGATIONS OF [REDACTED]
2.1. [REDACTED]
(b) In addition, during the term of this Agreement and
provided that Company remains competitive in price, technology, quality and
delivery, [REDACTED]
7
2.2. [REDACTED]
2.3 [REDACTED]
2.4. [REDACTED]
(a) Permit the Company to make public announcements, in form
and substance satisfactory to [REDACTED] in its discretion and subject to
Section 3.6 hereof, through the issuance of one or more press releases (in
addition to a release at the time of execution of this Agreement) that disclose
[REDACTED]
(b) [REDACTED]
(c) Hold annual review meetings with the Company where the
status of the [REDACTED]
(d) [REDACTED]
ARTICLE III
OBLIGATIONS OF THE COMPANY
3.1. Company Undertakings. In consideration of the rights granted to
the Company by [REDACTED] hereunder, the Company agrees to provide during the
term of this Agreement [REDACTED] that are technologically equal to or better
than any product of comparable offering, technology and functionality that can
be substituted for the Unit.
8
3.2. Pricing. [REDACTED] be competitive with any products offered by
other suppliers offering similar features and specifications. In the event at
any time during the term of this Agreement the Company [REDACTED].
3.3. Quality Assurance. The Company will, at all times during the term
of this Agreement, [REDACTED] The Company will maintain and work to improve the
quality standards for energy management and power control systems. [REDACTED]
will give rise to the termination rights set forth in Section 11.2 hereof,
provided hereof, that termination does not negate, vitiate or otherwise affect
the Company's obligations with respect to Units previously delivered, including
without limitation all warranty obligations.
3.4. Revenue Reports. The Company will maintain complete and accurate
records of the number of Units [REDACTED]. The Company will deliver [REDACTED]
shall have the right, at reasonable times during normal business hours and upon
reasonable notice, to audit or cause its independent accountants to audit all
relevant sales books and records of the Company relating thereto to ensure
compliance with the foregoing provision, provided that it may not conduct such
audit more than once in any twelve-month period.
3.5. Standard Terms and Conditions. The Company agrees that,[REDACTED]
and the Company agrees to be bound by, [REDACTED].
9
3.6 Publicity. The Company shall not use the [REDACTED] or logo in any
advertising or marketing materials. The Company agrees that all press releases
and public announcements [REDACTED] is attached as Schedule 3.6.
ARTICLE IV
ISSUANCE OF [REDACTED]
4.1. [REDACTED]
4.2. [REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
10
[REDACTED]
[REDACTED]
[REDACTED]
(c) [REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
11
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
12
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
13
[REDACTED]
[REDACTED]
[REDACTED]
14
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
15
[REDACTED]
[REDACTED]
[REDACTED]
([REDACTED]
16
4.11. No Impairment. The Company will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, share exchange, dissolution or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Agreement [REDACTED], including without limitation the
adjustments required under Section 4.10 hereof, and will at all times in good
faith assist in the carrying out of all such terms and in taking of all such
action as may be necessary or appropriate to protect the rights and benefits of
the Holder pursuant to this Agreement [REDACTED]. Without limiting the
generality of the foregoing and notwithstanding any other provision of the
[REDACTED] contrary (including by way of implication), the Company (a) will not
increase the par value of any shares of Common Stock receivable on [REDACTED]
and (b) will take all such action as may be necessary or appropriate so that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock on the exercise [REDACTED].
[REDACTED]
[REDACTED]
[REDACTED]
4.13. Rights of Transferees. The rights granted to the Holders
hereunder and under [REDACTED] shall pass to and inure to the benefit of all
Permitted Transferees of all or any [REDACTED] (provided that each Holder and
any transferee shall hold such rights in proportion to their respective
ownership [REDACTED] until extinguished pursuant to the terms hereof.
4.14. Change of Control. Upon the occurrence of a Change of Control,
all [REDACTED] which expired prior to such Change of Control, shall
become [REDACTED] prior to the effective date of the Change of Control, without
regard to Revenue Levels.
17
ARTICLE V
[REDACTED]
[REDACTED]
Notwithstanding the foregoing, if the managing underwriter or
underwriters, if any, of such offering determines that inclusion of all of the
Registrable Securities requested to be included exceeds the number which can be
sold in such offering without materially and adversely affecting the
marketability of the offering, then the amount of securities to be offered for
the accounts of Holders will be reduced pro rata (according to the Registrable
Securities proposed to be registered) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided, however,
that if securities are being offered for the account of other Persons as well as
the Company, then with respect to the Registrable Securities intended to be
offered by Holders, Registrable Securities shall be allocated among such other
Persons and Holders pro rata based on the number of shares for which
registration was requested.
5.2. Rule 144 and Rule 144A Exemptions. Notwithstanding the foregoing,
the Company will not be obligated to register any Registrable Securities as to
which counsel acceptable to the Holders (which may be counsel to the Company)
renders an opinion in form and substance satisfactory to the Holders to the
effect that such Registrable Securities are freely salable without limitation as
to volume, manner of sale, or otherwise under Rule 144 or 144A under the
Securities Act.
18
5.3. Registration Procedures. In connection with any registration of
Registrable Securities under the Article V, the Company shall, as soon as
reasonably practicable, undertake such actions on behalf of the Holders pursuant
to such registration as the Company is affording any other security holders in
connection with such registration so long as such actions with respect to the
Holders and the Registrable Securities are lawfully permissible and available to
the Company.
It will be a condition precedent to the obligation of the Company to
take any action pursuant to this Article V in respect of the Registrable
Securities that are to be registered at the request of any Holder of Registrable
Securities that such Holder furnish to the Company such information regarding
the Registrable Securities held by such Holder and the intended method of
disposition thereof as is reasonably requested in connection with the action
taken by the Company. The managing underwriter or underwriters for any offering
pursuant to Section 5.1 will be selected by the Company.
5.4. Allocation of Expenses.
Except as provided in the following sentence, the Company will bear all
expenses arising or incurred in connection with any of the transactions
contemplated by this Article V, including, without limitation, [REDACTED].
5.5. Listing on Securities Exchange. If the Company lists any shares of
Capital Stock on any securities exchange or on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar system, it will,
at its expense, list thereon, maintain and, when necessary, increase such
listing of all Registrable Securities.
5.6. Holdback Agreement. [REDACTED]
19
5.7. Rule 144 and Rule 144A Availability. So long as any Holder holds
any Registrable Securities, the Company will take such action as such Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell shares of Registrable Securities without registration pursuant to
and in accordance with (a) Rule 144 or Rule 144A under the Securities Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation adopted by the Commission. Upon the request of any such Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
ARTICLE VI
CONDITIONS TO THE OBLIGATION
OF [REDACTED]
The execution of this Agreement [REDACTED] shall take place at the
closing (the "Closing") to be held on June 14, 2001, or at such other time
[REDACTED] may agree (the "Closing Date"). The obligation of [REDACTED] enter
into this Agreement and to perform any obligations hereunder shall be subject to
the satisfaction as determined [REDACTED] the following conditions on or before
the Closing Date:
6.1. Representations and Warranties. The representations and warranties
contained in Article VIII hereof shall be true and correct on and as of the
Closing Date as if made on and as of such date.
6.2. Compliance with this Agreement. The Company shall have performed
and complied in all material respects with all of the agreements and conditions
set forth or contemplated herein that are required to be performed or complied
with by the Company on or before the Closing Date.
6.3. Secretary's Certificates. [REDACTED] a certificate from the
Company dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company certifying (a) that the attached copies of the
organizational documents of the Company and resolutions of the Board of
Directors of the Company approving this Agreement and the transactions
contemplated hereby, are all true, complete and correct and remain unamended and
in full force and effect, (b) as to the incumbency and specimen signature of
each officer of the Company executing this Agreement and any other document
delivered in connection herewith on behalf of the Company and (c) as to the good
standing of the Company in the jurisdiction of its incorporation and in each
other state in which the Company is transacting business, except where the
failure to be in good standing could not reasonably be expected to have a
Material Adverse Effect.
6.4. Issuance Permitted by Requirements of Laws. The issuance of the
[REDACTED] hereunder and the consummation of the transactions contemplated
hereby (a) shall not be prohibited by any Requirement of Law and (b) shall not
subject [REDACTED] penalty or, in its reasonable judgment, other onerous
condition under or pursuant to any Requirement of Law.
20
6.5. Consents and Approvals. All consents, exemptions, authorizations
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons in respect of all Requirements of Law and with respect to
Contractual Obligations of the Company required in connection with the
execution, delivery or performance by the Company or enforcement against the
Company of this Agreement shall have been obtained and be in full force and
effect, except to the extent that failure to obtain such consents would not have
a Material Adverse Effect, and [REDACTED] have been furnished with appropriate
evidence thereof, and all waiting periods shall have lapsed without extension or
the imposition of any conditions or restrictions.
6.6. No Material Adverse Change. Since March 31, 2001, no event shall
have occurred which has had or could reasonably be expected to have a Material
Adverse Effect.
6.7. Opinion of Counsel. [REDACTED]
6.8. Due Diligence and other Documents. [REDACTED]
ARTICLE VII
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company [REDACTED], and the obligations of the
Company to perform its other obligations hereunder shall be subject to the
satisfaction as determined by the Company of the following conditions on or
before the Closing Date:
7.1. Representations and Warranties. The representations and warranties
of [REDACTED] contained in Article IX hereof shall be true and correct on and as
of the Closing Date as if made on and as of such date.
7.2. Compliance with this Agreement. [REDACTED]
7.3. Issuance Permitted by Requirements of Laws. [REDACTED] and the
consummation of the transactions contemplated hereby (a) shall not be prohibited
by any Requirement of Law and (b) shall not subject the Company to any penalty
or, in its reasonable judgment, other onerous condition under or pursuant to any
Requirement of Law.
21
7.4. Consents and Approvals. All consents, exemptions, authorizations
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons in respect of all Requirements of Law and Contractual
[REDACTED].
ARTICLE VIII
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants [REDACTED] before and after
giving effect to the transactions contemplated by this Agreement, as follows:
8.1. Corporate Existence and Power. The Company (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, (b) has all requisite corporate power and authority to own
and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently, or is currently proposed to be,
engaged and (c) has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
8.2. Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and the transactions
contemplated hereby, including without limitation [REDACTED], (a) have been duly
authorized by all necessary corporate, and if required, stockholder action, (b)
do not contravene the terms of the organizational documents of the Company and
(c) will not violate, conflict with or result in any breach or contravention of
or the creation of any Lien under, any Contractual Obligation of the Company, or
any Requirement of Law applicable to the Company.
8.3. Governmental Authorization; Third Party Consents. Except to the
extent previously and duly obtained or made and in full force and effect, no
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Requirement of Law or Contractual Obligation, and no lapse of a
waiting period under any Requirement of Law or Contractual Obligation, is
necessary or required in connection with the execution, delivery or performance
by the Company or enforcement against the Company of this Agreement or the
transactions contemplated hereby.
22
8.4. Binding Effect. This Agreement, upon the due execution and
delivery hereof by the Company, [REDACTED] duly issued and delivered by the
Company, will constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its respective terms except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability.
8.5. Litigation. There are no legal actions, suits, proceedings, claims
or disputes pending, or to the knowledge of the Company, threatened, at law, in
equity, in arbitration or before any Governmental Authority against or affecting
the Company (a) which affects the legality, validity or enforceability of this
Agreement or which seeks to obtain damages or obtain relief as a result of, the
transactions contemplated by this Agreement or (b) which could reasonably be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement.
8.6. No Default or Breach. The Company is not in default under or with
respect to any Contractual Obligation in any respect, which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect.
8.7. ERISA. The execution and delivery of this Agreement, [REDACTED]
consummation of the transactions contemplated hereby and thereby will not result
in any prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code or any other violations of ERISA or any other
Requirement of Law related thereto.
8.8. Disclosure. [REDACTED] by the Company on the Closing Date do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
[REDACTED] in writing which has had or could reasonably be expected to have a
Material Adverse Effect.
8.9. Investment Company/Government Regulations. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended, or
any federal or state statute or regulation limiting its ability to incur
Indebtedness. Neither the Company nor any of its Subsidiaries is engaged
principally or as one of its activities in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" (as each such term
is defined or used in Regulation U of the Board of Governors of the Federal
Reserve System). No part [REDACTED] or for any purpose which violates, or which
would be inconsistent with, the provisions of Regulations T, U or X of such
Board of Governors.
23
8.10. Capitalization. [REDACTED].
8.11. Private Offering. No form of general solicitation or general
advertising was used by the Company or its representatives in connection
[REDACTED]. Assuming the truth of the representations made in Article IX,
[REDACTED].
8.12. Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby, based on any agreement, arrangement
or understanding with the Company or any action taken by the Company.
8.13. Contractual Obligations,- etc. To the best knowledge of the
Company after due inquiry, each material Contractual Obligation is, and after
giving effect to the consummation of the transactions contemplated hereby will
be, in full force and effect in accordance with the terms thereof and there are
no material defaults by the Company or by any other party under any such
Contractual Obligation.
8.14. Rights in Properties; Liens; Intellectual Property.
(a) The Company has good and indefeasible title to all
properties and assets reflected on its balance sheets, and none of such
properties or assets is subject to any Liens, except as set forth on Schedule
8.14(a) attached hereto. The Company enjoys peaceful and undisturbed possession
under all leases necessary for the operation of its other properties, assets,
and businesses and all such leases are valid and subsisting and are in full
force and effect. There exists no default under any provision of any lease which
would permit the lessor thereunder to terminate any such lease or to exercise
any rights under such lease which, individually or together with all other such
defaults, could have a Material Adverse Effect.
24
(b) The Company has, to the best of its knowledge after due
inquiry, the right to use all of the Intellectual Property necessary to its
business as presently conducted, and, to the knowledge of the Company, the
Company's use of the Intellectual Property does not infringe on the rights of
any other Person. To the best of the Company's knowledge, no other Person is
infringing the rights of the Company in any of the Intellectual Property. Except
as set forth on Schedule 8.14(b) attached hereto, the Company does not owe any
royalties, honoraria or fees to any Person by reason of its use of the
Intellectual Property.
8.15 Taxes. The Company has filed all tax returns (federal, state, and
local) required to be filed, including, without limitation, all income,
franchise, employment, property, and sales taxes, and has paid all of its tax
liabilities, other than immaterial amounts and taxes that are being contested by
the Company in good faith by appropriate actions or proceedings diligently
pursued, and for which adequate reserves in conformity with GAAP with respect
thereto have been established to the reasonable satisfaction of Purchaser. The
Company knows of no pending investigation of the Company by any taxing authority
or pending but unassessed tax liability of the Company that could reasonably be
expected to have a Material Adverse Effect.
8.16 No Labor Disputes. The Company is not involved in any labor
dispute. There are no strikes or walkouts or union organization of any of the
Company's employees threatened or in existence and no labor contract is
scheduled to expire during the term of this Agreement.
8.17 Insurance. The amount and types of insurance carried by the
Company, and the terms and conditions thereof, are substantially similar to the
coverage maintained by companies in the same or similar business as the Company
and similarly situated.
8.18 Conduct of Business. On the Closing Date, the Company is engaged
only in the business of the developing and manufacturing vehicle components for
automotive original equipment manufacturers.
8.19 Officers, Directors, Etc. None of the Company's officers,
directors, or executive employees has been convicted of a felony or been the
subject of a criminal, regulatory or governmental investigation or proceeding.
25
ARTICLE IX
REPRESENTATIONS AND
WARRANTIES [REDACTED]
[REDACTED] represents and warrants as follows:
9.1. Corporate Authorization; No Contravention. [REDACTED]
9.2. Binding Effect. [REDACTED] accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally or by general equitable principles relating to
enforceability.
9.3. [REDACTED]
9.4. Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding [REDACTED].
9.5. Governmental Authorization; Third Party Consent. No approval,
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law or Contractual Obligation, and no lapse of a waiting period
under any Requirement of Law or Contractual Obligation, is necessary or required
in connection with the execution, delivery or performance [REDACTED] Agreement
or the transactions contemplated hereby.
26
ARTICLE X
ADDITIONAL COVENANTS OF THE COMPANY
[REDACTED] under this Agreement, the Company hereby covenants and
agrees as follows:
10.1. Preservation of Corporate Existence and Related Matters. The
Company shall preserve and maintain its separate corporate existence and all
rights, franchises, licenses and privileges necessary to the conduct of its
business; and qualify and remain qualified as a foreign corporation and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization, and where failure to qualify would have a Material Adverse
Effect. Nothing contained in this Section 10.1 shall be deemed a limitation or
prohibition on the Company's ability to merge, consolidate, reorganize,
recapitalize, liquidate, dissolve or take any similar action, subject to any
other applicable terms and conditions of this Agreement.
10.2 Environmental Management. The Company shall maintain its business
premises (whether leased or owned in fee) free of any hazardous materials other
than in compliance with applicable environmental laws; and adopt and maintain
hazardous materials management practices including generation, storage, disposal
and remediation as may be required by environmental laws for all other hazardous
materials located on its business premises.
10.3 Compliance With Laws and Obligations. The Company shall observe
and remain in compliance with all Requirements of Law and Contractual
Obligations, in each case applicable or necessary to the conduct of its
business.
10.4 Visits and Inspections. During the term of this Agreement and
subject to [REDACTED] a reasonable confidentiality agreement, upon reasonable
advance notice, the Company shall permit representatives [REDACTED] but only
during normal business hours, to visit and inspect its properties; and inspect,
audit and make extracts from its books, records and files relating to sales of
Units to [REDACTED].
10.5 Financial Reports. The Company will [REDACTED] quarterly and
annual financial statements for the Company, including a balance sheet, income
statement and statement of cash flows, in accordance with GAAP (except for the
absence of footnotes and, with respect to quarterly statements, the absence of
normal year-end adjustments), and certified as true, complete and correct by the
chief financial officer of the Company within 45 days after the end of each
quarter and within 90 days after the end of each fiscal year. Breach of any of
the covenants set forth in this Article X will give rise [REDACTED] rights under
Section 11.3 [REDACTED] exclusive remedy for such breach.
27
ARTICLE XI
TERM; TERMINATION
11.1. Term. Unless sooner terminated as provided herein, this Agreement
shall continue in force and shall automatically expire [REDACTED] without any
action by the parties hereto, provided, [REDACTED], shall survive and remain in
full force and effect until [REDACTED] Expiration Date
11.2. [REDACTED]
11.3. [REDACTED]
11.4 Company Right to Terminate. The Company shall have the right to
terminate this Agreement [REDACTED].
11.5. [REDACTED]
28
ARTICLE XII
INDEMNIFICATION
12.1. Indemnification. The Company shall indemnify and hold harmless
each Holder and its Affiliates and its officers, directors, agents, employees,
subsidiaries, partners and controlling persons (each, an "Indemnified Party") to
the fullest extent permitted by law, from and against any and all losses,
claims, damages, expenses (including reasonable fees, disbursements and other
charges of counsel) or other liabilities (collectively, "Liabilities") resulting
from or arising out of (a) any legal, administrative or other actions (including
actions brought by any Holder or the Company or any equity holders of the
Company or derivative actions brought by any Person claiming through or in the
Company's name), proceedings or investigations (whether formal or informal),
based upon, relating to or arising out of this Agreement or the transactions
contemplated hereby and thereby, or any Indemnified Party's role therein or in
the transactions contemplated thereby, or (b) any infringement claim or other
challenge to the validity of the Intellectual Property used or utilized in the
Units, or (c) any claims arising from or related in any way to the Units,
including breach of warranty or product liability claims, or (d) any
registration of the Registrable Securities including Liabilities arising from
any untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing [REDACTED].
29
12.2. Notification. Each Indemnified Party under this Article XII will,
promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Company under this Article
XII, 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 (a) other than pursuant to this Article XII or (b) under this Article XII
unless, and only to the extent that, such omission results in the forfeiture by
the Company of substantive rights or defenses or the Company is otherwise
irrevocably prejudiced in defending such proceeding. In case any such action,
claim 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 assume the defense thereof at its own expense, with counsel
reasonably satisfactory to such Indemnified Party; provided, that such
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action, claim
or proceeding in which both the Company, on the one hand, and an Indemnified
Party, on the other hand, is, or is reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the expense
of the Company and to control its own defense of such action, claim or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a
conflict or potential conflict exists between the Company, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable. The Company agrees that it will not, without the prior
written consent of the Holders, 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 each
Holder and each other Indemnified Party from all liability arising or that may
arise out of such claim, action or proceeding. The Company shall not be liable
for any settlement of any claim, action or proceeding effected against an
Indemnified Party without the prior written consent of the Company. 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.
30
ARTICLE XIII
MISCELLANEOUS
13.1. Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf [REDACTED], or
termination of this Agreement.
13.2. Notices. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto, to be effective, shall be in
writing and shall be sent by certified or registered mail, return receipt
requested, by personal delivery against receipt, by overnight courier or by
facsimile and, unless otherwise expressly provided herein, shall be deemed to
have been validly served, given or delivered immediately when delivered against
receipt, five Business Days after deposit in the U.S. mail, postage prepaid, or
one Business Day after deposit with an overnight courier or, in the case of
facsimile notice, when sent, addressed as follows:
if to the Company:
Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
Attn: President
Telecopy: 310-527-7888
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
31
13.3. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, that neither party shall have the right to assign its rights,
or delegate its obligations, hereunder without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
13.4. Amendments, Requests or Consents. Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by a party from
the terms of any provision of this Agreement, shall be effective (a) only if it
is made or given in writing and [REDACTED].
13.5. Remedies Cumulative. No failure or delay on the part of the
Company [REDACTED] any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. Except as specifically provided herein, the
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company [REDACTED] or otherwise.
[REDACTED].
13.6. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
13.7. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
13.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE [REDACTED] WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW OF SUCH STATE.
32
13.9. Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the [REDACTED] and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 13.2 such service to become
effective 10 days after such mailing.
13.10. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
[REDACTED] IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
13.11. Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
13.12 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
13.13 Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the documents specifically referenced herein, is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement, together with
the exhibits hereto, supersedes all prior agreements and understandings between
the parties with respect to such subject matter.
13.14 Confidentiality and Publicity. No party shall make or consent to
any press release or other public disclosure relating to this Agreement or any
of the transactions contemplated hereunder without the prior consent of the
other party except to the extent, in the judgment of the disclosing party
(concurred in by such party's securities counsel), a particular disclosure is
required by applicable securities law or stock market listing requirements. In
all events, reasonably timely notice of the disclosure shall be given to the
other party; "timely notice" shall mean prior notice in the case of a written
disclosure. [REDACTED] Company shall consult with one another as to the content
of any disclosure to their respective shareholders, or to any Governmental
Authority, relating to this Agreement or any of the transactions contemplated
hereunder. Notwithstanding any other provision of this Agreement, in furtherance
of any decision by [REDACTED] following reasonable prior notice to the Company,
but without the Company's consent, [REDACTED].
33
13.15. Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
13.16 Dispute Resolution. If a dispute arises between the parties
relating to this Agreement [REDACTED] including any claims of breach of any
representation or warranty, covenant or agreement contained herein [REDACTED]
the following procedure shall be implemented before either party pursues other
available remedies, except that either party may seek injunctive relief from a
court where appropriate in order to maintain the status quo while this procedure
is being followed:
(a) Any party having a dispute or claim shall give the other
party written notice stating the nature of the dispute in reasonable detail.
Within (5) five Business Days after delivery of the notice, the receiving party
shall submit to the other a written response also in reasonable detail. Within
(5) five Business Days after delivery of the written response, decision makers
from both parties shall meet (in person or by telephone) at a mutually
acceptable time and place (including telephonic conference), and thereafter as
often as they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other shall be
honored.
(b) If the matter has not been resolved by the persons
referred to above within ten (10) days of the first meeting of such persons, the
dispute shall be referred to more senior executives of each party who have
authority to settle the dispute and who shall likewise meet (in person or by
telephone) to attempt to resolve the dispute. Within five (5) Business Days
after the referral of the dispute to more senior executives of each party, the
senior executives of both parties shall meet at a mutually acceptable time and
place (including telephonic conference), and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute.
34
(c) If the matter has not been resolved within ten (10) days
from the referral of the dispute to such senior executives, then either party
may pursue litigation, provided however, that if either party initiates
litigation based on or relating to this Agreement or the transactions
contemplated hereby, the other party shall have the right to initiate binding
arbitration in accordance with, the CPR Rules for Non-Administered Arbitration
of Business Disputes ("CPR"). Each party will bear equally the costs of the
mediation and arbitration.
(i) The parties will jointly appoint a mutually
acceptable arbitrator, seeking assistance in such regard from CPR, if they have
been unable to agree upon such appointment within twenty (20) days.
(ii) Unless otherwise agreed by the parties in writing, [REDACTED] and
this clause is subject to the Federal Arbitration Act, 9 U.S.C.A.ss.1 et seq.
Judgment upon the award rendered by the arbitrator, if any, may be entered by
any U.S. court having jurisdiction thereof.
Equitable remedies shall be available in any arbitration. Punitive and
exemplary damages shall not be awarded.
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized as
of the date first above written.
ENOVA SYSTEMS, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[REDACTED]
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
36
Schedule 2.2
Resources For Suppliers
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
37
Schedule 3.6
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
38
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
39
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]