STOCK AND WARRANT PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the 29th day of March,
1999 by and between ZAP Power Systems, a California corporation having its
principal place of business at 117 Morris Street, Sebastopol, California 95472
("Seller"), and Ridgewood ZAP, LLC, a Delaware limited liability company having
its principal place of business at 947 Linwood Avenue, Ridgewood, New Jersey
07450 ("Buyer").
Preliminary Statement. Buyer desires to purchase and acquire and Seller desires
to issue and sell to Buyer a variable number of shares of Common Stock of Seller
(depending on the price of the stock in the open market) and a Warrant for
Common Stock of Seller in the amount, for the consideration and on the terms and
conditions set forth in this Agreement.
Agreement. In consideration of the mutual covenants and agreements contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties covenant and agree as
follows:
ARTICLE ONE
Definitions and Construction
1.1 Definitions. The following terms shall have the meanings set forth below:
"Affiliate" shall mean, when used with reference to a specified person, any
person that directly or indirectly controls or is controlled by or is under
common control with the specified person. For purposes of this definition, the
term "person" means an individual, corporation, partnership, proprietorship,
limited liability company, limited liability partnership or other entity, and
the term "control" means the power to direct the management and policies of the
specified person.
"Articles of Incorporation" means the Articles of Incorporation of Seller, as
amended, dated September 25, 1994.
"Audited Balance Sheet" shall have the meaning given in Section 4.14.
"Balance Sheets" shall have the meaning given in Section 4.14.
"Buyer" shall have the meaning given in the first paragraph hereof.
"Closing" shall have the meaning given in Section 2.4.
"Closing Date" shall have the meaning given in Section 2.4.
"Closing Documents" mean this Agreement, the Warrant and the Investor's Rights
Agreement.
"Contract" shall have the meaning given in Section 4.27.
"Environmental Laws" means, collectively, all federal, state, local and other
applicable laws, statute and regulation, which in any way relate to health,
safety or the environment.
"Financial Statements" shall have the meaning given in Section 4.14.
"GAAP" means generally accepted accounting principles, applied on a basis
consistent with Seller's most recent audited financial statements.
"Governmental Approval" means any applicable authorization, approval, consent,
license, lease, ruling, permit, tariff, certification, exemption, notice, filing
or registration by or with any Governmental Person.
"Governmental Person" means any federal, state, local or other government, any
political subdivision or any governmental, judicial, public or statutory
instrumentality, tribunal, agency (including those pertaining to health, safety
or the environment), authority, body or entity, or other regulatory bureau,
authority, body or entity having legal jurisdiction over the matter or Person in
question.
"Governmental Rule" means any applicable federal, state, local or other law,
statute, treaty, rule, regulation, ordinance, order, code, judgment, decree,
directive, injunction, writ or similar action or decision duly implementing any
of the foregoing by any Governmental Person, but does not include Governmental
Approvals.
"Hazardous Substances" means any material which by reason of its composition or
characteristics is a hazardous substance, toxic substance or hazardous waste
under any Environmental Law or which would give rise to liability to the owner
or operator of the Facility under any Environmental Law.
"Investment Company Act" means the Investment Company Act of 1940, as amended.
"Investor's Rights Agreement" means the Investor's Rights Agreement of even date
herewith by and between Seller and Buyer substantially in the form attached
hereto as Exhibit A.
"Knowledge," "known" and "knows," whether or not capitalized herein and when
used with respect to matters covered by any representation, warranty, covenant
or other provision of this Agreement applicable to any party to this Agreement
means the actual knowledge and beliefs of each of the officers of such party who
are responsible for such matters.
"Laws" shall mean all federal, state, territorial, municipal or local statutes,
regulations or by-laws applicable to the parties hereto, including all orders,
notices, rules, decisions, codes, guidelines, policies, directions, permits,
approvals, licenses and similar authorizations issued, rendered or imposed by
any level of government including any ministry, department or administrative or
regulatory agency or authority.
"Licensed Intellectual Property" has the meaning given in Section 4.24.
"Lien" means any lien, mortgage, encumbrance, charge, pledge, lease, security
interest, claim, option or right of any kind (including any conditional sale or
other title retention agreement).
"Person" shall mean a natural person, corporation, limited partnership, general
partnership, joint stock company, joint venture, association, company, trust,
bank, trust company, and trust, business trust or other organization, whether or
not a legal entity, or a government or agency or any political subdivision
thereof.
"Purchase Price" shall have the meaning given in Section 2.2 of this Agreement.
"Schedules" means the schedules appended to this Agreement.
"Securities" shall mean the Shares and all Common Stock of the Company issuable
upon exercise of the Warrant.
"Securities Act" means the Securities Act of 1933, as amended, and all rules and
regulations adopted thereunder.
"Seller" shall have the meaning given in the first paragraph hereof.
"Seller's Intellectual Property" has the meaning given in Section 4.23.
"Shares" shall have the meaning given in Section 2.1.
"Tax Liabilities" means all income, excise, sales, unemployment, employer and
employee withholding, social security, occupation, franchise, customs and other
taxes, duties or charges that are levied, assessed or imposed upon, or accrued
or attributed to the operation of Seller.
"Tax Returns" has the meaning set forth in Section 4.17(a).
"Unaudited Balance Sheet" shall have the meaning given in Section 4.14.
"Warrant" shall have the meaning given in Section 2.3.
1.2 Interpretations.2 Interpretations. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise necessarily
requires:
(a) the terms "herein," "herewith" and "hereof" are references to this
Agreement, taken as a whole;
(b) the terms "include," "includes" and "including" shall mean "including,
without limitation";
(c) references to a "Section," "Article", "Exhibit" or "Schedule" shall mean a
Section, Article, Exhibit or Schedule of this Agreement, as the case may be;
(d) references to a given agreement, instrument or other document shall be a
reference to that agreement, instrument or other document (including all
exhibits and schedules) as modified, amended, supplemented and restated through
the date as of which such reference is made;
(e) references to a Person includes its permitted successors and permitted
assigns;
(f) the singular shall include the plural and the masculine shall include the
feminine and neuter, and vice versa;
(g) reference to a given Governmental Rule is a reference to that Governmental
Rule as amended, modified, supplemented or restated as of the date on which the
reference is made; and
(h) accounting terms have the meaning given to them by GAAP applied on a
consistent basis by the Person to which they relate.
ARTICLE TWO
Agreement to Sell; Actions at Closing
2.1 Agreement to Purchase and Sell the Shares. Upon the terms and subject to the
conditions set forth in this Agreement and upon the representations and
warranties made herein, Seller shall sell, grant, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from Seller, the number
of shares of Common Stock of Seller, having no par value, with the rights,
preferences, privileges and restrictions set forth in the Articles of
Incorporation (the "Shares") that result from the division of $2,050,000 by the
number equal to seventy-five percent (75%) of the average closing price of the
Shares as reported on the "Bulletin Board" for the twenty (20) days prior to the
date of the Closing, subject to a maximum cap on the average closing price of
$4.50 per share and a minimum floor on the average closing price of $3.50 per
share. Proceeds of Ridgewood's investment shall be used in accordance with
Schedule 2.1 to this Agreement.
2.2 Purchase Price. In consideration for issuance of the Shares and Warrant,
Buyer agrees to pay to Seller Two Million Fifty Thousand Dollars ($2,050,000)
(the "Purchase Price") on the Closing Date.
2.3 Warrant. Buyer is purchasing a Warrant in form and substance as attached
hereto as Exhibit B. The warrant must be exercised in whole for Two Million
Dollars ($2,000,000) in the event Seller meets the milestones prescribed in the
Warrant. The period in which the milestones must be met ends on December 29,
1999. Buyer may, at its option, exercise the Warrant at any time prior to
December 29, 1999.
The number of Shares to be received upon exercise of the Warrant will be
determined by dividing Two Million Dollars ($2,000,000) by 85% of the average
closing price of the shares for the twenty (20) days prior to the exercise of
the Warrant, subject to a maximum cap on the average closing price of $4.50 per
share and a minimum floor on the average closing price of $3.50 per share.
2.4 Closing. The closing of the purchase and sale of the Shares provided herein
(the "Closing") will be at the office of seller located at 117 Morris Street,
Sebastopol, California at 10:00 a.m., local time, on April 15, 1999, or at such
other place or at such other date and time as Seller and Buyer may mutually
agree. Such date and time of Closing is herein referred to as the "Closing
Date."
2.5 Closing Actions. Subject to the conditions set forth in this Agreement,
at the Closing:
(a) Seller shall:
(i) execute and deliver to Buyer this Agreement and the other Closing
Documents to be signed by it;
(ii) deliver to Buyer an original stock certificate executed by Seller
evidencing the shares issued in the name of Buyer or its designee; and
(iii) deliver to Buyer or its designee the original Warrant executed by Seller
issued in the name of Buyer or its designee.
(b) Buyer shall:
(i) execute and deliver to Seller this Agreement and the other Closing
Documents to be signed by it; and
(ii) pay the Purchase Price to Seller by wire transfer to an account designated
by Seller. (iii)
ARTICLE THREE
Conditions to Closing
3.1 Buyer's Conditions of Closing. The obligation of Buyer to purchase and pay
for the Shares and the Warrant shall be subject to and conditioned upon the
satisfaction at the Closing of each of the following conditions:
(a) All representations and warranties of Seller contained in this Agreement
shall be true and correct as of the Closing Date and Seller shall have performed
all agreements and covenants and satisfied all conditions on its part to be
performed or satisfied by the Closing Date pursuant to the terms of this
Agreement.
(b) Seller shall have completed the actions referenced in Sections 2.4(a) of
this Agreement to the satisfaction of Buyer, and Seller shall have performed in
all material respects all of its covenants and agreements under this Agreement
and the other Closing Documents prior to the Closing Date.
(c) There shall have been no material adverse change since the date of the
Unaudited Balance Sheet in the financial condition, business or affairs of
Seller, and Seller shall not have suffered any material loss (whether or not
insured) by reason of physical damage caused by fire, earthquake, accident or
other calamity which substantially affects the value of its assets, properties
or business.
(d) Seller shall have delivered to Buyer:
(i) copies of all instruments, agreements, certificates and other documents
referenced in the Schedules;
(ii) evidence of all necessary corporate action of Seller to authorize and
approve the execution, delivery and performance of the Closing Documents by
Seller and all other documents and agreements contemplated thereby and the
consummation of the transactions contemplated thereby;
(iii) a certificate of incumbency of its officers executing the Closing
Documents;
(iv) a certificate of good standing from the office of the Secretary of State of
California and the department of taxation for each jurisdiction in which Seller
is required to qualify to do business or file a Tax Return; and
(v) such other documents as Buyer may reasonably request in connection with the
consummation of the transactions contemplated at the Closing. (e) Buyer shall
have received from Seller's counsel opinion with respect to the matters set
forth in Exhibit C attached hereto, addressed to Buyer, dated the Closing Date
and in form and substance satisfactory to Buyer.
(f) Seller shall have obtained all government consents, if any, necessary to
allow the transaction to be completed.
(g) No action or proceeding before any court or government body will be pending
wherein a judgment, decree or order would prevent any of the transactions
contemplated hereby or cause such transactions to be declared unlawful or
rescinded.
(h) All proceedings to be taken by Seller in connection with the consummation of
the Closing on the Closing Date and the other transactions contemplated hereby
and all documents required to be delivered by Seller in connection with the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Buyer.
(i) The management team of Seller shall have entered into employment and
non-competition agreements and invention assignments and proprietary information
agreements acceptable to Buyer.
(j) Seller shall have delivered a certificate to Buyer certifying that all
conditions set forth in this Section 3.1 have been satisfied (except to the
extent waived by Buyer in writing).
Any condition specified in this Section 3.1 may be waived by Buyer provided that
no such waiver will be effective unless it is set forth in writing executed by
Buyer.
3.2 Seller's Conditions of Closing. The obligation of Seller to sell the Shares
shall be subject to and conditioned upon the satisfaction at the Closing of each
of the following conditions:
(a) All representations and warranties of Buyer contained in this Agreement
shall be true and correct as of the Closing Date and Buyer shall have performed
all agreements and covenants and satisfied all conditions on its part to the
performed or satisfied by the Closing Date pursuant to the terms of this
Agreement.
(b) Buyer shall have completed the actions referenced in Section 2.4(b) of this
Agreement to the satisfaction of Seller and shall have performed in all material
respects all of its covenants and agreements under this Agreement and the other
Closing Documents prior to the Closing Date.
(c) Buyer shall have delivered to Seller:
(i) resolutions of its Manager authorizing the execution, delivery and
performance of the Closing Documents and of all other agreements contemplated
thereby to which Buyer is a party and the consummation of the transactions
contemplated thereby;
(ii) such other documents as Seller may reasonably request in connection with
the consummation of the transactions contemplated at the Closing.
(d) No action or proceeding before any court or government body will be pending
wherein a judgment, decree or order would prevent any of the transactions
contemplated hereby or cause such transactions to be declared unlawful or
rescinded.
(e) All proceedings to be taken by Buyer in connection with the consummation of
the Closing on the Closing Date and the other transactions contemplated hereby
and all documents required to be delivered by Buyer in connection with the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Seller.
(f) Buyer shall have a delivered a certificate to Seller certifying that all
conditions set forth in this Section 3.2 have been satisfied (except to the
extent waived by Seller in writing).
Any condition specified in this Section 3.2 may be waived by Seller provided
that no such waiver will be effective unless it is set
forth in writing executed by Seller.
ARTICLE FOUR
Representations and Warranties of Seller
As of the date of this Agreement and the Closing Date, Seller represents and
warrants to Buyer as follows:
4.1 Organization and Authority. Seller is a corporation validly existing and in
good standing under the laws of the State of California, with full power and
authority to enter into and perform this Agreement and the other agreements
contemplated hereby to which it is a party. Seller is duly licensed or qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except for jurisdictions where failure to so qualify could not
reasonably be expected to have a material adverse effect on the business and
operations of the Seller taken as a whole. Seller has all requisite corporate
power and authority to own its properties, to carry on its business as now
conducted, and to enter into and perform its obligations under the Closing
Documents.
4.2 Authorization; Binding Effect. Seller has taken all corporate actions which
are necessary to authorize the execution, delivery and performance of this
Agreement and the other agreements contemplated hereby to which it is a party,
and the consummation of the transactions contemplated hereby and thereby. This
Agreement and the other agreements contemplated hereby to which Seller is a
party constitute the legal and binding obligations of such party, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights and the enforcement of debtors' obligations
generally and by general principles of equity, regardless of whether enforcement
is pursuant to a proceeding in equity or at law.
4.3 No Breach; No Default. Neither the execution, delivery or performance of
this Agreement or the other agreements contemplated hereby to which Seller is a
party, nor the consummation of the transactions contemplated hereby or thereby
by Seller, (a) conflicts with or results in any breach of, (b) constitutes a
default under, (c) results in a violation of, or (d) gives any third party any
right to accelerate any obligation under any Contract (as defined below) to
which Seller is a party or by which any of its assets are bound.
4.4 No Bankruptcy or Insolvency. Seller has not .4 No Bankruptcy or Insolvency.
Seller has not filed any voluntary petition in bankruptcy or been adjudicated a
bankrupt or insolvent, filed any petition or answer seeking any reorganization,
liquidation, dissolution or similar relief under any federal bankruptcy,
insolvency, or other debtor relief law, or sought or consented to or acquiesced
in the appointment of any trustee, receiver, conservator or liquidator of all or
any substantial part of its properties. No court of competent jurisdiction has
entered an order, judgment or decree approving a petition filed against Seller
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any federal bankruptcy act, or other debtor
relief law, and no other liquidator has been appointed of Seller or of all or
any substantial part of its properties.
4.5 No Litigation. There are no actions, suits or proceedings of any type
pending or, to the knowledge of Seller, threatened, against Seller which if
adversely determined could have an adverse effect on the Seller's ability to
perform the obligations contemplated under the Closing Documents. To the
knowledge of Seller, Seller is not operating under, or subject to, or in default
with respect to, any order, writ, injunction or decree affecting the ability of
Seller to enter into this Agreement or perform its obligations contemplated
under the Closing Documents to which it is a party.
4.6 Investment Company. Seller is not, and is not controlled by, an
"Investment Company" within the meaning of the Investment
Company Act.
4.7 Governmental Consents and Notices. No Governmental Approval is necessary or
appropriate in connection with the execution and delivery by Seller of this
Agreement or the other Closing Documents to which it is a party or the
consummation by Seller of the transactions contemplated hereby and thereby.
4.8 Additional Consents and Notices. No filing, registration, qualification,
notice, consent, approval or authorization to, with or from any Person is
necessary or appropriate in connection with the execution and delivery by Seller
of this Agreement or the other Closing Documents to which it is a party, or the
consummation by Seller of the transactions contemplated hereby and thereby.
4.9 No Brokers. Except as previously disclosed to Buyer regarding the fees to be
paid to Preferred Capital Equities Corporation and Harry Kraatz, Seller has not
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of Seller to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, and Seller is not aware of any claim or basis for any claim
for payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
4.10 Compliance with Laws. Seller is not in violation of or in default under any
order of any court, governmental authority or arbitration board or tribunal to
which Seller is a party or is subject. To the Seller's knowledge, except for any
violations that individually or in the aggregate would not have a material
adverse impact on the Seller's business, Seller is in compliance with all Laws
applicable to it, its business operations and its properties, including without
limitation Environmental Laws. Seller has made all filings, registrations, has
obtained all governmental consents, permits and other authorizations, and has
taken all actions required by applicable Laws or governmental approvals and
regulations in connection with its business as now conducted.
4.11 Business Activities; Affiliates. Seller has not engaged in any business or
activities other than the manufacture, sale and marketing of two and three wheel
bicycles and scooters and components therefor. Seller does not have any
Affiliates other than its individual shareholders, which are disclosed on
Schedule 4.18 hereto.
4.12 Jurisdiction. California is the only jurisdiction in which Seller is doing
business to the extent necessary to be qualified and Seller is presently
licensed or qualified to do business in California. Seller has not been denied
admission to conduct any type of business in any jurisdiction in which it is not
presently admitted, has not had its license or qualification to conduct business
in any jurisdiction revoked or suspended, and has not been involved in any
proceeding to revoke or suspend a license or qualification.
4.13 Corporate Records. The corporate minute book of Seller delivered to Buyer
at Closing contains true and complete copies of the articles of incorporation,
bylaws, and the minutes of all meetings of directors and shareholders and
consent resolutions reflecting all actions taken by the directors or
shareholders without a meeting, from the date of incorporation of Seller to the
Closing Date. The officers and directors of Seller are as set forth in Schedule
4.13.
4.14 Financial Statements. Seller has furnished to Buyer (a) an audited income
statement and balance sheet and notes thereto of Seller as of the fiscal year
ended December 31, 1998 (the "Audited Balance Sheet"), (b) an audited statement
of operations of Seller for the fiscal year ended December 31, 1998, and (c) an
unaudited income statement and balance sheet and notes thereto for the period
ending ________________ (the "Unaudited Balance Sheet"). The documents
referenced in (a), (b) and (c) above are collectively referred to as the
"Financial Statements." The Audited Balance Sheet and the Unaudited Balance
Sheet are collectively referred to as the "Balance Sheets." The Financial
Statements present fairly the financial condition of Seller as of the dates
indicated, and the results of its operations for the periods indicated, in
accordance with GAAP consistently applied, except as otherwise stated therein.
4.15 Indebtedness; Undisclosed Liabilities. Schedule 4.15 sets forth a true and
complete schedule of all of Seller's indebtedness for borrowed money, including
amounts owed to shareholders of Seller. Seller has no liabilities or
obligations, either accrued, absolute, contingent or otherwise, which are not
reflected or provided for in the Financial Statements, except (i) liabilities
not in an excess of $25,000 in the aggregate arising after the date of the
Unaudited Balance Sheet which are incurred in the ordinary course of business,
and none of which is materially adverse, and (ii) as and to the extent
specifically described in Schedule 4.15 attached hereto.
4.16 No Adverse Changes. Except as disclosed on Schedule 4.16, since the
date of the Unaudited Balance Sheet, Seller has not:
(a) except as disclosed in Section 4.15 above, incurred any obligation or
liability (fixed or contingent);
(b) discharged or satisfied any lien, security interest or encumbrance or paid
any obligation or liability (fixed or contingent), other than in the ordinary
course of business and consistent with past practice;
(c) mortgaged, pledged or subjected to any lien, security interest or other
encumbrance any of its assets or properties.
(d) transferred, leased or otherwise disposed of any of its assets or properties
except for a fair consideration in the ordinary course of business and
consistent with past practice or, except in the ordinary course of business and
consistent with past practice, acquired any assets or properties;
(e) canceled or compromised any debt or claim, except in the ordinary course of
business and consistent with past practice; (f) waived or released any rights of
material value;
(g) except pursuant to those contracts listed on Schedule 4.25 hereto,
transferred or granted any rights under any concessions, leases, licenses,
agreements, patents, inventions, trademarks, trade names, service marks or
copyrights or with respect to any know-how;
(h) made or granted any wage or salary increase applicable to any group or
classification of employees generally, entered into any employment contract
with, or made any loan to, or entered into any material transaction of any other
nature with, any officer or employee of Seller;
(i) entered into any transaction, contract, or commitment, except (i)
contracts listed on Schedules 4.24, 4.25 and 4.27 hereto and (ii) this
Agreement and the transactions contemplated hereby;
(j) suffered any casualty loss or damage (whether or not such loss or damage
shall have been covered by insurance) which affects in any material respect its
ability to conduct business; or
(k) declared any dividends or bonuses, or authorized or affected any amendment
or restatement of the articles of incorporation (except for the Articles of
Incorporation) or by-laws of Seller or taken any steps looking toward the
dissolution or liquidation of Seller.
4.17 Taxes. Seller (a) has duly and timely filed or caused to be filed all
federal, state, local and foreign tax returns including, without limitation,
consolidated and/or combined tax returns) required to be filed by it prior to
the date of this Agreement which relate to Seller or with respect to which
Seller is liable or to which the assets or properties of Seller are in any way
subject (the "Tax Returns") (b) has paid or fully accrued for all taxes shown to
be due and payable under the laws and regulations pursuant to which the Tax
Returns were filed, and (c) has properly accrued for all such taxes accrued in
respect of Seller or the assets and properties of Seller for periods subsequent
to the periods covered by the Tax Returns. No deficiency in payment of taxes for
any period has been asserted by any taxing body and remains unsettled at the
date of this Agreement. Copies of all of Seller's Tax Returns have been made
available for inspection by Buyer.
4.18 Capitalization. The Seller's authorized capital consists solely of
10,000,000 shares of Common Stock without par value. There are 2,710,321 shares
of Common Stock outstanding prior to the Closing. Assuming complete exercise of
all warrants, options and other rights, including conversion of preferred stock
the total outstanding common stock of Seller would consist of 3,762,016 shares
of Common Stock. Schedule 4.18(A) sets forth a true, accurate and complete
capitalization table setting forth (i) all outstanding capital stock of Seller,
including the name and address of the holders of more than 5% of the issued and
outstanding stock, the class or series issued, the price paid, and the date of
issuance; (ii) all outstanding warrants, options, subscriptions other rights to
purchase capital stock of Seller or any note or security convertible into
capital stock of the Seller, including the name and address of the holder, the
class or series issuable, the exercise price, and the expiration date of the
instrument; and (iii) the common stock of Seller reserved for issuance to
holders of instruments referenced in Subsection (ii) above. Except as set forth
on Schedule 4.18(A), Seller has not authorized or issued any other class or
series of capital stock and there are no outstanding rights, warrants, options,
subscriptions, agreements or commitments giving anyone any right to require
Seller to sell or issue any capital stock or other equity interest in Seller.
Except as set forth on Schedule 4.18(B), neither Seller, nor, to Seller's
knowledge, any of Seller's shareholders are party to any shareholders agreements
or other agreements providing voting rights, rights of first refusal or similar
rights. All options to purchase stock granted by Seller are in the form
previously delivered to Buyer.
4.19 Title to Shares. The Shares are duly authorized, and, upon issuance to
Buyer under this Agreement, shall be validly issued, fully paid and
nonassessable. Based in part on the representations and warranties made by Buyer
in Article 5 hereof, the Shares are subject to no restrictions with respect to
transferability to Buyer in accordance with the terms of this Agreement. Upon
issuance of the Shares to Buyer by Seller in accordance with the terms of this
Agreement, Buyer will receive good and marketable title to all of the Shares,
free and clear of all security interests, liens, encumbrances, charges,
assessments, restrictions and adverse claims, except as set forth in the
Investor's Rights Agreement, the Articles of Incorporation and applicable law.
4.20 Title to Property and Assets. Seller has good and marketable title to all
of the properties and assets used by it in the conduct of its business
(including, without limitation, the properties and assets reflected in the
Balance Sheets except any thereof since disposed of for value in the ordinary
course of business). Except as set forth on Schedule 4.20, none of such
properties or assets is subject to a contract of sale not in the ordinary course
of business, or subject to security interests, mortgages, encumbrances, liens or
charges, except for (i) statutory liens for the payment of current taxes that
are not yet delinquent and (ii) liens, encumbrances and security interests which
arise in the ordinary course of business (other than in connection with the
incurrence of debt by the Seller), and which, in the case of (i) or (ii) above,
do not affect material properties and assets of the Seller.
4.21 Condition of Personal Property. All tangible personal property, equipment,
fixtures and inventories included within the assets of Seller or required to be
used in the ordinary course of business are in good, merchantable or in
reasonably repairable condition and are suitable for the purposes for which they
are used. No value in excess of applicable reserves has been given to any
inventory with respect to obsolete or discontinued products. All of the
inventories and equipment, including equipment leased to others, are well
maintained and in good operating condition. 4.22 Real Property. Schedule 4.22
contains a list of all real property owned by Seller or in which Seller has a
leasehold or other interest and of any Lien thereupon. Schedule 4.22 also
contains a legal description of all such real property and the principal terms
(including rents, termination dates and renewal conditions) of any rental, lease
or other arrangements affecting such property. The improvements upon such
properties and use thereof by Seller conforms to all applicable land use laws,
regulations and ordinances and any applicable deed, easement or lease
restrictions.
4.23 Seller's Intellectual Property. Schedule 4.23 sets forth a list of each
patent, trademark, servicemark, tradename, copyright, trade secret or other item
of intellectual property, including any and all registrations and applications
therefor, which are owned by Seller. In each case, the registration number, date
of issuance or registration, and a brief description of such property is set
forth in Schedule 4.23. The property referenced in Schedule 4.23, together with
all designs, methods, inventions and know-how related thereto and all
trademarks, trade names, service marks, and copyrights claimed or used by Seller
which have not been registered is hereinafter referred to as "Seller's
Intellectual Property."
4.24 Licensed Intellectual Property. Schedule 4.24 lists all licenses held by
Seller authorizing Seller to use computer software, patents, trademarks,
servicemarks, tradenames, copyrights, trade secrets or other items of
intellectual property used or useful to Seller's business ("Licensed
Intellectual Property").
4.25 Licenses and Rights Granted by Seller. Schedule 4.25 lists any licenses,
purchase options or other interests held by any Person in Seller's Intellectual
Property.
4.26 Intellectual Property Rights and Interests. Seller's Intellectual Property
and the Licensed Intellectual Property constitutes all such proprietary rights
which are owned or held by Seller and which are reasonably necessary to, or used
in the conduct of, the business of Seller. Seller has taken all reasonably
necessary steps required under applicable law to protect its trade secrets.
Seller owns or has valid rights to use Seller's Intellectual Property and the
Licensed Intellectual Property without conflict with the rights of others.
Except as set forth in Schedule 4.26, no person or corporation has made or, to
the knowledge of Seller, threatened to make any claim that Seller's use of
Seller's Intellectual Property and the Licensed Intellectual Property is in
violation of any license held by Seller or infringes any proprietary right or
interest of any third party. To the knowledge of Seller, no third party is
infringing upon any of Seller's Intellectual Property or is in violation of any
license to use Seller's Intellectual Property granted by Seller. Seller holds
Seller's Intellectual Property and the Licensed Intellectual Property free and
clear of all Liens.
4.27 Contracts and Agreements. Schedule 4.27 sets forth a description of each of
the following, and, in each case, Seller has furnished Buyer with true and
complete copies of all documents and complete descriptions of all oral
agreements and understandings, if any, referred to in this Section 4.27
(collectively, the "Contracts"): (a) deeds, lease agreements or other documents
relating to the ownership or lease of real property;
(b) equipment leases or other documents permitting Seller to use personal
property owned by a third party (other than leases which in the aggregate do not
require payment in excess of $10,000 per year and which are not otherwise
material to the operation, affairs or prospects of Seller);
(c) all notes, loan agreements, indentures, commitments or debt arrangements
under which Seller has incurred a debt obligation to any person or under which
Seller is entitled to borrow money from any Person;
(d) all collective bargaining agreements, employment and consulting agreements,
executive compensation plans, bonus plans, profit-sharing plans, deferred
compensation agreements, employee pension or retirement plans, employee stock
purchase and stock option plans, group life insurance, hospitalization insurance
or other plans or arrangements providing for benefits to employees of Seller;
and
(e) any other contracts, understandings and commitments to which Seller is a
party, or to which it or any of its assets or properties are subject (other than
contracts, understandings and commitments which do not involve payments in
excess of $10,000 individually or in excess of $10,000 in the aggregate and
which in any event are not material to the operation, affairs or prospects of
Seller)
4.28 No Breach or Default. Seller is not in default under any Contract to which
it is a party or by which it is bound, nor has any event occurred which, after
the giving of notice or the passage of time or both, would constitute a default
under any such Contract, which default could reasonably be expected to have a
materially adverse effect on the Company's business, financial condition or
assets. Seller has no reason to believe that the parties to such Contracts will
not fulfill their obligations under such Contracts in all material respects or
are threatened with insolvency.
4.29 Labor Controversies. Seller is not a party to any collective bargaining
agreement. There are no disputes or controversies between Seller and any of its
employees which might reasonably be expected to materially adversely affect the
conduct of its business, or any unresolved labor union grievances or unfair
labor practice or labor arbitration proceedings pending or, to the Seller's
knowledge, threatened relating to its business, and there are no organizational
efforts presently being made or, to the Seller's knowledge, or threatened
involving any of Seller's employees. Seller has not received notice of any claim
that Seller has not complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that Seller is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
4.30 Litigation. Except as set forth in Schedule 4.30, there are no actions,
suits or proceedings with respect to Seller involving claims by or against
Seller or Seller which are pending, or to the knowledge of Seller, threatened
against Seller, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality. To the knowledge of Seller, no basis for any action, suit or
proceeding exists, and there are no orders, judgments, injunctions or decrees of
any court or governmental agency with respect to which Seller has been named or
to which Seller is a party, which apply, in whole or in part, to the business of
Seller, or to any of the assets or properties of Seller, or the Shares or which
would result in any material adverse change in the business or prospects of
Seller.
4.31 Environmental Matters. Without limiting the generality of Section 4.10, (i)
Seller and its properties are in compliance in all material respects with all
Environmental Laws, and (ii) during the time that Seller has leased or owned its
properties or owned or operated any facilities, there has not been any release,
emission, seepage, disposal, spill or discharge at or to any property owned,
leased or operated by Seller, whether onto or into the ground, water, air or
otherwise, of any Hazardous Substance, and to the best of knowledge of Seller,
none is reasonably expected to occur imminently, other than those which (A) are
not material, (B) are permitted under all applicable Environmental Laws,
Governmental Approvals and Governmental Rules, and (C) are not reasonably
expected to have any material adverse impact on Seller or its properties.
4.32 Bank Accounts. Schedule 4.32 also sets forth the name of each bank, savings
institution or other person with which Seller has an account or safe deposit box
and the names and identification of all persons authorized to drawn thereon or
to have access thereto.
4.33 Insurance. Schedule 4.33 contains a list and description of all insurance
policies of any type (other than title insurance policies) which are held by
Seller (or which otherwise insure Seller's properties) specifying the insurer,
amount of coverage, type of insurance, policy number and any pending claims
thereunder. Except as disclosed on Schedule 4.31, no claim of any type
(exceeding $5,000) has been made and remains unresolved under any of such
policies.
ARTICLE FIVE
Representations and Warranties of Buyer
As of the date of this Agreement and the Closing Date, Buyer represents and
warrants to Seller as follows:
5.1 Organization and Authority. Buyer is a limited liability company validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority to enter into and perform this Agreement and the other
agreements contemplated hereby to which it is a party.
5.2 Authorization; Binding Effect. Buyer has taken all limited liability company
actions which are necessary to authorize the execution, delivery and performance
of this Agreement and the other agreements contemplated hereby to which it is a
party, and the consummation of the transactions contemplated hereby and thereby.
This Agreement and the other agreements contemplated hereby to which Buyer is a
party constitute the legal and binding obligations of such party, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights and the enforcement of debtors' obligations
generally and by general principles of equity, regardless of whether enforcement
is pursuant to a proceeding in equity or at law.
5.3 No Breach; No Default. Neither the execution, delivery or performance of
this Agreement or the other agreements contemplated hereby to which Buyer is a
party, nor the consummation of the transactions contemplated hereby or thereby
by Buyer, (a) conflicts with or results in any breach of, (b) constitutes a
default under, (c) results in a violation of, or (d) gives any third party any
right to accelerate any obligation under any agreement or instrument to which
Buyer is a party or by which any of its assets are bound.
5.4 No Bankruptcy or Insolvency. Buyer has not .4 No Bankruptcy or Insolvency.
Buyer has not filed any voluntary petition in bankruptcy or been adjudicated a
bankrupt or insolvent, filed any petition or answer seeking any reorganization,
liquidation, dissolution or similar relief under any federal bankruptcy,
insolvency, or other debtor relief law, or sought or consented to or acquiesced
in the appointment of any trustee, receiver, conservator or liquidator of all or
any substantial part of its properties. No court of competent jurisdiction has
entered an order, judgment or decree approving a petition filed against Buyer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any federal bankruptcy act, or other debtor
relief law, and no other liquidator has been appointed of Buyer or of all or any
substantial part of its properties.
5.5 No Litigation. There are no actions, suits or proceedings of any type
pending or, to the knowledge of Buyer, threatened, against Buyer, which, if
adversely determined could have an adverse effect on the Buyer's ability to
perform the obligations contemplated under the Closing Documents. Buyer is not
operating under, or subject to, or in default with respect to, any order, writ,
injunction or decree affecting the ability of Buyer to enter into this Agreement
or perform its obligations contemplated under the Closing Documents to which it
is a party.
5.6 Investment Company. Buyer is not, and is not controlled by, an "Investment
Company" within the meaning of the Investment Company Act.
5.7 Governmental Approvals. No Governmental Approval is necessary or appropriate
in connection with the execution and delivery by Buyer of this Agreement or the
other Closing Documents to which it is a party or the consummation by Buyer of
the transactions contemplated hereby and thereby.
5.8 Additional Consents and Notices. No filing, registration, qualification,
notice, consent, approval or authorization to, with or from any Person
(excluding Governmental Persons) is necessary or appropriate in connection with
the execution and delivery by Buyer of this Agreement or the other Closing
Documents to which it is a party, or the consummation by Buyer of the
transactions contemplated hereby and thereby.
5.9 No Brokers. Buyer has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Seller to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, and , other than the
Preferred Capital Equities Corporation and Harry Kraatz fees to be paid by
Seller, Buyer is not aware of any claim or basis for any claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.10 Purchase for Own Account. The Securities will be acquired for investment
purposes and for Buyer's 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 1933
Act, and Buyer has no present intention of selling, granting any participation
in, or otherwise distributing the same.
5.11 Disclosure of Information. Buyer has received or has had full access to all
the information it considers necessary or appropriate to make an informed
investment decision with respect to the Securities to be purchased by it under
this Agreement. Buyer further has had an opportunity to ask questions and
receive answers from Seller regarding the terms and conditions of the offering
of the Securities and to obtain additional information (to the extent Seller
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to Buyer or to which it
had access. The foregoing, however, does not in any way limit or modify the
representations and warranties made by Seller in Section 4.
5.12 Investment Experience. Buyer understands that the purchase of the
Securities involves substantial risk. Buyer has experience as an investors in
securities of companies in the development stage and acknowledges that Buyer is
able to fend for itself, can bear the economic risk of its investment in the
Securities and has such knowledge and experience in financial or business
matters that Buyer is capable of evaluating the merits and risks of this
investment in the Securities and protecting its own interests in connection with
this investment.
5.13 Accredited Investor Status. Buyer is an "accredited investor" within the
meaning of Regulation D promulgated under the 1933 Act. 5.14 Restricted
Securities. Buyer understands that the Securities are characterized as
"restricted securities" under the 1933 Act inasmuch as they are being acquired
from Seller in a transaction not involving a public offering and that under the
1933 Act and applicable regulations thereunder such Securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
In this connection, Buyer represents that it is familiar with Rule 144 of the
U.S. Securities and Exchange Commission (the "SEC"), as presently in effect, and
understands the resale limitations imposed thereby and by the 1933 Act. Buyer
understands that Seller is under no obligation to register any of the Securities
sold hereunder except as provided in the Investor's Rights Agreement.
ARTICLE SIX
Pre-Closing Covenants
6.1 Pre-Closing Covenants. Prior to the Closing, Seller hereby covenants
and agrees to take the following actions:
(a) Conduct the business of Seller in the ordinary course and refrain from
taking any action that would cause any representation or warranty made herein to
be untrue or materially misleading;
(b) Comply in all material respects with contractual obligations of Seller and
legal requirements applicable to Seller;
(c) Permit Buyer and any of its employees, agents and representatives and their
representatives to have reasonable access to Seller's books and records of
account;
(d) Permit Buyer and any of its employees, agents and representatives and their
representatives to contact Seller's accountants and certain key employees of
Seller for the purpose of completing its due diligence;
(e) Provide Buyer with copies of all documents referenced on the Schedules
(including, without limitation, contracts, deeds, lease agreements, intellectual
property license agreements, intellectual property registrations, environmental
site assessments, and real property title search results); and
(f) Provide Buyer with such other instruments, agreements and documents as Buyer
may reasonably request in order to complete its due diligence review of Seller.
ARTICLE SEVEN
Termination
7.1 Termination Prior to Closing. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written consent of the parties;
(b) by Buyer on one hand, or by Seller on the other hand, if there has been a
material misrepresentation or material breach of warranty or covenant on the
part of the other party with respect to the representations, warranties or
covenants set forth in this Agreement given by such other party or parties; or
(c) by any party if the Closing has not occurred on or before June 1,1999.
7.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 7.1 hereof, this Agreement will forthwith become void and
there will be no continuing liability on the part of Buyer or Seller, except
that, to the extent that any of such parties has made material
misrepresentations or has committed a material breach of warranty or covenant
prior to the date of termination, such party shall remain fully liable therefor.
Notwithstanding any termination of this Agreement, the parties shall treat as
confidential and not disclose, or use whatsoever, or permit others under its
control to disclose or use any information concerning another party to this
transaction obtained pursuant to or in connection with the transaction which is
the subject of this Agreement which is not generally known to the trade or a
matter of public knowledge, for a period of one year after termination.
ARTICLE EIGHT
Additional Provisions
8.1 Survival. The representations, warranties, covenants and agreements of Buyer
and Seller set forth in this Agreement will survive the Closing Date and the
consummation of the transactions contemplated hereby, notwithstanding any
examination made for or on behalf of Buyer or Seller, the knowledge of Buyer or
Seller, or any of their officers, directors, shareholders, employees or agents,
or the acceptance of any certificate or opinion.
8.2 Indemnification.
(a) Seller agrees to indemnify Buyer and hold it harmless against any loss,
liability, damage or expense (including reasonable legal expenses and costs)
which Buyer may suffer, sustain or become subject to, as the result of a breach
of any representation, warranty, covenant, or agreement by Seller contained in
this Agreement or in any other agreement, instrument, certificate or other
document delivered in connection with the transactions contemplated in this
Agreement.
(b) Buyer agrees to indemnify Seller and hold it harmless against any loss,
liability, damage or expense (including reasonable legal expenses and costs)
which Seller may suffer, sustain or become subject to, as the result of a breach
of any representation, warranty, covenant, or agreement by Buyer contained in
this Agreement or in any other agreement, instrument, certificate or other
document delivered in connection with the transactions contemplated in this
Agreement.
(c) Any party seeking indemnity pursuant to this Section 8.2 shall give notice
to the other party promptly after such party seeking indemnity has actual
knowledge of any claim as to which indemnity may be sought hereunder. The
failure of the party seeking indemnity to give such notice shall relieve the
party that does not receive such notice of its obligations under this Section
8.2 to the extent that such failure to give notice is prejudicial.
(d) After the indemnifying party has acknowledged in writing that it is
indemnifying another party to this Agreement with respect to litigation
involving any claim to the full extent of such claim, the indemnifying party
will be entitled to assume the defense of any such litigation, provided that the
other party may at its election participate in any such defense to the extent
that it in its sole discretion believes that such litigation will materially
affect its ongoing business. At the indemnifying party's reasonable request, the
other party will cooperate with the indemnifying party in the preparation of any
such defense, and the indemnifying party will reimburse the other party for any
expenses incurred in connection with such request. The indemnifying party shall
not enter into any settlement of any claim which is the subject of
indemnification without the written consent of the indemnified party.
(e) Payment with respect to either party's indemnification obligations hereunder
shall be due and payable within thirty (30) days of receipt of written notice by
the indemnifying party. The rights of the parties hereunder are cumulative and
shall be in addition to all other rights and remedies available at law or in
equity.
8.3 Expenses. At Closing, Seller will pay Buyer the sum of $50,000 as partial
reimbursement of expenses incurred by Buyer in connection with the transactions
contemplated herein. Except as otherwise provided in this Agreement or the other
Closing Documents, each party will pay all of its expenses, including attorneys'
and accountants' fees, in connection with the negotiation of this Agreement and
the other Closing Documents, the performance of its obligations hereunder and
thereunder, and the consummation of the transactions contemplated by this
Agreement and the other Closing Documents.
8.4 Press Releases and Announcements. Neither party shall issue a press release
or announcement regarding this Agreement without the prior written consent of
the other parties to this Agreement.
8.5 Third-Party Beneficiaries. This Agreement does not create any rights in
any parties who are not otherwise a party to this Agreement.
ARTICLE NINE
Miscellaneous
9.1 Entire Agreement; Amendment and Waiver. This Agreement, together will all
exhibits and schedules referenced herein, constitutes the full and entire
understanding and agreement between the parties with regard to the subject
hereof and thereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated, except by a written instrument signed by
Seller and Buyer.
9.2 Notices. Except as otherwise expressly set forth in this Agreement, all
notices, demands and other communications to be given or delivered under or by
reason of the provisions of this Agreement will be in writing and will be deemed
to have been given when delivered personally, or by documented overnight
delivery service. Notices, demands and communications to Buyer or Seller will,
unless another address is specified in writing, be sent to the address indicated
below. All such notices and other written communications shall be effective (i)
if mailed, five (5) days after mailing, (ii) if sent by a nationally recognized
overnight courier, one business day after delivery to such courier, and (iii) if
faxed or delivered, upon fax or delivery.
Notices to Buyer with a copy to:
Ridgewood ZAP, LLC Downs Rachlin & Martin PLLC
Ridgewood Commons 199 Main Street
947 Linwood Avenue PO Box 190
Ridgewood, NJ 07450 Burlington, VT 05402-0190
Attn: Robert E. Swanson, President Attn: Thomas H. Moody, Esq.
Fax: (201) 947-0474 Fax: (802) 860-3948
Notices to Seller: with a copy to:
ZAP Power Systems Evers & Hendrickson, LLP
117 Morris Street 155 Montgomery St., 12th Floor
Sebastopol, California 95472 San Francisco, CA 94104
Attn: Gary Starr Attn: William D. Evers, Esq.
Fax: 707-824-4159 Fax: 415-772-8101
9.3 Assignment. This Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by either party without prior
written consent of the other party; provided, however, that Buyer may assign its
rights but not its obligations hereunder to an Affiliate.
9.4 Severability. Whenever possible, each provision of this Agreement will 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 prohibited by or invalid
under applicable law, such provisions will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
9.5 No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any party.
9.6 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
9.7 Governing Law. Disputes arising under this Agreement shall be governed by
and interpreted and construed in accordance with the substantive law (and not
the law of conflicts) of the State of California.
9.8 Jurisdiction and Venue. The parties hereto agree that courts located within
the State of California shall have exclusive jurisdiction over any dispute
arising under this Agreement and the parties hereby consent to such courts as
having venue and personal and subject matter jurisdiction as to all matters
arising under this Agreement and to service of process by registered mail,
return receipt requested, or by any other manner provided by law, and the
prevailing party or parties in a suit for breach of this Agreement shall be
entitled to all costs of such suit, including attorneys' fees.
9.9 Counterparts. This Agreement may be executed in one or more counterparts,
any one of which need not contain the signatures of more than one party, but all
such counterparts taken together will constitute one and the same instrument.
Confirmation of execution of this Agreement by telefax shall be binding upon any
party so confirming.
9.10 Further Assurances. The parties recognize that the consummation of this
Agreement and the transactions contemplated hereby will require the ongoing
cooperation of the parties, and each hereby agrees to comply in good faith with
the reasonable requests of any other party which may be made from time to time
in furtherance of the objectives of the parties in entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Stock and Warrant
Purchase Agreement on the day and year first above written.
ZAP POWER SYSTEMS
By:_____________________________
Name:___________________________
Title:____________________________
RIDGEWOOD ZAP, LLC
By: Ridgewood Management Corporation,
Manager
By:_____________________________
Name:___________________________
Title:____________________________
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