THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE
OFFERED OR SOLD WITHOUT REGISTRATION UNDER THE SECURITIES ACT, AND AS
REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH TRANSFER, UNLESS AN
EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW IS
AVAILABLE.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated effective as
of June 7, 2002, by and between Enova Systems, Inc., a California corporation
(the "Corporation") and the investor whose name is set forth on the signature
page attached hereto (the "Investor").
R E C I T A L S
A. The Investor desires to purchase from the Corporation, and the
Corporation desires to sell to the Investor, Common Stock on the terms and
conditions hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties hereby
agree as follows:
1. Issuance of Securities, Payment and Delivery.
a. Sale of Securities. Subject to the terms and conditions of
this Agreement, the Investor agrees to purchase on, or before the date
set forth on Schedule 1 to the signature page attached hereto, or on
such later date as is agreed upon in writing by the Investor and the
Corporation (the "Closing") and the Company agrees to sell and issue to
the Investor that number of shares of the Corporation's Common Stock
set forth on Schedule 1 (the "Shares") at the closing market share
price as of the effective date of this Agreement for an aggregate
purchase price as set forth on Schedule 1 (the "Purchase Price").
b. Payment and Delivery. The Investor shall purchase the
Shares by making payment to Enova Systems, Inc. in cash, by cashiers
check or wire transfer of funds, in immediately available U.S. Dollars
funds.
2. Deliveries at Closing. At the Closing or thereafter as indicated:
a. The Corporation and the Investor will at the Closing
deliver executed counterparts of this Stock Purchase Agreement and the
Registration Rights Agreement (as defined in Section 6 below);
b. The Investor will provide the Corporation at the Closing
with payment in immediately available funds of the aggregate amount of
the Purchase Price;
c. The Corporation will deliver within twenty (20) business
days after the Closing a share certificate evidencing the Shares in the
name of the Investor;
d. The Corporation will deliver an officer's certificate
providing that its representations and warranties contained in this
Agreement are true and correct as of the Closing;
e. The Investor will deliver a certificate providing that its
representations and warranties contained in this Agreement are true and
correct as of the Closing;
f. The Corporation will deliver a copy of its most recently
prepared unaudited financial statements (the "Financial Statements");
and
g. Upon the request of the Investor, the Corporation shall
deliver to the Investor written evidence reasonably satisfactory to the
Investor that the condition set forth in Section 3 below has been
satisfied.
3. Condition to Closing. It is expressly agreed by the parties that the
closing of the transactions contemplated by this Agreement is
conditional upon the Corporation entering into one or more definitive
written agreements with one or more third parties or affiliates of the
Investor to purchase the Corporation's Common Stock on or before the
Closing, the purchase price(s) of which when combined with the Purchase
Price of the Shares purchased by the Investor hereunder, will equal at
least $4 million in the aggregate. In the event that the foregoing
condition is not satisfied on or before the date of the Closing, the
Closing shall not occur and this Agreement shall automatically
terminate without obligation or liability of either party.
4. Corporation's Representations and Warranties. The Corporation hereby
represents and warrants to the Investor that as of the Closing:
a. Corporate Organization and Standing. The Corporation is a
corporation duly organized, validly existing and in good standing under
the laws of the State of California. The Corporation has the requisite
corporate power to carry on its business as presently conducted, and as
proposed or contemplated to be conducted in the future, and to enter
into and carry out the provisions of this Agreement and the
transactions contemplated under this Agreement.
b. Authorization. All corporate action on the part of the
Corporation, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement by
the Corporation and the performance of all of the Corporation's
obligations hereunder has been taken. This Agreement, when executed and
delivered by the Corporation, shall constitute a valid and binding
obligation of the Corporation, enforceable in accordance with its
terms, except as may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
The Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and non-assessable
c. No Breach. The issue and sale of the Shares by the
Corporation does not and will not conflict with and does not and will
not result in a breach of any of the terms of the Corporation's
incorporating documents or any agreement or instrument to which the
Corporation is a party. The consummation of the transactions or
performance of the obligations contemplated by this Agreement will not
result in a breach of any term of, or constitute a default under, any
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statute, indenture, mortgage, or other agreement or instrument to which
the Corporation or any of its subsidiaries is or are a party or by
which any of them is or are bound.
d. Pending or Threatened Claims. Neither the Corporation nor
any of its subsidiaries is a party to any action, suit or proceeding
which could materially affect its business or financial condition, and
no such actions, suits or proceedings are contemplated or have been
threatened.
5. Investor Representations and Warranties. The Investor represents and
warrants to the Corporation that:
a. Account. The Investor is acquiring the Shares for
investment for its own account, and not with a view to, or for resale
in connection with, any distribution thereof, and it has no present
intention of selling or distributing any of the Shares (but by making
this representation the Investor is not agreeing to hold the Shares for
any minimum period of time). The Investor understands that the Shares
have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment as expressed
herein.
b. Access to Data. The Investor has had an opportunity to
discuss the Corporation's business, management and financial affairs
with its management and to obtain any additional information which the
Investor has deemed necessary or appropriate for deciding whether or
not to purchase the Shares, and has had an opportunity to receive,
review and understand the disclosures and information regarding the
Corporation's financial statements, capitalization and other business
information as set forth in Corporation's filings with the Securities
and Exchange Commission (the "SEC Filings") which are all incorporated
herein by reference, together with all exhibits referenced therein. The
Investor acknowledges that no other representations or warranties, oral
or written, have been made by the Corporation or any agent thereof
except as set forth in this Agreement.
c. No Fairness Determination. The Investor is aware that no
federal, state or other agency has made any finding or determination as
to the fairness of the investment, nor made any recommendation or
endorsement of the Shares.
d. Knowledge And Experience. The Investor has such knowledge
and experience in financial and business matters, including investments
in other start-up companies, that it is capable of evaluating the
merits and risks of the investment in the Shares, and it is able to
bear the economic risk of such investment. Further, the individual
executing this Agreement has such knowledge and experience in financial
and business matters that he is capable of utilizing the information
made available to him in connection with the offering of the Shares, of
evaluating the merits and risks of an investment in the Shares and of
making an informed investment decision with respect to the Shares,
including assessment of the Risk Factors set forth in the SEC Filings
and incorporated herein by reference.
e. Limited Public Market. The Investor is aware that there is
currently a very limited "over-the-counter" public market for the
Corporation's registered securities and that the
3
Corporation became a "reporting issuer" under the Securities Exchange
Act of 1934, as amended, on January 27, 1995. There is no guarantee
that a more established public market will develop at any time in the
future. The Investor understands that the Shares are all unregistered
and may not presently be sold in even this limited public market. The
Investor understands that the Shares cannot be readily sold or
liquidated in case of an emergency or other financial need. The
Investor has sufficient liquid assets available so that the purchase
and holding of the Shares will not cause it undue financial
difficulties
f. Authority. If Investor is a corporation, partnership, trust
or estate: (i) the individual executing and delivering this Agreement
on behalf of the Investor has been duly authorized and is duly
qualified to execute and deliver this Agreement on behalf of Investor
in connection with the purchase of the Shares and (ii) the signature of
such individual is binding upon Investor.
g. Investment Experience. The Investor is an "accredited
investor" as that term is defined in Regulation D promulgated by the
Securities and Exchange Commission. The term "Accredited Investor"
under Regulation D refers to:
(i) A person or entity who is a director or executive
officer of the Corporation;
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the Exchange Act; insurance
Corporation as defined in Section 2(13) of the Securities Act;
investment Corporation registered under the Investment Corporation Act
of 1940; or a business development Corporation as defined in Section
2(a)(48) of that Act; Small Business Investment Corporation licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000; employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance
Corporation, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decision made solely by persons
that are accredited investors;
(iii) Any private business development Corporation as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
acquiring the Securities offered, with total assets in excess of
$5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
4
(vi) Any natural person who had an individual income
in excess of $200,000 during each of the previous two years or joint
income with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income
level in the current year;
(vii) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
Securities offered, whose purchase is directed by a person who has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective
investment; or
(viii) Any entity in which all of the equity owners
are accredited investors.
(ix) As used in this Section 4(g), the term "net
worth" means the excess of total assets over total liabilities. For the
purpose of determining a person's net worth, the principal residence
owned by an individual should be valued at fair market value, including
the cost of improvements, net of current encumbrances. As used in this
Section 4(g), "income" means actual economic income, which may differ
from adjusted gross income for income tax purposes. Accordingly, the
undersigned should consider whether it should add any or all of the
following items to its adjusted gross income for income tax purposes in
order to reflect more accurately its actual economic income: Any
amounts attributable to tax-exempt income received, losses claimed as a
limited partner in any limited partnership, deductions claimed for
depletion, contributions to an XXX or Xxxxx retirement plan, and
alimony payments.
6. Lock-Up/Registration Rights. Except for the registration rights
granted pursuant to the Registration Rights Agreement (as defined in
this Section 6), the Investor acknowledges and agrees that the Shares
may be subject to certain restrictions on transfer following a
registered public offering of the Corporation's securities as provided
in this Section 6. In connection with any underwritten registration of
the Corporation's securities, the Investor agrees, upon the request of
the underwriters managing such offering of the Corporation's
securities, if applicable, if applicable, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Shares (other than those included in the registration)
without the prior written consent of the Corporation and, if
applicable, such underwriters, as the case may be, for such period of
time, not to exceed fourteen (14) days before and one hundred eighty
(180) days, after the effective date of such registration as the
Corporation or the underwriters may specify; provided, however, that
all executive officers, directors and shareholders holding more than 1%
of the fully diluted capital stock of the Corporation are subject to
the same restrictions as the Investor. The Corporation and underwriters
may request such additional written agreements in furtherance of such
standoff in the form reasonably satisfactory to the underwriter and the
Investor. The Corporation may also impose stop-transfer instructions
with respect to the shares subject to the foregoing restrictions until
the end of said one hundred eighty (180) day or shorter period.
Contemporaneous with the execution of this Agreement, the Corporation
and the Investor shall enter into a written resale registration rights
agreement (the "Registration Rights Agreement"), which shall provide
for the registration by the Corporation of the Shares with the
Securities and Exchange Commission and such states as may be required
by the Investor according to the terms of such agreement. The
obligations of the Corporation pursuant to this Section hereof shall
cease and terminate upon the earlier to occur of (i) such time as all
of the Shares have been resold or (ii) such time as all of the Shares
may be sold during any 90 day
5
period pursuant to Rule 144, including Rule 144(k) or (iii) upon the
second anniversary date of the effective date of this Agreement.
7. Restrictive Legends. Each certificate evidencing the Shares which
the Investor may acquire hereunder and any other securities issued upon
any stock split, stock dividend, recapitalization, merger,
consolidation or similar event (unless no longer required in the
opinion of the counsel for the Corporation) shall be imprinted with one
or more legends substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE HOLDER OF THESE SHARES
MAY BE REQUIRED TO DELIVER TO THE COMPANY, IF THE COMPANY SO REQUESTS,
AN OPINION OF COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY) TO THE EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT (OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS
AVAILABLE WITH RESPECT TO ANY TRANSFER OF THESE SHARES THAT HAS NOT
BEEN SO REGISTERED (OR QUALIFIED).
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. A COPY
OF THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH CLASS AND
SERIES WILL BE PROVIDED TO EACH STOCKHOLDER WITHOUT CHARGE, UPON
WRITTEN REQUEST.
The Corporation shall be entitled to enter stop transfer notices on its
transfer books with respect to the Securities.
8. Indemnification of the Investor. The Corporation hereby agrees to
indemnify, defend and hold the Investor harmless from and against any
and all damages, losses, expenses or other costs (including reasonable
attorneys' fees and expenses) incurred by the Investor as a result of
the Corporation's breach of any representation or warranty of the
Corporation set forth in this Agreement.
9. Confidential Information. The parties agree that, except as may be
set forth on the attached Schedule 2, the Corporation has not provided
the Investor with any material non-public information with respect to
the Corporation or its activities ("Confidential Information"), and the
Corporation agrees to publicly disclose the substance of such
Confidential Information within the applicable time period set forth on
the attached Schedule 2 (unless such Confidential Information becomes
moot by such date). The Investor understands and agrees that such
Confidential Information may not be disclosed to any third party or
used by the Investor for purposes of trading in the Corporation's
publicly traded stock until such Confidential Information is publicly
disclosed by the Corporation.
6
10. Miscellaneous.
a. Notices. Any notice, request or other communication
required or permitted hereunder will be in writing and shall be deemed
to have been duly given if personally delivered or if telecopied or
mailed by registered or certified mail, postage prepaid, at the
respective addresses of the parties as set forth below. Any party
hereto may by notice so given change its address for future notice
hereunder. Notice will be deemed to have been given when personally
delivered or when deposited in the mail or telecopied in the manner set
forth above and will be deemed to have been received when delivered.
(a) If to the Investor: as set forth on Schedule 1
(b) If to the Company
Enova Systems, Inc.
00000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Finance and Administration
with a copy to:
Crosby, Heafey, Xxxxx & May
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
b. Survival. The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
c. Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and
assigns of the parties.
d. Applicable Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of California, without giving
effect to principles of conflicts of law.
e. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement may be
executed by facsimile.
f. Title and Subtitles. The titles of the Sections and
subsections of this Agreement are for the convenience of reference only
and are not to be considered in construing this Agreement.
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g. Attorney's Fees. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any
other relief to which it may be entitled.
h. Waiver. The provisions of this Agreement may be waived,
altered, amended or repealed, in whole or in part, only upon the
written consent of the Corporation and the Investor. No waiver by any
party hereto of any breach of this Agreement by any other party shall
operate or be construed as a waiver of any other or subsequent breach.
No waiver by any party hereto of any breach of this Agreement by any
other party hereto shall be effective unless it is in writing and
signed by the party claimed to have waived such breach.
i. Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not
alternative). The parties to this Agreement agree that, in the event of
any breach or threatened breach by the Corporation to this Agreement of
any covenant, obligation or other provision set forth in this Agreement
for the benefit of any other party to this Agreement, such other party
shall be entitled (in addition to any other remedy that may be
available to it under this Agreement or otherwise) to (A) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (B) an
injunction restraining such breach or threatened breach.
j. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith to achieve the closest
comparable terms as is possible. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this
Agreement, (b) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (c) the balance of the Agreement
shall be enforceable in accordance with its terms.
k. Venue. Any action, arbitration, or proceeding arising
directly or indirectly from this Agreement or any other instrument or
security referenced herein shall be litigated or arbitrated, as
appropriate, in the County of Los Angeles, State of California.
l. Entire Agreement. This Agreement and the Exhibits,
Schedules and other documents referred to herein (including the
Registration Rights Agreement) constitute the entire agreement between
the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements regarding the subject matter
hereof existing between the parties hereto are expressly canceled.
8
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
Selling Shareholder Enova Systems, Inc.
By:_____________________________ By:______________________________________
Xxxx X. Xxxxx, Chief Executive Officer
Title:__________________________
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Schedule 1
Shares Purchased
Closing Date: June 7, 2002
----------------
Number of Shares: XX,XXX,XXX
---------------
Purchase Price: US$X,XXX,XXX.
----------------
Price per share: $0.10
---------------
Schedule 2
Confidential Information
Confidential Information Public Disclosure Date
------------------------ ----------------------
Financial Statements [Next 10Q/10K/8K]
