EXHIBIT 99.1
Annexed hereto is the Agreement and Plan of Merger, dated November 16, 2004, by
and among EC Power, Inc., EC Power Acquisition Corp. and FBC Technologies, Inc.
The schedules to the Agreement are available upon request.
AGREEMENT AND PLAN OF MERGER
By and Among
EC Power, Inc.,
EC Power Acquisition Corp.,
and FBC Technologies, Inc.
Dated as of November 16, 2004
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGER....................................................1
1.1. The Merger....................................................1
1.2. Effective Time; Closing.......................................2
1.3. Effect of the Merger..........................................2
1.4. Certificate of Incorporation; Bylaws..........................2
1.5. Directors and Officers........................................2
1.6. Effect on Capital Stock.......................................2
1.7. Dissenting Shares.............................................3
1.8. Surrender and Payment.........................................4
1.9. Lost, Stolen or Destroyed Certificates........................5
1.10. Taking of Necessary Action; Further Action....................5
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF FBC.........................5
2.1. Organization and Qualification; Subsidiaries..................5
2.2. Certificate of Incorporation and Bylaws.......................5
2.3. FBC Capital Structure.........................................6
2.4. Obligations with Respect to Capital Stock.....................6
2.5. Authority Relative to this Agreement..........................6
2.6. No Conflicts, Required Filings and Consents...................7
2.7. Financial Statements..........................................7
2.8. No Undisclosed Liabilities....................................8
2.9. Absence of Certain Changes or Events..........................8
2.10. Absence of Litigation.........................................8
2.11. Employee Benefit Plans........................................9
2.12. Labor Matters................................................10
2.13. Taxes........................................................11
2.14. Intellectual Property........................................11
2.15. Compliance; Permits; Restrictions............................14
2.16. Agreements, Contracts and Commitments........................14
2.17. Title to Properties; Absence of Liens and Encumbrances.......15
2.18. Environmental Matters........................................15
2.19. Change of Control Payments...................................16
2.20. [INTENTIONALLY DELETED]......................................16
2.21. Books and Records............................................16
2.22. Improper Payments............................................16
2.23. Disclosure...................................................16
2.24. Condition and Sufficiency of Assets..........................16
2.25. Brokers......................................................16
2.26. Consent of FBC Stockholders..................................17
2.27. Title to Shares..............................................17
2.28. Exchange Act Representations.................................17
2.29. FBC Stockholder Representations..............................17
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF EC POWER AND NEWCO.........17
3.1. Organization and Qualification; Organizational Documents.....17
3.2. Certificate of Incorporation and Bylaws......................18
3.3. Capitalization...............................................18
3.4. Obligations with Respect to Capital Stock....................18
3.5. Authority Relative to this Agreement.........................19
3.6. No Conflict, Required Filings and Consents...................19
3.7. Financial Statements.........................................20
3.8. No Undisclosed Liabilities...................................20
3.9. Absence of Certain Changes or Events.........................21
3.10. Absence of Litigation........................................21
3.11. Taxes........................................................21
3.12. Brokers......................................................22
3.13. Compliance; Permits; Restrictions............................22
3.14. Agreements, Contracts and Commitments........................23
3.15. Title to Properties; Absence of Liens and Encumbrances.......23
3.16. [INTENTIONALLY DELETED]......................................24
3.17. Books and Records............................................24
3.18. Improper Payments............................................24
3.19. Employee Benefit Plans.......................................24
3.20. Labor Matters................................................26
3.21. Intellectual Property........................................26
3.22. Disclosure...................................................28
3.23. Condition and Sufficiency of Assets..........................28
3.24. Brokers......................................................28
ARTICLE IV. COVENANTS OF EC POWER........................................28
4.1. Exchange Act Covenant........................................28
4.2. EC Power Financial Obligations...............................29
4.3. Board Seats..................................................29
4.4. Registration Rights..........................................29
ARTICLE V. CONDITIONS PRECEDENT.........................................30
5.1. Obligations of EC Power......................................30
5.2. Obligations of FBC...........................................30
ARTICLE VI. CLOSING DELIVERIES...........................................31
6.1. Deliveries of FBC............................................31
6.2. The EC Power Parties' Deliveries.............................31
ARTICLE VII. INDEMNIFICATION..............................................32
7.1. Indemnification by FBC.......................................32
7.2. Indemnification by EC Power..................................32
7.3. No Impact from Investigation.................................32
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ARTICLE VIII. FURTHER PROVISIONS REGARDING INDEMNIFICATION.................32
8.1. Survival.....................................................32
8.2. Limitations..................................................33
ARTICLE IX. MISCELLANEOUS................................................33
9.1. Notices......................................................33
9.2. Entire Agreement.............................................34
9.3. Successors; Assignment.......................................35
9.4. Further Assurances...........................................35
9.5. Headings.....................................................35
9.6. Disclosure Schedules.........................................35
9.7. Waiver.......................................................35
9.8. Severability.................................................36
9.9. Governing Law and Consent to Jurisdiction....................36
9.10. Counterparts.................................................36
9.11. Definition of Knowledge......................................36
9.12. No Third-Party Beneficiaries.................................36
9.13. Expenses.....................................................36
Exhibits
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Exhibit A Warrantholder Warrant Agreement
Exhibit B FBC Guaranties
Exhibit C Guarantor Warrant Agreement
Exhibit D FBC Debt Obligations
Exhibit E Preferred Stock Terms
Exhibit F Registration Rights Agreement
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This AGREEMENT AND PLAN OF MERGER, dated as of November 16, 2004
(this "Agreement"), is by and among EC Power, Inc., a Delaware corporation ("EC
Power"), EC Power Acquisition Corp., a New York corporation and a wholly-owned
subsidiary of EC Power ("Newco" and, together with EC Power, the "EC Power
Parties"), and FBC Technologies, Inc., a New York corporation ("FBC").
RECITALS
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law") and the New York Business Corporation Law ("New York
Law"), EC Power, Newco and FBC intend to enter into a business combination
transaction;
WHEREAS, the Board of Directors of FBC (i) has determined that the
Merger (as defined below) is fair to, and in the best interest of, FBC and the
FBC stockholders and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement;
WHEREAS, the FBC stockholders have approved this Agreement, the
Merger and the other transactions contemplated by this Agreement; and
WHEREAS, the Board of Directors of each of the EC Power Parties (i)
has determined that the Merger is fair to, and in the best interest of, the EC
Power Parties and their respective stockholders, and (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, EC Power, Newco and FBC hereby agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. At the Effective Time (as defined in Section
1.2(a)) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of Delaware Law and New York Law, Newco shall be
merged with and into FBC (the "Merger"), the separate corporate existence of
Newco shall cease, and FBC shall continue as the surviving corporation. FBC, as
the surviving corporation after the Merger, is hereinafter sometimes referred to
as the "Surviving Corporation." The parties intend that, for federal income tax
purposes, the Merger shall constitute a tax-free reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code").
1.2. Effective Time; Closing.
(a) As promptly as practicable after the Closing (as defined in
Section 1.2(b)), the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger with the Secretary of State of the State of New
York (the "Certificate of Merger"), in such form as required by, and executed in
accordance with the relevant provisions of, New York Law. When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Merger becomes effective under New York Law.
(b) The closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of Patterson, Belknap, ▇▇▇▇ & ▇▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on
November 16, 2004, or at such other location, time and date as may be agreed by
the parties (the "Closing Date"). At the Closing, each of EC Power, Inc., EC
Power Acquisition Corp., and FBC Technologies, Inc. shall deliver the
agreements, certificates and other documents required to be delivered and which
have not been delivered prior to Closing.
1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
New York Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the rights, privileges, powers, franchises
and property of Newco and FBC shall vest in the Surviving Corporation, and all
restrictions, disabilities, duties, debts and liabilities of Newco and FBC shall
become the restrictions, disabilities, duties, debts and liabilities of the
Surviving Corporation.
1.4. Certificate of Incorporation; Bylaws. At the Effective Time,
the Certificate of Incorporation and the Bylaws of FBC shall be the Certificate
of Incorporation and Bylaws of the Surviving Corporation until thereafter
amended.
1.5. Directors and Officers. The directors and officers of FBC
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and has qualified.
1.6. Effect on Capital Stock.
(a) Conversion of FBC Common Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of either Newco, FBC or the
holders of any common stock, par value $.01 per share, of FBC ("FBC Common
Stock"), each share of FBC Common Stock issued and outstanding immediately prior
to the Effective Time, other than any shares of FBC Common Stock to be canceled
pursuant to Section 1.6(b) and Dissenting Shares (as defined in Section 1.7(a)
and, together with shares of FBC Common Stock to be canceled pursuant to Section
1.6(b), the "Excluded Shares"), will be canceled and extinguished and
automatically converted (subject to Section 1.6(d)) into the number of shares of
validly issued, fully paid and nonassessable common stock, par value $.001 per
share, of EC Power (the "EC Power Common Stock"), equal to (i) one million
(1,000,000), which number constitutes approximately 5.8% of the issued and
outstanding shares of EC Power Common Stock and preferred stock, on a fully
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converted basis, immediately after the Effective Time (the "Merger
Consideration") divided by (ii) the total number of shares of FBC Common Stock
(but excluding Excluded Shares and any unexercised options or warrants) which
are issued and outstanding immediately prior to the Effective Time (the
"Exchange Ratio"); provided, however, that the Merger Consideration is subject
to adjustment pursuant to Section 1.7. In addition to the Merger Consideration,
the FBC warrantholders set forth on Schedule 1.6(a) will also receive five-year
warrants, with the terms set forth in the form of Warrant Agreement annexed
hereto as Exhibit A (the "Warrantholder Warrant Agreement"), each warrant
agreement will entitle such holder to purchase a number of shares of EC Power
Common Stock as set forth on Section 1.6(a) of the FBC Disclosure Schedules (as
hereinafter defined). The per share exercise price for such warrants shall be
the lesser of (i) Four Dollars and Fifty Five Cents ($4.55) and (ii) eighty five
percent (85%) of the average of the three lowest closing bid prices for EC Power
Common Stock for the ten trading days ending on the close of business on the day
before the relevant warrant is exercised; provided, however, that in no event
will the per share exercise price for such warrant be below (i) $2.00 if such
warrant is exercised prior to November 16, 2005 or (ii) $3.00 if such warrant is
exercised at any time thereafter until such warrant expires.
(b) Cancellation of Company-Owned Stock. Each share of FBC Common
Stock held by FBC immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Capital Stock of Newco. Each share of common stock, par value
$0.01 per share, of Newco issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and
non-assessable share of FBC Common Stock. Each stock certificate of Newco
evidencing ownership of any such shares shall evidence ownership of such shares
of FBC Common Stock.
(d) Fractional Shares. No fraction of a share of EC Power Common
Stock shall be issued by virtue of the Merger, but in lieu thereof each holder
of a share of FBC Common Stock who would otherwise be entitled to a fraction of
a share of EC Power Common Stock (after aggregating all fractional shares of EC
Power Common Stock that otherwise would be received by such holder) shall
receive from EC Power an amount of cash (rounded to the nearest whole cent)
equal to such fraction multiplied by the greater of (i) the average of the three
lowest closing bid prices for EC Power Common Stock for the ten trading days
ending on the close of business on the day before the Closing Date and (ii)
$1.00.
(e) All Other Capital Stock of FBC. All other capital stock of FBC
shall be canceled and retired and shall cease to exist, and no consideration
shall be issued or delivered in exchange therefor.
1.7. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of FBC Common Stock held by a holder who has demanded and perfected
his right to appraisal of such shares in accordance with New York Law and who,
as of the Effective Time, has not effectively withdrawn or lost such right to
appraisal ("Dissenting Shares") shall not be converted into or represent a right
to receive shares of EC Power Common Stock pursuant to Section 1.6(a), but the
holder thereof shall only be entitled to such rights as are granted by New York
Law. In the event that a holder of FBC Common Stock makes a demand under Section
623 of the New York Law, the Merger Consideration shall be reduced by the number
of shares of EC Power Common Stock which otherwise would have been issued to
such holder.
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(b) Notwithstanding the provisions of Section 1.7(a), if any holder
of shares of FBC Common Stock who demands appraisal of such shares under New
York Law effectively withdraws or loses (through failure to perfect or
otherwise) his right to appraisal, then, as of the later of the Effective Time
or the occurrence of such event, such holder's shares of FBC Common Stock shall
automatically be converted into and represent only the right to receive shares
of EC Power Common Stock, upon surrender of the certificate or certificates
representing such shares of FBC Common Stock.
(c) FBC shall give EC Power (i) prompt notice of any written notices
and demands under Section 623 of the New York Law with respect to any shares of
capital stock of FBC, any withdrawal of any such demands and any other
instruments served pursuant to New York Law and received by FBC and (ii) the
right to participate in all negotiations and proceedings concerning any demands
under Section 623 with respect to any shares of capital stock of FBC. FBC shall
cooperate with EC Power concerning, and shall not, without the prior written
consent of EC Power, voluntarily make any payment with respect to, offer to
settle or settle any such demands.
1.8. Surrender and Payment.
(a) The FBC stockholders shall surrender the certificates therefor
as soon as practicable after the Effective Time, and EC Power shall deliver the
Warrantholder Warrant Agreements issued to such FBC stockholders as soon as
practicable after the Effective Time. The Merger Consideration and the
Warrantholder Warrant Agreements delivered upon the surrender for exchange of
the shares of FBC Common Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares or warrants, as the case may be, and after the Effective Time, there
shall be no further registration or transfers of shares of FBC Common Stock that
were outstanding prior to the Closing Date. If after the Effective Time
certificates which immediately prior to the Effective Time represented
outstanding shares of FBC Common Stock (the "Certificates") are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
(b) If certificates for shares of EC Power Common Stock are to be
issued in the name of a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of the issuance
thereof that the Certificates so surrendered be properly endorsed or otherwise
in proper form for transfer and that the person requesting such exchange has
paid to EC Power or any agent designated by it any transfer or other taxes
required by reason of the issuance of certificates for shares of EC Power Common
Stock in the name of a person other than the registered holder of the
Certificate surrendered or has established to the satisfaction of EC Power or
any agent designated by it that such tax either has been paid or is not
applicable.
1.9. Lost, Stolen or Destroyed Certificates. If any Certificates
have been lost, stolen or destroyed, EC Power shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, the Merger Consideration.
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1.10. Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of FBC and Newco, the officers and directors
of FBC and Newco are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action. EC Power shall cause Newco to perform all of its obligations relating to
this Agreement and the transactions contemplated hereby.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF FBC
Except as disclosed in the disclosure schedules delivered by FBC to
EC Power prior to or concurrently with the execution and delivery of this
Agreement (the "FBC Disclosure Schedules"), FBC hereby represents and warrants
to EC Power as follows:
2.1. Organization and Qualification; Subsidiaries. FBC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and has the requisite corporate power and authority to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted and as currently proposed
to be conducted. FBC is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for any
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of FBC, or on the ability of the
parties to consummate the transactions contemplated by this Agreement (an "FBC
Material Adverse Effect"). Except as set forth in Section 2.1 of the FBC
Disclosure Schedules, FBC does not, directly or indirectly, own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity. FBC has no subsidiaries.
2.2. Certificate of Incorporation and Bylaws. FBC has furnished to
EC Power a complete and correct copy of its Certificate of Incorporation
(certified by the Secretary of State of the State of New York) and Bylaws, as
amended to date. Such Certificate of Incorporation and Bylaws of FBC are in full
force and effect. FBC is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
2.3. FBC Capital Structure. The authorized capital stock of FBC
consists of 25,000,000 shares of FBC Common Stock, of which there are 2,746,179
shares issued and outstanding as of the date hereof. All of the outstanding
shares of FBC Common Stock are duly authorized, validly issued, fully paid and
nonassessable and, except as set forth in Section 2.3 of the FBC Disclosure
Schedules, are not subject to preemptive or similar rights created by statute,
the Certificate of Incorporation or Bylaws of FBC or any agreement or document
to which FBC is a party or by which it is bound. As of the date of this
Agreement there are no shares of FBC Common Stock held in treasury by FBC.
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2.4. Obligations with Respect to Capital Stock. Except as set forth
in Section 2.4 of the FBC Disclosure Schedules, there are no equity securities,
partnership interests or similar ownership interests of any class of FBC, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding that will not be cancelled in exchange for
warrants of EC Power at Closing. Except as set forth in Section 2.4 of the FBC
Disclosure Schedules, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character
(contingent or otherwise) to which FBC is a party or by which it is bound
obligating FBC to (i) issue, deliver or sell, or cause to be issued, delivered
or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of FBC; (ii) grant, extend, accelerate the
vesting of or enter into any subscription, option, warrant, equity security,
call, right, commitment or agreement of the type described in clause (i); or
(iii) provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any entity. As of the date of this Agreement,
there is no voting trust, proxy or other agreement or understanding to which FBC
or any FBC Stockholder is a party or by which he, she or it is bound with
respect to any equity security of any class of FBC and no person or entity has
any right to cause FBC to effect the registration under the Securities Act of
1933, as amended (the "Securities Act"), of any securities of FBC.
2.5. Authority Relative to this Agreement.
(a) FBC has all requisite power and authority to execute and deliver
this Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby, as well as all other agreements, certificates
and documents executed or delivered, or to be executed or delivered, by FBC in
connection herewith (collectively, with this Agreement, the "FBC Documents").
The execution and delivery of this Agreement by FBC has been and, as of the
Closing Date, the consummation by FBC of the transactions contemplated hereby
will be duly and validly authorized by all necessary action on the part of FBC,
and no other proceedings are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, except for the filing of the
Certificate of Merger pursuant to New York Law. Each of the FBC Documents to
which FBC or the FBC stockholders are, or will be, a party has been, or will be,
duly and validly executed and delivered by FBC and the FBC stockholders, and,
assuming the due authorization, execution and delivery of the FBC Documents by
EC Power and/or Newco, as applicable, is (or when executed and delivered will
be) the legal, valid and binding obligation of FBC and the FBC stockholders,
enforceable against FBC and the FBC stockholders in accordance with its terms.
(b) The Board of Directors of FBC (including any required committee
or subgroup of the Board of Directors of FBC) at a meeting duly called at which
all members were present or by unanimous written consent as permitted by New
York Law has (A) unanimously declared that this Agreement, the Merger and the
other transactions contemplated hereby are fair to, and in the best interests
of, FBC and its stockholders; (B) authorized, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby; and (C)
determined to recommend that the stockholders of FBC approve and adopt this
Agreement and approve the Merger. None of the aforesaid actions by the Board of
Directors of FBC has been amended, rescinded or modified.
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2.6. No Conflicts, Required Filings and Consents.
(a) The execution and delivery of this Agreement by FBC do not, and
the performance of this Agreement by FBC will not, (i) conflict with or violate
the Certificate of Incorporation or Bylaws of FBC; (ii) subject to compliance
with the requirements set forth in Section 2.6(b), conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to FBC or by which
FBC or any of its respective properties is bound or affected; or (iii) except as
set forth in Section 2.6 of the FBC Disclosure Schedules, result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or impair FBC's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a claim, charge, lien, encumbrance, security interest, pledge or
rights of others of any kind (collectively, an "Encumbrance") on any of the
properties or assets of FBC pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which FBC is a party or by which FBC or any of its respective
properties is bound or affected, except, in the case of clauses (ii) and (iii),
for such breaches, violations or defaults that could not reasonably be expected
to have an FBC Material Adverse Effect.
(b) The execution and delivery of this Agreement by FBC does not,
and the performance of this Agreement by FBC will not, require any consent,
approval, authorization or permit of, or declaration, registration or filing
with or notification to, any court, tribunal, self-regulatory organization,
administrative agency or commission or other governmental authority or
instrumentality, foreign or domestic ("Governmental Entity") except (i) such
consents, approvals, orders, authorizations, registrations, declarations,
filings and notifications as may be required under applicable federal and state
securities (or related) laws and (ii) the filing of the Certificate of Merger
pursuant to New York Law and (iii) such consents, approvals, orders,
authorizations, filings, registrations, declarations and notifications which, if
not obtained or made, would not prevent or delay consummation of the Merger or
otherwise prevent FBC from performing its obligations under this Agreement.
2.7. Financial Statements. FBC has delivered to EC Power (i) the
unaudited balance sheet of FBC as of December 31, 2003, and the related
statements of income and retained earnings and cash flows of FBC for the period
then ended and (ii) the unaudited balance sheets of FBC as of March 31, 2004,
June 30, 2004 and September 30, 2004, and the related statements of income and
retained earnings and cash flows of FBC for the period then ended (collectively
the "FBC Financial Statements") Except as disclosed in Section 2.7 of the FBC
Disclosure Schedules, the FBC Financial Statements are in accordance with the
books and records of FBC, and reflect accurately in all material respects the
financial position and results of operations of FBC as at the dates and for the
periods indicated, in each case in accordance with United States generally
accepted accounting principles, applied on a consistent basis ("GAAP"). Except
as disclosed in Section 2.7 of the FBC Disclosure Schedules, the FBC Financial
Statements do not omit any material transactions involving FBC as at the dates
and for the periods indicated.
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2.8. No Undisclosed Liabilities. Except as is disclosed in the FBC
Financial Statements, FBC has no liabilities (absolute, accrued, contingent or
otherwise) which are, individually or in the aggregate, material to the
business, operations or financial condition of FBC, except liabilities (i)
adequately provided for in the unaudited balance sheet as of September 30, 2004,
included in the Unaudited Financial Statements (the "FBC Balance Sheet"), (ii)
incurred since the date of the FBC Balance Sheet in the ordinary course of
business and consistent with past practice and (iii) incurred in connection with
the transactions contemplated by this Agreement. FBC does not know of any basis
for the assertion against FBC of any other liability or loss contingency for
which a reserve would be required to be disclosed in the FBC Financial
Statements, in accordance with GAAP.
2.9. Absence of Certain Changes or Events. Except as set forth in
Section 2.9 of the FBC Disclosure Schedules, since September 30, 2004, FBC has
conducted its business in the ordinary course and there has not occurred: (i)
any FBC Material Adverse Effect, (ii) any declaration, setting aside or payment
of any dividend on, or other distribution (whether in cash, stock or property)
in respect of any of FBC's capital stock, or any purchase, redemption or other
acquisition by FBC of any of its capital stock or any other securities of FBC,
(iii) any split, combination or reclassification of any of FBC's capital stock,
(iv) any amendments or changes in the Certificate of Incorporation or Bylaws of
FBC, (v) any change by FBC in its accounting methods, principles or practices
except as required by GAAP, (vi) any revaluation by FBC of any of its assets or
(vii) any sale or transfer of a material amount of assets of FBC.
2.10. Absence of Litigation. Section 2.10 of the FBC Disclosure
Schedules contains a complete and correct list of all actions, suits,
proceedings, claims or investigations pending or, to the knowledge of FBC,
threatened before any Governmental Entity against FBC or any of its assets or
against any of FBC's officers, directors or employees in their capacities as
officers, directors or employees of FBC. Except as set forth in Section 2.10 of
the FBC Disclosure Schedules, neither FBC nor any of FBC's officers, directors
or employees in his or her capacity as an officer, director or employee of FBC
is a party to or, to the knowledge of FBC, subject to any judgment, order,
decree or other direction of, or stipulation with, any Governmental Entity. As
of the date hereof, there are no actions, suits or proceedings pending or, to
the knowledge of FBC, threatened against FBC or any of the stockholders of FBC
that seek to prevent or challenge, or seek damages in connection with, the
transactions contemplated by any of the FBC Documents or otherwise arising out
of or in any way related to any of the FBC Documents.
2.11. Employee Benefit Plans.
(a) Except as disclosed on Section 2.11 of the FBC Disclosure
Schedules, neither FBC nor any entity that would be deemed a "single employer"
with FBC under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (an
"ERISA Affiliate"), maintains, sponsors, contributes to, or has or has had an
obligation to, or otherwise participated in or participates in, or in any way,
directly or indirectly, has or has had any liability with respect to, any
8
"employee benefit plan," as defined in Section 3(3) of ERISA, or any other
bonus, profit sharing, pension, deferred compensation, incentive, stock option,
fringe benefit, health, welfare, change in control, severance or other similar
plan, policy, or arrangement, whether written or unwritten, insured or self
insured (each, a "Plan"). None of FBC, any ERISA Affiliate or any of their
respective predecessors has ever contributed to, contributes to, has ever been
required to contribute to, or otherwise participated in or participates in, or
in any way, directly or indirectly, has any liability with respect to, any plan
subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA,
including, without limitation, any "multi-employer plan" (within the meaning of
Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code) or any
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA). Except as disclosed on Section 2.11 of the FBC Disclosure Schedules, the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability of FBC for severance pay or termination pay or accelerate
the time of payment or vesting or increase the amount of compensation or
benefits due to any employee, director, stockholder or beneficiary of FBC
(whether current, former or retired) or their beneficiaries solely by reason of
such transactions or by reason of a termination of employment following such
transactions. Section 2.11 of the FBC Disclosure Schedules contains a list of
all Plans. A copy of each such Plan has previously been delivered by FBC to EC
Power. No event, condition or circumstance exists that will prevent the
amendment or termination of any Plan.
(b) With respect to each of the Plans required to be listed in
Section 2.11 of the FBC Disclosure Schedules:
(i) each Plan intended to qualify under Section 401(a) of the
Code is qualified and has received a determination letter from the Internal
Revenue Service (the "IRS") to the effect that the Plan is qualified under
Section 401 of the Code, any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code and to the knowledge of
FBC, nothing has occurred or is expected to occur through the Effective Time
that caused or could cause the loss of such qualification or exemption or the
imposition of any penalty or tax liability;
(ii) all payments required by any Plan, any collective
bargaining agreement or other agreement or by law (including, without
limitation, all contributions, insurance premiums or intercompany charges) with
respect to all periods through the Effective Time shall have been made prior to
the Effective Time (on a pro rata basis where such payments are otherwise
discretionary at year end) or provided for by FBC, as applicable, by full
accruals as if all targets required by such Plan had been or will be met at
maximum levels on its financial statements;
(iii) no claim, lawsuit, arbitration or other action (other
than non-material or routine claims for benefits and appeals of such claims) has
been asserted or instituted, or to the knowledge of FBC, threatened or
anticipated against any Plan, any trustee or fiduciaries thereof, FBC, any ERISA
Affiliate, any director, officer or employee thereof, or any of the assets of
any trust of any Plan;
9
(iv) each Plan complies in all material respects and has been
maintained and administered at all times in all material respects in accordance
with its terms and all applicable laws, rules and regulations, including,
without limitation, ERISA and the Code;
(v) to the knowledge of FBC, no "prohibited transaction,"
within the meaning of Section 4975 of the Code and Section 406 of ERISA, has
occurred or is expected to occur with respect to each Plan (and the consummation
of the transactions contemplated by this Agreement will not constitute or
directly or indirectly result in such a "prohibited transaction");
(vi) no Plan is under audit or to the knowledge of FBC,
investigation by the IRS, Department of Labor or any other Governmental Entity
and no such completed audit, if any, has resulted in the imposition of any
material tax or penalty; and
(vii) with respect to each Plan that is funded mostly or
partially through an insurance policy, neither FBC nor any ERISA Affiliate has
any liability in the nature of retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring on or before the Effective Time.
(c) Neither FBC nor any ERISA Affiliate maintains, contributes to or
in any way provides for any benefits of any kind whatsoever (other than under
Section 4980B of the Code, the Federal Social Security Act or a plan qualified
under Section 401(a) of the Code) to any current or future retiree or terminee.
Neither FBC nor any ERISA Affiliate has any unfunded liabilities pursuant to any
Plan that is not intended to be qualified under Section 401(a) of the Code. No
amounts payable under any Plan will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code.
2.12. Labor Matters. FBC is not a party to a collective bargaining
agreement and does not know of any efforts within the last three years to
attempt to organize FBC's employees, and no strike or labor dispute involving
FBC has occurred during the last three years or, to the knowledge of FBC, is
threatened. To the knowledge of FBC, no key employee of FBC has indicated that
he or she is considering terminating his or her employment. FBC has complied in
all material respects with all applicable wage and hour, equal employment,
safety and other legal requirements relating to its employees.
2.13. Taxes. Except as disclosed in Section 2.13 of the FBC
Disclosure Schedules: (A) FBC does not have any obligation or liability (whether
fixed or contingent) for any tax that has accrued, is due and owing, or has been
assessed by any federal, state, local or foreign taxing authority or any
municipality, subdivision, agency or instrumentality thereof, or any other
taxing authority in excess of the applicable reserves therefor shown on the FBC
Balance Sheet; (B) there are no actions, proceedings, audits, examinations or
investigations pending against FBC or, to the knowledge of FBC, threatened
against FBC with respect to the assessment or collection of any taxes; (C) FBC
has timely and properly filed all federal, foreign, state, local and other tax
returns and reports which are required to be filed by it; (D) all such tax
10
returns were true, correct and complete in all material respects, and all taxes,
interest and penalties due and payable as shown on such returns or claimed to be
due by any taxing authority have been timely paid; (E) all unpaid federal,
foreign, state, local and other taxes, fees, assessments, duties and other
similar governmental charges payable by FBC or which will, with the passage of
time, become payable by FBC (including interest and penalties), whether or not
disputed, with respect to any period or a portion thereof ending at, on or prior
to and including March 31, 2004, have been adequately reserved against in
accordance with GAAP on the face of the FBC Balance Sheet; (F) there are no
outstanding waivers or extensions of time with respect to the assessment or
audit of any tax or tax return of FBC or audits, examinations or claims now
pending or matters under discussion with any taxing authority in respect of any
tax of FBC; (G) FBC has not at any time consented to have the provisions of
Section 341(f)(2) of the Code apply to it; (H) all taxes required to be
collected or withheld by FBC have been duly collected or withheld and any such
amounts that were required to be remitted to any taxing authority have been duly
remitted; (I) there are no closing agreements or changes of accounting method
and, to the knowledge of FBC, there are no tax rulings or requests for rulings
relating to FBC that could affect its tax liability for any period after the
Effective Time; and (J) FBC is not a party to any tax allocation or sharing
agreement and has not been a member of an Affiliated Group, as defined in
Section 1504(a) of the Code (or any similar provision of state, local or foreign
law), filing a consolidated federal income tax return, and has no liability for
the taxes of another person under Reg. 1.1502-6 (or similar provision of state,
local or foreign law), as transferee or successor, by contract, or otherwise.
Except as disclosed in Section 2.13 of the FBC Disclosure Schedules, FBC has not
used any of the following methods of accounting: installment, completed
contract, or long-term contract. For purposes of this Agreement, "tax" or
"taxes" means taxes of any kind, levies or other like assessments, customs,
duties, imposts, charges and including, without limitation, income, gross
receipts, ad valorem, value added, excise, real and personal property, asset,
sales, use, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, occupation and other governmental taxes imposed or payable to the
United States, or any state, local or foreign government or subdivision or
agency thereof, and in each instance such term shall include any interest,
penalties or additions to tax attributable to any such tax.
2.14. Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyright registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, URLs, common law
trademarks and service marks, trademark and service ▇▇▇▇ registrations and
applications therefor throughout the world (collectively, the "Trademarks");
(vi) all databases and data collections and all rights therein throughout the
world; (vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world; and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
11
"FBC Intellectual Property" means any Intellectual Property,
including, without limitation, all Registered Intellectual Property, that is
owned by, or exclusively licensed to, FBC that is material to the conduct of the
business of FBC.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
"FBC Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, FBC.
(a) EC Power has had the opportunity to review the FBC Registered
Intellectual Property, including all contracts, licenses and agreements to which
FBC is a party (i) with respect to any FBC Intellectual Property licensed or
transferred to any third party; or (ii) pursuant to which a third party has
licensed or transferred any Intellectual Property to FBC.
(b) No FBC Intellectual Property owned or developed by FBC or
product or service of FBC is subject to any proceeding or outstanding decree,
order, judgment, agreement, or stipulation of any Governmental Entity
restricting in any manner the use, transfer, or licensing thereof by FBC, or
which may affect the validity, use or enforceability of such FBC Intellectual
Property.
(c) All necessary registration, maintenance and renewal fees
currently due in connection with the FBC Registered Intellectual Property have
been made and all necessary documents, recordations and certificates in
connection with such FBC Registered Intellectual Property have been filed with
the relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such FBC Intellectual Property.
(d) FBC owns and has good and exclusive title to, or has joint
ownership or license (to the knowledge of FBC, sufficient for the conduct of its
business as currently conducted) to, each item of the FBC Intellectual Property
free and clear of any Encumbrance (excluding licenses and related restrictions);
and FBC is the exclusive owner of all Trademarks currently used in connection
with the operation or conduct of the business of FBC, including the sale of any
products or the provision of any services by FBC.
(e) FBC owns, and has good title to, or has valid licenses
sufficient for the conduct of FBC's business as currently conducted for all
copyrightable works currently used in its business except where the failure to
do so would not reasonably be expected to have an FBC Material Adverse Effect.
(f) To the extent that any Intellectual Property currently used in
and material to FBC's business has been developed or created by a third party
for FBC, FBC has a written agreement with such third party with respect thereto
which provides FBC either (i) joint or exclusive ownership of all such third
party Intellectual Property, or (ii) a license (to the knowledge of FBC,
sufficient for the conduct of its business as currently conducted) to all such
third parties' Intellectual Property by operation of law or by valid (to the
knowledge of FBC) assignment, transfer or license.
12
(g) FBC has not transferred ownership of, or granted any exclusive
license with respect to, any Intellectual Property currently used in FBC's
business that is or was FBC Intellectual Property, to any third party.
(h) All contracts, license agreements and other agreements relating
to FBC Intellectual Property currently used in FBC's business are in full force
and effect. The consummation of the transactions contemplated by this Agreement
will neither violate nor result in the breach, modification, cancellation,
termination, or suspension of such contracts, licenses and agreements. FBC is in
compliance with, and has not breached any material term of any such contracts,
licenses and agreements and, to the knowledge of FBC, all other parties to such
contracts, licenses and agreements are in compliance with, and have not breached
any term of, such contracts, licenses and agreements. Following the Closing
Date, the Surviving Corporation will be permitted to exercise all of FBC's
rights under such contracts, licenses and agreements to the same extent FBC
would have been able to had the transactions contemplated by this Agreement not
occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which FBC would otherwise have
been required to pay.
(i) The operation of the business of FBC as such business is
currently conducted, including FBC's design, development, marketing and sale of
the products or services of FBC (including with respect to products and services
currently under development) and FBC's use of FBC Intellectual Property, to the
knowledge of FBC, has not, does not and will not infringe, dilute or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any relevant jurisdiction.
(j) FBC has not received actual notice from any third party and, to
the knowledge of FBC, FBC has not received any threat, that the operation of the
business of FBC or any act, product or service of FBC, infringes, dilutes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
(k) To the knowledge of FBC, no person has or is infringing,
diluting or misappropriating any FBC Intellectual Property or unfairly competing
with FBC.
(l) FBC has taken reasonable steps to protect FBC's rights in FBC's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to FBC.
Except under confidentiality obligations, there has not been disclosure by FBC
of any such trade secrets or confidential information.
13
2.15. Compliance; Permits; Restrictions.
(a) FBC is not in conflict in any material respect with, or in
default or in violation in any material respect of (i) any law, rule,
regulation, order, judgment or decree applicable to FBC or by which FBC or any
of its business or properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which FBC is a party or by which FBC or its
respective properties is bound or affected. No investigation or review by any
Governmental Entity is pending or, to FBC's knowledge, has been threatened,
against FBC, nor, to FBC's knowledge, has any Governmental Entity indicated an
intention to conduct an investigation of FBC. There is no agreement, judgment,
injunction, order or decree binding upon FBC which has or could reasonably be
expected to have (after giving effect to the Merger) the effect of prohibiting
or impairing any current or currently anticipated future business practice of
FBC, any acquisition of property by FBC or the conduct of business by FBC as
currently conducted or as currently proposed to be conducted.
(b) FBC holds, to the extent legally required, all permits,
licenses, variances, exemptions, orders and approvals from Governmental Entities
that are required for the operation of the business of FBC as currently
conducted (collectively, the "FBC Permits") except for such permits, the failure
of which to hold would not reasonably be expected to have an FBC Material
Adverse Effect. FBC is in compliance in all material respects with the terms of
the FBC Permits.
2.16. Agreements, Contracts and Commitments. Except for the FBC
Documents and as otherwise set forth in Section 2.16 of the FBC Disclosure
Schedules, as of the date hereof FBC is not a party to or bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer, director or employee, other than those that are terminable by
FBC on no more than 30 days' notice without liability or financial obligation;
(b) any agreement of indemnification outside the ordinary course of
FBC's business or any guaranty;
(c) any agreement, contract or commitment containing any covenant
limiting the right of FBC to engage in any line of business or to compete with
any person or granting any exclusive distribution rights;
(d) any agreement, contract or commitment relating to the
disposition or acquisition by FBC of assets not in the ordinary course of
business or pursuant to which FBC has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise; or
(e) any other agreement, contract or commitment currently in effect
that is expected to represent more than ten percent (10%) of FBC's revenue for
the calendar year 2004 or that requires FBC to make payments of greater than
$10,000 per year or more than $20,000 in the aggregate.
14
Neither FBC, nor to FBC's knowledge any other party to an FBC
Contract (as defined below), is in breach, violation or default under, and FBC
has not received written notice that it has breached, violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which FBC is a party or by which it is bound that
are required to be disclosed in the FBC Disclosure Schedules pursuant to clauses
(a) through (e) above (any such agreement, contract or commitment, an "FBC
Contract"). The FBC Contracts are in full force and effect and FBC has performed
all of the material obligations required to be performed by it and is entitled
to all accrued benefits under all FBC Contracts.
2.17. Title to Properties; Absence of Liens and Encumbrances.
(a) FBC owns no real property interests. Section 2.17 of the FBC
Disclosure Schedules lists all real property leases to which FBC is a party and
each amendment thereto that is in effect as of the date of this Agreement. All
such leases are, and will after consummation of the Merger be, in full force and
effect, valid and effective in accordance with their respective terms, and there
is not, under any of such leases, any existing default or event of default (or
event which with notice or the lapse of time, or both, would constitute a
default) that would give rise to a material claim.
(b) FBC has good and valid title to, or in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Encumbrances, except as reflected in the FBC
Financial Statements. FBC's equipment and assets (whether owned or leased) are
in good operating condition and repair, subject to ordinary wear and tear. All
assets, properties and rights relating to FBC's business will, at the Closing,
be held by, and all agreements, obligations and transactions relating to FBC's
business will, as of the Closing Date, be entered into, incurred and conducted
by, FBC.
2.18. Environmental Matters.
(a) To the knowledge of FBC, all of the current operations of FBC
and its assets, businesses and real property, including any operations at or
from any real property presently or formerly owned, used, leased, occupied,
managed or operated by FBC (collectively, the "Real Property"), comply in all
material respects and have at all times complied in all material respects with
all applicable Environmental Laws (as defined below). "Environmental Laws" shall
means any federal, foreign, state, local or common law, rule, regulation,
ordinance, code, order or judgment (including any judicial or administrative
interpretations, guidances, directives, policy statements or opinions) relating
to the injury to, or the pollution or protection of, human health or the
environment.
(b) To the knowledge of FBC, FBC has not contractually, by operation
of law, by the Environmental Laws, by common law or otherwise assumed or
succeeded to any environmental liabilities of any predecessors or any other
person or entity.
2.19. Change of Control Payments. Section 2.19 of the FBC Disclosure
Schedules sets forth each plan or agreement pursuant to which any amounts may
become payable (whether currently or in the future) to current or former
officers and directors of FBC as a result of the Merger.
15
2.20. [INTENTIONALLY DELETED]
2.21. Books and Records. The minute books and records of FBC made
available to EC Power have been maintained in accordance with good business
practices, contain a complete and accurate summary of all meetings of the
directors or actions by written consent since the time of organization of FBC,
and reflect all transactions referred to in such minutes accurately in all
material respects.
2.22. Improper Payments. FBC and its officers and agents have not
made any illegal or improper payments to, or provided any illegal or improper
benefit or inducement for, any governmental official, supplier, customer or
other person in an attempt to influence any such person to take or to refrain
from taking any action relating to FBC.
2.23. Disclosure. No representation, warranty or other written
statement by FBC herein contains or will contain an untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
2.24. Condition and Sufficiency of Assets. FBC owns or has the right
to use all the tangible assets necessary for the conduct of its business as
conducted prior to the date hereof.
2.25. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of FBC.
2.26. Consent of FBC Stockholders. Each of the FBC Stockholders at a
special meeting duly called or by written consent as permitted by New York Law
has authorized, approved and adopted this Agreement, the Merger and the other
transactions contemplated hereby, and such actions by each of the FBC
Stockholders has not been amended, rescinded or modified.
2.27. Title to Shares. Each of the FBC Stockholders has full right
title and interest to the shares of FBC set forth opposite such FBC
Stockholders' name on Exhibit A hereto, free and clear of all liens,
encumbrances or other interests of third parties.
2.28. Exchange Act Representations. FBC and each of the FBC
stockholders hereby represents that he, she or it acknowledges and accepts that
EC Power has not made its required filings (the "EC Power Exchange Act Filings")
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
and therefore is not in compliance with the Exchange Act.
2.29. FBC Stockholder Representations. Each FBC stockholder hereby
represents that such FBC stockholder (i) acknowledges that the shares of EC
Power Common Stock such FBC stockholder is receiving in the merger may not be
sold, transferred, offered for sale, pledged, hypothecated, lent, or otherwise
disposed of by such FBC stockholder without registration under the Securities
Act, and applicable "blue sky laws," except pursuant to an exemption from
registration under the Securities Act, (ii) is an "accredited investor" as that
16
term is defined in Rule 501 promulgated under the Securities Act, (iii) has such
knowledge and experience in financial and business matters that such FBC
stockholder is able to evaluate the merits and risks of the Merger and an
investment in EC Power Common Stock and (iv) has received all requested
documents and other information from EC Power, and has had an opportunity to ask
questions of and to receive answers from the officers of EC Power with respect
to the business, results of operations, financial conditions and prospects of EC
Power.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF EC POWER AND NEWCO
Except as disclosed in the disclosure schedules delivered by EC
Power to FBC prior to or concurrently with the execution and delivery of this
Agreement (the "EC Power Disclosure Schedules"), the EC Power Parties each
hereby jointly and severally represent and warrant to FBC as follows:
3.1. Organization and Qualification; Organizational Documents. Each
of the EC Power Parties is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has the
requisite corporate power and authority to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted. Each of the EC Power Parties is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for any failures to be so duly qualified or licensed and in
good standing that would not reasonably be expected to have a material adverse
effect on the business, results of operations or financial condition of EC
Power, taken as a whole, or on the ability of the parties to consummate the
transactions contemplated by this Agreement (a "EC Power Material Adverse
Effect").
3.2. Certificate of Incorporation and Bylaws. EC Power has furnished
to FBC a complete and correct copy of the Certificate of Incorporation and
Bylaws of each of the EC Power Parties, each as amended to date. Such
Certificates of Incorporation and Bylaws are in full force and effect. None of
the EC Power Parties is in violation of any of the provisions of its respective
Certificate of Incorporation or Bylaws.
3.3. Capitalization.
(a) The authorized capital stock of EC Power consists of 100,000,000
shares of common stock, of which there are 13,753,080 shares issued and
outstanding as of the date hereof, and 50,000,000 shares of preferred stock, of
which there are (i) 2,589,815 shares of Series A preferred stock issued and
outstanding as of the date hereof, and (ii) 0 shares of Series C preferred stock
issued and outstanding as of the date hereof. All of the outstanding shares of
EC Power capital stock are duly authorized, validly issued, fully paid and
nonassessable and, except as set forth on Section 3.3 of the EC Power Disclosure
Schedules, none of such shares are subject to preemptive or similar rights
created by statute, the Certificate of Incorporation or Bylaws of EC Power or
any agreement or document to which EC Power is a party or by which it is bound.
Immediately after the Effective Time, 14,753,080 shares of EC Power Common Stock
will be issued and outstanding, of which 1,000,000 will be owned by the FBC
Stockholders (subject to adjustment pursuant to Section 1.7). The authorized
capital stock of Newco consists of 1,000 shares of common stock, par value $.01
per share, 100 shares of which are issued and outstanding and wholly owned by EC
Power. Newco was formed for the sole purpose of consummating the Merger and has
no material assets or liabilities except as necessary for such purpose.
17
(b) The shares of EC Power Common Stock to be issued in the Merger
have been duly authorized and, when so issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and will not be
issued in contravention of any pre-emptive right in respect thereof.
3.4. Obligations with Respect to Capital Stock. Except as set forth
in Section 3.4 of the EC Power Disclosure Schedules, there are no equity
securities, partnership interests or similar ownership interests of any class of
EC Power, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section 3.4
of the EC Power Disclosure Schedules, there are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character (contingent or otherwise) to which EC Power is a
party or by which it is bound obligating EC Power to (i) issue, deliver or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of EC Power;
(ii) grant, extend, accelerate the vesting of or enter into any subscription,
option, warrant, equity security, call, right, commitment or agreement of the
type described in clause (i); or (iii) provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any entity. As of
the date of this Agreement, there is no voting trust, proxy or other agreement
or understanding to which EC Power is a party or by which it is bound with
respect to any equity security of any class of EC Power and no person or entity
has any right to cause EC Power to effect the registration under the Securities
Act of any securities of EC Power.
3.5. Authority Relative to this Agreement.
(a) Each of the EC Power Parties has all necessary corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby, as
well as all other agreements, certificates and documents executed or delivered,
or to be executed or delivered, by any of the EC Power Parties in connection
herewith (collectively, with this Agreement, the "EC Power Documents"). The
execution and delivery of this Agreement by the EC Power Parties and the
consummation by the EC Power Parties of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of the EC Power Parties and no other corporate proceedings on the part of
any of the EC Power Parties are necessary to authorize this Agreement or to
consummate the transactions so contemplated hereby, except for the filing of the
Certificate of Merger pursuant to New York Law. Each of the EC Power Documents
to which any of the EC Power Parties is, or will be, a party has been, or will
be, duly and validly executed and delivered by such EC Power Party and, assuming
the due authorization, execution and delivery of each such EC Power Document by
the other parties thereto, is (or when executed and delivered will be) the
legal, valid and binding obligation of such EC Power Party, enforceable against
it in accordance with its terms.
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(b) The Board of Directors of EC Power (and the Board of Directors
of Newco, as necessary) at a meeting duly called at which all members were
present or by unanimous written consent as permitted by Delaware Law (and New
York Law in the case of Newco) has (i) unanimously declared that this Agreement,
the Merger and the other transactions contemplated hereby are fair to and in the
best interests of EC Power and its stockholders; and (ii) authorized, approved
and adopted this Agreement, the Merger and the other transactions contemplated
hereby. None of the aforesaid actions by the Board of Directors of EC Power or
Newco has been amended, rescinded or modified.
3.6. No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by the EC Power
Parties do not, and the performance of this Agreement by the EC Power Parties
will not, (i) conflict with or violate the Certificate of Incorporation or
Bylaws of any of the EC Power Parties; (ii) subject to compliance with the
requirements of Section 3.6(b), conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the EC Power Parties or by
which any of the EC Power Parties' respective properties is bound or affected;
or (iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or impair the EC
Power Parties' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of the EC Power Parties pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which any of the EC Power Parties is a party
or by which an EC Power Party or any of their respective properties is bound or
affected, except in the case of clauses (ii) and (iii), for such breaches,
violations or defaults that would not reasonably be expected to have an EC Power
Material Adverse Effect.
(b) The execution and delivery of this Agreement by the EC Power
Parties do not, and the performance of this Agreement by the EC Power Parties
will not, require any consent, approval, authorization or permit of, or
declaration, registration or filing with or notification to, any Governmental
Entity, except (i) such consents, approvals, orders, authorizations,
registrations, declarations, filings and notifications as may be required under
applicable federal and state securities (or related) laws, (ii) the filing of
the Certificate of Merger pursuant to New York Law and (iii) such consents,
approvals, orders, authorizations, filings, registrations, declarations and
notifications which, if not obtained or made, would not prevent or delay
consummation of the Merger or otherwise prevent the EC Power Parties from
performing their obligations under this Agreement.
3.7. Financial Statements. EC Power has delivered to FBC the
unaudited balance sheet of EC Power as of December 31, 2003, and the related
statements of income and retained earnings and cash flows of EC Power for the
period then ended (collectively, the "EC Power Financial Statements"). Except as
disclosed in Section 3.7 of the EC Power Disclosure Schedules, the EC Power
Financial Statements are in accordance with the books and records of EC Power,
19
and reflect accurately in all material respects the financial position and
results of operations of EC Power as at the dates and for the periods indicated,
in each case in accordance with GAAP. Except as disclosed in Section 3.7 of the
EC Power Disclosure Schedules, the EC Power Financial Statements do not omit any
material transactions involving EC Power as at the dates and for the periods
indicated.
3.8. No Undisclosed Liabilities. Except as is disclosed in the EC
Power Financial Statements, EC Power has no liabilities (absolute, accrued,
contingent or otherwise) which are material to the business, operations or
financial condition of EC Power, except liabilities (i) adequately provided for
in the unaudited balance sheet as of December 31, 2003, included in the EC Power
Financial Statements (the "EC Power Balance Sheet"), (ii) incurred since the
date of the EC Power Balance Sheet in the ordinary course of business and
consistent with past practice and (iii) incurred in connection with the
transactions contemplated by this Agreement. EC Power does not know of any basis
for the assertion against EC Power of any other liability or loss contingency
for which a reserve would be required to be disclosed in the EC Power Financial
Statements, in accordance with GAAP.
3.9. Absence of Certain Changes or Events. Except as set forth in
Section 3.9 of the EC Power Disclosure Schedules, since May 31, 2004, EC Power
has conducted its business in the ordinary course and there has not occurred:
(i) any EC Power Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of any of EC Power's capital stock, or any purchase,
redemption or other acquisition by EC Power of any of its capital stock or any
other securities of EC Power, (iii) any split, combination or reclassification
of any of EC Power's capital stock, (iv) any amendments or changes in the
Certificate of Incorporation or Bylaws of EC Power, (v) any change by EC Power
in its respective accounting methods, principles or practices except as required
by GAAP, (vi) any revaluation by EC Power of any of its respective assets,
including, without limitation, writing down the value of capitalized software or
inventory or writing off notes or accounts receivable other than in the ordinary
course of business, or (vii) any sale or transfer of a material amount of assets
of EC Power.
3.10. Absence of Litigation. Section 3.10 of the EC Power Disclosure
Schedules contains a complete and correct list of all actions, suits,
proceedings, claims or investigations pending or, to the knowledge of EC Power,
threatened before any Governmental Entity against EC Power or any of its assets
or against any of EC Power's officers, directors or employees in their capacity
as an officer, director or employee of EC Power. Except as set forth in Section
3.10 of the EC Power Disclosure Schedules, neither EC Power, its subsidiaries,
nor any of EC Power's officers, directors or employees in their capacity as an
officer, director or employee of EC Power is a party to or, to the knowledge of
EC Power, subject to any judgment, order, decree or other direction of, or
stipulation with, any Governmental Entity. As of the date hereof, there are no
actions suites or proceedings pending or, to the knowledge of EC Power,
threatened against EC Power or any of the stockholders of EC Power that seek to
prevent or challenge, or seek damages in connection with, the transactions
contemplated by the EC Power Documents or otherwise arising out of or related in
any way to any of the EC Power Documents.
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3.11. Taxes. Except as disclosed in Section 3.11 of the EC Power
Disclosure Schedules: (A) EC Power does not have any obligation or liability
(whether fixed or contingent) for any tax that has accrued, is due and owing, or
has been assessed by any federal, state, local or foreign taxing authority or
any municipality, subdivision, agency or instrumentality thereof, or any other
taxing authority in excess of the applicable reserves therefor shown on the EC
Power Balance Sheet; (B) there are no actions, proceedings, audits, examinations
or investigations pending against EC Power or, to the knowledge of EC Power,
threatened against EC Power with respect to the assessment or collection of any
taxes; (C) EC Power has timely and properly filed all federal, foreign, state,
local and other tax returns and reports which are required to be filed by it;
(D) all such tax returns were true, correct and complete in all material
respects, and all taxes, interest and penalties due and payable as shown on such
returns or claimed to be due by any taxing authority have been timely paid; (E)
all unpaid federal, foreign, state, local and other taxes, fees, assessments,
duties and other similar governmental charges payable by EC Power or which will,
with the passage of time, become payable by EC Power (including interest and
penalties), whether or not disputed, with respect to any period or a portion
thereof ending at, on or prior to and including December 31, 2003, have been
adequately reserved against in accordance with GAAP on the face of the EC Power
Balance Sheet; (F) there are no outstanding waivers or extensions of time with
respect to the assessment or audit of any tax or tax return of EC Power or
audits, examinations or claims now pending or matters under discussion with any
taxing authority in respect of any tax of EC Power; (G) EC Power has not at any
time consented to have the provisions of Section 341(f)(2) of the Code apply to
it; (H) all taxes required to be collected or withheld by EC Power have been
duly collected or withheld and any such amounts that were required to be
remitted to any taxing authority have been duly remitted; and (I) there are no
closing agreements or changes of accounting method and, to the knowledge of EC
Power, there are no tax rulings or requests for rulings relating to EC Power
that could affect their tax liability for any period after the Effective Time.
Except as disclosed in Section 3.11 of the EC Power Disclosure Schedules, EC
Power has not used any of the following methods of accounting: installment,
completed contract, or long-term contract. For purposes of this Agreement, "tax"
or "taxes" means taxes of any kind, levies or other like assessments, customs,
duties, imposts, charges and including, without limitation, income, gross
receipts, ad valorem, value added, excise, real and personal property, asset,
sales, use, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, occupation and other governmental taxes imposed or payable to the
United States, or any state, local or foreign government or subdivision or
agency thereof, and in each instance such term shall include any interest,
penalties or additions to tax attributable to any such tax.
3.12. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of EC Power.
3.13. Compliance; Permits; Restrictions.
(a) EC Power is not in conflict in any material respect with, or in
default or in violation in any material respect of (i) any law, rule,
regulation, order, judgment or decree applicable to it or by which it or any of
its businesses or properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which it is a party or by which it or any of
its properties is bound or affected. No investigation or review by any
21
Governmental Entity is pending or, to EC Power's knowledge, has been threatened,
against EC Power, nor, to or EC Power's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of EC Power. There is no
agreement, judgment, injunction, order or decree binding upon EC Power which has
or could reasonably be expected to have the effect of prohibiting or impairing
any current or currently anticipated future business practice of EC Power, any
acquisition of property by EC Power or the conduct of business by EC Power as
currently conducted or as currently proposed to be conducted.
(b) EC Power holds, to the extent legally required, all permits,
licenses, variances, exemptions, orders and approvals from Governmental Entities
that are required for the operation of its business as currently conducted
(collectively, the "EC Power Permits") except for such permits, the failure of
which to hold would not reasonably be expected to have an EC Power Material
Adverse Effect. EC Power is in compliance in all material respects with the
terms of the EC Power Permits.
3.14. Agreements, Contracts and Commitments. Except for the EC Power
Documents and as otherwise set forth in Section 3.14 of the EC Power Disclosure
Schedules, as of the date hereof EC Power is not a party to or bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer, director or employee, other than those that are terminable by
EC Power on no more than 30 days' notice without liability or financial
obligation;
(b) any agreement of indemnification outside the ordinary course of
EC Power's business or any guaranty;
(c) any agreement, contract or commitment containing any covenant
limiting the right of EC Power to engage in any line of business or to compete
with any person or granting any exclusive distribution rights;
(d) any agreement, contract or commitment relating to the
disposition or acquisition by EC Power of assets not in the ordinary course of
business or pursuant to which EC Power has any material ownership interest in
any corporation, partnership, joint venture or other business enterprise; or
(e) any other agreement, contract or commitment currently in effect
that is expected to represent more than ten percent (10%) of EC Power's revenue
(including its subsidiaries' revenue) for the calendar year 2004 or that
requires EC Power to make payments of greater than $10,000 per year or more than
$20,000 in the aggregate.
Neither EC Power, nor to EC Power's knowledge any other party to an
EC Power Contract (as defined below), is in breach, violation or default under,
and EC Power has not received written notice that they have breached, violated
or defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which EC Power is a party or by which
either is bound that are required to be disclosed in the EC Power Disclosure
Schedules pursuant to clauses (a) through (e) above (any such agreement,
contract or commitment, an "EC Power Contract"). The EC Power Contracts are in
full force and effect and EC Power has performed all material obligations
required to be performed by them and are entitled to all accrued benefits under
all EC Power Contracts.
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3.15. Title to Properties; Absence of Liens and Encumbrances.
(a) EC Power does not own any real property interests. Section 3.15
of the EC Power Disclosure Schedules lists all real property leases to which EC
Power is a party and each amendment thereto that is in effect as of the date of
this Agreement. All such leases are, and will after consummation of the Merger
be, in full force and effect, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or the lapse of time, or
both, would constitute a default) that would give rise to a material claim.
(b) EC Power has good and valid title to, or in the case of leased
properties and assets, valid leasehold interests in, all of their tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Encumbrances, except as reflected in the EC
Power Financial Statements. EC Power's equipment and assets (whether owned or
leased) are in good operating condition and repair, subject to ordinary wear and
tear. All assets, properties and rights relating to EC Power's business will, at
the Closing, be held by, and all agreements, obligations and transactions
relating to EC Power's business will, as of the Closing Date, be entered into,
incurred and conducted by, EC Power.
3.16. [INTENTIONALLY DELETED]
3.17. Books and Records. The minute books and records of the EC
Power Parties have been maintained in accordance with good business practices,
contain a complete and accurate summary of all meetings of the directors or
actions by written consent since the time of organization of the EC Power
Parties and reflect all transactions referred to in such minutes accurately in
all material respects.
3.18. Improper Payments. The EC Power Parties and their officers and
agents have not made any illegal or improper payments to, or provided any
illegal or improper benefit or inducement for, any governmental official,
supplier, customer or other person in an attempt to influence any such person to
take or to refrain from taking any action relating to the EC Power Parties.
3.19. Employee Benefit Plans.
(a) Except as disclosed on Section 3.19 of the EC Power Disclosure
Schedules, neither EC Power, nor any entity that would be deemed a "single
employer" with EC Power under ERISA, maintains, sponsors, contributes to, or has
or has had an obligation to, or otherwise participated in or participates in, or
in any way, directly or indirectly, has or has had any liability with respect
to, any Plan. None of EC Power, any ERISA Affiliate or any of their respective
predecessors has ever contributed to, contributes to, has ever been required to
contribute to, or otherwise participated in or participates in, or in any way,
directly or indirectly, has any liability with respect to, any plan subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including,
23
without limitation, any "multi-employer plan" (within the meaning of Sections
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code) or any single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA).
Except as disclosed on Section 3.18 of the EC Power Disclosure Schedules, the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability of EC Power for severance pay or termination pay or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due to any employee, director, stockholder or beneficiary of EC
Power (whether current, former or retired) or their beneficiaries solely by
reason of such transactions or by reason of a termination of employment
following such transactions. Section 3.18 of the EC Power Disclosure Schedules
contains a list of all Plans. A copy of each such Plan has previously been
delivered by EC Power to FBC. No event, condition or circumstance exists that
will prevent the amendment or termination of any Plan.
(b) With respect to each of the Plans required to be listed in
Section 3.18 of the EC Power Disclosure Schedules:
(i) each Plan intended to qualify under Section 401(a) of the
Code is qualified and has received a determination letter from the Internal
Revenue Service (the "IRS") to the effect that the Plan is qualified under
Section 401 of the Code, any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code and to the knowledge of EC
Power, nothing has occurred or is expected to occur through the Effective Time
that caused or could cause the loss of such qualification or exemption or the
imposition of any penalty or tax liability;
(ii) all payments required by any Plan, any collective
bargaining agreement or other agreement or by law (including, without
limitation, all contributions, insurance premiums or intercompany charges) with
respect to all periods through the Effective Time shall have been made prior to
the Effective Time (on a pro rata basis where such payments are otherwise
discretionary at year end) or provided for by EC Power, as applicable, by full
accruals as if all targets required by such Plan had been or will be met at
maximum levels on its financial statements;
(iii) no claim, lawsuit, arbitration or other action (other
than non-material or routine claims for benefits and appeals of such claims) has
been asserted or instituted, or to the knowledge of EC Power, threatened or
anticipated against any Plan, any trustee or fiduciaries thereof, EC Power, any
ERISA Affiliate, any director, officer or employee thereof, or any of the assets
of any trust of any Plan;
(iv) each Plan complies in all material respects and has been
maintained and administered at all times in all material respects in accordance
with its terms and all applicable laws, rules and regulations, including,
without limitation, ERISA and the Code;
(v) to the knowledge of EC Power, no "prohibited transaction,"
within the meaning of Section 4975 of the Code and Section 406 of ERISA, has
occurred or is expected to occur with respect to each Plan (and the consummation
of the transactions contemplated by this Agreement will not constitute or
directly or indirectly result in such a "prohibited transaction");
24
(vi) no Plan is under audit or to the knowledge of EC Power,
investigation by the IRS, Department of Labor or any other Governmental Entity
and no such completed audit, if any, has resulted in the imposition of any
material tax or penalty; and
(vii) with respect to each Plan that is funded mostly or
partially through an insurance policy, neither EC Power nor any ERISA Affiliate
has any liability in the nature of retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring on or before the Effective Time.
(c) Neither EC Power nor any ERISA Affiliate maintains, contributes
to or in any way provides for any benefits of any kind whatsoever (other than
under Section 4980B of the Code, the Federal Social Security Act or a plan
qualified under Section 401(a) of the Code) to any current or future retiree or
terminee. Neither EC Power nor any ERISA Affiliate has any unfunded liabilities
pursuant to any Plan that is not intended to be qualified under Section 401(a)
of the Code. No amounts payable under any Plan will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
3.20. Labor Matters. EC Power is not a party to a collective
bargaining agreement and does not know of any efforts within the last three
years to attempt to organize EC Power's employees, and no strike or labor
dispute involving EC Power has occurred during the last three years or, to the
knowledge of EC Power, is threatened. To the knowledge of EC Power, no key
employee of EC Power has indicated that he or she is considering terminating his
or her employment. EC Power has complied in all material respects with all
applicable wage and hour, equal employment, safety and other legal requirements
relating to its employees.
3.21. Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" as defined in Section 2.14.
"EC Power Intellectual Property" means any Intellectual Property,
including, without limitation, all Registered Intellectual Property, that is
owned by, or exclusively licensed to, EC Power that is material to the conduct
of the business of EC Power.
"Registered Intellectual Property" as defined in Section 2.14.
"EC Power Registered Intellectual Property" means all of the
Registered Intellectual Property owned by, or filed in the name of, EC Power.
(a) FBC has had the opportunity to review the EC Power Registered
Intellectual Property, including all contracts, licenses and agreements to which
EC Power is a party (i) with respect to any EC Power Intellectual Property
licensed or transferred to any third party; or (ii) pursuant to which a third
party has licensed or transferred any Intellectual Property to EC Power.
(b) No EC Power Intellectual Property owned or developed by EC Power
or product or service of EC Power is subject to any proceeding or outstanding
decree, order, judgment, agreement, or stipulation of any Governmental Entity
restricting in any manner the use, transfer, or licensing thereof by EC Power,
or which may affect the validity, use or enforceability of such EC Power
Intellectual Property.
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(c) All necessary registration, maintenance and renewal fees
currently due in connection with the EC Power Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such EC Power Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such EC Power Intellectual Property.
(d) EC Power owns and has good and exclusive title to, or has joint
ownership or license (to the knowledge of EC Power, sufficient for the conduct
of its business as currently conducted) to, each item of the EC Power
Intellectual Property free and clear of any Encumbrance (excluding licenses and
related restrictions); and except as disclosed in Section 3.21(d) of the EC
Power Disclosure Schedules, EC Power is the exclusive owner of all Trademarks
currently used in connection with the operation or conduct of the business of EC
Power, including the sale of any products or the provision of any services by EC
Power.
(e) EC Power owns, and has good title to, or has valid licenses
sufficient for the conduct of EC Power's business as currently conducted for all
copyrightable works currently used in its business except where the failure to
do so would not reasonably be expected to have an EC Power Material Adverse
Effect.
(f) Except as set forth in Section 3.21(f) of the EC Power
Disclosure Schedules, to the extent that any Intellectual Property currently
used in and material to EC Power's business has been developed or created by a
third party for EC Power, EC Power has a written agreement with such third party
with respect thereto which provides EC Power either (i) joint or exclusive
ownership of all such third party Intellectual Property, or (ii) a license (to
the knowledge of EC Power, sufficient for the conduct of its business as
currently conducted) to all such third parties' Intellectual Property by
operation of law or by valid (to the knowledge of EC Power) assignment, transfer
or license.
(g) EC Power has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property currently used in
EC Power's business that is or was EC Power Intellectual Property, to any third
party.
(h) All contracts, license agreements and other agreements relating
to EC Power Intellectual Property currently used in EC Power's business are in
full force and effect. Except as set forth in Section 3.21(h) of the EC Power
Disclosure Schedules, the consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of such contracts, licenses and
agreements. Except as set forth in Section 3.21(h) of the EC Power Disclosure
Schedules, EC Power is in compliance with, and has not breached any material
term of any such contracts, licenses and agreements and, to the knowledge of EC
Power, all other parties to such contracts, licenses and agreements are in
compliance with, and have not breached any term of, such contracts, licenses and
agreements.
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(i) The operation of the business of EC Power as such business is
currently conducted, including EC Power's design, development, marketing and
sale of the products or services of EC Power (including with respect to products
and services currently under development) and EC Power's use of EC Power
Intellectual Property, to the knowledge of EC Power, has not, does not and will
not infringe, dilute or misappropriate the Intellectual Property of any third
party or constitute unfair competition or trade practices under the laws of any
relevant jurisdiction.
(j) Except as provided in Section 3.21(j) of the EC Power Disclosure
Schedules, EC Power has not received actual notice from any third party and, to
the knowledge of EC Power, EC Power has not received any threat, that the
operation of the business of EC Power or any act, product or service of EC
Power, infringes, dilutes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(k) To the knowledge of EC Power, no person has or is infringing,
diluting or misappropriating any EC Power Intellectual Property or unfairly
competing with EC Power.
(l) EC Power has taken reasonable steps to protect EC Power's rights
in EC Power's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to EC Power. Except under confidentiality obligations, there has not
been disclosure by EC Power of any such trade secrets or confidential
information.
3.22. Disclosure. No representation, warranty or other written
statement by the EC Power Parties herein contains or will contain an untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
3.23. Condition and Sufficiency of Assets. EC Power owns or has the
right to use all the tangible assets necessary for the conduct of their
respective businesses as conducted prior to the date hereof.
3.24. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of EC Power.
ARTICLE IV.
COVENANTS OF EC POWER
EC Power covenants and agrees that:
4.1. Exchange Act Covenant. EC Power shall use commercially
reasonable efforts to be in compliance with the disclosure requirements of the
Exchange Act by submitting to the Securities and Exchange Commission the EC
Power Exchange Act Filings on or before June 30, 2005 (the "Filing Date"). If
compliance is not achieved on or before the Filing Date, EC Power shall issue
1,000,000 shares of EC Power Common Stock to the FBC shareholders.
27
4.2. EC Power Financial Obligations. EC Power shall use its best
efforts to replace the guaranties provided by certain FBC stockholders (the
"Guarantors") for the outstanding debt obligations described on Exhibit B
hereto. If the guaranties are not removed within six (6) months of the Closing
(the "Guaranty Removal Date"), EC Power will issue to the Guarantors whose
guaranties are still in place five-year warrants, with terms set forth in the
form of Guarantor Warrant Agreement annexed hereto as Exhibit C, which will
entitle such holder to purchase the number of shares of EC Power Common Stock
determined by dividing the amount of debt still guaranteed at the Guaranty
Removal Date by the Guarantor Warrant Agreement Exercise Price (as defined
below) at an exercise price equal to the greater of (i) $2.00 (or, if such
warrant is exercised after November 16, 2005, $3.00 per share) and (ii) eighty
five percent (85%) of the average of the three lowest closing bid prices for EC
Power Common Stock for the ten trading days ending on the close of business on
the day before the relevant warrant is exercised (the "Guarantor Warrant
Agreement Exercise Price"). In addition, with respect to the debt obligations
owed by FBC to certain FBC stockholders that are listed on Exhibit D annexed
hereto (the "FBC Debt Obligations"), EC Power shall either (i) pay off the FBC
Debt Obligations in full on or prior to the Closing or (ii) recapitalize the FBC
Debt Obligations (the "Recapitalization") and pay them off in equal quarterly
payments over a three (3) year period during which time the principal amount of
the FBC Debt Obligations shall accrue interest at a rate of seven percent (7%)
per annum. The FBC stockholders holding any part of the outstanding principal
under the FBC Debt Obligations may elect, at any time, to convert the
outstanding FBC Debt Obligations, in whole or part, into shares of Series D
Convertible Preferred Stock (the "Series D Stock") of EC Power at a conversion
price equal to the greater of (i) $2.00 per share (or, if such debt is converted
after November 16, 2005, $3.00 per share) or (ii) eighty-five percent (85%) of
the average of the three lowest closing bid prices for EC Power Common Stock for
the ten trading days ending on the close of business on the day before the
relevant debt is converted into Series D Stock. The Series D Stock shall have
the rights and obligations set forth on Exhibit E annexed hereto. In the event
that EC Power elects to engage in the Recapitalization, each of the FBC
stockholders that is owed the FBC Debt Obligations hereby consents to the
Recapitalization.
4.3. Board Seats. EC Power agrees (i) to take all necessary and
desirable actions within its control (including nominating directors and calling
special Board and stockholders meetings) to cause one director who shall be
mutually agreed upon by Klaus E.T. ▇▇▇▇▇▇▇ and EC Power to be nominated and
elected to the EC Power Board of Directors and (ii) to elect two directors
appointed by Klaus E.T. ▇▇▇▇▇▇▇ to the Board of Directors of the Surviving
Corporation.
4.4. Registration Rights. The FBC Stockholders shall be granted
piggyback registration rights for their shares of EC Power Common Stock pursuant
to the registration rights provisions set forth in the Registration Rights
Agreement, annexed hereto as Exhibit F.
4.5. Issuance of Additional Shares. EC Power agrees that in the
event that the stock certificate held by Mercatus & Partners Ltd. representing
10 million shares of EC Power Common Stock is not cancelled by December 10, 2004
(the "Cancellation Date"), it shall issue to the FBC stockholders an additional
number of shares of EC Power Common Stock so that the FBC stockholders would
have owned 5.8% of the issued and outstanding shares of EC Power Common Stock
and preferred stock, on a fully converted basis, as of the Effective Date.
28
ARTICLE V.
CONDITIONS PRECEDENT
5.1. Obligations of EC Power. The obligations of the EC Power
Parties to consummate the transactions contemplated by the EC Power Documents
are subject to the fulfillment, at or before the Effective Time, of each of the
following conditions, any of which may be waived by the EC Power Parties, and
FBC shall use commercially reasonable efforts to cause such conditions to be
fulfilled:
(a) Consents. FBC shall have obtained (a) the consent of holders of
at least sixty-five percent (65%) of its capital stock approving the Merger,
this Agreement and the consummation of the transactions contemplated hereby and
(b) all consents, approvals and waivers from Governmental Entities and third
parties necessary for the execution, delivery and performance of the FBC
Documents and the transactions contemplated thereby, without any material cost
or adverse consequences to FBC.
(b) FBC Representations and Warranties. The representations and
warranties of the FBC shall be true and correct in all respects on the date
hereof and as of the Closing Date as if made on the Closing Date.
(c) FBC Agreements. FBC shall have performed or complied with all
agreements and covenants required to be performed by each of the parties under
this Agreement on or before the Closing Date.
(d) Certificate. EC Power shall have received a certificate of an
authorized officer of FBC, on behalf of FBC that the conditions of this Article
V have been complied with and that FBC has delivered to EC Power (i) a long form
certificate of good standing; and (ii) an FBC Power capitalization table.
5.2. Obligations of FBC. The obligations of FBC to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Effective Time, of each of the following conditions, any of which
may be waived by FBC, and the EC Power Parties shall use commercially reasonable
efforts to cause such conditions to be fulfilled:
(a) EC Power Representations and Warranties. The representations and
warranties of the EC Power Parties shall be true and correct in all respects on
the date hereof and as of the Closing Date as if made on the Closing Date.
(b) EC Power Agreements. The EC Power Parties shall have performed
or complied with all agreements and covenants required to be performed by each
of the parties under this Agreement on or before the Closing Date.
(c) Approval. The issuance of the EC Power Shares in the Merger
shall have been approved and adopted by the EC Power Board of Directors in
accordance with applicable laws, and EC Power shall have approved the
transactions contemplated by this Agreement in its capacity as sole stockholder
of Newco.
29
(d) Certificate. FBC shall have received a certificate of an
authorized officer of EC Power and Newco, on behalf of EC Power and Newco that
the conditions of this Article V have been complied with and that EC Power has
delivered to FBC (i) a long form certificate of good standing; and (ii) an EC
Power capitalization table.
ARTICLE VI.
CLOSING DELIVERIES
6.1. Deliveries of FBC. At the Closing (or as provided below), FBC
shall deliver, or shall cause to be delivered, to the EC Power Parties the
following:
(a) The minute books and stock transfer records of FBC (including a
list of the full names and current addresses of all of FBC's stockholders);
(b) Duly executed resignations of all directors, officers and
fiduciaries of FBC, provided that one or more of such individuals may be
retained as consultants for a post closing transition period if necessary.
(c) FBC shall have executed and delivered to EC Power the
Certificate of Merger referred to in Section 1.2(a); and
(d) FBC shall have delivered to EC Power documentation necessary to
change the authorized signatories for FBC's bank and brokerage accounts as
specified by EC Power.
6.2. The EC Power Parties' Deliveries. The EC Power Parties shall
deliver, or shall cause to be delivered the following:
(a) To the FBC stockholders, as promptly as practicable after the
Closing, certificates representing shares of EC Power Common Stock in payment of
the Merger Consideration and the Warrantholder and Guarantor Warrant Agreements;
and
(b) All other items required to be delivered pursuant to Section
5.2(d) of this Agreement.
ARTICLE VII.
INDEMNIFICATION
7.1. Indemnification by FBC. Subject to the limitations set forth in
Article VIII below, FBC shall indemnify, defend and hold harmless EC Power and
its affiliates (including the Surviving Corporation), promptly upon demand at
any time and from time to time, against any and all losses, liabilities, claims,
actions, damages and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) (collectively, "Losses"), arising out of or
in connection with any of the following: (i) any misrepresentation or breach of
any representation, warranty or covenant made by FBC or the FBC stockholders in
any of the FBC Documents; (ii) any breach or non-fulfillment of any covenant or
agreement made by FBC or the FBC stockholders in any of the FBC Documents; or
(iii) the claims of any broker or finder engaged by FBC or any FBC stockholder.
30
7.2. Indemnification by EC Power. Subject to the limitations set
forth in Article VIII below, EC Power, shall indemnify, defend and hold harmless
FBC and the Surviving Corporation, promptly upon demand at any time and from
time to time, against any and all Losses arising out of or in connection with
any of the following: (i) any misrepresentation or breach of any representation,
warranty or covenant made by EC Power or Newco in any of the EC Power Documents;
(ii) any breach or non-fulfillment of any covenant or agreement made by EC Power
or Newco in any of the EC Power Documents; or (iii) the claims of any broker or
finder engaged by EC Power or Newco.
7.3. No Impact from Investigation. No investigation by or knowledge
of any party prior to or after the date of this Agreement shall alter, diminish,
obviate or impair any of the representations, warranties, covenants or
agreements of any other party contained in this Agreement or limit in any way
any party's right to rely on such representations, warranties, covenants or
agreements or to bring a claim based on any misrepresentation or breach thereof.
ARTICLE VIII.
FURTHER PROVISIONS REGARDING INDEMNIFICATION
8.1. Survival. All representations and warranties made by FBC in the
FBC Documents or by the EC Power Parties in the EC Power Documents shall survive
the Closing and expire two (2) years after the Closing Date.
8.2. Limitations. Notwithstanding the foregoing,
(a) The indemnification in Sections 7.1 and 7.2, as the case may be,
shall be the exclusive remedy of FBC, the Surviving Corporation, the EC Power
Parties and their respective affiliates with respect to claims for Losses;
(b) The indemnification provided for in Section 7.1(i) or 7.2(i)
above shall not be required unless and until the total amount of Losses
otherwise subject to indemnification under such section exceeds $25,000, in
which event the indemnified party or parties will be entitled to indemnification
for the entire amounts of their Losses;
(c) Neither FBC or the Surviving Corporation, on the one hand, nor
the EC Power Parties, on the other, shall be entitled to indemnification for
Losses arising out of matters referred to in Section 7.1(i), or 7.2(i), as
applicable, unless it shall have given written notice to the indemnifying party,
setting forth its claim for indemnification in reasonable detail on or prior to
the date two (2) years after the Closing Date;
(d) An indemnified party shall promptly give written notice to the
indemnifying party (or in the case of the indemnification obligations of FBC, EC
Power shall give written notice to Klaus E.T. ▇▇▇▇▇▇▇ (the "FBC
Representative")) when the indemnified party has knowledge that any legal
proceeding has been instituted or any claim has been asserted in respect of
which indemnification may be sought under the provisions of Sections 7.1 or 7.2.
If the indemnifying party, within thirty (30) days after the indemnified party
gives such notice (or within such shorter period of time as an answer or other
31
responsive motion may be required), acknowledges in writing its obligation to
indemnify, then the indemnifying party shall have the right to control the
defense of such claim or proceeding, provided, that the indemnifying party may
not settle or compromise such claim or proceeding without the written consent of
the indemnified party, which shall not be unreasonably withheld or delayed. The
indemnified party may in any event participate in any such defense with its own
counsel and at its own expense. The failure to give notice of a claim within the
period described above will not affect an indemnified party's rights to
indemnification under this Agreement unless such delay actually prejudices the
indemnifying party and in such event, only to the extent of such prejudice; and
(e) The indemnified party shall be kept fully informed by the
indemnifying party of such action, suit or proceeding at all stages thereof,
whether or not it is represented by counsel. The indemnifying party shall, at
the indemnifying party's expense, make available to the indemnified party and
its attorneys and accountants all books and records of the indemnifying party
relating to such action, suit or proceeding, and the parties hereto agree to
render to each other such assistance as may be reasonably required to ensure the
proper and adequate defense of any such action, suit or proceeding.
ARTICLE IX.
MISCELLANEOUS
9.1. Notices. All notices or other communications in connection with
this Agreement shall be in writing and shall be considered given when personally
delivered or three (3) days after being mailed by registered or certified mail,
postage prepaid, return receipt requested, or one (1) day after being deposited
with a nationally recognized overnight courier as follows:
If to FBC:
FBC Technologies, Inc.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ Peabody LLP
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
32
If to EC Power, Newco or the Surviving Corporation:
EC Power, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Patterson, Belknap, ▇▇▇▇ & Tyler LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including telecopy, telex, ordinary mail or electronic mail), but
no such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other parties notice in the manner set forth in this Section 9.1.
9.2. Entire Agreement. This Agreement (which includes the schedules
and exhibits hereto), sets forth the parties' final and entire agreement with
respect to its subject matter and supersedes any and all prior and
contemporaneous understandings, representations, warranties and agreements
(whether oral or written) with respect to the subject matter herein; provided
that the mutual Non-Disclosure Agreement by and between EC Power and FBC will
remain in full force and effect in accordance with its terms. This Agreement can
be amended, supplemented or changed, and any provision hereof can be waived,
only by a written instrument making specific reference to this Agreement signed
by the party against whom enforcement of any such amendment, supplement, change
or waiver is sought.
9.3. Successors; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any
right or obligation hereunder may be assigned or transferred without the prior
written consent of the other parties. Any attempted assignment in violation of
this Section 9.3 will be null and void ab initio.
9.4. Further Assurances. Upon the terms and subject to the
conditions hereof, FBC and the EC Power Parties shall use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement and to obtain in a timely manner all necessary waivers, consents
and approvals and to effect all necessary registrations and filings.
33
9.5. Headings. The paragraph and section headings in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6. Disclosure Schedules. All references in this Agreement to
either the FBC Disclosure Schedules or the EC Power Disclosure Schedules
(collectively, the "Disclosure Schedules") will mean the Disclosure Schedules of
such party identified in this Agreement, which are incorporated into this
Agreement and will be deemed a part of this Agreement for all purposes. Any
disclosure under a particular section will be made in the relevant Disclosure
Schedules under the heading of any relevant subsection of such section. A
disclosure of an item for a particular section of the Disclosure Schedules will
be deemed disclosure for purposes of any other section of the Disclosure
Schedules to the extent applicable, but only if such item is described in
sufficient detail in such section to permit the other party to reasonably
determine its relevance to the matter requiring disclosure under the other
section or sections of the Disclosure Schedules.
9.7. Waiver. At any time prior to the Closing, the parties hereto
may, to the extent permitted by applicable Law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
9.8. Severability. If any provision of this Agreement is held by any
court of competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be illegal, invalid or unenforceable, and such illegality,
invalidity or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
9.9. Governing Law and Consent to Jurisdiction. This Agreement shall
be governed by and construed and interpreted in accordance with the internal
substantive laws of the State of New York without regard to the conflict of laws
provisions thereof. The state courts of the State of New York in New York County
and, if the jurisdictional prerequisites exist at the time, the United States
District Court for the Southern District of New York, shall have sole and
exclusive jurisdiction to hear and determine any dispute or controversy arising
under or concerning this Agreement. In any action or proceeding concerning such
dispute or controversy, the parties consent to such jurisdiction and waive
personal service of any summons, complaint or other process; a summons or
complaint in any such action or proceeding may be served in the manner set forth
in Section 9.1.
9.10. Counterparts. This Agreement may be executed by facsimile and
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
34
9.11. Definition of Knowledge. As used herein, the words "knowledge"
or "known" shall, with respect to FBC or EC Power, mean the actual knowledge of
the executive officers of FBC or EC Power (as the case may be), in each case
after such individuals have made due and diligent inquiry as to the matters
which are the subject of the statements which are "known" by FBC or EC Power or
made to the "knowledge" of FBC or EC Power.
9.12. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the parties and
their respective successors and permitted assigns.
9.13. Expenses. EC Power shall bear the out-of-pocket legal,
accounting and other expenses of FBC and EC Power incurred in connection with
this Agreement and the consummation of the Merger.
[SIGNATURE PAGES TO FOLLOW]
35
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, each of the parties has caused this Agreement
and Plan of Merger to be executed by a duly authorized officer as of the day and
year first written above.
FBC TECHNOLOGIES, INC. EC POWER ACQUISITION CORP.
By: By:
------------------------------ -------------------------------
Name: Name:
Title: Title:
EC POWER, INC.
By:
------------------------------
Name:
Title:
36
Exhibit A - Form of Warrantholder Warrant Agreement
See Attached
EXHIBIT A
FORM OF WARRANTHOLDER WARRANT AGREEMENT
The Securities represented by this instrument have not been registered under the
Securities Act of 1933 (the "Securities Act") or qualified under the securities
laws of any state, in reliance upon exemptions from such registration and
qualification requirements.
CLASS A REDEEMABLE
WARRANT CERTIFICATE
For the Purchase of Common Shares,
$0.001 Par Value per Share
of
EC POWER, INC.
(a Delaware corporation)
Warrant No. Warrants
WA -[____] [______]
===================== ====================
THIS WARRANT CERTIFIES THAT, for value received, [__________], or
registered assigns ("Warrantholder") is the registered owner of the above
indicated number of Warrants entitling the Warrantholder, commencing upon the
Exercise Date, as defined in paragraph 1 of this Certificate, but before 5:00
o'clock p.m., Eastern Standard Time, on the [__] day of November, 2009
("Expiration Date") but not thereafter, to subscribe for, purchase and receive,
upon presentation and surrender of this Warrant and upon payment of the Exercise
Price (as defined below) for such of the shares of Common Stock of the Company,
at any time after the Exercise Date, but only subject to the conditions set
forth herein, one (1) fully paid and non-assessable share of Common Stock,
$0.001 par value (the "Common Stock") of EC Power, Inc., a Delaware corporation
(the "Company"), at a purchase price per share of Common Stock equal to the
lesser of (i) Four Dollars and Fifty Five cents ($4.55) and (ii) eighty five
percent (85%) of the average of the three lowest closing bid prices for EC Power
Common Stock for the ten trading days ending on the close of business on the day
before the date this Warrant is exercised; provided, however, that in no event
will the Exercise Price be below (i) Two Dollars ($2.00) if this warrant is
exercised prior to November 16, 2005 or (ii) Three Dollars ($3.00) if this
warrant is exercised at any time thereafter until such warrant expires (the
"Exercise Price"). For the avoidance of doubt, if this Warrant is not exercised
in full, the Exercise Price shall be recalculated for each subsequent exercise
of this Warrant. The Exercise Price, the number of shares purchasable upon
exercise of each Warrant, and the Expiration Date are subject to adjustments
described herein. The Warrantholders may exercise all or any number of the
Warrants represented hereby. Upon exercise of this Warrant, the form of election
hereinafter provided for must be duly executed and the instructions for
registration of the Common Stock acquired by such exercise must be completed. If
the rights represented hereby shall not be exercised at or before the Expiration
Date, this Warrant shall become and be void without further force or effect, and
all rights represented hereby shall cease and expire.
1. TERM OF WARRANT. The Warrants evidenced by this Warrant Certificate may
be exercised in whole or in part at any time commencing on the date hereof and
ending at 5:00 p.m. Eastern Standard Time on the Expiration Date; provided,
however, that the Company may extend the Exercise Period of this Warrant by
giving notice of such extension.
-1-
2. NOTICE OF EXTENDED EXPIRATION DATE. The Company may extend the
Expiration Date for the exercise of this Warrant at any time by giving thirty
(30) days' written notice thereof to the Warrantholder. If this Warrant is not
exercised on or before the extended Expiration Date, it shall become wholly
void.
3. ADJUSTMENTS OF EXERCISE PRICE AND SHARES. In the event the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise, or in the event the Company shall
at any time issue Common Stock by way of dividend or other distribution on any
stock of the Company, or subdivide or combine the outstanding shares of Common
Stock, then in each such event the Holder of this Warrant shall have the right
thereafter to exercise such Warrant and receive the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such Warrant might have been exercised immediately prior to
such reorganization, reclassification or change. In the case of any such
reorganization, reclassification or change, the Exercise Price shall also be
appropriately adjusted so as to maintain the aggregate Exercise Price. Further,
in case of any consolidation or merger of the Company with or into another
corporation in which consolidation or merger the Company is not the continuing
corporation, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety, or substantially as an entirety, the
Company shall cause effective provision to be made so that the Warrantholder
shall have the right thereafter, by exercising this Warrant, to purchase the
kind and amount of shares of stock and other securities and property receivable
upon such consolidation, merger, sale or conveyance by holders of the number of
shares of Common Stock into which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or conveyance, which
provision shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. The
foregoing provisions shall similarly apply to successive reclassifications,
capital reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
4. ADJUSTMENT TO PURCHASE PRICE. The Company may, in its sole discretion,
lower the Exercise Price at any time, or from time-to-time. When any adjustment
is made in the Exercise Price, the Company shall cause a copy of such statement
to be mailed to the Warrantholder, as of a date within ten (10) days after the
date when the Exercise Price has been adjusted.
5. MANNER OF EXERCISE. The Warrantholder of the Warrants evidenced by this
Warrant Certificate may exercise all or any whole number of such Warrants during
the Exercise Period in the manner stated herein. This Warrant Certificate,
together with the purchase form provided herein duly executed by the
Warrantholder or by the Warrantholder's duly authorized attorney, plus payment
of the exercise price in the manner set forth in paragraph 6 below, shall be
surrendered to the Company. If upon exercise of any Warrants evidenced by this
Warrant Certificate the number of Warrants exercised shall be less than the
total number of Warrants so evidenced, there shall be issued to the
Warrantholder a new Warrant Certificate evidencing the number of Warrants not so
exercised.
6. MANNER OF PAYMENT. The exercise price of each Warrant shall be paid, to
the extent permitted by applicable statutes and regulations, either (i) in cash
at the time the Warrant is exercised, (ii) by delivery to the Company of other
Common Stock of the Company valued at its then established fair market value,
(iii) by delivery to the Company of either options or warrants of the Company,
including, without limitation, this Warrant, valued at the difference between
their exercise price and the then established fair market value of the Company's
Common Stock, (iv) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the holder hereof agreed to by such holder and
the Company, or (v) any other form of legal consideration that may be acceptable
to the Board of Directors of the Company, in their discretion. For the purposes
of this paragraph 6, the fair market value of the Company's Common Stock shall
be (i) the closing sale price for the Common Stock on the primary exchange upon
which the shares are listed and traded on the date the Warrant is exercised, or
(ii) if the shares are not traded on any national exchange, the closing sale
price for the Common Stock on the NASDAQ National Market on the date the Warrant
-2-
is exercised, or (iii) if the shares or neither traded on a national exchange
nor listed on the NASDAQ National Market, then the average of the bid and ask
prices for the Common Stock in the Over-The-Counter Market as quoted on the
NASDAQ Small-Cap Market or (iv) if the shares of Common Stock are neither traded
on a national exchange or the NASDAQ National Market nor quoted on the NASDAQ
Small-Cap Market, the average of the bid and ask prices for the Common Stock as
quoted by any recognized securities quotation service such as the National
Quotation Bureau, Inc. or the OTC Electronic Bulletin Board on the date the
Warrant is exercised. In the case of any deferred payment arrangement, any
interest shall be payable at least annually and shall be charged at the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Internal Revenue Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.
7. RESERVATION OF COMMON STOCK. The Company agrees that the number of
shares of Common Stock sufficient to provide for the exercise of the Warrant
upon the basis herein set forth will at all times during the term of this
Warrant be reserved for the exercise thereof.
8. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its expense,
shall cause to be issued, within ten (10) days after exercise of this Warrant, a
certificate or certificates in the name requested by the Warrantholder of the
number of shares of Common Stock to which the Warrantholder is entitled upon
such exercise. All shares of Common Stock or other securities delivered upon the
exercise of the Warrants shall be validly issued, fully paid and non-assessable.
9. NO RIGHT AS STOCKHOLDER. The Warrantholder is not, by virtue of
ownership of the Warrant, entitled to any rights whatsoever of a stockholder of
the Company.
10. NO ASSIGNMENT. This Warrant may not be assigned without the written
consent of the Company.
Dated: November [___], 2004
By: ____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
-3-
EC Power, Inc.
ELECTION OF PURCHASE
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Warrant Certificate, and to purchase the common shares issuable upon the
exercise of such Warrants, and requests that the certificates for such shares
shall be issued in the name of:
________________________________________________________________________________
________________________________________________________________________________
Address
________________________________________________________________________________
Social Security or other identifying number
________________________________________________________________________________
and be delivered to
________________________________________________________________________________
Name
at
________________________________________________________________________________
Address
and, if said number of Warrants shall not be all the Warrants evidenced by this
Warrant certificate, that a new Warrant certificate for the balance of such
Warrants be registered in the name of, AND delivered to, the undersigned at the
address stated below.
Dated: ______________, 19__
Name of Warrantholder: _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
Signature: _____________________________________________________________________
ASSIGNMENT
For value received _______________________________________________________
hereby sell, assign, and transfer unto _________________________________________
________________________________________________________________________________
Warrants represented by this Warrant certificate, together with all right,
title, and interest therein, and do hereby irrevocably constitute and appoint
________________________________________________________________________________
attorney, to transfer this Warrant certificate on the books of the Company, with
full power of substitution.
Dated:_______________, 19___ X_______________________________________
X_______________________________________
SIGNATURE GUARANTEED: NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate, in
every particular, without alteration or
enlargement, or any change whatever.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF
ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK EXCHANGE.
Exhibit B
FBC Guaranties
▇▇▇▇▇ A. K. ▇▇▇▇ $ 187,500
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $ 185,000
Klaus E. T. ▇▇▇▇▇▇▇ $ 92,500
Exhibit C - Form of Guarantor Warrant Agreement
See Attached
EXHIBIT C
FORM OF GUARANTOR WARRANT AGREEMENT
The Securities represented by this instrument have not been registered under the
Securities Act of 1933 (the "Securities Act") or qualified under the securities
laws of any state, in reliance upon exemptions from such registration and
qualification requirements.
CLASS A REDEEMABLE
WARRANT CERTIFICATE
For the Purchase of Common Shares,
$0.001 Par Value per Share
of
EC POWER, INC.
(a Delaware corporation)
Warrant No. Debt Guaranteed
as of May 16, 2005
WA -[____] [______]
========== ==================
THIS WARRANT CERTIFIES THAT, for value received, [__________], or
registered assigns ("Warrantholder") is the registered owner of the above
indicated number of Warrants entitling the Warrantholder, commencing upon the
Exercise Date, as defined in paragraph 1 of this Certificate, but before 5:00
o'clock p.m., Eastern Standard Time, on the [__] day of May, 2010 ("Expiration
Date") but not thereafter, to subscribe for, purchase and receive such number of
paid and non-assessable shares of Common Stock, $0.001 par value (the "Common
Stock") of EC Power, Inc., a Delaware corporation (the "Company"), determined by
dividing the amount of debt guaranteed by the Warrantholder as of May 16, 2005
(as such amount is reduced by any partial exercise of this Warrant), by the
Exercise Price (as defined below) upon presentation and surrender of this
Warrant and upon payment of the Exercise Price for such of the shares of Common
Stock of the Company, at any time after the Exercise Date, but only subject to
the conditions set forth herein. The exercise price for this Warrant for each
share of Common Stock shall be equal to the greater of (i) Two Dollars ($2.00)
(or, if this Warrant is exercised by the Warrantholder after November 16, 2005,
Three Dollars ($3.00)) and (ii) eighty five percent (85%) of the average of the
three lowest closing bid prices for EC Power Common Stock for the ten trading
days ending on the close of business on the day before the date this Warrant is
exercised (the "Exercise Price"). For the avoidance of doubt, if this Warrant is
not exercised in full, the Exercise Price shall be recalculated for each
subsequent exercise of this Warrant. The Exercise Price, the number of shares
purchasable upon exercise of each Warrant, and the Expiration Date are subject
to adjustments described herein. The Warrantholders may exercise all or any
number of the Warrants represented hereby. Upon exercise of this Warrant, the
form of election hereinafter provided for must be duly executed and the
instructions for registration of the Common Stock acquired by such exercise must
be completed. If the rights represented hereby shall not be exercised at or
before the Expiration Date, this Warrant shall become and be void without
further force or effect, and all rights represented hereby shall cease and
expire.
1. TERM OF WARRANT. The Warrants evidenced by this Warrant Certificate may
be exercised in whole or in part at any time commencing on the date hereof and
ending at 5:00 p.m. Eastern Standard Time on the Expiration Date; provided,
however, that the Company may extend the Exercise Period of this Warrant by
giving notice of such extension.
-1-
2. NOTICE OF EXTENDED EXPIRATION DATE. The Company may extend the
Expiration Date for the exercise of this Warrant at any time by giving thirty
(30) days' written notice thereof to the Warrantholder. If this Warrant is not
exercised on or before the extended Expiration Date, it shall become wholly
void.
3. ADJUSTMENTS OF EXERCISE PRICE AND SHARES. In the event the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise, or in the event the Company shall
at any time issue Common Stock by way of dividend or other distribution on any
stock of the Company, or subdivide or combine the outstanding shares of Common
Stock, then in each such event the Holder of this Warrant shall have the right
thereafter to exercise such Warrant and receive the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such Warrant might have been exercised immediately prior to
such reorganization, reclassification or change. In the case of any such
reorganization, reclassification or change, the Exercise Price shall also be
appropriately adjusted so as to maintain the aggregate Exercise Price. Further,
in case of any consolidation or merger of the Company with or into another
corporation in which consolidation or merger the Company is not the continuing
corporation, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety, or substantially as an entirety, the
Company shall cause effective provision to be made so that the Warrantholder
shall have the right thereafter, by exercising this Warrant, to purchase the
kind and amount of shares of stock and other securities and property receivable
upon such consolidation, merger, sale or conveyance by holders of the number of
shares of Common Stock into which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or conveyance, which
provision shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. The
foregoing provisions shall similarly apply to successive reclassifications,
capital reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
4. ADJUSTMENT TO PURCHASE PRICE. The Company may, in its sole discretion,
lower the Exercise Price at any time, or from time-to-time. When any adjustment
is made in the Exercise Price, the Company shall cause a copy of such statement
to be mailed to the Warrantholder, as of a date within ten (10) days after the
date when the Exercise Price has been adjusted.
5. MANNER OF EXERCISE. The Warrantholder of the Warrants evidenced by this
Warrant Certificate may exercise all or any whole number of such Warrants during
the Exercise Period in the manner stated herein. This Warrant Certificate,
together with the purchase form provided herein duly executed by the
Warrantholder or by the Warrantholder's duly authorized attorney, plus payment
of the exercise price in the manner set forth in paragraph 6 below, shall be
surrendered to the Company. If upon exercise of any Warrants evidenced by this
Warrant Certificate the number of Warrants exercised shall be less than the
total number of Warrants so evidenced, there shall be issued to the
Warrantholder a new Warrant Certificate evidencing the number of Warrants not so
exercised.
6. MANNER OF PAYMENT. The exercise price of each Warrant shall be paid, to
the extent permitted by applicable statutes and regulations, either (i) in cash
at the time the Warrant is exercised, (ii) by delivery to the Company of other
Common Stock of the Company valued at its then established fair market value,
(iii) by delivery to the Company of either options or warrants of the Company,
including, without limitation, this Warrant, valued at the difference between
their exercise price and the then established fair market value of the Company's
Common Stock, (iv) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the holder hereof agreed to by such holder and
the Company, or (v) any other form of legal consideration that may be acceptable
to the Board of Directors of the Company, in their discretion. For the purposes
of this paragraph 6, the fair market value of the Company's Common Stock shall
be (i) the closing sale price for the Common Stock on the primary exchange upon
-2-
which the shares are listed and traded on the date the Warrant is exercised, or
(ii) if the shares are not traded on any national exchange, the closing sale
price for the Common Stock on the NASDAQ National Market on the date the Warrant
is exercised, or (iii) if the shares or neither traded on a national exchange
nor listed on the NASDAQ National Market, then the average of the bid and ask
prices for the Common Stock in the Over-The-Counter Market as quoted on the
NASDAQ Small-Cap Market or (iv) if the shares of Common Stock are neither traded
on a national exchange or the NASDAQ National Market nor quoted on the NASDAQ
Small-Cap Market, the average of the bid and ask prices for the Common Stock as
quoted by any recognized securities quotation service such as the National
Quotation Bureau, Inc. or the OTC Electronic Bulletin Board on the date the
Warrant is exercised. In the case of any deferred payment arrangement, any
interest shall be payable at least annually and shall be charged at the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Internal Revenue Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.
7. RESERVATION OF COMMON STOCK. The Company agrees that the number of
shares of Common Stock sufficient to provide for the exercise of the Warrant
upon the basis herein set forth will at all times during the term of this
Warrant be reserved for the exercise thereof.
8. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its expense,
shall cause to be issued, within ten (10) days after exercise of this Warrant, a
certificate or certificates in the name requested by the Warrantholder of the
number of shares of Common Stock to which the Warrantholder is entitled upon
such exercise. All shares of Common Stock or other securities delivered upon the
exercise of the Warrants shall be validly issued, fully paid and non-assessable.
9. NO RIGHT AS STOCKHOLDER. The Warrantholder is not, by virtue of
ownership of the Warrant, entitled to any rights whatsoever of a stockholder of
the Company.
10. NO ASSIGNMENT. This Warrant may not be assigned without the written
consent of the Company.
Dated: May [___], 2005
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
-3-
EC Power, Inc.
ELECTION OF PURCHASE
The undersigned hereby irrevocably elects to exercise _____________
Warrants represented by this Warrant Certificate, and to purchase the common
shares issuable upon the exercise of such Warrants, and requests that the
certificates for such shares shall be issued in the name of:
________________________________________________________________________________
________________________________________________________________________________
Address
________________________________________________________________________________
Social Security or other identifying number
________________________________________________________________________________
and be delivered to
________________________________________________________________________________
Name
at
________________________________________________________________________________
Address
and, if said number of Warrants shall not be all the Warrants evidenced by this
Warrant certificate, that a new Warrant certificate for the balance of such
Warrants be registered in the name of, AND delivered to, the undersigned at the
address stated below.
Dated: ________________, 19__
Name of Warrantholder: _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
Signature: _____________________________________________________________________
ASSIGNMENT
For value received _______________________________________________________
hereby sell, assign, and transfer unto _________________________________________
________________________________________________________________________________
Warrants represented by this Warrant certificate, together with all right,
title, and interest therein, and do hereby irrevocably constitute and appoint
________________________________________________________________________________
attorney, to transfer this Warrant certificate on the books of the Company, with
full power of substitution.
Dated: ________________, 19__ X ____________________________________
X ____________________________________
SIGNATURE GUARANTEED: NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the
certificate, in every particular, without alteration or
enlargement, or any change whatever.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF
ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK EXCHANGE.
Exhibit D - FBC Debt Obligations
Debt Holder Total Debt Amount
----------- -----------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. and ▇▇▇▇▇
▇▇▇▇▇▇▇ secured credit card debt $95,883
▇▇▇▇ ▇▇▇▇ $41,350
▇▇▇▇ ▇▇▇▇▇▇▇▇ $11,196
▇▇▇▇▇▇▇▇ Ventures $385,208
▇▇▇▇▇ ▇▇▇▇ $5,650
TIW LLC $22,600
Total $561,887
Exhibit E - Preferred Stock Terms
See Attached
EXHIBIT E
TERMS OF SERIES D CONVERTIBLE PREFERRED STOCK
Issuer: EC Power, Inc. (the "Corporation").
Name of Security: Series D Convertible Preferred Stock ("Series D
Stock").
Dividends: Dividends will be paid only if and when declared
by the Board of Directors and upon liquidation. No
dividends may be paid on the common stock of the
Corporation (the "Common Stock") at a rate greater
than the rate at which dividends are paid on the
Series D. Stock (based on the number of shares of
Common Stock into which it is convertible on the
date the dividend is declared).
Liquidation Preference: In the event of a liquidation or winding up of the
Corporation, the holders of the Series D Stock
will be entitled to receive, in preference to the
holders of the Common Stock or any other class or
series of stock junior to the Series D Stock and
pari pasu with the holders of the Corporation's
Series A Convertible Preferred Stock ("Series A
Stock") and Series B Convertible Preferred Stock
("Series B Stock" and, together with the Series A
Stock and the Series D Stock, the "Preferred
Stock"), an amount equal to the purchase price per
share of Series D Stock. In the event that there
is an insufficient amount to pay the full
liquidation preference amounts to the holders of
the Preferred Stock, the holders of the Preferred
Stock will be paid on a pro rata basis in
proportion to their respective unpaid liquidation
preference amount. After payment of the respective
liquidation preferences to the holders of the
Preferred Stock, the balance of proceeds will be
paid on a pro rata basis to holders of Common
Stock. Conversion of the Series D Stock into
Common Stock could occur at any time up to the
liquidation date.
A merger, reorganization or other transaction in
which control of the Corporation is transferred
will be treated as a liquidation.
Optional Conversion: The holders shall have the right to convert the
Series D Stock, in whole or in part, at any time,
into shares of Common Stock, on a one-for-one
basis, subject to customary anti-dilution
adjustments, as described below.
Automatic Conversion: Each share of the Series D Stock shall be
automatically converted into Common Stock in the
event of the closing of a firm-commitment
underwritten public offering of Common Stock
pursuant to an effective registration statement
under the Securities Act of 1933, as amended,
resulting in aggregate offering proceeds of not
less than Forty Million Dollars ($40,000,000) (a
"Qualified Offering").
Anti-Dilution Provisions: The conversion rate of the Series D Stock will be
subject to adjustment for any stock splits,
dividends on Common Stock payable in Common Stock
or other similar capital structure
reorganizations.
Voting Rights: The holders of the Series D Stock shall vote
together with the holders of Common Stock on an
as-converted basis.
-2-
Exhibit F - Form of Registration Rights Agreement
See Attached
REGISTRATION RIGHTS AGREEMENT
This EC POWER REGISTRATION RIGHTS AGREEMENT, dated as of November
16, 2004, by and among EC POWER, INC., a Delaware corporation (the "Company"),
and the several Holders of securities of the Company executing this Agreement,
identified on Schedule I hereto, as amended from time to time.
W I T N E S S E T H
WHEREAS, the Holders are the holders of Company Securities (as such
term and other capitalized terms not otherwise defined herein are defined in
Section 1), including those listed on Schedule I hereto; and
WHEREAS, the Holders and the Company wish to provide for the Holders
to have certain rights to have their shares of Common Stock (as defined below)
registered under the Securities Act (as defined below), on and subject to the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Commission": the Securities and Exchange Commission or any
successor agency.
"Claims" has the meaning set forth in Section 2.8(a).
"Common Stock": The common stock, $.001 par value per share of the
Company.
"Company Registered Securities" has the meaning set forth in Section
2.2(a).
"Company Securities": The Common Stock and the Preferred Stock,
together with any convertible securities, options or warrants pursuant to which
Common Stock or Preferred Stock is issuable, directly or indirectly.
"Holder" or "Holders": Each Holder identified on Schedule I hereto,
any holder of Company Securities who or which hereafter becomes a party to this
Agreement, and any Person who shall hereafter acquire Registrable Securities
from any Holder and to whom such Holder assigns his or its rights under this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"Person": any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
other entity, whether acting in an individual, fiduciary, or other capacity.
"Piggyback Registration" has the meaning set forth in Section 2.3.
"Preferred Stock": the Series A Convertible Preferred Stock of the
Company, par value $.01 per share, the Series B Convertible Preferred Stock of
the Company, par value $.01 per share, Series C Convertible Preferred Stock of
the Company, par value $.01 per share and Series D Convertible Preferred Stock
of the Company, par value $.01 per share.
"Registrable Securities": shares of Common Stock (i) acquired,
issued or issuable upon the (x) exercise of the Warrants or (y) conversion of
any Preferred Stock, or (ii) otherwise issued with respect to any such Common
Stock or Preferred Stock by way of stock dividend or stock split, in connection
with a merger, combination, reorganization or similar transaction; provided,
that any shares of Common Stock constituting Registrable Securities shall cease
to be such at such time as (A) they are distributed to the public pursuant to a
registration statement under the Securities Act or Rule 144 thereunder, (B) they
become subject to resale pursuant to Rule 144(k) under the Securities Act (or
any successor provision) ("Rule 144"), (C) the holder thereof may sell all such
shares held by such Holder in a single 90-day period under Rule 144 because such
shares constitute not more than 1.0% of the outstanding shares of Common Stock
(provided, in the case of clause (B) and this clause (C), that any shares which
cease to be Registrable Securities by operation of such clauses shall again
become Registrable Securities if such shares can no longer be sold in a single
90-day period pursuant to Rule 144), or (D) they shall have otherwise been
transferred and the new certificate evidencing ownership thereof does not bear a
restrictive legend pursuant to the Securities Act and is not subject to a stop
transfer order delivered by or on behalf of the Company.
For all purposes of this Agreement, a "majority in interest" of the
Holders or a group thereof shall be determined on the basis of the Registrable
Securities held by them, and shall be determined as if all outstanding Company
Securities held by the Holders or such group were converted into Common Stock
and the preceding paragraph were applied thereto at the time the determination
is made.
"Securities Act": the Securities Act of 1933, as amended.
"Section 2.1 Sale Number" has the meaning set forth in Section 2.3.
"Underlying Common": (i) the shares of Common Stock issued or
issuable upon conversion of the share or shares of the Preferred Stock held by
the Holders and (ii) any capital stock issued or issuable with respect to
securities referred to in clause (i) above by any stock dividend or stock split
or in connection with a combination of shares, recapitalization,
reclassification, merger, consolidation, reorganization or similar transactions.
For purposes of this Agreement, any Person that holds shares of Preferred Stock
shall be deemed to be the holder of the number of shares of Underlying Common
then obtainable upon conversion of the Preferred Stock held by such Person.
"Warrants" means the Warrants issued to certain of the Holders in
connection with the merger by and among the Company, EC Power Acquisition Corp.
and FBC Technologies, Inc. and all replacements and subdivisions thereof as may
be issued from time to time.
2
2. Registration Rights.
2.1. Piggyback Registrations.
(a) If, at any time, the Company proposes or is required to register
any of its equity securities under the Securities Act (other than pursuant to
registrations solely of securities in connection with an employee benefit plan
or dividend reinvestment plan or a merger, consolidation or reorganization
subject to Form S-4 or any equivalent successor form), pursuant to a
registration statement on Form SB-1, Form SB-2, Form S-1, Form S-2 or Form S-3
(or any equivalent successor form), whether or not for its own account, the
Company shall give prompt written notice of its intention to do so to each of
the Holders of record of Registrable Securities. Upon the written request of any
Holder, made within 15 days following the receipt of any such written notice
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof) the Company shall, subject to Sections 2.1(b), 2.2 and 2.5
hereof, use its best efforts to cause all such Registrable Securities, the
Holders of which have so requested the registration thereof to be registered
under the Securities Act (together with the securities which the Company at the
time proposes to register), to permit the sale or other disposition by the
Holders (in accordance with the intended method of distribution thereof) of the
Registrable Securities to be so registered.
(b) If, at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
equity securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such abandoned
registration, and (ii) in case of a determination to delay such registration of
its equity securities, shall be permitted to delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities.
(c) Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 2.1 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such request must be made in writing prior
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (ii) such
withdrawal shall be irrevocable and, after making such withdrawal, a Holder
shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
2.2. Allocation of Securities Included in Registration Statement. If
any registration pursuant to Section 2.1 (a "Piggyback Registration") involves
an underwritten offering and the managing underwriter shall advise the Company
that, in its view, the number of securities requested to be included in such
registration exceeds the number (the "Section 2.1 Sale Number") that can be sold
in an orderly manner in such registration within a price range acceptable to the
Company, the Company shall include in such registration:
(a) subject to clause (b) below, all equity securities that the
Company proposes to register for its own account (the "Company Registered
Securities"), and
3
(b) to the extent that the number of Company Registered Securities
is less than the Section 2.1 Sale Number, the remaining equity securities to be
included in such registration shall be allocated on a pro rata basis to all
Holders of Underlying Common requesting that Registrable Securities be included
in such registration.
2.3. Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities Act
as provided in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement on
an appropriate registration form of the Commission for the disposition of such
Registrable Securities in accordance with the intended method of disposition
thereof, which form (i) shall be selected by the Company and (ii) shall, in the
case of a shelf registration, be available for the sale of the Registrable
Securities by the selling Holders thereof and such registration statement shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith, and the Company shall use its reasonable best efforts to
cause such registration statement to become and remain effective (provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, or comparable statements under securities or
blue sky laws of any jurisdiction, the Company will furnish to one counsel for
the Holders participating in the planned offering and the underwriters, if any,
copies of all such documents proposed to be filed (including all exhibits
thereto), which documents will be subject to the reasonable review and
reasonable comment of such counsel, and the Company shall not file any
registration statement or amendment thereto or any prospectus or supplement
thereto to which the holders of a majority of the Registrable Securities covered
by such registration statement or the underwriters, if any, shall reasonably
object in writing);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until all Registrable Securities (other than those held by affiliates of the
Company) are eligible for sale under Rule 144(k) and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such registration statement;
(c) furnish, without charge and upon request, to each seller of such
Registrable Securities and each underwriter, if any, of the securities covered
by such registration statement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits), and the prospectus included in such registration statement (including
each preliminary prospectus) in conformity with the requirements of the
Securities Act, and other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller (the Company hereby
consenting to the use in accordance with all applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus;
4
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other applicable
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter, if any, shall reasonably
request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such sellers or underwriter, if any, to
consummate the disposition of the Registrable Securities in such jurisdictions,
except that in no event shall the Company be required to qualify to do business
as a foreign corporation in any jurisdiction where it would not, but for the
requirements of this paragraph (d), be required to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any:
(i) when the registration statement, any pre-effective amendment, the prospectus
or any prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or state securities authority for
amendments or supplements to the registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding for such
purpose; and (v) of the existence of any fact of which the Company becomes aware
which results in the registration statement, the prospectus related thereto or
any document incorporated therein by reference containing an untrue statement of
a material fact or omitting to state a material fact required to be stated
therein or necessary to make any statement therein not misleading; and, if the
notification relates to an event described in clause (v), the Company shall
promptly prepare and furnish to each such seller and each underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading;
(f) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 1.1(a) of the Securities Act and Rule 158
thereunder;
(g) (i) use its best efforts to cause all such Registrable
Securities covered by such registration statement to be listed on the principal
securities exchange on which similar securities issued by the Company are then
listed (if any), if the listing of such Registrable Securities is then permitted
under the rules of such exchange;
5
(h) provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if applicable,
an underwriting agreement in accordance with Section 3.1) and take such other
actions as the Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(j) obtain an opinion from the Company's counsel and, if requested
by the underwriter in an underwritten offering, a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters as are customarily covered by such opinions and "cold comfort" letters
delivered to underwriters in underwritten public offerings, which opinion and
letter shall be reasonably satisfactory to the underwriter, if any, and to
counsel for the Holders participating in the offering, and to furnish upon
request to each underwriter, if any, and each such Holder (in the case only of
such opinion) a copy of any such opinion and letter addressed to such Holder or
underwriter;
(k) deliver promptly to each Holder participating in the offering
and each underwriter, if any, copies of all correspondence between the
Commission and the Company, its counsel or auditors or with the Commission or
its staff with respect to the registration statement, other than those portions
of any such correspondence and memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of such
confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable Securities
covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such under after all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;
(n) make reasonably available its senior employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;
(o) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates representing the Registrable Securities to be sold, and
cause such Registrable Securities to be issued in such denominations and
registered in such names in accordance with the underwriting agreement prior to
any sale of Registrable Securities to the underwriters or, if not an
underwritten offering, in accordance with the instructions of the selling
Holders of Registrable Securities, at least three business days prior to any
sale of Registrable Securities; and
6
(p) take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities in accordance with this Agreement.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.3 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration; provided, however, that any such
information shall be given or made by a seller of Registrable Securities without
representation or warranty of any kind whatsoever, except representations with
respect to the identity of the seller, such seller's Registrable Securities and
such seller's intended method of distribution or any other representations
required by applicable law.
Each Holder of Registrable Securities agrees that upon receipt of
any notice from the Company of the happening of any event of the kind described
in clause (v) of paragraph (e) of this Section 2.3, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(e) of this Section 2.4 and if so directed by the Company will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. In the
event the Company shall give any such notice, the applicable period set forth in
paragraph (b) of this Section 2.4 shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph (e) of this Section 2.4.
2.4. Registration Expenses. The Company shall, whether or not any
registration pursuant to this Agreement becomes effective, pay all customary
expenses incident to the Company's performance of or compliance with this
Article 2 (other than underwriting discounts and commissions payable with
respect to Registrable Securities sold in the offering), including (i)
Commission, stock exchange or NASD registration and filing fees and all listing
fees and fees with respect to the inclusion of securities in NASDAQ, (ii) fees
and expenses of compliance with state securities or "blue sky" laws and in
connection with the preparation of a "blue sky" survey, including without
limitation, reasonable fees and expenses of blue sky counsel, (iii) printing
expenses, (iv) messenger and delivery expenses, (v) internal expenses
(including, without limitation, all salaries and expenses of the Company's
officers and employees performing legal and accounting duties), (vi) expenses
incurred in connection with any road show, (vii) fees and disbursements of
counsel for the Company, (viii) with respect to each registration, the fees and
disbursements of one counsel for the selling Holders selected by Holders of a
majority of the Registrable Securities included in such registration (ix) fees
7
and disbursements of all independent public accountants (including the expenses
of any audit and/or "cold comfort" letter) and fees and expenses of other
persons, including special experts, retained by the Company and (x) any other
fees and disbursements of underwriters, if any, customarily paid by issuers or
sellers of securities. Notwithstanding the foregoing, (A) the provisions of this
Section 2.4 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (B) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and transfer taxes, if any, attributable to such
Registrable Securities.
2.5. Certain Limitations on Registration Rights. If the Company has
determined to enter into an underwriting agreement in connection therewith, all
Registrable Securities to be included in such registration shall be subject to
an underwriting agreement and no Person may participate in such registration
unless such Person agrees to sell such Person's securities on the basis provided
therein and completes and/or executes all questionnaires and other documents
(other than powers of attorney) which must be executed in connection therewith.
2.6. [Intentionally Deleted]
2.7. Indemnification.
(a) In the event of any registration of any securities of the
Company under the Securities Act pursuant to this Article 2, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, the seller of any Registrable Securities covered by such registration
statement, its directors, officers, fiduciaries, employees and stockholders or
general and limited partners (and the directors, officers, employees and
stockholders thereof), each other Person who participates as an underwriter in
the offering or sale of such securities, each officer, director, employee,
stockholder or partner of such underwriter, and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof ("Claims") and expenses (including reasonable fees of counsel
and any amounts paid in any settlement effected with the Company's consent,
which consent shall not be unreasonably withheld or delayed) to which each such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such Claims or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus or any
amendment or supplement thereto, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and the Company will reimburse any such indemnified party
for any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, that (i) the Company shall not be liable to any such
indemnified party in any such case to the extent such Claim or expense arises
out of or is based upon any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact made in such
registration statement or amendment thereof or supplement thereto or in any such
prospectus or any preliminary, final or summary prospects in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such indemnified party specifically for use therein, and (ii) the foregoing
indemnity with respect to any untrue statement contained in or omission from
8
such registration statement or the prospectus included therein shall not inure
to the benefit of any Holder (or any Person controlling such Holder) from whom
the Person asserting any such loss, liability, claim, damage or expense
purchased any of the Registrable Securities which are the subject thereof if it
is finally judicially determined that such loss, liability, claim, damage or
expense resulted solely from the fact that the Holder sold Registrable
Securities to a Person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of such registration statement and the
prospectus, as amended or supplemented, and (x) the Company shall have
previously and timely furnished sufficient copies of such registration statement
and prospectus, as amended or supplemented, to such Holder in accordance with
this Agreement and (y) such registration statement or prospectus, as so amended
or supplemented, would have corrected such untrue statement omission of a
material fact. Such indemnity and reimbursement of expenses shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified party and shall survive the transfer of such securities by such
seller.
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2 is being effected (and
if the Company requires as a condition to including any Registrable Securities
in any registration statement filed in accordance with Section 2) any
underwriters shall, severally and not jointly, indemnify and hold harmless (in
the same manner and to the same extent as set forth in paragraph (a) of this
Section 2.7) to the extent permitted by law the Company, its officers, directors
and employees, each Person controlling the Company within the meaning of the
Securities Act and all other prospective sellers and their directors, officers,
employees, general and limited partners and respective controlling Persons with
respect to any untrue statement or alleged untrue statement of any material fact
in, or omission or alleged omission of any material fact from, such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such Holder or underwriter, specifically stating that it is for use in
such registration statement, preliminary, final or summary prospectus or
amendment or supplement or document incorporated by reference into any of the
foregoing; provided, however, that the aggregate amount which any such Holder
shall be required to pay pursuant to this Section 2.7(b) and Sections 2.7(c) and
(e) shall be limited to the amount of the net proceeds received by such person
upon the sale of the Registrable Securities pursuant to the registration
statement giving rise to such claim. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such
indemnified party and shall survive the transfer of such securities by such
Holder.
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.7 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 2.7, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.7, except to the
extent the indemnifying party is materially prejudiced thereby, and shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 2. In case any action or
proceeding is brought against an indemnified party and it shall notify the
9
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to assume the
defense thereof jointly with any other indemnifying party similarly notified, to
the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party that it so chooses, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if the indemnifying party fails to take reasonable steps
necessary to defend diligently the action or proceeding within 20 business days
after receiving notice from such indemnified party that the indemnified party
believes it has failed to do so; or (ii) if such indemnified party who is a
defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that there may be one or more
legal defenses available to such indemnified party which are not available to
the indemnifying party; or (iii) if representation of both parties by the same
counsel is otherwise inappropriate under applicable standards of professional
conduct, then, in any such case, the indemnified party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of counsel reasonably acceptable to the Company for all indemnified parties
in each jurisdiction, except to the extent any indemnified party or parties
reasonably shall have concluded that there may be legal defenses available to
such party which are not available to the other indemnified parties or to the
extent representation of all indemnified parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct) and
the indemnifying party shall be liable for any expenses therefor. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability, or a failure to act by or on behalf of any indemnified party and,
if the indemnifying party is the Company, such settlement, compromise or
judgment is reasonably acceptable to the Company.
(e) If for any reason the forgoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.7(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a suit of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other from such offering of securities.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. If, however, the allocation provided
in the immediately preceding sentence is not permitted by applicable law, then
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
10
relative benefits but also the relative fault of the indemnifying party on the
one hand, and the indemnified party, on the other hand, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying partly or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 2.7(e) were to be determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 2.7(e).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding anything in this
Section 2.7(e) to the contrary, no indemnifying party (other than the Company)
shall be required pursuant to this Section 2.7(e) to contribute any amount in
excess of the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate, less the amount of any
indemnification payment made pursuant to Sections 2.7(b) and (c).
(f) The indemnity agreements contained herein shall be in addition
to any other rights to indemnification or contribution which any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.
(g) The indemnification and contribution required by this Section
2.7 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
3. Underwritten Offerings. In the case of a registration pursuant to
Section 2 hereof, if the Company shall have determined to enter into any
underwriting agreements in connection therewith, all of the Holder's Registrable
Securities to be included in such registration shall be subject to such
underwriting agreements.
4. General.
4.1. Notices and Other Communications. All notices, requests,
demands and other communications made in connection with this Agreement shall be
in writing and shall be deemed to have been duly given (a) on the date of
delivery, if delivered to the persons identified below, (b) five calendar days
after mailing if mailed, with proper postage, by certified or registered mail,
return receipt requested, (c) on the date of receipt if sent by telecopy or
e-mail, and confirmed in writing in the manner set forth in (b) on or before the
next day after the sending of the telecopy, or (d) one business day after
delivered to a nationally recognized overnight courier service marked for
overnight delivery, in each case addressed to the Holders at their respective
addresses set forth on the stock records of the Company and to the Company at:
11
EC Power, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
4.2. Amendments. This Agreement may be amended only by written
instruments signed by the Company and a majority in interest of the Holders. No
waiver of any right or remedy provided for in this Agreement shall be effective
unless it is set forth in writing signed by a majority in interest of the
Holders. No waiver of any right or remedy granted in one instance shall be
deemed to be a continuing waiver under the same or similar circumstances
thereafter arising.
4.3. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and the respective successors and
assigns of the parties hereto, whether so expressed or not. No Person other than
a Holder shall be entitled to any benefits under this Agreement, except as
otherwise expressed, provided herein. This Agreement and the rights of the
parties hereunder may be assigned by any of the parties hereto to any transferee
of Registrable Securities.
(b) If any term, provision, covenant or restriction of this
Agreement or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement and such exhibits shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
recitations without including any of such which may be hereafter declared
invalid, void or unenforceable.
(c) Each of the parties hereto acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to enforce specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which they may be entitled at law or equity.
(d) This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more of the counterparts have been signed by each party
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
(e) This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without giving effect to
conflict of laws principles that would require the application of the laws of
another jurisdiction.
12
IN WITNESS WHEREOF, the Company and Holders have caused this
Agreement to be executed and delivered as of the date set forth above.
EC POWER, INC.
By: ____________________________
Name:
Title:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
13
Schedule I
Registrable Securities as of November __, 2004
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Name of Holder Common Shares Shares of
Preferred Stock
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