Exhibit 10.24
EXHIBIT 10.24
WARRANT AND COMMON
STOCK PURCHASE AGREEMENT
THIS WARRANT AND COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made
effective as of June 3, 2005 (the "Effective Date"), by and among Enova Systems,
Inc., a California corporation located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company" or the "Corporation") ), and the investor who is
identified on and has executed the signature page to this Agreement ( the
"Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares and Warrants.
1.1 Sale of Shares and Warrants.
(a) Subject to the terms and conditions of this Agreement, the
Investor agrees, severally, to purchase and the Company agrees to sell and issue
to the Investor, Five Million Five Hundred Fifty-five Thousand Five Hundred and
Fifty-five (5,555,555) shares of the Company's Common Stock at the per share
purchase price of the Common Stock of $0.09 per share for an aggregate purchase
price of $499,999.95 (the "Purchase Price").
(b) In addition, subject to the terms and conditions of this
Agreement, the Investor agrees to purchase, and the Company agrees to sell and
issue to the Investor, a Warrant for the purchase price of $100 in form and
substance attached hereto as Exhibit A to acquire One Million One Hundred Eleven
Thousand One Hundred and Eleven (1,111,111) of the Company's Common Stock at an
exercise price of $0.12 per share with an exercise period terminating no later
than June 2, 2006 (the "Warrant").
(c) The shares of Common Stock sold to the Investor pursuant to
this Agreement are hereinafter referred to as the "Shares." The Warrant to
purchase Common Stock sold hereunder are hereinafter referred to as the
"Warrant." The total amount of Common Stock and other securities issued or
issuable upon exercise of the Warrant are hereinafter referred to as the
"Conversion Stock." The Shares, the Warrants and the Conversion Stock are
hereinafter collectively referred to as the "Securities."
1.2 Closing. The purchase and sale of the Shares and Warrant shall take
place at the offices of ▇▇▇▇ ▇▇▇▇▇, LLP Two Embarcadero, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 A.M., effective as of the Effective Date, or at
such other time and place as the Company and the Investor mutually agree upon
(which time and place are designated as the "Closing"). Within thirty (30) days
after the Closing, the Company shall deliver to the Investor a certificate
representing the Shares and a corresponding Warrant, which such Investor is
purchasing against delivery to the Company by the Investor of a check, wire
transfer or cancellation of indebtedness (principal and interest)in the
aggregate amount of the Purchase Price for the Shares plus $100 for the Warrant
therefor payable to the Company's order.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants the following as of the Closing to the Investor:
2.1 Corporate Organization and Standing. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Corporation has the requisite corporate power to
carry on its business as presently conducted, and as proposed or contemplated to
be conducted in the future, and to enter into and carry out the provisions of
this Agreement and the transactions contemplated under this Agreement.
2.2 Authorization. All corporate action on the part of the Corporation,
its directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Corporation and the
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performance of all of the Corporation's obligations hereunder has been taken.
This Agreement, when executed and delivered by the Corporation, shall constitute
a valid and binding obligation of the Corporation, enforceable in accordance
with its terms, except as may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and non-assessable
2.3 No Breach. The issue and sale of the Shares and Warrant by the
Corporation does not and will not conflict with and does not and will not result
in a breach of any of the terms of the Corporation's incorporating documents or
any agreement or instrument to which the Corporation is a party. The
consummation of the transactions or performance of the obligations contemplated
by this Agreement will not result in a breach of any term of, or constitute a
default under, any statute, indenture, mortgage, or other agreement or
instrument to which the Corporation or any of its subsidiaries is or are a party
or by which any of them is or are bound.
2.4 Pending or Threatened Claims. Neither the Corporation nor any of
its subsidiaries is a party to any action, suit or proceeding which could
materially affect its business or financial condition, and no such actions,
suits or proceedings are contemplated or have been threatened.
2.5 Brokers and Finders. No agent, broker, investment banker or other
firm or person acting on behalf or under the authority of the Company is or
shall be entitled to any broker's or finder's fee or any other commission or
similar fee from the Company in connection with any of the transactions
contemplated by this Agreement.
3.0 Representations and Warranties of the Investor. The Investor hereby
represents and warrants that:
3.1 Authorization. When executed and delivered by the Investor, and
assuming execution and delivery by the Company, this Agreement and the Warrant
constitute its valid and legally binding obligations, enforceable in accordance
with their terms. If Investor is a corporation, partnership, trust or estate:
(i) the individual executing and delivering this Agreement on behalf of the
Investor has been duly authorized and is duly qualified to execute and deliver
this Agreement and the Warrant on behalf of Investor in connection with the
purchase of the Shares and the Warrant and (ii) the signature of such individual
is binding upon Investor. The Investor represents that it has full power and
authority to enter into this Agreement and the Warrant.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which by
such Investor's execution of this Agreement such Investor hereby confirms, that
the Securities will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, the Investor further represents that the Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
3.3 Disclosure of and Access to Information. The Investor has had an
opportunity to discuss the Corporation's business, management and financial
affairs with its management and to obtain any additional information which the
Investor has deemed necessary or appropriate for deciding whether or not to
purchase the Securities, and has had an opportunity to receive, review and
understand the disclosures and information regarding the Company's financial
statements, capitalization and other business information as set forth in the
Company's filings with the Securities and Exchange Commission (the "SEC
Filings") which are all incorporated herein by reference, together with all
exhibits referenced therein. The Investor acknowledges that no representations
or warranties, oral or written, have been made by the Company or any agent
thereof except as set forth in this Agreement.
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3.4 Investment Experience. The Investor has such knowledge and
experience in financial and business matters, including investments in other
start-up companies, that it is capable of evaluating the merits and risks of the
investment in the Securities, and it is able to bear the economic risk of such
investment. Further, the individual executing this Agreement has such knowledge
and experience in financial and business matters that he/it is capable of
utilizing the information made available to him/it in connection with the
offering of the Securities, of evaluating the merits and risks of an investment
in the Securities and of making an informed investment decision with respect to
the Securities, including assessment of the Risk Factors set forth in the SEC
Filings which are incorporated herein by reference.
3.5 Restricted Securities. The Investor understands that the Shares and
Warrants it is purchasing and the Conversion Stock are characterized as
"restricted securities" under the United States federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, the Investor represents that
it is familiar with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act. The Investor is aware that there is
currently a very limited "over-the-counter" public market for the Company's
common stock shares which are eligible for such sales. There is no guarantee
that a more established public market will develop at any time in the future.
The Investor understands that the Securities are all unregistered and may not
presently be sold in even this limited public market. The Investor understands
that the Securities cannot be readily sold or liquidated in case of an emergency
or other financial need. The Investor has sufficient liquid assets available so
that the purchase and holding of the Securities will not cause it undue
financial difficulties.
3.6 Accredited Investor. The Investor is an "accredited investor" as
that term is defined in Regulation D promulgated by the Securities and Exchange
Commission. The term "Accredited Investor" under Regulation D refers to:
(i) A person or entity who is a director or executive officer of
the Corporation;
(ii) Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the Exchange Act; insurance Corporation as defined in Section 2(13) of the
Securities Act; investment Corporation registered under the Investment
Corporation Act of 1940; or a business development Corporation as defined in
Section 2(a)(48) of that Act; Small Business Investment Corporation licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance Corporation, or
registered investment adviser, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with investment decision
made solely by persons that are accredited investors;
(iii) Any private business development Corporation as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Securities
offered, with total assets in excess of $5,000,000;
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(v) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;
(vi) Any natural person who had an individual income in excess of
$200,000 during each of the previous two years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Section 3.6, the term "net worth" means the excess of total
assets over total liabilities. For the purpose of determining a person's net
worth, the principal residence owned by an individual should be valued at fair
market value, including the cost of improvements, net of current encumbrances.
As used in this Section 3.6, "income" means actual economic income, which may
differ from adjusted gross income for income tax purposes. Accordingly, the
undersigned should consider whether it should add any or all of the following
items to its adjusted gross income for income tax purposes in order to reflect
more accurately its actual economic income: Any amounts attributable to
tax-exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an ▇▇▇ or ▇▇▇▇▇
retirement plan, and alimony payments
3.7 Economic Risk. The Investor understands that an investment in the
Company involves substantial risks. The Investor understands all of the risks
related to the purchase of the Securities. The Investor further understands that
the purchase of the Securities will be a highly speculative investment. The
Investor is able, without impairing the Investor's financial condition, to hold
the Securities for an indefinite period of time and to suffer a complete loss of
the Investor's investment.
3.8 Brokers or Finders. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by such Investor, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
3.9 Tax Liability. It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. It relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents. It understands that it (and not the Company) shall be responsible for
its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
3.10 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Shares, Warrants (or the Conversion
Stock) unless and until:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested by the Company, the Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act, provided
that the Company will not require opinions of counsel for transactions made
pursuant to Rule 144 of such Act; or
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3.11 Legends. It is understood that the certificates evidencing the
Shares and Warrants (and the Conversion Stock) may bear one or all of the
following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. THE HOLDER OF THESE SHARES MAY BE
REQUIRED TO DELIVER TO THE COMPANY, IF THE COMPANY SO REQUESTS, AN OPINION OF
COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY) TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (OR
QUALIFICATION UNDER STATE SECURITIES LAWS) IS AVAILABLE WITH RESPECT TO ANY
TRANSFER OF THESE SHARES THAT HAS NOT BEEN SO REGISTERED (OR QUALIFIED).
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK.
A COPY OF THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH CLASS AND
SERIES WILL BE PROVIDED TO EACH SHAREHOLDER WITHOUT CHARGE, UPON WRITTEN
REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A "LOCK-UP" PROVISION RESTRICTING
THE TRANSFER OF THE SECURITIES FOR A PERIOD OF TIME NOT TO EXCEED ONE HUNDRED
EIGHTY (180) DAYS FROM THE EFFECTIVE DATE OF THE CORPORATION'S PUBLIC OFFERING.
(b) Any legend required by the laws of the State of California or
any other applicable state, including any legend required by the California
Department of Corporations and Sections 417 and 418 of the California
Corporations Code.
4. Lock-up/Registration Rights. Except for the piggy-back registration
rights granted under the Warrant, the Investor acknowledges and agrees that the
Securities may be subject to certain restrictions on transfer following a
registered public offering of the Corporation's securities as provided in this
Section 4. In connection with any registration of the Corporation's securities,
the Investor agrees, upon the request of the underwriters managing such offering
of the Company's securities, if applicable, or the Company if there are no
underwriters, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Corporation and,
if applicable, such underwriters, as the case may be, for such period of time,
not to exceed thirty (30) days before and one hundred eighty (180) days, after
the effective date of such registration as the Corporation or the underwriters
may specify; provided, however, that all executive officers, directors and
shareholders holding more than 1% of the fully diluted capital stock of the
Corporation are subject to the same restrictions as the Investor. The
Corporation and underwriters may request such additional written agreements in
furtherance of such standoff in the form reasonably satisfactory to the
underwriter and the Investor. The Corporation may also impose stop-transfer
instructions with respect to the shares subject to the foregoing restrictions
until the end of said one hundred eighty (180) day or shorter period.
5. Conditions of Investor's Obligations at the Closing. The obligations of
the Investor under this Agreement are subject to the fulfillment on or before
the Closing of each of the following conditions, the waiver of which shall not
be effective against the Investor unless consented to in writing thereto:
5.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the date of the
Closing
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5.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Satisfaction. All corporate and legal proceedings taken by the
Company in connection with the transactions contemplated by this Agreement and
all documents relating to such transactions shall be satisfactory to the
Investors in the reasonable exercise of their judgment.
5.4 Warrant. The Company and the Investor shall have entered into the
Warrant.
5.5 Consents, Permits, and Waivers. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by this Agreement (except for such as may be
properly obtained subsequent to the Closing).
5.6 Legal Investment. Subject in part to the truth and accuracy of the
Investor's representations set forth in this Agreement, the sale and issuance of
the Shares and Warrants to the Investor, and the proposed delivery of the
Conversion Stock into which the Warrant may convert, shall be legally permitted
by all securities laws and regulations to which the Investor and the Company are
subject.
6. Conditions of the Company's Obligations at the Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective unless consented to in writing by the
Company:
6.1 Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 shall be true on and as of the date of
the Closing.
6.2 Payment of Purchase Price. The Investor shall have delivered the
purchase price specified in Section 1.1(a) and 1.1(b).
6.3 Warrant. The Company and the Investor shall have entered into the
Warrant.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company. In
particular, the warranties and representations of the Company in Section 2 shall
survive for a period of one year after the Closing.
7.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law/Venue. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California, without reference to the conflict of laws. Venue for all purposes
hereunder shall be the County of Los Angeles, California.
7.4 Counterparts/Titles. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
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together shall constitute one and the same instrument. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
7.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing and, except as otherwise noted herein, shall be
deemed effectively given upon personal delivery, delivery by nationally
recognized courier, by facsimile to a telephone number provided by the receiving
party or upon deposit with the United States Post Office, (by first class mail,
postage prepaid) addressed: (a) if to the Company, at the address set forth on
the first page of this Agreement (or at such other address as the Company shall
have furnished to the Investors in writing) and (b) if to the Investor, at the
latest address of the Investor on the Company's records, which as of the
Effective Date shall be deemed to be the address set forth on the signature page
hereto
7.6 Finder's Fee/Investor Legal Fees. Each party represents that it
neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. The Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
7.7 Expenses. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement (including any exhibit or schedule
hereto), the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
7.8 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), by the
Investor and the Company. Any amendment or waiver effected in accordance with
this Section 7.9 shall be binding upon the Investor and each transferee of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company. All provisions under this Agreement and
the Warrant shall be deemed to be the product of all parties hereto, and no
ambiguity shall be construed in favor of or against Company or the Investor.
7.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision will be deemed amended
to conform to applicable law so as to be valid, legal and enforceable in such
jurisdiction, and the validity, legality and enforceability of such provision
will not be affected or impaired thereby in any other jurisdiction; if such
provision cannot be amended without altering materially the intention of the
parties, such provision shall be excluded from this Agreement and the balance of
the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
7.10 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the Effective Date.
7.11 Entire Agreement/Acknowledgment of Representation. This Agreement,
and the documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto are expressly
canceled. The Investor acknowledges that the Company's counsel, ▇▇▇▇ ▇▇▇▇▇ LLP,
is representing only the Company in this transaction and the terms and
conditions set forth in this Agreement and the Warrant. The Investor represents
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and acknowledges that it has had the opportunity and has been advised by the
Company to consult with independent counsel of its own selection concerning the
transactions set forth in this Agreement and the negotiations and terms set
forth in this Agreement and the Warrant. Investor further acknowledges and
represents that it has had no communications or discussions with the Company's
counsel.
7.12 Confidential Information. The Investor agrees that any information
not currently set forth in the Company's SEC Filings may be treated by the
Company as confidential with respect to the Company or its activities
("Confidential Information"). The Investor understands and agrees that such
Confidential Information may not be disclosed to any third party or used by the
Investor for purposes of trading in the Company's publicly traded stock until
such Confidential Information is publicly disclosed by the Company or is no
longer deemed in writing by the Company to be Confidential Information.
[SIGNATURES TO FOLLOW]
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SIGNATURE PAGE TO
ENOVA SYSTEMS, INC. JUNE 2005 WARRANT AND COMMON STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"COMPANY"
ENOVA SYSTEMS., INC.
By: _______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
"INVESTOR"
Eruca Limited
Signature:__________________________________
By:_________________________________________
Title:______________________________________
Address:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
#▇▇-▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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