US SENSOR SYSTEMS INC. CAPITAL STOCK OPTION PURCHASE AGREEMENT
Exhibit
10.2
US
SENSOR SYSTEMS INC.
This
Capital Stock Option Purchase Agreement (the “Agreement”) is made as of
February 23, 2010 by and among US Sensor Systems Inc., a Delaware corporation
(the “Company”), Acorn
Energy, Inc., a Delaware corporation (the “Purchaser”) and each of the
holders of Capital Stock of the Company listed on Exhibit A hereto
(collectively, the “Capital
Stockholders”).
Preliminary
Statement
The
Company issued and sold to the Purchaser, and Purchaser did purchase, 50,917
shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) and such sale
and purchase closed on November 30, 2009 (the “Initial Closing”). The Company
and the Purchaser entered into that certain Common Stock Option Purchase
Agreement dated of even date (the “Common Stock Option Purchase
Agreement”) providing for the grant by the Company to the Purchaser of
certain options to purchase shares of the Company’s common stock.
The
Capital Stockholders desire to grant to the Purchaser certain options for the
Purchaser to purchase all shares of Capital Stock of the Company held by the
Capital Stockholders, and the Purchaser desires to acquire such options, all in
accordance with the terms of this Agreement. The shares of Capital Stock subject
to the options granted to the Purchaser pursuant to this Agreement including any
shares of Preferred Stock converted into shares of Common Stock by certain of
the Capital Stockholders as described on Exhibit A prior to
exercise of the options described below shall be referred to in this Agreement
as the “Shares.”
NOW,
THEREFORE, for and in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Options
to Purchase Capital Stock.
1.1. Grant of Options to Purchase
Capital
Stock. Subject
to the terms and conditions of this Agreement, each of the Capital Stockholders
hereby grants to the Purchaser, and the Purchaser hereby accepts, an option to
purchase Shares as follows:
An option
to purchase all of the Shares owned by each of the Capital Stockholders as
described in Exhibit
A with such option being exercisable no later than August 27, 2010 with
payment to each Capital Stockholder of a purchase price equal to $4.09
multiplied by the number of Shares owned by such respective Capital Stockholder
as set forth in Exhibit
A. With respect to the Preferred Stockholders, the option
granted by such Preferred Stockholders under this Section 1.1 shall cover and
include all shares of preferred stock of the Company held by such Capital
Stockholders and all shares of common stock of the Company into which such
shares of preferred stock are converted in accordance with Section 1.5 below,
and the above per share purchase price shall be applicable to such shares of
common stock, including all shares of common stock issued in lieu of payment of
dividends. The purchase price for such Shares will be payable by
Purchaser in shares of its common stock as described below or if required by
Nasdaq regulations a minimal amount of cash with the balance in shares of
Purchaser’s common stock. Such option may be exercised, if at all, only
simultaneously with or following exercise in full of all options granted under
Section 1.1 of the Common Stock Option Purchase Agreement and, if not exercised
in full on or before August 27, 2010, such option shall terminate and be of no
further force or effect.
1.2. Exercise of Options.
The Options granted above may be exercised by the Purchaser providing written
notice of such exercise to the Company which shall serve as notice agent for the
Capital Stockholders (the “Exercise Notice”) prior to the
expiration of the option period. Such exercise shall only be effective for
purchase of all of the Shares owned by all of the Capital
Stockholders.
1.3. Closing;
Delivery.
(a) The
Company as notice agent for the Capital Stockholders shall, upon receiving the
Exercise Notice, promptly notify the Capital Stockholders of same, and the
Capital Stockholders shall within ten (10) days thereafter deliver to the
Purchaser the certificates representing each of their Shares duly endorsed to
Purchaser or with stock powers attached and duly executed to Purchaser which
Purchaser shall hold in trust until Purchaser’s delivery to each of the Capital
Stockholders of his respective number of the Company’s shares of common stock as
payment of the purchase price.
(b) Shares
of common stock of the Purchaser, par value $0.01 per share, to be delivered in
payment upon exercise of the Options (“Purchaser Stock”) will be
determined based on the volume weighted average price of the Purchaser’s common
stock on the Nasdaq during the 20 trading day sessions ending on the day that is
five days preceding the date of the Exercise Notice. Provided Purchaser has
timely received the Capital Stockholders’ duly endorsed certificates and duly
executed stock powers for all Shares, Purchaser shall deliver to each of the
Capital Stockholders his respective number of shares of the Purchaser Stock
within thirty (30) days after the date of the Exercise Notice. All
certificates representing Purchaser Stock to be delivered in accordance with
this subparagraph shall contain thereon legends providing that the Purchaser
Stock may only be sold or otherwise transferred in compliance with the
Securities Act, and further providing that 25% of the number of shares of such
Purchaser Stock may not be offered, sold, pledged or otherwise transferred on or
before expiration of each of the following time periods: ninety (90) days
following the date of issuance of such certificates, 180 days following the date
of issuance of such certificates, 270 days following the date of issuance of
such certificates and one year following the date of issuance of such
certificates. Purchaser shall, upon expiration of the foregoing applicable time
periods, facilitate removal of such legends as well as the legend described in
Section 2.13 upon satisfaction of the requirements set forth in such
legend.
1.4. Defined Terms Used in this
Agreement. In addition to the terms defined above, the
following terms used in this Agreement shall be construed to have the meanings
set forth or referenced below.
“Affiliate” means with respect
to any person or entity (a “Person”) any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with such Person, including, without limitation, any partner, officer, director,
or member of such Person and any venture capital fund now or hereafter existing
which is controlled by or under common control with one or more general partners
or shares the same management company with such Person.
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“Code” means the Internal
Revenue Code of 1986, as amended.
“Common Stock” means the shares
of the Company’s Common Stock, $0.001 par value per share.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Material Adverse Effect” means
a material adverse effect on the business, assets (including intangible assets),
liabilities, financial condition, property, prospects or
results of operations of the Company.
“Options” means all of the
options to purchase shares of Capital Stock granted by the Capital Stockholders
to the Purchaser under Section
1.
“Preferred Stock” means the
shares of the Company’s Preferred Stock, $0.001 par value per
share.
“Preferred Stockholders” means
those persons who hold shares of the Company’s Preferred Stock and who are
described on Exhibit
A.
“Purchaser” means the Purchaser
who is a party to this Agreement.
”Purchaser Stock” means the
shares of Purchaser’s common stock, par value $0.01 per share, to be given by
Purchaser as consideration under Section
1.3.
“Rights Agreement” means the
Amended and Restated Investors Rights Agreement by and among the Company, the
Purchaser and the Stockholders, dated as of the date hereof, in the form of
Exhibit B
attached to this Agreement.
“Securities Act” means the
Securities Act of 1933, as amended.
“Shares” means the shares of
Capital Stock of the Company subject to the options granted to Purchaser under
this Agreement.
“Stock” shall mean all of the
shares of the Company’s Common Stock and Capital Stock.
“Stockholders” means the
holders of all shares of Common and Capital Stock of the Company as of the date
hereof.
“Stockholders’ Agreement” means
the agreement between the Company, the Purchaser and the Stockholders, dated as
of the date hereof, in the form of Exhibit C attached to
this Agreement.
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“Transaction Agreements” means
this Agreement, the Stockholders’ Agreement, the Rights Agreement, the Common
Stock Option Purchase Agreement and any other agreements, instruments or
documents entered into in connection with this Agreement.
1.5 Conversion of Preferred
Stock. The Preferred Stockholders hereby irrevocably elect to
(i) convert all shares of Preferred Stock held by them to Common Stock in
accordance with Section 4 of Article V of the Amended and Restated Certificate
of Incorporation of the Company effective as of the day immediately preceding
the date of the Exercise Notice and (ii) to receive payment of all accrued but
unpaid dividends on the Preferred Stock held by the Preferred Stockholders in
shares of Preferred Stock which shall be converted in accordance with the
preceding clause (i).
2. Representations and
Warranties of the Capital
Stockholders. The Capital
Stockholders, individually and not jointly and severally, hereby represent and
warrant to the Purchaser that the following representations are true and
complete as of the date hereof and will be true and correct as of the date of
exercise of the Options, except as otherwise indicated.
2.1. Title to Capital
Stock.
(a) Each
of the Capital Stockholders is the sole record and beneficial owner of the
Shares set forth opposite such Capital Stockholder’s name on Exhibit A hereto,
free and clear of all liens and encumbrances. Except for the Rights Agreement to
which the Preferred Stockholders are parties thereto, such Capital Stockholder
is not a party to any voting trust, proxy or other agreement or understanding
between or among any other stockholders or persons that affects or relates to
the voting or giving of written consent with respect to any outstanding security
of the Company.
(b) Each
of the Capital Stockholders has not incurred and will not incur, directly or
indirectly, as a result of any action taken or permitted to be taken by or on
behalf of such Capital Stockholder, any liability or obligation to pay any fees
or commissions to any broker, finder or agent in connection with the execution
and performance of the transactions contemplated by this Agreement for which the
Purchaser or the Company could become liable or obligated.
2.2. Authorization. All
corporate and other action required to be taken by any of the Capital
Stockholders in order to enter into this Agreement, and to deliver their
certificates representing Capital Stock, has been taken, and no other
proceedings on his, her or its part are necessary to authorize the execution,
delivery or performance of this Agreement and the Transaction
Agreements. Each of the Capital Stockholders has the full power to
sell, exchange, assign, transfer and deliver its shares of Capital Stock to the
Purchaser, free and clear of any and all liens and encumbrances. This
Agreement and the other Transaction Agreements, when executed and delivered by
each of the Capital Stockholders, shall constitute valid and legally binding
obligations of each of the Capital Stockholders, enforceable against each of the
Capital Stockholders in accordance with its respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies, or (iii) to the extent the indemnification
provisions contained in the Stockholders’ Agreement may be limited by applicable
federal or state securities laws.
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2.3. Consents and
Filings. Assuming the accuracy of the representations made by
the Purchaser in Section 3 of this
Agreement, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority is required on the part of the Capital Stockholders
in connection with the consummation of the transactions contemplated by this
Agreement.
2.4. Litigation. There
is no claim, action, suit, proceeding, arbitration, complaint, charge or
investigation pending or, to each of the Capital Stockholder’s knowledge,
currently threatened that questions the validity of this Agreement or the right
of each of the Capital Stockholders to enter into this Agreement, or to
consummate the transactions contemplated by this Agreement.
2.5. Compliance with Other
Instruments. The execution, delivery and performance of the
Transaction Agreements and the consummation of the transactions contemplated by
the Transaction Agreements will not result in any violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either (i) a default under any instrument, judgment, order, writ, decree,
contract or agreement to which any of the Capital Stockholders is a party or by
which he, she or it is bound or (ii) an event which results in the creation of
any lien, charge or encumbrance upon the Capital Stock or any property or assets
of any of the Capital Stockholders or the suspension, revocation, forfeiture, or
nonrenewal of any permit or license applicable to any of the Capital
Stockholders.
2.6. Consents. All
consents, approvals, releases, filings, terminations and waivers by third
parties necessary to complete the transactions contemplated hereby have been
obtained and delivered to the Purchaser and such consents, approvals, releases,
filings, terminations and waivers have not expired or been
withdrawn.
2.7. Restricted
Securities. The Capital Stockholders acknowledge that the
Purchaser Stock when issued will not be registered under the Securities Act and
will be “restricted securities” as that term is defined in Regulation S and Rule
144 under the Securities Act and that the Purchaser Stock must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from such registration is available. The Capital Stockholders
acknowledge that the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of common stock purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the common stock, the availability
of certain current public information about Purchaser, the resale occurring not
less than six months after a party has purchased and paid for the security to be
sold, the sale being effected through a “broker’s transaction” or in
transactions directly with a “market maker” and the number of shares of common
stock being sold during any three-month period not exceeding specified
limitations.
2.8. Investment. The
Capital Stockholders are acquiring the Purchaser Stock for investment purposes
for their own account and not, in whole or in part, for the account of any other
person and not with a view to distribution or resale, nor with the intention of
selling, transferring or otherwise disposing of all or any part thereof for any
particular price, or at any particular time, or upon the happening of any
particular event or circumstances, except selling, transferring, or disposing
the Purchaser Stock in full compliance with the applicable provisions of the
Securities Act, the rules and regulations promulgated thereunder, and applicable
state securities laws. The Capital Stockholders have not formed any entity for
the purpose of acquiring the Purchaser Stock.
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2.9. Information. The
Capital Stockholders have had the opportunity to ask questions of, and receive
answers from Purchaser or any person acting on its behalf concerning Purchaser
and its business and to obtain any additional information, to the extent
possessed by Purchaser (or to the extent it could have been acquired by
Purchaser without unreasonable effort or expense) necessary to verify the
accuracy of the information received by the Capital Stockholders. In connection
therewith, the Capital Stockholders acknowledge that the Capital Stockholders
have had the opportunity to discuss Purchaser’s business, management and
financial affairs with Purchaser’s management or any person acting on its
behalf. The Capital Stockholders have received and reviewed all the information
concerning Purchaser that they desire. Without limiting the generality of the
foregoing, the Capital Stockholders have been furnished with or have had the
opportunity to acquire, and to review: (i) copies of all of Purchaser’s publicly
available documents, and (ii) all information that it desires with respect to
Purchaser’s business, management, financial affairs and prospects. In
determining whether to accept the Purchaser Stock in connection with the
transactions hereunder, the Capital Stockholders have relied solely on the
Capital Stockholders’ own knowledge and understanding of Purchaser and its
business based upon any information furnished to the Capital Stockholders in
writing. The Capital Stockholders understand that no person has been authorized
to give any information or to make any representations which were not furnished
pursuant to this Section and the Capital Stockholders have not relied on any
other representations or information.
2.10. Advisors. The Capital
Stockholders have carefully considered and have discussed with the Capital
Stockholders’ professional legal, tax, accounting and financial advisors, to the
extent that such Capital Stockholders have deemed necessary, the suitability of
this investment and the transaction agreements contemplated by this Agreement
and for the Capital Stockholders’ particular federal, local and foreign tax and
financial situation and has determined that the acquisition of the Purchaser
Stock and the transactions contemplated by this Agreement are suitable for the
Capital Stockholders. The Capital Stockholders rely solely on such advisors and
not on any statements or representations of Purchaser or any of its agents. The
Capital Stockholders understand that the Capital Stockholders (and not
Purchaser) shall be responsible for the Capital Stockholders’ own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement.
2.11. Risk of Ownership of
Purchaser Stock. The Capital Stockholders acknowledge that
ownership of Purchaser Stock is speculative and involves a high degree of risk
and that the Capital Stockholders can bear the economic risk of ownership of the
Purchaser Stock, including a total loss of their investment.
2.12. No Governmental
Recommendation. The Capital Stockholders acknowledge that no
federal, state or foreign agency has recommended or endorsed the Capital
Stockholders’ acquisition of Purchaser Stock.
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2.13. Legends. The
Capital Stockholders acknowledge that all certificates representing Purchaser
Stock and any and all securities issued in replacement thereof or in exchange
therefor shall bear the legends described in Section 1.3(b) and the following
legend or one substantially similar thereto, which such Capital Stockholders
have read and understand:
“THE
SECURITIES REPRESENTED HEREBY WERE ORIGINALLY ISSUED WITHOUT REGISTRATION UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) AND MAY BE
OFFERED, SOLD, PLEDGE OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE 1933 ACT OR (C)
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS, PROVIDED
IN SUCH LATTER CASE THAT THE HOLDER UPON REQUEST PRIOR TO SUCH SALE FURNISHES TO
ACORN ENERGY, INC. AN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT
REASONABLY SATISFACTORY TO ACORN ENERGY, INC. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
1933 ACT.
UNTIL
TWELVE MONTHS AFTER THE DATE OF THIS CERTIFICATE, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO CERTAIN OTHER RESTRICTIONS ON
TRANSFER.”
2.14. Stop-Transfer.
Because of the restrictions imposed on resale, the Capital Stockholders
acknowledge that Purchaser shall have the right to note stop-transfer
instructions in its stock transfer records, and that Purchaser intends to do so.
Any sales, transfers, or any other dispositions of the Purchaser Stock by the
Capital Stockholders, if any, will be in compliance with the Securities
Act.
2.15. Investment
Experience. The Capital Stockholders acknowledge that the Capital
Stockholders have such knowledge and experience in financial and business
matters that the Capital Stockholders are capable of evaluating the merits and
risks of an investment in the Purchaser Stock and of making an informed
investment decision.
2.16. No Advertisement or General
Solicitation. The Capital Stockholders represent that the Capital
Stockholders are not acquiring the Purchaser Stock as a result of any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over the Internet, television
or radio or presented at any seminar or meeting.
2.17. Read and Understood this
Agreement. The Capital Stockholders have carefully read and
understand this Agreement.
2.18. Representations and
Warranties. No representations or warranties have been made to
the Capital Stockholders or any officer, employee, agent, affiliate or
subsidiary of the Purchaser other than the representations of Purchaser
contained herein, and in acquiring the Purchaser Stock the Capital Stockholders
are not relying upon any representations other than those contained in this
Agreement.
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2.19. No Reliance upon Purchaser’s
or Company’s Counsel. The Capital Stockholders are not being represented
by counsel to Purchaser or the Company and have been advised to obtain
independent legal advice regarding an investment in the Purchaser
Stock.
3. Representations and
Warranties of the Purchaser. The Purchaser hereby represents
and warrants to the Capital Stockholders that:
3.1. Authorization. The
Purchaser has full power and authority to enter into the Transaction
Agreements. The Transaction Agreements to which the Purchaser is a
party, when executed and delivered by the Purchaser, will constitute valid and
legally binding obligations of the Purchaser, enforceable in accordance with
their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors’ rights generally, and as limited
by laws relating to the availability of a specific performance, injunctive
relief, or other equitable remedies, or (b) to the extent the
indemnification provisions contained in the Stockholders’ Agreement may be
limited by applicable federal or state securities laws.
3.2. Compliance with Other
Instruments. The execution and delivery of this Agreement by
the Purchaser, and the performance by the Purchaser of its obligations
hereunder, will not conflict, or result in any violation of, or default under,
any provision of any certificate of incorporation, bylaws or other governing
instrument applicable to the Purchaser, or any agreement or other instrument to
which the Purchaser is a party or by which the Purchaser or any of its
properties are bound, or any permit, franchise, judgment, decree, order, rule or
regulation applicable to the Purchaser or the Purchaser’s business or
properties.
3.3. Purchase Entirely for Own
Account. This Agreement is made with the Purchaser in reliance
upon the Purchaser’s representation to the Capital Stockholders, which by the
Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the
Options and Shares to be acquired by the Purchaser will be acquired for
investment for the Purchaser’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
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the
Purchaser further represents that the Purchaser does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares. The Purchaser has not been formed for the specific
purpose of acquiring the Options and Shares.
3.4. Disclosure of
Information. The Purchaser has had an opportunity to discuss
the Company’s business, management, financial affairs and the terms and
conditions of the offering of the Options and Shares with the Company’s
management. Except as set forth in the Transaction Agreements, no
representations or warranties, whether written or oral, have been made to the
Purchaser by the Capital Stockholders. The foregoing, however, does
not limit or modify the representations and warranties of the Capital
Stockholders in Section 2 of this
Agreement or the right of the Purchaser to rely thereon.
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3.5. Restricted
Securities. The Purchaser understands that the Options and
Shares have not been, and will not be, registered under the Securities Act, by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser’s representations as
expressed herein. The Purchaser understands that the Options and
Shares are “restricted securities” under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Purchaser must hold
the Options and
Shares indefinitely unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. The
Purchaser acknowledges that the Capital Stockholders have no obligation to
register or qualify the Options and Shares for resale. The Purchaser
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Options and
Shares, and on requirements relating to the Company which are outside of the
Purchaser’s control, and which the Company is under no obligation and may not be able to
satisfy.
3.6. No Public
Market. The Purchaser understands that no public market now
exists for the Options and Shares, and that the Capital Stockholders have made
no assurances that a public market will ever exist for the Options and
Shares.
3.7. Suitability of
Investment. The Purchaser has such knowledge and experience in
financial, business and tax matters that the Purchaser is capable of evaluating
the merits and risks relating to the Purchaser’s investment in the Options and
Shares and making an investment decision with respect to the
Company. The Purchaser acknowledges that it has had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with its own legal counsel. The Purchaser is not relying on any
statements or representations of the Company or any of its agents for legal
advice with respect to this investment or the transactions contemplated by this
Agreement other than as set forth in the Transaction Agreements.
3.8. Legends. The
Purchaser understands that the Shares and any securities issued in respect of or
exchange for the Shares, 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 (THE “ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
ACT, UNLESS SUCH TRANSFER SHALL (I) CONSTITUTE A ROUTINE SALE UNDER RULE 144 OF
THE ACT OR (II) BE OF SHARES THAT ARE ELIGIBLE FOR RESALE UNDER RULE 144(B)(1)
OF THE ACT.”
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(b) Any
legend set forth in, or required by, the other Transaction
Agreements.
(c) Any
legend required by the securities laws of any state to the extent such laws are
applicable to the Shares represented by the certificate so
legended.
3.9. Accredited
Investor. The Purchaser is an accredited investor as defined
in Rule 501(a) of Regulation D promulgated under the Securities
Act.
3.10. Foreign
Investors. If the Purchaser is not a United States person (as
defined by Section 7701(a)(30) of the Code), such Purchaser hereby
represents that it has satisfied itself as to the full observance of the laws of
its jurisdiction in connection with any invitation to subscribe for
the Options and Shares or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Shares, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be obtained, and
(iv) the income tax and other tax consequences, if any, that may be
relevant to the purchase, holding, redemption, sale, or transfer of the Options
and Shares. Such Purchaser’s subscription and payment for and continued
beneficial ownership of the Options and Shares, will not violate any applicable
securities or other laws of the Purchaser’s jurisdiction.
3.11. Residence. The
office or offices of the Purchaser in which its principal place of business is
located at the address or addresses of the Purchaser set forth in Section
6.5.
4. Covenants of the
Capital
Stockholders.
4.1. Stockholders’ Agreement and
Rights Agreement. As of the date hereof, the Capital
Stockholders shall have executed and delivered the Stockholders’ Agreement and
the Rights Agreement.
4.2. Notices to
Purchaser. Prior to the exercise by Purchaser of the Options
or termination of all Options, as the case may be, the Capital Stockholders
shall give prompt written notice to the Purchaser of: (a) any breach or default
by the Capital Stockholders of the representations, warranties, covenants or
agreements hereunder or under any document or instrument contemplated hereby;
(b) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement; or (c) any notice or other
communication from any governmental authority in connection with the
transactions contemplated by this Agreement.
4.3. Exclusivity. From
the date hereof to the exercise by Purchaser of the Options or termination of
all Options, as the case may be, the Capital Stockholders shall not, nor shall
they authorize or permit any officer, director or employee of or any investment
banker, broker, attorney, accountant, or other representative retained by the
Capital Stockholders or the Company to, solicit, initiate or encourage
(including by way of furnishing information) submission of any proposal or offer
from any person which constitutes, or may reasonably be expected to lead to, a
Financing Proposal. As used herein, a “Financing Proposal” shall mean
any proposal for a merger or other business combination involving the Company,
or any proposal or offer to acquire in any manner an equity interest in or a
material portion of the assets of the Company (other than sales in the ordinary
course of business consistent with past practice), to extend indebtedness to the
Company or to acquire any of the Options or the Shares. If any of the
Capital Stockholders receives a Financing Proposal during such period of time,
such Capital Stockholder shall notify the Purchaser immediately and shall
provide to the Purchaser a copy of any written documentation of such Financing
Proposal.
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5. Survival Period;
Indemnification.
5.1. Survival of Representations,
Warranties and Covenants. Unless otherwise set forth in this
Agreement, the representations and warranties of the Capital Stockholders and
the Purchaser contained in or made pursuant to this Agreement (x)
shall survive the execution and delivery of this Agreement until one year after
the date of issuance by the Company of the certificates referenced in Section
1.3(6) or the earlier expiration of all the Options, except that the
representations and warranties in Sections 2.1, 2.2 and 2.3 shall survive the
exercise of the Options indefinitely, and (y) shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchaser or the Capital Stockholders and shall bind the parties’ successors and
assigns (including, without limitation, any successor by way of acquisition,
merger or otherwise), whether so expressed or not. This Section 5
shall survive the exercise of all Options, and the covenants contained in this
Agreement shall survive for the periods contemplated by their terms but in any
event until one year after the date of issuance by the Company of the
certificates referenced in Section 1.3(6).
5.2. Indemnification. The
Capital Stockholders, individually and not jointly and severally, and the
Purchaser shall, with respect to the representations, warranties and agreements
made by them herein, indemnify, pay, defend and hold the Capital Stockholders or
the Purchaser, as the case may be, and each of the Capital Stockholders or the
Purchaser’s officers, directors, partners, employees and agents and their
respective Affiliates, as the case may be, (the “Indemnitees”) harmless against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding (collectively, “Losses”), whether or not such
Indemnitees shall be designated a party thereto, which may be (a) imposed on
such Indemnitee, or (b) incurred by such Indemnitee, as a result of (i) the
violation or breach of any representation, warranty or covenant of the Capital
Stockholders or the Purchaser, as the case may be, under this Agreement, the
Rights Agreement or the Stockholders’ Agreement; or (ii) actions or omissions by
any agent, representative or employee of the Capital Stockholders or the
Purchaser, as the case may be.
5.3. Limitations on
Indemnification. The Capital Stockholders or the Purchaser, as
the case may be, shall not have liability under Section 5.2 until the aggregate
amount of Losses of the Indemnitees exceeds $25,000, in which case the
Indemnitees shall be entitled to Losses in an amount up to the aggregate of the
purchase price paid by Purchaser under this Agreement.
6. Miscellaneous.
6.1. Transfer; 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. The Capital Stockholders may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Purchaser. 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.
11
6.2. Governing
Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
its principles of conflicts of laws.
6.3. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed and delivered by
facsimile signature and in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
6.4. Titles and
Subtitles. 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.
6.5. Notices. All
notices and other communications given or made pursuant to this Agreement shall
be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, and if not so confirmed, then on the next business day, (c) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the
respective parties at their address as set forth below, or to such e-mail
address, facsimile number or address as subsequently modified by written notice
given in accordance with this Section 6.5. For
purposes of notice under this Agreement, the Capital Stockholders hereby appoint
the Company as its agent to receive and transmit notices and the Company hereby
accepts such appointment.
If notice
is given to Purchaser, it shall be sent to:
▇ ▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇
▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
& CEO
A copy
shall also be sent to:
▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: General
Counsel
12
If notice
is given to the Capital Stockholders or the Company, it shall be sent to the
address set forth below:
US Sensor
Systems Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: President
A copy shall also be sent
to:
▇▇▇▇
▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇▇ Gunny, Esq.
and
▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
6.6. No Finder’s
Fees. Each party represents that it neither is nor will be
obligated for any finder’s fee, commission or other compensation in connection
with this transaction. The Purchaser agrees to indemnify and to hold
harmless the Capital Stockholders from any liability for any commission or
compensation in the nature of a finder’s fee arising out of this transaction
(and the costs and expenses of defending against such liability or asserted
liability) for which the Purchaser or any of its officers, employees, or
representatives is responsible. The Capital Stockholders, jointly and
severally, agree to indemnify and hold harmless the Purchaser from any liability
for any commission or compensation in the nature of a finder’s or broker’s
fee arising out of this transaction (and the costs and expenses of defending
against such liability or asserted liability) for which the Capital Stockholders
or any of their officers, employees or representatives
is responsible.
6.7. Amendments and
Waivers. Any term of this Agreement may be amended, terminated
or waived only with the written consent of the Company, the Capital
Stockholders and the Purchaser. Any amendment or
waiver effected in accordance with this Section 6.7
shall be binding upon the Company, the Purchaser, the Capital Stockholders and
each transferee of the Options and Shares, each future holder of all such
securities and the Company. In the event a nonmaterial provision of
this Agreement is required to be amended by the Purchaser after the date hereof,
the Company and the Capital Stockholders will not unreasonably withhold their
consent to such amendment.
6.8. Severability. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
13
6.9. Delays or
Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not
alternative.
6.10. Entire
Agreement. This Agreement (including the Exhibits hereto, if
any), and the other Transaction Agreements constitute the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof, and any other written or oral agreement relating to the subject
matter hereof existing between the parties are expressly canceled.
6.11. Publicity. The
Capital Stockholders may not disclose the existence of this Agreement or its
terms other than to their respective lenders, accountants or legal counsel
without the Purchaser’s prior written consent which Purchaser may withhold in
its sole discretion.
6.12. Right to Conduct
Activities. The Capital Stockholders acknowledge and agree
that (i) the Purchaser and its respective partners, affiliates and affiliates of
its partners engage in a wide variety of activities and have investments in many
other companies, some of which may be competitive with the business of the
Company; (ii) subject to any fiduciary obligations of the Purchaser’s designees
to the Company’s Board of Directors, except as waived by the Company pursuant to
this Section, it is critical that the Purchaser be permitted to continue to
develop its current and future business and investment activities without any
restriction arising from an investment by the Purchaser in the Company, the
right of the Purchaser to designate directors of the Company or any other
relationship, contractual or otherwise, between the Purchaser, on the one hand,
and the Company or any of its affiliates, on the other hand; and (iii) from time
to time, in connection with the foregoing activities of the Purchaser
(collectively, the “Activities”), the Purchaser may have information that may be
useful to the Company or its other stockholders (which information may or may
not be known by the member or members of the Company’s Board of Directors
designated by the Purchaser), and neither the Purchaser nor any director so
designated shall have any duty to disclose any information known to such person
or entity to the Company or any of its other stockholders. In addition, the
Purchaser shall not be liable for any claim arising out of, or based upon, (i)
the investment by the Purchaser in any entity competitive to the Company or any
of the Capital Stockholders, (ii) actions taken by any officer, director,
stockholder or other representative of the Purchaser to assist any such
competitive company, whether or not such action was taken as a board member of
such competitive company, or otherwise, and whether or not such action has a
detrimental effect on the Company, unless such claim arises directly from the
Purchaser’s misuse of confidential information in material breach of Section 3.4 of the
Stockholders’ Agreement.
14
The
parties have executed this Capital Stock Option Purchase Agreement as of the
date first written above.
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PURCHASER:
|
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|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
|
||
|
Name:
|
▇▇▇▇
▇. ▇▇▇▇▇
|
||
|
Title:
|
President
&
CEO
|
||
|
CAPITAL
STOCKHOLDERS:
|
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|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇,
|
|||
|
Trustee
of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust dtd 7/25/97
|
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|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
|
|||
|
Trustee
of the ▇▇▇▇▇ ▇▇▇▇▇▇ Trust of 2004
|
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|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
|
|||
|
▇▇▇▇▇▇▇
▇▇▇▇,
|
|||
|
Trustee
of The ▇▇▇▇ Family Trust dtd 12/15/97
|
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|
CKSW
Partners
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
|
||
|
Name:
|
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
||
|
Title:
|
General Partner
|
||
|
LWL
Investment Group LLC
|
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|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
|
||
|
Name:
|
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
||
|
Title:
|
Manager
|
||
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇▇
▇▇▇▇▇
|
|||
|
/s/ ▇▇▇▇▇ ▇▇▇
|
|||
|
▇▇▇▇▇
▇▇▇
|
|||
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇▇
▇▇▇▇▇
|
|||
|
With
respect to Sections 1.2, 1.3(a) and 6.5 only:
|
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|
COMPANY:
|
|||
|
US
SENSOR SYSTEMS INC.
|
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|
By:
|
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
||
|
Name:
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
||
|
Title:
|
President
and Chief Executive
Officer
|
||