Form 8-K QUANTUM FUEL SYSTEMS For: Jun 29
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E-mailUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 29, 2015
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
DE | 000-49629 | 33-0933072 | |
(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | |
25242 Arctic Ocean Drive, Lake Forest, CA 92630
(Address of principal executive offices) (Zip Code)
(949) 399-4500
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 - Entry into a Material Definitive Agreement
On June 29, 2015, the Company entered into a Convertible Note Purchase Agreement (the “Purchase Agreement”) with certain "accredited investors" (each, an "Investor" and collectively, the "Investors"), as such term is defined in Rule 501(a) of Regulation D under the United States Securities Act of 1933, as amended (the "Securities Act"), for the purchase and sale of 2% senior secured Series B convertible promissory notes (the "Convertible Notes") in the aggregate principal amount of $2.0 million. The Company intends to use the net proceeds from the offering to develop new CNG tanks and systems for use in virtual pipeline applications and general working capital purposes. The closing of the transaction occurred on June 30, 2015. The Purchase Agreement contains customary representations and warranties and indemnification provisions. The foregoing description of the Purchase Agreement is qualified by reference to the complete terms of such Purchase Agreement, the form of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
The holders of the Convertible Notes have the right at any time and from time to time to convert the principal amount into up to 839,489 shares of the Company's common stock at a fixed conversion price of $2.3824 per share, subject only to customary anti-dilution provisions for stock splits, stock dividends and similar corporate events. Interest on the Convertible Notes accrues at the rate of 2% per annum and is payable upon the earlier of conversion or maturity. The Company has the right to pay the accrued interest in cash or stock. If the Company elects to pay in stock, then the number of shares to be issued in payment of the interest will be based on the $2.3824 conversion price. The Convertible Notes mature on September 18, 2018; provided, however, during the 30-day period beginning on July 1, 2017, and upon notice provided by the holders of a majority of the outstanding principal amount of the Convertible Notes, the holders can put the Convertible Notes to the Company and the Company would be obligated to redeem the principal and interest then outstanding under the Convertible Notes within 90 days thereafter. In addition, the Convertible Notes are subject to redemption in connection with a change in control transaction. The Convertible Notes are subordinated in all respects to the Company’s obligations to Bridge Bank, National Association (“Bridge Bank”) and provide for a default if the Company’s common stock is not listed on Nasdaq or another national securities exchange as well as other customary events of default. The foregoing description of the Convertible Notes is qualified by reference to the complete terms of such Convertible Notes, the form of which is filed herewith as Exhibit 4.1 and incorporated herein by reference.
The Convertible Notes are secured by a second lien on substantially all of the Company’s operating assets (excluding the Company’s direct and indirect ownership interests in Schneider Power Inc. (“SPI”) and each of SPI’s wholly-owned subsidiaries) pursuant to the terms of a Subordinated Security Agreement between the Company and Kevin Douglas, as collateral agent for all the Convertible Note holders. The lien granted to the collateral agent on behalf of the Convertible Note holders is subordinate in all respects to the first lien position of Bridge Bank. The foregoing description of the Subordinated Security Agreement is qualified by reference to the complete terms of such Subordinated Security Agreement, the form of which is filed herewith as 10.2 and incorporated herein by reference.
Concurrent with the closing of the transactions described above, the Company and each of the holders of the outstanding convertible promissory notes originally issued by the Company on September 18, 2013 (the “September 2013 Notes”) agreed to amend Section 2(a) of such notes and executed an amendment to the September 2013 Notes (the “Amendment”). Pursuant to the terms of the Amendment, the Company and the holders of the September 2013 Notes agreed to change the commencement date of the put right held by the holders of the September 2013 Notes from September 18, 2016 to July 1, 2017. The foregoing description of the Amendment to Convertible Notes is qualified by reference to the complete terms of such Amendment to Convertible Notes, the form of which is filed herewith as 10.3 and incorporated herein by reference.
The Company's press release, dated July 1, 2015, announcing the offering is filed as Exhibit 99.1 to this Current Report on Form 8-K.
The Convertible Notes and shares of common stock issuable upon conversion of the Convertible Notes have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the Securities Act or any applicable state securities laws.
Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
See the disclosures made in Item 1.01, which are incorporated herein by reference.
Item 3.02 - Unregistered Sales of Equity Securities
See the disclosures made in Item 1.01, which are incorporated herein by reference.
Item 9.01 – Financial Statements and Exhibits
Exhibit No. | Description | |
4.1 | Form of Convertible Note | |
10.1 | Form of Convertible Note Purchase Agreement | |
10.2 | Form of Subordinated Security Agreement | |
10.3 | Form of Amendment to Convertible Notes | |
99.1 | Press released dated July 1, 2015 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC. | ||||
July 1, 2015 | By: | /s/ Kenneth R. Lombardo | ||
Kenneth R. Lombardo | ||||
General Counsel | ||||
EXHIBIT INDEX
Exhibit No. | Description | |
4.1 | Form of Convertible Note | |
10.1 | Form of Convertible Note Purchase Agreement | |
10.2 | Form of Subordinated Security Agreement | |
10.3 | Form of Amendment to Convertible Notes | |
99.1 | Press release dated July 1, 2015 | |
Exhibit 4.1
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES (COLLECTIVELY, THE “ACTS”). THESE SECURITIES AND THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE MAY NOT BE SOLD, DISTRIBUTED, OFFERED, PLEDGED, ENCUMBERED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF THE FOLLOWING: (1) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACTS COVERING THE TRANSACTION, (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR (3) THE COMPANY OTHERWISE SATISFIES ITSELF THAT REGISTRATION IS NOT REQUIRED UNDER THE ACTS.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.
THIS NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT DATED ON OR ABOUT THE DATE HEREOF BY AND BETWEEN THE HOLDER HEREOF AND BRIDGE BANK, NATIONAL ASSOCIATION.
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.
SENIOR SECURED SERIES B CONVERTIBLE NOTE
Due: September 17, 2018
$[__________] June 29, 2015
This Senior Secured Series B Convertible Note (the “Series B Note”) is one of a duly authorized issue of Series B Notes of Quantum Fuel Systems Technologies Worldwide, Inc., a Delaware corporation (the “Company”), designated as the Quantum Fuel Systems Technologies Worldwide, Inc. Senior Secured Series B Convertible Notes initially due September 17, 2018 (the “Maturity Date”) in an aggregate principal amount (when taken together with the original principal amounts of all other Series B Notes) that does not exceed $2,000,000 (collectively, the “Series B Notes”).
FOR VALUE RECEIVED, the Company hereby promises to pay to [____________] or its registered assigns or successors-in-interest (“Holder”) the principal sum of [_____________] United States Dollars ($[__________]), together with all accrued but unpaid interest thereon, if any, on the Maturity Date, to the extent such principal amount and interest has not been repaid or converted into the Company’s Common Stock, $0.02 par value per share (the “Common Stock”), in accordance with the terms hereof. Interest on the unpaid principal balance hereof shall accrue at the rate of 2.0% per annum from the date of original issuance hereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date, or such earlier date upon acceleration or by conversion or redemption in accordance with the terms hereof or of the Purchase Agreement. Interest on this Note shall accrue daily commencing on the Issuance Date and shall be computed on the basis of a 360-day year, 30-day months and actual days elapsed and shall be subject to the provisions of Section 1 hereof. Notwithstanding anything contained herein, this Note shall bear interest on the due and unpaid Principal Amount from and after the occurrence and during the continuance of an Event of Default pursuant to Section 5(a) at the rate (the “Default Rate”) equal to the lower of 18% per annum or the highest rate permitted by law, until and unless such Event of Default has been cured. Unless otherwise agreed or required by applicable law, payments or conversions hereunder will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal.
All payments of principal and interest on this Series B Note shall be made in lawful money of the United States of America by wire transfer of immediately available funds to such account as the Holder may from time to time designate by written notice in accordance with the provisions of this Series B Note or by check mailed to the Holder at its principal office, or at such other address as the Holder may from time to time designate by written notice in accordance with the provisions of this Series B Note. This Series B Note may not be prepaid in whole or in part except as otherwise provided herein or with the Holder’s prior written consent. If any amount expressed to be due by the terms of this Series B Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.
Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Purchase Agreement dated June 29, 2015 pursuant to which the Series B Notes originally were issued (the “Purchase Agreement”). For purposes hereof the following terms shall have the meanings ascribed to them below:
“Bankruptcy Event” means any of the following events: (a) the Company or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any subsidiary thereof; (b) there is commenced against the Company or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Company or any subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any subsidiary consistently fails to pay, or publicly states that it is unable to pay or is unable to pay, its debts as they become due; (g) the Company or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing. For purposes of this definition, Schneider Power Inc. and its wholly-owned subsidiaries will not be treated as subsidiaries of the Company unless any such entity has continuing operations as a subsidiary of the Company and such operations are in a different line of business than such entity’s operations as of the date hereof.
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.
“Change in Control Transaction” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving entity after such event, (ii) any person (as defined in Section 13(d) of the Exchange Act), together with its affiliates and associates (as such terms are defined in Rule 405 under the Act), but excluding Holder together with its affiliates and associates, beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 35% of the Company’s voting power, (iii) there is a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Company’s Board of Directors on the date thereof, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis, or (v) the Company enters into any agreement providing for an event set forth in (i), (ii), (iii) or (iv) above.
“Conversion Price” shall equal $2.3824 (which Conversion Price shall be subject to adjustment as set forth herein).
“Indebtedness” of any person or entity means (a) all obligations evidenced by notes, bonds, debentures or similar instruments, including without limitation obligations so evidenced incurred in connection with the acquisition of property, assets or businesses and (b) all contingent obligations or guarantees in respect of the foregoing.
“Lien” means a lien, charge, security interest, mortgage, encumbrance, pledge or hypothecation.
“Permitted Indebtedness” means any Indebtedness of the Company or any subsidiary (a) evidenced by any of the Series B Notes; (b) evidenced by any of the September 2013 Notes; (c) consisting of a lease or similar obligation relating to equipment classified as a “capital lease” in accordance with generally accepted accounting principles in the United States; or (d) that is unsecured, is made expressly subordinate in right of payment to the indebtedness evidenced by the Series B Notes pursuant to a written subordination agreement that is reasonably acceptable to the Holders of a majority of the outstanding principal and accrued and unpaid interest of the Series B Notes, and does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium thereon (if any) until at least 91 days after the Maturity Date.
“Permitted Liens” means any Lien (a) incurred pursuant to the Company’s credit facility with Bridge Bank, National Association in effect on the date hereof and any extension, refinancing and renewal thereof provided by a commercial lender, (b) upon or in any property or equipment acquired or held by the Company or any of its subsidiaries to secure the purchase price of such property or equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such property or equipment, (c) existing on property or equipment acquired or held by the Company at the time of its acquisition, provided that the Lien is confined solely to the property or equipment so acquired and improvements thereon and the proceeds of such property or equipment to the extent of such indebtedness, or (d) disclosed on Schedule A hereto.
“Principal Amount” shall refer to the sum of (i) the original principal amount of this Series B Note and (ii) all accrued but unpaid interest hereunder.
“Principal Market” shall mean the Nasdaq Stock Market or such other principal market or exchange on which the Common Stock is then listed for trading.
“September 2013 Notes” means the Senior Secured Convertible Notes issued by the Company to the Holder and other purchasers on September 18, 2013.
“Trading Day” shall mean a day on which there is trading on the Principal Market.
“Transaction Documents” means the Purchase Agreement, the Series B Notes, the Security Agreement and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith.
“Underlying Shares” means the shares of Common Stock into which the Series B Notes are convertible (including interest or principal payments in Common Stock as set forth herein) in accordance with the terms hereof and the Purchase Agreement.
The following terms and conditions shall apply to this Series B Note:
Section 1. Payments.
(a) Interest Payments. Subject to the terms hereof, on the Maturity Date and in connection with each conversion pursuant to Section 4(a), the Company shall, at the Company’s option, either (i) pay in cash all interest accrued to date on the outstanding Principal Amount (the “Interest Amount”) or (ii) issue shares of Common Stock in satisfaction of such Interest Amount in accordance with the terms hereof. The Company shall deliver to all the holders of Series B Notes a written irrevocable notice (each and “Interest Payment Election Notice”) electing to pay such Interest Amount in cash or Common Stock or a combination of both. The Interest Payment Election Notice shall be delivered at least ten (10) Trading Days prior to the Maturity Date or within one Trading Day after the delivery of the Conversion Notice to the Company (as applicable). If the Interest Payment Election Notice is not delivered within the prescribed period set forth in the preceding sentence, then the Interest Amount shall be paid in Common Stock. If the Company elects to pay the Interest Amount in shares of Common Stock, the number of such shares to be issued shall be the number determined by dividing (x) the Interest Amount due or to be converted (as applicable), by (y) the then-applicable Conversion Price. Such shares shall be issued and delivered within three Trading Days following the Maturity Date of the date on which the conversion is to be effected in accordance with the applicable Conversion Notice.
(b) No Deduction, Withholding or Offset. Any payment by the Company to the Holder hereunder, whether for principal, interest or otherwise, shall not be subject to any deduction, withholding or offset for any reason whatsoever except to the extent required by law, and the Company represents that to its best knowledge no deduction, withholding or offset is so required for any tax or any other reason.
Section 2. Put Right.
(a) Put Right. During the 30-day period beginning on July 1, 2017, and upon notice provided by the Holders of a majority of the outstanding principal amount of the Series B Notes during such period, the Company shall redeem the Series B Notes in whole, and each Holder shall be obligated to surrender the Series B Note in whole, at a redemption price equal to 100% of the outstanding principal amount of such Series B Note being redeemed, together with any accrued but unpaid interest thereon to the redemption date. The Holders of a majority of the outstanding principal amount of the Series B Notes shall effect such request for redemption under this Section 2 by giving notice by mail, first-class postage prepaid, to the Company of the intent to exercise the Holder’s right to require redemption and the date fixed for redemption (which shall be within 90-days of delivery of the redemption notice pursuant to this Section 2(a)). On or after the date fixed for redemption by the Holders, each Holder of Series B Notes shall surrender his, her or its certificates evidencing all Series B Notes to be redeemed to the Company at its principal executive offices and shall thereupon be entitled to receive payment of the redemption price for the Series B Notes redeemed within 90-days of delivery of the redemption notice provided pursuant to this Section 2(a).
(b) Conversion Prior to Redemption. Notwithstanding anything to the contrary in this Section 2, any Series B Notes included in a redemption notice pursuant to Section 2(a) shall continue to be convertible in accordance with Section 4 after the notice of redemption and prior to the date fixed for redemption by delivery to the Company from such Holder of a notice of intent to convert to the Company prior to the date fixed for redemption.
Section 3. Senior Debt; Secured Obligations. So long as this Series B Note remains outstanding, the Company shall not, and shall not permit any subsidiary (whether or not a subsidiary on the Closing Date) other than Schneider Power Inc. and its wholly-owned subsidiaries to, directly or indirectly:
(a) Other than Permitted Indebtedness, issue, enter into, create, incur or assume any Indebtedness; or
(b) Other than Permitted Liens, enter into, create, incur, assume or suffer or permit to exist any Liens on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom.
The obligations of the Company due under this Series B Note and the other Transaction Documents are secured by, among other things, that certain Security Agreement of even date herewith executed by the Company in favor of Kevin Douglas, in his capacity as collateral agent for himself and other Purchasers party to the Purchase Agreement, as amended, restated, supplemented or otherwise modified from time to time.
Section 4. Conversion.
(a) Conversion Right. Subject to the terms hereof, the Holder shall have the right, at such Holder’s option, at any time and from time to time, to convert the outstanding Principal Amount under this Series B Note in whole or in part by delivering to the Company a fully executed notice of conversion in the form of conversion notice attached hereto as Exhibit A (the “Conversion Notice”), which may be delivered in the manner for providing notices to the Company provided for in the Purchase Agreement.
(b) Common Stock Issuance upon Conversion.
(i) Conversion Date Procedures. Upon conversion of this Series B Note pursuant to Section 4(a), the outstanding Principal Amount hereunder shall be converted into such number of shares of Common Stock as is determined by dividing (x) the Principal Amount elected to be converted, by (y) the then-applicable Conversion Price. The date of any Conversion Notice is referred to herein as the “Conversion Date”. If the Holder is converting less than all of the outstanding Principal Amount hereunder pursuant to a Conversion Notice and has delivered this Series B Note to the Company, the Company shall promptly deliver to the Holder (but no later than five Trading Days after the Conversion Date) a Series B Note for such outstanding Principal Amount as has not been converted if this Series B Note has been tendered to the Company for partial conversion. The Holder shall not be required to physically surrender this Series B Note to the Company upon any conversion or hereunder unless the full outstanding Principal Amount represented by this Series B Note is being converted or repaid. The Company shall maintain accurate records showing the outstanding Principal Amount so converted and repaid and the dates of such conversions or repayments.
(ii) Stock Certificates or DWAC. The Company will deliver to the Holder not later than three Trading Days after the Conversion Date, a certificate or certificates (which shall be free of restrictive legends and trading restrictions if a Registration Statement has been declared effective covering such shares or such shares may be resold pursuant to Rule 144 under the Securities Act), representing the number of shares of Common Stock being acquired upon the conversion of this Series B Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Series B Note, provided the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposit Withdrawal at Custodian system (provided that the same time periods herein as for stock certificates shall apply). If in the case of any conversion hereunder, such certificate or certificates are not delivered to or as directed by the Holder by the third Trading Day after the Conversion Date, the Holder, in addition to any other remedy the Holder may have at law or in equity, shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return this Series B Note tendered for conversion.
(iii) Restricted Shares. The Holder understands that the shares of Common Stock issuable upon conversion of this Series B Note will be “restricted securities” within the meaning of Rule 144 under the 1933 Act and may not be sold, pledged, assigned or transferred and must be held indefinitely in the absence of (i) an effective registration statement under the 1933 Act and applicable state securities laws with respect thereto or (ii) an opinion of counsel satisfactory to the Company that such registration is not required. The certificates for the Common Stock issuable upon conversion of this Series B Note shall bear the following or similar legend (in addition to such other restrictive legends as are required or deemed advisable under any applicable law or any other agreement to which the Company is a party):
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.”
The Holder consents to the Company making a notation on its records or giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer set forth and described herein. Notwithstanding the foregoing, the legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Shares upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at DTC, if (i) such Shares are registered for resale under the Securities Act, (ii) such Shares are sold or transferred pursuant to Rule 144 (assuming the transferor is not an Affiliate of the Company), (iii) such Shares are eligible for sale under Rule 144, or (iv) if such legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Commission).
(iv) [Reserved]
(c) Conversion Price Adjustments.
(i) Stock Dividends, Splits and Combinations. If the Company, at any time while the Series B Notes are outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares, or (C) combine as defined below) shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(c)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.
(ii) Reorganizations. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another person, or the sale of all or substantially all of the Company’s assets to another person shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in this Series B Note and in lieu of the shares of the Common Stock of the Company immediately theretofore receivable upon conversion hereof, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore receivable upon conversion hereof had such reorganization, reclassification, consolidation, merger or sale not taken place.
(iii) Rounding of Adjustments. All calculations under this Section 4 or Section 1 shall be made to the nearest 4 decimal places or the nearest 1/100th of a share, as the case may be.
(iv) Notice of Adjustments. Whenever the Conversion Price is adjusted pursuant hereto, the Company shall promptly deliver to each holder of the Series B Notes, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, provided that any failure to so provide such notice shall not affect the automatic adjustment hereunder.
(v) Change in Control Transactions. In case of any Change in Control Transaction, the Holder shall have the right thereafter to, at its option, (A) convert this Series B Note, in whole or in part in accordance with the terms hereof, into the shares of stock and other securities, cash or property receivable upon or deemed to be held by holders of Common Stock following such Change in Control Transaction, and the Holder shall be entitled upon such event to receive such amount of securities, cash or property as the Holder would have been entitled with respect to the Underlying Shares immediately prior to such Change in Control Transaction, or (B) require the Company or its successor to redeem this Series B Note, in whole or in part, at a redemption price equal to the outstanding Principal Amount being redeemed. The terms of any such Change in Control Transaction shall include such terms so as to continue to give to the Holders the right to receive the amount of securities, cash or property upon any conversion or redemption following such Change in Control Transaction to which a holder of the Underlying Shares would have been entitled in such Change in Control Transaction.
(vi) Notice of Certain Events. If:
A. the Company shall declare a dividend (or any other distribution) on its Common Stock;
B. the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock;
C. the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights;
D. the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Series B Note, and shall cause to be mailed to the Holder at its last address as it shall appear upon the books of the Company, on or prior to the date notice to the Company’s stockholders generally is given, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange.
(vii) Purchase Rights. If at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of the Common Stock (“Purchase Rights”), then the Holder will be entitled to acquire, upon conversion of this Series B Note in accordance with its terms, a portion of the aggregate Purchase Rights which the Holder would have acquired if the Holder had held all Underlying Shares immediately before the date on which a record is taken to determine holders of the Common Stock for the grant, issue or sale of such Purchase Rights. Such portion will be determined based on the Principal Amount converted on the applicable Conversion Date in accordance the terms hereof relative to aggregate Principal Amount on the Conversion Date.
(d) Reservation and Issuance of Underlying Securities. The Company will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Series B Note, free from preemptive rights or any other actual contingent purchase rights of persons other than the holders of the Series B Notes, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable upon the conversion of this Series B Note hereunder in Common Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid, and nonassessable.
(e) No Fractions. Upon a conversion hereunder the Company shall not be required to issue fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the closing price of a share of Common Stock on the applicable Conversion Date; provided that, if at any time the Common Stock is not traded on a securities exchange or an automated quotation system or in the over-the-counter market, the cash payment provided for by this Section 4(e) will be based on the fair market value of a share of Common Stock as determined in good faith by the Company’s board of directors and the fractional share not required to be issued pursuant to the foregoing. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.
(f) Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the conversion of this Series B Note (including repayment in stock) shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Series B Note when surrendered for conversion shall be accompanied by an assignment form; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any such transfer.
(g) Cancellation. After all of the Principal Amount has been paid in full or converted into Common Stock, this Series B Note shall automatically be deemed canceled and the Holder shall promptly surrender the Series B Note to the Company at the Company’s principal executive offices.
(h) Notices Procedures. Any and all notices or other communications or deliveries to be provided by the Holder to the Company hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered in the manner provided for in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or by a nationally recognized overnight courier service addressed to the Holder at the facsimile telephone number or address of the Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed delivered at the times provided for in the Purchase Agreement.
Section 5. Defaults and Remedies.
(a) Events of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more than five Business Days after the due date thereof; (ii) the occurrence of an “Event of Default” under the September 2013 Notes; (iii) a default in the timely issuance of Underlying Shares upon and in accordance with terms hereof, which default continues for five Business Days after the Company has received written notice informing the Company that it has failed to issue shares or deliver stock certificates within the fifth day following the Conversion Date; (iv) failure by the Company for five Business Days after written notice has been received by the Company to comply with any material provision of any of the Transaction Documents; (v) a material breach by the Company of its representations or warranties in the Transaction Documents; (vi) if at any time the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (vii) if at any time the Common Stock shall not be listed or quoted for trading on the Nasdaq Stock Market, the New York Stock Exchange or the NYSE MKT; (viii) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company in excess of $50,000 or for money borrowed the repayment of which is guaranteed by the Company for in excess of $50,000, whether such indebtedness or guarantee now exists or shall be created hereafter (and which indebtedness or guarantee, for the avoidance of doubt, does not include the Company’s trade payables); or (ix) if the Company is subject to any Bankruptcy Event.
(b) Remedies. If an Event of Default occurs and is continuing with respect to any of the Series B Notes, the Holder may (a) declare all of the then outstanding Principal Amount of this Series B Note to be due and payable immediately, except that in the case of an Event of Default arising from events described in clause (viii) of Section 5(a), this Series B Note shall become due and payable without further action or notice and (b) exercise any and all rights and remedies available to it under applicable law or the Transaction Documents. The remedies under this Series B Note, the Transaction Documents and applicable law shall be cumulative. Notwithstanding anything contained in this Series B Note to the contrary, upon the occurrence of an Event of Default under no circumstances shall the Company be obligated to pay the Holder a cash payment for the “deemed” value of the conversion right.
Section 6. General.
(a) Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in successfully enforcing this Series B Note and/or collecting any amount due under this Series B Note.
(b) Savings Clause. In case any provision of this Series B Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Series B Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.
(c) Amendment. Neither this Series B Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
(d) Assignment, Etc. The Holder may assign or transfer this Series B Note to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Holder may assign or transfer this Series B Note to any of such Holder’s affiliates without the consent of the Company and (ii) upon any Event of Default, the Holder may assign or transfer this Series B Note without the consent of the Company. The Holder shall notify the Company of any such assignment or transfer promptly. This Series B Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.
(e) No Waiver. No failure on the part of the Holder to exercise, and no delay in exercising any right, remedy or power hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time.
(f) Governing Law. THIS SERIES B NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(g) Replacement Series B Notes. This Series B Note may be exchanged by Holder at any time and from time to time for a Series B Note or Series B Notes with different denominations representing an equal aggregate outstanding Principal Amount, as reasonably requested by Holder, upon surrendering the same. No service charge will be made for such registration or exchange. In the event that Holder notifies the Company that this Series B Note has been lost, stolen or destroyed, a replacement Series B Note identical in all respects to the original Series B Note (except for registration number and Principal Amount, if different than that shown on the original Series B Note), shall be issued to the Holder, provided that the Holder executes and delivers to the Company an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with the Series B Note.
(h) Waivers of Demand, etc. The Company hereby waives demand, presentment, notice of dishonor or nonpayment, protest and notice of protest and acceptance of partial payments, whether before, at, or after the Maturity Date, all which may be made without notice to the Company and without affecting its liability to the Holder.
dms.us.52782134.010
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Series B Note to be duly executed on the day and in the year first above written.
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.
By:/s/ Brad Timon
Name: Brad Timon
Title: Chief Financial Officer
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to convert a Series B Note)
Re: Series B Note (this “Series B Note”) issued by QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC. to on or about June 29, 2015 in the original principal amount of $900,000.
The undersigned hereby elects to convert the aggregate outstanding Principal Amount (as defined in the Series B Note) indicated below of this Series B Note into shares of Common Stock, $0.02 par value per share (the “Common Stock”), of QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC. (the “Company”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the name of such person is indicated below and the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
Conversion Information:
Date to Effect Conversion:
Aggregate Principal Amount of Series B Note Being Converted:
Applicable Conversion Price:
Signature:
Name:
Name of Person to whom shares should be delivered (if different from the signatory):
Address to which shares should be delivered or account and DTC participation information for DWAC:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Series B Convertible Note Page 1
Exhibit 10.1
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.
AND
THE PURCHASERS NAMED HEREIN
____________________________________________________________
CONVERTIBLE NOTE PURCHASE AGREEMENT
____________________________________________________________
June 29, 2015
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.
CONVERTIBLE NOTE PURCHASE AGREEMENT
This Convertible Note Purchase Agreement (this “Agreement”) is made as of June 29, 2015 by and between QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC., a Delaware corporation (the “Company”), and those purchasers listed on the attached Exhibit A, as such exhibit may be amended from time to time (each a “Purchaser”, and collectively, the “Purchasers”).
RECITALS
A. The Company has authorized the sale and issuance of up to $2,000,000 in principal of senior secured Series B convertible notes substantially in the form attached hereto as Exhibit B (individually, a “Series B Note” and collectively, the “Series B Notes”), which shall be convertible into shares of the common stock of the Company, $0.02 par value per share (the “Common Stock”), in a private placement.
B. Pursuant to Section 4(2) of the Securities Act of 1933 (the “Securities Act” or the “Act”) and Rule 506 promulgated thereunder, the Company desires to sell to the Purchasers listed on the attached Exhibit A, as such exhibit may be amended from time to time, and such Purchasers, severally and not jointly, desire to purchase from the Company that aggregate principal amount of Series B Notes set forth opposite such Purchaser’s name on Exhibit A, on the terms and subject to the conditions set forth in this Agreement.
TERMS AND CONDITIONS
Now, therefore, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows:
1. Purchase of the Series B Notes.
1.1 Agreement to Sell and Purchase. At the Closing (as hereinafter defined), the Company will issue and sell to each of the Purchasers, and each Purchaser will, severally and not jointly, purchase from the Company, the Series B Note in the principal amount set forth opposite such Purchaser’s name on Exhibit A for an aggregate purchase price set forth opposite such Purchaser’s name on Exhibit A (the “Purchase Price”). The Series B Notes shall be in the form set forth as Exhibit B.
1.2 Closing; Closing Date. The completion of the sale and purchase of the Series B Notes (the “Closing”) shall be held at 9:00 a.m. (Pacific Time) as soon as practicable following the satisfaction of the conditions set forth in Section 4 (the “Closing Date”), at the offices of the Company, 25242 Arctic Ocean Drive, Lake Forest, California 92630, or at such other time and place as the Company and Purchasers may agree.
1.3 Delivery of the Series B Notes. At the Closing, subject to the terms and conditions hereof, the Company will deliver to each Purchaser a Series B Note, in such denominations and registered in such names as such Purchaser may designate by notice to the Company, dated as of the Closing Date, against payment of the purchase price set forth on Exhibit A therefor by cash in the form of wire transfer, unless other means of payment shall have been agreed upon by the Purchasers and the Company.
2. Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser:
2.1 Authorization; No Conflicts; Authority. This Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid, legal and binding obligation of the Company, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. The Series B Notes have been duly authorized and, on the Closing Date will be, duly executed and delivered by the Company, and, when issued and paid for in accordance with the terms hereof, will constitute valid, legal and binding obligations of the Company, enforceable in accordance with their terms, except as rights to indemnity thereunder may be limited by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. The execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated and the issuance of the Common Stock issuable upon conversion of the Series B Notes (the “Series B Note Shares”) will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the Company’s charter or by-laws or (iii) result in the violation of any law or statute or any judgment, order, rule, regulation or decree of any court or arbitrator or federal, state, local or foreign governmental agency or regulatory authority having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets (each, a “Governmental Authority”), except in the case of clause (i) as would not result in a material adverse effect upon the business, prospects, management, properties, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole (“Material Adverse Effect”). Except for notices required or permitted to be filed with certain state and federal securities commissions, which notices will be filed on a timely basis, no consent, approval, authorization or order of, or registration or filing with any Governmental Authority is required for the execution, delivery and performance of this Agreement or for the consummation of the transactions contemplated hereby, including the issuance or sale of the Series B Notes by the Company, except such as may be required under the Act or state securities or blue sky laws; and the Company has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including the authorization, issuance and sale of the Series B Notes as contemplated by this Agreement.
2.2 No Violations or Defaults. Neither the Company nor any of its subsidiaries is in violation of its respective charter, by‑laws or other organizational documents, or in breach of or otherwise in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note, indenture, loan agreement or any other material contract, lease or other instrument to which it is subject or by which any of them may be bound, or to which any of the material property or assets of the Company or any of its subsidiaries is subject.
2.3 Organization, Good Standing and Qualification. Each of the Company and its subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. Each of the Company and its subsidiaries has full corporate power and authority to own its properties and conduct its business as currently being carried on and as described in the Company SEC Documents, is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which it owns or leases real property or in which the conduct of its business makes such qualification necessary and in which the failure to so qualify would have a Material Adverse Effect.
2.4 Ownership of Assets. The Company and its subsidiaries have good and marketable title to all property (whether real or personal) described in the Company SEC Documents as being owned by them, in each case free and clear of all liens, claims, security interests, other encumbrances or defects except such as are described in the Company SEC Documents. The property held under lease by the Company and its subsidiaries is held by them under valid, subsisting and enforceable leases with only such exceptions with respect to any particular lease as do not interfere in any material respect with the conduct of the business of the Company or its subsidiaries.
2.5 SEC Filings. Each report, registration statement and definitive proxy statement filed by the Company with the Securities and Exchange Commission (the “SEC,” and the documents, the “Company SEC Documents”): (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto and, with respect to those filed within the past twenty-four months, were timely filed; (ii) the information contained therein as of the respective dates thereof did not contain 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 light of the circumstances under which they were made not misleading; (iii) the consolidated financial statements contained therein were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered, except as may be indicated in the notes to such financial statements and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes and are subject to year-end audit adjustments; and (iv) the consolidated balance sheets contained therein fairly present the consolidated financial position of the Company and its subsidiaries as of the respective dates thereof and the consolidated results of operations cash flows and the changes in stockholders’ equity of the Company and its subsidiaries for the periods covered thereby. Except as set forth in the financial statements included in the Company SEC Documents, neither the Company nor its subsidiaries has any liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business subsequent to March 31, 2015, and liabilities of the type not required under generally accepted accounting principles to be reflected in such financial statements. Such liabilities incurred subsequent to March 31, 2015, are not, in the aggregate, material to the financial condition or operating results of the Company and its subsidiaries, taken as a whole.
2.6 Capitalization. All of the issued and outstanding shares of capital stock of the Company, including the outstanding shares of Common Stock, are duly authorized and validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state and foreign securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities that have not been waived in writing (a copy of which has been delivered to counsel to the Purchasers), and the holders thereof are not subject to personal liability by reason of being such holders; the Series B Note Shares have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement or, if applicable, in accordance with the terms of the Series B Notes, will have been validly issued and will be fully paid and nonassessable, and the holders thereof will not be subject to personal liability by reason of being such holders; and the capital stock of the Company, including the Series B Note Shares, conforms to the description thereof in the Company SEC Documents. The Series B Note Shares have been duly reserved for issuance upon conversion of the Series B Notes. Except as otherwise stated in the Company SEC Documents, (i) there are no preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, any shares of Common Stock pursuant to the Company’s charter, by‑laws or any agreement or other instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound and (ii) the offering or sale of the Series B Notes as contemplated by this Agreement does not give rise to any rights for or relating to the registration of any shares of Common Stock or other securities of the Company. All of the issued and outstanding shares of capital stock of each of the Company’s subsidiaries have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise described in the Company SEC Documents or disclosed in writing to the Purchasers, the Company owns of record and beneficially, free and clear of any security interests, claims, liens, proxies, equities or other encumbrances, all of the issued and outstanding shares of such stock.
2.7 Stock Options. Except as described in the Company SEC Documents, the rights described in Section 2.6 above and issuances under the Company Stock Plans (defined herein) after March 31, 2015, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company or any subsidiary of the Company any shares of the capital stock of the Company or any subsidiary of the Company. The description of the Company’s stock option, stock bonus and other stock plans or arrangements (the “Company Stock Plans”), and the options (the “Options”) or other rights granted thereunder, set forth in the Company SEC Documents accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. Each grant of an Option (i) was duly authorized no later than the date on which the grant of such Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto and (ii) was made in accordance with the terms of the applicable Company Stock Plan, and all applicable laws and regulatory rules or requirements, including all applicable federal securities laws.
2.8 Subsidiaries. Other than (i) the subsidiaries of the Company listed in Exhibit 21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and (ii) those other equity interests owned by the Company disclosed in such Form 10-K, the Company, directly or indirectly, owns no capital stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust or other entity.
2.9 Offering. Assuming the accuracy of the representations of the Purchasers in Section 3.3 of this Agreement on the date hereof, on the Closing Date and solely as this Section 2.9 relates to the issue and sale of the Series B Note Shares on the date(s) of conversion of the Series B Notes, the offer, issue and sale of the Series B Notes and the issuance of the Series B Note Shares upon conversion of the Series B Notes (assuming no change in applicable law prior to the date the Series B Note Shares are issued), are and will be exempt from the registration and prospectus delivery requirements of the Securities Act and have been or will be registered or qualified (or are or will be exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Series B Notes to the Purchasers or the issuance of the Series B Note Shares upon conversion of the Series B Notes. Other than the Company SEC Documents, the Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with the offering and sale of the Series B Notes or Series B Note Shares. The Company has not taken any action to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale of the Series B Notes or the Series B Note Shares upon conversion of the Series B Notes, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 4 of the Securities Act.
2.10 Litigation. Except as set forth in the Company SEC Documents, there is not pending or, to the knowledge of the Company, threatened or contemplated, any action, suit or proceeding (a) to which the Company or any of its subsidiaries is a party or (b) which has as the subject thereof any officer or director of the Company or any subsidiary, any employee benefit plan sponsored by the Company or any subsidiary or any property or assets owned or leased by the Company or any subsidiary before or by any court or Governmental Authority, or any arbitrator, which, individually or in the aggregate, might result in any material adverse change in the general affairs, condition (financial or otherwise), business, prospects, management, properties, operations or results of operations of the Company and its subsidiaries, taken as a whole (“Material Adverse Change”), or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement or which are otherwise material in the context of the sale of the Series B Notes. There are no current or, to the knowledge of the Company, pending, legal, governmental or regulatory actions, suits or proceedings (i) to which the Company or any of its subsidiaries is subject or (ii) which has as the subject thereof any officer or director of the Company or any subsidiary, any employee plan sponsored by the Company or any subsidiary or any property or assets owned or leased by the Company or any subsidiary, that are required to be described in the Company SEC Documents by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the rules and regulations under the Exchange Act, the Act or by the rules and regulations under the Act and that have not been so described.
2.11 No 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 on arrangements made by the Company.
2.12 Compliance. The Company and each of its subsidiaries holds, and is operating in compliance in all material respects with, all franchises, grants, authorizations, licenses, permits, easements, consents, certificates and orders of any Governmental Authority or self‑regulatory body required for the conduct of its business and all such franchises, grants, authorizations, licenses, permits, easements, consents, certifications and orders are valid and in full force and effect; and neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such franchise, grant, authorization, license, permit, easement, consent, certification or order or has reason to believe that any such franchise, grant, authorization, license, permit, easement, consent, certification or order will not be renewed in the ordinary course; and the Company and each of its subsidiaries is in compliance in all material respects with all applicable federal, state, local and foreign laws, regulations, orders and decrees.
2.13 No Material Changes. Except as disclosed in the Company SEC Documents, since March 31, 2015, neither the Company nor any of its subsidiaries has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, or declared or paid any dividends or made any distribution of any kind with respect to its capital stock; and there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to (i) the issuance of shares upon the exercise of outstanding options or warrants or conversion of convertible securities and (ii) grants of stock awards under the Company Stock Plans), or any material change in the short term or long term debt (other than as a result of the conversion of convertible securities), or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock, of the Company or any of its subsidiaries (other than grants of stock awards under the Company Stock Plans), or any Material Adverse Change or any development which could reasonably be expected to result in any Material Adverse Change.
2.14 Intellectual Property. The Company and each of its subsidiaries owns, possesses, or can acquire on reasonable terms, all Intellectual Property necessary for the conduct of the Company’s and it subsidiaries’ business as now conducted or as described in the Company SEC Documents to be conducted, except as such failure to own, possess, or acquire such rights would not result in a Material Adverse Effect. Furthermore, (i) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any such Intellectual Property, except as such infringement, misappropriation or violation would not result in a Material Adverse Effect; (ii) there is no pending or, to the knowledge of the Company, threatened, action, suit, proceeding or claim by others challenging the Company’s or any of its subsidiaries’ rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (iii) the Intellectual Property owned by the Company and its subsidiaries, and to the knowledge of the Company, the Intellectual Property licensed to the Company and its subsidiaries, has not been adjudged invalid or unenforceable, in whole or in part, and there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (iv) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company or any of its subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property or other proprietary rights of others, neither the Company or any of its subsidiaries has received any written notice of such claim and the Company is unaware of any other fact which would form a reasonable basis for any such claim; and (v) to the Company’s knowledge, no employee of the Company or any of its subsidiaries is in or has ever been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company nor any of its subsidiaries or actions undertaken by the employee while employed with the Company or any of its subsidiaries, except as such violation would not result in a Material Adverse Effect. “Intellectual Property” shall mean all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, domain names, technology, know-how and other intellectual property.
2.15 Exchange Compliance. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is included or approved for listing on the NASDAQ Capital Market and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the NASDAQ Capital Market nor has the Company received any notification that the SEC or the NASDAQ Capital Market is contemplating terminating such registration or listing. The Company has complied in all material respects with the applicable requirements of the NASDAQ Capital Market for maintenance of inclusion of the Common Stock thereon. The Company has filed an application to include the Series B Note Shares on the NASDAQ Capital Market.
2.16 Taxes. The Company and its subsidiaries have timely filed all federal, state, local and foreign income and franchise tax returns required to be filed and are not in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other than any which the Company or any of its subsidiaries is contesting in good faith. There is no pending dispute with any taxing authority relating to any of such returns, and the Company has no knowledge of any proposed liability for any tax to be imposed upon the properties or assets of the Company for which there is not an adequate reserve reflected in the Company’s financial statements included in the Company SEC Documents.
2.17 Insurance. The Company and each of its subsidiaries carries, or is covered by, insurance from reputable insurers in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and the properties of its subsidiaries and as is customary for companies engaged in similar businesses in similar industries; all policies of insurance and any fidelity or surety bonds insuring the Company or any of its subsidiaries or its business, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
2.18 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Series B Notes hereunder will be, or will have been, fully paid or provided for by the Company and the Company will have complied with all laws imposing such taxes.
2.19 Investment Company. The Company is not and, after giving effect to the offering and sale of the Series B Notes, will not be an “investment company,” as such term is defined in the Investment Company Act of 1940, as amended.
2.20 Internal Controls. The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Company SEC Documents, the Company’s internal control over financial reporting is effective and none of the Company, its board of directors and audit committee is aware of any “material weaknesses” (each as defined by the Public Company Accounting Oversight Board) in its internal control over financial reporting, or any fraud, whether or not material, that involves management or other employees of the Company and its subsidiaries who have a significant role in the Company’s internal controls; and since the end of the latest audited fiscal year, there has been no change in the Company’s internal control over financial reporting (whether or not remediated) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s board of directors has, subject to the exceptions, cure periods and the phase in periods specified in the applicable stock exchange rules (“Exchange Rules”), validly appointed an audit committee to oversee internal accounting controls whose composition satisfies the applicable requirements of the Exchange Rules and the Company’s board of directors and/or the audit committee has adopted a charter that satisfies the requirements of the Exchange Rules.
2.21 No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D promulgated under the Securities Act) in connection with the offer or sale of the Series B Notes.
2.22 Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation or the laws of the jurisdiction of its formation which is or could become applicable to any Purchaser as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Series B Notes and any Purchaser’s ownership of the Series B Notes. The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.
2.23 Anti-Bribery and Money Laundering Laws. Each of the Company, its subsidiaries, its affiliates and, to the knowledge of the Company, any of their respective officers, directors, supervisors, managers, agents, or employees, has not violated, its participation in the Offering will not violate, and the Company and each of its subsidiaries has instituted and maintains policies and procedures designed to ensure continued compliance with, each of the following laws: anti-bribery laws, including but not limited to, any applicable law, rule, or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed December 17, 1997, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act 2010, or any other law, rule or regulation of similar purposes and scope, or anti-money laundering laws, including but not limited to, applicable federal, state, international, foreign or other laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 US. Code section 1956 and 1957, the Patriot Act, the Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended, and any executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder.
2.24 Sarbanes-Oxley Act. The Company is in compliance with all applicable provisions of the Sarbanes-Oxley Act and the rules and regulations of the SEC thereunder.
2.25 Disclosure Controls. The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange Act) and such controls and procedures are effective in ensuring that material information relating to the Company, including its subsidiaries, is made known to the principal executive officer and the principal financial officer. The Company has utilized such controls and procedures in preparing and evaluating the disclosures in the Company SEC Documents.
2.26 OFAC.
(a) Neither the Company nor any of its subsidiaries, nor any or their directors, officers or employees, nor, to the Company’s knowledge, any agent, affiliate or representative of the Company or its subsidiaries, is an individual or entity that is, or is owned or controlled by an individual or entity that is:
(i) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor
(ii) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Cuba, Iran, Libya, North Korea, Sudan and Syria).
(b) Neither the Company nor any of its subsidiaries will, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other individual or entity:
(i) to fund or facilitate any activities or business of or with any individual or entity or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
(ii) in any other manner that will result in a violation of Sanctions by any individual or entity (including any individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise).
(c) For the past five years, neither the Company nor any of its subsidiaries has knowingly engaged in, and is not now knowingly engaged in, any dealings or transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
2.27 ERISA and Employee Benefits. (A) To the knowledge of the Company, no “prohibited transaction” as defined under Section 406 of ERISA or Section 4975 of the Code and not exempt under ERISA Section 408 and the regulations and published interpretations thereunder has occurred with respect to any Employee Benefit Plan. At no time has the Company or any ERISA Affiliate maintained, sponsored, participated in, contributed to or has or had any liability or obligation in respect of any Employee Benefit Plan subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA, or Section 412 of the Code or any “multiemployer plan” as defined in Section 3(37) of ERISA or any multiple employer plan for which the Company or any ERISA Affiliate has incurred or could incur liability under Section 4063 or 4064 of ERISA. No Employee Benefit Plan provides or promises, or at any time provided or promised, retiree health, life insurance, or other retiree welfare benefits except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state law. Each Employee Benefit Plan is and has been operated in material compliance with its terms and all applicable laws, including but not limited to ERISA and the Code and, to the knowledge of the Company, no event has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists that would subject the Company or any ERISA Affiliate to any material tax, fine, lien, penalty or liability imposed by ERISA, the Code or other applicable law. Each Employee Benefit Plan intended to be qualified under Code Section 401(a) is so qualified and has a favorable determination or opinion letter from the IRS upon which it can rely, and any such determination or opinion letter remains in effect and has not been revoked; to the knowledge of the Company, nothing has occurred since the date of any such determination or opinion letter that is reasonably likely to adversely affect such qualification; (B) with respect to each Foreign Benefit Plan, such Foreign Benefit Plan (1) if intended to qualify for special tax treatment, meets, in all material respects, the requirements for such treatment, and (2) if required to be funded, is funded to the extent required by applicable law, and with respect to all other Foreign Benefit Plans, adequate reserves therefor have been established on the accounting statements of the applicable Company or subsidiary; (C) the Company does not have any obligations under any collective bargaining agreement with any union and no organization efforts are underway with respect to Company employees. As used in this Agreement, “Code” means the Internal Revenue Code of 1986, as amended; “Employee Benefit Plan” means any “employee benefit plan” within the meaning of Section 3(3) of ERISA, including, without limitation, all stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, under which (1) any current or former employee, director or independent contractor of the Company or its subsidiaries has any present or future right to benefits and which are contributed to, sponsored by or maintained by the Company or any of its respective subsidiaries or (2) the Company or any of its subsidiaries has had or has any present or future obligation or liability; “ERISA” means the Employee Retirement Income Security Act of 1974, as amended; “ERISA Affiliate” means any member of the company’s controlled group as defined in Code Section 414(b), (c), (m) or (o); and “Foreign Benefit Plan” means any Employee Benefit Plan established, maintained or contributed to outside of the United States of America or which covers any employee working or residing outside of the United States.
2.28 Labor Matters. No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, that could have a Material Adverse Effect.
2.29 Business Arrangements. Except as disclosed in the Company SEC Filed Documents, neither the Company nor any of its subsidiaries has granted rights to develop, manufacture, produce, assemble, distribute, license, market or sell its products to any other person and is not bound by any agreement that affects the exclusive right of the Company or such subsidiary to develop, manufacture, produce, assemble, distribute, license, market or sell its products.
2.30 Occupational Laws. The Company and each of its subsidiaries (i) is in compliance, in all material respects, with any and all applicable foreign, federal, state and local laws, rules, regulations, treaties, statutes and codes promulgated by any and all Governmental Authorities (including pursuant to the Occupational Health and Safety Act) relating to the protection of human health and safety in the workplace (“Occupational Laws”); (ii) has received all material permits, licenses or other approvals required of it under applicable Occupational Laws to conduct its business as currently conducted; and (iii) is in compliance, in all material respects, with all terms and conditions of such permit, license or approval. No action, proceeding, revocation proceeding, writ, injunction or claim is pending or, to the Company’s knowledge, threatened against the Company or any of its subsidiaries relating to Occupational Laws, and the Company does not have knowledge of any facts, circumstances or developments relating to its operations or cost accounting practices that could reasonably be expected to form the basis for or give rise to such actions, suits, investigations or proceedings.
2.31 Environmental Laws. Except as disclosed in the Company SEC Documents, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any Governmental Authority or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate, have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. Neither the Company nor any of its subsidiaries anticipates incurring any material capital expenditures relating to compliance with Environmental Laws.
2.32 Restrictions on Subsidiary Payments. Except for restrictions on Zephyr Farms Limited ability to make distributions pursuant to the terms of a Credit Agreement dated March 19, 2013, as amended, with Samsung Heavy Industries Co., Ltd., no subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Company SEC Documents.
2.33 No Manipulation; Disclosure of Information. The Company has not taken and will not take any action designed to or that might reasonably be expected to cause or result in an unlawful manipulation of the price of the Common Stock to facilitate the sale or resale of the Series B Notes or the Series B Note Shares. The Company confirms that, to its knowledge, with the exception of the proposed sale of Series B Notes as contemplated herein (as to which the Company makes not representation), neither it nor any other person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchasers shall be relying on the foregoing representations in effecting transactions in securities of the Company. All disclosures provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the exhibits to this Agreement, furnished by the Company are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
2.34 No Undisclosed Liabilities or Events. The Company has no liabilities or obligations other than those disclosed in this Agreement or the Company SEC Documents or those incurred in the ordinary course of the Company’s business since December 31, 2014, or which individually or in the aggregate, do not or would not have a Material Adverse Effect. No event or circumstance has occurred or exists with respect to the Company or its properties, business, operations, condition (financial or otherwise), or results of operations, which, under applicable laws, rules or regulations, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed. There are no proposals currently under consideration or currently anticipated to be under consideration by the board of directors or the executive officers of the Company which proposal would (i) change the Certificate of Incorporation or bylaws of the Company, each as currently in effect, with or without stockholder approval, which change would reduce or otherwise adversely affect the rights and powers of the stockholders of the Common Stock or (ii) materially or substantially change the business, assets or capital of the Company, including its interests in subsidiaries.
2.35 No Integrated Offering. Neither the Company nor any of its affiliates nor any person acting on its or their behalf has, directly or indirectly, made any offer or sale of any security of the Company or solicited any offer to buy any such security under circumstances that would eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale of the Series B Notes contemplated hereby.
2.36 Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Series B Notes or Series B Note Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Series B Notes or Series B Note Shares, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.
3. Representations and Warranties of the Purchasers. Each Purchaser, severally and not jointly, hereby represents and warrants to the Company as follows:
3.1 Legal Power. The Purchaser has the requisite authority to enter into this Agreement and to carry out and perform its obligations under the terms of this Agreement. All action on the Purchaser’s part required for the lawful execution and delivery of this Agreement have been or will be effectively taken prior to the Closing.
3.2 Due Execution. This Agreement has been duly authorized, executed and delivered by the Purchaser, and, upon due execution and delivery by the Company, this Agreement will be a valid and binding agreement of the Purchaser, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by equitable principles.
3.3 Investment Representations. In connection with the sale and issuance of the Series B Notes and Series B Note Shares, the Purchaser, for itself and no other Purchaser, makes the following representations:
(a) Investment for Own Account. The Purchaser is acquiring the Series B Notes and Series B Note Shares for its own account, not as nominee or agent, and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act; provided, however, that by making the representations herein, the Purchaser does not agree to hold any of the Series B Notes or Series B Note Shares for any minimum or specific term and reserves the right to dispose of the securities at any time in accordance with or pursuant to a registration statement or an exemption from the registration requirements of the Securities Act.
(b) Transfer Restrictions; Legends. The Purchaser understands that (i) the Series B Notes and Series B Note Shares have not been registered under the Securities Act or applicable state securities laws nor has the Company promised or agreed to register such Series B Note Shares in the future; (ii) the Series B Notes and Series B Note Shares are being offered and sold pursuant to an exemption from registration, based in part upon the Company’s reliance upon the statements and representations made by the Purchasers in this Agreement, and that the Series B Notes and Series B Note Shares must be held by the Purchaser indefinitely, and that the Purchaser must, therefore, bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration; (iii) each certificate representing the Series B Notes and Series B Note Shares will be endorsed with the following legend until the earlier of (1) in the case of the Series B Note Shares, such date as the Series B Note Shares have been registered for resale by the Purchaser, if ever, or (2) the date the Series B Notes and Series B Note Shares, as the case may be, are eligible for sale under Rule 144 under the Securities Act or any successor rule (“Rule 144”):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(iv) the Company will instruct any transfer agent not to register the transfer of the Series B Notes and Series B Note Shares (or any portion thereof) until the applicable date set forth in clause (iii) above unless the conditions specified in the foregoing legends are satisfied or, if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provisions of the Securities Act or this Agreement, or other satisfactory assurances of such nature are given to the Company.
The Company acknowledges and agrees that a Purchaser may from time to time pledge, and/or grant a security interest in some or all of the Series B Notes pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, the Purchaser may transfer pledged or secured Series B Notes to the pledgees or secured parties. Such a pledge or transfer shall not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Purchaser transferee of the pledge. No notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Series B Notes may reasonably request in connection with a pledge or transfer of the Series B Notes or Series B Note Shares including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.
Certificates evidencing the Series B Note Shares shall not contain any legend (including the legend set forth in this Section): (i) following a sale of such Series B Note Shares pursuant to an effective registration statement, or (ii) following a sale of such Series B Note Shares pursuant to Rule 144, or (iii) while such Series B Note Shares are eligible for sale under Rule 144, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the SEC). Following such time as restrictive legends are not required to be placed on certificates representing Series B Note Shares, the Company will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Company's transfer agent of a certificate representing Series B Note Shares containing a restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such Series B Note Shares that is free from all restrictive and other legends. The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after the effective date of a registration statement covering the Series B Note Shares if required by the Company’s transfer agent to effect the removal of the legend hereunder. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section. Certificates for Series B Note Shares subject to legend removal hereunder shall be transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the Purchaser’s prime broker with the Depository Trust Company system.
Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Series B Notes and Series B Note Shares as set forth in this Section 3.2(b) is predicated upon the Company’s reliance that the Purchaser will sell any Series B Notes or Series B Note Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom.
(c) Financial Sophistication; Due Diligence. The Purchaser has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in connection with the transactions contemplated in this Agreement. Such Purchaser has, in connection with its decision to purchase the Series B Notes, relied only upon the representations and warranties contained herein and the information contained in the Company SEC Documents. Further, the Purchaser has had such opportunity to obtain additional information and to ask questions of, and receive answers from, the Company, concerning the terms and conditions of the investment and the business and affairs of the Company, as the Purchaser considers necessary in order to form an investment decision.
(d) Accredited Investor Status. The Purchaser is an “accredited investor” as such term is defined in Rule 501(a) of the rules and regulations promulgated under the Securities Act.
(e) Residency. The Purchaser is organized under the laws of the state set forth beneath such Purchaser’s name on the signature page attached hereto, and its principal place of operations is in the state set forth beneath such Purchaser’s name on the signature page attached hereto.
(f) General Solicitation. The Purchaser is not purchasing the Series B Notes as a result of any advertisement, article, notice or other communication regarding the Series B Notes published in any newspaper, magazine or similar media or broadcast over the television or radio or presented at any seminar or any other general solicitation or general advertisement. Prior to the time that the Purchaser was first contacted by the Company such Purchaser had a pre-existing and substantial relationship with the Company.
3.4 No Investment, Tax or Legal Advice. Each Purchaser understands that nothing in the Company SEC Documents, this Agreement, or any other materials presented to the Purchaser in connection with the purchase and sale of the Series B Notes constitutes legal, tax or investment advice. Each Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Series B Notes.
3.5 Additional Acknowledgement. Each Purchaser acknowledges that it has independently evaluated the merits of the transactions contemplated by this Agreement, that it has independently determined to enter into the transactions contemplated hereby, and that it is not relying on any advice from or evaluation by any other person. Each Purchaser acknowledges that it has not taken any actions that would deem the Purchasers to be members of a “group” for purposes of Section 13(d) of the Exchange Act.
4. Conditions to Closing.
4.1 Conditions to Obligations of Purchasers at Closing. Each Purchaser’s obligation to purchase the Series B Notes at the Closing is subject to the fulfillment to that Purchaser’s reasonable satisfaction, on or prior to the Closing, of all of the following conditions, any of which may be waived by the Purchaser:
(a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in Section 2 shall be true and correct in all respects on the Closing Date with the same force and effect as if they had been made on and as of said date and the Company shall have performed and complied with all obligations and conditions herein required to be performed or complied with by it on or prior to the Closing and a certificate duly executed by an officer of the Company, to the effect of the foregoing, shall be delivered to the Purchasers.
(b) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to counsel to the Purchaser, and counsel to the Purchaser shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. The Company shall have delivered (or caused to have been delivered) to each Purchaser, the Series B Note required by this Agreement. The Series B Note shares shall have been duly authorized and reserved for issuance upon conversion of the Series B Notes.
(c) Qualifications, Legal Investment. All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful sale and issuance of the Series B Notes and Series B Note Shares shall have been duly obtained and shall be effective on and as of the Closing. No stop order or other order enjoining the sale of the Series B Notes and Series B Note Shares shall have been issued and no proceedings for such purpose shall be pending or, to the knowledge of the Company, threatened by the SEC, or any commissioner of corporations or similar officer of any state having jurisdiction over this transaction. At the time of the Closing, the sale and issuance of the Series B Notes and Series B Note Shares shall be legally permitted by all laws and regulations to which Purchasers and the Company are subject. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction will have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(d) Execution of Agreements. The Company shall have executed this Agreement and have delivered this Agreement to the Purchasers.
(e) Consents from September 2013 Note Holders. Each of the holders (other than Purchasers) of a convertible promissory note issued on September 18, 2013 that is outstanding on the date hereof has (i) executed and delivered to the Company a consent to this Agreement and the transactions contemplated hereby and (ii) executed and delivered to Purchasers an Intercreditor Agreement in the form attached hereto as Exhibit C.
(f) Secretary’s Certificate. The Company shall have delivered to the Purchasers a certificate of the Secretary of the Company certifying as to the truth and accuracy of the resolutions of the board of directors and any committee thereof relating to the transaction contemplated hereby (a copy of which shall be included with such certificate).
(g) Trading and Listing. Trading and listing of the Company’s common stock on the NASDAQ Capital Market shall not have been suspended by the SEC or the NASDAQ Capital Market.
(h) Market Listing. The Company will comply with all of the requirements of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the NASDAQ Capital Market with respect to the issuance of the Series B Notes and Series B Note Shares.
(i) Blue Sky. The Company shall have obtained all necessary “blue sky” law permits and qualifications, or have the availability of exemptions therefrom, required by any state for the offer and sale of the Series B Notes and issuance of the Series B Note Shares upon conversion of the Series B Notes.
(j) Material Adverse Change. Since the date of this Agreement, there shall not have occurred any event which results in a Material Adverse Effect.
(k) Security Agreements; Consents and Approvals. The Company shall have executed and delivered to Purchasers the Subordinated Security Agreement (the “Security Agreement”) and the Patent Security Agreement, each in a form acceptable to the Purchasers and the Company, as well as provided all consents or approvals required by the Company’s lenders or financing sources in connection with the Offering.
(l) Subordination Agreement. Bridge Bank, National Association and Kevin Douglas, in his capacity as collateral agent, shall have executed and delivered to Purchasers the Subordination Agreement (the “Subordination Agreement”), in a form acceptable to the Purchasers, the Company and Bridge Bank, National Association and Kevin Douglas, in his capacity as collateral agent.
4.2 Conditions to Obligations of the Company. The Company’s obligation to issue and sell the Series B Notes at the Closing is subject to the fulfillment to the Company’s reasonable satisfaction, on or prior to the Closing of the following conditions, any of which may be waived by the Company:
(a) Representations and Warranties True. The representations and warranties made by the Purchasers in Section 3 shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. The Purchasers shall have performed and complied with all agreements and conditions herein required to be performed or complied with by them on or before the Closing. The Purchasers shall have delivered the Purchase Price, by wire transfer, to the account designated by the Company for such purpose.
(c) Qualifications, Legal Investment. All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful sale and issuance of the Series B Notes and Series B Note Shares shall have been duly obtained and shall be effective on and as of the Closing. No stop order or other order enjoining the sale of the Series B Notes or Series B Note Shares shall have been issued and no proceedings for such purpose shall be pending or, to the knowledge of the Company, threatened by the SEC, or any commissioner of corporations or similar officer of any state having jurisdiction over this transaction. At the time of the Closing, the sale and issuance of the Series B Notes and Series B Note Shares shall be legally permitted by all laws and regulations to which the Purchasers and the Company are subject. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction will have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(d) Execution of Agreements. The Purchasers shall have executed this Agreement and delivered this Agreement to the Company.
(e) Consents from September 2013 Note Holders. Each of the holders (other than Purchasers) of a convertible promissory note issued on September 18, 2013 that is outstanding on the date hereof has (i) executed and delivered to the Company a consent to this Agreement and the transactions contemplated hereby and (ii) executed and delivered to Purchasers an Intercreditor Agreement in the form attached hereto as Exhibit C.
5. Additional Covenants.
5.1 Listing. So long as a Purchaser owns any of the Series B Notes or Series B Note Shares, the Company will use its best efforts to maintain the automated quotation of its Common Stock, including the Series B Note Shares, on the NASDAQ Capital Market or an alternative listing on the New York Stock Exchange or the NYSE MKT (formerly the American Stock Exchange) and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of FINRA and such exchanges, if applicable. The Company will also list the Series B Note Shares on the NASDAQ Capital Market no later than 150 days following the Closing Date.
5.2 SEC Filings. With a view to making available to the Purchaser the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the Purchaser to sell Common Shares to the public without registration, the Company covenants and agrees to use its commercially reasonable best efforts to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) such date as all of the Common Shares qualify to be resold immediately pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Common Shares shall have been resold pursuant to Rule 144 (and may be further resold without restriction); (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and under the Exchange Act; and (iii) furnish to the Purchaser upon request, as long as the Purchaser owns any Common Shares, (A) a written statement by the Company as to whether it has complied with the reporting requirements of the Securities Act and the Exchange Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail the Purchaser of any rule or regulation of the SEC that permits the selling of any such Common Shares without registration.
5.3 Non-Public Information. The Company covenants and agrees that neither it nor any other person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company.
5.4 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in this Agreement or the Series B Notes to a number of shares or price per share shall be amended appropriately to account for such event.
5.5 Prohibited Actions. The Company hereby covenants and agrees with each of the Purchasers that (A) for a period of twelve (12) months following the Closing Date, it shall not sell or offer to sell any equity securities of the Company in connection with a capital raising transaction without the prior written approval by Purchasers holding a majority of the aggregate outstanding principal amount of the Series B Notes and (B) so long as any portion of the Series B Notes remain outstanding, create, or authorize the creation of, or issue or obligate itself to issue shares of, any security unless the same ranks junior to the Series B Notes with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company. Notwithstanding the foregoing, the Company shall not be restricted from (i) selling or offering for sale shares of its Common Stock pursuant to any warrants outstanding as of the Closing Date, (ii) increasing the amount of indebtedness owed to Bridge Bank, National Association (or any successor commercial lender to Bridge Bank, the “Bank Debt”), whether by an increase to the existing credit facility or otherwise, and to amend the existing notes evidencing the Bank Debt or issue new notes to evidence the Bank Debt, (iii) extending or amending the repayment terms of the Bank Debt, (iv) obtaining a new secured credit facility from another commercial bank to replace or refinance the Bank Debt and that is senior in all respects to the Convertible Series B Notes and the lien granted to the Purchasers, or (v) obtaining secured debt of any type from any other lender that is senior in all respects to the Convertible Series B Notes and the lien granted to the Purchasers, provided that such debt is approved in advance by the Purchasers holding a majority of the aggregate outstanding principal amount of the Series B Notes.
5.6 Use of Proceeds. The Company intends to use the net proceeds from the sale of the Series B Notes for the development of new CNG tanks and systems for use in virtual pipeline applications as well as for general corporate purposes.
6. [Reserved]
7. Miscellaneous.
7.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the choice of law provisions thereof, and the federal laws of the United States.
7.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto.
7.3 Entire Agreement. This Agreement and the exhibits hereto, and the other documents delivered pursuant hereto, constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants, or agreements except as specifically set forth herein or therein. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto and their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein.
7.4 Severability. In the event any provision of this Agreement shall be invalid, illegal, or unenforceable, it shall to the extent practicable, be modified so as to make it valid, legal and enforceable and to retain as nearly as practicable the intent of the parties, and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
7.5 Amendment and Waiver. Except as otherwise provided herein, 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, either retroactively or prospectively, and either for a specified period of time or indefinitely), with the written consent of the Company and each Purchaser. Any amendment or waiver effected in accordance with this Section 7.5 shall be binding upon any holder of any Series B Note Shares purchased under this Agreement (including securities into which such Series B Notes have been converted), each future holder of all such securities, and the Company.
7.6 Fees and Expenses. Except as otherwise set forth herein, the Company and the Purchasers shall bear their own expenses and legal fees incurred on their behalf with respect to this Agreement and the transactions contemplated hereby. Each party hereby agrees to indemnify and to hold harmless of and from any liability the other party for any commission or compensation in the nature of a finder’s fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which such indemnifying party or any of its employees or representatives are responsible.
7.7 Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be delivered (A) if within the United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if from outside the United States, by International Federal Express (or comparable service) or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail domestic, upon the business day received, (ii) if delivered by nationally recognized overnight carrier, one business day after timely delivery to such carrier, (iii) if delivered by International Federal Express (or comparable service), two business days after so mailed, (iv) if delivered by facsimile, upon electric confirmation of receipt and shall be addressed as follows, or to such other address or addresses as may have been furnished in writing by a party to another party pursuant to this paragraph:
if to the Company, to:
Quantum Fuel Systems Technologies Worldwide, Inc.
25242 Arctic Ocean Drive
25242 Arctic Ocean Drive
Lake Forest, California 92630,
Attention: Chief Executive Officer
Facsimile: 949-399-4567
Attention: Chief Executive Officer
Facsimile: 949-399-4567
if to the Purchaser, at its address on the signature page to this Agreement.
7.8 Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the Purchaser herein shall survive the execution of this Agreement, the delivery to the Purchaser of the Series B Notes being purchased and the payment therefor, and a party’s reliance on such representations and warranties shall not be affected by any investigation made by such party or any information developed thereby.
7.9 Counterparts. This Agreement may be executed by facsimile signature and in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
7.10 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
[The Remainder of this Page is Blank]
In witness whereof, the foregoing Convertible Note Purchase Agreement is hereby executed as of the date first above written.
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.
By: /s/ Brad Timon
Name: Brad Timon
Title: CFO
In witness whereof, the foregoing Convertible Note Purchase Agreement is hereby executed as of the date first above written.
"Purchasers”
By:
Name:
Title:
Investment Amount:
Tax Identification No.:
State of Domicile:
Address for Notice:
Attention:
Telephone:
Facsimile:
Delivery Instructions (if different from above):
Attention:
Telephone:
Facsimile:
Exhibit 10.2
THIS SUBORDINATED SECURITY AGREEMENT, AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER AND ANY LIENS AND ENCUMBRANCES EVIDENCED HEREBY, IS SUBORDINATED IN RIGHT OF PAYMENT AND PRIORITY IN THE MANNER SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BY AND BETWEEN BRIDGE BANK, NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION, AS LENDER, AND KEVIN DOUGLAS, NOT IN HIS INDIVIDUAL CAPACITY BUT SOLELY AS THE COLLATERAL AGENT FOR THE PURCHASERS, AS DEFINED BELOW, TO THE PRIOR PAYMENT OF THE SENIOR DEBT, AS DEFINED THEREIN.
SUBORDINATED SECURITY AGREEMENT
THIS SUBORDINATED SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is entered into as of June 29, 2015, by and between QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC., a Delaware corporation (the “Grantor”), and [______________], not in his individual capacity but solely as the collateral agent (in such separate capacity, and together with any successors, assigns and designees, the “Collateral Agent”) for the various purchasers (the “Purchasers”) party to that certain Convertible Note Purchase Agreement of even date herewith by and among the Grantor and the Purchasers (as amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”).
Pursuant to the Note Purchase Agreement, the Purchasers have agreed to make certain advances and extend certain other credit accommodations to the Grantor.
As a condition to making advances and other extensions of credit under the Note Purchase Agreement, the Purchasers have required the execution and delivery of this Agreement by the Grantor.
1. DEFINITIONS.
(a) All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Note Purchase Agreement.
(b) The following terms, when used herein (whether or not capitalized), shall have the meanings given them in the Uniform Commercial Code as in effect in the state of New York (the “Code”), except that (i) for purposes of this Agreement, the meaning of such terms will not be limited by reason of any limitation on the scope of the Code, and (ii) to the extent the definition of any category or type of Collateral is expanded by any amendment, modification or revision to the Code, such expanded definition will apply automatically as of the date of such amendment, modification of revision: “Accession”, “Account”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Deposit Account”, “Document”, “Equipment”, “Fixture”, “General Intangible”, “Goods”, “Instrument”, “Inventory”, “Investment Property”, “Letter-of-Credit Right”, “Letter of Credit”, “Money”, “Securities Account” and “Supporting Obligations”.
2. GRANT OF SECURITY INTEREST. The Grantor hereby grants and transfers to the Collateral Agent, for the benefit of the Collateral Agent and each Purchaser, a continuing security interest (the “Security Interest”) in all of the following property of the Grantor or in which the Grantor has rights, whether presently existing or acquired after the date of this Agreement (collectively, the “Collateral”).
(a) Accounts;
(b) Chattel Paper;
(c) Commercial Tort Claims;
(d) Deposit Accounts;
(e) Documents;
(f) General Intangibles;
(g) Goods, including Equipment and Fixtures;
(h) Instruments;
(i) Inventory;
(j) Investment Property;
(k) Letters of Credit and Letter‑of‑Credit Rights;
(l) Money and other assets of Grantor that now or later come into possession, custody, or control of Lender;
(m) all Accessions and Supporting Obligations; and
all books and records relating to the above property and all proceeds (as such term is defined in the Code) and products, whether tangible or intangible of any of the above property, all proceeds of any condemnation award relating to any of the above property, all proceeds of insurance covering or relating to any or all of the above property and all rebates and returns relating to any of the above property (all such proceeds, collectively, the “Proceeds”).
Notwithstanding the foregoing, the Security Interest granted hereunder shall not attach to any shares, interests or other equivalents (however designated) of the Grantor in (i) any capital stock or equity of Schneider Power Inc. or any subsidiary thereof (collectively, the “SPI Entities”), whether now outstanding or issued after the date hereof, including, without limitation, all common and preferred stock and (ii) any assets owned or used by the SPI Entities.
3. OBLIGATIONS SECURED. The obligations (collectively, the “Obligations”) secured by the Security Interest are the payment and performance of:
(a) all present and future obligations or liabilities of any of the Grantor, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with this Agreement, the Series B Notes or any other document, agreement, contract or instrument executed in connection therewith; and
(b) all obligations of the Grantor under this Agreement.
4. AUTHORIZATION TO FILE FINANCING STATEMENTS. The Grantor hereby authorizes the Collateral Agent to file UCC financing statements describing the Collateral to perfect the Collateral Agent’s Security Interest in the Collateral, and the Collateral Agent may describe the Collateral as “all personal property” or “all assets” or describe specific items of Collateral including, without limitation, any Commercial Tort Claims. All UCC financing statements filed before the date of this Agreement to perfect the Security Interest were authorized by the Grantor and are hereby ratified.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents and warrants to the Collateral Agent that:
(a) the Grantor’s legal name is exactly as set forth on the first page of this Agreement, its chief executive office and principal place of business are located at 25242 Arctic Ocean Drive, Lake Forest, California 92630, and all of the Grantor’s constituent documents or agreements delivered to Collateral Agent and the Purchasers are complete and accurate in every respect;
(b) the Grantor is the owner and has possession or control of the Collateral;
(c) the Grantor has the exclusive right to grant a security interest in the Collateral;
(d) other than a security interest in favor of Bridge Bank, National Association, a national banking association (the “Senior Lender”) and a security interest in favor of certain of the purchasers of convertible promissory notes issued by the Grantor in a private placement completed on September 18, 2013, all Collateral is genuine, free from liens, adverse claims, setoffs, default, prepayment, defenses and conditions precedent of any kind or character, except the lien created by this Agreement and other “Permitted Liens” described on Schedule A;
(e) all statements contained in this Agreement and, where applicable, in the Collateral are true and complete in all respects;
(f) except as disclosed on Schedule A, no UCC financing statement covering any of the Collateral, and naming any secured party other than the Senior Lender and the Collateral Agent, is on file in any public office;
(g) all individuals or entities appearing to be obligated on Collateral have authority and capacity to contract and are bound as they appear to be;
(h) all property subject to chattel paper has been properly registered and filed in compliance with law and to perfect the interest of the Grantor in such property;
(i) all Accounts and other rights to payment comply with all applicable laws concerning form, content and manner of preparation and execution, including where applicable Federal Reserve Regulation Z and any state consumer credit laws;
(j) the Grantor does not own any real property;
(k) Schedule A provides a complete and correct list of: (i) all registered copyrights and copyright applications owned by the Grantor, (ii) all intellectual property licenses entered into by the Grantor that are material to the Grantor’s business; (iii) all registered patents and patent applications owned by the Grantor; and (iv) all registered trademarks and trademark applications owned by the Grantor;
(l) Schedule A contains a listing of all of Deposit Accounts, Securities Accounts and Commodity Accounts of the Grantor, including, with respect to each bank, securities intermediary or commodity intermediary: (a) the name and address of such entity, and (b) the account numbers of the Deposit Accounts, Securities Accounts or Commodity Accounts maintained with such entity; and
(m) the Inventory and Equipment of the Grantor are not stored with a bailee, warehouseman, processor or similar party and are located only at, or in-transit between or to, the locations identified on Schedule A.
6. COVENANTS OF GRANTOR.
(a) The Grantor agrees in general:
(i) to pay Obligations secured by this Agreement when due;
(ii) to permit Collateral Agent to exercise its powers; and
(iii) not to change the places where the Grantor keeps any Collateral or the Grantor’s records concerning the Collateral without giving the Collateral Agent 30 days’ prior written notice of the address to which the Grantor is moving same and a fully executed collateral access agreement with respect thereto if such location is not owned by the Grantor; and
(b) The Grantor agrees with regard to the Collateral, unless the Collateral Agent agrees otherwise in writing:
(i) not to use any Collateral for any unlawful purpose or in any way that would void any insurance required to be carried on such Collateral;
(ii) to keep, in accordance with Generally Accepted Accounting Principles, complete and accurate records regarding all Collateral, and to permit the Collateral Agent to inspect the same and make copies thereof at any reasonable time;
(iii) if requested by the Collateral Agent, to receive and use reasonable diligence to collect Accounts, in trust and as the property of Lender, and to immediately endorse as appropriate and deliver such Accounts to the Collateral Agent daily in the exact form in which they are received;
(iv) not to commingle Accounts, Proceeds or collections with other property;
(v) to give only normal allowances and credits and to advise the Collateral Agent thereof immediately in writing if they affect any Accounts in any material respect;
(vi) on demand, to deliver to the Collateral Agent returned property resulting from, or payment equal to, such allowances or credits on any Accounts or to execute such documents and do such other things as the Collateral Agent may reasonably request for the purpose of perfecting, preserving and enforcing its Security Interest in such returned property;
(vii) from time to time, when requested by the Collateral Agent, to prepare and deliver a schedule of all Collateral subject to this Agreement and to assign in writing and deliver to the Collateral Agent all accounts, contracts, leases and other chattel paper, instruments, documents and other evidences thereof;
(viii) to deliver to the Collateral Agent notice of any Commercial Tort Claim it may bring against any person or entity, including a detailed description of such Commercial Tort Claim, together with such documents as the Collateral Agent may require to grant the Collateral Agent a security interest in the Grantor’s rights therein;
(ix) to deliver to the Collateral Agent any instrument, document or chattel paper constituting Collateral, duly endorsed or assigned by the Grantor to the Collateral Agent;
(x) to provide any service and do any other acts which may be necessary to maintain, preserve and protect all Collateral and, as appropriate and applicable, to keep all Collateral in good and saleable condition, to deal with the Collateral in accordance with the standards and practices adhered to generally by users and manufacturers of like property, and to keep all Collateral free and clear of all defenses, rights of offset and counterclaims;
(xi) not to withdraw any funds from any Deposit Account pledged to the Collateral Agent pursuant to this Agreement except for Grantor’s principal operating account and any Deposit Accounts which are specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for employees of the Grantor or any of its Subsidiaries; and
(xii) not to consign any of its Inventory or sell any of its Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale.
7. POWERS OF COLLATERAL AGENT. Following an Event of Default (as defined below), the Grantor appoints the Collateral Agent its attorney-in-fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by the Collateral Agent’s officers and employees, or any of them:
(a) to perform any obligation of the Grantor hereunder in the Grantor’s name or otherwise;
(b) to give notice to account debtors or others of the Collateral Agent’s rights in the Collateral, to enforce or forebear from enforcing the same and to make extension or modification agreements;
(c) to release persons or entities liable on Collateral and to give receipts and compromise disputes;
(d) to release or substitute security;
(e) to resort to security in any order;
(f) to prepare, execute, file, record or deliver notes, assignments, schedules, designation statements, initial UCC financing statements and amendments, continuation statements, termination statements, statements of assignment, applications for registration or like papers to perfect, preserve or release the Collateral Agent’s interest in the Collateral;
(g) to take cash, instruments for the payment of money and other property to which the Collateral Agent is entitled;
(h) to verify facts concerning the Collateral by inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;
(i) to endorse, collect, deliver and receive payment under instruments for the payment of money constituting or relating to the Proceeds;
(j) to prepare, adjust, execute, deliver and receive payment under insurance claims, and to collect and receive payment of and endorse any instrument in payment of loss or returned premiums or any other insurance refund or return, and to apply such amounts received by the Collateral Agent, at the Collateral Agent’s sole option, toward repayment of the Obligations or replacement of the Collateral;
(k) to exercise all rights, powers and remedies which the Grantor would have, but for this Agreement, with respect to all Collateral;
(l) to enter onto the Grantor’s premises to inspect the Collateral;
(m) to make withdrawals from and to close deposit accounts or other accounts with any financial institution, wherever located, into which the Proceeds may have been deposited, and to apply funds so withdrawn to payment of the Obligations;
(n) to preserve or release the interest evidenced by chattel paper to which the Collateral Agent is entitled hereunder and to endorse and deliver any evidence of title to such interest; and
(o) to do all acts and things and execute all documents in the name of the Grantor or otherwise, deemed by the Collateral Agent as necessary, proper and convenient in connection with the preservation, perfection or enforcement of the Collateral Agent’s rights.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. The Grantor agrees to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral, and upon the failure of the Grantor to do so, the Collateral Agent at its option may pay any of them and shall be the sole judge of the legality or validity and the amount necessary to discharge the same. Any such payments made by the Collateral Agent shall be deemed Obligations.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:
(a) any default in the payment or performance of any obligation, or any defined event of default, under the Note Purchase Agreement or any other contract or instrument evidencing any Obligation or other indebtedness to the Collateral Agent or any Purchaser;
(b) any representation or warranty made by the Grantor in this Agreement shall prove to be incorrect, false or misleading in any material respect when made; and
(c) the Grantor shall fail to observe or perform any material obligation or agreement set forth in this Agreement.
10. REMEDIES. Upon the occurrence of any Event of Default, the Collateral Agent shall have the right to declare immediately due and payable all or any Obligations secured by this Agreement and to terminate any commitments to make loans or otherwise extend credit to Grantor under the Note Purchase Agreement. The Collateral Agent shall have all other rights, powers, privileges and remedies granted to a secured party upon default under the Code or otherwise provided by law, including without limitation, the right
(a) to contact all persons or entities obligated to the Grantor on any Collateral and to instruct such persons or entities to deliver all Collateral directly to the Collateral Agent;
(b) to sell, lease, license or otherwise dispose of any or all Collateral. It is agreed that public or private sales or other dispositions, for cash or on credit, to a wholesaler or retailer or investor, or user of property of the types subject to this Agreement, or public auctions, are all commercially reasonable since differences in the prices generally realized in the different kinds of dispositions are ordinarily offset by the differences in the costs and credit risks of such dispositions;
(c) to notify the United States Postal Service to change the address for delivery of mail of the Grantor to any address designated by the Collateral Agent;
(d) without notice to or consent by the Grantor, and without the obligation to pay rent or other compensation, to take exclusive possession of all locations where the Grantor conducts its business or has any rights of possession and use the locations to store, process, manufacture, sell, use and liquidate or otherwise dispose of the Collateral;
(e) with regard to any Deposit Account, instruct the bank maintaining such Deposit Account to pay the balance of such Deposit Account to the Collateral Agent or take such other action as the Collateral Agent shall instruct;
(f) with regard to any Securities Account or Commodity Account, instruct the securities intermediary maintaining such Securities Account or the commodity intermediary maintaining such Commodity Account, as applicable, to pay the balance of such Securities Account or such Commodity Account, as applicable, to the Collateral Agent or take such other action as the Collateral Agent shall instruct; and
(g) without regard to the occurrence of waste or the adequacy of security, apply for the appointment of a receiver for the Grantor or for the assets of the Grantor and the Grantor waives any objection to such appointment or to the right to have a bond or security posted by the Collateral Agent.
While an Event of Default exists:
(a) the Grantor will deliver to the Collateral Agent from time to time, as requested by Lender, current lists of all Collateral;
(b) the Grantor will not dispose of any Collateral except in the ordinary course of business or on terms approved by the Collateral Agent;
(c) at the Collateral Agent’s request, the Grantor will assemble and deliver all Collateral, and books and records pertaining thereto, to the Collateral Agent at a reasonably convenient place designated by Lender; and
(d) the Collateral Agent may, without notice to the Grantor, enter onto the Grantor’s premises and take possession of the Collateral.
With respect to any sale by the Collateral Agent of any Collateral subject to this Agreement, the Grantor expressly grants to the Collateral Agent the right to sell such Collateral using any or all of the Grantor’s trademarks, trade names, trade name rights and/or proprietary labels or marks. The Grantor further agrees that the Collateral Agent shall have no obligation to process or prepare any Collateral for sale or other disposition.
11. CUMULATIVE RIGHTS. All rights, powers, privileges and remedies of the Collateral Agent shall be cumulative. No delay, failure or discontinuance of the Collateral Agent in exercising any right, power, privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy preclude, waive or otherwise affect any other or further exercise or the exercise of any other right, power, privilege or remedy.
12. WAIVERS AND CONSENTS OF LENDER. Any waiver, permit, consent or approval of any kind by the Collateral Agent of any default, or any such waiver of any provisions or conditions, must be in writing and shall be effective only to the extent set forth in writing.
13. DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In disposing of Collateral, the Collateral Agent may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral, may be applied by the Collateral Agent to the payment of expenses incurred by the Collateral Agent and the Purchasers, including attorneys’ fees, and the balance of such proceeds may be applied by the Collateral Agent toward the payment of the Obligations in such order of application as the Collateral Agent may from time to time elect. Upon the transfer of all or any part of the Obligations, the Collateral Agent may transfer all or any part of the Collateral and shall be fully discharged from all liability and responsibility with respect to such transferred Collateral, and the transferee shall be vested with all rights and powers of Lender hereunder; but with respect to any Collateral not so transferred, Lender shall retain all rights, powers, privileges and remedies.
14. STATUTE OF LIMITATIONS. Until all Obligations shall have been paid in full and all commitments by Purchasers to extend credit to the Grantor under the Note Purchase Agreement have been terminated, the power of sale or other disposition and all other rights, powers, privileges and remedies granted to the Collateral Agent shall continue to exist and may be exercised by the Collateral Agent at any time and from time to time irrespective of the fact that the Obligations or any part thereof may have become barred by any statute of limitations, or that the personal liability of the Grantor may have ceased, unless such liability shall have ceased due to the payment in full of all Obligations and Indebtedness secured by this Agreement.
15. FURTHER ASSURANCES. At any time upon the request of the Collateral Agent, the Grantor will execute or deliver to the Collateral Agent any and all financing statements, fixture filings, security agreements, pledges, assignments, endorsements, certificates of title, mortgages, deeds of trust and all other documents (the “Additional Documents”) that the Collateral Agent may request and in form and substance satisfactory to the Collateral Agent, to create, perfect, and continue perfection or to better perfect the Collateral Agent’s liens in all of the assets of the Grantor (whether now owned or hereafter arising of acquired, tangible or intangible, real or personal), and in order to fully consummate all of the transactions contemplated under this Agreement, the Note Purchase Agreement and related agreements. To the maximum extent permitted by applicable law, if the Grantor refuses or fails to execute or deliver any requested Additional Documents, the Grantor hereby authorizes the Collateral Agent to execute such Additional Documents in Grantor’s name, and authorizes the Collateral Agent to file such executed Additional Documents in any appropriate filing office. In furtherance and not in limitation of the foregoing, Grantor shall take such actions as the Collateral Agent may request from time to time to ensure that the Obligations are secured by substantially all of the assets of the Grantor. The Grantor shall not file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of the Collateral Agent.
16. SUBROGATION RIGHTS. Until all Obligations shall have been paid in full and all commitments by Purchasers to extend credit to the Grantor under the Note Purchase Agreement have been terminated, the Grantor shall not have any right of subrogation or contribution or similar right, and the Grantor waives any benefit of or right to participate in any of the Collateral or any other security now or later held by the Collateral Agent.
17. WAIVERS OF GRANTOR. The Grantor waives any right to require the Collateral Agent to (i) proceed against the Grantor or any other person or entity, (ii) marshal assets or proceed against or exhaust any security from the Grantor or any other person or entity, (iii) perform any obligation of the Grantor with respect to any Collateral, and (iv) make any presentment or demand, or give any notice of nonpayment or nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any Collateral. The Grantor further waives any right to direct the application of payments or security for any Obligations or other indebtedness of the Grantor to Purchasers or indebtedness of customers of the Grantor.
18. NOTICES. All notices, requests and demands required under this Agreement must be given, and shall be deemed received, as provided in Section 7.7 of the Note Purchase Agreement.
19. COSTS, EXPENSES AND ATTORNEYS' FEES. Grantor shall pay to Lender immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Lender's counsel), expended or incurred by Lender in connection with or related to this Agreement as set forth in Section 7.6 of the Note Purchase Agreement.
20. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties, and may be amended or modified only in writing signed by the Collateral Agent and the Grantor.
21. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement.
22. GOVERNING LAW. The validity of this Agreement and the construction, interpretation, and enforcement of this Agreement, and the rights of the parties, as well as all claims, controversies or disputes arising under or related to this Agreement will be determined under, governed by and construed in accordance with the laws of the State of New York, without regard conflicts of laws principles.
23. LIMITED AGENCY; NO FIDUCIARY OR OTHER DUTIES. The term “Collateral Agent” is used herein in reference to the Collateral Agent merely as a matter of custom; it is intended to reflect only an administrative relationship between the Collateral Agent and the Purchasers. The Grantor, the Collateral Agent and the Purchaser agree that it is the intent of the parties to limit the scope of the powers and the duties and obligations of the Collateral Agent to the specific powers delegated and the specific duties and obligations imposed hereunder, together with such powers as are reasonably incidental thereto, and the Collateral Agent does not and shall not have any right or authority to bind the Purchasers in any other manner or thing whatsoever or have any duty, obligation or responsibility as a fiduciary or any other duty, obligation or responsibility not expressly set forth herein.
24. JURISDICTION. All actions or proceedings arising in connection with this Agreement may be tried and litigated in the State and, to the extent permitted by applicable law, federal courts located in the City of Minneapolis and the County of Hennepin, State of Minnesota; provided that any suit seeking enforcement against any Collateral or other property may be brought, at the Collateral Agent’s option, in the courts of any jurisdiction where the Collateral Agent elects to bring such action or where such Collateral or other property may be found. The Grantor and the Collateral Agent waive, to the extent permitted under applicable law, any right they may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought.
25. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE GRANTOR AND THE COLLATERAL AGENT WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
Signature page follows
In witness whereof, the foregoing Agreement is hereby executed as of the date first above written.
QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC. By: __/s/ Brad Timon________________________ Name: Brad Timon____________________ Title: Chief Financial Officer | |
[____________], AS COLLATERAL AGENT
By: __________________________________
Name: _____________________________
Title: Collateral Agent__________________
Exhibit 10.3
AMENDMENT TO SENIOR SECURED CONVERTIBLE NOTE
This Amendment to Senior Secured Convertible Note (the “Amendment”) is entered into as of June 29, 2015, by and between Quantum Fuel Systems Technologies Worldwide, Inc. (the “Company”), and the counterparties named on the signature page (the “Holders”).
WHEREAS, on September 15, 2013 each of the Holders and the Company entered into that certain Convertible Note and Warrant Purchase Agreement (the “Note and Warrant Purchase Agreement”);
WHEREAS, the closing of the transactions contemplated by the Note and Warrant Purchase Agreement occurred on September 18, 2013, and each of the Holders purchased from the Company and the Company issued to each of the Holders a Senior Secured Convertible Promissory Note (each, a “September 2013 Note” and collectively, the “September 2013 Notes”) in the original principal amount set forth opposite each Holder’s name on Schedule A attached hereto;
WHEREAS, Section 6(c) of the September 2013 Notes provides that the September 2013 Notes may be amended by a written instrument signed by the Company and the Holder; and
WHEREAS, the Company and each of the Holders now desire to amend the terms of each of their September 2013 Notes, as more particularly described herein.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged and agreed, the Company and Holders hereby agree as follows:
1.Amendment to Section 2(a) of the September 2013 Notes. Section 2(a) of the September 2013 Notes is hereby amended and restated in its entirety as follows:
“(a). During the 30-day period beginning on July 1, 2017, and upon notice provided by the Holders of a majority of the outstanding principal amount of the Notes during such period, the Company shall redeem the Notes in whole, and each Holder shall be obligated to surrender the Note in whole, at a redemption price equal to 100% of the outstanding principal amount of such Note being redeemed, together with any accrued but unpaid interest thereon to the redemption date. The Holders of a majority of the outstanding principal amount of the Notes shall effect such request for redemption under this Section 2 by giving notice by mail, first-class postage prepaid, to the Company of the intent to exercise the Holder’s right to require redemption and the date fixed for redemption (which shall be within 90-days of delivery of the redemption notice pursuant to this Section 2(a)). On or after the date fixed for redemption by the Holders, each Holder of Notes shall surrender his, her or its certificates evidencing all Notes to be redeemed to the Company at its principal executive offices and shall thereupon be entitled to receive payment of the redemption price for the Notes redeemed within 90-days of delivery of the redemption notice provided pursuant to this Section 2(a).”
2. Terms of September 2013 Notes. Except as expressly modified hereby, all terms, conditions and provisions of the September 2013 Notes shall continue in full force and effect. In the event of any inconsistency or conflict between the September 2013 Notes and this Amendment, the terms and conditions of this Amendment shall govern and control.
3. Representations and Warranties of the Company. The Company represents and warrants to each Holder as of the date hereof:
a.This Amendment has been duly authorized, executed and delivered by the Company, and constitutes a valid, legal and binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity.
b. The execution, delivery and performance of this Amendment and the consummation of the transactions herein contemplated will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the Company’s charter or by-laws or (iii) result in the violation of any law or statute or any judgment, order, rule, regulation or decree of any court or arbitrator or federal, state, local or foreign governmental agency or regulatory authority having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, except in the case of clause (i) as would not result in a material adverse effect upon the business, prospects, management, properties, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole. Except for notices required or permitted to be filed with certain state and federal securities commissions, which notices will be filed on a timely basis, no consent, approval, authorization or order of, or registration or filing with any governmental authority is required for the execution, delivery and performance of this Amendment or for the consummation of the transactions contemplated hereby.
4. This Amendment may be executed by facsimile signature and in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
Quantum Fuel Systems Technologies Worldwide, Inc. By:_/s/ Brad Timon_____________________ Name: Brad Timon Title: Chief Financial Officer | HOLDERS: By: /s/ Kevin Douglas Name: The Douglas Irrevocable Descendant’s Trust Title: Trustee By: /s/ Kevin Douglas Name: K&M Douglas Trust Title: Trustee By: /s/ W. Brian Olson Name:W. Brian Olson By: /s/ Bradley Timon Name: Bradley Timon By: /s/ Mark Arold Name: Mark Arold By: /s/ David Mazaika Name: David Mazaika, Trustee of the David and Kristina Mazaika Trust U/A DTD 5/3/2008 Title: Trustee__ _________________________ _ By: /s/ Jonathan Lundy Name: Jonathan Lundy By: /s/ G. Scott Samuelsen Name: G. Scott Samuelsen By: /s/ Timothy McGaw Name: Timothy McGaw | |
Quantum Technologies Signs Definitive Agreements for $2.0 Million Private Placement of Convertible Notes
― The proceeds will be used to further advance the Company’s virtual CNG pipeline product offerings
LAKE FOREST, CA., July 1, 2015/GlobeNewswire/ -- Quantum Fuel Systems Technologies Worldwide, Inc. (Nasdaq: QTWW) (the "Company"), a global leader in natural gas storage systems, integration and vehicle system technologies, announced today that on June 29, 2015 it entered into definitive agreements with certain accredited investors for a private placement of 2% senior secured convertible notes in the cumulative principal amount of $2.0 million (the “Offering”). Mr. Kevin Douglas of Larkspur, California, led the transaction with an investment of $1.5 million. The closing of the Offering occurred on June 30, 2015. The Company intends to use a portion of the proceeds to design, develop and validate additional compressed natural gas (“CNG”) virtual pipeline tanks and systems including packaging and design features that can be applied for ground storage use for CNG stations.
“This funding will enable us to develop additional tanks and systems to complement our recently released and innovative 5,000 psi virtual pipeline tank product and continue to advance storage and transport technology to meet the growing needs in the market for virtual natural gas pipelines and advanced storage applications for mining, marine and CNG stations," said Brian Olson, President and CEO of Quantum. "The development and commercialization of virtual pipeline technology will serve us well in the near future during the continued build out of CNG infrastructure, and we believe the same technology will lend itself longer-term to the future development of hydrogen infrastructure and virtual hydrogen pipeline applications," continued Mr. Olson.
The principal and interest due under the notes is payable on September 18, 2018, subject to the investors’ put right that may be exercised during the thirty day period following July 1, 2017 or in connection with a change in control transaction. The notes are secured by a second lien position on substantially all of the assets of the Company’s continuing operations.
In connection with the Offering, existing holders of Convertible Notes issued by the Company dated September 18, 2013 agreed to amend the commencement date of their put right from September 18, 2016 to July 1, 2017.
The full terms of the transaction will be filed with the Securities and Exchange Commission in a Current Report on Form 8-K later today.
The securities are being offered and sold solely to accredited investors on a private placement basis.
This press release does not and shall not constitute an offer to sell, or the solicitation of an offer to buy, any of the securities, nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration under the securities laws of any state or jurisdiction.
About Quantum: Quantum Fuel Systems Technologies Worldwide, Inc. is a leader in the innovation, development and production of natural gas fuel storage systems and the integration of vehicle system technologies including engine and vehicle control systems and drivetrains. Quantum produces one of the most innovative, advanced, and light‐weight compressed natural gas storage tanks in the world and supplies these tanks, in addition to fully‐integrated natural gas storage systems, to truck and automotive OEMs and aftermarket and OEM truck integrators. Quantum provides low emission and fast‐to‐market solutions to support the integration and production of natural
gas fuel and storage systems, hybrid, fuel cell, and specialty vehicles, as well as modular, transportable hydrogen refueling stations. Quantum is headquartered in Lake Forest, California, and has operations and affiliations in the United States, Canada, and India.
More information about the products and services of Quantum can be found at http://www.qtww.com or you may contact:
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