MTI MICROFUEL CELLS
INC.
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT
This Convertible Note and Warrant
Purchase Agreement (this “ Agreement ”) is made
as of __________, 2008 by and among MTI MicroFuel Cells Inc., a
Delaware corporation (the “ Company ”) and each
of the investors listed on Exhibit A attached to this
Agreement (each a “ Purchaser ” and together the
“ Purchasers ”).
RECITALS
The Company desires to issue and
sell and the Purchasers desire to purchase secured convertible
promissory notes in substantially the form attached to this
Agreement as Exhibit B (each, a “ Note ”
and together, the “ Notes ”), which shall be
convertible on the terms stated therein into equity securities of
the Company, and a Warrant (each, a “ Warrant ”)
in substantially the form attached to this Agreement as Exhibit
C . The Notes, the Warrants and the equity securities issuable
upon conversion or exercise thereof, as applicable (and the
securities issuable upon conversion of such equity securities), are
collectively referred to herein as the “ Securities
.”
AGREEMENT
In consideration of the mutual
promises contained herein and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
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1.
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Purchase and Sale of
Notes .
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(a)
Sale and Issuance of Notes . Subject to the terms and
conditions of this Agreement, each Purchaser agrees to purchase at
the Closing (as defined below) and the Company agrees to sell and
issue to each Purchaser (i) a Note in the principal amount
specified with respect to such Purchaser on Exhibit A to
this Agreement; and (ii) a Warrant. The purchase price of each
Note shall be equal to 100% of the principal amount of such Note
and the exercise price of each Warrant is as set forth in the
Warrant. The Company’s agreements with each of the Purchasers
are separate agreements, and the sales of the Notes and Warrants to
each of the Purchasers are separate sales.
(i) The
purchase and sale of the Notes and Warrants shall take place at the
offices of the Company at 2:00 p.m., on the date hereof, or at
such other time and place as the Company and the Purchasers
mutually agree upon, orally or in writing (which time and place are
designated as the “ First Closing ”). In the
event there is more than one closing, the term “
Closing ” shall apply to each such closing unless
otherwise specified herein; provided , however , that
at least an aggregate of $500,000 in cash consideration must be
received and closed upon by the Company on the First Closing date
(excluding Exchanged Principal, as defined below).
(ii) At each
Closing, the Company shall deliver to each Purchaser the Note and a
Warrant to be purchased by such Purchaser against: (1) payment of
the principal amount of such Note, in the amount set forth next to
such Purchaser’s name on Exhibit A , by (a) a
check payable to the order of the Company drawn on a U.S. bank, (b)
wire transfer of immediately available funds to an account
designated by the Company or (c) the surrender of promissory notes
or other instruments representing indebtedness of the Company to
the Purchaser, the principal amounts of which shall be exchanged
dollar-for-dollar for principal amount outstanding under such
Purchaser's Note (“ Exchanged Principal ”); (2)
delivery of counterpart signature pages to this Agreement, the Note
and the Warrant; (3) delivery of a validly completed and executed
IRS Form W-8 BEN or IRS Form W-9, as applicable, establishing such
Purchaser’s exemption from withholding tax, which forms are
attached to this Agreement as Exhibit D ; and (4) delivery
of a validly completed and executed Certificate of Accredited
Investor Status, establishing such Purchaser’s status as an
accredited investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the
“ Securities Act ”), in the form is attached to
this Agreement as Exhibit E (an “ Investor
Certification ”).
(iii) Until
the earlier of (a) such time as the aggregate amount of principal
indebtedness subject to the terms of this Agreement equals a total
of $2,200,000, or such higher amount as approved by the
Company’s Board of Directors, or (b) thirty (30) days
following the First Closing, the Company may sell additional Notes
and Warrants to such persons or entities as determined by the
Company, or to any Purchaser who desires to acquire additional
Notes and Warrants. All such sales shall be made on the terms and
conditions set forth in this Agreement. Effective upon delivery to
the Company of the items (1) through (4) listed in Section 1(b)(ii)
above by such persons or entities, any notes and warrants sold
pursuant to this Section 1(b) shall be deemed to be
“Notes” and “Warrants,” respectively, for
all purposes under this Agreement, and any purchasers thereof shall
be deemed to be “Purchasers” for all purposes under
this Agreement.
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2.
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Additional
Provisions .
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(a)
Stock Purchase Agreement . Each Purchaser understands
and agrees that the conversion of the Notes into, and exercise of
the Warrants for, equity securities of the Company may require such
Purchaser’s execution of certain agreements relating to the
purchase and sale of such securities as well as registration,
co-sale and voting rights, if any, relating to such equity
securities.
(b)
Security Interest . The indebtedness represented by
the Notes shall be secured by all of the assets of the Company in
accordance with the provisions of a security agreement among the
Company and the Purchasers in the form attached to this Agreement
as Exhibit F (the “ Security Agreement
”).
3.
Representations and Warranties of the Company . The
Company hereby represents and warrants to each Purchaser
that:
(a)
Organization, Good Standing and Qualification . The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business as
now conducted and as proposed to be conducted.
(b)
Authorization . This Agreement, the Notes and the
Warrants have been duly authorized by the Board of Directors of the
Company; however, (A) the Company has not obtained the necessary
corporate approval for the authorization of any new series of
Preferred Stock into which the Notes may be convertible or Warrants
may be exercisable in accordance with their terms; and (B) a
sufficient number of shares of any new series of Preferred Stock
has not been authorized under the Company’s Certificate of
Incorporation to provide for the issuance of such shares upon
conversion or exercise (as applicable) of the Notes and Warrants.
The Agreement, the Notes, and the Warrants, when executed and
delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable against the Company
in accordance with their respective terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application
affecting enforcement of creditors’ rights generally, and as
limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable
remedies.
4.
Representations and Warranties of the Purchasers .
Each Purchaser hereby represents and warrants to the Company
that:
(a)
Authorization . Such Purchaser has full power and
authority to enter into this Agreement. This Agreement, when
executed and delivered by the Purchaser, will constitute a valid
and legally binding obligation of the Purchaser, enforceable in
accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting
enforcement of creditors’ rights generally, and as limited by
laws relating to the availability of a specific performance,
injunctive relief, or other equitable remedies.
(b)
Purchase Entirely for Own Account . This Agreement is
made with the Purchaser in reliance upon the Purchaser’s
representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms, that
the Securities to be acquired by the Purchaser will be acquired for
investment for the Purchaser’s own account, not as a nominee
or agent, and not with a view to the resale or distribution of any
part thereof, and that the Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person or entity to
sell, transfer or grant participations to such person or entity or
to any third person, with respect to any of the Securities. The
Purchaser has not been formed for the specific purpose of acquiring
any of the Securities.
(c)
Knowledge . The Purchaser is aware of the
Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the
securities.
(d)
Restricted Securities . The Purchaser understands
that the Securities have not been, and will not be, registered
under the Securities Act, by reason of a specific exemption from
the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser’s representations as
expressed herein. The Purchaser understands that the Securities are
“restricted securities” under applicable U.S. federal
and state securities laws and that, pursuant to these laws, the
Purchaser must
hold the Securities indefinitely unless they are
registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such
registration and qualification requirements is available. The
Purchaser acknowledges that the Company has no obligation to
register or qualify the Securities for resale. The Purchaser
further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of
sale, the holding period for the Securities, and on requirements
relating to the Company which are outside of the Purchaser’s
control, and which the Company is under no obligation and may not
be able to satisfy.
(e)
No Public Market . The Purchaser understands that no
public market now exists for any of the securities issued by the
Company, that the Company has made no assurances that a public
market will ever exist for the Securities.
(f)
Legends . The Purchaser understands that the
Securities, and any securities issued in respect thereof or
exchange therefor, may bear one or all of the following
legends:
(i) “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.”
(ii) Any
legend required by the Blue Sky laws of any state to the extent
such laws are applicable to the shares represented by the
certificate so legended.
(g)
Accredited Investor . The Purchaser is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
(h)
Legal Advice . The Purchaser has had the opportunity
to consult with his, her or its counsel regarding the matters
relevant to this Agreement and the transactions contemplated
hereby.
(i)
Corporate Approvals . Purchaser acknowledges that the
Company has not authorized the securities to be issued upon
conversion of the Notes or exercise of the Warrants, which
authorization is subject to Board and stockholder
approval.
(j)
Foreign Investors . If a Purchaser is not a United
States person or entity (as defined by Rule 902(k) under the
Securities Act), such Purchaser hereby represents that it has
satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including: (A) the legal
requirements within its jurisdiction for the purchase of the
Securities; (B) any foreign exchange restrictions applicable to
such purchase; (C) any governmental or other consents that may need
to be obtained; and (D) the income tax and other tax consequences,
if any, that may be relevant to the
purchase, holding, redemption, sale or transfer
of the Securities. Such Purchaser’s subscription and payment
for, and his or her continued beneficial ownership of the
Securities, will not violate any applicable securities or other
laws of Purchaser’s jurisdiction.
5.
Conditions
of the Purchasers’ Obligations at Closing . The
obligations of each Purchaser to the Company under this Agreement
are subject to the fulfillment, on or before the Closing, of each
of the following conditions, unless otherwise
waived:
(a)
Representations and Warranties . The representations
and warranties of the Company contained in Section 3 shall be
true on and as of the First Closing with the same effect as though
such representations and warranties had been made on and as of the
date of the First Closing.
(b)
Qualifications . 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 issuance and sale of the Securities
pursuant to this Agreement shall be obtained and effective on or
following the First Closing.
(c)
Minimum First Closing Investment Amount . The First
Closing shall include the issuance of Notes with an aggregate
principal amount of at least $500,000, excluding Notes issued upon
surrender of Exchanged Principal.
(d)
Security Agreement . The Company and the Purchasers
shall have executed the Security Agreement.
6.
Conditions of the Company’s Obligations at Closing
. The obligations of the Company to each Purchaser under this
Agreement are subject to the fulfillment, on or before the Closing,
of each of the following conditions, unless otherwise
waived:
(a)
Representations and Warranties . The representations
and warranties of the Purchaser contained in Section 4 shall
be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the
Closing.
(b)
Qualifications . 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 issuance and sale of the Securities
pursuant to this Agreement shall be obtained and effective as of
the Closing.
(c)
Delivery of Form W-8 BEN or Form W-9 . Each Purchaser
shall have completed and delivered to the Company a validly
executed IRS Form W-8 BEN or IRS Form W-9, as applicable,
establishing such Purchaser’s exemption from withholding
tax.
(d)
Delivery of Investor Certification . Each Purchaser
shall have completed and delivered to the Company a validly
executed Investor Certification establishing such Purchaser’s
status as an accredited investor as defined in Rule 501(a) of
Regulation D promulgated under the Securities
Act.
(a)
Lock-Up Period; Agreement . In connection with the
initial public offering of the Company’s securities and upon
request of the Company or the underwriters managing such offering
of the Company’s securities, each Purchaser agrees not to
sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any securities of the Company,
however or whenever acquired (other than those included in the
registration) without the prior written consent of the Company or
such underwriters, as the case may be, for such period of time (not
to exceed 180 days) from the effective date of such registration as
may be requested by the Company or such managing underwriters and
to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the Company’s
initial public offering.
(b)
Limitations . The obligations described in Section
7(a) shall apply only if all officers and directors of the Company
and shareholders holding at least 1% of the Company’s
outstanding Common Stock enter into similar agreements, and shall
not apply to a registration relating solely to employee benefit
plans, or to a registration relating solely to a transaction
pursuant to Rule 145 under the Securities Act.
(c)
Stop-Transfer Instructions . In order to enforce the
foregoing covenants, the Company may impose stop-transfer
instructions with respect to the securities of each Purchaser (and
the securities of every other person or entity subject to the
restrictions in Section 7(a)).
(d)
Transferees Bound . Each Purchaser agrees that prior
to the Company’s initial public offering it will not transfer
securities of the Company unless each transferee agrees in writing
to be bound by all of the provisions of this Section
7.
(a)
Successors and Assigns . The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors
and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b)
Governing Law . This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law.
(c)
Counterparts . This Agreement may be executed in two
or more counterparts and by facsimile, each of which shall be
deemed an original and all of which together shall constitute one
instrument.
(d)
Titles and Subtitles . The titles and subtitles used
in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this
Agreement.
(e)
Notices . Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon
delivery, when delivered personally, by overnight courier three
days after deposit with such courier, by facsimile (upon customary
confirmation of
receipt) or sent electronically (upon customary
confirmation of receipt), addressed to the party to be notified at
such party’s address as set forth on the signature page or
Exhibit A hereto, or as subsequently modified by
written notice, and if to the Company.
(f)
Finder’s Fee . Each party represents that it
neither is nor will be obligated for any finder’s fee or
commission in connection with this transaction. Each Purchaser
agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a
finder’s fee (and the costs and expenses of defending
against such liability or asserted liability) for which each
Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each
Purchaser from any liability for any commission or compensation
in the nature of a finder’s fee (and the costs and
expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or
representatives is responsible.
(g)
Amendments and Waivers . Any term of this Agreement
may be amended or waived only with the written consent of the
Company and holders of at least a majority in interest of the
Notes; provided, however , the aggregate amount of principal
indebtedness subject to the terms of this Agreement as set forth
under Section 1(b)(iii) hereof may be increased unilaterally by the
Company upon approval of its Board of Directors. Any amendment or
waiver effected in accordance with this Section 8(g) shall be
binding upon each Purchaser and each transferee of the Securities,
each future holder of all such Securities, and the
Company.
(h)
Severability . If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the
parties agree to renegotiate such provision in good faith, in order
to maintain the economic position enjoyed by each party as close as
possible to that under the provision rendered unenforceable. In the
event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the
balance of the Agreement shall be interpreted as if such provision
were so excluded and (iii) the balance of the Agreement shall
be enforceable in accordance with its terms.
(i)
Entire Agreement . This Agreement, and the documents
referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements existing between the parties
hereto are expressly canceled.
(j)
Exculpation Among Purchasers . Each Purchaser
acknowledges that it is not relying upon any person, firm or
corporation, other than the Company and its officers and directors,
in making its investment or decision to invest in the Company. Each
Purchaser agrees that no Purchaser nor the respective controlling
persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter
taken or omitted to be taken by any of them in connection with the
Securities.
(k)
Stockholders, Officers and Directors Not Liable . In
no event shall any stockholder, officer or director of the Company
be liable for any amounts due or payable pursuant to the
Note.
(l)
Loss of Note . Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or
mutilation of the Note or any Note exchanged for it, and indemnity
satisfactory to the Company (in case of loss, theft or destruction)
or surrender and cancellation of such Note (in case of mutilation),
the Company will make and deliver to Purchaser in lieu of such Note
a new Note of like tenor.
(m)
Corporate Securities Law . THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF DELAWARE AND THE
ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF
THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION
BY SECTION 25100, 25102 OR 25105 OF THE DELAWARE CORPORATIONS CODE.
THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE
IS SO EXEMPT.
[Signature
Pages Follow]
The parties have executed this Convertible Note
and Warrant Purchase Agreement as of the date first written
above.
COMPANY:
MTI MICROFUEL CELLS INC.
Peng K. Lim
Chief Executive Officer
SIGNATURE
PAGE TO MTI MICROFUEL CELLS INC.
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
IMS_FOOTERDIVEND
The parties have executed this Convertible Note
Purchase and Warrant Agreement as of the date first written
above.
PURCHASER:
Print Name of Purchaser
Signature
Print Name and Title of Signatory (if
entity)
SIGNATURE
PAGE TO MTI MICROFUEL CELLS INC.
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
IMS_FOOTERDIVEND
EXHIBIT
A
SCHEDULE
OF PURCHASERS
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First Closing :
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_______________
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Name and Address of
Purchaser
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Original Principal Amount of
Note
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EXHIBIT
B
FORM OF
SECURED CONVERTIBLE PROMISSORY NOTE
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISPOSITION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
MTI
MICROFUEL CELLS INC.
SECURED CONVERTIBLE PROMISSORY
NOTE
For value received, MTI MicroFuel Cells Inc., a
Delaware corporation (the “ Company ”), promises
to pay to «Holder» (the “ Holder ”),
the principal sum of «Principal». Interest shall accrue
from the date of this Note on the unpaid principal amount at a rate
equal to 10.0% per annum, compounded annually. This Note is one of
a series of Secured Convertible Promissory Notes containing
substantially identical terms and conditions issued pursuant to
that certain Convertible Note and Warrant Purchase Agreement dated
_________ __, 2008 (the “ Purchase Agreement ”).
Such Notes are referred to herein as the “ Notes
,” and the holders thereof are referred to herein as the
“ Holders .” This Note is subject to the
following terms and conditions.
1.
Maturity . Unless converted as provided in Section 2
below, all unpaid principal and accrued interest under this Note
shall be due and payable upon demand by the Holder at any time on
or after March 31, 2009 (the “ Maturity Date ”),
except as otherwise provided hereunder. Notwithstanding the
foregoing, the entire unpaid principal sum of this Note, together
with accrued and unpaid interest thereon, shall become immediately
due and payable upon the insolvency of the Company, the commission
of any act of bankruptcy by the Company, the execution by the
Company of a general assignment for the benefit of creditors, the
filing by or against the Company of a petition in bankruptcy or any
petition for relief under the federal bankruptcy act or the
continuation of such petition without dismissal for a period of 90
days or more, or the appointment of a receiver or trustee to take
possession of the property or assets of the
Company.
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(a)
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Investment by the
Holder .
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(i) The
entire principal amount of and (at the Company’s option)
accrued but unpaid interest on this Note will automatically convert
into shares of the Company’s preferred stock (the “
Next Equity Preferred ”) issued and sold in the
Company’s next equity financing in a single or a series of
related transactions yielding gross proceeds to the Company of at
least $3,500,000 (including conversion, in whole or in part, of any
Notes) (the “ Next Equity
Financing ”).
The number of shares of Next Equity Preferred to be issued upon
such conversion shall be equal to the quotient obtained by dividing
(a) the entire principal amount of this Note plus (if applicable)
accrued but unpaid interest, by (b) the price per share of the Next
Equity Preferred, rounded down to the nearest whole share, and the
issuance of such shares upon such conversion shall be upon the
terms and subject to the conditions applicable to the Next Equity
Financing.
(ii) If the
Next Equity Financing does not occur on or before the Maturity
Date, all principal and (at the Company’s option) accrued
interest outstanding under all of the Notes shall be converted into
equity securities of the Company (“ Equity Securities
”) based upon a Company valuation and on such terms to be
agreed upon by the Company and the holders of a majority in
interest of the Notes within thirty (30) days following the
Maturity Date, which valuation and terms shall be negotiated in
good faith by the Company and a majority in interest of the Notes
(a “ Negotiated Conversion ”). If the Company
and holders of a majority in interest of the Notes cannot agree
upon the valuation and terms of a Negotiated Conversion, and fail
to consummate such Negotiated Conversion within thirty (30) days
following the Maturity Date, then all principal and accrued
interest outstanding under the Notes shall be due and payable upon
demand by the Holders at any time thereafter.
(iii) Notwithstanding
the above, in the event a Change of Control (as defined below) is
consummated prior to the Next Equity Financing, a Negotiated
Conversion, or the repayment in full of all principal and accrued
interest under the Notes, then the Notes shall become immediately
due and payable in an amount equal to 125% of the principal amount
of the Note(s) and 100% of the accrued interest outstanding
thereon, payment of which shall be in full satisfaction of the
Note(s) and shall be made within thirty (30) days following the
consummation of such Change of Control.
(iv) The term
“ Change of Control ” shall mean the sale,
conveyance or other disposition of all or substantially all of the
Company’s property or business or the Company’s merger
with or into or consolidation with any other corporation, limited
liability company or other entity (other than a wholly owned
subsidiary of the Company), provided that the term “Change of
Control” shall not include a merger of the Company effected
exclusively for the purpose of changing the domicile of the
Company, to an equity financing in which the Company is the
surviving corporation, or to a transaction in which the
stockholders of the Company immediately prior to the transaction
own 50% or more of the voting power of the surviving corporation
following the transaction.
(b)
Mechanics and Effect of Conversion . Upon conversion
of this Note pursuant to this Section 2, the Holder shall surrender
this Note, duly endorsed, at the principal offices of the Company
or any transfer agent of the Company. At its expense, the Company
will, as soon as practicable thereafter, issue and deliver to such
Holder, at such principal office, a certificate or certificates for
the number of shares to which such Holder is entitled upon such
conversion, together with any other securities and property to
which the Holder is entitled upon such conversion under the terms
of this Note, including a check payable to the Holder for any cash
amounts payable as described herein. Upon conversion of this Note,
the Company will be forever released from all of its obligations
and liabilities under this Note with regard to
that
portion of the principal amount and accrued
interest being converted including without limitation the
obligation to pay such portion of the principal amount and accrued
interest.
(c)
Payment of Interest . Upon conversion of the
principal amount of this Note into the Company’s Next Equity
Preferred or Equity Securities, as applicable, any interest accrued
on this Note that is not by reason of Section 2(a) hereof
simultaneously converted into Next Equity Preferred or Equity
Securities, as applicable, shall be immediately paid to the
Holder.
3.
Payment; Prepayment . All payments shall be made in
lawful money of the United States of America at such place as the
Holder hereof may from time to time designate in writing to the
Company. Payment shall be credited first to the accrued interest
then due and payable and the remainder applied to principal.
Prepayment of this Note may be made at any time without
penalty.
4.
Transfer; Successors and Assigns . The terms and
conditions of this Note shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
Notwithstanding the foregoing, the Holder may not assign, pledge,
or otherwise transfer this Note without the prior written consent
of the Company. Subject to the preceding sentence, this Note may be
transferred only upon surrender of the original Note for
registration of transfer, duly endorsed, or accompanied by a duly
executed written instrument of transfer in form satisfactory to the
Company. Thereupon, a new note for the appropriate principal amount
and interest will be issued to, and registered in the name of, the
transferee. Interest and principal are payable only to the
registered holder of this Note.
5.
Governing Law . This Note and all acts and
transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law.
6.
Amendments and Waivers . Any term of this Note may be
amended only with the written consent of the Company and at least a
majority in interest of the Holders. Any amendment or waiver
effected in accordance with this Section 6 shall be binding
upon the Company, each Holder and each transferee of any
Note.
7.
Security Interest . This Note is secured by all of
the assets of the Company in accordance with a separate security
agreement (the “ Security Agreement ”) of even
date herewith between the Company and the Holder. In case of an
Event of Default (as defined in the Security Agreement), the Holder
shall have the rights set forth in the Security
Agreement.
8.
Company Covenant . For so long as this Note is
outstanding, the Company shall not, without written consent of at
least a majority in interest of the Holders, sell or transfer any
accounts, inventory, equipment, general intangibles (to include all
intellectual property including without limitation: patents, patent
applications, copyrights, trademarks and trade names), documents,
instruments, chattel paper, deposit accounts, and all proceeds of
the foregoing, except for: (i) the payment on accounts payable in
the ordinary course of the Company’s
operations;
(ii) the sale of finished inventory and
the non-exclusive licenses of intellectual property in the ordinary
course of the Company’s business; (iii) the sale of obsolete
or unneeded equipment in the ordinary course of business; (iv) cash
and equipment to the Company’s subsidiaries necessary for
their operations; and (v) the repayment of accrued interest and/or
principal under the Notes.
9.
Stockholders, Officers and Directors Not Liable . In
no event shall any stockholder, officer or director of the Company
be liable for any amounts due or payable pursuant to this
Note.
10.
Counterparts . This Note may be executed in
counterparts and by facsimile, each of which will be deemed to be
an original and all of which together will constitute a single
agreement.
[Signature
Page Follows]
This Secured Convertible Promissory Note was
executed as of the date first above written.
COMPANY:
MTI MICROFUEL CELLS INC.
Peng K. Lim
Chief Executive Officer
AGREED TO
AND ACCEPTED:
HOLDER:
"HOLDER"
Signature
Print Name
and Title of Signatory (if entity)
EXHIBIT
C
FORM OF
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
MTI MICROFUEL CELLS INC.
Warrant
MTI MicroFuel Cells Inc. (the “
Company ”), for value received, hereby certifies that
«Holder», or its registered assigns (the “
Holder ”), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time after the date
hereof and on or before the Expiration Date (as defined in Section
6 below) shares of capital stock of the Company at an exercise
price per share as set forth herein. This Warrant is one of a
series of Warrants containing substantially identical terms and
conditions issued pursuant to that certain Convertible Note and
Warrant Purchase Agreement dated ________ __, 2008 (the “
Purchase Agreement ”). This Warrant is issued pursuant
to, and is subject to the terms and conditions of, the Purchase
Agreement.
The shares purchasable upon exercise of this
Warrant are hereinafter referred to as the “ Warrant
Stock ”.
1.
Number and Type of Shares; Purchase Price . Subject
to the terms and conditions hereinafter set forth, the Holder is
entitled, upon surrender of this Warrant, to purchase from the
Company the following: in the event the Company (i) issues or sells
preferred stock (“ Next Equity Preferred ”) in a
Next Equity Financing (as defined in the Note(s) issued to the
Holder pursuant to the Purchase Agreement), or (ii) issues equity
securities (“ Equity Securities ”) in a
Negotiated Conversion (as defined in the Note(s) issued to the
Holder pursuant to the Purchase Agreement), the Holder is entitled
to exercise this Warrant for a number of shares of such Next Equity
Preferred or Equity Securities issued in the earlier to occur of
the Next Equity Financing or a Negotiated Conversion, as
applicable, equal to (x) 10% of the original principal amount of
the Note(s) issued to the Holder pursuant to the Purchase
Agreement, divided by (y) the purchase or conversion price per
share of the Next Equity Preferred or Equity Securities, as
applicable, issuable upon conversion of the Note(s) (the “
Purchase Price ”), rounded down to the nearest whole
share, at a per share purchase price equal to the Purchase Price
per share of such Next Equity Preferred or Equity Securities, as
applicable, issued therein.
2.
Exercise .
(a)
Manner of Exercise . This Warrant may be exercised by
the Holder, in whole or in part, by surrendering this Warrant, with
the purchase/exercise form appended hereto as Exhibit A
duly executed by such Holder or by such Holder’s duly
authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate,
accompanied by payment in full of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon
such exercise. The Purchase Price may be paid by cash, check, wire
transfer, or by the surrender of promissory notes or other
instruments representing indebtedness of the Company to the
Holder.
(b)
Effective Time of Exercise . Each exercise of this
Warrant shall be deemed to have been effected immediately prior to
the close of business on the day on which this Warrant shall have
been surrendered to the Company as provided in Section 2(a) above.
At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise
as provided in Section 2(d) below shall be deemed to have become
the holder or holders of record of the Warrant Stock represented by
such certificates.
(i) In
lieu of exercising this Warrant in the manner provided above in
Section 2(a), the Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company
together with notice of such election on the purchase/exercise form
appended hereto as Exhibit A duly executed by such Holder or
such Holder’s duly authorized attorney, in which event the
Company shall issue to such Holder a number of shares of Warrant
Stock computed using the following formula:
|
Where:
|
X
=
|
The number of shares of Warrant
Stock to be issued to the Holder.
|
|
|
Y
=
|
The number of shares of Warrant
Stock purchasable under this Warrant (at the date of such
calculation).
|
|
|
A
=
|
The fair market value of one share
of Warrant Stock (at the date of such calculation).
|
|
|
B
=
|
The Purchase Price (as adjusted to
the date of such calculation).
|
(ii) For
purposes of this Section 2(c), the fair market value of Warrant
Stock on the date of calculation shall mean with respect to each
share of Warrant Stock:
(A) if the
exercise is in connection with an initial public offering of the
Company’s Common Stock, and if the Company’s
Registration Statement relating to such public offering has been
declared effective by the Securities and Exchange Commission, then
the
fair market value shall be the product of
(x) the initial “Price to Public” per share
specified in the final prospectus with respect to the offering and
(y) the number of shares of Common Stock into which each share
of Warrant Stock is convertible at the date of
calculation;
(B) if
(A) is not applicable, the fair market value of Warrant Stock shall
be at the highest price per share which the Company could obtain on
the date of calculation from a willing buyer (not a current
employee or director) for shares of Warrant Stock sold by the
Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors, unless the Company is at such time
subject to an acquisition as described in Section 6 below, in which
case the fair market value of Warrant Stock shall be deemed to be
the value received by the holders of such stock pursuant to such
acquisition.
(d)
Delivery to Holder . As soon as practicable after the
exercise of this Warrant in whole or in part, and in any event
within ten (10) days thereafter, the Company at its expense will
cause to be issued in the name of, and delivered to, the Holder, or
as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct:
(i) a
certificate or certificates for the number of shares of Warrant
Stock to which such Holder shall be entitled; and
(ii) in case
such exercise is in part only, a new warrant or warrants (dated the
date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the number of
such shares called for on the face of this Warrant minus the number
of such shares purchased by the Holder upon such exercise as
provided in Section 2(a) or 2(c) above.
(a)
Stock Splits and Dividends . If outstanding shares of
the Company’s Common Stock shall be subdivided into a greater
number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Common Stock
shall be combined into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be
made in the Purchase Price, the number of shares of Warrant Stock
purchasable upon the exercise of this Warrant shall be changed to
the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase
Price in effect immediately prior to such adjustment; by
(ii) the Purchase Price in effect immediately after such
adjustment.
(b)
Reclassification, Etc . In case there occurs any
reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other
corporation the stock or securities of which are at the time
receivable upon the exercise of this Warrant) or any similar
corporate reorganization on or after the date hereof, then and in
each such
case the Holder, upon the exercise hereof at any
time after the consummation of such reclassification, change, or
reorganization shall be entitled to receive, in lieu of the stock
or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or
property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately
prior thereto, all subject to further adjustment pursuant to the
provisions of this Section 3; provided, however, that the operation
of this Section 3(b) shall not effect the termination of this
Warrant upon a Change of Control (as defined i
